News
M.D.C. Holdings, Inc.
Net income for the nine months ended September 30, 2004 was $248.5 million, or $7.29 per share, which is 71% higher than net income of $145.2 million, or $4.39 per share, for the same period in 2003. Total revenues for the first nine months of 2004 were $2.67 billion, compared with $2.06 billion for the same period in 2003, representing an increase of 30%.
"These impressive results demonstrate the strength of our operating model, which again has delivered exceptional returns to our shareowners in a variety of economic conditions," said Larry A. Mizel, MDC's chairman and chief executive officer. "By adhering to a conservative capital structure and maintaining our disciplined approach to expansion, we have been able to achieve some of the highest returns in the industry."
Mizel continued, "Because of certain advantages we enjoy as a large, well- capitalized builder, the Company has been able to increase its market share by steady, deliberate growth, both organically and through the acquisitions of assets of other homebuilders. With respect to the latter, we were successful on two fronts in the third quarter as we acquired control of approximately 2,000 residential lots in Jacksonville from Watson Home Builders, Inc. and more than 600 lots from Patriot Homes, LLC, and others, in southern New Jersey, enabling us to expand significantly our geographic footprint in two of the strongest markets for new homes in the country. And, to expand in the strong Inland Empire market in Southern California, we established a new division there, our fourth in the region, led by management experienced in that market. All of these events mark important milestones in the continued growth of our Company. Overall, MDC ended the quarter with almost 40,000 lots under control to support future expansion, up 74% from last year."
Mizel concluded, "Our capital structure continues to be one of our most important strengths. Our ratio of debt-to-capital, net of cash, was only .31 at September 30th, which generally is a seasonal peak, and stands as one of the lowest of our peers. We further enhanced our financial flexibility with the recent expansion of our shelf registration to $1 billion, with $500 million earmarked for our recently announced medium term notes program. This program should enhance our ability to react to opportunities in the capital markets with a wide variety of pricing and terms that better match our short-term and long-term objectives. Armed with these financial tools, a growing share in most of our markets, and the highest September 30th backlog in our history, we expect to close more than 4,400 homes in the 2004 fourth quarter on our way to earnings that should exceed significantly our record results in the third quarter. Absent adverse changes in economic conditions, we believe we will continue to grow our business and produce our eighth consecutive year of record earnings in 2005."
Highest Homebuilding Profits in Company History
Homebuilding profits totaled $193.1 million for the third quarter and $459.0 million for the first nine months of 2004, representing increases of 63% and 71% over profits of $118.1 million and $267.9 million, respectively, during the same periods in 2003. The increases in the 2004 periods largely are the result of the record levels of home closings, higher average selling prices and substantial improvements in home gross margins. As previously reported, MDC closed 3,558 homes and 9,553 homes, respectively, for the three and nine months ended September 30, 2004, compared with closings of 3,113 homes and 7,837 homes, respectively, for the same periods in 2003. For the third quarter and first nine months of 2004, the Company's home gross margins were 28.2% and 27.4%, respectively, compared with 24.8% and 23.7%, respectively, for the same periods of 2003. The Company's average selling prices rose to $283,100 and $273,700 for the third quarter and first nine months of 2004, respectively, compared with $250,400 and $255,900 for the same periods in 2003. Home sales revenues for the three and nine months ended September 30, 2004, increased to $1.01 billion and $2.62 billion, respectively, compared with home sales revenues of $779 million and $2.01 billion for the same periods of 2003.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "All of our established homebuilding divisions except Colorado reported significantly increased operating profits in the third quarter and first nine months of 2004. Each of these markets experienced higher third quarter and nine month levels of home closings. Significant increases in average selling prices in Nevada, Virginia and California also contributed to our strong results in these periods. In addition, the exceptionally strong demand for new homes in Nevada and, to a lesser extent, Arizona and California earlier in the year enabled us to realize substantial improvements to our home gross margins in these markets, serving as the main drivers for the 340 and 370 basis point improvements in home gross margins in the third quarter and first nine months."
Reece continued, "As previously announced, our orders for new homes essentially were flat year-over-year in the 2004 third quarter. However, the demand for new homes remained healthy in most of our markets, as reflected in our particularly strong home order increases in Arizona and in our newer markets in Texas, Utah and Florida. Orders were lower in the mid-Atlantic region, as we limited the release of new lots for sale. In addition, we received fewer orders in Las Vegas and Southern California, where the extraordinary order rates that we experienced in a number of our communities in these markets over the last year appear to be returning to more normal levels."
Reece concluded, "In Las Vegas, the resulting home order rate of six homes per month per community in the 2004 third quarter, while still healthy for this time of year in any market, was roughly half that of a year ago. This rate, combined with more communities selling without model homes open, were the primary reasons for our reduced home orders in this market during this period. Nevertheless, we generally have maintained the significant home price increases realized in our Las Vegas communities earlier in the year, and have continued to increase prices in certain communities, albeit at a much slower rate. Our order cancellations in Las Vegas in the third quarter were comparable to the level of a year ago. Our current sales incentives in Las Vegas, while higher than in the previous four quarters, are consistent with levels in most of our better markets. And we have experienced only modest increases in our finished unsold homes. Therefore, we continue to believe that the market for new homes in Las Vegas in our price points is healthy. With more than ten new model complexes scheduled to open in the next 100 days, we should be in a good position to capitalize on the strength of the selling season beginning in January."
Financial Services Results
Operating profits from the Company's financial services business were $5.6 million and $13.4 million, respectively, for the three and nine months ended September 30, 2004, compared with $7.2 million and $23.4 million for the same periods in 2003. These profit reductions primarily were due to a more competitive mortgage pricing environment, which contributed to lower gains on sales of mortgage loans. In addition, gains were impacted by the 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 reduced 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 established operating divisions in Dallas/Fort Worth, Houston, Jacksonville, West Florida, Philadelphia/Delaware Valley and Chicago. 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. Additional information about the risks and uncertainties applicable to the Company's business is contained in the Company's Form 10-Q for the quarterly period ended June 30, 2004, which was filed with the Securities and Exchange Commission. All forward-looking statements made in this press release are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this press release will increase with the passage of time. The Company undertakes no duty to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent filings, releases or presentations should be consulted.
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
REVENUES
Homebuilding $1,011,392 $782,726 $2,623,625 $2,011,058
Financial Services 14,627 16,022 41,022 46,348
Corporate 110 158 569 584
Total Revenues $1,026,129 $798,906 $2,665,216 $2,057,990
NET INCOME
Homebuilding $193,091 $118,121 $459,021 $267,923
Financial Services 5,573 7,242 13,375 23,408
Operating Profit 198,664 125,363 472,396 291,331
Expenses related
to debt redemption -- -- -- (9,315)
Corporate general
and administrative
expense, net (27,795) (18,001) (67,422) (43,883)
Income before income
taxes 170,869 107,362 404,974 238,133
Provision for income
taxes (65,796) (41,886) (156,432) (92,926)
Net Income $105,073 $65,476 $248,542 $145,207
EARNINGS PER SHARE
Basic $3.21 $2.05 $7.63 $4.57
Diluted $3.07 $1.96 $7.29 $4.39
WEIGHTED-AVERAGE SHARES
OUTSTANDING
Basic 32,687 31,973 32,594 31,796
Diluted 34,186 33,333 34,096 33,081
DIVIDENDS DECLARED
PER SHARE $.150 $.114 $.414 $.254
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months Nine Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
Homebuilding
Home sales $1,007,134 $779,457 $2,615,100 $2,005,471
Land sales 1,839 1,175 1,839 1,298
Other revenues 2,419 2,094 6,686 4,289
Total
Homebuilding
Revenues 1,011,392 782,726 2,623,625 2,011,058
Home cost of sales 723,240 585,970 1,898,158 1,529,557
Land cost of sales 1,316 755 1,316 842
Marketing 49,856 42,453 137,677 115,678
General and
administrative 43,889 35,427 127,453 97,058
Total
Homebuilding
Expenses 818,301 664,605 2,164,604 1,743,135
Homebuilding
Operating Profit 193,091 118,121 459,021 267,923
Financial Services
Interest revenues 993 1,264 2,823 3,297
Origination fees 6,801 5,812 17,464 15,706
Gains on sales of
mortgage servicing 406 444 1,543 1,607
Gains on sales of
mortgage loans, net 5,595 7,924 16,905 24,021
Mortgage servicing
and other 832 578 2,287 1,717
Total Financial
Services Revenues 14,627 16,022 41,022 46,348
General and
administrative 9,054 8,780 27,647 22,940
Financial Services
Operating Profit 5,573 7,242 13,375 23,408
Total Operating Profit 198,664 125,363 472,396 291,331
Corporate
Expenses related to
debt redemption -- -- -- (9,315)
Interest and other
revenues 110 158 569 584
Other general and
administrative
expenses (27,905) (18,159) (67,991) (44,467)
Income Before Income
Taxes $170,869 $107,362 $404,974 $238,133
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
September 30, December 31, September 30,
2004 2003 2003
BALANCE SHEET DATA
Stockholders' Equity
Per Share Outstanding $38.47 $31.27 $29.24
Stockholders' Equity $1,263,751 $1,015,920 $940,986
Homebuilding and
Corporate Debt 617,847 500,179 399,611
Total Capital (excluding
mortgage lending debt) $1,881,598 $1,516,099 $1,340,597
Cash and Cash Equivalents $53,083 $173,565 $21,751
Unrestricted Cash and
Available Borrowing
Capacity Under Lines
of Credit $575,281 $779,407 $513,727
Ratio of Homebuilding and
Corporate Debt to Equity .49 .49 .42
Ratio of Homebuilding and
Corporate Debt to Capital .33 .33 .30
Ratio of Homebuilding and
Corporate Debt to Capital
(net of cash) .31 .24 .29
Housing Completed or Under
Construction Inventories $1,104,240 $732,744 $776,951
Land and Land Under
Development Inventories $938,989 $763,569 $720,385
Corporate and Homebuilding
Interest Capitalized Quarter Full Year Quarter
Interest Capitalized in
Inventories at
Beginning of Period $22,023 $17,783 $20,590
Interest Incurred
During the Period 8,406 26,779 6,099
Interest in Home and
Land Cost of Sales
for the Period (7,175) (24,519) (6,624)
Interest Capitalized in
Inventories at
End of Period $23,254 $20,043 $20,065
Interest Capitalized as
a Percent of Inventories 1.1% 1.3% 1.3%
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
OPERATING DATA
Interest in Home Cost
of Sales as a Percent
of Home Sales Revenues 0.7% 0.8% 0.8% 0.9%
Homebuilding and
Corporate SG&A as a
Percent of Home Sales
Revenues 12.1% 12.3% 12.7% 12.8%
Depreciation and
Amortization 11,663 9,388 28,756 25,863
Home Gross Margins 28.2% 24.8% 27.4% 23.7%
Excluding Interest
in Home Cost of
Sales 28.9% 25.7% 28.2% 24.6%
Cash Used in
Operating
Activities $(32,889) $81,716 $(194,232) $22,462
Cash Used in
Investing
Activities $(21,806) $(1,385) $(27,083) $(4,575)
Cash Provided by
Financing
Activities $31,077 $(88,443) $100,833 $(25,078)
After-Tax Return
on Revenues 10.2% 8.2% 9.3% 7.1%
After-Tax Return
on Average Assets
(Rolling 12 Months
Ended) N/A N/A 14.9% 12.0%
After-Tax Return on
Average Equity
(Rolling 12 Months
Ended) N/A N/A 29.0% 24.4%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
September 30, December 31, September 30,
2004 2003 2003
LOTS OWNED AND CONTROLLED
Lots Owned 19,909 16,351 16,283
Lots Under Option 20,060 12,251 6,663
Homes Under Construction
(including models) 7,159 4,754 5,655
LOTS OWNED AND CONTROLLED BY MARKET
(excluding homes under construction)
Arizona 9,436 5,258 3,394
California 4,226 3,512 3,098
Colorado 5,625 5,206 4,700
Florida 3,331 875 565
Illinois 987 -- --
Maryland 1,705 1,767 1,513
Nevada 5,825 5,359 3,970
Philadelphia/Delaware Valley 984 -- --
Texas 3,010 2,203 1,572
Utah 1,255 1,220 1,214
Virginia 3,585 3,202 2,920
Total Company 39,969 28,602 22,946
ACTIVE SUBDIVISIONS
Arizona 30 38 42
California 21 26 22
Colorado 56 49 56
Florida 22 9 7
Illinois 1 -- --
Maryland 10 9 7
Nevada 26 17 18
Texas 24 11 8
Utah 22 11 8
Virginia 26 28 30
Total Company 238 198 198
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
AVERAGE SELLING PRICE PER HOME CLOSED
Arizona $192.9 $188.7 $192.1 $185.3
California 452.6 386.6 427.5 388.9
Colorado 264.0 248.4 264.7 255.3
Florida 182.3 182.7 179.5 182.7
Maryland 397.3 382.7 404.5 378.0
Nevada 258.3 185.4 232.6 184.4
Texas 155.0 162.9 158.1 159.2
Utah 180.1 172.6 177.8 173.9
Virginia 447.8 353.3 430.1 365.1
Company Average $283.1 $250.4 $273.7 $255.9
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in Thousands)
Three Months Nine Months
Ended September 30, Ended September 30,
Orders For Homes, net (units) 2004 2003 2004 2003
Arizona 951 757 3,104 2,667
California 311 440 1,764 1,481
Colorado 521 525 1,811 2,008
Florida 93 3 292 3
Illinois 5 -- 8 --
Maryland 52 82 255 308
Nevada 454 704 2,411 2,061
Philadelphia/Delaware Valley 1 -- 1 --
Texas 152 75 647 194
Utah 187 106 573 292
Virginia 198 218 720 926
Total 2,925 2,910 11,586 9,940
Cancellation Rate 30.6% 29.2% 23.6% 24.8%
Homes Closed (units)
Arizona 808 833 2,343 2,067
California 631 503 1,642 1,418
Colorado 583 736 1,603 1,970
Florida 96 12 251 12
Maryland 90 70 251 214
Nevada 690 578 1,887 1,359
Texas 222 56 440 95
Utah 188 84 416 193
Virginia 250 241 720 509
Total 3,558 3,113 9,553 7,837
Backlog (units) September 30, December 31, September 30,
2004 2003 2003
Arizona 2,094 1,333 1,676
California 1,241 1,119 985
Colorado 942 734 995
Florida * 685 104 130
Illinois 8 -- --
Maryland 273 269 282
Nevada 1,410 886 1,052
Philadelphia/Delaware Valley 1 -- --
Texas 350 143 115
Utah 308 151 149
Virginia 854 854 893
Total 8,166 5,593 6,277
Backlog Estimated Sales
Value $2,480,000 $1,600,000 $1,650,000
Estimated Average Selling
Price of Homes in Backlog $303.7 $286.1 $262.9
* 2004 includes 540 homes in backlog acquired from Watson Home Builders,
Inc. in Jacksonville.
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/
