M.D.C. HOLDINGS, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8-K - M.D.C. HOLDINGS, INC.	mdc20150501_8k.htm

Exhibit 99.1

M.D.C. HOLDINGS, INC.

News Release

M.D.C. HOLDINGS ANNOUNCES 2015 FIRST QUARTER RESULTS

DENVER, COLORADO, Tuesday, May 5, 2015. M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended March 31, 2015.

2015 First Quarter Highlights and Comparisons to 2014 First Quarter

●

Net income of $8.4 million, or $0.17 per share, vs. $11.5 million, or $0.23 per share

●

Home sale revenues of $377.0 million, up 18% from $318.5 million

Average sales price up $49,900 per home, or 14%, to $414,800

Homes delivered of 909 up from 873

●

Gross margin from home sales of 15.4% down from 18.5%

Decrease partly due to higher incentives utilized to reduce speculative inventory

●

Homebuilding SG&A rate improved by 180 basis points to 13.4% vs. 15.2%

●

Homebuilding interest and other income decreased to $1.9 million vs. $13.5 million

●

No debt extinguishment charge vs. $9.4 million

●

Dollar value of net new orders of $666.5 million, up 43%

Unit net new orders of 1,593, up 29%

Average monthly absorption rate increased 18%

●

Ending active community count of 166, up 6%

●

Ending backlog dollar value of $952.9 million, up 46%

Ending backlog units of 2,203, up 36%

Larry A. Mizel, MDC’s Chairman and Chief Executive Officer, stated, “During the first quarter, to start the spring selling season, we were pleased to see an overall improvement in homebuilding industry conditions across most of our markets. Our net new orders increased 29% year-over-year, driven by increases in both our absorption rate and active community count. Furthermore, we were able to increase prices in many of our active communities across the country, helping to offset cost increases experienced over the past few quarters.”

Mizel continued, “We succeeded in reducing our supply of spec inventory during the quarter, consistent with the objective we outlined in prior periods. By offering increased incentives on aged spec homes, we decreased our spec homes per active community by more than 40% year-over-year. The additional incentives adversely impacted our gross margin for the first quarter, but the reduction in aged spec inventory was an important step toward improving our gross margin in the future.”

Mr. Mizel concluded, “The dollar value of our quarter-end backlog increased by 46% year-over-year, giving us a foundation for solid performance in the coming quarters. Looking forward to our prospects further out, we believe we are well prepared for growth, with a strong balance sheet, overall liquidity of $825 million and no senior note maturities until 2020. Although our land acquisition activity has been relatively light over the past couple quarters, we have recently seen an uptick in our pipeline of new proposed land acquisitions, which provides the potential for additional home closings in 2016 and beyond.”

M.D.C. HOLDINGS, INC.

Homebuilding

Home sale revenues for the 2015 first quarter increased 18% to $377.0 million, compared to $318.5 million for the prior year period. The increase in revenue was driven by a 14% increase in average selling price, mostly due to a mix shift to higher-priced submarkets, and a 4% increase in the number of homes closed.

Gross margin from home sales for the 2015 first quarter was 15.4%, compared with 18.5% for the year earlier period and 16.3% for the 2014 fourth quarter. The 310 basis point year-over-year decline was driven by higher incentives utilized to reduce aged spec inventory and by higher land and construction costs. Sequentially, gross margin from home sales was down 90 basis points primarily due to an increased use of incentives to reduce aged spec inventory. Gross margin from home sales excluding inventory impairments and interest in cost of sales was 18.8%* for the 2015 first quarter versus 22.2%* for the year earlier period and 20.0%* for the 2014 fourth quarter.

SG&A expenses were $50.5 million for the 2015 first quarter, up $2.2 million from the 2014 first quarter of $48.3 million. The increase in SG&A expenses was largely attributable to a $1.7 million increase in commission expenses, due to an increase in home sale revenues, and a $2.6 million increase in marketing expenses, due to the increase in our active communities. These increases were partially offset by a $2.1 million decrease in our general and administrative expenses, mostly due to lower compensation-related and legal expenses. Despite the slight increase in SG&A expenses, our SG&A expense as a percentage of home sale revenues decreased by 180 basis points to 13.4% for the 2015 first quarter versus 15.2% for the same period in 2014.

Interest and other income of $1.9 million for the 2015 first quarter decreased by $11.7 million from $13.5 million in the first quarter 2014. The decrease was primarily driven by a decrease in the gain on sales of marketable securities in the 2015 first quarter, as the overall volume of marketable securities sold decreased year-over-year. In addition, interest income declined due to a year-over-year reduction in our overall marketable securities held. We sold the marketable securities in the 2014 first quarter in part to fund our extinguishment of $250 million in Senior Notes due December 2014, which also resulted in a $9.4 million early extinguishment of debt charge during the 2014 first quarter.

The dollar value of net new orders for the 2015 first quarter increased 43% to $666.5 million from $466.0 million for the same period in 2014. The improvement was driven by a 29% increase in unit volume, resulting primarily from an 18% growth in our absorption rate and an 11% improvement in the average selling price of net new home orders to $418,400, compared to $377,000 for the same period in 2014, due mostly to a change in mix of new orders. Our cancellation rate for the 2015 first quarter was 17%, down from 19% in the same period in the prior year.

M.D.C. HOLDINGS, INC.

Our backlog value at the end of the 2015 first quarter was up 46% year-over-year to $952.9 million. The increase was driven primarily by a 36% increase in units in backlog to 2,203 units, due mostly to the net new order activity discussed above, coupled with an 8% increase in the average selling price of homes in backlog which was driven by a shift in mix.

Financial Services

Income before taxes from our financial services operations for the 2015 first quarter was $5.3 million, up $0.2 million compared to $5.1 million for the 2014 first quarter. The improvement, mostly from our mortgage operations, was due to slight increases in the volume of and gains on loans locked and sold.

About MDC

Since 1972, MDC's subsidiary companies have built and financed the American dream for more than 180,000 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, 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.

M.D.C. HOLDINGS, INC.

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 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, including 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 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-Q for the quarter ended March 31, 2015, 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. 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.

Contact:

Robert N. Martin

Vice President of Finance and Corporate Controller

1-866-424-3395 / (720) 977-3395

IR@mdch.com

*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
	March 31,
	2015			2014
	(Dollars in thousands, except per share amounts)
	(Unaudited)
Homebuilding:
Home sale revenues	$	377,009		$	318,534
Land sale revenues		910			-
Total home and land sale revenues		377,919			318,534
Home cost of sales		(318,642	)		(259,478	)
Land cost of sales		(1,125	)		-
Inventory impairments		(350	)		-
Total cost of sales		(320,117	)		(259,478	)
Gross margin		57,802			59,056
Selling, general and administrative expenses		(50,532	)		(48,341	)
Interest and other income		1,854			13,549
Interest expense		-			(685	)
Other expense		(1,134	)		(614	)
Loss on early extinguishment of debt		-			(9,412	)
Homebuilding pretax income		7,990			13,553

Financial Services:
Revenues		10,591			9,223
Expenses		(6,159	)		(4,924	)
Interest and other income		904			788
Financial services pretax income		5,336			5,087

Income before income taxes		13,326			18,640
Provision for income taxes		(4,906	)		(7,136	)
Net income	$	8,420		$	11,504

Other comprehensive income (loss) related to available for sale securities, net of tax		1,308			(4,046	)
Comprehensive income	$	9,728		$	7,458

Earnings per share:
Basic	$	0.17		$	0.24
Diluted	$	0.17		$	0.23

Weighted average common shares outstanding
Basic		48,714,637			48,585,757
Diluted		48,891,514			48,854,675

Dividends declared per share	$	0.25		$	0.25

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

	March 31,		December 31,
	2015		2014
	(Dollars in thousands, except
ASSETS	per share amounts)
	(Unaudited)
Homebuilding:
Cash and cash equivalents	$	101,326	$	122,642
Marketable securities		144,098		140,878
Restricted cash		4,260		2,816
Trade and other receivables		34,397		28,555
Inventories:
Housing completed or under construction		728,240		732,692
Land and land under development		936,512		935,268
Total inventories		1,664,752		1,667,960
Property and equipment, net		29,783		30,491
Deferred tax asset, net		134,845		140,486
Metropolitan district bond securities (related party)		19,978		18,203
Prepaid and other assets		65,940		67,996
Total homebuilding assets		2,199,379		2,220,027
Financial Services:
Cash and cash equivalents		28,589		31,183
Marketable securities		18,525		15,262
Mortgage loans held-for-sale, net		64,708		88,392
Other assets		5,234		3,574
Total financial services assets		117,056		138,411
Total Assets	$	2,316,435	$	2,358,438


LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	38,720	$	35,445
Accrued liabilities		92,605		115,117
Revolving credit facility		15,000		15,000
Senior notes, net		846,600		846,450
Total homebuilding liabilities		992,925		1,012,012
Financial Services:
Accounts payable and accrued liabilities		57,010		57,268
Mortgage repurchase facility		40,037		60,822
Total financial services liabilities		97,047		118,090
Total Liabilities		1,089,972		1,130,102
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; 48,850,110 and 48,831,639 issued and outstanding at March 31, 2015 and December 31, 2014, respectively		488		488
Additional paid-in-capital		910,585		909,974
Retained earnings		303,627		307,419
Accumulated other comprehensive income		11,763		10,455
Total Stockholders' Equity		1,226,463		1,228,336
Total Liabilities and Stockholders' Equity	$	2,316,435	$	2,358,438

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

	Three Months Ended
	March 31,
	2015			2014
	(Dollars in thousands)
	(Unaudited)
Operating Activities:
Net income	$	8,420		$	11,504
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss on early extinguishment of debt		-			9,412
Stock-based compensation expense		875			1,292
Depreciation and amortization		1,083			934
Inventory impairments		350			-
Loss (gain) on sale of marketable securities		11			-
Amortization of discount / premiums on marketable debt securities, net		59			(90	)
Deferred income tax expense (benefit)		4,713			7,103
Net changes in assets and liabilities:
Restricted cash		(1,444	)		690
Trade and other receivables		(6,141	)		(8,711	)
Mortgage loans held-for-sale		23,684			27,778
Housing completed or under construction		4,282			(75,190	)
Land and land under development		(1,274	)		(63,718	)
Prepaid expenses and other assets		489			(6,881	)
Accounts payable and accrued liabilities		(19,681	)		(18,371	)
Net cash provided by (used in) operating activities		15,426			(114,248	)

Investing Activities:
Purchases of marketable securities		(20,484	)		(356,287	)
Maturities of marketable securities		1,510			133,724
Sales of marketable securities		12,976			279,450
Purchases of property and equipment		(340	)		(545	)
Net cash provided by (used in) investing activities		(6,338	)		56,342

Financing Activities:
Advances (payments) on mortgage repurchase facility, net		(20,785	)		(23,734	)
Proceeds from issuance of senior notes		-			248,375
Repayment of senior notes		-			(259,118	)
Dividend payments		(12,213	)		(12,207	)
Proceeds from exercise of stock options		-			71
Net cash used in financing activities		(32,998	)		(46,613	)

Net decrease in cash and cash equivalents		(23,910	)		(104,519	)
Cash and cash equivalents:
Beginning of period		153,825			199,338
End of period	$	129,915		$	94,819

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data

New Home Deliveries

	Three Months Ended March 31,
	2015						2014						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		150	$	46,886	$	312.6		125	$	32,672	$	261.4		20	%		44	%		20	%
California		140		68,986		492.8		92		41,100		446.7		52	%		68	%		10	%
Nevada		111		40,914		368.6		120		39,937		332.8		(8)	%		2	%		11	%
Washington		56		20,031		357.7		64		22,713		354.9		(13)	%		(12)	%		1	%
West		457		176,817		386.9		401		136,422		340.2		14	%		30	%		14	%
Colorado		245		111,938		456.9		248		93,383		376.5		(1)	%		20	%		21	%
Utah		31		11,172		360.4		24		7,562		315.1		29	%		48	%		14	%
Mountain		276		123,110		446.1		272		100,945		371.1		1	%		22	%		20	%
Maryland		56		27,156		484.9		77		36,905		479.3		(27)	%		(26)	%		1	%
Virginia		59		29,120		493.6		57		27,267		478.4		4	%		7	%		3	%
Florida		61		20,806		341.1		66		16,995		257.5		(8)	%		22	%		32	%
East		176		77,082		438.0		200		81,167		405.8		(12)	%		(5)	%		8	%
Total		909	$	377,009	$	414.8		873	$	318,534	$	364.9		4	%		18	%		14	%

Net New Orders

	Three Months Ended March 31,
	2015								2014								% Change
	Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes			Dollar Value			Average Price			Monthly Absorption Rate *
	(Dollars in thousands)
Arizona		225	$	59,721	$	265.4		2.08		191	$	52,392	$	274.3		2.32		18	%		14	%		(3)	%		(10)	%
California		229		120,963		528.2		3.76		153		75,421		492.9		4.08		50	%		60	%		7	%		(8)	%
Nevada		227		86,186		379.7		5.29		150		44,861		299.1		3.16		51	%		92	%		27	%		67	%
Washington		112		45,109		402.8		2.99		92		34,017		369.8		2.67		22	%		33	%		9	%		12	%
West		793		311,979		393.4		3.18		586		206,691		352.7		2.90		35	%		51	%		12	%		10	%
Colorado		490		223,955		457.1		3.82		396		157,613		398.0		3.52		24	%		42	%		15	%		9	%
Utah		66		23,531		356.5		3.49		43		14,481		336.8		2.61		53	%		62	%		6	%		34	%
Mountain		556		247,486		445.1		3.78		439		172,094		392.0		3.40		27	%		44	%		14	%		11	%
Maryland		67		33,370		498.1		2.54		68		31,347		461.0		1.35		(1	%)		6	%		8	%		88	%
Virginia		72		34,818		483.6		2.33		59		29,893		506.7		1.87		22	%		16	%		(5)	%		25	%
Florida		105		38,838		369.9		2.54		84		25,930		308.7		2.19		25	%		50	%		20	%		16	%
East		244		107,026		438.6		2.48		211		87,170		413.1		1.76		16	%		23	%		6	%		41	%
Total		1,593	$	666,491	$	418.4		3.22		1,236	$	465,955	$	377.0		2.74		29	%		43	%		11	%		18	%

* 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

	March 31,				%
	2015		2014		Change
Arizona		36		31		16	%
California		22		15		47	%
Nevada		10		17		(41)	%
Washington		13		11		18	%
West		81		74		9	%
Colorado		45		38		18	%
Utah		6		6		0	%
Mountain		51		44		16	%
Maryland		9		15		(40)	%
Virginia		10		10		0	%
Florida		15		14		7	%
East		34		39		(13)	%
Total		166		157		6	%
Average for quarter ended		165		150		10	%

Backlog

	March 31,
	2015						2014						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		306	$	88,599	$	289.5		226	$	63,587	$	281.4		35	%		39	%		3	%
California		281		149,351		531.5		208		106,121		510.2		35	%		41	%		4	%
Nevada		271		104,686		386.3		170		53,490		314.6		59	%		96	%		23	%
Washington		111		45,216		407.4		74		27,427		370.6		50	%		65	%		10	%
West		969		387,852		400.3		678		250,625		369.7		43	%		55	%		8	%
Colorado		824		382,025		463.6		565		237,413		420.2		46	%		61	%		10	%
Utah		75		25,783		343.8		45		15,232		338.5		67	%		69	%		2	%
Mountain		899		407,808		453.6		610		252,645		414.2		47	%		61	%		10	%
Maryland		79		39,856		504.5		120		57,871		482.3		(34)	%		(31)	%		5	%
Virginia		103		50,864		493.8		105		53,278		507.4		(2)	%		(5)	%		(3)	%
Florida		153		66,569		435.1		112		36,852		329.0		37	%		81	%		32	%
East		335		157,289		469.5		337		148,001		439.2		(1)	%		6	%		7	%
Total		2,203	$	952,949	$	432.6		1,625	$	651,271	$	400.8		36	%		46	%		8	%

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data

Homes Completed or Under Construction (WIP lots)

	March 31,				%
	2015		2014		Change
Unsold:
Completed		326		484		(33)	%
Under construction		419		740		(43)	%
Total unsold started homes (spec homes)		745		1,224		(39)	%
Sold homes under construction or completed		1,519		1,245		22	%
Model homes		279		258		8	%
Total homes completed or under construction		2,543		2,727		(7)	%

Lots Owned and Options (including homes completed or under construction)

	March 31, 2015						March 31, 2014
	Lots Owned		Lots Optioned		Total		Lots Owned		Lots Optioned		Total		Total % Change
Arizona		2,138		40		2,178		2,861		40		2,901		(25)	%
California		1,468		150		1,618		1,779		23		1,802		(10)	%
Nevada		1,765		52		1,817		1,591		290		1,881		(3)	%
Washington		830		-		830		687		140		827		0	%
West		6,201		242		6,443		6,918		493		7,411		(13)	%
Colorado		4,089		699		4,788		4,220		1,239		5,459		(12)	%
Utah		561		-		561		533		20		553		1	%
Mountain		4,650		699		5,349		4,753		1,259		6,012		(11)	%
Maryland		399		376		775		427		311		738		5	%
Virginia		613		322		935		466		421		887		5	%
Florida		936		121		1,057		844		151		995		6	%
East		1,948		819		2,767		1,737		883		2,620		6	%
Total		12,799		1,760		14,559		13,408		2,635		16,043		(9)	%

M.D.C. HOLDINGS, INC.

Reconciliations of Non-GAAP Financial Measures

Gross Margin from Home Sales Excluding Interest and Impairments (Unaudited)

Gross Margin from Home Sales Excluding Impairments and Gross Margin from Home Sales Excluding Interest and Impairments are 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 March 31, 2015			Gross Margin %			Three Months Ended December 31, 2014			Gross Margin %			Three Months Ended March 31, 2014		Gross Margin %
	(Dollars in thousands)
Gross Margin	$	57,802			15.3	%	$	80,239			16.3	%	$	59,056		18.5	%
Less: Land Sale Revenues		(910	)					(62	)					-
Add: Land Cost of Sales		1,125						52						-
Gross Margin from Home Sales		58,017			15.4	%		80,229			16.3	%		59,056		18.5	%
Add: Inventory Impairments		350						910						-
Gross Marin from Home Sales Excluding Impairments		58,367			15.5	%		81,139			16.5	%		59,056		18.5	%
Add: Interest in Cost of Sales		12,491						17,296						11,724
Gross Margin from Home Sales Excluding Impairments and Interest in Cost of Sales	$	70,858			18.8	%	$	98,435			20.0	%	$	70,780		22.2	%

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M.D.C. HOLDINGS, INC. Reports