News
M.D.C. Holdings, Inc.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "Our operating results in the second quarter were the strongest for any quarter in our Company's history, and our record returns on assets, equity and quarterly revenues of 14.0%, 27.3% and 9.4%, respectively, rank among the highest of our peers. Our second quarter performance evidences our ability to achieve some of the strongest risk-adjusted returns in our industry, realizing the significant pricing increases created by the demand for housing that has existed in most of our markets, while maintaining our discipline of not speculating in land. The outstanding results for the quarter were driven by extraordinary demand for housing in Nevada and organic growth in our other long-standing markets, particularly California and Arizona. At the same time, home orders received in five of our seven newest markets are setting the stage for meaningful contributions in future quarters. As previously reported, our second quarter home orders were a record for the tenth consecutive quarter, contributing to our highest ever quarter-end backlog of 8,259 homes with an estimated sales value of $2.5 billion. On the strength of this backlog, our record-setting performance during the first half of this year and our plans for continued expansion in all of our markets, we are positioned to close more than 13,500 homes and post our seventh consecutive year of record earnings in 2004."
Mizel added, "We continue to focus on our primary objectives of maximizing long-term value for our shareowners and maintaining a strong financial position. During the 2004 second quarter, while we allocated significant capital dollars to expand our highly profitable homebuilding operations, we also increased our cash dividend by 102% year-over-year to fifteen cents per share and repurchased 119,200 shares of MDC common stock under our stock repurchase program at an average price of approximately $57 per share. Despite these capital outlays, we ended the quarter with a net debt-to-capital ratio of only .31, one of the industry's lowest. Also during the quarter, we strengthened our financial flexibility by increasing the capacity of our homebuilding line of credit to $700 million, with the ability to expand the line to $850 million with lender approval, and extending the term by three years to 2009. As a result, our unrestricted cash and available borrowing capacity increased year-over-year by more than 50% to $654 million."
Net income for the six months ended June 30, 2004 was $143.5 million, or $4.21 per share, 80% higher than the $79.7 million, or $2.42 per share, for the same period in 2003. Total revenues for the six months ended June 30, 2004 reached a record $1.639 billion, representing an increase of 30% from revenues of $1.259 billion for the first six months of 2003.
Record Homebuilding Performance
Homebuilding operating profits for the quarter and six months ended June 30, 2004 were $152.5 million and $265.9 million, respectively, representing increases of 79% and 78% over profits of $85.3 million and $149.8 million, respectively, for the same periods in 2003. These increases primarily are the result of the record level of home closings, higher average selling prices and a 430 basis point increase in home gross margins. The Company closed 3,085 homes and 5,995 homes, respectively, in the second quarter and first six months of 2004, 18% and 27% higher, respectively, than home closings in the same periods in 2003. For the second quarter and first six months of 2004, the Company's average selling prices increased to $279,300 and $268,200, respectively, compared with $256,300 and $259,500 for the same periods in 2003. Home gross margins in the 2004 second quarter and first six months increased to historic highs of 27.6% and 26.9%, respectively, compared with 23.3% and 23.0% for the comparable periods in 2003.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Most of our more-established homebuilding divisions reported significantly improved operating profits in the second quarter and first six months of 2004. Increased home closings and substantially higher average selling prices in Nevada, California and Virginia contributed to these strong profit improvements. In addition, we are fortunate to have accelerated our expansion in Nevada during a period of extraordinary demand for new homes, which has driven up home prices throughout the market and enabled us to realize significant year-over-year improvements in home gross margins. To a lesser extent, our record performance in this quarter was supported by similar circumstances leading to home gross margin increases in California and Arizona. Increased selling prices in most of our markets, higher profit contributions from our design centers, and increased savings from our national purchasing initiatives enabled us to more than offset the impact of the rising costs of land, lumber and other building materials."
Reece continued, "Over the remaining two quarters of this year, we anticipate increasing contributions to our bottom line resulting from organic expansion in our established markets, most significantly in Nevada. In 2005, we expect to see this organic growth supplemented to an increasing degree throughout the year with meaningful contributions from our new operations in Utah and Jacksonville, as well as Dallas/Fort Worth, Houston and Chicago. Our Philadelphia/Delaware Valley and Tampa operations should add to the mix in 2006. We believe these disciplined expansion efforts in new and existing markets will enable our Company to continue to grow, even if the exceptional performances we are enjoying in certain of our markets do not continue at their current levels."
Financial Services Results
Operating profits from the Company's financial services segment were $3.2 million and $7.8 million, respectively, for the three and six months ended June 30, 2004, compared with $8.6 million and $16.2 million reported for the same periods in 2003. The decreases in profits for both periods primarily were due to a more competitive mortgage pricing environment, which contributed to lower gains on sales of mortgage loans. The lower gains primarily resulted from relative increases in originations of less-valuable adjustable rate mortgage loans, as well as brokering to third party mortgage companies a higher percentage of total loans processed in the two periods. Operating profits in the 2004 periods also were impacted by higher general and administrative expenses 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, Houston and Jacksonville, and has recently entered the Philadelphia/Delaware Valley, West Florida and Chicago markets. For more information about our Company, 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 Six Months Ended
June 30, June 30,
2004 2003 2004 2003
REVENUES
Homebuilding $863,369 $673,420 $1,612,233 $1,228,332
Financial Services 11,947 15,813 26,395 30,326
Corporate 167 209 459 426
Total Revenues $875,483 $689,442 $1,639,087 $1,259,084
NET INCOME
Homebuilding $152,485 $85,344 $265,930 $149,802
Financial Services 3,145 8,599 7,802 16,166
Operating Profit 155,630 93,943 273,732 165,968
Expenses related
to debt
redemption -- (9,315) -- (9,315)
Corporate general
and
administrative
expense, net (21,343) (14,623) (39,627) (25,882)
Income before
income taxes 134,287 70,005 234,105 130,771
Provision for
income taxes (51,719) (27,311) (90,636) (51,040)
Net Income $82,568 $42,694 $143,469 $79,731
EARNINGS PER SHARE
Basic $2.54 $1.35 $4.41 $2.51
Diluted $2.43 $1.30 $4.21 $2.42
WEIGHTED-AVERAGE
SHARES OUTSTANDING
Basic 32,552 31,557 32,548 31,705
Diluted 34,025 32,909 34,044 32,919
DIVIDENDS DECLARED
PER SHARE $.150 $.075 $.264 $.141
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
Homebuilding
Home sales $861,537 $672,439 $1,607,966 $1,226,014
Land sales -- -- -- 123
Other revenues 1,832 981 4,267 2,195
Total
Homebuilding
Revenues 863,369 673,420 1,612,233 1,228,332
Home cost of sales 623,894 515,985 1,174,918 943,587
Land cost of sales -- -- -- 87
Marketing 44,653 39,625 87,821 73,225
General and
administrative 42,337 32,466 83,564 61,631
Total
Homebuilding
Expenses 710,884 588,076 1,346,303 1,078,530
Homebuilding
Operating Profit 152,485 85,344 265,930 149,802
Financial Services
Interest revenues 900 1,025 1,830 2,033
Origination fees 5,399 5,234 10,663 9,894
Gains on sales
of mortgage
servicing 521 329 1,137 1,163
Gains on sales
of mortgage loans,
net 4,533 8,755 11,310 16,097
Mortgage
servicing and other 594 470 1,455 1,139
Total Financial
Services
Revenues 11,947 15,813 26,395 30,326
General and
administrative 8,802 7,214 18,593 14,160
Financial
Services
Operating Profit 3,145 8,599 7,802 16,166
Total Operating
Profit 155,630 93,943 273,732 165,968
Corporate
Expenses related
to debt redemption -- (9,315) -- (9,315)
Interest and
other revenues 167 209 459 426
Other general
and
administrative
expenses (21,510) (14,832) (40,086) (26,308)
Income Before
Income Taxes $134,287 $70,005 $234,105 $130,771
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
June 30, December 31, June 30,
2004 2003 2003
BALANCE SHEET DATA
Stockholders' Equity
Per Share Outstanding $35.38 $31.27 $27.28
Stockholders' Equity $1,150,383 $1,015,920 $869,374
Homebuilding and
Corporate Debt 587,797 500,179 497,075
Total Capital
(excluding mortgage
lending debt) $1,738,180 $1,516,099 $1,366,449
Cash and Cash Equivalents $76,701 $173,565 $29,863
Unrestricted Cash
and Available Borrowing
Capacity Under Lines
of Credit $653,753 $779,407 $429,758
Ratio of Homebuilding
and Corporate Debt
to Equity .51 .49 .57
Ratio of Homebuilding
and Corporate Debt
to Capital .34 .33 .36
Ratio of Homebuilding
and Corporate Debt
to Capital (net of cash) .31 .24 .35
Housing Completed or
Under Construction
Inventories $982,307 $732,744 $718,297
Land and Land
Under Development
Inventories $875,494 $763,569 $725,311
Corporate and Quarter Full Year Quarter
Homebuilding Interest
Capitalized
Interest Capitalized
in Inventories at
Beginning of Period $21,047 $17,783 $20,032
Interest Incurred
During the Period 7,709 26,779 7,363
Interest in Home
and Land Cost of
Sales for the Period (6,733) (24,519) (6,805)
Interest Capitalized
in Inventories at
End of Period $22,023 $20,043 $20,590
Interest Capitalized
as a Percent
of Inventories 1.2% 1.3% 1.4%
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
OPERATING DATA
Interest in
Home Cost of
Sales as a
Percent of
Home Sales
Revenues 0.8% 1.0% 0.8% 1.0%
Homebuilding and
Corporate SG&A
as a Percent of
Home Sales Revenues 12.6% 12.9% 13.2% 13.2%
Depreciation
and Amortization $8,163 $9,447 $17,093 $16,475
Home Gross Margins 27.6% 23.3% 26.9% 23.0%
Excluding Interest
in Home Cost
of Sales 28.4% 24.3% 27.7% 24.0%
Cash Used in
Operating
Activities $(118,123) $(93,889) $(161,343) $(59,254)
Cash Used
in Investing
Activities $(2,978) $(1,625) $(5,277) $(3,190)
Cash Provided
by Financing
Activities $98,723 $67,304 $69,756 $63,365
After-Tax Return
on Revenues 9.4% 6.2% 8.8% 6.3%
After-Tax Return
on Average Assets
(Rolling 12 Months
Ended) N/A N/A 14.0% 11.3%
After-Tax Return
on Average Equity
(Rolling 12 Months
Ended) N/A N/A 27.3% 22.8%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
June 30, December 31, June 30,
2004 2003 2003
LOTS OWNED AND CONTROLLED
Lots Owned 19,523 16,351 16,273
Lots Under Option 13,340 12,251 6,608
Homes Under Construction
(including models) 6,551 4,754 5,126
LOTS OWNED AND CONTROLLED
BY MARKET
(excluding homes
under construction)
Arizona 7,318 5,258 3,343
California 3,215 3,512 3,173
Colorado 5,435 5,206 4,971
Florida 1,313 875 --
Illinois 649 -- --
Maryland 1,723 1,767 1,513
Nevada 5,636 5,359 4,535
Philadelphia/Delaware Valley 321 -- --
Texas 2,694 2,203 1,063
Utah 1,490 1,220 1,096
Virginia 3,069 3,202 3,187
Total Company 32,863 28,602 22,881
ACTIVE SUBDIVISIONS
Arizona 34 38 42
California 20 26 20
Colorado 55 49 56
Florida 7 9 --
Maryland 10 9 7
Nevada 23 17 22
Texas 22 11 6
Utah 18 11 7
Virginia 28 28 30
Total Company 217 198 190
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
AVERAGE SELLING PRICE
PER HOME CLOSED
Arizona $192.7 $189.1 $191.7 $182.9
California 434.0 381.6 411.8 390.2
Colorado 268.3 254.0 265.1 259.4
Florida 183.9 -- 177.8 --
Maryland 400.0 381.5 408.5 375.7
Nevada 227.7 182.0 217.7 183.6
Texas 161.1 155.0 161.2 153.9
Utah 177.3 176.5 176.0 174.9
Virginia 430.3 385.2 420.7 375.6
Company Average $279.3 $256.3 $268.2 $259.5
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Orders For Homes,
net (Units)
Arizona 1,243 986 2,153 1,910
California 627 511 1,453 1,041
Colorado 599 812 1,290 1,483
Florida 90 -- 199 --
Illinois 3 -- 3 --
Maryland 79 115 203 226
Nevada 927 774 1,957 1,357
Texas 224 69 495 119
Utah 210 93 386 186
Virginia 230 305 522 708
Total 4,232 3,665 8,661 7,030
Cancellation Rate 23.2% 23.5% 20.9% 22.8%
Homes Closed (Units)
Arizona 665 663 1,535 1,234
California 535 487 1,011 915
Colorado 542 625 1,020 1,234
Florida 84 -- 155 --
Maryland 91 77 161 144
Nevada 629 508 1,197 781
Texas 148 29 218 39
Utah 124 69 228 109
Virginia 267 166 470 268
Total 3,085 2,624 5,995 4,724
June 30, December 31, June 30,
2004 2003 2003
Backlog (Units)
Arizona 1,951 1,333 1,752
California 1,561 1,119 1,048
Colorado 1,004 734 1,206
Florida 148 104 --
Illinois 3 -- --
Maryland 311 269 270
Nevada 1,646 886 926
Texas 420 143 96
Utah 309 151 127
Virginia 906 854 916
Total 8,259 5,593 6,341
Backlog Estimated
Sales Value $2,500,000 $1,600,000 $1,630,000
Estimated Average
Selling Price of
Homes in Backlog $302.7 $286.1 $257.1
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/
