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 Average
Homes Home Sale Average
Homes Home Sale
Average
Revenues Price Revenues Price Revenues 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 Average
Monthly
Homes Dollar Average
Monthly
Homes
Dollar
Average
Monthly
Value Price Absorption Value Price Absorption Value Price Absorption
Rate * Rate * 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 Average
Homes
Dollar Average
Homes
Dollar
Average
Value Price Value Price Value 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
Lots
Total
Lots
Lots
Total Total %
Owned Optioned Owned Optioned 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
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SOURCE M.D.C. Holdings, Inc.
