M.D.C. HOLDINGS ANNOUNCES 2023 FOURTH QUARTER AND FULL YEAR RESULTS
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Insights
The announcement by M.D.C. Holdings regarding the definitive agreement to be acquired by Sekisui House represents a significant event that warrants the attention of stakeholders and investors. The all-cash nature of the transaction suggests a premium is being paid for the company, which is typically favorable for shareholders. The financial implications here are substantial, as such mergers can lead to synergies that may result in cost savings and enhanced market competitiveness. It is crucial to assess the offered price against the company's current market valuation, historical stock performance and book value to determine the attractiveness of the deal.
Furthermore, the transaction's impact on the company's financials will depend on the strategic objectives of the acquiring entity. If Sekisui House aims to expand its geographical footprint or diversify its portfolio, M.D.C. Holdings' financial performance post-acquisition could see a positive trajectory. However, investors should also consider the potential risks of integration and whether the merger aligns with the long-term strategic vision of both companies.
The acquisition of M.D.C. Holdings by Sekisui House is poised to reshape the competitive landscape within the housing construction sector. It is essential to understand the market dynamics, such as current demand for housing, economic indicators influencing the construction industry and the competitive positioning of both M.D.C. Holdings and Sekisui House. The merger could potentially strengthen the combined entity's bargaining power with suppliers, expand its customer base and enhance its ability to innovate. This could lead to a more robust market presence, which may affect competitors and could trigger further consolidation in the industry.
Analysis of historical data on similar mergers within the sector can provide insights into the expected market reaction and long-term effects on market share. Stakeholders should monitor the regulatory environment, as changes could influence the timeline and viability of the merger, potentially affecting the stock's volatility in the short term.
The consummation of the Merger between M.D.C. Holdings and Sekisui House is contingent upon shareholder and regulatory approval, which introduces a layer of uncertainty that must be navigated carefully. Shareholder approval hinges on the belief that the merger serves their best interests, which often involves a thorough examination of the terms and potential impact on their investment. Regulatory scrutiny will focus on antitrust considerations, ensuring that the merger does not create an unfair market advantage or harm consumer interests.
It is also important to consider the legal precedents set by similar transactions and the current regulatory climate. Any delays or challenges in obtaining approvals can affect the expected timeline for completion of the merger, which in turn could impact the stock price. Stakeholders should be aware of the legal complexities involved and the possibility of conditions or divestitures being imposed to secure regulatory approval.
About MDC
M.D.C. Holdings, Inc. was founded in 1972. MDC's homebuilding subsidiaries, which operate under the name Richmond American Homes, have helped more than 240,000 homebuyers achieve the American Dream since 1977. One of the largest homebuilders in the nation, MDC is committed to quality and value that is reflected in each home its subsidiaries build. The Richmond American companies have operations in
Forward-Looking Statements
Any statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects, 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 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, changes in consumer confidence, inflation or deflation and employment levels; (2) changes in business conditions experienced by MDC, including 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-K for the year ended December 31, 2023, which is scheduled to be filed with the Securities and Exchange Commission today. All forward-looking statements are made as of their date, and the risk that actual results will differ materially from expectations expressed 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. | |||||||
Three Months Ended | Year Ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
(Dollars in thousands, except per share amounts) | |||||||
Homebuilding: | |||||||
Home sale revenues | $ 1,309,760 | $ 1,487,279 | $ 4,520,296 | $ 5,586,264 | |||
Home cost of sales | (1,062,125) | (1,170,989) | (3,684,487) | (4,214,379) | |||
Inventory impairments | (2,200) | (92,800) | (29,700) | (121,875) | |||
Total cost of sales | (1,064,325) | (1,263,789) | (3,714,187) | (4,336,254) | |||
Gross profit | 245,435 | 223,490 | 806,109 | 1,250,010 | |||
Selling, general and administrative expenses | (126,862) | (131,797) | (429,894) | (536,395) | |||
Interest and other income | 21,755 | 7,046 | 73,567 | 10,843 | |||
Other income (expense), net | (637) | (4,258) | 350 | (32,991) | |||
Homebuilding pretax income | 139,691 | 94,481 | 450,132 | 691,467 | |||
Financial Services: | |||||||
Revenues | 36,696 | 32,262 | 122,570 | 131,723 | |||
Expenses | (16,712) | (16,887) | (62,942) | (71,327) | |||
Other income (expense), net | 4,603 | 3,364 | 16,345 | 7,991 | |||
Financial services pretax income | 24,587 | 18,739 | 75,973 | 68,387 | |||
Income before income taxes | 164,278 | 113,220 | 526,105 | 759,854 | |||
Provision for income taxes | (44,771) | (33,444) | (125,100) | (197,715) | |||
Net income | $ 119,507 | $ 79,776 | $ 401,005 | $ 562,139 | |||
Other comprehensive income net of tax: | |||||||
Unrealized gain related to available-for-sale debt | $ (40) | $ — | $ 51 | $ — | |||
Other comprehensive income | (40) | — | 51 | — | |||
Comprehensive income | $ 119,467 | $ 79,776 | $ 401,056 | $ 562,139 | |||
Earnings per share: | |||||||
Basic | $ 1.60 | $ 1.11 | $ 5.42 | $ 7.87 | |||
Diluted | $ 1.56 | $ 1.08 | $ 5.29 | $ 7.67 | |||
Weighted average common shares outstanding: | |||||||
Basic | 74,216,586 | 71,646,237 | 73,505,508 | 71,035,558 | |||
Diluted | 76,126,163 | 73,179,135 | 75,357,965 | 72,943,844 | |||
Dividends declared per share | $ 0.55 | $ 0.50 | $ 2.10 | $ 2.00 | |||
M.D.C. HOLDINGS, INC. | |||
December 31, | December 31, | ||
(Dollars in thousands, except per share amounts) | |||
ASSETS | |||
Homebuilding: | |||
Cash and cash equivalents | $ 1,475,964 | $ 696,075 | |
Restricted cash | 4,094 | 3,143 | |
Marketable securities | — | 443,712 | |
Trade and other receivables | 119,004 | 116,364 | |
Inventories: | |||
Housing completed or under construction | 1,881,268 | 1,722,061 | |
Land and land under development | 1,419,778 | 1,793,718 | |
Total inventories | 3,301,046 | 3,515,779 | |
Property and equipment, net | 82,218 | 63,730 | |
Deferred tax assets, net | 38,830 | 49,252 | |
Prepaids and other assets | 76,036 | 70,007 | |
Total homebuilding assets | 5,097,192 | 4,958,062 | |
Financial Services: | |||
Cash and cash equivalents | 162,839 | 17,877 | |
Marketable securities | 78,250 | 117,388 | |
Mortgage loans held-for-sale, net | 258,212 | 229,513 | |
Other assets | 34,592 | 40,432 | |
Total financial services assets | 533,893 | 405,210 | |
Total Assets | $ 5,631,085 | $ 5,363,272 | |
LIABILITIES AND EQUITY | |||
Homebuilding: | |||
Accounts payable | $ 114,852 | $ 109,218 | |
Accrued and other liabilities | 326,478 | 383,406 | |
Revolving credit facility | 10,000 | 10,000 | |
Senior notes, net | 1,483,404 | 1,482,576 | |
Total homebuilding liabilities | 1,934,734 | 1,985,200 | |
Financial Services: | |||
Accounts payable and accrued liabilities | 113,485 | 110,536 | |
Mortgage repurchase facility | 204,981 | 175,752 | |
Total financial services liabilities | 318,466 | 286,288 | |
Total Liabilities | 2,253,200 | 2,271,488 | |
Stockholders' Equity | |||
Preferred stock, | — | — | |
Common stock, | 747 | 726 | |
Additional paid-in-capital | 1,824,434 | 1,784,173 | |
Retained earnings | 1,552,653 | 1,306,885 | |
Accumulated other comprehensive income | 51 | — | |
Total Stockholders' Equity | 3,377,885 | 3,091,784 | |
Total Liabilities and Stockholders' Equity | $ 5,631,085 | $ 5,363,272 | |
M.D.C. HOLDINGS, INC. | |||||||
Three Months Ended | Year Ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
(Dollars in thousands) | |||||||
Operating Activities: | |||||||
Net income | $ 119,507 | $ 79,776 | $ 401,005 | $ 562,139 | |||
Adjustments to reconcile net income to net cash provided by (used in) | |||||||
Stock-based compensation expense | 9,110 | 10,637 | 23,468 | 60,985 | |||
Depreciation and amortization | 7,683 | 7,088 | 25,553 | 27,751 | |||
Inventory impairments | 2,200 | 92,800 | 29,700 | 121,875 | |||
Project abandonment costs | 918 | 4,371 | (45) | 33,129 | |||
Amortization of discount of marketable debt securities | (4,809) | (3,208) | (29,673) | (4,290) | |||
Deferred income tax expense | 7,800 | (27,130) | 10,408 | (31,310) | |||
Net changes in assets and liabilities: | |||||||
Trade and other receivables | (22,993) | (2,463) | 21,986 | (21,784) | |||
Mortgage loans held-for-sale, net | (93,958) | (38,680) | (28,699) | 53,016 | |||
Housing completed or under construction | 39,035 | 505,348 | (163,877) | 186,265 | |||
Land and land under development | (106,658) | (75,662) | 349,783 | (95,402) | |||
Prepaids and other assets | (789) | 39,786 | (3,886) | 31,736 | |||
Accounts payable and accrued liabilities | (18,565) | (30,970) | (74,093) | (18,464) | |||
Net cash provided by (used in) operating activities | (61,519) | 561,693 | 561,630 | 905,646 | |||
Investing Activities: | |||||||
Purchases of marketable securities | (77,979) | (365,684) | (1,166,412) | (656,810) | |||
Maturities of marketable securities | 430,000 | 100,000 | 1,679,000 | 100,000 | |||
Purchases of property and equipment | (28,265) | (7,646) | (43,145) | (29,075) | |||
Net cash provided by (used in) investing activities | 323,756 | (273,330) | 469,443 | (585,885) | |||
Financing Activities: | |||||||
Advances on mortgage repurchase facility, net | 59,511 | (20,462) | 29,229 | (80,548) | |||
Dividend payments | (41,065) | (35,632) | (155,237) | (142,417) | |||
Payments of deferred debt issuance costs | (36) | — | (36) | — | |||
Issuance of shares under stock-based compensation programs, net | (39) | 28,385 | 20,773 | 16,840 | |||
Net cash provided by (used in) financing activities | 18,371 | (27,709) | (105,271) | (206,125) | |||
Net increase in cash, cash equivalents and restricted cash | 280,608 | 260,654 | 925,802 | 113,636 | |||
Cash, cash equivalents and restricted cash: | |||||||
Beginning of period | 1,362,289 | 456,441 | 717,095 | 603,459 | |||
End of period | $ 1,642,897 | $ 717,095 | $ 1,642,897 | $ 717,095 | |||
Reconciliation of cash, cash equivalents and restricted cash: | |||||||
Homebuilding: | |||||||
Cash and cash equivalents | $ 1,475,964 | $ 696,075 | $ 1,475,964 | $ 696,075 | |||
Restricted cash | 4,094 | 3,143 | 4,094 | 3,143 | |||
Financial Services: | |||||||
Cash and cash equivalents | 162,839 | 17,877 | 162,839 | 17,877 | |||
Total cash, cash equivalents and restricted cash | $ 1,642,897 | $ 717,095 | $ 1,642,897 | $ 717,095 | |||
New Home Deliveries | |||||||||||||||||
Three Months Ended December 31, | |||||||||||||||||
2023 | 2022 | % Change | |||||||||||||||
Homes | Home Sale Revenues | Average Price | Homes | Home Sale Revenues | Average Price | Homes | Home Sale Revenues | Average Price | |||||||||
(Dollars in thousands) | |||||||||||||||||
West | 1,397 | $ 778,410 | $ 557.2 | 1,308 | $ 756,109 | $ 578.1 | 7 % | 3 % | (4) % | ||||||||
Mountain | 561 | 336,220 | 599.3 | 756 | 492,850 | 651.9 | (26) % | (32) % | (8) % | ||||||||
East | 442 | 195,130 | 441.5 | 490 | 238,320 | 486.4 | (10) % | (18) % | (9) % | ||||||||
Total | 2,400 | $ 1,309,760 | $ 545.7 | 2,554 | $ 1,487,279 | $ 582.3 | (6) % | (12) % | (6) % | ||||||||
Year Ended December 31, | |||||||||||||||||
2023 | 2022 | % Change | |||||||||||||||
Homes | Home Sale Revenues | Average Price | Homes | Home Sale Revenues | Average Price | Homes | Home Sale Revenues | Average Price | |||||||||
(Dollars in thousands) | |||||||||||||||||
West | 4,821 | $ 2,624,373 | $ 544.4 | 5,234 | $ 3,024,056 | $ 577.8 | (8) % | (13) % | (6) % | ||||||||
Mountain | 2,028 | 1,267,586 | 625.0 | 2,616 | 1,689,376 | 645.8 | (22) % | (25) % | (3) % | ||||||||
East | 1,379 | 628,337 | 455.6 | 1,860 | 872,832 | 469.3 | (26) % | (28) % | (3) % | ||||||||
Total | 8,228 | $ 4,520,296 | $ 549.4 | 9,710 | $ 5,586,264 | $ 575.3 | (15) % | (19) % | (5) % | ||||||||
Net New Orders | |||||||||||||||||||||||
Three Months Ended December 31, | |||||||||||||||||||||||
2023 | 2022 | % Change | |||||||||||||||||||||
Homes | Dollar Value | Average Price 1 | Monthly Absorption Rate 2 | Homes | Dollar | Average | Monthly Absorption | Homes | Dollar | Average | Monthly Absorption Rate | ||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
West | 827 | $ 457,532 | $ 553.2 | 1.96 | 155 | $ 67,710 | $ 436.8 | 0.39 | 434 % | 576 % | 27 % | 406 % | |||||||||||
Mountain | 372 | 219,867 | 591.0 | 2.29 | (37) | (25,924) | 700.6 | (0.24) | N/A | N/A | N/A | N/A | |||||||||||
East | 316 | 138,770 | 439.1 | 2.79 | 72 | 32,649 | 453.5 | 0.64 | 339 % | 325 % | (3) % | 333 % | |||||||||||
Total | 1,515 | $ 816,169 | $ 538.7 | 2.17 | 190 | $ 74,435 | $ 391.8 | 0.29 | 697 % | 996 % | 38 % | 660 % | |||||||||||
1 Gross order average selling price for the three months ended December 31, 2023 decreased approximately |
Year Ended December 31, | |||||||||||||||||||||||
2023 | 2022 | % Change | |||||||||||||||||||||
Homes | Dollar Value | Average Price | Monthly Absorption Rate 2 | Homes | Dollar | Average | Monthly Absorption Rate 2 | Homes | Dollar | Average | Monthly Absorption Rate | ||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
West | 4,202 | $ 2,399,987 | $ 571.2 | 2.51 | 2,909 | $ 1,735,202 | $ 596.5 | 2.01 | 44 % | 38 % | (4) % | 25 % | |||||||||||
Mountain | 1,657 | 1,004,360 | 606.1 | 2.50 | 1,157 | 788,734 | 681.7 | 1.85 | 43 % | 27 % | (11) % | 35 % | |||||||||||
East | 1,285 | 578,427 | 450.1 | 2.85 | 978 | 489,946 | 501.0 | 2.25 | 31 % | 18 % | (10) % | 27 % | |||||||||||
Total | 7,144 | $ 3,982,774 | $ 557.5 | 2.57 | 5,044 | $ 3,013,882 | $ 597.5 | 2.02 | 42 % | 32 % | (7) % | 27 % | |||||||||||
2 Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period |
Active Subdivisions | |||||||||||||||||
Average Active Subdivisions | |||||||||||||||||
Active Subdivisions | Three Months Ended | Year Ended | |||||||||||||||
December 31, | % | December 31, | % | December 31, | % | ||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||
West | 138 | 134 | 3 % | 141 | 133 | 5 % | 140 | 120 | 17 % | ||||||||
Mountain | 53 | 53 | — % | 54 | 51 | 6 % | 55 | 52 | 6 % | ||||||||
East | 35 | 38 | (8) % | 38 | 37 | 1 % | 38 | 36 | 6 % | ||||||||
Total | 226 | 225 | — % | 233 | 222 | 5 % | 233 | 208 | 12 % | ||||||||
Backlog | |||||||||||||||||
December 31, | |||||||||||||||||
2023 | 2022 | % Change | |||||||||||||||
Homes | Dollar Value | Average Price | Homes | Dollar Value | Average Price | Homes | Dollar Value | Average Price | |||||||||
(Dollars in thousands) | |||||||||||||||||
West | 1,272 | $ 789,317 | $ 620.5 | 1,891 | $ 1,049,805 | $ 555.2 | (33) % | (25) % | 12 % | ||||||||
Mountain | 344 | 237,154 | 689.4 | 715 | 515,460 | 720.9 | (52) % | (54) % | (4) % | ||||||||
East | 274 | 130,524 | 476.4 | 368 | 187,629 | 509.9 | (26) % | (30) % | (7) % | ||||||||
Total | 1,890 | $ 1,156,995 | $ 612.2 | 2,974 | $ 1,752,894 | $ 589.4 | (36) % | (34) % | 4 % | ||||||||
Homes Completed or Under Construction (WIP lots) | |||||
December 31, | % | ||||
2023 | 2022 | Change | |||
Unsold: | |||||
Completed | 339 | 396 | (14) % | ||
Under construction | 2,709 | 1,063 | 155 % | ||
Total unsold started homes | 3,048 | 1,459 | 109 % | ||
Sold homes under construction or completed | 1,812 | 2,756 | (34) % | ||
Model homes under construction or completed | 542 | 555 | (2) % | ||
Total homes completed or under construction | 5,402 | 4,770 | 13 % | ||
Lots Owned and Optioned (including homes completed or under construction) | |||||||||||||
December 31, 2023 | December 31, 2022 | ||||||||||||
Lots Owned | Lots Optioned | Total | Lots Owned | Lots Optioned | Total | Total % Change | |||||||
West | 9,957 | 1,186 | 11,143 | 12,667 | 687 | 13,354 | (17) % | ||||||
Mountain | 5,038 | 1,088 | 6,126 | 5,398 | 1,561 | 6,959 | (12) % | ||||||
East | 3,004 | 2,142 | 5,146 | 3,534 | 1,455 | 4,989 | 3 % | ||||||
Total | 17,999 | 4,416 | 22,415 | 21,599 | 3,703 | 25,302 | (11) % | ||||||
Selling, General and Administrative Expenses | |||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||||||
(Dollars in thousands) | |||||||||||
General and administrative expenses | $ 62,665 | $ 66,614 | $ (3,949) | $ 203,878 | $ 292,349 | $ (88,471) | |||||
General and administrative expenses as a | 4.8 % | 4.5 % | 30 bps | 4.5 % | 5.2 % | -70 bps | |||||
Marketing expenses | $ 26,199 | $ 25,308 | $ 891 | $ 96,807 | $ 103,330 | $ (6,523) | |||||
Marketing expenses as a percentage of home | 2.0 % | 1.7 % | 30 bps | 2.1 % | 1.8 % | 30 bps | |||||
Commissions expenses | $ 37,998 | $ 39,875 | $ (1,877) | $ 129,209 | $ 140,716 | $ (11,507) | |||||
Commissions expenses as a percentage of home | 2.9 % | 2.7 % | 20 bps | 2.9 % | 2.5 % | 40 bps | |||||
Total selling, general and administrative expenses | $ 126,862 | $ 131,797 | $ (4,935) | $ 429,894 | $ 536,395 | $ (106,501) | |||||
Total selling, general and administrative | 9.7 % | 8.9 % | 80 bps | 9.5 % | 9.6 % | -10 bps | |||||
Capitalized Interest | |||||||
Three Months Ended | Year Ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
(Dollars in thousands) | |||||||
Homebuilding interest incurred | $ 17,515 | $ 17,419 | $ 69,901 | $ 69,450 | |||
Less: Interest capitalized | (17,515) | (17,419) | (69,901) | (69,450) | |||
Homebuilding interest expensed | $ — | $ — | $ — | $ — | |||
Interest capitalized, beginning of period | $ 65,428 | $ 63,583 | $ 59,921 | $ 58,054 | |||
Plus: Interest capitalized during period | 17,515 | 17,419 | 69,901 | 69,450 | |||
Less: Previously capitalized interest included in home and land cost of | (18,284) | (21,081) | (65,163) | (67,583) | |||
Interest capitalized, end of period | $ 64,659 | $ 59,921 | $ 64,659 | $ 59,921 | |||
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SOURCE M.D.C. Holdings, Inc.
FAQ
What are the financial results of MDC Holdings, Inc. for the quarter and full year ended December 31, 2023?
What is the definitive agreement entered into by MDC Holdings, Inc.?
What are the conditions for the consummation of the Merger?
