News
M.D.C. Holdings, Inc.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "We are pleased with our record-setting performance in the third quarter and first nine months of 2001, which represents the 15th consecutive quarter for setting new Company highs in operating results. We also are well aware that the world has been changed by the tragic events of September 11th, although it is too soon to speculate on the long-term impact of this tragedy on our economy, our industry and our Company. We have been encouraged by the continued improvement in the levels of home buyer traffic and home orders since the week of the attack, while the number of order cancellations have remained fairly consistent with cancellations during the weeks immediately prior to the attack. Therefore, in 2001, we expect to close more than 8,000 homes and to realize the highest revenues and net income for any year in our Company's history."
Mizel continued, "While we are confident that the leadership of our country will successfully guide our nation through this crisis, our industry and our Company in particular have never been better prepared to respond to the economic challenges that may accompany this conflict. We own a conservatively managed supply of lots that are all active, while controlling almost a year's supply of lots under option at a nominal risk, and we have only a three-week supply of unsold homes. We rank among the industry leaders in operating returns, our leverage ratios are among the lowest in the history of our industry, and our liquidity has risen to $335 million at quarter-end. Each of these factors has contributed to the substantial flexibility we have either to streamline our operations and generate significant levels of cash in a downturn, or to take advantage of opportunities to effectively grow our business in an expanding economy."
Net income for the nine months ended September 30, 2001 was $108.7 million, or $4.39 per share, compared with $84.1 million, or $3.48 per share, for the same period in 2000. In addition to the third quarter impact of the IRS income tax examination settlement discussed above, net income for the 2000 nine-month period included realized, non-recurring after-tax gains of $3.4 million, or $.14 per share, from the sale of certain investments by MDC's captive insurance subsidiary. Total revenues for the nine months ended September 30, 2001 were $1.449 billion, representing an increase of 19% over revenues of $1.213 billion for the first nine months of 2000.
Record Homebuilding Profits
Operating profits from the Company's homebuilding operations increased to $71.9 million and $195.8 million, respectively, for the three and nine months ended September 30, 2001, representing increases of 18% and 23%, respectively, compared with $61.2 million and $159.0 million, respectively, for the same periods in 2000. These profit improvements primarily resulted from higher home gross margins, record home closings and increased average selling prices (up over $19,200 and $26,300, respectively). As previously reported, MDC closed 2,076 homes and 5,759 homes, respectively, for the three and nine months ended September 30, 2001, compared with closings of 1,943 homes and 5,355 homes, respectively, for the same periods in 2000. Home gross margins improved to 24.2% and 23.7%, respectively, for the third quarter and first nine months of 2001, compared with 23.2% and 22.3%, respectively, for the same periods in 2000.
Operating profits for the quarter and nine months ended September 30, 2001 were impacted adversely by a non-cash, pre-tax asset impairment charge of $2.9 million, compared with an asset impairment charge of $800,000 for the nine months ended September 30, 2000. The third quarter 2001 charge resulted from the write-down to fair market value of two homebuilding projects in the San Francisco Bay area. Each of these projects has homes with prices averaging over $750,000, and each has experienced a much slower than anticipated home order pace and significantly increased sales incentive requirements. These subdivisions are the Company's only two subdivisions selling at this high a price point in this market.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "All of our homebuilding divisions were profitable in the 2001 third quarter, with most divisions achieving substantial improvements over their 2000 third quarter operating results. Contributing to these profit improvements were increases in average selling prices of more than $30,000 in Las Vegas, Northern California, Virginia and Maryland, and significantly higher home closings in Phoenix, which were up over 70%."
Reece continued, "Our home gross margins improved on a year-over-year basis for the 22nd consecutive quarter, lead by significant margin increases in Maryland, Virginia, Southern California and Las Vegas. These margin improvements primarily resulted from the earlier close-out of low margin subdivisions in Maryland, higher profit contributions from our design centers, increased savings from purchasing initiatives and raw material cost reductions, and the benefits of price increases in most of our markets earlier in the year which more than offset the increasing cost of land."
Highest Mortgage Lending Profits in Company History
Operating profits from the Company's mortgage lending operations were $5.8 million and $14.7 million, respectively, for the quarter and nine months ended September 30, 2001, representing the highest levels of third quarter and nine-month operating profits from mortgage lending in the Company's history. Mortgage lending operating profits for the quarter and nine months ending September 30, 2000 were $3.4 million and $9.8 million, respectively.
The 2001 operating profit increases primarily resulted from higher origination fees received from the record levels of mortgage loans originated and brokered for MDC home buyers. The Company originated or brokered $372.9 million and $1.038 billion, respectively, in mortgage loans for 85% of MDC's home buyers in the quarter and nine months ended September 30, 2001, compared with $300.3 million and $809.1 million, respectively, for 81% and 80%, respectively, of MDC's home buyers for the same periods in 2000. Operating profits for the 2001 periods also were impacted favorably by higher gains on sales of mortgage loans, compared with the third quarter and first nine months of 2000.
Balance Sheet Strength and Improved Operating Efficiency
MDC has one of the strongest balance sheets and financial positions in the homebuilding industry. This is represented by the achievement of ratios of homebuilding and corporate debt-to-capital and debt-to-EBITDA, as adjusted (as defined below) at September 30, 2001 of .34 and 1.07, respectively. These ratios are not only the lowest levels ever achieved by MDC at a time generally considered to be a seasonal peak for inventories and debt levels, they are among the lowest in the industry. In addition, the Company's strong operating results over the past year increased stockholders' equity to $607 million, or $25.16 per outstanding share, at September 30, 2001. Further, notwithstanding higher inventory levels needed to support the Company's expanded homebuilding operations, the Company ended the third quarter of 2001 with liquidity of $335 million, 31% higher than at September 30, 2000.
Earnings before interest, taxes, depreciation and amortization ("EBITDA, as adjusted") for the third quarter and first nine months of 2001 increased to $82.9 million and $219.3 million, respectively, compared with $66.6 million and $175.4 million, respectively, for the same periods in 2000. These increases contributed to the increase in the ratio of EBITDA, as adjusted, to interest incurred to 12.4 for the nine months ended September 30, 2001, compared with 10.1 for the same period in 2000.
MDC, whose subsidiaries build homes under the name "Richmond American Homes," is one of the largest homebuilders in the United States. The Company's wholly owned subsidiary HomeAmerican Mortgage Corporation provides mortgage financing primarily for MDC's home buyers. MDC is a major regional homebuilder with a significant presence in some of the country's best housing markets. Richmond American Homes is the largest homebuilder in Colorado; among the top five homebuilders in northern Virginia, Phoenix and Tucson; among the top ten homebuilders in suburban Maryland, Las Vegas and Northern California; and has a significant market share in six Southern California counties.
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 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; (14) actual or threatened terrorist acts and other acts of war and the results thereof; and (15) 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,
2001 2000
ASSETS
Corporate
Cash and cash equivalents $11,676 $8,411
Property and equipment, net 2,895 3,069
Deferred income taxes 34,719 31,821
Deferred debt issue costs, net 2,007 2,180
Other assets, net 7,908 8,039
59,205 53,520
Homebuilding
Cash and cash equivalents 5,546 5,265
Home sales and other accounts receivable 8,359 4,713
Inventories, net
Housing completed or under construction 596,300 443,512
Land and land under development 433,890 388,711
Prepaid expenses and other assets, net 49,587 51,631
1,093,682 893,832
Financial Services
Cash and cash equivalents 528 439
Mortgage loans held in inventory 106,042 107,151
Other assets, net 5,682 6,656
112,252 114,246
Total Assets $1,265,139 $1,061,598
LIABILITIES
Corporate
Accounts payable and accrued expenses $49,351 $50,843
Income taxes payable 25,628 9,558
Senior notes, net 174,488 174,444
249,467 234,845
Homebuilding
Accounts payable and accrued expenses 192,088 164,660
Line of credit 145,000 90,000
337,088 254,660
Financial Services
Accounts payable and accrued expenses 22,872 15,404
Line of credit 48,334 74,459
71,206 89,863
Total Liabilities 657,761 579,368
STOCKHOLDERS' EQUITY
Total Stockholders' Equity 607,378 482,230
Total Liabilities and Stockholders' Equity $1,265,139 $1,061,598
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,
2001 2000 2001 2000
REVENUES
Homebuilding $511,008 $438,818 $1,421,114 $1,191,769
Financial Services 10,081 7,203 27,420 20,507
Corporate 223 218 735 768
Total Revenues $521,312 $446,239 $1,449,269 $1,213,044
NET INCOME
Homebuilding $71,914 $61,195 $195,831 $159,024
Financial Services 5,750 3,370 14,680 9,799
Operating Profit 77,664 64,565 210,511 168,823
Corporate general and
administrative expense,
net (10,874) (10,950) (32,278) (27,469)
Income before income
taxes 66,790 53,615 178,233 141,354
Provision for income
taxes (26,265) (19,355) (69,582) (57,264)
Net Income $40,525 $34,260 $108,651 $84,090
EARNINGS PER SHARE
Basic $1.67 $1.47 $4.54 $3.54
Diluted $1.63 $1.44 $4.39 $3.48
WEIGHTED-AVERAGE
SHARES OUTSTANDING
Basic 24,231 23,297 23,958 23,746
Diluted 24,882 23,870 24,739 24,153
DIVIDENDS PAID PER SHARE $.07 $.06 $.20 $.18
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
Homebuilding
Home sales $505,995 $436,174 $1,413,121 $1,173,084
Land sales 2,142 939 2,901 5,482
Other revenues 2,871 1,705 5,092 13,203
Total Homebuilding
Revenues 511,008 438,818 1,421,114 1,191,769
Home cost of sales 383,777 334,884 1,077,786 911,778
Land cost of sales 646 842 1,103 3,197
Asset impairment charges 2,900 -- 2,900 800
Marketing 28,116 24,230 78,033 66,077
General and administrative 23,655 17,667 65,461 50,893
439,094 377,623 1,225,283 1,032,745
Homebuilding Operating
Profit 71,914 61,195 195,831 159,024
Financial Services
Interest revenues 901 651 2,356 1,714
Origination fees 4,418 3,535 12,570 9,573
Gains on sales of
mortgage servicing 461 706 2,863 2,535
Gains on sales of
mortgage loans, net 4,128 2,151 9,638 6,243
Mortgage servicing
and other 173 160 (7) 442
Total Financial
Services Revenues 10,081 7,203 27,420 20,507
General and administrative 4,331 3,833 12,740 10,708
Financial Services
Operating Profit 5,750 3,370 14,680 9,799
Total Operating Profit 77,664 64,565 210,511 168,823
Corporate
Interest and other
revenues 223 218 735 768
General and
administrative (11,097) (11,168) (33,013) (28,237)
Net Corporate Expenses (10,874) (10,950) (32,278) (27,469)
Income Before Income Taxes $66,790 $53,615 $178,233 $141,354
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
September December September
30, 31, 30,
2001 2000 2000
BALANCE SHEET DATA
Stockholders' Equity $607,378 $482,230 $440,608
Book Value Per Share Outstanding $25.16 $20.69 $19.04
Homebuilding and Corporate Debt $319,488 $264,444 $329,430
Ratio of Homebuilding and Corporate
Debt to Equity .53 .55 .75
Total Capital (excluding mortgage
lending debt) $926,866 $746,674 $770,038
Ratio of Homebuilding and Corporate
Debt to Total Capital .34 .35 .43
Ratio of Homebuilding and Corporate
Debt (net of cash) to Total Capital .33 .34 .41
Ratio of Homebuilding and Corporate
Debt to EBITDA, as adjusted* 1.07 1.04 1.41
Ratio of Homebuilding and Corporate
Debt (net of cash) to EBITDA,
as adjusted* 1.01 .98 1.33
Total Liquidity $334,823 $342,583 $256,350
Total Homebuilding Inventories $1,030,190 $832,223 $823,262
Interest Capitalized in Inventories $19,461 $19,417 $18,832
Interest Capitalized as a Percent
of Inventories 1.9% 2.3% 2.3%
Total Lots Owned 13,331 11,633 10,098
Total Lots Under Option 7,205 8,131 8,567
Homes Under Construction (including
models) 3,854 3,230 3,847
Active Subdivisions 141 133 120
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
OPERATING DATA
EBITDA, as adjusted
Net income $40,525 $34,260 $108,651 $84,090
Add:
Income taxes 26,265 19,355 69,582 57,264
Interest in home and
land cost of sales 5,921 6,041 17,594 15,902
Other fixed charges 979 837 2,682 2,503
Depreciation and
amortization 6,348 6,102 17,889 14,793
Asset impairment
charges 2,900 -- 2,900 800
Total EBITDA, as adjusted $82,938 $66,595 $219,298 $175,352
Ratio of EBITDA, as
adjusted to Interest
Incurred 14.1 9.7 12.4 10.1
Homebuilding and Corporate
SG&A as a Percent of Home
Sales Revenues 12.4% 12.2% 12.5% 12.4%
Interest Incurred $5,879 $6,836 $17,638 $17,328
Interest Capitalized $5,879 $6,836 $17,638 $17,328
Interest in Home Cost of
Sales as a Percent of
Home Sales
Revenues 1.1% 1.4% 1.3% 1.3%
Operating Return on
Revenues 7.8% 7.7% 7.5% 6.9%
Operating Return on
Average Assets* 12.9% 11.8% N/A N/A
Operating Return on
Average Equity* 28.2% 27.7% N/A N/A
*Rolling 12 months ended
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Home Sales Revenues $505,995 $436,174 $1,413,121 $1,173,084
Average Selling Price
Per Home Closed $243.7 $224.5 $245.4 $219.1
Home Gross Margins 24.2% 23.2% 23.7% 22.3%
Excluding Interest in
Home Cost of Sales 25.3% 24.6% 25.0% 23.6%
Orders For Homes, Net (Units)
Colorado 494 668 2,101 2,134
California 362 415 1,217 1,272
Arizona 433 573 1,699 1,486
Nevada 161 199 591 631
Virginia 117 177 481 641
Maryland 61 60 239 217
Total 1,628 2,092 6,328 6,381
Homes Closed (Units)
Colorado 688 702 1,988 2,152
California 433 369 1,048 887
Arizona 611 405 1,622 1,094
Nevada 165 212 493 500
Virginia 107 175 413 497
Maryland 72 80 195 225
Total 2,076 1,943 5,759 5,355
September December September
30, 31, 30,
2001 2000 2000
Backlog (Units)
Colorado 1,498 1,385 1,608
California 677 508 642
Arizona 887 747 844
Nevada 296 198 268
Virginia 396 328 434
Maryland 170 126 171
Total 3,924 3,292 3,967
Backlog Estimated
Sales Value $1,050,000 $775,000 $930,000
SOURCE: M.D.C. Holdings, Inc.
Contact: Paris G. Reece III, Chief Financial Officer of M.D.C. Holdings,
Inc., +1-303-804-7706,
Associates, Inc., +1-212-843-8000,
Holdings, Inc.
Website: https://www.richmondamerican.com/
