News

DENVER, Feb. 3, 2016 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the year and fourth quarter ended December 31, 2015.

2015 Fourth Quarter Highlights and Comparisons to 2014 Fourth Quarter

• Net income of $22.6 million, or $0.46 per share vs. $14.6 million or $0.30 per share
  • Pretax income of $32.6 million vs. $23.9 million
• Home sale revenues of $554.4 million, up 12% from $493.1 million
• Gross margin from home sales down 20 basis points to 16.1% vs. 16.3%
  • Excluding inventory impairments*, gross margin from home sales increased 60 basis points year-over-year
• Ending backlog dollar value of $1.05 billion, up 59%
  • Ending backlog units of 2,332, up 54%
• Dollar value of net new orders of $450.5 million, up 26%
  • Net new orders of 1,020, up 15%

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "Throughout the year, the homebuilding industry continued to be positively impacted by encouraging macroeconomic drivers such as increasing personal income levels, high employment levels and increasing consumer confidence. As a result of these factors, strong execution by our management team, and a renewed focus on "build to order homes", we experienced positive results by many measures for the 2015 fourth quarter, including a year-over-year increase in our average selling price of homes delivered and a 60 basis point improvement in our pre-impairment gross margin percentage, which helped us to achieve $22.6 million of net income for the quarter. Furthermore, our 2015 fourth quarter net orders improved by 15% year-over-year, driven by our highest fourth quarter absorption pace in ten years."

Mr. Mizel concluded, "With our active community count up 5% year-over-year and a backlog dollar value of $1.05 billion, which is a 59% increase from the prior year, we are well positioned for top-line growth in 2016. However, our optimism is tempered somewhat by key domestic and global events that have recently unfolded, such as the slowdown of economic growth in China, the significant drop in oil prices, the Federal Reserve's action to increase the federal funds rate for the first time in almost a decade and significant volatility in securities markets around the globe. Thus far, these risks have not had a significant impact on our industry, but their presence does reinforce our long-standing objective of maintaining balance sheet-focused operating policies."

Homebuilding

Home sale revenues for the 2015 fourth quarter increased 12% to $554.4 million, compared to $493.1 million for the prior year period. This improvement was driven by a 3% increase in deliveries coupled with a 10% increase in average selling price, primarily due to a mix shift to higher-priced submarkets and, to a lesser extent, price increases implemented earlier in the year.

Gross margin from home sales for the 2015 fourth quarter was down 20 basis points from the same period in 2014. The decline was primarily due to a $4.4 million increase in inventory impairments coupled with higher land and construction costs. These items were partially offset by a 90 basis point improvement in our interest in cost of sales as a percent of home sale revenues, price increases implemented in various communities and a higher percentage of our deliveries coming from "build to order" sales, which typically have higher gross margins. Excluding inventory impairments, our gross margin from home sales for the 2015 fourth quarter was 17.1%* (see below for a reconciliation of non-GAAP measures), up 60 basis points year-over-year.

Selling, general and administrative expenses ("SG&A") expenses for the 2015 fourth quarter were $63.6 million, up $9.0 million from $54.6 million for the same period in 2014. Our SG&A expenses as a percentage of home sale revenues ("SG&A rate") increased by 40 basis points to 11.5% for the 2015 fourth quarter from 11.1% in the 2014 fourth quarter.  The 40 basis point increase in our SG&A rate was driven primarily by an increase in stock based compensation expense based on a stock option grant approved earlier in the year.

The dollar value of net new orders for the 2015 fourth quarter increased 26% to $450.5 million from $356.4 million for the same period in 2014. The improvement was the result of a 10% increase in our average selling price and a 15% increase in the net number of homes sold, driven primarily by an 18% improvement in our monthly sales absorption pace to 2.1, our highest fourth quarter absorption pace since 2005. The increase in average selling price was primarily the result of changes in the mix of net new orders to higher priced submarkets coupled with price increases implemented in most of our markets during the early part of 2015. Our cancellation rate for the 2015 fourth quarter was down slightly to 27% from 28% for the same period in the prior year.

Our backlog value at the end of the 2015 fourth quarter was up 59% year-over-year to $1.05 billion. The increase was due mostly to a 54% increase in units in backlog, driven primarily by year-over-year increases in net new orders for each of the past four quarters, a higher percentage of dirt sales, which are generally in backlog for a longer period of time, and longer than average construction times as a result of limited subcontractor availability.

During the 2014 fourth quarter, we completed the early redemption of $250 million in Senior Notes due July 2015. As a result of that transaction, we recognized an $8.7 million charge related to the extinguishment of debt in the 2014 fourth quarter. No such charges were incurred during 2015.

Financial Services

Income before taxes for our financial services operations for the 2015 fourth quarter was $9.1 million, a $2.1 million increase from $7.0 million in the 2014 fourth quarter. An increase in the dollar value of loans locked, originated and sold in our mortgage operations segment drove $1.3 million of the $2.1 million improvement in income before taxes. The remaining increase was primarily the result of a $1.0 million adjustment recorded during the 2015 fourth quarter in our other financial services segment to reduce insurance reserves as a result of a decline in insurance claim payment severity and frequency relative to prior period estimates.

About MDC

Since 1972, MDC's subsidiary companies have built and financed the American dream for more than 185,000 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, 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 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, 2015, 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.