News

DENVER, July 29, 2014 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended June 30, 2014.

2014 Second Quarter Highlights and Comparisons to 2013 Second Quarter

• Net income of $21.5 million, or $0.44 per diluted share vs. net income of $224.9 million, or $4.55 per diluted share
  • Tax expense of $12.5 million vs. tax benefit of $186.9 million, which included the reversal of a substantial portion of the deferred tax asset valuation allowance of $187.6 million, or $3.84 per share
• Pretax income of $34.0 million vs. $38.0 million
• Net new orders up 5% to 1,419 homes
  • Dollar value of net new orders of $544.8 million, up 12%
• Ending backlog dollar value of $761.5 million vs. $784.2 million
• Home sale revenues of $430.7 million, up 8% vs. $400.3 million
  • Average sales price increase of $33,600 per home, or 10%, to $372,000
  • Homes delivered of 1,158 down slightly from 1,183
• Ending active community count of 159, up 14% from 140
• Gross margin from home sales of 17.1% vs. 18.1%
  • Gross margin excluding interest and impairments of 21.1%* vs. 21.3%*
• SG&A expenses as a percentage of home sale revenues of 11.6% vs. 13.0%, a 140 basis point improvement
• Lots owned and under option of 16,706, up 13% year-over-year

Our net income for the 2014 second quarter was $21.5 million, or $0.44 per diluted share, compared to net income of $224.9 million, or $4.55 per diluted share, for the year earlier period. Our 2013 second quarter included a $187.6 million benefit from the reversal of our deferred tax asset valuation allowance, while we had no such benefit for the 2014 second quarter and recognized $12.5 million of income tax expense. Pretax income for the 2014 second quarter was $34.0 million, compared to $38.0 million for the same period in the prior year.

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "For the homebuilding industry as a whole, the spring selling season was modestly slower than a year ago, highlighting volatile conditions in the short-term as the industry continues down a broader path of long-term growth. We saw hesitation from some potential buyers, especially in the first-time buyer segment, following a significant run-up in home prices in 2013 and tepid economic trends that have persisted for much of the past year. However, our net new home orders improved year-over-year in the 2014 second quarter for the first time in five quarters on the strength of a year-over-year increase in our average active community count."

Mr. Mizel continued, "Additionally, during the quarter we benefited from our prior decision to increase spec homes available for quick delivery, which supported our operations by allowing us to convert backlog to deliveries at a quicker rate than a year ago. Our increased conversion rate, coupled with a 10% increase in average selling price, helped to drive a year-over-year increase in our home sale revenues, offsetting the impact of higher land, material and labor costs. The higher revenues also helped us achieve better leverage on our overhead, as our SG&A rate dropped meaningfully year-over-year for the 2014 second quarter."

Mr. Mizel concluded, "As the second quarter ended, we saw significant improvements in employment levels and consumer confidence, which supports our long-term view that the homebuilding industry is poised for growth in the coming years. We continue our preparations to embrace this growth, as evidenced by the 14% increase in our active subdivision count, the 13% increase in our controlled lot supply and the 20% increase in our available liquidity to $1.1 billion at the end of the quarter, all of which position us well to grow our earnings in future periods."

Homebuilding

Home sale revenues for the 2014 second quarter increased 8% to $430.7 million, compared to $400.3 million for the prior year period.  The increase in revenues resulted primarily from a 10% increase in average selling price to $372,000, as compared to $338,400 in the prior year. The increase in average selling price was due to price increases achieved during much of 2013 and a shift to higher-priced homes in certain markets.

Gross margin from home sales decreased to 17.1% from 18.1% for the year-earlier period. The decrease was due primarily to higher interest costs, cost increases from vendors and land sellers, and additional incentives offered in certain markets to spur demand in a slower homebuilding environment. Gross margin from home sales excluding interest and impairments was nearly flat from the year-earlier period at 21.1%* for the second quarter 2014, compared to 21.3%* for the 2013 second quarter.

SG&A expenses as a percentage of home sales revenues decreased by 140 basis points to 11.6% for the 2014 second quarter versus 13.0% for the same period in 2013. The improvement was the result of operating leverage created by the Company's 8% year-over-year increase in home sale revenues, lower incentive and stock-based compensation expenses, and lower legal expenses, including a $1.4 million net legal recovery.

The dollar value of net new orders for the 2014 second quarter increased 12% to $544.8 million from the same period in 2013.  The increase in net new orders was driven by a 14% increase in active communities to 159 from 140 in the same period in the prior year, which was partially offset by a slight decrease in our monthly sales absorption pace. Our cancellation rate for the 2014 second quarter was essentially flat at 18% versus 19% in the prior year second quarter.

We ended the 2014 second quarter with 1,886 homes in backlog with an estimated sales value of $761.5 million, compared to a backlog of 2,095 homes with an estimated sales value of $784.2 million at June 30, 2013.

Interest and other income of $4.6 million for the 2014 second quarter decreased by $5.6 million from the same period last year primarily due to lower interest income as overall cash and investment balances decreased to fund an increase in our investment in real estate inventories.

Financial Services

Income before taxes from our financial services operations for the 2014 second quarter was $6.6 million, compared to $8.2 million for the 2013 second quarter.  The decrease was primarily driven by lower pretax income from our mortgage operations segment for both periods due to reduced volumes, origination income per unit and gains on loans locked and sold compared to a year ago resulting primarily from a more competitive mortgage market.

Income Taxes

During the 2014 second quarter, we recognized $12.5 million of income tax expense resulting in an effective tax rate of 36.7%.  For the 2013 second quarter, we recognized a $186.9 million income tax benefit, driven almost entirely by our reversal of a substantial portion of our deferred tax asset valuation allowance.  

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 Diego, Orange County, San Francisco Bay Area, Sacramento, Washington D.C., Baltimore, Philadelphia, Orlando, Jacksonville, 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 June 30, 2014, 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.