DENVER, Oct. 24 /PRNewswire-FirstCall/ -- M.D.C. Holdings, Inc. today announced a net loss for the quarter ended September 30, 2007 of $155.4 million, or $3.40 per diluted share, which included pre-tax charges of $249.0 million for asset impairments and $5.1 million for write-offs of deposits and pre-acquisition costs associated with land option contracts the Company does not intend to pursue. Net income for the third quarter of 2006 was $48.7 million, or $1.06 per diluted share, including pre-tax charges of $19.9 million for asset impairments and $7.3 million for write-offs of deposits and pre-acquisition costs. Total revenue for the third quarter of 2007 was $686.7 million, compared with revenue of $1.08 billion for the same period in 2006.
Net loss for the nine months ended September 30, 2007 was $355.8 million, or $7.79 per diluted share, which included pre-tax charges of $551.4 million for asset impairments and $15.6 million for write-offs of deposits and pre- acquisition costs. Net income for the first nine months of 2006 was $220.6 million, or $4.80 per diluted share, including pre-tax charges of $20.8 million for asset impairments and $23.0 million for write-offs of deposits and pre-acquisition costs. Total revenue for the first nine months of 2007 was $2.15 billion, compared with revenue of $3.46 billion for the same period in 2006.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "Throughout these turbulent times for the homebuilding industry, we have remained focused on improving our investment grade balance sheet, strengthening our financial position and enhancing our operating structure and processes in preparation for an eventual recovery."
Mizel continued, "We have generated cash flow from operations of $740 million over the last 12 months, including more than $130 million in this third quarter, primarily as a result of significant reductions in our inventories of land, homes under construction and mortgage loans. This cash flow raised our quarter-end cash balance to $730 million, with no borrowings outstanding on our $1.25 billion line of credit, increasing our cash and available borrowing capacity year-over-year by 45% to nearly $2.0 billion. Having already reduced the lots we control by more than 40% over the past year, we kept our expenditures for land acquisition to a small fraction of prior-year amounts. At the same time, we tightened our controls on cash outflows for land development and home starts, while continuing to work with our suppliers and subcontractors to achieve further reductions in the costs of home construction. Finally, to reduce our overhead and increase our efficiency in these difficult times, our organization has continued its downsizing and realignment efforts, reducing the number of our homebuilding divisions to 17 from 27 at the beginning of 2006, and lowering our employee headcount by almost 40% during the same period."
Homebuilding Results
Homebuilding loss before taxes for the quarter and nine months ended September 30, 2007 was $258.0 million and $568.3 million, respectively, compared with income before taxes of $82.3 million and $385.8 million for the same periods in 2006. The pre-tax differences were driven in large part by the asset impairment charges discussed above, as well as significant declines in home closings and home gross margins from the levels achieved during the same periods in 2006. These income decreases were offset partially by the impact of reduced homebuilding commissions, marketing, general and administrative expenses ("SG&A").
The Company closed 1,963 homes and produced home gross margins of 14.1% in the 2007 third quarter, compared with 2,955 home closings and home gross margins of 22.5% for the same period in 2006. For the nine months ended September 30, 2007, the Company closed 5,995 homes and produced home gross margins of 14.7%, compared with 9,529 home closings and home gross margins of 24.3% for the nine months ended September 30, 2006. Average selling prices were $331,700 and $342,100, respectively, for the quarter and nine months ended September 30, 2007, down $23,900 and $10,200 from the same periods in 2006. Homebuilding SG&A decreased to $105.2 million and $330.1 million, respectively, for the three and nine months ended September 30, 2007, compared with $137.0 million and $418.3 million for the same periods in the prior year.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "During the 2007 third quarter, we continued to battle adverse conditions in all of our homebuilding markets. As buyer confidence continued to erode and competition for new home sales intensified, we experienced reduced selling prices and increased incentive levels in most of our markets, which decreased our performance expectations with respect to certain subdivisions in these markets. As a consequence, we recognized $249 million in inventory impairments with respect to more than 7,000 lots in 132 subdivisions, which largely accounted for our third quarter loss. Land inventory was impaired by $192 million and work-in-process inventory was impaired by $57 million. The quarter-end book value of the impaired subdivisions after the impairments was $873 million, consisting of $403 million of land and $470 million of work-in-process. As has been the case in each of the last three quarters, the impairments this quarter primarily occurred in our West homebuilding segment, with more than 75% applicable to subdivisions in our Arizona, Nevada and California markets. Over the last five quarters, we have impaired approximately 55% of the 18,500 lots we owned at the end of our 2007 third quarter."
Financial Services and Other Results
Income before taxes from the Company's Financial Services and Other segment for the quarter and nine months ended September 30, 2007 was $5.0 million and $16.8 million, respectively, compared with $13.0 million and $35.2 million for the same periods in the previous year. The decreases in both 2007 periods primarily resulted from lower gains on sales of mortgage loans, as the dollar volumes of mortgage loan originations and mortgage loans sold declined in line with builder home closings. Additionally, in an effort to reduce its exposure to the risks inherent in holding mortgage loans, the Company continued to sell loans more quickly, resulting in less profitable loan sales during the quarter.
Home Orders and Backlog
MDC received orders, net of cancellations, for 1,228 homes with an estimated sales value of $365.0 million during the 2007 third quarter, compared with net orders for 2,120 homes with an estimated sales value of $678.0 million during the same period in 2006. For the nine months ended September 30, 2007, the Company received net orders for 5,756 homes with a sales value of $1.92 billion, compared with orders for 8,658 homes with a sales value of $2.95 billion for the nine months ended September 30, 2006. During the third quarter and first nine months of 2007, the Company's approximate order cancellation rates were 57% and 44%, respectively, compared with rates of 49% and 40% experienced during the same periods in 2006. The Company ended the third quarter of 2007 with a backlog of 3,399 homes with an estimated sales value of $1.21 billion, compared with a backlog of 5,661 homes with an estimated sales value of $2.10 billion at September 30, 2006.
MDC, whose subsidiaries build homes under the name "Richmond American Homes," is one of the top ten homebuilders in the United States, based on 2006 revenue. The Company also provides mortgage financing, primarily for MDC's homebuyers, through its wholly owned subsidiary HomeAmerican Mortgage Corporation. MDC, a Fortune 500 Company, is a major regional homebuilder with a significant presence in Colorado, Jacksonville, Las Vegas, Maryland, Northern California, Northern Virginia, Phoenix, Salt Lake City, Southern California and Tucson. MDC also has established operating divisions in Chicago, Philadelphia/Delaware Valley and West Florida. For more information about our Company, please visit RichmondAmerican.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 and business conditions, including changes in cancellation rates, net home orders, home gross margins, and land and home values; (2) changes in interest rates, mortgage lending programs and the availability of credit; (3) the relative stability of debt and equity markets; (4) competition; (5) the availability and cost of land and other raw materials used by the Company in its homebuilding operations; (6) the availability and cost of performance bonds and insurance covering risks associated with our business; (7) shortages and the cost of labor; (8) weather related slowdowns; (9) slow growth initiatives; (10) building moratoria; (11) governmental regulation, including the interpretation of tax, labor and environmental laws; (12) changes in consumer confidence and preferences; (13) required accounting changes; (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, 2006 and Form 10-Q for the quarter ended June 30, 2007, which were filed with the Securities and Exchange Commission. 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 publicly update 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 Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 REVENUE Home sales revenue $651,124 $1,050,700 $2,050,737 $3,356,416 Land sales revenue 2,700 3,336 12,151 18,812 Other revenue 32,837 26,887 85,605 83,101 Total Revenue 686,661 1,080,923 2,148,493 3,458,329 COSTS AND EXPENSES Home cost of sales 559,402 813,824 1,749,165 2,540,381 Land cost of sales 452 3,210 7,740 18,124 Asset impairments 248,950 19,915 551,422 20,775 Marketing expenses 28,694 31,296 87,144 91,899 Commission expenses 23,900 36,390 71,530 106,627 General and administrative expenses 76,482 99,779 247,229 326,595 Related party expenses 95 88 286 2,792 Total Costs and Expenses 937,975 1,004,502 2,714,516 3,107,193 (Loss) income before income taxes (251,314) 76,421 (566,023) 351,136 Benefit from (provision for) income taxes 95,936 (27,715) 210,175 (130,518) NET (LOSS) INCOME $(155,378) $48,706 $(355,848) $220,618 (LOSS) EARNINGS PER SHARE Basic $(3.40) $1.08 $(7.79) $4.91 Diluted $(3.40) $1.06 $(7.79) $4.80 WEIGHTED-AVERAGE SHARES Basic 45,751 44,972 45,659 44,911 Diluted 45,751 45,868 45,659 45,932 DIVIDENDS DECLARED PER SHARE $0.25 $0.25 $0.75 $0.75 M.D.C. HOLDINGS, INC. Consolidated Balance Sheets (Dollars in thousands, except per share amounts) (Unaudited) September 30, December 31, 2007 2006 ASSETS Cash and cash equivalents $729,479 $507,947 Restricted cash 1,633 2,641 Home sales and other receivables 66,891 143,936 Mortgage loans held in inventory, net 72,863 212,903 Income taxes receivable, net 22,748 - Inventories Housing completed or under construction 1,267,478 1,178,671 Land and land under development 754,728 1,575,158 Property and equipment, net 47,020 44,606 Deferred income taxes 306,942 124,880 Prepaid expenses and other assets, net 91,471 119,133 Total Assets $3,361,253 $3,909,875 LIABILITIES Accounts payable $150,037 $171,005 Accrued liabilities 369,168 418,953 Income taxes payable - 28,485 Related party liabilities 701 2,401 Homebuilding line of credit - - Mortgage line of credit 41,957 130,467 Senior notes, net 996,986 996,682 Total Liabilities 1,558,849 1,747,993 COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding - - Common stock, $0.01 par value; 250,000,000 shares authorized; 45,869,000 and 45,838,000 issued and outstanding, respectively, at September 30, 2007 and 45,179,000 and 45,165,000 issued and outstanding, respectively, at December 31, 2006 459 452 Additional paid-in capital 791,212 760,831 Retained earnings 1,012,395 1,402,261 Accumulated other comprehensive loss (1,003) (1,003) Less treasury stock, at cost; 31,000 and 14,000 shares, respectively, at September 30, 2007 and December 31, 2006 (659) (659) Total Stockholders' Equity 1,802,404 2,161,882 Total Liabilities and Stockholders' Equity $3,361,253 $3,909,875 M.D.C. HOLDINGS, INC. Information on Segments (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 REVENUE Homebuilding West $389,309 $653,932 $1,277,012 $2,061,708 Mountain 138,439 168,193 418,300 519,107 East 72,368 137,050 205,523 444,765 Other Homebuilding 60,364 105,553 184,195 374,299 Total Homebuilding 660,480 1,064,728 2,085,030 3,399,879 Financial Services and Other 14,652 23,843 47,836 74,158 Corporate 16,048 60 30,510 675 Inter-company Adjustments (4,519) (7,708) (14,883) (16,383) Consolidated $686,661 $1,080,923 $2,148,493 $3,458,329 (LOSS) INCOME BEFORE INCOME TAXES Homebuilding West $(197,917) $53,762 $(462,547) $274,642 Mountain (925) 9,320 3,218 25,183 East (15,998) 23,911 (27,168) 85,691 Other Homebuilding (43,158) (4,660) (81,776) 237 Total Homebuilding (257,998) 82,333 (568,273) 385,753 Financial Services and Other 5,018 12,989 16,776 35,161 Corporate 1,666 (18,901) (14,526) (69,778) Consolidated $(251,314) $76,421 $(566,023) $351,136 ASSET IMPAIRMENTS West $190,490 $15,243 $445,122 $15,243 Mountain 6,930 627 16,709 627 East 16,237 1,357 24,669 1,357 Other Homebuilding 35,293 2,688 64,922 3,548 Total Homebuilding $248,950 $19,915 $551,422 $20,775 September 30, December 31, 2007 2006 TOTAL ASSETS West $1,157,760 $1,869,442 Mountain 535,568 535,554 East 308,070 333,902 Other Homebuilding 168,990 266,326 Total Homebuilding 2,170,388 3,005,224 Financial Services and Other 142,456 284,791 Corporate 1,091,566 657,917 Inter-company (43,157) (38,057) Consolidated $3,361,253 $3,909,875 M.D.C. HOLDINGS, INC. Selected Financial Data (Dollars in thousands) (Unaudited) Three Months Ended September 30, Change 2007 2006 Amount % SELECTED FINANCIAL DATA General and Administrative Expenses Homebuilding Operations $52,561 $69,317 $(16,756) -24% Financial Services and Other Operations $9,635 $11,516 $(1,881) -16% Corporate (1) $14,381 $19,034 $(4,653) -24% SG&A as a % of Home Sales Revenue Homebuilding Operations 16.1% 13.0% 3.1% Corporate (1) 2.2% 1.8% 0.4% Depreciation and Amortization $11,777 $13,028 $(1,251) -10% Home Gross Margins (2) 14.1% 22.5% -8.4% Cash Provided by (Used in) Operating Activities $136,246 $70,928 $65,318 Cash Used in Investing Activities $(6,307) $(2,893) $(3,414) Cash Used in Financing Activities $(68,839) $(26,675) $(42,164) Ending Unrestricted Cash and Available Borrowing Capacity $1,960,336 $1,356,532 $603,804 45% Corporate and Homebuilding Interest Interest Capitalized During the Period $14,444 $14,150 $294 2% Interest Included in Home Cost of Sales for the Period $14,428 $12,574 $1,854 15% Interest in Home Cost of Sales as a % of Home Sales Revenue 2.2% 1.2% 1.0% Interest Capitalized in Inventories at End of Period $54,004 $50,145 $3,859 8% Nine Months Ended September 30, Change 2007 2006 Amount % SELECTED FINANCIAL DATA General and Administrative Expenses Homebuilding Operations $171,419 $219,820 $(48,401) -22% Financial Services and Other Operations $31,060 $39,041 $(7,981) -20% Corporate (1) $45,036 $70,526 $(25,490) -36% SG&A as a % of Home Sales Revenue Homebuilding Operations 16.1% 12.5% 3.6% Corporate (1) 2.2% 2.1% 0.1% Depreciation and Amortization $33,994 $41,537 $(7,543) -18% Home Gross Margins (2) 14.7% 24.3% -9.6% Cash Provided by (Used in) Operating Activities $335,568 $(41,343) $376,911 Cash Used in Investing Activities $(8,362) $(7,224) $(1,138) Cash Used in Financing Activities $(105,674) $(33,120) $(72,554) Ending Unrestricted Cash and Available Borrowing Capacity Corporate and Homebuilding Interest Interest Capitalized During the Period $43,320 $43,993 $(673) -2% Interest Included in Home Cost of Sales for the Period $39,971 $35,847 $4,124 12% Interest in Home Cost of Sales as a % of Home Sales Revenue 2.0% 1.1% 0.9% Interest Capitalized in Inventories at End of Period (1) Includes related party expenses. (2) Home sales revenue less home cost of sales (excluding commissions, amortization of deferred marketing, project cost write offs and asset impairments) as a percent of home sales revenue. During the three and nine months ended September 30, 2007, we closed homes on lots for which we had previously recorded $36.4 million and $64.4 million, respectively, of asset impairments. M.D.C. HOLDINGS, INC. Selected Financial Data (Dollars in thousands) (Unaudited) Three Months Ended September 30, Change 2007 2006 Amount % HOMEAMERICAN OPERATING ACTIVITIES Principal Amount of Mortgage Loans Originated $286,192 $541,446 $(255,254) -47% Principal Amount of Mortgage Loans Brokered $118,580 $162,783 $(44,203) -27% Capture Rate 54% 60% -6% Including Brokered Loans 73% 78% -5% Mortgage Products (% of Loans Originated) Fixed Rate 86% 53% 33% Adjustable Rate - Interest Only 11% 39% -28% Adjustable Rate - Other 3% 8% -5% Prime Loans (3) 86% 54% 32% Alt-A Loans (4) 0% 41% -41% Government Loans (5) 14% 4% 10% Sub-Prime Loans (6) 0% 1% -1% Nine Months Ended September 30, Change 2007 2006 Amount % HOMEAMERICAN OPERATING ACTIVITIES Principal Amount of Mortgage Loans Originated $930,769 $1,672,096 $(741,327) -44% Principal Amount of Mortgage Loans Brokered $364,813 $492,464 $(127,651) -26% Capture Rate 55% 58% -3% Including Brokered Loans 74% 75% -1% Mortgage Products (% of Loans Originated) Fixed Rate 78% 50% 28% Adjustable Rate - Interest Only 20% 42% -22% Adjustable Rate - Other 2% 8% -6% Prime Loans (3) 77% 61% 16% Alt-A Loans (4) 14% 33% -19% Government Loans (5) 9% 4% 5% Sub-Prime Loans (6) 0% 2% -2% (3) Prime loans are defined as loans with Fair, Isaac and Company ("FICO") scores greater than 620 and that comply in all ways with the documentation standards of the government sponsored enterprise guidelines. (4) Alt-A loans are defined as loans that would otherwise qualify as prime loans except that they do not comply in all ways with the government sponsored enterprise guidelines. (5) Government loans are loans either insured by the Federal Housing Administration or guaranteed by the Department of Veteran Affairs. (6) Sub-prime loans are loans that have FICO scores of less than or equal to 620. M.D.C. HOLDINGS, INC. Homebuilding Operational Data (Dollars in thousands) (Unaudited) September December September 30, 31, 30, 2007 2006 2006 HOMES COMPLETED OR UNDER CONSTRUCTION Unsold Homes Under Construction - Final 493 476 468 Unsold Homes Under Construction - Frame 862 573 780 Unsold Homes Under Construction - Foundation 196 400 244 Total Unsold Homes Under Construction 1,551 1,449 1,492 Sold Homes Under Construction 2,791 2,430 4,340 Model Homes 758 757 762 Homes Completed or Under Construction 5,100 4,636 6,594 LOTS OWNED (excluding homes completed or under construction) Arizona 3,962 6,368 6,958 California 1,867 2,802 3,051 Nevada 1,879 2,747 3,096 West 7,708 11,917 13,105 Colorado 2,904 3,479 3,325 Utah 900 1,185 1,132 Mountain 3,804 4,664 4,457 Maryland 307 528 505 Virginia 417 643 674 East 724 1,171 1,179 Delaware Valley 141 265 283 Florida 849 1,093 1,220 Illinois 201 287 300 Texas - 13 69 Other Homebuilding 1,191 1,658 1,872 Total 13,427 19,410 20,613 LOTS UNDER OPTION Arizona 388 744 1,283 California 157 387 1,053 Nevada 4 250 627 West 549 1,381 2,963 Colorado 258 801 1,304 Utah - 91 272 Mountain 258 892 1,576 Maryland 605 960 1,034 Virginia 1,769 2,381 2,459 East 2,374 3,341 3,493 Delaware Valley 315 683 874 Florida 497 1,800 1,999 Illinois - - 47 Texas - - - Other Homebuilding 812 2,483 2,920 Total 3,993 8,097 10,952 Non-refundable Option Deposits Cash $8,093 $20,228 $34,034 Letters of Credit 8,287 14,224 16,069 Total Non-refundable Option Deposits $16,380 $34,452 $50,103 M.D.C. HOLDINGS, INC. Homebuilding Operational Data (Dollars in thousands) (Unaudited) Three Months Ended September 30, Change 2007 2006 Amount % HOMES CLOSED (UNITS) Arizona 700 716 (16) -2% California 237 383 (146) -38% Nevada 310 696 (386) -55% West 1,247 1,795 (548) -31% Colorado 219 334 (115) -34% Utah 162 206 (44) -21% Mountain 381 540 (159) -29% Maryland 71 104 (33) -32% Virginia 72 150 (78) -52% East 143 254 (111) -44% Delaware Valley 35 50 (15) -30% Florida 115 195 (80) -41% Illinois 41 46 (5) -11% Texas 1 75 (74) -99% Other Homebuilding 192 366 (174) -48% Total 1,963 2,955 (992) -34% AVERAGE SELLING PRICES PER HOME CLOSED Arizona $247.9 $311.8 $(63.9) -20% California 492.4 520.7 (28.3) -5% Colorado 357.7 301.4 56.3 19% Delaware Valley 417.2 394.3 22.9 6% Florida 253.8 275.6 (21.8) -8% Illinois 396.1 365.6 30.5 8% Maryland 521.4 576.1 (54.7) -9% Nevada 294.2 317.8 (23.6) -7% Texas 110.0 164.0 (54.0) -33% Utah 363.3 321.5 41.8 13% Virginia 484.1 486.2 (2.1) 0% Company Average $331.7 $355.6 $(23.9) -7% Nine Months Ended September 30, Change 2007 2006 Amount % HOMES CLOSED (UNITS) Arizona 1,997 2,337 (340) -15% California 831 1,252 (421) -34% Nevada 1,028 2,109 (1,081) -51% West 3,856 5,698 (1,842) -32% Colorado 583 1,154 (571) -49% Utah 568 580 (12) -2% Mountain 1,151 1,734 (583) -34% Maryland 181 290 (109) -38% Virginia 216 498 (282) -57% East 397 788 (391) -50% Delaware Valley 116 122 (6) -5% Florida 381 702 (321) -46% Illinois 68 119 (51) -43% Texas 26 366 (340) -93% Other Homebuilding 591 1,309 (718) -55% Total 5,995 9,529 (3,534) -37% AVERAGE SELLING PRICES PER HOME CLOSED Arizona $254.4 $303.6 $(49.2) -16% California 524.7 542.8 (18.1) -3% Colorado 345.5 302.2 43.3 14% Delaware Valley 452.7 396.5 56.2 14% Florida 265.2 290.1 (24.9) -9% Illinois 381.7 367.7 14.0 4% Maryland 521.3 573.8 (52.5) -9% Nevada 301.5 320.6 (19.1) -6% Texas 129.6 167.1 (37.5) -22% Utah 359.8 293.0 66.8 23% Virginia 491.4 555.2 (63.8) -11% Company Average $342.1 $352.2 $(10.2) -3% M.D.C. HOLDINGS, INC. Homebuilding Operational Data (Dollars in thousands) (Unaudited) Three Months Ended September 30, Change 2007 2006 Amount % ORDERS FOR HOMES, NET (UNITS) Arizona 385 680 (295) -43% California 152 273 (121) -44% Nevada 239 436 (197) -45% West 776 1,389 (613) -44% Colorado 153 196 (43) -22% Utah 41 251 (210) -84% Mountain 194 447 (253) -57% Maryland 36 70 (34) -49% Virginia 81 76 5 7% East 117 146 (29) -20% Delaware Valley 23 36 (13) -36% Florida 81 81 - 0% Illinois 37 20 17 85% Texas - 1 (1) -100% Other Homebuilding 141 138 3 2% Total 1,228 2,120 (892) -42% Estimated Value of Orders for Homes, net $365,000 $678,000 $(313,000) -46% Estimated Average Selling Price of Orders for Homes, net $297.2 $319.8 $(22.6) -7% Approximate Order Cancellation Rate (7) 57% 49% 8% Nine Months Ended September 30, Change 2007 2006 Amount % ORDERS FOR HOMES, NET (UNITS) Arizona 1,750 2,278 (528) -23% California 849 1,209 (360) -30% Nevada 984 1,734 (750) -43% West 3,583 5,221 (1,638) -31% Colorado 677 938 (261) -28% Utah 390 916 (526) -57% Mountain 1,067 1,854 (787) -42% Maryland 227 320 (93) -29% Virginia 275 383 (108) -28% East 502 703 (201) -29% Delaware Valley 104 110 (6) -5% Florida 377 530 (153) -29% Illinois 109 82 27 33% Texas 14 158 (144) -91% Other Homebuilding 604 880 (276) -31% Total 5,756 8,658 (2,902) -34% Estimated Value of Orders for Homes, net $1,920,000 $2,952,000 $(1,032,000) -35% Estimated Average Selling Price of Orders for Homes, net $333.6 $341.0 $(7.4) -2% Approximate Order Cancellation Rate (7) 44% 40% 4% (7) Gross number of cancellations received divided by gross number of orders received. M.D.C. HOLDINGS, INC. Homebuilding Operational Data (Dollars in thousands) (Unaudited) September December September 30, 31, 30, 2007 2006 2006 BACKLOG (UNITS) Arizona 1,257 1,504 2,040 California 445 427 722 Nevada 271 315 648 West 1,973 2,246 3,410 Colorado 347 253 361 Utah 287 465 674 Mountain 634 718 1,035 Maryland 233 187 281 Virginia 195 136 266 East 428 323 547 Delaware Valley 107 119 169 Florida 193 197 427 Illinois 64 23 43 Texas - 12 30 Other Homebuilding 364 351 669 Total 3,399 3,638 5,661 Backlog Estimated Sales Value $1,210,000 $1,300,000 $2,100,000 Estimated Average Selling Price of Homes in Backlog $356.0 $357.3 $371.0 ACTIVE SUBDIVISIONS Arizona 67 67 65 California 41 45 46 Nevada 41 41 37 West 149 153 148 Colorado 52 47 45 Utah 25 22 21 Mountain 77 69 66 Maryland 16 19 17 Virginia 21 19 19 East 37 38 36 Delaware Valley 4 8 7 Florida 23 30 29 Illinois 7 6 7 Texas - 2 2 Other Homebuilding 34 46 45 Total 297 306 295 Average for Quarter Ended 303 299 296 M.D.C. HOLDINGS, INC. Reconciliation of Non-GAAP Financial Measures (Dollars in thousands) (Unaudited) September December September 30, 31, 30, 2007 2006 2006 CORPORATE AND HOMEBUILDING DEBT-TO- CAPITAL, NET OF CASH Total Debt $1,038,943 $1,127,149 $1,148,952 Less Mortgage Line of Credit (41,957) (130,467) (152,369) Total Corporate and Homebuilding Debt 996,986 996,682 996,583 Less Cash (Including Restricted Cash) (731,112) (510,588) (137,926) Total Corporate and Homebuilding Debt, Net of Cash 265,874 486,094 858,657 Stockholders' Equity 1,802,404 2,161,882 2,167,132 Total Corporate and Homebuilding Capital, Net of Cash $2,068,278 $2,647,976 $3,025,789 Ratio of Corporate and Homebuilding Debt to Capital, Net of Cash 0.13 0.18 0.28
NOTE: From time to time, MDC discloses selected non-GAAP financial measures. While non-GAAP financial measures are not a substitute for the comparable GAAP measures, we believe that certain non-GAAP information is useful to investors and management in comparing current results to historical periods and to competitor results, and that it provides additional information on the performance of MDC's businesses. The above is a presentation of and reconciliation of a selected non-GAAP measure with the most directly comparable GAAP financial measure.
"Ratio of corporate and homebuilding debt to capital, net of cash" is a non-GAAP financial measure. MDC's management and investors use this ratio to help assess the risk associated with debt in the Company's capital structure. It excludes debt incurred under MDC's mortgage line of credit from both the numerator and denominator, as this debt is directly collateralized by mortgage loans held in inventory, which are typically liquidated within 45 days of origination, thereby reducing the risk associated with this type of debt. The ratio's numerator and denominator are also reduced by MDC's cash position, as this balance could be used to reduce MDC's exposure to debt outstanding.
