2014

M.D.C. Holdings Announces 2012 First Quarter Results

DENVER, May 3, 2012 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended March 31, 2012.

2012 First Quarter Highlights and Comparisons to 2011 First Quarter

  • Net income of $2.3 million, or $0.04 per diluted share, vs. net loss of $19.9 million, or $0.43 per diluted share
  • Net new orders of 1,063, up 51%
  • Backlog of 1,487 homes, up 50%
  • Home sale revenues of $184.7 million, up 13%
  • 619 homes closed, up 12%
  • Homebuilding SG&A expenses of $34.1 million, a decrease of $13.5 million, or 28%
    • G&A expense included $3.8 million in litigation recoveries
    • SG&A as a percentage of home sale revenues of 18.5%, a 1,070 basis point improvement
  • Interest expense of $0.8 million, a $7.9 million decrease
  • Unrestricted cash and investments of $816 million, which exceeded total homebuilding debt by $72 million 

Larry A. Mizel, MDC's chairman and chief executive officer, stated, "I am pleased to announce our first pretax profit since the 2006 third quarter. This achievement represents the significant progress we have made over the last several quarters in implementing our initiatives to streamline our business, improve our sales, reduce our overhead and cut our capital costs.  As a result of these efforts, we have reduced our homebuilding SG&A expenses by over $13 million as compared to the 2011 first quarter and cut our interest expense by nearly $8 million during that same period."

Mr. Mizel continued, "We recorded our strongest first quarter order level in four years, with net orders up 51% year-over-year to 1,063 homes.  The improvement in orders reflects the general improvement in the housing market, the impact of successful changes we have implemented with our sales processes and product offerings, and a reduction in our cancellation rate."

Mr. Mizel concluded, "We are encouraged by our first quarter results and believe that the recent improvement in sales demand, our ongoing efforts to reduce overhead, and our focus on improving gross margins, coupled with our strong balance sheet and liquidity, will help us pursue our goal of reaching profitability in 2012."

For the 2012 first quarter, the Company reported net income of $2.3 million, or $0.04 per diluted share, compared to a net loss of $19.9 million, or $0.43 per diluted share for the year earlier period.  The improvement in quarterly performance was driven primarily by a 13% increase in home sale revenues, a $13.5 million decrease in our homebuilding selling, general and administrative expenses, and a $7.9 million decrease in interest expense.

Homebuilding

Home sale revenues for the 2012 first quarter increased 13% to $184.7 million compared to $163.4 million for the prior year period.  The increase in revenues resulted primarily from an 12% increase in homes closed to 619 homes as compared to 554 in the prior year. The Company's average selling price for homes closed was up in most of its markets. However, on a consolidated basis, it was essentially flat at $298,300 for the 2012 first quarter due to a mix shift in closings.

Gross margin from home sales for the 2012 first quarter was 14.1% versus 13.5% for the year earlier period and 14.6% for the 2011 fourth quarter.  The 2011 first quarter included $0.3 million in inventory impairments and a $0.4 million benefit related to a warranty accrual reduction, while the 2012 first quarter did not include any inventory impairments or warranty accrual adjustments and the 2011 fourth quarter included $0.8 million in inventory impairments and a $2.3 million benefit related to a warranty accrual reduction. 

Excluding inventory impairments, warranty accrual adjustments and previously capitalized interest in cost of sales, adjusted gross margin from home sales was 16.7%* for the 2012 first quarter, higher than the 16.0%* for the 2011 first quarter and relatively flat compared to 16.8%* for the 2011 fourth quarter. The 70 basis point year-over-year improvement in the Company's adjusted gross margin from home sales was driven by closing a significantly higher percentage of homes started with buyers under contract, which historically have been more profitable than homes started without a buyer under contract. 

The Company's 2012 first quarter homebuilding selling, general and administrative ("SG&A") expenses (includes Corporate general and administrative expenses) decreased 28% to $34.1 million, compared to $47.7 million for 2011 first quarter.  The primary factors contributing to the decrease in SG&A expenses were a $7.0 million reduction in compensation-related expenses and $3.8 million in legal recoveries. SG&A expenses included $0.9 million in restructuring charges related to employee severance costs incurred in connection with further adjusting the size of the Company's workforce. 

Net new orders for the 2012 first quarter increased 51% to 1,063 homes, compared to 705 homes during the same period in 2011.  The Company's monthly sales absorption rate for the 2012 first quarter was 1.9 per community, compared to 1.5 per community for the 2011 first quarter and 0.9 per community for the 2011 fourth quarter.  The Company's cancellation rate for the 2012 first quarter was 21% versus 32% in the prior year first quarter and 43% in the 2011 fourth quarter.

The Company ended the 2012 first quarter with 1,487 homes in backlog, its highest backlog level since the 2008 second quarter, with an estimated sales value of $477 million, compared with a backlog of 993 homes with an estimated sales value of $312 million at March 31, 2011.

Financial Services

Income before taxes from our financial services segment for the 2012 first quarter was $4.9 million, compared to $1.8 million for the 2011 first quarter.  The increase in pretax income primarily reflected a $2.3 million increase in our mortgage operations pretax income from $1.0 million in the 2011 first quarter to $3.3 million for the 2012 first quarter.  The improvement in our mortgage profitability was driven largely by a $1.2 million increase in the gains on sales of mortgage loans due to favorable mortgage market conditions, a decrease in the level of special financing programs that we offered our homebuyers, combined with a $0.6 million decrease in our loan loss reserve and a $0.6 million reduction in other overhead expenses.  

Change in Financial Presentation

For the 2012 first quarter, we changed the presentation of our financial statements to provide enhanced disclosure on our homebuilding and financial services segments. Certain items were reclassified to conform to current period presentation.

About MDC

Since 1972, MDC's subsidiary companies have built and financed the American dream for more than 165,000 homebuyers. 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 Francisco Bay Area, Washington D.C., Baltimore, Philadelphia, Jacksonville and Seattle. 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 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 the Company 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 the Company, including cancellation rates, net home orders, home gross margins, and land and home values; (3) changes in interest rates, mortgage lending programs and the availability of credit; (4) changes in the market value of the Company's investments in marketable securities; (5) uncertainty in the mortgage lending industry, including repurchase requirements associated with HomeAmerican'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 the Company 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; (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; and (16) other factors over which the Company has little or no control.  Additional information about the risks and uncertainties applicable to the Company's business is contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.  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.  The Company 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.

* Please see "Reconciliation of Non-GAAP Financial Measures" on page 12.

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

 


Three Months Ended March 31,


2012


2011


(Dollars in thousands, except per share amounts)


(Unaudited)

Homebuilding:





Home sale revenues

$               184,678


$                163,383


Land sale revenues

1,590


204


 

Total home sale and land revenues

186,268


163,587


Home cost of sales

(158,654)


(140,981)


Land cost of sales

(1,490)


(17)


Inventory impairments

-


(279)



Total cost of sales

(160,144)


(141,277)




Gross margin

26,124


22,310


Selling, general and administrative expenses

(34,124)


(47,654)


Interest income

5,913


6,488


Interest expense

(808)


(8,667)


Other income (expense)

158


2,039



Homebuilding pretax loss

(2,737)


(25,484)







Financial Services:





Revenues

7,720


5,703


Expenses

(2,858)


(3,923)



Financial services pretax income

4,862


1,780





Income (loss) before income taxes

2,125


(23,704)

Benefit (provision) for income taxes

140


3,825

Net income (loss)

$                   2,265


$                (19,879)

Other comprehensive income (loss):




Unrealized gain related to available-for-sale





securities

6,548


3,303

Comprehensive income (loss)

$                   8,813


$                (16,576)






Earnings (loss) per share:





Basic

$                     0.04


$                    (0.43)


Diluted

$                     0.04


$                    (0.43)






Weighted Average Common Shares Outstanding:





Basic

47,311,840


46,716,562


Diluted

47,575,470


46,716,562






Dividends declared per share

$                     0.25


$                      0.25






M.D.C. HOLDINGS, INC.
Consolidated Balance Sheets

 



March 31, 


December 31, 



2012


2011



(Dollars in thousands, except per share amounts)

ASSETS

(Unaudited)

Homebuilding:





Cash and cash equivalents


$                  263,303


$                  316,418

Marketable securities


494,277


485,434

Restricted cash


1,080


667

Trade and other receivables


34,059


21,593

Inventories:





Housing completed or under construction


346,665


300,714

Land and land under development


488,442


505,338

Property and equipment, net


35,373


36,277

Deferred tax asset, net of valuation allowance of $277,185 and $281,178




at March 31, 2012 and December 31, 2011, respectively


-


-

Prepaid expenses and other assets


46,310


50,423

Total homebuilding assets


1,709,509


1,716,864

Financial Services:





Cash and cash equivalents


22,436


26,943

Marketable securities


35,955


34,509

Mortgage loans held-for-sale, net


54,990


78,335

Prepaid expenses and other assets


2,681


2,074

Total financial services assets


116,062


141,861

      Total Assets


$               1,825,571


$               1,858,725






LIABILITIES AND EQUITY




Homebuilding:





Accounts payable 


$                    33,416


$                    25,645

Accrued liabilities


104,605


119,188

Senior notes, net


744,288


744,108

Total homebuilding liabilities


882,309


888,941






Financial Services:





Accounts payable and accrued liabilities


49,356


52,446

Mortgage repurchase facility


25,840


48,702

Total financial services liabilities


75,196


101,148

      Total liabilities


957,505


990,089






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; 48,043,634  



and 47,981,404 issued and outstanding, respectively, at March 31, 2012 



and 48,017,108 and 47,957,196 issued and outstanding, respectively,





at December 31, 2011


480


480

Additional paid-in-capital


865,739


863,128

Retained earnings


3,198


12,927

Accumulated other comprehensive income (loss)


(692)


(7,240)

Treasury stock, at cost; 62,230 shares at March 31, 2012 and 59,912, 





    respectively, at December 31, 2011


(659)


(659)

Total Stockholders' Equity


868,066


868,636

Total Liabilities and Stockholders' Equity


$               1,825,571


$               1,858,725






M.D.C. HOLDINGS, INC.
Consolidated Statement of Cash Flows

 


Three Months


Ended March 31,


2012


2011


(Dollars in thousands)


(Unaudited)

Operating Activities:




Net income (loss)

$            2,265


$         (19,879)

Adjustments to reconcile net income (loss) to net cash 




provided by (used in) operating activities:




Stock-based compensation expense

2,611


3,121

Depreciation and amortization 

1,307


1,590

Inventory impairments and write-offs of land option deposits

82


1,061

Amortization of (premium) discount on marketable debt securities

(152)


436

    Net changes in assets and liabilities:




      Restricted cash

(413)


1

      Trade and other receivables

(11,062)


(782)

      Mortgage loans held-for-sale

23,345


27,417

      Housing completed or under construction

(45,875)


26,972

      Land and land under development

17,000


(73,507)

      Prepaid expenses and other assets

3,394


844

      Accounts payable

7,792


(11,845)

      Accrued liabilities

(19,107)


(13,130)

Net cash provided by (used in) operating activities

(18,813)


(57,701)

Investing Activities:




Purchase of marketable securities

(185,610)


(75,426)

Sale of marketable securities

182,021


74,950

Purchase of property and equipment

(364)


(483)

Purchases of held-to-maturity debt securities

-


(40,000)

Maturities of held-to-maturity debt securities

-


146,000

Net cash provided by (used in) investing activities

(3,953)


105,041

Financing Activities:




Payments on mortgage repurchase facility

(53,625)


(25,434)

Advances on mortgage repurchase facility

30,763


6,736

Dividend payments

(11,994)


(11,824)

Net cash provided by (used in) financing activities

(34,856)


(30,522)

Net increase (decrease) in cash and cash equivalents

(57,622)


16,818

Cash and cash equivalents:




      Beginning of period

343,361


572,225

      End of period

$        285,739


$        589,043

M.D.C. HOLDINGS, INC.
Selected Financial Data

 


 Three Months 




 Ended March 31, 

 Change 


2012

2011

 Amount 

%

HOMEBUILDING

 (Dollars in thousands) 






Selling, general and administrative expenses ("SG&A"):





Marketing

$               7,500

$              9,833

$          (2,333)

-24%

Commissions

6,358

5,767

591

10%

General and administrative expenses

20,266

32,054

(11,788)

-37%

Total SG&A

$             34,124

$            47,654

$        (13,530)

-28%






SG&A as a % of home sale revenues

18.5%

29.2%

-10.7%

 N/A 






Capitalization of interest:





Interest incurred

$             10,563

$            18,186

$          (7,623)

-42%






Interest capitalized, beginning of period

$             58,742

$            38,446

$          20,296

53%

Interest capitalized during period

9,785

9,519

266

3%

Less: Previously capitalized interest included 





in home cost of sales

(4,894)

(4,203)

(691)

16%

Interest capitalized, end of period

$             63,633

$            43,762

$          19,871

45%






FINANCIAL SERVICES










Financial services revenues:





Gains on sales of mortgage loans and





broker origination fees, net

$               5,456

$              4,323

$            1,133

26%

Insurance revenue

1,893

988

905

92%

Title and other revenue

371

392

(21)

-5%

Total financial services revenue

$               7,720

$              5,703

$            2,017

35%






Total originations (including transfer loans):





Loans

410

421

(11)

-3%

Principal

$           112,680

$          116,099

$          (3,419)

-3%

Capture Rate

64%

76%

-12%

N/A






Loans sold to third parties:





Loans

498

521

-23

-4%

Principal

$           134,891

$          143,274

$          (8,383)

-6%






Mortgage loan origination product mix:





FHA loans

34%

43%

-9%

N/A

Other government loans (VA & USDA)

29%

27%

2%

N/A

Total government loans

63%

70%

-7%

N/A

Conventional loans

37%

30%

7%

N/A

Jumbo loans

0%

0%

0%

N/A


100%

100%

0%

N/A






Loan type:





Fixed rate

97%

97%

0%

N/A

ARM

3%

3%

0%

N/A






Credit quality:





Average FICO Score

733

735

(2)

-0.3%






Other data:





Average Combined LTV ratio

90%

91%

-1%

N/A

Full documentation loans

100%

100%

0%

N/A

Non-full documentation loans

0%

0%

0%

N/A

 

M.D.C. HOLDINGS, INC.
Homebuilding Operational Data

 


 Three Months   




 Ended March 31, 

Change


2012

2011

Amount

%

Homes closed:





Arizona 

88

77

11

14%

California 

55

48

7

15%

Nevada 

106

66

40

61%

Washington

44

-

44

N/A

West 

293

191

102

53%

Colorado 

125

166

(41)

-25%

Utah 

52

54

(2)

-4%

Mountain 

177

220

(43)

-20%

Maryland 

44

57

(13)

-23%

Virginia 

59

43

16

37%

East 

103

100

3

3%

Florida 

46

43

3

7%

Illinois 

-

-

-

N/A

Other Homebuilding 

46

43

3

7%

Total 

619

554

65

12%







 Three Months   




 Ended March 31, 

Change


2012

2011

Amount

%

Average selling price:

 (Dollars in thousands) 

Arizona 

$           205.7

$         180.0

$            25.7

14%

California 

328.9

317.3

11.6

4%

Nevada 

205.7

201.5

4.2

2%

Washington

272.9

N/A

 N/A 

N/A

Colorado 

362.5

336.8

25.7

8%

Utah 

273.2

274.9

(1.7)

-1%

Maryland 

429.6

428.4

1.2

0%

Virginia 

446.2

430.0

16.2

4%

Florida 

243.4

229.0

14.4

6%

Illinois 

 N/A 

 N/A 

 N/A 

N/A

Company Average 

$           298.3

$         294.9

$              3.4

1%

 

M.D.C. HOLDINGS, INC.
Homebuilding Operational Data

 


 Three Months   




 Ended March 31, 

 Change 


2012

2011

 Amount 

%

Net new orders:

(Dollars in thousands)

Arizona 

187

122

65

53%

California 

121

77

44

57%

Nevada 

166

88

78

89%

Washington

76

-

76

N/A

West 

550

287

263

92%

Colorado 

235

181

54

30%

Utah 

68

67

1

1%

Mountain 

303

248

55

22%

Maryland 

83

46

37

80%

Virginia 

90

68

22

32%

East 

173

114

59

52%

Florida 

36

51

(15)

-29%

Illinois 

1

5

(4)

-80%

Other 

37

56

(19)

-34%

Total 

1,063

705

358

51%






Estimated Value of Orders for Homes, net

$       322,000

$       205,000

$       117,000

57%

Estimated Average Selling Price of Orders for Homes, net

$           302.9

$           290.8

$             12.1

4%

 



 March 31, 

 Change 

Active Subdivisions:

2012

2011

 Amount 

%

Arizona 

22

29

(7)

-24%

California 

18

16

2

13%

Nevada 

20

19

1

5%

Washington

11

-

11

N/A

West 

71

64

7

11%

Colorado 

48

42

6

14%

Utah 

17

18

(1)

-6%

Mountain 

65

60

5

8%

Maryland 

18

14

4

29%

Virginia 

16

10

6

60%

East 

34

24

10

42%

Florida 

16

13

3

23%

Illinois 

-

1

(1)

-100%

Other Homebuilding 

16

14

2

14%

Total 

186

162

24

15%

Average for quarter ended

187

155

32

21%

M.D.C. HOLDINGS, INC.
Homebuilding Operational Data

 


March 31,


2012


2011


% Change


 Homes 

 $ Value 


 Homes 

 $ Value 


 Homes 

 $ Value 


 (Dollars in thousands) 

Backlog:









Arizona 

227

$    49,000


129

$    25,100


76%

95%

California 

184

61,700


108

33,400


70%

85%

Nevada 

216

42,500


98

19,900


120%

114%

Washington

86

25,900


-

-


N/A

N/A

West 

713

179,100


335

78,400


113%

128%

Colorado 

343

127,100


288

99,500


19%

28%

Utah 

84

23,700


82

22,600


2%

5%

Mountain 

427

150,800


370

122,100


15%

24%

Maryland 

152

64,100


115

51,200


32%

25%

Virginia 

134

67,100


95

41,100


41%

63%

East 

286

131,200


210

92,300


36%

42%

Florida 

60

15,700


72

17,500


-17%

-10%

Illinois 

1

200


6

1,700


-83%

-88%

Other Homebuilding 

61

15,900


78

19,200


-22%

-17%

Total 

1,487

$  477,000


993

$  312,000


50%

53%

Estimated average selling price









of homes in backlog


$      320.8



$      314.2



2%


March 31,

Change


2012

2011

 Amount 

%

Homes started:





Unsold Started Homes - Completed

147

67

80

119%

Unsold Started Homes - Frame 

222

570

(348)

-61%

Unsold Started Homes - Foundation 

158

37

121

327%

Total Unsold Started Homes 

527

674

(147)

-22%

Sold Homes Started

872

641

231

36%

Model Homes 

236

246

(10)

-4%

Total homes started

1,635

1,561

74

5%

 


March 31, 2012


March 31, 2011

Lots owned and optioned:

Owned

Optioned

Total


Owned

Optioned

Total

Arizona 

684

118

802


1,219

241

1,460

California 

1,065

-

1,065


1,499

17

1,516

Nevada 

778

75

853


1,087

724

1,811

Washington

305

97

402


-

-

-

West

2,832

290

3,122


3,805

982

4,787

Colorado 

2,768

363

3,131


2,985

845

3,830

Utah 

451

-

451


619

369

988

Mountain

3,219

363

3,582


3,604

1,214

4,818

Maryland 

520

400

920


339

822

1,161

Virginia 

516

156

672


599

128

727

East

1,036

556

1,592


938

950

1,888

Florida 

197

255

452


232

606

838

Illinois 

123

-

123


128

-

128

Other

320

255

575


360

606

966

Total 

7,407

1,464

8,871


8,707

3,752

12,459









 

M.D.C. HOLDINGS, INC.

Reconciliation of Non-GAAP Financial Measures



Adjusted gross margin from home sales is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that inventory impairments, warranty adjustments and interest have on our Gross Margin from Home Sales and permits investors to make better comparisons with our competitors, who also break out and adjust gross margins in a similar fashion.









 Three Months Ended 


 March 31, 2012 

 Gross
Margin % 

December 31, 2011

 Gross
Margin % 

March 31, 2011

Gross
Margin % 


(Dollars in thousands)






Gross Margin

$       26,124

14.0%

$       33,827

14.1%

$       22,310

13.6%

Less: Land Sales Revenue

(1,590)


(8,360)


(204)


Add: Land Cost of Sales

1,490


8,314


17


Gross Margin from Home Sales

$       26,024

14.1%

$       33,781

14.6%

$       22,123

13.5%

Add: Inventory Impairments

-


811


279


Add: Interest in Cost of Sales

4,895


6,355


4,203


Less: Warranty Adjustments

-


(2,251)


(431)


Adjusted gross margin from home sales

$       30,919

16.7%

$       38,696

16.8%

$       26,174

16.0%

 

SOURCE M.D.C. Holdings, Inc.



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