MDC(US:MDC)2022-07-28 17:33Financial Performance - For the three months ended June 30, 2022, the company reported net income of $189.5 million, or $2.59 per diluted share, a 23% increase from $154.4 million, or $2.11 per diluted share, in the prior year[108]. - Home sale revenues for the three months ended June 30, 2022, were $1,450.8 million, a 6% increase compared to $1,367.8 million in the same period of the previous year[103]. - The gross margin from home sales increased by 370 basis points to 26.8% for the three months ended June 30, 2022, compared to 23.1% in the prior year[103]. - Homebuilding pretax income for the three months ended June 30, 2022, was $240.3 million, an increase of 28% from $187.5 million in the same period last year[114]. - Financial services pretax income for the three months ended June 30, 2022, was $18.7 million, a 4% increase from $18.0 million in the prior year[103]. - The effective income tax rate increased to 26.8% for the three months ended June 30, 2022, compared to 24.9% in the same period of 2021, resulting in an income tax expense of $69.4 million[150]. Sales and Orders - The dollar value of net new home orders decreased by 40% year-over-year, driven by a 48% decrease in the number of net new orders, partially offset by a 16% increase in the average selling price[109]. - The number of net new orders decreased by 48% to 1,404 homes for the three months ended June 30, 2022, compared to 2,714 homes in the same period of 2021[132]. - The cancellation rate increased due to a rise in mortgage interest rates during the first half of 2022, impacting net new orders[131]. - For the three months ended June 30, 2022, the cancellation rate increased to 10% from 6% year-over-year, attributed to rising mortgage interest rates impacting homebuyers[140]. - As of June 30, 2022, the backlog consisted of 7,426 homes valued at $4.44 billion, reflecting a 3% decrease in the number of homes but an 8% increase in dollar value compared to the previous year[141]. Assets and Liquidity - Total cash and cash equivalents at the end of the quarter were $590.2 million, with total liquidity of $1.74 billion and no senior note maturities until 2030[106]. - Total homebuilding assets increased by 7% from December 31, 2021, to June 30, 2022, reaching $4,879.3 million[117]. - The company controlled 33,130 lots at the end of the quarter, representing a 4% decrease from the prior year[106]. - The company maintains a liquidity position with an effective shelf registration statement allowing for the issuance of up to $5.0 billion in securities, with the full amount remaining available[156]. - As of June 30, 2022, the company had outstanding senior notes totaling an aggregate principal amount of $1.5 billion, with future interest payments of $1.3 billion[158]. Operational Challenges - The company experienced production challenges due to supply chain disruptions and labor market tightness, impacting cycle times year-over-year[105]. - The total unsold started homes increased to 653, a 180% rise from 233 in the prior year, primarily due to the increased cancellation rate[142]. - The total owned and optioned lots decreased by 4% year-over-year to 33,130, reflecting a strategic slowdown in land acquisition due to market uncertainty[143]. Financial Services - Financial services revenues for the three months ended June 30, 2022, increased by 9% to $36.2 million, while the pretax income for financial services decreased by 24% to $10.7 million[145]. - Total mortgage loan originations decreased by 3% to 1,517 loans for the three months ended June 30, 2022, with principal amounting to $703.3 million, a 9% increase from the previous year[149]. - The capture rate as a percentage of all homes delivered was 60% for the three months ended June 30, 2022, up from 57% year-over-year[149]. - HomeAmerican's mortgage loans in process with interest rate lock commitments not yet closed totaled an aggregate principal balance of $871.8 million as of June 30, 2022, with $556.6 million not yet committed to a mortgage purchaser[184]. - The company had mortgage loans held-for-sale with an aggregate principal balance of $190.3 million at June 30, 2022, of which $55.1 million had not yet been committed to a mortgage purchaser[184]. Expenses - General and administrative expenses rose by $10.9 million to $72.9 million for the three months ended June 30, 2022, representing 5.0% of home sale revenues[128]. - The total selling, general and administrative expenses increased by $4.99 million to $133.8 million for the three months ended June 30, 2022[128]. - Cash used to increase housing completed or under construction was $468.3 million for the six months ended June 30, 2022, compared to $385.7 million in the prior year[176]. Financing Activities - The company incurred net cash used in financing activities of $164.6 million for the six months ended June 30, 2022, compared to net cash provided of $238.8 million in the prior year[178]. - The Revolving Credit Facility was amended to increase the aggregate commitment from $1.0 billion to $1.2 billion, with a potential increase to $1.7 billion upon request[165]. - As of June 30, 2022, the availability under the Revolving Credit Facility was approximately $1.14 billion[169]. - The company had deposits of $43.6 million in cash and $11.6 million in letters of credit securing option contracts to purchase 7,296 lots for an estimated total purchase price of $743.1 million[159]. Interest Rate Impact - 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 company does not have an obligation to prepay its senior notes prior to maturity, mitigating interest rate risk impact on financial position[187].