PR Newswire | Oct 29, 2020 06:01AM EDT

Management Promotions

10/29 05:00 CDT

M.D.C. Holdings Announces Third Quarter 2020 Results, Dividend Increase, And Management Promotions- Revenue growth and margin expansion drove a 96% improvement to net income;- Positioned for continued growth based on favorable industry fundamentals, solid market positioning, and a 47% year-over-year increase in backlog value;- Quarterly cash dividend of $0.40 per share declared, up 21% from the prior quarter and 33% from the prior year;- Management promotions and changes highlight the depth of Company leadership. DENVER, Oct. 29, 2020

DENVER, Oct. 29, 2020 /PRNewswire/ -- M.D.C Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended September 30, 2020.

Larry A. Mizel, MDC's newly appointed Executive Chairman, stated, "MDC posted another quarter of significant top and bottom line growth in the third quarter of 2020. Home sales revenue grew 33% year-over-year, while net income rose at nearly three times that rate thanks to the operational leverage we were able to achieve in the quarter. Both our home sale gross margin and our SG&A leverage improved during the quarter, a testament to our ability to drive revenue growth while keeping costs in check."

Mr. Mizel continued, "We experienced extremely strong order activity in the third quarter, with net new orders up 73% year-over-year on an absorption pace of 6.1 homes per community per month. The demand has been broad-based both from a geographic and buyer segment standpoint, allowing us to implement price increases at a majority of our communities during the quarter. We believe this demand is being driven by a number of factors, including low interest rates, scarce resale inventory and an accelerating demographic shift towards homebuying."

Mr. Mizel concluded, "MDC remains well positioned to take advantage of the shifts we are seeing in our industry thanks to our focus on the more affordable segments of the market, our geographic footprint and our build-to-order operating model. The favorable industry fundamentals we are experiencing coupled with our market positioning and strategic focus has our Company primed for growth. With a backlog sales value at the end of the quarter nearly 50% higher than a year ago, we expect to end 2020 on a strong note and carry that momentum into 2021."

Dividend Increase

The Company also announced that its board of directors has declared a quarterly cash dividend of forty cents($0.40) per share on the Company's common stock. The dividend will be paid on Tuesday, November 24th, 2020 to shareholders of record on Tuesday, November 10th, 2020.

Mr. Mizel said, "The dividend increase this quarter reflects our continued confidence in the time-tested operating strategy that we execute at the Company. The dividend has been a key element in our long-standing efforts to generate strong risk-adjusted returns for our shareholders."

Management Promotions and Changes

Additionally, the Company disclosed a number of promotions and changes with the Company's senior management team.

Mr. Mizel will continue his leadership role with MDC as the newly appointed Executive Chairman. As Executive Chairman, Mr. Mizel will continue to be actively involved in all aspects of the Company's operations and continue to set the strategic direction for MDC. Mr. Mizel founded the Company in 1972 and has served as a Director and Chairman since that time.

David D. Mandarich has been appointed as the new President and Chief Executive Officer of MDC. Mr. Mandarich has been associated with the Company since 1977 and has served as President and Chief Operating Officer of the Company since 1999. He has also served as a member of the Company's Board of Directors for 35 years.

Rebecca Givens has been appointed as Senior Vice President and General Counsel of MDC, following the retirement of Michael Touff, who served in the role for more than 25 years. Ms. Givens joins the Company with over 30 years of experience in the Legal field, most recently as Senior Vice President & General Counsel for Spectrum Retirement Communities.

Staci Woolsey has been appointed as Chief Accounting Officer of MDC. In this role, Staci will have oversight over corporate and divisional accounting, financial reporting, planning and analysis, audit and office administration. Ms. Woolsey joined the Company in November 2018 as Vice President and Corporate Controller and is an accomplished finance executive with more than twenty years of global accounting, finance and leadership experience.

David Viger has been promoted to serve as Chief Operating Officer for Richmond American Homes. In this new role, Mr. Viger will have direct management responsibility for most of MDC's Richmond American subsidiaries. Mr. Viger joined the Company in 2004 and, prior to his promotion to Regional President in 2015, served as Division President for several different markets across the country.

Anthony Berris has been promoted to President of Financial Services, continuing in his role as President of HomeAmerican Mortgage Corporation ("HMC") but also adding increased oversight responsibility over our other four financial services entities. Anthony joined HMC in 2006 and was promoted to President of HMC in 2012.

Dawn Huth has been promoted to Senior Vice President of National Finance for Richmond American Homes, overseeing the division finance function for our homebuilding operations. She joined the Company in 2009 in an Audit Management role, and in 2014 she was promoted to Vice President of Division Finance.

"The promotion of key leaders in our organization is a critical step in the evolution of our Company," said Mr. Mizel. "As a part of our expanding leadership team, I am confident that they will help continue MDC's long-standing excellence in generating strong risk-adjusted returns for its shareholders."

Mr. Mizel concluded, "On behalf of the Board of Directors and executive management team, I want to express my sincere gratitude to Michael Touff, who is retiring after 26 years of service to our Company. Michael's leadership and counsel will be missed and we wish him all the best in his retirement."

2020 Third Quarter Highlights and Comparisons to 2019 Third Quarter

? Home sale revenues increased 33% to $1.0 billion from $750.3 million

? Unit deliveries up 25% to 2,147

? Average selling price of deliveries up 6% to $466,000

? Homebuilding pretax income increased 109% to $101.7 million from$48.7 million

? Gross margin from home sales increased 170 basis points to 20.5% from 18.8%

? Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved by 200 basis points to 10.4%

? Financial services pretax income increased 73% to $24.4 million vs. $14.1million

? Net income of $98.9 million, or $1.49 per diluted share, up 96% from $50.6million or $0.79 per diluted share

? Effective tax rate of 21.5% vs. 19.5%

? Dollar value of net new orders increased 89% to $1.65 billion from $871.7million

? Unit net orders increased 73% to 3,515

? Average selling price of net orders up 10%

? Dollar value of ending backlog up 47% to $3.08 billion from $2.10 billion

? Unit backlog increased 41% to 6,511

? Average selling price of homes in backlog up 4%

2020/2021 Outlook and Other Selected Information^1

? Home deliveries for the 2020 fourth quarter between 2,400 and 2,600

? Average selling price for 2020 fourth quarter unit deliveries exceeding $460,000

? Gross margin from home sales for the 2020 fourth quarter approaching 21% (excluding impairments and warranty adjustments)

? Preliminary target of at least 10,000 home deliveries for 2021

? Lots controlled of 26,830 at September 30, 2020, up 8% year-over-year

? Quarterly cash dividend of forty cents ($0.40) per share declared onOctober 26, 2020, up 21% from the prior quarter and 33% from the 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 September 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 Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(Dollars in thousands, except per share amounts)

Homebuilding:

Home sale revenues $ 1,000,549 $ 750,274 $ 2,584,392 $ 2,130,396

Home cost of sales (795,172) (609,316) (2,061,608) (1,724,040)

Inventory impairments - - - (610)

Total cost of sales (795,172) (609,316) (2,061,608) (1,724,650)

Gross profit 205,377 140,958 522,784 405,746

Selling, general and (103,632) (92,716) (285,269) (257,689)administrative expenses

Interest and other income 756 2,336 3,365 7,491

Other expense (851) (1,887) (4,640) (4,188)

Homebuilding pretax income 101,650 48,691 236,240 151,360

Financial Services:

Revenues 36,803 22,388 91,653 58,389

Expenses (13,294) (10,352) (36,401) (28,883)

Other income (expense), net 859 2,079 (5,274) 11,877

Financial services pretax 24,368 14,115 49,978 41,383income

Income before income taxes 126,018 62,806 286,218 192,743

Provision for income taxes (27,080) (12,226) (66,124) (47,020)

Net income $ 98,938 $ 50,580 $ 220,094 $ 145,723

Comprehensive income $ 98,938 $ 50,580 $ 220,094 $ 145,723

Earnings per share:

Basic $ 1.54 $ 0.81 $ 3.46 $ 2.36

Diluted $ 1.49 $ 0.79 $ 3.37 $ 2.29

Weighted average commonshares outstanding:

Basic 63,868,486 61,978,195 63,129,077 61,422,925

Diluted 65,824,910 63,968,215 64,969,855 63,360,535

Dividends declared per share $ 0.33 $ 0.30 $ 0.99 $ 0.90

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

(Unaudited)

September 30, December 31, 2020 2019

(Dollars in thousands, except per share amounts)

ASSETS

Homebuilding:

Cash and cash equivalents $ 432,277 $ 424,186

Restricted cash 19,732 14,279

Trade and other receivables 90,609 65,829

Inventories:

Housing completed or under construction 1,423,855 1,036,191

Land and land under development 1,221,854 1,330,384

Total inventories 2,645,709 2,366,575

Property and equipment, net 64,024 60,414

Deferred tax asset, net 13,297 21,768

Prepaid and other assets 78,421 78,358

Total homebuilding assets 3,344,069 3,031,409

Financial Services:

Cash and cash equivalents 70,435 35,747

Marketable securities - 56,747

Mortgage loans held-for-sale, net 160,506 197,021

Other assets 37,764 17,432

Total financial services assets 268,705 306,947

Total Assets $ 3,612,774 $ 3,338,356

LIABILITIES AND EQUITY

Homebuilding:

Accounts payable $ 103,260 $ 87,364

Accrued and other liabilities 259,261 245,940

Revolving credit facility 10,000 15,000

Senior notes, net 1,037,225 989,422

Total homebuilding liabilities 1,409,746 1,337,726

Financial Services:

Accounts payable and accrued liabilities 84,168 68,529

Mortgage repurchase facility 130,861 149,616

Total financial services liabilities 215,029 218,145

Total Liabilities 1,624,775 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 sharesauthorized; 64,865,577 and 62,574,961 issued and 649 626outstanding at September 30, 2020 and December 31,2019, respectively

Additional paid-in-capital 1,397,220 1,348,733

Retained earnings 590,130 433,126

Total Stockholders' Equity 1,987,999 1,782,485

Total Liabilities and Stockholders' Equity $ 3,612,774 $ 3,338,356

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

(Unaudited)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(Dollars in thousands)

Operating Activities:

Net income $ 98,938 $ 50,580 $ 220,094 $ 145,723

Adjustments to reconcile netincome to net cash provided byoperating activities:

Stock-based compensation expense 8,608 9,795 18,536 18,178

Depreciation and amortization 7,354 5,537 18,881 15,478

Inventory impairments - - - 610

Net (gain) loss on marketable - (767) 8,285 (7,934)equity securities

Deferred income tax expense 6,531 1,729 8,493 9,488

Net changes in assets andliabilities:

Trade and other receivables 5,933 (4,646) (17,512) (4,682)

Mortgage loans held-for-sale, 13,061 (7,683) 36,515 32,191net

Housing completed or under (153,440) (133,221) (387,269) (251,749)construction

Land and land under development 13,792 (34,899) 108,710 (10,461)

Prepaid and other assets (21,523) 317 (20,314) (3,889)

Accounts payable and accrued (5,516) 24,475 35,023 23,929liabilities

Net cash provided by (used in) (26,262) (88,783) 29,442 (33,118)operating activities

Investing Activities:

Purchases of marketable - (5,224) (10,804) (10,340)securities

Sales of marketable securities - 1,220 59,266 6,277

Purchases of property and (7,917) (6,268) (20,885) (20,128)equipment

Net cash provided by (used in) (7,917) (10,272) 27,577 (24,191)investing activities

Financing Activities:

Payments on mortgage repurchase (11,233) 7,432 (18,755) (26,344)facility, net

Payments on homebuilding line of - - (5,000) -credit, net

Repayment of senior notes - - (250,000) -

Proceeds from issuance of senior - - 298,050 -notes

Dividend payments (21,374) (18,701) (63,056) (54,337)

Issuance of shares understock-based compensation 28,642 16,304 29,974 16,304programs, net

Net cash (used in) financing (3,965) (12,293) (8,787) (64,377)activities

Net increase (decrease) in cash,cash equivalents and restricted (38,144) (111,348) 48,232 (121,686)cash

Cash, cash equivalents andrestricted cash:

Beginning of period 560,588 459,801 474,212 470,139

End of period $ 522,444 $ 348,453 $ 522,444 $ 348,453

Reconciliation of cash, cashequivalents and restricted cash:

Homebuilding:

Cash and cash equivalents $ 432,277 $ 285,338 $ 432,277 $ 285,338

Restricted cash 19,732 16,325 19,732 16,325

Financial Services: -

Cash and cash equivalents 70,435 46,790 70,435 46,790

Total cash, cash equivalents and $ 522,444 $ 348,453 $ 522,444 $ 348,453restricted cash

New Home Deliveries

Three Months Ended September 30,

2020 2019 % Change

Home Sale Average Home Sale Average Home Average Homes Revenues Price Homes Revenues Price Homes Sale Price Revenues

(Dollars in thousands)

West 1,135 $ 552,319 $ 486.6 927 $ 410,414 $ 442.7 22 % 35 % 10 %

Mountain 677 347,095 512.7 537 263,802 491.2 26 % 32 % 4 %

East 335 101,135 301.9 249 76,058 305.5 35 % 33 % (1) %

Total 2,147 $ 1,000,549 $ 466.0 1,713 $ 750,274 $ 438.0 25 % 33 % 6 %

Nine Months Ended September 30,

2020 2019 % Change

Home Sale Average Home Sale Average Home Average Homes Revenues Price Homes Revenues Price Homes Sale Price Revenues

(Dollars in thousands)

West 3,023 $ 1,447,934 $ 479.0 2,464 $ 1,164,502 $ 472.6 23 % 24 % 1 %

Mountain 1,720 886,619 515.5 1,480 760,470 513.8 16 % 17 % 0 %

East 851 249,839 293.6 641 205,424 320.5 33 % 22 % (8) %

Total 5,594 $ 2,584,392 $ 462.0 4,585 $ 2,130,396 $ 464.6 22 % 21 % (1) %

Net New Orders

Three Months Ended September 30,

2020 2019 % Change

Dollar Average Monthly Dollar Average Monthly Dollar Average Monthly Homes Value Price Absorption Homes Value Price Absorption Homes Value Price Absorption Rate * Rate * Rate

(Dollars in thousands)

West 1,955 $ 932,111 $ 476.8 6.58 1,168 $ 516,000 $ 441.8 4.09 67 % 81 % 8 % 61 %

Mountain 1,051 542,375 516.1 5.70 565 271,800 481.1 2.86 86 % 100 % 7 % 99 %

East 509 176,896 347.5 5.39 303 83,896 276.9 3.58 68 % 111 % 26 % 50 %

Total 3,515 $ 1,651,382 $ 469.8 6.10 2,036 $ 871,696 $ 428.1 3.59 73 % 89 % 10 % 70 %

Nine Months Ended September 30,

2020 2019 % Change

Dollar Average Monthly Dollar Average Monthly Dollar Average Monthly Homes Value Price Absorption Homes Value Price Absorption Homes Value Price Absorption Rate * Rate * Rate

(Dollars in thousands)

West 4,646 $ 2,265,557 $ 487.6 5.47 3,379 $ 1,543,584 $ 456.8 4.14 37 % 47 % 7 % 32 %

Mountain 2,502 1,309,176 523.3 4.39 1,974 960,109 486.4 3.30 27 % 36 % 8 % 33 %

East 1,156 393,913 340.8 4.23 912 268,578 294.5 4.02 27 % 47 % 16 % 5 %

Total 8,304 $ 3,968,646 $ 477.9 4.91 6,265 $ 2,772,271 $ 442.5 3.82 33 % 43 % 8 % 28 %

*Calculated as total net new orders in period / average active communitiesduring period / number of months in period

Active Subdivisions

Average Active Average Active Subdivisions Subdivisions

Active Subdivisions Three Months Ended Nine Months Ended

September % September 30, % September 30, % 30,

2020 2019 Change 2020 2019 Change 2020 2019 Change

West 102 93 10 % 99 96 3 % 94 92 2 %

Mountain 61 67 (9) % 62 66 (6) % 63 66 (5) %

East 31 30 3 % 32 29 10 % 30 25 20 %

Total 194 190 2 % 193 191 1 % 187 183 2 %

Backlog

September 30,

2020 2019 % Change

Homes Dollar Average Homes Dollar Average Homes Dollar Average Value Price Value Price Value Price

(Dollars in thousands)

West 3,646 $ 1,743,547 $ 478.2 2,438 $ 1,146,912 $ 470.4 50 % 52 % 2 %

Mountain 1,993 $ 1,033,264 518.4 1,537 $ 768,317 499.9 30 % 34 % 4 %

East 872 $ 298,965 342.9 641 $ 183,856 286.8 36 % 63 % 20 %

Total 6,511 $ 3,075,776 $ 472.4 4,616 $ 2,099,085 $ 454.7 41 % 47 % 4 %

Homes Completed or Under Construction (WIP lots)

September 30, %

2020 2019 Change

Unsold:

Completed 74 82 (10) %

Under construction 129 255 (49) %

Total unsold started homes 203 337 (40) %

Sold homes under construction or completed 4,540 3,433 32 %

Model homes under construction or completed 505 455 11 %

Total homes completed or under construction 5,248 4,225 24 %

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

September 30, 2020 September 30, 2019

Lots Lots Total Lots Lots Total Total Owned Optioned Owned Optioned % Change

West 10,140 3,280 13,420 9,128 2,203 11,331 18 %

Mountain 6,217 2,708 8,925 6,456 3,139 9,595 (7) %

East 2,716 1,769 4,485 2,014 2,003 4,017 12 %

Total 19,073 7,757 26,830 17,598 7,345 24,943 8 %

Selling, General and Administrative Expenses

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 Change 2020 2019 Change

(Dollars in thousands)

General andadministrative $ 45,980 $ 46,951 $ (971) $ 131,488 $ 128,849 $ 2,639expenses

General andadministrativeexpenses as a 4.6 % 6.3 % -170 bps 5.1 % 6.0 % -90 bpspercentage ofhome salerevenues

Marketing $ 24,725 $ 20,457 $ 4,268 $ 68,828 $ 58,266 $ 10,562expenses

Marketingexpenses as apercentage of 2.5 % 2.7 % -20 bps 2.7 % 2.7 % 0 bpshome salerevenues

Commissions $ 32,927 $ 25,308 $ 7,619 $ 84,953 $ 70,574 $ 14,379expenses

Commissionsexpenses as apercentage of 3.3 % 3.4 % -10 bps 3.3 % 3.3 % 0 bpshome salerevenues

Total selling,general and $ 103,632 $ 92,716 $ 10,916 $ 285,269 $ 257,689 $ 27,580administrativeexpenses

Total selling,general andadministrativeexpenses as a 10.4 % 12.4 % -200 bps 11.0 % 12.1 % -110 bpspercentage ofhome salerevenues

Capitalized Interest

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(Dollars in thousands)

Homebuilding interest incurred $ 14,799 $ 15,879 $ 46,427 $ 47,890

Less: Interest capitalized (14,799) (15,879) (46,427) (47,890)

Homebuilding interest expensed $ - $ - $ - $ -

Interest capitalized, beginning of $ 56,929 $ 58,193 $ 55,310 $ 54,845period

Plus: Interest capitalized during 14,799 15,879 46,427 47,890period

Less: Previously capitalizedinterest included in home cost of (16,511) (14,451) (46,520) (43,114)sales

Interest capitalized, end of period $ 55,217 $ 59,621 $ 55,217 $ 59,621

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SOURCE M.D.C. Holdings, Inc.