News
M.D.C. Holdings, Inc.
Net income for the six months ended June 30, 2005 was $187.3 million, or $4.10 per share, 31% higher than the $143.5 million, or $3.24 per share, for the same period in 2004. Total revenues for the six months ended June 30, 2005 reached a record $1.980 billion, representing an increase of 21% from revenues of $1.639 billion for the first six months of 2004.
"We have leveraged the strong fundamentals that continue to support the homebuilding industry to produce record quarterly operating profits for the 12th consecutive quarter and for the 23rd time in the last six years," said Larry A. Mizel, MDC's chairman and chief executive officer. "Low interest rates, increasing job growth, declining unemployment, rising consumer confidence, strong demographic trends and a generally improving economy have provided the platform for outstanding performances by all of the well-capitalized public homebuilders. We believe that the increased use of adjustable rate, interest-only mortgages and purchases of homes for investment, while receiving a great deal of publicity, remain limited threats to our industry's well-being.
MDC's conservative operating model, strong financial position and expanding geographic footprint have enabled us to produce operating margins and returns in this environment that rank among the best of our peers, including our record 28.6% home gross margin in the 2005 second quarter and our 31.2% return on average equity over the last 12 months. At the same time, we have maintained leverage ratios that are among our industry's lowest, evidenced by our ratio of debt-to-capital, net of cash, of .30 at June 30, 2005. This unique combination resulted in our recent recognition as one of the top six companies named to the prestigious Barron's 500, which ranks companies on how well they perform for investors."
Mizel continued, "While producing these record results, we continued to focus on strengthening our financial position and enhancing shareowner value. As we positioned our Company for future growth through the 30% year-over-year increases in our lot supply and active subdivisions, we increased our June 30th cash and available borrowing capacity by 58% from this time last year. Our financial flexibility improved even more last week when we closed on the issuance of an additional $250 million in 10-year, unsecured medium term notes at a coupon interest rate of only 5 3/8%. In addition, to achieve our desired balance in the allocation of capital between growth of operations and sharing our successes with our shareowners, we increased our quarterly dividend declared in April to $.18 per share. This dividend amount represents increases of 20% and 56%, respectively, over the previous quarter and the same quarter last year and, considering the previously paid stock dividends and our 30% stock split earlier this year, is more than three times the quarterly dividend we paid 24 months ago."
Mizel concluded, "The continued strength in demand for new homes in our long-standing markets, combined with the ramping up of our operations in our newer markets in Utah, Florida, Delaware Valley and Chicago, enable us to look forward to the balance of 2005 and 2006 with optimism that we can meet our goals for future growth. With the significant increase in our active subdivisions and our highest-ever quarter-end backlog of more than 9,200 homes, we are well-positioned to generate new Company highs for revenues and earnings in 2005. And we are optimistic regarding continued solid growth in 2006."
Record Homebuilding Profits
Homebuilding operating profits for the quarter and six months ended June 30, 2005 were $187.6 million and $350.1 million, respectively, representing increases of 23% and 32% over profits of $152.5 million and $265.9 million, respectively, for the same periods in 2004. These increases primarily are the result of the record level of home closings and home gross margins, as well as higher average selling prices of homes closed. The Company closed 3,512 homes and 6,670 homes, respectively, in the second quarter and first six months of 2005, 14% and 11% higher than home closings in the same periods in 2004. Home gross margins reached 28.6% and 28.5%, respectively, for the three and six months ended June 30, 2005, representing increases of 100 basis points and 160 basis points from home gross margins for the comparable periods in 2004. For the second quarter and first six months of 2005, the Company's average selling prices increased to $293,200 and $291,800, respectively, compared with $279,300 and $268,200 for the same periods in 2004.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "The record performance by our homebuilding segment in the 2005 second quarter was driven by improved year-over-year operating results from our long-standing businesses in Arizona, Nevada and Virginia, as well as from our relatively new operations in Utah and Florida. Profits in Arizona, Utah and Florida were enhanced by significant increases in home closings. Substantial improvements in home gross margins in Virginia added to our increased results and offset the impact of the anticipated easing of home gross margins in Nevada from the extraordinary levels of the past year. Higher average selling prices in each of these five markets and in most of our other operating divisions contributed to our higher profitability in this quarter."
Reece continued, "Our average selling price of all homes closed in this quarter was higher than we had anticipated. This increase primarily resulted from the combination of closing a greater number of homes than expected in the higher-priced California markets and closing fewer homes than expected in Arizona due to weather and subcontractor-related delays. The average selling price of homes in our quarter-end backlog also increased more than previously expected, to just over $340,000 from $308,000 at the end of the first quarter. While sales price increases played a part, this rise also can be attributed to a change in the backlog mix, the most significant of which was an increase in California and a decrease in Arizona as a percentage of total backlog. We anticipate that a significant number of the homes added to our backlog in this quarter in California, as well as in the Mid-Atlantic markets, will be delivered late this year and in 2006. Therefore, while we expect that the average selling price of homes we close in the third and fourth quarters of 2005 will rise sequentially from the $293,000 in the second quarter, we believe the increase in the third quarter will be relatively modest, influenced more by our growth in the lower-priced, faster-delivering markets such as Utah, Florida, Texas and Arizona."
Reece concluded, "Our home gross margins reached a new high in the 2005 second quarter. While these margins benefited from the strong demand for new homes in many of our markets, particularly in Arizona and Virginia, approximately half of the margin increase is attributable to certain non-recurring items, including insurance proceeds and other cash recoveries related to warranty and land development costs expensed in previous periods."
Improved Financial Services Results
Operating profits from the Company's financial services business for the quarter and six months ended June 30, 2005, were $4.1 million and $7.0 million, respectively, compared with $3.1 million and $7.8 million for the same periods in 2004. The improvement in profits in the 2005 second quarter was due primarily to an increase in loan origination fees earned in connection with the record second quarter level of mortgage loans originated. This increase partially was offset by lower gains on sales of mortgage loans resulting from the more competitive mortgage pricing environment.
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, Jacksonville, 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, West Florida, Philadelphia/Delaware Valley and Chicago. For more information about our Company, please visit www.richmondamerican.com.
Forward-Looking Statements
Certain statements in this release, including statements regarding future revenues, earnings, margins and selling prices, 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-K for the year ended December 31, 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 Six Months Ended
June 30, June 30,
2005 2004 2005 2004
REVENUES
Homebuilding $1,033,294 $863,369 $1,954,624 $1,612,233
Financial Services 12,812 11,947 24,410 26,395
Corporate 234 167 1,222 459
Total Revenues $1,046,340 $875,483 $1,980,256 $1,639,087
NET INCOME
Homebuilding $187,625 $152,485 $350,135 $265,930
Financial Services 4,127 3,145 6,974 7,802
Operating Profit 191,752 155,630 357,109 273,732
Corporate general
and administrative
expense, net (27,775) (21,343) (57,203) (39,627)
Income before
income taxes 163,977 134,287 299,906 234,105
Provision for
income taxes (61,354) (51,719) (112,652) (90,636)
Net Income $102,623 $82,568 $187,254 $143,469
EARNINGS PER SHARE
Basic $2.35 $1.95 $4.30 $3.39
Diluted $2.25 $1.87 $4.10 $3.24
WEIGHTED-AVERAGE
SHARES OUTSTANDING
Basic 43,718 42,318 43,584 42,312
Diluted 45,703 44,233 45,649 44,257
DIVIDENDS DECLARED
PER SHARE $.180 $.115 $.330 $.203
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
Homebuilding
Home sales $1,029,553 $861,537 $1,946,384 $1,607,966
Land sales -- -- 1,296 --
Other revenues 3,741 1,832 6,944 4,267
Total
Homebuilding
Revenues 1,033,294 863,369 1,954,624 1,612,233
Home cost of sales 734,772 623,894 1,391,552 1,174,918
Land cost of sales -- -- 790 --
Marketing 53,688 44,653 101,852 87,821
General and
administrative 57,209 42,337 110,295 83,564
Total Homebuilding
Expenses 845,669 710,884 1,604,489 1,346,303
Homebuilding
Operating Profit 187,625 152,485 350,135 265,930
Financial Services
Interest revenues 728 900 1,255 1,830
Origination fees 6,854 5,399 12,995 10,663
Gains on sales of
mortgage servicing 791 521 1,469 1,137
Gains on sales of
mortgage loans, net 3,769 4,533 7,016 11,310
Mortgage servicing
and other 670 594 1,675 1,455
Total Financial
Services Revenues 12,812 11,947 24,410 26,395
General and
administrative 8,685 8,802 17,436 18,593
Financial Services
Operating Profit 4,127 3,145 6,974 7,802
Total Operating
Profit 191,752 155,630 357,109 273,732
Corporate
Interest and
other revenues 234 167 1,222 459
Other general
and
administrative
expenses (28,009) (21,510) (58,425) (40,086)
Income Before
Income Taxes $163,977 $134,287 $299,906 $234,105
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
June 30, December 31, June 30,
2005 2004 2004
BALANCE SHEET DATA
Stockholders' Equity
Per Share Outstanding $36.88 $32.80 $27.22
Stockholders' Equity $1,614,022 $1,418,821 $1,150,383
Homebuilding and
Corporate Debt 776,459 746,310 587,797
Total Capital
(excluding
mortgage lending
debt) $2,390,481 $2,165,131 $1,738,180
Cash and Cash Equivalents $70,489 $408,150 $76,701
Unrestricted Cash and
Available Borrowing
Capacity Under
Lines of Credit $1,030,361 $1,050,954 $653,753
Ratio of Homebuilding
and Corporate Debt
to Equity .48 .53 .51
Ratio of Homebuilding
and Corporate Debt
to Capital .32 .34 .34
Ratio of Homebuilding
and Corporate Debt
to Capital (net of cash) .30 .19 .31
Housing Completed or
Under Construction
Inventories $1,190,380 $851,628 $982,307
Land and Land Under
Development Inventories $1,302,718 $1,109,953 $875,494
Corporate and
Homebuilding Interest
Capitalized Quarter Full Year Quarter
Interest Capitalized
in Inventories
at Beginning
of Period $27,741 $20,043 $21,047
Interest Incurred
During the Period 11,110 32,879 7,709
Interest in Home
and Land Cost
of Sales for
the Period (8,558) (28,702) (6,733)
Interest Capitalized
in Inventories
at End of Period $30,293 $24,220 $22,023
Interest Capitalized
as a Percent
of Inventories 1.2% 1.2% 1.2%
Three Months Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
OPERATING DATA
Interest in Home
Cost of Sales
as a Percent of
Home Sales
Revenues 0.8% 0.8% 0.8% 0.8%
Homebuilding and
Corporate SG&A as
a Percent of
Home Sales
Revenues 13.5% 12.6% 13.9% 13.2%
Depreciation and
Amortization $11,592 $8,163 $21,586 $17,093
Home Gross Margins 28.6% 27.6% 28.5% 26.9%
Cash Used in
Operating
Activities $(208,595) $(118,123) $(326,103) $(161,343)
Cash Used in
Investing
Activities $(7,061) $(2,978) $(11,724) $(5,277)
Cash Provided
by Financing
Activities $59,311 $98,723 $166 $69,756
After-Tax Return
on Revenues 9.8% 9.4% 9.5% 8.8%
After-Tax Return
on Average Assets
(Rolling 12
Months Ended) N/A N/A 16.3% 14.0%
After-Tax Return
on Average Equity
(Rolling 12
Months Ended) N/A N/A 31.2% 27.3%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in Thousands)
June 30, December 31, June 30,
2005 2004 2004
LOTS OWNED AND CONTROLLED
Lots Owned 22,721 20,760 19,523
Lots Under Option 20,158 21,164 13,340
Homes Under Construction
(including models) 7,891 5,573 6,551
LOTS OWNED AND CONTROLLED BY MARKET
(excluding homes under construction)
Arizona 11,763 11,151 7,318
California 4,226 4,428 3,215
Colorado 6,362 5,859 5,435
Florida 4,259 3,574 1,313
Illinois 771 711 649
Maryland 1,829 1,856 1,723
Nevada 5,143 5,775 5,636
Philadelphia/
Delaware Valley 1,586 1,035 321
Texas 1,875 2,336 2,694
Utah 1,270 1,078 1,490
Virginia 3,795 4,121 3,069
Total Company 42,879 41,924 32,863
ACTIVE SUBDIVISIONS
Arizona 44 32 34
California 31 22 20
Colorado 55 53 55
Florida 23 18 7
Illinois 5 1 --
Maryland 14 11 10
Nevada 45 31 23
Philadelphia/
Delaware Valley 5 2 --
Texas 25 24 22
Utah 17 22 18
Virginia 18 26 28
Total Company 282 242 217
Average for Quarter Ended 275 237 223
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
AVERAGE SELLING
PRICE PER HOME CLOSED
Arizona $219.5 $192.7 $211.7 $191.7
California 498.1 434.0 508.4 411.8
Colorado 286.2 268.3 284.6 265.1
Florida 206.4 183.9 196.3 177.8
Illinois 451.6 -- 439.8 --
Maryland 418.2 400.0 420.8 408.5
Nevada 297.7 227.7 293.3 217.7
Philadelphia/
Delaware Valley 347.3 -- 347.3 --
Texas 158.6 161.1 157.2 161.2
Utah 215.1 177.3 214.2 176.0
Virginia 507.4 430.3 496.3 420.7
Company Average $293.2 $279.3 $291.8 $268.2
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in Thousands)
Three Months Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
Orders For Homes, net (units)
Arizona 1,090 1,243 2,242 2,153
California 702 627 1,233 1,453
Colorado 594 599 1,258 1,290
Florida 359 90 679 199
Illinois 31 3 60 3
Maryland 131 79 276 203
Nevada 1,209 927 1,959 1,957
Philadelphia/
Delaware Valley 57 -- 100 --
Texas 189 224 510 495
Utah 236 210 484 386
Virginia 234 230 577 522
Total 4,832 4,232 9,378 8,661
Cancellation Rate 19.3% 23.2%
Homes Closed, net (units)
Arizona 859 665 1,655 1,535
California 377 535 763 1,011
Colorado 568 542 1,016 1,020
Florida 285 84 580 155
Illinois 16 -- 21 --
Maryland 80 91 154 161
Nevada 626 629 1,235 1,197
Philadelphia/
Delaware Valley 1 -- 1 --
Texas 237 148 402 218
Utah 233 124 401 228
Virginia 230 267 442 470
Total 3,512 3,085 6,670 5,995
Backlog (units) June 30, Dec 31, June 30,
2005 2004 2004
Arizona 2,730 2,143 1,951
California 1,277 807 1,561
Colorado 934 692 1,004
Florida 737 638 148
Illinois 57 18 3
Maryland 347 225 311
Nevada 1,470 746 1,646
Philadelphia/
Delaware Valley 122 23 --
Texas 364 256 420
Utah 372 289 309
Virginia 803 668 906
Total 9,213 6,505 8,259
Backlog Estimated
Sales Value $3,140,000 $1,920,000 $2,500,000
Estimated Average
Selling Price of
Homes in Backlog $340.8 $295.2 $302.7
SOURCE: M.D.C. Holdings, Inc.
CONTACT: Paris G. Reece III, Chief Financial Officer, +1-303-804-7706,
Web site: https://www.richmondamerican.com/
