SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported): July 19, 1999
M.D.C. Holdings, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8951 84-0622967
- ----------------- -------------------- -------------------
(State or other (Commission file number) (I.R.S. employer
jurisdiction of identification no.)
incorporation)
3600 South Yosemite Street, Suite 900, Denver, Colorado 80237
- -------------------------------------------------------- ---------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 773-1100
------------------------------------------------------------------
Not Applicable
-----------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 5. OTHER EVENTS
On July 19, 1999 the Registrant issued the press release attached as
Exhibit 99.1 to this Current Report on Form 8-K.
<PAGE>
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.
-------------------
M.D.C. HOLDINGS, INC.
By:/s/ Daniel S. Japha
---------------------
Vice President of Law
and Secretary
Dated: July 27, 1999
EXHIBIT 99.1
NEWS BULLETIN
M.D.C. HOLDINGS, INC. RICHMOND AMERICAN HOMES
HOMEAMERICAN MORTGAGE
FOR IMMEDIATE RELEASE
MONDAY, JULY 19, 1999
- ------------------------------------------------------------------------------
Contacts: Paris G. Reece III Daniel S. Japha
Chief Financial Officer Director, Investor Relations
(303) 804-7706 (303) 804-7730
(Financial Information) (General Information)
MDC HOLDINGS REPORTS 98% INCREASE
IN SECOND QUARTER EARNINGS
* Record quarterly earnings per share of $1.10 vs. $.58 a year ago
* Highest revenues, home closings, home orders and backlog in Company history
* Record homebuilding profits of $44.0 million, up 160%
* Record home gross margins of 19.8%, a 320 basis point increase
DENVER, Monday, July 19, 1999 - M.D.C. Holdings, Inc. (NYSE/PCX: MDC),
which builds homes under the name "Richmond American Homes," today announced net
income for the three months ended June 30, 1999 of $25.0 million, or $1.10 per
share, the highest quarterly net income in the Company's history and 98% higher
than net income of $12.6 million, or $.58 per share, for the same period in
1998. Total revenues for the quarter ended June 30, 1999 totalled a record $400
million, 32% higher than revenues of $304 million for the same period in 1998.
Larry A. Mizel, MDC's chairman and chief executive officer, stated, "We
are pleased to report MDC has achieved the best operating results for any
quarter or six-month period in its 27-year history. Our focused operating
strategy and efficiency initiatives have enabled us to capitalize on our
nation's historic economic expansion to propel MDC to among the leaders in our
industry in virtually every major performance category. Over the past year, we
have increased our market share in our select, high-growth housing markets,
translated operating efficiencies into record home gross margins and returns,
and positioned MDC to begin the next century. With our record backlog of 3,894
homes with an estimated sales value of $800 million, and expectations of a
continued favorable environment for homebuilding for the balance of this year,
we are well-positioned to close more than 7,000 homes and establish new annual
records for revenues and profitability in 1999."
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<PAGE>
M.D.C. HOLDINGS, INC.
Page 2
Net income for the six months ended June 30, 1999 was $38.7 million, or
$1.71 per share, compared with $5.2 million, or $.27 per share, for the same
period in 1998. Net income for the first six months 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. Total
revenues for the six months ended June 30, 1999 totalled a record $697 million,
representing an increase of 27% over revenues of $547 million for the first six
months of 1998.
Record Homebuilding Profits Increase Over 120%
Operating profits from the Company's homebuilding operations increased
to $44.0 million and $69.2 million, respectively, for the three and six months
ended June 30, 1999, representing increases of 160% and 123%, compared with
$16.9 million and $31.1 million, respectively, for the same periods in 1998.
These profit improvements primarily resulted from significant increases in home
gross margins, home closings and average selling prices (up $22,000 in the
second quarter). Home gross margins improved to 19.8% and 19.3%, respectively,
for the second quarter and first half of 1999, compared with 16.6% and 16.2%,
respectively, for the same periods in 1998. Home sales revenues of $389 million
and $677 million for the second quarter and first half of 1999 were the highest
for comparable periods in the Company's history.
Paris G. Reece III, MDC's executive vice president and chief financial
officer said, "All of our homebuilding divisions recorded positive operating
profits for the second quarter of 1999. Our Colorado operations continued to
post the strongest absolute profit gains, while most of our other divisions
exceeded by more than 100% their operating results from a year ago. Contributing
to these outstanding divisional performances were substantial improvements in
home gross margins in most divisions, increases in average selling prices in all
divisions, higher home closings in all markets but Maryland and a reduction in
homebuilding S,G&A expenses as a percentage of home sales revenues by more than
120 basis points from the second quarter of 1998."
Reece continued, "We are especially proud of our continued improvement
in home gross margins, which reached almost 22% excluding capitalized interest
in the second quarter of 1999. The 320 basis point increase in margins over the
second quarter of 1998 marks the 13th consecutive quarter that we have realized
year-over-year improvements in our quarterly home gross margins. These continued
home gross margin increases are a direct result of initiatives implemented in
each of our divisions designed to reduce costs and increase operating
efficiencies. These initiatives have resulted in more effective home pricing
strategies, reduced interest, warranty and construction costs, increased sales
of options and upgrades, and more
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<PAGE>
M.D.C. HOLDINGS, INC.
Page 3
efficient inventory management. The benefits of these initiatives should enable
the Company to continue the trend of higher year-over-year quarterly home gross
margins for the balance of 1999. Such margins may be less than those realized in
the 1999 second quarter due to increases in land and construction costs for
homes in backlog."
Strong Financial Services Results
Operating profits from the Company's mortgage lending operations were
$3.3 million and $6.8 million, respectively, for the quarter and six months
ended June 30, 1999, compared with $2.6 million and $4.6 million, respectively,
for the same periods in 1998. This improvement in operating profit primarily
resulted from record levels of mortgage loan originations which increased 24%
and 20%, respectively, for the quarter and six months ended June 30, 1999.
Operating profit from the financial services segment was $3.3 million
and $6.8 million, respectively, for the three and six months ended June 30,
1999, compared with $7.2 million and $9.2 million, respectively, for the same
periods in 1998. The 1998 periods benefited from the recognition of a $4.5
million pre-tax gain related to the September 1996 sale of the Company's asset
management business.
Strengthened Balance Sheet and Improved Operating Efficiency
During the second quarter and first six months of 1999, the Company
continued its strategy of strengthening its balance sheet and improving its
financial position. Homebuilding and corporate debt levels decreased, compared
with June 30, 1998 levels, by 14% to $230 million, despite a $120 million
increase in work-in-process and land inventories. The debt reduction was aided
by the fourth quarter 1998 conversion into MDC common stock of all $28 million
principal amount of the Company's convertible subordinated notes. These factors
contributed to a reduction in the Company's homebuilding and corporate debt to
capital ratio at June 30, 1999 to .40 from .53 at June 30, 1998.
Lower debt levels and more favorable effective interest rates on the
Company's outstanding debt contributed to reductions of 9% and 13%,
respectively, in the Company's corporate and homebuilding interest incurred in
the second quarter and first six months of 1999, compared with the same periods
in 1998. Second quarter and first half 1999 earnings before interest, taxes,
depreciation and amortization ("EBITDA"), as adjusted, increased to $53.9
million and $87.7 million, respectively, compared with $36.1 million and $61.4
million, respectively, for the same periods in 1998. These adjusted EBITDA
increases, combined with the 1999 reductions in interest incurred, resulted in
increases in the Company's ratio of EBITDA,
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M.D.C. HOLDINGS, INC.
Page 4
as adjusted, to interest incurred to 10.3 and 8.8, respectively, for the three
and six months ended June 30, 1999, compared with 6.3 and 5.3, respectively, for
the comparable periods 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, Tucson and
Colorado Springs; among the top ten homebuilders in Southern California,
Phoenix, suburban Maryland 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, including those related to
projected home gross margins, closing levels, revenues and profitability, 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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<PAGE>
M.D.C. HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
ASSETS
<S> <C> <C>
Corporate
Cash and cash equivalents.............................. $ 11,000 $ 2,460
Property and equipment, net............................ 2,604 2,901
Deferred income taxes.................................. 18,218 17,949
Deferred debt issue costs, net......................... 2,493 2,589
Other assets, net...................................... 5,675 5,670
------------- -------------
39,990 31,569
------------- -------------
Homebuilding
Cash and cash equivalents.............................. 8,145 7,279
Home sales and other accounts receivable............... 11,814 12,771
Inventories, net
Housing completed or under construction.............. 360,330 294,104
Land and land under development...................... 254,605 217,180
Prepaid expenses and other assets, net................. 52,657 58,981
------------- -------------
687,551 590,315
------------- -------------
Financial Services....................................... 89,171 92,129
------------- -------------
Total Assets................................................ $ 816,712 $ 714,013
============= =============
LIABILITIES
Corporate
Accounts payable and accrued expenses.................. $ 35,671 $ 32,378
Income taxes payable................................... 18,237 14,568
Senior notes, net...................................... 174,364 174,339
------------- -------------
228,272 221,285
------------- -------------
Homebuilding
Accounts payable and accrued expenses.................. 150,751 131,374
Line of credit......................................... 55,000 21,871
Note payable........................................... 1,044 866
------------- -------------
206,795 154,111
------------- -------------
Financial Services....................................... 41,524 40,486
------------- -------------
Total Liabilities.................................... 476,591 415,882
------------- -------------
STOCKHOLDERS' EQUITY
Total Stockholders' Equity........................... 340,121 298,131
------------- -------------
Total Liabilities and Stockholders' Equity.................. $ 816,712 $ 714,013
============= =============
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</TABLE>
<PAGE>
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ -------------
REVENUES
<S> <C> <C> <C> <C>
Homebuilding.......................... $ 391,130 $ 293,420 $ 681,010 $ 532,017
Financial Services.................... 7,011 10,149 13,925 14,820
Corporate............................. 1,618 310 1,949 543
------------ ------------ ------------ ------------
Total Revenues.................... $ 399,759 $ 303,879 $ 696,884 $ 547,380
============ ============ ============ ============
NET INCOME
Homebuilding.......................... $ 43,996 $ 16,907 $ 69,150 $ 31,051
Financial Services.................... 3,297 7,162 6,845 9,187
------------ ------------ ------------ ------------
Operating Profit.................. 47,293 24,069 75,995 40,238
Corporate general and administrative
expense, net........................ (6,041) (3,730) (12,015) (7,009)
------------ ------------ ------------ ------------
Income before income taxes............ 41,252 20,339 63,980 33,229
Provision for income taxes............ (16,295) (7,758) (25,272) (12,720)
------------- ------------ ------------- ------------
Income before extraordinary item...... 24,957 12,581 38,708 20,509
Extraordinary loss from early
extinguishment of debt, net of
income tax benefit of $9,587........ - - - - - - (15,314)
------------ ------------ ------------ ------------
Net Income........................ $ 24,957 $ 12,581 $ 38,708 $ 5,195
============ ============ ============ ============
EARNINGS PER SHARE
Basic
Income before extraordinary item.. $ 1.12 $ .70 $ 1.74 $ 1.14
============ ============ ============ ============
Net Income........................ $ 1.12 $ .70 $ 1.74 $ .29
============ ============ ============ ============
Diluted
Income before extraordinary item.. $ 1.10 $ .58 $ 1.71 $ .95
============ ============ ============ ============
Net Income........................ $ 1.10 $ .58 $ 1.71 $ .27
============ ============ ============ ============
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic............................. 22,274 18,042 22,189 17,981
============ ============ ============ ============
Diluted........................... 22,695 22,469 22,630 22,472
============ ============ ============ ============
DIVIDENDS PAID PER SHARE $ .05 $ .04 $ .10 $ .07
============ ============ ============ ============
</TABLE>
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M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Homebuilding
Home sales........................... $ 389,144 $ 291,752 $ 677,228 $ 524,515
Land sales........................... 1,439 1,276 2,825 6,803
Other revenues....................... 547 392 957 699
----------- ----------- ----------- -----------
Total Homebuilding Revenues...... 391,130 293,420 681,010 532,017
----------- ----------- ----------- -----------
Home cost of sales................... 312,065 243,253 546,813 439,522
Land cost of sales................... 984 1,179 2,023 4,285
Asset impairment charges............. - - 3,000 - - 3,000
Marketing............................ 21,226 18,146 38,109 33,396
General and administrative........... 12,859 10,935 24,915 20,763
----------- ----------- ----------- -----------
347,134 276,513 611,860 500,966
----------- ----------- ----------- -----------
Homebuilding Operating Profit.... 43,996 16,907 69,150 31,051
----------- ----------- ----------- -----------
Financial Services
Mortgage Lending Revenues
Interest revenues.................... 616 502 1,277 1,033
Origination fees..................... 3,217 2,275 5,720 4,140
Gains on sales of mortgage servicing. 1,026 692 2,289 927
Gains on sales of mortgage loans, net 2,010 2,012 4,350 4,016
Mortgage servicing and other......... 142 72 289 102
Asset Management Revenues.............. - - 4,596 - - 4,602
----------- ----------- ----------- -----------
Total Financial Services Revenues 7,011 10,149 13,925 14,820
----------- ----------- ----------- -----------
General and Administrative Expenses.... 3,714 2,987 7,080 5,633
----------- ----------- ----------- -----------
Financial Services Operating 3,297 7,162 6,845 9,187
----------- ----------- ----------- -----------
Profit.........................
Total Operating Profit.................... 47,293 24,069 75,995 40,238
----------- ----------- ----------- -----------
Corporate
Interest and other revenues.......... (1,618) (310) (1,949) (543)
Interest expense..................... - - - - - - - -
General and administrative........... 7,659 4,040 13,964 7,552
----------- ----------- ----------- -----------
Net Corporate Expenses........... 6,041 3,730 12,015 7,009
----------- ----------- ----------- -----------
Income Before Income Taxes and
Extraordinary Item..................... $ 41,252 $ 20,339 $ 63,980 $ 33,229
=========== =========== =========== ===========
</TABLE>
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<PAGE>
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1999 1998 1998
------------ ------------ ------------
BALANCE SHEET DATA
<S> <C> <C> <C>
Stockholders' Equity......................................... $ 340,121 $ 298,131 $ 237,886
Book Value Per Share Outstanding (pro forma for
June 30, 1998 based on conversion of the 8 3/4%
convertible subordinated notes)............................ $ 15.27 $ 13.56 $ 12.26
Homebuilding and Corporate Debt.............................. $ 230,408 $ 197,076 $ 267,810
Ratio of Homebuilding and Corporate Debt to Equity........... .68 .66 1.13
Total Capital (excluding mortgage lending debt).............. $ 570,529 $ 495,207 $ 505,696
Ratio of Homebuilding and Corporate Debt to Total Capital.... .40 .40 .53
Total Liquidity.............................................. $ 273,535 $ 298,334 $ 259,637
Total Homebuilding Inventories............................... $ 614,935 $ 511,284 $ 495,313
Interest Capitalized in Homebuilding Inventories............. $ 22,183 $ 26,332 $ 33,316
Interest Capitalized as a Percent of Homebuilding Inventories 3.6% 5.2% 6.7%
Total Lots Owned............................................. 9,191 8,925 8,358
Total Lots Under Option...................................... 7,950 7,729 6,198
Active Subdivisions.......................................... 122 130 132
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
OPERATING DATA
<S> <C> <C> <C> <C>
EBITDA, As Adjusted
Income From Continuing Operations......................... $ 24,957 $ 12,581 $ 38,708 $ 20,509
Add:
Income taxes........................................ 16,295 7,758 25,272 12,720
Corporate & homebuilding interest expense........... - - - - - - - -
Interest in home and land cost of sales............. 7,581 7,957 14,100 16,174
Other fixed charges................................. 229 200 527 326
Depreciation and amortization....................... 4,865 4,617 9,092 8,658
Asset impairment charges............................ - - 3,000 - - 3,000
------------ ------------ ------------ ------------
Total EBITDA, As Adjusted.................................... $ 53,927 $ 36,113 $ 87,699 $ 61,387
============ ============ ============ ============
Fixed Charges Incurred....................................... $ 5,460 $ 5,927 $ 10,478 $ 11,825
Ratio of EBITDA, As Adjusted, to Fixed Charges............... 9.9 6.1 8.4 5.2
Ratio of EBITDA, As Adjusted, to Interest Incurred........... 10.3 6.3 8.8 5.3
Homebuilding and Corporate SG&A as a Percent of Home Sales
Revenues................................................... 10.7% 11.4% 11.4% 11.8%
Interest Data
Interest Incurred............................................ $ 5,231 $ 5,727 $ 9,951 $ 11,499
Interest Capitalized......................................... $ 5,231 $ 5,727 $ 9,951 $ 11,499
Interest in Home Cost of Sales as a Percent of Home Sales
Revenues................................................... 2.0% 2.7% 2.0% 2.8%
</TABLE>
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M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Home Sales Revenues.............................. $ 389,144 $ 291,752 $ 677,228 $ 524,515
Average Selling Price Per Home Closed............ $ 208.8 $ 186.8 $ 204.5 $ 185.2
Home Gross Margins............................... 19.8% 16.6% 19.3% 16.2%
Excluding Interest in Home Cost of Sales.... 21.8% 19.3% 21.3% 19.0%
Orders For Homes, Net (Units)
Colorado.................................... 759 687 1,604 1,597
California.................................. 407 310 800 620
Arizona..................................... 413 430 938 951
Nevada...................................... 146 163 274 305
Virginia.................................... 194 163 461 427
Maryland.................................... 110 96 198 225
------------ ------------ ------------ ------------
Total................................... 2,029 1,849 4,275 4,125
============ ============ ============ ============
Homes Closed (Units)
Colorado.................................... 691 631 1,193 1,111
California.................................. 317 194 540 375
Arizona..................................... 469 365 855 691
Nevada...................................... 115 106 256 196
Virginia.................................... 190 163 310 285
Maryland.................................... 82 103 157 174
------------ ------------ ------------ ------------
Total................................... 1,864 1,562 3,311 2,832
============ ============ ============ ============
June 30, December 31, June 30,
1999 1998 1998
------------ ------------ ---------
Backlog (Units)
Colorado.................................... 1,766 1,355 1,366
California.................................. 586 326 515
Arizona..................................... 779 696 653
Nevada...................................... 164 146 204
Virginia.................................... 405 254 353
Maryland.................................... 194 153 234
------------ ------------ ------------
Total................................... 3,894 2,930 3,325
============ ============ ============
Estimated Sales Value................... $ 800,000 $ 580,000 $ 640,000
============ ============ ============
</TABLE>
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<PAGE>
M.D.C. Holdings, Inc.
1999 First Half Operating Performance
Performance Graphs
Set forth below are graphs that show the increasing levels of Diluted
Operating Earnings Per Share, Home Gross Margin Percent and Ratio of EBITDA to
Interest Incurred.
Diluted Operating Earnings Per Share
|------------------------------------------------------|
| | |
| | |
2.50| | | 1st Half 1999
| $2.32 | | Up 80%
O 2.00| |------| | |
L | | | | $1.71 |
L 1.50| | | | |---------| | 2nd Qtr Up 90%
A | $1.18 | | | | | |
R 1.00| $.98 |------| | | | $.95 | $1.10 | |
S |------| | | | | | |---------| |(2nd Qtr)| |
0.50| | | | | | | | $.58 | |---------| |
| | | | | | | |(2nd Qtr)| | | |
0.00| | | | | | | | | | | |
0|------------------------------------------------------|
6 Mths Ended June 30,
1996 1997 1998 ---------------------
1998 1999
Home Gross Margin Percent
|-----------------------------------------------------|
22.0| | |
| | 21.3% | 1st Half 1999
20.0| | / |Up 310 Basis Points
| - 19.5% | 19.0% -/ 19.3% |
18.0| 17.5% / | |-------| |
| 16.7% / 16.9% | 16.2% | | |
16.0| |-------| | |-------| | | | 2nd Qtr of 19.8%
| 14.5% | | | | | | | |Up 320 Basis Points
14.0| 13.7% |-------| | | | | | | | |
|-------| | | | | | | | | | |
12.0|-----------------------------------------------------|
6 Mths Ended June 30,
1996 1997 1998 ---------------------
1998 1999
---/---/- Home Gross Margin Before Interest in Cost of Sales
Ratio of EBITDA to Interest Incurred
|-----------------------------------------------|
10.0| | |
9.0| | 8.8 |
8.0| | |------| | 1st Half 1999
7.0| 6.4 | | | | Up 65%
6.0| |------| | 5.3 | | |
5.0| | | | |------| | | |
4.0| 3.4 | | | | | | | | 2nd Qtr of 10.3
3.0| 2.8 |------| | | | | | | | | Up 63%
2.0|------| | | | | | | | | | |
1.0| | | | | | | | | | | |
0.0|-----------------------------------------------|
6 Mths Ended June 30,
1996 1997 1998 --------------------
1998 1999
