M.D.C. Holdings Announces Fourth Quarter 2011 Results
DENVER, Feb. 2, 2012 /PRNewswire/ --
- Loss before tax of $19.8 million, including charges of $20.2 million for extinguishment of debt and $2.7 million for asset impairments and project abandonment
- Adjusted income before tax of $3.1 million (excluding charges), an $18.9 million year-over-year improvement
- Net loss of $18.8 million, or $0.40 per share
- General and administrative expense of $28.7 million decreased 33% year-over-year
- Net orders increased 1% year-over-year to 523 homes
- Backlog of 1,043 homes at 12/31/2011, up 24% year-over-year
- Cash and investments of $863 million at 12/31/2011 exceeds total debt by $70 million
M.D.C. Holdings, Inc. (NYSE: MDC) today reported a net loss for the 2011 fourth quarter of $18.8 million, or $0.40 per share, including pretax charges of $20.2 million related to the extinguishment of debt and $2.7 million related to asset impairments and project abandonment charges. In the 2010 fourth quarter, our net loss was $30.0 million, or $0.65 per share, including pretax charges of $19.2 million related to asset impairments and project abandonment charges. Revenue for the 2011 fourth quarter decreased 5% to $247.4 million, compared with $259.6 million a year ago.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "In the fourth quarter of 2011, excluding debt extinguishment and land-related charges, we achieved profitability, thereby providing strong evidence of the meaningful progress we have made in implementing Company initiatives over the past few quarters."
Mizel continued, "Our efforts to reduce overhead continued in the fourth quarter, allowing us to decrease general and administrative expense by 33% year-over-year. In addition, since the second quarter of 2011, when we announced a change to our strategy on starting unsold homes, our home gross margins have improved 200 basis points. Also, we completed our previously announced plan to reduce our debt by $500 million, which decreased the Company's annualized interest incurred going forward by $30 million. We believe that the actions we have taken so far will continue to positively impact our operating results going forward as we aggressively pursue our goal of returning to full-year profitability in 2012."
Mizel concluded, "To start 2012, we implemented changes to our sales process and product offering across our Company. At the same time, January 2012 orders increased approximately 30% from January 2011. We cannot be certain that the improvement in net orders is attributable to our recent actions, or that the improvement will be sustained in future months. Nonetheless, we are encouraged by this data point and other increasingly positive signs for the health of the housing market overall and for our individual markets, which lead us to believe that our industry has stabilized and may begin to recover in 2012."
Fourth Quarter Highlights
Home closings in the 2011 fourth quarter were 792 units, with an average selling price of $291,300, compared with 865 units, with an average selling price of $291,700, in the fourth quarter of 2010. Our ratio of closings to beginning backlog decreased to 60% for the 2011 fourth quarter, compared with 73% in the 2010 fourth quarter. The decrease is attributable to a year-over-year decrease in the percentage of backlog under construction at the beginning of the quarter, consistent with our change in strategy on starting unsold homes.
Home gross margins in the 2011 fourth quarter were 15.0% as compared with 17.0% in the 2010 fourth quarter. Adjusted home gross margins (excluding warranty adjustments and interest) were 16.8% in the 2011 fourth quarter, up from 16.5% in the 2010 fourth quarter.
Marketing costs were $9.1 million in the 2011 fourth quarter, compared with $11.6 million in the 2010 fourth quarter, primarily due to a decrease in product advertising costs. Commission costs were $8.2 million, as compared with $9.4 million in the same quarter last year, inline with the decrease in revenue we experienced.
General and administrative expenses decreased to $28.7 million for the 2011 fourth quarter, compared with $42.9 million for the same period in the prior year. The primary driver behind the decrease was a $10.3 million decline in compensation-related expenses.
During the 2011 fourth quarter, asset impairments totaled $0.8 million, compared with $17.9 million in the same quarter last year. We also incurred $1.8 million of expense related to write-offs of land option deposits and pre-acquisition costs associated with lot option contracts that we elected not to exercise during the 2011 fourth quarter, compared with $1.3 million during the 2010 fourth quarter.
Net orders for the 2011 fourth quarter increased slightly to 523 homes with an estimated sales value of $153 million, compared with net orders for 519 homes with an estimated sales value of $150 million during the same period in 2010.
We ended the 2011 fourth quarter with 1,043 homes under contract with an estimated sales value of $330 million, compared with a backlog of 842 homes with an estimated sales value of $269 million at December 31, 2010. Our estimated home gross margin in backlog at the end of the fourth quarter increased from the estimated home gross margin in backlog to start the quarter.
Full Year Results
For full year results, please consult the Company's Form 10-K for the year ended December 31, 2011, which is scheduled to be filed with the Securities and Exchange Commission today.
Since 1972, MDC's subsidiary companies have built and financed the American dream for more than 165,000 families. MDC's commitment to customer satisfaction, quality and value is reflected in each home its subsidiaries build. MDC is one of the largest homebuilders in the United States. Its subsidiaries have homebuilding operations across the country, including the metropolitan areas of Denver, Colorado Springs, Salt Lake City, Las Vegas, Phoenix, Tucson, Riverside-San Bernardino, Los Angeles, San Francisco Bay Area, Washington D.C., Baltimore, Philadelphia, Jacksonville and Seattle. The Company's subsidiaries also provide mortgage financing, insurance and title services, primarily for Richmond American homebuyers, through 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 www.mdcholdings.com.
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) changes in the market value of the Company's investments in marketable securities; (5) uncertainty in the mortgage lending industry, including repurchase requirements associated with HomeAmerican's sale of mortgage loans (6) the relative stability of debt and equity markets; (7) competition; (8) the availability and cost of land and other raw materials used by the Company in its homebuilding operations; (9) the availability and cost of performance bonds and insurance covering risks associated with our business; (10) shortages and the cost of labor; (11) weather related slowdowns; (12) slow growth initiatives; (13) building moratoria; (14) governmental regulation, including the interpretation of tax, labor and environmental laws; (15) changes in consumer confidence and preferences; (16) terrorist acts and other acts of war; and (17) 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-K for the year ended December 31, 2011, 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 webcasts should be consulted.
M.D.C. HOLDINGS, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
Home sales revenue
Land sales revenue
COSTS AND EXPENSES
Home cost of sales
Land cost of sales
General and administrative expenses