News
M.D.C. Holdings, Inc.
"Our performance in 2004 is by far the best in our 33-year history and once again confirms our position as an industry leader," said Larry A. Mizel, chairman and chief executive officer. "Our exceptional earnings growth in 2004 has established MDC as one of the fastest growing companies in one of the best performing industries in the country. Our ability to obtain higher returns on the capital invested in our business continues to be one of our greatest competitive advantages in each market. In 2004, we maintained our conservative capital structure and operating discipline that have distinguished us on Wall Street, as we continued to increase market share, while delivering some of the industry's highest risk-adjusted returns. Our investment grade profile is supported by our after-tax returns on average assets and equity of 17% and 33%, representing improvements from 2003 of 490 and 900 basis points, respectively. And we ended the year with cash and borrowing capacity of more than $1 billion, a 40% year-over-year increase in stockholders' equity to $1.4 billion, and a debt-to-capital ratio, net of cash, of .19, one of the industry's lowest."
Mizel added, "We made significant progress in 2004 in furthering our expansion efforts in markets across the country, as evidenced by a 22% increase in our actively selling communities. Our focus on opportunistic acquisitions enabled us to acquire control of certain assets of Watson Home Builders in Jacksonville and of Patriot Homes and others in southern New Jersey in the third quarter. These transactions significantly expanded our presence in two of the country's strongest housing markets. Nationwide, our total lots controlled at year-end increased by over 45% to nearly 42,000, with more than half controlled through options, up from 29% just fifteen months ago. These expansion activities should contribute to our continued growth into the future."
Mizel concluded, "Our strong results reflect the dedication of our employees, our subcontractors and other business partners, whose skill and hard work throughout the year made these achievements possible. They also demonstrate our ability to capitalize on the fundamentals that are driving the housing market, such as increasing consumer confidence, improving job growth, low interest rates, a limited supply of land in high-demand markets and the economies of scale that we enjoy as a large, well-capitalized homebuilder. We do not anticipate material changes in these favorable industry dynamics in 2005, even allowing for the 'measured' interest rate increases being pursued by the Federal Reserve Board. And our increasing market diversification should help to mitigate the short-term impact of local market fluctuations. As a result, we are positioned to close more homes and realize higher revenues in 2005 on our way to record earnings for the eighth straight year."
Highest Homebuilding Profits in Company History
Operating profits for the Company's homebuilding divisions were record highs for the quarter and year ended December 31, 2004, totaling $260.2 million and $719.2 million, respectively, representing increases of 107% and 83%, compared with the same periods in 2003. The 2004 increases can be attributed to record levels of home closings, significantly higher average selling prices and substantially improved home gross margins. As announced last week, the Company closed 4,323 homes and 13,876 homes, respectively, for the quarter and year ended December 31, 2004, representing increases of 28% and 24%, respectively, from the same periods in 2003. The average selling prices of homes closed increased to $304,600 and $283,400, respectively, for the fourth quarter and full year 2004, compared with $250,700 and $254,300 for the same periods in 2003. Home gross margins reached record levels at 28.2% and 27.7%, respectively, for the three and twelve months ended December 31, 2004, compared with 25.0% and 24.1% for the same periods in 2003.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Our record fourth quarter homebuilding results were driven by improved performances by most of our operating divisions, particularly those located in Nevada, California, Arizona and Virginia. Increased home closings in all of our markets and higher average selling prices in every market but Texas were the primary contributors to these strong results. In addition, the extraordinary demand for new homes in Nevada during the first half of 2004 resulted in substantial increases in home selling prices and significantly higher home gross margins, driving the 320 basis point improvement in our average home gross margin in the quarter. Finally, with growth in home closings in all of our long-standing operating divisions, and with increased activity in our new operations in Utah, Texas, Jacksonville and Chicago, we have begun to experience some positive leverage with respect to our administrative expenses. As a result, the selling, general and administrative expenses of our homebuilding and corporate operations as a percentage of home sales revenues in the 2004 fourth quarter declined by 160 basis points from the prior year."
Reece concluded, "In support of our 24% increase in home closings in 2004, we increased the number of our active communities during the year from 198 to 242, primarily driven by our expansion in Nevada and growth of our new operations in Texas, Utah and Jacksonville. In order to expand our home closings in 2005 and to continue our growth in 2006, we anticipate that the number of our active communities will approach 300 before the end of the year, with most of our divisions realizing some level of growth. Active communities in Arizona and California should expand by more than 50% from current levels in each market, with a significant portion of these increases expected to occur in the first half of the year. Annual increases of more than 15% are expected in Nevada, Colorado and Jacksonville and, during the first six months of 2005, we should see several communities coming on line for each of our new operations in Chicago, Tampa and the Delaware Valley. The resulting increase in our mix of communities in more affordable markets may have the impact of lowering the average selling prices we realize throughout 2005 relative to the average prices we experienced in 2004."
Financial Services Results
Operating profits from the Company's financial services business were $5.1 million and $18.5 million, respectively, for the quarter and year ended December 31, 2004, compared with $4.9 million and $28.3 million for the same periods in 2003. The reduction in total year profits primarily resulted from the more competitive mortgage pricing environment during 2004, which contributed to lower gains on sales of mortgage loans. In addition, profits 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 2004. 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 Jacksonville, Northern California and Southern California. MDC also has established operating divisions in Dallas/Fort Worth, Houston, West Florida, Philadelphia/Delaware Valley and Chicago. For more information about our Company, visit www.richmondamerican.com.
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 September 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 Year Ended
December 31, December 31,
2004 2003 2004 2003
REVENUES
Homebuilding $1,328,019 $848,028 $3,951,644 $2,859,086
Financial Services 15,588 13,868 56,610 60,216
Corporate 249 184 818 768
Total Revenues $1,343,856 $862,080 $4,009,072 $2,920,070
NET INCOME
Homebuilding $260,176 $125,956 $719,197 $393,879
Financial Services 5,108 4,869 18,483 28,277
Operating Profit 265,284 130,825 737,680 422,156
Expenses related to
debt redemption -- -- -- (9,315)
Corporate general
and administrative
expense, net (33,344) (20,735) (100,766) (64,618)
Income before
income taxes 231,940 110,090 636,914 348,223
Provision for
income taxes (89,317) (43,068) (245,749) (135,994)
Net Income $142,623 $67,022 $391,165 $212,229
EARNINGS PER SHARE
Basic $3.31 $1.59 $9.19 $5.11
Diluted $3.17 $1.52 $8.79 $4.90
WEIGHTED-AVERAGE
SHARES OUTSTANDING
Basic 43,117 42,073 42,560 41,521
Diluted 44,960 44,041 44,498 43,333
DIVIDENDS DECLARED
PER SHARE $.115 $.087 $.434 $.283
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
HOMEBUILDING
Home sales $1,316,913 $845,857 $3,932,013 $2,851,328
Land sales 7,059 -- 8,898 1,298
Other revenues 4,047 2,171 10,733 6,460
Total Homebuilding
Revenues 1,328,019 848,028 3,951,644 2,859,086
Home cost of sales 945,385 634,139 2,843,543 2,163,696
Land cost of sales 7,467 -- 8,783 842
Marketing 60,864 46,470 198,541 162,148
General and
administrative 54,127 41,463 181,580 138,521
Total Homebuilding
Expenses 1,067,843 722,072 3,232,447 2,465,207
Homebuilding
Operating Profit 260,176 125,956 719,197 393,879
FINANCIAL SERVICES
Interest revenues 1,015 1,319 3,838 4,616
Origination fees 7,264 6,539 24,728 22,245
Gains on sales of
mortgage servicing 550 365 2,093 1,972
Gains on sales of
mortgage loans, net 5,752 4,601 22,657 28,622
Mortgage servicing
and other 1,007 1,044 3,294 2,761
Total Financial
Services Revenues 15,588 13,868 56,610 60,216
General and
administrative 10,480 8,999 38,127 31,939
Financial Services
Operating Profit 5,108 4,869 18,483 28,277
Total Operating Profit 265,284 130,825 737,680 422,156
CORPORATE
Expenses related to
debt redemption -- -- -- (9,315)
Interest and other
revenues 249 184 818 768
Other general and
administrative
expenses (33,593) (20,919) (101,584) (65,386)
INCOME BEFORE TAXES $231,940 $110,090 $636,914 $348,223
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
December 31, December 31, December 31,
2004 2003 2002
BALANCE SHEET DATA
Stockholders' Equity
Per Share Outstanding $32.80 $24.06 $19.25
Stockholders' Equity $1,418,821 $1,015,920 $800,567
Homebuilding and
Corporate Debt 746,310 500,179 322,990
Total Capital (excluding
mortgage lending debt) $2,165,131 $1,516,099 $1,123,557
Cash and Cash Equivalents $408,150 $173,565 $28,942
Unrestricted Cash/Available
Borrowing Capacity Under
Lines of Credit $1,050,954 $779,407 $618,774
Ratio of Homebuilding and
Corporate Debt to Equity .53 .49 .40
Ratio of Homebuilding and
Corporate Debt to Capital .34 .33 .29
Ratio of Homebuilding and
Corporate Debt to Capital
(net of cash) .19 .24 .27
Housing Completed or
Under Construction
Inventories $851,628 $732,744 $578,475
Land and Land Under
Development Inventories $1,109,953 $763,569 $656,843
Corporate and Homebuilding
Interest Capitalized
Interest Capitalized in
Inventories at Beginning
of Year $20,043 $17,783 $17,358
Interest Incurred
During the Year 32,879 26,779 21,116
Interest in Home and
Land Cost of Sales
for the Year (28,702) (24,519) (20,691)
Interest Capitalized in
Inventories at End
of Year $24,220 $20,043 $17,783
Interest Capitalized as
a Percent of Inventories 1.2% 1.3% 1.4%
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
OPERATING DATA
Interest in Home
Cost of Sales as
a Percent of Home
Sales Revenues 0.6% 0.8% 0.7% 0.9%
Homebuilding and
Corporate SG&A as
a Percent of Home
Sales Revenues 11.3% 12.9% 12.3% 12.8%
Depreciation and
Amortization $13,150 $9,814 $41,906 $35,677
Home Gross Margins 28.2% 25.0% 27.7% 24.1%
After-Tax Return
on Revenues 10.6% 7.8% 9.8% 7.3%
After-Tax Return
on Average Assets N/A N/A 17.0% 12.1%
After-Tax Return on
Average Equity N/A N/A 33.0% 24.0%
Cash Provided by
(Used in) Operating
Activities $170,368 $61,465 $(23,864) $83,927
Cash Used in
Investing Activities $(2,834) $(2,210) $(29,917) $(6,785)
Cash Provided by
Financing Activities $187,533 $92,559 $288,366 $67,481
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
December 31, December 31, December 31,
2004 2003 2002
LOTS OWNED AND CONTROLLED
Lots Owned 20,760 16,351 16,962
Lots Under Option 21,164 12,251 6,995
Homes Under Construction
(including models) 5,573 4,754 3,751
LOTS OWNED AND CONTROLLED
BY MARKET (excluding homes
under construction)
Arizona 11,151 5,258 3,940
California 4,428 3,512 3,456
Colorado 5,859 5,206 5,760
Florida 3,574 875 --
Illinois 711 -- --
Maryland 1,856 1,767 1,451
Nevada 5,775 5,359 4,391
Philadelphia/
Delaware Valley 1,035 -- --
Texas 2,336 2,203 841
Utah 1,078 1,220 861
Virginia 4,121 3,202 3,257
Total Company 41,924 28,602 23,957
ACTIVE SUBDIVISIONS
Arizona 32 38 44
California 22 26 24
Colorado 53 49 61
Florida 18 9 --
Illinois 1 -- --
Maryland 11 9 6
Nevada 31 17 18
Philadelphia/Delaware Valley 2 -- --
Texas 24 11 1
Utah 22 11 4
Virginia 26 28 20
Total Company 242 198 178
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
AVERAGE SELLING PRICE
PER HOME CLOSED
Arizona $194.0 $182.1 $192.7 $184.3
California 534.3 393.0 459.5 390.0
Colorado 266.6 251.2 265.3 254.2
Florida 182.0 166.2 180.6 168.3
Illinois 496.9 -- 496.9 --
Maryland 448.1 416.7 419.6 388.2
Nevada 279.6 190.1 247.2 186.3
Texas 156.9 164.5 157.7 161.4
Utah 199.0 175.8 184.7 174.5
Virginia 450.4 393.7 436.8 375.1
Company Average $304.6 $250.7 $283.4 $254.3
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in Thousands)
Three Months Ended Year Ended
December 31, December 31,
Orders For Homes, 2004 2003 2004 2003
net (units)
Arizona 962 562 4,066 3,229
California 270 635 2,034 2,116
Colorado 465 425 2,276 2,433
Florida 154 55 446 58
Illinois 12 -- 20 --
Maryland 86 64 341 372
Nevada 185 534 2,596 2,595
Philadelphia/
Delaware Valley 22 -- 23 --
Texas 160 95 807 289
Utah 180 86 753 378
Virginia 166 234 886 1,160
Total 2,662 2,690 14,248 12,630
Cancellation Rate 32.0% 26.5% 25.3% 25.1%
Homes Closed (units)
Arizona 913 905 3,256 2,972
California 704 501 2,346 1,919
Colorado 715 686 2,318 2,656
Florida 201 81 452 93
Illinois 2 -- 2 --
Maryland 134 77 385 291
Nevada 849 700 2,736 2,059
Texas 254 67 694 162
Utah 199 84 615 277
Virginia 352 273 1,072 782
Total 4,323 3,374 13,876 11,211
Backlog (units) December 31, December 31,
2004 2003
Arizona 2,143 1,333
California 807 1,119
Colorado 692 734
Florida 638 104
Illinois 18 --
Maryland 225 269
Nevada 746 886
Philadelphia/
Delaware Valley 23 --
Texas 256 143
Utah 289 151
Virginia 668 854
Total 6,505 5,593
Backlog Estimated
Sales Value $1,920,000 $1,600,000
Estimated Average Selling Price of
Homes in Backlog $295.2 $286.1
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/
