Mr. Reece: M.D.C. Holdings was formed in 1972 with $50,000 in initial capital. Today, our company has grown to become one of the top 10 homebuilders in the country. We have capital in excess of $1.6 billion and a market cap in excess of $3.5 billion. After achieving more than $4 billion in revenues in 2004, we were named to the Fortune 500 for the first time this year. Perhaps more important, we were recognized as one of the top five among all Fortune 500 companies based on returns to shareholders over the last five and 10-year periods. M.D.C. Holdings began building single-family homes in 1977, and since then we have delivered almost 125,000 homes and generated over $25 billion in revenues. Our growth over the last decade has been particularly strong. We have averaged an annual growth in home closings of about 15%. Our revenues have grown at about 20% and our earnings have been growing at a compound annual rate of about 35%.
TWST: What are the principal drivers in this success, especially the
ones that differentiate you from others?
Mr. Reece: We employ a strategic, conservative approach to land
acquisition. The land we purchase is always entitled and generally has a
preliminary plan. We buy a relatively short supply, keeping about a two-
year supply of land at any one point in time. This allows us to be
flexible and responsive to changes in conditions within our various
markets. This approach has been the secret to our success, because it
has enabled us to minimize the application of capital in running our
business. We have one of the homebuilding industry's strongest balance
sheets and one of the lowest debt-to-cap ratios. As a result, we have
achieved industry-leading gross profit margins and returns on assets and
equity. Last year, 2004, was the best year in our history. While
producing record results, we achieved earnings growth in excess of 80%,
establishing us as the number one growth company in our industry based
on earnings. Another key to our success has been to operate within the
'sweet spot' price points and product offerings in each of our markets.
We are a merchant homebuilder, focusing on maximizing risk-adjusted
returns. We do not develop master-planned communities, and we generally
do not build townhomes or condominiums. Our focus is building single-
family, detached, owner-occupied homes for the largest segments within a
given market. Approximately 85% of our homebuyers fall into the category
of first-time or first-time move-up homebuyer, but we also build a
limited number of homes for the second-time move-up and luxury segment.
Tickers included in this excerpt: MDC
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