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2005 FOURTH QUARTER
2005 FULL YEAR AND 2006 OUTLOOK
Jan 17, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- M.D.C. Holdings, Inc. (NYSE: MDC; PCX) today announced net income for the quarter ended December 31, 2005 of $197.5 million, or $4.29 per share, compared with net income of $142.6 million, or $3.17 per share, for the same period in 2004. This earnings growth was derived primarily from increased levels of home closings and average selling prices.
Net income for the year ended December 31, 2005 was $505.7 million, or $10.99 per share, 29% higher than the $391.2 million, or $8.79 per share, for the same period in 2004. Total revenues for the year ended December 31, 2005 reached $4.88 billion, representing an increase of 22% from revenues of $4.01 billion for the year ended December 31, 2004.
"We are pleased to announce our 10th consecutive year of earnings growth, which we concluded with the strongest quarterly results of our 34 years in business," said Larry A. Mizel, MDC's chairman and chief executive officer. "The successful execution of our business model enabled us to produce exceptional returns in 2005, including after-tax returns on average equity and assets of 31% and 16%, respectively. At the same time, we continued to maintain a strong financial position, as represented by our year-end ratio of homebuilding and corporate debt-to-capital, net of cash, of .28, which ranks among the best in the homebuilding industry. In addition, we ended the year with over $1.2 billion in available cash and borrowing capacity, more than at any other time in our history."
Mizel continued, "Our record performance in 2005 continues a long history of earnings growth. Over the last decade, we have withstood a host of national and world-level challenges to increase our earnings at an average year-over-year growth rate of more than 40%. During this 10-year time span, we have generated improved year-over-year earnings in 36 of 40 quarterly periods, while we have grown our stockholders' equity by 850% and improved our after-tax return on average equity by 2,200 basis points. Our robust and quality growth has propelled our Company to its prestigious investment grade status and established us as a performance leader, not only in our industry, but among all public companies in the nation. In 2005, we achieved Fortune 500 status and ranked #6 in the Barron's 500, and we were recently named to the Forbes Platinum 400 as one of 'America's Best Big Companies' for the eighth consecutive year. These accomplishments are a testament to our operating discipline, our conservative and strategic allocation of capital, the strength of our markets and the dedication of our employees and business associates throughout the country."
Mizel concluded, "As always, we remain committed to our goal of increasing long-term shareowner value. Our actions in pursuit of this goal have positioned us well to continue to grow and produce new Company highs for home closings, revenues and earnings in 2006."
Please refer to the last paragraph of this release for a discussion of factors that may impact the Company's estimates of home closings, revenues and earnings.
Growth in Homebuilding Profits
Homebuilding operating profits for the quarter and year ended December 31, 2005 were $337.8 million and $902.6 million, respectively, representing increases of 30% and 25% over profits of $260.2 million and $719.2 million, respectively, for the same periods in 2004. Homebuilding operating margins in the 2005 fourth quarter and full year improved to 19.7% and 18.7%, respectively, from 19.6% and 18.2% for comparable periods in 2004. These 2005 increases largely resulted from increased levels of home closings and higher average selling prices. The Company closed 4,951 homes and 15,307 homes, respectively, in the quarter and year ended December 31, 2005, 15% and 10% higher than home closings in the same periods in 2004. Average selling prices reached $345,100 and $313,800, respectively, for the quarter and year ended December 31, 2005, representing year-over-year increases of 13% and 11%. During the quarter and year ended December 31, 2005, the Company's home gross margins were 27.9% and 28.4%, respectively, compared with 28.2% and 27.7% for the comparable periods in 2004.
Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Our record 2005 homebuilding profits are the product of our careful attention to allocating capital to homebuilding projects that generate solid risk-adjusted returns. Increased capital allocations to our long-standing operations in Arizona, Virginia and Maryland, as well as to our relatively new operations in Utah and Florida, enabled us to produce improved fourth quarter results in all of these markets. Significant increases in average selling prices of homes closed and home gross margins contributed to these improvements. As in the 2005 second and third quarters, these fourth quarter gross margin increases were offset by the impact of easing home gross margins in Nevada from last year's extraordinary levels.
"Home gross margins in the 2005 fourth quarter were impacted negatively relative to the 2005 third quarter and the 2004 fourth quarter by the greater mix of homes closed in California, where our average selling prices were 50% above the Company average and our home gross margins were below the Company average. Notwithstanding our lower home gross margins, our 2005 fourth quarter homebuilding operating margins were higher than margins in both the 2005 third quarter and the 2004 fourth quarter. Lower selling, general and administrative expenses as a percentage of revenues, resulting from the increased revenue production in most of our long-standing and newer markets, was the primary driver of these improved operating margins."
Reece continued, "Although the number of our 2005 fourth quarter home orders received was lower than orders received in the same 2004 period, the estimated sales value of our 2005 fourth quarter orders was 9% higher, resulting from the 21% increase in the average selling price of home orders, compared with the year ago average price. Average home order prices rose year-over-year in almost all of our markets, with the most significant increases in Arizona, Nevada, Maryland and Florida. The extraordinary home price increases experienced in several of our markets over the past two years have moderated to more normalized levels. Nevertheless, we believe that the overall demand for new homes in most of our markets remains strong, as evidenced by the year-over-year increase in the sales value of our home orders."
Reece concluded, "Consistent with our commitment to create long-term value for our shareowners, we are reallocating capital from Texas to investment opportunities in other markets where we expect to generate higher risk-adjusted returns for our Company. We are continuing to build on or sell the lots we control in Texas, which we anticipate we will complete by the fall of 2006. However, we currently have no plans to enter into new contracts for the acquisition of additional land in this market. "
Improved Financial Services Results
Operating profits from the Company's financial services business for the quarter and year ended December 31, 2005, increased to $11.5 million and $24.7 million, respectively, compared with $5.1 million and $18.5 million for the same periods in 2004. The increases in profits for both periods primarily were due to increases in loan origination fees earned in conjunction with record levels of mortgage loans originated. The 2005 fourth quarter also benefited from higher gains on sales of mortgage loans and loan servicing, compared with the same period in 2004.
Combination of Units Release With Earnings Release Beginning in the 2006 First Quarter
Beginning in the first quarter of 2006, MDC will combine its announcement of quarterly home orders, home closings and backlog with the release of its quarterly earnings in an effort to provide more detailed information when releasing its quarterly results. In addition, this approach should enable the Company to provide a broader picture of its operating results and the overall trends in the market for new homes on a quarterly basis.
MDC, whose subsidiaries build homes under the name "Richmond American Homes," is one of the largest homebuilders in the United States. The Company also provides mortgage financing, primarily for MDC's homebuyers, 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 Colorado; among the top five homebuilders in Northern Virginia, suburban Maryland, Phoenix, Tucson, Las Vegas, Jacksonville and Salt Lake City; and among the top ten homebuilders in Northern California and Southern California. MDC also has established operating divisions in West Florida, Philadelphia/Delaware Valley, Chicago, Dallas/Fort Worth and Houston. For more information about our Company, please visit www.richmondamerican.com.
Forward-Looking Statements
Certain statements in this release, including statements regarding future home closings, revenues and earnings, 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, among other things, (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) the availability and cost of performance bonds and insurance covering risks associated with our business; (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) terrorist acts and other acts of war; and (15) other factors over which the Company has little or no control. Additional information about the risks and uncertainties applicable to the Company's business is contained in the Company's Form 10-K for the year ended December 31, 2004, which was filed with the Securities and Exchange Commission. 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. The Company undertakes no duty to publicly update 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 presentations should be consulted.
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
REVENUES
Homebuilding $1,713,910 $1,328,019 $4,820,638 $3,951,644
Financial Services 22,154 15,588 62,035 56,610
Corporate 28 249 1,487 818
Total Revenues $1,736,092 $1,343,856 $4,884,160 $4,009,072
OPERATING PROFITS
Homebuilding $337,791 $260,176 $902,576 $719,197
Financial Services 11,492 5,108 24,730 18,483
Operating Profit 349,283 265,284 927,306 737,680
Corporate general
and administrative
expense, net (33,752) (33,344) (118,543) (100,766)
Income before income
taxes 315,531 231,940 808,763 636,914
Provision for income
taxes (118,052) (89,317) (303,040) (245,749)
Net Income $197,479 $142,623 $505,723 $391,165
EARNINGS PER SHARE
Basic $4.43 $3.31 $11.48 $9.19
Diluted $4.29 $3.17 $10.99 $8.79
WEIGHTED-AVERAGE
SHARES OUTSTANDING
Basic 44,605 43,117 44,046 42,560
Diluted 46,068 44,960 46,036 44,498
DIVIDENDS DECLARED
PER SHARE $.250 $.115 $.760 $.434
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Homebuilding
Home sales $1,708,734 $1,316,913 $4,802,875 $3,932,013
Land sales 430 7,059 2,995 8,898
Other revenues 4,746 4,047 14,768 10,733
Total
Homebuilding
Revenues 1,713,910 1,328,019 4,820,638 3,951,644
Home cost of sales 1,231,976 945,385 3,440,858 2,843,543
Land cost of sales 365 7,467 1,861 8,783
Marketing 77,628 60,864 236,322 198,541
General and
administrative 66,150 54,127 239,021 181,580
Total
Homebuilding
Expenses 1,376,119 1,067,843 3,918,062 3,232,447
Homebuilding
Operating
Profit 337,791 260,176 902,576 719,197
Financial Services
Interest revenues 772 1,015 2,782 3,838
Origination fees 11,048 7,264 32,476 24,728
Gains on sales of
mortgage servicing 1,631 550 4,221 2,093
Gains on sales of
mortgage loans, net 7,327 5,752 18,699 22,657
Mortgage servicing
and other 1,376 1,007 3,857 3,294
Total Financial
Services Revenues 22,154 15,588 62,035 56,610
General and
administrative 10,662 10,480 37,305 38,127
Financial
Services
Operating Profit 11,492 5,108 24,730 18,483
Total Operating Profit 349,283 265,284 927,306 737,680
Corporate
Interest and other
revenues 28 249 1,487 818
Other general and
administrative
expenses (33,780) (33,593) (120,030) (101,584)
Income Before Income
Taxes $315,531 $231,940 $808,763 $636,914
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
(Unaudited)
December 31, December 31, December 31,
2005 2004 2003
BALANCE SHEET DATA
Stockholders' Equity Per
Share Outstanding $43.74 $32.80 $24.06
Stockholders' Equity $1,952,109 $1,418,821 $1,015,920
Homebuilding and
Corporate Debt 996,297 746,310 500,179
Total Capital (excluding
mortgage lending debt) $2,948,406 $2,165,131 $1,516,099
Cash and Cash Equivalents $221,273 $408,150 $173,565
Unrestricted Cash and
Available Borrowing
Capacity Under Lines
of Credit $1,231,340 $1,050,954 $779,407
Ratio of Homebuilding and
Corporate Debt to Equity .51 .53 .49
Ratio of Homebuilding and
Corporate Debt to Capital .34 .34 .33
Ratio of Homebuilding and
Corporate Debt to Capital
(net of cash) .28 .19 .24
Housing Completed or Under
Construction Inventories $1,266,901 $851,628 $732,744
Land and Land Under
Development Inventories $1,656,198 $1,109,953 $763,569
Corporate and Homebuilding
Interest Capitalized
Interest Capitalized in
Inventories at Beginning
of Year $24,220 $20,043 $17,783
Interest Incurred
During the Year 51,872 32,879 26,779
Interest in Home and
Land Cost of Sales for
the Year (34,093) (28,702) (24,519)
Interest Capitalized in
Inventories at End of Year $41,999 $24,220 $20,043
Interest Capitalized as a
Percent of Inventories 1.4% 1.2% 1.3%
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
OPERATING DATA
Interest in Home Cost
of Sales as a Percent
of Home Sales Revenues 0.7% 0.6% 0.7% 0.7%
Homebuilding and
Corporate SG&A as a
Percent of Home Sales
Revenues 10.4% 11.3% 12.4% 12.3%
Depreciation and
Amortization $19,907 $13,150 $54,425 $41,906
Home Gross Margins 27.9% 28.2% 28.4% 27.7%
Cash Provided by
(Used in) Operating
Activities $128,498 $170,368 $(425,378) $(23,864)
Cash Provided by
(Used in) Investing
Activities $(4,771) $(2,834) $(22,889) $(29,917)
Cash Provided by
(Used in) Financing
Activities $ (32,575) $187,533 $ 261,390 $288,366
After-Tax Return
on Revenues 11.4% 10.6% 10.4% 9.8%
After-Tax Return
on Average Assets N/A N/A 15.8% 17.0%
After-Tax Return
on Average Equity N/A N/A 30.6% 33.0%
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
(Unaudited)
Year Ended December 31,
2005 2004 2003 2002 2001
FIVE-YEAR TRENDS
Total
Revenues $4,884,160 $4,009,072 $2,920,070 $2,318,524 $2,125,874
Year-Over-
Year
Increase 21.8% 37.3% 25.9% 9.1% 21.4%
Net Income $505,723 $391,165 $212,229 $167,305 $155,715
Year-Over-
Year
Increase 29.3% 84.3% 26.9% 7.4% 26.3%
Diluted
Earnings Per
Share $10.99 $8.79 $4.90 $3.83 $3.64
Year-Over-
Year
Increase 25.0% 79.4% 27.9% 5.2% 23.4%
After-Tax
Return on
Revenues 10.4% 9.8% 7.3% 7.2% 7.3%
After-Tax
Return on
Average Assets 15.8% 17.0% 12.1% 12.0% 13.3%
After-Tax
Return on
Average Equity 30.6% 33.0% 24.0% 23.0% 27.4%
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
December 31, December 31, December 31,
2005 2004 2003
LOTS OWNED AND CONTROLLED
Lots Owned 23,445 20,760 16,351
Lots Under Option 18,819 21,164 12,251
Homes Under Construction
(including models) 6,891 5,573 4,754
LOTS OWNED AND CONTROLLED
BY MARKET
(excluding homes under
construction)
Arizona 11,035 11,151 5,258
California 5,372 4,428 3,512
Colorado 5,837 5,859 5,206
Florida 4,403 3,574 875
Illinois 616 711 --
Maryland 1,852 1,856 1,767
Nevada 5,455 5,775 5,359
Philadelphia/Delaware Valley 1,754 1,035 --
Texas 551 2,336 2,203
Utah 1,382 1,078 1,220
Virginia 4,007 4,121 3,202
Total Company 42,264 41,924 28,602
ACTIVE SUBDIVISIONS
Arizona 54 32 38
California 34 22 26
Colorado 57 53 49
Florida 19 18 9
Illinois 8 1 --
Maryland 11 11 9
Nevada 43 31 17
Philadelphia/Delaware Valley 7 2 --
Texas 21 24 11
Utah 18 22 11
Virginia 20 26 28
Total Company 292 242 198
Average for Quarter Ended 287 237 200
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
AVERAGE SELLING PRICE
PER HOME CLOSED
Arizona $255.0 $194.0 $227.2 $192.7
California 517.5 534.3 512.6 459.5
Colorado 288.0 266.6 286.3 265.3
Florida 268.2 182.0 219.9 180.6
Illinois 357.2 496.9 389.4 496.9
Maryland 528.8 448.1 482.8 419.6
Nevada 318.2 279.6 305.8 247.2
Philadelphia/
Delaware Valley 379.4 -- 369.6 --
Texas 165.7 156.9 160.6 157.7
Utah 244.4 199.0 226.4 184.7
Virginia 577.0 450.4 527.1 436.8
Company Average $345.1 $304.6 $313.8 $283.4
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in Thousands)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Orders for Homes,
net (units)
Arizona 587 962 3,627 4,066
California 323 270 2,060 2,034
Colorado 348 465 2,075 2,276
Florida 127 154 1,044 446
Illinois 35 12 148 20
Maryland 58 86 423 341
Nevada 505 185 3,293 2,596
Philadelphia/
Delaware Valley 35 22 191 23
Texas 109 160 781 807
Utah 212 180 953 753
Virginia 66 166 739 886
Total 2,405 2,662 15,334 14,248
Estimated Value of
Orders for Homes,
net $830,000 $760,000
Estimated Average
Selling Price of
Orders for Homes,
net $345.1 $285.5
Order Cancellation
Rate 33.8% 32.0% 23.7% 25.3%
Homes Closed (units)
Arizona 1,121 913 3,671 3,256
California 864 704 2,102 2,346
Colorado 575 715 2,190 2,318
Florida 251 201 1,083 452
Illinois 46 2 86 2
Maryland 137 134 397 385
Nevada 1,165 849 3,016 2,736
Philadelphia/
Delaware Valley 15 -- 33 --
Texas 183 254 799 694
Utah 264 199 904 615
Virginia 330 352 1,026 1,072
Total 4,951 4,323 15,307 13,876
Backlog (units) December 31, December 31,
2005 2004
Arizona 2,099 2,143
California 765 807
Colorado 577 692
Florida 599 638
Illinois 80 18
Maryland 251 225
Nevada 1,023 746
Philadelphia/
Delaware Valley 181 23
Texas 238 256
Utah 338 289
Virginia 381 668
Total 6,532 6,505
Backlog Estimated
Sales Value $2,440,000 $1,920,000
Estimated Average
Selling Price
of Homes in
Backlog $373.5 $295.2
SOURCE M.D.C. Holdings, Inc.
Paris G. Reece III,
Chief Financial Officer,
+1-303-804-7706,
greece@mdch.com,
or
Robert N. Martin,
Investor Relations,
+1-720-977-3431,
bnmartin@mdch.com,
both of M.D.C. Holdings, Inc.;
or
Richard Matthews of Rubenstein Communications,
+1-212-843-8267,
rmatthews@rubenstein.com,
for M.D.C. Holdings, Inc.