News
M.D.C. Holdings, Inc.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "We are very proud of our achievements in the 2000 third quarter. The record performance of our homebuilding operations is a direct result of our successful operating strategy and disciplined financial policies. Our operating returns on assets and equity improved to 11.8% and 27.7%, respectively, further solidifying our position among the industry leaders in measures of operating performance and financial strength. The quality of our improving operating results and financial stability have recently been recognized by Moody's Investors Service through their upgrade of the Company's senior debt, the first credit upgrade given by Moody's to any major conventional homebuilder in the last eighteen months. In addition, our financial flexibility has been enhanced by the recent expansion of our unsecured revolving line of credit to $413 million from $350 million, as we welcomed U.S. Bank, National Association and California Bank & Trust as new participants. These achievements, combined with the highest quarter-end backlog in our history at 3,967 units, have positioned us to close more than 7,500 homes in 2000, and to achieve new records for revenues and profitability for comparable periods in the 2000 fourth quarter and total year."
Net income for the nine months ended September 30, 2000 was $84.1 million, or $3.83 per share, compared with $62.8 million, or $2.77 per share, for the same period in 1999. Total revenues for the nine months ended September 30, 2000 were $1.213 billion, representing an increase of 10% over revenues of $1.107 billion for the first nine months of 1999.
Record Homebuilding Profits and Improved Mortgage Lending Results
Operating profits from the Company's homebuilding operations increased to $61.2 million and $159.0 million, respectively, for the three and nine months ended September 30, 2000, representing increases of 34% and 38%, compared with $45.8 million and $115.0 million, respectively, for the same periods in 1999. These profit improvements primarily resulted from significant increases in home gross margins (up 340 and 290 basis points, respectively) and average selling prices (up over $11,500) in the three and nine month periods. As previously reported, MDC closed 1,943 homes and 5,355 homes, respectively, for the three and nine months ended September 30, 2000, compared with closings of 1,875 homes and 5,186 homes, respectively, for the same periods in 1999. Home gross margins improved to 23.2% and 22.3%, respectively, for the third quarter and first nine months of 2000, compared with 19.8% and 19.4%, respectively, for the same periods in 1999. Home sales revenues of $436 million and $1.173 billion for the third quarter and first nine months of 2000 were the highest for comparable periods in the Company's history.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Each of our homebuilding divisions contributed profitable operating results in the 2000 third quarter, with most divisions realizing substantial improvements over their 1999 third quarter operating performance. As in the 2000 second quarter, Phoenix reported lower year-over-year operating profits in the 2000 third quarter, primarily due to reduced home closings resulting from fewer active subdivisions in early 2000, lower home gross margins and a $13,000 decrease in average selling prices, as the division has increased its emphasis on more affordable homes. Each of our other divisions except Southern California realized higher levels of home closings and year-over-year increases in average selling prices of more than $10,000."
Reece continued, "Our home gross margins of 23.2%, or 24.6% before capitalized interest, not only improved on a year-over-year basis for the eighteenth consecutive quarter, but exceeded by 100 basis points our previous record margins of 22.2% reported in the 2000 second quarter. Each of our divisions except Phoenix and Nevada realized increases in home gross margins of more than 300 basis points in the third quarter of 2000, compared with the third quarter of 1999. Similar to the situation in the 2000 second quarter, we have continued to be successful in offsetting increases in the costs of land and labor through our initiatives for increasing revenues and reducing other costs and expenses. These initiatives should help us realize home gross margins in the fourth quarter of 2000 which, although they may be lower than the record level achieved in the 2000 third quarter, will exceed 20% for the fourth consecutive quarter."
Operating profits from the Company's mortgage lending operations were $3.4 million and $9.8 million, respectively, for the three and nine months ended September 30, 2000, compared with $2.9 million and $9.8 million, respectively, for the same periods in 1999. The third quarter improvement in operating profits primarily resulted from increased gains on sales of mortgage loans and loan servicing, as well as higher origination fee income.
Balance Sheet Strength and Improved Operating Efficiency
MDC has one of the strongest balance sheets in the homebuilding industry. The Company's continued success in strengthening its balance sheet and improving its financial position is represented by the achievement of ratios of homebuilding and corporate debt-to-capital and debt-to-EBITDA (as defined below) at September 30, 2000 of .43 and 1.4, respectively. Both of these ratios are among the lowest in the industry at a time generally considered to be a seasonal peak for inventories and debt levels. In addition, the Company's strong operating results over the past year, partially offset by repurchases of 1,932,000 shares of MDC common stock for $30.8 million during the first nine months of 2000, increased stockholders' equity to $440.6 million, or $20.94 per outstanding share, at September 30, 2000. Further, notwithstanding higher inventory levels needed to support the Company's expanded homebuilding operations, the Company ended the third quarter of 2000 with liquidity of $256 million, 10% higher than at September 30, 1999.
Earnings before interest, taxes, depreciation and amortization ("EBITDA, as adjusted") for the third quarter and first nine months of 2000 increased to $66.6 million and $175.4 million, respectively, compared with $54.1 million and $141.8 million, respectively, for the same periods in 1999. These EBITDA increases contributed to the increase in the ratio of EBITDA to interest incurred to 10.1 for the nine months ended September 30, 2000, compared with 9.2 for the same period in 1999.
MDC is one of the largest homebuilders in the United States. The Company also provides mortgage financing, primarily for MDC's home buyers, through its wholly owned subsidiary, HomeAmerican Mortgage Corporation. MDC is a major regional homebuilder with a significant presence in some of the country's best housing markets. The Company is the largest homebuilder in metropolitan Denver; among the top five homebuilders in Northern Virginia, suburban Maryland, Tucson and Colorado Springs; and among the top ten homebuilders in Phoenix, Las Vegas, Southern California and the San Francisco Bay area.
All earnings per share amounts discussed above are on a diluted basis.
Certain statements in this press release, including those related to projected home closing levels, revenues, home gross margins and earnings, may 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 (1) general economic and business conditions; (2) interest rate changes; (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) demographic changes; (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; and (14) other factors over which the Company has little or no control.
M.D.C. HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
September 30, December 31,
2000 1999
ASSETS
Corporate
Cash and cash equivalents $12,842 $33,637
Property and equipment, net 2,946 2,909
Deferred income taxes 29,742 21,201
Deferred debt issue costs, net 2,235 2,393
Other assets, net 8,384 6,771
56,149 66,911
Homebuilding
Cash and cash equivalents 5,591 4,935
Home sales and other accounts receivable 10,657 3,496
Inventories, net
Housing completed or under construction 489,733 337,029
Land and land under development 333,529 308,680
Prepaid expenses and other assets, net 60,567 58,156
900,077 712,296
Financial Services
Cash and cash equivalents 506 358
Mortgage loans held in inventory 96,252 89,953
Other assets, net 6,321 7,490
103,079 97,801
Total Assets $1,059,305 $877,008
LIABILITIES
Corporate
Accounts payable and accrued expenses $46,223 $46,721
Income taxes payable 9,922 18,291
Senior notes, net 174,430 174,389
230,575 239,401
Homebuilding
Accounts payable and accrued expenses 158,687 152,488
Line of credit 155,000 40,000
313,687 192,488
Financial Services
Accounts payable and accrued expenses 19,620 5,862
Line of credit 54,815 50,234
74,435 56,096
Total Liabilities 618,697 487,985
STOCKHOLDERS' EQUITY
Total Stockholders' Equity 440,608 389,023
Total Liabilities and Stockholders' Equity $1,059,305 $877,008
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
REVENUES
Homebuilding $438,818 $403,195 $1,191,769 $1,084,205
Financial Services 7,203 6,739 20,507 20,664
Corporate 218 192 768 2,141
Total Revenues $446,239 $410,126 $1,213,044 $1,107,010
NET INCOME
Homebuilding $61,195 $45,832 $159,024 $114,982
Financial Services 3,370 2,927 9,799 9,772
Operating Profit 64,565 48,759 168,823 124,754
Corporate general and
administrative
expense, net (10,950) (8,527) (27,469) (20,542)
Income before income
taxes 53,615 40,232 141,354 104,212
Provision for income
taxes (19,355) (16,092) (57,264) (41,364)
Net Income $34,260 $24,140 $84,090 $62,848
EARNINGS PER SHARE
Basic $1.62 $1.08 $3.90 $2.83
Diluted $1.58 $1.06 $3.83 $2.77
WEIGHTED-AVERAGE SHARES
OUTSTANDING
Basic 21,179 22,294 21,587 22,224
Diluted 21,700 22,739 21,957 22,667
DIVIDENDS PAID
PER SHARE $.06 $.05 $.18 $.15
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
Homebuilding
Home sales $436,174 $398,833 $1,173,084 $1,076,061
Land sales 939 2,912 5,482 5,737
Other revenues 1,705 1,450 13,203 2,407
Total Homebuilding
Revenues 438,818 403,195 1,191,769 1,084,205
Home cost of sales 334,884 320,020 911,778 866,833
Land cost of sales 842 2,403 3,197 4,426
Asset impairment
charges -- -- 800 --
Marketing 24,230 19,936 66,077 58,045
General and
administrative 17,667 15,004 50,893 39,919
377,623 357,363 1,032,745 969,223
Homebuilding
Operating Profit 61,195 45,832 159,024 114,982
Financial Services
Interest revenues 651 735 1,714 2,012
Origination fees 3,535 3,315 9,573 9,035
Gains on sales of
mortgage servicing 706 543 2,535 2,832
Gains on sales of
mortgage loans, net 2,151 2,011 6,243 6,361
Mortgage servicing
and other 160 135 442 424
Total Financial
Services Revenues 7,203 6,739 20,507 20,664
General and
administrative 3,833 3,812 10,708 10,892
Financial Services
Operating Profit 3,370 2,927 9,799 9,772
Total Operating
Profit 64,565 48,759 168,823 124,754
Corporate
Interest and other
revenues 218 192 768 2,141
General and
administrative (11,168) (8,719) (28,237) (22,683)
Net Corporate
Expenses (10,950) (8,527) (27,469) (20,542)
Income Before Income
Taxes $53,615 $40,232 $141,354 $104,212
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
September 30, December 31, September 30,
2000 1999 1999
BALANCE SHEET DATA
Stockholders' Equity $440,608 $389,023 $363,805
Book Value Per Share
Outstanding $20.94 $17.43 $16.30
Homebuilding and Corporate
Debt $329,430 $214,389 $250,014
Ratio of Homebuilding and
Corporate Debt to Equity .75 .55 .69
Total Capital (excluding
mortgage lending debt) $770,038 $603,412 $613,819
Ratio of Homebuilding and
Corporate Debt to
Total Capital .43 .36 .41
Ratio of Homebuilding and
Corporate Debt to EBITDA,
as Adjusted 1.4 1.1 1.3
Total Liquidity $256,350 $300,539 $232,992
Total Homebuilding
Inventories $823,262 $645,709 $666,909
Interest Capitalized in
Inventories $18,832 $17,406 $18,049
Interest Capitalized as a
Percent of Inventories 2.3% 2.7% 2.7%
Total Lots Owned 10,098 10,452 9,436
Total Lots Under Option 8,567 8,063 8,503
Active Subdivisions 120 131 129
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
OPERATING DATA
EBITDA, As Adjusted
Net income $34,260 $24,140 $84,090 $62,848
Add:
Income taxes 19,355 16,092 57,264 41,364
Interest in home
and land cost of
sales 6,041 9,527 15,902 23,627
Other fixed charges 837 472 2,503 999
Depreciation and
amortization 6,102 3,876 14,793 12,968
Asset impairment
charges -- -- 800 --
Total EBITDA, As
Adjusted $66,595 $54,107 $175,352 $141,806
Ratio of EBITDA, As
Adjusted, to Interest
Incurred 9.7 10.0 10.1 9.2
Homebuilding and
Corporate SG&A as a
Percent of Home
Sales Revenues 12.2% 10.9% 12.4% 11.2%
Interest Incurred $6,836 $5,393 $17,328 $15,344
Interest Capitalized $6,836 $5,393 $17,328 $15,344
Interest in Home Cost
of Sales as a Percent
of Home Sales
Revenues 1.4% 2.1% 1.3% 2.1%
Operating Return on
Revenues 7.7% 5.9% 6.9% 5.7%
Operating Return on
Average Assets* 11.8% 10.2% N/A N/A
Operating Return on
Average Equity* 27.7% 25.4% N/A N/A
* Rolling 12 Months Ended September 30
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Home Sales Revenues $436,174 $398,833 $1,173,084 $1,076,061
Average Selling Price
Per Home Closed $224.5 $212.7 $219.1 $207.5
Home Gross Margins 23.2% 19.8% 22.3% 19.4%
Excluding Interest in
Home Cost of Sales 24.6% 21.9% 23.6% 21.5%
Orders For Homes, Net
(Units)
Colorado 668 655 2,134 2,259
California 415 329 1,272 1,129
Arizona 573 261 1,486 1,199
Nevada 199 151 631 425
Virginia 177 150 641 611
Maryland 60 70 217 268
Total 2,092 1,616 6,381 5,891
Homes Closed (Units)
Colorado 702 653 2,152 1,846
California 369 381 887 921
Arizona 405 444 1,094 1,299
Nevada 212 151 500 407
Virginia 175 183 497 493
Maryland 80 63 225 220
Total 1,943 1,875 5,355 5,186
September 30, December 31, September 30,
2000 1999 1999
Backlog (Units)
Colorado 1,608 1,626 1,768
California 642 257 534
Arizona 844 452 596
Nevada 268 137 164
Virginia 434 290 372
Maryland 171 179 201
Total 3,967 2,941 3,635
Estimated Sales Value $930,000 $600,000 $750,000
SOURCE: M.D.C. Holdings, Inc.
Contact: Paris G. Reece III, Chief Financial Officer of M.D.C. Holdings,
Inc., 303-804-7706
Website: https://www.richmondamerican.com/
