M.D.C. Holdings Announces 2019 Fourth Quarter And Full Year Results
DENVER, Jan. 30, 2020 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter and full year ended December 31, 2019.
Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "MDC finished the year on a strong note, generating fully diluted earnings per share of $1.42 in the fourth quarter, a 61% increase as compared to last year. We also achieved year-over-year improvements in our homebuilding gross margin and SG&A leverage, resulting in homebuilding operating margin expansion of 150 basis points. The sales environment continues to be favorable, as evidenced by the 49% growth in unit orders for the quarter. These demand trends have carried into the new year, giving our business strong momentum as we head into the spring selling season."
Mr. Mizel continued, "For the full year 2019, we posted year-over-year improvements to both revenue and profitability, which resulted in fully diluted earnings per share of $3.72. This marks our fifth consecutive year of net income growth, and we are well positioned to continue that trend in 2020 thanks to a 29% increase in homes in backlog to start the year. We also ended the year in a strong financial position with a year-over-year decrease in our debt to capital ratio and a maturity schedule that was further enhanced earlier this month by the issuance of $300 million of 3.850% senior notes due 2030."
Mr. Mizel concluded, "As we enter 2020, we will continue to focus on the more affordable segments of the market due to the ongoing lack of supply and broad-based demand we have witnessed. We believe this favorable supply-demand environment will remain in place for some time given the demographic shifts occurring in this country. These factors, coupled with our solid market positioning and growing backlog, provided us with the confidence to increase our cash dividend by 10% just a few days ago."
2019 Fourth Quarter Highlights and
Comparisons to 2018 Fourth Quarter
---
Home sale revenues up 25% to $1,074.9
million from $858.5 million
Unit deliveries up 31% to 2,389
Average selling price of deliveries
down 4% to $450,000
Net income of $92.6 million, or $1.42
per diluted share, up 69% from $54.7
million or $0.88 per diluted share(1)
Effective tax rate of 17.5% vs. 21.0%
Gross margin from home sales up 40
basis points to 18.5% from 18.1%
Inventory impairments of $0.3 million
vs. $10.0 million
Selling, general and administrative
expenses as a percentage of home sale
revenues ("SG&A rate") improved by 110
basis points to 9.8% from 10.9%
Dollar value of net new orders up 51%
to $684.9 million from $453.3 million
Unit net orders increased 49% to 1,574
Monthly sales absorption pace increased
28% to 2.8
Average selling price of net orders up
2% to $435,000
2019 Full Year Highlights and
Comparisons to 2018 Full Year
---
Home sale revenues up 7% to $3.21
billion from $2.98 billion
Unit deliveries up 13% to 6,974
Net income of $238.3 million, or $3.72
per diluted share, up 13% from $210.8
million or $3.39 per diluted share(1)
Third highest net income in Company
history
Gross margin from home sales of 18.8%
vs. 18.3%
Inventory impairments of $0.9 million
vs. $21.9 million
SG&A rate of 11.3% vs. 11.1%
Dollar value of net new orders up 26%
to $3.50 billion from $2.77 billion
Unit net orders increased 31% to 7,839
Monthly sales absorption pace increased
13% to 3.6
(1)
Per share
amount for the 2018 fourth quarter and
full year have been adjusted for the
8% stock dividend declared and paid in
the 2019 first quarter.
2020 Outlook - Selected Information
(2)
---
Backlog dollar value at December 31,
2019 up 22% year-over-year to $1.75
billion
Home deliveries for the 2020 first
quarter between 1,550 and 1,650
Average selling price for 2020 first
quarter unit deliveries between
$450,000 and $460,000
Gross margin from home sales for the
2020 first quarter between 18.8% and
19.2% (excluding impairments and
warranty adjustments)
Active subdivision count at December
31, 2019 of 185, up 11% year-over-
year
Lots controlled of 27,386 at December
31, 2019, up 18% year-over-year
Declared 10% increase in quarterly
dividend to $0.33 ($1.32 annualized)
in January 2020
2
See "Forward-
Looking Statements" below.
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-K for the year ended December 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
Year Ended
December 31,
December 31,
---
2019 2018 2019 2018
---
(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues $
1,074,852 $
858,488 $
3,205,248 $
2,981,811
Home cost of sales (876,156) (692,856) (2,600,196) (2,415,139)
Inventory impairments (325) (10,002) (935) (21,850)
Total cost of sales (876,481) (702,858) (2,601,131) (2,436,989)
Gross margin 198,371 155,630 604,117 544,822
Selling, general and administrative expenses (105,101) (93,366) (362,790) (329,801)
Interest and other income 1,579 2,132 9,070 7,718
Other expense (1,447) (2,683) (5,635) (5,245)
Homebuilding pretax income 93,402 61,713 244,762 217,494
Financial Services:
Revenues 29,616 23,387 88,005 83,405
Expenses (16,118) (10,350) (45,001) (38,200)
Other income (expense), net 5,346 (5,464) 17,223 1,155
Financial services pretax income 18,844 7,573 60,227 46,360
Income before income taxes 112,246 69,285 304,989 263,854
Provision for income taxes (19,657) (14,562) (66,677) (53,074)
Net income $
92,589 $
54,723 $
238,312 $
210,780
===
Comprehensive income $
92,589 $
54,723 $
238,312 $
210,780
===
Earnings per share
Basic $
1.48 $
0.90 $
3.84 $
3.46
Diluted $
1.42 $
0.88 $
3.72 $
3.39
Weighted average common shares outstanding
Basic 62,192,849 60,764,617 61,616,988 60,571,123
Diluted 64,609,357 61,712,544 63,702,666 61,830,761
Dividends declared per share $
0.30 $
0.28 $
1.18 $
1.11
M.D.C. HOLDINGS, INC.
Consolidated Balance Sheets
(Unaudited)
December 31, December 31,
2019 2018
---
ASSETS (Dollars in thousands, except
per share amounts)
Homebuilding:
Cash and cash equivalents $
424,186 $
414,724
Restricted cash 14,279 6,363
Trade and other receivables 65,829 52,982
Inventories:
Housing completed or under construction 1,036,191 952,436
Land and land under development 1,330,384 1,180,558
Total inventories 2,366,575 2,132,994
Property and equipment, net 60,414 58,167
Deferred tax assets, net 21,768 37,178
Prepaid and other assets 78,358 45,794
Total homebuilding assets 3,031,409 2,748,202
Financial Services:
Cash and cash equivalents 35,747 49,052
Marketable securities 56,747 40,879
Mortgage loans held-for-sale, net 197,021 149,211
Other assets 17,432 13,733
Total financial services assets 306,947 252,875
Total Assets $
3,338,356 $
3,001,077
===
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable $
87,364 $
50,505
Accrued and other liabilities 245,940 196,247
Revolving credit facility 15,000 15,000
Senior notes, net 989,422 987,967
Total homebuilding liabilities 1,337,726 1,249,719
Financial Services:
Accounts payable and accrued liabilities 68,529 58,543
Mortgage repurchase facility 149,616 116,815
Total financial services liabilities 218,145 175,358
Total Liabilities 1,555,871 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; 62,574,961 and 56,615,352
issued and outstanding at December 31, 2019 and December 31, 2018, respectively
626 566
Additional paid-in-capital 1,348,733 1,168,442
Retained earnings 433,126 406,992
Total Stockholders' Equity 1,782,485 1,576,000
Total Liabilities and Stockholders' Equity $
3,338,356 $
3,001,077
===
M.D.C. HOLDINGS, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
---
2019 2018 2019 2018
---
(Dollars in thousands)
Operating Activities:
Net income $
92,589 $
54,725 $
238,312 $
210,780
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Stock-based compensation expense 7,838 5,517 26,016 14,017
Depreciation and amortization 7,576 5,920 23,054 21,326
Inventory impairments 325 10,002 935 21,850
Net loss on marketable equity securities (3,863) 6,873 (11,797) 3,745
Amortization of discount / premiums on marketable debt securities (366)
Deferred income tax expense (benefit) 4,182 (363) 13,670 3,729
Net changes in assets and liabilities:
Trade and other receivables (8,315) 2,411 (12,997) (4,638)
Mortgage loans held-for-sale (80,001) (34,375) (47,810) (11,097)
Housing completed or under construction 168,265 119,575 (83,484) (12,082)
Land and land under development (139,116) (154,287) (149,577) (304,250)
Prepaid expenses and other assets (805) 12,083 (4,694) (245)
Accounts payable and accrued liabilities 42,276 23,259 66,205 49,325
Net cash provided by (used in) operating activities 90,951 51,340 57,833 (7,906)
Investing Activities:
Purchases of marketable securities (1,368) (1,667) (11,708) (18,850)
Maturities of marketable securities 50,000
Sales of marketable securities 1,360 2,920 7,637 16,230
Purchases of property and equipment (4,586) (7,267) (24,714) (27,166)
Net cash provided by (used in) investing activities (4,594) (6,014) (28,785) 20,214
Financing Activities:
Advances on mortgage repurchase facility, net 59,145 26,031 32,801 4,475
Dividend payments (18,780) (16,985) (73,117) (67,718)
Payments of deferred financing costs (3,026) (3,026)
Issuance of shares under stock-based compensation programs, net (963) 1 15,341 9,860
Net cash provided by (used in) financing activities 39,402 6,021 (24,975) (56,409)
Net increase (decrease) in cash, cash equivalents and restricted cash 125,759 51,347 4,073 (44,101)
Cash, cash equivalents and restricted cash:
Beginning of period 348,453 418,792 470,139 514,240
End of period $
424,212 $
470,139 $
474,212 $
470,139
===
Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents $
424,186 $
414,724 $
424,186 $
414,724
Restricted cash 14,279 6,363 14,279 6,363
Financial Services:
Cash and cash equivalents 35,747 49,052 35,747 49,052
Total cash, cash equivalents and restricted cash $
474,212 $
470,139 $
474,212 $
470,139
===
New Home Deliveries
Three Months Ended December 31,
2019 2018
% Change
Homes Dollar Average
Homes Dollar Average
Homes Dollar Value
Average
Price Price Price
Value Value
(Dollars in thousands)
West 1,299 $
606,558 $
466.9 958 $
446,826 $
466.4 36% 36% 0%
Mountain 762 371,098 487.0 645 330,315 512.1 18% 12% (5)%
East 328 97,196 296.3 224 81,348 363.2 46% 19% (18)%
Total 2,389 $
1,074,852 $
449.9 1,827 $
858,489 $
469.9 31% 25% (4)%
Year Ended December 31,
2019 2018
% Change
Homes Dollar Average
Homes Dollar Average
Homes
Dollar
Average
Price Price Price
Value
Value
Value
(Dollars in thousands)
West 3,763 $
1,771,061 $
470.7 3,244 $
1,567,141 $
483.1 16% 13% (3)%
Mountain 2,242 1,131,568 504.7 2,118 1,080,475 510.1 6% 5% (1)%
East 969 302,619 312.3 835 334,195 400.2 16% (9)% (22)%
Total 6,974 $
3,205,248 $
459.6 6,197 $
2,981,811 $
481.2 13% 7% (4)%
Net New Orders
Three Months Ended December 31,
2019 2018
% Change
---
Homes Dollar Average Price
Monthly
Homes Dollar Average Price
Monthly
Homes
Dollar Average Price
Monthly
Value Value
Value
Absorption
Absorption
Absorption
Rate *
Rate *
Rate *
(Dollars in thousands)
West 884 $
400,147 $
452.7 3.19 573 $
250,647 $
437.4 2.51 54% 60% 3% 27%
Mountain 436 212,772 488.0 2.21 315 149,583 474.9 1.60 38% 42% 3% 38%
East 254 71,950 283.3 2.80 171 53,028 310.1 2.78 49% 36% (9)% 1%
Total 1,574 $
684,869 $
435.1 2.79 1,059 $
453,258 $
428.0 2.18 49% 51% 2% 28%
Year Ended December 31,
2019 2018
% Change
Homes
Dollar Average Price
Monthly
Homes
Dollar Average Price
Monthly
Homes
Dollar Average Price
Monthly
Value Value
Value
Absorption
Absorption
Absorption
Rate *
Rate *
Rate *
(Dollars in thousands)
West 4,263 $
1,963,489 $
460.6 3.91 3,316 $
1,535,438 $
463.0 3.71 29% 28% (1)% 5%
Mountain 2,410 1,189,193 493.4 3.04 1,908 972,826 509.9 2.63 26% 22% (3)% 15%
East 1,166 342,469 293.7 3.68 750 262,518 350.0 2.78 55% 30% (16)% 32%
Total 7,839 $
3,495,151 $
445.9 3.56 5,974 $
2,770,782 $
463.8 3.16 31% 26% (4)% 13%
*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
Year Ended
December 31,
% December 31,
% December 31,
%
2019 2018
Change 2019 2018
Change 2019 2018
Change
West 89 79 13% 92 76 21% 90 75 20%
Mountain 65 67 (3)% 66 65 2% 66 60 10%
East 31 20 55% 30 21 43% 27 22 23%
Total 185 166 11% 188 162 16% 183 157 17%
Backlog
At December 31,
2019 2018
% Change
Homes
Dollar Average Price
Homes
Dollar Average Price
Homes
Dollar Average Price
Value
Value
Value
(Dollars in thousands)
West 2,023 $
960,057 $
474.6 1,523 $
756,335 $
496.6 33% 27% (4)%
Mountain 1,211 624,672 515.8 1,043 550,329 527.6 16% 14% (2)%
East 567 160,618 283.3 370 119,303 322.4 53% 35% (12)%
Total 3,801 $
1,745,347 $
459.2 2,936 $
1,425,967 $
485.7 29% 22% (5)%
Homes Completed or Under Construction (WIP lots)
December 31,
2019 2018
% Change
Unsold:
Completed 122 179 (32)%
Under construction 255 263 (3)%
Total unsold started homes 377 442 (15)%
Sold homes under construction or completed 2,779 2,219 25%
Model homes under construction or completed 473 407 16%
Total homes completed or under construction 3,629 3,068 18%
Lots Owned and Optioned (including homes completed or under construction)
December 31, 2019
December 31, 2018
Lots Owned
Lots Optioned
Total
Lots Owned
Lots Optioned
Total Total % Change
West 9,538 2,805 12,343 8,093 3,004 11,097 11%
Mountain 6,654 3,879 10,533 6,305 2,477 8,782 20%
East 2,313 2,197 4,510 1,899 1,409 3,308 36%
Total 18,505 8,881 27,386 16,297 6,890 23,187 18%
Selling, General and Administrative Expenses
Three Months Ended December 31,
Year Ended December 31,
2019 2018 Change 2019 2018 Change
(Dollars in thousands)
General and administrative expenses $
46,178 $
45,317 $
861 $
175,027 $
161,679 $
13,348
General and administrative expenses
as a percentage of home sale revenues 4.3% 5.3%
(100) bps 5.5% 5.4%
10 bps
Marketing expenses $
23,349 $
19,234 $
4,115 $
81,615 $
70,122 $
11,493
Marketing expenses as a percentage of
home sale revenues 2.2% 2.2%
0 bps 2.5% 2.4%
10 bps
Commissions expenses $
35,574 $
28,815 $
6,759 $
106,148 $
98,000 $
8,148
Commissions expenses as a percentage of
home sale revenues 3.3% 3.4%
(10) bps 3.3% 3.3%
0 bps
Total selling, general and administrative
expenses $
105,101 $
93,366 $
11,735 $
362,790 $
329,801 $
32,989
Total selling, general and administrative
expenses as a percentage of home
sale revenues (SG&A Rate) 9.8% 10.9%
(110) bps 11.3% 11.1%
20 bps
Capitalized Interest
Year Ended December 31,
2019 2018 2017
(Dollars in thousands)
Homebuilding interest incurred $
63,635 $
62,631 $
55,170
Less: Interest capitalized (63,635) (62,631) (55,170)
Homebuilding interest expensed
$
$
$ -
Interest capitalized, beginning of period $
54,845 $
57,541 $
68,085
Plus: Interest capitalized during period 63,635 62,631 55,170
Less: Previously capitalized interest included in home and land cost of sales (63,170) (65,327) (65,714)
Interest capitalized, end of period $
55,310 $
54,845 $
57,541
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SOURCE M.D.C. Holdings, Inc.
