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Press release from PR Newswire

M.D.C. Holdings Announces 2012 Third Quarter Results

Thursday, November 01, 2012

M.D.C. Holdings Announces 2012 Third Quarter Results06:00 EDT Thursday, November 01, 2012DENVER, Nov. 1, 2012 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended September 30, 2012.2012 Third Quarter Highlights and Comparisons to 2011 Third QuarterNet income of $20.1 million, or $0.41 per diluted share vs. net loss of $31.7 million, or $0.68 per diluted share 2011 third quarter included $18.6 million charge related to debt extinguishment Net new orders of 1,008 homes, up 69% Backlog of 1,997 homes, up 52%; backlog dollar value up 65% to $667.0 million Home sale revenues of $320.6 million, up 57% Homes closed of 1,039 homes, up 47% Gross margin from home sales of 15.5% vs. 14.8% Improvement of 130 basis points vs. 14.2% in 2012 second quarterSG&A expenses as a percentage of home sale revenues of 14.0% vs. 22.6%, an 860 basis point improvement Homebuilding operations pretax income of $10.2 million vs. loss of $33.7 million Financial services segment pretax profit of $9.3 million vs. loss of $0.5 million Approved the acquisition of 1,478 lots in 31 communitiesLarry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "I am pleased to announce a third quarter profit of $0.41 per share, our third consecutive quarterly operating profit, with net income improving by more than $50 million over the prior year. Our favorable results were largely attributable to significantly improved operating profits from our homebuilding segment, which experienced top-line growth as well as operating margin expansion. In addition, the Company's financial services segment produced considerably better results as the Company took advantage of favorable mortgage market conditions, including increased volume and margins for its mortgage loan products."Mr. Mizel continued, "Looking forward, we will continue to balance our improved sales rate by increasing home prices and reducing incentives in subdivisions where demand is strong. Our efforts to date in this regard have helped us push the gross margins in our backlog higher, positioning us to increase our gross margin in the fourth quarter and into 2013. In addition, we believe our unit backlog, which ended the quarter up 52% from a year ago, will drive the revenue increases we need to improve our operating leverage in future periods."Mizel concluded, "At the end of the quarter, we owned nearly 9,000 lots across the country and had an additional 3,700 lots under option or in feasibility. While our overall supply of owned lots is somewhat smaller than our peers, our proportion of finished lots is much higher, and nearly all of our communities are actively selling or under development. This finished, in-production lot supply compares favorably with our peers and should allow us to drive top-line growth in 2013. Also, we have the financial strength to support future land acquisition opportunities, as evidenced by our unique net liquidity position and investment-grade balance sheet."HomebuildingHome sale revenues for the 2012 third quarter increased 57% to $320.6 million compared to $204.9 million for the prior year period.  The increase in revenues resulted primarily from a 47% increase in homes closed to 1,039 homes as compared to 707 in the prior year. The Company's average selling price for homes closed was $308,600, up 6% year-over-year compared to $289,800 for the prior year period, primarily due to a mix shift in closings to more desirable communities within individual markets, coupled with increased prices and lower incentives in many of our markets.Gross margin from home sales for the 2012 third quarter was 15.5% versus 14.8% for the year-earlier period.  The 2011 third quarter benefited by $6.4 million from the settlement of a construction defect claim and the impact of project close-out adjustments, as well as from a $1.0 million benefit related to a warranty accrual reduction.  These benefits were partially offset by $4.0 million in inventory impairments while the 2012 third quarter had no inventory impairments.  On a sequential basis, our 2012 third quarter gross margin from home sales was up 130 basis points as compared to 14.2% for the 2012 second quarter.  The year-over-year improvement in the Company's gross margin from home sales was driven partially 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. In addition, both the year-over-year and sequential increases in the gross margin percentage were driven by price increases and a reduction of incentives in many of our communities across the country.Our 2012 third quarter SG&A expenses fell slightly to $44.8 million, compared to $46.4 million for the 2011 third quarter. The decrease in SG&A was attributable to a $4.6 million decrease in general and administrative expenses, including reductions in salaries and other overhead costs and a $2.2 million legal recovery, partially offset by a $3.8 million increase in commission expenses attributable to our increase in home sale revenues. The decreased SG&A expenses, combined with increased revenues, resulted in better operating leverage, with SG&A expenses as a percentage of home sales revenues decreasing 860 basis points to 14.0% for the 2012 third quarter versus 22.6% for the same period in 2011.Net new orders for the 2012 third quarter increased 69% to 1,008 homes, compared to 595 homes during the same period in 2011.  The Company's monthly sales absorption rate for the 2012 third quarter was 2.0 per community, compared to 1.1 per community for the 2011 third quarter.  The Company's cancellation rate for the 2012 third quarter was 27% versus 44% in the prior year third quarter. The Company ended the 2012 third quarter with 1,997 homes in backlog, with an estimated sales value of $667.0 million, compared with a backlog of 1,312 homes with an estimated sales value of $405.0 million at September 30, 2011.Financial ServicesIncome before taxes from our financial services operations for the 2012 third quarter was $9.3 million, compared to a loss of $0.5 million for the 2011 third quarter.  The increase in pretax income primarily reflected an $8.9 million increase in our mortgage segment's pretax results from a loss of $1.6 million in the 2011 third quarter to income of $7.3 million for the 2012 third quarter.  The improvement in our mortgage profitability was driven mostly by year-over-year increases in the gains on sales of mortgage loans and the corresponding servicing rights, and higher origination income. These increases were due largely to favorable mortgage market conditions, increases in the volume of loans locked and originated, and a decrease in the level of special financing programs that we offered our homebuyers. Additionally, mortgage operations benefited from a $2.8 million decrease in the expense recognized for mortgage loan losses. About MDCSince 1972, MDC's subsidiary companies have built and financed the American dream for more than 170,000 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, 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) 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 Form 10-Q for the quarter ended September 30, 2012, 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 and Comprehensive Income Three MonthsNine Months  Ended September 30,Ended September 30,2012201120122011(Dollars in thousands, except per share amounts)Homebuilding:(Unaudited)Home sale revenues$   320,647$   204,886$   761,857$   574,432Land sale revenues157303,4203,499Total home sale and land revenues320,662205,616765,277577,931Home cost of sales(271,067)(170,443)(649,941)(490,521)Land cost of sales(2)(724)(3,210)(2,482)Inventory impairments-(4,049)-(12,682)Total cost of sales(271,069)(175,216)(653,151)(505,685)Gross margin49,59330,400112,12672,246Selling, general and administrative expenses(44,788)(46,360)(118,135)(143,171)Interest income5,3655,96416,65119,437Interest expense-(3,641)(808)(19,642)Other income (expense)16(20,102)592(20,985)Homebuilding pretax income (loss)10,186(33,739)10,426(92,115)Financial Services:Revenues14,4546,32234,30420,480Expenses(5,156)(6,772)(13,466)(16,061)Financial services pretax income9,298(450)20,8384,419Income (loss) before income taxes19,484(34,189)31,264(87,696)Benefit (provision) for income taxes6422,4791,7658,127Net income (loss)$     20,126$    (31,710)$     33,029$    (79,569)Other comprehensive income (loss):Unrealized gain related to available-for-sale securities5,095(20,237)10,945(18,905)Comprehensive income (loss)$     25,221$   (51,947)$     43,974$   (98,474)Earnings (loss) per share:Basic$         0.42$       (0.68)$        0.69$       (1.72)Diluted$         0.41$       (0.68)$        0.68$       (1.72)Weighted Average Common Shares Outstanding:Basic47,761,30746,736,63847,499,42946,717,408Diluted48,173,31546,736,63847,818,18846,717,408Dividends declared per share$         0.25$        0.25$        0.75$        0.75  M.D.C. HOLDINGS, INC.Consolidated Balance SheetsSeptember 30, December 31, 20122011(Dollars in thousands, except per share amounts)ASSETS(Unaudited)Homebuilding:Cash and cash equivalents$                  235,273$                  316,418Marketable securities503,805485,434Restricted cash2,084667Trade and other receivables35,76821,593Inventories:Housing completed or under construction504,016300,714Land and land under development393,170505,338     Total inventories897,186806,052Property and equipment, net33,78936,277Deferred tax asset, net of valuation allowance of $263,562 and $281,178 at September 30, 2012 and December 31, 2011, respectively--Prepaid expenses and other assets47,61650,423Total homebuilding assets1,755,5211,716,864Financial Services:Cash and cash equivalents28,52426,943Marketable securities32,91534,509Mortgage loans held-for-sale, net86,64878,335Prepaid expenses and other assets4,8152,074Total financial services assets152,902141,861      Total Assets$               1,908,423$               1,858,725LIABILITIES AND EQUITYHomebuilding:Accounts payable $                   49,636$                   25,645Accrued liabilities106,457119,188Senior notes, net744,654744,108Total homebuilding liabilities900,747888,941Financial Services:Accounts payable and accrued liabilities54,22652,446Mortgage repurchase facility46,88848,702Total financial services liabilities101,114101,148      Total Liabilities1,001,861990,089Stockholders' EquityPreferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding--Common stock, $0.01 par value; 250,000,000 shares authorized; 48,651,558 issued and outstanding at September 30, 2012 and 48,017,108and 47,957,196 issued and outstanding, respectively, at December 31, 2011487480Additional paid-in-capital892,461863,128Retained earnings9,90912,927Accumulated other comprehensive income (loss)3,705(7,240)Treasury stock, at cost; no shares at September 30, 2012 and 59,912 at December 31, 2011-(659)Total Stockholders' Equity906,562868,636Total Liabilities and Stockholders' Equity$               1,908,423$               1,858,725 M.D.C. HOLDINGS, INC.Consolidated Statement of Cash Flows  Three Months  Nine Months  Ended September 30,  Ended September 30, 2012201120122011(Dollars in thousands)(Unaudited)Operating Activities:Net income (loss)$       20,126$      (31,710)$       33,029$      (79,569)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    Loss on extinguishment of senior notes-18,559-18,559Stock-based compensation expense4,9075,41212,62812,092Depreciation and amortization 1,0521,4963,7084,713Inventory impairments and write-offs of land option deposits1035,57841417,883Amortization of (premium) discount on marketable debt securities4306922791,604    Net changes in assets and liabilities:      Restricted cash176(78)(1,417)(262)      Trade and other receivables4,660(2,821)(13,685)16,114      Mortgage loans held-for-sale(20,961)(3,101)(8,313)22,813      Housing completed or under construction(66,607)2,271(202,994)53,861      Land and land under development21,3583,468112,406(105,154)      Prepaid expenses and other assets(4,509)(1,406)(553)(2,782)      Accounts payable6,894(1,813)24,063(7,723)      Accrued liabilities(2,494)(8,033)(10,020)(32,892)Net cash provided by (used in) operating activities(34,865)(11,486)(50,455)(80,743)Investing Activities:Purchase of marketable securities(104,379)(30,201)(397,167)(288,624)Maturity of marketable securities-2,071106,000453,071Sale of marketable securities59,355118,755285,056248,432Purchase of property and equipment and other(290)(2,422)(958)(31,717)Net cash provided by (used in) investing activities(45,314)88,203(7,069)381,162Financing Activities:    Extinguishment of senior notes-(254,903)-(254,903)Payments on mortgage repurchase facility(47,120)(9,339)(137,529)(56,454)Advances on mortgage repurchase facility61,34811,059135,71541,728Dividend payments(12,056)(11,868)(36,046)(35,560)Proceeds from exercise of stock options15,680-15,82046Net cash provided by (used in) financing activities17,852(265,051)(22,040)(305,143)Net increase (decrease) in cash and cash equivalents(62,327)(188,334)(79,564)(4,724)Cash and cash equivalents:      Beginning of period326,124755,835343,361572,225      End of period$     263,797$     567,501$     263,797$     567,501  M.D.C. HOLDINGS, INC.Homebuilding Operational Data New Home Deliveries: Three Months Ended September 30, 20122011 % Change  Homes Dollar Value  AveragePrice  Homes Dollar Value  AveragePrice  Homes Dollar Value  Average Price (Dollars in thousands)Arizona 203$ 44,877$ 221.1126$ 25,272$ 200.661%78%10%California 13146,580355.65817,883308.3126%160%15%Nevada 17837,679211.77714,387186.8131%162%13%Washington6318,894299.94913,135268.129%44%12%West 575148,030257.431070,677228.085%109%13%Colorado 22981,706356.818965,234345.221%25%3%Utah 5314,632276.15816,712288.1-9%-12%-4%Mountain 28296,338341.624781,946331.814%18%3%Maryland 6529,382452.04721,020447.238%40%1%Virginia 6734,069508.53615,370426.986%122%19%East 13263,451480.78336,390438.459%74%10%Florida 5012,828256.66314,592231.6-21%-12%11%Illinois ---41,281320.3N/MN/MN/MOther Homebuilding 5012,828256.66715,873236.9-25%-19%8%Total 1,039$ 320,647$ 308.6707$ 204,886$ 289.847%57%6% Nine Months Ended September 30, 20122011 % Change  Homes Dollar Value  Average Price  Homes Dollar Value  AveragePrice  Homes Dollar Value  Average Price (Dollars in thousands)Arizona 418$ 89,920$ 215.1301$ 57,183$ 190.039%57%13%California 319107,768337.816852,554312.890%105%8%Nevada 43987,735199.922342,150189.097%108%6%Washington16648,060289.510026,912269.166%79%8%West 1,342333,483248.5792178,799225.869%87%10%Colorado 539192,923357.9537180,256335.70%7%7%Utah 15141,874277.317849,185276.3-15%-15%0%Mountain 690234,797340.3715229,441320.9-3%2%6%Maryland 15667,953435.615365,506428.12%4%2%Virginia 19692,395471.415164,161424.930%44%11%East 352160,348455.5304129,667426.516%24%7%Florida 13332,678245.715434,951227.0-14%-7%8%Illinois 2551275.551,574314.8-60%-65%-12%Other Homebuilding 13533,229246.115936,525229.7-15%-9%7%Total 2,519$ 761,857$ 302.41,970$ 574,432$ 291.628%33%4% M.D.C. HOLDINGS, INC.Homebuilding Operational Data  Net New Orders: Three Months Ended September 30, 20122011 % Change  Homes Dollar Value  AveragePrice  Homes Dollar Value  AveragePrice  Homes Dollar Value  AveragePrice (Dollars in thousands)Arizona 136$        30,441$     223.8104$        19,127$     183.931%59%22%California 17356,507326.65316,526311.8226%242%5%Nevada 13130,944236.210718,220170.322%70%39%Washington7121,998309.84210,737255.669%105%21%West 511139,890273.830664,610211.167%117%30%Colorado 25184,575337.014751,812352.571%63%-4%Utah 6620,220306.43810,604279.174%91%10%Mountain 317104,795330.618562,416337.471%68%-2%Maryland 3918,031462.34825,178524.5-19%-28%-12%Virginia 8842,554483.64218,586442.5110%129%9%East 12760,585477.09043,764486.341%38%-2%Florida 5312,918243.7164,379273.7231%195%-11%Illinois ---(2)(564)282.0N/MN/MN/MOther 5312,918243.7143,815272.5279%239%-11%Total 1,008$      318,188$     315.7595$      174,605$     293.569%82%8% Nine Months Ended September 30, 20122011 % Change  Homes Dollar Value  Average Price  Homes Dollar Value  Average Price  Homes Dollar Value  Average Price (Dollars in thousands)Arizona 569$      124,723$     219.2390$        74,007$     189.846%69%15%California 511175,533343.524773,341296.9107%139%16%Nevada 522114,823220.034964,256184.150%79%20%Washington21664,040296.56817,464256.8218%267%15%West 1,818479,119263.51,054229,068217.372%109%21%Colorado 797276,767347.3560190,560340.342%45%2%Utah 20360,491298.021459,154276.4-5%2%8%Mountain 1,000337,258337.3774249,714322.629%35%5%Maryland 235103,079438.616875,626450.240%36%-3%Virginia 276136,740495.420588,669432.535%54%15%East 511239,819469.3373164,295440.537%46%7%Florida 14233,502235.915836,339230.0-10%-8%3%Illinois 2550275.051,477295.4-60%-63%-7%Other 14434,052236.516337,816232.0-12%-10%2%Total 3,473$   1,090,248$     313.92,364$      680,893$     288.047%60%9%      M.D.C. HOLDINGS, INC.Homebuilding Operational Data Active Subdivisions: September 30, 20122011% ChangeArizona 1426-46%California 181613%Nevada 1620-20%Washington121020%West 6072-17%Colorado 4547-4%Utah 1621-24%Mountain 6168-10%Maryland 171421%Virginia 13130%East 302711%Florida 15150%Other Homebuilding 15150%Total 166182-9%Average for quarter ended170179-5%  Backlog:September 30,20122011% Change Homes  DollarValue  AveragePrice  Homes  DollarValue  AveragePrice  Homes  DollarValue  AveragePrice  (Dollars in thousands) Arizona 279$       62,902$     225.5173$      34,474$     199.361%82%13%California 310104,825338.115848,476306.896%116%10%Nevada 23956,902238.120239,432195.218%44%22%Washington10433,885325.84411,675265.3136%190%23%West 932258,514277.4577134,057232.362%93%19%Colorado 491179,779366.1296105,850357.666%70%2%Utah 12035,745297.910529,667282.514%20%5%Mountain 611215,524352.7401135,517337.952%59%4%Maryland 19280,876421.214161,567436.636%31%-4%Virginia 18391,993502.712456,480455.548%63%10%East 375172,869461.0265118,047445.542%46%3%Florida 7920,052253.86816,926248.916%18%2%Illinois ---1329329.1N/MN/MN/MOther Homebuilding 7920,052253.86917,255250.114%16%1%Total 1,997$     666,959$     334.01,312$    404,876$     308.652%65%8%   M.D.C. HOLDINGS, INC.Homebuilding Operational Data Homes Completed or Under Construction (WIP lots):September 30,20122011 % Change UnsoldCompleted1378561%Under construction - frame39131425%Under construction - foundation 23385174%Total unsold started homes 76148457%Sold homes under construction or completed1,46387168%Model homes 2292204%Total homes completed or under construction2,4531,57556%   Lots Owned and Optioned (including homes completed or under construction):September 30, 2012September 30, 2011Lots OwnedLots OptionedTotalLots OwnedLots OptionedTotalArizona 938631,001981961,077California 1,0651121,1771,306-1,306Nevada 994611,0551,091751,166Washington524212736312182494West3,5214483,9693,6903534,043Colorado 3,3254333,7583,1034643,567Utah 55713570545273818Mountain3,8824464,3283,6487374,385Maryland 5843589424467301,176Virginia 547103650566192758East1,1314611,5921,0129221,934Florida 32195416233373606Illinois 123-123123-123Other44495539356373729Total 8,9781,45010,4288,7062,38511,091SOURCE M.D.C. Holdings, Inc.For further information: Robert N. Martin, Vice President of Finance, +1-720-977-3431, bob.martin@mdch.com