News

DENVER, Jan. 28, 2015 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended December 31, 2014.

2014 Fourth Quarter Highlights and Comparisons to 2013 Fourth Quarter

• Net income of $14.6 million, or $0.30 per share; excluding debt extinguishment charge, net income of $20.1* million, or $0.41* per share vs. $30.7 million or $0.62 per share
  • Year-over-year decrease almost entirely attributable to 2014 fourth quarter debt charge ($8.7 million) and increased effective tax rate (38.7% vs. 10.5%)
• Income before tax of $23.9 million; excluding debt extinguishment charge, income before tax of $32.6* million vs. $34.3 million
• Home sale revenues of $493.1 million, up 7% from $460.9 million
  • Homes delivered of 1,242 down from 1,252
  • Average sales price up $28,800 per home, or 8%, to $397,000
• Gross margin from home sales of 16.3% down from 17.4%
  • Gross margin excluding impairments of 16.5%* vs. 17.5%*
• Homebuilding SG&A rate of 11.1% vs. 12.0%, a 90 basis point improvement
• Dollar value of net new orders of $356.4 million, up 25%
• Ending active community count of 159, up 9%
• Ending backlog dollar value of $663.2 million, up 31%

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "We are pleased to announce a successful 2014 fourth quarter, capping a third consecutive year of profitability for our Company. Although we have made significant progress with our business since the end of the downturn, in 2014 the homebuilding industry experienced weaker demand, following a brief surge in sales velocity and home prices during the first half of 2013. This environment led us to increase our use of incentives during 2014 to stimulate demand for new homes in certain markets. Combined with rising construction and land costs, the increased incentives placed pressure on our homebuilding gross margins for both the fourth quarter and full year, although we have been able to offset some of the gross margin pressure by keeping our overhead low."

Mr. Mizel concluded, "The outlook for 2015 is somewhat clouded by uncertainty surrounding global and domestic economic conditions, with the full impact of issues such as falling oil prices yet to be fully understood. Nonetheless, primarily as a result of our land acquisition efforts over the past two years, we have set the stage for our Company's growth in 2015 by expanding both our active communities and our backlog year-over-year. Additionally, during 2014, we reduced our interest costs and extended our next senior note maturity to 2020 by eliminating $500 million of existing senior notes and issuing $250 million of new senior notes. These improvements provide us with the opportunity for top and bottom line expansion in future periods, in spite of the obstacles that may remain for the housing market."

Homebuilding

Home sale revenues for the 2014 fourth quarter increased 7% to $493.1 million, compared to $460.9 million for the prior year period.  The increase in revenue was primarily driven by an 8% increase in the average selling price due to the mix of homes closed and, to a lesser extent, price appreciation. 

Gross margin from home sales for the 2014 fourth quarter was 16.3%, compared with 17.4% for the year-earlier period and 16.5% in the prior quarter. Gross margin from home sales excluding impairments was 16.5%* versus 17.5%* in the prior year and 16.5%* in the prior quarter. The year-over-year decrease was primarily due to the use of additional incentives used to stimulate demand and higher construction and land costs in our homes delivered.

SG&A expenses as a percentage of home sale revenues decreased by 90 basis points to 11.1% for the 2014 fourth quarter versus 12.0% for the same period in 2013. The improvement from the prior year was primarily the result of lower compensation-related expenses and, to a lesser extent, lower legal expenses.

The dollar value of net new orders for the 2014 fourth quarter increased 25% from the same period in 2013 to $356.4 million. The increase was driven by an 18% increase in unit volume, resulting primarily from a 16% increase in our average active communities, and a 6% increase in the average selling price of net new home orders to $402,000 compared to $379,000 for the same period in 2013. Our cancellation rate for the 2014 fourth quarter was 28% compared to 26% in the same period in the prior year.

Our backlog value at the end of the 2014 fourth quarter was up 31% year-over-year to $663.2 million. The increase was driven primarily by a 20% increase in units in backlog, due primarily to the net sales activity discussed above, coupled with a 9% increase in the average selling price of homes in backlog, primarily driven by a shift in mix.

During the quarter, we completed the early redemption of $250 million in Senior Notes due July 2015. As a result of this transaction, we recognized an $8.7 million charge related to the extinguishment of debt.

Financial Services

Income before taxes from our financial services operations for the 2014 fourth quarter was $7.0 million, up $1.7 million compared to $5.3 million for the 2013 fourth quarter, as both our mortgage and insurance operations experienced growth in pretax income. The improvement in pretax income for our mortgage operations was driven primarily by an increase in the number of loans locked, due to higher net sales activity, and lower SG&A expenses. 

Income Taxes

During the 2014 fourth quarter, we recognized $9.2 million of income tax expense resulting in an effective tax rate of 38.7% while for the 2013 fourth quarter, we had income tax expense of $3.6 million, resulting in an effective tax rate of 10.5%, due primarily to an $11.3 million reversal of our deferred tax asset valuation allowance.

About MDC

Since 1972, MDC's homebuilding subsidiary companies, which operate under the name Richmond American Homes, have built and financed the American dream for more than 180,000 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. MDC'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 MDC 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 MDC, 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 MDC's investments in marketable securities; (5) uncertainty in the mortgage lending industry, including repurchase requirements associated with HomeAmerican Mortgage Corporation'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 MDC 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 and natural disasters; (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; (16) changes in energy prices; and (17) other factors over which MDC has little or no control. Additional information about the risks and uncertainties applicable to MDC's business is contained in MDC's Form 10-K for the year ended December 31, 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. MDC 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.