M.D.C. Holdings Announces Third Quarter 2020 Results, Dividend Increase, And Management Promotions
DENVER, Oct. 29, 2020 /PRNewswire/ -- M.D.C Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended September 30, 2020.
Larry A. Mizel, MDC's newly appointed Executive Chairman, stated, "MDC posted another quarter of significant top and bottom line growth in the third quarter of 2020. Home sales revenue grew 33% year-over-year, while net income rose at nearly three times that rate thanks to the operational leverage we were able to achieve in the quarter. Both our home sale gross margin and our SG&A leverage improved during the quarter, a testament to our ability to drive revenue growth while keeping costs in check."
Mr. Mizel continued, "We experienced extremely strong order activity in the third quarter, with net new orders up 73% year-over-year on an absorption pace of 6.1 homes per community per month. The demand has been broad-based both from a geographic and buyer segment standpoint, allowing us to implement price increases at a majority of our communities during the quarter. We believe this demand is being driven by a number of factors, including low interest rates, scarce resale inventory and an accelerating demographic shift towards homebuying."
Mr. Mizel concluded, "MDC remains well positioned to take advantage of the shifts we are seeing in our industry thanks to our focus on the more affordable segments of the market, our geographic footprint and our build-to-order operating model. The favorable industry fundamentals we are experiencing coupled with our market positioning and strategic focus has our Company primed for growth. With a backlog sales value at the end of the quarter nearly 50% higher than a year ago, we expect to end 2020 on a strong note and carry that momentum into 2021."
Dividend Increase
The Company also announced that its board of directors has declared a quarterly cash dividend of forty cents ($0.40) per share on the Company's common stock. The dividend will be paid on Tuesday, November 24th, 2020 to shareholders of record on Tuesday, November 10th, 2020.
Mr. Mizel said, "The dividend increase this quarter reflects our continued confidence in the time-tested operating strategy that we execute at the Company. The dividend has been a key element in our long-standing efforts to generate strong risk-adjusted returns for our shareholders."
Management Promotions and Changes
Additionally, the Company disclosed a number of promotions and changes with the Company's senior management team.
Mr. Mizel will continue his leadership role with MDC as the newly appointed Executive Chairman. As Executive Chairman, Mr. Mizel will continue to be actively involved in all aspects of the Company's operations and continue to set the strategic direction for MDC. Mr. Mizel founded the Company in 1972 and has served as a Director and Chairman since that time.
David D. Mandarich has been appointed as the new President and Chief Executive Officer of MDC. Mr. Mandarich has been associated with the Company since 1977 and has served as President and Chief Operating Officer of the Company since 1999. He has also served as a member of the Company's Board of Directors for 35 years.
Rebecca Givens has been appointed as Senior Vice President and General Counsel of MDC, following the retirement of Michael Touff, who served in the role for more than 25 years. Ms. Givens joins the Company with over 30 years of experience in the Legal field, most recently as Senior Vice President & General Counsel for Spectrum Retirement Communities.
Staci Woolsey has been appointed as Chief Accounting Officer of MDC. In this role, Staci will have oversight over corporate and divisional accounting, financial reporting, planning and analysis, audit and office administration. Ms. Woolsey joined the Company in November 2018 as Vice President and Corporate Controller and is an accomplished finance executive with more than twenty years of global accounting, finance and leadership experience.
David Viger has been promoted to serve as Chief Operating Officer for Richmond American Homes. In this new role, Mr. Viger will have direct management responsibility for most of MDC's Richmond American subsidiaries. Mr. Viger joined the Company in 2004 and, prior to his promotion to Regional President in 2015, served as Division President for several different markets across the country.
Anthony Berris has been promoted to President of Financial Services, continuing in his role as President of HomeAmerican Mortgage Corporation ("HMC") but also adding increased oversight responsibility over our other four financial services entities. Anthony joined HMC in 2006 and was promoted to President of HMC in 2012.
Dawn Huth has been promoted to Senior Vice President of National Finance for Richmond American Homes, overseeing the division finance function for our homebuilding operations. She joined the Company in 2009 in an Audit Management role, and in 2014 she was promoted to Vice President of Division Finance.
"The promotion of key leaders in our organization is a critical step in the evolution of our Company," said Mr. Mizel. "As a part of our expanding leadership team, I am confident that they will help continue MDC's long-standing excellence in generating strong risk-adjusted returns for its shareholders."
Mr. Mizel concluded, "On behalf of the Board of Directors and executive management team, I want to express my sincere gratitude to Michael Touff, who is retiring after 26 years of service to our Company. Michael's leadership and counsel will be missed and we wish him all the best in his retirement."
2020 Third Quarter Highlights and
Comparisons to 2019 Third Quarter
---
--
Home sale revenues increased
33% to $1.0 billion from $750.3 million
--
Unit
deliveries
up 25% to
2,147
-- Average
selling
price of
deliveries
up 6% to
$466,000
--
Homebuilding pretax income
increased 109% to $101.7 million from
$48.7 million
--
Gross margin
from home
sales
increased
170 basis
points to
20.5% from
18.8%
-- Selling,
general and
administrative
expenses as
a percentage
of home sale
revenues
("SG&A
rate")
improved by
200 basis
points to
10.4%
-- Financial services pretax income
increased 73% to $24.4 million vs. $14.1
million
-- Net income of $98.9 million, or $1.49
per diluted share, up 96% from $50.6
million or $0.79 per diluted share
-- Effective
tax rate of
21.5% vs.
19.5%
-- Dollar value of net new orders
increased 89% to $1.65 billion from
$871.7 million
-- Unit net
orders
increased
73% to 3,515
-- Average
selling
price of net
orders up
10%
-- Dollar value of ending backlog up 47% to
$3.08 billion from $2.10 billion
-- Unit
backlog
increased
41% to 6,511
-- Average
selling
price of
homes in
backlog up
4%
2020/2021 Outlook and Other Selected
Information(1)
---
-- Home deliveries for the 2020 fourth
quarter between 2,400 and 2,600
-- Average
selling
price for
2020 fourth
quarter unit
deliveries
exceeding
$460,000
--
Gross margin
from home
sales for
the 2020
fourth
quarter
approaching
21%
(excluding
impairments
and warranty
adjustments)
--
Preliminary target of at least
10,000 home deliveries for 2021
-- Lots controlled of 26,830 at September
30, 2020, up 8% year-over-year
-- Quarterly cash dividend of forty cents
($0.40) per share declared on October 26,
2020, up 21% from the prior quarter and
33% from the prior year
1 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 210,000 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 the impact of the COVID-19 pandemic, changes in consumer confidence, inflation or deflation and employment levels; (2) changes in business conditions experienced by MDC, including restrictions on business activities resulting from the COVID-19 pandemic, 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 orders addressing the COVID-19 pandemic, 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, 2020, 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,
---
2020 2019 2020 2019
---
(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues $
1,000,549 $
750,274 $
2,584,392 $
2,130,396
Home cost of sales (795,172) (609,316) (2,061,608) (1,724,040)
Inventory impairments - (610)
Total cost of sales (795,172) (609,316) (2,061,608) (1,724,650)
Gross profit 205,377 140,958 522,784 405,746
Selling, general and administrative expenses (103,632) (92,716) (285,269) (257,689)
Interest and other income 756 2,336 3,365 7,491
Other expense (851) (1,887) (4,640) (4,188)
Homebuilding pretax income 101,650 48,691 236,240 151,360
Financial Services:
Revenues 36,803 22,388 91,653 58,389
Expenses (13,294) (10,352) (36,401) (28,883)
Other income (expense), net 859 2,079 (5,274) 11,877
Financial services pretax income 24,368 14,115 49,978 41,383
Income before income taxes 126,018 62,806 286,218 192,743
Provision for income taxes (27,080) (12,226) (66,124) (47,020)
Net income $
98,938 $
50,580 $
220,094 $
145,723
Comprehensive income $
98,938 $
50,580 $
220,094 $
145,723
Earnings per share:
Basic $
1.54 $
0.81 $
3.46 $
2.36
Diluted $
1.49 $
0.79 $
3.37 $
2.29
Weighted average common shares outstanding:
Basic 63,868,486 61,978,195 63,129,077 61,422,925
Diluted 65,824,910 63,968,215 64,969,855 63,360,535
Dividends declared per share $
0.33 $
0.30 $
0.99 $
0.90
M.D.C. HOLDINGS, INC.
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2020 2019
---
(Dollars in thousands, except
per share amounts)
ASSETS
Homebuilding:
Cash and cash equivalents $
432,277 $
424,186
Restricted cash 19,732 14,279
Trade and other receivables 90,609 65,829
Inventories:
Housing completed or under
construction 1,423,855 1,036,191
Land and land under development 1,221,854 1,330,384
Total inventories 2,645,709 2,366,575
Property and equipment, net 64,024 60,414
Deferred tax asset, net 13,297 21,768
Prepaid and other assets 78,421 78,358
Total homebuilding assets 3,344,069 3,031,409
Financial Services:
Cash and cash equivalents 70,435 35,747
Marketable securities - 56,747
Mortgage loans held-for-sale, net 160,506 197,021
Other assets 37,764 17,432
Total financial services assets 268,705 306,947
Total Assets $
3,612,774 $
3,338,356
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable $
103,260 $
87,364
Accrued and other liabilities 259,261 245,940
Revolving credit facility 10,000 15,000
Senior notes, net 1,037,225 989,422
Total homebuilding liabilities 1,409,746 1,337,726
Financial Services:
Accounts payable and accrued
liabilities 84,168 68,529
Mortgage repurchase facility 130,861 149,616
Total financial services liabilities 215,029 218,145
Total Liabilities 1,624,775 1,555,871
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;
64,865,577 and 62,574,961 issued and
outstanding at September 30, 2020 and
December 31, 2019, respectively 649 626
Additional paid-in-capital 1,397,220 1,348,733
Retained earnings 590,130 433,126
Total Stockholders' Equity 1,987,999 1,782,485
Total Liabilities and Stockholders'
Equity $
3,612,774 $
3,338,356
M.D.C. HOLDINGS, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
---
(Dollars in thousands)
Operating Activities:
Net income $
98,938 $
50,580 $
220,094 $
145,723
Adjustments to reconcile net income to net cash provided by operating
activities:
Stock-based compensation expense 8,608 9,795 18,536 18,178
Depreciation and amortization 7,354 5,537 18,881 15,478
Inventory impairments - 610
Net (gain) loss on marketable equity securities - (767) 8,285 (7,934)
Deferred income tax expense 6,531 1,729 8,493 9,488
Net changes in assets and liabilities:
Trade and other receivables 5,933 (4,646) (17,512) (4,682)
Mortgage loans held-for-sale, net 13,061 (7,683) 36,515 32,191
Housing completed or under construction (153,440) (133,221) (387,269) (251,749)
Land and land under development 13,792 (34,899) 108,710 (10,461)
Prepaid and other assets (21,523) 317 (20,314) (3,889)
Accounts payable and accrued liabilities (5,516) 24,475 35,023 23,929
Net cash provided by (used in) operating activities (26,262) (88,783) 29,442 (33,118)
Investing Activities:
Purchases of marketable securities - (5,224) (10,804) (10,340)
Sales of marketable securities - 1,220 59,266 6,277
Purchases of property and equipment (7,917) (6,268) (20,885) (20,128)
Net cash provided by (used in) investing activities (7,917) (10,272) 27,577 (24,191)
Financing Activities:
Payments on mortgage repurchase facility, net (11,233) 7,432 (18,755) (26,344)
Payments on homebuilding line of credit, net - (5,000)
Repayment of senior notes - (250,000)
Proceeds from issuance of senior notes - 298,050
Dividend payments (21,374) (18,701) (63,056) (54,337)
Issuance of shares under stock-based compensation
programs, net 28,642 16,304 29,974 16,304
Net cash (used in) financing activities (3,965) (12,293) (8,787) (64,377)
Net increase (decrease) in cash, cash equivalents and
restricted cash (38,144) (111,348) 48,232 (121,686)
Cash, cash equivalents and restricted cash:
Beginning of period 560,588 459,801 474,212 470,139
End of period $
522,444 $
348,453 $
522,444 $
348,453
Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents $
432,277 $
285,338 $
432,277 $
285,338
Restricted cash 19,732 16,325 19,732 16,325
Financial Services:
Cash and cash equivalents 70,435 46,790 70,435 46,790
Total cash, cash equivalents and restricted cash $
522,444 $
348,453 $
522,444 $
348,453
New Home Deliveries
Three Months Ended September 30,
2020 2019
% Change
---
Homes Home Sale Average Homes Home Sale Average Homes Home Average
Revenues Price Revenues Price Sale Price
Revenues
---
(Dollars in thousands)
West 1,135 $
552,319 $
486.6 927 $
410,414 $
442.7 22 35 10
% % %
Mountain 677 347,095 512.7 537 263,802 491.2 26 32 4
% % %
East 335 101,135 301.9 249 76,058 305.5 35 33 (1)
% % %
Total 2,147 $
1,000,549 $
466.0 1,713 $
750,274 $
438.0 25 33 6
% % %
Nine Months Ended September 30,
2020 2019
% Change
--- ---
Homes Home Sale Average Homes Home Sale Average Homes Home Average
Revenues Price Revenues Price Sale Price
Revenues
---
(Dollars in thousands)
West 3,023 $
1,447,934 $
479.0 2,464 $
1,164,502 $
472.6 23 24 1
% % %
Mountain 1,720 886,619 515.5 1,480 760,470 513.8 16 17 0
% % %
East 851 249,839 293.6 641 205,424 320.5 33 22 (8)
% % %
Total 5,594 $
2,584,392 $
462.0 4,585 $
2,130,396 $
464.6 22 21 (1)
% % %
Net New Orders
Three Months Ended September 30,
2020 2019
% 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 1,955 $
932,111 $
476.8 6.58 1,168 $
516,000 $
441.8 4.09 67 81 8
%
% % % 61
Mountain 1,051 542,375 516.1 5.70 565 271,800 481.1 2.86 86 100 7
%
% % % 99
East 509 176,896 347.5 5.39 303 83,896 276.9 3.58 68 111 26
%
% % % 50
Total 3,515 $
1,651,382 $
469.8 6.10 2,036 $
871,696 $
428.1 3.59 73 89 10
%
% % % 70
Nine Months Ended September 30,
2020 2019
% 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 4,646 $
2,265,557 $
487.6 5.47 3,379 $
1,543,584 $
456.8 4.14 37 47 7
%
% % % 32
Mountain 2,502 1,309,176 523.3 4.39 1,974 960,109 486.4 3.30 27 36 8
%
% % % 33
East 1,156 393,913 340.8 4.23 912 268,578 294.5 4.02 27 47 16
%
% % % 5
Total 8,304 $
3,968,646 $
477.9 4.91 6,265 $
2,772,271 $
442.5 3.82 33 43 8
%
% % % 28
*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, %
2020 2019 Change 2020 2019 Change 2020 2019 Change
---
West 102 93 10 99 96 3 94 92 2
% % %
Mountain 61 67 (9) 62 66 (6) 63 66 (5)
% % %
East 31 30 3 32 29 10 30 25 20
% % %
Total 194 190 2 193 191 1 187 183 2
% % %
Backlog
September 30,
2020 2019
% Change
---
Homes
Dollar Average Homes
Dollar Average Homes Dollar Average
Value Price Value Price Value Price
---
(Dollars in thousands)
West 3,646 $
1,743,547 $
478.2 2,438 $
1,146,912 $
470.4 50 52 2
% % %
Mountain 1,993 $
1,033,264 518.4 1,537 $
768,317 499.9 30 34 4
% % %
East 872 $
298,965 342.9 641 $
183,856 286.8 36 63 20
% % %
Total 6,511 $
3,075,776 $
472.4 4,616 $
2,099,085 $
454.7 41 47 4
% % %
Homes Completed or Under Construction (WIP lots)
September 30, %
2020 2019 Change
---
Unsold:
Completed 74 82 (10)
%
Under construction 129 255 (49)
%
Total unsold started 203 337 (40)
homes
%
Sold homes under
construction or %
completed 4,540 3,433 32
Model homes under
construction or %
completed 505 455 11
Total homes completed
or under %
construction 5,248 4,225 24
Lots Owned and Optioned (including homes completed or under construction)
September 30, 2020
September 30, 2019
Lots Lots Total Lots Lots Total Total
Owned Optioned Owned Optioned % Change
---
West 10,140 3,280 13,420 9,128 2,203 11,331 18
%
Mountain 6,217 2,708 8,925 6,456 3,139 9,595 (7)
%
East 2,716 1,769 4,485 2,014 2,003 4,017 12
%
Total 19,073 7,757 26,830 17,598 7,345 24,943 8
%
Selling, General and Administrative Expenses
Three Months Ended September 30,
Nine Months Ended September 30,
---
2020 2019 Change 2020 2019 Change
---
(Dollars in thousands)
General and administrative
expenses $
45,980 $
46,951 $
(971) $
131,488 $
128,849 $
2,639
General and administrative
expenses as a percentage %
of home sale revenues 4.6
% 6.3 -170 bps 5.1
% 6.0
% -90 bps
Marketing expenses $
24,725 $
20,457 $
4,268 $
68,828 $
58,266 $
10,562
Marketing expenses as a
percentage of home sale %
revenues 2.5
% 2.7 -20 bps 2.7
% 2.7
% 0 bps
Commissions expenses $
32,927 $
25,308 $
7,619 $
84,953 $
70,574 $
14,379
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 $
103,632 $
92,716 $
10,916 $
285,269 $
257,689 $
27,580
Total selling, general and
administrative expenses as %
a percentage of home sale
revenues 10.4
% 12.4 -200 bps 11.0
% 12.1
% -110 bps
Capitalized Interest
Three Months Ended
Nine Months Ended
September 30, September 30,
---
2020 2019 2020 2019
---
(Dollars in thousands)
Homebuilding interest
incurred $
14,799 $
15,879 $
46,427 $
47,890
Less: Interest
capitalized (14,799) (15,879) (46,427) (47,890)
Homebuilding interest
expensed
$
$
$
$
Interest capitalized,
beginning of period $
56,929 $
58,193 $
55,310 $
54,845
Plus: Interest
capitalized during
period 14,799 15,879 46,427 47,890
Less: Previously
capitalized interest
included in home cost
of sales (16,511) (14,451) (46,520) (43,114)
Interest capitalized,
end of period $
55,217 $
59,621 $
55,217 $
59,621
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SOURCE M.D.C. Holdings, Inc.
