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M.D.C. Holdings Announces 2018 First Quarter Results

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M.D.C. Holdings Announces 2018 First Quarter Results

Strong earnings growth was driven by the Company's most significant year-over-year expansion of gross margin from home sales since 2013, while increased affordable product offerings and robust consumer demand yielded the Company's strongest net order absorption rate since 2006.

PR Newswire

DENVER, May 3, 2018 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE:MDC) announced results for the first quarter ended March 31, 2018.

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "We are pleased with our 2018 first quarter results, highlighted by a 74% year-over-year increase in net income. Our quarter benefited from solid top-line growth, a significant expansion of our gross margin percentage and a much lower effective tax rate. At the same time, our 2018 spring selling season kicked off with our strongest first quarter net order absorption rate since 2006. We believe that this robust sales activity was driven by strong consumer demand and limited housing supply, combined with our increased offering of more affordable homes, which more than offset any negative impact from rising mortgage rates."

Mr. Mizel continued, "We approved over 4,000 lots for purchase in the 2018 first quarter, with almost 50% of those lots designated for the Seasons collection, which is the centerpiece of our efforts to drive affordability. Even at this lower price point, we continue to offer the benefits of a build-to-order model, where our customers can personalize their homes to match their own unique preferences. We believe that this approach provides us with a competitive advantage as we look to continue to drive our growth through this important homebuyer segment."

Mr. Mizel concluded, "With our ending backlog value up nearly 20% from a year ago, we enter our second quarter with the opportunity for more significant year-over-year growth in revenues for the balance of the year, which could drive enhanced operating leverage to complement our already significantly expanded gross margin from home sales. With that in mind, we are optimistic about our prospects for the continued growth of the Company's core* pretax operating margin and return on equity in 2018."

2018 First Quarter Highlights and Comparisons to 2017 First Quarter

  • Net income up 74% to $38.8 million, or $0.68 per diluted share, from $22.2 million or $0.40 per diluted share**
    • Effective tax rate of 23.3% vs. 38.8%
  • Pretax income up 39% to $50.5 million from $36.4 million
  • Home sale revenues up 8% to $607.7 million from $563.5 million
    • Average selling price of homes delivered up 6% to $477,000
  • Gross margin from home sales percentage up 230 basis points to 18.2% from 15.9%
    • Impairments of $0.6 million vs. $4.9 million
  • Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved 10 basis points year-over-year to 11.7%
  • Dollar value of net new orders up 15% to $863.7 million from $750.0 million
    • Monthly sales absorption pace of 4.19, up 19%
  • Ending backlog dollar value up 18% to $1.88 billion from $1.59 billion
  • Lot purchase approvals more than doubled to 4,072 lots in 47 communities

*  Excluding the impact of significant one-time or infrequent items
** Per share amount has been adjusted for the 8% stock dividend declared and paid in the 2017 fourth quarter

2018 Outlook – Selected Information

  • Backlog dollar value at March 31, 2018 up 18% year-over-year to $1.88 billion
    • Gross margin from home sales in backlog at 3/31/2018 modestly exceeds 2018 first quarter closing gross margin of 18.2%
    • Backlog conversion ratio (home deliveries divided by beginning backlog) for Q2 2018 estimated to be in the 39% to 40% range
  • Active subdivision count at 3/31/2018 of 155, down 3% year-over-year but up 3% from 12/31/2017
    • Targeting a 10% year-over-year increase in active subdivision count by year end (from 151 at 12/31/2017 to at least 166 at 12/31/2018)
  • Lots controlled of 21,453 at 3/31/2018, up 44% year-over-year
  • Quarterly dividend of $0.30 ($1.20 annualized) declared in April 2018, up 30% year-over-year (after adjusting for 8% stock dividend in December 2017)
  • Revised estimate for full year 2018 effective tax rate of 24% to 26%, excluding impact of any further discrete items

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-Q for the quarter ended March 31, 2018, 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,


2018


2017


(Dollars in thousands, except per


share amounts)


(Unaudited)

Homebuilding:






Home sale revenues

$

607,688


$

563,479

Land sale revenues


-



247

Total home and land sale revenues


607,688



563,726

Home cost of sales


(496,632)



(468,942)

Land cost of sales


-



(211)

Inventory impairments


(550)



(4,850)

Total cost of sales


(497,182)



(474,003)

Gross profit


110,506



89,723

Selling, general and administrative expenses


(71,341)



(66,298)

Interest and other income


1,859



2,327

Other expense


(563)



(351)

Other-than-temporary impairment of marketable securities


-



(50)

Homebuilding pretax income


40,461



25,351







Financial Services:






Revenues


19,035



17,979

Expenses


(8,831)



(7,898)

Interest and other income


1,020



979

Other expense


(1,153)



-

Other-than-temporary impairment of marketable securities


-



(51)

Financial services pretax income


10,071



11,009







Income before income taxes


50,532



36,360

Provision for income taxes


(11,768)



(14,111)

Net income

$

38,764


$

22,249







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


-



1,986

Comprehensive income

$

38,764


$

24,235







Earnings per share:






Basic

$

0.69


$

0.40

Diluted

$

0.68


$

0.40







Weighted average common shares outstanding:






Basic


55,871,087



55,448,161

Diluted


56,895,892



55,717,218







Dividends declared per share

$

0.30


$

0.23

 

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets



March 31,


December 31,


2018


2017

ASSETS

(Dollars in thousands, except


per share amounts)

Homebuilding:


(Unaudited)




Cash and cash equivalents

$

352,868


$

472,957

Marketable securities


49,817



49,634

Restricted cash


6,198



8,812

Trade and other receivables


52,909



53,362

Inventories:






Housing completed or under construction


1,009,197



936,685

Land and land under development


964,660



893,051

Total inventories


1,973,857



1,829,736

Property and equipment, net


53,368



26,439

Deferred tax asset, net


40,484



41,480

Prepaid and other assets


38,015



75,666

Total homebuilding assets


2,567,516



2,558,086

Financial Services:






Cash and cash equivalents


48,514



32,471

Marketable securities


40,912



42,004

Mortgage loans held-for-sale, net


113,158



138,114

Other assets


17,062



9,617

Total financial services assets


219,646



222,206

      Total Assets

$

2,787,162


$

2,780,292

LIABILITIES AND EQUITY






Homebuilding:






Accounts payable

$

53,347


$

39,655

Accrued liabilities


155,245



166,312

Revolving credit facility


15,000



15,000

Senior notes, net


986,932



986,597

Total homebuilding liabilities


1,210,524



1,207,564

Financial Services:






Accounts payable and accrued liabilities


54,019



53,101

Mortgage repurchase facility


90,126



112,340

Total financial services liabilities


144,145



165,441

      Total Liabilities


1,354,669



1,373,005

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; 56,219,643 and 56,123,228 issued and outstanding at March 31, 2018 and December 31, 2017, respectively


562



561

Additional paid-in-capital


1,146,102



1,144,570

Retained earnings


285,829



258,164

Accumulated other comprehensive income


-



3,992

Total Stockholders' Equity


1,432,493



1,407,287

Total Liabilities and Stockholders' Equity

$

2,787,162


$

2,780,292

 

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows



Three Months Ended


March 31,


2018


2017


(Dollars in thousands)


(Unaudited)

Operating Activities:





Net income

$

38,764


$

22,249

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






Stock-based compensation expense


1,251



595

Depreciation and amortization


4,636



1,328

Inventory impairments


550



4,850

Other-than-temporary impairment of marketable securities


-



101

Net gain on sale of available-for-sale marketable securities


-



(561)

Net loss on marketable equity securities


1,153



-

Amortization of discount / premiums on marketable debt securities, net


(182)



-

Deferred income tax expense


423



3,220

Net changes in assets and liabilities:






      Trade and other receivables


(3,261)



7,326

      Mortgage loans held-for-sale


24,956



41,401

      Housing completed or under construction


(65,378)



(20,866)

      Land and land under development


(71,552)



29,030

      Prepaid and other assets


389



(2,407)

      Accounts payable and accrued liabilities


6,765



8,071

Net cash provided by (used in) operating activities


(61,486)



94,337







Investing Activities:






Purchases of marketable securities


(8,761)



(5,361)

Sales of marketable securities


8,700



4,983

Purchases of property and equipment


(6,316)



(1,122)

Net cash used in investing activities


(6,377)



(1,500)







Financing Activities:






Payments on mortgage repurchase facility, net


(22,214)



(43,943)

Dividend payments


(16,865)



(12,897)

Proceeds from exercise of stock options


282



1,607

Net cash used in financing activities


(38,797)



(55,233)







Net increase (decrease) in cash, cash equivalents and restricted cash


(106,660)



37,604

Cash, cash equivalents and restricted cash:






      Beginning of period


514,240



286,687

      End of period

$

407,580


$

324,291







Reconciliation of cash, cash equivalents and restricted cash:






Homebuilding:






Cash and cash equivalents

$

352,868


$

296,731

Restricted cash


6,198



4,229

Financial Services:






Cash and cash equivalents


48,514



23,331

Total cash, cash equivalents and restricted cash

$

407,580


$

324,291

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data


New Home Deliveries




 Three Months Ended March 31, 



2018


2017


 % Change



 Homes


Dollar
Value


Average
Price


 Homes


Dollar
Value


Average
Price


 Homes


Dollar
Value


Average
Price



(Dollars in thousands)


West

681


$

319,509


$

469.2


705


$

309,080


$

438.4


(3)%


3%


7%


Mountain

416



208,632



501.5


369


172,891


468.5


13%


21%


7%


East

177



79,547



449.4


182



81,508



447.8


(3)%


(2)%


0%


Total

1,274


$

607,688


$

477.0


1,256


$

563,479


$

448.6


1%


8%


6%

 

Net New Orders



 Three Months Ended March 31, 


2018


2017


% 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)

West

1,033


$

458,195


$

443.6


4.78


893


$

387,399


$

433.8


3.83


16%


18%


2%


25%

Mountain

667


327,006


490.3


3.92


557


256,092


459.8


3.87


20%


28%


7%


1%

East

204



78,459



384.6


2.99


246



106,512



433.0


2.34


(17)%


(26)%


(11)%


28%

Total

1,904


$

863,660


$

453.6


4.19


1,696


$

750,003


$

442.2


3.52


12%


15%


3%


19%




*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



March 31,


%


March 31,


%



2018


2017


Change


2018


2017


Change


West

73


77


(5)%


72


79


(9)%


Mountain

58


48


21%


57


48


19%


East

24


35


(31)%


23


36


(36)%


Total

155


160


(3)%


152


163


(7)%

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data


Backlog




March 31,



2018


2017


% Change



Homes


Dollar
Value


Average
Price


Homes


Dollar
Value


Average
Price


Homes


Dollar
Value


Average
Price



(Dollars in thousands)


West

1,803


$

923,326


$

512.1


1,535


$

733,576


$

477.9


17%


26%


7%


Mountain

1,504



766,010



509.3


1,256



600,793



478.3


20%


27%


6%


East

482



190,102



394.4


533



252,615



473.9


(10)%


(25)%


(17)%


Total

3,789


$

1,879,438


$

496.0


3,324


$

1,586,984


$

477.4


14%


18%


4%

 

Homes Completed or Under Construction (WIP lots)




March 31,


%



2018


2017


Change


Unsold:







Completed

86


82


5%


Under construction

203


212


(4)%


Total unsold started homes

289


294


(2)%


Sold homes under construction or completed

2,549


2,322


10%


Model homes under construction or completed

366


324


13%


Total homes completed or under construction

3,204


2,940


9%

 

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




March 31, 2018


March 31, 2017





Lots
Owned


Lots
Optioned


Total


Lots
Owned


Lots
Optioned


Total


Total %
Change


West

7,421


2,205


9,626


5,851


767


6,618


45%


Mountain

5,206


3,398


8,604


4,615


1,447


6,062


42%


East

1,531


1,692


3,223


1,377


818


2,195


47%


Total

14,158


7,295


21,453


11,843


3,032


14,875


44%

 

M.D.C. HOLDINGS, INC.

Other Financial Data


Selling, General and Administrative Expenses




Three Months Ended March 31,



2018


2017


Change



(Dollars in thousands)


General and administrative expenses

$

35,753


$

32,369


$

3,384


General and administrative expenses as a percentage of home sale revenues


5.9%



5.7%



20 bps












Marketing expenses

$

15,571


$

15,124


$

448


Marketing expenses as a percentage of home sale revenues


2.6%



2.7%



(10) bps












Commissions expenses

$

20,017


$

18,805


$

1,212


Commissions expenses as a percentage of home sale revenues


3.3%



3.3%



0 bps












Total selling, general and administrative expenses

$

71,341


$

66,298


$

5,044


Total selling, general and administrative expenses as a percentage of home sale revenues


11.7%



11.8%



(10) bps

 

Capitalized Interest




Three Months Ended



March 31,



2018


2017



(Dollars in thousands)


Homebuilding interest incurred

$

15,625


$

13,188


Less:  Interest capitalized


(15,625)



(13,188)


Homebuilding interest expensed

$

-


$

-









Interest capitalized, beginning of period

$

57,541


$

68,085


Plus: Interest capitalized during period


15,625



13,188


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


(14,428)



(15,197)


Interest capitalized, end of period

$

58,738


$

66,076

 

Cision View original content:http://www.prnewswire.com/news-releases/mdc-holdings-announces-2018-first-quarter-results-300641809.html

SOURCE M.D.C. Holdings, Inc.

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