News
M.D.C. Holdings, Inc.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "The successful execution of our operating strategy has enabled us to produce the highest level of operating results for any third quarter and first nine months in our history. We achieved a return on total capital of more than 28%, raised our quarterly interest coverage to over 14 times, and built one of the strongest and most liquid balance sheets in the industry. Our financial flexibility recently has been enhanced with the amendment of our unsecured bank credit facility. This amendment increased the aggregate commitment amount to $538 million, raised the maximum amount available to $600 million, subject to additional commitments, and extended the maturity date to July 2006. The liquidity provided by this expanded line of credit should support growth planned in our existing markets, as well as our pursuit of opportunities to enter new markets."
Mizel continued, "The continued strength of the single-family housing market is reflected in our home orders in this quarter and throughout the year, including seven straight months of record home orders. In fact, the 7,968 net orders for homes in the first nine months of 2002 already exceed the highest level of home orders received in any full year in our history. The 50% year-over-year increase in our third quarter home orders, including a 95% increase in September, is a direct result of the strong demand for homes in most of our markets, as well as the 28% increase in our active subdivisions since the beginning of the year. Our substantial order growth has contributed to a record quarter-end backlog of 5,098 homes at September 30th, which should enable us to close more than 8,800 homes in 2002 and to establish new Company highs for revenues and earnings in the 2002 fourth quarter and full year. With our growth in active communities and an anticipated record year-end backlog, we should be positioned to meet our objectives for 2003 of closing more than 10,500 homes and realizing year-over-year growth in operating performance."
Net income for the nine months ended September 30, 2002 was $110.2 million, or $3.96 per share, compared with $108.7 million, or $3.99 per share, for the same period in 2001. Total revenues for the nine months ended September 30, 2002 were $1.548 billion, compared with revenues of $1.449 billion for the first nine months of 2001.
Strong Homebuilding and Mortgage Lending Results
Operating profits from the Company's homebuilding operations increased to $75.5 million and $194.5 million, respectively, for the quarter and nine months ended September 30, 2002, compared with $71.9 million and $195.8 million for the same periods in 2001. Operating profits in the 2001 periods were reduced by a non-cash, pre-tax asset impairment charge of $2.9 million. As previously reported, MDC closed 2,276 homes and 5,906 homes, respectively, for the three and nine months ended September 30, 2002, compared with closings of 2,076 homes and 5,759 homes for the same periods in 2001. For the third quarter and first nine months of 2002, the Company's average selling prices were $249,600 and $255,700, respectively, and home gross margins were 23.4% and 23.1%, respectively. Average selling prices were $243,700 and $245,400, respectively, for the third quarter and first nine months of 2001, and the Company posted home gross margins of 24.2% and 23.7%, respectively.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Our increased homebuilding profits in the 2002 third quarter primarily resulted from improved performances by our Phoenix, Virginia and Maryland divisions. Our Phoenix and Maryland operations experienced significant improvements in home gross margins and increased average selling prices, partially offset by a reduced number of homes closed in the quarter, compared with the 2001 third quarter. In Virginia, while home gross margins increased to the highest level in the Company, the primary driver for improved profitability was 27 more homes closed, partially offset by a lower average selling price. Third quarter profits also improved in Las Vegas, where we closed 141 more homes than in the 2001 third quarter, including 103 homes closed in lower-priced, lower-margin subdivisions acquired from W.L. Homes LLC in April 2002."
Operating profits from the Company's mortgage lending operations improved to $5.9 million and $16.1 million, respectively, for the quarter and nine months ended September 30, 2002, 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, 2001 were $5.8 million and $14.7 million, respectively. The profit improvements in 2002 primarily resulted from increased gains on sales of mortgage loans.
Strengthened Balance Sheet and Improved Operating Efficiency
The Company continued to strengthen its balance sheet and improve the efficiency of its operations in the third quarter of 2002. This success 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, 2002 of .36 and 1.37, respectively. These ratios are among the lowest in the homebuilding industry. The Company's strong operating results over the past year increased stockholders' equity by 24% to $755 million, or $28.33 per outstanding share, at September 30, 2002. This stockholders' equity amount also reflects the repurchase during the 2002 third quarter of 492,600 shares of MDC common stock for an aggregate price of $19.0 million. In addition, the Company ended the 2002 third quarter with liquidity of $310 million.
Earnings before interest and other fixed charges, taxes, depreciation, amortization and asset impairment charges ("EBITDA, as adjusted") for the third quarter and first nine months of 2002 was $83.5 million and $214.3 million, respectively, compared with $82.9 million and $219.3 million, respectively, for the same periods in 2001. Reduced interest incurred, primarily resulting from lower interest rates, increased the Company's ratio of EBITDA, as adjusted, to interest incurred to 14.4 for the nine months ended September 30, 2002, compared with 12.4 for the same 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 homebuyers, 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, Tucson and Las Vegas; among the top ten homebuilders in suburban Maryland, Northern California and Southern California; and has recently entered the Salt Lake City and Dallas/Fort Worth markets.
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) the availability and cost of insurance covering risks associated with our business; (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) September 30, December 31, 2002 2001 ASSETS Corporate Cash and cash equivalents $28,156 $31,322 Property and equipment, net 10,050 2,723 Deferred income taxes 24,430 30,081 Deferred debt issue costs, net 1,758 1,947 Other assets, net 7,929 7,597 72,323 73,670 Homebuilding Cash and cash equivalents 6,215 4,760 Home sales and other accounts receivable 15,433 2,621 Inventories, net Housing completed or under construction 675,233 456,752 Land and land under development 604,717 450,502 Prepaid expenses and other assets, net 61,669 49,544 1,363,267 964,179 Financial Services Cash and cash equivalents 872 518 Mortgage loans held in inventory 134,708 144,971 Other assets, net 5,094 7,618 140,674 153,107 Total Assets $1,576,264 $1,190,956 LIABILITIES Corporate Accounts payable and accrued expenses $50,842 $61,135 Income taxes payable 6,261 9,953 Senior notes, net 174,551 174,503 231,654 245,591 Homebuilding Accounts payable and accrued expenses 216,991 174,955 Line of credit 255,000 -- 471,991 174,955 Financial Services Accounts payable and accrued expenses 27,597 16,937 Line of credit 90,060 99,642 117,657 116,579 Total Liabilities 821,302 537,125 STOCKHOLDERS' EQUITY Total Stockholders' Equity 754,962 653,831 Total Liabilities and Stockholders' Equity $1,576,264 $1,190,956 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, 2002 2001 2002 2001 REVENUES Homebuilding $570,386 $511,008 $1,516,318 $1,421,114 Financial Services 11,160 10,081 30,437 27,420 Corporate 152 223 747 735 Total Revenues $581,698 $521,312 $1,547,502 $1,449,269 NET INCOME Homebuilding $75,472 $71,914 $194,531 $195,831 Financial Services 5,905 5,750 16,120 14,680 Operating Profit 81,377 77,664 210,651 210,511 Corporate general and administrative expense, net (10,346) (10,874) (30,245) (32,278) Income before income taxes 71,031 66,790 180,406 178,233 Provision for income taxes (27,472) (26,265) (70,175) (69,582) Net Income $43,559 $40,525 $110,231 $108,651 EARNINGS PER SHARE Basic $1.63 $1.52 $4.11 $4.12 Diluted $1.57 $1.48 $3.96 $3.99 WEIGHTED-AVERAGE SHARES OUTSTANDING Basic 26,727 26,654 26,814 26,354 Diluted 27,680 27,370 27,861 27,213 DIVIDENDS PAID PER SHARE $.08 $.07 $.23 $.20 M.D.C. HOLDINGS, INC. Information on Business Segments (In thousands) Three Months Nine Months Ended September 30, Ended September 30, 2002 2001 2002 2001 Homebuilding Home sales $568,195 $505,995 $1,510,224 $1,413,121 Land sales 1,485 2,142 2,231 2,901 Other revenues 706 2,871 3,863 5,092 Total Homebuilding Revenues 570,386 511,008 1,516,318 1,421,114 Home cost of sales 435,041 383,777 1,161,155 1,077,786 Land cost of sales 1,237 646 1,741 1,103 Asset impairment charges -- 2,900 -- 2,900 Marketing 31,794 28,116 85,139 78,033 General and administrative 26,842 23,655 73,752 65,461 494,914 439,094 1,321,787 1,225,283 Homebuilding Operating Profit 75,472 71,914 194,531 195,831 Financial Services Interest revenues 1,045 901 2,994 2,356 Origination fees 4,563 4,418 12,784 12,570 Gains on sales of mortgage servicing 408 461 1,360 2,863 Gains on sales of mortgage loans, net 4,902 4,128 12,643 9,638 Mortgage servicing and other 242 173 656 (7) Total Financial Services Revenues 11,160 10,081 30,437 27,420 General and administrative 5,255 4,331 14,317 12,740 Financial Services Operating Profit 5,905 5,750 16,120 14,680 Total Operating Profit 81,377 77,664 210,651 210,511 Corporate Interest and other revenues 152 223 747 735 General and administrative (10,498) (11,097) (30,992) (33,013) Net Corporate Expenses (10,346) (10,874) (30,245) (32,278) Income Before Income Taxes $71,031 $66,790 $180,406 $178,233 M.D.C. HOLDINGS, INC. Selected Financial Data (Dollars in thousands, except per share amounts) September 30, December 31, September 30, 2002 2001 2001 BALANCE SHEET DATA Stockholders' Equity $754,962 $653,831 $607,378 Book Value Per Share Outstanding $28.33 $24.59 $25.16 Homebuilding and Corporate Debt $429,551 $174,503 $319,488 Ratio of Homebuilding and Corporate Debt to Equity .57 .27 .53 Total Capital (excluding mortgage lending debt) $1,184,513 $828,334 $926,866 Ratio of Homebuilding and Corporate Debt to Total Capital .36 .21 .34 Ratio of Homebuilding and Corporate Debt to Total Capital (net of cash) .34 .17 .33 Ratio of Homebuilding and Corporate Debt to EBITDA, as adjusted * 1.37 .55 1.07 Ratio of Homebuilding and Corporate Debt (net of cash) to EBITDA, as adjusted* 1.26 .43 1.01 Total Liquidity $310,466 $491,770 $334,823 Total Homebuilding Inventories $1,279,950 $907,254 $1,030,190 Interest Capitalized in Inventories $18,943 $17,358 $19,461 Interest Capitalized as a Percent of Inventories 1.5% 1.9% 1.9% Total Lots Owned 16,975 13,524 13,331 Total Lots Under Option 6,288 6,059 7,205 Homes Under Construction (including models) 4,705 2,783 3,854 Active Subdivisions 175 137 141 Three Months Ended Nine Months Ended September 30, September 30, 2002 2001 2002 2001 OPERATING DATA EBITDA, as adjusted Net income $43,559 $40,525 $110,231 $108,651 Add: Income taxes 27,472 26,265 70,175 69,582 Interest in home and land cost of sales 4,568 5,921 13,278 17,594 Other fixed charges 1,306 979 3,298 2,682 Depreciation and amortization 6,548 6,348 17,366 17,889 Asset impairment charges -- 2,900 -- 2,900 Total EBITDA, as adjusted $83,453 $82,938 $214,348 $219,298 Ratio of EBITDA, as adjusted to Interest Incurred 14.1 14.1 14.4 12.4 Homebuilding and Corporate SG&A as a Percent of Home Sales Revenues 12.2% 12.4% 12.6% 12.5% Interest Incurred $5,907 $5,879 $14,863 $17,638 Interest Capitalized $5,907 $5,879 $14,863 $17,638 Interest in Home Cost of Sales as a Percent of Home Sales Revenues 0.8% 1.1% 0.9% 1.3% Operating Return on Revenues 7.5% 7.8% 7.1% 7.5% Operating Return on Average Assets* 11.8% 12.9% Operating Return on Average Equity* 22.9% 28.2% EBIT Return on Capital* 28.2% 31.9% * 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, 2002 2001 2002 2001 Home Sales Revenues $568,195 $505,995 $1,510,224 $1,413,121 Average Selling Price Per Home Closed $249.6 $243.7 $255.7 $245.4 Home Gross Margins 23.4% 24.2% 23.1% 23.7% Excluding Interest in Home Cost of Sales 24.2% 25.3% 24.0% 25.0% Orders For Homes, Net (Units) Colorado 541 494 2,299 2,101 Utah 46 -- 77 -- California 475 362 1,699 1,217 Arizona 755 433 2,096 1,699 Nevada 359 161 977 591 Virginia 186 117 604 481 Maryland 75 61 214 239 Texas 2 - - 2 -- Total 2,439 1,628 7,968 6,328 Homes Closed (Units) Colorado 790 688 2,105 1,988 Utah 39 -- 64 -- California 394 433 1,048 1,048 Arizona 550 611 1,434 1,622 Nevada 306 165 694 493 Virginia 134 107 368 413 Maryland 63 72 193 195 Texas -- -- -- -- Total 2,276 2,076 5,906 5,759 September 30, December 31, September 30, 2002 2001 2001 Backlog (Units) Colorado 1,389 1,195 1,498 Utah 54 -- -- California 1,141 490 677 Arizona 1,287 625 887 Nevada 577 181 296 Virginia 470 234 396 Maryland 178 157 170 Texas 2 -- -- Total 5,098 2,882 3,924 Backlog Estimated Sales Value $1,350,000 $760,000 $1,050,000
SOURCE: M.D.C. Holdings, Inc.
CONTACT: Paris G. Reece III, Chief Financial Officer of M.D.C. Holdings,
Inc., +1-303-804-7706,
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Holdings, Inc.
Web site: https://www.richmondamerican.com/