News

DENVER, Oct. 29, 2013 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended September 30, 2013.

2013 Third Quarter Highlights and Comparisons to 2012 Third Quarter

• Net income of $36.3 million, or $0.73 per diluted share vs. net income of $20.1 million, or $0.41 per diluted share
• Pretax income of $34.9 million, up 79% from $19.5 million
  • Homebuilding pretax income of $26.7 million vs. $10.2 million
  • Pretax operating margin of 7.8%, up 200 basis points from 5.8%
• Home sale revenues of $433.7 million, up 35%
  • Homes delivered of 1,257, up 21%
  • Average selling price of $345,000, up 12%
  • Gross margin from home sales of 18.1% vs. 15.5%, up 260 basis points
• SG&A expenses as a percentage of home sale revenues of 13.3% vs. 14.0%, a 70 basis point improvement
• Monthly net home order absorption pace of 2.3 homes per active community, up 14%
  • Net new orders of 924 homes, down 8%; dollar value up 2% to $325.5 million
• Backlog dollar value of $676.8 million, up 1%
  • Backlog units of 1,762, down 12%
• Acquired 2,117 lots in 55 communities, including 31 new communities
  • Total land acquisition spend of $162.0 million
• Cash and investments of $797.5 million at September 30, 2013

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "I am pleased to announce we earned a third quarter profit of $0.73 per diluted share, our seventh consecutive quarterly operating profit, with net income improving by $16.1 million over the prior year and our pretax operating margin increasing by 200 basis points year-over-year. These improvements were again driven by the performance of our homebuilding business, on the strength of both volume and gross margin gains."

Mr. Mizel continued, "The recent increase in mortgage interest rates from historically low levels, combined with economic uncertainty created by the government shutdown, debt ceiling debates, and the potential for tapering of federal stimulus, has temporarily dampened housing demand. In spite of these factors, we increased the pace of our new home sales during the 2013 third quarter as our monthly absorption rate increased by 14% year-over-year to 2.3 net new home orders per active community. Our active community count decreased both year-over-year and sequentially due to the selling out of communities quicker than anticipated and delays encountered with various municipalities, all of which contributed to lower net new orders for the quarter. However, based on our land acquisition activity over the past year, we are confident that our active community count will start growing again before the spring selling season."

Mr. Mizel concluded, "We continue to believe that a solid housing recovery is ongoing, supported by attractive affordability levels and a low inventory of available-for-sale housing. Our confidence in the market is evidenced by our continued land acquisition activity in the 2013 third quarter, as we purchased approximately 2,100 lots and ended the quarter with more than 15,800 lots owned and controlled, an increase of 52% year-over-year. We believe that this lot supply can provide us the opportunity to drive meaningful gains in both closings volume and profitability for 2014. At the same time, we have balanced our land acquisition efforts with continued discipline in our approach to managing our balance sheet, ending the quarter with nearly $800 million in cash and investments, maintaining an industry leading net leverage ratio, and adhering to a conservative land supply strategy. We believe this approach is valuable for our Company, not only in providing us the liquidity we need to drive growth and take advantage of market opportunities, but also in protecting us in the event that the housing market experiences more volatility."

Homebuilding

Home sale revenues for the 2013 third quarter increased 35% to $433.7 million compared to $320.6 million for the prior year period.  The increase in revenues resulted from a 21% increase in homes delivered to 1,257 homes as compared to 1,039 in the prior year and a 12% increase in our average selling price to $345,000. The increase in average selling price was largely due to price appreciation and lower incentives in many of our markets.

Gross margin from home sales for the 2013 third quarter increased to 18.1% from 15.5% for the year-earlier period. The increase was attributable to our continued focus on increasing pricing and decreasing incentives as its markets improved since the start of 2012. On a sequential basis, our 2013 third quarter gross margin from home sales was flat as compared to 18.1% for the 2013 second quarter. Excluding inventory impairments, warranty accrual adjustments and previously capitalized interest in cost of sales, adjusted gross margin from home sales was 21.8%* for the 2013 third quarter, compared to 18.2%* for the 2012 third quarter and 21.3%* for the 2013 second quarter.

SG&A expenses as a percentage of home sales revenues decreased by 70 basis points to 13.3% for the 2013 third quarter versus 14.0% for the same period in 2012. The improvement was the result of operating leverage created by a year-over-year increase in home sale revenues, which outpaced a year-over-year increase in our absolute level of SG&A expenses, and was slightly offset by a year-over-year increase in legal expenses driven by various significant legal recoveries in the 2012 third quarter which did not recur in the 2013 third quarter.

Net new orders for the 2013 third quarter decreased 8% to 924 homes, compared to 1,008 homes during the same period in 2012, largely due to a 19% decrease in our average active community count.  However, our monthly sales absorption rate for the 2013 third quarter rose 14% to 2.3 per community, compared to 2.0 per community for the 2012 third quarter. Our cancellation rate for the 2013 third quarter was 26% versus 27% in the prior year third quarter.

We ended the 2013 third quarter with 1,762 homes in backlog, with an estimated sales value of $676.8 million, compared with a backlog of 1,997 homes with an estimated sales value of $667.0 million at September 30, 2012.

At September 30, 2013, we had 134 active subdivisions, down 19% from September 30, 2012.  As a result of the significant increase in our land acquisition activity in the fourth quarter of 2012 and the first nine months of 2013, our lots owned and under option increased by 52% year-over-year to over 15,800 lots. 

Financial Services

Income before taxes from our financial services operations for the 2013 third quarter was $8.2 million, compared to $9.3 million for the 2012 third quarter.  The decrease in pretax income primarily reflected a $1.5 million decrease in pretax income for our mortgage operations to $5.9 million in the 2013 third quarter, compared to $7.4 million in the 2012 third quarter, despite higher loan volumes.  The decrease in our mortgage profitability was mostly driven by lower per unit origination income and gains on loans locked and sold compared to a year ago resulting primarily from a more competitive mortgage market and higher interest rates. Additionally, our mortgage operations experienced increases in overhead and loan loss reserve expenses.

About MDC

Since 1972, MDC's subsidiary companies have built and financed the American dream for more than 175,000 homebuyers. MDC's commitment to customer satisfaction, quality and value is reflected in each home its subsidiaries build. MDC is one of the largest homebuilders in the United States. Its subsidiaries have homebuilding operations across the country, including the metropolitan areas of Denver, Colorado Springs, Salt Lake City, Las Vegas, Phoenix, Tucson, Riverside-San Bernardino, Los Angeles, San Francisco Bay Area, Washington D.C., Baltimore, Philadelphia, Jacksonville, Orlando, South Florida and Seattle. The Company's subsidiaries also provide mortgage financing, insurance and title services, primarily for Richmond American homebuyers, through HomeAmerican Mortgage Corporation, American Home Insurance Agency, Inc. and American Home Title and Escrow Company, respectively. M.D.C. Holdings, Inc. is traded on the New York Stock Exchange under the symbol "MDC." For more information, visit www.mdcholdings.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 conditions, including changes in consumer confidence, inflation or deflation and employment levels; (2) changes in business conditions experienced by the Company, including cancellation rates, net home orders, home gross margins, land and home values and subdivision counts; (3) changes in interest rates, mortgage lending programs and the availability of credit; (4) changes in the market value of the Company's investments in marketable securities; (5) uncertainty in the mortgage lending industry, including repurchase requirements associated with HomeAmerican's sale of mortgage loans (6) the relative stability of debt and equity markets; (7) competition; (8) the availability and cost of land and other raw materials used by the Company in its homebuilding operations; (9) the availability and cost of performance bonds and insurance covering risks associated with our business; (10) shortages and the cost of labor; (11) weather related slowdowns; (12) slow growth initiatives; (13) building moratoria; (14) governmental regulation, including the interpretation of tax, labor and environmental laws; (15) terrorist acts and other acts of war; and (16) 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 quarter ended September 30, 2013, which is scheduled to be filed with the Securities and Exchange Commission today.  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 update publicly 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 webcasts should be consulted.

* Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.

 

 

 

 

 

                      

 

 

 

 

 

 

SOURCE M.D.C. Holdings, Inc.