Exhibit 99.1
NEWS BULLETIN
M.D.C. HOLDINGS, INC.
FOR IMMEDIATE RELEASE
FRIDAY, OCTOBER 29, 2010
| | | |
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| Contact: | | Robert N. Martin |
| | | Investor Relations |
| | | (720) 977-3431 |
| | | bob.martin@mdch.com |
M.D.C. HOLDINGS ANNOUNCES THIRD QUARTER 2010 RESULTS
| | • | | Loss per share narrowed to $0.22 vs. loss of $0.69 in Q3 2009 |
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| | • | | Closings increased 10% to 722 homes |
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| | • | | Net orders decreased 22% to 796 homes |
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| | • | | Backlog decreased 8% to 1,188 homes at 9/30/10 |
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| | • | | Secured control of 2,044 lots; 27 new communities |
DENVER, Friday, October 29, 2010 — M.D.C. Holdings, Inc. (NYSE: MDC) today reported a net loss for the 2010 third quarter of $10.2 million, or $0.22 per share, compared with a net loss for the 2009 third quarter of $32.0 million, or $0.69 per share. The improvement in operating results was driven primarily by an increase in home closings, average selling price and home gross margin. The Company also benefited from reduced general and administrative expenses and increased interest income.
For the nine months ended September 30, 2010, net loss was $34.8 million, or $0.75 per diluted share, compared with a net loss for the nine months ended September 30, 2009 of $102.5 million, or $2.21 per diluted share.
Management Comments
Larry A. Mizel, MDC’s chairman and chief executive officer, stated, “During the third quarter, the pace of our sales slowed, reflecting a continued low level of demand following the expiration of the federal homebuyer tax credit in the second quarter. However, we are pleased to report our second consecutive quarter of top-line growth, with revenue up 11% year-over-year on the strength of a 10% increase in home closings.”
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Mizel continued, “Since we first resumed significant land acquisition activity in the second half of 2009, we have secured control of 184 new communities across the country, including 27 in the third quarter alone. As a result, our lot supply increased 39% year-over-year to nearly 12,000, with the majority of the growth coming from lots controlled under option with minimal capital at risk. Our acquisition activity also drove a year-over-year increase in our active subdivision count for the first time since the third quarter of 2007, and we have started home construction or sales in a significant number of additional communities that have not yet reached active subdivision status.”
Mizel concluded, “We believe that our achievements in adding new subdivisions to our operating platform, combined with our focused effort to improve business processes and procedures across the Company, provide us with a unique opportunity to drive future growth. With $1.6 billion in cash and investments at the end of the quarter, which exceed total debt by more than $350 million, we are well-positioned for continued expansion into new projects, even if overall market conditions remain weak. ”
Highlights
Home closings for the third quarter ended September 30, 2010 improved to 722 homes with an average selling price of $299,900, compared with home closings of 659 units with an average selling price of $283,500 during the same period in 2009. The improvement in closings is attributable to an increase in beginning backlog to 1,114 units, compared with 941 units in backlog to begin the third quarter of 2009. Total revenue for the third quarter of 2010 was $225.7 million, compared with revenue of $203.2 million for the same period in 2009. The increase in revenue was primarily driven by a 10% increase in home closings and a 6% year-over-year increase in average selling price.
Net orders for the third quarter ended September 30, 2010 decreased to 796 homes with an estimated sales value of $231 million, compared with net orders for 1,016 homes with an estimated sales value of $272 million during the same period in 2009. The decrease in net orders is attributable to a 19% decrease in the average rate of sales per active community. Active subdivisions increased slightly to 142 at September 30, 2010, compared with 137 at the same time in 2009. In addition, 64 new communities are close to reaching active status, while only 38 active subdivisions are nearing inactive status.
During the third quarter of 2010, the Company’s cancellation rate increased to 30%, compared with 23% during the same period in 2009. We ended the 2010 third quarter with 1,188 homes under contract with an estimated sales value of $368 million, compared with a backlog of 1,298 homes with an estimated sales value of $383 million at September 30, 2009.
Home gross margin in the 2010 third quarter was 20.9% as compared with 18.9% in the 2009 third quarter. Excluding interest expense and warranty adjustments, home gross margin increased to 20.2% in the third quarter of 2010 as compared with 16.9% in the third quarter of
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2009. The improvement was primarily the result of an increase in net option revenue, relative to home sales revenue, combined with a reduction in construction costs relative to home sales revenue. Both the increase in average upgrade revenue and the decrease in construction costs were driven by the Company’s efforts to build smaller, more efficient homes that can be personalized based on homebuyer preference. These redesigned homes comprised 53% of our home closings during the third quarter of 2010, compared with only 17% in the same quarter in 2009. These improvements partially were offset by an increase in land costs relative to home sales revenue from 16.8% in the 2009 third quarter to 21.8% in the 2010 third quarter.
The home gross margins in our backlog at September 30, 2010 are lower than the margins we achieved in the 2010 third quarter. The decrease is attributable to sizeable incentives used to drive a higher sales velocity, especially for older homes in our inventory.
General and administrative expenses decreased to $39.3 million for the quarter ended September 30, 2010, compared with $45.8 million for the same period in the prior year. The decrease was driven primarily by a $7.3 million decline in the expense we recognized related to expected loan losses and a $3.3 million decrease in fees related to our homebuilding line of credit, which was terminated in the second quarter of 2010. These improvements were partially offset by a $5.1 million increase in employee compensation and other employee-related benefits, which was in part caused by the hiring of employees engaged in the acquisition and opening of new communities.
Marketing and commissions costs increased to $19.3 million in the third quarter of 2010, compared with $16.4 million in the third quarter of 2009, directly related to the Company’s increased home sales revenue. Other operating expenses, which relate primarily to the write-off of pre-acquisition costs and deposits on lot option contracts that we choose not to exercise, declined to $0.8 million for the quarter, compared with $3.6 million in the same quarter in 2009. The Company also recognized $3.7 million of asset impairments during the quarter, compared with $1.2 million incurred in the third quarter of 2009.
About MDC
Since 1972, MDC’s subsidiary companies have built and financed the American dream for more than 160,000 families. 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 Denver, Colorado Springs, Salt Lake City, Las Vegas, Phoenix, Tucson, California, Northern Virginia, Maryland, Philadelphia/Delaware Valley and Jacksonville. 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.
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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, and land and home values; (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) changes in consumer confidence and preferences; (16) terrorist acts and other acts of war; and (17) 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 September 30, 2010, 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.
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M.D.C. HOLDINGS, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months | | | Nine Months | |
| | | Ended September 30, | | | Ended September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| Revenue | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Home sales revenue | | $ | 216,501 | | | $ | 186,816 | | | $ | 668,720 | | | $ | 539,352 | |
| Land sales revenue | | | 904 | | | | 9,414 | | | | 6,618 | | | | 13,986 | |
| Other revenue | | | 8,276 | | | | 6,996 | | | | 23,751 | | | | 21,086 | |
| | | | | | | | | | | | | |
| Total Revenue | | | 225,681 | | | | 203,226 | | | | 699,089 | | | | 574,424 | |
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| | | | | | | | | | | | | | | | | |
| Costs and Expenses | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Home cost of sales | | | 171,199 | | | | 151,596 | | | | 535,651 | | | | 445,039 | |
| Land cost of sales | | | 818 | | | | 9,433 | | | | 5,983 | | | | 12,274 | |
| Asset impairments, net | | | 3,718 | | | | 1,197 | | | | 3,718 | | | | 17,009 | |
| Marketing expenses | | | 11,191 | | | | 9,631 | | | | 29,726 | | | | 26,393 | |
| Commission expenses | | | 8,078 | | | | 6,808 | | | | 24,818 | | | | 20,119 | |
| General and administrative expenses | | | 39,269 | | | | 45,800 | | | | 124,060 | | | | 121,981 | |
| Other operating expenses | | | 817 | | | | 3,594 | | | | 1,837 | | | | 4,151 | |
| Related party expenses | | | — | | | | 5 | | | | 9 | | | | 14 | |
| | | | | | | | | | | | | |
| Total Operating Costs and Expenses | | | 235,090 | | | | 228,064 | | | | 725,802 | | | | 646,980 | |
| | | | | | | | | | | | | |
| Loss from Operations | | | (9,409 | ) | | | (24,838 | ) | | | (26,713 | ) | | | (72,556 | ) |
| | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | | | | | |
| Interest income | | | 7,544 | | | | 2,724 | | | | 19,513 | | | | 9,763 | |
| Interest expense | | | (9,000 | ) | | | (9,760 | ) | | | (28,810 | ) | | | (29,338 | ) |
| Other income | | | 271 | | | | 56 | | | | 475 | | | | 177 | |
| | | | | | | | | | | | | |
| Loss Before Income Taxes | | | (10,594 | ) | | | (31,818 | ) | | | (35,535 | ) | | | (91,954 | ) |
| | | | | | | | | | | | | |
| Benefit from (provision for) income taxes, net | | | 355 | | | | (230 | ) | | | 739 | | | | (10,529 | ) |
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NET LOSS | | $ | (10,239 | ) | | $ | (32,048 | ) | | $ | (34,796 | ) | | $ | (102,483 | ) |
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LOSS PER SHARE | | | | | | | | | | | | | | | | |
| Basic | | $ | (0.22 | ) | | $ | (0.69 | ) | | $ | (0.75 | ) | | $ | (2.21 | ) |
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| Diluted | | $ | (0.22 | ) | | $ | (0.69 | ) | | $ | (0.75 | ) | | $ | (2.21 | ) |
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DIVIDENDS DECLARED PER SHARE | | $ | 0.25 | | | $ | 0.25 | | | $ | 0.75 | | | $ | 0.75 | |
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M.D.C. HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | |
| | | September 30, | | | December 31, | |
| | | 2010 | | | 2009 | |
| Assets | | | | | | | | |
| Cash and cash equivalents | | $ | 688,561 | | | $ | 1,234,252 | |
| Marketable securities | | | 922,102 | | | | 327,944 | |
| Restricted cash | | | 504 | | | | 476 | |
| Receivables | | | | | | | | |
| Home sales receivables | | | 13,738 | | | | 10,056 | |
| Income taxes receivable | | | 642 | | | | 145,144 | |
| Other receivables | | | 11,518 | | | | 5,844 | |
| Mortgage loans held-for-sale, net | | | 48,161 | | | | 62,315 | |
| Inventories, net | | | | | | | | |
| Housing completed or under construction | | | 417,485 | | | | 260,324 | |
| Land and land under development | | | 365,307 | | | | 262,860 | |
| Property and equipment, net | | | 42,169 | | | | 38,421 | |
| Deferred tax asset, net of valuation allowance of $221,477 and $208,144 at September 30, 2010 and December 31, 2009, respectively | | | — | | | | — | |
| Related party assets | | | 7,856 | | | | 7,856 | |
| Prepaid expenses and other assets, net | | | 84,112 | | | | 73,816 | |
| | | | | | | |
| Total Assets | | $ | 2,602,155 | | | $ | 2,429,308 | |
| | | | | | | |
| Liabilities | | | | | | | | |
| Accounts payable | | $ | 50,770 | | | $ | 36,087 | |
| Accrued liabilities | | | 277,871 | | | | 291,969 | |
| Related party liabilities | | | 153 | | | | 1,000 | |
| Mortgage repurchase facility | | | 11,155 | | | | 29,115 | |
| Senior notes, net | | | 1,242,114 | | | | 997,991 | |
| | | | | | | |
| Total Liabilities | | | 1,582,063 | | | | 1,356,162 | |
| | | | | | | |
| Commitments and Contingencies | | | — | | | | — | |
| | | | | | | |
| 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; 47,195,000 and 47,139,000 issued and outstanding, respectively, at September 30, 2010 and 47,070,000 and 47,017,000 issued and outstanding, respectively, at December 31, 2009 | | | 472 | | | | 471 | |
| Additional paid-in-capital | | | 815,148 | | | | 802,675 | |
| Retained earnings | | | 200,508 | | | | 270,659 | |
| Accumulated other comprehensive income | | | 4,623 | | | | — | |
| Treasury stock, at cost; 56,000 and 53,000 shares at September 30, 2010 and December 31, 2009, respectively | | | (659 | ) | | | (659 | ) |
| | | | | | | |
| Total Stockholders’ Equity | | | 1,020,092 | | | | 1,073,146 | |
| | | | | | | |
| Total Liabilities and Stockholders’ Equity | | $ | 2,602,155 | | | $ | 2,429,308 | |
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M.D.C. HOLDINGS, INC.
Information on Segments
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months | | | Nine Months | |
| | | Ended September 30, | | | Ended September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
REVENUE | | | | | | | | | | | | | | | | |
| Homebuilding | | | | | | | | | | | | | | | | |
| West | | $ | 66,233 | | | $ | 94,079 | | | $ | 246,563 | | | $ | 250,519 | |
| Mountain | | | 89,111 | | | | 61,945 | | | | 245,905 | | | | 163,720 | |
| East | | | 58,304 | | | | 33,033 | | | | 162,466 | | | | 113,004 | |
| Other Homebuilding | | | 7,344 | | | | 10,909 | | | | 33,137 | | | | 37,709 | |
| | | | | | | | | | | | | |
| Total Homebuilding | | | 220,992 | | | | 199,966 | | | | 688,071 | | | | 564,952 | |
| Financial Services and Other | | | 7,932 | | | | 6,578 | | | | 22,696 | | | | 19,147 | |
| Corporate | | | — | | | | — | | | | — | | | | 50 | |
| Inter-company adjustments | | | (3,243 | ) | | | (3,318 | ) | | | (11,678 | ) | | | (9,725 | ) |
| | | | | | | | | | | | | |
| Consolidated | | $ | 225,681 | | | $ | 203,226 | | | $ | 699,089 | | | $ | 574,424 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
(LOSS) INCOME BEFORE INCOME TAXES | | | | | | | | | | | | | | | | |
| Homebuilding | | | | | | | | | | | | | | | | |
| West | | $ | 4,900 | | | $ | 6,037 | | | $ | 13,611 | | | $ | 5,809 | |
| Mountain | | | 520 | | | | (1,681 | ) | | | 6,652 | | | | (8,800 | ) |
| East | | | 2,021 | | | | (1,707 | ) | | | 1,957 | | | | (8,704 | ) |
| Other Homebuilding | | | (1,673 | ) | | | (2,724 | ) | | | (1,897 | ) | | | (4,232 | ) |
| | | | | | | | | | | | | |
| Total Homebuilding | | | 5,768 | | | | (75 | ) | | | 20,323 | | | | (15,927 | ) |
| Financial Services and Other | | | 4,326 | | | | (4,344 | ) | | | 10,261 | | | | (108 | ) |
| Corporate | | | (20,688 | ) | | | (27,399 | ) | | | (66,119 | ) | | | (75,919 | ) |
| | | | | | | | | | | | | |
| Consolidated | | $ | (10,594 | ) | | $ | (31,818 | ) | | $ | (35,535 | ) | | $ | (91,954 | ) |
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INVENTORY IMPAIRMENTS | | | | | | | | | | | | | | | | |
| West | | $ | 3,633 | | | $ | 283 | | | $ | 3,633 | | | $ | 13,350 | |
| Mountain | | | — | | | | 191 | | | | — | | | | 445 | |
| East | | | — | | | | — | | | | — | | | | 2,475 | |
| Other Homebuilding | | | — | | | | 629 | | | | — | | | | 913 | |
| | | | | | | | | | | | | |
| Consolidated | | $ | 3,633 | | | $ | 1,103 | | | $ | 3,633 | | | $ | 17,183 | |
| | | | | | | | | | | | | |
| | | | | | | | | |
| | | September 30, | | | December 31, | |
| | | 2010 | | | 2009 | |
TOTAL ASSETS | | | | | | | | |
| Homebuilding | | | | | | | | |
| West | | $ | 309,178 | | | $ | 190,204 | |
| Mountain | | | 320,447 | | | | 237,702 | |
| East | | | 171,867 | | | | 112,964 | |
| Other Homebuilding | | | 41,786 | | | | 26,778 | |
| | | | | | | |
| Total Homebuilding | | | 843,278 | | | | 567,648 | |
| Financial Services and Other | | | 119,132 | | | | 133,957 | |
| Corporate | | | 1,642,402 | | | | 1,773,660 | |
| Inter-company adjustments | | | (2,657 | ) | | | (45,957 | ) |
| | | | | | | |
| Consolidated | | $ | 2,602,155 | | | $ | 2,429,308 | |
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M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months | | | | | | | | | | | Nine Months | | | | |
| | | Ended September 30, | | | Change | | | Ended September 30, | | | Change | |
| | | 2010 | | | 2009 | | | Amount | | | % | | | 2010 | | | 2009 | | | Amount | | | % | |
SELECTED FINANCIAL DATA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| General and Administrative Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Homebuilding | | $ | 16,111 | | | $ | 14,579 | | | $ | 1,532 | | | | 11 | % | | $ | 54,326 | | | $ | 46,264 | | | $ | 8,062 | | | | 17 | % |
| Financial Services and Other | | | 4,521 | | | | 11,303 | | | $ | (6,782 | ) | | | -60 | % | | | 14,267 | | | | 20,646 | | | $ | (6,379 | ) | | | -31 | % |
Corporate (1) | | | 18,637 | | | | 19,923 | | | $ | (1,286 | ) | | | -6 | % | | | 55,476 | | | | 55,085 | | | $ | 391 | | | | 1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 39,269 | | | $ | 45,805 | | | $ | (6,536 | ) | | | -14 | % | | $ | 124,069 | | | $ | 121,995 | | | $ | 2,074 | | | | 2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SG&A as a % of Home Sales Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Homebuilding Segments | | | 16.3 | % | | | 16.6 | % | | | -0.3 | % | | | | | | | 16.3 | % | | | 17.2 | % | | | -0.9 | % | | | | |
Corporate Segment (1) | | | 8.6 | % | | | 10.7 | % | | | -2.1 | % | | | | | | | 8.3 | % | | | 10.2 | % | | | -1.9 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation and Amortization(2) | | $ | 3,705 | | | $ | 3,404 | | | $ | 301 | | | | 9 | % | | $ | 11,806 | | | $ | 10,128 | | | $ | 1,678 | | | | 17 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home Gross Margins (3) | | | 20.9 | % | | | 18.9 | % | | | 2.0 | % | | | | | | | 19.9 | % | | | 17.5 | % | | | 2.4 | % | | | | |
| Interest in Home Cost of Sales as a % of Home Sales Revenue | | | -2.6 | % | | | -3.8 | % | | | 1.2 | % | | | | | | | -2.5 | % | | | -4.4 | % | | | 1.9 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | �� | | | | | | | | | | | | |
| Cash Provided by (Used in) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating Activities | | $ | 41,343 | | | $ | (7,312 | ) | | $ | 48,655 | | | | | | | $ | (137,591 | ) | | $ | 244,506 | | | $ | (382,097 | ) | | | | |
| Investing Activities | | $ | 21,021 | | | $ | (80,881 | ) | | $ | 101,902 | | | | | | | $ | (597,126 | ) | | $ | (46,938 | ) | | $ | (550,188 | ) | | | | |
| Financing Activities | | $ | (65,935 | ) | | $ | (22,757 | ) | | $ | (43,178 | ) | | | | | | $ | 189,026 | | | $ | (53,421 | ) | | $ | 242,447 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Corporate and Homebuilding Interest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest capitalized, beginning of period | | $ | 32,420 | | | $ | 32,089 | | | $ | 331 | | | | 1 | % | | $ | 28,339 | | | $ | 39,239 | | | $ | (10,900 | ) | | | -28 | % |
| Interest capitalized, net of interest expense | | | 9,370 | | | | 4,810 | | | | 4,560 | | | | 95 | % | | | 24,855 | | | | 14,354 | | | | 10,501 | | | | 73 | % |
| Previously capitalized interest included in home cost of sales | | | (5,581 | ) | | | (7,142 | ) | | | 1,561 | | | | -22 | % | | | (16,985 | ) | | | (23,836 | ) | | | 6,851 | | | | -29 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest capitalized, end of period | | $ | 36,209 | | | $ | 29,757 | | | $ | 6,452 | | | | 22 | % | | $ | 36,209 | | | $ | 29,757 | | | $ | 6,452 | | | | 22 | % |
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| (1) | | Includes related party expenses. |
| |
| (2) | | Includes depreciation and amortization of long-lived assets and amortization of deferred marketing costs. |
| |
| (3) | | Home sales revenue less home cost of sales (excluding commissions, amortization of deferred marketing, project cost write offs and asset impairments) as a percent of home sales revenue. During the three months ended September 30, 2010 and September 30, 2009, we closed homes on lots for which we had previously recorded $24.2 million and $45.8 million, respectively, of asset impairments. During the nine months ended September 30, 2010 and September 30, 2009, we closed homes on lots for which we had previously recorded $105.9 million and $136.4 million, respectively, of asset impairments. |
8
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months | | | | | | | | | | Nine Months | | |
| | | Ended September 30, | | Change | | Ended September 30, | | Change |
| | | 2010 | | 2009 | | Amount | | % | | 2010 | | 2009 | | Amount | | % |
HOMEAMERICAN OPERATING ACTIVITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Principal amount of mortgage loans originated | | $ | 158,337 | | | $ | 137,990 | | | $ | 20,347 | | | | 15 | % | | $ | 507,120 | | | $ | 406,688 | | | $ | 100,432 | | | | 25 | % |
| Principal amount of mortgage loans brokered | | $ | 370 | | | $ | 6,136 | | | $ | (5,766 | ) | | | -94 | % | | $ | 5,883 | | | $ | 25,131 | | | $ | (19,248 | ) | | | -77 | % |
| Capture Rate | | | 79 | % | | | 80 | % | | | -1 | % | | | | | | | 81 | % | | | 80 | % | | | 1 | % | | | | |
| Including brokered loans | | | 79 | % | | | 84 | % | | | -5 | % | | | | | | | 82 | % | | | 85 | % | | | -3 | % | | | | |
| Mortgage products (% of mortgage loans originated) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | | 97 | % | | | 100 | % | | | -3 | % | | | | | | | 96 | % | | | 100 | % | | | -4 | % | | | | |
| Adjustable rate — other | | | 3 | % | | | 0 | % | | | 3 | % | | | | | | | 4 | % | | | 0 | % | | | 4 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Prime loans (4) | | | 32 | % | | | 28 | % | | | 4 | % | | | | | | | 27 | % | | | 32 | % | | | -5 | % | | | | |
| Government loans (5) | | | 68 | % | | | 72 | % | | | -4 | % | | | | | | | 73 | % | | | 68 | % | | | 5 | % | | | | |
| | |
| (4) | | Prime loans generally are defined as loans with Fair, Isaac and Company (“FICO”) scores greater than 620 and that comply with the documentation standards of the government sponsored enterprise guidelines. |
| |
| (5) | | Government loans are loans either insured by the Federal Housing Administration or guaranteed by the Department of Veteran Affairs. |
9
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | |
| | | September 30, | | December 31, | | September 30, |
| | | 2010 | | 2009 | | 2009 |
HOMES COMPLETED OR UNDER CONSTRUCTION | | | | | | | | | | | | |
| Unsold Home Under Construction — Final | | | 56 | | | | 41 | | | | 19 | |
| Unsold Home Under Construction — Frame | | | 725 | | | | 389 | | | | 298 | |
| Unsold Home Under Construction — Foundation | | | 104 | | | | 109 | | | | 226 | |
| | | | | | | | | | | | | |
| Total Unsold Homes Under Construction | | | 885 | | | | 539 | | | | 543 | |
| Sold Homes Under Construction | | | 955 | | | | 570 | | | | 1,073 | |
| Model Homes | | | 246 | | | | 212 | | | | 215 | |
| | | | | | | | | | | | | |
| Homes Completed or Under Construction | | | 2,086 | | | | 1,321 | | | | 1,831 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
LOTS OWNED(excluding homes completed or under construction) | | | | | | | | | | | | |
| Arizona | | | 1,290 | | | | 1,075 | | | | 1,303 | |
| California | | | 1,095 | | | | 581 | | | | 721 | |
| Nevada | | | 632 | | | | 966 | | | | 706 | |
| | | | | | | | | | | | | |
| West | | | 3,017 | | | | 2,622 | | | | 2,730 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Colorado | | | 2,762 | | | | 2,514 | | | | 2,345 | |
| Utah | | | 494 | | | | 545 | | | | 469 | |
| | | | | | | | | | | | | |
| Mountain | | | 3,256 | | | | 3,059 | | | | 2,814 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Delaware Valley | | | 47 | | | | 82 | | | | 91 | |
| Maryland | | | 160 | | | | 100 | | | | 131 | |
| Virginia | | | 380 | | | | 241 | | | | 161 | |
| | | | | | | | | | | | | |
| East | | | 587 | | | | 423 | | | | 383 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Florida | | | 204 | | | | 138 | | | | 196 | |
| Illinois | | | 130 | | | | 141 | | | | 141 | |
| | | | | | | | | | | | | |
| Other Homebuilding | | | 334 | | | | 279 | | | | 337 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | | | 7,194 | | | | 6,383 | | | | 6,264 | |
| | | | | | | | | | | | | |
10
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | |
| | | September 30, | | | December 31, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2009 | |
LOTS CONTROLLED UNDER OPTION | | | | | | | | | | | | |
| Arizona | | | 453 | | | | 328 | | | | 413 | |
| California | | | 45 | | | | 113 | | | | 46 | |
| Nevada | | | 1,018 | | | | 222 | | | | 87 | |
| | | | | | | | | | |
| West | | | 1,516 | | | | 663 | | | | 546 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Colorado | | | 616 | | | | 537 | | | | 532 | |
| Utah | | | 581 | | | | 117 | | | | 143 | |
| | | | | | | | | | |
| Mountain | | | 1,197 | | | | 654 | | | | 675 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Delaware Valley | | | — | | | | — | | | | — | |
| Maryland | | | 906 | | | | 575 | | | | 528 | |
| Virginia | | | 220 | | | | 192 | | | | 278 | |
| | | | | | | | | | |
| East | | | 1,126 | | | | 767 | | | | 806 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Florida | | | 906 | | | | 500 | | | | 299 | |
| Illinois | | | — | | | | — | | | | — | |
| | | | | | | | | | |
| Other Homebuilding | | | 906 | | | | 500 | | | | 299 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | | | 4,745 | | | | 2,584 | | | | 2,326 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
NON-REFUNDABLE OPTION DEPOSITS | | | | | | | | | | | | |
| Cash | | $ | 9,314 | | | $ | 7,654 | | | $ | 5,430 | |
| Letters of Credit | | | 3,086 | | | | 2,134 | | | | 2,702 | |
| | | | | | | | | | |
| Total Non-Refundable Option Deposits | | $ | 12,400 | | | $ | 9,788 | | | $ | 8,132 | |
| | | | | | | | | | |
11
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months | | | | | | | | | | | Nine Months | | | | |
| | | Ended September 30, | | | Change | | | Ended September 30, | | | Change | |
| | | 2010 | | | 2009 | | | Amount | | | % | | | 2010 | | | 2009 | | | Amount | | | % | |
HOMES CLOSED (UNITS) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Arizona | | | 111 | | | | 152 | | | | (41 | ) | | | -27 | % | | | 461 | | | | 505 | | | | (44 | ) | | | -9 | % |
| California | | | 62 | | | | 80 | | | | (18 | ) | | | -23 | % | | | 176 | | | | 191 | | | | (15 | ) | | | -8 | % |
| Nevada | | | 108 | | | | 106 | | | | 2 | | | | 2 | % | | | 427 | | | | 294 | | | | 133 | | | | 45 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| West | | | 281 | | | | 338 | | | | (57 | ) | | | -17 | % | | | 1,064 | | | | 990 | | | | 74 | | | | 7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Colorado | | | 208 | | | | 159 | | | | 49 | | | | 31 | % | | | 546 | | | | 363 | | | | 183 | | | | 50 | % |
| Utah | | | 78 | | | | 40 | | | | 38 | | | | 95 | % | | | 277 | | | | 136 | | | | 141 | | | | 104 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mountain | | | 286 | | | | 199 | | | | 87 | | | | 44 | % | | | 823 | | | | 499 | | | | 324 | | | | 65 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Delaware Valley | | | 13 | | | | 12 | | | | 1 | | | | 8 | % | | | 29 | | | | 42 | | | | (13 | ) | | | -31 | % |
| Maryland | | | 55 | | | | 25 | | | | 30 | | | | 120 | % | | | 156 | | | | 90 | | | | 66 | | | | 73 | % |
| Virginia | | | 58 | | | | 34 | | | | 24 | | | | 71 | % | | | 166 | | | | 120 | | | | 46 | | | | 38 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| East | | | 126 | | | | 71 | | | | 55 | | | | 77 | % | | | 351 | | | | 252 | | | | 99 | | | | 39 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Florida | | | 29 | | | | 48 | | | | (19 | ) | | | -40 | % | | | 142 | | | | 141 | | | | 1 | | | | 1 | % |
| Illinois | | | — | | | | 3 | | | | (3 | ) | | | N/M | | | | — | | | | 22 | | | | (22 | ) | | | N/M | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other Homebuilding | | | 29 | | | | 51 | | | | (22 | ) | | | -43 | % | | | 142 | | | | 163 | | | | (21 | ) | | | -13 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | 722 | | | | 659 | | | | 63 | | | | 10 | % | | | 2,380 | | | | 1,904 | | | | 476 | | | | 25 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVERAGE SELLING PRICES PER HOME CLOSED | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Arizona | | $ | 200.7 | | | $ | 193.6 | | | $ | 7.1 | | | | 4 | % | | $ | 196.1 | | | $ | 194.8 | | | $ | 1.3 | | | | 1 | % |
| California | | | 375.2 | | | | 417.0 | | | | (41.8 | ) | | | -10 | % | | | 396.0 | | | | 410.3 | | | | (14.3 | ) | | | -3 | % |
| Colorado | | | 322.6 | | | | 317.3 | | | | 5.3 | | | | 2 | % | | | 309.8 | | | | 333.7 | | | | (23.9 | ) | | | -7 | % |
| Delaware Valley | | | 369.1 | | | | 429.5 | | | | (60.4 | ) | | | -14 | % | | | 367.6 | | | | 418.0 | | | | (50.4 | ) | | | -12 | % |
| Florida | | | 253.2 | | | | 208.2 | | | | 45.0 | | | | 22 | % | | | 230.6 | | | | 217.9 | | | | 12.7 | | | | 6 | % |
| Illinois | | | — | | | | 294.0 | | | | N/M | | | | N/M | | | | — | | | | 313.0 | | | | N/M | | | | N/M | |
| Maryland | | | 460.8 | | | | 405.7 | | | | 55.1 | | | | 14 | % | | | 462.2 | | | | 405.4 | | | | 56.8 | | | | 14 | % |
| Nevada | | | 190.2 | | | | 204.6 | | | | (14.4 | ) | | | -7 | % | | | 188.4 | | | | 206.4 | | | | (18.0 | ) | | | -9 | % |
| Utah | | | 268.9 | | | | 283.1 | | | | (14.2 | ) | | | -5 | % | | | 272.8 | | | | 295.2 | | | | (22.4 | ) | | | -8 | % |
| Virginia | | | 484.5 | | | | 521.1 | | | | (36.6 | ) | | | -7 | % | | | 479.5 | | | | 490.6 | | | | (11.1 | ) | | | -2 | % |
| Company Average | | $ | 299.9 | | | $ | 283.5 | | | $ | 16.4 | | | | 6 | % | | $ | 281.0 | | | $ | 283.3 | | | $ | (2.3 | ) | | | -1 | % |
12
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months | | | | | | | | | | | Nine Months | | | | |
| | | Ended September 30, | | | Change | | | Ended September 30, | | | Change | |
| | | 2010 | | | 2009 | | | Amount | | | % | | | 2010 | | | 2009 | | | Amount | | | % | |
ORDERS FOR HOMES, NET (UNITS) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Arizona | | | 119 | | | | 227 | | | | (108 | ) | | | -48 | % | | | 471 | | | | 599 | | | | (128 | ) | | | -21 | % |
| California | | | 101 | | | | 75 | | | | 26 | | | | 35 | % | | | 236 | | | | 262 | | | | (26 | ) | | | -10 | % |
| Nevada | | | 106 | | | | 214 | | | | (108 | ) | | | -50 | % | | | 471 | | | | 462 | | | | 9 | | | | 2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| West | | | 326 | | | | 516 | | | | (190 | ) | | | -37 | % | | | 1,178 | | | | 1,323 | | | | (145 | ) | | | -11 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Colorado | | | 220 | | | | 197 | | | | 23 | | | | 12 | % | | | 722 | | | | 537 | | | | 185 | | | | 34 | % |
| Utah | | | 73 | | | | 102 | | | | (29 | ) | | | -28 | % | | | 308 | | | | 229 | | | | 79 | | | | 34 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mountain | | | 293 | | | | 299 | | | | (6 | ) | | | -2 | % | | | 1,030 | | | | 766 | | | | 264 | | | | 34 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Delaware Valley | | | 10 | | | | 13 | | | | (3 | ) | | | -23 | % | | | 26 | | | | 46 | | | | (20 | ) | | | -43 | % |
| Maryland | | | 57 | | | | 53 | | | | 4 | | | | 8 | % | | | 150 | | | | 144 | | | | 6 | | | | 4 | % |
| Virginia | | | 60 | | | | 61 | | | | (1 | ) | | | -2 | % | | | 202 | | | | 178 | | | | 24 | | | | 13 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| East | | | 127 | | | | 127 | | | | — | | | | 0 | % | | | 378 | | | | 368 | | | | 10 | | | | 3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Florida | | | 50 | | | | 71 | | | | (21 | ) | | | -30 | % | | | 156 | | | | 193 | | | | (37 | ) | | | -19 | % |
| Illinois | | | — | | | | 3 | | | | (3 | ) | | | N/M | | | | — | | | | 19 | | | | (19 | ) | | | N/M | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other Homebuilding | | | 50 | | | | 74 | | | | (24 | ) | | | -32 | % | | | 156 | | | | 212 | | | | (56 | ) | | | -26 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | 796 | | | | 1,016 | | | | (220 | ) | | | -22 | % | | | 2,742 | | | | 2,669 | | | | 73 | | | | 3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Estimated Value of Orders for Homes, net | | $ | 231,000 | | | $ | 272,000 | | | $ | (41,000 | ) | | | -15 | % | | $ | 770,000 | | | $ | 752,000 | | | $ | 18,000 | | | | 2 | % |
| Estimated Average Selling Price of Orders for Homes, net | | $ | 290.2 | | | $ | 267.7 | | | $ | 22.5 | | | | 8 | % | | $ | 280.8 | | | $ | 281.8 | | | $ | (1.0 | ) | | | 0 | % |
Cancellation Rate(6) | | | 30 | % | | | 23 | % | | | 7 | % | | | | | | | 26 | % | | | 22 | % | | | 4 | % | | | | |
| | |
| (6) | | We define “Cancellation Rate” as the approximate number of cancelled home order contracts during a reporting period as a percent of total home orders received during such reporting period. |
13
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | |
| | | September 30, | | | December 31, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2009 | |
BACKLOG (UNITS) | | | | | | | | | | | | |
| Arizona | | | 113 | | | | 103 | | | | 252 | |
| California | | | 136 | | | | 76 | | | | 120 | |
| Nevada | | | 132 | | | | 88 | | | | 221 | |
| | | | | | | | | | |
| West | | | 381 | | | | 267 | | | | 593 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Colorado | | | 383 | | | | 207 | | | | 246 | |
| Utah | | | 125 | | | | 94 | | | | 135 | |
| | | | | | | | | | |
| Mountain | | | 508 | | | | 301 | | | | 381 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Delaware Valley | | | 20 | | | | 23 | | | | 31 | |
| Maryland | | | 97 | | | | 103 | | | | 112 | |
| Virginia | | | 109 | | | | 73 | | | | 94 | |
| | | | | | | | | | |
| East | | | 226 | | | | 199 | | | | 237 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Florida | | | 73 | | | | 59 | | | | 87 | |
| Illinois | | | — | | | | — | | | | — | |
| | | | | | | | | | |
| Other Homebuilding | | | 73 | | | | 59 | | | | 87 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | | | 1,188 | | | | 826 | | | | 1,298 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Backlog Estimated Sales Value | | $ | 368,000 | | | $ | 265,000 | | | $ | 383,000 | |
| | | | | | | | | | |
| Estimated Average Selling Price of Homes in Backlog | | $ | 309.8 | | | $ | 320.8 | | | $ | 295.1 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
ACTIVE SUBDIVISIONS | | | | | | | | | | | | |
| Arizona | | | 28 | | | | 28 | | | | 30 | |
| California | | | 10 | | | | 3 | | | | 5 | |
| Nevada | | | 19 | | | | 18 | | | | 20 | |
| | | | | | | | | | |
| West | | | 57 | | | | 49 | | | | 55 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Colorado | | | 39 | | | | 42 | | | | 41 | |
| Utah | | | 19 | | | | 16 | | | | 17 | |
| | | | | | | | | | |
| Mountain | | | 58 | | | | 58 | | | | 58 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Delaware Valley | | | 1 | | | | 1 | | | | 1 | |
| Maryland | | | 8 | | | | 8 | | | | 8 | |
| Virginia | | | 7 | | | | 7 | | | | 7 | |
| | | | | | | | | | |
| East | | | 16 | | | | 16 | | | | 16 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Florida | | | 11 | | | | 10 | | | | 8 | |
| Illinois | | | — | | | | — | | | | — | |
| | | | | | | | | | |
| Other Homebuilding | | | 11 | | | | 10 | | | | 8 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | | | 142 | | | | 133 | | | | 137 | |
| | | | | | | | | | |
| Average for quarter ended | | | 135 | | | | 134 | | | | 140 | |
| | | | | | | | | | |
14
M.D.C. HOLDINGS, INC.
Reconciliation of Non-GAAP Financial Measure
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months | | | Nine Months | |
| | | Ended September 30, | | | Ended September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| Home Sales Revenue — As reported | | $ | 216,501 | | | $ | 186,816 | | | $ | 668,720 | | | $ | 539,352 | |
| | | | | | | | | | | | | | | | | |
| Home Cost of Sales — As reported | | $ | 171,199 | | | $ | 151,596 | | | $ | 535,651 | | | $ | 445,039 | |
| Warranty Adjustments | | | (7,197 | ) | | | (10,814 | ) | | | (12,803 | ) | | | (25,361 | ) |
| Interest in Cost of Sales | | | 5,581 | | | | 7,142 | | | | 16,985 | | | | 23,836 | |
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| Home Cost of Sales — Excluding Warranty Adjustments and Interest | | $ | 172,815 | | | $ | 155,268 | | | $ | 531,469 | | | $ | 446,564 | |
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| Home Gross Margins — Excluding Warranty Adjustments and Interest (7) | | | 20.2 | % | | | 16.9 | % | | | 20.5 | % | | | 17.2 | % |
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| (7) | | Home Gross Margins excluding the impact of warranty adjustments and interest in cost of sales is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that warranty adjustments and interest have on our Home Gross Margins. |
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