M.D.C. Holdings Announces 2014 Second Quarter Results

            M.D.C. Holdings Announces 2014 Second Quarter Results  PR Newswire  DENVER, July 29, 2014  DENVER, July 29, 2014 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended June 30, 2014.  2014 Second Quarter Highlights and Comparisons to 2013 Second Quarter    oNet income of $21.5 million, or $0.44 per diluted share vs. net income of     $224.9 million, or $4.55 per diluted share         oTax expense of $12.5 million vs. tax benefit of $186.9 million, which          included the reversal of a substantial portion of the deferred tax          asset valuation allowance of $187.6 million, or $3.84 per share    oPretax income of $34.0 million vs. $38.0 million   oNet new orders up 5% to 1,419 homes         oDollar value of net new orders of $544.8 million, up 12%    oEnding backlog dollar value of $761.5 million vs. $784.2 million   oHome sale revenues of $430.7 million, up 8% vs. $400.3 million         oAverage sales price increase of $33,600 per home, or 10%, to $372,000        oHomes delivered of 1,158 down slightly from 1,183    oEnding active community count of 159, up 14% from 140   oGross margin from home sales of 17.1% vs. 18.1%         oGross margin excluding interest and impairments of 21.1%* vs. 21.3%*    oSG&A expenses as a percentage of home sale revenues of 11.6% vs. 13.0%, a     140 basis point improvement   oLots owned and under option of 16,706, up 13% year-over-year  Our net income for the 2014 second quarter was $21.5 million, or $0.44 per diluted share, compared to net income of $224.9 million, or $4.55 per diluted share, for the year earlier period. Our 2013 second quarter included a $187.6 million benefit from the reversal of our deferred tax asset valuation allowance, while we had no such benefit for the 2014 second quarter and recognized $12.5 million of income tax expense. Pretax income for the 2014 second quarter was $34.0 million, compared to $38.0 million for the same period in the prior year.  Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "For the homebuilding industry as a whole, the spring selling season was modestly slower than a year ago, highlighting volatile conditions in the short-term as the industry continues down a broader path of long-term growth. We saw hesitation from some potential buyers, especially in the first-time buyer segment, following a significant run-up in home prices in 2013 and tepid economic trends that have persisted for much of the past year. However, our net new home orders improved year-over-year in the 2014 second quarter for the first time in five quarters on the strength of a year-over-year increase in our average active community count."  Mr. Mizel continued, "Additionally, during the quarter we benefited from our prior decision to increase spec homes available for quick delivery, which supported our operations by allowing us to convert backlog to deliveries at a quicker rate than a year ago. Our increased conversion rate, coupled with a 10% increase in average selling price, helped to drive a year-over-year increase in our home sale revenues, offsetting the impact of higher land, material and labor costs. The higher revenues also helped us achieve better leverage on our overhead, as our SG&A rate dropped meaningfully year-over-year for the 2014 second quarter."  Mr. Mizel concluded, "As the second quarter ended, we saw significant improvements in employment levels and consumer confidence, which supports our long-term view that the homebuilding industry is poised for growth in the coming years. We continue our preparations to embrace this growth, as evidenced by the 14% increase in our active subdivision count, the 13% increase in our controlled lot supply and the 20% increase in our available liquidity to $1.1 billion at the end of the quarter, all of which position us well to grow our earnings in future periods."  Homebuilding  Home sale revenues for the 2014 second quarter increased 8% to $430.7 million, compared to $400.3 million for the prior year period. The increase in revenues resulted primarily from a 10% increase in average selling price to $372,000, as compared to $338,400 in the prior year. The increase in average selling price was due to price increases achieved during much of 2013 and a shift to higher-priced homes in certain markets.  Gross margin from home sales decreased to 17.1% from 18.1% for the year-earlier period. The decrease was due primarily to higher interest costs, cost increases from vendors and land sellers, and additional incentives offered in certain markets to spur demand in a slower homebuilding environment. Gross margin from home sales excluding interest and impairments was nearly flat from the year-earlier period at 21.1%* for the second quarter 2014, compared to 21.3%* for the 2013 second quarter.  SG&A expenses as a percentage of home sales revenues decreased by 140 basis points to 11.6% for the 2014 second quarter versus 13.0% for the same period in 2013. The improvement was the result of operating leverage created by the Company's 8% year-over-year increase in home sale revenues, lower incentive and stock-based compensation expenses, and lower legal expenses, including a $1.4 million net legal recovery.  The dollar value of net new orders for the 2014 second quarter increased 12% to $544.8 million from the same period in 2013. The increase in net new orders was driven by a 14% increase in active communities to 159 from 140 in the same period in the prior year, which was partially offset by a slight decrease in our monthly sales absorption pace. Our cancellation rate for the 2014 second quarter was essentially flat at 18% versus 19% in the prior year second quarter.  We ended the 2014 second quarter with 1,886 homes in backlog with an estimated sales value of $761.5 million, compared to a backlog of 2,095 homes with an estimated sales value of $784.2 million at June 30, 2013.  Interest and other income of $4.6 million for the 2014 second quarter decreased by $5.6 million from the same period last year primarily due to lower interest income as overall cash and investment balances decreased to fund an increase in our investment in real estate inventories.  Financial Services  Income before taxes from our financial services operations for the 2014 second quarter was $6.6 million, compared to $8.2 million for the 2013 second quarter. The decrease was primarily driven by lower pretax income from our mortgage operations segment for both periods due to reduced volumes, origination income per unit and gains on loans locked and sold compared to a year ago resulting primarily from a more competitive mortgage market.  Income Taxes  During the 2014 second quarter, we recognized $12.5 million of income tax expense resulting in an effective tax rate of 36.7%. For the 2013 second quarter, we recognized a $186.9 million income tax benefit, driven almost entirely by our reversal of a substantial portion of our deferred tax asset valuation allowance.  About MDC  Since 1972, MDC's subsidiary companies have built and financed the American dream for more than 175,000 homebuyers. MDC's commitment to customer satisfaction, quality and value is reflected in each home its subsidiaries build. MDC is one of the largest homebuilders in the United States. Its subsidiaries have homebuilding operations across the country, including the metropolitan areas of Denver, Colorado Springs, Salt Lake City, Las Vegas, Phoenix, Tucson, Riverside-San Bernardino, Los Angeles, San Diego, Orange County, San Francisco Bay Area, Sacramento, Washington D.C., Baltimore, Philadelphia, Orlando, Jacksonville, South Florida and Seattle. The Company's subsidiaries also provide mortgage financing, insurance and title services, primarily for Richmond American homebuyers, through HomeAmerican Mortgage Corporation, American Home Insurance Agency, Inc. and American Home Title and Escrow Company, respectively. M.D.C. Holdings, Inc. is traded on the New York Stock Exchange under the symbol "MDC." For more information, visit www.mdcholdings.com.  Forward-Looking Statements  Certain statements in this release, including statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects, 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 conditions, including changes in consumer confidence, inflation or deflation and employment levels; (2) changes in business conditions experienced by the Company, 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 the Company's investments in marketable securities; (5) uncertainty in the mortgage lending industry, including repurchase requirements associated with HomeAmerican'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 the Company 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; (12) slow growth initiatives; (13) building moratoria; (14) governmental regulation, including the interpretation of tax, labor and environmental laws; (15) terrorist acts and other acts of war; and (16) 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-Q for the quarter ended June 30, 2014, which is scheduled to be filed with the Securities and Exchange Commission today. 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 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.  *Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.    M.D.C. HOLDINGS, INC.  Consolidated Statements of Operations and Comprehensive Income                         Three Months Ended          Six Months Ended                         June 30,                    June 30,                         2014          2013          2014          2013                         (Dollars in thousands, except per share amounts)                         (Unaudited) Homebuilding: Home sale revenues      $ 430,743     $ 400,327     $ 749,277     $ 732,075 Land sale revenues        518           1,807         518           1,807 Total home and land       431,261       402,134       749,795       733,882 sale revenues Home cost of sales        (356,175)     (327,927)     (615,653)     (602,003) Land cost of sales        (522)         (1,435)       (522)         (1,435) Inventory impairments     (850)         -             (850)         - Total cost of sales       (357,547)     (329,362)     (617,025)     (603,438) Gross margin              73,714        72,772        132,770       130,444 Selling, general and      (49,798)      (51,908)      (98,140)      (100,109) administrative expenses Interest and other        4,613         10,200        18,162        16,749 income Interest expense          -             (909)         (685)         (1,726) Other expense             (1,080)       (366)         (1,693)       (722) Loss on early             -             -             (9,412)       - extinguishment of debt Homebuilding pretax       27,449        29,789        41,002        44,636 income Financial Services: Revenues                  11,491        13,884        20,714        26,390 Expenses                  (5,615)       (6,581)       (10,539)      (12,223) Interest and other        701           920           1,489         1,795 income Financial services        6,577         8,223         11,664        15,962 pretax income Income before income      34,026        38,012        52,666        60,598 taxes Benefit from (provision   (12,484)      186,897       (19,620)      186,827 for) income taxes Net income              $ 21,542      $ 224,909     $ 33,046      $ 247,425 Other comprehensive income (loss) related to available for sale     2,327         (1,995)       (1,719)       540 securities, net of tax Comprehensive income    $ 23,869      $ 222,914     $ 31,327      $ 247,965 Earnings per share: Basic                   $ 0.44        $ 4.60        $ 0.68        $ 5.06 Diluted                 $ 0.44        $ 4.55        $ 0.67        $ 5.01 Weighted average common shares outstanding Basic                     48,640,979    48,478,076    48,613,521    48,410,486 Diluted                   48,852,696    48,946,055    48,842,527    48,916,988 Dividends declared per  $ 0.25        $ -           $ 0.50        $ - share      M.D.C. HOLDINGS, INC.  Consolidated Balance Sheets                                                  June 30,        December 31,                                                  2014            2013 ASSETS                                           (Dollars in thousands, except                                                  per share amounts) Homebuilding:                                    (Unaudited) Cash and cash equivalents                        $  100,150      $   148,634 Marketable securities                               492,498          569,021 Restricted cash                                     2,188            2,195 Trade and other receivables                         27,250           23,407 Inventories: Housing completed or under construction             758,392          636,700 Land and land under development                     837,889          774,961 Total inventories                                   1,596,281        1,411,661 Property and equipment, net                         30,765           31,248 Deferred tax asset, net                            160,872          176,262 Metropolitan district bond securities (related      14,291           12,729 party) Prepaid and other assets                            65,374           53,525 Total homebuilding assets                           2,489,669        2,428,682 Financial Services: Cash and cash equivalents                           29,881           50,704 Marketable securities                               13,390           19,046 Mortgage loans held-for-sale, net                   58,377           92,578 Other assets                                        5,244            4,439 Total financial services assets                     106,892          166,767  Total Assets                               $  2,596,561    $   2,595,449 LIABILITIES AND EQUITY Homebuilding: Accounts payable                                 $  34,266       $   15,046 Accrued liabilities                                 145,290          152,821 Revolving credit facility                           10,000           - Senior notes, net                                   1,096,112        1,095,620 Total homebuilding liabilities                      1,285,668        1,263,487 Financial Services: Accounts payable and accrued liabilities            56,086           55,639 Mortgage repurchase facility                        32,198           63,074 Total financial services liabilities                88,284           118,713  Total Liabilities                             1,373,952        1,382,200 Stockholders' Equity Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding       -                - Common stock, $0.01 par value; 250,000,000 shares authorized; 48,816,639 and 48,788,887 issued and outstanding at June 30, 2014 and         488              488 December 31, 2013, respectively Additional paid-in-capital                          910,535          908,090 Retained earnings                                   301,730          293,096 Accumulated other comprehensive income              9,856            11,575 Total Stockholders' Equity                          1,222,609        1,213,249 Total Liabilities and Stockholders' Equity       $  2,596,561    $   2,595,449      M.D.C. HOLDINGS, INC.  Consolidated Statement of Cash Flows                              Three Months Ended       Six Months Ended                              June 30,                 June 30,                              2014        2013         2014         2013                              (Dollars in thousands)                              (Unaudited) Operating Activities: Net income                   $ 21,542    $ 224,909    $ 33,046     $ 247,425 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Loss on early extinguishment   -           -            9,412        - of debt Stock-based compensation       1,258       1,838        2,550        5,214 expense Depreciation and               999         994          1,933        2,072 amortization Loss (gain) on sale of         549         -            (6,356)      - marketable securities Amortization of discount / premiums on marketable debt    512         804          422          1,423 securities Deferred income tax expense    12,451      (187,643)    19,554       (187,643) (benefit) Net changes in assets and liabilities:  Restricted cash          (683)       (153)        7            (820)  Trade and other          302         (4,596)      (8,409)      (8,566) receivables  Mortgage loans           6,423       (6,034)      34,201       27,490 held-for-sale  Housing completed or     (47,178)    (47,469)     (122,368)    (56,087) under construction  Land and land under      972         (93,739)     (62,746)     (138,509) development  Prepaid expenses and     (2,734)     (1,414)      (9,615)      (7,884) other assets  Accounts payable and     30,468      21,678       12,097       (30,358) accrued liabilities Net cash provided by (used     24,881      (90,825)     (96,272)     (146,243) in) operating activities Investing Activities: Purchases of marketable        (25,992)    (161,284)    (382,279)    (312,095) securities Maturities of marketable       26,065      87,015       159,789      87,015 securities Sales of marketable            20,414      92,399       306,769      137,067 securities Purchases of property and      (809)       (72)         (1,354)      (998) equipment Net cash provided by (used     19,678      18,058       82,925       (89,011) in) investing activities Financing Activities: Payments on mortgage           (7,142)     7,380        (30,876)     (27,479) repurchase facility, net Proceeds from issuance of      -           99,125       248,375      346,938 senior notes Repayment of senior notes      -           -            (259,118)    - Advances on revolving credit   10,000      -            10,000       - facility, net Dividend payments              (12,205)    -            (24,412)     - Proceeds from exercise of      -           -            71           5,118 stock options Net cash provided by (used     (9,347)     106,505      (55,960)     324,577 in) financing activities Net increase (decrease) in     35,212      33,738       (69,307)     89,323 cash and cash equivalents Cash and cash equivalents:  Beginning of period      94,819      215,680      199,338      160,095  End of period          $ 130,031   $ 249,418    $ 130,031    $ 249,418      M.D.C. HOLDINGS, INC.  Homebuilding Operational Data New Home Deliveries             Three Months Ended June 30,             2014                       2013                       % Change                    Dollar     Average         Dollar     Average         Dollar  Average             Homes             Price    Homes             Price    Homes          Price                    Value                      Value                      Value             (Dollars in thousands)  Arizona    184    $ 47,413   $ 257.7  130    $ 30,472   $ 234.4  42%    56%     10%  California 143      70,898     495.8  167      61,199     366.5  (14)%  16%     35%  Nevada     144      42,782     297.1  161      41,850     259.9  (11)%  2%      14%  Washington 78       28,568     366.3  98       30,992     316.2  (20)%  (8)%    16%  West       549      189,661    345.5  556      164,513    295.9  (1)%   15%     17%  Colorado   328      132,004    402.5  309      113,320    366.7  6%     16%     10%  Utah       44       14,143     321.4  59       18,643     316.0  (25)%  (24)%   2%  Mountain   372      146,147    392.9  368      131,963    358.6  1%     11%     10%  Maryland   81       36,351     448.8  83       35,407     426.6  (2)%   3%      5%  Virginia   67       35,023     522.7  95       47,350     498.4  (29)%  (26)%   5%  Florida    89       23,561     264.7  81       21,094     260.4  10%    12%     2%  East       237      94,935     400.6  259      103,851    401.0  (8)%   (9)%    (0)%  Total      1,158  $ 430,743  $ 372.0  1,183  $ 400,327  $ 338.4  (2)%   8%      10%              Six Months Ended June 30,             2014                       2013                       % Change                    Dollar     Average         Dollar     Average         Dollar  Average             Homes             Price    Homes             Price    Homes  Value   Price                    Value                      Value             (Dollars in thousands)  Arizona    309    $ 80,085   $ 259.2  270    $ 63,633   $ 235.7  14%    26%     10%  California 235      111,998    476.6  313      110,788    354.0  (25)%  1%      35%  Nevada     264      82,719     313.3  294      74,595     253.7  (10)%  11%     23%  Washington 142      51,281     361.1  159      50,476     317.5  (11)%  2%      14%  West       950      326,083    343.2  1,036    299,492    289.1  (8)%   9%      19%  Colorado   576      225,387    391.3  613      226,808    370.0  (6)%   (1)%    6%  Utah       68       21,705     319.2  126      38,532     305.8  (46)%  (44)%   4%  Mountain   644      247,092    383.7  739      265,340    359.1  (13)%  (7)%    7%  Maryland   158      73,256     463.6  137      57,111     416.9  15%    28%     11%  Virginia   124      62,290     502.3  158      76,469     484.0  (22)%  (19)%   4%  Florida    155      40,556     261.7  131      33,663     257.0  18%    20%     2%  East       437      176,102    403.0  426      167,243    392.6  3%     5%      3%  Total      2,031  $ 749,277  $ 368.9  2,201  $ 732,075  $ 332.6  (8)%   2%      11%      M.D.C. HOLDINGS, INC.  Homebuilding Operational Data Net New Orders:            Three Months Ended June 30,            2014                                   2013                                   % Change                                       Monthly                                Monthly                             Monthly                   Dollar     Average                     Dollar     Average                     Dollar  Average            Homes             Price    Absorption  Homes  Value      Price    Absorption  Homes  Value   Price    Absorption                   Value                                       Rate *                                 Rate *                              Rate *            (Dollars in thousands) Arizona    262    $ 74,051   $ 282.6  2.65        196    $ 48,825   $ 249.1  3.84        34%    52%     13%      (31)% California 214      101,695    475.2  4.14        196      79,196     404.1  5.23        9%     28%     18%      (21)% Nevada     180      57,456     319.2  3.75        152      49,085     322.9  4.94        18%    17%     (1)%     (24)% Washington 74       27,960     377.8  2.67        94       31,016     330.0  2.72        (21)%  (10)%   14%      (2)% West       730      261,162    357.8  3.22        638      208,122    326.2  4.15        14%    25%     10%      (22)% Colorado   410      171,001    417.1  3.67        381      143,754    377.3  3.30        8%     19%     11%      11% Utah       55       17,517     318.5  3.06        44       14,582     331.4  2.10        25%    20%     (4)%     46% Mountain   465      188,518    405.4  3.58        425      158,336    372.6  3.11        9%     19%     9%       15% Maryland   77       37,877     491.9  1.71        112      53,091     474.0  1.84        (31)%  (29)%   4%       (7)% Virginia   64       31,305     489.1  2.59        90       43,830     487.0  2.50        (29)%  (29)%   0%       4% Florida    83       25,966     312.8  1.78        86       22,080     256.7  2.25        (3)%   18%     22%      (21)% East       224      95,148     424.8  1.93        288      119,001    413.2  2.13        (22)%  (20)%   3%       (9)% Total      1,419  $ 544,828  $ 384.0  3.00        1,351  $ 485,459  $ 359.3  3.18        5%     12%     7%       (6)%             Six Months Ended June 30,            2014                                     2013                                   % Change                   Dollar       Average  Monthly            Dollar     Average  Monthly            Dollar  Average  Monthly            Homes  Value        Price    Absorption  Homes  Value      Price    Absorption  Homes  Value   Price    Absorption                                         Rate *                                 Rate *                              Rate            (Dollars in thousands) Arizona    453    $ 127,560    $ 281.6  2.50        323    $ 79,760   $ 246.9  3.36        40%    60%     14%      (26)% California 367      178,119      485.3  4.12        360      140,358    389.9  4.77        2%     27%     24%      (14)% Nevada     330      102,618      311.0  3.50        322      95,267     295.9  4.94        2%     8%      5%       (29)% Washington 166      62,212       374.8  2.69        187      59,942     320.5  2.91        (11)%  4%      17%      (8)% West       1,316    470,509      357.5  3.09        1,192    375,327    314.9  3.96        10%    25%     14%      (22)% Colorado   806      333,920      414.3  3.60        799      291,343    364.6  3.40        1%     15%     14%      6% Utah       98       32,219       328.8  2.86        109      35,179     322.7  1.99        (10)%  (8)%    2%       44% Mountain   904      366,139      405.0  3.50        908      326,522    359.6  3.13        (0)%   12%     13%      12% Maryland   145      69,515       479.4  1.51        202      91,526     453.1  1.76        (28)%  (24)%   6%       (14)% Virginia   123      61,485       499.9  2.21        183      92,714     506.6  2.51        (33)%  (34)%   (1)%     (12)% Florida    167      52,490       314.3  1.97        166      42,626     256.8  2.11        1%     23%     22%      (7)% East       435      183,490      421.8  1.84        551      226,866    411.7  2.07        (21)%  (19)%   2%       (11)% Total      2,655  $ 1,020,138  $ 384.2  2.88        2,651  $ 928,715  $ 350.3  3.09        0%     10%     10%      (7)%  * Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period    M.D.C. HOLDINGS, INC.  Homebuilding Operational Data Active Subdivisions                                   June 30,    %                                   2014  2013  Change  Arizona                          34    19    79%  California                       20    11    82%  Nevada                           16    13    23%  Washington                       8     12    (33)%  West                             78    55    42%  Colorado                         36    38    (5)%  Utah                             6     4     50%  Mountain                         42    42    0%  Maryland                         14    20    (30)%  Virginia                         8     11    (27)%  Florida                          17    12    42%  East                             39    43    (9)%  Total                            159   140   14%  Average for quarter ended        158   142   11%  Average for the six months ended 153   143   7%    Backlog             June 30,             2014                       2013                       % Change                    Dollar     Average         Dollar     Average         Dollar  Average             Homes             Price    Homes             Price    Homes          Price                    Value                      Value                      Value             (Dollars in thousands)  Arizona    304    $ 90,028   $ 296.1  203    $ 50,836   $ 250.4  50%    77%     18%  California 279      135,197    484.6  276      107,950    391.1  1%     25%     24%  Nevada     206      66,713     323.8  232      71,488     308.1  (11)%  (7)%    5%  Washington 70       26,127     373.2  107      36,118     337.6  (35)%  (28)%   11%  West       859      318,065    370.3  818      266,392    325.7  5%     19%     14%  Colorado   647      278,643    430.7  656      246,797    376.2  (1)%   13%     14%  Utah       56       18,583     331.8  64       21,576     337.1  (13)%  (14)%   (2)%  Mountain   703      297,226    422.8  720      268,373    372.7  (2)%   11%     13%  Maryland   116      58,674     505.8  248      113,824    459.0  (53)%  (48)%   10%  Virginia   102      49,381     484.1  210      109,180    519.9  (51)%  (55)%   (7)%  Florida    106      38,120     359.6  99       26,470     267.4  7%     44%     34%  East       324      146,175    451.2  557      249,474    447.9  (42)%  (41)%   1%  Total      1,886  $ 761,466  $ 403.7  2,095  $ 784,239  $ 374.3  (10)%  (3)%    8%    M.D.C. HOLDINGS, INC.  Homebuilding Operational Data Homes Completed or Under Construction (WIP lots)                                              June 30,      %                                              2014   2013   Change  Unsold:  Completed                                   419    185    126%  Under construction                          725    628    15%  Total unsold started homes                  1,144  813    41%  Sold homes under construction or completed  1,422  1,652  (14)%  Model homes                                 263    207    27%  Total homes completed or under construction 2,829  2,672  6%    Lots Owned and Options (including homes completed or under construction)             June 30, 2014             June 30, 2013             Lots    Lots      Total   Lots    Lots      Total   Total %             Owned   Optioned          Owned   Optioned          Change  Arizona    2,683   50        2,733   2,707   239       2,946   (7)%  California 1,655   132       1,787   971     -         971     84%  Nevada     1,534   434       1,968   1,573   136       1,709   15%  Washington 756     226       982     477     141       618     59%  West       6,628   842       7,470   5,728   516       6,244   20%  Colorado   4,439   983       5,422   4,174   1,079     5,253   3%  Utah       553     163       716     468     -         468     53%  Mountain   4,992   1,146     6,138   4,642   1,079     5,721   7%  Maryland   409     434       843     551     358       909     (7)%  Virginia   569     499       1,068   491     284       775     38%  Florida    803     384       1,187   648     424       1,072   11%  East       1,781   1,317     3,098   1,690   1,066     2,756   12%  Total      13,401  3,305     16,706  12,060  2,661     14,721  13%    M.D.C. HOLDINGS, INC. Reconciliations of Non-GAAP Financial Measures Gross Margin from Homes Sales Excluding Interest and Impairments (Unaudited) Gross Margin from Home Sales Excluding Interest and Impairments is a non-GAAP financial measures. We believe this information is meaningful as it isolates the impact that interest and impairments have on our Gross Margin from Home Sales and permits investors to make better comparisons with our competitors, who also break out and adjust gross margins in a similar fashion.                Three Months Ended June 30,          Six Months Ended June 30,                       Gross              Gross              Gross              Gross             2014      Margin  2013       Margin  2014       Margin  2013       Margin                       %                  %                  %                  %               (Dollars in thousands) Gross       $ 73,714  17.1%   $ 72,772   18.1%   $ 132,770  17.7%   $ 130,444  17.8% Margin Less: Land Sales         (518)             (1,807)            (518)              (1,807) Revenue Add: Land Cost of       522               1,435              522                1,435 Sales Gross Margin from   73,718  17.1%     72,400   18.1%     132,774  17.7%     130,072  17.8% Home Sales Add: Inventory     850               -                  850                - Impairments Gross Margin from Home Sales Excluding     74,568  17.3%     72,400   18.1%     133,624  17.8%     130,072  17.8% Impairments Add: Interest in   16,522            12,680             28,246             22,554 Cost of Sales Gross Margin from Home Sales Excluding Impairments $ 91,090  21.1%   $ 85,080   21.3%   $ 161,870  21.6%   $ 152,626  20.8% and Interest    SOURCE M.D.C. Holdings, Inc.  Website: http://www.mdcholdings.com Contact: Robert N. Martin, Vice President of Finance and Corporate Controller, 1-866-424-3395 / (720) 977-3395, IR@mdch.com  
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