M.D.C. Holdings Announces 2017 Fourth Quarter And Full Year Results

DENVER, Feb. 1, 2018 /PRNewswire/ -- M.D.C. Holdings, Inc. MDC announced results for the quarter and full year ended December 31, 2017.

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "Our strong performance in the 2017 full year is evidenced not only by double-digit percentage increases for home sale revenues and net income, but also by the steps we took to strengthen our financial position, enhance shareholder value, and prepare for future growth."

Mr. Mizel continued, "During the year, we added $150 million to our senior notes due January 2043, bringing the total amount outstanding to $500 million. In doing so, we pushed our average senior note maturity to almost 15 years, a strong advantage as interest rates start to rise. In addition, we expanded the capacity under our unsecured line of credit from $550 million to $700 million and extended its maturity to December 2022. We ended the year with liquidity of $1.25 billion, an increase of nearly 40% over the prior year, which provides us with additional resources to fund our future growth. Already, our plans for expansion are well underway, as shown by the nearly 10,400 lots we approved during 2017 for purchase, which was more than double our total in 2016."

Mr. Mizel concluded, "We ended the year on a strong note, with fourth quarter net home orders surging 23% year-over-year. We believe the robust demand is not only the result of solid economic fundamentals, but also our focus on affordable product. At the center of our emphasis on affordability is our Seasons^TM collection, which accounted for 15% of our fourth quarter net orders. Because of our strong sales performance, our yearend backlog value is 16% higher than a year ago, setting the stage for growth in 2018. Given our positive outlook and strong financial position, we enhanced our industry-leading dividend program with an 8% stock dividend in the fourth quarter and a 20% increase in our cash dividend declared at the start of the 2018 first quarter, reflecting our confidence in the prospects for growth against the backdrop of solid industry conditions."

Net income for the 2017 fourth quarter was $24.6 million, or $0.43 per diluted share, versus $40.4 million, or $0.72 per diluted share* for the 2016 fourth quarter. Net income for the 2017 full year was $141.8 million, or $2.48 per diluted share, versus $103.2 million, or $1.85 per diluted share*, for the 2016 full year. Net income and diluted earnings per share for the fourth quarter and year ended December 31, 2017 were impacted by the following tax-related items:

• The enactment of the Tax Cuts and Jobs Act in December 2017, which required a remeasurement of the Company's deferred tax assets, resulted in a charge of $10.0 million for both the 2017 fourth quarter and full year.
• The Company's January 1, 2017 adoption of Accounting Standard Update 2016-09, which resulted in the Company recognizing an income tax charge of $2.8 million related to tax deficiencies from stock option expirations for both the 2017 fourth quarter and full year.
• The Company realized income tax benefits of $3.5 million for the 2017 fourth quarter and $7.2 million for the 2017 full year from the release of a portion of its deferred tax asset valuation allowance relating to the sale and valuation of certain assets.

Additional 2017 Fourth Quarter Highlights and Comparisons to 2016 Fourth Quarter

• Home sale revenues of $702.6 million versus $715.8 million
• Home deliveries of 1,556 versus 1,582
• Approximately 35 home deliveries delayed to later periods due to Weyerhaeuser joist issue (net of Weyerhaeuser closings originally scheduled for the third quarter that closed in the fourth quarter)
• Gross margin from home sales percentage up 120 basis points to 17.3% from 16.1%
• Impairments of $0.6 million vs. $3.9 million
• Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") of 11.6% versus 9.5%
• Includes $5.4 million of infrequent charges to general and administrative expenses for accrual adjustments and tax planning strategies
• Financial services segment income of $11.5 million versus $11.4 million
• Dollar value of net new orders of $574.3 million, up 23% from $465.9 million
• Absorption rate increased by 31%
• Lot purchase approvals up 64% to 2,566 lots in 38 communities

Additional 2017 Full Year Highlights and Comparisons to 2016 Full Year

• Home sale revenues up 11% to $2.50 billion from $2.26 billion
• Home deliveries of 5,541 increased from 5,054
• Approximately 120 home deliveries delayed to 2018 due to Weyerhaeuser joist issue
• Gross margin from home sales percentage up 50 basis points from 16.1% to 16.6%
• Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") of 11.5% versus 11.1%
• Realized gains from the sale of investments of $54.0 million versus $1.1 million
• Financial services segment income of $43.8 million versus $36.4 million
• Dollar value of net new orders of $2.70 billion, up 6%
• Lot purchase approvals up more than 100% to 10,382 lots in 144 communities
• Pretax return on equity improved 510 basis points to 16.9%

2018 Outlook – Selected Information

• Backlog dollar value at 12/31/2017 up 16% year-over-year to $1.60 billion
• Gross margin from home sales percentage in backlog at 12/31/2017 exceeds 2017 fourth quarter closing gross profit margin of 17.3%
• Backlog conversion ratio (home deliveries divided by beginning backlog) for Q1 2018 estimated to be in the 38% to 40% range
• Active subdivision count at 12/31/2017 of 151, down 8% year-over-year
• Targeting a 10% year-over-year increase in active subdivision count from 151 at 12/31/2017 to at least 166 at 12/31/2018
• Lots controlled of 19,312 at 12/31/2017, up 32% year-over-year
• Quarterly dividend of $0.30 ($1.20 annualized) declared in January 2018, up 20% sequentially
• Preliminary estimate for full year 2018 effective tax rate of 25% to 27%, excluding impact of any potential discrete items

*All per share amounts have been adjusted for the 8% stock dividend declared and paid in the 2017 fourth quarter.

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 195,000 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, South Florida, 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, 2017, 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.

 

 

 

 

 

 

 

 

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SOURCE M.D.C. Holdings, Inc.