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

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April 30, 2019 4:07 PM EDT

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 SaleRevenues

 AveragePrice

 Homes

 Home SaleRevenues

 AveragePrice

 Homes

 Home SaleRevenues

 AveragePrice

(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

DollarValue

AveragePrice

MonthlyAbsorptionRate *

Homes

DollarValue

AveragePrice

MonthlyAbsorptionRate *

Homes

DollarValue

AveragePrice

MonthlyAbsorptionRate

(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

DollarValue

AveragePrice

Homes

DollarValue

AveragePrice

Homes

DollarValue

AveragePrice

(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

LotsOwned

LotsOptioned

Total

LotsOwned

LotsOptioned

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

 

Cision View original content:http://www.prnewswire.com/news-releases/mdc-holdings-announces-2019-first-quarter-results-300840954.html

SOURCE M.D.C. Holdings, Inc.


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