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.	mdc20170505_8k.htm

Exhibit 99.1

News Release

M.D.C. HOLDINGS ANNOUNCES 2017 FIRST QUARTER RESULTS

DENVER, COLORADO, Tuesday, May 9, 2017. M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the first quarter ended March 31, 2017.

2017 First Quarter Highlights and Comparisons to 2016 First Quarter

●

Net income up 133% to $22.2 million, or $0.43 per diluted share, from $9.6 million or $0.19 per diluted share*

●

Home sale revenues up 43% to $563.5 million from $394.4 million

●

Selling, general and administrative expenses as a percentage of home sale revenues (“SG&A rate”) improved 250 basis points from 14.3% to 11.8%

●

Dollar value of net new orders up 3% to $750.0 million from $726.0 million

Monthly sales absorption pace of 3.5, up 8%

●

Ending backlog dollar value up 11% to $1.59 billion from $1.43 billion

●

Continued industry-leading dividend payment of $0.25 per share

●

Outlook upgraded by Standard & Poor’s in April

*Per share amount for 2016 first quarter has been adjusted for the 5% stock dividend declared and paid in the 2016 fourth quarter.

Larry A. Mizel, MDC’s Chairman and Chief Executive Officer, stated, “We advanced the efficiency of our build-to-order operating model during the first quarter, as demonstrated by the strength of our financial results. An improved conversion rate, coupled with a larger backlog to start the quarter, drove a 43% year-over-year increase in home sale revenues and a significant gain in operating leverage. As a result, our first quarter net income increased to $22.2 million, more than double the level of the same quarter a year ago.”

Mr. Mizel continued, “Strong performance from both our homebuilding and financial services operations has greatly benefited our returns, with our last twelve months return on equity for the 2017 first quarter expanding by 350 basis points year-over-year to 8.9%. We achieved this improvement in returns without losing focus on the balance sheet, which features a unique combination of low leverage, carefully managed exposure to homebuilding assets, and liquidity of nearly $1.0 billion. Our efforts directed at prudently managing our financial position were recently recognized with an upgrade to our ratings outlook from Standard & Poor’s in April.”

Mr. Mizel concluded, “Our more affordable collections of home plans continue to be a key focus as we look to expand in most of our markets across the country. The demand for this product is encouraging, bolstering our view that first-time homebuyers should serve as a significant source of growth for new home sales nationwide. Some uncertainty remains because of potential changes in policy from the new administration, but we remain optimistic about the future of the homebuilding industry, supported by a solid macroeconomic environment and favorable dynamics in the balance between housing supply and demand.”

Homebuilding

Home sale revenues for the 2017 first quarter increased 43% to $563.5 million, primarily driven by a 38% increase in deliveries, which was mostly the result of a 24% year-over-year increase in our homes in beginning backlog and a 500 basis point year-over-year increase in our backlog conversion rate.

For the 2017 first quarter, our gross margin from home sales was 15.9% a 40 basis point decrease from 16.3% in the prior year period. The 2017 first quarter included $4.9 million of inventory impairments while our 2016 first quarter included $3.0 million of expense to adjust our warranty accrual.

Selling, general and administrative (“SG&A”) expenses for the 2017 first quarter were $66.3 million, up $10.0 million from $56.3 million for the same period in 2016. Our SG&A rate improved by 250 basis points to 11.8% for the 2017 first quarter from 14.3% in the 2016 first quarter. This decrease in our SG&A rate was primarily the result of our increase in home sale revenues and, to a lesser extent, a $2.5 million decrease in stock-based compensation.

The dollar value of net new orders for the 2017 first quarter increased 3% year-over-year to $750.0 million. The improvement was the result of a 3% increase net new order activity as our monthly sales absorption pace increased 8% year-over-year. Strong demand for our more affordable home plans was one of the key drivers of the increase in absorption pace. The positive impact of our improved monthly sales absorption pace was partially offset by a 4% year-over-year decrease in our average active community count.

Our backlog value at the end of the 2017 first quarter was up 11% year-over-year to $1.59 billion. The improvement was due mostly to an 8% increase in the number of units in backlog, which was primarily the result of (1) strong sales activity over the last-twelve months and, (2) slightly extended cycle times in certain of our larger markets.

Financial Services

Income before taxes for our financial services operations for the 2017 first quarter was $11.0 million, a $5.4 million increase from $5.6 million in the 2016 first quarter. This improvement was primarily driven by our mortgage operations segment, which had (1) year-over-year increases in the dollar value of loans locked, originated, and sold, and (2) higher gains on loans locked and originated.

Income Taxes

For the three months ended March 31, 2017 and 2016, we had effective income tax rates of 38.8% and 33.0%, respectively. The year-over-year increase in our effective tax rate was primarily the result of (1) our 2016 first quarter estimate of our full year effective tax rate including an estimate for energy credits whereas our estimate for the 2017 full year includes no such estimate as a credit for 2017 has not been approved by the U.S. Congress and (2) establishment of a valuation allowance against certain state net operating loss carryforwards where realization is more uncertain at this time.

About MDC

M.D.C. Holdings, Inc. was founded in 1972. MDC's homebuilding subsidiaries, which operate under the name Richmond American Homes, have built and financed the American Dream for more than 190,000 homebuyers since 1977. 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, Northern Colorado, 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. MDC'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. MDC’s stock 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 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, 2017, 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: Kevin McCarty

Vice President of Finance and Corporate Controller

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

IR@mdch.com

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

	Three Months Ended
	March 31,
	2017			2016
	(Dollars in thousands, except per share amounts)
	(Unaudited)
Homebuilding:
Home sale revenues	$	563,479		$	394,420
Land sale revenues		247			2,324
Total home and land sale revenues		563,726			396,744
Home cost of sales		(468,942	)		(330,026	)
Land cost of sales		(211	)		(1,663	)
Inventory impairments		(4,850	)		-
Total cost of sales		(474,003	)		(331,689	)
Gross margin		89,723			65,055
Selling, general and administrative expenses		(66,298	)		(56,277	)
Interest and other income		2,327			1,850
Other expense		(351	)		(1,541	)
Other-than-temporary impairment of marketable securities		(50	)		(431	)
Homebuilding pretax income		25,351			8,656

Financial Services:
Revenues		17,979			11,017
Expenses		(7,898	)		(6,241	)
Interest and other income		979			841
Other-than-temporary impairment of marketable securities		(51	)		-
Financial services pretax income		11,009			5,617

Income before income taxes		36,360			14,273
Provision for income taxes		(14,111	)		(4,710	)
Net income	$	22,249		$	9,563

Other comprehensive income related to available for sale securities, net of tax		1,986			1,948
Comprehensive income	$	24,235		$	11,511

Earnings per share:
Basic	$	0.43		$	0.19
Diluted	$	0.43		$	0.19

Weighted average common shares outstanding
Basic		51,340,890			51,269,370
Diluted		51,590,017			51,275,117

Dividends declared per share	$	0.25		$	0.24

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

	March 31,		December 31,
	2017		2016
	(Dollars in thousands, except
	per share amounts)
	(Unaudited)
ASSETS
Homebuilding:
Cash and cash equivalents	$	296,731	$	259,087
Marketable securities		62,316		59,770
Restricted cash		4,229		3,778
Trade and other receivables		36,210		42,492
Inventories:
Housing completed or under construction		890,883		874,199
Land and land under development		855,208		884,615
Total inventories		1,746,091		1,758,814
Property and equipment, net		27,984		28,041
Deferred tax asset, net		70,451		74,888
Metropolitan district bond securities (related party)		31,004		30,162
Prepaid and other assets		63,419		60,463
Total homebuilding assets		2,338,435		2,317,495
Financial Services:
Cash and cash equivalents		23,331		23,822
Marketable securities		37,549		36,436
Mortgage loans held-for-sale, net		97,373		138,774
Other assets		9,860		12,062
Total financial services assets		168,113		211,094
Total Assets	$	2,506,548	$	2,528,589
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	52,351	$	42,088
Accrued liabilities		141,707		144,566
Revolving credit facility		15,000		15,000
Senior notes, net		841,937		841,646
Total homebuilding liabilities		1,050,995		1,043,300
Financial Services:
Accounts payable and accrued liabilities		51,401		50,734
Mortgage repurchase facility		70,542		114,485
Total financial services liabilities		121,943		165,219
Total Liabilities		1,172,938		1,208,519
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; 51,649,695 and 51,485,090 issued and outstanding at March 31, 2017 and December 31, 2016, respectively		516		515
Additional paid-in-capital		985,733		983,532
Retained earnings		323,304		313,952
Accumulated other comprehensive income		24,057		22,071
Total Stockholders' Equity		1,333,610		1,320,070
Total Liabilities and Stockholders' Equity	$	2,506,548	$	2,528,589

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

	Three Months Ended
	March 31,
	2017			2016
	(Dollars in thousands)
	(Unaudited)
Operating Activities:
Net income	$	22,249		$	9,563
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense		595			2,987
Depreciation and amortization		1,328			1,073
Inventory impairments		4,850			-
Other-than-temporary impairment of marketable securities		101			431
Loss (gain) on sale of marketable securities		(561	)		915
Deferred income tax expense		3,220			1,788
Net changes in assets and liabilities:
Restricted cash		(451	)		401
Trade and other receivables		7,326			(15,251	)
Mortgage loans held-for-sale		41,401			33,477
Housing completed or under construction		(20,866	)		(115,357	)
Land and land under development		29,030			68,311
Prepaid expenses and other assets		(2,407	)		911
Accounts payable and accrued liabilities		8,071			(4,234	)
Net cash provided by (used in) operating activities		93,886			(14,985	)

Investing Activities:
Purchases of marketable securities		(5,361	)		(5,482	)
Sales of marketable securities		4,983			20,600
Purchases of property and equipment		(1,122	)		(1,944	)
Net cash provided by (used in) investing activities		(1,500	)		13,174

Financing Activities:
Payments on mortgage repurchase facility, net		(43,943	)		(28,390	)
Dividend payments		(12,897	)		(12,252	)
Proceeds from exercise of stock options		1,607			-
Net cash used in financing activities		(55,233	)		(40,642	)

Net increase (decrease) in cash and cash equivalents		37,153			(42,453	)
Cash and cash equivalents:
Beginning of period		282,909			180,988
End of period	$	320,062		$	138,535

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data

New Home Deliveries

	Three Months Ended March 31,
	2017						2016						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		188	$	55,676	$	296.1		160	$	45,062	$	281.6		18	%		24	%		5	%
California		229		136,483		596.0		125		75,530		604.2		83	%		81	%		(1	)%
Nevada		187		66,133		353.7		107		38,426		359.1		75	%		72	%		(2	)%
Washington		101		50,788		502.9		74		32,357		437.3		36	%		57	%		15	%
West		705		309,080		438.4		466		191,375		410.7		51	%		62	%		7	%
Colorado		336		160,187		476.7		249		121,575		488.3		35	%		32	%		(2	)%
Utah		33		12,704		385.0		39		14,575		373.7		(15	)%		(13	)%		3	%
Mountain		369		172,891		468.5		288		136,150		472.7		28	%		27	%		(1	)%
Maryland		35		16,603		474.4		34		15,806		464.9		3	%		5	%		2	%
Virginia		50		26,529		530.6		40		20,154		503.9		25	%		32	%		5	%
Florida		97		38,376		395.6		79		30,935		391.6		23	%		24	%		1	%
East		182		81,508		447.8		153		66,895		437.2		19	%		22	%		2	%
Total		1,256	$	563,479	$	448.6		907	$	394,420	$	434.9		38	%		43	%		3	%

Net New Orders

	Three Months Ended March 31,
	2017								2016								% 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		216	$	66,146	$	306.2		2.80		223	$	65,566	$	294.0		2.38		(3	)%		1	%		4	%		18	%
California		243		151,023		621.5		4.05		229		140,369		613.0		3.72		6	%		8	%		1	%		9	%
Nevada		295		97,496		330.5		4.80		229		77,446		338.2		3.59		29	%		26	%		(2	)%		34	%
Washington		139		72,734		523.3		4.03		124		58,639		472.9		3.01		12	%		24	%		11	%		34	%
West		893		387,399		433.8		3.83		805		342,020		424.9		3.09		11	%		13	%		2	%		24	%
Colorado		501		233,286		465.6		4.31		493		229,119		464.7		4.11		2	%		2	%		0	%		5	%
Utah		56		22,806		407.3		2.02		66		23,794		360.5		2.84		(15	)%		(4	)%		13	%		(29	)%
Mountain		557		256,092		459.8		3.87		559		252,913		452.4		3.90		(0	)%		1	%		2	%		(1	)%
Maryland		51		21,996		431.3		1.79		89		46,760		525.4		2.58		(43	)%		(53	)%		(18	)%		(31	)%
Virginia		64		33,531		523.9		3.28		85		41,378		486.8		3.33		(25	)%		(19	)%		8	%		(2	)%
Florida		131		50,985		389.2		2.30		108		42,907		397.3		2.57		21	%		19	%		(2	)%		(11	)%
East		246		106,512		433.0		2.34		282		131,045		464.7		2.76		(13	)%		(19	)%		(7	)%		(15	)%
Total		1,696	$	750,003	$	442.2		3.52		1,646	$	725,978	$	441.1		3.26		3	%		3	%		0	%		8	%

* 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

								Average Active Subdivisions
	Active Subdivisions							Three Months Ended
	March 31,				%			March 31,				%
	2017		2016		Change			2017		2016		Change
Arizona		27		30		(10	)%		26		31		(16	)%
California		19		21		(10	)%		20		21		(5	)%
Nevada		21		23		(9	)%		21		21		0	%
Washington		10		12		(17	)%		12		14		(14	)%
West		77		86		(10	)%		79		87		(9	)%
Colorado		40		40		0	%		39		40		(3	)%
Utah		8		8		0	%		9		8		13	%
Mountain		48		48		0	%		48		48		0	%
Maryland		9		13		(31	)%		10		12		(17	)%
Virginia		5		7		(29	)%		7		9		(22	)%
Florida		21		15		40	%		19		14		36	%
East		35		35		0	%		36		35		3	%
Total		160		169		(5	)%		163		170		(4	)%

Backlog

	March 31,
	2017						2016						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		350	$	116,984	$	334.2		384	$	116,646	$	303.8		(9	)%		0	%		10	%
California		495		331,926		670.6		446		297,790		667.7		11	%		11	%		0	%
Nevada		415		140,611		338.8		317		107,850		340.2		31	%		30	%		(0	)%
Washington		275		144,055		523.8		229		109,733		479.2		20	%		31	%		9	%
West		1,535		733,576		477.9		1,376		632,019		459.3		12	%		16	%		4	%
Colorado		1,129		548,614		485.9		1,066		516,264		484.3		6	%		6	%		0	%
Utah		127		52,179		410.9		135		48,215		357.1		(6	)%		8	%		15	%
Mountain		1,256		600,793		478.3		1,201		564,479		470.0		5	%		6	%		2	%
Maryland		108		50,837		470.7		145		70,575		486.7		(26	)%		(28	)%		(3	)%
Virginia		125		68,933		551.5		146		76,790		526.0		(14	)%		(10	)%		5	%
Florida		300		132,845		442.8		203		89,046		438.7		48	%		49	%		1	%
East		533		252,615		473.9		494		236,411		478.6		8	%		7	%		(1	)%
Total		3,324	$	1,586,984	$	477.4		3,071	$	1,432,909	$	466.6		8	%		11	%		2	%

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data

Homes Completed or Under Construction (WIP lots)

	March 31,				%
	2017		2016		Change
Unsold:
Completed		82		133		(38	)%
Under construction		212		266		(20	)%
Total unsold started homes		294		399		(26	)%
Sold homes under construction or completed		2,322		2,169		7	%
Model homes under construction or completed		324		296		9	%
Total homes completed or under construction		2,940		2,864		3	%

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

	March 31, 2017						March 31, 2016
	Lots Owned		Lots Optioned		Total		Lots Owned		Lots Optioned		Total		Total % Change
Arizona		1,736		271		2,007		1,575		247		1,822		10	%
California		1,526		245		1,771		1,754		232		1,986		(11	)%
Nevada		1,827		251		2,078		2,234		-		2,234		(7	)%
Washington		762		-		762		892		19		911		(16	)%
West		5,851		767		6,618		6,455		498		6,953		(5	)%
Colorado		4,265		1,398		5,663		3,892		819		4,711		20	%
Utah		350		49		399		403		72		475		(16	)%
Mountain		4,615		1,447		6,062		4,295		891		5,186		17	%
Maryland		196		79		275		354		199		553		(50	)%
Virginia		336		-		336		528		152		680		(51	)%
Florida		845		739		1,584		1,035		194		1,229		29	%
East		1,377		818		2,195		1,917		545		2,462		(11	)%
Total		11,843		3,032		14,875		12,667		1,934		14,601		2	%

M.D.C. HOLDINGS, INC.

Other Financial Data

Selling, General and Administrative Expense

	Three Months Ended March 31,
	2017			2016			Change
	(Dollars in thousands)
General and administrative expenses	$	32,369		$	31,465		$	904
General and administrative expenses as a percentage of home sale revenues		5.7	%		8.0	%	(230) bps

Marketing expenses	$	15,124		$	12,034		$	3,090
Marketing expenses as a percentage of home sale revenues		2.7	%		3.1	%	(40) bps

Commissions expenses	$	18,805		$	12,778		$	6,027
Commissions expenses as a percentage of home sale revenues		3.3	%		3.2	%	10 bps

Total selling, general and administrative expenses	$	66,298		$	56,277		$	10,021
Total selling, general and administrative expenses as a percentage of home sale revenues (SG&A Rate)		11.8	%		14.3	%	(250) bps

Capitalized Interest

	Three Months Ended
	March 31,
	2017			2016
	(Dollars in thousands)
Homebuilding interest incurred	$	13,188		$	13,218
Less: Interest capitalized		(13,188	)		(13,218	)
Homebuilding interest expensed	$	-		$	-

Interest capitalized, beginning of period	$	68,085		$	77,541
Plus: Interest capitalized during period		13,188			13,218
Less: Previously capitalized interest included in home and land cost of sales		(15,197	)		(10,976	)
Interest capitalized, end of period	$	66,076		$	79,783

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M.D.C. HOLDINGS, INC. Reports