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Mdc Holdings Inc (MDC) SEC Filing 8-K Material Event for the period ending Tuesday, May 5, 2020

Mdc Holdings Inc

CIK: 773141 Ticker: MDC

Exhibit 99.1

 

News Release

 

M.D.C. HOLDINGS ANNOUNCES FIRST QUARTER 2020 RESULTS AND

SELECTED PRELIMINARY APRIL 2020 RESULTS

 

DENVER, COLORADO, Tuesday, May 5, 2020. M.D.C Holdings, Inc. (NYSE: MDC), one of the nation’s leading homebuilders, announced results for the quarter ended March 31, 2020. In light of recent market volatility and business disruptions caused by the COVID-19 pandemic, the Company also provided selected preliminary April 2020 results.

 

2020 First Quarter Highlights and Comparisons to 2019 First Quarter

 

 

Homebuilding pretax income increased 21% to $49.7 million from $41.1 million

 

o

Home sale revenues up 8% to $697.1 million from $647.3 million

 

o

Gross margin from home sales increased 100 basis points to 19.9% from 18.9%

 

Mortgage operations pretax income increased 65% to $8.2 million vs. $5.0 million

 

Other financial services pretax loss of $9.4 million vs. pretax income of $9.6 million

 

o

Unrealized losses on equity securities of $13.9 million vs. unrealized gains of $4.6 million

 

Net income of $36.8 million, or $0.56 per diluted share, down 9% from $40.6 million or $0.64 per diluted share

 

o

Effective tax rate of 24.3% vs. 27.1%

 

Dollar value of net new orders up 28% to $1.09 billion from $851.4 million

 

o

Unit net orders increased 23% to 2,399

 

Dollar value of ending backlog up 31% to $2.17 billion from $1.65 billion

 

o

Unit backlog increased 32% to 4,653

 

March 31, 2020 Financial Position Highlights

 

 

Total liquidity of $1.41 billion

 

o

Total cash and investments of $452.8 million

 

o

$959.3 million of availability under homebuilding line of credit ($1.0 billion facility size; maturity of December 2023)

 

No senior note maturities until 2024

 

Quarterly cash dividend of thirty-three cents ($0.33) per share declared on April 1, 2020, up 10% from prior year

 

2020 April Highlights and Comparison to 2019 April (preliminary and unaudited)

 

 

Net new home orders decreased 53% to 357 vs. 753

 

o

Gross new home orders decreased 27% to 662 vs. 906

 

o

Cancellations as a percentage of homes in beginning backlog of 6.6% vs. 4.3%

 

New home deliveries increased 11% to 523 vs. 470

 

Ending backlog units up 18% to 4,487 from 3,817

 

1

 

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "In response to the COVID-19 pandemic, we have adapted our business to protect the health and safety of our employees, subcontractors and customers. For example, we are using technology to help drive compliance with social distancing and shelter-in-place requirements by guiding many customers through the homebuilding process using a virtual environment. Our technology has also enabled hundreds of our employees to work from home. For those who cannot work remotely, we have greatly enhanced our cleaning and sanitizing protocols and implemented screening at our sites and offices across the country, and we have modified our business practices as necessary to allow for social distancing. On behalf of our management team, I would like to express sincere gratitude to our dedicated employees and all others who have supported our Company in adjusting to the new reality brought on by COVID-19."

 

Mr. Mizel continued, "As our results from the first quarter demonstrate, 2020 was off to an excellent start thanks to a robust job market, elevated consumer confidence and low levels of new and existing home inventory. This positive fundamental backdrop, coupled with our continued shift to more affordable product offerings, resulted in a 21% increase in our homebuilding pretax income for the quarter, as well as solid order and backlog growth. While demand trends deteriorated significantly at the end of March and into April, we believe the long-term outlook for our industry remains positive due to the ongoing demographic shifts taking place in our country and the lack of available housing supply.”

 

Mr. Mizel concluded, "Although the ultimate impact of COVID-19 on the economy is still unclear, MDC is well-positioned to weather the current economic crisis thanks to our seasoned leadership team, our strong balance sheet and our conservative operating model. With high liquidity, low leverage and limited speculative inventory, our Company is built to succeed through the entirety of the homebuilding cycle. We believe that this approach, coupled with our industry-leading dividend, will lead to superior risk-adjusted returns for shareholders over time.”

 

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.

 

2

 

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 March 31, 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.

 

Contact:          Robert N. Martin

Senior Vice President and Chief Financial Officer

1-866-424-3395

IR@mdch.com 

 

3

 

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

 

 

   

Three Months Ended

 
   

March 31,

 
   

2020

   

2019

 
   

(Dollars in thousands, except per share amounts)

 

Homebuilding:

               

Home sale revenues

  $ 697,085     $ 647,278  

Home cost of sales

    (558,647 )     (524,552 )

Inventory impairments

    -       (610 )

Total cost of sales

    (558,647 )     (525,162 )

Gross profit

    138,438       122,116  

Selling, general and administrative expenses

    (89,321 )     (82,261 )

Interest and other income

    1,889       2,391  

Other expense

    (1,337 )     (1,191 )

Homebuilding pretax income

    49,669       41,055  
                 

Financial Services:

               

Revenues

    21,886       17,404  

Expenses

    (10,929 )     (8,957 )

Other income (expense), net

    (12,064 )     6,104  

Financial services pretax income (loss)

    (1,107 )     14,551  
                 

Income before income taxes

    48,562       55,606  

Provision for income taxes

    (11,802 )     (15,056 )

Net income

  $ 36,760     $ 40,550  
                 

Comprehensive income

  $ 36,760     $ 40,550  
                 

Earnings per share:

               

Basic

  $ 0.58     $ 0.66  

Diluted

  $ 0.56     $ 0.64  
                 

Weighted average common shares outstanding:

               

Basic

    62,491,238       60,939,364  

Diluted

    64,931,225       62,708,334  
                 

Dividends declared per share

  $ 0.33     $ 0.30  

 

4

 

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

(Unaudited)

 

 

   

March 31,

   

December 31,

 
   

2020

   

2019

 

 

 

(Dollars in thousands, except

 
   

per share amounts)

 
ASSETS                
                 

Homebuilding:

               

Cash and cash equivalents

  $ 386,704     $ 424,186  

Restricted cash

    15,762       14,279  

Trade and other receivables

    69,301       65,829  

Inventories:

               

Housing completed or under construction

    1,215,214       1,036,191  

Land and land under development

    1,301,433       1,330,384  

Total inventories

    2,516,647       2,366,575  

Property and equipment, net

    62,316       60,414  

Deferred tax asset, net

    20,660       21,768  

Prepaid and other assets

    78,002       78,358  

Total homebuilding assets

    3,149,392       3,031,409  

Financial Services:

               

Cash and cash equivalents

    22,159       35,747  

Marketable securities

    43,985       56,747  

Mortgage loans held-for-sale, net

    133,921       197,021  

Other assets

    24,255       17,432  

Total financial services assets

    224,320       306,947  

Total Assets

  $ 3,373,712     $ 3,338,356  

LIABILITIES AND EQUITY

               

Homebuilding:

               

Accounts payable

  $ 97,980     $ 87,364  

Accrued and other liabilities

    233,034       245,940  

Revolving credit facility

    15,000       15,000  

Senior notes, net

    1,036,900       989,422  

Total homebuilding liabilities

    1,382,914       1,337,726  

Financial Services:

               

Accounts payable and accrued liabilities

    70,977       68,529  

Mortgage repurchase facility

    108,744       149,616  

Total financial services liabilities

    179,721       218,145  

Total Liabilities

    1,562,635       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; 63,052,495 and 62,574,961 issued and outstanding at March 31, 2020 and December 31, 2019, respectively

    631       626  

Additional paid-in-capital

    1,361,362       1,348,733  

Retained earnings

    449,084       433,126  

Total Stockholders' Equity

    1,811,077       1,782,485  

Total Liabilities and Stockholders' Equity

  $ 3,373,712     $ 3,338,356  

 

5

 

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

(Unaudited)

 

 

   

Three Months Ended

 
   

March 31,

 
   

2020

   

2019

 
   

(Dollars in thousands)

 

Operating Activities:

               

Net income

  $ 36,760     $ 40,550  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

               

Stock-based compensation expense

    4,440       4,251  

Depreciation and amortization

    5,152       4,878  

Inventory impairments

    -       610  

Net (gain) loss on marketable equity securities

    13,268       (4,840 )

Deferred income tax expense

    1,131       2,696  

Net changes in assets and liabilities:

               

Trade and other receivables

    (1,611 )     (13,771 )

Mortgage loans held-for-sale, net

    63,100       38,401  

Housing completed or under construction

    (178,873 )     2,137  

Land and land under development

    29,051       (18,496 )

Prepaid and other assets

    (8,460 )     1,085  

Accounts payable and accrued liabilities

    (1,131 )     (3,153 )

Net cash provided by (used in) operating activities

    (37,173 )     54,348  
                 

Investing Activities:

               

Purchases of marketable securities

    (9,782 )     (4,785 )

Sales of marketable securities

    9,276       4,737  

Purchases of property and equipment

    (6,512 )     (6,386 )

Net cash used in investing activities

    (7,018 )     (6,434 )
                 

Financing Activities:

               

Payments on mortgage repurchase facility, net

    (40,872 )     (31,959 )

Repayment of senior notes

    (250,000 )     -  

Proceeds from issuance of senior notes

    298,050       -  

Dividend payments

    (20,768 )     (17,115 )

Issuance of shares under stock-based compensation programs, net

    8,194       7,087  

Net cash used in financing activities

    (5,396 )     (41,987 )
                 

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

    (49,587 )     5,927  

Cash, cash equivalents and restricted cash:

               

Beginning of period

    474,212       470,139  

End of period

  $ 424,625     $ 476,066  
                 

Reconciliation of cash, cash equivalents and restricted cash:

               

Homebuilding:

               

Cash and cash equivalents

  $ 386,704     $ 416,374  

Restricted cash

    15,762       8,136  

Financial Services:

               

Cash and cash equivalents

    22,159       51,556  

Total cash, cash equivalents and restricted cash

  $ 424,625     $ 476,066  

 

6

 

New Home Deliveries

 

   

Three Months Ended March 31,

 
   

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

    871     $ 405,498     $ 465.6       752     $ 369,558     $ 491.4       16 %     10 %     (5 )%

Mountain

    435       222,858       512.3       409       209,192       511.5       6 %     7 %     0 %

East

    241       68,729       285.2       197       68,528       347.9       22 %     0 %     (18 )%

Total

    1,547     $ 697,085     $ 450.6       1,358     $ 647,278     $ 476.6       14 %     8 %     (5 )%

 

 

Net New Orders

 

   

Three Months Ended March 31,

 
   

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

    1,382     $ 655,892     $ 474.6       5.13       965     $ 433,307     $ 449.0       3.82       43 %     51 %     6 %     34 %

Mountain

    693       339,132       489.4       3.54       719       336,932       468.6       3.52       (4 )%     1 %     4 %     1 %

East

    324       97,723       301.6       3.66       272       81,179       298.5       4.17       19 %     20 %     1 %     (12 )%

Total

    2,399     $ 1,092,747     $ 455.5       4.33       1,956     $ 851,418     $ 435.3       3.75       23 %     28 %     5 %     16 %

 

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

 

 

Active Subdivisions

 

                           

Average Active Subdivisions

 
   

Active Subdivisions

   

Three Months Ended

 
   

March 31,

   

%

   

March 31,

   

%

 
   

2020

   

2019

   

Change

   

2020

   

2019

   

Change

 

West

    92       88       5 %     90       84       7 %

Mountain

    64       64       0 %     65       69       (6 )%

East

    29       26       12 %     30       22       36 %

Total

    185       178       4 %     185       175       6 %

 

7

 

Backlog

 

   

March 31,

 
   

2020

   

2019

   

% Change

 
   

Homes

   

Dollar
Value

   

Average

Price

   

Homes

   

Dollar
Value

   

Average

Price

   

Homes

   

Dollar
Value

   

Average

Price

 
   

(Dollars in thousands)

 

West

    2,534     $ 1,227,996     $ 484.6       1,736     $ 830,703     $ 478.5       46 %     48 %     1 %

Mountain

    1,469       754,155       513.4       1,353       690,623       510.4       9 %     9 %     1 %

East

    650       191,972       295.3       445       133,140       299.2       46 %     44 %     (1 )%

Total

    4,653     $ 2,174,123     $ 467.3       3,534     $ 1,654,466     $ 468.2       32 %     31 %     (0 )%

 

 

Homes Completed or Under Construction (WIP lots)

 

   

March 31,

   

%

 
   

2020

   

2019

   

Change

 

Unsold:

                       

Completed

    160       120       33 %

Under construction

    216       177       22 %

Total unsold started homes

    376       297       27 %

Sold homes under construction or completed

    3,259       2,362       38 %

Model homes under construction or completed

    502       459       9 %

Total homes completed or under construction

    4,137       3,118       33 %

 

 

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

 

   

March 31, 2020

   

March 31, 2019

         
   

Lots

Owned

   

Lots

Optioned

   

Total

   

Lots

Owned

   

Lots

Optioned

   

Total

   

Total %

Change

 

West

    9,641       2,393       12,034       7,894       2,462       10,356       16 %

Mountain

    6,540       4,007       10,547       6,636       2,612       9,248       14 %

East

    2,410       2,133       4,543       1,989       1,294       3,283       38 %

Total

    18,591       8,533       27,124       16,519       6,368       22,887       19 %

 

8

 

Selling, General and Administrative Expenses

 

   

Three Months Ended March 31,

 
   

2020

   

2019

   

Change

 
   

(Dollars in thousands)

 

General and administrative expenses

  $ 45,089     $ 42,572     $ 2,517  

General and administrative expenses as a percentage of home sale revenues

    6.5 %     6.6 %  

(10) bps

 
                         

Marketing expenses

  $ 21,446     $ 18,296     $ 3,150  

Marketing expenses as a percentage of home sale revenues

    3.1 %     2.8 %  

30 bps

 
                         

Commissions expenses

  $ 22,786     $ 21,393     $ 1,393  

Commissions expenses as a percentage of home sale revenues

    3.3 %     3.3 %  

0 bps

 
                         

Total selling, general and administrative expenses

  $ 89,321     $ 82,261     $ 7,060  

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

    12.8 %     12.7 %  

10 bps

 

 

 

Capitalized Interest

 

   

Three Months Ended

 
   

March 31,

 
   

2020

   

2019

 
   

(Dollars in thousands)

 

Homebuilding interest incurred

  $ 16,534     $ 16,031  

Less: Interest capitalized

    (16,534 )     (16,031 )

Homebuilding interest expensed

  $ -     $ -  
                 

Interest capitalized, beginning of period

  $ 55,310     $ 54,845  

Plus: Interest capitalized during period

    16,534       16,031  

Less: Previously capitalized interest included in home cost of sales

    (12,767 )     (13,929 )

Interest capitalized, end of period

  $ 59,077     $ 56,947  

 

9

 

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Ticker: MDC
CIK: 773141
Form Type: 8-K Corporate News
Accession Number: 0001437749-20-009345
Submitted to the SEC: Tue May 05 2020 6:05:53 AM EST
Accepted by the SEC: Tue May 05 2020
Period: Tuesday, May 5, 2020
Industry: Operative Builders
Events:
  1. Earnings Release
  2. Financial Exhibit

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