M.D.C. Holdings Announces 2019 Third Quarter Results
DENVER, Oct. 30, 2019 /PRNewswire/ -- M.D.C Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended September 30, 2019.
Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "MDC delivered another strong performance in the third quarter of 2019, generating net income of $51 million, or $0.79 per diluted share. Net new orders increased 58% year-over-year on a sales pace of 3.6 homes per community per month. The sizable demand we experienced during the quarter led us to raise prices at a majority of our communities. We believe that these price increases reflected marketplace conditions, as the sales pace in September remained at a healthy 3.3 homes per community for the month."
Mr. Mizel continued, "We continue to focus our efforts on the more affordable segments of the market, as demand for lower priced homes remains strong across our geographic footprint. We believe this trend will continue for some time given the widespread lack of affordable housing and the demographic shifts occurring in this country."
Mr. Mizel concluded, "We have experienced remarkable order growth this year and have done so without the use of heavy discounting or changing our approach to speculative inventory. Our company's long-term strategy focuses on limiting risk by adhering to a built-to-order model with the objective of maximizing the value of each lot. We believe this strategy, coupled with our industry leading dividend payout, leads to superior risk-adjusted returns for our shareholders over time."
2019 Third Quarter Highlights and Comparisons to 2018 Third Quarter
-- Home sale revenues of $750.3 million, down 2% from $766.0 million
-- Unit deliveries up 8% to 1,713
-- Average selling price of deliveries down 9% to $438,000
-- Net income of $50.6 million, or $0.79 per diluted share, down 5% from
$53.4 million or $0.86 per diluted share*
-- Effective tax rate of 19.5% vs. 20.8%
-- Gross margin from home sales of 18.8% versus 17.7%
-- No inventory impairments vs. $11.1 million
-- Selling, general and administrative expenses as a percentage of home
sale revenues ("SG&A rate") of 12.4% vs. 10.9%
-- $9.8 million of stock based compensation expense versus $2.4 million
-- Dollar value of net new orders up 50% to $871.7 million from $581.2
million
-- Unit net orders increased 58% to 2,036
-- Monthly sales absorption pace increased 34% to 3.6
-- Average selling price of net orders down 5% to $428,000
* Per share amount for the 2018 third 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 September 30, 2019 up 16% year-over-year to
$2.10 billion
-- Estimated gross margin from homes in backlog at September 30, 2019
slightly higher than 2019 third quarter closing gross margin of
18.8%
-- Backlog conversion ratio (home deliveries divided by beginning
backlog) for the fourth quarter of approximately 50%
-- Average selling price for fourth quarter unit deliveries estimated
at approximately $450,000
-- Active subdivision count at September 30, 2019 of 190, up 20%
year-over-year
-- Quarterly dividend of $0.30 ($1.20 annualized) declared in October 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 205,000 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 September 30, 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
Nine Months Ended
September 30,
September 30,
---
2019 2018 2019 2018
---
(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues $
750,274 $
766,027 $
2,130,396 $
2,123,323
Home cost of sales (609,316) (619,248) (1,724,040) (1,722,283)
Inventory impairments (11,098) (610) (11,848)
Total cost of sales (609,316) (630,346) (1,724,650) (1,734,131)
Gross profit 140,958 135,681 405,746 389,192
Selling, general and administrative expenses (92,716) (83,523) (257,689) (236,435)
Interest and other income 2,336 1,953 7,491 5,586
Other expense (1,887) (1,128) (4,188) (2,562)
Homebuilding pretax income 48,691 52,983 151,360 155,781
Financial Services:
Revenues 22,388 19,611 58,389 60,018
Expenses (10,352) (9,408) (28,883) (27,850)
Interest and other income 1,312 1,230 3,943 3,490
Net gain on marketable equity securities 767 3,004 7,934 3,129
Financial services pretax income 14,115 14,437 41,383 38,787
Income before income taxes 62,806 67,420 192,743 194,568
Provision for income taxes (12,226) (14,028) (47,020) (38,513)
Net income $
50,580 $
53,392 $
145,723 $
156,055
===
Comprehensive income $
50,580 $
53,392 $
145,723 $
156,055
===
Earnings per share:
Basic $
0.81 $
0.87 $
2.36 $
2.56
Diluted $
0.79 $
0.86 $
2.29 $
2.52
Weighted average common shares outstanding:
Basic 61,978,195 60,665,349 61,422,925 60,505,916
Diluted 63,968,215 61,804,792 63,360,535 61,592,092
Dividends declared per share $
0.30 $
0.28 $
0.90 $
0.83
M.D.C. HOLDINGS, INC.
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2019 2018
---
ASSETS (Dollars in thousands, except
per share amounts)
Homebuilding:
Cash and cash equivalents $
285,338 $
414,724
Restricted cash 16,325 6,363
Trade and other receivables 58,528 52,982
Inventories:
Housing completed or under construction 1,204,641 952,436
Land and land under development 1,191,036 1,180,558
Total inventories 2,395,677 2,132,994
Property and equipment, net 63,673 58,167
Operating lease right-of-use asset 31,251
Deferred tax asset, net 27,712 37,178
Prepaid and other assets 46,395 45,794
Total homebuilding assets 2,924,899 2,748,202
Financial Services:
Cash and cash equivalents 46,790 49,052
Marketable securities 52,876 40,879
Mortgage loans held-for-sale, net 117,020 149,211
Other assets 16,994 13,733
Total financial services assets 233,680 252,875
Total Assets $
3,158,579 $
3,001,077
===
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable $
79,043 $
50,505
Accrued liabilities 189,296 196,247
Operating lease liability 31,887
Revolving credit facility 15,000 15,000
Senior notes, net 989,050 987,967
Total homebuilding liabilities 1,304,276 1,249,719
Financial Services:
Accounts payable and accrued liabilities 62,031 58,543
Mortgage repurchase facility 90,471 116,815
Total financial services liabilities 152,502 175,358
Total Liabilities 1,456,778 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; 62,597,390 and 56,615,352
issued and outstanding at September
30, 2019 and December 31, 2018, respectively 626 566
Additional paid-in-capital 1,341,858 1,168,442
Retained earnings 359,317 406,992
Total Stockholders' Equity 1,701,801 1,576,000
Total Liabilities and Stockholders'
Equity $
3,158,579 $
3,001,077
===
M.D.C. HOLDINGS, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
---
2019 2018 2019 2018
---
(Dollars in thousands)
Operating Activities:
Net income $
50,580 $
53,392 $
145,723 $
156,055
Adjustments to reconcile net income to net cash
used in:
operating activities:
Stock-based compensation expense 9,795 2,425 18,178 8,500
Depreciation and amortization 5,537 5,454 15,478 15,406
Inventory impairments 11,098 610 11,848
Net gain on marketable equity securities (767) (3,004) (7,934) (3,129)
Amortization of discount /premiums on marketable
debt securities, net (366)
Deferred income tax expense 1,729 535 9,488 4,092
Net changes in assets and liabilities:
Trade and other receivables (4,646) (4,732) (4,682) (7,049)
Mortgage loans held-for-sale (7,683) (7,651) 32,191 23,278
Housing completed or under construction (133,221) 1,919 (251,749) (131,657)
Land and land under development (34,899) (65,506) (10,461) (149,963)
Prepaid expenses and other assets 317 (7,220) (3,889) (12,328)
Accounts payable and accrued liabilities 24,475 10,232 23,929 26,067
Net cash used in operating activities (88,783) (3,058) (33,118) (59,246)
Investing Activities:
Purchases of marketable securities (5,224) (2,524) (10,340) (17,183)
Maturities of marketable securities 50,000
Sales of marketable securities 1,220 850 6,277 13,310
Purchases of property and equipment (6,268) (6,848) (20,128) (19,899)
Net cash provided by (used in) investing
activities (10,272) (8,522) (24,191) 26,228
Financing Activities:
Payments on mortgage repurchase facility, net 7,432 9,965 (26,344) (21,556)
Dividend payments (18,701) (16,940) (54,337) (50,733)
Issuance of shares under stock-based
compensation programs, net (1,024) 4,024 16,304 9,859
Net cash used in financing activities (12,293) (2,951) (64,377) (62,430)
Net decrease in cash, cash equivalents and
restricted cash (111,348) (14,531) (121,686) (95,448)
Cash, cash equivalents and restricted cash:
Beginning of period 459,801 433,323 470,139 514,240
End of period $
348,453 $
418,792 $
348,453 $
418,792
===
Reconciliation of cash, cash equivalents and
restricted cash:
Homebuilding:
Cash and cash equivalents $
285,338 $
360,947 $
285,338 $
360,947
Restricted cash 16,325 7,866 16,325 7,866
Financial Services:
Cash and cash equivalents 46,790 49,979 46,790 49,979
Total cash, cash equivalents and
restricted cash $
348,453 $
418,792 $
348,453 $
418,792
===
New Home Deliveries
Three Months Ended September 30,
2019 2018
% Change
Homes Home Sale Average
Homes Home Sale Average
Homes Home
Average
Revenues Price Revenues Price Sale Price
Revenues
(Dollars in thousands)
West 927 $
410,414 $
442.7 836 $
409,001 $
489.2 11% 0% (10)%
Mountain 537 263,802 491.2 535 272,989 510.3 0% (3)% (4)%
East 249 76,058 305.5 213 84,037 394.5 17% (9)% (23)%
Total 1,713 $
750,274 $
438.0 1,584 $
766,027 $
483.6 8% (2)% (9)%
Nine Months Ended September 30,
---
2019 2018
% Change
Homes Home Sale Average
Homes Home Sale Average
Homes Home
Average
Revenues Price Revenues Price Sale Price
Revenues
(Dollars in thousands)
West 2,464 $
1,164,502 $
472.6 2,286 $
1,120,316 $
490.1 8% 4% (4)%
Mountain 1,480 760,470 513.8 1,473 750,162 509.3 0% 1% 1%
East 641 205,424 320.5 611 252,845 413.8 5% (19)% (23)%
Total 4,585 $
2,130,396 $
464.6 4,370 $
2,123,323 $
485.9 5% 0% (4)%
Net New Orders
Three Months Ended September 30,
2019 2018
% Change
---
Homes
Dollar Average
Monthly
Homes Dollar Value Average
Monthly
Homes
Dollar
Average
Monthly
Price Absorption Price Absorption Value Price Absorption
Value Rate * Rate * Rate
(Dollars in thousands)
West 1,168 $
516,000 $
441.8 4.09 690 $
316,556 $
458.8 3.06 69% 63% (4)% 34%
Mountain 565 271,800 481.1 2.86 418 206,945 495.1 2.22 35% 31% (3)% 29%
East 303 83,896 276.9 3.58 182 57,649 316.8 2.64 66% 46% (13)% 35%
Total 2,036 $
871,696 $
428.1 3.59 1,290 $
581,150 $
450.5 2.67 58% 50% (5)% 34%
Nine Months Ended September 30,
2019 2018
% Change
--- ---
Homes
Dollar Average Price
Monthly
Homes Dollar Value Average
Monthly
Homes
Dollar
Average
Monthly
Absorption Price Absorption Price Absorption
Value Rate * Rate *
Value Rate
(Dollars in thousands)
West 3,379 $
1,543,584 $
456.8 4.14 2,743 $
1,274,115 $
464.5 4.14 23% 21% (2)% 0%
Mountain 1,974 960,109 486.4 3.30 1,593 814,939 511.6 3.02 24% 18% (5)% 9%
East 912 268,578 294.5 4.02 579 207,394 358.2 2.78 58% 30% (18)% 45%
Total 6,265 $
2,772,271 $
442.5 3.82 4,915 $
2,296,448 $
467.2 3.51 27% 21% (5)% 9%
*Calculated as total net new
orders in period ÷ average
active communities during
period ÷ number of months in
period
Active Subdivisions
Average Active Subdivisions Average Active Subdivisions
Active Subdivisions
Three Months Ended
Nine Months Ended
September 30,
% September 30,
% September 30,
%
2019 2018
Change 2019 2018
Change 2019 2018
Change
West 93 73 27% 96 75 28% 92 73 26%
Mountain 67 64 5% 66 63 5% 66 59 12%
East 30 21 43% 29 23 26% 25 24 4%
Total 190 158 20% 191 161 19% 183 156 17%
Backlog
September 30,
2019 2018
% Change
Homes
Dollar Average
Homes
Dollar Average
Homes
Dollar
Average
Price Price Price
Value
Value
Value
(Dollars in thousands)
West 2,438 $
1,146,912 $
470.4 1,908 $
939,247 $
492.3 28% 22% (4)%
Mountain 1,537 768,317 499.9 1,373 717,988 522.9 12% 7% (4)%
East 641 183,856 286.8 423 145,829 344.7 52% 26% (17)%
Total 4,616 $
2,099,085 $
454.7 3,704 $
1,803,064 $
486.8 25% 16% (7)%
Homes Completed or Under Construction (WIP lots)
September 30,
%
2019 2018
Change
Unsold:
Completed 82 129 (36)%
Under construction 255 311 (18)%
Total unsold started homes 337 440 (23)%
Sold homes under construction or completed 3,433 2,835 21%
Model homes under construction or completed 455 403 13%
Total homes completed or under construction 4,225 3,678 15%
Lots Owned and Optioned (including homes completed or under construction)
September 30, 2019
September 30, 2018
Lots
Lots
Total
Lots
Lots
Total Total %
Owned Optioned Owned Optioned Change
West 9,128 2,203 11,331 7,736 4,215 11,951 (5)%
Mountain 6,456 3,139 9,595 6,020 3,648 9,668 (1)%
East 2,014 2,003 4,017 1,895 1,497 3,392 18%
Total 17,598 7,345 24,943 15,651 9,360 25,011 (0)%
Selling, General and Administrative Expenses
Three Months Ended September 30,
Nine Months Ended September 30,
2019 2018 Change 2019 2018 Change
(Dollars in thousands)
General and administrative expenses $
46,951 $
40,237 $
6,714 $
128,849 $
116,362 $
12,487
General and administrative expenses as a
percentage of
home sale revenues
6.3% 5.3%
100 bps 6.0% 5.5%
50 bps
Marketing expenses $
20,457 $
18,102 $
2,355 $
58,266 $
50,888 $
7,378
Marketing expenses as a percentage of
home sale
revenues
2.7% 2.4%
30 bps 2.7% 2.4%
30 bps
Commissions expenses $
25,308 $
25,184 $
124 $
70,574 $
69,185 $
1,389
Commissions expenses as a percentage of
home sale
revenues
3.4% 3.3%
10 bps 3.3% 3.3%
0 bps
Total selling, general and administrative
expenses $
92,716 $
83,523 $
9,193 $
257,689 $
236,435 $
21,254
Total selling, general and administrative
expenses as a
percentage of
home sale revenues
12.4% 10.9%
150 bps 12.1% 11.1%
100 bps
Capitalized Interest
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019 2018 2019 2018
(Dollars in thousands)
Homebuilding interest incurred $
15,879 $
15,641 $
47,890 $
46,905
Less: Interest capitalized (15,879) (15,641) (47,890) (46,905)
Homebuilding interest expensed
$
$
$
$ -
Interest capitalized, beginning of
period $
58,193 $
58,227 $
54,845 $
57,541
Plus: Interest capitalized during
period 15,879 15,641 47,890 46,905
Less: Previously capitalized interest
included in home and land cost of
sales (14,451) (16,636) (43,114) (47,214)
Interest capitalized, end of period $
59,621 $
57,232 $
59,621 $
57,232
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SOURCE M.D.C. Holdings, Inc.
