(Source: PRNewswire-FirstCall)
DENVER, July 31 /PRNewswire-FirstCall/ -- M.D.C. Holdings, Inc. today reported results for its second quarter ended June 30, 2009. The Company announced a net loss for the quarter of $29.6 million, or $0.64 per diluted share, which included a pre-tax charge of $1.2 million for asset impairments. The 2009 second quarter net loss also included a $17.6 million increase in our deferred tax valuation allowance, of which $9.7 million related to a 2006 alternative minimum tax liability associated with our 2008 net operating loss carry back. The net loss for the 2008 second quarter was $100.7 million, or $2.18 per diluted share, which included a pre-tax charge of $88.3 million for asset impairments and an increase in our deferred tax valuation allowance of $43.4 million. Total revenue for the second quarter of 2009 was $195.3 million, compared with revenue of $403.4 million for the same period in 2008.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "Overall economic conditions in the second quarter remained extremely difficult, as evidenced by a national unemployment rate that now stands at its highest level in more than 25 years. However, we did experience a year-over-year increase in quarterly net home orders for the first time since 2005, and our impairments dropped to a nominal level. In addition, building and sales activity for the industry overall improved from historic lows recorded earlier this year."
Mizel continued, "We are pleased to report that we made significant progress during the second quarter on strategic initiatives designed to strengthen our operating platform. The smaller, more affordable homes that we introduced earlier this year in many of our markets have been well-received by our buyers, with a sales absorption pace exceeding the Company's average. These homes are designed both to meet the current needs of our customers and to allow for a more efficient construction process, and we intend to expand their availability to a larger percentage of our active communities in the future."
"We believe that the strategic production of unsold homes can be very effective if managed properly, and therefore we have built a limited supply of unsold inventory. We generally require construction on the unsold homes to stop at the drywall stage so that the buyers have the opportunity to personalize the homes with upgrades from one of our Home Galleries or design centers. We believe that this strategy will help us to turn our inventories more quickly while we maintain margins similar to those received for a build-to-order home. Because of this strategy, the number of unsold homes available for personalization increased slightly during the quarter. During the same period, we reduced our inventory of finished, unsold homes by more than 70%."
Mizel concluded, "With our cash and investments balance of more than $1.6 billion at the end of the quarter, no borrowings outstanding on our homebuilding line of credit and no senior debt maturities until 2012, we are well positioned with the option to take advantage of market opportunities that may arise. We continue to actively pursue and evaluate potential investments, subjecting each to our rigorous and disciplined investment process and approving only those that we believe will maximize long-term value for our shareholders."
Operational Highlights
Net orders for the second quarter ended June 30, 2009 totaled 977 homes with an estimated sales value of $289.0 million, compared with net orders for 959 homes with an estimated sales value of $279.0 million during the same period in 2008. The slight net order improvement was driven by significant increases in our Mountain and East segments, offset by a substantial decline in our West segment. During the second quarter of 2009, the Company's cancellation rate dropped to 20% compared with 43% during the same period in 2008, primarily due to a significantly lower beginning backlog in the second quarter of 2009 as compared with the second quarter of 2008. In addition, cancellation rates were lower due to a decrease in mortgage-related issues and a decline in the number of prospective home buyers with a contingency to sell an existing home.
Homebuilding revenue for the 2009 second quarter fell to $192.0 million, compared with $400.9 million in the second quarter of 2008. The decline in revenue was primarily the result of a year-over-year decline in home closings and average selling price of 49% and 6%, respectively. All of our markets experienced year-over-year decreases in home closings and all but California experienced year-over-year declines in average selling price.
Home gross margins during the second quarter of 2009 increased to 18.0% from 11.7% in the second quarter of 2008, primarily due to significant prior period impairments, which lowered the lot cost basis on homes that closed during the quarter. In addition, second quarter home gross margins were positively impacted by a reduction in the warranty reserve, due to a decrease in warranty payments actually incurred. These positive results were partially offset by the decline in the average selling prices of homes closed and by a shift in mix to a higher percentage of low-margin model and finished spec home closings during the second quarter of 2009.
Homebuilding SG&A decreased to $30.8 million for the quarter ended June 30, 2009, compared with $56.7 million for the same period in the prior year. The decrease in SG&A resulted from various cost saving initiatives associated with right-sizing our operations in response to the reduced level of home closings, including a 44% reduction in homebuilding headcount over the past year. Also contributing to this decrease was a reduction in marketing expenses, primarily due to a significant reduction in both the amortization of deferred marketing costs and sales office and model home expenses, as well as a decline in commission expenses resulting from fewer home closings and lower average selling prices.
During the second quarter of 2009, we recognized $1.2 million of asset impairments, a decrease of 99% from the $88.3 million recognized in the 2008 second quarter. Overall, the year-over-year decrease in asset impairments can be attributed to the reduction in the total number of lots owned and the impact of recording significant impairments over the last eleven quarters, thereby reducing our exposure to further impairments.
Six Month Results
Net loss for the six months ended June 30, 2009 was $70.4 million, or $1.52 per diluted share, which included a pre-tax charge of $15.8 million for asset impairments. The net loss for the six months ended June 30, 2009 also included a $33.0 million increase in our deferred tax valuation allowance, of which $9.7 million related to a 2006 alternative minimum tax liability associated with our 2008 net operating loss carry back. The net loss for the first six months of 2008 was $173.5 million, or $3.77 per diluted share, which included a pre-tax charge of $143.1 million for asset impairments and an increase of $54.0 million to our deferred tax asset valuation allowance.
About MDC
Since 1972, MDC has built and financed the American dream for over 160,000 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 Form 10-Q for the quarter June 30, 2009, which is scheduled to be filed with the Securities and Exchange Commission 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. HOLDINGS, INC. Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Six Months Ended June 30, Ended June 30, --------------- --------------- 2009 2008 2009 2008 ---- ---- ---- ---- Revenue Home sales revenue $185,554 $382,093 $352,536 $737,885 Land sales revenue 1,954 12,281 4,572 40,849 Other revenue 7,758 9,048 14,090 20,466 ----- ----- ------ ------ Total Revenue 195,266 403,422 371,198 799,200 ------- ------- ------- ------- Costs and Expenses Home cost of sales 152,118 337,543 293,443 652,580 Land cost of sales 1,500 6,835 2,841 34,784 Asset impairments, net 1,243 88,278 15,812 143,110 Marketing expenses 7,930 20,350 16,762 39,553 Commission expenses 6,953 14,659 13,311 28,092 General and administrative expenses 37,800 43,922 76,181 95,110 Other operating expenses 292 1,846 557 3,570 Related party expenses 4 5 9 10 --- --- --- --- Total Operating Costs and Expenses 207,840 513,438 418,916 996,809 ------- ------- ------- ------- Loss from Operations (12,574) (110,016) (47,718) (197,609) ------- -------- ------- -------- Other income (expense) Interest income 2,968 8,547 7,039 19,023 Interest expense (9,838) (80) (19,578) (210) Other income 381 9 121 30 --- --- --- --- Loss Before Taxes (19,063) (101,540) (60,136) (178,766) ------- -------- ------- -------- Provision for benefit from income taxes, net (10,519) 814 (10,299) 5,220 ------- --- ------- ----- NET LOSS $(29,582) $(100,726) $(70,435) $(173,546) ======== ========= ======== ========= LOSS PER SHARE Basic $(0.64) $(2.18) $(1.52) $(3.77) ====== ====== ====== ====== Diluted $(0.64) $(2.18) $(1.52) $(3.77) ====== ====== ====== ====== WEIGHTED-AVERAGE SHARES OUTSTANDING Basic 46,548 46,110 46,474 46,033 ====== ====== ====== ====== Diluted 46,548 46,110 46,474 46,033 ====== ====== ====== ====== DIVIDENDS DECLARED PER SHARE $0.25 $0.25 $0.50 $0.50 ===== ===== ===== ===== M.D.C. HOLDINGS, INC.
