News
M.D.C. Holdings, Inc.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "The weakened demand for new homes experienced in 2006 continued throughout the first quarter of 2007, with most of our markets reporting lower orders for new homes compared to a year earlier. Many prospective homebuyers hesitated in making purchase decisions because of uncertainties in the stability of home prices. Competition for new home orders continued at a high level, caused in part by expanding new and existing home inventories. In addition, new issues emerged in the mortgage industry that caused a tightening of sub-prime and Alt-A lending standards, which negatively impacted net home orders in March. The existence of these factors in most of our markets required us and our peers to increase the use of incentives to sell homes, which contributed significantly to our first quarter net loss."
Mizel continued, "While awaiting signs of stabilization for our industry, we have continued to take actions that strengthen our balance sheet, improve our financial position and further prepare us to respond to opportunities that may emerge in this difficult homebuilding environment. In addition to reducing our supply of controlled lots by more than 10% since the beginning of the year, we generated almost $150 million in operating cash flow during the first quarter, contributing to a 47% year-over-year increase in our cash and available borrowing capacity to almost $1.9 billion. We ended the quarter with over $630 million in cash on hand and no borrowings under our homebuilding line of credit, and our debt-to-capital ratio declined year-over-year and continued to rank among the industry's lowest."
Homebuilding Results
Homebuilding loss before taxes for the quarter ended March 31, 2007 was $138.9 million, compared with income before taxes of $170.9 million for the same period in 2006. This pre-tax difference was driven in large part by the asset impairment charges discussed above, as well as significant declines in home closings and home gross margins from the first quarter levels achieved during the same period in 2006. These income decreases were offset partially by the impact of reduced homebuilding commissions, marketing, general and administrative expense ("SG&A") in the 2007 first quarter. The Company closed 2,001 homes and produced home gross margins of 15.8% in the 2007 first quarter, compared with 3,198 home closings and home gross margins of 27.1% for the comparable period in 2006. Average selling prices reached $355,700 for the quarter, up $6,400 from the same period in 2006, while SG&A decreased to $113.3 million from $133.6 million for the prior year first quarter.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Because the spring selling season did not materialize as anticipated, we continued to provide incentives and lower prices in many of our markets to encourage homebuyer demand, in many cases in response to actions taken by our competitors. As a result, we have reduced our performance expectations with respect to certain subdivisions, leading to $115 million of impairments to land inventory and $26 million of impairments to work in process inventory in the first quarter. Nearly all of the impairments occurred in California, Nevada and Florida, with California alone accounting for over 60% of the total charge. In total, more than 3,200 lots in 52 subdivisions were impaired. The quarter-end book value of these subdivisions after the impairments was $381 million, including $203 million of land and $178 million of work in process."
Reece concluded, "Our general and administrative expenses declined year-over-year in the 2007 first quarter by 19%, reflecting reduced employee-related costs resulting from our continued efforts to right-size our homebuilding operations in view of current market conditions. While commissions declined approximately in line with the decreases in home sales revenue, advertising expenses were almost the same as the 2006 first quarter, as we maintained an intense marketing program designed to improve homebuyer traffic in response to the continuing competitive home selling environment in most of our markets."
Financial Services and Other Results
Income before taxes from the Company's Financial Services and Other segment for the quarter ended March 31, 2007 was $7.5 million, compared with $11.2 million for the same period in the previous year. The decrease primarily resulted from lower gains on sales of mortgage loans, as the dollar volumes of mortgage loan originations and mortgage loans sold declined in line with builder home closings.
Home Orders and Backlog
MDC received orders, net of cancellations, for 2,558 homes with an estimated sales value of $902 million during the 2007 first quarter, compared with net orders for 3,800 homes with an estimated sales value of $1.36 billion during the same period in 2006. Net home orders declined year-over-year in all of the Company's markets except the Delaware Valley, with the largest unit decreases occurring in the West and Mountain homebuilding segments. During the 2007 first quarter, the Company's order cancellation rate rose to approximately 35%, compared with the 31% rate experienced during the same period in 2006. The Company ended the first quarter of 2007 with a backlog of 4,195 homes, compared with a backlog of 7,134 homes at March 31, 2006. The estimated sales value of backlog at the end of the 2007 first quarter was $1.50 billion, compared with $2.70 billion at March 31, 2006.
MDC, whose subsidiaries build homes under the name "Richmond American Homes," is one of the top ten homebuilders in the United States, based on 2006 revenue. The Company also provides mortgage financing, primarily for MDC's homebuyers, through its wholly owned subsidiary HomeAmerican Mortgage Corporation. MDC, a Fortune 500 Company, is a major regional homebuilder with a significant presence in Colorado, Jacksonville, Las Vegas, Maryland, Northern California, Northern Virginia, Phoenix, Salt Lake City, Southern California and Tucson. MDC also has established operating divisions in Chicago, Philadelphia/Delaware Valley and West Florida. For more information about our Company, please visit RichmondAmerican.com.
Forward-Looking Statements
Certain statements in this release, including statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects, 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, including changes in cancellation rates, net home orders, home gross margins, and land and home values; (2) changes in interest rates and mortgage lending programs; (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 Annual Report on Form 10-K for the year ended December 31, 2006, 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.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2007 2006
REVENUE
Home sales revenue $711,800 $1,117,155
Land sales revenue 6,034 1,837
Other revenue 27,290 26,433
Total Revenue 745,124 1,145,425
COSTS AND EXPENSES
Home cost of sales 599,199 814,849
Land cost of sales 5,107 1,774
Asset impairments 141,422 600
Marketing expenses 29,079 29,035
Commission expenses 23,250 32,843
General and administrative expenses 90,657 111,266
Related party expenses 91 2,577
Total Costs and Expenses 888,805 992,944
(Loss) income before income taxes (143,681) 152,481
Benefit (provision) for income taxes 49,283 (57,060)
NET (LOSS) INCOME $(94,398) $95,421
(LOSS) EARNINGS PER SHARE
Basic $(2.07) $2.13
Diluted $(2.07) $2.08
WEIGHTED-AVERAGE SHARES
Basic 45,501 44,820
Diluted 45,501 45,970
DIVIDENDS DECLARED PER SHARE $0.25 $0.25
M.D.C. HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
March 31, December 31,
2007 2006
ASSETS
Cash and cash equivalents $630,681 $507,947
Restricted cash 2,546 2,641
Home sales receivables 69,255 143,936
Mortgage loans held in inventory, net 150,356 212,903
Inventories
Housing completed or under construction 1,171,137 1,178,671
Land and land under development 1,341,804 1,575,158
Property and equipment, net 41,503 44,606
Deferred income taxes 174,590 124,880
Prepaid expenses and other assets, net 107,593 119,133
Total Assets $3,689,465 $3,909,875
LIABILITIES
Accounts payable $132,905 $171,005
Accrued liabilities 367,362 418,953
Income taxes payable 11,602 28,485
Related party liabilities 701 2,401
Homebuilding line of credit -- --
Mortgage line of credit 100,703 130,467
Senior notes, net 996,782 996,682
Total Liabilities 1,610,055 1,747,993
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value;
25,000,000 shares authorized;
none issued or outstanding -- --
Common stock, $0.01 par value;
250,000,000 shares authorized;
45,708,000 and 45,694,000 issued and
outstanding, respectively, at
March 31, 2007 and 45,179,000 and
45,165,000 issued and outstanding,
respectively, at December 31, 2006 457 452
Additional paid-in capital 783,873 760,831
Retained earnings 1,296,742 1,402,261
Accumulated other comprehensive loss (1,003) (1,003)
Less treasury stock, at cost;
14,000 shares at March 31, 2007 and
December 31, 2006 (659) (659)
Total Stockholders' Equity 2,079,410 2,161,882
Total Liabilities and
Stockholders' Equity $3,689,465 $3,909,875
M.D.C. HOLDINGS, INC.
Information on Segments
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
2007 2006
REVENUE
West $454,654 $687,246
Mountain 145,191 163,190
East 61,355 147,181
Other Homebuilding 64,860 125,887
Total Homebuilding 726,060 1,123,504
Financial Services and Other 19,570 23,642
Corporate 5,433 432
Intercompany Adjustments (5,939) (2,153)
Consolidated $745,124 $1,145,425
(LOSS) INCOME BEFORE INCOME TAXES
West $(125,391) $122,063
Mountain 10,971 8,635
East (4,386) 35,318
Other Homebuilding (20,131) 4,882
Total Homebuilding (138,937) 170,898
Financial Services and Other 7,517 11,184
Corporate (12,261) (29,601)
Consolidated $(143,681) $152,481
ASSET IMPAIRMENTS
West $121,902 $--
Mountain 654 --
East 2,567 --
Other Homebuilding 16,297 600
Total Homebuilding $141,420 $600
Realized Benefit of Prior-Period
Asset Impairment 9,213 0
March 31, December 31,
2007 2006
TOTAL ASSETS
West $1,604,053 $1,869,442
Mountain 525,298 535,554
East 320,779 333,902
Other Homebuilding 232,328 266,326
Total Homebuilding 2,682,458 3,005,224
Financial Services and Other 177,810 246,734
Corporate 829,197 657,917
Consolidated $3,689,465 $3,909,875
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31, Change
2007 2006 Amount %
SELECTED FINANCIAL DATA
General and
Administrative Expenses
Homebuilding Operations $60,999 $71,681 $(10,682) -15%
Financial Services and
Other Operations $12,058 $12,129 $(71) -1%
Corporate $17,600 $27,456 $(9,856) -36%
SG&A as a Percent of
Home Sales Revenue
Homebuilding Operations 15.9% 12.0% 3.9%
Corporate 2.5% 2.6% -0.1%
Depreciation and
Amortization $11,820 $13,628 $(1,808) -13%
Home Gross Margins (1) 15.8% 27.1% -11.3%
Cash Provided by (Used in)
Operating Activities $149,323 $(108,443) $257,766
Cash Used in Investing
Activities $(710) $(1,638) $928
Cash (Used in) Provided by
Financing Activities $(25,879) $61,289 $(87,168)
Ending Unrestricted Cash
and Available Borrowing
Capacity $1,868,783 $1,267,845 $600,938 47%
Corporate and Homebuilding
Interest
Interest Capitalized
During the Period $14,441 $14,841 $(400) -3%
Interest in Home and
Land Cost of Sales
for the Period $13,285 $9,618 $3,667 38%
Interest in Home Cost
of Sales as a Percent
of Home Sales Revenue 1.9% 0.9% 1.0%
Interest Capitalized
in Inventories
at End of Period $51,811 $47,222 $4,589 10%
HOMEAMERICAN OPERATING ACTIVITIES
Principal Amount of
Mortgage Loans Originated $351,033 $526,231 $(175,198) -33%
Principal Amount of
Mortgage Loans Brokered $118,342 $157,243 $(38,901) -25%
Capture Rate 58% 56% 2%
Including Brokered Loans 77% 72% 5%
Mortgage Products
(% of Loans Originated)
Fixed Rate 69% 49% 20%
Adjustable Rate -
Interest Only 27% 44% -17%
Adjustable Rate - Other 4% 7% -3%
Prime Loans (2) 59% 59% 0%
Alt-A Loans (3) 35% 34% 1%
Government Loans 5% 5% 0%
Sub-Prime Loans (4) 1% 2% -1%
(1) Home sales revenue less home cost of sales (excluding commissions,
amortization of deferred marketing and asset impairments) as a
percent of home sales revenue.
(2) Prime loans are defined as loans with FICO scores greater than 620
and that comply in all ways with the documentation standards of the
government sponsored enterprise guidelines.
(3) Alt-A loans are defined as loans that would otherwise qualify
as prime loans except that they do not comply in all ways with the
government sponsored enterprise guidelines.
(4) Sub-prime loans are loans that have FICO scores of less than or equal
to 620.
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
March 31, December 31, March 31,
2007 2006 2006
HOMES COMPLETED OR UNDER
CONSTRUCTION
Unsold Homes Under
Construction - Final 422 476 261
Unsold Homes Under
Construction - Frame 480 573 531
Unsold Homes Under
Construction - Foundation 310 400 346
Total Unsold Homes Under
Construction 1,212 1,449 1,138
Sold Homes Under Construction 2,677 2,430 4,934
Model Homes 792 757 709
Homes Completed or Under
Construction 4,681 4,636 6,781
LOTS OWNED (excluding homes
completed or under construction)
Arizona 5,701 6,368 7,686
California 2,508 2,802 3,622
Nevada 2,416 2,747 4,139
West 10,625 11,917 15,447
Colorado 3,274 3,479 3,508
Utah 987 1,185 1,295
Mountain 4,261 4,664 4,803
Maryland 492 528 624
Virginia 600 643 784
East 1,092 1,171 1,408
Delaware Valley 261 265 402
Florida 1,033 1,093 1,458
Illinois 268 287 380
Texas -- 13 365
Other Homebuilding 1,562 1,658 2,605
Total 17,540 19,410 24,263
LOTS UNDER OPTION
Arizona 575 744 3,592
California 157 387 1,921
Nevada 117 250 665
West 849 1,381 6,178
Colorado 931 801 2,064
Utah 91 91 454
Mountain 1,022 892 2,518
Maryland 992 960 1,148
Virginia 2,148 2,381 3,231
East 3,140 3,341 4,379
Delaware Valley 644 683 1,277
Florida 1,436 1,800 2,686
Illinois -- -- 186
Texas -- -- 80
Other Homebuilding 2,080 2,483 4,229
Total 7,091 8,097 17,304
Non-refundable Option Deposits
Cash $15,649 $20,228 $44,108
Letters of Credit 14,422 14,224 19,240
Total Non-refundable
Option Deposits $30,071 $34,452 $63,348
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31, Change
2007 2006 Amount %
HOMES CLOSED (UNITS)
Arizona 652 778 (126) -16%
California 328 464 (136) -29%
Nevada 313 675 (362) -54%
West 1,293 1,917 (624) -33%
Colorado 164 399 (235) -59%
Utah 228 173 55 32%
Mountain 392 572 (180) -31%
Maryland 49 74 (25) -34%
Virginia 68 177 (109) -62%
East 117 251 (134) -53%
Delaware Valley 46 31 15 48%
Florida 128 252 (124) -49%
Illinois 14 36 (22) -61%
Texas 11 139 (128) -92%
Other Homebuilding 199 458 (259) -57%
Total 2,001 3,198 (1,197) -37%
AVERAGE SELLING PRICE PER
HOME CLOSED
Arizona $262.5 $285.2 $(22.7) -8%
California 540.0 533.3 6.7 1%
Colorado 352.5 296.5 56.0 19%
Delaware Valley 489.6 412.0 77.6 19%
Florida 280.9 297.7 (16.8) -6%
Illinois 311.3 363.3 (52.0) -14%
Maryland 530.8 570.3 (39.5) -7%
Nevada 305.3 323.1 (17.8) -6%
Texas 135.5 169.0 (33.5) -20%
Utah 350.0 260.7 89.3 34%
Virginia 492.0 596.2 (104.2) -17%
Company Average $355.7 $349.3 $6.4 2%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31, Change
2007 2006 Amount %
ORDERS FOR HOMES, NET (UNITS)
Arizona 754 919 (165) -18%
California 415 544 (129) -24%
Nevada 380 779 (399) -51%
West 1,549 2,242 (693) -31%
Colorado 300 451 (151) -33%
Utah 210 339 (129) -38%
Mountain 510 790 (280) -35%
Maryland 99 152 (53) -35%
Virginia 112 194 (82) -42%
East 211 346 (135) -39%
Delaware Valley 62 39 23 59%
Florida 179 272 (93) -34%
Illinois 41 44 (3) -7%
Texas 6 67 (61) -91%
Other Homebuilding 288 422 (134) -32%
Total 2,558 3,800 (1,242) -33%
Estimated Value of Orders
for Homes, net $902,000 $1,360,000 $(458,000) -34%
Estimated Average Selling
Price of Orders for Homes,
net $352.6 $357.9 $(5.3) -1%
Approximate Order
Cancellation Rate (5) 35% 31% 4%
(5) Gross number of cancellations received divided by gross number of
orders received.
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
March 31, December 31, March 31,
2007 2006 2006
BACKLOG (UNITS)
Arizona 1,606 1,504 2,240
California 514 427 845
Nevada 382 315 1,127
West 2,502 2,246 4,212
Colorado 389 253 629
Utah 447 465 504
Mountain 836 718 1,133
Maryland 237 187 329
Virginia 180 136 398
East 417 323 727
Delaware Valley 135 119 189
Florida 248 197 619
Illinois 50 23 88
Texas 7 12 166
Other Homebuilding 440 351 1,062
Total 4,195 3,638 7,134
Backlog Estimated
Sales Value $1,500,000 $1,300,000 $2,700,000
Estimated Average Selling
Price of Homes in Backlog $357.6 $357.3 $378.5
ACTIVE SUBDIVISIONS
Arizona 70 67 58
California 47 45 42
Nevada 45 41 41
West 162 153 141
Colorado 49 47 50
Utah 26 22 21
Mountain 75 69 71
Maryland 18 19 15
Virginia 22 19 25
East 40 38 40
Delaware Valley 4 8 8
Florida 28 30 26
Illinois 6 6 7
Texas -- 2 18
Other Homebuilding 38 46 59
Total 315 306 311
Average for Quarter Ended 311 299 299
M.D.C. HOLDINGS, INC.
Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands)
(Unaudited)
March 31, December 31, March 31,
2007 2006 2006
CORPORATE AND HOMEBUILDING
DEBT-TO-CAPITAL, NET OF CASH
Total Debt $1,097,485 $1,127,149 $1,221,931
Less Mortgage Line of Credit (100,703) (130,467) (125,540)
Total Corporate and
Homebuilding Debt 996,782 996,682 1,096,391
Less Cash (Including
Restricted Cash) (633,227) (510,588) (173,388)
Total Corporate and
Homebuilding Debt,
Net of Cash 363,555 486,094 923,003
Stockholders' Equity 2,079,410 2,161,882 2,055,208
Total Corporate and
Homebuilding Capital,
Net of Cash $2,442,965 $2,647,976 $2,978,211
Ratio of Corporate and
Homebuilding Debt to Capital,
Net of Cash 0.15 0.18 0.31
NOTE: From time to time, MDC discloses selected non-GAAP financial measures. While non-GAAP financial measures are not a substitute for the comparable GAAP measures, we believe that certain non-GAAP information is useful to investors and management in comparing current results to historical periods and to competitor results, and that it provides additional information on the performance of MDC's businesses. The above is a presentation of and reconciliation of selected non-GAAP measures with the most directly comparable GAAP financial measure.
"Ratio of corporate and homebuilding debt to capital, net of cash" is a non-GAAP financial measure. MDC's management and investors use this ratio to help assess the risk associated with debt in the Company's capital structure. It excludes debt incurred under MDC's mortgage line of credit from both the numerator and denominator, as this debt is directly collateralized by mortgage loans held in inventory, which are typical liquidated within 45 days from origination, thereby substantially reducing the risk associated with this type of debt. The ratio's numerator and denominator are also reduced by MDC's cash position, as this balance could be used to reduce MDC's exposure to debt outstanding.
First Call Analyst:
FCMN Contact: lynn.gore@mdch.com
SOURCE: M.D.C. Holdings, Inc.
CONTACT: Paris G. Reece III, Chief Financial Officer, +1-303-804-7706,
+1-720-977-3554,
Web site: https://www.richmondamerican.com/
