News
M.D.C. Holdings, Inc.
Net income for the six months ended June 30, 2003 was $79.7 million, or $2.66 per share, 20% higher than the $66.7 million, or $2.17 per share, for the same period in 2002. Total revenues for the six months ended June 30, 2003 reached a record $1.259 billion, representing an increase of 30% from revenues of $966 million for the first six months of 2002.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "Our operating results in the 2003 second quarter are among the strongest for any quarter in our history. Home closings, revenues, and homebuilding and financial services operating profits reached new second quarter highs. Without the debt redemption expenses mentioned earlier, our net income and earnings per share would have ranked as our second-best among all prior quarters. In addition, we received more home orders during the last three months than for any quarter in our history, contributing to our record backlog at June 30th of 6,341 homes with a future sales value of more than $1.6 billion. Despite ongoing economic challenges and concerns surrounding the global war on terrorism, the continued strength in demand for housing, low interest rates and our successful growth strategy in most of our markets enabled us to produce these outstanding results. In view of our performance through the first six months and the visibility inherent in our strong backlog, we now believe that we will close more than 10,800 homes in 2003, which should produce new Company highs for revenues and profits."
Mizel continued, "Equal in importance to our operating successes are the steps we made in the second quarter to enhance our capital structure and further our primary objective of maximizing shareowner value. Our debt-to- capital ratio at June 30th of .36 remains one of the lowest in the homebuilding industry. While continuing to maintain a relatively liquid balance sheet, we ended the quarter with $430 million in unrestricted cash and available borrowing capacity under our lines of credit, almost 40% above levels a year ago. In May, we distributed a 10% stock dividend to our shareowners and increased our quarterly cash dividend by 13%. Also in May, we redeemed our $175 million of 8 3/8% senior notes and completed the issuance of $150 million of new 10-year senior notes with an interest rate of 5 1/2%, the lowest rate for a 10-year note issued in the public market by a homebuilder."
Record Homebuilding and Financial Services Results
Homebuilding operating profits for the quarter and six months ended June 30, 2003 were $85.3 million and $149.8 million, respectively, representing increases of 39% and 26% over profits of $61.2 million and $119.1 million, respectively, for the same periods in 2002. The increases in the 2003 periods primarily are the result of the record levels of home closings and, for the second quarter, higher home gross margins. The Company closed 2,624 homes and 4,724 homes, respectively, in the second quarter and first six months of 2003, 34% and 30% higher, respectively, than home closings in the same periods in 2002. Home sales revenues for the three and six months ended June 30, 2003 increased to $672 million and $1.226 billion, respectively, compared with home sales revenues of $497 million and $942 million for the same periods in 2002. For the second quarter and first six months of 2003, the Company's average selling prices were $256,300 and $259,500, respectively, compared with $254,000 and $259,500 for the same periods in 2002, and home gross margins increased to 23.3% and 23.0%, respectively, compared with 22.5% and 22.9%.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Each of our homebuilding divisions outside of Colorado posted improved results compared with the 2002 second quarter, evidencing the success of our efforts to diversify our operations geographically. We realized particularly strong earnings growth in Las Vegas, Phoenix, Southern California and Virginia, primarily due to improved home gross margins in Las Vegas and Southern California and increases in active subdivisions that produced substantially more home closings in each of these markets. Our total of 190 active subdivisions at June 30th is 15% higher than a year ago. The slight decline over the last 90 days primarily is the result of selling out of a number of active subdivisions earlier than expected due to our strong orders received year-to-date. The impact of this order strength may cause an earlier sell-out of additional subdivisions over the balance of this year. As a result, when combined with anticipated delays in opening certain new subdivisions, the number of our active subdivisions should remain relatively consistent with current levels for the balance of this year, with more substantial growth anticipated in the 2004 first quarter."
Reece continued, "As anticipated, average selling prices in the 2003 second quarter declined from the first quarter, primarily due to a greater relative number of homes closed in our lower-priced Phoenix and Las Vegas markets, as well as lower average selling prices in Southern California resulting from our increased emphasis on providing more-affordable homes in the Inland Empire. These factors, as well as increased closings from our divisions in Salt Lake City and Dallas/Fort Worth, should cause average selling prices to decline further by as much as 5% in the 2003 third quarter."
Operating profits from the Company's financial services operations increased to $8.6 million and $16.2 million, respectively, for the quarter and six months ended June 30, 2003, compared with profits of $5.2 million and $10.2 million, respectively, for the same periods in 2002. The profit improvements in 2003 primarily resulted from increased gains on sales of mortgage loans due to a higher volume of mortgage loan originations and the favorable mortgage interest rate environment. Reported gains on sales of mortgage loans may vary significantly from period to period depending on the volatility in the interest rate market. The Company received a record $5.2 million in mortgage loan origination income in the 2003 second quarter on $456 million in mortgage loans originated, 31% higher than the $4.0 million received on $338 million of originations for the same period in 2002.
All earnings per share amounts discussed above are on a diluted basis. Earnings per share, book value per share, weighted average shares outstanding and dividends paid per share have been restated for the effects of the Company's May 2003 10% stock dividend.
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; and among the top ten homebuilders in suburban Maryland, Northern California, Southern California and Salt Lake City. MDC also has a growing presence in Dallas/Fort Worth and has recently entered the Houston and Philadelphia/Delaware Valley markets.
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) the availability and cost of performance bonds and 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 Statements of Income
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
REVENUES
Homebuilding $673,420 $499,171 $1,228,332 $945,932
Financial Services 15,813 9,896 30,326 19,277
Corporate 209 363 426 595
Total Revenues $689,442 $509,430 $1,259,084 $965,804
NET INCOME
Homebuilding $85,344 $61,215 $149,802 $119,059
Financial Services 8,599 5,185 16,166 10,215
Operating Profit 93,943 66,400 165,968 129,274
Expenses related to
debt redemption (9,315) -- (9,315) --
Other corporate
expense, net (14,623) (10,071) (25,882) (19,899)
Income before
income taxes 70,005 56,329 130,771 109,375
Provision for
income taxes (27,311) (21,993) (51,040) (42,703)
Net Income $42,694 $34,336 $79,731 $66,672
EARNINGS PER SHARE
Basic $1.49 $1.16 $2.77 $2.26
Diluted $1.43 $1.11 $2.66 $2.17
WEIGHTED-AVERAGE
SHARES OUTSTANDING
Basic 28,688 29,701 28,823 29,544
Diluted 29,917 30,912 29,926 30,744
DIVIDENDS PAID PER SHARE $.082 $.073 $.155 $.136
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months Six Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
Homebuilding
Home sales $672,439 $496,862 $1,226,014 $942,029
Land sales -- 746 123 746
Other revenues 981 1,563 2,195 3,157
Total Homebuilding
Revenues 673,420 499,171 1,228,332 945,932
Home cost of sales 515,985 385,053 943,587 726,114
Land cost of sales -- 504 87 504
Marketing 39,625 27,682 73,225 53,345
General and
administrative 32,466 24,717 61,631 46,910
588,076 437,956 1,078,530 826,873
Homebuilding
Operating Profit 85,344 61,215 149,802 119,059
Financial Services
Interest revenues 1,025 941 2,033 1,949
Origination fees 5,234 3,992 9,894 8,221
Gains on sales of
mortgage servicing 329 481 1,163 952
Gains on sales of
mortgage loans, net 8,755 4,280 16,097 7,741
Mortgage servicing
and other 470 202 1,139 414
Total Financial
Services Revenues 15,813 9,896 30,326 19,277
General and administrative 7,214 4,711 14,160 9,062
Financial Services
Operating Profit 8,599 5,185 16,166 10,215
Total Operating Profit 93,943 66,400 165,968 129,274
Corporate
Expenses related to
debt redemption (9,315) -- (9,315) --
Interest and
other revenues 209 363 426 595
Other general and
administrative
expenses (14,832) (10,434) (26,308) (20,494)
Income Before
Income Taxes $70,005 $56,329 $130,771 $109,375
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
June 30, December 31, June 30,
2003 2002 2002
BALANCE SHEET DATA
Stockholders' Equity
Per Share Outstanding $30.01 $27.54 $24.55
Stockholders' Equity $869,374 $800,567 $730,328
Homebuilding and
Corporate Debt 497,075 322,990 339,652
Capital (excluding
mortgage lending debt) $1,366,449 $1,123,557 $1,069,980
Ratio of Homebuilding
and Corporate Debt to Equity .57 .40 .47
Ratio of Homebuilding and
Corporate Debt to Capital .36 .29 .32
Cash and Cash Equivalents $29,863 $28,942 $22,621
Unrestricted Cash and
Available Borrowing Capacity
Under Lines of Credit $429,758 $618,774 $308,201
Housing Completed or Under
Construction Inventories $718,297 $578,475 $587,568
Land and Land Under
Development Inventories $725,311 $656,843 $582,385
Corporate and Homebuilding
Interest Capitalized
Interest Capitalized in
Inventory at Beginning
of Period $17,783 $17,358 $17,358
Interest Incurred 14,415 21,116 8,956
Interest in Home and
Land Cost of Sales (11,608) (20,691) (8,710)
Interest Capitalized in
Inventory at End of Period $20,590 $17,783 $17,604
Interest Capitalized as a
Percent of Inventories 1.4% 1.4% 1.5%
Lots Owned 16,273 16,962 16,773
Lots Under Option 6,608 6,995 6,403
Homes Under Construction
(including models) 5,126 3,751 4,118
Active Subdivisions 190 178 165
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
OPERATING DATA
Interest in Home and
Land Cost of Sales as
a Percent of Home Sales
Revenues 1.0% .9% 1.0% .9%
Homebuilding and Corporate
SG&A as a Percent of
Home Sales Revenues 12.9% 12.7% 13.2% 12.8%
Depreciation and
Amortization $9,447 $5,569 $16,475 $10,818
Average Selling Price
Per Home Closed $256.3 $254.0 $259.5 $259.5
Home Gross Margins 23.3% 22.5% 23.0% 22.9%
Excluding Interest in
Home Cost of Sales 24.2% 23.4% 23.9% 23.8%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Orders For Homes, Net (Units)
Colorado 812 757 1,483 1,758
California 511 633 1,041 1,224
Nevada 774 411 1,357 618
Arizona 986 671 1,910 1,341
Utah 93 31 186 31
Texas 69 -- 119 --
Virginia 305 176 708 418
Maryland 115 74 226 139
Total 3,665 2,753 7,030 5,529
Homes Closed (Units)
Colorado 625 706 1,234 1,315
California 487 362 915 654
Nevada 508 247 781 388
Arizona 663 446 1,234 884
Utah 69 25 109 25
Texas 29 -- 39 --
Virginia 166 104 268 234
Maryland 77 66 144 130
Total 2,624 1,956 4,724 3,630
June 30, December 31, June 30,
2003 2002 2002
Backlog (Units)
Colorado 1,206 957 1,638
California 1,048 922 1,060
Nevada 926 350 524
Arizona 1,752 1,076 1,082
Utah 127 50 47
Texas 96 16 --
Virginia 916 476 418
Maryland 270 188 166
Total 6,341 4,035 4,935
Backlog Estimated Sales Value $1,630,000 $1,120,000 $1,300,000
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/
