M.D.C. lost $155.4 million, which came in at a loss-per-share of $3.40 for the quarter ended September 30, 2007. Wachovia estimated that M.D.C would hit -$4.13 per share in the third quarter. Wachovia said M.D.C's relatively better performance came from lower impairment charges (it had $249 million in land impairment charges with 77% of those in the Western U.S.) than its estimates, better gross margins, higher land sales income, higher financial services and other income, and lower corporate administrative costs. Lower home sales and higher than expected selling, general, and administrative expenses (which rose 320 bps to 16.1%) hurt the company.
"MDC'S weak orders were a negative surprise, indicating either a firm slow to react to competitive pressures with price, or beginning to attempt to 'hold margin' as its lot supply runs thin (owned lots are at 1.4 years' supply at current absorptions, among the lowest in the industry)," Wachovia said in its report. "MDC's balance sheet continues to be what differentiates it from its peers; cash increased sequentially by 9% to $730 million and the revolver remains untapped. Cash flow from operations were strong at $130 million. However, unlike peers, spec units increased sequentially from 1,495 units to 1,551, perhaps as a result of high cans."
M.D.C didn't meet other expectations though. J.P. Morgan Securities estimated the builder would lose $1.52 per share and the Street's estimated that it would lose $1.46 per share. J.P. Morgan did say the builder's charges represented an 8.0% after-tax hit to equity, which was less than the range for other builders. The builder also continued to generate solid operating cash flow, coming in at $130 million, because of a 17% reduction in lots and spec management. That caused J.P. to keep its Overweight rating
One thing hurting M.D.C was the cancellation rate. The company had a 57% cancellation rate, and its orders fell 42% this year compared to the third quarter of 2006. M.D.C. took $249.0 million for asset impairments and $5.1 million for write-offs of deposits and pre-acquisition costs that the company.
The company's net income was $48.7 million, or $1.06 per diluted share, including pre-tax charges of $19.9 million for asset impairments and $7.3 million for write-offs of deposits and pre-acquisition costs.
M.D.C's total revenue for the third quarter was $686.7 million, compared with revenue of $1.08 billion for the same period in 2006. Its net loss for the nine months ended September 30, 2007 was $355.8 million, or $7.79 per diluted share, which included pre-tax charges of $551.4 million for asset impairments and $15.6 million for write-offs of deposits and pre- acquisition costs.
M.D.C's net income for the first nine months of 2006 was $220.6 million, or $4.80 per diluted share, including pre-tax charges of $20.8 million for asset impairments and $23.0 million for write-offs of deposits and pre-acquisition costs. Total revenue for the first nine months of 2007 was $2.15 billion, compared with revenue of $3.46 billion for the same period in 2006.
