News
M.D.C. Holdings, Inc.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "We're off to a very good start in 2003, as we posted record first quarter revenues and operating earnings for the sixth consecutive year. Both our homebuilding and mortgage lending businesses contributed new Company highs for first quarter operating profits on the strength of record home closings and mortgage loan originations. These results, combined with record first quarter home orders reported earlier, reflect the success of our organic expansion and our operating strategy, as well as the resiliency of the homebuilding industry in the face of tremendous challenges to our nation and our economy. With our first quarter performance, a backlog of 5,300 homes and more than 200 active subdivisions in some of the best markets for homebuilding in the country, we are positioned to meet our goals for 2003 of closing more than 10,500 homes and achieving new Company milestones for revenues and net income."
Mizel continued, "We have managed our growth with the objective of maximizing value for our shareowners, which we believe begins with the continued strengthening of our balance sheet and maintaining substantial liquidity. Consistent with this focus, our leverage and interest coverage ratios in the 2003 first quarter continue to rank among the best in the homebuilding industry, and we ended the quarter with over $550 million in liquidity. We further enhanced shareowner value in the quarter with the repurchase of 727,100 shares of MDC common stock at an average cost of $36.76 per share, contributing to our repurchase of almost 6% of our outstanding stock over the last nine months. Our recently approved repurchase authorization will enable us to repurchase up to an additional 1,769,600 shares. MDC's growing financial strength was recognized by all three major rating agencies in the 2003 first quarter, with Moody's Investors Service assigning an 'investment grade' rating of 'Baa3' to our senior debt and both Standard & Poor's and Fitch Ratings increasing their ratings outlooks to positive."
Record Homebuilding and Financial Services Results
Operating profits from the Company's homebuilding operations for the first quarter of 2003 increased to $64.5 million, compared with $57.8 million for the same period in 2002. The 2003 increase primarily resulted from a 25% increase in homes closed. These increased home closings, partially offset by a $2,300 decrease in average selling prices, contributed to record first quarter home sales revenues of $554 million, 24% higher than revenues of $445 million in the 2002 first quarter. Home gross margins were 22.8% for the three months ended March 31, 2003, compared with 22.6% in the 2002 fourth quarter and 23.4% for the first three months in 2002.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Home closings increased significantly in Las Vegas, Phoenix and our California markets, primarily due to higher backlogs at the beginning of the year. Average selling prices in the 2003 first quarter were relatively consistent with those of a year ago. However, we anticipate that our average selling prices will decline sequentially from current levels in the second and third quarters of 2003 by as much as 5% each quarter. These expected declines primarily result from the implementation of our strategy to build a greater number of homes in more affordable price points in most of our markets."
Reece continued, "Over the last year, we have experienced substantial growth in most of our markets outside of Colorado and California, particularly in Virginia, Las Vegas and Phoenix, where active subdivisions have increased by 19, 14 and 10, respectively, from March 31, 2002. Overall, our active subdivisions are 36% higher than at this time last year and up 15% since the end of 2002. These increases have contributed to our record home orders in each of the last 13 months, including a 21% year-over-year increase in the 2003 first quarter. Over the balance of 2003, we will continue to evaluate prudent uses of our capital in view of current economic conditions, opportunities to maximize value to our shareowners and our strategy for disciplined, opportunistic growth. Given our growth in the first quarter, we anticipate that our active subdivision count will remain relatively consistent with current levels through the third quarter, with an increase of approximately 10% expected in the fourth quarter as we prepare for meeting our growth objectives for 2004."
The Company's financial services segment, primarily mortgage lending operations, reported record operating profits of $7.6 million for the first three months of 2003, 50% higher than the $5.0 million reported for the same period in 2002. The improvement in operating profits primarily was due to increased gains from sales of mortgage loans in the first quarter of 2003. In addition, the Company recognized increased loan origination fees in the 2003 first quarter, primarily resulting from a greater volume of loans originated for MDC's homebuyers. The Company originated or brokered $364 million in mortgage loans for 81% of MDC's homebuyers in the 2003 first quarter, compared with $306 million in mortgage loans for 83% of MDC's homebuyers for the same period in 2002.
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 2003. This success is represented by the achievement of ratios of homebuilding and corporate net debt-to-capital and net debt-to-EBITDA, as adjusted (as defined below) at March 31, 2003 of .30 and 1.05, respectively. First quarter 2003 earnings before interest, taxes, depreciation and amortization ("EBITDA, as adjusted") increased to $74.0 million, contributing to a ratio of EBITDA, as adjusted-to- interest incurred for the twelve months ended March 31, 2003 of 13.9. The Company's strong operating results over the past year, partially offset by expenditures of $56.1 million for the repurchase of 1,516,100 shares of MDC common stock, have increased MDC's stockholders' equity by 18% to $816 million, or $31.50 per outstanding share, at March 31, 2003. Further, notwithstanding higher inventory levels needed to support the Company's expanded homebuilding operations, MDC ended the 2003 first quarter with liquidity (as defined below) of $556 million, 28% higher than at March 31, 2002.
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, Southern California and Salt Lake City; and has recently entered the Dallas/Fort Worth market.
All earnings per share amounts discussed above are on a diluted basis. Forward-Looking Statements
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) 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.
Sarbanes-Oxley Disclosures
Liquidity represents funds immediately available to MDC and is calculated as the maximum amount available under the Company's lines of credit, plus unrestricted cash, less outstanding letters of credit and borrowings. EBITDA, as adjusted and liquidity are not generally accepted accounting principle ("GAAP") measures. EBITDA, as adjusted has been computed in accordance with the definition of "Consolidated EBITDA" set forth under the Company's 8 3/8% senior notes indenture. Under this definition, EBITDA, as adjusted is calculated by adding to net income the provision for income tax, depreciation, amortization, interest charges, other fixed charges and other non-cash, extraordinary charges that reduce net income, including asset impairment charges. EBITDA, as adjusted should not be considered an alternative to net income determined in accordance with GAAP as an indicator of operating performance, nor an alternative to cash flows from operating activities determined in accordance with GAAP as a measure of liquidity. Because some analysts and companies may not calculate EBITDA, as adjusted in the same manner as MDC, the EBITDA, as adjusted information presented above may not be comparable to similar presentations by others. MDC's management believes that EBITDA, as adjusted reflects the changes in the Company's operating results, particularly changes in the Company's net income, and is an indication of MDC's ability to generate funds from operations that are available to pay income taxes, interest and principal on debt and to meet other cash obligations. Consolidated EBITDA is a component of the "Consolidated Fixed Charge Coverage Ratio," as defined in the Company's 8 3/8% senior notes indenture. The Consolidated Fixed Charge Coverage Ratio must be at least 2.0 according to the 8 3/8% senior notes indenture or the Company may not be able to incur additional indebtedness under certain circumstances. The Consolidated Fixed Charge Coverage Ratio is calculated as Consolidated EBITDA divided by "Consolidated Interest Incurred," as defined by the Company's 8 3/8% senior notes indenture. A reconciliation of EBITDA, as adjusted to net income, the most directly comparable GAAP measure, is provided below.
M.D.C. HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
March 31, December 31,
2003 2002
ASSETS
Corporate
Cash and cash equivalents $51,832 $23,164
Property and equipment, net 10,683 10,851
Deferred income taxes 24,986 25,980
Deferred debt issue costs, net 3,210 3,305
Other assets, net 6,386 6,708
97,097 70,008
Homebuilding
Cash and cash equivalents 4,690 4,686
Home sales and other accounts receivable 23,592 3,519
Inventories, net
Housing completed or
under construction 634,677 578,475
Land and land under development 643,698 656,843
Prepaid expenses and other assets, net 70,182 65,936
1,376,839 1,309,459
Financial Services
Cash and cash equivalents 1,551 1,092
Mortgage loans held in inventory 133,891 207,938
Other assets, net 7,861 6,683
143,303 215,713
Total Assets $1,617,239 $1,595,180
LIABILITIES
Corporate
Accounts payable and accrued expenses $48,235 $63,871
Income taxes payable 26,031 21,571
Senior notes, net 323,035 322,990
397,301 408,432
Homebuilding
Accounts payable and accrued expenses 204,650 210,601
Line of credit 90,000 --
294,650 210,601
Financial Services
Accounts payable and accrued expenses 20,541 21,506
Line of credit 88,552 154,074
109,093 175,580
Total Liabilities 801,044 794,613
STOCKHOLDERS' EQUITY
Total Stockholders' Equity 816,195 800,567
Total Liabilities and
Stockholders' Equity $1,617,239 $1,595,180
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended
March 31,
2003 2002
REVENUES
Homebuilding $554,912 $446,761
Financial Services 14,513 9,381
Corporate 217 232
Total Revenues $569,642 $456,374
NET INCOME
Homebuilding $64,458 $57,844
Financial Services 7,567 5,030
Operating Profit 72,025 62,874
Corporate general and
administrative expense, net (11,259) (9,828)
Income before income taxes 60,766 53,046
Provision for income taxes (23,729) (20,710)
Net Income $37,037 $32,336
EARNINGS PER SHARE
Basic $1.41 $1.21
Diluted $1.36 $1.16
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic 26,359 26,714
Diluted 27,212 27,773
DIVIDENDS PAID PER SHARE $.08 $.07
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months
Ended March 31,
2003 2002
Homebuilding
Home sales $553,575 $445,167
Land sales 123 --
Other revenues 1,214 1,594
Total Homebuilding Revenues 554,912 446,761
Home cost of sales 427,602 341,061
Land cost of sales 87 --
Marketing 33,600 25,663
General and administrative 29,165 22,193
490,454 388,917
Homebuilding Operating Profit 64,458 57,844
Financial Services
Interest revenues 1,008 1,008
Origination fees 4,660 4,229
Gains on sales of mortgage servicing 834 471
Gains on sales of mortgage loans, net 7,342 3,461
Mortgage servicing and other 669 212
Total Financial Services Revenues 14,513 9,381
General and administrative 6,946 4,351
Financial Services Operating Profit 7,567 5,030
Total Operating Profit 72,025 62,874
Corporate
Interest and other revenues 217 232
General and administrative (11,476) (10,060)
Net Corporate Expenses (11,259) (9,828)
Income Before Income Taxes $60,766 $53,046
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
March 31, December 31, March 31,
2003 2002 2002
BALANCE SHEET DATA
Stockholders' Equity
Per Share Outstanding $31.50 $30.29 $25.81
Stockholders' Equity $816,195 $800,567 $693,528
Homebuilding and
Corporate Debt 413,035 322,990 224,519
Total Capital
(excluding mortgage
lending debt) $1,229,230 $1,123,557 $918,047
Ratio of Homebuilding
and Corporate Debt
to Equity .51 .40 .32
Ratio of Homebuilding
and Corporate Debt
to Equity (net of cash) .43 .37 .28
Ratio of Homebuilding
and Corporate Debt
to Total Capital .34 .29 .24
Ratio of Homebuilding
and Corporate Debt
to Total Capital
(net of cash) .30 .27 .22
Ratio of Homebuilding
and Corporate Debt
to EBITDA, as adjusted 1.23 .99 .70
Ratio of Homebuilding
and Corporate Debt
(net of cash) to
EBITDA, as adjusted 1.05 .90 .61
Total Liquidity $556,098 $618,774 $433,655
Total Homebuilding
Inventories $1,278,375 $1,235,318 $982,390
Interest Capitalized
in Inventories $20,032 $17,783 $16,937
Interest Capitalized
as a Percent of
Inventories 1.6% 1.4% 1.7%
Total Lots Owned 16,054 16,962 14,354
Total Lots Under Option 6,813 6,995 5,559
Homes Under Construction
(including models) 4,356 3,751 3,248
Active Subdivisions 204 178 150
Three Months Ended
March 31,
2003 2002
OPERATING DATA
Reconciliation of Net Income
to EBITDA, as adjusted
Net Income $37,037 $32,336
Add:
Income taxes 23,729 20,710
Interest included in home
and land cost of sales 4,803 4,462
Other fixed charges 1,449 963
Depreciation and
amortization 7,028 5,249
Total EBITDA, as adjusted $74,046 $63,720
Ratio of EBITDA, as adjusted to
Homebuilding and Corporate
Interest Incurred 10.5 15.8
Homebuilding and Corporate SG&A
as a Percent of Home Sales
Revenues 13.4% 13.0%
Homebuilding and Corporate
Interest Incurred $7,052 $4,041
Interest Capitalized $7,052 $4,041
Interest in Home Cost of Sales
as a Percent of Home Sales
Revenues 0.9% 1.0%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
Three Months Ended
March 31,
2003 2002
Home Sales Revenues $553,575 $445,167
Average Selling Price
Per Home Closed $263.6 $265.9
Home Gross Margins 22.8% 23.4%
Excluding Interest in
Home Cost of Sales 23.7% 24.4%
Orders For Homes, net (Units)
Colorado 671 1,001
California 530 591
Nevada 583 207
Arizona 924 670
Utah 93 --
Texas 50 --
Virginia 403 242
Maryland 111 65
Total 3,365 2,776
Homes Closed (Units)
Colorado 609 609
California 428 292
Nevada 273 141
Arizona 571 438
Utah 40 --
Texas 10 --
Virginia 102 130
Maryland 67 64
Total 2,100 1,674
March 31, December 31, March 31,
2003 2002 2002
Backlog (Units)
Colorado 1,019 957 1,587
California 1,024 922 789
Nevada 660 350 247
Arizona 1,429 1,076 857
Utah 103 50 --
Texas 56 16 --
Virginia 777 476 346
Maryland 232 188 158
Total 5,300 4,035 3,984
Backlog Estimated
Sales Value $1,400,000 $1,120,000 $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,
Associates, Inc., +1-212-843-8050,
Holdings, Inc.
Web site: https://www.richmondamerican.com/
