- Cash flow from operations of $106.0 million
- Quarter-end cash and investments of $1.37 billion
- No borrowings on homebuilding line of credit
- Pre-tax loss of $117.0 million; includes asset impairments of $95.4 million
- Net loss of $118.0 million vs. $155.4 million in 2007
- Diluted loss per share of $2.55 vs. $3.40 in 2007
- Total revenue of $361.2 million vs. $686.7 million in 2007
- G&A expenses of $51.6 million vs. $76.6 million in 2007, down 33%
- Closed 1,116 homes at an average selling price of $301,700
- Net orders for 667 homes with an estimated value of $182.0 million
DENVER, Oct. 31 /PRNewswire-FirstCall/ -- M.D.C. Holdings, Inc.
(NYSE: MDC) today announced a net loss for the quarter ended September 30,
2008 of $118.0 million, or $2.55 per diluted share, which included pre-tax
charges of $95.4 million for asset impairments. This 2008 third quarter net
loss also was impacted adversely by a $61.1 million increase in our deferred
tax asset valuation allowance, which contributed to the recognition of a
provision for income taxes during the quarter. The net loss for the third
quarter of 2007 was $155.4 million, or $3.40 per diluted share, including
pre-tax charges of $249.0 million for asset impairments. Total revenue for
the third quarter of 2008 was $361.2 million, compared with revenue of $686.7
million for the same period in 2007.
Net loss for the nine months ended September 30, 2008 was $291.5 million,
or $6.32 per diluted share, which included pre-tax charges of $238.5 million
for asset impairments. This net loss for the first nine months of 2008 also
was impacted adversely by a $115.1 million increase in our deferred tax asset
valuation allowance, which reduced our benefit from income taxes. The net loss
for the first nine months of 2007 was $355.8 million, or $7.79 per diluted
share, including pre-tax charges of $551.4 million for asset impairments.
Total revenue for the first nine months of 2008 was $1.18 billion, compared
with revenue of $2.15 billion for the same period in 2007.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, 'As
national economic conditions continued to deteriorate during the third quarter
of 2008, we generated in excess of $100 million in operating cash flow,
largely through our efforts to reduce inventory balances and overhead
expenses. As a result, we ended the quarter with $1.37 billion in cash and
investments. Though many businesses across the country have struggled in the
wake of tightening credit markets and overall market volatility, we believe
that our capital structure currently provides us with adequate resources to
pursue opportunistic land investments, given that our quarter-end cash and
investments exceeded our total debt by more than $300 million and that our
next debt maturity does not occur until 2012.'
Homebuilding Results
Homebuilding loss before taxes for the quarter and nine months ended
September 30, 2008 improved to $99.1 million and $270.8 million, respectively,
compared with $258.0 million and $568.3 million for the same periods in 2007.
The loss in 2008 narrowed in large part due to declines in asset impairment
charges of 62% and 57%, respectively, for the third quarter and first nine
months of 2008, and declines in homebuilding commissions, marketing and
general and administrative expenses ('SG&A') of 44% and 45%, respectively,
from the comparative 2007 periods. These decreases in expenses and charges
were offset partially by the impact of reductions in home closings and average
selling prices from the levels achieved during the same periods in 2007.
The Company closed 1,116 homes and produced home gross margins of 15.3% in
the 2008 third quarter, compared with 1,963 home closings and home gross
margins of 14.1% for the same period in 2007. For the nine months ended
September 30, 2008, the Company closed 3,544 homes and produced home gross
margins of 12.7%, compared with 5,995 home closings and 14.7% home gross
margins for the nine months ended September 30, 2007. Average selling prices
were $301,700 and $303,200, respectively, for the quarter and nine months
ended September 30, 2008, down $30,000 and $38,900, respectively, from the
same periods in 2007. Homebuilding SG&A decreased to $59.3 million and $183.0
million, respectively, for the three and nine months ended September 30, 2008,
compared with $105.2 million and $330.1 million for the same periods in the
prior year.
Christopher M. Anderson, MDC's senior vice president and chief financial
officer, said, 'We recognized $95 million of asset impairments charges during
the quarter, including $91 million of inventory impairment charges. We
impaired our land inventory by $70 million and our work-in-process inventory
by $21 million, impacting approximately 3,500 lots in 150 subdivisions. The
quarter-end book value of the impaired subdivisions after the impairments was
$213 million, consisting of $55 million of land and $158 million of
work-in-process. As was the case in the prior quarter, impairments in the
West and Mountain segments accounted for more than 80% of all inventory
impairments recorded in the 2008 third quarter.'
Anderson continued, 'In the interest of preserving value for our
shareholders, we continued to evaluate strategies for reducing our overhead
during the quarter, and as a part of that process we made the decision to exit
the Illinois market. We continue to build on or sell the lots we control in
this market but currently have no plans to evaluate any new land investments.'
Anderson concluded, 'We also made adjustments to our operating structure
in most of our other markets and, as a result, our employee headcount
decreased by more than 10% in the third quarter alone. Unfortunately, these
difficult steps are necessary to return our Company to profitability.
However, even as we right-size our organization, we continue to search for
opportunities to make new investments to capitalize on current market
conditions.'
Financial Services and Other and Corporate Results
Income before taxes from the Company's Financial Services and Other
segment for the quarter and nine months ended September 30, 2008 was $3.4
million and $8.1 million, respectively, compared with $5.0 million and $16.8
million for the same periods in the previous year. The decreases in the 2008
periods primarily resulted from lower insurance revenue due to lower insurance
premiums collected from our homebuilding subcontractors as a result of the
decline in home construction levels. The Company also realized lower gains on
sales of mortgage loans, as the dollar volumes of mortgage loan originations
and mortgage loans sold declined in conjunction with builder home closings,
which were offset by reductions in general and administrative expenses for our
mortgage operations.
Loss before taxes from the Company's Corporate segment for the quarter and
nine months ended September 30, 2008 was $21.3 million and $33.0 million,
respectively, compared with income before taxes of $1.7 million and loss
before taxes of $14.5 million for the same periods in 2007. The decline for
both periods primarily resulted from reduced supervisory fees charged to other
segments, an increase in interest expense related to incurred amounts that
could no longer be capitalized to inventory and the impact of recording an
$8.0 million gain on the sale of an aircraft during the 2007 third quarter.
Home Orders and Backlog
MDC received orders, net of cancellations, for 667 homes with an estimated
sales value of $182.0 million during the 2008 third quarter, compared with net
orders for 1,228 homes with an estimated sales value of $365.0 million during
the same period in 2007. For the nine months ended September 30, 2008, the
Company received net orders for 2,724 homes with a sales value of $786
million, compared with 5,756 homes with a sales value of $1.92 billion for the
nine months ended September 30, 2007. During the third quarter and first nine
months of 2008, the Company's approximate order cancellation rate was 46% and
43%, respectively, compared with rates of 57% and 44% experienced during the
same periods in 2007. The Company ended the third quarter of 2008 with a
backlog of 1,127 homes with an estimated sales value of $364.0 million,
compared with a backlog of 3,399 homes with an estimated sales value of $1.21
billion at September 30, 2007.
Since 1972, MDC has built and financed the American dream for more than
150,000 families. MDC's commitment to customer satisfaction, quality and value
is reflected in each home its subsidiaries build. As one of the largest
homebuilders in the United States, the Company has homebuilding divisions
across the country, including Denver, Colorado Springs, Salt Lake City, Las
Vegas, Phoenix, Tucson, California, Northern Virginia, Maryland,
Philadelphia/Delaware Valley and Jacksonville. The Company also provides
mortgage financing, insurance and title services, primarily for MDC
homebuyers, through its wholly owned subsidiaries, HomeAmerican Mortgage
Corporation, American Home Insurance Agency, Inc. and American Home Title and
Escrow Company, respectively. M.D.C. Holdings, Inc. is traded on the New York
Stock Exchange under the symbol 'MDC.' For more information, visit
http://www.mdcholdings.com.
Forward-Looking Statements
Certain statements in this release, including statements regarding our
business, financial condition, results of operation, cash flows, strategies
and prospects, constitute 'forward-looking statements' within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Such
factors include, among other things, (1) general economic conditions,
including changes in consumer confidence, inflation or deflation and
employment levels; (2) changes in business conditions experienced by the
Company, including cancellation rates, net home orders, home gross margins,
and land and home values; (3) changes in interest rates, mortgage lending
programs and the availability of credit; (4) the relative stability of debt
and equity markets; (5) competition; (6) the availability and cost of land and
other raw materials used by the Company in its homebuilding operations; (7)
the availability and cost of performance bonds and insurance covering risks
associated with our business; (8) shortages and the cost of labor; (9) weather
related slowdowns; (10) slow growth initiatives; (11) building moratoria; (12)
governmental regulation, including the interpretation of tax, labor and
environmental laws; (13) changes in consumer confidence and preferences; (14)
terrorist acts and other acts of war; and (15) other factors over which the
Company has little or no control. Additional information about the risks and
uncertainties applicable to the Company's business is contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2007,
which has been filed with the Securities and Exchange Commission ('SEC'), and
the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 2008, which is scheduled to be filed with the SEC today. All
forward-looking statements made in this press release are made as of the date
hereof, and the risk that actual results will differ materially from
expectations expressed in this press release will increase with the passage of
time. The Company undertakes no duty to update publicly any forward-looking
statements, whether as a result of new information, future events or
otherwise. However, any further disclosures made on related subjects in our
subsequent filings, releases or presentations should be consulted.
M.D.C.
