News

M.D.C. Holdings Announces 2019 First Quarter Results

DENVER, April 30, 2019 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended March 31, 2019.

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "MDC generated another strong quarter of profitability to start 2019, with net income of $40.6 million, or $0.64 cents per diluted share.  Home sales revenues grew 7% year-over-year on a similar increase in new home deliveries, even though the number of homes in backlog to start the year was 7% lower than a year ago. Additionally, homebuilding gross margins expanded 70 basis points over the prior year, and net new orders increased 3% on a healthy absorption pace of 3.75 homes per community per month.  We believe that these results provide further validation of our shift to more affordable product and our adherence to a build-to-order business model."

Mr. Mizel continued, "The housing industry continues to benefit from a national economy that is characterized by steady job creation, improving wage growth and low interest rates.  A lack of available supply has also resulted in pent up demand, particularly for more affordable housing, which is why we continue to focus our investments in this segment."

Mr. Mizel concluded, "MDC is poised for growth as we head into the latter part of the spring selling season, with 15% more active communities open at the end of the first quarter as compared to last year.  A majority of these communities cater to buyers seeking more affordable homes, giving us an increased presence in this high growth segment of the homebuilding market.  With a great platform for growth, a diverse product offering and a strong balance sheet, MDC is well positioned to sustain the positive momentum generated in the first quarter."

2019 First Quarter Highlights and Comparisons to 2018 First Quarter

  • Home sale revenues up 7% to $647.3 million from $607.7 million
    • Unit deliveries increased 7% to 1,358
    • Average selling price of deliveries nearly unchanged at $476,600
  • Pretax income up 10% to $55.6 million from $50.5 million
  • Net income of $40.6 million, or $0.64 per diluted share, up 5% from $38.8 million or $0.63 per diluted share*
    • Effective tax rate of 27.1% vs. 23.3%
  • Gross margin from home sales up 70 basis points to 18.9% from 18.2%
  • Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") of 12.7% vs. 11.7%
  • Dollar value of net new orders of $851.4 million vs. $863.7 million
    • Unit net orders increased 3% to 1,956
    • Average selling price of net orders down 4% to $435,300

* Per share amount for the 2018 first quarter has been adjusted for the 8% stock dividend declared and paid in the 2019 first quarter

2019 Outlook – Selected Information

  • Backlog dollar value at March 31, 2019 down 12% year-over-year to $1.65 billion
    • Estimated gross margin from homes in backlog at March 31, 2019 slightly lower than 2019 first quarter closing gross margin of 18.9%
    • Backlog conversion ratio (home deliveries divided by beginning backlog) for the second quarter  estimated to be in the 41% to 43% range
  • Active subdivision count at March 31, 2019 of 178, up 15% year-over-year and 7% from December 31, 2018
  • Lots controlled of 22,887 at March 31, 2019, up 7% year-over-year
  • Quarterly dividend of $0.30 ($1.20 annualized) declared in April 2019

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 200,000 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, 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, 2019, 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

(Unaudited)






Three Months Ended


March 31,


2019


2018


(Dollars in thousands, except per share amounts)

Homebuilding:






Home sale revenues

$

647,278


$

607,688







Home cost of sales


(524,552)



(496,632)

Inventory impairments


(610)



(550)

Total cost of sales


(525,162)



(497,182)

Gross profit


122,116



110,506

Selling, general and administrative expenses


(82,261)



(71,341)

Interest and other income


2,391



1,859

Other expense


(1,191)



(563)

Homebuilding pretax income


41,055



40,461







Financial Services:






Revenues


17,404



19,035

Expenses


(8,957)



(8,831)

Interest and other income


1,264



1,020

Net gain (loss) on marketable equity securities


4,840



(1,153)

Financial services pretax income


14,551



10,071







Income before income taxes


55,606



50,532

Provision for income taxes


(15,056)



(11,768)

Net income

$

40,550


$

38,764







Other comprehensive income


-



-

Comprehensive income

$

40,550


$

38,764







Earnings per share:






Basic

$

0.66


$

0.64

Diluted

$

0.64


$

0.63







Weighted average common shares outstanding:






Basic


60,939,364



60,340,774

Diluted


62,708,334



61,447,563







Dividends declared per share

$

0.30


$

0.28

 

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

(Unaudited)










March 31,


December 31,


2019


2018

ASSETS

(Dollars in thousands, except


per share amounts)

Homebuilding:






Cash and cash equivalents

$

416,374


$

414,724

Restricted cash


8,136



6,363

Trade and other receivables


67,960



52,982

Inventories:






Housing completed or under construction


950,274



952,436

Land and land under development


1,198,824



1,180,558

Total inventories


2,149,098



2,132,994

Property and equipment, net


59,765



58,167

Operating lease right-of-use asset


32,604



-

Deferred tax asset, net


34,504



37,178

Prepaid and other assets


42,545



45,794

Total homebuilding assets


2,810,986



2,748,202

Financial Services:






Cash and cash equivalents


51,556



49,052

Marketable securities


45,767



40,879

Mortgage loans held-for-sale, net


110,810



149,211

Other assets


15,800



13,733

Total financial services assets


223,933



252,875

      Total Assets

$

3,034,919


$

3,001,077

LIABILITIES AND EQUITY






Homebuilding:






Accounts payable

$

58,570


$

50,505

Accrued liabilities


185,131



196,247

Operating lease liability


33,460



-

Revolving credit facility


15,000



15,000

Senior notes, net


988,322



987,967

Total homebuilding liabilities


1,280,483



1,249,719

Financial Services:






Accounts payable and accrued liabilities


58,874



58,543

Mortgage repurchase facility


84,856



116,815

Total financial services liabilities


143,730



175,358

      Total Liabilities


1,424,213



1,425,077

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; 61,520,890 and 56,615,352 issued and outstanding at March 31, 2019 and December 31, 2018, respectively


615



566

Additional paid-in-capital


1,318,726



1,168,442

Retained earnings


291,365



406,992

Total Stockholders' Equity


1,610,706



1,576,000

Total Liabilities and Stockholders' Equity

$

3,034,919


$

3,001,077

 

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

(Unaudited)






Three Months Ended


March 31,


2019


2018



(Dollars in thousands)

Operating Activities:






Net income

$

40,550


$

38,764

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






Stock-based compensation expense


4,251



1,251

Depreciation and amortization


4,878



4,636

Inventory impairments


610



550

Net (gain) loss on marketable equity securities


(4,840)



1,153

Amortization of discount / premiums on marketable debt securities, net


-



(182)

Deferred income tax expense


2,696



423

Net changes in assets and liabilities:






      Trade and other receivables


(13,771)



(3,261)

      Mortgage loans held-for-sale, net


38,401



24,956

      Housing completed or under construction


2,137



(65,378)

      Land and land under development


(18,496)



(71,552)

      Prepaid and other assets


1,085



389

      Accounts payable and accrued liabilities


(3,153)



6,765

Net cash provided by (used in) operating activities


54,348



(61,486)







Investing Activities:






Purchases of marketable securities


(4,785)



(8,761)

Sales of marketable securities


4,737



8,700

Purchases of property and equipment


(6,386)



(6,316)

Net cash used in investing activities


(6,434)



(6,377)







Financing Activities:






Payments on mortgage repurchase facility, net


(31,959)



(22,214)

Dividend payments


(17,115)



(16,865)

Proceeds from exercise of stock options


7,087



282

Net cash used in financing activities


(41,987)



(38,797)







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


5,927



(106,660)

Cash, cash equivalents and restricted cash:






      Beginning of period


470,139



514,240

      End of period

$

476,066


$

407,580







Reconciliation of cash, cash equivalents and restricted cash:






Homebuilding:






Cash and cash equivalents

$

416,374


$

352,868

Restricted cash


8,136



6,198

Financial Services:






Cash and cash equivalents


51,556



48,514

Total cash, cash equivalents and restricted cash

$

476,066


$

407,580

 

New Home Deliveries






 Three Months Ended March 31, 



2019


2018


 % Change



 Homes


 Home Sale
Revenues


 Average
Price


 Homes


 Home Sale
Revenues


 Average
Price


 Homes


 Home Sale
Revenues

 Average
Price



(Dollars in thousands)


West

752


$

369,558


$

491.4


681


$

319,509


$

469.2


10%


16%


5%


Mountain

409



209,192



511.5


416


208,632


501.5


(2)%


0%


2%


East

197



68,528



347.9


177



79,547



449.4


11%


(14)%


(23)%


Total

1,358


$

647,278


$

476.6


1,274


$

607,688


$

477.0


7%


7%


(0)%

 

Net New Orders




 Three Months Ended March 31, 


2019


2018


% 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

965


$

433,307


$

449.0


3.82


1,033


$

458,195


$

443.6


4.78


(7)%


(5)%


1%


(20)%

Mountain

719


336,932


468.6


3.52


667


327,006


490.3


3.92


8%


3%


(4)%


(10)%

East

272



81,179



298.5


4.17


204



78,459



384.6


2.99


33%


3%


(22)%


39%

Total

1,956


$

851,418


$

435.3


3.75


1,904


$

863,660


$

453.6


4.19


3%


(1)%


(4)%


(11)%




__________________________________________________


*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,


%



2019


2018


Change


2019


2018


Change


West

88


73


21%


84


72


17%


Mountain

64


58


10%


69


57


21%


East

26


24


8%


22


23


(4)%


Total

178


155


15%


175


152


15%

 

Backlog






March 31,



2019


2018


% Change



Homes


Dollar
Value


Average
Price


Homes


Dollar
Value


Average
Price


Homes


Dollar
Value


Average
Price



(Dollars in thousands)


West

1,736


$

830,703


$

478.5


1,803


$

923,326


$

512.1


(4)%


(10)%


(7)%


Mountain

1,353



690,623



510.4


1,504



766,010



509.3


(10)%


(10)%


0%


East

445



133,140



299.2


482



190,102



394.4


(8)%


(30)%


(24)%


Total

3,534


$

1,654,466


$

468.2


3,789


$

1,879,438


$

496.0


(7)%


(12)%


(6)%

 

Homes Completed or Under Construction (WIP lots)








March 31,


%



2019


2018


Change


Unsold:







Completed

120


86


40%


Under construction

177


203


(13)%


Total unsold started homes

297


289


3%


Sold homes under construction or completed

2,362


2,549


(7)%


Model homes under construction or completed

459


366


25%


Total homes completed or under construction

3,118


3,204


(3)%

 

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










March 31, 2019


March 31, 2018





Lots
Owned


Lots
Optioned


Total


Lots
Owned


Lots
Optioned


Total


Total %
Change


West

7,894


2,462


10,356


7,421


2,205


9,626


8%


Mountain

6,636


2,612


9,248


5,206


3,398


8,604


7%


East

1,989


1,294


3,283


1,531


1,692


3,223


2%


Total

16,519


6,368


22,887


14,158


7,295


21,453


7%

 

Selling, General and Administrative Expenses






Three Months Ended March 31,



2019


2018


Change



(Dollars in thousands)


General and administrative expenses

$

42,572


$

35,753


$

6,819


General and administrative expenses as a percentage of home sale revenues


6.6%



5.9%



70 bps












Marketing expenses

$

18,296


$

15,571


$

2,725


Marketing expenses as a percentage of home sale revenues


2.8%



2.6%



20 bps












Commissions expenses

$

21,393


$

20,017


$

1,376


Commissions expenses as a percentage of home sale revenues


3.3%



3.3%



0 bps












Total selling, general and administrative expenses

$

82,261


$

71,341


$

10,920


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


12.7%



11.7%



100 bps

 

Capitalized Interest






Three Months Ended



March 31,



2019


2018



(Dollars in thousands)


Homebuilding interest incurred

$

16,031


$

15,625


Less:  Interest capitalized


(16,031)



(15,625)


Homebuilding interest expensed

$

-


$

-









Interest capitalized, beginning of period

$

54,845


$

57,541


Plus: Interest capitalized during period


16,031



15,625


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


(13,929)



(14,428)


Interest capitalized, end of period

$

56,947


$

58,738

 

SOURCE M.D.C. Holdings, Inc.

For further information: Robert N. Martin, Senior Vice President and Chief Financial Officer, 1-866-424-3395, IR@mdch.com