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Press release from PR Newswire

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

Thursday, February 02, 2012

M.D.C. Holdings Announces Fourth Quarter 2011 Results06:00 EST Thursday, February 02, 2012DENVER, Feb. 2, 2012 /PRNewswire/ --Loss before tax of $19.8 million, including charges of $20.2 million for extinguishment of debt and $2.7 million for asset impairments and project abandonmentAdjusted income before tax of $3.1 million (excluding charges), an $18.9 million year-over-year improvementNet loss of $18.8 million, or $0.40 per shareGeneral and administrative expense of $28.7 million decreased 33% year-over-yearNet orders increased 1% year-over-year to 523 homesBacklog of 1,043 homes at 12/31/2011, up 24% year-over-yearCash and investments of $863 million at 12/31/2011 exceeds total debt by $70 millionM.D.C. Holdings, Inc. (NYSE: MDC) today reported a net loss for the 2011 fourth quarter of $18.8 million, or $0.40 per share, including pretax charges of $20.2 million related to the extinguishment of debt and $2.7 million related to asset impairments and project abandonment charges. In the 2010 fourth quarter, our net loss was $30.0 million, or $0.65 per share, including pretax charges of $19.2 million related to asset impairments and project abandonment charges.  Revenue for the 2011 fourth quarter decreased 5% to $247.4 million, compared with $259.6 million a year ago. Management CommentsLarry A. Mizel, MDC's chairman and chief executive officer, stated, "In the fourth quarter of 2011, excluding debt extinguishment and land-related charges, we achieved profitability, thereby providing strong evidence of the meaningful progress we have made in implementing Company initiatives over the past few quarters."Mizel continued, "Our efforts to reduce overhead continued in the fourth quarter, allowing us to decrease general and administrative expense by 33% year-over-year. In addition, since the second quarter of 2011, when we announced a change to our strategy on starting unsold homes, our home gross margins have improved 200 basis points. Also, we completed our previously announced plan to reduce our debt by $500 million, which decreased the Company's annualized interest incurred going forward by $30 million. We believe that the actions we have taken so far will continue to positively impact our operating results going forward as we aggressively pursue our goal of returning to full-year profitability in 2012."Mizel concluded, "To start 2012, we implemented changes to our sales process and product offering across our Company.  At the same time, January 2012 orders increased approximately 30% from January 2011. We cannot be certain that the improvement in net orders is attributable to our recent actions, or that the improvement will be sustained in future months. Nonetheless, we are encouraged by this data point and other increasingly positive signs for the health of the housing market overall and for our individual markets, which lead us to believe that our industry has stabilized and may begin to recover in 2012."Fourth Quarter HighlightsHome closings in the 2011 fourth quarter were 792 units, with an average selling price of $291,300, compared with 865 units, with an average selling price of $291,700, in the fourth quarter of 2010.  Our ratio of closings to beginning backlog decreased to 60% for the 2011 fourth quarter, compared with 73% in the 2010 fourth quarter.  The decrease is attributable to a year-over-year decrease in the percentage of backlog under construction at the beginning of the quarter, consistent with our change in strategy on starting unsold homes.Home gross margins in the 2011 fourth quarter were 15.0% as compared with 17.0% in the 2010 fourth quarter.  Adjusted home gross margins (excluding warranty adjustments and interest) were 16.8% in the 2011 fourth quarter, up from 16.5% in the 2010 fourth quarter.Marketing costs were $9.1 million in the 2011 fourth quarter, compared with $11.6 million in the 2010 fourth quarter, primarily due to a decrease in product advertising costs.  Commission costs were $8.2 million, as compared with $9.4 million in the same quarter last year, inline with the decrease in revenue we experienced.General and administrative expenses decreased to $28.7 million for the 2011 fourth quarter, compared with $42.9 million for the same period in the prior year.  The primary driver behind the decrease was a $10.3 million decline in compensation-related expenses.During the 2011 fourth quarter, asset impairments totaled $0.8 million, compared with $17.9 million in the same quarter last year. We also incurred $1.8 million of expense related to write-offs of land option deposits and pre-acquisition costs associated with lot option contracts that we elected not to exercise during the 2011 fourth quarter, compared with $1.3 million during the 2010 fourth quarter.  Net orders for the 2011 fourth quarter increased slightly to 523 homes with an estimated sales value of $153 million, compared with net orders for 519 homes with an estimated sales value of $150 million during the same period in 2010.We ended the 2011 fourth quarter with 1,043 homes under contract with an estimated sales value of $330 million, compared with a backlog of 842 homes with an estimated sales value of $269 million at December 31, 2010. Our estimated home gross margin in backlog at the end of the fourth quarter increased from the estimated home gross margin in backlog to start the quarter.Full Year ResultsFor full year results, please consult the Company's Form 10-K for the year ended December 31, 2011, which is scheduled to be filed with the Securities and Exchange Commission today.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 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, 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-K for the year ended December 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 MonthsYear EndedDecember 31,December 31,2011201020112010REVENUEHome sales revenue$ 230,732$ 252,302$ 805,164$  921,022Land sales revenue8,360(735)11,8595,883Other revenue8,2847,99927,14531,750Total Revenue247,376259,566844,168958,655COSTS AND EXPENSESHome cost of sales196,140209,434686,661745,085Land cost of sales8,314(617)10,7965,366Asset impairments81117,92914,90121,647Marketing expenses9,05911,59638,79141,322Commission expenses8,2489,43728,94734,255General and administrative expenses28,74542,933137,314166,993Other operating expenses1,8661,3165,2093,162Total Operating Costs and Expenses253,183292,028922,6191,017,830LOSS FROM OPERATIONS(5,807)(32,462)(78,451)(59,175)Other income (expense)Interest income and other7,5787,20930,90427,197Interest expense(1,311)(9,813)(21,130)(38,623)Extinguishment of senior notes(20,236)   -(38,795)   -LOSS BEFORE TAXES(19,776)(35,066)(107,472)(70,601)Benefit from income taxes, net9555,0929,0825,831NET LOSS$ (18,821)$ (29,974)$ (98,390)$  (64,770)EARNINGS (LOSS) PER SHAREBasic$     (0.40)$     (0.65)$     (2.12)$      (1.40)Diluted$     (0.40)$     (0.65)$     (2.12)$      (1.40)DIVIDENDS DECLARED PER SHARE$       0.25$       0.25$       1.00$        1.00M.D.C. HOLDINGS, INC.Consolidated Balance Sheets(Dollars in thousands)(Unaudited)December 31,20112010ASSETSCash and cash equivalents$    343,361$    572,225Marketable securities519,943968,729Restricted cash667420ReceivablesHome sales receivables15,1558,530Income taxes receivable-2,048Other receivables7,5149,432Mortgage loans held-for-sale, net78,33565,114Inventories, netHousing completed or under construction300,714372,422Land and land under development505,338415,237Property and equipment, net36,28840,826Deferred tax asset, net of valuation allowance of $281,178 and $231,179 atDecember 31, 2011 and 2010, respectively--Prepaid expenses and other assets, net 51,41092,786TOTAL ASSETS$ 1,858,725$ 2,547,769LIABILITIESAccounts payable$      26,006$      35,018Accrued liabilities 171,273260,819Mortgage repurchase facility 48,70225,434Senior notes, net744,1081,242,815TOTAL LIABILITIES990,0891,564,086COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS' EQUITYPreferred stock, $0.01 par value; 25,000,000 shares authorized; none issuedor outstanding--Common stock, $0.01 par value; 250,000,000 shares authorized; 48,017,000 and  47,957,000 issued and outstanding, respectively, at December 31, 2011 and47,198,000 and 47,142,000 issued and outstanding, respectively,at December 31, 2010480472Additional paid-in-capital863,128820,237Retained earnings12,927158,749Accumulated other comprehensive (loss) income(7,240)4,884Treasury stock, at cost; 60,000 and 56,000 shares at December 31, 2011 andDecember 31, 2010, respectively(659)(659)TOTAL STOCKHOLDERS' EQUITY868,636983,683TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$ 1,858,725$ 2,547,769M.D.C. HOLDINGS, INC.Information on Segments(Dollars in thousands)(Unaudited)Three Months EndedYear EndedDecember 31,December 31,2011201020112010REVENUEHomebuildingWest$      93,247$      87,183$  276,423$ 333,746Mountain88,309106,536320,772352,441East52,43350,119183,211212,585Other Homebuilding9,82212,06047,30845,197Total Homebuilding243,811255,898827,714943,969Financial Services and Other8,1127,77826,08630,474Corporate----Inter-company adjustments(4,547)(4,110)(9,632)(15,788)Consolidated$    247,376$    259,566$  844,168$ 958,655(LOSS) INCOME BEFORE INCOME TAXESHomebuildingWest$        2,092$      (3,702)$   (16,889)$     9,909Mountain845(5,593)1,3971,059East3,240(1,866)(3,579)91Other Homebuilding(411)(1,243)(3,617)(3,140)Total Homebuilding5,766(12,404)(22,688)7,919Financial Services and Other(1,263)383,15610,299Corporate(24,279)(22,700)(87,940)(88,819)Consolidated$    (19,776)$    (35,066)$ (107,472)$ (70,601)INVENTORY IMPAIRMENTSWest $           219$      14,338$      8,769$   17,971Mountain641,5192,2991,519East -990285990Other Homebuilding   -7151,612715Consolidated$           283$      17,562$    12,965$   21,195December 31,20112010TOTAL ASSETSHomebuildingWest$    346,442$    300,652Mountain262,787311,833East223,606188,693Other Homebuilding31,46840,554Total Homebuilding864,303841,732Financial Services and Other143,561135,286Corporate852,6571,573,408Inter-company adjustments(1,796)(2,657)Consolidated$ 1,858,725$ 2,547,769M.D.C. HOLDINGS, INC.Selected Financial Data(Dollars in thousands)(Unaudited) Three Months Ended Year Ended December 31, Change December 31, Change 2011 2010 Amount % 2011 2010 Amount % SELECTED FINANCIAL DATAGeneral and Administrative ExpensesHomebuilding$      8,981$  15,149$     (6,168)-41%$    53,528$    69,475$    (15,947)-23%Financial Services and Other10,1148,6231,49117%25,94622,8903,05613%Corporate9,65019,161(9,511)-50%57,84074,628(16,788)-22%Total $    28,745$  42,933$   (14,188)-33%$  137,314$  166,993$    (29,679)-18%SG&A as a % of Home Sales RevenueHomebuilding Segments11.4%14.3%-2.9%15.1%15.7%-0.7%Corporate Segment4.2%7.6%-3.4%7.2%8.1%-0.9%Depreciation and Amortization (1)$      4,442$    5,137$        (695)-14%$    16,540$    16,943$         (403)-2%Home Gross Margins (2) 15.0%17.0%-2.0%14.7%19.1%-4.4%Adjusted Home Gross Margin (3) 16.8%16.5%0.3%16.7%19.4%-2.8%Interest in Home Cost of Sales as a % of Home Sales Revenue-2.8%-2.7%-0.1%-2.6%-2.6%0.0%Cash Provided by (Used in)Operating Activities$         459$ (71,490)$    71,949$   (80,284)$ (209,081)$    128,797Investing Activities$    23,102$ (47,340)$    70,442$  404,264$ (644,466)$ 1,048,730Financing Activities$ (247,701)$    2,494$ (250,195)$ (552,844)$  191,520$  (744,364)Corporate and Homebuilding InterestInterest capitalized during the year$    10,346$    9,064$      1,28214%$    41,448$    33,919$        7,52922%Previously capitalized interest included in home cost of sales$      6,355$    6,827$        (472)-7%$    21,152$    23,812$      (2,660)-11%Interest capitalized in homebuilding inventory, end of year$    58,742$  38,446$    20,29653%$    58,742$    38,446$      20,29653%(1) Includes depreciation and amortization of long-lived assets and amortization of deferred marketing costs.(2) 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.  (3) Excludes warranty adjustments and interest in cost of sales. See reconciliation of non-GAAP financial measures at the end of this release.M.D.C. HOLDINGS, INC.Selected Financial Data(Dollars in thousands)(Unaudited)Three Months EndedYear EndedDecember 31,ChangeDecember 31,Change20112010Amount%20112010Amount%HOMEAMERICAN OPERATING ACTIVITIESPrincipal amount of mortgage loans originated$ 165,898$ 192,831$ (26,933)-14%$ 556,558$ 699,951$ (143,393)-20%Principal amount of mortgage loans brokered $             -$        828$      (828)-100%$     4,518$     6,711$     (2,193)-33%Capture Rate74%81%-7%72%81%-9%Including brokered loans74%82%-8%73%82%-9%Mortgage products (% ofmortgage loans originated)Fixed rate 98%98%0%96%97%-1%Adjustable rate - other 2%2%0%4%3%1%Prime loans (4) 37%31%6%32%28%4%Government loans (5) 63%69%-6%68%72%-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 (Unaudited)December 31,December 31,HOMES STARTED 2011 2010 Unsold Started Homes - Completed146119Unsold Started Homes - Frame 249722Unsold Started Homes - Foundation 79103   Total Unsold Started Homes 474944Sold Homes Started638609Model Homes 226242TOTAL HOMES STARTED1,3381,795LOTS OWNED (excluding homes started)Arizona 8121,257California 1,1731,201Nevada 1,001991Washington275   -   West 3,2613,449Colorado 2,9512,919Utah 524594   Mountain 3,4753,513Maryland 456319Virginia 545414   East 1,001733Florida 241210Illinois 123130   Other Homebuilding 364340        Total 8,1018,035M.D.C. HOLDINGS, INC.Homebuilding Operational Data(Dollars in thousands)(Unaudited)December 31,December 31,LOTS CONTROLLED UNDER OPTION 2011 2010 Arizona 92408California -222Nevada 33838Washington147   -   West 2721,468Colorado 321688Utah 17393   Mountain 3381,081Maryland 598745Virginia 173132   East 771877Florida 340733Illinois   -   -   Other Homebuilding 340733        Total 1,7214,159TOTAL LOTS OWNED AND CONTROLLED9,82212,194NON-REFUNDABLE OPTION DEPOSITSCash $            6,952$            9,019Letters of Credit 4,3164,467        Total $          11,268$          13,486M.D.C. HOLDINGS, INC.Homebuilding Operational Data(Unaudited)Three Months EndedYear EndedDecember 31,ChangeDecember 31,Change20112010Amount%20112010Amount%HOMES CLOSED   (UNITS)   Arizona 1221101211%423571(148)-26%   California 104122(18)-15%272298(26)-9%   Nevada 108117(9)-8%331544(213)-39%   Washington46   -46N/M146   -146N/M        West 380349319%1,1721,413(241)-17%   Colorado 211243(32)-13%748789(41)-5%   Utah 47106(59)-56%225383(158)-41%        Mountain 258349(91)-26%9731,172(199)-17%   Maryland 5446817%207231(24)-10%   Virginia 6070(10)-14%211236(25)-11%        East 114116(2)-2%418467(49)-10%   Florida 3651(15)-29%190193(3)-2%   Illinois 4   -  4N/M  9   -  9N/M         Other           Homebuilding4051(11)-22%199193  63%   Total 792865(73)-8%2,7623,245(483)-15%M.D.C. HOLDINGS, INC.Homebuilding Operational Data(Dollars in thousands)(Unaudited)Three MonthsYear EndedDecember 31,ChangeDecember 31,Change20112010Amount%20112010Amount%AVERAGE SELLING PRICE OFHOMES CLOSEDArizona$ 191.3$ 193.3$       (2.0)-1%$ 191.8$ 195.6$       (3.8)-2%California303.4350.3(46.9)-13%311.3377.3(66.0)-17%Colorado347.3323.224.17%341.4313.927.59%Florida241.3236.54.82%230.6232.1(1.5)-1%Illinois283.0 N/A N/M N/M 300.7 N/A N/M N/M Maryland465.6407.558.114%439.4439.4-0%Nevada186.4197.6(11.2)-6%190.0190.4(0.4)0%Utah275.0270.94.12%278.1272.35.82%Virginia454.0446.08.02%435.8469.6(33.8)-7%Washington257.5 N/A N/M N/M 265.6 N/A N/M N/M Average$ 291.3$ 291.7$       (0.4)0%$ 291.5$ 283.8$         7.73%M.D.C. HOLDINGS, INC.Homebuilding Operational Data(Dollars in thousands)(Unaudited)Three MonthsYear EndedEnded December 31,ChangeDecember 31,Change20112010Amount%20112010Amount%ORDERS FOR HOMES,   NET (UNITS)   Arizona 7781(4)-5%467552(85)-15%   California 6465(1)-2%311301103%   Nevada 626112%411532(121)-23%   Washington56   -56N/M124   -124N/M        West 2592075225%1,3131,385(72)-5%   Colorado 1481331511%708855(147)-17%   Utah 1050(40)-80%224358(134)-37%        Mountain 158183(25)-14%9321,213(281)-23%   Maryland 2655(29)-53%194231(37)-16%   Virginia 3931826%244233115%        East 6586(21)-24%438464(26)-6%   Florida 3842(4)-10%196198(2)-1%   Illinois  3  1  2N/M  8  1  7700%         Other           Homebuilding 4143(2)-5%204199  53%   Total 523519  41%2,8873,261(374)-11%Estimated Value of   Orders for Homes,   net$ 153,000$ 150,000$      3,0002%$ 835,000$ 920,000$   (85,000)-9%Estimated Average   Selling Price of   Orders for Homes,   net$     292.5$     289.0$          3.51%$     289.2$     282.1$          7.13%Cancellation Rate (6) 43%46%-3%37%30%7%(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)December 31,December 31,20112010BACKLOG (UNITS)   Arizona 12884   California 11879   Nevada 15676   Washington54   -        West 456239   Colorado 233273   Utah 6869        Mountain 301342   Maryland 113126   Virginia 10370        East 216196   Florida 7064   Illinois   -  1        Other Homebuilding 7065            Total 1,043842Backlog Estimated Sales Value $        330,000$        269,000Estimated Average Selling Price   of Homes in Backlog $            316.4$            319.5ACTIVE SUBDIVISIONSArizona 2526California 1713Nevada 2018Washington  9   -   West 7157Colorado 4739Utah 2119   Mountain 6858Maryland 1614Virginia 15  8   East 3122Florida 1711Illinois   -   -   Other Homebuilding 1711      Total 187148M.D.C. HOLDINGS, INC.Reconciliation of Non-GAAP Financial Measures(Dollars in thousands)(Unaudited)Three MonthsYear EndedEnded December 31,Ended December 31,2011201020112010ADJUSTED HOME GROSS MARGINSHome Sales Revenue - As reported$ 230,732$ 252,302$  805,164$ 921,022Home Cost of Sales - As reported196,140209,434686,661745,085Home Gross Margin - As reported (Dollars)$   34,592$   42,868$  118,503$ 175,937Home Gross Margin - As reported (Percent)15.0%17.0%14.7%19.1%Home Gross Margin - As reported (Dollars)34,59242,868118,503175,937Interest in Cost of Sales6,3556,82721,15223,812Warranty Adjustments(2,251)(8,042)(5,478)(20,845)Adjusted Home Gross Margin (Dollars)$   38,696$   41,653$  134,177$ 178,904Adjusted Home Gross Margins (Percent) (7)16.8%16.5%16.7%19.4%ADJUSTED INCOME (LOSS) BEFORE TAXESIncome (Loss) Before Taxes - As reported$ (19,776)$ (35,066)$ (107,472)$ (70,601)Debt Extinguishment20,236-38,795-Impairments81117,92914,90121,647Project Abandonment 1,8441,3087,1023,102Adjusted Income (Loss) Before Taxes (8)$     3,115$ (15,829)$   (46,674)$ (45,852)(7)  We believe this information is meaningful to investors as management uses it to isolate the impact that warranty adjustments and interest have on our Home Gross Margins.(8)  We believe this information is meaningful to investors as management uses it to isolate the impact that infrequent or volatile charges have on income before tax.SOURCE M.D.C. Holdings, Inc.For further information: Robert N. Martin, Vice President of Finance of M.D.C. Holdings, Inc., +1-720-977-3431, bob.martin@mdch.com