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M.D.C. Holdings Announces 2017 First Quarter Results

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DENVER, May 9, 2017 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the first quarter ended March 31, 2017.

2017 First Quarter Highlights and Comparisons to 2016 First Quarter

  • Net income up 133% to $22.2 million, or $0.43 per diluted share, from $9.6 million or $0.19 per diluted share*
  • Home sale revenues up 43% to $563.5 million from $394.4 million
  • Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved 250 basis points from 14.3% to 11.8%
  • Dollar value of net new orders up 3% to $750.0 million from $726.0 million
    • Monthly sales absorption pace of 3.5, up 8%
  • Ending backlog dollar value up 11% to $1.59 billion from $1.43 billion
  • Continued industry-leading dividend payment of $0.25 per share
  • Outlook upgraded by Standard & Poor's in April

*Per share amount for 2016 first quarter has been adjusted for the 5% stock dividend declared and paid in the 2016 fourth quarter.

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "We advanced the efficiency of our build-to-order operating model during the first quarter, as demonstrated by the strength of our financial results. An improved conversion rate, coupled with a larger backlog to start the quarter, drove a 43% year-over-year increase in home sale revenues and a significant gain in operating leverage. As a result, our first quarter net income increased to $22.2 million, more than double the level of the same quarter a year ago."

Mr. Mizel continued, "Strong performance from both our homebuilding and financial services operations has greatly benefited our returns, with our last twelve months return on equity for the 2017 first quarter expanding by 350 basis points year-over-year to 8.9%. We achieved this improvement in returns without losing focus on the balance sheet, which features a unique combination of low leverage, carefully managed exposure to homebuilding assets, and liquidity of nearly $1.0 billion. Our efforts directed at prudently managing our financial position were recently recognized with an upgrade to our ratings outlook from Standard & Poor's in April."

Mr. Mizel concluded, "Our more affordable collections of home plans continue to be a key focus as we look to expand in most of our markets across the country. The demand for this product is encouraging, bolstering our view that first-time homebuyers should serve as a significant source of growth for new home sales nationwide. Some uncertainty remains because of potential changes in policy from the new administration, but we remain optimistic about the future of the homebuilding industry, supported by a solid macroeconomic environment and favorable dynamics in the balance between housing supply and demand."

Homebuilding

Home sale revenues for the 2017 first quarter increased 43% to $563.5 million, primarily driven by a 38% increase in deliveries, which was mostly the result of a 24% year-over-year increase in our homes in beginning backlog and a 500 basis point year-over-year increase in our backlog conversion rate.

For the 2017 first quarter, our gross margin from home sales was 15.9% a 40 basis point decrease from 16.3% in the prior year period. The 2017 first quarter included $4.9 million of inventory impairments while our 2016 first quarter included $3.0 million of expense to adjust our warranty accrual.

Selling, general and administrative ("SG&A") expenses for the 2017 first quarter were $66.3 million, up $10.0 million from $56.3 million for the same period in 2016. Our SG&A rate improved by 250 basis points to 11.8% for the 2017 first quarter from 14.3% in the 2016 first quarter. This decrease in our SG&A rate was primarily the result of our increase in home sale revenues and, to a lesser extent, a $2.5 million decrease in stock-based compensation.

The dollar value of net new orders for the 2017 first quarter increased 3% year-over-year to $750.0 million. The improvement was the result of a 3% increase net new order activity as our monthly sales absorption pace increased 8% year-over-year. Strong demand for our more affordable home plans was one of the key drivers of the increase in absorption pace. The positive impact of our improved monthly sales absorption pace was partially offset by a 4% year-over-year decrease in our average active community count.

Our backlog value at the end of the 2017 first quarter was up 11% year-over-year to $1.59 billion. The improvement was due mostly to an 8% increase in the number of units in backlog, which was primarily the result of (1) strong sales activity over the last-twelve months and, (2) slightly extended cycle times in certain of our larger markets.

Financial Services

Income before taxes for our financial services operations for the 2017 first quarter was $11.0 million, a $5.4 million increase from $5.6 million in the 2016 first quarter. This improvement was primarily driven by our mortgage operations segment, which had (1) year-over-year increases in the dollar value of loans locked, originated, and sold, and (2) higher gains on loans locked and originated.

Income Taxes

For the three months ended March 31, 2017 and 2016, we had effective income tax rates of 38.8% and 33.0%, respectively. The year-over-year increase in our effective tax rate was primarily the result of (1) our 2016 first quarter estimate of our full year effective tax rate including an estimate for energy credits whereas our estimate for the 2017 full year includes no such estimate as a credit for 2017 has not been approved by the U.S. Congress and (2) establishment of a valuation allowance against certain state net operating loss carryforwards where realization is more uncertain at this time. 

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 190,000 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, Northern Colorado, 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 and Seattle. MDC'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. MDC's stock 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 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 March 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.

 

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income



Three Months Ended


March 31,


2017


2016


(Dollars in thousands, except per

 share amounts)


(Unaudited)

Homebuilding:






Home sale revenues

$

563,479


$

394,420

Land sale revenues


247



2,324

Total home and land sale revenues


563,726



396,744

Home cost of sales


(468,942)



(330,026)

Land cost of sales


(211)



(1,663)

Inventory impairments


(4,850)



-

Total cost of sales


(474,003)



(331,689)

Gross margin


89,723



65,055

Selling, general and administrative expenses


(66,298)



(56,277)

Interest and other income


2,327



1,850

Other expense


(351)



(1,541)

Other-than-temporary impairment of marketable securities


(50)



(431)

Homebuilding pretax income


25,351



8,656







Financial Services:






Revenues


17,979



11,017

Expenses


(7,898)



(6,241)

Interest and other income


979



841

Other-than-temporary impairment of marketable securities


(51)



-

Financial services pretax income


11,009



5,617







Income before income taxes


36,360



14,273

Provision for income taxes


(14,111)



(4,710)

Net income

$

22,249


$

9,563







Other comprehensive income related to available for sale securities, net of tax


1,986



1,948

Comprehensive income

$

24,235


$

11,511







Earnings per share:






Basic

$

0.43


$

0.19

Diluted

$

0.43


$

0.19







Weighted average common shares outstanding






Basic


51,340,890



51,269,370

Diluted


51,590,017



51,275,117







Dividends declared per share

$

0.25


$

0.24

 

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets



March 31,


December 31,


2017


2016

ASSETS

(Dollars in thousands, except


per share amounts)

Homebuilding:

(Unaudited)




Cash and cash equivalents

$

296,731


$

259,087

Marketable securities


62,316



59,770

Restricted cash


4,229



3,778

Trade and other receivables


36,210



42,492

Inventories:






Housing completed or under construction


890,883



874,199

Land and land under development


855,208



884,615

Total inventories


1,746,091



1,758,814

Property and equipment, net


27,984



28,041

Deferred tax asset, net


70,451



74,888

Metropolitan district bond securities (related party)


31,004



30,162

Prepaid and other assets


63,419



60,463

Total homebuilding assets


2,338,435



2,317,495

Financial Services:






Cash and cash equivalents


23,331



23,822

Marketable securities


37,549



36,436

Mortgage loans held-for-sale, net


97,373



138,774

Other assets


9,860



12,062

Total financial services assets


168,113



211,094

      Total Assets

$

2,506,548


$

2,528,589

LIABILITIES AND EQUITY






Homebuilding:






Accounts payable

$

52,351


$

42,088

Accrued liabilities


141,707



144,566

Revolving credit facility


15,000



15,000

Senior notes, net


841,937



841,646

Total homebuilding liabilities


1,050,995



1,043,300

Financial Services:






Accounts payable and accrued liabilities


51,401



50,734

Mortgage repurchase facility


70,542



114,485

Total financial services liabilities


121,943



165,219

      Total Liabilities


1,172,938



1,208,519

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; 51,649,695 and 51,485,090 issued and outstanding at March 31, 2017 and December 31, 2016, respectively


516



515

Additional paid-in-capital


985,733



983,532

Retained earnings


323,304



313,952

Accumulated other comprehensive income


24,057



22,071

Total Stockholders' Equity


1,333,610



1,320,070

Total Liabilities and Stockholders' Equity

$

2,506,548


$

2,528,589

 

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows



Three Months Ended


March 31,


2017


2016


(Dollars in thousands)


(Unaudited)

Operating Activities:






Net income

$

22,249


$

9,563

Adjustments to reconcile net income to net cash provided by (used in) operating activities:






Stock-based compensation expense


595



2,987

Depreciation and amortization


1,328



1,073

Inventory impairments


4,850



-

Other-than-temporary impairment of marketable securities


101



431

Loss (gain) on sale of marketable securities


(561)



915

Deferred income tax expense


3,220



1,788

Net changes in assets and liabilities:






      Restricted cash


(451)



401

      Trade and other receivables


7,326



(15,251)

      Mortgage loans held-for-sale


41,401



33,477

      Housing completed or under construction


(20,866)



(115,357)

      Land and land under development


29,030



68,311

      Prepaid expenses and other assets


(2,407)



911

      Accounts payable and accrued liabilities


8,071



(4,234)

Net cash provided by (used in) operating activities


93,886



(14,985)







Investing Activities:






Purchases of marketable securities


(5,361)



(5,482)

Sales of marketable securities


4,983



20,600

Purchases of property and equipment


(1,122)



(1,944)

Net cash provided by (used in) investing activities


(1,500)



13,174







Financing Activities:






Payments on mortgage repurchase facility, net


(43,943)



(28,390)

Dividend payments


(12,897)



(12,252)

Proceeds from exercise of stock options


1,607



-

Net cash used in financing activities


(55,233)



(40,642)







Net increase (decrease) in cash and cash equivalents


37,153



(42,453)

Cash and cash equivalents:






      Beginning of period


282,909



180,988

      End of period

$

320,062


$

138,535

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data


New Home Deliveries





Three Months Ended March 31, 




2017


2016


 % Change



 Homes


 Dollar
Value


 Average

 Price


 Homes


 Dollar
Value


 Average

Price


 Homes


 Dollar
Value


 Average

Price



(Dollars in thousands)


Arizona

188


$

55,676


$

296.1


160


$

45,062


$

281.6


18%


24%


5%


California

229



136,483



596.0


125



75,530



604.2


83%


81%


(1)%


Nevada

187



66,133



353.7


107



38,426



359.1


75%


72%


(2)%


Washington

101



50,788



502.9


74



32,357



437.3


36%


57%


15%


West

705



309,080



438.4


466



191,375



410.7


51%


62%


7%


Colorado

336



160,187



476.7


249



121,575



488.3


35%


32%


(2)%


Utah

33



12,704



385.0


39



14,575



373.7


(15)%


(13)%


3%


Mountain

369



172,891



468.5


288



136,150



472.7


28%


27%


(1)%


Maryland

35



16,603



474.4


34



15,806



464.9


3%


5%


2%


Virginia

50



26,529



530.6


40



20,154



503.9


25%


32%


5%


Florida

97



38,376



395.6


79



30,935



391.6


23%


24%


1%


East

182



81,508



447.8


153



66,895



437.2


19%


22%


2%


Total

1,256


$

563,479


$

448.6


907


$

394,420


$

434.9


38%


43%


3%

 

Net New Orders




Three Months Ended March 31,









2017


2016


% Change


Homes


Dollar
Value


Average

 Price


Monthly

 Absorption

Rate *


Homes


Dollar

Value


Average

Price


Monthly

Absorption

 Rate *


Homes


Dollar

Value


Average

 Price


Monthly

Absorption

Rate


(Dollars in thousands)

Arizona

216


$

66,146


$

306.2


2.80


223


$

65,566


$

294.0


2.38


(3)%


1%


4%


18%

California

243



151,023



621.5


4.05


229



140,369



613.0


3.72


6%


8%


1%


9%

Nevada

295



97,496



330.5


4.80


229



77,446



338.2


3.59


29%


26%


(2)%


34%

Washington

139



72,734



523.3


4.03


124



58,639



472.9


3.01


12%


24%


11%


34%

West

893



387,399



433.8


3.83


805



342,020



424.9


3.09


11%


13%


2%


24%

Colorado

501



233,286



465.6


4.31


493



229,119



464.7


4.11


2%


2%


0%


5%

Utah

56



22,806



407.3


2.02


66



23,794



360.5


2.84


(15)%


(4)%


13%


(29)%

Mountain

557



256,092



459.8


3.87


559



252,913



452.4


3.90


(0)%


1%


2%


(1)%

Maryland

51



21,996



431.3


1.79


89



46,760



525.4


2.58


(43)%


(53)%


(18)%


(31)%

Virginia

64



33,531



523.9


3.28


85



41,378



486.8


3.33


(25)%


(19)%


8%


(2)%

Florida

131



50,985



389.2


2.30


108



42,907



397.3


2.57


21%


19%


(2)%


(11)%

East

246



106,512



433.0


2.34


282



131,045



464.7


2.76


(13)%


(19)%


(7)%


(15)%

Total

1,696


$

750,003


$

442.2


3.52


1,646


$

725,978


$

441.1


3.26


3%


3%


0%


8%

 

* Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data


Active Subdivisions










Average Active Subdivisions



Active Subdivisions


Three Months Ended



March 31,


%


March 31,


%



2017


2016


Change


2017


2016


Change


Arizona

27


30


(10)%


26


31


(16)%


California

19


21


(10)%


20


21


(5)%


Nevada

21


23


(9)%


21


21


0%


Washington

10


12


(17)%


12


14


(14)%


West

77


86


(10)%


79


87


(9)%


Colorado

40


40


0%


39


40


(3)%


Utah

8


8


0%


9


8


13%


Mountain

48


48


0%


48


48


0%


Maryland

9


13


(31)%


10


12


(17)%


Virginia

5


7


(29)%


7


9


(22)%


Florida

21


15


40%


19


14


36%


East

35


35


0%


36


35


3%


Total

160


169


(5)%


163


170


(4)%

 

Backlog





March 31,




2017


2016


% Change



Homes


Dollar
Value


Average 

Price


Homes


Dollar
Value


Average

Price


Homes


Dollar
Value


Average

Price



(Dollars in thousands)


Arizona

350


$

116,984


$

334.2


384


$

116,646


$

303.8


(9)%


0%


10%


California

495



331,926



670.6


446



297,790



667.7


11%


11%


0%


Nevada

415



140,611



338.8


317



107,850



340.2


31%


30%


(0)%


Washington

275



144,055



523.8


229



109,733



479.2


20%


31%


9%


West

1,535



733,576



477.9


1,376



632,019



459.3


12%


16%


4%


Colorado

1,129



548,614



485.9


1,066



516,264



484.3


6%


6%


0%


Utah

127



52,179



410.9


135



48,215



357.1


(6)%


8%


15%


Mountain

1,256



600,793



478.3


1,201



564,479



470.0


5%


6%


2%


Maryland

108



50,837



470.7


145



70,575



486.7


(26)%


(28)%


(3)%


Virginia

125



68,933



551.5


146



76,790



526.0


(14)%


(10)%


5%


Florida

300



132,845



442.8


203



89,046



438.7


48%


49%


1%


East

533



252,615



473.9


494



236,411



478.6


8%


7%


(1)%


Total

3,324


$

1,586,984


$

477.4


3,071


$

1,432,909


$

466.6


8%


11%


2%

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data


Homes Completed or Under Construction (WIP lots)




March 31,


%



2017


2016


Change


Unsold:







Completed

82


133


(38)%


Under construction

212


266


(20)%


Total unsold started homes

294


399


(26)%


Sold homes under construction or completed

2,322


2,169


7%


Model homes under construction or completed

324


296


9%


Total homes completed or under construction

2,940


2,864


3%

 

Lots Owned and Optioned (including homes completed or under construction)




March 31, 2017


March 31, 2016





Lots

Owned


Lots

Optioned


Total


Lots

Owned


Lots

Optioned


Total


Total %

Change


Arizona

1,736


271


2,007


1,575


247


1,822


10%


California

1,526


245


1,771


1,754


232


1,986


(11)%


Nevada

1,827


251


2,078


2,234


-


2,234


(7)%


Washington

762


-


762


892


19


911


(16)%


West

5,851


767


6,618


6,455


498


6,953


(5)%


Colorado

4,265


1,398


5,663


3,892


819


4,711


20%


Utah

350


49


399


403


72


475


(16)%


Mountain

4,615


1,447


6,062


4,295


891


5,186


17%


Maryland

196


79


275


354


199


553


(50)%


Virginia

336


-


336


528


152


680


(51)%


Florida

845


739


1,584


1,035


194


1,229


29%


East

1,377


818


2,195


1,917


545


2,462


(11)%


Total

11,843


3,032


14,875


12,667


1,934


14,601


2%

 

M.D.C. HOLDINGS, INC.

Other Financial Data


Selling, General and Administrative Expense




Three Months Ended March 31,



2017


2016


Change



(Dollars in thousands)


General and administrative expenses

$

32,369


$

31,465


$

904


General and administrative expenses as a percentage of home sale revenues


5.7%



8.0%



(230) bps












Marketing expenses

$

15,124


$

12,034


$

3,090


Marketing expenses as a percentage of home sale revenues


2.7%



3.1%



(40) bps












Commissions expenses

$

18,805


$

12,778


$

6,027


Commissions expenses as a percentage of home sale revenues


3.3%



3.2%



10 bps












Total selling, general and administrative expenses

$

66,298


$

56,277


$

10,021


Total selling, general and administrative expenses as a percentage of home sale revenues (SG&A Rate)


11.8%



14.3%



(250) bps

 

Capitalized Interest




Three Months Ended



March 31,



2017


2016



(Dollars in thousands)


Homebuilding interest incurred

$

13,188


$

13,218


Less:  Interest capitalized


(13,188)



(13,218)


Homebuilding interest expensed

$

-


$

-









Interest capitalized, beginning of period

$

68,085


$

77,541


Plus: Interest capitalized during period


13,188



13,218


Less: Previously capitalized interest included in home and land cost of sales


(15,197)



(10,976)


Interest capitalized, end of period

$

66,076


$

79,783

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mdc-holdings-announces-2017-first-quarter-results-300453803.html

SOURCE M.D.C. Holdings, Inc.

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