News
M.D.C. Holdings, Inc.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "We have experienced a tremendous start to what may be the best year in our Company's history. Through a balance of disciplined organic growth in our existing markets, opportunistic asset acquisitions and strategic start-ups in new markets, we positioned our Company in some of the country's fastest growing markets where we were able to capitalize on low mortgage rates and an improving economy. As a result, we established new first quarter highs for home closings, revenues, net income and earnings per share. These results contributed to our achievement of after-tax returns on revenues, assets and equity that rank among the best in our industry. In addition, we realized a quarterly record 4,429 net home orders, which enabled us to increase the sales value of our backlog to more than $2 billion for the first time. We continued to improve our investment grade financial position, lowering our March 31st ratio of debt-to-capital, net of cash, to .27 and increasing our cash and available borrowing capacity by more than 22% to $680 million, with no outstanding borrowings under our unsecured line of credit. Our financial flexibility was further enhanced late last week with the extension of the term of our unsecured line to five years and the increase in our borrowing capacity to $700 million, with the ability to further expand to $850 million with lender approval."
Mizel continued, "While our strong results give us confidence for the future, equity investors appear to be concerned about the potential impact of higher interest rates. As the economy picks up steam, MDC and the other large homebuilders are positioned to continue growing, aided by our solid financial positions, the constrained supply of land and the wide array of mortgage products available to our homebuyers. Indeed, we are encouraged by the apparent improvement in job growth that has elevated the recent interest rate concerns, because more jobs are critical to sustaining healthy homebuying demand. However, as always, we remain prepared for shifts in demand or changes in the economy. Our conservative land acquisition, operational and financial strategies should continue to serve us well across a broad range of business conditions."
Record Homebuilding Performance
Operating profits from the Company's homebuilding operations for the first quarter of 2004 increased by 76% to $113.4 million, compared with $64.5 million for the same period in 2003. The 2004 increase primarily resulted from a record 2,910 homes closed, up 39%, and a 340 basis point improvement in home gross margins to 26.2%. The increased home closings, partially offset by a $7,100 decrease in average selling prices, contributed to record first quarter home sales revenues of $746 million, 35% higher than revenues of $554 million in the 2003 first quarter.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Consistent with our targeted growth objectives over the last three years, we achieved significant year-over-year improvements in operating results in Nevada, Virginia, Arizona and California. Higher home closing volumes resulting from strong demand and increased active communities, significant selling price increases, and higher home gross margins in each of these markets except Virginia contributed to these improved results. Our performances in Arizona, Virginia and California were enhanced by the closing of a number of homes with much higher than average margins in subdivisions that are in the process of closing out. Nevada exhibited the greatest improvement in the quarter, reflecting an extraordinary demand for new homes that has created significant opportunities to increase prices in all of our price points in that market. The resulting increases in our Nevada home gross margins contributed significantly to the record average home gross margins realized by our Company in the 2004 first quarter."
Reece continued, "Our 2,910 first quarter home closings were higher than anticipated, primarily due to favorable weather conditions that enabled us to accelerate the closing of more than 200 homes into March that were otherwise scheduled to close in the 2004 second quarter, primarily in Nevada, Arizona and California. As a result of this acceleration, as well as an increase in our backlog of homes sold and not yet started at March 31st to almost 3,000 units, we anticipate that our home closings in the 2004 second quarter will be comparable to the exceptional level achieved in the first quarter. This projected record start to the year, which reflects our successful expansion in existing markets and meaningful contributions from four of our seven new markets, combined with the prospects of an improving economy, should position us to close more than 13,000 homes in 2004."
Financial Services Results
Driven by the record home closings from the homebuilding segment, the Company originated and brokered $341.3 million and $158.8 million, respectively, in mortgage loans in the quarter ended March 31, 2004, compared with $318.8 million and $45.9 million, respectively, in the same period in 2003. The resulting increase in mortgage loan origination fee revenues were more than offset by a reduction in gains on sales of mortgage loans and higher general and administrative expenses. As a result, the operating profits of the Company's financial services segment were $4.7 million for the first three months of 2004, compared with $7.6 million reported for the same period in 2003. The decline in gains on sales of mortgage loans in the 2004 first quarter primarily was due to a more competitive pricing environment for mortgage loans. This competitive environment contributed to the Company originating a higher percentage of less-valuable adjustable rate mortgage loans in the first quarter of 2004, as well as brokering a higher percentage of total loans processed in the quarter to third party mortgage companies, for which no gains on sales are realized by the Company. Higher general and administrative expenses were incurred to handle the higher volume of mortgage loan closings, as well as the record backlog level of the homebuilding segment.
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, suburban Maryland, Phoenix, Tucson, Las Vegas and Salt Lake City; and among the top ten homebuilders in Northern California and Southern California. MDC also has a growing presence in Dallas/Fort Worth and has recently entered the Houston, Philadelphia/Delaware Valley, West Florida, Jacksonville and Chicago markets. For more information, please visit www.richmondamerican.com.
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) 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
March 31,
2004 2003
REVENUES
Homebuilding $748,864 $554,912
Financial Services 14,448 14,513
Corporate 292 217
Total Revenues $763,604 $569,642
NET INCOME
Homebuilding $113,445 $64,458
Financial Services 4,657 7,567
Operating Profit 118,102 72,025
Corporate general and
administrative expense, net (18,284) (11,259)
Income before income taxes 99,818 60,766
Provision for income taxes (38,917) (23,729)
Net Income $60,901 $37,037
EARNINGS PER SHARE
Basic $1.87 $1.16
Diluted $1.79 $1.12
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic 32,543 31,895
Diluted 34,063 32,926
DIVIDENDS DECLARED PER SHARE $.114 $.066
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months
Ended March 31,
2004 2003
Homebuilding
Home sales $746,429 $553,575
Land sales -- 123
Other revenues 2,435 1,214
Total Homebuilding Revenues 748,864 554,912
Home cost of sales 551,024 427,602
Land cost of sales -- 87
Marketing 43,168 33,600
General and administrative 41,227 29,165
635,419 490,454
Homebuilding Operating Profit 113,445 64,458
Financial Services
Interest revenues 930 1,008
Origination fees 5,264 4,660
Gains on sales of mortgage servicing 616 834
Gains on sales of mortgage loans, net 6,777 7,342
Mortgage servicing and other 861 669
Total Financial Services Revenues 14,448 14,513
General and administrative 9,791 6,946
Financial Services Operating Profit 4,657 7,567
Total Operating Profit 118,102 72,025
Corporate
Interest and other revenues 292 217
General and administrative (18,576) (11,476)
Net Corporate Expenses (18,284) (11,259)
Income Before Income Taxes $99,818 $60,766
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
March 31, December 31, March 31,
2004 2003 2003
BALANCE SHEET DATA
Stockholders' Equity Per
Share Outstanding $33.08 $31.27 $26.03
Stockholders' Equity $1,078,616 $1,015,920 $816,195
Homebuilding and Corporate Debt 497,748 500,179 413,035
Total Capital
(excluding mortgage
lending debt) $1,576,364 $1,516,099 $1,229,230
Cash and Cash Equivalents $99,079 $173,565 $58,073
Unrestricted Cash and
Available Borrowing
Capacity Under Lines of Credit $680,957 $779,407 556,098
Ratio of Homebuilding and
Corporate Debt to Equity .46 .49 .51
Ratio of Homebuilding and
Corporate Debt to Capital .32 .33 .34
Ratio of Homebuilding and
Corporate Debt to Capital
(net of cash) .27 .24 .30
Housing Completed or Under
Construction Inventories $794,943 $732,744 $634,677
Land and Land Under Development
Inventories $847,282 $763,569 $643,698
Corporate and Homebuilding
Interest Capitalized Quarter Full Year Quarter
Interest Capitalized in
Inventories at Beginning
of Period $20,043 $17,783 $17,783
Interest Incurred During the
Period 7,366 26,779 7,052
Interest in Home and Land Cost
of Sales for the Period (6,362) (24,519) (4,803)
Interest Capitalized in
Inventories at End of Period $21,047 $20,043 $20,032
Interest Capitalized as a
Percent of Inventories 1.3% 1.3% 1.6%
Three Months Ended
March 31,
2004 2003
OPERATING DATA
Interest in Home Cost of Sales as a
Percent of Home Sales Revenues 0.8% 0.9%
Homebuilding and Corporate SG&A as a
Percent of Home Sales Revenues 13.8% 13.4%
Depreciation and Amortization $8,930 $7,028
Home Gross Margins 26.2% 22.8%
Excluding Interest in Home Cost of Sales 27.0% 23.7%
Cash Provided by (Used in)
Operating Activities $(43,220) $34,635
Cash Used in Investing Activities $(2,299) $(1,565)
Cash Used in Financing Activities $(28,967) $(3,939)
After-Tax Return on Revenues 8.0% 6.5%
After-Tax Return on Average Assets
(Rolling 12 Months Ended) 12.8% 11.6%
After-Tax Return on Average Equity
(Rolling 12 Months Ended) 25.0% 22.7%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
March 31, December 31, March 31,
2004 2003 2003
LOTS OWNED AND CONTROLLED
Lots Owned 18,692 16,351 16,054
Lots Under Option 13,272 12,251 6,813
Homes Under Construction
(including models) 5,106 4,754 4,356
LOTS OWNED AND CONTROLLED BY MARKET
(excluding homes under construction)
Colorado 5,186 5,206 5,628
California 3,451 3,512 3,001
Nevada 5,880 5,359 4,614
Arizona 7,477 5,258 3,515
Utah 1,459 1,220 791
Texas 2,399 2,203 800
Virginia 3,265 3,202 3,148
Maryland 1,721 1,767 1,370
Florida 1,081 875 --
Illinois 45 -- --
Total Company 31,964 28,602 22,867
ACTIVE SUBDIVISIONS
Colorado 55 49 62
California 25 26 22
Nevada 20 17 23
Arizona 42 38 46
Utah 14 11 7
Texas 20 11 4
Virginia 28 28 32
Maryland 10 9 8
Florida 11 9 - -
Total Company 225 198 204
Three Months Ended
March 31,
2004 2003
AVERAGE SELLING PRICE PER HOME CLOSED
Colorado $261.5 $264.8
California 386.9 399.9
Nevada 206.6 186.6
Arizona 191.0 175.8
Utah 174.4 172.1
Texas 161.6 150.7
Virginia 408.2 359.9
Maryland 419.5 369.0
Florida 170.6 --
Company Average $256.5 $263.6
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
Three Months Ended
March 31,
2004 2003
Orders For Homes, net (Units)
Colorado 691 671
California 826 530
Nevada 1,030 583
Arizona 910 924
Utah 176 93
Texas 271 50
Virginia 292 403
Maryland 124 111
Florida 109 --
Total 4,429 3,365
Homes Closed (Units)
Colorado 478 609
California 476 428
Nevada 568 273
Arizona 870 571
Utah 104 40
Texas 70 10
Virginia 203 102
Maryland 70 67
Florida 71 --
Total 2,910 2,100
March 31, December 31, March 31,
2004 2003 2003
Backlog (Units)
Colorado 947 734 1,019
California 1,469 1,119 1,024
Nevada 1,348 886 660
Arizona 1,373 1,333 1,429
Utah 223 151 103
Texas 344 143 56
Virginia 943 854 777
Maryland 323 269 232
Florida 142 104 --
Total 7,112 5,593 5,300
Backlog Estimated Sales
Value $2,080,000 $1,600,000 $1,400,000
Estimated Average Selling
Price of Homes in Backlog $292.5 $286.1 $264.2
SOURCE: M.D.C. Holdings, Inc.
CONTACT: Paris G. Reece III, Chief Financial Officer, +1-303-804-7706,
+1-303-804-7729,
Web site: https://www.richmondamerican.com/
