M.D.C. Holdings Announces Second Quarter 2020 Results

|Jul 28|magazine40 min read

DENVER, July 28, 2020 /PRNewswire/ -- M.D.C Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended June 30, 2020.

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "MDC experienced a remarkable turnaround in the second quarter of 2020, as order activity rebounded sharply from the initial weeks of the pandemic. Unit net orders for the quarter rose 5% year-over-year and increased 53% for the month of June, with our sales efforts gaining momentum as the quarter progressed. We also generated strong revenue growth and margin expansion in the quarter, resulting in net income of $84.4 million, or $1.31 per diluted share."

Mr. Mizel continued, "Our results this quarter reflect the favorable industry dynamics in place today, including a low interest rate environment, a lack of available supply and a highly motivated buyer. They also reflect our continued shift in focus to the more affordable segments of the market and the benefits of our build-to-order strategy, which caters to the wants and needs of a large segment of the buying population. We believe that providing homebuyers with flexibility and choice at an affordable price is a winning strategy for our company. Given the favorable market conditions we are experiencing, we now believe that we may achieve as many as 8,000 home deliveries for the 2020 full year, which would be a 15% increase from the prior year."

Mr. Mizel concluded, "While there are still many uncertainties regarding the pandemic's impact on our industry and the broader economy, MDC is well positioned for the future given our seasoned leadership team, our strategic focus and our balance sheet strength. I want to thank all of our team members who have done such an excellent job adapting to this new reality and who have been vigilant in providing a safe environment for our employees, suppliers and customers."

2020 Second Quarter Highlights and Comparisons to 2019 Second Quarter

•  Home sale revenues increased 21% to $886.8 million from $732.8 million


•  Unit deliveries up 25% to 1,900


•  Average selling price of deliveries down 4% to $466,700

•  Homebuilding pretax income increased 38% to $84.9 million from $61.6 million


•  Gross margin from home sales increased 70 basis points to 20.2% from 19.5%


•  Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved by 90 basis points to 10.4%

•  Financial services pretax income increased 110% to $26.7 million vs. $12.7 million


•  Loan capture rate increased 800 basis points to 69%

•  Net income of $84.4 million, or $1.31 per diluted share, up 55% from $54.6 million or $0.86 per diluted share


•  Effective tax rate of 24.4% vs. 26.6%

•  Dollar value of net new orders increased 8% to $1.04 billion from $967.9 million


     •  Unit net orders increased 5% to 2,390


     •  Average selling price of net orders up 3%

•  Dollar value of ending backlog up 23% to $2.37 billion from $1.93 billion


     •  Unit backlog increased 20% to 5,143


     •  Average selling price of homes in backlog up 3%



June 30, 2020 Financial Position Highlights

•  Total liquidity of $1.52 billion


•  Total cash and cash equivalents of $544.9 million


•  $964.1 million of availability under homebuilding line of credit ($1.0 billion facility size; maturity of December 2023)

•  No senior note maturities until 2024



2020 Outlook and Other Selected Information1

•  Home deliveries for the 2020 third quarter between 1,900 and 2,100


•  Average selling price for 2020 third quarter unit deliveries exceeding $460,000


•  Gross margin from home sales for the 2020 third quarter of approximately 20% (excluding impairments and warranty adjustments)

•  Full year 2020 home deliveries between 7,700 and 8,000

•  Active subdivision count at June 30, 2020 of 192, up 3% year-over-year

•  Lots controlled of 25,027 at June 30, 2020, up 6% year-over-year

•  Quarterly cash dividend of thirty-three cents ($0.33) per share declared on July 27, 2020, up 10% from prior year


1 See "Forward-Looking Statements" below.

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 210,000 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 the impact of the COVID-19 pandemic, changes in consumer confidence, inflation or deflation and employment levels; (2) changes in business conditions experienced by MDC, including restrictions on business activities resulting from the COVID-19 pandemic, 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 orders addressing the COVID-19 pandemic, 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, 2020, 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.

 

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)




Three Months Ended
June 30,


Six Months Ended
June 30,


2020


2019


2020


2019


(Dollars in thousands, except per share amounts)

Homebuilding:








Home sale revenues

$

886,758



$

732,844



$

1,583,843



$

1,380,122


Home cost of sales

(707,789)



(590,172)



(1,266,436)



(1,114,724)


Inventory impairments







(610)


Total cost of sales

(707,789)



(590,172)



(1,266,436)



(1,115,334)


Gross profit

178,969



142,672



317,407



264,788


Selling, general and administrative expenses

(92,316)



(82,712)



(181,637)



(164,973)


Interest and other income

720



2,764



2,609



5,155


Other expense

(2,452)



(1,110)



(3,789)



(2,301)


Homebuilding pretax income

84,921



61,614



134,590



102,669










Financial Services:








Revenues

32,964



18,597



54,850



36,001


Expenses

(12,178)



(9,574)



(23,107)



(18,531)


Other income (expense), net

5,931



3,694



(6,133)



9,798


Financial services pretax income

26,717



12,717



25,610



27,268










Income before income taxes

111,638



74,331



160,200



129,937


Provision for income taxes

(27,242)



(19,738)



(39,044)



(34,794)


Net income

$

84,396



$

54,593



$

121,156



$

95,143










Comprehensive income

$

84,396



$

54,593



$

121,156



$

95,143










Earnings per share:








Basic

$

1.33



$

0.88



$

1.92



$

1.55


Diluted

$

1.31



$

0.86



$

1.87



$

1.50










Weighted average common shares outstanding:








Basic

63,015,827



61,336,404



62,755,310



61,138,982


Diluted

64,080,940



63,323,267



64,538,835



63,023,149










Dividends declared per share

$

0.33



$

0.30



$

0.66



$

0.60


 

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

(Unaudited) 




June 30,
2020


December 31,
2019


(Dollars in thousands, except
per share amounts)

ASSETS




Homebuilding:




Cash and cash equivalents

$

482,702



$

424,186


Restricted cash

15,668



14,279


Trade and other receivables

88,279



65,829


Inventories:




Housing completed or under construction

1,270,300



1,036,191


Land and land under development

1,235,598



1,330,384


Total inventories

2,505,898



2,366,575


Property and equipment, net

62,516



60,414


Deferred tax asset, net

19,828



21,768


Prepaid and other assets

69,484



78,358


Total homebuilding assets

3,244,375



3,031,409


Financial Services:




Cash and cash equivalents

62,218



35,747


Marketable securities



56,747


Mortgage loans held-for-sale, net

173,567



197,021


Other assets

25,775



17,432


Total financial services assets

261,560



306,947


Total Assets

$

3,505,935



$

3,338,356


LIABILITIES AND EQUITY




Homebuilding:




Accounts payable

$

95,018



$

87,364


Accrued and other liabilities

278,543



245,940


Revolving credit facility

10,000



15,000


Senior notes, net

1,037,062



989,422


Total homebuilding liabilities

1,420,623



1,337,726


Financial Services:




Accounts payable and accrued liabilities

70,033



68,529


Mortgage repurchase facility

142,094



149,616


Total financial services liabilities

212,127



218,145


Total Liabilities

1,632,750



1,555,871


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; 63,384,866 and 62,574,961 issued and outstanding at June 30, 2020 and December 31, 2019, respectively

634



626


Additional paid-in-capital

1,359,985



1,348,733


Retained earnings

512,566



433,126


Total Stockholders' Equity

1,873,185



1,782,485


Total Liabilities and Stockholders' Equity

$

3,505,935



$

3,338,356


 

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

(Unaudited)




Three Months Ended
June 30,


Six Months Ended
June 30,


2020


2019


2020


2019


(Dollars in thousands)

Operating Activities:








Net income

$

84,396



$

54,593



$

121,156



$

95,143


Adjustments to reconcile net income to net cash provided by operating activities:








Stock-based compensation expense

5,488



4,132



9,928



8,383


Depreciation and amortization

6,375



5,063



11,527



9,941


Inventory impairments







610


Net (gain) loss on marketable equity securities

(4,983)



(2,327)



8,285



(7,167)


Deferred income tax expense

831



5,063



1,962



7,759


Net changes in assets and liabilities:



-





Trade and other receivables

(21,834)



13,735



(23,445)



(36)


Mortgage loans held-for-sale, net

(39,646)



1,473



23,454



39,874


Housing completed or under construction

(54,956)



(120,665)



(233,829)



(118,528)


Land and land under development

65,867



42,934



94,918



24,438


Prepaid and other assets

9,669



(5,291)



1,209



(4,206)


Accounts payable and accrued liabilities

41,670



2,607



40,539



(546)


Net cash provided by operating activities

92,877



1,317



55,704



55,665










Investing Activities:








Purchases of marketable securities

(1,022)



(331)



(10,804)



(5,116)


Sales of marketable securities

49,990



320



59,266



5,057


Purchases of property and equipment

(6,456)



(7,474)



(12,968)



(13,860)


Net cash provided by (used in) investing activities

42,512



(7,485)



35,494



(13,919)










Financing Activities:








Payments on mortgage repurchase facility, net

33,350



(1,817)



(7,522)



(33,776)


Payments on homebuilding line of credit, net

(5,000)





(5,000)




Repayment of senior notes





(250,000)




Proceeds from issuance of senior notes





298,050




Dividend payments

(20,914)



(18,521)



(41,682)



(35,636)


Issuance of shares under stock-based compensation programs, net

(6,862)



10,241



1,332



17,328


Net cash provided by (used in) financing activities

574



(10,097)



(4,822)



(52,084)










Net increase (decrease) in cash, cash equivalents and restricted cash

135,963



(16,265)



86,376



(10,338)


Cash, cash equivalents and restricted cash:








Beginning of period

424,625



476,066



474,212



470,139


End of period

$

560,588



$

459,801



$

560,588



$

459,801










Reconciliation of cash, cash equivalents and restricted cash:








Homebuilding:








Cash and cash equivalents

$

482,702



$

390,061



$

482,702



$

390,061


Restricted cash

15,668



12,911



15,668



12,911


Financial Services:



-





Cash and cash equivalents

62,218



56,829



62,218



56,829


Total cash, cash equivalents and restricted cash

$

560,588



$

459,801



$

560,588



$

459,801


 

New Home Deliveries



Three Months Ended June 30,


2020


2019


% Change


Homes


Home Sale
Revenues


Average
Price


Homes


Home Sale
Revenues


Average
Price


Homes


Home
Sale
Revenues


Average
Price


(Dollars in thousands)

West

1,017



$

490,117



$

481.9



785



$

384,530



$

489.8



30

%


27

%


(2)

%

Mountain

608



316,666



520.8



534



287,476



538.3



14

%


10

%


(3)

%

East

275



79,975



290.8



195



60,838



312.0



41

%


31

%


(7)

%

Total

1,900



$

886,758



$

466.7



1,514



$

732,844



$

484.0



25

%


21

%


(4)

%



Six Months Ended June 30,


2020


2019


% Change


Homes


Home Sale
Revenues


Average
Price


Homes


Home Sale
Revenues


Average
Price


Homes


Home
Sale
Revenues


Average
Price


(Dollars in thousands)

West

1,888



$

895,615



$

474.4



1,537



$

754,088



$

490.6



23

%


19

%


(3)

%

Mountain

1,043



539,524



517.3



943



496,668



526.7



11

%


9

%


(2)

%

East

516



148,704



288.2



392



129,366



330.0



32

%


15

%


(13)

%

Total

3,447



$

1,583,843



$

459.5



2,872



$

1,380,122



$

480.5



20

%


15

%


(4)

%

 

Net New Orders



Three Months Ended June 30,


2020


2019


% 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

1,309



$

574,996



$

439.3



4.62


1,246



$

550,742



$

442.0



4.46


5

%


4

%


(1)

%


4

%

Mountain

758



362,228



477.9



3.99


690



318,275



461.3



3.56


10

%


14

%


4

%


12

%

East

323



106,436



329.5



3.53


337



98,843



293.3



4.36


(4)

%


8

%


12

%


(19)

%

Total

2,390



$

1,043,660



$

436.7



4.23


2,273



$

967,860



$

425.8



4.13


5

%


8

%


3

%


2

%



Six Months Ended June 30,


2020


2019


% 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

2,691



$

1,262,330



$

469.1



4.88


2,211



$

1,003,236



$

453.7



4.15


22

%


26

%


3

%


18

%

Mountain

1,451



722,197



497.7



3.76


1,409



669,523



475.2



3.53


3

%


8

%


5

%


7

%

East

647



206,911



319.8



3.58


609



182,141



299.1



4.33


6

%


14

%


7

%


(17)

%

Total

4,789



$

2,191,438



$

457.6



4.28


4,229



$

1,854,900



$

438.6



3.94


13

%


18

%


4

%


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


Six Months Ended


June 30,


%


June 30,


%


June 30,


%


2020


2019


Change


2020


2019


Change


2020


2019


Change

West

96



97



(1)

%


95



94



1

%


92



89



3

%

Mountain

63



65



(3)

%


63



65



(3)

%


64



66



(3)

%

East

33



25



32

%


31



26



19

%


30



23



30

%

Total

192



187



3

%


189



185



2

%


186



178



4

%

 

Backlog



June 30,


2020


2019


% Change


Homes


Dollar
Value


Average
Price


Homes


Dollar
Value


Average
Price


Homes


Dollar
Value


Average
Price


(Dollars in thousands)

West

2,826



$

1,336,251



$

472.8



2,197



$

1,016,327



$

462.6



29

%


31

%


2

%

Mountain

1,619



$

816,559



$

504.4



1,509



$

739,921



$

490.3



7

%


10

%


3

%

East

698



$

220,362



$

315.7



587



$

173,436



$

295.5



19

%


27

%


7

%

Total

5,143



$

2,373,172



$

461.4



4,293



$

1,929,684



$

449.5



20

%


23

%


3

%

 

Homes Completed or Under Construction (WIP lots)


June 30,


%


2020


2019


Change

Unsold:






Completed

109



96



14

%

Under construction

191



236



(19)

%

Total unsold started homes

300



332



(10)

%

Sold homes under construction or completed

3,573



3,023



18

%

Model homes under construction or completed

502



457



10

%

Total homes completed or under construction

4,375



3,812



15

%

 

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



June 30, 2020


June 30, 2019




Lots
Owned


Lots
Optioned


Total


Lots
Owned


Lots
Optioned


Total


Total
% Change

West

9,364



2,619



11,983



8,611



2,446



11,057



8

%

Mountain

6,076



2,667



8,743



6,457



2,741



9,198



(5)

%

East

2,260



2,041



4,301



2,085



1,267



3,352



28

%

Total

17,700



7,327



25,027



17,153



6,454



23,607



6

%

 

Selling, General and Administrative Expenses



Three Months Ended June 30,


Six Months Ended June 30,


2020


2019


Change


2020


2019


Change


(Dollars in thousands)

General and administrative expenses

$

40,419



$

39,326



$

1,093



$

85,508



$

81,898



$

3,610


General and administrative expenses as a percentage of home sale revenues

4.6

%


5.4

%


-80 bps



5.4

%


5.9

%


-50 bps


Marketing expenses

$

22,657



$

19,513



$

3,144



$

44,103



$

37,809



$

6,294


Marketing expenses as a percentage of home sale revenues

2.6

%


2.7

%


-10 bps



2.8

%


2.7

%


10 bps


Commissions expenses

$

29,240



$

23,873



$

5,367



$

52,026



$

45,266



$

6,760


Commissions expenses as a percentage of home sale revenues

3.3

%


3.3

%


0 bps



3.3

%


3.3

%


0 bps


Total selling, general and administrative expenses

$

92,316



$

82,712



$

9,604



$

181,637



$

164,973



$

16,664


Total selling, general and administrative expenses as a percentage of home sale revenues

10.4

%


11.3

%


-90 bps



11.5

%


12.0

%


-50 bps


 

Capitalized Interest



Three Months Ended
June 30,


Six Months Ended
June 30,


2020


2019


2020


2019


(Dollars in thousands)

Homebuilding interest incurred

$

15,094



$

15,980



$

31,628



$

32,011


Less: Interest capitalized

(15,094)



(15,980)



(31,628)



(32,011)


Homebuilding interest expensed

$



$



$



$










Interest capitalized, beginning of period

$

59,077



$

56,947



$

55,310



$

54,845


Plus: Interest capitalized during period

15,094



15,980



31,628



32,011


Less: Previously capitalized interest included in home cost of sales

(17,242)



(14,734)



(30,009)



(28,663)


Interest capitalized, end of period

$

56,929



$

58,193



$

56,929



$

58,193


 

Cision View original content:http://www.prnewswire.com/news-releases/mdc-holdings-announces-second-quarter-2020-results-301100728.html

SOURCE M.D.C. Holdings, Inc.