Larry Mizel
Denver-based M.D.C. Holdings Inc., parent of Richmond Homes of Colorado, today posted second-quarter earnings, which showed its homebuilding operation had its first operating profit in five years, while almost every financial metric had improved from the second quarter of 2011.
Among other things in the second quarter, compared to a year earlier.
- Net income of $10.6 million, or $0.22 per diluted share, compared with a net loss of $28.0 million, or $0.60 per diluted share in the second quarter of 2011.
- 1,402 net new orders, up 32 percent.
- Backlog of 2,028 homes, up 42%; backlog dollar value up 52% to $657.5 million
- Home sale revenues of $256.5 million, up 24 percent.
- 861 homes closed, up 21 percent.
- Gross margin from home sales of 14.2 percent compared with 8.9 percent.
- No inventory impairment charges versus $8.6 million for the 2011 second quarter.
- Home gross margin before impairment charges, interest and warranty adjustments improved 200 basis points to 16.9 percent.
- Homebuilding Selling, General and Administrative expenses (SG&A) of $39.2 million, a decrease of $9.9 million, or 20 percent.
- SG&A as a percentage of home sale revenues of 15.3 percent, an 850 basis point improvement
- G&A expense included $3.8 million in litigation recoveries
“I am pleased to announce a second quarter profit of $0.22 per share, with net income improving by nearly $40 million over the prior year,” said Larry Mizel, CEO and chairman of M.D.C., one of the nation’s largest homebuilding companies, said in a statement.
“We believe that our favorable results are largely attributable to our implementation of several key strategic initiatives, which we announced over the past few quarters, combined with modest improvements in homebuilding and overall market conditions.
“We dramatically improved our operating leverage in the second quarter by accelerating our sales absorption pace and reducing overhead costs,” Mizel continued. “These efforts drove a 21 percent year-over-year increase in new home deliveries and a 20 percent year-over-year reduction in our homebuilding SG&A costs. In addition, our interest expense decreased by $7.3 million for the second quarter, largely due to the debt reduction we undertook during the last half of 2011, and our impairment charges fell $8.6 million against a backdrop of stabilizing new home prices. As a result, our homebuilding segment achieved an operating profit for the first time in five years.”
“As the overall housing market has continued to show signs of recovery over the last several quarters, our efforts to improve our sales process, product offering and cancellation rate have helped us improve sales results. During the second quarter, net new orders increased 32 percent year-over-year to a five-year second quarter high, driven by a 24 percent improvement in our absorption pace per community and a 900 basis point reduction in our cancellation rate.
“With our quarter-end backlog up 42 percent over the prior year, we are well-positioned to achieve continued gains in operating leverage during the second half of 2012 and achieve our goal of reaching profitability for 2012.”
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