EX-99.1 3 exhibit99_1.txt M.D.C. HOLDINGS, INC. EARNINGS RELEASE Exhibit 99.1 NEWS BULLETIN [GRAPHIC OMITTED] M.D.C. HOLDINGS, INC. RICHMOND AMERICAN HOMES HOMEAMERICAN MORTGAGE FOR IMMEDIATE RELEASE MONDAY, JANUARY 12, 2004 ------------------------------------------------------------------------------- Contacts: Paris G. Reece III Rachel L. Neumann Chief Financial Officer Communications Director (303) 804-7706 (303) 804-7729 greece@mdch.com rlneumann@mdch.com M.D.C. HOLDINGS REPORTS RECORD FOURTH QUARTER AND ANNUAL RESULTS FOR 2003 o EPS of $2.18 and $7.00, up 15% and 28%, respectively o Annual revenues rise 26% to $2.92 billion o Fourth quarter home gross margins of 25%, up 240 basis points o Year-end backlog and fourth quarter home orders both increase 39% o Net debt-to-capital ratio reduced to .24 from .27 a year ago o Return on average equity of 24% exceeds 20% for sixth consecutive year o Company anticipates record profits and 15% growth in home closings in 2004 DENVER, Monday, January 12, 2004 - M.D.C. Holdings, Inc. (NYSE/PCX: MDC) today announced net income for the quarter ended December 31, 2003 of $67.0 million, or $2.18 per share - the highest quarterly net income in the Company's history and 17% higher than net income of $57.1 million, or $1.90 per share, for the same period in 2002. Net income for the year ended December 31, 2003 was a record $212.2 million, or $7.00 per share, compared with $167.3 million, or $5.48 per share, for 2002. MDC achieved record revenues for the quarter and year ended December 31, 2003 of $862.1 million and $2.92 billion, increases of 12% and 26%, respectively, from the same periods in 2002. Larry A. Mizel, MDC's chairman and chief executive officer, stated, "We are pleased to announce the completion of the most successful year in our 32 years in business, culminated by the most profitable quarter in our history. In the process, we posted record annual net income and revenues for the sixth and tenth consecutive years, respectively. These outstanding results, which were achieved despite the economic and geopolitical challenges facing our industry and our nation throughout much of 2003, validate the success of our operating strategy. This strategy encompasses both a conservative capital management policy and an objective to maximize risk-adjusted returns on invested capital. As a result of achieving these objectives, stockholders' equity exceeded $1 billion for the first time, and we ended the year with a net debt-to-capital -more- [GRAPHIC OMITTED] M.D.C. HOLDINGS, INC. Page 2 ratio of .24 and $780 million in cash and borrowing capacity. In the process, we generated more than a 24% net return on average stockholders' equity, 140 basis points above our 2002 return and exceeding 20% for the sixth year in a row. And our home gross margins and the net return on our assets in 2003 rank among the highest in the industry. We especially are proud to report that Standard & Poor's, Moody's and Fitch Ratings recognized our successes in 2003 through ratings upgrades, all at the investment grade level, placing MDC among an elite group of only five homebuilders with investment grade ratings from all three major rating agencies." Mizel continued, "We made tremendous progress in 2003 toward our stated goals of geographically diversifying and growing our homebuilding operations. Our strategic entry into six new markets, significant expansion in the Salt Lake City and Dallas/Fort Worth markets that we entered in 2002, and continued growth in most of our existing markets enabled us to increase substantially our active subdivisions and inventory of controlled lots. These expansion activities, aided by record low interest rates and strong demand for new homes in most of our markets, contributed to the 28% year-over-year increase in our total year home orders, including a 39% increase in the fourth quarter." Mizel concluded, "As our new market operations come online and our controlled lot positions evolve into additional active subdivisions, we anticipate capitalizing on the apparent improving economic conditions, strong demographic trends and the competitive advantages available to large, well-capitalized homebuilders to meet our three-year objective to increase home closings and revenues an average of 15% each year. With our record year-end backlog of almost 5,600 homes, solid contributions expected from our new markets in Houston and Jacksonville, and an expanded presence in most of our other markets, we are well-positioned to meet these volume and top-line objectives in 2004 and produce record earnings for the seventh consecutive year." Highest Homebuilding Profits in Company History Operating profits from the Company's homebuilding operations reached record levels in the quarter and year ended December 31, 2003, increasing 25% and 33% to $126.0 million and $393.9 million, respectively, from the same periods in 2002. The increases in 2003 primarily were attributable to record home closings and improved home gross margins. As previously reported, the Company closed 3,374 homes and 11,211 homes, respectively, in the fourth quarter and year ended December 31, 2003, representing increases of 13% and 26% from the same periods in 2002. Home gross margins were 25.0% and 24.1%, respectively, for the quarter and year ended December 31, 2003, compared with 22.6% and 23.0% for the same periods in 2002. Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Increases in home closings in each of our markets except Colorado and California contributed to -more- [GRAPHIC OMITTED] M.D.C. HOLDINGS, INC. Page 3 improved quarterly operating performances by most of our homebuilding divisions. Home closings were lower in Colorado and California primarily due to a temporary reduction in the average number of active subdivisions in these two states. In California, higher home gross margins more than offset the impact of lower home closings. In fact, all of our homebuilding divisions that have been operational for at least two years reported home gross margins in excess of 20%. The strength of our home gross margins this quarter reflects our ability to raise home prices in most of our markets over the last several quarters, along with the success of corporate initiatives aimed at reducing construction costs. Among other things, these initiatives helped delay until 2004 the margin impact of the significant rise in lumber costs that began in May. In addition, we benefited from particularly strong margins in a number of relatively mature subdivisions in California, Las Vegas, Virginia and Maryland, many of which have closed out recently, or will be closing out in the near future." Reece continued, "Looking forward to 2004, our average selling price should be consistent with the current level, as we expect selling price increases and an increased volume of homes closed in higher-priced markets in California, Virginia and Maryland to be offset by relatively greater growth in home closings in our new lower-priced markets in Texas, Salt Lake City and Jacksonville, and our more-affordable existing markets in Las Vegas and Arizona. We expect our active subdivisions to grow on a net basis throughout the year at a rate that, by year-end, should approximate our growth in home closings for 2004. Consistent with our discussions each quarter over the last couple of years, our home gross margins in 2004 will be challenged by ongoing increases in the cost of land and certain building materials, including lumber. In addition, the sources of our growth in 2004 will result in closing a large number of homes in new and existing markets that may produce home gross margins below our Company average. These factors will be mitigated by recent price increases and the benefits of our cost saving initiatives. Maintaining or increasing home gross margins in 2004 relative to record levels realized in 2003 also may depend on continued home price increases that are reflective of the strong demand for homes we are experiencing currently in most of our markets." The Company received orders, net of cancellations, for 2,690 homes and 12,630 homes, respectively, during the 2003 fourth quarter and total year, the highest for any fourth quarter and year in MDC's history. These home order levels represent increases of 39% and 28%, respectively, from the net home orders received in the same periods in 2002. Generally, the demand for new homes remained strong throughout the quarter, despite fluctuations in certain economic indicators, mortgage interest rates and weather conditions in several markets. An 11% increase in the number of active subdivisions and a reduced rate of order cancellations to 26.5% from 32.1% a year ago also contributed to the Company's relative net home order strength in the fourth quarter of 2003. -more- [GRAPHIC OMITTED] M.D.C. HOLDINGS, INC. Page 4 Strong Financial Services Results Operating profits from the Company's financial services operations were $4.9 million and $28.3 million for the quarter and year ended December 31, 2003, respectively, compared with $8.1 million and $24.2 million, for the same periods in 2002. Record quarterly revenues from mortgage loan origination fees in the 2003 fourth quarter, driven by the record home closings from the homebuilding segment, were more than offset by a reduction in gains on sales of mortgage loans and higher general and administrative expenses incurred to handle the higher volume of mortgage loans. The decline in gains on sales of mortgage loans in the 2003 fourth quarter largely was due to year-over-year differences in the volatility of mortgage interest rates, and the more competitive pricing environment for mortgage loans that resulted from the significant decline in refinancing activity in the marketplace. This competitive environment contributed to the Company originating a higher percentage of less-valuable adjustable rate mortgage loans in the fourth quarter of 2003, as well as brokering a higher percentage of total loans processed in the quarter to third party mortgage companies, for which no gains on sales are realized by the Company. The Company originated and brokered $383.6 million and $165.2 million, respectively, in mortgage loans in the quarter ended December 31, 2003, compared with $455.1 million and $59.8 million, respectively, in the same period in 2002. All earnings per share amounts discussed above are on a diluted basis. MDC, whose subsidiaries build homes under the name "Richmond American Homes," is one of the largest homebuilders in the United States. The Company also provides mortgage financing, primarily for MDC's homebuyers, through its wholly owned subsidiary HomeAmerican Mortgage Corporation. MDC is a major regional homebuilder with a significant presence in some of the country's best housing markets. The Company is the largest homebuilder in Colorado; among the top five homebuilders in Northern Virginia, suburban Maryland, Phoenix, Tucson, Las Vegas and Salt Lake City; and among the top ten homebuilders in Northern California and Southern California. MDC also has a growing presence in Dallas/Fort Worth and has recently entered the Houston, San Antonio, Philadelphia/Delaware Valley, West Florida, Jacksonville and Chicago markets. For more information, please visit www.richmondamerican.com. -more- [GRAPHIC OMITTED] M.D.C. HOLDINGS, INC. Page 5 Forward-Looking Statements Certain statements in this release 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 and business conditions; (2) interest rate changes; (3) the relative stability of debt and equity markets; (4) competition; (5) the availability and cost of land and other raw materials used by the Company in its homebuilding operations; (6) the availability and cost of performance bonds and insurance covering risks associated with our business; (7) shortages and the cost of labor; (8) weather related slowdowns; (9) slow growth initiatives; (10) building moratoria; (11) governmental regulation, including the interpretation of tax, labor and environmental laws; (12) changes in consumer confidence and preferences; (13) required accounting changes; (14) terrorist acts and other acts of war; and (15) other factors over which the Company has little or no control. -more- M.D.C. HOLDINGS, INC. Condensed Consolidated Statements of Income (In thousands, except per share amounts)
Three Months Ended Year Ended December 31, December 31, ----------------------------- ------------------------------ 2003 2002 2003 2002 ------------ ------------ ------------ ------------ REVENUES Homebuilding................................. $ 848,028 $ 755,877 $ 2,859,086 $ 2,272,195 Financial Services........................... 13,868 14,919 60,216 45,356 Corporate.................................... 184 226 768 973 ------------ ------------ ------------ ------------ Total Revenues........................... $ 862,080 $ 771,022 $ 2,920,070 $ 2,318,524 ============ ============ ============ ============ NET INCOME Homebuilding................................. $ 125,956 $ 101,073 $ 393,879 $ 295,604 Financial Services........................... 4,869 8,074 28,277 24,194 ------------ ------------ ------------ ------------ Operating Profit......................... 130,825 109,147 422,156 319,798 Expenses related to debt redemption.......... - - - - (9,315) - - Other corporate expense, net................. (20,735) (15,509) (64,618) (45,754) ------------ ------------ ------------ ------------ Income before income taxes................... 110,090 93,638 348,223 274,044 Provision for income taxes................... (43,068) (36,564) (135,994) (106,739) ------------ ------------ ------------ ------------ Net Income............................... $ 67,022 $ 57,074 $ 212,229 $ 167,305 ============ ============ ============ ============ EARNINGS PER SHARE Basic.................................... $ 2.28 $ 1.95 $ 7.31 $ 5.68 ============ ============ ============ ============ Diluted.................................. $ 2.18 $ 1.90 $ 7.00 $ 5.48 ============ ============ ============ ============ WEIGHTED-AVERAGE SHARES OUTSTANDING Basic.................................... 29,422 29,289 29,035 29,443 ============ ============ ============ ============ Diluted.................................. 30,798 30,117 30,303 30,529 ============ ============ ============ ============ DIVIDENDS PAID PER SHARE $ .125 $ .073 $ .405 $ .282 ============ ============ ============ ============
-more- M.D.C. HOLDINGS, INC. Information on Business Segments (Dollars in thousands)
Three Months Ended Year Ended December 31, December 31, ------------------------- ------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Homebuilding Home sales............................................. $ 845,857 $ 750,067 $ 2,851,328 $ 2,260,291 Land sales............................................. - - 3,791 1,298 6,022 Other revenues......................................... 2,171 2,019 6,460 5,882 ----------- ----------- ----------- ----------- Total Homebuilding Revenues....................... 848,028 755,877 2,859,086 2,272,195 ----------- ----------- ----------- ----------- Home cost of sales..................................... 634,139 580,294 2,163,696 1,741,449 Land cost of sales..................................... - - 2,859 842 4,600 Marketing.............................................. 46,470 39,921 162,148 125,060 General and administrative............................. 41,463 31,730 138,521 105,482 ----------- ----------- ----------- ----------- 722,072 654,804 2,465,207 1,976,591 ----------- ----------- ----------- ----------- Homebuilding Operating Profit..................... 125,956 101,073 393,879 295,604 ----------- ----------- ----------- ----------- Financial Services Interest revenues...................................... 1,319 1,354 4,616 4,348 Origination fees....................................... 6,539 5,987 22,245 18,771 Gains on sales of mortgage servicing................... 365 413 1,972 1,773 Gains on sales of mortgage loans, net.................. 4,601 6,944 28,622 19,587 Mortgage servicing and other........................... 1,044 221 2,761 877 ----------- ----------- ----------- ----------- Total Financial Services Revenues................. 13,868 14,919 60,216 45,356 General and administrative............................. 8,999 6,845 31,939 21,162 ----------- ----------- ----------- ----------- Financial Services Operating Profit................ 4,869 8,074 28,277 24,194 ----------- ----------- ----------- ----------- Total Operating Profit........................................ 130,825 109,147 422,156 319,798 ----------- ----------- ----------- ----------- Corporate Expenses related to debt redemption.................... - - - - (9,315) - - Interest and other revenues............................ 184 226 768 973 Other general and administrative expenses.............. (20,919) (15,735) (65,386) (46,727) ----------- ----------- ----------- ----------- Net Corporate Expenses............................. (20,735) (15,509) (73,933) (45,754) ----------- ----------- ----------- ----------- Income Before Income Taxes.................................... $ 110,090 $ 93,638 $ 348,223 $ 274,044 =========== =========== =========== ===========
-more- M.D.C. HOLDINGS, INC. Selected Financial Data (Dollars in thousands, except per share amounts)
December 31, ------------------------------------------- 2003 2002 2001 ------------ ------------ ------------ BALANCE SHEET DATA Stockholders' Equity Per Share Outstanding................................... $ 34.40 $ 27.54 $ 22.36 Stockholders' Equity......................................................... $ 1,015,920 $ 800,567 $ 653,831 Homebuilding and Corporate Debt.............................................. 500,179 322,990 174,503 ------------ ------------ ------------ Capital (excluding mortgage lending debt)................................ $ 1,516,099 $ 1,123,557 $ 828,334 ============ ============ ============ Ratio of Homebuilding and Corporate Debt to Equity........................... .49 .40 .27 Ratio of Homebuilding and Corporate Debt to Capital.......................... .33 .29 .21 Ratio of Homebuilding and Corporate Debt to Capital (net of cash)............ .24 .27 .17 Cash and Cash Equivalents.................................................... $ 173,565 $ 28,942 $ 36,600 Unrestricted Cash and Available Borrowing Capacity Under Lines of Credit..... $ 779,407 $ 618,774 $ 491,770 Housing Completed or Under Construction Inventories.......................... $ 732,744 $ 578,475 $ 456,752 Land and Land Under Development Inventories.................................. $ 763,569 $ 656,843 $ 450,502 Corporate and Homebuilding Interest Capitalized Interest Capitalized in Inventory at Beginning of Year..................... $ 17,783 $ 17,358 $ 19,417 Interest Incurred During the Year........................................ 26,779 21,116 22,498 Interest in Home and Land Cost of Sales for the Year..................... (24,519) (20,691) (24,557) ------------ ------------ ------------ Interest Capitalized in Inventory at End of Year........................... $ 20,043 $ 17,783 $ 17,358 ============ ============ ============ Interest Capitalized as a Percent of Inventories............................. 1.3% 1.4% 1.9%
Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2003 2002 2003 2002 --------- ---------- ---------- ---------- OPERATING DATA Interest in Home and Land Cost of Sales as a Percent of Home Sales Revenues................................................ .8% .9% .9% .9% Homebuilding and Corporate SG&A as a Percent of Home Sales Revenues.. 12.9% 11.7% 12.8% 12.3% Depreciation and Amortization........................................ $ 9,814 $ 9,541 $ 35,677 $ 26,907 Home Gross Margins................................................... 25.0% 22.6% 24.1% 23.0% Excluding Interest in Home Cost of Sales...................... 25.8% 23.5% 25.0% 23.9% Cash Provided by (Used in) Operating Activities...................... $ 81,448 $ (166,429) Cash Used in Investing Activities.................................... $ (6,785) $ (12,441) Cash Provided by Financing Activities................................ $ 69,960 $ 171,212
-more- M.D.C. HOLDINGS, INC. Homebuilding Operational Data (Dollars in thousands)
December 31, ------------------------------------------ 2003 2002 2001 ----------- ----------- ----------- LOTS OWNED AND CONTROLLED Lots Owned................................................................... 16,351 16,962 13,524 Lots Under Option............................................................ 12,251 6,995 6,059 Homes Under Construction (including models).................................. 4,754 3,751 2,783 LOTS OWNED AND CONTROLLED BY MARKET (excluding homes under construction) Colorado..................................................................... 5,206 5,760 6,940 California................................................................... 3,512 3,456 3,006 Nevada ..................................................................... 5,359 4,391 1,897 Arizona ..................................................................... 5,258 3,940 4,657 Utah 1,220 861 - - Texas 2,203 841 - - Virginia..................................................................... 3,202 3,257 2,422 Maryland 1,767 1,451 661 Florida...................................................................... 875 - - - - ----------- ----------- ----------- Total Company............................................................ 28,602 23,957 19,583 =========== =========== =========== ACTIVE SUBDIVISIONS Colorado..................................................................... 49 61 61 California................................................................... 26 24 26 Nevada ..................................................................... 17 18 7 Arizona ..................................................................... 38 44 27 Utah 11 4 - - Texas 11 1 - - Virginia..................................................................... 28 20 11 Maryland 9 6 5 Florida...................................................................... 9 - - - - ----------- ----------- ----------- Total Company............................................................ 198 178 137 =========== =========== ===========
Three Months Ended Year Ended December 31, December 31, ---------------------------- --------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ----------- AVERAGE SELLING PRICE PER HOME CLOSED Colorado.................................................... $ 251.2 $ 252.3 $ 254.2 $ 250.5 California.................................................. 393.0 366.2 390.0 390.4 Nevada...................................................... 190.1 186.1 186.3 188.8 Arizona..................................................... 182.1 173.9 184.3 167.0 Utah........................................................ 175.8 181.6 174.5 166.0 Texas....................................................... 164.5 176.8 161.4 176.8 Virginia.................................................... 393.7 343.0 375.1 330.3 Maryland.................................................... 416.7 376.0 388.2 345.2 Florida..................................................... 166.2 - - 168.3 - - Company Average......................................... $ 250.7 $ 250.5 $ 254.3 $ 254.0
-more- M.D.C. HOLDINGS, INC. Homebuilding Operational Data
Three Months Ended Year Ended December 31, December 31, ---------------------------- ---------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Orders For Homes, net (Units) Colorado.................................... 425 382 2,433 2,681 California.................................. 635 387 2,116 2,086 Nevada...................................... 534 283 2,595 1,260 Arizona..................................... 562 573 3,229 2,669 Utah........................................ 86 34 378 111 Texas....................................... 95 15 289 17 Virginia.................................... 234 194 1,160 798 Maryland.................................... 64 63 372 277 Florida..................................... 55 - - 58 - - ------------ ------------ ------------ ------------ Total................................... 2,690 1,931 12,630 9,899 ============ ============ ============ ============ Homes Closed (Units) Colorado.................................... 686 814 2,656 2,919 California.................................. 501 606 1,919 1,654 Nevada...................................... 700 510 2,059 1,204 Arizona..................................... 905 784 2,972 2,218 Utah........................................ 84 38 277 102 Texas....................................... 67 1 162 1 Virginia.................................... 273 188 782 556 Maryland.................................... 77 53 291 246 Florida..................................... 81 - - 93 - - ------------ ------------ ------------ ------------ Total................................... 3,374 2,994 11,211 8,900 ============ ============ ============ ============
December 31, ---------------------------- 2003 2002 ------------ ------------ Backlog (Units) Colorado................................................................... 734 957 California................................................................. 1,119 922 Nevada..................................................................... 886 350 Arizona.................................................................... 1,333 1,076 Utah....................................................................... 151 50 Texas...................................................................... 143 16 Virginia................................................................... 854 476 Maryland................................................................... 269 188 Florida.................................................................... 104 - - ------------ ------------ Total.................................................................. 5,593 4,035 ============ ============ Backlog Estimated Sales Value (in thousands)................................... $ 1,600,000 $ 1,120,000 ============ ============
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