News
M.D.C. Holdings, Inc.
Net income for the nine months ended September 30, 2005 was $308.2 million, or $6.70 per share, 24% higher than the $248.5 million, or $5.61 per share, for the same period in 2004. Total revenues for the nine months ended September 30, 2005 reached $3.15 billion, representing an increase of 18% from revenues of $2.67 billion for the first nine months of 2004.
"We are pleased to announce our 13th consecutive quarter of growth in earnings," said Larry A. Mizel, MDC's chairman and chief executive officer. "Notwithstanding the previously announced production-related challenges we are facing in Arizona and Nevada, two of our strongest and highest-volume markets, we achieved improved earnings per share for the 27th time in the last 28 quarters. Our strong performance in some of the nation's largest and most land-constrained markets enabled us to produce outstanding operating margins and returns, including our after-tax returns over the last 12 months on average equity and assets of approximately 30% and 15%, respectively."
Mizel continued, "The strength of our balance sheet is a direct result of our conservative operating model. In addition to strict control of spec inventories and backlog, this model requires a disciplined and critical underwriting of every land transaction and, perhaps most importantly, a focus on maintaining control of a limited, two-year supply of entitled lots in any market or subdivision in which we build. We are proud to report that our successful execution of this model produced an 87% year-over-year increase in our available cash and borrowing capacity to almost $1.1 billion, as well as leverage ratios that have continued to rank among our industry's lowest, as represented by our ratio of debt-to-capital, net of cash, of .34 at September 30, 2005.
"As successful as this model has been in recent years of general operating strength, we expect that it also will prove to be effective if the overall market becomes more challenging, as some investors seem to believe. By limiting our lot commitments and diversifying our geographic profile, we have enhanced our ability to react to changes in market conditions in either direction. We have greater flexibility to change price points, product or location within a given market, or to allocate capital to markets that have a greater potential for improved performance. This has helped us capture a top- three market share in both Phoenix and Las Vegas, where demand has been very strong, but also to maintain our market position among the leaders in Colorado, where demand has been softer."
Mizel concluded, "As we stated in our press release dated September 14, 2005, we are taking actions in Arizona and Nevada to meet the production challenges presented by the tremendous volume of homes being constructed in these leading homebuilding markets. On the basis of these actions, our record September 30th backlog and our anticipated rise in average selling price, we reiterate our statement of September 14th that our 2005 earnings per share should exceed the then consensus analyst estimate of $10.44. As a result, we expect to report record earnings for our 2005 fourth quarter. Further, with our 18% year-over-year increase in active subdivisions, our expanded supply of available lots, anticipated contributions to our bottom line from our newer operations in Chicago, Tampa and Philadelphia/Delaware Valley, and assuming no significant changes in overall market conditions, we believe we are well-positioned to continue to grow and produce new Company highs for home closings, revenues and profits in 2006."
Please refer to the last paragraph of this release for a discussion of factors that may impact the Company's estimates of home closings, average selling price, revenues and earnings.
Growth in Homebuilding Profits
Homebuilding operating profits for the quarter and nine months ended September 30, 2005 were $214.7 million and $564.8 million, respectively, representing increases of 11% and 23% over profits of $193.1 million and $459.0 million, respectively, for the same periods in 2004. These increases largely resulted from increased levels of home closings and higher average selling prices, as well as improved home gross margins for homes closed during the 2005 periods. The Company closed 3,686 homes and 10,356 homes, respectively, in the third quarter and first nine months of 2005, 4% and 8% higher than home closings in the same periods in 2004. During the third quarter and first nine months of 2005, the Company's average selling prices increased to $311,400 and $298,800, respectively, compared with $283,100 and $273,700 for the comparable periods in 2004. Home gross margins reached 28.8% and 28.6%, respectively, for the three and nine months ended September 30, 2005, representing year-over-year increases of 60 basis points and 120 basis points.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Similar to earlier quarters this year, the 2005 increase in our third quarter homebuilding profits was driven by improved year-over-year results from our long-standing operations in Arizona, Virginia and Maryland, as well as from our relatively new operations in Utah and Florida. Strong demand for new homes in these five markets resulted in significant increases in average selling prices of homes closed and substantial improvements in home gross margins. As in the 2005 second quarter, these margin improvements offset the impact of the anticipated easing of home gross margins in Nevada from last year's extraordinary levels."
Reece continued, "As reported previously, our home orders in the 2005 third quarter increased by 21% over home orders received during the 2004 third quarter, primarily resulting from the 24% year-over-year increase in our average active subdivisions. While our average selling price of homes closed increased by 10% over last year, the estimated average price of our home orders received during the 2005 third quarter increased by 20% to approximately $344,000. Average home order price increases in most of our markets, particularly in Arizona, Maryland, Virginia and Florida, contributed to the higher overall average price of our home orders. As a result, the estimated value of home orders received during the third quarter of 2005 increased by more than 45% from the 2004 third quarter."
Reece concluded, "Our 280 active subdivisions at September 30, 2005 were 18% above the level of a year ago. However, the number was slightly below our expectations, primarily due to strong home orders in Nevada, California and Maryland that resulted in a number of subdivisions in these markets selling out earlier than anticipated. In addition, we experienced land development, permitting or architectural delays in certain subdivisions in Colorado, Arizona, California and Florida that postponed their opening for sales. These types of delays could continue to impact our ability to bring new subdivisions online in the fourth quarter as well. Nevertheless, assuming we do not sell out faster than expected in certain subdivisions or that delays do not become further protracted, we anticipate that our subdivision count at year-end 2005 should be between 15% and 20% higher than levels at the end of 2004."
Please refer to the last paragraph of this release for a discussion of factors that may impact the Company's estimate of active subdivision count.
Improved Financial Services Results
Operating profits from the Company's financial services business for the quarter and nine months ended September 30, 2005, were $6.3 million and $13.2 million, respectively, compared with $5.6 million and $13.4 million for the same periods in 2004. The increase in profits in the 2005 third quarter primarily was due to an increase in loan origination fees earned in conjunction with a higher level of mortgage loans originated in the third quarter.
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, Jacksonville 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 closings, average selling price, revenues, earnings and active subdivision count, 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 Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
REVENUES
Homebuilding $1,152,104 $1,011,392 $3,106,728 $2,623,625
Financial Services 15,471 14,627 39,881 41,022
Corporate 237 110 1,459 569
Total Revenues $1,167,812 $1,026,129 $3,148,068 $2,665,216
NET INCOME
Homebuilding $214,650 $193,091 $564,785 $459,021
Financial Services 6,264 5,573 13,238 13,375
Operating Profit 220,914 198,664 578,023 472,396
Corporate general
and administrative
expense, net (27,588) (27,795) (84,791) (67,422)
Income before income
taxes 193,326 170,869 493,232 404,974
Provision for income
taxes (72,336) (65,796) (184,988) (156,432)
Net Income $120,990 $105,073 $308,244 $248,542
EARNINGS PER SHARE
Basic $2.73 $2.47 $7.03 $5.87
Diluted $2.62 $2.36 $6.70 $5.61
WEIGHTED-AVERAGE SHARES
OUTSTANDING
Basic 44,379 42,493 43,849 42,373
Diluted 46,258 44,442 46,006 44,324
DIVIDENDS DECLARED PER
SHARE $.180 $.115 $.510 $.318
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months Nine Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
Homebuilding
Home sales $1,147,757 $1,007,134 $3,094,141 $2,615,100
Land sales 1,269 1,839 2,565 1,839
Other revenues 3,078 2,419 10,022 6,686
Total Homebuilding
Revenues 1,152,104 1,011,392 3,106,728 2,623,625
Home cost of sales 817,330 723,240 2,208,882 1,898,158
Land cost of sales 706 1,316 1,496 1,316
Marketing 56,842 49,856 158,694 137,677
General and
administrative 62,576 43,889 172,871 127,453
Total Homebuilding
Expenses 937,454 818,301 2,541,943 2,164,604
Homebuilding
Operating
Profit 214,650 193,091 564,785 459,021
Financial Services
Interest revenues 755 993 2,010 2,823
Origination fees 8,433 6,801 21,428 17,464
Gains on sales of
mortgage servicing 1,121 406 2,590 1,543
Gains on sales of
mortgage loans, net 4,356 5,595 11,372 16,905
Mortgage servicing
and other 806 832 2,481 2,287
Total Financial
Services Revenues 15,471 14,627 39,881 41,022
General and
administrative 9,207 9,054 26,643 27,647
Financial Services
Operating Profit 6,264 5,573 13,238 13,375
Total Operating Profit 220,914 198,664 578,023 472,396
Corporate
Interest and other
revenues 237 110 1,459 569
Other general and
administrative
expenses (27,825) (27,905) (86,250) (67,991)
Income Before
Income Taxes $193,326 $170,869 $493,232 $404,974
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
September 30, December 31, September 30,
2005 2004 2004
BALANCE SHEET DATA
Stockholders' Equity Per
Share Outstanding $39.57 $32.80 $29.59
Stockholders' Equity $1,764,184 $1,418,821 $1,263,751
Homebuilding and
Corporate Debt 1,036,171 746,310 617,847
Total Capital (excluding
mortgage lending debt) $2,800,355 $2,165,131 $1,881,598
Cash and Cash Equivalents $130,121 $408,150 $53,083
Unrestricted Cash and
Available Borrowing
Capacity Under Lines
of Credit $1,073,762 $1,050,954 $575,281
Ratio of Homebuilding and
Corporate Debt to Equity .59 .53 .49
Ratio of Homebuilding and
Corporate Debt to Capital .37 .34 .33
Ratio of Homebuilding and
Corporate Debt to Capital
(net of cash) .34 .19 .31
Housing Completed or Under
Construction Inventories $1,535,936 $851,628 $1,104,240
Land and Land Under
Development Inventories $1,367,890 $1,109,953 $938,989
Corporate and Homebuilding
Interest Capitalized Quarter Full Year Quarter
Interest Capitalized in
Inventories at Beginning
of Period $30,293 $20,043 $22,023
Interest Incurred
During the Period 14,615 32,879 8,406
Interest in Home and
Land Cost of Sales
for the Period (7,030) (28,702) (7,175)
Interest Capitalized in
Inventories at End of
Period $37,878 $24,220 $23,254
Interest Capitalized as a
Percent of Inventories 1.3% 1.2% 1.1%
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
OPERATING DATA
Interest in Home Cost
of Sales as a Percent
of Home Sales Revenues 0.6% 0.7% 0.7% 0.8%
Homebuilding and
Corporate SG&A as a
Percent of Home Sales
Revenues 12.8% 12.1% 13.5% 12.7%
Depreciation and
Amortization $12,932 $11,663 $34,518 $28,756
Home Gross Margins 28.8% 28.2% 28.6% 27.4%
Cash Used in
Operating
Activities $(227,773) $(32,889) $(553,876) $(194,232)
Cash Used in
Investing
Activities $ (6,394) $(21,806) $(18,118) $(27,083)
Cash Provided by
Financing
Activities $293,799 $31,077 $293,965 $100,833
After-Tax Return
on Revenues 10.4% 10.2% 9.8% 9.3%
After-Tax Return
on Average Assets
(Rolling 12 Months
Ended) N/A N/A 15.4% 14.9%
After-Tax Return
on Average Equity
(Rolling 12 Months
Ended) N/A N/A 29.8% 29.0%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
September 30, December 31, September 30,
2005 2004 2004
LOTS OWNED AND CONTROLLED
Lots Owned 21,660 20,760 19,909
Lots Under Option 22,327 21,164 20,060
Homes Under Construction
(including models) 9,217 5,573 7,159
LOTS OWNED AND CONTROLLED
BY MARKET
(excluding homes under
construction)
Arizona 11,059 11,151 9,436
California 5,771 4,428 4,226
Colorado 6,747 5,859 5,625
Florida 4,381 3,574 3,331
Illinois 660 711 987
Maryland 1,890 1,856 1,705
Nevada 5,121 5,775 5,825
Philadelphia/Delaware Valley 1,478 1,035 984
Texas 1,520 2,336 3,010
Utah 1,449 1,078 1,255
Virginia 3,911 4,121 3,585
Total Company 43,987 41,924 39,969
ACTIVE SUBDIVISIONS
Arizona 46 32 30
California 28 22 21
Colorado 56 53 56
Florida 19 18 22
Illinois 8 1 1
Maryland 10 11 10
Nevada 47 31 26
Philadelphia/Delaware Valley 6 2 --
Texas 24 24 24
Utah 16 22 22
Virginia 20 26 26
Total Company 280 242 238
Average for Quarter Ended 281 237 226
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
AVERAGE SELLING PRICE
PER HOME CLOSED
Arizona $221.2 $192.9 $215.0 $192.1
California 510.5 452.6 509.2 427.5
Colorado 287.7 264.0 285.7 264.7
Florida 226.2 182.3 205.3 179.5
Illinois 411.7 -- 426.5 --
Maryland 513.5 397.3 458.6 404.5
Nevada 307.6 258.3 298.1 232.6
Philadelphia/
Delaware Valley 362.2 -- 361.3 --
Texas 162.7 155.0 159.1 158.1
Utah 226.9 180.1 219.0 177.8
Virginia 515.9 447.8 503.4 430.1
Company Average $311.4 $283.1 $298.8 $273.7
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Orders for Homes, net (units)
Arizona 798 951 3,040 3,104
California 504 311 1,737 1,764
Colorado 469 521 1,727 1,811
Florida 238 93 917 292
Illinois 53 5 113 8
Maryland 89 52 365 255
Nevada 829 454 2,788 2,411
Philadelphia/
Delaware Valley 56 1 156 1
Texas 162 152 672 647
Utah 257 187 741 573
Virginia 96 198 673 720
Total 3,551 2,925 12,929 11,586
Estimated Value of
Orders for Homes, net $1,220,000 $840,000
Estimated Average
Selling Price of
Orders for Homes, net $343.6 $287.2
Cancellation Rate 25.7% 30.6% 21.5% 23.6%
Homes Closed, net (units)
Arizona 895 808 2,550 2,343
California 475 631 1,238 1,642
Colorado 599 583 1,615 1,603
Florida 252 96 832 251
Illinois 19 - - 40 - -
Maryland 106 90 260 251
Nevada 616 690 1,851 1,887
Philadelphia/Delaware Valley 17 - - 18 - -
Texas 214 222 616 440
Utah 239 188 640 416
Virginia 254 250 696 720
Total 3,686 3,558 10,356 9,553
Backlog (units) September 30, December 31, September 30,
2005 2004 2004
Arizona 2,633 2,143 2,094
California 1,306 807 1,241
Colorado 804 692 942
Florida 723 638 685
Illinois 91 18 8
Maryland 330 225 273
Nevada 1,683 746 1,410
Philadelphia/
Delaware Valley 161 23 1
Texas 312 256 350
Utah 390 289 308
Virginia 645 668 854
Total 9,078 6,505 8,166
Backlog Estimated
Value $3,290,000 $1,920,000 $2,480,000
Estimated Average
Selling Price
of Homes in Backlog $362.4 $295.2 $303.7
SOURCE: M.D.C. Holdings, Inc.
CONTACT: Paris G. Reece III, Chief Financial Officer, +1-303-804-7706,
Rubenstein Communications, +1-212-843-8267,
M.D.C. Holdings, Inc.
Web site: https://www.richmondamerican.com/
