M.D.C. Holdings, Inc., Denver (NYSE: MDC) on Friday morning reported a net loss for its second quarter ended June 30 of $3.7 million (-$0.08 per share), compared with a net loss for the 2009 second quarter of $29.6 million (-$0.64 per share). There were no asset impairments for the quarter.
Analysts were expecting a loss of two cents per share. Shares of M.D.C. were down a half percent at $29.02 early in the trading session Friday.
Revenues for the quarter were up 67.1% from the same period last year to$326.3 million, with $311.3 million of that coming from home building. The rise was fueled by a 71% increase in closings to 1,135 partly offset by a 2% decrease in average selling price to $274,300.
New orders were up 4% to 1,015, but the average selling price fell 3% to $281,000. Sales per community was up 25%, partially offset by a 17% decline in the average number of active communities to 134. The cancellation rate was 25% compared with 20% in last year's quarter.
Backlog rose to 1,114 from 826 at yearend 2009 and 941 at the same time last year. Backlog value rose to $351 million from $265 million at the end of2009 and $295 million at the close of second quarter, 2009.
M.D.C. Picked up control of 2,160 lots in 36 new communities during the quarter. At quarter's end, M.D.C. owned 7,326 lots, up from 6,383 at yearend2009 and 6,744 at the close of last year's quarter. It also had 3,606 lots under option, up from 2,584 and 1,971 at the end of the fourth and second quarters of 2009, respectively.
Home building gross margin was flat with last year's quarter at 18.1%, but minus interest expense and warranty adjustments, it improved to 20.2% during the quarter from 16.8% for the same period last year. The company said the improvement was due to an increase in net option revenue, relative to home sales revenue, combined with a reduction in construction costs relative to home sales revenue. Both the increase in average upgrade revenue and the decrease in construction costs were driven by the company's strategy of building smaller homes customized by homebuyer preference. The improvements were offset in part by an increase in land costs relative to home sales revenue from 12.3% in the 2009 second quarter to 20.6% in the 2010 second quarter. Gross margin, however, fell on a sequential basis.
SG&A increased to $67.7 million for the quarter ended June 30, 2010, compared with $52.7 million for the same period in the prior year. The increase was driven primarily by an $8.2 million increase in marketing and commissions costs directly related to the increased closings, combined with a $6.8 million increase in general and administrative costs associated with increased salaries and benefits. As a percentage of home sales revenue, SG& A fell to 14% from 16.6% in last year's quarter.
"Over the past twelve months, we have secured control of 157 new communities across the country, including 36 in the second quarter alone," said Larry A.Mizel, M.D.C. chairman and CEO. "These subdivisions provide us with a strong platform for future growth. However, our outlook remains cautious given the industry-wide slowdown in new home orders in the second quarter immediately following the expiration of the federal homebuyer tax credit and the uncertainty surrounding overall economic conditions."
M.D.C. ended the quarter with $1.6 billion in cash and marketable securities, up slightly from yearend, 2009. It was carrying $1.2 billion in senior debt on its balance sheet.
Carl Reichardt, home building analyst at Wells Fargo Securities, said the company's "order and closing performance was the best we have seen so far (on a year-over-year basis) form any of the six builders already reporting June quarters. However, the company as not profitable, while several peers were. With Q2 likely to the the peak revenue quarter during 2010, we do not see M.D.C. reporting a profitable quarter this year."