M.D.C. Holdings Inc. (NYSE:MDC) on April 24 reported a lesser loss for the first quarter of 2008 than it did for the same quarter in 2007--$72.8 million vs. $94.4 million--but that it ended the quarter in sound financial shape with plenty of cash and borrowing capacity on hand.
The loss of $1.58 per diluted share was primarly due to large declines in closings, which were off 43% to 1,136 as well as average selling price of closed home, which fell 12% to $313,200. Orders were down 57% to 1,098; value of orders was down 64% to $324 million and the average sales price of orders was down 16% to $295,100. The cancellation rate increased to 43% from 35% during the 2007 first quarter.
The company also took $56.5 million in write downs, including $54.8 million for asset impairments ($48.3 million in the West region alone) and $1.7 million for write-offs of deposits and pre-acquisition costs associated with abandoned land-option contracts. It was the lowest quarterly impairment charge since the third quarter of 2006, a period during which the company has impaired 60% of the 13,100 lots it owned or controlled at the end of the quarter.
M.D.C. generated cash flow from operations of $230.7 million. Homes in backlog declined to 1,909 from 1,947 at yearend 2007 and 4,195 at the end of 2007's first quarter. The estimated sales value of homes in backlog at the end of first quarter, 2008 was $623 million, with the estimated average selling price of homes in backlog down marginally to $326.3 million from$333.8 million
Home building loss before taxes were $77.3 million, compared with $138.9 million for the same period in 2007. The company said improvement in 2008 was driven in large part by a 61% decline in asset impairment charges and a 43% decline in home building commissions, marketing and general and administrative expenses. Home building SG&A fell to $65.1 million from$113.3 million in first quarter, 2007 and achieved gross margins of 11.5% in the 2008 quarter compared to 15.8% the year before.
The number of active communities was cut to 272 from 287 at yearend and 311 at the end of first quarter, 2007. Owned lots were 10,021 at the end of the2008 quarter compared to 11,515 at yearend and 17,540 at the end of the prior year's quarter, owing in large part to the sale of 800 lots primarily in California, Nevada and Arizona. Lots under option fell to 3,130 from 3,615 on December 31 and 7,091 on March 31, 2007.
"We believe the strength of our balance sheet is established and, therefore, we are comfortable expanding our focus on continued business process improvements in 2008," said Larry Mizel, M.D.C. CEO, in a statement. "During the first quarter, we laid the framework for such improvements through a companywide initiative to transform and streamline our business practices, with a goal of enhancing efficiency across our company in preparation for future growth." In an indication that the company may be interested in acquistions, he continued, "This initiative is intended to contribute to the long-term value of our Company as we continue to look for opportunities to invest the substantial capital available to us."
Shares of M.D.C. were up 1.75% at $44.23 in late-morning trading.