PR Newswire | Jul 28, 2020 06:01AM EDT

07/28 05:00 CDT

M.D.C. Holdings Announces Second Quarter 2020 ResultsSignificant revenue growth and margin expansion drove a 55% improvement to net income, while ongoing consumer demand for new housing strengthened both the Company's backlog and earnings outlook. DENVER, July 28, 2020

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 salerevenues ("SG&A rate") improved by 90 basis points to 10.4%

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

? Loan capture rate increased 800 basis points to 69%

? Net income of $84.4 million, or $1.31 per diluted share, up 55% from $54.6million 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 Information^1

? 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 MDCM.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 StatementsCertain 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 Six Months Ended June 30, 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 63,015,82761,336,40462,755,310 61,138,982

Diluted 64,080,94063,323,26764,538,835 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, December 31, 2020 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 634 626 outstanding at June 30, 2020 and December 31, 2019, respectively

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 Six Months Ended June 30, 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

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

(Dollars in thousands)

West 1,017$490,117 $481.9785 $384,530 $489.830% 27 % (2) %

Mountain608 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 $466.71,514$732,844 $484.025% 21 % (4) %



Six Months Ended June 30,

2020 2019 % Change

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

(Dollars in thousands)

West 1,888$895,615 $474.41,537$754,088 $490.623% 19 % (3) %

Mountain1,043539,524 517.3 943 496,668 526.7 11% 9 % (2) %

East 516 148,704 288.2 392 129,366 330.0 32% 15 % (13)%

Total 3,447$1,583,843$459.52,872$1,380,122$480.520% 15 % (4) %

Net New Orders



Three Months Ended June 30,

2020 2019 % Change

Dollar Average Monthly Dollar Average Monthly DollarAverageMonthly Homes Value Price AbsorptionHomes Value Price AbsorptionHomesValue Price Absorption Rate * Rate * Rate

(Dollars in thousands)

West 1,309$574,996 $439.34.62 1,246$550,742 $442.04.46 5 %4 % (1) % 4 %

Mountain758 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$436.74.23 2,273$967,860 $425.84.13 5 %8 % 3 % 2 %



Six Months Ended June 30,

2020 2019 % Change

Dollar Average Monthly Dollar Average Monthly DollarAverageMonthly Homes Value Price AbsorptionHomes Value Price AbsorptionHomesValue Price Absorption Rate * Rate * Rate

(Dollars in thousands)

West 2,691$1,262,330$469.14.88 2,211$1,003,236$453.74.15 22 %26 % 3 % 18 %

Mountain1,451722,197 497.7 3.76 1,409669,523 475.2 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$457.64.28 4,229$1,854,900$438.63.94 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 SubdivisionsThree Months Ended Six Months Ended

June 30, % June 30, % June 30, %

20202019Change 2020 2019 Change2020 2019 Change

West 96 97 (1) %95 94 1 %92 89 3 %

Mountain63 65 (3) %63 65 (3) %64 66 (3) %

East 33 25 32 %31 26 19 %30 23 30 %

Total 1921873 %189 185 2 %186 178 4 %

Backlog



June 30,

2020 2019 % Change

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

(Dollars in thousands)

West 2,826$1,336,251$472.82,197$1,016,327$462.629% 31 % 2 %

Mountain1,619$816,559 $504.41,509$739,921 $490.37 % 10 % 3 %

East 698 $220,362 $315.7587 $173,436 $295.519% 27 % 7 %

Total 5,143$2,373,172$461.44,293$1,929,684$449.520% 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 3,5733,02318 %

Model homes under construction or completed502 457 10 %

Total homes completed or under construction4,3753,81215 %

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



June 30, 2020 June 30, 2019

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

West 9,364 2,619 11,983 8,611 2,446 11,057 8 %

Mountain6,076 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 17,7007,327 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 4.6 %5.4 %-80 bps5.4 %5.9 %-50 bps home sale revenues

Marketing expenses $22,657 $19,513 $3,144$44,103 $37,809 $6,294

Marketing expenses as a percentage of home sale revenues2.6 %2.7 %-10 bps2.8 %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 3.3 %3.3 %0 bps 3.3 %3.3 %0 bps revenues

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 10.4 %11.3 %-90 bps11.5 %12.0 %-50 bps percentage of home sale revenues

Capitalized Interest



Three Months Ended Six Months Ended June 30, 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

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

SOURCE M.D.C. Holdings, Inc.