M.D.C. Holdings, Inc. : M.D.C. Holdings Announces 2012 First Quarter Results
05/03/2012| 06:31am US/Eastern
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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
$0.04per diluted share, vs. net loss of
$19.9 million, or $0.43per
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 millionin
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 milliondecrease
Unrestricted cash and investments of $816
million, which exceeded total homebuilding debt
by $72million
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
millionas compared to the 2011 first quarter and
cut our interest expense by nearly $8
millionduring 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
$0.04per diluted share, compared to a net
loss of $19.9 million, or
$0.43per 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 milliondecrease in our
homebuilding selling, general and administrative
expenses, and a $7.9 milliondecrease in
interest expense.
Homebuilding
Home sale revenues for the 2012 first quarter increased
13% to $184.7 millioncompared to
$163.4 millionfor 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 $298,300for 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 millionin inventory
impairments and a $0.4 millionbenefit
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 millionin inventory
impairments and a $2.3 millionbenefit
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 millionfor 2011 first
quarter. The primary factors contributing to the
decrease in SG&A expenses were a $7.0
millionreduction in compensation-related expenses
and $3.8 millionin legal recoveries. SG&A
expenses included $0.9 millionin
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
millionat 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 millionfor the 2011 first
quarter. The increase in pretax income primarily
reflected a $2.3 millionincrease in our
mortgage operations pretax income from $1.0
millionin the 2011 first quarter to $3.3
millionfor the 2012 first quarter. The
improvement in our mortgage profitability was driven
largely by a $1.2 millionincrease 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
milliondecrease in our loan loss reserve and a
$0.6 millionreduction 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,
Jacksonvilleand 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.
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