News

DENVER, Feb. 5, 2014 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended December 31, 2013.

2013 Fourth Quarter Highlights and Comparisons to 2012 Fourth Quarter

• Net income of $30.7 million, or $0.62 per diluted share vs. $29.7 million, or $0.59 per diluted share
• Pretax income of $34.3 million, up 15% from $29.9 million
• Home sale revenues of $460.9 million, up 18%
• Gross margin from home sales of 17.4% vs. 16.7%, up 70 basis points
• SG&A expenses as a percentage of home sale revenues of 12.0%, a 60 basis point improvement
• Ending active community count of 146 vs. 148
  • Up 9% from 134 at September 30, 2013
• Net new orders of 752 homes, down 13% on an 8% decrease in average active community count
  • Dollar value down 2% to $285.2 million
• Backlog dollar value of $506.0 million, down 13%
• Lots owned and optioned of 15,786, up 38%
• Total liquidity of $1.24 billion at December 31, 2013, including amount available under new $450 million line of credit
  • Issued $250 million 10-year 5½% senior unsecured notes in January 2014

2013 Full Year Highlights and Comparisons to 2012 Full Year

• Net income of $314.4 million, or $6.34 per diluted share vs. $62.7 million, or $1.29 per diluted share
  • Excluding the $187.6 million reversal of the deferred tax asset valuation allowance in the second quarter, net income was $126.7 million*, or $2.56* per diluted share
• Home sale revenues of $1.63 billion, up 41%
  • Home deliveries of 4,710 homes, up 26%
• Gross margin from home sales of 17.8% vs. 15.4%, up 240 basis points
• SG&A expenses as a percentage of home sale revenues of 13.1% vs. 14.5%, a 140 basis point improvement
• Net new orders of 4,327 homes vs. 4,342 in 2012
• Acquired 7,887 lots in 168 communities, including 128 new communities
  • Total land acquisition spend of $632.6 million

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "I am pleased to announce fourth quarter net income of $0.62 per diluted share, our eighth consecutive quarterly operating profit. For the full year, our net income improved by more than $250 million. Included in this was the reversal of most of our deferred tax asset valuation allowance during the second quarter, stemming from our return to consistent profitability and an improving housing market. Excluding the tax benefit from the allowance reversal, our income nearly doubled in 2013 on the strength of more than 40% top-line growth and significant expansion of our operating margin."

Mr. Mizel continued, "Our net home orders declined year-over-year in the fourth quarter, largely due to a lower average active community count. Our orders also appear to have been affected by an increase in mortgage interest rates from historically low levels and the economic uncertainty created by the discussion surrounding the tapering of federal stimulus in the later part of the year. While it is difficult to discern a trend in the fourth quarter, which is typically our seasonally slow period, we continue to believe that the current housing recovery is progressing and should continue into 2014.  We believe we are well-prepared to capture incremental demand from an improving market, especially given that our active community count increased sequentially by 9% in the fourth quarter, our highest increase in the last eight quarters and just in time for the historically strong spring selling season."

Mr. Mizel concluded, "We have worked to strengthen our financial position during 2013 not only by increasing profits, but also by accessing the capital markets. During the first half of the year, we issued $350 million of 30-year 6% senior unsecured notes, and in the fourth quarter, we finalized a new 5-year, $450 million unsecured line of credit. In doing so, we increased our overall liquidity by more than 70% to over $1.2 billion at the end of 2013, even after investing more than $600 million in acquiring new communities during the year. Furthermore, to start 2014, we issued $250 million of 10-year 5½% senior unsecured notes.  We believe that this financing activity, coupled with the equity added by our strong earnings in 2013 and our expectation of further sequential improvement in active community count during the first half of 2014, positions us well as we pursue continued growth and address near-term debt maturities."

Homebuilding

Home sale revenues for the 2013 fourth quarter increased 18% to $460.9 million compared to $389.1 million for the prior year period.  The increase in revenues resulted from a 3% increase in homes delivered to 1,252 homes as compared to 1,221 in the prior year and a 16% increase in our average selling price to $368,000. The increase in average selling price was largely due to price appreciation and lower incentives in many of our markets, combined with a shift in the mix of our closings.

Gross margin from home sales for the 2013 fourth quarter was 17.4%, compared to 16.7% for the year-earlier period and 18.1% for the 2013 third quarter. The year-over-year increase was primarily attributable to our continued focus on increasing pricing as we took advantage of improving markets during 2013. On a sequential basis, gross margin from home sales declined slightly due to a shift in the mix of homes closed, including fewer deliveries from our Nevada division, which have the highest gross margins in the Company, and more deliveries from our Maryland and Virginia markets, which have a lower gross margin percentage than the Company average. Excluding inventory impairments and previously capitalized interest in cost of sales, adjusted gross margin from home sales was 21.0%* for the 2013 fourth quarter, compared to 19.6%* for the 2012 fourth quarter and 21.8%* for the 2013 third quarter.

SG&A expenses as a percentage of home sale revenues decreased by 60 basis points to 12.0% for the 2013 fourth quarter versus 12.6% 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.

Net new orders for the 2013 fourth quarter decreased 13% to 752 homes, compared to 869 homes during the same period in 2012, largely due to an 8% decrease in our average active community count.  Our cancellation rate for the 2013 fourth quarter was 26% versus 24% in the prior year fourth quarter.

We ended the 2013 fourth quarter with 1,262 homes in backlog, with an estimated sales value of $506.0 million, compared with a backlog of 1,645 homes with an estimated sales value of $579.0 million at December 31, 2012.

As a result of the significant increase in our land acquisition activity in 2013, our lots owned and under option increased by 38% year-over-year to 15,786 lots. At December 31, 2013, we had 146 active subdivisions, down 1% from 148 at December 31, 2012 and up 9% from 134 at September 30, 2013.  Additionally, our soon to be active communities exceeded our soon to be inactive communities by 23 as of December 31, 2013.

Financial Services

Pretax income from our financial services operations for the 2013 fourth quarter was $5.3 million, compared to $7.7 million for the 2012 fourth quarter.  The decrease in pretax income primarily reflected a $4.6 million decrease in pretax income from our mortgage operations to $2.8 million in the 2013 fourth quarter. The decrease in our mortgage profitability was driven partly by lower loan lock activity, as the homebuilding segment generated lower home orders during the last half of 2013 compared with the same period a year ago. Additionally, the mortgage segment realized lower per unit origination income and gains on loans locked and sold compared to the same period a year ago, resulting primarily from a more competitive mortgage market and higher interest rates. This decrease was partially offset by improvements in the other segment of our financial services operations.

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-K for the year ended December 31, 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.