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03.05.2018 12:00:00
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M.D.C. Holdings Announces 2018 First Quarter Results
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 | Average | Homes | Dollar | Average | Homes | Dollar | Average | ||||||||||||||
(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 | Average | Monthly | Homes | Dollar | Average | Monthly | Homes | Dollar | Average | Monthly | ||||||||||||||||
(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 | Average | Homes | Dollar | Average | Homes | Dollar | Average | ||||||||||||||
(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 | Lots | Total | Lots | Lots | Total | Total % | ||||||||
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 | ||
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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