Getting your player ready...
MDC Holdings, Inc., Denver’s largest homebuilding company, cut its losses by $1 million from a year ago.
Today, the parent of Richmond American Homes, reported a net loss of $19.9 million, or 43 cents per share in the first quarter, compared with a net loss of $20.9 million, or 45 cents per share, in the first quarter of 2010.
MDC also reported that its revenues increased 15 percent to $169.7 million, compared with $147.1 million a year ago.
Mizel addresses “difficult” market
“Difficult market conditions, coupled with the absence of the federal homebuyer tax credit, resulted in a reduction in net home orders during the three months ended March 31, 2011 compared with the same period during 2010,” Larry Mizel, MDC’s CEO and chairman, said in a statement. “However, we have seen sequential improvement in home orders during each month in 2011 through April, consistent with seasonality.”
Mizel went on to say that, “Top-line growth is a key component of the strategy we are executing in an effort to return to profitability. We pursued that growth strategy by entering the Seattle market in April 2011 through the purchase of substantially all of the homebuilding assets of SDC Homes, which ranked as Seattle’s third largest builder. We have also dedicated substantial resources towards increasing market share in our current footprint, as shown by a 23 percent year-over-year increase in our active subdivision count at the end of the 2011 first quarter.”
However, he said MDC’s home gross margins have come under pressure during the past few quarters.
“First, our land costs have increased significantly, as the market for acquiring finished residential lots in prime locations has been very competitive, despite the continuing overall weakness in the market for new homes,” Mizel said. ‘However, we believe our current land costs are consistent with our historical costs. Furthermore, first quarter home gross margins in our newer projects, which accounted for more than 50 percent of closings, exceeded the home gross margins we achieved in older projects.”
Mizel also said MDC has accepted lower gross margins to reduce its excess supply of unsold units under construction.
“Given that our land costs have returned to a level consistent with our historical average and we have substantially reduced our unsold inventory, we believe we have an opportunity to stabilize our home gross margins near current levels, if demand does not deteriorate further,” Mizel said.
1st Quarter Highlights
Home closings for the first quarter ended March 31, increased to 554 homes with an average selling price of $294,900, compared with home closings of 523 homes with an average selling price of $269,500 during the same period in 2010.
Total revenue for the first quarter of 2011 was $169.7 million, compared with revenue of $147.1 million for the same period in 2010. The increase in revenue was driven primarily by the 6% increase in home closings and the 9% year-over-year increase in average selling price.
Net orders for the first quarter ended March 31, 2011 decreased to 705 homes with an estimated sales value of $205 million, compared with net orders for 931 homes with an estimated sales value of $258 million during the same period in 2010. The decrease in net orders is attributable to an increase in our cancellation rate for the quarter, which rose to 32 percent from 22% during the first quarter of 2010, in addition to decreased absorptions per community, as the first quarter of 2010 was heavily influenced by the homebuyer tax credit.
The company ended the 2011 first quarter with 993 homes under contract with an estimated sales value of $312 million, compared with a backlog of 1,234 homes with an estimated sales value of $381 million at March 31, 2010.
Home gross margins in the 2011 first quarter were 13.7% as compared with 22.4 percent in the 2010 first quarter. Excluding interest expense and warranty adjustments, home gross margin was 16.0 percent in the first quarter of 2011 as compared with 21.9 percent in the first quarter of 2010.
Looking at the trend in backlog, its estimated home gross margin at the end of the first quarter was roughly equal to the estimated home gross margin at the start of the quarter.
General and administrative expenses decreased to $36.8 million for the quarter ended March 31, 2011, compared with $40.2 million for the same period in the prior year.
The decrease was driven primarily by lower legal costs and employee compensation expense.
Marketing costs were $9.8 million in the first quarter of 2011, compared with $7.1 million in the first quarter of 2010, primarily due to the year-over-year increase in our community count. Commission costs were $5.8 million as compared with $5.1 million in the same quarter last year, inline with the increase in revenue.
Contact John Rebchook at JRCHOOK@gmail.com.
