News

M.D.C. Holdings Announces 2018 First Quarter Results
Strong earnings growth was driven by the Company's most significant year-over-year expansion of gross margin from home sales since 2013, while increased affordable product offerings and robust consumer demand yielded the Company's strongest net order absorption rate since 2006.
PR Newswire
DENVER

DENVER, May 3, 2018 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the first quarter ended March 31, 2018.

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "We are pleased with our 2018 first quarter results, highlighted by a 74% year-over-year increase in net income. Our quarter benefited from solid top-line growth, a significant expansion of our gross margin percentage and a much lower effective tax rate. At the same time, our 2018 spring selling season kicked off with our strongest first quarter net order absorption rate since 2006. We believe that this robust sales activity was driven by strong consumer demand and limited housing supply, combined with our increased offering of more affordable homes, which more than offset any negative impact from rising mortgage rates."

Mr. Mizel continued, "We approved over 4,000 lots for purchase in the 2018 first quarter, with almost 50% of those lots designated for the Seasons™ collection, which is the centerpiece of our efforts to drive affordability. Even at this lower price point, we continue to offer the benefits of a build-to-order model, where our customers can personalize their homes to match their own unique preferences. We believe that this approach provides us with a competitive advantage as we look to continue to drive our growth through this important homebuyer segment."

Mr. Mizel concluded, "With our ending backlog value up nearly 20% from a year ago, we enter our second quarter with the opportunity for more significant year-over-year growth in revenues for the balance of the year, which could drive enhanced operating leverage to complement our already significantly expanded gross margin from home sales. With that in mind, we are optimistic about our prospects for the continued growth of the Company's core* pretax operating margin and return on equity in 2018."

2018 First Quarter Highlights and Comparisons to 2017 First Quarter

  • Net income up 74% to $38.8 million, or $0.68 per diluted share, from $22.2 million or $0.40 per diluted share**
    • Effective tax rate of 23.3% vs. 38.8%
  • Pretax income up 39% to $50.5 million from $36.4 million
  • Home sale revenues up 8% to $607.7 million from $563.5 million
    • Average selling price of homes delivered up 6% to $477,000
  • Gross margin from home sales percentage up 230 basis points to 18.2% from 15.9%
    • Impairments of $0.6 million vs. $4.9 million
  • Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved 10 basis points year-over-year to 11.7%
  • Dollar value of net new orders up 15% to $863.7 million from $750.0 million
    • Monthly sales absorption pace of 4.19, up 19%
  • Ending backlog dollar value up 18% to $1.88 billion from $1.59 billion
  • Lot purchase approvals more than doubled to 4,072 lots in 47 communities

*  Excluding the impact of significant one-time or infrequent items
** Per share amount has been adjusted for the 8% stock dividend declared and paid in the 2017 fourth quarter

2018 Outlook – Selected Information

  • Backlog dollar value at March 31, 2018 up 18% year-over-year to $1.88 billion
    • Gross margin from home sales in backlog at 3/31/2018 modestly exceeds 2018 first quarter closing gross margin of 18.2%
    • Backlog conversion ratio (home deliveries divided by beginning backlog) for Q2 2018 estimated to be in the 39% to 40% range
  • Active subdivision count at 3/31/2018 of 155, down 3% year-over-year but up 3% from 12/31/2017
    • Targeting a 10% year-over-year increase in active subdivision count by year end (from 151 at 12/31/2017 to at least 166 at 12/31/2018)
  • Lots controlled of 21,453 at 3/31/2018, up 44% year-over-year
  • Quarterly dividend of $0.30 ($1.20 annualized) declared in April 2018, up 30% year-over-year (after adjusting for 8% stock dividend in December 2017)
  • Revised estimate for full year 2018 effective tax rate of 24% to 26%, excluding impact of any further discrete items

About MDC

M.D.C. Holdings, Inc. was founded in 1972. MDC's homebuilding subsidiaries, which operate under the name Richmond American Homes, have built and financed the American Dream for more than 195,000 homebuyers since 1977.  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, Seattle and Portland. 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 any 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-Q for the quarter ended March 31, 2018, 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.

 

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

Three Months Ended

March 31,


2018

2017

(Dollars in thousands, except per


share amounts)

(Unaudited)

Homebuilding:




Home sale revenues

$

607,688

$

563,479

Land sale revenues

-

247

Total home and land sale revenues

607,688

563,726

Home cost of sales

(496,632)

(468,942)

Land cost of sales

-

(211)

Inventory impairments

(550)

(4,850)

Total cost of sales

(497,182)

(474,003)

Gross profit

110,506

89,723

Selling, general and administrative expenses

(71,341)

(66,298)

Interest and other income

1,859

2,327

Other expense

(563)

(351)

Other-than-temporary impairment of marketable securities

-

(50)

Homebuilding pretax income

40,461

25,351




Financial Services:




Revenues

19,035

17,979

Expenses

(8,831)

(7,898)

Interest and other income

1,020

979

Other expense

(1,153)

-

Other-than-temporary impairment of marketable securities

-

(51)

Financial services pretax income

10,071

11,009




Income before income taxes

50,532

36,360

Provision for income taxes

(11,768)

(14,111)

Net income

$

38,764

$

22,249




Other comprehensive income related to available for sale securities, net of tax

-

1,986

Comprehensive income

$

38,764

$

24,235




Earnings per share:




Basic

$

0.69

$

0.40

Diluted

$

0.68

$

0.40




Weighted average common shares outstanding:




Basic

55,871,087

55,448,161

Diluted

56,895,892

55,717,218




Dividends declared per share

$

0.30

$

0.23

 

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

March 31,


December 31,


2018

2017

ASSETS

(Dollars in thousands, except

per share amounts)

Homebuilding:

(Unaudited)


Cash and cash equivalents

$

352,868

$

472,957

Marketable securities

49,817

49,634

Restricted cash

6,198

8,812

Trade and other receivables

52,909

53,362

Inventories:




Housing completed or under construction

1,009,197

936,685

Land and land under development

964,660

893,051

Total inventories

1,973,857

1,829,736

Property and equipment, net

53,368

26,439

Deferred tax asset, net

40,484

41,480

Prepaid and other assets

38,015

75,666

Total homebuilding assets

2,567,516

2,558,086

Financial Services:




Cash and cash equivalents

48,514

32,471

Marketable securities

40,912

42,004

Mortgage loans held-for-sale, net

113,158

138,114

Other assets

17,062

9,617

Total financial services assets

219,646

222,206

      Total Assets

$

2,787,162

$

2,780,292

LIABILITIES AND EQUITY




Homebuilding:




Accounts payable

$

53,347

$

39,655

Accrued liabilities

155,245

166,312

Revolving credit facility

15,000

15,000

Senior notes, net

986,932

986,597

Total homebuilding liabilities

1,210,524

1,207,564

Financial Services:




Accounts payable and accrued liabilities

54,019

53,101

Mortgage repurchase facility

90,126

112,340

Total financial services liabilities

144,145

165,441

      Total Liabilities

1,354,669

1,373,005

Stockholders' Equity




Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding

-

-

Common stock, $0.01 par value; 250,000,000 shares authorized; 56,219,643 and 56,123,228 issued and outstanding at March 31, 2018 and December 31, 2017, respectively

562

561

Additional paid-in-capital

1,146,102

1,144,570

Retained earnings

285,829

258,164

Accumulated other comprehensive income

-

3,992

Total Stockholders' Equity

1,432,493

1,407,287

Total Liabilities and Stockholders' Equity

$

2,787,162

$

2,780,292

 

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

Three Months Ended

March 31,

2018

2017

(Dollars in thousands)

(Unaudited)

Operating Activities:



Net income

$

38,764

$

22,249

Adjustments to reconcile net income to net cash provided by (used in) operating activities:




Stock-based compensation expense

1,251

595

Depreciation and amortization


4,636

1,328

Inventory impairments

550

4,850

Other-than-temporary impairment of marketable securities

-

101

Net gain on sale of available-for-sale marketable securities

-

(561)

Net loss on marketable equity securities

1,153

-

Amortization of discount / premiums on marketable debt securities, net

(182)

-

Deferred income tax expense

423

3,220

Net changes in assets and liabilities:




      Trade and other receivables

(3,261)

7,326

      Mortgage loans held-for-sale

24,956

41,401

      Housing completed or under construction

(65,378)

(20,866)

      Land and land under development

(71,552)

29,030

      Prepaid and other assets

389

(2,407)

      Accounts payable and accrued liabilities

6,765

8,071

Net cash provided by (used in) operating activities

(61,486)

94,337




Investing Activities:




Purchases of marketable securities

(8,761)

(5,361)

Sales of marketable securities

8,700

4,983

Purchases of property and equipment

(6,316)

(1,122)

Net cash used in investing activities

(6,377)

(1,500)




Financing Activities:




Payments on mortgage repurchase facility, net

(22,214)

(43,943)

Dividend payments

(16,865)

(12,897)

Proceeds from exercise of stock options

282

1,607

Net cash used in financing activities

(38,797)

(55,233)




Net increase (decrease) in cash, cash equivalents and restricted cash

(106,660)

37,604

Cash, cash equivalents and restricted cash:




      Beginning of period

514,240

286,687

      End of period

$

407,580

$

324,291




Reconciliation of cash, cash equivalents and restricted cash:




Homebuilding:




Cash and cash equivalents

$

352,868

$

296,731

Restricted cash

6,198

4,229

Financial Services:




Cash and cash equivalents

48,514

23,331

Total cash, cash equivalents and restricted cash

$

407,580

$

324,291

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data


New Home Deliveries

 Three Months Ended March 31, 



2018

2017

 % Change



 Homes


Dollar
Value

Average
Price

 Homes


Dollar
Value

Average
Price

 Homes


Dollar
Value

Average
Price

(Dollars in thousands)

West

681

$

319,509

$

469.2

705

$

309,080

$

438.4

(3)%

3%

7%

Mountain

416

208,632

501.5

369

172,891

468.5

13%

21%

7%

East

177

79,547

449.4

182

81,508

447.8

(3)%

(2)%

0%

Total

1,274

$

607,688

$

477.0

1,256

$

563,479

$

448.6

1%

8%

6%

 

Net New Orders

 Three Months Ended March 31, 


2018

2017

% Change

Homes

Dollar
Value

Average
Price

Monthly
Absorption
Rate *

Homes

Dollar
Value

Average
Price

Monthly
Absorption
Rate *

Homes

Dollar
Value

Average
Price

Monthly
Absorption
Rate

(Dollars in thousands)

West

1,033

$

458,195

$

443.6

4.78

893

$

387,399

$

433.8

3.83

16%

18%

2%

25%

Mountain

667

327,006

490.3

3.92

557

256,092

459.8

3.87

20%

28%

7%

1%

East

204

78,459

384.6

2.99

246

106,512

433.0

2.34

(17)%

(26)%

(11)%

28%

Total

1,904

$

863,660

$

453.6

4.19

1,696

$

750,003

$

442.2

3.52

12%

15%

3%

19%

*Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period

 

Active Subdivisions






Average Active Subdivisions

Active Subdivisions

Three Months Ended

March 31,


%

March 31,


%

2018

2017

Change

2018

2017

Change

West

73

77

(5)%

72

79

(9)%

Mountain

58

48

21%

57

48

19%

East

24

35

(31)%

23

36

(36)%

Total

155

160

(3)%

152

163

(7)%

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data


Backlog

March 31,



2018

2017

% Change

Homes

Dollar
Value

Average
Price

Homes

Dollar
Value

Average
Price

Homes

Dollar
Value

Average
Price

(Dollars in thousands)

West

1,803

$

923,326

$

512.1

1,535

$

733,576

$

477.9

17%

26%

7%

Mountain

1,504

766,010

509.3

1,256

600,793

478.3

20%

27%

6%

East

482

190,102

394.4

533

252,615

473.9

(10)%

(25)%

(17)%

Total

3,789

$

1,879,438

$

496.0

3,324

$

1,586,984

$

477.4

14%

18%

4%

 

Homes Completed or Under Construction (WIP lots)

March 31,

%

2018

2017

Change

Unsold:





Completed

86

82

5%

Under construction

203

212

(4)%

Total unsold started homes

289

294

(2)%

Sold homes under construction or completed

2,549

2,322

10%

Model homes under construction or completed

366

324

13%

Total homes completed or under construction

3,204

2,940

9%

 

Lots Owned and Optioned (including homes completed or under construction)

March 31, 2018

March 31, 2017



Lots
Owned

Lots
Optioned

Total

Lots
Owned

Lots
Optioned

Total

Total %
Change

West

7,421

2,205

9,626

5,851

767

6,618

45%

Mountain

5,206

3,398

8,604

4,615

1,447

6,062

42%

East

1,531

1,692

3,223

1,377

818

2,195

47%

Total

14,158

7,295

21,453

11,843

3,032

14,875

44%

 

M.D.C. HOLDINGS, INC.

Other Financial Data


Selling, General and Administrative Expenses

Three Months Ended March 31,



2018

2017

Change

(Dollars in thousands)

General and administrative expenses

$

35,753

$

32,369

$

3,384

General and administrative expenses as a percentage of home sale revenues

5.9%

5.7%

20 bps









Marketing expenses

$

15,571

$

15,124

$

448

Marketing expenses as a percentage of home sale revenues

2.6%

2.7%

(10) bps









Commissions expenses

$

20,017

$

18,805

$

1,212

Commissions expenses as a percentage of home sale revenues

3.3%

3.3%

0 bps









Total selling, general and administrative expenses

$

71,341

$

66,298

$

5,044

Total selling, general and administrative expenses as a percentage of home sale revenues

11.7%

11.8%

(10) bps

 

Capitalized Interest

Three Months Ended

March 31,



2018

2017

(Dollars in thousands)

Homebuilding interest incurred

$

15,625

$

13,188

Less:  Interest capitalized

(15,625)

(13,188)

Homebuilding interest expensed

$

-

$

-






Interest capitalized, beginning of period

$

57,541

$

68,085

Plus: Interest capitalized during period

15,625

13,188

Less: Previously capitalized interest included in home and land cost of sales

(14,428)

(15,197)

Interest capitalized, end of period

$

58,738

$

66,076

 

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SOURCE M.D.C. Holdings, Inc.