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/