M.D.C. Holdings Announces 2015 First Quarter Results

DENVER, May 5, 2015 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended March 31, 2015.

2015 First Quarter Highlights and Comparisons to 2014 First Quarter

• Net income of $8.4 million, or $0.17 per share, vs. $11.5 million, or $0.23 per share
• Home sale revenues of $377.0 million, up 18% from $318.5 million
  • Average sales price up $49,900 per home, or 14%, to $414,800
  • Homes delivered of 909 up from 873
• Gross margin from home sales of 15.4% down from 18.5%
  • Decrease partly due to higher incentives utilized to reduce speculative inventory
• Homebuilding SG&A rate improved by 180 basis points to 13.4% vs. 15.2%
• Homebuilding interest and other income decreased to $1.9 million vs. $13.5 million
• No debt extinguishment charge vs. $9.4 million
• Dollar value of net new orders of $666.5 million, up 43%
  • Unit net new orders of 1,593, up 29%
  • Average monthly absorption rate increased 18%
• Ending active community count of 166, up 6%
• Ending backlog dollar value of $952.9 million, up 46%
  • Ending backlog units of 2,203, up 36%

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "During the first quarter, to start the spring selling season, we were pleased to see an overall improvement in homebuilding industry conditions across most of our markets. Our net new orders increased 29% year-over-year, driven by increases in both our absorption rate and active community count. Furthermore, we were able to increase prices in many of our active communities across the country, helping to offset cost increases experienced over the past few quarters."

Mizel continued, "We succeeded in reducing our supply of spec inventory during the quarter, consistent with the objective we outlined in prior periods. By offering increased incentives on aged spec homes, we decreased our spec homes per active community by more than 40% year-over-year. The additional incentives adversely impacted our gross margin for the first quarter, but the reduction in aged spec inventory was an important step toward improving our gross margin in the future."

Mr. Mizel concluded, "The dollar value of our quarter-end backlog increased by 46% year-over-year, giving us a foundation for solid performance in the coming quarters. Looking forward to our prospects further out, we believe we are well prepared for growth, with a strong balance sheet, overall liquidity of $825 million and no senior note maturities until 2020.  Although our land acquisition activity has been relatively light over the past couple quarters, we have recently seen an uptick in our pipeline of new proposed land acquisitions, which provides the potential for additional home closings in 2016 and beyond."

Homebuilding

Home sale revenues for the 2015 first quarter increased 18% to $377.0 million, compared to $318.5 million for the prior year period. The increase in revenue was driven by a 14% increase in average selling price, mostly due to a mix shift to higher-priced submarkets, and a 4% increase in the number of homes closed.

Gross margin from home sales for the 2015 first quarter was 15.4%, compared with 18.5% for the year earlier period and 16.3% for the 2014 fourth quarter. The 310 basis point year-over-year decline was driven by higher incentives utilized to reduce aged spec inventory and by higher land and construction costs. Sequentially, gross margin from home sales was down 90 basis points primarily due to an increased use of incentives to reduce aged spec inventory. Gross margin from home sales excluding inventory impairments and interest in cost of sales was 18.8%* for the 2015 first quarter versus 22.2%* for the year earlier period and 20.0%* for the 2014 fourth quarter.

SG&A expenses were $50.5 million for the 2015 first quarter, up $2.2 million from the 2014 first quarter of $48.3 million.  The increase in SG&A expenses was largely attributable to a $1.7 million increase in commission expenses, due to an increase in home sale revenues, and a $2.6 million increase in marketing expenses, due to the increase in our active communities. These increases were partially offset by a $2.1 million decrease in our general and administrative expenses, mostly due to lower compensation-related and legal expenses. Despite the slight increase in SG&A expenses, our SG&A expense as a percentage of home sale revenues decreased by 180 basis points to 13.4% for the 2015 first quarter versus 15.2% for the same period in 2014.

Interest and other income of $1.9 million for the 2015 first quarter decreased by $11.7 million from $13.5 million in the first quarter 2014.  The decrease was primarily driven by a decrease in the gain on sales of marketable securities in the 2015 first quarter, as the overall volume of marketable securities sold decreased year-over-year. In addition, interest income declined due to a year-over-year reduction in our overall marketable securities held. We sold the marketable securities in the 2014 first quarter in part to fund our extinguishment of $250 million in Senior Notes due December 2014, which also resulted in a $9.4 million early extinguishment of debt charge during the 2014 first quarter.

The dollar value of net new orders for the 2015 first quarter increased 43% to $666.5 million from $466.0 million for the same period in 2014. The improvement was driven by a 29% increase in unit volume, resulting primarily from an 18% growth in our absorption rate and an 11% improvement in the average selling price of net new home orders to $418,400, compared to $377,000 for the same period in 2014, due mostly to a change in mix of new orders. Our cancellation rate for the 2015 first quarter was 17%, down from 19% in the same period in the prior year.

Our backlog value at the end of the 2015 first quarter was up 46% year-over-year to $952.9 million. The increase was driven primarily by a 36% increase in units in backlog to 2,203 units, due mostly to the net new order activity discussed above, coupled with an 8% increase in the average selling price of homes in backlog which was driven by a shift in mix.

Financial Services

Income before taxes from our financial services operations for the 2015 first quarter was $5.3 million, up $0.2 million compared to $5.1 million for the 2014 first quarter. The improvement, mostly from our mortgage operations, was due to slight increases in the volume of and gains on loans locked and sold.

About MDC

Since 1972, MDC's subsidiary companies 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, 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-Q for the quarter ended March 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.

 

 

 

 

 

 

 

 

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SOURCE M.D.C. Holdings, Inc.