SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 20, 1999
M.D.C. Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-8951 84-0622967
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(State or other (Commission file number) (I.R.S. employer
jurisdiction of identification no.)
incorporation)
3600 South Yosemite Street, Suite 900, Denver, Colorado 80237
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 773-1100
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On April 20, 1999 the Registrant issued the press release attached as
Exhibit 99.1 to this Current Report on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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M.D.C. HOLDINGS, INC.
By:/s/ Paris G. Reece III
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Paris G. Reece III
Senior Vice President and
Dated: April 20, 1999 Chief Financial Officer
M.D.C. HOLDINGS REPORTS 73% INCREASE
IN FIRST QUARTER EARNINGS
o Record operating earnings per share of $.61 vs. $.37 a year ago o Homebuilding
operating profits of $25.2 million, up 78% o Home gross margins of 18.5%, a 280
basis point increase o Record first quarter revenues, home closings and backlog
DENVER, Tuesday, April 20, 1999 - M.D.C. Holdings, Inc. (NYSE/PCX:
MDC), which builds homes under the name "Richmond American Homes," today
announced income before extraordinary item for the three months ended March 31,
1999 of $13.8 million, or $.61 per share, 36% higher than the First Call
consensus estimate and 73% higher than $7.9 million, or $.37 per share, for the
same period in 1998. Total revenues for the first quarter of 1999 were $297
million, the highest first quarter revenues in the Company's history and 22%
higher than revenues of $244 million for the same period in 1998.
Larry A. Mizel, MDC's chairman, president and chief executive officer,
stated, "In realizing these record first quarter operating results, we continue
to benefit from a strong national economy, marked by the lowest unemployment
rate in three decades, continued low mortgage interest rates, high consumer
confidence and record levels of housing affordability. Our core homebuilding
operations have continued to lead the way, with record home sales revenues, home
closings and operating profits, improved home gross margins and a $750 million
backlog of homes sold, the highest quarter-end backlog in our history. These
favorable economic conditions and outstanding operating results, combined with
the strength of our balance sheet and liquidity have positioned us to achieve
our objectives for 1999 of increased home closings, revenues and earnings per
share, and continued improvement in shareowner value."
Net income for the quarter ended March 31, 1999 was $13.8 million, or
$.61 per share, compared with a net loss of $7.4 million, or $.31 per share, for
the same period in 1998. The net loss in the first quarter of 1998 included an
extraordinary after tax loss of $15.3 million, or $.68 per share, recognized in
connection with the January 1998 refinancing of MDC's senior debt.
Record Homebuilding Profits
Operating profits from the Company's homebuilding operations increased
78% to a record $25.2 million for the first quarter of 1999, compared with $14.1
million for the same period in 1998. The increase in operating profit primarily
resulted from record first quarter home closings of 1,447 units, a $15,800
increase in the average selling price per home closed and a 280 basis point
improvement in home gross margins. Operating profits in the first quarter of
1999 included only $.3 million in land sale gains, compared with $2.4 million in
land sale gains in the first quarter of 1998, primarily from the sale of lots in
a project in Virginia.
Paris G. Reece III, MDC's senior vice president and chief financial
officer, said, "Each of our homebuilding divisions recorded improved
year-over-year operating results in the first quarter of 1999, excluding the
effects of the 1998 Virginia land sale gain. Our Colorado operations continued
their record-setting performance with a 100% increase in operating profits. The
improvements in all of our divisions' operating results generally can be
attributed to higher home closings and, with the exception of Southern
California and Maryland, substantial increases in home gross margins."
Improved Financial Services Results
Operating profits from the Company's mortgage lending operations were
$3.5 million for the three months ended March 31, 1999, 75% higher than the $2.0
million for the same period in 1998. This significant improvement in operating
profits primarily resulted from a 14% increase in mortgage loan originations to
a record $174 million, and a $1.0 million increase in gains from sales of
mortgage loan servicing.
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Strengthened Balance Sheet and Improved Operating Efficiency
The Company successfully continued its efforts to strengthen its
balance sheet and improve the efficiency of its operations. The Company's
investment in unsold homes under construction at March 31, 1999 was reduced by
26% to $32 million, compared with March 31, 1998. In addition, homebuilding and
corporate indebtedness decreased by $49 million to $219 million. This debt
reduction was facilitated by the fourth quarter 1998 conversion into MDC common
stock of all $28 million principal amount of the Company's convertible
subordinated notes. The Company's strong operating results over the last year,
together with the debt conversion, increased stockholders' equity by 41% to $316
million, or $14.19 per outstanding share, at March 31, 1999. These factors
contributed to a reduction in the Company's ratio of homebuilding and corporate
debt to total capital (excluding mortgage lending debt) to .41 at March 31, 1999
from .54 at March 31, 1998.
Lower effective interest rates on the Company's outstanding debt
contributed to a reduction of 18% in the Company's corporate and homebuilding
interest incurred for the quarter ended March 31, 1999, compared with the same
period in 1998. First quarter 1999 earnings before interest, taxes, depreciation
and amortization ("EBITDA") increased 33% to $33.5 million, compared with $25.1
million for the same period in 1998. This EBITDA increase, combined with the
reduction in interest incurred, resulted in an increase in the Company's ratio
of EBITDA to interest incurred to 7.1 for the quarter ended March 31, 1999,
compared with 4.4 for the comparable period in 1998.
MDC is one of the largest homebuilders in the United States. The
Company also provides mortgage financing, primarily for MDC's home buyers,
through its wholly owned subsidiary, HomeAmerican Mortgage Corporation. MDC is a
major regional homebuilder with a significant presence in some of the country's
best housing markets. The Company is the largest homebuilder in metropolitan
Denver; among the top five homebuilders in Northern Virginia, suburban Maryland,
Tucson and Colorado Springs; among the top ten homebuilders in Southern
California, Phoenix and Las Vegas; and has a growing presence in the San
Francisco Bay area.
All earnings per share amounts discussed above are on a diluted basis.
Certain statements in this press release may 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 (1) general economic and
business conditions; (2) interest rate changes; (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)
demographic changes; (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)
required accounting changes; (14) the impact on the Company of Y2K compliance by
the Company and its vendors, suppliers and subcontractors and by various
governmental and regulatory agencies; and (15) other factors over which the
Company has little or no control.
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-more-
M.D.C. HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
March 31, December 31,
1999 1998
ASSETS
Corporate
Cash and cash equivalents.................. $ 2,591 $ 2,460
Property and equipment, net................ 2,693 2,901
Deferred income taxes...................... 17,078 17,949
Deferred debt issue costs, net............. 2,542 2,589
Other assets, net.......................... 6,135 5,670
31,039 31,569
Homebuilding
Cash and cash equivalents.................. 7,505 7,279
Home sales and other accounts receivable... 15,136 12,771
Inventories, net
Housing completed or under construction.. 336,431 294,104
Land and land under development.......... 239,036 217,180
Prepaid expenses and other assets, net..... 57,765 58,981
655,873 590,315
Financial Services........................... 75,354 92,129
Total Assets.................................... $ 762,266 $ 714,013
LIABILITIES
Corporate
Accounts payable and accrued expenses...... $ 26,441 $ 32,378
Income taxes payable....................... 16,691 14,568
Senior notes, net.......................... 174,351 174,339
217,483 221,285
Homebuilding
Accounts payable and accrued expenses...... 137,438 131,374
Line of credit............................. 43,000 21,871
Notes payable.............................. 1,176 866
181,614 154,111
Financial Services........................... 47,133 40,486
Total Liabilities........................ 446,230 415,882
STOCKHOLDERS' EQUITY
Total Stockholders' Equity............... 316,036 298,131
Total Liabilities and Stockholders' Equity...... $ 762,266 $ 714,013
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M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Income (Loss)
(In thousands, except per share amounts)
Three Months Ended
March 31,
1999 1998
REVENUES
Homebuilding.................................. $ 289,880 $ 238,597
Financial Services............................ 6,914 4,671
Corporate..................................... 331 233
Total Revenues............................ $ 297,125 $ 243,501
NET INCOME
Homebuilding.................................. $ 25,154 $ 14,144
Financial Services............................ 3,548 2,025
Operating Profit.......................... 28,702 16,169
Corporate general and administrative
expense, net................................ (5,974) (3,279)
Corporate and homebuilding interest expense... - - - -
Income before income taxes....................... 22,728 12,890
Provision for income taxes....................... (8,977) (4,962)
Income before extraordinary item................. 13,751 7,928
Extraordinary loss from early extinguishment
of debt, net of income tax benefit of $9,587.. - - (15,314)
Net Income (Loss)......................... $ 13,751 $ (7,386)
EARNINGS PER SHARE
Basic
Income before extraordinary item.......... $ .62 $ .44
Net Income (Loss)......................... $ .62 $ (.41)
Diluted
Income before extraordinary item.......... $ .61 $ .37
Net Income (Loss)......................... $ .61 $ (.31)
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic..................................... 22,102 17,919
Diluted................................... 22,565 22,392
DIVIDENDS PER SHARE.............................. $ .05 $ .03
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M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
Three Months
Ended March 31,
1999 1998
Homebuilding
Home sales................................... $ 288,084 $ 232,763
Land sales................................... 1,386 5,527
Other revenues............................... 410 307
Total Homebuilding Revenues............... 289,880 238,597
Home cost of sales........................... 234,748 196,269
Land cost of sales........................... 1,039 3,106
Asset impairment charges..................... - - - -
Marketing.................................... 16,883 15,250
General and administrative................... 12,056 9,828
264,726 224,453
Homebuilding Operating Profit............. 25,154 14,144
Financial Services
Mortgage Lending Revenues
Interest revenues............................ 661 531
Origination fees............................. 2,503 1,865
Gains on sales of mortgage servicing......... 1,263 235
Gains on sales of mortgage loans, net........ 2,340 2,004
Mortgage servicing and other................. 147 30
Asset Management Revenues...................... - - 6
Total Financial Services Revenues......... 6,914 4,671
General and Administrative Expenses............ 3,366 2,646
Financial Services Operating Profit....... 3,548 2,025
Total Operating Profit............................ 28,702 16,169
Corporate
Interest and other revenues.................. 331 233
Interest expense............................. - - - -
General and administrative................... (6,305) (3,512)
Net Corporate Expenses.................... (5,974) (3,279)
Income Before Income Taxes and Extraordinary Item. $ 22,728 $ 12,890
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<TABLE>
<CAPTION>
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
March 31, December 31, March 31,
1999 1998 1998
BALANCE SHEET DATA
<S> <C> <C> <C>
Stockholders' Equity........................................ $ 316,036 $ 298,131 $ 224,354
Book Value Per Share Outstanding (pro forma for March 31,
1998 based on conversion of the 8 3/4%
convertible subordinated notes)........................... $ 14.19 $ 13.56 $ 11.69
Homebuilding and Corporate Debt............................. $ 218,527 $ 197,076 $ 267,391
Ratio of Homebuilding and Corporate Debt to Equity.......... .69 .66 1.19
Total Capital (excluding mortgage lending debt)............. $ 534,563 $ 495,207 $ 491,745
Ratio of Homebuilding and Corporate Debt to Total Capital... .41 .40 0.54
Total Liquidity............................................. $ 269,735 $ 298,334 $ 153,669
Total Homebuilding Inventories.............................. $ 575,467 $ 511,284 $ 477,206
Interest Capitalized in Homebuilding Inventories............ $ 24,533 $ 26,332 $ 35,546
Interest Capitalized as a Percent of Homebuilding Inventories
4.3% 5.2% 7.5%
Total Lots Owned............................................ 9,144 8,925 8,297
Total Lots Under Option..................................... 6,734 7,729 5,366
Active Subdivisions......................................... 126 130 138
</TABLE>
Three Months Ended
March 31,
1999 1998
OPERATING DATA
EBITDA Computation
Income From Continuing Operations................. $ 13,751 $ 7,928
Add:
Income taxes............................... 8,977 4,962
Corporate & homebuilding interest expense.. - - - -
Interest in home and land cost of sales.... 6,519 8,217
Depreciation and amortization.............. 4,227 4,041
Total EBITDA......................................... $ 33,474 $ 25,148
Ratio of EBITDA to Interest Incurred................. 7.1 4.4
Homebuilding and Corporate SG&A as a Percent of
Home Sales Revenues................................. 12.2% 12.3%
Interest Data
Interest Incurred.................................... $ 4,720 $ 5,772
Interest Capitalized................................. $ 4,720 $ 5,772
Interest in Home Cost of Sales as a Percent of
Home Sales Revenues................................ 2.2% 2.9%
<PAGE>
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M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
Three Months Ended
March 31,
1999 1998
Home Sales Revenues............................ $ 288,084 $ 232,763
Average Selling Price Per Home Closed.......... $ 199.1 $ 183.3
Home Gross Margins............................. 18.5% 15.7%
Excluding Interest in Home Cost of Sales.. 20.7% 18.6%
Orders For Homes, Net (Units)
Colorado.................................. 845 910
California................................ 393 310
Arizona................................... 525 521
Nevada.................................... 128 142
Virginia.................................. 267 264
Maryland.................................. 88 129
Total................................. 2,246 2,276
Homes Closed (Units)
Colorado.................................. 502 480
California................................ 223 181
Arizona................................... 386 326
Nevada.................................... 141 90
Virginia.................................. 120 122
Maryland.................................. 75 71
Total................................. 1,447 1,270
March 31, December 31, March 31,
1999 1998 1998
Backlog (Units)
Colorado.................. 1,698 1,355 1,310
California................ 496 326 399
Arizona................... 835 696 588
Nevada.................... 133 146 147
Virginia.................. 401 254 353
Maryland.................. 166 153 241
Total................. 3,729 2,930 3,038
Estimated Sales Value. $ 750,000 $ 580,000 $ 570,000
