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Press release from PR Newswire

M.D.C. Holdings Announces First Quarter 2011 Results

Tuesday, May 10, 2011

M.D.C. Holdings Announces First Quarter 2011 Results06:00 EDT Tuesday, May 10, 2011- Revenue increased 15% to $169.7 million - Closings increased 6% to 554 homes - Net loss of $19.9 million or $0.43 per share - Net orders decreased 24% to 705 homes - Active subdivisions increased 23% to 162 - Entered Seattle market in April via acquisition of assets from SDC HomesDENVER, May 10, 2011 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) today reported a net loss for the 2011 first quarter of $19.9 million, or $0.43 per share, compared with net loss for the 2010 first quarter of $20.9 million, or $0.45 per share.  Revenue increased 15% to $169.7 million, compared with $147.1 million a year ago.Management CommentsLarry A. Mizel, MDC's chairman and chief executive officer, stated, "Difficult market conditions, coupled with the absence of the federal homebuyer tax credit, resulted in a reduction in net home orders during the three months ended March 31, 2011 compared with the same period during 2010.  However, we have seen sequential improvement in home orders during each month in 2011 through April, consistent with seasonality."Mizel continued, "Top-line growth is a key component of the strategy we are executing in an effort to return to profitability.  We pursued that growth strategy by entering the Seattle market in April 2011 through the purchase of substantially all of the homebuilding assets of SDC Homes, which ranked as Seattle's third largest builder.  We have also dedicated substantial resources towards increasing market share in our current footprint, as shown by a 23% year-over-year increase in our active subdivision count at the end of the 2011 first quarter." "Our home gross margins have come under pressure over the past few quarters for several reasons.  First, our land costs have increased significantly, as the market for acquiring finished residential lots in prime locations has been very competitive, despite the continuing overall weakness in the market for new homes.  However, we believe our current land costs are consistent with our historical costs.  Furthermore, first quarter home gross margins in our newer projects, which accounted for more than 50% of closings, exceeded the home gross margins we achieved in older projects."Mizel concluded, "Second, we have accepted lower gross margins to reduce our excess supply of unsold units under construction.  Given that our land costs have returned to a level consistent with our historical average and we have substantially reduced our unsold inventory, we believe we have an opportunity to stabilize our home gross margins near current levels, if demand does not deteriorate further."First Quarter HighlightsHome closings for the first quarter ended March 31, 2011 increased to 554 homes with an average selling price of $294,900, compared with home closings of 523 homes with an average selling price of $269,500 during the same period in 2010.  Total revenue for the first quarter of 2011 was $169.7 million, compared with revenue of $147.1 million for the same period in 2010.  The increase in revenue was driven primarily by the 6% increase in home closings and the 9% year-over-year increase in average selling price.  Net orders for the first quarter ended March 31, 2011 decreased to 705 homes with an estimated sales value of $205 million, compared with net orders for 931 homes with an estimated sales value of $258 million during the same period in 2010.  The decrease in net orders is attributable to an increase in our cancellation rate for the quarter, which rose to 32% from 22% during the first quarter of 2010, in addition to decreased absorptions per community, as the first quarter of 2010 was heavily influenced by the homebuyer tax credit.  We ended the 2011 first quarter with 993 homes under contract with an estimated sales value of $312 million, compared with a backlog of 1,234 homes with an estimated sales value of $381 million at March 31, 2010. Home gross margin in the 2011 first quarter was 13.7% as compared with 22.4% in the 2010 first quarter.  Excluding interest expense and warranty adjustments, home gross margin was 16.0% in the first quarter of 2011 as compared with 21.9% in the first quarter of 2010.  Looking at the trend in backlog, our estimated home gross margin at the end of the first quarter was roughly equal to the estimated home gross margin to start the quarter.General and administrative expenses decreased to $36.8 million for the quarter ended March 31, 2011, compared with $40.2 million for the same period in the prior year. The decrease was driven primarily by lower legal costs and employee compensation expense.  Marketing costs were $9.8 million in the first quarter of 2011, compared with $7.1 million in the first quarter of 2010, primarily due to the year-over-year increase in our community count.  Commission costs were $5.8 million as compared with $5.1 million in the same quarter last year, inline with the increase in revenue.About MDCSince 1972, MDC's subsidiary companies have built and financed the American dream for more than 165,000 families. 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 Denver, Colorado Springs, Salt Lake City, Las Vegas, Phoenix, Tucson, California, Northern Virginia, Maryland, Philadelphia/Delaware Valley, Jacksonville and 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 StatementsCertain 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) changes in consumer confidence and preferences; (16) terrorist acts and other acts of war; and (17) 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 Form 10-Q for the quarter ended March 31, 2011, 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.  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.M.D.C. HOLDINGS, INC.Consolidated Statements of Operations(In thousands, except per share amounts)(Unaudited) Three Months   Ended March 31, 2011 2010 RevenueHome sales revenue$ 163,383$ 140,943Land sales revenue20415Other revenue6,1606,120Total Revenue169,747147,078Costs and ExpensesHome cost of sales140,981109,390Land cost of sales17191Asset impairments279-Marketing expenses9,8337,060Commission expenses5,7675,129General and administrative expenses36,75240,203Other operating expenses(1,550)491Related party expenses49Total Operating Costs and Expenses192,083162,473Loss from Operations(22,336)(15,395)Other income (expense)Interest income7,3264,428Interest expense(8,730)(10,374)Gain (loss) on sale of other assets3699Loss before Income Taxes(23,704)(21,242)Benefit from income taxes, net3,825369Net Loss$ (19,879)$ (20,873)Loss Per ShareBasic$     (0.43)$     (0.45)Diluted$     (0.43)$     (0.45)Dividends Declared Per Share$       0.25$       0.25M.D.C. HOLDINGS, INC.Consolidated Balance Sheets(Dollars in thousands, except per share amounts)(Unaudited) March 31, December 31, 2011 2010 AssetsCash and cash equivalents$    589,043$    572,225Marketable securities866,072968,729Restricted cash419420ReceivablesHome sales receivables10,0518,530Income taxes receivable13,4422,048Other receivables8,3889,432Mortgage loans held-for-sale, net37,69765,114Inventories, netHousing completed or under construction345,554372,422Land and land under development488,887415,237Property and equipment, net39,71140,826Deferred tax asset, net of valuation allowance of $239,012 and $231,379at March 31, 2011 and December 31, 2010, respectively--Related party assets7,3937,393Prepaid expenses and other assets, net47,88285,393Total Assets$ 2,454,539$ 2,547,769LiabilitiesAccounts payable$      23,173$      35,018Accrued liabilities210,053260,729Related party liabilities10790Mortgage repurchase facility6,73625,434Senior notes, net1,243,0621,242,815Total Liabilities1,483,1311,564,086Commitments and Contingencies--Stockholders' EquityPreferred stock, $0.01 par value; 25,000,000 shares authorized; none issuedor outstanding--Common stock, $0.01 par value; 250,000,000 shares authorized; 47,351,000 and  47,295,000 issued and outstanding, respectively, at March 31, 2011 and47,198,000 and 47,142,000 issued and outstanding, respectively,at December 31, 2010474472Additional paid-in-capital836,360820,237Retained earnings127,046158,749Accumulated other comprehensive income8,1874,884Treasury stock, at cost; 56,000 shares at March 31, 2011 and December 31, 2010(659)(659)Total Stockholders' Equity971,408983,683Total Liabilities and Stockholders' Equity$ 2,454,539$ 2,547,769M.D.C. HOLDINGS, INC.Information on Segments(Dollars in thousands)(Unaudited) Three Months   Ended March 31, 20112010REVENUEHomebuildingWest$      42,483$             57,137Mountain71,12446,682East43,09231,505Other Homebuilding9,8599,036Total Homebuilding166,558144,360Financial Services and Other5,7035,621Corporate--Intercompany adjustments(2,514)(2,903)          Consolidated$    169,747$           147,078(LOSS) INCOME BEFORE INCOME TAXESHomebuildingWest$      (4,560)$               2,354Mountain(1,232)1,170East(1,956)(1,519)Other Homebuilding(776)(519)Total Homebuilding(8,524)1,486Financial Services and Other1,7801,846Corporate(16,960)(24,574)Consolidated$    (23,704)$           (21,242) March 31, December 31, 20112010TOTAL ASSETSHomebuildingWest$    328,225$           300,652Mountain315,103311,833East205,502188,693Other Homebuilding39,13840,554Total Homebuilding887,968841,732Financial Services and Other110,206135,286Corporate1,459,1821,573,408Intercompany adjustments(2,817)(2,657)Consolidated$ 2,454,539$        2,547,769M.D.C. HOLDINGS, INC.Selected Financial Data(Dollars in thousands)(Unaudited) Three Months Ended March 31, Change 2011 2010 Amount % SELECTED FINANCIAL DATAGeneral and Administrative Expenses      Homebuilding$   14,959$    17,726$     (2,767)-16%      Financial Services and Other4,6994,08861115%      Corporate (1) 17,09818,398(1,300)-7%         Total $   36,756$    40,212$     (3,456)-9%SG&A as a % of Home Sales Revenue      Homebuilding Segments18.7%21.2%-2.5%      Corporate Segment (1) 10.5%13.1%-2.6%   Depreciation and Amortization (2)$     3,729$      2,932$         79727%   Home Gross Margins (3) 13.7%22.4%-8.7%   Interest in Home Cost of Sales as         a % of Home Sales Revenue2.6%2.3%0.3%   Cash Provided by (Used in)       Operating Activities$ (57,701)$    11,516$   (69,217)       Investing Activities$ 105,041$ (501,767)$  606,808       Financing Activities$ (30,522)$  206,138$ (236,660)Corporate and Homebuilding Interest    Interest capitalized, beginning of period$   38,446$    28,339$    10,10736%    Interest capitalized, net of interest expense9,5196,6362,88343%    Previously capitalized interest included    in home cost of sales(4,203)(3,202)(1,001)31%    Interest capitalized, end of period$   43,762$    31,773$    11,98938%(1) Includes related party expenses.(2) Includes depreciation and amortization of long-lived assets and amortization of deferred marketing costs.(3) Home sales revenue less home cost of sales (excluding commissions, amortization of deferred marketing, project cost write offs and asset impairments) as a percent of home sales revenue.  M.D.C. HOLDINGS, INC.Selected Financial Data(Dollars in thousands)(Unaudited) Three Months   Ended March 31, Change 2011 2010 Amount % HOMEAMERICAN OPERATING ACTIVITIESPrincipal amount of mortgage      loans originated$    115,380$     108,090$            7,2907%Principal amount of mortgage      loans brokered $           719$         2,856$           (2,137)-75%Capture Rate75%80%-5%      Including brokered loans76%82%-6%Mortgage products (% of mortgage loans originated)      Fixed rate 97%95%2%      Adjustable rate - other 3%5%-2%      Prime loans (4) 30%26%4%      Government loans (5) 70%74%-4%(4) Prime loans generally are defined as loans with Fair, Isaac and Company ("FICO") scores greater than 620 and that comply with the documentation standards of the government sponsored enterprise guidelines. (5) Government loans are loans either insured by the Federal Housing Administration or guaranteed by the Department of Veteran Affairs.M.D.C. HOLDINGS, INC.Homebuilding Operational Data(Dollars in thousands)(Unaudited)March 31,December 31,March 31, 2011 2010 2010 HOMES COMPLETED OR UNDER CONSTRUCTIONUnsold Home Under Construction - Final 6711948Unsold Home Under Construction - Frame 570722675Unsold Home Under Construction - Foundation 37103376   Total Unsold Homes Under Construction 6749441,099Sold Homes Under Construction 6416091,002Model Homes 246242210   Homes Completed or Under Construction 1,5611,7952,311LOTS OWNED (excluding homes completed or under construction)Arizona 1,2191,2571,040California 1,4991,201756Nevada 1,087991894   West 3,8053,4492,690Colorado 2,9852,9192,549Utah 619594366   Mountain 3,6043,5132,915Maryland 339319158Virginia 599414318   East 938733476Florida 232210127Illinois 128130141   Other Homebuilding 360340268        Total 8,7078,0356,349M.D.C. HOLDINGS, INC.Homebuilding Operational Data(Dollars in thousands)(Unaudited)March 31,December 31,March 31,201120102010LOTS CONTROLLED UNDER OPTIONArizona 241408482California 17222232Nevada 724838429   West 9821,4681,143Colorado 845688507Utah 369393145   Mountain 1,2141,081652Maryland 822745602Virginia 128132271   East 950877873Florida 606733713Illinois ---   Other Homebuilding 606733713        Total 3,7524,1593,381AT RISK OPTION DEPOSITSCash $ 10,283$   9,019$   9,467Letters of Credit 5,2644,4672,084Total At Risk Option Deposits$ 15,547$ 13,486$ 11,551M.D.C. HOLDINGS, INC.Homebuilding Operational Data(Dollars in thousands)(Unaudited) Three Months   Ended March 31, Change 2011 2010 Amount % HOMES CLOSED (UNITS)Arizona 77108(31)-29%California 484624%Nevada 6698(32)-33%   West 191252(61)-24%Colorado 1661085854%Utah 545224%   Mountain 2201606038%Maryland 57302790%Virginia 434038%   East 100703043%Florida 434125%Illinois ---N/A   Other Homebuilding 434125%        Total 554523316%AVERAGE SELLING PRICES PERHOME CLOSEDArizona $ 180.0$ 203.7$ (23.7)-12%California 317.3351.9(34.6)-10%Colorado 336.8299.837.012%Florida 229.0220.38.74%Illinois N/AN/AN/AN/A Maryland 428.4412.416.04%Nevada 201.5189.312.26%Utah 274.9273.51.41%Virginia 430.0477.8(47.8)-10%      Company Average $ 294.9$ 269.5$  25.49%M.D.C. HOLDINGS, INC.Homebuilding Operational Data(Dollars in thousands)(Unaudited) Three Months   Ended March 31, Change 2011 2010 Amount % ORDERS FOR HOMES, NET (UNITS)Arizona 122168(46)-27%California 772651196%Nevada 88170(82)-48%   West 287364(77)-21%Colorado 181270(89)-33%Utah 67125(58)-46%   Mountain 248395(147)-37%Maryland 4647(1)-2%Virginia 686623%   East 11411311%Florida 5159(8)-14%Illinois 5-5N/A    Other Homebuilding 5659(3)-5%        Total 705931(226)-24%Estimated Value of Orders for   Homes, net$ 205,000$ 258,000$ (53,000)-21%Estimated Average Selling Price of   Orders for Homes, net$     290.8$     277.1$      13.75%Cancellation Rate(6) 32%22%10%(6) We define "Cancellation Rate" as the approximate number of cancelled home order contracts during a reporting period as a percent of total home orders received during such reporting period.M.D.C. HOLDINGS, INC.Homebuilding Operational Data(Dollars in thousands)(Unaudited)March 31,December 31,March 31, 2011 2010 2010 BACKLOG (UNITS)Arizona 12984163California 1087956Nevada 9876160   West 335239379Colorado 288273369Utah 8269167   Mountain 370342536Maryland 115126143Virginia 957099   East 210196242Florida 726477Illinois 61-   Other Homebuilding 786577        Total 9938421,234Backlog Estimated Sales Value$ 312,000$ 269,000$ 381,000Estimated Average Selling Price   of Homes in Backlog$     314.2$     319.5$     308.8ACTIVE SUBDIVISIONSArizona 292628California 16133Nevada 191817   West 645748Colorado 423941Utah 181917   Mountain 605858Maryland 14149Virginia 1087   East 242216Florida 131110Illinois 1--   Other Homebuilding 141110        Total 162148132   Average for quarter ended155145133M.D.C. HOLDINGS, INC.Reconciliation of Non-GAAP Financial Measure(Dollars in thousands)(Unaudited) Three Months Ended March 31, 2011 2010 Home Sales Revenue - As reported$ 163,383$ 140,943Home Cost of Sales - As reported$ 140,981$ 109,390Warranty Adjustments(431)(3,929)Interest in Cost of Sales4,2033,202Home Cost of Sales - Excluding Warranty Adjustments and Interest$ 137,209$ 110,117Home Gross Margins - Excluding Warranty Adjustments and Interest (7)16.0%21.9%(7) "Home Gross Margins - Excluding Warranty Adjustments and Interest" is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that warranty adjustments and interest have on our Home Gross Margins.SOURCE M.D.C. Holdings, Inc.For further information: Robert N. Martin, Investor Relations of M.D.C. Holdings, Inc., +1-720-977-3431, bob.martin@mdch.com