ex_152038.htm

EX-99.1 2 ex_152038.htm EXHIBIT 99.1 ex_152038.htm

Exhibit 99.1

News Release

M.D.C. HOLDINGS ANNOUNCES 2019 SECOND QUARTER RESULTS

DENVER, COLORADO, Wednesday, July 31, 2019. M.D.C Holdings, Inc. (NYSE: MDC), one of the nation’s leading homebuilders, announced results for the quarter ended June 30, 2019.

Larry A. Mizel, MDC’s Chairman and Chief Executive Officer, stated, "MDC turned in another strong performance in the second quarter of 2019, generating net income of $55 million, or $0.86 per diluted share. We continued to see healthy demand for our new home offerings during the quarter, with a 32% year-over-year increase in net new orders on an absorption pace of 4.1 homes per community per month. The robust demand we experienced has helped to stabilize the environment for pricing and incentives, which allowed us to achieve a homebuilding gross margin for the quarter of 19.5%. It also resulted in the biggest quarter-end unit backlog for our company in over 13 years. These achievements were a direct result of the investments we have made over the last several years, our focus on the more affordable segment and the ability of our talented employees to execute our strategic plan."

Mr. Mizel continued, "We ended the second quarter with 14% more active communities than we had at the end of the second quarter of 2018. A majority of these communities are targeted for the more affordable segment, which continues to be the deepest part of the market. We believe this combination of higher community count and favorable market positioning provides MDC with the opportunity for growth as we enter the second half of 2019."

Mr. Mizel concluded, "Our return metrics have improved significantly over the last several years thanks to the strategic moves we have made. We believe this operational momentum, coupled with our industry-leading dividend payout and balance sheet strength, provide MDC with a path to continued success.”

2019 Second Quarter Highlights and Comparisons to 2018 Second Quarter

●

Home sale revenues of $732.8 million, down 2% from $749.6 million

Unit deliveries nearly unchanged at 1,514

Average selling price of deliveries down 2% to $484,000

●

Pretax income of $74.3 million, down 3% from $76.6 million

●

Net income of $54.6 million, or $0.86 per diluted share, down 15% from $63.9 million or $1.03 per diluted share*

Effective tax rate of 26.6% vs. 16.6%

●

Gross margin from home sales up 40 basis points to 19.5% from 19.1%

●

Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") of 11.3% vs. 10.9%

●

Dollar value of net new orders up 25% to $967.9 million from $776.2 million

Unit net orders increased 32% to 2,273

Monthly sales absorption pace increased 12% to 4.1

Average selling price of net orders down 6% to $425,800

* Per share amount for the 2018 second quarter has been adjusted for the 8% stock dividend declared and paid in the 2019 first quarter.

2019 Outlook – Selected Information

●

Backlog dollar value at June 30, 2019 down 1% year-over-year to $1.93 billion

Estimated gross margin from homes in backlog at June 30, 2019 slightly lower than 2019 second quarter closing gross margin of 19.5%

Backlog conversion ratio (home deliveries divided by beginning backlog) for the third quarter estimated to be in the 39% to 41% range

●

Active subdivision count at June 30, 2019 of 187, up 14% year-over-year and 13% from December 31, 2018

●

Quarterly dividend of $0.30 ($1.20 annualized) declared in July 2019

About MDC

M.D.C. Holdings, Inc. was founded in 1972. MDC's homebuilding subsidiaries, which operate under the name Richmond American Homes, have built and financed the American Dream for more than 200,000 homebuyers since 1977. 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 Diego, Orange County, San Francisco Bay Area, Sacramento, Washington D.C., Baltimore, Orlando, Jacksonville, Seattle and Portland. The Company's subsidiaries also provide mortgage financing, insurance and title services, primarily for Richmond American homebuyers, through HomeAmerican Mortgage Corporation, American Home Insurance Agency, Inc. and American Home Title and Escrow Company, respectively. M.D.C. Holdings, Inc. is traded on the New York Stock Exchange under the symbol "MDC." For more information, visit www.mdcholdings.com.

Forward-Looking Statements

Certain statements in this release, including any 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 MDC 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 MDC, including cancellation rates, net home orders, home gross margins, land and home values and subdivision counts; (3) changes in interest rates, mortgage lending programs and the availability of credit; (4) changes in the market value of MDC’s investments in marketable securities; (5) uncertainty in the mortgage lending industry, including repurchase requirements associated with HomeAmerican Mortgage Corporation’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 MDC 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 and natural disasters; (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; (16) changes in energy prices; and (17) other factors over which MDC has little or no control. Additional information about the risks and uncertainties applicable to MDC's business is contained in MDC's Form 10-Q for the quarter ended June 30, 2019, 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. MDC 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.

Contact:

Robert N. Martin

Senior Vice President and Chief Financial Officer

1-866-424-3395

IR@mdch.com

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues	$	732,844		$	749,608		$	1,380,122		$	1,357,296
Home cost of sales		(590,172	)		(606,403	)		(1,114,724	)		(1,103,035	)
Inventory impairments		-			(200	)		(610	)		(750	)
Total cost of sales		(590,172	)		(606,603	)		(1,115,334	)		(1,103,785	)
Gross profit		142,672			143,005			264,788			253,511
Selling, general and administrative expenses		(82,712	)		(81,571	)		(164,973	)		(152,912	)
Interest and other income		2,764			1,774			5,155			3,633
Other expense		(1,110	)		(871	)		(2,301	)		(1,434	)
Homebuilding pretax income		61,614			62,337			102,669			102,798

Financial Services:
Revenues		18,597			21,372			36,001			40,407
Expenses		(9,574	)		(9,611	)		(18,531	)		(18,442	)
Interest and other income		1,367			1,240			2,631			2,260
Net gain on marketable equity securities		2,327			1,278			7,167			125
Financial services pretax income		12,717			14,279			27,268			24,350

Income before income taxes		74,331			76,616			129,937			127,148
Provision for income taxes		(19,738	)		(12,717	)		(34,794	)		(24,485	)
Net income	$	54,593		$	63,899		$	95,143		$	102,663

Comprehensive income	$	54,593		$	63,899		$	95,143		$	102,663

Earnings per share:
Basic	$	0.88		$	1.05		$	1.55		$	1.69
Diluted	$	0.86		$	1.03		$	1.50		$	1.66

Weighted average common shares outstanding:
Basic		61,336,404			60,590,899			61,138,982			60,466,527
Diluted		63,323,267			61,604,286			63,023,149			61,525,442

Dividends declared per share	$	0.30		$	0.28		$	0.60		$	0.56

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

(Unaudited)

	June 30,		December 31,
	2019		2018
	(Dollars in thousands, except
	per share amounts)
ASSETS

Homebuilding:
Cash and cash equivalents	$	390,061	$	414,724
Restricted cash		12,911		6,363
Trade and other receivables		54,780		52,982
Inventories:
Housing completed or under construction		1,071,181		952,436
Land and land under development		1,156,009		1,180,558
Total inventories		2,227,190		2,132,994
Property and equipment, net		62,888		58,167
Operating lease right-of-use asset		31,600		-
Deferred tax asset, net		29,441		37,178
Prepaid and other assets		47,176		45,794
Total homebuilding assets		2,856,047		2,748,202
Financial Services:
Cash and cash equivalents		56,829		49,052
Marketable securities		48,105		40,879
Mortgage loans held-for-sale, net		109,337		149,211
Other assets		15,779		13,733
Total financial services assets		230,050		252,875
Total Assets	$	3,086,097	$	3,001,077
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	58,986	$	50,505
Accrued liabilities		186,500		196,247
Operating lease liability		32,240		-
Revolving credit facility		15,000		15,000
Senior notes, net		988,683		987,967
Total homebuilding liabilities		1,281,409		1,249,719
Financial Services:
Accounts payable and accrued liabilities		60,498		58,543
Mortgage repurchase facility		83,039		116,815
Total financial services liabilities		143,537		175,358
Total Liabilities		1,424,946		1,425,077
Stockholders' Equity
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding		-		-
Common stock, $0.01 par value; 250,000,000 shares authorized; 61,922,406 and 56,615,352 issued and outstanding at June 30, 2019 and December 31, 2018, respectively		619		566
Additional paid-in-capital		1,333,095		1,168,442
Retained earnings		327,437		406,992
Total Stockholders' Equity		1,661,151		1,576,000
Total Liabilities and Stockholders' Equity	$	3,086,097	$	3,001,077

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(Dollars in thousands)
Operating Activities:
Net income	$	54,593		$	63,899		$	95,143		$	102,663
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense		4,132			4,824			8,383			6,075
Depreciation and amortization		5,063			5,316			9,941			9,952
Inventory impairments		-			200			610			750
Net gain on marketable equity securities		(2,327	)		(1,278	)		(7,167	)		(125	)
Amortization of discount / premiums on marketable debt securities, net		-			(184	)		-			(366	)
Deferred income tax expense		5,063			3,134			7,759			3,557
Net changes in assets and liabilities:
Trade and other receivables		13,735			944			(36	)		(2,317	)
Mortgage loans held-for-sale		1,473			5,973			39,874			30,929
Housing completed or under construction		(120,665	)		(68,198	)		(118,528	)		(133,576	)
Land and land under development		42,934			(12,905	)		24,438			(84,457	)
Prepaid expenses and other assets		(5,291	)		(5,497	)		(4,206	)		(5,108	)
Accounts payable and accrued liabilities		2,607			9,070			(546	)		15,835
Net cash provided by (used in) operating activities		1,317			5,298			55,665			(56,188	)

Investing Activities:
Purchases of marketable securities		(331	)		(5,898	)		(5,116	)		(14,659	)
Maturities of marketable securities		-			50,000			-			50,000
Sales of marketable securities		320			3,760			5,057			12,460
Purchases of property and equipment		(7,474	)		(6,735	)		(13,860	)		(13,051	)
Net cash provided by (used in) investing activities		(7,485	)		41,127			(13,919	)		34,750

Financing Activities:
Payments on mortgage repurchase facility, net		(1,817	)		(9,307	)		(33,776	)		(31,521	)
Dividend payments		(18,521	)		(16,928	)		(35,636	)		(33,793	)
Proceeds from exercise of stock options		10,241			5,553			17,328			5,835
Net cash used in financing activities		(10,097	)		(20,682	)		(52,084	)		(59,479	)

Net increase (decrease) in cash, cash equivalents and restricted cash		(16,265	)		25,743			(10,338	)		(80,917	)
Cash, cash equivalents and restricted cash:
Beginning of period		476,066			407,580			470,139			514,240
End of period	$	459,801		$	433,323		$	459,801		$	433,323

Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents	$	390,061		$	378,219		$	390,061		$	378,219
Restricted cash		12,911			7,443			12,911			7,443
Financial Services:
Cash and cash equivalents		56,829			47,661			56,829			47,661
Total cash, cash equivalents and restricted cash	$	459,801		$	433,323		$	459,801		$	433,323

New Home Deliveries

	Three Months Ended June 30,
	2019						2018						% Change
	Homes		Home Sale Revenues		Average Price		Homes		Home Sale Revenues		Average Price		Homes			Home Sale Revenues			Average Price
	(Dollars in thousands)
West		785	$	384,530	$	489.8		769	$	391,806	$	509.5		2	%		(2	%)		(4	%)
Mountain		534		287,476		538.3		522		268,541		514.4		2	%		7	%		5	%
East		195		60,838		312.0		221		89,261		403.9		(12	%)		(32	%)		(23	%)
Total		1,514	$	732,844	$	484.0		1,512	$	749,608	$	495.8		0	%		(2	%)		(2	%)

	Six Months Ended June 30,
	2019						2018						% Change
	Homes		Home Sale Revenues		Average Price		Homes		Home Sale Revenues		Average Price		Homes			Home Sale Revenues			Average Price
	(Dollars in thousands)
West		1,537	$	754,088	$	490.6		1,450	$	711,315	$	490.6		6	%		6	%		0	%
Mountain		943		496,668		526.7		938		477,173		508.7		1	%		4	%		4	%
East		392		129,366		330.0		398		168,808		424.1		(2	%)		(23	%)		(22	%)
Total		2,872	$	1,380,122	$	480.5		2,786	$	1,357,296	$	487.2		3	%		2	%		(1	%)

Net New Orders

	Three Months Ended June 30,
	2019								2018								% Change
	Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes			Dollar Value			Average Price			Monthly Absorption Rate
	(Dollars in thousands)
West		1,246	$	550,742	$	442.0		4.46		1,020	$	458,082	$	449.1		4.55		22	%		20	%		(2	%)		(2	%)
Mountain		690		318,275		461.3		3.56		508		250,454		493.0		2.97		36	%		27	%		(6	%)		20	%
East		337		98,843		293.3		4.36		193		67,627		350.4		2.65		75	%		46	%		(16	%)		65	%
Total		2,273	$	967,860	$	425.8		4.13		1,721	$	776,163	$	451.0		3.68		32	%		25	%		(6	%)		12	%

	Six Months Ended June 30,
	2019								2018								% Change
	Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes			Dollar Value			Average Price			Monthly Absorption Rate
	(Dollars in thousands)
West		2,211	$	1,003,236	$	453.7		4.15		2,053	$	937,759	$	456.8		4.66		8	%		7	%		(1	%)		(11	%)
Mountain		1,409		669,523		475.2		3.53		1,175		590,045		502.2		3.45		20	%		13	%		(5	%)		2	%
East		609		182,141		299.1		4.33		397		147,943		372.7		2.82		53	%		23	%		(20	%)		54	%
Total		4,229	$	1,854,900	$	438.6		3.94		3,625	$	1,675,747	$	462.3		3.93		17	%		11	%		(5	%)		0	%

*Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period

Active Subdivisions

								Average Active Subdivisions							Average Active Subdivisions
	Active Subdivisions							Three Months Ended							Six Months Ended
	June 30,				%			June 30,				%			June 30,				%
	2019		2018		Change			2019		2018		Change			2019		2018		Change
West		97		78		24	%		94		75		25	%		89		73		22	%
Mountain		65		61		7	%		65		57		14	%		66		57		16	%
East		25		25		0	%		26		24		8	%		23		24		(4	%)
Total		187		164		14	%		185		156		19	%		178		154		16	%

Backlog

	June 30,
	2019						2018						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
West		2,197	$	1,016,327	$	462.6		2,054	$	1,011,780	$	492.6		7	%		0	%		(6	%)
Mountain		1,509		739,921		490.3		1,490		766,539		514.5		1	%		(3	%)		(5	%)
East		587		173,436		295.5		454		170,364		375.3		29	%		2	%		(21	%)
Total		4,293	$	1,929,684	$	449.5		3,998	$	1,948,683	$	487.4		7	%		(1	%)		(8	%)

Homes Completed or Under Construction (WIP lots)

	June 30,				%
	2019		2018		Change
Unsold:
Completed		96		86		12	%
Under construction		236		268		(12	%)
Total unsold started homes		332		354		(6	%)
Sold homes under construction or completed		3,023		2,980		1	%
Model homes under construction or completed		457		373		23	%
Total homes completed or under construction		3,812		3,707		3	%

Lots Owned and Optioned (including homes completed or under construction)

	June 30, 2019						June 30, 2018
	Lots Owned		Lots Optioned		Total		Lots Owned		Lots Optioned		Total		Total % Change
West		8,611		2,446		11,057		7,906		2,916		10,822		2	%
Mountain		6,457		2,741		9,198		5,329		4,041		9,370		(2	%)
East		2,085		1,267		3,352		1,509		1,925		3,434		(2	%)
Total		17,153		6,454		23,607		14,744		8,882		23,626		(0	%)

Selling, General and Administrative Expenses

	Three Months Ended June 30,									Six Months Ended June 30,
	2019			2018			Change			2019			2018			Change
	(Dollars in thousands)
General and administrative expenses	$	39,326		$	40,372		$	(1,046	)	$	81,898		$	76,125		$	5,773
General and administrative expenses as a percentage of home sale revenues		5.4	%		5.4	%	0 bps				5.9	%		5.6	%	30 bps

Marketing expenses	$	19,513		$	17,215		$	2,298		$	37,809		$	32,786		$	5,023
Marketing expenses as a percentage of home sale revenues		2.7	%		2.3	%	40 bps				2.7	%		2.4	%	30 bps

Commissions expenses	$	23,873		$	23,984		$	(111	)	$	45,266		$	44,001		$	1,265
Commissions expenses as a percentage of home sale revenues		3.3	%		3.2	%	10 bps				3.3	%		3.2	%	10 bps

Total selling, general and administrative expenses	$	82,712		$	81,571		$	1,141		$	164,973		$	152,912		$	12,061
Total selling, general and administrative expenses as a percentage of home sale revenues		11.3	%		10.9	%	40 bps				12.0	%		11.3	%	70 bps

Capitalized Interest

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(Dollars in thousands)
Homebuilding interest incurred	$	15,980		$	15,639		$	32,011		$	31,264
Less: Interest capitalized		(15,980	)		(15,639	)		(32,011	)		(31,264	)
Homebuilding interest expensed	$	-		$	-		$	-		$	-

Interest capitalized, beginning of period	$	56,947		$	58,738		$	54,845		$	57,541
Plus: Interest capitalized during period		15,980			15,639			32,011			31,264
Less: Previously capitalized interest included in home and land cost of sales		(14,734	)		(16,150	)		(28,663	)		(30,578	)
Interest capitalized, end of period	$	58,193		$	58,227		$	58,193		$	58,227