M.D.C. Holdings, Inc., Denver (NYSE: MDC), parent of Richmond American Homes, on Friday morning reported a net loss of $30.0 million, or ($0.65) per share, for the fourth quarter ended Dec. 31. The loss included impairments of $19.9 million. Analysts were expecting a loss of 18 cents per share, excluding write downs.

The loss compared with net income for the 2009 fourth quarter of $127.2 million, or $2.68 per share. That quarter included $14 million in impairments that were more than offset by a $142.6 million income tax benefit.

Revenues declined 19.9% to $259.6 million as home closings dropped 22% to865 homes and average selling price rose 8.7% to $291,700.

New orders were down 19% to 519 and new-order dollars fell 18% to $150 million as the average selling price rose slightly from $287,300 to $289,000. The cancellation rate jumped to 46% from 30% in the year-ago quarter. The company attributed the rise to prospective buyers who could not sell an existing home or had difficulty qualifying for a mortgage.

Backlog at quarter's end was up 2% to 842 homes with a value of $269 million, up from $265 million at the close of the 2009 quarter. The average selling price of homes in backlog fell to $319,500 from $320,800.

Inventory of unsold homes, the bulk at the framing stage, rose to 944 from539 at the close of last year's quarter.

During the quarter, M.D.C. added control of 1,448 lots in 26 new communities and increased its active subdivisions count by 11% to 148. At quarter's end, the company controlled 13,846 lots, up from 9,788 at the end of 2009, with8,035 owned and 4,159 controlled.

Home building gross margin in quarter was 17%, down from 18.8% in the 2009 quarter. Excluding interest expense and warranty adjustments, the margin fell to 16.5% from 20.3% in the fourth quarter of 2009. The company said the decrease resulted from "sizable incentives used during the last half of the year to drive a higher sales velocity, especially for older homes in our inventory, combined with an increase in land costs relative to home sales revenue from 18% in the 2009 fourth quarter to 23% in the 2010 fourth quarter."

G&A increased to $42.9 million for the quarter from $40.5 million in the prior-year quarter. M.D.C. invested in a new "enterprise resource planning system" that it expects to drive efficiencies in both construction processes and communications going forward. It also lopped off more than 100 positions during the quarter. M.D.C. Chairman and CEO Larry A. Mizel said the results of the moves "are not readily apparent in our 2010 financial statements" but that they "will help us to achieve improved operating leverage in the long-term."

Marketing and commissions costs, the "S" in SG&A, were $21.0 million in the fourth quarter of 2010, compared with $20.9 million in the fourth quarter of 2009. As a percentage of home sales reveune, SG&A was 6%, down from 6.7% in the prior-year quarter, but up to 7.6% from 6% in the corporate segment.

The company ended the quarter with $572 million in cash and $968.7 million in marketable securities, with the cash down from $1.23 billion and marketable securities up from $328 million at the close of the 2009 fourth quarter. Long-term debt was up 24.2% to $1.24 billion.

For the full year, M.D.C.'s loss was $64.8 million, or ($1.40) per share compared with net income of $24.7 million, or 52 cents per share, in 2009.Closings increased 8% to 3,245 homes and net new orders decreased 1% to3,261 homes. During the year, the company secured control of 7,861 lots in 130 new communities.

"We are focused on maximizing gross margin through the continued deployment of our new product across the country, combined with an increased focus on inventory management," said Mizel in a statement. "Coupled with our increased community count, these investments and decisions form a strong foundation for our goal of substantially improving our operating results."

Michael Rehaut, home building analyst at J.P. Morgan, said the company missed his estimates on both orders and margins. "While we remain impressed with MDC's strong cash position, we believe this is already priced into the stock, and point to the company's underlevered position within our universe to the emerging housing recovery, as well as its still solidly negative EPS," Rehaut wrote in a research note.

Stephen East at Ticonderoga Securities took a more negative tone. "One must look very hard to find anything good in this release," he wrote in his research alert. "We see good execution on only one front--community acquisition and growth. Otherwise, there is disappointment on virtually every metric. There are so many issues to address that we believe investors would be well served avoiding this builder for the foreseeable future. In our view, Community growth cannot fix the operational cost pressures in 2011. We continue recommending investors sell this equity."

Wells Fargo's Carl Reichardt wrote, "This was a weak quarter with all key metrics missing our estimates. MDC cited 'sizeable incentives,' particularly on homes in inventory as the reason for the thinner gross margins, indicating to us that MDC's spec 'hold-at-drywall' strategy may not be working as well as the company hoped."

Shares of M.D.C. were down sharply in early trading to $29.05, more than 7% off Thursday's close.