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.
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,
Associates, Inc., +1-212-843-8050,
Web site: https://www.richmondamerican.com/