ex_161952.htm

EX-99.1 2 ex_161952.htm EXHIBIT 99.1 ex_161952.htm

Exhibit 99.1

News Release

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

Strong execution of strategy to offer more affordable homes drives a 58% increase in third quarter net orders and a 16% increase in ending backlog value, setting the stage for significant year-over-year revenue and income growth in coming quarters.

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

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "MDC delivered another strong performance in the third quarter of 2019, generating net income of $51 million, or $0.79 per diluted share. Net new orders increased 58% year-over-year on a sales pace of 3.6 homes per community per month. The sizable demand we experienced during the quarter led us to raise prices at a majority of our communities. We believe that these price increases reflected marketplace conditions, as the sales pace in September remained at a healthy 3.3 homes per community for the month."

Mr. Mizel continued, "We continue to focus our efforts on the more affordable segments of the market, as demand for lower priced homes remains strong across our geographic footprint. We believe this trend will continue for some time given the widespread lack of affordable housing and the demographic shifts occurring in this country.”

Mr. Mizel concluded, "We have experienced remarkable order growth this year and have done so without the use of heavy discounting or changing our approach to speculative inventory. Our company’s long-term strategy focuses on limiting risk by adhering to a built-to-order model with the objective of maximizing the value of each lot. We believe this strategy, coupled with our industry leading dividend payout, leads to superior risk-adjusted returns for our shareholders over time.”

2019 Third Quarter Highlights and Comparisons to 2018 Third Quarter

●

Home sale revenues of $750.3 million, down 2% from $766.0 million

Unit deliveries up 8% to 1,713

Average selling price of deliveries down 9% to $438,000

●

Net income of $50.6 million, or $0.79 per diluted share, down 5% from $53.4 million or $0.86 per diluted share*

Effective tax rate of 19.5% vs. 20.8%

●

Gross margin from home sales of 18.8% versus 17.7%

No inventory impairments vs. $11.1 million

●

Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") of 12.4% vs. 10.9%

$9.8 million of stock based compensation expense versus $2.4 million

●

Dollar value of net new orders up 50% to $871.7 million from $581.2 million

Unit net orders increased 58% to 2,036

Monthly sales absorption pace increased 34% to 3.6

Average selling price of net orders down 5% to $428,000

* Per share amount for the 2018 third 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 September 30, 2019 up 16% year-over-year to $2.10 billion

Estimated gross margin from homes in backlog at September 30, 2019 slightly higher than 2019 third quarter closing gross margin of 18.8%

Backlog conversion ratio (home deliveries divided by beginning backlog) for the fourth quarter of approximately 50%

Average selling price for fourth quarter unit deliveries estimated at approximately $450,000

●

Active subdivision count at September 30, 2019 of 190, up 20% year-over-year

●

Quarterly dividend of $0.30 ($1.20 annualized) declared in October 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 205,000 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 September 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						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues	$	750,274		$	766,027		$	2,130,396		$	2,123,323
Home cost of sales		(609,316	)		(619,248	)		(1,724,040	)		(1,722,283	)
Inventory impairments		-			(11,098	)		(610	)		(11,848	)
Total cost of sales		(609,316	)		(630,346	)		(1,724,650	)		(1,734,131	)
Gross profit		140,958			135,681			405,746			389,192
Selling, general and administrative expenses		(92,716	)		(83,523	)		(257,689	)		(236,435	)
Interest and other income		2,336			1,953			7,491			5,586
Other expense		(1,887	)		(1,128	)		(4,188	)		(2,562	)
Homebuilding pretax income		48,691			52,983			151,360			155,781

Financial Services:
Revenues		22,388			19,611			58,389			60,018
Expenses		(10,352	)		(9,408	)		(28,883	)		(27,850	)
Interest and other income		1,312			1,230			3,943			3,490
Net gain on marketable equity securities		767			3,004			7,934			3,129
Financial services pretax income		14,115			14,437			41,383			38,787

Income before income taxes		62,806			67,420			192,743			194,568
Provision for income taxes		(12,226	)		(14,028	)		(47,020	)		(38,513	)
Net income	$	50,580		$	53,392		$	145,723		$	156,055

Comprehensive income	$	50,580		$	53,392		$	145,723		$	156,055

Earnings per share:
Basic	$	0.81		$	0.87		$	2.36		$	2.56
Diluted	$	0.79		$	0.86		$	2.29		$	2.52

Weighted average common shares outstanding:
Basic		61,978,195			60,665,349			61,422,925			60,505,916
Diluted		63,968,215			61,804,792			63,360,535			61,592,092

Dividends declared per share	$	0.30		$	0.28		$	0.90		$	0.83

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

(Unaudited)

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

Homebuilding:
Cash and cash equivalents	$	285,338	$	414,724
Restricted cash		16,325		6,363
Trade and other receivables		58,528		52,982
Inventories:
Housing completed or under construction		1,204,641		952,436
Land and land under development		1,191,036		1,180,558
Total inventories		2,395,677		2,132,994
Property and equipment, net		63,673		58,167
Operating lease right-of-use asset		31,251		-
Deferred tax asset, net		27,712		37,178
Prepaid and other assets		46,395		45,794
Total homebuilding assets		2,924,899		2,748,202
Financial Services:
Cash and cash equivalents		46,790		49,052
Marketable securities		52,876		40,879
Mortgage loans held-for-sale, net		117,020		149,211
Other assets		16,994		13,733
Total financial services assets		233,680		252,875
Total Assets	$	3,158,579	$	3,001,077
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	79,043	$	50,505
Accrued liabilities		189,296		196,247
Operating lease liability		31,887		-
Revolving credit facility		15,000		15,000
Senior notes, net		989,050		987,967
Total homebuilding liabilities		1,304,276		1,249,719
Financial Services:
Accounts payable and accrued liabilities		62,031		58,543
Mortgage repurchase facility		90,471		116,815
Total financial services liabilities		152,502		175,358
Total Liabilities		1,456,778		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; 62,597,390 and 56,615,352 issued and outstanding at September 30, 2019 and December 31, 2018, respectively		626		566
Additional paid-in-capital		1,341,858		1,168,442
Retained earnings		359,317		406,992
Total Stockholders' Equity		1,701,801		1,576,000
Total Liabilities and Stockholders' Equity	$	3,158,579	$	3,001,077

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(Dollars in thousands)
Operating Activities:
Net income	$	50,580		$	53,392		$	145,723		$	156,055
Adjustments to reconcile net income to net cash used in: operating activities:
Stock-based compensation expense		9,795			2,425			18,178			8,500
Depreciation and amortization		5,537			5,454			15,478			15,406
Inventory impairments		-			11,098			610			11,848
Net gain on marketable equity securities		(767	)		(3,004	)		(7,934	)		(3,129	)
Amortization of discount / premiums on marketable debt securities, net		-			-			-			(366	)
Deferred income tax expense		1,729			535			9,488			4,092
Net changes in assets and liabilities:
Trade and other receivables		(4,646	)		(4,732	)		(4,682	)		(7,049	)
Mortgage loans held-for-sale		(7,683	)		(7,651	)		32,191			23,278
Housing completed or under construction		(133,221	)		1,919			(251,749	)		(131,657	)
Land and land under development		(34,899	)		(65,506	)		(10,461	)		(149,963	)
Prepaid expenses and other assets		317			(7,220	)		(3,889	)		(12,328	)
Accounts payable and accrued liabilities		24,475			10,232			23,929			26,067
Net cash used in operating activities		(88,783	)		(3,058	)		(33,118	)		(59,246	)

Investing Activities:
Purchases of marketable securities		(5,224	)		(2,524	)		(10,340	)		(17,183	)
Maturities of marketable securities		-			-			-			50,000
Sales of marketable securities		1,220			850			6,277			13,310
Purchases of property and equipment		(6,268	)		(6,848	)		(20,128	)		(19,899	)
Net cash provided by (used in) investing activities		(10,272	)		(8,522	)		(24,191	)		26,228

Financing Activities:
Payments on mortgage repurchase facility, net		7,432			9,965			(26,344	)		(21,556	)
Dividend payments		(18,701	)		(16,940	)		(54,337	)		(50,733	)
Issuance of shares under stock-based compensation programs, net		(1,024	)		4,024			16,304			9,859
Net cash used in financing activities		(12,293	)		(2,951	)		(64,377	)		(62,430	)

Net decrease in cash, cash equivalents and restricted cash		(111,348	)		(14,531	)		(121,686	)		(95,448	)
Cash, cash equivalents and restricted cash:
Beginning of period		459,801			433,323			470,139			514,240
End of period	$	348,453		$	418,792		$	348,453		$	418,792

Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents	$	285,338		$	360,947		$	285,338		$	360,947
Restricted cash		16,325			7,866			16,325			7,866
Financial Services:
Cash and cash equivalents		46,790			49,979			46,790			49,979
Total cash, cash equivalents and restricted cash	$	348,453		$	418,792		$	348,453		$	418,792

New Home Deliveries

	Three Months Ended September 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		927	$	410,414	$	442.7		836	$	409,001	$	489.2		11	%		0	%		(10	%)
Mountain		537		263,802		491.2		535		272,989		510.3		0	%		(3	%)		(4	%)
East		249		76,058		305.5		213		84,037		394.5		17	%		(9	%)		(23	%)
Total		1,713	$	750,274	$	438.0		1,584	$	766,027	$	483.6		8	%		(2	%)		(9	%)

	Nine Months Ended September 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		2,464	$	1,164,502	$	472.6		2,286	$	1,120,316	$	490.1		8	%		4	%		(4	%)
Mountain		1,480		760,470		513.8		1,473		750,162		509.3		0	%		1	%		1	%
East		641		205,424		320.5		611		252,845		413.8		5	%		(19	%)		(23	%)
Total		4,585	$	2,130,396	$	464.6		4,370	$	2,123,323	$	485.9		5	%		0	%		(4	%)

Net New Orders

	Three Months Ended September 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		1,168	$	516,000	$	441.8		4.09		690	$	316,556	$	458.8		3.06		69	%		63	%		(4	%)		34	%
Mountain		565		271,800		481.1		2.86		418		206,945		495.1		2.22		35	%		31	%		(3	%)		29	%
East		303		83,896		276.9		3.58		182		57,649		316.8		2.64		66	%		46	%		(13	%)		35	%
Total		2,036	$	871,696	$	428.1		3.59		1,290	$	581,150	$	450.5		2.67		58	%		50	%		(5	%)		34	%

	Nine Months Ended September 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		3,379	$	1,543,584	$	456.8		4.14		2,743	$	1,274,115	$	464.5		4.14		23	%		21	%		(2	%)		0	%
Mountain		1,974		960,109		486.4		3.30		1,593		814,939		511.6		3.02		24	%		18	%		(5	%)		9	%
East		912		268,578		294.5		4.02		579		207,394		358.2		2.78		58	%		30	%		(18	%)		45	%
Total		6,265	$	2,772,271	$	442.5		3.82		4,915	$	2,296,448	$	467.2		3.51		27	%		21	%		(5	%)		9	%

*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							Nine Months Ended
	September 30,				%			September 30,				%			September 30,				%
	2019		2018		Change			2019		2018		Change			2019		2018		Change
West		93		73		27	%		96		75		28	%		92		73		26	%
Mountain		67		64		5	%		66		63		5	%		66		59		12	%
East		30		21		43	%		29		23		26	%		25		24		4	%
Total		190		158		20	%		191		161		19	%		183		156		17	%

Backlog

	September 30,
	2019						2018						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
West		2,438	$	1,146,912	$	470.4		1,908	$	939,247	$	492.3		28	%		22	%		(4	%)
Mountain		1,537		768,317		499.9		1,373		717,988		522.9		12	%		7	%		(4	%)
East		641		183,856		286.8		423		145,829		344.7		52	%		26	%		(17	%)
Total		4,616	$	2,099,085	$	454.7		3,704	$	1,803,064	$	486.8		25	%		16	%		(7	%)

Homes Completed or Under Construction (WIP lots)

	September 30,				%
	2019		2018		Change
Unsold:
Completed		82		129		(36	%)
Under construction		255		311		(18	%)
Total unsold started homes		337		440		(23	%)
Sold homes under construction or completed		3,433		2,835		21	%
Model homes under construction or completed		455		403		13	%
Total homes completed or under construction		4,225		3,678		15	%

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

	September 30, 2019						September 30, 2018
	Lots Owned		Lots Optioned		Total		Lots Owned		Lots Optioned		Total		Total % Change
West		9,128		2,203		11,331		7,736		4,215		11,951		(5	%)
Mountain		6,456		3,139		9,595		6,020		3,648		9,668		(1	%)
East		2,014		2,003		4,017		1,895		1,497		3,392		18	%
Total		17,598		7,345		24,943		15,651		9,360		25,011		(0	%)

Selling, General and Administrative Expenses

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019			2018			Change		2019			2018			Change
	(Dollars in thousands)
General and administrative expenses	$	46,951		$	40,237		$	6,714	$	128,849		$	116,362		$	12,487
General and administrative expenses as a percentage of home sale revenues		6.3	%		5.3	%	100 bps			6.0	%		5.5	%	50 bps

Marketing expenses	$	20,457		$	18,102		$	2,355	$	58,266		$	50,888		$	7,378
Marketing expenses as a percentage of home sale revenues		2.7	%		2.4	%	30 bps			2.7	%		2.4	%	30 bps

Commissions expenses	$	25,308		$	25,184		$	124	$	70,574		$	69,185		$	1,389
Commissions expenses as a percentage of home sale revenues		3.4	%		3.3	%	10 bps			3.3	%		3.3	%	0 bps

Total selling, general and administrative expenses	$	92,716		$	83,523		$	9,193	$	257,689		$	236,435		$	21,254
Total selling, general and administrative expenses as a percentage of home sale revenues		12.4	%		10.9	%	150 bps			12.1	%		11.1	%	100 bps

Capitalized Interest

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(Dollars in thousands)
Homebuilding interest incurred	$	15,879		$	15,641		$	47,890		$	46,905
Less: Interest capitalized		(15,879	)		(15,641	)		(47,890	)		(46,905	)
Homebuilding interest expensed	$	-		$	-		$	-		$	-

Interest capitalized, beginning of period	$	58,193		$	58,227		$	54,845		$	57,541
Plus: Interest capitalized during period		15,879			15,641			47,890			46,905
Less: Previously capitalized interest included in home and land cost of sales		(14,451	)		(16,636	)		(43,114	)		(47,214	)
Interest capitalized, end of period	$	59,621		$	57,232		$	59,621		$	57,232