M.D.C. Holdings, Inc.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "We are proud to report another quarter of significant accomplishments by our Company. Not only did we achieve record first quarter levels of net income and earnings per share, but our home orders were the highest for any quarter in the Company's history, producing a quarter-end backlog with a sales value in excess of $1 billion. Also in the 2002 first quarter, we continued our strategy of expanding in our existing markets, and we made significant progress in further enhancing our geographic diversity."
The Company recently announced an agreement to acquire most of the homebuilding assets of W.L. Homes LLC (dba John Laing Homes) in Salt Lake City and in Las Vegas, where the Company will be among the top five builders in this market. In February, the Company announced the hiring of a senior manager to lead its expansion into the Dallas/Fort Worth market.
Mizel continued, "Our successes have continued to be recognized by the firms that rate our public debt. Standard & Poor's recently upgraded our senior credit rating to 'BB+,' and Moody's Investors Service assigned a 'positive' outlook to their 'Ba1' rating of our senior debt. Both of these ratings are one step away from the investment grade rating which already has been assigned to MDC by Fitch Ratings."
Record Homebuilding and Mortgage Lending Results
Operating profits from the Company's homebuilding operations for the first quarter of 2002 increased to $57.8 million, compared with $53.9 million for the same period in 2001. The 2002 increase primarily resulted from a $33,000 increase in the average selling price of homes closed, partially offset by 85 fewer homes closed, compared with the first quarter of 2001. Home gross margins were 23.4% for the three months ended March 31, 2002, compared with 23.3% for the same period in 2001.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "We experienced significantly higher year-over-year operating results in Virginia, Maryland and Las Vegas, primarily due to increases in average selling prices of more than $30,000 and improvements in home gross margins of over 400 basis points in each of these markets. In Southern California, higher home closings as well as increased average selling prices and home gross margins combined to produce substantially improved earnings in the 2002 first quarter in this strengthening market. Our first quarter home gross margins improved by 120 basis points from the 2001 fourth quarter primarily as a result of non-recurring adjustments to reduce previous estimates of costs to complete land development in certain active projects in Virginia and Southern California."
Reece continued, "As previously announced, our first quarter results were enhanced by favorable weather for construction in most of our markets, enabling us to close approximately 100 homes that originally were scheduled for completion and closing in the 2002 second quarter. While a small number of these accelerated home closings may be replaced in the second quarter as a result of our record first quarter home orders, most of the increased homes sold will close in the third and fourth quarters of 2002. Our increased first quarter home orders help to confirm the importance of getting new communities open and completing and opening model homes in these communities, particularly in Colorado. With active communities up 10% from 2001 year-end levels, we are on track to achieve our objective of having over 160 communities active by June 30, 2002, which should position us to take further advantage of the strong demand for new homes we have been experiencing in each of our markets."
The Company's mortgage lending operations reported operating profits of $5.0 million for the three months ended March 31, 2002, compared with $4.2 million for the same period in 2001. The improvement in operating profits primarily was due to increased gains from sales of mortgage loans and higher interest revenues in the first quarter of 2002. In addition, the Company recognized increased loan origination fees in the 2002 first quarter primarily due to a greater volume of loans originated for MDC's home buyers. The Company originated or brokered $306 million in mortgage loans for 83% of MDC's home buyers in the 2002 first quarter, compared with $293 million in mortgage loans for 83% of MDC's home buyers for the same period in 2001.
Strengthened Balance Sheet and Improved Operating Efficiency
The Company continued to strengthen its balance sheet and improve the efficiency of its operations in the first quarter of 2002. This success is represented by the achievement of ratios of homebuilding and corporate debt-to-capital and debt-to-EBITDA (as defined below) at March 31, 2002 of .24 and .70, respectively. In addition, MDC improved its return on average assets and EBIT return on capital for the 12 months ended March 31, 2002 to 13.2% and 30.9%, respectively. Each of these ratios rank among the best in the homebuilding industry. The Company's strong operating results over the past year have increased MDC's stockholders' equity by 33% to $694 million, or $25.81 per outstanding share, at March 31, 2002. Further, notwithstanding higher inventory levels needed to support the Company's expanded homebuilding operations, MDC ended the 2002 first quarter with liquidity of $434 million, 27% higher than at March 31, 2001.
First quarter 2002 earnings before interest, taxes, depreciation and amortization ("EBITDA") increased to $63.7 million, compared with $59.9 million for the same period in 2001. This EBITDA increase contributed to the improvement in the Company's ratio of EBITDA to interest incurred to 15.8 for the quarter ended March 31, 2002, compared with 9.9 for the comparable period in 2001.
MDC, whose subsidiaries build homes under the name "Richmond American Homes," 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 Colorado; among the top five homebuilders in Northern Virginia, Phoenix and Tucson; and among the top ten homebuilders in suburban Maryland, Las Vegas, Northern California and Southern California.
All earnings per share amounts discussed above are on a diluted basis.
Certain statements in this release 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; (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) terrorist acts and other acts of war; and (15) other factors over which the Company has little or no control.
M.D.C. HOLDINGS, INC. Condensed Consolidated Balance Sheets (In thousands) March 31, December 31, 2002 2001 ASSETS Corporate Cash and cash equivalents $23,265 $31,322 Property and equipment, net 2,097 2,723 Deferred income taxes 27,379 30,081 Deferred debt issue costs, net 1,885 1,947 Other assets, net 13,555 7,597 68,181 73,670 Homebuilding Cash and cash equivalents 5,094 4,760 Home sales and other accounts receivable 5,750 2,621 Inventories, net Housing completed or under construction 475,854 456,752 Land and land under development 506,536 450,502 Prepaid expenses and other assets, net 55,277 49,544 1,048,511 964,179 Financial Services Cash and cash equivalents 550 518 Mortgage loans held in inventory 92,135 144,971 Other assets, net 4,993 7,618 97,678 153,107 Total Assets $1,214,370 $1,190,956 LIABILITIES Corporate Accounts payable and accrued expenses $41,939 $61,135 Income taxes payable 22,273 9,953 Senior notes, net 174,519 174,503 238,731 245,591 Homebuilding Accounts payable and accrued expenses 165,043 174,955 Line of credit 50,000 -- 215,043 174,955 Financial Services Accounts payable and accrued expenses 22,235 16,937 Line of credit 44,833 99,642 67,068 116,579 Total Liabilities 520,842 537,125 STOCKHOLDERS' EQUITY Total Stockholders' Equity 693,528 653,831 Total Liabilities and Stockholders' Equity $1,214,370 $1,190,956 M.D.C. HOLDINGS, INC. Condensed Consolidated Statements of Income (In thousands, except per share amounts) Three Months Ended March 31, 2002 2001 REVENUES Homebuilding $446,761 $411,096 Financial Services 9,381 8,341 Corporate 232 285 Total Revenues $456,374 $419,722 NET INCOME Homebuilding $57,844 $53,931 Financial Services 5,030 4,204 Operating Profit 62,874 58,135 Corporate general and administrative expense, net (9,828) (10,121) Income before income taxes 53,046 48,014 Provision for income taxes (20,710) (18,731) Net Income $32,336 $29,283 EARNINGS PER SHARE Basic $1.21 $1.13 Diluted $1.16 $1.09 WEIGHTED-AVERAGE SHARES OUTSTANDING Basic 26,714 25,933 Diluted 27,773 26,938 DIVIDENDS PAID PER SHARE $.07 $.06 M.D.C. HOLDINGS, INC. Information on Business Segments (In thousands) Three Months Ended March 31, 2002 2001 Homebuilding Home sales $445,167 $409,720 Land sales -- 346 Other revenues 1,594 1,030 Total Homebuilding Revenues 446,761 411,096 Home cost of sales 341,061 314,437 Land cost of sales -- 263 Marketing 25,663 22,853 General and administrative 22,193 19,612 388,917 357,165 Homebuilding Operating Profit 57,844 53,931 Financial Services Interest revenues 1,008 541 Origination fees 4,229 3,685 Gains on sales of mortgage servicing 471 1,683 Gains on sales of mortgage loans, net 3,461 2,574 Mortgage servicing and other 212 (142) Total Financial Services Revenues 9,381 8,341 General and administrative 4,351 4,137 Financial Services Operating Profit 5,030 4,204 Total Operating Profit 62,874 58,135 Corporate Interest and other revenues 232 285 General and administrative (10,060) (10,406) Net Corporate Expenses (9,828) (10,121) Income Before Income Taxes $53,046 $48,014 M.D.C. HOLDINGS, INC. Selected Financial Data (Dollars in thousands, except per share amounts) March 31, December 31, March 31, 2002 2001 2001 BALANCE SHEET DATA Stockholders' Equity $693,528 $653,831 $521,962 Book Value Per Share Outstanding $25.81 $24.59 $20.03 Homebuilding and Corporate Debt $224,519 $174,503 $284,458 Ratio of Homebuilding and Corporate Debt to Equity .32 .27 .54 Total Capital (excluding mortgage lending debt) $918,047 $828,334 $806,420 Ratio of Homebuilding and Corporate Debt to Total Capital .24 .21 .35 Ratio of Homebuilding and Corporate Debt to Total Capital (net of cash) .22 .17 .34 Ratio of Homebuilding and Corporate Debt to EBITDA* .70 .55 1.07 Ratio of Homebuilding and Corporate Debt (net of cash) to EBITDA* .61 .43 1.01 Total Liquidity $433,655 $491,770 $341,380 Total Homebuilding Inventories $982,390 $907,254 $872,923 Interest Capitalized in Inventories $16,937 $17,358 $19,770 Interest Capitalized as a Percent of Inventories 1.7% 1.9% 2.3% Total Lots Owned 14,354 13,524 11,453 Total Lots Under Option 5,559 6,059 9,703 Homes Under Construction (including models) 3,248 2,783 3,459 Active Subdivisions 150 137 138 Three Months Ended March 31, 2002 2001 OPERATING DATA EBITDA Net Income $32,336 $29,283 Add: Income taxes 20,710 18,731 Interest in home and land cost of sales 4,462 5,679 Other fixed charges 963 876 Depreciation and amortization 5,249 5,376 Total EBITDA $63,720 $59,945 Ratio of EBITDA to Interest Incurred 15.8 9.9 Homebuilding and Corporate SG&A as a Percent of Home Sales Revenues 13.0% 12.9% Interest Incurred $4,041 $6,032 Interest Capitalized $4,041 $6,032 Interest in Home Cost of Sales as a Percent of Home Sales Revenues 1.0% 1.3% Operating Return on Revenues 7.1% 7.0% Operating Return on Average Assets* 13.2% 12.9% EBIT Return on Capital* 30.9% 29.2% *Rolling 12 months Ended March 31 M.D.C. HOLDINGS, INC. Homebuilding Operational Data (Dollars in thousands) Three Months Ended March 31, 2002 2001 Home Sales Revenues $445,167 $409,720 Average Selling Price Per Home Closed $265.9 $232.9 Home Gross Margins 23.4% 23.3% Excluding Interest in Home Cost of Sales 24.4% 24.6% Orders For Homes, net (Units) Colorado 1,001 968 California 591 441 Arizona 670 732 Nevada 207 268 Virginia 242 220 Maryland 65 98 Total 2,776 2,727 Homes Closed (Units) Colorado 609 629 California 292 240 Arizona 438 498 Nevada 141 159 Virginia 130 170 Maryland 64 63 Total 1,674 1,759 March 31, December 31, March 31, 2002 2001 2001 Backlog (Units) Colorado 1,587 1,195 1,724 California 789 490 709 Arizona 857 625 1,044 Nevada 247 181 307 Virginia 346 234 378 Maryland 158 157 161 Total 3,984 2,882 4,323 Backlog Estimated Sales Value $1,050,000 $760,000 $1,075,000
SOURCE: M.D.C. Holdings, Inc.
Contact: Paris G. Reece III, Chief Financial Officer of M.D.C. Holdings,
Associates, Inc., +1-212-843-8000,