M.D.C. Holdings, Inc., Denver (NYSE:MDC), on Friday reported a net loss for the third quarter ended Sept. 30 of $32.0 million (-$0.69 per diluted share), compared to a loss of $118 million (-$2.55 per diluted share) for the same period last year. The loss included $1.2 million in impairments and an $11.8 million charge to tax valuation, far lower than the impairment charge of $95.4 million and $61.1 million charge to deferred tax assets in the prior year quarter.
Total revenue for the quarter fell 44% to $203.2 million; home building revenue fell 44.1% to $200 million. Home closings dropped 41% to 659 and the average selling price dipped 6% to $283,500.
New orders, however, jumped 52% to 1,016 as the cancellation rate fell to 23% from 46% for last year's quarter. Estimated value of new orders shot up 49% to $272 million. Average selling price of new orders fell 2% from last year's quarter to $267,700.
Backlog more than doubled from yearend 2008 to 1,298 homes and increased 15% from the last year's third quarter, and backlog estimated value rose to $383 million from $173 million at yearend 2008 and $364 million at the end of last year's third quarter.
Community count dropped to 140 from 202 at the end of 2008 and 219 last Sept. 30. Lot count was down to 6,264 owned and 2,326 optioned from 7,577 and 2,358, respectively, at yearend 2008 and 7,762 and 2,752 at the end of last year's quarter. The company added 1,300 lots through acquisition or option during this year's quarter.
Gross margins improved to 18.9% from 15.3% in the third quarter of 2008, but the improvement was largely the result of a reduction in the company's warranty reserve and lower lot costs on previously impaired land. SG&A improved as well, falling to $31.0 million from $57.7 million for the same period last year. The decrease was due mostly to cost cutting, including a 35% reduction in home building headcount during the past year and reduced marketing and sales expenses due to fewer closings and lower average prices.
The financial services segment posted a loss of $4.3 million compared with income of $3.4 million for the same period in 2008 due to fewer mortgages originated and an increase in reserves for mortgage loan losses.
M.D.C. ended the quarter with $1.45 billion in cash and equivalents and$151.2 million in marketable securities.
"Our outlook remains cautious because of the employment situation and the overall uncertain state of the economy," said Larry A. Mizel, MDC's chairman and CEO. "However, we are encouraged by a year-over-year increase in our own net home orders for the second consecutive quarter."
Mizel continued, "We achieved the improvement in home orders in part due to our efforts to adapt our homes to the changing needs of our customers.During the third quarter, we continued to expand our offering of the smaller, more affordable homes that we introduced earlier this year. In addition, in an effort to improve affordability for our homebuyers, we initiated a new sales program during the quarter, which focused on providing low mortgage interest rates, and we positioned inventory to allow buyers the opportunity to close on a home prior to the impending expiration of the federal homebuyer tax credit."
"We strategically increased the number of unsold homes available for personalization in our inventory by more than 40% during the quarter, while we decreased our finished homes by more than 75%," he continued. "This should help to improve our profitability, as the margins we realize on unsold homes available for personalization significantly exceed those on finished inventory. Generally, we stop construction on unsold units at the drywall stage. Once construction is restarted, these homes can close within45 days, in direct competition with finished homes on the market. However, by holding the units at drywall, we offer our buyers the opportunity to personalize the home at one of our home galleries."