- Cash flow from operations of $230.7 million
DENVER, April 24 /PRNewswire-FirstCall/ --
M.D.C. Holdings, Inc. (NYSE:MDC) today announced a net loss for the quarter ended March 31, 2008 of $72.8 million, or $1.58 per diluted share, which included pre-tax charges of $54.8 million for asset impairments and $1.7 million for write-offs of deposits and pre-acquisition costs associated with land option contracts the Company does not intend to pursue. This 2008 first quarter net loss also was impacted adversely by a significant decline in our effective tax rate to 5.7%, compared with 34.3% for the same period in 2007. The decrease in the effective tax rate primarily resulted from the loss of certain manufacturing deduction benefits received in prior years and a $10.6 million increase in the deferred tax asset valuation allowance. The net loss for the first quarter of 2007 was $94.4 million, or $2.07 per diluted share, including pre-tax charges of $141.4 million for asset impairments and $4.0 million for write-offs of option deposits and pre-acquisition costs. Total revenue for the first quarter of 2008 was $406.1 million, compared with revenue of $745.1 million for the same period in 2007.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "We remain committed to strengthening our balance sheet and reengineering our business practices as we await a recovery for the homebuilding industry. After generating positive operating cash flow for seven consecutive quarters, including over $230 million in this first quarter, we accumulated $1.2 billion in cash on hand as of March 31, 2008, with no borrowings outstanding on our $1.25 billion line of credit. In addition, we have continued to aggressively manage our exposure to performance bonds and letters of credit related to various land development activities. At the end of the 2008 first quarter, our estimated cost to complete these activities was less than $50 million."
Mizel continued, "We believe the strength of our balance sheet is established and, therefore, we are comfortable expanding our focus on continued business process improvements in 2008. During the first quarter, we laid the framework for such improvements through a Company-wide initiative to transform and streamline our business practices, with a goal of enhancing efficiency across our Company in preparation for future growth. This initiative is intended to contribute to the long-term value of our Company as we continue to look for opportunities to invest the substantial capital available to us."
Homebuilding Results
Homebuilding loss before taxes for the quarter ended March 31, 2008 improved to $77.3 million, compared with $138.9 million for the same period in 2007. The improvement in 2008 was driven in large part by a 61% decline in asset impairment charges and a 43% decline in homebuilding commissions, marketing and general and administrative expenses ("SG&A"). These decreases in expenses and charges were offset partially by reductions in home closings, average selling prices and home gross margins from the levels achieved during the same period in 2007.
The Company closed 1,136 homes and produced home gross margins of 11.5% in the 2008 first quarter, compared with 2,001 home closings and home gross margins of 15.8% for the same period in 2007. The average selling price for the 2008 first quarter was $313,200, down $42,500 year-over-year. Homebuilding SG&A decreased to $65.1 million for the three months ended March 31, 2008, compared with $113.3 million for the same period in the prior year.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "The $55 million in asset impairments we recognized this quarter was nearly 70% lower than the charge recognized in the 2007 fourth quarter and was our lowest quarterly impairment charge since the third quarter of 2006. We impaired our land inventory by $30 million and our work-in-process inventory and other assets by $25 million, impacting approximately 2,600 lots in 94 subdivisions. The quarter-end book value of the impaired subdivisions after the impairments was $219 million, consisting of $50 million of land and $169 million of work-in-process. As has been the case in each of the last five quarters, the impairments this quarter primarily occurred in our West homebuilding segment, with almost 90% applicable to subdivisions in our Arizona, Nevada and California markets. Over the last seven quarters, we have impaired approximately 60% of the 13,100 lots we owned at the end of our 2008 first quarter."
Reece continued, "We reduced our lots owned, excluding lots with homes completed or under construction, by 13% in the first quarter alone. We accomplished this reduction in large part through the sale of more than 800 lots primarily located in Arizona and California. While these land sales had little impact on our book income for this quarter, they contributed almost $30 million in proceeds and generated a tax loss in excess of $70 million, which should increase the tax refund we expect to receive early next year."
Reece concluded, "During the 2008 first quarter, our homebuilding general and administrative expenses declined by 47% year-over-year, primarily due to our efforts to right-size our homebuilding operations in 2007. However, despite these successful efforts, we continued to make adjustments to our operating structure throughout the first quarter, and we intend to make further adjustments during the remainder of the year as we streamline our operations. Through our commitment to improving our processes and procedures during this downturn in homebuilding activity, we hope to better leverage our overhead during future periods of growth."
Financial Services and Other and Corporate Results
Income before taxes from the Company's Financial Services and Other segment for the quarter ended March 31, 2008 was $4.1 million, compared with $7.5 million for the same period in the previous year. The decrease primarily resulted from lower gains on sales of mortgage loans, as the dollar volumes of mortgage loan originations and mortgage loans sold declined in conjunction with builder home closings. Also, insurance revenue for the first quarter of 2008 decreased year-over-year due to lower insurance premiums collected from our homebuilding subcontractors as a result of the decline in home construction levels. These decreases were offset partially by year-over-year reductions in financial services general and administrative expenses.
Loss before taxes from the Company's Corporate segment for the quarter ended March 31, 2008 was $4.1 million, compared with $12.3 million for the same period in the previous year. The improvement primarily resulted from an increase in interest income generated from significantly higher cash balances in 2008 and a year-over-year reduction in compensation-related expenses.
Home Orders and Backlog
MDC received orders, net of cancellations, for 1,098 homes with an estimated sales value of $324.0 million during the 2008 first quarter, compared with net orders for 2,558 homes with an estimated sales value of $902.0 million during the same period in 2007. During the 2008 first quarter, the Company's approximate order cancellation rate was 43%, compared with a rate of 35% experienced during the same period in 2007. The Company ended the first quarter of 2008 with a backlog of 1,909 homes with an estimated sales value of $623.0 million, compared with a backlog of 4,195 homes with an estimated sales value of $1.50 billion at March 31, 2007.
Since 1972, MDC has built and financed the American dream for more than 150,000 families. MDC's commitment to customer satisfaction, quality and value is reflected in each home it builds. As one of the largest homebuilders in the United States, the Company has homebuilding divisions across the country, including Denver, Colorado Springs, Salt Lake City, Las Vegas, Phoenix, Tucson, California, Chicago, Northern Virginia, Maryland, Philadelphia/Delaware Valley and Jacksonville. The Company also provides mortgage financing, insurance and title services, primarily for MDC homebuyers, through its wholly owned subsidiaries, HomeAmerican Mortgage Corporation, American Home Insurance Agency and American Home Title and Escrow, respectively. M.D.C. Holdings, Inc. is traded on the New York Stock Exchange under the symbol "MDC." For more information, visit http://www.richmondamerican.com/.
Forward-Looking Statements
Certain 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 and business conditions, including changes in cancellation rates, net home orders, home gross margins, and land and home values; (2) changes in interest rates, mortgage lending programs and the availability of credit; (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) terrorist acts and other acts of war; and (14) 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 Annual Report on Form 10-K for the year ended December 31, 2007, which has been filed with the Securities and Exchange Commission. 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 presentations should be consulted.
M.D.C. HOLDINGS, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months
Ended March 31,
2008 2007
REVENUE
Home sales revenue $355,792 $711,800
Land sales revenue 28,568 6,034
Other revenue 21,785 27,290
Total Revenue 406,145 745,124
COSTS AND EXPENSES
Home cost of sales 315,037 599,199
Land cost of sales 27,949 5,107
Asset impairments 54,832 141,422
Marketing expenses 19,203 29,079
Commission expenses 13,433 23,250
General and administrative expenses 52,912 90,657
Related party expenses 5 91
Total Costs and Expenses 483,371 888,805
Loss before income taxes (77,226) (143,681)
Benefit from income taxes 4,406 49,283
NET LOSS $(72,820) $(94,398)
LOSS PER SHARE
Basic $(1.58) $(2.07)
Diluted $(1.58) $(2.07)
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic 45,953 45,501
Diluted 45,953 45,501
DIVIDENDS DECLARED PER SHARE $0.25 $0.25
M.D.C. HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
March 31, December 31,
2008 2007
ASSETS
Cash and cash equivalents $1,193,849 $1,004,763
Restricted cash 1,936 1,898
Receivables
Home sales receivables 29,174 33,647
Income taxes receivable, net - 36,988
Other receivables 15,596 16,796
Mortgage loans held for sale, net 56,630 100,144
Inventories, net
Housing completed or under construction 778,281 902,221
Land and land under development 470,522 554,336
Property and equipment, net 41,972 44,368
Deferred income taxes, net 125,208 160,565
Related party assets 28,627 28,627
Prepaid expenses and other assets, net 65,404 71,884
Total Assets $2,807,199 $2,956,237
LIABILITIES
Accounts payable $49,388 $71,932
Accrued liabilities 313,228 339,353
Income taxes payable, net 13,005 --
Related party liabilities -- 1,701
Homebuilding line of credit -- --
Mortgage line of credit 32,416 70,147
Senior notes, net 997,198 997,091
Total Liabilities 1,405,235 1,480,224
COMMITMENTS AND CONTINGENCIES -- --
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;
46,389,000 and 46,344,000 issued and
outstanding, respectively, at March 31,
2008, and 46,084,000 and 46,053,000
issued and outstanding, respectively,
at December 31, 2007 464 461
Additional paid-in-capital 767,324 757,039
Retained earnings 635,504 719,841
Accumulated other comprehensive loss (669) (669)
Treasury stock, at cost; 45,000 and
31,000 shares at March 31, 2008 and
December 31, 2007, respectively (659) (659)
Total Stockholders' Equity 1,401,964 1,476,013
Total Liabilities and Stockholders'
Equity $2,807,199 $2,956,237
M.D.C. HOLDINGS, INC.
Information on Segments
(Dollars in thousands)
(Unaudited)
Three Months
Ended March 31,
2008 2007
REVENUE
Homebuilding
West $223,506 $454,654
Mountain 70,495 145,191
East 54,091 61,355
Other Homebuilding 40,354 64,860
Total Homebuilding 388,446 726,060
Financial Services and Other 11,172 19,570
Corporate 9,368 5,433
Inter-company adjustments (2,841) (5,939)
Consolidated $406,145 $745,124
(LOSS) INCOME BEFORE INCOME TAXES
Homebuilding
West $(61,391) $(125,391)
Mountain (11,608) 10,971
East (2,335) (4,386)
Other Homebuilding (1,940) (20,131)
Total Homebuilding (77,274) (138,937)
Financial Services and Other 4,148 7,517
Corporate (4,100) (12,261)
Consolidated $(77,226) $(143,681)
ASSET IMPAIRMENTS
West $48,310 $121,903
Mountain 3,954 654
East 1,533 2,567
Other Homebuilding 1,035 16,298
Consolidated $54,832 $141,422
March 31, December 31,
2008 2007
TOTAL ASSETS
Homebuilding
West $605,268 $747,835
Mountain 450,492 474,203
East 215,056 250,658
Other Homebuilding 107,909 125,003
Total Homebuilding 1,378,725 1,597,699
Financial Services and Other 128,320 174,617
Corporate 1,343,611 1,229,178
Inter-company adjustments (43,457) (45,257)
Consolidated $2,807,199 $2,956,237
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands)
(Unaudited)
Three Months
Ended March 31, Change
2008 2007 Amount %
SELECTED FINANCIAL DATA
General and Administrative
Expenses
Homebuilding Segments $32,426 $60,999 $(28,573) -47%
Financial Services and Other
Segment $7,023 $12,058 $(5,035) -42%
Corporate Segment (1) $13,468 $17,691 $(4,223) -24%
Total $52,917 $90,748 $(37,831) -42%
SG&A as a % of Home Sales Revenue
Homebuilding Segments 18.3% 15.9% 2.4%
Corporate Segment (1) 3.8% 2.5% 1.3%
Depreciation and Amortization $8,612 $11,820 $(3,208) -27%
Home Gross Margins (2) 11.5% 15.8% -4.3%
Interest in Home Cost of Sales
as a % of Home Sales Revenue 4.4% 1.9% 2.5%
Cash Provided by Operating
Activities $230,733 $149,323 $81,410 55%
Cash Used in Investing
Activities $(43) $(710) $667 -94%
Cash Used in Financing
Activities $(41,604) $(25,879) $(15,725) 61%
Ending Unrestricted Cash and
Available Borrowing Capacity $2,430,471 $1,868,783 $561,688 30%
Corporate and Homebuilding
Interest
Interest Capitalized During
the Period $14,453 $14,441 $12 0%
Previously capitalized interest
included in home cost of sales
during the period $15,773 $13,285 $2,488 19%
Interest Capitalized in
Inventories at End of Period $52,167 $51,811 $356 1%
(1) Includes related party expenses.
(2) Home sales revenue less home cost of sales (excluding commissions,
amortization of deferred marketing, project cost write offs and asset
impairments) as a percent of home sales revenue. During the three
months ended March 31, 2008, we closed homes on lots for which we had
previously recorded $49.9 million of asset impairments. During the
three months ended March 31, 2007, we closed homes on lots for which
we had previously recorded $9.2 million of asset impairments.
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands)
(Unaudited)
Three Months
Ended March 31, Change
2008 2007 Amount %
HOMEAMERICAN OPERATING ACTIVITIES
Principal amount of mortgage loans
originated $164,743 $351,033 $(186,290) -53%
Principal amount of mortgage loans
brokered $59,571 $118,342 $(58,771) -50%
Capture Rate 61% 58% 3%
Including brokered loans 79% 77% 2%
Mortgage products (% of mortgage
loans originated)
Fixed rate 94% 69% 25%
Adjustable rate - interest only 2% 27% -25%
Adjustable rate - other 4% 4% 0%
Prime loans (3) 63% 59% 4%
Alt A loans (4) 0% 35% -35%
Government loans (5) 37% 5% 32%
Sub-prime loans (6) 0% 1% -1%
(3) Prime loans are defined as loans with Fair, Isaac and Company
("FICO") scores greater than 620 and that comply with the
documentation standards of the government sponsored enterprise
guidelines.
(4) Alt-A loans are defined as loans that would otherwise qualify as
prime loans except that they do not comply with the documentation
standards of the government sponsored enterprise guidelines.
(5) Government loans are loans either insured by the Federal Housing
Administration or guaranteed by the Department of Veteran Affairs.
(6) Sub-prime loans are loans that have FICO scores of less than or equal
to 620.
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(unaudited)
March 31, December 31, March 31,
2008 2007 2007
HOMES COMPLETED OR UNDER CONSTRUCTION
Unsold Home Under Construction -
Final 449 515 422
Unsold Home Under Construction -
Frame 516 656 480
Unsold Home Under Construction -
Foundation 134 229 310
Total Unsold Homes Under
Construction 1,099 1,400 1,212
Sold Homes Under Construction 1,340 1,350 2,677
Model Homes 640 730 792
Homes Completed or Under
Construction 3,079 3,480 4,681
LOTS OWNED (excluding homes completed
or under construction)
Arizona 2,423 2,969 5,701
California 1,150 1,491 2,508
Nevada 1,241 1,549 2,416
West 4,814 6,009 10,625
Colorado 2,890 2,992 3,274
Utah 830 863 987
Mountain 3,720 3,855 4,261
Maryland 287 302 492
Virginia 336 369 600
East 623 671 1,092
Delaware Valley 138 151 261
Florida 561 638 1,033
Illinois 165 191 268
Other Homebuilding 864 980 1,562
Total 10,021 11,515 17,540
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(unaudited)
March 31, December 31, March 31,
2008 2007 2007
LOTS CONTROLLED UNDER OPTION
Arizona 400 512 575
California 157 157 157
Nevada -- 4 117
West 557 673 849
Colorado 255 262 931
Utah -- -- 91
Mountain 255 262 1,022
Maryland 449 558 992
Virginia 1,072 1,311 2,148
East 1,521 1,869 3,140
Delaware Valley 327 327 644
Florida 470 484 1,436
Illinois -- -- --
Other Homebuilding 797 811 2,080
Total 3,130 3,615 7,091
NON-REFUNDABLE OPTION DEPOSITS
Cash $6,476 $6,292 $15,649
Letters of Credit 4,221 6,547 14,422
Total Non-Refundable Option Deposits $10,697 $12,839 $30,071
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
Three Months
Ended March 31, Change
2008 2007 Amount %
HOMES CLOSED (UNITS)
Arizona 351 652 (301) -46%
California 154 328 (174) -53%
Nevada 180 313 (133) -42%
West 685 1,293 (608) -47%
Colorado 117 164 (47) -29%
Utah 82 228 (146) -64%
Mountain 199 392 (193) -49%
Maryland 49 49 -- 0%
Virginia 65 68 (3) -4%
East 114 117 (3) -3%
Delaware Valley 31 46 (15) -33%
Florida 95 128 (33) -26%
Illinois 12 14 (2) -14%
Texas -- 11 (11) -100%
Other Homebuilding 138 199 (61) -31%
Total 1,136 2,001 (865) -43%
AVERAGE SELLING PRICES PER
HOME CLOSED
Arizona $232.2 $262.5 $(30.3) -12%
California 444.6 540.0 (95.4) -18%
Colorado 354.4 352.5 1.9 1%
Delaware Valley 425.8 489.6 (63.8) -13%
Florida 233.4 280.9 (47.5) -17%
Illinois 400.5 311.3 89.2 29%
Maryland 496.9 530.8 (33.9) -6%
Nevada 247.3 305.3 (58.0) -19%
Texas -- 135.5 (135.5) -100%
Utah 340.1 350.0 (9.9) -3%
Virginia 453.5 492.0 (38.5) -8%
Company Average $313.2 $355.7 $(42.5) -12%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
Three Months
Ended March 31, Change
2008 2007 Amount %
ORDERS FOR HOMES, NET (UNITS)
Arizona 282 754 (472) -63%
California 159 415 (256) -62%
Nevada 181 380 (199) -52%
West 622 1,549 (927) -60%
Colorado 163 300 (137) -46%
Utah 44 210 (166) -79%
Mountain 207 510 (303) -59%
Maryland 47 99 (52) -53%
Virginia 70 112 (42) -38%
East 117 211 (94) -45%
Delaware Valley 22 62 (40) -65%
Florida 115 179 (64) -36%
Illinois 15 41 (26) -63%
Texas - 6 (6) -100%
Other Homebuilding 152 288 (136) -47%
Total 1,098 2,558 (1,460) -57%
Estimated Value of Orders for
Homes, net $324,000 $902,000 $(578,000) -64%
Estimated Average Selling Price of
Orders for Homes, net $295.1 $352.6 $(57.5) -16%
Cancellation Rate(7) 43% 35% 8%
(7) We define "Cancellation Rate" as the approximate number of cancelled
home order contracts during a reporting period as a percent of total
home orders received during such reporting period.
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
March 31, December 31, March 31,
2008 2007 2007
BACKLOG (UNITS)
Arizona 523 592 1,606
California 208 203 514
Nevada 308 307 382
West 1,039 1,102 2,502
Colorado 259 213 389
Utah 140 178 447
Mountain 399 391 836
Maryland 124 126 237
Virginia 105 100 180
East 229 226 417
Delaware Valley 48 57 135
Florida 145 125 248
Illinois 49 46 50
Texas -- -- 7
Other Homebuilding 242 228 440
Total 1,909 1,947 4,195
Backlog Estimated Sales Value $623,000 $650,000 $1,500,000
Estimated Average Selling Price of
Homes in Backlog $326.3 $333.8 $357.6
ACTIVE SUBDIVISIONS
Arizona 62 66 70
California 34 41 47
Nevada 34 39 45
West 130 146 162
Colorado 49 47 49
Utah 24 23 26
Mountain 73 70 75
Maryland 17 15 18
Virginia 19 18 22
East 36 33 40
Delaware Valley 2 4 4
Florida 15 20 28
Illinois 4 5 6
Other Homebuilding 21 29 38
Total 260 278 315
Average for quarter ended 272 287 311
M.D.C. HOLDINGS, INC.
Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands)
(Unaudited)
March 31, December 31, March 31,
2008 2007 2007
CORPORATE AND HOMEBUILDING
DEBT-TO-CAPITAL, NET OF CASH
Total Debt $1,029,614 $1,067,238 $1,097,485
Less Mortgage Line of Credit (32,416) (70,147) (100,703)
Total Corporate and Homebuilding
Debt 997,198 997,091 996,782
Less Cash (Including Restricted
Cash) (1,195,785) (1,006,661) (633,227)
Total Corporate and Homebuilding
Debt, Net of Cash (198,587) (9,570) 363,555
Stockholders' Equity 1,401,964 1,476,013 2,079,410
Total Corporate and Homebuilding
Capital, Net of Cash $1,203,377 $1,466,443 $2,442,965
Ratio of Corporate and Homebuilding
Debt to Capital, Net of Cash (0.17) (0.01) 0.15
NOTE: From time to time, MDC discloses selected non-GAAP financial measures. While non-GAAP financial measures are not a substitute for the comparable GAAP measures, we believe that certain non-GAAP information is useful to investors and management in comparing current results to historical periods and to competitor results, and that it provides additional information on the performance of MDC's businesses. The above is a presentation of and reconciliation of a selected non-GAAP measure with the most directly comparable GAAP financial measure.
"Ratio of corporate and homebuilding debt to capital, net of cash" is a non-GAAP financial measure. MDC's management and investors use this ratio to help assess the risk associated with debt in the Company's capital structure. It excludes debt incurred under MDC's mortgage line of credit from both the numerator and denominator, as this debt is directly collateralized by mortgage loans held in inventory, which are typically liquidated within 60 days of origination, thereby reducing the risk associated with this type of debt. The ratio's numerator and denominator are also reduced by MDC's cash position, as this balance could be used to reduce MDC's exposure to debt outstanding.
DATASOURCE: M.D.C. Holdings, Inc.
CONTACT: Paris G. Reece III, Chief Financial Officer, +1-303-804-7706,
, or Robert N. Martin, Investor Relations, +1-720-977-3431,
, both of M.D.C. Holdings, Inc.
Web site: http://www.richmondamerican.com/