M.D.C. Holdings, Inc., Denver (NYSE: MDC) on Friday morning reported a net loss for the 2010 third quarter ended Sept. 30 of $10.2 million (-$0.22 per share), compared with a net loss for the 2009 third quarter of $32.0 million (-$0.69 per share). The results beat the consensus analyst estimate of a loss of 31 cents per share and sent the stock up nearly 4% during morning trading.
The loss included impairments of $3.7 million, up from $1.2 million in the comparable quarter last year, and other write-downs of $0.8 million, down from $3.6 million in the prior-year quarter.
Revenue was up 11% to $225.7 million as home closings rose 10% to 722 worth approximately $216.5 million, up from $186.8 million in the prior-year quarter, due to increases in Utah, Colorado, Maryland and Virginia markets. The average closing price rose by 5.8% to $299,900.
New orders dropped 22% from last year's quarter to 796, and new-order dollars fell 15% to $231 million. The average selling price of new orders rose 22.5% to $290,200, but the cancellation rate rose to 30% from 23% in last year's quarter. Community count averaged 135 for the quarter but rose to 142 at quarter's end, up from 137 at the end of the comparable quarter last year and 133 at yearend 2009. The company also said 64 new communities are close to reaching active status, while 38 are nearing inactive status.
Backlog fell 8.4% to 1,188 units; backlog value fell to $368 million from $383 million. The average selling price of homes in backlog rose to $309,800 from $295,100 at the end of last year's quarter.
Gross margin in the quarter was 20.9%, up from 18.9% in the 2009 third quarter, primarily the result of an increase in net option revenue and 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 construction of smaller, more efficient homes that can be personalized based on homebuyer preference, which comprised 53% of closings compared with only 17% in the same quarter in 2009. Land costs relative to home sales revenue rose from 16.8% in the 2009 third quarter to 21.8% in the 2010 third quarter.
SG&A fell to $58.6 million from $62.2 million as G&A fell by more than $6 million and sales costs rose by $3.1 million. As a percentage of home sales, SG&A was 16.3%, down from 16.6% in last year's quarter.
The company's lot count rose to 11,939 (7,194 owned, 4,745 optioned) from 8,590 (6,264 and 2,326, respectively) at the close of last year's quarter.
At quarter's end, M.D.C. had $688.6 million in cash, $922.1 million in marketable securities and $504,000 in restricted cash on hand compared to $1.23 billion, $328 million and $476,000 at the same time in 2009. It listed $1.2 billion in senior notes on its balance sheet, up from $998 million at yearend, 2009.
"During the third quarter, the pace of our sales slowed, reflecting a continued low level of demand following the expiration of the federal homebuyer tax credit in the second quarter," said Larry A. Mizel, M.D.C.'s chairman and CEO. "Since we first resumed significant land acquisition activity in the second half of 2009, we have secured control of 184 new communities across the country, including 27 in the third quarter alone. As a result, our lot supply increased 39% year-over-year to nearly 12,000, with the majority of the growth coming from lots controlled under option with minimal capital at risk. Our acquisition activity also drove a year-over-year increase in our active subdivision count for the first time since the third quarter of 2007, and we have started home construction or sales in a significant number of additional communities that have not yet reached active subdivision status. ... we are well-positioned for continued expansion into new projects, even if overall market conditions remain weak."