Edgar Filing: MDC HOLDINGS INC

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FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-8951

M.D.C. HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)


Delaware		84-0622967
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

4350 South Monaco Street, Suite 500 Denver, Colorado		80237
(Address of principal executive offices)		(Zip code)

(303) 773-1100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of October 25, 2012, 48,660,308 shares of M.D.C. Holdings, Inc. common stock were outstanding.

M.D.C. HOLDINGS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED September 30, 2012

INDEX


		Page No.
Part I. Financial Information:

Item 1.	Unaudited Consolidated Financial Statements:

	Consolidated Balance Sheets at September 30, 2012 and December 31, 2011		1

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011		2

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011		3

	Notes to Unaudited Consolidated Financial Statements		4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		38

Item 4.	Controls and Procedures		38

Part II. Other Information:

Item 1.	Legal Proceedings		39

Item 1A.	Risk Factors		39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		40

Item 3.	Defaults Upon Senior Securities		40

Item 4.	Mine Safety Disclosures		40

Item 5.	Other Information		40

Item 6.	Exhibits		41

Signature			41

(i)

ITEM 1. Unaudited Consolidated Financial Statements

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets


	September 30, 2012		December 31, 2011
	(Dollars in thousands, except per share amounts)
	(Unaudited)
ASSETS
Homebuilding:
Cash and cash equivalents	$	235,273	$	316,418
Marketable securities		503,805		485,434
Restricted cash		2,084		667
Trade and other receivables		35,768		21,593
Inventories:
Housing completed or under construction		504,016		300,714
Land and land under development		393,170		505,338

Total inventories		897,186		806,052
Property and equipment, net		33,789		36,277
Deferred tax asset, net of valuation allowance of $263,562 and $281,178 at September 30, 2012 and December 31, 2011, respectively		—		—
Prepaid expenses and other assets		47,616		50,423

Total homebuilding assets		1,755,521		1,716,864

Financial Services:
Cash and cash equivalents		28,524		26,943
Marketable securities		32,915		34,509
Mortgage loans held-for-sale, net		86,648		78,335
Prepaid expenses and other assets		4,815		2,074

Total financial services assets		152,902		141,861

Total Assets	$	1,908,423	$	1,858,725

LIABILITIES AND EQUITY

Homebuilding:
Accounts payable	$	49,636	$	25,645
Accrued liabilities		106,457		119,188
Senior notes, net		744,654		744,108

Total homebuilding liabilities		900,747		888,941

Financial Services:
Accounts payable and accrued liabilities		54,226		52,446
Mortgage repurchase facility		46,888		48,702

Total financial services liabilities		101,114		101,148

Total Liabilities		1,001,861		990,089

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; 48,651,558 issued and outstanding at September 30, 2012 and 48,017,108 and 47,957,196 issued and outstanding, respectively, at December 31, 2011		487		480
Additional paid-in-capital		892,461		863,128
Retained earnings		9,909		12,927
Accumulated other comprehensive income (loss)		3,705		(7,240	)
Treasury stock, at cost; no shares at September 30, 2012 and 59,912 at December 31, 2011		—		(659	)

Total Stockholders’ Equity		906,562		868,636

Total Liabilities and Stockholders’ Equity	$	1,908,423	$	1,858,725

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

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M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands, except per share amounts)
	(Unaudited)
Homebuilding:
Home sale revenues	$	320,647		$	204,886		$	761,857		$	574,432
Land sale revenues		15			730			3,420			3,499

Total home sale and land sale revenues		320,662			205,616			765,277			577,931

Home cost of sales		(271,067	)		(170,443	)		(649,941	)		(490,521	)
Land cost of sales		(2	)		(724	)		(3,210	)		(2,482	)
Inventory impairments		—			(4,049	)		—			(12,682	)

Total cost of sales		(271,069	)		(175,216	)		(653,151	)		(505,685	)

Gross margin		49,593			30,400			112,126			72,246

Selling, general and administrative expenses		(44,788	)		(46,360	)		(118,135	)		(143,171	)
Interest income		5,365			5,964			16,651			19,437
Interest expense		—			(3,641	)		(808	)		(19,642	)
Other income (expense)		16			(20,102	)		592			(20,985	)

Homebuilding pretax income (loss)		10,186			(33,739	)		10,426			(92,115	)

Financial Services:
Revenues		14,454			6,322			34,304			20,480
Expenses		(5,156	)		(6,772	)		(13,466	)		(16,061	)

Financial services pretax income (loss)		9,298			(450	)		20,838			4,419

Income (loss) before income taxes		19,484			(34,189	)		31,264			(87,696	)
Benefit for income taxes		642			2,479			1,765			8,127

Net income (loss)	$	20,126		$	(31,710	)	$	33,029		$	(79,569	)

Other comprehensive income (loss):
Unrealized gain (loss) related to available-for-sale securities		5,095			(20,237	)		10,945			(18,905	)

Comprehensive income (loss)	$	25,221		$	(51,947	)	$	43,974		$	(98,474	)

Earnings (loss) per share:
Basic	$	0.42		$	(0.68	)	$	0.69		$	(1.72	)
Diluted	$	0.41		$	(0.68	)	$	0.68		$	(1.72	)

Weighted Average Common Shares Outstanding:
Basic		47,761,307			46,736,638			47,499,429			46,717,408
Diluted		48,173,315			46,736,638			47,818,188			46,717,408

Dividends declared per share	$	0.25		$	0.25		$	0.75		$	0.75

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

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M.D.C. HOLDINGS, INC.

Consolidated Statements of Cash Flows


	Nine Months Ended September 30,
	2012			2011
	(Dollars in thousands)
	(Unaudited)
Operating Activities:
Net income (loss)	$	33,029		$	(79,569	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss on extinguishment of senior notes		—			18,559
Stock-based compensation expense		12,628			12,092
Depreciation and amortization		3,708			4,713
Inventory impairments and write-offs of land option deposits		414			17,883
Amortization of discount on marketable debt securities		279			1,604
Net changes in assets and liabilities:
Restricted cash		(1,417	)		(262	)
Trade and other receivables		(13,685	)		16,114
Mortgage loans held-for-sale		(8,313	)		22,813
Housing completed or under construction		(202,994	)		53,861
Land and land under development		112,406			(105,154	)
Prepaid expenses and other assets		(553	)		(2,782	)
Accounts payable		24,063			(7,723	)
Accrued liabilities		(10,020	)		(32,892	)

Net cash provided by (used in) operating activities		(50,455	)		(80,743	)

Investing Activities:
Purchase of marketable securities		(397,167	)		(288,624	)
Maturity of marketable securities		106,000			453,071
Sale of marketable securities		285,056			248,432
Purchase of property and equipment and other		(958	)		(31,717	)

Net cash provided by (used in) investing activities		(7,069	)		381,162

Financing Activities:
Extinguishment of senior notes		—			(254,903	)
Payments on mortgage repurchase facility		(137,529	)		(56,454	)
Advances on mortgage repurchase facility		135,715			41,728
Dividend payments		(36,046	)		(35,560	)
Proceeds from exercise of stock options		15,820			46

Net cash provided by (used in) financing activities		(22,040	)		(305,143	)

Net increase (decrease) in cash and cash equivalents		(79,564	)		(4,724	)
Cash and cash equivalents:
Beginning of period		343,361			572,225

End of period	$	263,797		$	567,501

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

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M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

1.	Basis of Presentation

The Unaudited Consolidated Financial Statements of M.D.C. Holdings, Inc. (“MDC,” “the Company,” “we,” “us,” or “our” which refers to M.D.C. Holdings, Inc. and its subsidiaries) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of MDC at September 30, 2012 and for all periods presented. These statements should be read in conjunction with MDC’s Consolidated Financial Statements and Notes thereto included in MDC’s Annual Report on Form 10-K for the year ended December 31, 2011.

Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the 2012 presentation.

Refer to the economic conditions described under the caption “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and “Risk Factors Relating to our Business” in Item 1A of our December 31, 2011 Annual Report on Form 10-K.

2.	Recently Adopted Accounting Standards

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, (“ASU 2011-04”). ASU 2011-04 amends Accounting Standards Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the ASC 820 disclosure requirements, particularly for Level 3 fair value measurements. ASU 2011-04 was effective for our interim and annual periods beginning January 1, 2012. The adoption of ASU 2011-04 did not have a material effect on our consolidated financial position or results of operations.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, (“ASU 2011-05”), which improves the comparability, consistency, and transparency of financial reporting and increases the prominence of items reported in other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in stockholders’ equity. The amendments in this standard require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this standard do not change the items that must be reported in OCI, when an item of OCI must be reclassified to net income, or change the option for an entity to present components of OCI gross or net of the effect of income taxes. The amendments in ASU 2011-05 were effective for our interim and annual periods beginning January 1, 2012 and were applied retrospectively. The adoption of the provisions of ASU 2011-05 did not have a material impact on our consolidated financial position or results of operations.

In September 2011, the FASB issued an amendment to ASC 350, Intangibles—Goodwill and Other (“ASC 350”), which simplifies how entities test goodwill for impairment. Previous guidance under ASC 350 required an entity to test goodwill for impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes otherwise, then it is required to test goodwill for impairment under the two-step process as described under ASC 350. The amendments are effective for us for annual and interim goodwill impairment tests performed for fiscal years beginning January 1, 2012, and early adoption is permitted. We adopted this standard in the 2012 first quarter. The adoption of the amended provisions of ASC 350 did not have a material impact on our consolidated financial position or results of operations.

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M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

3.	Segment Reporting

Our operating segments are defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the chief operating decision-maker, or decision-making group, to evaluate performance and make operating decisions. We have identified our chief operating decision-makers (“CODMs”) as two key executives—the Chief Executive Officer and the Chief Operating Officer.

We have identified each homebuilding subdivision as an operating segment as each homebuilding subdivision engages in business activities from which it earns revenue, primarily from the sale of single-family detached homes, generally to first-time and first-time move-up homebuyers. Subdivisions in the reportable segments noted below have been aggregated because they are similar in the following regards: (1) economic characteristics; (2) housing products; (3) class of homebuyer; (4) regulatory environments; and (5) methods used to construct and sell homes. Our homebuilding reportable segments are as follows:

(1)

West (Arizona, California, Nevada and Washington)

(2)

Mountain (Colorado and Utah)

(3)

East (Virginia and Maryland, which includes Pennsylvania, Delaware and New Jersey)

(4)

Other (Florida and Illinois)

Our financial services operating segments are as follows: (1) HomeAmerican Mortgage Corporation (“HomeAmerican”); (2) Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”); (3) StarAmerican Insurance Ltd. (“StarAmerican”); (4) American Home Insurance Agency, Inc.; and (5) American Home Title and Escrow Company. Due to HomeAmerican’s contributions to consolidated pretax income over the past few quarters, HomeAmerican is considered to be a reportable segment (“Mortgage operations”) as of the third quarter 2012. The remaining operating segments have been aggregated into one reportable segment because they do not individually exceed 10 percent of: (1) consolidated revenue; (2) the greater of (A) the combined reported profit of all operating segments that did not report a loss or (B) the positive value of the combined reported loss of all operating segments that reported losses; or (3) consolidated assets.

Corporate is a non-operating segment that develops and implements strategic initiatives and supports our operating divisions by centralizing key administrative functions such as finance and treasury, information technology, insurance and risk management, litigation and human resources. Corporate also provides the necessary administrative functions to support MDC as a publicly traded company. A portion of the expenses incurred by Corporate are allocated to the homebuilding operating segments based on their respective percentages of assets, and to a lesser degree, a portion of Corporate expenses are allocated to the financial services segments. A majority of Corporate’s personnel and resources are primarily dedicated to activities relating to the homebuilding segments, and, therefore, the balance of any unallocated Corporate expenses is included in the homebuilding segment.

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M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

The following table summarizes revenues and pretax income (loss) for our homebuilding and financial services operations.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands)
Homebuilding
Home and land sale revenues:
West	$	148,037		$	70,676		$	335,002		$	181,129
Mountain		96,335			81,945			236,625			229,879
East		63,463			36,390			160,360			129,667
Other		12,827			16,605			33,290			37,256

Total home and land sale revenues	$	320,662		$	205,616		$	765,277		$	577,931

Pretax income (loss):
West	$	8,334		$	(2,584	)	$	11,178		$	(18,981	)
Mountain		6,951			2,988			13,746			552
East		4,417			(2,518	)		6,717			(6,819	)
Other		490			(1,514	)		426			(3,206	)
Corporate		(10,006	)		(30,111	)		(21,641	)		(63,661	)

Total homebuilding pretax income (loss)	$	10,186		$	(33,739	)	$	10,426		$	(92,115	)

Financial Services
Revenues:
Mortgage operations	$	10,892		$	3,855		$	25,407		$	13,034
Other		3,562			2,467			8,897			7,446

Total financial services revenues	$	14,454		$	6,322		$	34,304		$	20,480

Pretax income (loss):
Mortgage operations	$	7,428		$	(1,610	)	$	16,518		$	781
Other		1,870			1,160			4,320			3,638

Total financial services pretax income (loss)	$	9,298		$	(450	)	$	20,838		$	4,419

The following table summarizes total assets for our homebuilding and financial services operations. The assets in our Corporate segment primarily include cash and cash equivalents, marketable securities, and property and equipment.


	September 30, 2012		December 31, 2011
	(Dollars in thousands)
Homebuilding assets:
West	$	376,167	$	346,442
Mountain		329,436		262,787
East		229,478		223,606
Other		33,995		31,468
Corporate		786,445		852,561

Total homebuilding assets	$	1,755,521	$	1,716,864

Financial services assets:
Mortgage operations	$	91,055	$	80,097
Other		61,847		61,764

Total financial services assets	$	152,902	$	141,861

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M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

4.	Earnings (Loss) Per Share

A company that has participating security holders (for example, unvested restricted stock that has non-forfeitable dividend rights) is required to utilize the two-class method for purposes of calculating earnings (loss) per share (“EPS”). The two-class method is an allocation of earnings/(loss) between the holders of common stock and a company’s participating security holders. Under the two-class method, earnings/(loss) for the reporting period are allocated between common shareholders and other security holders, based on their respective rights to receive distributed earnings (i.e., dividends) and undistributed earnings (i.e., net income or loss). Currently, we have one class of security and we have participating security holders consisting of shareholders of unvested restricted stock. The following table shows basic and diluted EPS calculations:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands, except per share amounts)
Basic and Diluted Earnings (Loss) Per Common Share:
Net income (loss)	$	20,126		$	(31,710	)	$	33,029		$	(79,569	)
Less: distributed and undistributed earnings allocated to participating securities		(280	)		(215	)		(450	)		(580	)

Earnings (loss) attributable to common stockholders	$	19,846		$	(31,925	)	$	32,579		$	(80,149	)

Basic weighted-average shares outstanding		47,761,307			46,736,638			47,499,429			46,717,408
Dilutive effect of common stock equivalents		412,008			—			318,759			—

Diluted weighted-average common shares outstanding, assuming conversion of common stock equivalents		48,173,315			46,736,638			47,818,188			46,717,408

Basic Earnings (Loss) Per Common Share	$	0.42		$	(0.68	)	$	0.69		$	(1.72	)

Diluted Earnings (Loss) Per Common Share	$	0.41		$	(0.68	)	$	0.68		$	(1.72	)

Diluted EPS includes the dilutive effect of common stock equivalents and is computed using the weighted-average number of common stock and common stock equivalents outstanding during the reporting period. Common stock equivalents include stock options and unvested restricted stock. A total of 1.0 million unvested performance-based stock options were excluded from the calculation of diluted EPS for both the three and nine months ended September 30, 2012 as the performance-based conditions were not met during such periods. Diluted EPS for the three and nine months ended September 30, 2012 also excluded options to purchase approximately 3.7 million shares and 4.9 million shares, respectively, of common stock because the effect of their inclusion would be anti-dilutive. There was no dilutive effect of common stock equivalents for the three and nine months ended September 30, 2011 because the effect of their inclusion would decrease the reported loss per share.

5.	Fair Value Measurements

ASC 820, as updated and amended by ASU 2011-04, defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

The following table sets forth the fair values and methods used for measuring the fair values of financial instruments on a recurring basis:


			Fair Value
Financial Instrument	Hierarchy		September 30, 2012		December 31, 2011
			(Dollars in thousands)
Marketable Securities (available-for-sale)
Equity securities		Level 1	$	204,377	$	160,021
Debt securities		Level 2		332,343		359,922

Total available-for-sale securities			$	536,720	$	519,943

Mortgage Loans Held-For-Sale, net		Level 2	$	86,648	$	78,335

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Cash and Cash Equivalents. For cash and cash equivalents, the fair value approximates carrying value.

Marketable Securities. Our marketable securities consist of fixed rate and floating rate interest earning securities, primarily: (1) debt securities, which may include, among others, United States government and government agency debt and corporate debt; (2) holdings in mutual fund equity securities which consist primarily of debt securities; and (3) deposit securities, which may include, among others, certificates of deposit and time deposits. As of September 30, 2012 and December 31, 2011, all of our marketable securities were treated as available-for-sale investments and, as such, we have recorded all of its marketable securities at fair value with changes in fair value being recorded as a component of accumulated other comprehensive income (loss).

The following tables set forth the amortized cost and estimated fair value of our available-for-sale marketable securities.


	September 30, 2012				December 31, 2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding:
Equity security	$	205,764	$	204,377	$	169,565	$	160,021
Debt securities		294,890		299,428		323,454		325,413

Total homebuilding available-for-sale securities	$	500,654	$	503,805	$	493,019	$	485,434

Financial Services:
Total financial services available-for-sale debt securities	$	32,361	$	32,915	$	34,164	$	34,509

Total available-for-sale marketable securities	$	533,015	$	536,720	$	527,183	$	519,943

As of September 30, 2012 and December 31, 2011, our marketable securities (homebuilding and financial services in aggregate) were in an unrealized gain position of $3.7 million and an unrealized loss position of $7.2 million, respectively. The equity securities, which consist of four mutual funds which primarily invest in corporate bonds and other fixed income securities, had a combined unrealized loss of $1.4 million as of September 30, 2012. Management currently does not have the intent to sell any of its securities that are currently in an unrealized loss position, and it is currently not likely that we will need to sell these marketable securities before the recovery of their cost basis. The unrealized loss related to these mutual funds at December 31, 2011 was $9.5 million. Given the significant improvement in the unrealized loss since December, 31, 2011 and the fact that the decline in market value occurred during a period of overall decline in market values, the unrealized loss is believed to be temporary.

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M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

Mortgage Loans Held-for-Sale, Net. As of September 30, 2012, the primary components of our mortgage loans held-for-sale that are measured at fair value on a recurring basis are: (1) mortgage loans held-for-sale under commitments to sell; and (2) mortgage loans held-for-sale not under commitments to sell. At September 30, 2012 and December 31, 2011, we had $80.0 million and $77.5 million, respectively, of mortgage loans held-for-sale under commitments to sell for which fair value was based upon Level 2 inputs, which were the quoted market prices for those mortgage loans. At September 30, 2012 and December 31, 2011, we had $6.6 million and $0.8 million, respectively, of mortgage loans held-for-sale that were not under commitments to sell. The fair value for those loans was primarily based upon the estimated market price received from an outside party which is a Level 2 fair value input.

Inventories. Our inventories consist of housing completed or under construction and land and land under development. Inventories are primarily associated with subdivisions where we intend to construct and sell homes on the land, including model and unsold started homes. Components of housing completed or under construction primarily include: (1) land costs transferred from land and land under development; (2) direct construction costs associated with a house; (3) real property taxes, engineering fees, permits and other fees; (4) capitalized interest; and (5) indirect construction costs, which include field construction management salaries and benefits, utilities and other construction related costs. Land costs are transferred from land and land under development to housing completed or under construction at the point in time that construction of a home on an owned lot begins. Costs capitalized to land and land under development primarily include: (1) land costs; (2) land development costs; (3) entitlement costs; (4) capitalized interest; (5) engineering fees; and (6) title insurance, real property taxes and closing costs directly related to the purchase of the land parcel.

Homebuilding inventories are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision may not be recoverable. We determine impairments on a subdivision level basis as each such subdivision represents the lowest level of identifiable cash flows. In making this determination, we review, among other things, the following for each subdivision:

•

actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all direct incremental costs associated with the home closing) for homes closed;

•

estimated future undiscounted cash flows and Operating Margin;

•

forecasted Operating Margin for homes in “Backlog” (which is defined as homes under contract but not yet delivered);

•

actual and trending net and gross home orders;

•

base sales price and home sales incentive information for homes closed and homes in backlog;

•

market information for each sub-market; and

•

known or probable events indicating that the carrying value may not be recoverable.

If events or circumstances indicate that the carrying value of our inventory may not be recoverable, assets are reviewed for impairment by comparing the undiscounted estimated future cash flows from an individual subdivision to its carrying value. If the undiscounted future cash flows are less than the subdivision’s carrying value, the carrying value of the subdivision is written down to its then estimated fair value. We generally determine the estimated fair value of each subdivision by determining the present value of the estimated future cash flows at discount rates that are commensurate with the risk of the subdivision under evaluation. For both the three months and nine months ended September 30, 2011, we recognized inventory impairment charges of $4.0 million and $12.7 million, respectively. The discount rates used to estimate discounted cash flows ranged from 12% to 20% during the three months and nine months ended September 30, 2011. We did not record any inventory impairments during the three and nine months ended September 30, 2012.

Related Party Assets. Related party assets are included in prepaid expenses and other assets in our accompanying consolidated balance sheets. Our related party assets are debt security bonds (“Metro District Bond Securities”) that we acquired from a quasi-municipal corporation in the state of Colorado. We estimated the fair value of the related party assets based upon discounted cash flows as we do not believe there is a readily available market for such assets. The estimated cash flows from the bonds are ultimately based upon our estimated cash flows associated with building, selling and closing homes in one of our Colorado communities. The estimated fair values of these assets are based upon Level 3 cash flow inputs. Based upon this evaluation, the estimated fair value of the related party assets approximates its carrying value which was $6.7 million as of September 30, 2012 and December 31, 2011.

- 9 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

Mortgage Repurchase Facility. Our Mortgage Repurchase Facility is at floating rates or at fixed rates that approximate current market rates and have relatively short-term maturities, generally within 30 days. The fair value approximates carrying value.

Senior Notes. The estimated values of the senior notes in the following table are based on Level 2 inputs, including market prices of other homebuilder bonds.


	September 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
5.375% Senior Notes due 2014	$	249,574	$	263,967	$	249,438	$	254,667
5.375% Senior Notes due 2015		249,885		266,467		249,857		252,083
5.625% Senior Notes due 2020		245,195		271,050		244,813		227,467

Total	$	744,654	$	801,484	$	744,108	$	734,217

6.	Inventories

The following table sets forth, by reportable segment, information relating to our homebuilding inventories:


	September 30, 2012		December 31, 2011
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	199,344	$	121,343
Mountain		177,913		80,964
East		105,631		81,623
Other		21,128		16,784

Subtotal		504,016		300,714

Land and Land Under Development:
West		142,158		199,941
Mountain		133,100		164,961
East		106,691		127,291
Other		11,221		13,145

Subtotal		393,170		505,338

Total Inventories	$	897,186	$	806,052

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), homebuilding inventories are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision may not be recoverable. We evaluate inventories for impairment at each quarter end. Please see “Inventories” in Note 5 for more detail on the methods and assumptions that were used to estimate the fair value of our inventories. Based on the impairment review, we did not record any inventory impairments during the three and nine months ended September 30, 2012.

- 10 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

Inventory impairments recognized for the three and nine months ended September 30, 2011 are shown in the table below:


	Three Months Ended September 30, 2011		Nine Months Ended September 30, 2011
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	484	$	1,438
Mountain		210		449
East		—		—
Other		93		93

Subtotal		787		1,980

Land and Land Under Development:
West		1,193		7,112
Mountain		550		1,786
East		—		285
Other		1,519		1,519

Subtotal		3,262		10,702

Inventory Impairments	$	4,049	$	12,682

The inventory impairments recorded during the three and nine months ended September 30, 2011 resulted from a decline in the market value of land and homes primarily in our California, Nevada and Utah markets.

7.	Capitalization of Interest

We capitalize interest on our senior notes associated with our qualified assets, which includes land and land under development that is actively being developed and homes under construction through the completion of construction. When construction of an unsold home is complete, such home is no longer considered to be a qualified asset and interest is no longer capitalized on that home. We expensed no interest and $0.8 million of interest for the three and nine months ended September 30, 2012, respectively, and expensed $3.7 million and $19.6 million of interest primarily associated with interest incurred on our homebuilding debt during the three and nine months ended September 30, 2011, respectively. The table set forth below summarizes homebuilding interest activity.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands)
Interest incurred	$	10,573		$	14,474		$	31,709		$	50,744

Interest capitalized, beginning of period	$	67,101		$	49,058		$	58,742		$	38,446
Interest capitalized during period		10,573			10,833			30,931			31,102
Less: Previously capitalized interest included in home cost of sales		(8,655	)		(5,140	)		(20,654	)		(14,797	)

Interest capitalized, end of period	$	69,019		$	54,751		$	69,019		$	54,751

- 11 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

8.	Homebuilding Prepaid Expenses and Other Assets

The following table sets forth the components of homebuilding prepaid expenses and other assets.


	September 30, 2012		December 31, 2011
	(Dollars in thousands)
Deferred marketing costs	$	16,333	$	20,786
Land option deposits		7,867		6,952
Deferred debt issuance costs, net		2,792		3,235
Prepaid expenses		5,274		4,376
Metro district bond securities (related party)		6,663		6,663
Goodwill and intangible assets, net		6,140		6,308
Other		2,547		2,103

Total	$	47,616	$	50,423

9.	Homebuilding Accrued Liabilities

The following table sets forth information relating to homebuilding accrued liabilities.


	September 30, 2012		December 31, 2011
	(Dollars in thousands)
Warranty reserves	$	23,082	$	25,525
Accrued interest payable		10,182		13,698
Accrued executive deferred compensation		27,140		24,136
Liability for unrecognized tax benefits		917		3,303
Legal accruals		1,750		9,360
Land development and home construction accruals		8,705		10,619
Accrued compensation and related expenses		15,299		11,350
Customer and escrow deposits		9,683		5,468
Other accrued liabilities		9,699		15,729

Total accrued liabilities	$	106,457	$	119,188

10.

Warranty Accrual

We record expenses and warranty accruals for general and structural warranty claims, as well as reserves for known, unusual warranty-related expenditures. Management estimates the warranty accruals based on our trends in historical warranty payment levels and warranty payments for claims not considered to be normal and recurring. Warranty payments incurred for an individual house may differ from the related accrual established for the home at the time it was closed. The actual disbursements for warranty claims are evaluated in the aggregate. The table set forth below summarizes warranty accrual and payment activity for the three and nine months ended September 30, 2012 and 2011.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands)
Balance at beginning of period	$	24,036		$	31,200		$	25,525		$	34,704
Expense provisions		1,479			1,265			3,122			3,140
Cash payments		(2,433	)		(2,707	)		(5,565	)		(5,823	)
Adjustments		—			(955	)		—			(3,218	)

Balance at end of period	$	23,082		$	28,803		$	23,082		$	28,803

- 12 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

During the three and nine months ended September 30, 2011, we experienced lower warranty payments on previously closed homes as compared to the same periods in 2010. We believe the lower warranty payment experience rate in the 2011 periods were driven by, among other things, tighter focus and controls over our warranty expenditures, a significant drop in sales volumes over the last several years, which resulted in fewer homes under warranty, and better quality controls and construction practices. As a result of favorable warranty payment experience relative to our estimates at the time of home closing, partially offset by increases in specific warranty reserves established for warranty-related issues in a limited number of subdivisions, we recorded adjustments to reduce our warranty reserve by $1.0 million and $3.2 million for the three and nine months ended September 30, 2011, respectively.

11.

Insurance Reserves

We record expenses and liabilities for losses and loss adjustment expenses for claims associated with: (1) insurance policies issued by Allegiant and re-insurance agreements issued by StarAmerican; (2) self-insurance, including workers compensation; and (3) deductible amounts under our insurance policies. The establishment of the provisions for outstanding losses and loss adjustment expenses is based on actuarial or internally developed studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns such as those caused by natural disasters, fires, or accidents, depending on the business conducted, and changing regulatory and legal environments.

The table set forth below summarizes the insurance reserve activity for the three and nine months ended September 30, 2012 and 2011. The insurance reserve is included as a component of accrued liabilities in the Financial Services section of the accompanying consolidated balance sheets.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands)
Balance at beginning of period	$	45,831		$	52,310		$	50,459		$	52,901
Expense provisions		1,037			645			2,590			2,060
Cash payments		(1,850	)		(1,380	)		(8,031	)		(3,386	)

Balance at end of period	$	45,018		$	51,575		$	45,018		$	51,575

In the ordinary course of business, we make payments from our insurance reserves to settle litigation claims arising primarily from our homebuilding activities. These payments are irregular in both their timing and their magnitude. As a result, the cash payments shown for the three and nine months ended September 30, 2012 are not necessarily indicative of what future cash payments will be for subsequent periods. This is exemplified by the increase in cash payments for the nine months ended September 30, 2012 compared to the same period in 2011 which were driven by resolution of several significant covered claims in the first two quarters of 2012.

12.

Income Taxes

At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and use that rate to provide for income taxes for the current year-to-date reporting period. Due to the effects of the deferred tax valuation allowance and changes in unrecognized tax benefits, our effective tax rates in 2012 and 2011 are not meaningful as the income tax benefit is not directly correlated to the amount of pretax income or loss. The income tax benefits of $0.6 million and $1.8 million during the three and nine months ended September 30, 2012, respectively, resulted primarily from the release of reserves attributable to the expiration of statute of limitations periods. The income tax benefits of $2.5 million and $8.1 million for the three and nine months ended September 30, 2011, respectively, resulted primarily from our 2011 second quarter settlement of various state income tax matters and our 2011 first quarter settlement with the IRS on the audit of our 2004 and 2005 federal income tax returns.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is recorded against a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not (a likelihood of more than 50%) that some portion, or all, of the deferred tax asset will not be realized. At September 30, 2012 and December 31, 2011, we had a full valuation allowance recorded against our net deferred tax asset. Future realization of our deferred tax

- 13 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

assets ultimately depends upon the existence of sufficient taxable income in the carryforward periods under the tax laws. We will continue analyzing, in subsequent reporting periods, the positive and negative evidence in determining the expected realization of our deferred tax assets.

The components of our net deferred tax asset were as follows.


	September 30, 2012			December 31, 2011
	(Dollars in thousands)
Deferred tax assets:
Federal net operating loss carryforwards	$	133,796		$	133,454
State net operating loss carryforwards		52,576			53,350
Stock-based compensation expense		28,944			26,771
Accrued liabilities		26,391			29,600
Asset impairment charges		20,613			31,137
Alternative minimum tax and other tax credit carryforwards		10,726			10,296
Inventory, additional costs capitalized for tax		3,833			3,466
Unrealized loss on marketable securities		—			2,787
Other		1,606			1,522

Total deferred tax assets		278,485			292,383
Valuation allowance		(263,561	)		(281,178	)

Total deferred tax assets, net of valuation allowance		14,924			11,205

Deferred tax liabilities:
Property, equipment and other assets		4,440			706
Deferred revenue		3,445			5,589
Unrealized gain on marketable securities		1,426			—
Inventory, additional costs capitalized for financial statement purposes		482			542
Accrued liabilities		758			32
Other, net		4,373			4,336

Total deferred tax liabilities		14,924			11,205

Net deferred tax asset	$	—		$	—

13.

Senior Notes

Our senior notes are not secured and, while the senior note indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by substantially all of our homebuilding segment subsidiaries. The following table sets forth the carrying amount of our senior notes as of September 30, 2012 and December 31, 2011, net of applicable discounts:


	September 30, 2012		December 31, 2011
	(Dollars in thousands)
5.375% Senior Notes due 2014	$	249,574	$	249,438
5.375% Senior Notes due 2015		249,885		249,857
5.625% Senior Notes due 2020		245,195		244,813

Total	$	744,654	$	744,108

- 14 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

14.

Stock Based Compensation

We account for share-based awards in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”), which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at fair value on the date of grant.

During the three and nine months ended September 30, 2012, we recognized $3.6 million and $8.4 million, respectively, for option grants, compared to $3.1 million and $7.3 million, respectively, during the same periods in the prior year. We recognized $1.3 million and $4.3 million for restricted stock awards during the three and nine months ended September 30, 2012, respectively, compared to $2.3 million and $4.8 million, respectively, during the same periods in the prior year.

On March 8, 2012, we granted a long term performance-based non-qualified stock option to each of our Chief Executive Officer and our Chief Operating Officer for 500,000 shares of common stock under our 2011 Equity Incentive Plan. The terms of the performance-based options provide that, over a three year period, one third of the option shares will vest as of March 1 following any fiscal year in which, in addition to the Company achieving a Home Gross Margin of at least 16.7% (as calculated in our 2011 Form 10-K, excluding warranty adjustments and interest), the Company achieves: (1) at least a 10% increase in total revenue over 2011 (166,667 option shares vest); (2) at least a 15% increase in total revenue over 2011 (166,667 option shares vest); or (3) at least a 20% increase in total revenue over 2011 (166,666 option shares vest). Any of the three tranches of option shares that are not performance vested by March 1, 2015 shall be forfeited. ASC 718 prohibits recognition of expense associated with performance based stock awards until achievement of the performance targets are probable of occurring. In the 2012 second quarter, we concluded that achievement of all the performance targets had met the level of probability required to record compensation expense at that time. At September 30, 2012, the achievement of all performance targets continues to be probable. As such, $1.8 million and $4.3 million of compensation expense was recognized related to the grant of these awards during the three and nine months ended September 30, 2012, respectively.

In accordance with ASC 718, the performance-based awards were valued at the fair value on the date of grant. The grant date fair value of these awards was $7.42 per share. The maximum potential expense that would be recognized by us if all of the performance targets were met would be approximately $7.4 million.

15.

Commitments and Contingencies

Surety Bonds and Letters of Credit. We are required to obtain surety bonds and letters of credit in support of our obligations for land development and subdivision improvements, homeowner association dues, warranty work, contractor license fees and earnest money deposits. At September 30, 2012, we had issued and outstanding surety bonds and letters of credit totaling $56.0 million and $18.0 million, respectively, including $7.1 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit was approximately $27.4 million and $3.1 million, respectively. In the event any such surety bonds or letters of credit issued by third parties are called, MDC could be obligated to reimburse the issuer of the bond or letter of credit.

Mortgage Loan Loss Reserves. In the normal course of business, we establish reserves for potential losses associated with HomeAmerican’s sale of mortgage loans to third-parties. These reserves are created to address repurchase and indemnity claims by third-party purchasers of the mortgage loans, which claims arise primarily out of allegations of homebuyer fraud at the time of origination of the loan. These reserves are based upon, among other things: (1) pending claims received from third-party purchasers associated with previously sold mortgage loans; and (2) a current assessment of the potential exposure associated with future claims of fraud in mortgage loans originated in prior periods. Our mortgage loan reserves are reflected as a component of accrued liabilities in the Financial Services section of the accompanying consolidated balance sheets, and the associated expenses are included in Expenses in the Financial Services section of the accompanying consolidated statements of operations.

- 15 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

The following table summarizes the mortgage loan loss reserve activity for the three months and nine months ended September 30, 2012 and 2011.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands)						(Dollars in thousands)
Balance at beginning of period	$	799		$	4,100		$	442		$	6,881
Expense provisions		160			3,035			615			4,332
Cash payments		(128	)		(174	)		(226	)		(4,252	)

Balance at end of period	$	831		$	6,961		$	831		$	6,961

During 2011, HomeAmerican reached settlements with third parties concerning claims and potential claims to repurchase certain previously sold mortgage loans, including a comprehensive settlement with Bank of America. We believe that the settlements substantially reduce our future exposure to liabilities associated with previously sold mortgage loans, as our experience was significantly worse for the mortgage loans sold that were covered by the Bank of America settlement when compared to the mortgage loans sold that were not covered by the settlement.

Legal Accruals. Because of the nature of the homebuilding business, we have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business, including product liability claims and claims associated with the sale and financing of homes. In the opinion of management, the outcome of these ordinary course matters will not have a material adverse effect upon our financial condition, results of operations or cash flows.

For the three and nine months ended September 30 2012, we had a legal recovery of $2.2 million and various significant legal recoveries totaling $9.8 million, respectively, which were included in selling, general and administrative expenses. These recoveries were realized primarily from prior claims we had made in connection with various construction defect cases.

Lot Option Contracts. In the normal course of business, we enter into lot option purchase contracts (“Option Contracts”), generally through a deposit of cash or a letter of credit, for the right to purchase land or lots at a future point in time with predetermined terms. The use of such land option and other contracts generally allows us to reduce the risks associated with direct land ownership and development, reduces our capital and financial commitments and minimizes the amount of our land inventories on our consolidated balance sheets. Our obligation with respect to Option Contracts generally is limited to forfeiture of the related cash deposits and/or letters of credit. At September 30, 2012, we had cash deposits and letters of credit totaling $6.2 million and $3.3 million, respectively, at risk associated with the option to purchase 1,450 lots.

16.

Derivative Financial Instruments

We utilize certain derivative instruments in the normal course of business, which primarily include commitments to originate mortgage loans (interest rate lock commitments or locked pipeline) and forward sales of mortgage-backed securities commitments, both of which typically are short-term in nature. Forward sales securities commitments and private investor sales commitments are utilized to hedge changes in fair value of mortgage loan inventory and commitments to originate mortgage loans. At September 30, 2012, we had $76.1 million in interest rate lock commitments and $45.5 million in forward sales of mortgage-backed securities.

We record our mortgage loans held-for-sale at fair value to achieve matching of the changes in the fair value of our derivative instruments with the changes in fair values of hedged loans, without having to designate our derivatives as hedging instruments. For forward sales commitments, as well as commitments to originate mortgage loans that are still outstanding at the end of a reporting period, we record the fair value of the derivatives in Financial Services revenues in the consolidated statements of operations with an offset to Financial Services prepaid expenses and other assets or accrued liabilities in the accompanying consolidated balance sheets, depending on the nature of the change.

- 16 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

17.

Mortgage Repurchase Facility

Mortgage Lending. HomeAmerican has a Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association (“USBNA”). This agreement was amended on September 21, 2012 and extended until September 20, 2013. The Mortgage Repurchase Facility provides liquidity to HomeAmerican by providing for the sale of eligible mortgage loans to USBNA with an agreement by HomeAmerican to repurchase the mortgage loans at a future date. Until such mortgage loans are transferred back to HomeAmerican, the documents relating to such loans are held by USBNA, as custodian, pursuant to the Custody Agreement (“Custody Agreement”), dated as of November 12, 2008, by and between HomeAmerican and USBNA. As of September 30, 2012, the Mortgage Repurchase Facility had a maximum aggregate commitment of $50 million. At September 30, 2012 and December 31, 2011, we had $46.9 million and $48.7 million, respectively, of mortgage loans that we were obligated to repurchase under our Mortgage Repurchase Facility. Mortgage loans that we are obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility on the consolidated balance sheets. Advances under the Mortgage Repurchase Facility carry a Pricing Rate equal to the greater of (i) the LIBOR Rate (as defined in the Mortgage Repurchase Facility) plus 2.5%, or (ii) 3.25%. The Mortgage Repurchase Facility contains various representations, warranties and affirmative and negative covenants customary for agreements of this type. The negative covenants include, among others, (i) an Adjusted Tangible Net Worth requirement, (ii) a minimum Adjusted Tangible Net Worth Ratio, (iii) an Adjusted Net Income requirement, and (iv) a minimum Liquidity requirement. The foregoing terms are defined in the Mortgage Repurchase Facility. We believe we were in compliance with the representations, warranties and covenants included in the Mortgage Repurchase Facility.

18.

Supplemental Guarantor Information

Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the following subsidiaries (collectively, the “Guarantor Subsidiaries”), which are 100% owned by us.

•

M.D.C. Land Corporation

•

RAH of Florida, Inc.

•

Richmond American Construction, Inc.

•

Richmond American Homes of Arizona, Inc.

•

Richmond American Homes of Colorado, Inc.

•

Richmond American Homes of Delaware, Inc.

•

Richmond American Homes of Florida, LP

•

Richmond American Homes of Illinois, Inc.

•

Richmond American Homes of Maryland, Inc.

•

Richmond American Homes of Nevada, Inc.

•

Richmond American Homes of New Jersey, Inc.

•

Richmond American Homes of Pennsylvania, Inc.

•

Richmond American Homes of Utah, Inc.

•

Richmond American Homes of Virginia, Inc.

Subsidiaries that do not guarantee our senior notes (collectively, the “Non-Guarantor Subsidiaries”) primarily include:

•

American Home Insurance

•

American Home Title

•

HomeAmerican

•

StarAmerican

•

Allegiant

•

Richmond American Homes of West Virginia, Inc.

•

Richmond American Homes of Washington, Inc.

We have determined that separate, full financial statements of the Guarantor Subsidiaries would not be material to investors and, accordingly, supplemental financial information for the Guarantor and Non-Guarantor Subsidiaries is presented below.

- 17 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

Supplemental Condensed Combining Balance Sheets


	September 30, 2012
	MDC			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents	$	231,595		$	3,475	$	203		$	—		$	235,273
Marketable securities		503,805			—		—			—			503,805
Restricted cash		—			2,084		—			—			2,084
Trade and other receivables		8,594			25,986		1,188			—			35,768
Inventories:
Housing completed or under construction		—			469,618		34,398			—			504,016
Land and land under development		—			376,059		17,111			—			393,170
Investment in subsidiaries		172,975			—		—			(172,975	)		—
Other assets, net		42,454			29,956		8,995			—			81,405

Total homebuilding assets		959,423			907,178		61,895			(172,975	)		1,755,521

Financial Services:
Cash and cash equivalents		—			—		28,524			—			28,524
Marketable securities		—			—		32,915			—			32,915
Mortgage loans held-for-sale, net		—			—		86,648			—			86,648
Prepaid expenses and other assets		—			—		6,515			(1,700	)		4,815

Total financial services assets		—			—		154,602			(1,700	)		152,902

Total Assets	$	959,423		$	907,178	$	216,497		$	(174,675	)	$	1,908,423

LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	—		$	46,958	$	2,678			—		$	49,636
Accrued liabilities		56,840			46,277		3,340			—			106,457
Advances and notes payable to parent and subsidiaries		(748,633	)		721,772		33,776			(6,915	)		—
Senior notes, net		744,654			—		—			—			744,654

Total homebuilding liabilities		52,861			815,007		39,794			(6,915	)		900,747

Financial Services:
Accounts payable and other liabilities		—			—		54,226			—			54,226
Advances and notes payable to parent and subsidiaries		—			—		(5,215	)		5,215			—
Mortgage repurchase facility		—			—		46,888			—			46,888

Total financial services liabilities		—			—		95,899			5,215			101,114

Total Liabilities		52,861			815,007		135,693			(1,700	)		1,001,861

Equity:
Total Stockholder’s Equity		906,562			92,171		80,804			(172,975	)		906,562

Total Liabilities and Stockholders’ Equity	$	959,423		$	907,178	$	216,497		$	(174,675	)	$	1,908,423

- 18 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

Supplemental Condensed Combining Balance Sheets


	December 31, 2011
	MDC			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents	$	313,566		$	2,771	$	81		$	—		$	316,418
Marketable securities		485,434			—		—			—			485,434
Restricted cash		—			667		—			—			667
Trade and other receivables		8,368			12,740		485			—			21,593
Inventories:
Housing completed or under construction		—			280,932		19,782			—			300,714
Land and land under development		—			489,305		16,033			—			505,338
Investment in subsidiaries		126,768			—		—			(126,768	)		—
Other assets, net		45,287			33,074		8,435			(96	)		86,700

Total homebuilding assets		979,423			819,489		44,816			(126,864	)		1,716,864

Financial Services:
Cash and cash equivalents		—			—		26,943			—			26,943
Marketable securities		—			—		34,509			—			34,509
Mortgage loans held-for-sale, net		—			—		78,335			—			78,335
Prepaid expenses and other assets		—			—		3,774			(1,700	)		2,074

Total financial services assets		—			—		143,561			(1,700	)		141,861

Total Assets	$	979,423		$	819,489	$	188,377		$	(128,564	)	$	1,858,725

LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	—		$	23,409	$	2,236			—		$	25,645
Accrued liabilities		67,199			50,271		1,814			(96	)		119,188
Advances and notes payable to parent and subsidiaries		(700,520	)		682,088		21,998			(3,566	)		—
Senior notes, net		744,108			—		—			—			744,108

Total homebuilding liabilities		110,787			755,768		26,048			(3,662	)		888,941

Financial Services:
Accounts payable and other liabilities		—			—		52,446			—			52,446
Advances and notes payable to parent and subsidiaries		—			—		(1,866	)		1,866			—
Mortgage repurchase facility		—			—		48,702			—			48,702

Total financial services liabilities		—			—		99,282			1,866			101,148

Total Liabilities		110,787			755,768		125,330			(1,796	)		990,089

Equity:
Total Stockholder’s Equity		868,636			63,721		63,047			(126,768	)		868,636

Total Liabilities and Stockholders’ Equity	$	979,423		$	819,489	$	188,377		$	(128,564	)	$	1,858,725

- 19 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

Supplemental Condensed Combining Statements of Operations


	Three Months Ended September 30, 2012
	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	—		$	303,503		$	18,919		$	(1,760	)	$	320,662
Cost of Sales		—			(257,322	)		(15,507	)		1,760			(271,069	)
Inventory impairments		—			—			—			—			—

Gross margin		—			46,181			3,412			—			49,593

Selling, general, and administrative expenses		(15,461	)		(29,164	)		(163	)		—			(44,788	)
Equity income (loss) of subsidiaries		26,656			—			—			(26,656	)		—
Interest income		5,364			1			—			—			5,365
Interest expense		—			—			—			—			—
Other income (expense)		97			132			(213	)		—			16

Homebuilding pretax income (loss)		16,656			17,150			3,036			(26,656	)		10,186

Financial Services:
Financial services pretax income		—			—			9,298			—			9,298

Income (loss) before income taxes		16,656			17,150			12,334			(26,656	)		19,484
(Provision) benefit for income taxes		3,470			586			(3,414	)		—			642

Net income (loss)	$	20,126		$	17,736		$	8,920		$	(26,656	)	$	20,126


	Three Months Ended September 30, 2011
	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	—		$	193,857		$	13,155		$	(1,396	)	$	205,616
Cost of Sales		—			(161,751	)		(10,812	)		1,396			(171,167	)
Inventory impairments		—			(4,049	)		—			—			(4,049	)

Gross margin		—			28,057			2,343			—			30,400

Selling, general, and administrative expenses		(15,106	)		(28,704	)		(2,550	)		—			(46,360	)
Equity income (loss) of subsidiaries		(4,022	)		—			—			4,022			—
Interest income		5,958			6			—			—			5,964
Interest expense		(3,641	)		—			—			—			(3,641	)
Other income (expense)		(17,318	)		(2,742	)		(42	)		—			(20,102	)

Homebuilding pretax income (loss)		(34,129	)		(3,383	)		(249	)		4,022			(33,739	)

Financial Services:
Financial services pretax income (loss)		—			—			(450	)		—			(450	)

Income (loss) before income taxes		(34,129	)		(3,383	)		(699	)		4,022			(34,189	)
(Provision) benefit for income taxes		2,419			(1	)		61			—			2,479

Net income (loss)	$	(31,710	)	$	(3,384	)	$	(638	)	$	4,022		$	(31,710	)

- 20 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

Supplemental Condensed Combining Statements of Operations


	Nine Months Ended September 30, 2012
	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	—		$	720,358		$	49,632		$	(4,713	)	$	765,277
Cost of Sales		—			(616,077	)		(41,787	)		4,713			(653,151	)
Inventory impairments		—			—			—			—			—

Gross margin		—			104,281			7,845			—			112,126

Selling, general, and administrative expenses		(38,030	)		(77,535	)		(2,570	)		—			(118,135	)
Equity income (loss) of subsidiaries		46,776			—			—			(46,776	)		—
Interest income		16,642			9			—			—			16,651
Interest expense		(778	)		(30	)		—			—			(808	)
Other income (expense)		535			208			(151	)		—			592

Homebuilding pretax income (loss)		25,145			26,933			5,124			(46,776	)		10,426

Financial Services:
Financial services pretax income (loss)		—			—			20,838			—			20,838

Income (loss) before income taxes		25,145			26,933			25,962			(46,776	)		31,264
(Provision) benefit for income taxes		7,884			1,519			(7,638	)		—			1,765

Net income (loss)	$	33,029		$	28,452		$	18,324		$	(46,776	)	$	33,029


	Nine Months Ended September 30, 2011
	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	—		$	556,078		$	26,938		$	(5,085	)	$	577,931
Cost of Sales		—			(475,005	)		(23,083	)		5,085			(493,003	)
Inventory impairments		—			(12,682	)		—			—			(12,682	)

Gross margin		—			68,391			3,855			—			72,246

Selling, general, and administrative expenses		(48,170	)		(90,527	)		(4,474	)		—			(143,171	)
Equity income (loss) of subsidiaries		(23,295	)		—			—			23,295			—
Interest income		19,413			24			—			—			19,437
Interest expense		(19,642	)		—			—			—			(19,642	)
Other income (expense)		(15,255	)		(5,755	)		25			—			(20,985	)

Homebuilding pretax income (loss)		(86,949	)		(27,867	)		(594	)		23,295			(92,115	)

Financial Services:
Financial services pretax income		—			—			4,419			—			4,419

Income (loss) before income taxes		(86,949	)		(27,867	)		3,825			23,295			(87,696	)
(Provision) benefit for income taxes		7,380			2,583			(1,836	)		—			8,127

Net income (loss)	$	(79,569	)	$	(25,284	)	$	1,989		$	23,295		$	(79,569	)

- 21 -

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

Supplemental Condensed Combining Statements of Cash Flows


	Nine Months Ended September 30, 2012
	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	39,291		$	(37,887	)	$	(5,083	)	$	(46,776	)	$	(50,455	)

Net cash provided by (used in) investing activities		(8,106	)		(719	)		1,756			—			(7,069	)

Financing activities:
Payments from (advances to) subsidiaries		(92,930	)		39,310			6,844			46,776			—
Mortgage repurchase facility		—			—			(1,814	)		—			(1,814	)
Dividend payments		(36,046	)		—			—			—			(36,046	)
Proceeds from the exercise of stock options		15,820			—			—			—			15,820

Net cash provided by (used in) financing activities		(113,156	)		39,310			5,030			46,776			(22,040	)

Net increase (decrease) in cash and cash equivalents		(81,971	)		704			1,703			—			(79,564	)
Cash and cash equivalents:
Beginning of period		313,566			2,771			27,024			—			343,361

End of period	$	231,595		$	3,475		$	28,727		$	—		$	263,797


	Nine Months Ended September 30, 2011
	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(39,482	)	$	(77,129	)	$	12,567		$	23,301		$	(80,743	)

Net cash provided by (used in) investing activities		413,999			(20	)		(32,817	)		—			381,162

Financing activities:
Extinguishment of senior notes		(254,903	)		—			—			—			(254,903	)
Payments from (advances to) subsidiaries		(86,833	)		75,707			34,427			(23,301	)		—
Mortgage repurchase facility		—			—			(14,726	)		—			(14,726	)
Dividend payments		(35,560	)		—			—			—			(35,560	)
Proceeds from the exercise of stock options		46			—			—			—			46

Net cash provided by (used in) financing activities		(377,250	)		75,707			19,701			(23,301	)		(305,143	)

Net increase (decrease) in cash and cash equivalents		(2,733	)		(1,442	)		(549	)		—			(4,724	)
Cash and cash equivalents:
Beginning of period		535,035			4,287			32,903			—			572,225

End of period	$	532,302		$	2,845		$	32,354		$	—		$	567,501

- 22 -

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with, and is qualified in its entirety by, the Unaudited Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in “Item 1A: Risk Factors Relating to our Business” of our Annual Report on Form 10-K for the year ended December 31, 2011 and this Quarterly Report on Form 10-Q.

M.D.C. HOLDINGS, INC.

Selected Financial Information (unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues	$	320,647		$	204,886		$	761,857		$	574,432
Land sale revenues		15			730			3,420			3,499

Total home sale and land revenues		320,662			205,616			765,277			577,931

Home cost of sales		(271,067	)		(170,443	)		(649,941	)		(490,521	)
Land cost of sales		(2	)		(724	)		(3,210	)		(2,482	)
Inventory impairments		—			(4,049	)		—			(12,682	)

Total cost of sales		(271,069	)		(175,216	)		(653,151	)		(505,685	)

Gross margin		49,593			30,400			112,126			72,246

Gross margin %		15.5	%		14.8	%		14.7	%		12.5	%

Selling, general and administrative expenses		(44,788	)		(46,360	)		(118,135	)		(143,171	)
Interest income		5,365			5,964			16,651			19,437
Interest expense		—			(3,641	)		(808	)		(19,642	)
Other income (expense)		16			(20,102	)		592			(20,985	)

Homebuilding pretax income (loss)		10,186			(33,739	)		10,426			(92,115	)

Financial Services:
Revenues		14,454			6,322			34,304			20,480
Expenses		(5,156	)		(6,772	)		(13,466	)		(16,061	)

Financial services pretax income (loss)		9,298			(450	)		20,838			4,419

Income (loss) before income taxes		19,484			(34,189	)		31,264			(87,696	)
Benefit from income taxes		642			2,479			1,765			8,127

Net income (loss)	$	20,126		$	(31,710	)	$	33,029		$	(79,569	)

Earnings (loss) per share:
Basic	$	0.42		$	(0.68	)	$	0.69		$	(1.72	)
Diluted	$	0.41		$	(0.68	)	$	0.68		$	(1.72	)
Weighted Average Common Shares Outstanding:
Basic		47,761,307			46,736,638			47,499,429			46,717,408
Diluted		48,173,315			46,736,638			47,818,188			46,717,408
Dividends declared per share	$	0.25		$	0.25		$	0.75		$	0.75
Cash provided by (used in):
Operating Activities	$	(34,865	)	$	(11,486	)	$	(50,455	)	$	(80,743	)
Investing Activities	$	(45,314	)	$	88,203		$	(7,069	)	$	381,162
Financing Activities	$	17,852		$	(265,051	)	$	(22,040	)	$	(305,143	)

- 23 -

Overview

Over the past few quarters, we implemented a series of strategic initiatives designed to help us achieve a goal of generating full-year profitability in 2012. These initiatives were previously discussed in detail under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K for the year ended December 31, 2011. In addition, during the first nine months of 2012, we took advantage of a recovering housing market and better overall economic conditions in most of our markets.

As a result, we achieved our third consecutive quarterly operating profit during the 2012 third quarter, with net income increasing by more than $50 million over the prior year. Our favorable results were largely attributable to improved operating profits from our homebuilding segment, which experienced significant revenue growth as well as operating margin expansion. In addition, our financial services segment produced considerably better results as we took advantage of favorable mortgage market conditions, including increased volume and margins for our mortgage loan products.

For the 2012 third quarter, we reported net income of $20.1 million, or $0.41 per diluted share, compared to a net loss of $31.7 million, or $0.68 per diluted share for the year earlier period. The improvement in our quarterly performance was driven primarily by a 57% increase in home sale revenues, an 860 basis point reduction in our homebuilding selling, general and administrative (“SG&A”) expenses as a percentage of home sale revenues, a $4.0 million reduction in inventory impairments, a $3.6 million decrease in interest expense and a $9.7 million increase in our financial services segment pretax income.

For the nine months ended September 30, 2012, we reported net income of $33.0 million, or $0.68 per diluted share, compared to a net loss of $79.6 million, or $1.72 per diluted share for the year earlier period. The improvement in our performance was driven primarily by a 33% increase in home sale revenues, a 940 basis point reduction in our homebuilding SG&A expenses as a percentage of home sale revenues, an $18.8 million decrease in interest expense, a $12.7 million reduction in impairments, and a $16.4 million increase in our financial services segment pretax income.

Both the three and nine month periods ended September 30, 2012 also benefited from a decrease in other expense, which was higher for the three and nine months ended September 30, 2011 due to an $18.6 million charge related to the early extinguishment of debt.

As the overall housing market has continued to show signs of recovery over the last several quarters, our efforts to improve our sales process, product offering and cancellation rate has also helped us drive significantly improved sales results. During the 2012 third quarter, net new orders increased 69% year-over-year to 1,008 homes, driven by a 78% improvement in our absorption pace per community and a 1,700 basis point reduction in our cancellation rate. At the same time, we have worked to balance our improved absorption pace by increasing home prices and reducing incentives in many subdivisions across the country. This effort has helped us improve our gross margin from home sales both year-over-year and sequentially for the 2012 third quarter.

For the nine months ended September 30, 2012, our net orders were up 47% year-over-year to 3,473 homes. With our quarter-end backlog up 52% over the prior year, coupled with the positive net income recorded to date in 2012, we believe we are well positioned to achieve our goal of reaching profitability for 2012.

Our financial position remained strong at the end of the quarter, as evidenced by our total cash and marketable securities of $801 million, which exceeded the amount of our senior note debt by $56 million. We believe that our strong financial position gives us a competitive advantage as we pursue attractive land acquisition opportunities as the housing market improves, which can help us further grow our operations in the future.

- 24 -

Homebuilding


	Three Months Ended September 30,								Nine Months Ended September 30,
	2012			2011			Change		2012			2011			Change
	(Dollars in thousands)
Homebuilding pretax income (loss):
West	$	8,334		$	(2,584	)	$	10,918	$	11,178		$	(18,981	)	$	30,159
Mountain		6,951			2,988			3,963		13,746			552			13,194
East		4,417			(2,518	)		6,935		6,717			(6,819	)		13,536
Other		490			(1,514	)		2,004		426			(3,206	)		3,632
Corporate		(10,006	)		(30,111	)		20,105		(21,641	)		(63,661	)		42,020

Total homebuilding pretax income (loss)	$	10,186		$	(33,739	)	$	43,925	$	10,426		$	(92,115	)	$	102,541

For the 2012 third quarter, we reported homebuilding pretax income of $10.2 million, compared to a pretax loss of $33.7 million for the third quarter of 2011. The $43.9 million improvement in our homebuilding financial performance was driven primarily by a 57% increase in home sale revenues, a 70 basis point improvement in our gross margin from home sales, an 860 basis point reduction in our SG&A expenses as a percentage of home sale revenues and a $3.6 million decrease in our interest expense.

For the nine months ended September 30, 2012, we reported homebuilding pretax income of $10.4 million, compared to a pretax loss of $92.1 million for the same period in 2011. The $102.5 million improvement in our homebuilding financial performance was driven primarily by a 33% increase in home sale revenues, a 230 basis point improvement in our gross margin from home sales, a $25 million reduction in our SG&A expenses and an $18.8 million decrease in our interest expense.

In addition, both the three and nine month periods ended September 30, 2011 were negatively impacted by an $18.6 million charge related to the early extinguishment of $237 million of debt.

Our West, Mountain, East and Other segments all showed improvements in pretax results for the three and nine months ended September 30, 2012 when compared with the same periods in 2011. The improvements in each of these segments were driven by reductions in SG&A expenses and improvements in our gross margins in certain markets. The improvements in pretax results were also aided by increases in our homebuilding revenues in our West, Mountain and East segments due to increases in homebuilding deliveries and average price per home delivered. Our pretax results for our non-operating Corporate segment improved $20.1 million and $42.0 million, respectively, for the three and nine months ended September 30, 2012 due primarily to reductions in both interest and SG&A expenses, which included a legal recovery of $2.2 million and various significant legal recoveries totaling $9.8 million, respectively, and an $18.6 million reduction in loss on extinguishment of senior debt that was recorded in the third quarter 2011.


	September 30, 2012		December 31, 2011
	(Dollars in thousands)
Homebuilding assets:
West	$	376,167	$	346,442
Mountain		329,436		262,787
East		229,478		223,606
Other		33,995		31,468
Corporate		786,445		852,561

Total homebuilding assets	$	1,755,521	$	1,716,864

Homebuilding assets in the West and Mountain segments increased $29.7 million and $66.6 million, respectively, from December 31, 2011 to September 30, 2012, primarily due to increases in construction activity and related inventory balances. Homebuilding assets in the Corporate segment decreased $66.1 million from December 31, 2011 to September 30, 2012, primarily due to a $64 million decrease in cash and marketable securities related to further investments in inventories.

- 25 -

Revenues


	Three Months Ended September 30,				Change						Nine Months Ended September 30,				Change
	2012		2011		Amount			%			2012		2011		Amount			%
	(Dollars in thousands)
Home and land sale revenues
West	$	148,037	$	70,676	$	77,361			109	%	$	335,002	$	181,129	$	153,873			85	%
Mountain		96,335		81,945		14,390			18	%		236,625		229,879		6,746			3	%
East		63,463		36,390		27,073			74	%		160,360		129,667		30,693			24	%
Other		12,827		16,605		(3,778	)		-23	%		33,290		37,256		(3,966	)		-11	%

Total home and land sale revenues	$	320,662	$	205,616	$	115,046			56	%	$	765,277	$	577,931	$	187,346			32	%

Total home and land sale revenues for the 2012 third quarter increased 56% to $320.7 million compared to $205.6 million for the prior year period. For the nine months ended September 30, 2012, total home and land sales revenues increased 32% to $765.3 million compared to $577.9 million for the prior year period. The increase in revenues for both periods was driven primarily by changes to the number and average price of new home deliveries as shown in the table below.

New Home Deliveries


	Three Months Ended September 30,
	2012						2011						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price
	(Dollars in thousands)
Arizona		203	$	44,877	$	221.1		126	$	25,272	$	200.6		61%		78%		10%
California		131		46,580		355.6		58		17,883		308.3		126%		160%		15%
Nevada		178		37,679		211.7		77		14,387		186.8		131%		162%		13%
Washington		63		18,894		299.9		49		13,135		268.1		29%		44%		12%

West		575		148,030		257.4		310		70,677		228.0		85%		109%		13%

Colorado		229		81,706		356.8		189		65,234		345.2		21%		25%		3%
Utah		53		14,632		276.1		58		16,712		288.1		-9%		-12%		-4%

Mountain		282		96,338		341.6		247		81,946		331.8		14%		18%		3%

Maryland		65		29,382		452.0		47		21,020		447.2		38%		40%		1%
Virginia		67		34,069		508.5		36		15,370		426.9		86%		122%		19%

East		132		63,451		480.7		83		36,390		438.4		59%		74%		10%

Florida		50		12,828		256.6		63		14,592		231.6		-21%		-12%		11%
Illinois		—		—		—		4		1,281		320.3		N/M		N/M		N/M

Other Homebuilding		50		12,828		256.6		67		15,873		236.9		-25%		-19%		8%

Total		1,039	$	320,647	$	308.6		707	$	204,886	$	289.8		47%		57%		6%

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