MDC(MDC) - 2021 Q3 - Quarterly Report

Financial Performance - Home sale revenues for Q3 2021 reached $1,257.7 million, a 26% increase from $1,000.5 million in Q3 2020[102] - Gross profit for Q3 2021 was $295.6 million, with a gross margin of 23.5%, up from 20.5% in Q3 2020[102] - Net income for Q3 2021 was $146.0 million, or $1.99 per diluted share, representing a 48% increase compared to $98.9 million, or $1.38 per diluted share, in Q3 2020[106] - Homebuilding pretax income for Q3 2021 was $165.2 million, a 62% increase from $101.6 million in Q3 2020[110] - Financial services pretax income increased by 53% to $76.4 million for the nine months ended September 30, 2021[108] - For the nine months ended September 30, 2021, total home sales revenues increased by 42% to $3,667.3 million from $2,584.4 million in the same period of 2020[117] Home Sales and Orders - The number of net new home orders decreased by 32% year-over-year, leading to a 21% decline in dollar value of net new orders[107] - The average selling price of homes delivered increased by 12% to $519.9 thousand in Q3 2021 from $466.0 thousand in Q3 2020[117] - The average monthly absorption rate for new orders decreased by 33% to 4.10 in Q3 2021 compared to 6.10 in Q3 2020[131] - The cancellation rate for the three months ended September 30, 2021, was 7% for the total, a decrease from 12% in the same period of 2020, indicating strong demand for new homes[142] - The total number of homes in backlog at the beginning of Q3 2021 contributed to the increase in new home deliveries, despite a decrease in backlog conversion rates[119] Community and Asset Growth - The company ended Q3 2021 with 203 active communities, a 9% increase from June 30, 2021, and a 5% increase from the prior year-end[104] - Total homebuilding assets increased by 28% to $4,495.9 million as of September 30, 2021, compared to $3,506.4 million at the end of 2020[114] - The company controlled 36,666 lots at the end of Q3 2021, a 37% increase over the prior year period[104] - The total owned and optioned lots increased by 37% year-over-year to 36,666 lots as of September 30, 2021, supporting future growth plans[147] Operational Efficiency - Selling, general and administrative expenses for Q3 2021 rose to $120.1 million, an increase of 16.0% from $103.6 million in Q3 2020[127] - The number of new homes delivered in Q3 2021 was negatively impacted by increased construction cycle times, which averaged approximately 37 weeks, up six weeks year-over-year[117] - The company reported a 42% increase in sold homes under construction or completed, totaling 6,468 homes as of September 30, 2021, compared to 4,540 homes in the prior year[146] Financing and Liquidity - The company issued $350 million of 40-year senior notes at a rate of 3.966%, increasing total liquidity to $2.03 billion[105] - The company has an effective shelf registration statement allowing the issuance of equity, debt, or hybrid securities up to $2.0 billion, with $1.0 billion remaining after a $350 million issuance of senior notes[158] - The Revolving Credit Facility was increased from $1.0 billion to $1.2 billion, with a maturity extension to December 18, 2025, and potential increase to $1.7 billion upon request[163] - Cash used in operating activities for the nine months ended September 30, 2021, was $86.5 million, compared to a cash generation of $29.4 million in the prior year[172] - The company reported net cash provided by financing activities of $471.2 million for the nine months ended September 30, 2021, primarily due to proceeds from the issuance of senior notes[174] Mortgage Operations - Financial services revenues for the three months ended September 30, 2021, increased by 17% to $43.1 million, driven by a 9% increase in mortgage operations revenue[148] - The capture rate for mortgage loans as a percentage of all homes delivered was 60% for the three months ended September 30, 2021, down from 68% in the same period of 2020[152] - The average FICO score for mortgage loans was 740 for the three months ended September 30, 2021, reflecting stable credit quality[152] - HomeAmerican's mortgage loans in process had an aggregate principal balance of $305.2 million, with an average interest rate of 2.96% as of September 30, 2021[185] - HomeAmerican held mortgage loans for sale with an aggregate principal balance of $241.5 million, of which $103.0 million had not yet been committed to a mortgage purchaser, at an average interest rate of 2.84%[185] Risk Management - The company has made no material guarantees with respect to third-party obligations, indicating a conservative approach to risk management[178] - Changes in interest rates do not affect the fair value of fixed-rate debt instruments, but they do impact earnings and cash flows for variable-rate debt[187] - The market risk associated with rate-locked mortgage loans is limited due to the company's economic hedging philosophy[186] - HomeAmerican employs interest rate lock commitments and forward sales of mortgage-backed securities to manage price risk associated with mortgage loans[186] - HomeAmerican's cash and investment policy aims to achieve appropriate investment returns while preserving principal and managing risk[183]