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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _____ to _____
Commission file number 1-08951
__________________________________________
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
80237
Denver, Colorado
(Zip code)
(Address of principal executive offices)
(303) 773-1100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value
MDC
New York Stock Exchange
6% Senior Notes due January 2043MDC 43
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No
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 o
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Emerging Growth Company
Non-Accelerated Filer
Smaller Reporting Company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 726(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of June 30, 2023, the aggregate market value of the Registrant's common stock held by non-affiliates of the Registrant was $2.80 billion based on the closing sales price of $46.77 per share as reported on the New York Stock Exchange on June 30, 2023.
As of December 31, 2023, the number of shares outstanding of Registrant's common stock was 74,661,479.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of part III of this Form 10-K are incorporated by reference from the Registrant's 2024 definitive proxy statement to be filed with the Securities and Exchange Commission no later than 120 days after the end of the Registrant's fiscal year.



M.D.C. HOLDINGS, INC.
FORM 10-K
For the Year Ended December 31, 2023
Table of Contents
Page
No.

(i)

M.D.C. HOLDINGS, INC.
FORM 10-K
PART I
Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K, as well as statements made by us in periodic press releases, oral statements made by our officials in the course of presentations about the Company and conference calls in connection with quarterly earnings releases, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects. In addition, this Report includes forward-looking statements regarding the Agreement and Plan of Merger, dated as of January 17, 2024 (the “Merger Agreement”), by and among the Company, SH Residential Holdings, LLC (“Parent”), Clear Line, Inc., a wholly owned subsidiary of Parent (“Merger Sub”), and, solely for the purposes of Section 6.2, Section 6.17 and Section 9.15 of the Merger Agreement, Sekisui House, Ltd. (“Guarantor”), including statements as to the expected timing, completion and effects of the proposed transaction. Pursuant to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation (the “Merger”). These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” ”confident,” “could,” “intends,” “target,” “might,” “path,” “approximately,” “our planning assumptions,” “forecast,” “outlook” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, we cannot guarantee future results. These statements, including statements regarding the proposed transaction, are based largely on information currently available to our management and our management's current expectations and assumptions, and 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 those expressed or implied by the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Form 10-K, 10-Q and 8-K or in the proxy statement that the Company will file in connection with the transactions contemplated by the Merger Agreement should be considered.
Important factors, risks and uncertainties and other factors that may cause actual results to differ materially from our plans, estimates or expectations include but are not limited to: (i) the completion of the proposed transaction on the anticipated terms and timing, including obtaining required stockholder and regulatory approvals, and the satisfaction of other conditions to the completion of the proposed transaction; (ii) potential litigation relating to the proposed transaction that could be instituted against the Company or its directors, managers or officers, including the effects of any outcomes related thereto; (iii) the risk that disruptions from the proposed transaction will harm the Company’s business, including current plans and operations, including during the pendency of the proposed transaction; (iv) the ability of the Company to retain and hire key personnel; (v) the diversion of management’s time and attention from ordinary course business operations to completion of the proposed transaction and integration matters; (vi) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed transaction; (vii) legislative, regulatory and economic developments; (viii) potential business uncertainty, including changes to existing business relationships, during the pendency of the proposed transaction that could affect the Company’s financial performance; (ix) certain restrictions during the pendency of the proposed transaction that may impact the Company’s ability to pursue certain business opportunities or strategic transactions; (x) unpredictability and severity of catastrophic events, including but not limited to acts of terrorism, outbreaks of war or hostilities or the COVID-19 pandemic, as well as management’s response to any of the aforementioned factors; (xi) the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (xii) the occurrence of any event, change or other circumstance that could give rise to the termination of the proposed transaction, including in circumstances requiring the Company to pay a termination fee; and (xiii) those risks and uncertainties set forth under “Item 1A, Risk Factors.” These risks, as well as other risks associated with the proposed transaction, will be more fully discussed in the proxy statement that will be filed with the SEC in connection with the proposed transaction.

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Item 1. Business.
(a) General Development of Business
M.D.C. Holdings, Inc. is a Delaware corporation. We refer to M.D.C. Holdings, Inc. as the “Company,” “MDC,” “we” or “our” in this Annual Report on Form 10-K, and these designations include our subsidiaries unless we state otherwise. We have two primary operations, homebuilding and financial services. Our homebuilding operations consist of wholly-owned subsidiary companies that generally purchase finished lots or develop lots to the extent necessary for the construction and sale primarily of single-family detached homes to first-time and first-time move-up homebuyers under the name “Richmond American Homes.” Our homebuilding operations are comprised of various homebuilding divisions that we consider to be our operating segments. For financial reporting purposes, our homebuilding operations are aggregated into reportable segments as follows: (1) West (includes operations in Arizona, California, Nevada, New Mexico, Oregon, Texas and Washington); (2) Mountain (includes operations in Colorado, Idaho and Utah); and (3) East (includes operations in Alabama, Florida, Maryland, Pennsylvania, Tennessee and Virginia).
Our financial services operations consist of (1) HomeAmerican Mortgage Corporation (“HomeAmerican”), which originates mortgage loans primarily for our homebuyers, (2) Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”), which provides insurance coverage primarily to our homebuilding subsidiaries on homes that have been delivered and most of our subcontractors for completed work on those delivered homes, (3) StarAmerican Insurance Ltd. ("StarAmerican"), which is a re-insurer of Allegiant claims, (4) American Home Insurance Agency, Inc., which offers third-party insurance products to our homebuyers, and (5) American Home Title and Escrow Company, which provides title agency services to our homebuilding subsidiaries and our customers in certain states. For financial reporting, we have aggregated our financial services operating segments into reportable segments as follows: (1) mortgage operations (represents HomeAmerican only) and (2) other (all remaining operating segments).
Announcement of SH Residential Holdings Merger. On January 17, 2024, we entered into the Merger Agreement with Parent, Merger Sub and, solely for the purposes of Section 6.2, Section 6.17 and Section 9.15 of the Merger Agreement, the Guarantor. Pursuant to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation. At the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.01 per share, of the Company, outstanding as of immediately prior to the Effective Time (other than shares of common stock that are (A)(1) held by the Company as treasury stock; (2) held directly by Parent or Merger Sub; or (3) held by any direct or indirect wholly owned subsidiary of Parent or Merger Sub, in each case, immediately prior to the Effective Time (collectively, the “Owned Company Shares”), (B) held by any direct or indirect wholly owned subsidiary of the Company immediately prior to the Effective Time, (C) held by a holder who is entitled to demand, and has properly and validly demanded, appraisal for such shares of common stock in accordance with, and who complies in all respects with, Section 262 of the Delaware General Corporation Law (the “DGCL” and such shares, the “Dissenting Shares”), or (D) subject to vesting restrictions and/or forfeiture back to the Company (“Company RSAs”)) will be automatically converted into the right to receive $63.00 per share, in cash, without interest thereon (the “Merger Consideration”). At the Effective Time, each Owned Company Share will automatically be cancelled and cease to exist, and no consideration or payment will be delivered in exchange therefor or in respect thereof, and each share of common stock held by any direct or indirect wholly owned subsidiary of the Company shall be converted into such number of shares of common stock of the surviving corporation with an aggregate value immediately after the consummation of the Merger equal to the Merger Consideration. At the Effective Time, each Dissenting Share will be cancelled and cease to exist, and the holders of Dissenting Shares will only be entitled to the rights granted to them under Section 262 of the DGCL with respect to such Dissenting Shares.
At the Effective Time, subject to the terms and conditions set forth in the Merger Agreement, each (i) option to purchase shares of common stock granted under any Company equity plan (each, a “Company Option”) that is outstanding and unexercised, whether vested or unvested, as of immediately prior to the Effective Time will be fully vested, cancelled and automatically converted into the right to receive an amount in cash (without interest), if any, equal to the product of (A) the excess (if any) of (1) the Merger Consideration over (2) the exercise price per share of such Company Option, multiplied by (B) the number of shares of common stock subject to such Company Option, subject to any required withholding of taxes; provided, however, that any Company Option with respect to which the applicable per share exercise price is greater than the Merger Consideration will be cancelled without consideration; (ii) Company RSA, whether vested or unvested, that is outstanding as of immediately prior to the Effective Time will be fully vested, cancelled and automatically converted into the right to receive an amount in cash (without interest) equal to the product of (A) the aggregate number of shares of common stock subject to such Company RSA, multiplied by (B) the Merger Consideration, subject to any required withholding of taxes; and (iii) performance stock unit award relating to shares of common stock granted under any Company equity plan (each, a “Company PSU”), whether vested or unvested, that is outstanding as of immediately prior to the Effective Time will be fully
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vested, cancelled and automatically converted into the right to receive an amount in cash equal to the product of (A) the aggregate number of shares of common stock subject to such Company PSU based on maximum performance, multiplied by (B) the Merger Consideration, subject to any required withholding of taxes.
Our Board of Directors unanimously approved the Merger and the Merger Agreement. If approved by our stockholders, we currently expect the Merger to close in the first half of 2024. Until the closing, we will continue to operate as an independent company.
The closing of the Merger is subject to certain conditions set forth in the Merger Agreement, including, but not limited to, the (i) affirmative vote of the holders of a majority of all of the outstanding shares of common stock to adopt the Merger Agreement; (ii) expiration or termination of any waiting period (and extensions thereof) applicable to the transactions contemplated by the Merger Agreement, including the Merger, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder; (iii) absence of any law, order or injunction enacted or issued after the date of the Merger Agreement restraining, enjoining or otherwise prohibiting the Merger; and (iv) the absence of certain events constituting a material adverse effect on the Company’s business following the date of the Merger Agreement. The obligations of Parent and Merger Sub to consummate the Merger are not subject to any financing condition.
The Company made customary representations and warranties in the Merger Agreement and agreed to customary covenants regarding the operation of the business of the Company and its subsidiaries prior to the consummation of the Merger. The Merger Agreement also provides that the Company, on the one hand, or Parent and Merger Sub, on the other hand, may specifically enforce the obligations under the Merger Agreement, including the obligation to consummate the Merger if the conditions set forth in the Merger Agreement are satisfied. The parties to the Merger Agreement have also agreed to use their respective reasonable best efforts and take certain actions to obtain the requisite regulatory approvals for the transactions contemplated by the Merger Agreement, including the Merger.
From the execution of the Merger Agreement until the earlier to occur of the termination of the Merger Agreement and the Effective Time, the Company will be subject to customary “no-shop” restrictions on its ability to solicit alternative acquisition proposals from third parties and to provide information to, and participate in discussions and negotiations with, third parties regarding any alternative acquisition proposals, subject to a customary “fiduciary out” provision that allows the Company, under certain specified circumstances, to provide information to, and participate or engage in discussions or negotiations with, third parties with respect to an acquisition proposal if the Board determines in good faith (after consultation with the Company’s financial advisor and outside legal counsel) that such alternative acquisition proposal constitutes a superior proposal or would be reasonably likely to result in a superior proposal, and the failure to take such actions would be reasonably likely to be inconsistent with the directors’ fiduciary duties pursuant to applicable law.
The Merger Agreement contains certain termination rights for the Company on the one hand and Parent and Merger Sub on the other hand. Upon termination of the Merger Agreement under specified circumstances, including (i) the Company terminating the Merger Agreement to enter into an alternative acquisition agreement providing for a superior proposal; or (ii) Parent terminating the Merger Agreement due to the Company’s Board’s change of its recommendation that our shareholders adopt the Merger Agreement and approve the transactions, including the Merger, in each case pursuant to and in accordance with the “fiduciary out” provisions of the Merger Agreement, the Company will be required to pay Parent a termination fee of $147,420,000. The termination fee will also be payable by the Company if the Merger Agreement is terminated under certain circumstances and prior to such termination (or at least two business days prior to our special meeting in the case of termination for the failure to receive the requisite shareholder approval), an acquisition proposal has been publicly announced and not publicly withdrawn or not otherwise publicly abandoned and an acquisition proposal is consummated or we enter into a definitive agreement with respect to an acquisition proposal within one year of the termination. In addition to the foregoing termination rights, and subject to certain limitations, the Company or Parent may terminate the Merger Agreement if the Merger is not consummated by July 17, 2024, subject to extension at the election of the Company or Parent for three months if necessary to obtain HSR approval or to resolve an injunction relating to other specified governmental consents.
The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement, which has been filed herewith as Exhibit 2.1 to this Report.
(c) Description of Business
Our business consists of two primary operations, homebuilding and financial services. Our homebuilding subsidiaries build and sell primarily single-family detached homes that are designed and built to meet local customer preferences. Each homebuilding subsidiary is the general contractor for its projects and retains subcontractors for land development and home
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construction. Our homebuilding subsidiaries build a variety of home styles in each of their markets, targeting primarily first-time and first-time move-up homebuyers.

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For 2023, the percentage of our home deliveries and home sale revenues by state were as follows:
Percentage
of
Deliveries
Percentage
of Home Sale
Revenues
Arizona23 %19 %
California20 %24 %
Nevada%%
New Mexico— %— %
Oregon%%
Texas%%
Washington%%
West57 %57 %
Colorado20 %23 %
Idaho%%
Utah%%
Mountain25 %28 %
Alabama— %— %
Maryland%%
Pennsylvania%— %
Tennessee%%
Virginia%%
Florida12 %%
East18 %15 %
Total100 %100 %
Our financial services operations include subsidiaries that provide mortgage financing, place title insurance and homeowner insurance for our homebuyers, and provide general liability insurance for our subsidiaries and most of our subcontractors.
Homebuilding Operations
Operating Divisions. The primary functions of our homebuilding segments include land acquisition and development, home construction, sales and marketing, and customer service. Operating decisions are made by our local management teams under the oversight of our Chief Operating Decision Maker (“CODM”), or decision-making group, defined as two key executives - our Executive Chairman and Chief Executive Officer. Our organizational structure (i.e., the grouping and reporting of divisions) changes based upon the current needs of the Company. We had 19 active homebuilding operating divisions at December 31, 2023. We had 21 active homebuilding operating divisions at December 31, 2022 and 2021.
Corporate Management. Our homebuilding business is managed primarily through members of senior management in our Corporate segment and our four Asset Management Committees (“AMCs”), three for reviewing real estate transactions and one for reviewing corporate transactions. Each real estate AMC is comprised of the Chief Executive Officer, Chief Financial Officer and at least one of our other corporate officers, with the corporate AMC comprised of our Chief Executive Officer and Chief Financial Officer.  All real estate acquisition transactions are reviewed to confirm that the transaction is projected to achieve the objectives established by our decision-making group and must be approved by the designated real estate AMC. Generally, the role of our senior management team and/or AMC includes:
review and approval of division business plans and budgets;
oversight of land and home inventory levels;
review of major personnel decisions; and
review of capital allocation decisions.
Additionally, our corporate executives and corporate departments generally are responsible for establishing and monitoring compliance with our policies and procedures. Among other things, the corporate office has primary responsibility for:
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asset management and capital allocation;
treasury;
insurance and risk management;
merchandising and marketing;
national purchasing contracts;
accounting, tax and internal audit functions;
legal matters;
human resources and payroll;
information technology; and
training and development.
Housing. Generally, our homebuilding subsidiaries build single-family detached homes in a number of standardized series, designed to provide variety in the size and style of homes for our potential homebuyers. In certain markets, our homebuilding subsidiaries build and sell duplexes. Within each series of our single-family detached homes, our homebuilding subsidiaries build several different floor plans offering standard and optional features (such as upgraded appliances, cabinetry, flooring, etc.). Differences in sales prices of similar models from market-to-market depend primarily upon homebuyer demand, home prices offered by our competitors, market conditions (such as home inventory supply levels), location, cost of land, optional features and design specifications. The series of homes offered at a particular location is based on perceived customer preferences, lot size, area demographics and, in certain cases, the requirements of major land sellers and local municipalities. Previously, our homebuilding subsidiaries would focus generally on selling “build-to-order,” also referred to as “dirt sales,” and limit the number of homes started without a contract, also known as “spec homes.” However, with the increase in interest rates during 2022 and interest rate variability during 2023, we have seen an increased preference for spec homes that can be closed within 30 - 60 days. As a result, we have increased the number of spec home construction starts in response to this demand.
Land Acquisition and Development. Our homebuilding subsidiaries acquire lots with the intention of constructing and selling homes on the acquired land. Generally, we prefer to purchase finished lots using option contracts, in phases or in bulk for cash. As such, more than one-half of the lots we purchased in 2023 were finished lots that required no level of development. In making land purchases, we consider a number of factors, including projected rates of return, estimated gross margins from home sales, sales prices of the homes to be built, mortgage loan limits within the respective county, population and employment growth patterns, proximity to developed areas, estimated cost and complexity of development including environmental and geological factors, quality of schools, estimated levels of competition and demographic trends.
In their option contracts, our homebuilding subsidiaries generally obtain the right to purchase lots in consideration for an option deposit in the form of cash or letters of credit. In the event they elect not to purchase the lots within a specified period of time, they may be required to forfeit the option deposit. Our option contracts do not contain provisions requiring our specific performance.
Our homebuilding subsidiaries may own or have the right under option contracts to acquire undeveloped parcels of real estate that they intend to develop into finished lots. They generally develop land in phases in order to limit our risk in a particular subdivision and to efficiently employ available capital resources. Generally, building permits and utilities are available and zoning is suitable for the current intended use of substantially all of our undeveloped land. When developed, these lots generally will be used in our homebuilding activities. See “Forward-Looking Statements” above.
Labor and Raw Materials. Materials used in our homebuilding operations are mainly standard items carried by major suppliers. We generally contract for our materials and labor at a fixed price for the anticipated construction period of our homes. This allows us to mitigate the risks associated with increases in the cost of building materials and labor between the time construction begins on a home and the time it is closed. Increases in the cost of building materials and subcontracted labor may reduce gross margins from home sales to the extent that market conditions prevent the recovery of increased costs through higher home sales prices. From time to time and to varying degrees, we may experience shortages in the availability of building materials and/or labor in each of our markets. These shortages and delays may result in delays in the delivery of homes under construction, reduced gross margins from home sales, or both. See “Forward-Looking Statements” above. Discussion of shortages in the availability of building materials and labor are described in more detail in our description of Risk Factors under the heading "Supply shortages and other risks related to the demand for skilled labor and building materials could continue to increase costs and delay deliveries."
Warranty. Our homebuilding subsidiaries sell their homes with limited third-party warranties that generally provide for one year of coverage for workmanship and materials, two years of coverage for plumbing, electrical, heating, ventilation and air conditioning systems, and structural coverage for an amount of time depending on the jurisdiction in which the house was
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purchased. Under our agreement with the issuer of the third-party warranties, our homebuilding subsidiaries perform all of the work for the first two years of the warranty coverage and pay for certain work required to be performed subsequent to year two.
Seasonal Nature of Business. The homebuilding industry can experience noticeable seasonality and quarter-to-quarter variability in homebuilding activity levels. The seasonal nature of our business is described in more detail in our description of Risk Factors under the heading “Because of the seasonal nature of our business, our quarterly operating results can fluctuate.
Backlog. At December 31, 2023 and 2022, homes under contract but not yet delivered (“backlog”) totaled 1,890 and 2,974, respectively, with an estimated sales value of $1.16 billion and $1.75 billion, respectively. We anticipate that homes in backlog at December 31, 2023 generally will close during 2024 under their existing home order contracts or through the replacement of an existing contract with a new home order contract. The estimated backlog sales value at December 31, 2023 may be impacted by, among other things, subsequent home order cancellations, incentives provided, and/or options and upgrades selected. See “Forward-Looking Statements” above.
Customer Service and Quality Control. Our homebuilding divisions are responsible for pre-closing quality control inspections and responding to customers’ post-closing needs. We have a product service and quality control program, focused on improving and/or maintaining the quality of our customers’ complete home buying and homeownership experience.

Sales and Marketing. Our sales and marketing programs are designed to attract homebuyers in a cost-effective manner. We have a centralized in-house advertising and marketing department, including digital marketing, that oversees our efforts to communicate the inherent value of our homes to our prospective homebuyers and distinguish our Richmond American Homes brand from our competitors and other home buying opportunities. The main objective of this team is to generate homebuyer leads, which are actively pursued by our HomeBuyer Resource Center (HBRC) and community sales associates. Our HBRC team consists of new home specialists local to each market we build in, who are dedicated to supporting our digital and phone leads and set appointments for them to meet at one of our sales centers with a community sales associate. Our centralized in-house merchandising team furnishes our model homes and sales centers.
Another part of our marketing presentation takes place in our design centers (also known as Home Galleries). Here, homebuyers are able to personalize their homes with a variety of options and upgrades. Additionally, these locations often serve as an information center for prospective homebuyers and real estate agents who may opt to receive personalized attention from one of our new home specialists, resulting in a more focused and efficient home search across all of our Richmond American communities in a given market place. We believe that the services provided by our Home Galleries represent a key competitive advantage in attracting and retaining prospective homebuyers who prefer to personalize their home purchase.
Competition. The homebuilding industry is fragmented and highly competitive. The competitive nature of our business is described in more detail in our description of Risk Factors.
Regulation. Our homebuilding operations are subject to compliance with applicable laws and regulations, which are described in more detail in our description of Risk Factors.
Financial Services Operations
Mortgage Lending Operations
General. HomeAmerican is a full-service mortgage lender and the principal originator of mortgage loans for our homebuyers. HomeAmerican has a centralized loan processing center where it originates mortgage loans, primarily for our homebuyers.
HomeAmerican is authorized to originate Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) (together “the government-sponsored enterprises”), Federal Housing Administration-insured (“FHA”), and Department of Veterans Affairs-guaranteed (“VA”) mortgages and is an authorized issuer of Government National Mortgage Association (“Ginnie Mae”) mortgage-backed securities. Furthermore, HomeAmerican also is an authorized loan servicer for Fannie Mae, Freddie Mac and Ginnie Mae and, as such, is subject to the rules and regulations of these entities.
HomeAmerican uses a mortgage repurchase facility, internally generated funds, and temporary financing provided by its parent to finance the origination of mortgage loans until they are sold. HomeAmerican sells originated mortgage loans to third-party purchasers on either a bulk or flow basis. Mortgage loans sold on a bulk basis include the sale of a package of
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substantially similar originated mortgage loans, while sales of mortgage loans on a flow basis are completed as HomeAmerican originates each loan. Mortgage loans sold to third-party purchasers include HomeAmerican’s representations and warranties with respect to certain borrower payment defaults, credit quality issues and/or misstatements made by HomeAmerican or misrepresentations by our homebuyers. Substantially all of the mortgage loans originated by HomeAmerican are sold to third-party purchasers, generally between 5 to 35 days of origination.
Pipeline. HomeAmerican’s mortgage loans in process for which a rate and price commitment had been made to a borrower that had not closed (the “locked pipeline”) at December 31, 2023 and 2022 had an aggregate principal balance of approximately $229.2 million and $394.0 million, respectively, and were under interest rate lock commitments at an average interest rate of 5.88% and 5.50%, respectively.
Forward Sales Commitments. HomeAmerican is exposed to market risks related to fluctuations in interest rates. We mitigate our exposure to interest rate market risk relating to mortgage loans held-for-sale and interest rate lock commitments using: (1) forward sales of mortgage-backed securities, which are commitments to sell a specified financial instrument at a specified future date for a specified price, (2) mandatory delivery forward loan sale commitments, which are obligations of an investor to buy loans at a specified price within a specified time period, and (3) best-effort delivery forward loan sale commitments, which are obligations of an investor to buy loans at a specified price subject to the underlying mortgage loans being funded and closed. The market related risks in our business are described in more detail in our description of Risk Factors.
Competition. HomeAmerican has significant competition with other mortgage bankers to arrange financing for our homebuyers. The competitive nature of our mortgage business is described in more detail in our description of Risk Factors.
Regulation. Our mortgage lending operations are subject to compliance with applicable laws and regulations, which are described in more detail in our description of Risk Factors.
Insurance Operations
General. Allegiant and StarAmerican were formed to provide insurance coverage of homebuilding risks for our homebuilding subsidiaries and most of our homebuilding subcontractors. Allegiant was organized as a risk retention group under the Federal Liability Risk Retention Act of 1981. Allegiant, which began operations in June of 2004, is licensed as a Class 3 Stock Insurance Company by the Division of Insurance of the State of Hawaii and is subject primarily to the regulations of its state of incorporation. StarAmerican is a single parent captive insurance company licensed by the Division of Insurance of the State of Hawaii. Pursuant to agreements executed on an annual basis since June of 2004, StarAmerican has re-insured Allegiant for all claims in excess of $50,000 per occurrence up to $3.0 million per occurrence prior to July 1, 2022, and up to $5.0 million per occurrence subsequent to July 1, 2022, subject to various aggregate limits.
Allegiant generates premium revenue generally by providing to its customers, comprised of the Company’s homebuilding subsidiaries and most subcontractors of the Company’s homebuilding subsidiaries, general liability insurance on homes sold by our homebuilding subsidiaries and for work performed in completed subdivisions. Allegiant seeks to provide to its customers coverage and insurance rates that are competitive with other insurers. StarAmerican generates premium revenue by providing re-insurance coverage to Allegiant. Allegiant and StarAmerican incur expenses for actual losses and loss adjustment expenses and for reserves established based on actuarial studies including known facts, such as our experience with similar insurance cases and historical trends involving insurance claim payment patterns, pending levels of unpaid insurance claims, claim severity, claim frequency patterns and interpretations of circumstances including changing regulatory and legal environments.
Regulation. Allegiant and StarAmerican are licensed in the State of Hawaii and, therefore, are subject to regulation by the Hawaii Insurance Division. This regulation includes restrictions and oversight regarding: types of insurance provided; investment options; required capital and surplus; financial and information reporting; use of auditors, actuaries and other service providers; periodic examinations; and other operational items. Additionally, as a risk retention group, Allegiant is also registered in other states where certain MDC homebuilding subsidiaries do business.
Insurance Agency Operations
American Home Insurance is an insurance agency that sells primarily homeowners, personal property and casualty insurance products in the same markets where our homebuilding subsidiaries operate and primarily to our homebuyers.

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Title Operations
American Home Title provides title agency services to the Company and its homebuyers in Colorado, Florida, Maryland, Nevada, Pennsylvania and Virginia.
Human Capital Resources
The table below summarizes the approximate number of employees for our combined Homebuilding, combined Financial Services and Corporate segments at December 31, 2023 and 2022.
December 31,
20232022
Homebuilding1,305 1,200 
Financial Services208 205 
Corporate247 238 
Total1,760 1,643 

We believe our employees are one of our greatest assets and our Company is made up of diverse, talented and dedicated employees working together to achieve common and rewarding goals. We value integrity, hard work, dedication, energy and teamwork. Our goal is to promote an environment where employees are encouraged to do their best work with high professional standards, team collaboration and customer excellence.

At MDC we are committed to fostering a diverse and inclusive workplace. Our management teams and all of our employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. We have implemented and maintained a corporate compliance program to provide guidance for everyone associated with the Company, including its employees, officers and directors (the "Code"). Annual review of the Code is required and it, in summary, prohibits unlawful or unethical activity, including discrimination, and directs our employees, officers, and directors to avoid actions that, even if not unlawful or unethical, might create an appearance of illegality or impropriety. In addition, the Code includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination.

We recognize that we are in a competitive marketplace when it comes to finding top talent. Our leaders across all levels of the organization consistently review their business metrics to determine appropriate workforce planning goals. We offer a variety of career paths for our employees; which includes consistent training and development through online resources, job shadowing, mentoring, etc. Our employees may participate in a robust benefits program, which includes a focus on health and wellness, and we offer a variety of other employee perks. We believe our compensation packages and benefits are competitive with others in our industry. We are committed to consistently evaluating total compensation across all positions within the Company.

As we look to the future, we will continue to leverage the core principles and practices that contributed to our past achievements, while welcoming new perspectives that allow our organization to evolve with the changing economic landscape. We will maintain our commitment to quality craftsmanship, providing excellent customer service, hiring from within when possible and fostering an internal culture that supports collaboration and teamwork as well as work-life balance.
(e) Available Information
We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available free of charge on our website as soon as reasonably practicable after we file or furnish the materials electronically with the Securities and Exchange Commission (“SEC”). To obtain any of this information, go to our website, www.mdcholdings.com, and select “SEC Filings” from the menu. Our website includes our: (1) Corporate Governance Guidelines; (2) Corporate Code of Conduct; (3) Rules for Senior Financial Officers; (4) Audit Committee Procedures for Handling Confidential Complaints; (5) charters for the Audit, Compensation, Legal and Corporate Governance/Nominating Committees; (6) Director Standards of Independence; and (7) Lead Director Description. These materials may be obtained, free of charge, at www.mdcholdings.com (select “Governance”).
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Item 1A. Risk Factors.
Public health issues such as a pandemic or epidemic could harm business and results of operations of the Company.
Demand for our homes is dependent on a variety of macroeconomic factors, such as employment levels, availability of financing for homebuyers, interest rates, consumer confidence and spending, wage growth and inflation, household formations, levels of new and existing homes for sale, cost of land, labor and construction materials, demographic trends and housing demand. These factors, in particular consumer confidence, can be significantly and adversely affected by a variety of factors beyond our control. Specifically, an epidemic, pandemic, or similar public health issue could significantly disrupt us from operating our business in the ordinary course for an extended period, and thereby, along with associated economic and/or consumer confidence instability, have a material adverse impact on our financial position, results of operations and cash flows.
For example, the COVID-19 pandemic continues to affect the global economy. The effects of the pandemic contributed to disrupting our supply chain, which has resulted in shortages of certain building materials and tightness in the labor market. There is still significant uncertainty as a result of the pandemic and its continuing potential to negatively impact the U.S. economy. The degree to which the pandemic will impact our financial results in the coming periods depends on future developments that are highly uncertain, including whether there are additional outbreaks of COVID-19 and related variants and the actions taken to contain or address the virus. If the pandemic continues to cause significant negative impacts to the U.S. economy and consumer confidence, our results of operations, financial condition and cash flows could be significantly and adversely impacted.
Changes in general economic, real estate and other business conditions may have an adverse effect on the homebuilding and mortgage industries, which could have a negative impact on our business.
The homebuilding industry is cyclical and is significantly affected by changes in industry conditions, the national political environment and general economic conditions such as:
employment levels;
availability of financing for homebuyers;
interest rates;
consumer confidence and spending;
wage growth;
inflation;
household formations;
levels of new and existing homes for sale;
cost of land, labor and construction materials;
demographic trends; and
housing demand.
These conditions may exist on a national level or may affect some of the regions or markets in which we operate more than others. When adverse conditions affect any of our larger markets, they could have a proportionately greater impact on us than on some other homebuilding companies.
Changes to monetary policy or other actions by the Federal Reserve could have an adverse effect on interest rates (including mortgage interest rates), equity markets and consumer confidence. Adverse effects could cause and have caused us to experience declines in the market value of our inventory and the demand for our homes, resulting in a negative impact to our financial position, results of operations and cash flows.
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An oversupply of alternatives to new homes, including foreclosed homes, homes held for sale or rent by investors and speculators, other existing homes, and rental properties, can also reduce our ability to sell new homes, depress new home prices and reduce our margins on the sale of new homes. High levels of foreclosures and short-sales not only contribute to additional inventory available for sale, but also can reduce appraisal valuations for new homes, potentially resulting in lower sales prices.
Terrorist attacks, acts of war, other acts of violence or threats to national security, and any corresponding response by the United States or others, or related domestic or international instability, may adversely affect general economic conditions or cause a slowdown of the economy.
As a result of the foregoing matters, potential customers may be less willing or able to buy our homes. In the future, our pricing strategies may be limited by market conditions. We may be unable to change the mix of our home offerings, reduce the costs of the homes we build or offer more affordable homes to maintain our gross margins or satisfactorily address changing market conditions in other ways. In addition, cancellations of home sales contracts in backlog may increase as homebuyers choose to not honor their contracts.
Additionally, the factors discussed above may increase our counterparty risk, which may include, among others, banks under our credit facilities and mortgage purchasers who may not be willing or able to perform on obligations to us. To the extent a third-party is unable or unwilling to meet its obligations, our financial position, results of operations and cash flows could be negatively impacted.
Our mortgage operations are closely related to our homebuilding business, as HomeAmerican originates mortgage loans principally to purchasers of the homes we build. Therefore, a decrease in the demand for our homes because of the preceding matters may also adversely affect the financial results of this segment of our business. Furthermore, any adverse changes in the economic conditions discussed previously could increase the default rate on the mortgages we originate, which may adversely affect our ability to sell the mortgages, the pricing we receive upon the sale of mortgages, or our potential exposure to recourse regarding mortgage loan sales.
These challenging conditions are complex and interrelated. We cannot predict their occurrence or severity, nor can we provide assurance that our responses would be successful.
Increased competition levels in the homebuilding and mortgage lending industries could have a negative impact on our homebuilding and mortgage operations.
The homebuilding industry is fragmented and highly competitive. Our homebuilding subsidiaries compete with numerous public and private homebuilders, including a number that are substantially larger than us and may have greater financial resources than we do. Our homebuilding subsidiaries also compete with subdivision developers and land development companies, some of which are themselves homebuilders or affiliates of homebuilders. Homebuilders compete for customers, land, building materials, subcontractor labor and desirable financing. Competition for home orders is based primarily on home sales price, location of property, home style, financing available to prospective homebuyers, quality of homes built, customer service and general reputation in the community, and may vary market-by-market and/or submarket-by-submarket. Additionally, competition within the homebuilding industry can be impacted by an excess supply of new and existing homes available for sale resulting from a number of factors, including, among other things, increases in the number of new home communities, increases in speculative homes available for sale and increases in home foreclosures. Increased competition can result in a decrease in our net new home orders, a decrease in our home sales prices and/or an increase in our home sales incentives in an effort to generate new home sales and maintain homes in backlog until they close. These competitive pressures may negatively impact our financial position, results of operations and cash flows.
Our mortgage lending subsidiary, HomeAmerican, experiences competition from numerous banks and other mortgage bankers and brokers, many of which are larger and may have greater financial resources. As a result, these competitors may be able to offer better pricing and/or mortgage loan terms, more relaxed underwriting criteria and a greater range of products, which could negatively impact the financial position, results of operations and cash flows of our mortgage operations.
If land is not available at reasonable prices or terms, we could be required to scale back our operations in a given market and/or we may operate at lower levels of profitability.
Our operations depend on our homebuilding subsidiaries’ ability to obtain land for the development of our residential communities at reasonable prices and with terms that meet our underwriting criteria. Our ability to obtain land for new residential communities may be adversely affected by changes in the general availability of land, the willingness of land sellers to sell land at reasonable prices, competition for available land, availability of financing to acquire land, zoning, regulations that
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limit housing density, and other market conditions. If the supply of land, and especially finished lots, appropriate for development of residential communities is limited because of these factors, or for any other reason, the number of homes that our homebuilding subsidiaries build and sell may decline. To the extent that we are unable to purchase land timely or enter into new contracts for the purchase of land at reasonable prices, due to the lag time between the time we acquire land and the time we begin selling homes, we may be required to scale back our operations in a given market and/or we may operate at lower levels of profitability. As a result, our financial position, results of operations and cash flows could be negatively impacted.
Supply shortages and other risks related to the demand for skilled labor and building materials could continue to increase costs and delay deliveries.
The residential construction industry experiences price fluctuations and shortages in labor and materials from time to time. Shortages in labor can be due to: competition for labor, work stoppages, labor disputes, shortages in qualified trades people, lack of availability of adequate utility infrastructure and services, or our need to rely on local subcontractors who may not be adequately capitalized or insured. Labor and material shortages can be more severe during periods of strong demand for housing or during periods in which the markets where we operate experience natural disasters that have a significant impact on existing residential and commercial structures. Additionally, we could experience labor shortages as a result of subcontractors going out of business or leaving the residential construction market due to low levels of housing production and volumes. Pricing for labor and materials can be affected by the factors discussed above, changes in energy prices, and various other national, regional and local economic factors. In addition, environmental and other regulations and import tariffs and trade restrictions have had, and in the future could continue to have, an adverse impact on the cost of certain raw materials such as lumber. Recalls of materials driven by manufacturing defects can drive shortages in materials and delay the delivery of homes. Any of these circumstances could give rise to delays in the start or completion of our residential communities, increase the cost of developing one or more of our residential communities and/or increase the construction cost of our homes.
We generally are unable to pass on increases in construction costs on build-to-order homes to customers who have already entered into sales contracts, as those sales contracts fix the price of the homes at the time the contracts are signed, which generally is in advance of the construction of the home. With our increase in the number of spec homes due to spec construction starts, we may see an increase in our ability to pass on increases in construction costs to customers should market conditions permit. To the extent that market conditions prevent the recovery of increased costs, including, among other things, subcontracted labor, finished lots, building materials, and other resources, through higher selling prices, our financial position, cash flows and operating results, including our gross margin from home sales, could be negatively impacted.
If mortgage interest rates continue to rise, if down payment requirements are increased, if loan limits are decreased, or if mortgage financing otherwise becomes less available, it could adversely affect our business.
Mortgage liquidity influenced by governmental entities like the FHA, VA, USDA and Ginnie Mae or government-sponsored enterprises (“GSEs”) like Fannie Mae and Freddie Mac continue to be an important factor in marketing our homes. Financial losses or other factors may limit, restrict or otherwise curtail their ability or willingness to insure mortgage loans, offer insurance at rates and on terms that are not prohibitive, or purchase mortgage loans. Should this occur, it may negatively impact the availability of mortgage financing and our sales of new homes.
We believe that the liquidity provided by Fannie Mae, Freddie Mac and Ginnie Mae to the mortgage industry has been very important to the housing market. Any reduction in the availability of the liquidity provided by these institutions could adversely affect interest rates, mortgage availability and our sales of new homes and mortgage loans.
Loans sold to or insured by the GSEs are subject to various loan limits. Decreases in these loan limits may require homebuyers to make larger down payments or obtain more restrictive non-conforming or “jumbo” mortgages, which could adversely impact on our financial position, results of operations and cash flows.
Even if potential customers do not need financing, changes in the availability of mortgage products may make it harder for them to sell their current homes to potential buyers who need financing.
If interest rates continue to increase, the costs of owning a home may continue to be affected and could result in further reductions in the demand for our homes. During fiscal 2022 and into 2023, the increase in mortgage interest rates had a significant impact on the demand for our homes.

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Changes to tax laws, incentives or credits currently available to our customers may negatively impact our business.
Many homeowners receive substantial tax benefits in the form of tax deductions against their personal taxable income for mortgage interest and property tax payments and the loss or reduction of these deductions could affect homeowners’ net cost of owning a home. Significant changes to existing tax laws, such as the ability to deduct mortgage interest and real property taxes, may result in an increase in the total cost of home ownership and may make the purchase of a home less attractive to buyers. This could adversely impact demand for and/or sales prices of new homes, which would have a negative impact on our business.
A decline in the market value of our homes or carrying value of our land could continue to have a negative impact on our business.
Our homebuilding subsidiaries acquire land for the replacement of land inventory and/or expansion within our current markets and may, from time to time, purchase land for expansion into new markets. The fair value of our land and land under development inventory and housing completed or under construction inventory depends on market conditions. Factors that can impact our determination of the fair value of our inventory primarily include home sale prices, levels of home sale incentives and home construction and land costs. Our home sale prices and/or levels of home sale incentives can be impacted by, among other things, uncertainty in the homebuilding and mortgage industries or the United States/global economy overall, decreased demand for new homes, decreased home prices offered by our competitors, home foreclosure and short-sale levels, decreased ability of our homebuyers to obtain suitable mortgage loan financing and high levels of home order cancellations. Under such circumstances, we may be required to record impairments of our inventory. Any such inventory impairments would have a negative impact on our financial position and results of operations. During fiscal 2022 and into 2023, the increase in mortgage interest rates had a significant impact on the homebuilding industry causing home sale prices to decrease and home sale incentives to increase across the industry. This has resulted in inventory impairments in certain of our communities due to the decline in the market value of our housing completed or under construction and land and land under development inventory.
Natural disasters could cause an increase in home construction costs, as well as delays, and could negatively impact our business.
The climates and geology of many of the markets in which we operate present increased risks of natural disasters. To the extent that hurricanes, severe storms, earthquakes, droughts, floods, heavy or prolonged precipitation, wildfires or other natural disasters or similar events occur, the financial position, results of operations and cash flows of our business may be negatively impacted.
Changes in energy prices or regulations may have an adverse effect on our cost of building homes.
Some of the markets in which we operate are impacted by regulations related to energy, such as setbacks required from oil / gas drilling operations or restrictions on the use of land. To the extent that these regulations are modified, the value of land we already own or the availability of land we are looking to purchase may decline, which may adversely impact the financial position, results of operations and cash flows of our business. Furthermore, pricing offered by our suppliers and subcontractors can be adversely affected by increases in various energy costs resulting in a negative impact to our financial position, results of operations and cash flows of our business.
We have financial needs that we meet through the capital markets, including the debt and secondary mortgage markets, and disruptions in these markets could have an adverse impact on the results of our business.
We have financial needs that we meet through the capital markets, including the debt and secondary mortgage markets. Our requirements for additional capital, whether to finance operations or to service or refinance our existing indebtedness, fluctuate as market conditions and our financial performance and operations change. We cannot provide assurance that we will maintain cash reserves and generate sufficient cash flow from operations in an amount to enable us to service our debt or to fund other liquidity needs.
The availability of additional capital, whether from private capital sources or the public capital markets, fluctuates as our financial condition and market conditions in general change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. Additionally, any reduction in our credit ratings and/or a weakening of our financial condition, could adversely affect our ability to obtain necessary funds. Even if financing is available, it could be costly or have other adverse consequences.
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In addition, the sources and terms and conditions of our mortgage repurchase facility are subject to change. These changes may impact, among other things, availability of capital, cost of borrowings, collateral requirements and collateral advance rates.
Our business is subject to numerous federal, state and local laws and regulations concerning land development, construction of homes, sales, mortgage lending, environmental and other aspects of our business. These laws and regulations could give rise to additional liabilities or expenditures, or restrictions on our business.
Our operations are subject to continuing compliance requirements mandated by applicable federal, state and local statutes, ordinances, rules and regulations, including zoning and land use ordinances, building, plumbing and electrical codes, contractors’ licensing laws, state insurance laws, federal and state human resources laws and regulations, and health and safety laws and regulations. Various localities in which we operate have imposed (or may impose in the future) fees on developers to fund schools, road improvements and low and moderate-income housing.
Availability of and costs related to permit, water/sewer tap, and impact fees can impact our homebuilding operations. From time to time, various municipalities in which our homebuilding subsidiaries operate restrict or place moratoria on the availability of utilities, including water and sewer taps. Additionally, certain jurisdictions in which our homebuilding subsidiaries operate have proposed or enacted “slow growth” or “no growth” initiatives and other measures that may restrict the number of building permits available in any given year. These initiatives or other similar measures could reduce our ability to open new subdivisions and build and sell homes in the affected markets. The availability issues previously discussed and any increases in costs of these fees may negatively impact our financial position, results of operations and cash flows.
Our homebuilding operations also are affected by regulations pertaining to availability of water, municipal sewage treatment capacity, land use, dust controls, oil and gas operations, building materials, population density and preservation of endangered species, natural terrain and vegetation.

We are subject to growing local, state and federal statutes, ordinances, rules and regulations concerning the protection of public health and the environment. These include regulating the emission or discharge of materials into the environment such as greenhouse gas emissions, storm water runoff, the handling, use, storage and disposal of hazardous substances, and impacts to wetlands and other sensitive environments. These restrictions and requirements could increase our operating costs and require additional capital investment, which could negatively impact our financial position, results of operations and cash flows. Further, we have extensive operations in the western United States, where some of the most extensive environmental laws and building construction standards in the country have been enacted. We believe we are in compliance in all material respects with existing governmental environment restrictions, standards and regulations applicable to our business, and such compliance has not had a material impact on our business. Given the emerging and rapid changes of environmental laws and other matters that may arise that are not currently known, we cannot predict our future exposure, and our future costs to achieve compliance or remedy potential violations could be significant.
The particular environmental laws and regulations that apply to any given homebuilding project vary greatly according to a particular site’s location, the site’s environmental conditions and the present and former uses. These environmental laws may result in project delays, cause us to incur substantial compliance and other costs and/or prohibit or severely restrict homebuilding activity in certain environmentally sensitive locations. Environmental laws and regulations may also have a negative impact on the availability and price of certain raw materials, such as lumber.
Our revolving credit facility contains representations regarding anti-corruption and sanctions laws, a violation of which could result in an event of default.
We also are subject to rules and regulations with respect to originating, processing, selling and servicing mortgage loans, which, among other things: prohibit discrimination and establish underwriting guidelines; provide for audits and inspections; require appraisals and/or credit reports on prospective borrowers and disclosure of certain information concerning credit and settlement costs; establish maximum loan amounts; prohibit predatory lending practices; and regulate the referral of business to affiliated entities.
The regulatory environment for mortgage lending is complex and ever changing and has led to an increase in the number of audits and examinations in the industry. These examinations can include consumer lending practices, sales of mortgages to financial institutions and other investors and the practices in the financial services segments of homebuilding companies. New rules and regulations or revised interpretations of existing rules and regulations applicable to our mortgage lending operations could result in more stringent compliance standards, which may substantially increase costs of compliance.
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In the ordinary course of business, we are required to obtain surety bonds, the unavailability of which could adversely affect our business.
As is customary in the homebuilding industry, we often are required to provide surety bonds to secure our performance under construction contracts, development agreements and other arrangements. Our ability to obtain surety bonds primarily depends upon our credit rating, capitalization, working capital, past performance, management expertise and certain external factors, including the overall capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain surety bonds also can be impacted by the willingness of insurance companies to issue surety bonds. If we are unable to obtain surety bonds when required, our financial position, results of operations and cash flows could be adversely impacted.
Product liability litigation and warranty claims that arise in the ordinary course of business may be costly.
As a homebuilder, we are subject to construction defect and home warranty claims, as well as claims associated with the sale and financing of our homes arising in the ordinary course of business. These types of claims can be costly. The costs of insuring against or directly paying for construction defect and product liability claims can be high and the amount of coverage offered by insurance companies may be limited. If we are not able to obtain adequate insurance against these claims, we may incur additional expenses that would have a negative impact on our results of operations in future reporting periods. Additionally, changes in the facts and circumstances of our pending litigation matters could have a material impact on our financial position, results of operations and cash flows.
Repurchase requirements associated with HomeAmerican’s sale of mortgage loans, could negatively impact our business.
We are subject to risks associated with mortgage loans, including conventional mortgage loans, FHA and VA mortgage loans, second mortgage loans, high loan-to-value mortgage loans and jumbo mortgage loans (mortgage loans with principal balances that exceed various thresholds in our markets). These risks may include, among other things, compliance with mortgage loan underwriting criteria and the associated homebuyers’ performance, which could require HomeAmerican to repurchase certain of those mortgage loans or provide indemnification. Repurchased mortgage loans and/or the settlement of claims associated with such loans could have a negative impact on HomeAmerican’s financial position, results of operations and cash flows.
Because of the seasonal nature of our business, our quarterly operating results can fluctuate.
We may experience noticeable seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, the number of homes delivered and the associated home sale revenues increase during the third and fourth quarters, compared with the first and second quarters. We believe that this type of seasonality reflects the historical tendency of homebuyers to purchase new homes in the spring and summer with deliveries scheduled in the fall or winter, as well as the scheduling of construction to accommodate seasonal weather conditions in certain markets.
We are dependent on the services of key employees, and the loss of their services could hurt our business.
Although we believe that we have made provision for adequately staffing current operations, because of competition for experienced homebuilding industry personnel, retaining our skilled people is an important area of focus. Our future success depends, in part, on our ability to attract, train and retain skilled personnel. If we are unable to retain our key employees or attract, train and retain other skilled personnel in the future, it could have an adverse impact on our financial position, results of operations and cash flows.
The interests of certain controlling stockholders may be adverse to other investors
Larry A. Mizel and David D. Mandarich beneficially own, directly or indirectly through their affiliates, in the aggregate, approximately 21.2% of our common stock. To the extent they and their affiliates vote their shares in the same manner, their combined stock ownership may effectively give them the power to influence the election of members of our board of directors and other matters reserved for our stockholders.
On January 17, 2024, in connection with the Company’s execution of the Merger Agreement, Mr. Larry Mizel, Mr. David Mandarich and certain of Mr. Mizel’s affiliates and estate planning vehicles (the “Specified Company Stockholders”) entered into a Voting Agreement (the “Voting Agreement”) with Parent, pursuant to which the Specified Company Stockholders have agreed, among other things, to vote their shares of common stock in favor of the adoption of the Merger Agreement and the approval of the Merger and any other matters that would reasonably be expected to facilitate the Merger and against, among other things, any other action, proposal or transaction that is intended, or would reasonably be expected, to
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impede, interfere with, delay, postpone, discourage or prevent the consummation of, or otherwise adversely affect, the Merger or any of the other transactions contemplated by the Merger Agreement or Voting Agreement. The Voting Agreement also includes certain restrictions on transfer of shares of common stock by such Specified Company Stockholders. The Voting Agreement will automatically terminate upon certain events, including the termination of the Merger Agreement.
Information technology failures and cybersecurity breaches could harm our business.
We use information technology and other computer resources to carry out important operational activities and to maintain our business records. These information technology systems are dependent upon electronic systems and other aspects of the internet infrastructure. A material breach in the security of our information technology systems or other data security controls could result in third parties obtaining or corrupting customer, employee or company data. To date, we have not had a material breach of data security, however such occurrences could have a material and adverse effect on our financial position, results of operations and cash flows.
Financial industry turmoil could materially and adversely affect our liquidity and consolidated financial statements.
The banking industry has experienced certain bank failures and other turmoil in 2023. The failure of other banks or financial institutions, if it occurs, could have a material adverse effect on our liquidity or consolidated financial statements if we have placed cash or other deposits at such banks or financial institutions, or if such banks or financial institutions, or any substitute or additional banks or financial institutions, participate in our Revolving Credit Facility. Under our Revolving Credit Facility, non-defaulting lenders are not obligated to cover or acquire a defaulting lender’s respective commitment to fund loans or to issue letters of credit and may be unwilling to issue additional letters of credit if we do not enter into arrangements to address the risk with respect to the defaulting lender (which may include cash collateral). If the non-defaulting lenders are unable or unwilling to cover or acquire a defaulting lender’s respective commitment, we may not be able to access the Revolving Credit Facility’s full borrowing or letter of credit capacity to support our business needs. In addition, if a buyer under our Mortgage Repurchase Facility, which is used to fund mortgage originations, fails or is unable or unwilling to fulfill its obligations, HomeAmerican may be limited in its ability to provide mortgage loans to our homebuyers, which may prevent them from closing on their homes at the time expected or at all.
Our By-laws designate the Court of Chancery of the State of Delaware, subject to certain exceptions, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders and designate the federal district courts of the United States as the exclusive forum for actions arising under the Securities Act of 1933, as amended, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our By-laws, as amended, designate the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, as the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, or other employee or agent of the Company to the Company or its stockholders, or a claim of aiding and abetting any such breach of fiduciary duty, (c) any action asserting a claim arising pursuant to any provision of the DGCL, the Company’s Amended and Restated Certificate of Incorporation or the By-laws, (d) any action to interpret, apply, enforce or determine the validity of the Company’s Amended and Restated Certificate of Incorporation or By-laws, or (e) any action asserting a claim governed by the internal affairs doctrine. If the Court of Chancery of the State of Delaware lacks jurisdiction over such action or proceeding, the sole and exclusive forum for such action or proceeding shall be another court of the State of Delaware or, if no court of the State of Delaware has jurisdiction, then the federal district court for the District of Delaware. In addition, the By-laws provide that the federal district courts of the United States are the sole and exclusive forum for any complaint raising a cause of action arising under the Securities Act of 1933, as amended.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our By-laws described above. In addition, to the fullest extent permitted by law, any person who, or entity that, holds, purchases or otherwise acquires an interest in stock of the Company shall be deemed to have consented to the personal jurisdiction of the Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction, another court of the State of Delaware, or if no court of the State of Delaware has jurisdiction, the federal district court for the District of Delaware) in any proceeding brought to enjoin any action by that person or entity that is inconsistent with the exclusive jurisdiction provided for in our By-Laws. To the fullest extent permitted by applicable law, if any action the subject matter of which is within the scope of the exclusive forum provisions in our By-Laws is filed in a court other than as specified above in the name of any stockholder, such stockholder shall be deemed to have consented to (a) the personal jurisdiction of the Court of Chancery of the State of Delaware, another court in the State of Delaware or the federal district court in the District of Delaware, as appropriate, in connection with any action brought in any such court to enforce the exclusive forum provisions of our By-Laws and (b) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the action as agent for such stockholder.
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These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our By-laws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Risks Related to the Merger
The Merger is subject to receipt of approval from our stockholders as well as the satisfaction of other closing conditions, including conditions that may not be satisfied or completed within the expected timeframe, if at all.
The consummation of the Merger is subject to a number of important closing conditions that make the closing and timing of the Merger uncertain. These conditions include, among others, the (i) affirmative vote of the holders of a majority of all of the outstanding shares of common stock to adopt the Merger Agreement; (ii) expiration or termination of any waiting period (and extensions thereof) applicable to the transactions contemplated by the Merger Agreement, including the Merger, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder; (iii) absence of any law, order or injunction enacted or issued after the date of the Merger Agreement restraining, enjoining or otherwise prohibiting the Merger; and (iv) absence of certain events constituting a material adverse effect on the Company’s business following the date of the Merger Agreement. We can provide no assurance that all required consents and approvals will be obtained or that all closing conditions will otherwise be satisfied (or waived, if applicable), and, if all required consents and approvals are obtained and all closing conditions are satisfied (or waived, if applicable), we can provide no assurance as to the terms, conditions and timing of such consents and approvals or the timing of the completion of the Merger. Many of the conditions to completion of the Merger are not within either our or Parent’s control, and neither us nor Parent can predict when or if these conditions will be satisfied (or waived, if applicable).
Each party’s obligation to consummate the Merger is also subject to the accuracy of the representations and warranties of the other party (subject to customary materiality qualifications) and compliance in all material respects with the covenants and agreements contained in the Merger Agreement as of the closing of the Merger, including, with respect to us, covenants to conduct our business in the ordinary course and to not engage in certain kinds of material transactions prior to closing.
Failure to complete the Merger in a timely manner, or at all, could negatively impact our future business and our financial condition, results of operations and cash flows.
The Merger may not be completed within the expected timeframe, or at all, as a result of various factors and conditions, some of which may be beyond our control. If the Merger is not completed for any reason, including as a result of our stockholders failing to adopt the Merger Agreement, our stockholders will not receive any payment for their shares in connection with the Merger. Instead, the Company will remain an independent public company, and its shares will continue to be traded on the New York Stock Exchange and registered under the Securities Exchange Act of 1934, as amended, and we will be required to continue to file periodic reports with the SEC. Moreover, our ongoing business may be materially adversely affected and we would be subject to a number of risks, including the following:
we may experience negative reactions from the financial markets, including negative impacts on our stock price, and it is uncertain when, if ever, the price of the shares would return to the prices at which the shares currently trade;
we may experience negative publicity, which could have an adverse effect on our ongoing operations including, but not limited to, retaining and attracting employees, customers, partners, suppliers and others with whom we do business;
we will still be required to pay certain significant costs relating to the Merger, such as legal, accounting, financial advisor, printing and other professional services fees, which may relate to activities that we would not have undertaken other than in connection with the Merger;
we may be required to pay a cash termination fee to Parent, as required under the Merger Agreement under certain circumstances;
while the Merger Agreement is in effect, we are subject to restrictions on the conduct of our business, including restrictions on our ability to engage in certain kinds of material transactions, which could prevent us from pursuing strategic business opportunities, taking actions with respect to our business that we may consider advantageous and responding effectively and/or timely to competitive pressures and industry developments, and may as a result materially adversely affect our business, results of operations and financial condition;
matters relating to the Merger require substantial commitments of time and resources by our management, which could result in the distraction of management from ongoing business operations and pursuing other opportunities that could have been beneficial to us; and
litigation related to the Merger or related to any enforcement proceeding commenced against us to perform our obligations under the Merger Agreement.
If the Merger is not consummated, the risks described above may materialize and they may have a material adverse effect on our business operations, financial results and stock price, especially to the extent that the current market price of our common stock reflects an assumption that the Merger will be completed.
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We are subject to certain restrictions in the Merger Agreement that may hinder operations pending the consummation of the Merger.
The Merger Agreement generally requires us to operate our business in the ordinary course pending consummation of the Merger and restricts us, without Parent’s consent, from taking certain specified actions until the Merger is completed, subject to certain exceptions. These restrictions may affect our ability to execute our business strategies and attain our financial and other goals and may impact our financial condition, results of operations and cash flows.
These restrictions could be in place for an extended period of time if the consummation of the Merger is delayed, which may delay or prevent us from undertaking business opportunities that, absent the Merger Agreement, we might have pursued, or from effectively responding to competitive pressures or industry developments.
Whether or not the Merger is completed, the pending Merger may disrupt our current plans and operations, which could have an adverse effect on our business and financial results. For these and other reasons, the pendency of the Merger could adversely affect our business and financial results.
We will be subject to various uncertainties while the Merger is pending that may cause disruption and may make it more difficult to maintain relationships with employees, clients, customers, and others with whom we do business.
Our efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business. In connection with the Merger, our current and prospective employees may experience uncertainty about their future roles with the combined company following the Merger, which may materially adversely affect our ability to attract and retain key personnel while the Merger is pending. Key employees may depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the Merger. Accordingly, no assurance can be given that we will be able to attract and retain key employees to the same extent that we have been able to in the past. If we do not succeed in attracting, hiring, and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow and operate our business effectively.
As mentioned above, some amount of our management’s and employees’ attention is being directed toward the completion of the Merger and thus is being diverted from our day-to-day operations. The Merger further could cause disruptions to our business or business relationships, which could have an adverse impact on our results of operations. Parties with which we have business relationships may experience uncertainty as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties. The pursuit of the Merger and the preparation for the integration may also place a significant burden on management and internal resources. The diversion of management’s attention away from day-to-day business concerns could adversely affect our financial results.
The Merger Agreement contains provisions that could discourage a third party from making a competing acquisition proposal.
The Merger Agreement contains certain customary restrictions on our ability to solicit proposals from third parties for an acquisition of the Company prior to obtaining the approval of the Merger Agreement from our stockholders. In addition, subject to certain customary “fiduciary out” exceptions, the Board is required to recommend that our stockholders vote in favor of the approval of the Merger, the Merger Agreement and the transactions contemplated thereby.
We may, under certain circumstances, be obligated to pay a termination fee to Parent and/or reimburse Parent for its expenses. These costs could require us to use cash that would have otherwise been available for other uses.
These provisions might discourage an otherwise-interested third party from considering or proposing an acquisition of the Company, including proposals that may be deemed to offer greater value to our stockholders than as provided in the Merger Agreement. Furthermore, even if a third party elects to propose an acquisition, the requirement that we must pay a termination fee to accept any such proposal may cause that third party to offer a lower price to our stockholders than such third party might otherwise have offered.
In certain instances, the Merger Agreement requires us to pay a termination fee to Parent, which could affect the decisions of a third party considering making an alternative acquisition proposal.
Under the terms of the Merger Agreement, we may be required to pay Parent a termination fee under specified conditions, including in the event Parent terminates the Merger Agreement before receipt of our stockholders’ approval due to a change in recommendation by our Board of Directors, in the event we terminate the Merger Agreement to enter into an alternative acquisition agreement providing for a superior proposal, or in the event we enter into a definitive agreement providing for or consummate an alternative transaction within twelve months of termination of the Merger Agreement in certain
18

circumstances. This payment could affect the structure, pricing and terms proposed by a third party seeking to acquire or merge with us and could discourage a third party from making a competing acquisition proposal, including a proposal that may be deemed to offer greater value to our stockholders than the Merger.
We have incurred, and will continue to incur, direct and indirect costs as a result of the Merger.
We have incurred, and will continue to incur, significant costs and expenses, including regulatory costs, fees for professional services and other transaction costs in connection with the Merger, for which we will have received little or no benefit if the Merger is not completed. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses. Many of these fees and costs will be payable by us even if the Merger is not completed and may relate to activities that we would not have undertaken other than to complete the Merger.
Litigation challenging the Merger Agreement may prevent the Merger from being consummated within the expected timeframe or at all.
Lawsuits may be filed against us, our Board of Directors or other parties to the Merger Agreement, challenging our acquisition by Parent or making other claims in connection therewith. Such lawsuits may be brought by our purported stockholders and may seek, among other things, to enjoin consummation of the Merger. One of the conditions to the consummation of the Merger is that the consummation of the Merger is not restrained, made illegal, enjoined or prohibited by any order or legal or regulatory restraint or prohibition of a court of competent jurisdiction or any governmental entity. As such, if the plaintiffs in such potential lawsuits are successful in obtaining an injunction prohibiting the defendants from completing the Merger on the agreed upon terms, then such injunction may prevent the Merger from becoming effective, or from becoming effective within the expected timeframe.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
The Company understands the importance of preventing, assessing, identifying, and managing material risks associated with cybersecurity threats. Cybersecurity processes to assess, identify and manage risks from cybersecurity threats have been incorporated as a part of the Company’s overall risk assessment process. On a regular basis we implement into our operations these cybersecurity processes, technologies, and controls to assess, identify, and manage material risks. Specifically, we engage a third-party cybersecurity firm to assist with network and endpoint monitoring, cloud system monitoring and assessment of our incident response procedures. Further, we employ periodic penetration testing and tabletop exercises to inform our risk identification and assessment of material cybersecurity threats.
To manage our material risks from cybersecurity threats and to protect against, detect, and prepare to respond to cybersecurity incidents, we undertake the below listed activities:
a.Monitor emerging data protection laws and implement changes to our processes to comply;
b.Conduct periodic customer data handling and use requirement training for our employees;
c.Conduct annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data;
d.Conduct regular phishing email simulations for all employees; and
e.Carry cybersecurity risk insurance that provides protection against the potential losses arising from a cybersecurity incident
Our incident response plan coordinates the activities that we and our third-party cybersecurity provider take to prepare to respond and recover from cybersecurity incidents, which include processes to triage, assess severity, investigate, escalate, contain, and remediate an incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.
As part of the above processes, we engage with consultants to review our cybersecurity program to help identify areas for continued focus, improvement, and compliance.
Our processes also include assessing cybersecurity threat risks associated with our use of third-party services providers in normal course of business use, including those in our supply chain or who have access to our customer and employee data or our systems. Third-party risks are included within our risk management process discussed above. In addition, we assess cybersecurity considerations in the selection and oversight of our third-party services providers, including due diligence on the third parties that have access to our systems and facilities that house systems and data.
19

We describe whether and how risks from identified cybersecurity threats have or that are reasonably likely to affect our financial position, results of operations and cash flows, under the heading “Information technology failures and cybersecurity breaches could harm our business” included as part of our Item 1A. Risk Factors of this Annual Report on Form 10-K, which disclosures are incorporated by reference herein.
Our Audit Committee of the Board of Directors is responsible for oversight of our risk assessment, risk management, disaster recovery procedures and cybersecurity risks. Periodically during each year, the Audit Committee receives an overview from our Vice President of IT of our cybersecurity threat risk management and strategy processes, including potential impact on the Company, the efforts of management to manage the risks that are identified and our disaster recovery preparations. Members of the Board of Directors regularly engage in discussions with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.
Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by our Vice President of IT. Our Vice President of IT has over 20 years of experience in various roles involving managing information security, developing cybersecurity strategy, and implementing cybersecurity programs. The Vice President of IT is informed about and monitors the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of the cybersecurity risk management and strategy processes described above, including our incident response plan.
Item 2. Properties.
Our corporate office is located at 4350 South Monaco Street, Denver, Colorado 80237, where we lease all 144,000 square feet of office space in the building. In many of our markets, our homebuilding divisions and other MDC subsidiaries lease additional office space. While we are currently satisfied with the suitability and capacity of our office locations to meet our current business needs, we continue to evaluate them in view of market conditions and the size of our operations.
Item 3. Legal Proceedings.
Because of the nature of the homebuilding business, we and certain of our subsidiaries and affiliates 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 our 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.
Item 4. Mine Safety Disclosures.
Not applicable.
20

PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
At December 31, 2023, we had 507 shareholders of record. The shares of our common stock are traded on the New York Stock Exchange under the trading symbol MDC. On January 25, 2021, the Company declared an 8% stock dividend that was distributed on March 17, 2021 to shareholders of record on March 3, 2021. In accordance with Accounting Standards Codification Topic 260, “Earnings per Share”, weighted-average shares outstanding, and dividends declared per share have been restated for all periods presented to reflect the effect of this stock dividend.
The table below sets forth the cash dividends declared and paid in 2023, 2022 and 2021:
Date of
Declaration
Date of
Payment
Dividend
per Share
Total
Dividends
Paid
(In thousands)
2023
First Quarter
01/23/2302/22/23$0.50 $36,543 
Second Quarter
04/17/2305/24/230.50 36,565 
Third Quarter
07/24/2308/23/230.55 41,064 
Fourth Quarter
10/23/2311/22/230.55 41,065 
$2.10 $155,237 
2022
First Quarter01/24/2202/23/22$0.50 $35,583 
Second Quarter04/26/2205/25/220.50 35,580 
Third Quarter07/26/2208/24/220.50 35,622 
Fourth Quarter10/24/2211/23/220.50 35,632 
$2.00 $142,417 
2021
First Quarter01/25/2102/24/21$0.37 $25,978 
Second Quarter04/26/2105/26/210.40 28,249 
Third Quarter07/26/2108/25/210.40 28,276 
Fourth Quarter10/25/2111/24/210.50 35,339 
$1.67 $117,842 


21

The following table provides information about our repurchases of common stock during the Three Months Ended December 31, 2023:
Period:
Total Number of Shares Purchased (1)
Average
Price Paid
Per Share
Total Number of Shares Purchased
as Part of Publicly Announced Plan
or Program (2)
Maximum Number of Shares that
 may yet be Purchased under the
Plan or Program (2)
October 1 to October 31, 2023989 40.37 — 4,000,000 
November 1 to November 30, 2023— N/A— 4,000,000 
December 1 to December 31, 2023— N/A— 4,000,000 
__________________________________
(1)     Represents shares of common stock withheld by us to cover withholding taxes due upon the vesting of restricted stock award shares, at the election of certain holders of nonvested shares, with market value approximating the amount of withholding taxes due.    
(2)     We are authorized to repurchase up to 4,000,000 shares of our common stock. There were no shares of MDC common stock repurchased under this repurchase program during the years ended December 31, 2023, 2022 or 2021. This repurchase authorization was announced on October 25, 2005 and has no expiration.
Performance Graph
Set forth below is a graph comparing the yearly change in the cumulative total return of MDC's common stock with the cumulative total return of the S&P 500® Stock Index and with that of a peer group of other homebuilders over the five-year period ended December 31, 2023, weighted as of the beginning of that period.
It is assumed in the graph that $100 was invested (1) in our common stock; (2) in the stocks of the companies in the S&P 500® Stock Index; and (3) in the stocks of the peer group companies, just prior to the commencement of the period and that all dividends received within a quarter were reinvested in that quarter. The peer group index is composed of the following companies: Beazer Homes USA, Inc., D.R. Horton, Inc., Hovnanian Enterprises, Inc., KB Home, Lennar Corporation, M/I Homes, Inc., Meritage Homes Corporation, NVR, Inc., PulteGroup, Inc. and Toll Brothers, Inc.
The stock price performance shown on the following graph is not indicative of future price performance.
Performance Graph.jpg
22

Item 6. [Reserved]

23

Item 7. 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 Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K. 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.” This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
202320222021
(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues$4,520,296 $5,586,264 $5,102,456 
Home cost of sales(3,684,487)(4,214,379)(3,924,093)
Inventory impairments(29,700)(121,875)(1,600)
Total cost of sales(3,714,187)(4,336,254)(3,925,693)
Gross profit806,109 1,250,010 1,176,763 
Gross margin %17.8 %22.4 %23.1 %
Selling, general and administrative expenses(429,894)(536,395)(493,993)
Loss on debt retirement— — (23,571)
Interest and other income73,567 10,843 5,965 
Other income (expense), net
350 (32,991)(5,476)
Homebuilding pretax income450,132 691,467 659,688 
Financial Services:
Revenues122,570 131,723 152,212 
Expenses(62,942)(71,327)(64,477)
Other income (expense), net16,345 7,991 4,271 
Financial services pretax income75,973 68,387 92,006 
Income before income taxes526,105 759,854 751,694 
Provision for income taxes(125,100)(197,715)(178,037)
Net income$401,005 $562,139 $573,657 
Earnings per share:
Basic$5.42 $7.87 $8.13 
Diluted$5.29 $7.67 $7.83 
Weighted average common shares outstanding:
Basic73,505,508 71,035,558 70,174,281 
Diluted75,357,965 72,943,844 72,854,601 
Cash dividends declared per share$2.10 $2.00 $1.67 
Cash provided by (used in):
Operating Activities$561,630 $905,646 $(207,990)
Investing Activities$469,443 $(585,885)$(27,679)
Financing Activities$(105,271)$(206,125)$335,156 

24

EXECUTIVE SUMMARY
Overview
Industry Conditions and Outlook for MDC*
During 2023, housing market conditions stabilized compared to the more challenging housing market conditions that were present during much of 2022. The majority of 2022 saw housing demand deteriorate as 30-year fixed mortgage rates increased significantly due to the Federal Reserve's aggressive actions to combat inflationary pressures, which caused many buyers to pause and reconsider a home purchase. This resulted in lower gross orders and higher cancellations. In comparison, we saw a much more modest pace of interest rate changes during 2023, which has given consumers the confidence to move forward with their home purchase decision. The housing market continues to see inventory levels that remain undersupplied relative to demand due to (1) the underproduction of new homes over the past decade, and (2) near record low levels of existing home resale inventory as the majority of homeowners with a mortgage have an interest rate below 4%. As a result, our net orders increased 42% during the year ended 2023 as compared to the prior year. Further, supply chain conditions have also normalized to a large degree with average construction build times improving year-over-year.

During 2023, we executed on our strategic pivot to build more speculative inventory, due to a shift in consumer preferences and the ongoing uncertainty around mortgage rates. The demand for our quick move-in homes was strong, with spec homes representing 75% of our gross orders during 2023. During the year we introduced our Curated by the Home GalleryTM concept. These homes include finish details selected by members of our professional design team specific to our home plans. This allows us to capitalize on our design expertise, given our experience with build-to-order homes, to deliver thoughtfully designed homes to quick move-in homebuyers. This pivot to speculative inventory helped reduce cycle times and cancellation activity and in turn drove improved inventory turnover. We ended the year with 13.5 unsold homes under construction, excluding model homes, per active community and just 1.5 completed spec homes per active community.

We believe we are well-positioned to navigate the ever-evolving market conditions given our seasoned leadership team and strong financial position. We ended the quarter with total cash and cash equivalents and marketable securities of $1.72 billion, total liquidity of $2.77 billion and no senior note maturities until 2030. We generated cash flow from operating activities during the year ended December 31, 2023 of $561.6 million and ended the year with a debt-to-capital ratio of 30.7%.

We believe that the underproduction of new homes over the past decade and the constrained supply of existing home resale inventory will benefit the industry over the long term. Further, the Federal Reserve has made more measured adjustments to combat inflation during 2023 versus the aggressive measures taken in 2022. With that said, the current demand for new homes is subject to continued uncertainty due to many factors, including ongoing inflation concerns, the Federal Reserve's efforts to reduce capital in the market and the resulting impact on mortgage interest rates, consumer confidence, the current geopolitical environment and other factors. The potential effect of these factors is highly uncertain and could adversely and materially impact our operations and financial results in future periods.
Proposed Merger*
On January 17, 2024, we entered into the Merger Agreement with Parent, Merger Sub, and solely for purposes of certain provisions specified therein, the Guarantor, providing for the merger of Merger Sub with and into the Company, with the Company continuing as the surviving corporation. The Company has incurred and will incur certain significant costs relating to the Merger, such as legal, accounting, financial advisory, printing and other professional services fees, as well as other customary payments. We currently expect the Merger, which is subject to stockholder and regulatory approvals, and other customary closing conditions, to close in the first half of 2024. See Part I, Item 1 “Business” and Item 1A, “Risk Factors” above.
Results for the Twelve Months Ended December 31, 2023
For the year ended December 31, 2023, we reported net income of $401.0 million, or $5.29 per diluted share, a 29% decrease compared to net income of $562.1 million, or $7.67 per diluted share, for the prior year period. Our homebuilding business was the driver of the difference, as pretax income decreased $241.3 million, or 35%. This was slightly offset by both our financial services business, as pretax income increased $7.6 million, or 11%, and our effective tax rate, which decreased to 23.8% during the year ended December 31, 2023 compared to 26.0% in the prior year period. The decrease in homebuilding pretax income was the result of a 19% decrease in home sale revenues and a 460 basis point decrease in gross margin. This decrease in homebuilding pretax income was partially offset by project abandonment expense of $33.1 million and $121.9 million of inventory impairments incurred in the year ended December 31, 2022 compared to $29.7 million of inventory impairments incurred during 2023. This was further offset by an increase in interest and other income to $73.6 million during
25

the period ended December 31, 2023 compared to $10.8 million during the prior year period. The increase in financial services pretax income was primarily due to our mortgage operations business, driven by a decrease in salary related expenses due to lower headcount, the allocation of revenue from our homebuilding business associated with our financing incentives and an increase in capture rate. This was partially offset by a decrease in closing volume during the period ended December 31, 2023. Our other financial services operations saw an increase in interest income due to increases in both interest rates and our cash and short-term investments year-over-year. The decrease in our effective tax rate was due to a decrease on limitations on deductible executive compensation, as well as an increase in tax windfalls recognized upon the vesting and exercise of equity awards.
* See “Forward-Looking Statements” above.
Homebuilding
Pretax Income (Loss)
Year Ended December 31,
2023Change2022Change2021
Amount%Amount%
(Dollars in thousands)
West$219,560 $(193,866)(47)%$413,426 $(49,876)(11)%$463,302 
Mountain143,838 (101,618)(41)%245,456 13,933 %231,523 
East64,222 (62,602)(49)%126,824 67,330 113 %59,494 
Corporate22,512 116,751 124 %(94,239)392 — %(94,631)
Total homebuilding pretax income$450,132 $(241,335)(35)%$691,467 $31,779 %$659,688 
Homebuilding pretax income for 2023 was $450.1 million, a decrease of $241.3 million from $691.5 million for the year ended December 31, 2022. The decrease was primarily attributable to a 19% decrease in home sale revenues and a 460 basis point decrease in gross margin from home sales. These decreases were partially offset by project abandonment expense of $33.1 million during the year ended December 31, 2022.
Our West segment experienced a $193.9 million year-over-year decrease in pretax income, as a result of a 13% decrease in home sale revenues and a decrease in gross margin from home sales. Our Mountain segment experienced a $101.6 million decrease in pretax income from the prior year, as a result of an 25% decrease in home sale revenues and a decrease in gross margin from home sales. Our East segment experienced a $62.6 million decrease in pretax income from the prior year, primarily due to a 28% decrease in home sale revenues and a decrease in gross margin from home sales. Our Corporate segment experienced a $116.8 million increase in pretax income, due primarily to an increase in interest income from money market funds, time deposits and marketable securities acquired in the current year and a decrease in stock-based and deferred compensation expense.
Assets
December 31,Change
20232022Amount%
(Dollars in thousands)
West$2,155,357 $2,275,144 $(119,787)(5)%
Mountain874,0311,005,622(131,591)(13)%
East459,078427,92631,152%
Corporate1,608,7261,249,370359,35629 %
Total homebuilding assets$5,097,192 $4,958,062 $139,130 %
Total homebuilding assets increased 3% from December 31, 2022 to December 31, 2023. Homebuilding assets decreased in our West and Mountain homebuilding operating segments largely due to a decrease in land and land under development as of period-end. Homebuilding assets increased in our East homebuilding operating segment largely due to an increase in housing completed and under construction, partially offset by a decrease in land and land under development as of period end. Corporate assets increased due to an increase in cash and cash equivalents year-over-year.

26

New Home Deliveries & Home Sale Revenues:
Changes in home sale revenues are impacted by changes in the number of new homes delivered and the average selling price of those delivered homes. Commentary for each of our segments on significant changes in these two metrics is provided below.
December 31,
20232022
% Change
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
(Dollars in thousands)
West
4,821 $2,624,373 $544.4 5,234 $3,024,056 $577.8 (8)%(13)%(6)%
Mountain
2,028 1,267,586 625.0 2,616 1,689,376 645.8 (22)%(25)%(3)%
East
1,379 628,337 455.6 1,860 872,832 469.3 (26)%(28)%(3)%
Total
8,228 $4,520,296 $549.4 9,710 $5,586,264 $575.3 (15)%(19)%(5)%
December 31,
20222021
% Change
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
(Dollars in thousands)
West
5,234 $3,024,056 $577.8 5,732 $2,964,766 $517.2 (9)%%12 %
Mountain
2,616 1,689,376 645.8 2,770 1,567,198 565.8 (6)%%14 %
East
1,860 872,832 469.3 1,480 570,492 385.5 26 %53 %22 %
Total
9,710 $5,586,264 $575.3 9,982 $5,102,456 $511.2 (3)%%13 %
For the twelve months ended December 31, 2023, the decrease in the number of new homes delivered in each of our segments was primarily driven by a decrease in the number of homes under construction (excluding models) to begin the period. This decrease was partially offset within each segment by an increase to monthly absorption rates and decreased cycle times during the twelve months ended December 31, 2023. The average selling price of homes delivered was negatively impacted by increased incentives during the twelve months ended December 31, 2023.
West Segment Commentary
For the year ended December 31, 2023, the decrease in new home deliveries was driven by the factors discussed above. The average selling price of homes delivered decreased as a result of a shift in closing mix to our Arizona divisions from our California divisions as well as a change in mix to more affordable product and the increased incentives discussed above.
Mountain Segment Commentary
For the year ended December 31, 2023, the decrease in new home deliveries was driven by the factors discussed above. The average selling price of homes delivered decreased as a result of the increased incentives discussed above.
East Segment Commentary
For the year ended December 31, 2023, the decrease in new home deliveries was driven by the factors discussed above. The average selling price of homes delivered decreased as a result of a change in mix to more affordable product as well as the increased incentives discussed above.
27

Gross Margin
Our gross margin from home sales for the year ended December 31, 2023 decreased 460 basis points year-over-year from 22.4% to 17.8%. The decrease in gross margin from home sales was driven by increased incentives and to a lesser extent increased construction and land costs year-over-year. This was partially offset by a reduction of inventory impairments to $29.7 million during the current year, compared to $121.9 million of inventory impairments recorded in the prior year.
Inventory Impairments
Inventory impairments recognized by segment for the years ended December 31, 2023, 2022 and 2021 are shown in the table below.
Year Ended December 31,
202320222021
(Dollars in thousands)
Housing Completed or Under Construction:
West$3,673 $8,017 $1,600 
Mountain1,533 1,812— 
East— 
Subtotal
5,206 9,829 1,600 
Land and Land Under Development:
West
15,677 88,843 — 
Mountain
8,817 20,688 — 
East
— 2,515 — 
Subtotal
24,494 112,046 — 
Total Inventory Impairments
$29,700 $121,875 $1,600 
The table below provides quantitative data, for the periods presented, where applicable, used in determining the fair value of the impaired inventory.
Impairment DataQuantitative Data
Three Months EndedNumber of
Subdivisions
Impaired
Inventory
Impairments
Fair Value of
Inventory After Impairments
Discount Rate
(Dollars in thousands)
December 31, 20233$2,200 $13,273 12 %15%
September 30, 202326,200 17,116 15 %18%
June 30, 2023113,500 17,886 18%
March 31, 202317,800 13,016 18%
Total$29,700 
December 31, 202216$92,800 $96,496 15%20%
September 30, 2022928,415 44,615 15%18%
March 31, 20221660 1,728 N/A
Total$121,875 
December 31, 20211$1,600 $6,903 N/A
Total$1,600 

28

Selling, General and Administrative Expenses
Year Ended December 31,
2023Change2022Change2021
(Dollars in thousands)
General and administrative expenses$203,878$(88,471)$292,349$46,307$246,042
General and administrative expenses as a percentage of home sale revenues
4.5%(70) bps5.2%40 bps4.8%
Marketing expenses$96,807$(6,523)$103,330$(1,105)$104,435
Marketing expenses as a percentage of home sale revenues
2.1%30 bps1.8%(20) bps2.0%
Commissions expenses$129,209$(11,507)$140,716$(2,800)$143,516
Commissions expenses as a percentage of home sale revenues
2.9%40 bps2.5%(30) bps2.8%
Total selling, general and administrative expenses$429,894$(106,501)$536,395$42,402$493,993
Total selling, general and administrative expenses as a percentage of home sale revenues (SG&A Rate)
9.5%(10) bps9.6%(10) bps9.7%
For the year ended December 31, 2023, the decrease in our general and administrative expenses was primarily due to lower stock-based and deferred compensation expenses, as well as decreased compensation related costs associated with a decline in average headcount.
For the year ended December 31, 2023, marketing expenses decreased compared to the previous year as a result of decreased marketing fees, amortization of deferred selling costs, and model home expenses.
For the year ended December 31, 2023, commissions expenses decreased due to decreases in home sale revenues, partially offset by changes in our commission structure.

29

Other Homebuilding Operating Data
Net New Orders and Active Subdivisions:
Changes in the dollar value of net new orders are impacted by changes in the number of net new orders and the average selling price of those homes. Commentary for each of our segments on significant changes in these two metrics is provided below.
December 31,
20232022% Change
HomesDollar
Value
Average
Price
Monthly
Absorption
Rate *
HomesDollar ValueAverage PriceMonthly
Absorption Rate *
HomesDollar ValueAverage PriceMonthly
Absorption
Rate *
(Dollars in thousands)
West4,202 $2,399,987 $571.2 2.512,909 $1,735,202 $596.5 2.0144 %38 %(4)%25 %
Mountain1,657 1,004,360 606.1 2.501,157 788,734 681.7 1.8543 %27 %(11)%35 %
East1,285 578,427 450.1 2.85978 489,946 501.0 2.2531 %18 %(10)%27 %
Total7,144 $3,982,774 $557.5 2.575,044 $3,013,882 $597.5 2.0242 %32 %(7)%27 %
December 31,
20222021% Change
HomesDollar
Value
Average
Price
Monthly
Absorption
Rate *
HomesDollar ValueAverage PriceMonthly
Absorption Rate *
HomesDollar ValueAverage PriceMonthly
Absorption
Rate *
(Dollars in thousands)
West2,909 $1,735,202 $596.5 2.016,238 $3,417,437 $547.8 5.25(53)%(49)%%(62)%
Mountain1,157 788,734 681.7 1.852,926 1,831,755 626.0 4.33(60)%(57)%%(57)%
East978 489,946 501.0 2.251,803 789,810 438.1 4.05(46)%(38)%14 %(44)%
Total5,044 $3,013,882 $597.5 2.0210,967 $6,039,002 $550.7 4.75(54)%(50)%%(57)%
*Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period

Active SubdivisionsAverage Active Subdivisions
December 31,Year Ended December 31,
20232022% Change20232022% Change
West138 134 %140 120 17 %
Mountain53 53 — %55 52 %
East35 38 (8)%38 36 %
Total226 225 — %233 208 12 %
For the year ended December 31, 2023, the increase in the number of net new orders in each of our segments was primarily the result of an increase in the monthly sales absorption pace as well as an increase in average active subdivisions. The increase in the monthly sales absorption pace was driven by a decrease in cancellations as a percentage of gross sales during the year ended December 31, 2023. The increased cancellations experienced during the year ended December 31, 2022 was the result of the sharp rise in mortgage interest rates and homebuyer concerns about purchasing in an uncertain housing market. The decrease in the average selling price in each of our segments was due to decreases in base pricing and increased incentives.
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Cancellation Rate:

Cancellations As a Percentage of Homes in Beginning Backlog
20232022
Three Months Ended
Dec 31
Sep 30
Jun 30
Mar 31
Dec 31
Sep 30
Jun 30
Mar 31
West
16 %16 %19 %26 %25 %17 %10 %%
Mountain
22 %22 %21 %25 %26 %17 %%%
East
23 %21 %16 %24 %20 %17 %11 %%
Total
18 %17 %19 %25 %25 %17 %10 %%
Cancellations As a Percentage of Gross Sales
December 31,
2023
Change
2022
Change
2021
West
26 %(18)%44 %28 %16 %
Mountain
25 %(25)%50 %32 %18 %
East
21 %(17)%38 %20 %18 %
Total
25 %(20)%45 %28 %17 %
In light of our recent pivot to build more spec homes, we believe it is appropriate to view our cancellations as a product of both our beginning backlog as well as our gross sales during the periods. Our cancellation rate as a percentage of homes in beginning backlog decreased during the three months ended December 31, 2023 compared to the same period in 2022, due to a decrease in cancellations during the three months ended December 31, 2023 partially offset by a decrease in beginning backlog to start the period. Further, our cancellation rate as a percentage of gross sales decreased year-over-year during the year ended December 31, 2023 as a result of improved demand as well as the impact of the sharp increase in mortgage interest rates in the prior year period on our homebuyers in backlog who where unable to lock their interest rate prior to these increases.
Backlog:
December 31,
20232022
% Change
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average Price
(Dollars in thousands)
West
1,272 $789,317 $620.5 1,891 $1,049,805 $555.2 (33)%(25)%12 %
Mountain
344 237,154 689.4 715 515,460 720.9 (52)%(54)%(4)%
East
274 130,524 476.4 368 187,629 509.9 (26)%(30)%(7)%
Total
1,890 $1,156,995 $612.2 2,974 $1,752,894 $589.4 (36)%(34)%%
At December 31, 2023, we had 1,890 homes in backlog with a total value of $1.16 billion, representing respective decreases of 36% and 34%, respectively, from December 31, 2022. The decrease in the number of homes in backlog was primarily a result of the shift in consumer preference to quick move-in homes and our associated pivot to build more spec homes. The decrease in average selling price in our Mountain segment was driven by a shift in mix from our Colorado communities to our Utah and Boise communities. The decrease in average selling price in our East segment was driven by a shift in mix to more affordable product in our Jacksonville communities. The increase in average selling price in the West segment was driven by a change in backlog mix from our Arizona communities to our California communities. Our ability to convert backlog into closings could be negatively impacted in future periods by rising mortgage interest rates and other factors, the extent to which is highly uncertain and depends on future developments.
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Homes Completed or Under Construction:
December 31,
20232022
% Change
Unsold:
Completed
339 396 (14)%
Under construction
2,709 1,063 155 %
Total unsold started homes
3,048 1,459 109 %
Sold homes under construction or completed
1,812 2,756 (34)%
Model homes under construction or completed
542 555 (2)%
Total homes completed or under construction
5,402 4,770 13 %
The increase in total unsold started homes and decrease in sold homes under construction or completed is due to a shift in strategy to focus on speculative construction starts given current market conditions and a shift in consumer preferences.
Lots Owned and Optioned (including homes completed or under construction):
December 31, 2023December 31, 2022
Lots
Owned
Lots
Optioned
Total
Lots
Owned
Lots
Optioned
Total
Total %
Change
West
9,9571,18611,14312,66768713,354(17)%
Mountain
5,0381,0886,1265,3981,5616,959(12)%
East
3,0042,1425,1463,5341,4554,989%
Total
17,9994,41622,41521,5993,70325,302(11)%
Our total owned and optioned lots at December 31, 2023 were 22,415, a decrease of 11% from December 31, 2022. This decrease is a result of our intentional slowdown in land acquisition and approval activity in the second half of 2022 and into the first quarter of 2023 due to the market uncertainty during those periods. We believe that our total lot supply is sufficient to meet our operating needs, consistent with our philosophy of maintaining a two to three year supply of land. See "Forward-Looking Statements" above.
Financial Services
Year Ended December 31,
ChangeChange
2023Amount%2022Amount%2021
(Dollars in thousands)
Financial services revenues
Mortgage operations$76,479 $3,673 %$72,806 $(34,729)(32)%$107,535 
Other46,091 (12,826)(22)%58,917 14,240 32 %44,677 
Total financial services revenues$122,570 $(9,153)(7)%$131,723 $(20,489)(13)%$152,212 
Financial services pretax income
Mortgage operations$40,756 $10,579 35 %$30,177 $(39,278)(57)%$69,455 
Other35,217 (2,993)(8)%38,210 15,659 69 %22,551 
Total financial services pretax income$75,973 $7,586 11 %$68,387 $(23,619)(26)%$92,006 
For the year ended December 31, 2023, our financial services pretax income increased $7.6 million or 11% from the same period in the prior year. The increase in financial services pretax income was driven by our mortgage operations as a result of a decrease in salary related expenses driven by lower headcount, the allocation of revenue from our homebuilding business associated with our financing incentives and an increase in capture rate. This was partially offset by a decrease in closing volume during the period ended December 31, 2023. Our other financial services businesses experienced a decrease in pretax income driven by our insurance operations, which saw a decrease in revenue due to a decrease in homes closed, partially offset by an increase in interest income due to increases in both interest rates and our cash and short-term investments year-over-year.
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The table below sets forth information for our mortgage operations relating to mortgage loans originated and capture rate.
Year Ended December 31,
2023% or Percentage Change2022% or Percentage Change2021
(Dollars in thousands)
Total Originations:
Loans5,430 (8)%5,876 (6)%6,247 
Principal$2,448,426(11)%$2,746,903 %$2,622,158 
Capture Rate Data:
Capture rate as % of all homes delivered66 %%60 %(2)%62 %
Capture rate as % of all homes delivered (excludes cash sales)72 %%64 %(1)%65 %
Mortgage Loan Origination Product Mix:
FHA loans26 %13 %13 %(3)%16 %
Other government loans (VA & USDA)19 %(2)%21 %%19 %
Total government loans45 %11 %34 %(1)%35 %
Conventional loans55 %(11)%66 %%65 %
100 %— %100 %— %100 %
Loan Type:
Fixed rate97 %(2)%99 %(1)%100 %
ARM%%%%— %
Credit Quality:
Average FICO Score741 — %744 %740 
Other Data:
Average Combined LTV ratio83 %%81 %(3)%84 %
Full documentation loans100 %— %100 %— %100 %
Loans Sold to Third Parties:
Loans5,356 (10)%5,977 (4)%6,210 
Principal$2,419,558 (13)%$2,785,712 %$2,563,637 
Income Taxes

We recorded an income tax provision of $125.1 million, $197.7 million and $178.0 million for the years ended December 31, 2023, 2022 and 2021, respectively, and our resulting effective income tax rates were 23.8%, 26.0% and 23.7%, respectively. Our tax provision and effective tax rate are driven by (i) pre-tax book income for the full year, adjusted for items that are deductible/non-deductible for tax purposes only (i.e., permanent items); (ii) benefits from federal energy credits; (iii) taxable income generated in state jurisdictions that varies from consolidated income and (iv) stock based compensation windfalls recorded as discrete items. The difference between our effective tax rate for the year ended December 31, 2023 and the federal statutory rate (21%) was primarily due to 4.0% in state taxes and a 1.3% increase due to limitations on deductible executive compensation. These items were partially offset by a 1.7% decrease due to benefits for federal energy credits.
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LIQUIDITY AND CAPITAL RESOURCES
We use our liquidity and capital resources to (1) support our operations, including the purchase of land, land development and construction of homes; (2) provide working capital; and (3) provide mortgage loans for our homebuyers. Our liquidity includes our cash and cash equivalents, marketable securities, Revolving Credit Facility (as defined below) and Mortgage Repurchase Facility (as defined below). Additionally, we have an existing effective shelf registration statement that allows us to issue equity, debt or hybrid securities up to $5.0 billion, of which $5.0 billion remains.
Material Cash Requirements
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of December 31, 2023, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, payments due on our Mortgage Repurchase Facility, purchase obligations related to expected acquisition of land under purchase agreements and land development agreements (many of which are secured by letters of credit or surety bonds) and operating leases. Other material cash requirements include land acquisition and development costs not yet contracted for, home construction costs, operating expenses, including our selling, general and administrative expenses, investments and funding of capital improvements and dividend payments.
At December 31, 2023, we had outstanding senior notes with varying maturities totaling an aggregate principal amount of $1.5 billion, with none payable within 12 months. Future interest payments associated with the notes total $1.3 billion, with $64.2 million payable within 12 months. As of December 31, 2023, we had $25.3 million of required operating lease future minimum payments.
At December 31, 2023, we had deposits of $28.0 million in the form of cash and $9.2 million in the form of letters of credit that secured option contracts to purchase 4,416 lots for a total estimated purchase price of $437.8 million.
At December 31, 2023, we had outstanding surety bonds and letters of credit totaling $311.0 million and $118.3 million, respectively, including $77.5 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately $107.1 million and $62.4 million, respectively. We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit. We have made no material guarantees with respect to third-party obligations.
Capital Resources
Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) long-term financing, represented by our 3.850% senior notes due 2030, 2.500% senior notes due 2031, 6.000% senior notes due 2043, and 3.966% senior notes due 2061; (3) our Revolving Credit Facility; and (4) our Mortgage Repurchase Facility. Because of our current balance of cash, cash equivalents, marketable securities, ability to access the capital markets, and available capacity under both our Revolving Credit Facility and Mortgage Repurchase Facility, we believe that our capital resources are adequate to satisfy our short and long-term capital requirements, including meeting future payments on our senior notes as they become due. See “Forward-Looking Statements” above.
We may from time to time seek to retire or purchase our outstanding senior notes through cash purchases, whether through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Senior Notes, Revolving Credit Facility and Mortgage Repurchase Facility
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 most of our homebuilding segment subsidiaries. We believe that we are in compliance with the representations, warranties and covenants in the senior note indentures.
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Revolving Credit Facility. We have an unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders, which may be used for general corporate purposes. This agreement was amended on December 28, 2020 to (1) increase the aggregate commitment from $1.0 billion to $1.2 billion (the "Commitment"), (2) extend the Revolving Credit Facility maturity of $1.125 billion of the Commitments to December 18, 2025 with the remaining Commitment terminated on December 18, 2023 and (3) provide that the aggregate amount of the commitments may increase to an amount not to exceed $1.7 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents.
Effective April 11, 2023, the Revolving Credit Facility was amended to transition from a eurocurrency based interest rate to an interest rate based on the Secured Overnight Financing Rate ("SOFR"). As defined in the Revolving Credit Facility, interest rates on base rate borrowings are equal to the highest of (1) 0.0%, (2) a prime rate, (3) a federal funds effective rate plus 0.50%, and (4) the one month term SOFR screen rate plus the SOFR adjustment plus 1.00% and, in each case, plus a margin that is determined based on our credit ratings and leverage ratio. Interest rates on SOFR borrowings are equal to the greater of (1) 0.0% and (2) the sum of the term SOFR screen rate for such interest period plus the SOFR adjustment, plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds 55%, the aggregate principal amount of all consolidated senior debt borrowings outstanding may not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is 55% or less.
The Revolving Credit Facility is fully and unconditionally guaranteed, jointly and severally, by most of our homebuilding segment subsidiaries. The facility contains various representations, warranties and covenants that we believe are customary for agreements of this type. The financial covenants include a consolidated tangible net worth test and a leverage test, along with a consolidated tangible net worth covenant, all as defined in the Revolving Credit Facility. A failure to satisfy the foregoing tests does not constitute an event of default, but can trigger a “term-out” of the facility. A breach of the consolidated tangible net worth covenant (but not the consolidated tangible net worth test) or a violation of anti-corruption or sanctions laws would result in an event of default.
The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including breach of the consolidated tangible net worth covenant, a violation of anti-corruption or sanctions laws, failure to make timely payments, breaches of certain representations or covenants, failure to pay other material indebtedness, or another person becoming beneficial owner of 50% or more of our outstanding common stock. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of December 31, 2023.
We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. As of December 31, 2023, we had $10.0 million in borrowings and $40.8 million in letters of credit outstanding under the Revolving Credit Facility, leaving a remaining borrowing capacity of $1.07 billion.
The Merger will trigger a change in control event of default under the Revolving Credit Facility, and the Company expects to either obtain lenders’ consent to the transaction prior to closing or terminate the Revolving Credit Agreement and repay all outstanding amounts thereunder in connection with the closing of the Merger.
Mortgage Repurchase Facility. HomeAmerican has a Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association (“USBNA”). The Mortgage Repurchase Facility provides liquidity to HomeAmerican by providing for the sale of up to an aggregate of $75 million (subject to increase by up to $75 million under certain conditions) 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. In the event that an eligible mortgage loan becomes ineligible, as defined under the Mortgage Repurchase Facility, HomeAmerican may be required to repurchase the ineligible mortgage loan immediately. The Mortgage Repurchase Facility was amended on March 25, 2021, May 20, 2021, December 21, 2021, May 19, 2022 and May 18, 2023 to adjust the commitments to purchase for specific time periods. The total capacity of the facility at December 31, 2023 was $225 million. The termination date of the Repurchase Agreement is May 15, 2024.

At December 31, 2023 and 2022, HomeAmerican had $205.0 million and $175.8 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. Pricing under the Mortgage Repurchase Facility is based on SOFR.
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The Mortgage Repurchase Facility contains various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the Mortgage Repurchase Facility. We believe HomeAmerican was in compliance with the representations, warranties and covenants included in the Mortgage Repurchase Facility as of December 31, 2023.
The Merger will trigger a change in control event of default under the Mortgage Repurchase Facility, and the Company expects to either obtain lender’s consent to the transaction prior to closing or terminate the Mortgage Repurchase Facility and repay all outstanding amounts thereunder in connection with the closing of the Merger.
Dividends
In the years ended December 31, 2023 and 2022, we paid dividends of $2.10 per share and $2.00 per share, respectively.
MDC Common Stock Repurchase Program
At December 31, 2023, we were authorized to repurchase up to 4,000,000 shares of our common stock. We did not repurchase any shares of our common stock under this repurchase program during the year ended December 31, 2023.
Consolidated Cash Flow
Our operating cash flows are primarily impacted by: (1) land purchases and related development and construction of homes; (2) closing homes and the associated timing of collecting receivables from home closings; (3) the origination and subsequent sale of mortgage loans originated by HomeAmerican; (4) payments on accounts payables and accrued liabilities; and (5) funding for payroll. When we close on the sale of a house, our homebuilding subsidiaries will generally receive the proceeds from the sale of the homes within a few days of the home being closed. Therefore, our home sales receivable balance can increase or decrease from period to period based upon the timing of our home closings. Additionally, the amount of mortgage loans held-for-sale can be impacted period to period based upon the number of mortgage loans that were originated by HomeAmerican that have not been sold to third party purchasers and by the timing of fundings by third party mortgage purchasers. Accordingly, mortgage loans held-for-sale may increase if HomeAmerican originates more homes towards the end of one reporting period when compared with the same period in the previous year. HomeAmerican will generally sell mortgage loans it originates between 5 to 35 days after origination.
Operating Cash Flow Activities
For the year ended December 31, 2023, net cash provided by operating activities was $561.6 million compared with net cash provided by operating activities of $905.6 million in the prior year. During the years ended December 31, 2023 and 2022, the most significant source of cash provided by operating activities was net income of $401.0 million and $562.1 million, respectively. Another significant source of cash provided by operating activities during the year ended December 31, 2023 was cash provided by the decrease in land and land under development of $349.8 million compared to cash used by the increase in land and land under development of $95.4 million in the prior year. This decrease in 2023 was the result of home starts outnumbering lot acquisitions during the period. Cash used by the increase in housing completed or under construction for the year ended December 31, 2023 was $163.9 million, as the number of homes under construction increased during the period. Cash provided by the decrease in housing completed or under construction for the year ended December 31, 2022 was $186.3 million as the number of homes under construction decreased during the period. Cash used to decrease accounts payable and accrued liabilities for the years ended December 31, 2023 and 2022 was $74.1 million and $18.5 million, respectively. This change was due to the decreased construction spend during the twelve months ended December 31, 2023. Cash used to increase mortgage loans held-for-sale was $28.7 million compared to cash provided by the decrease in mortgage loans held-for-sale of $53.0 million in the years ended December 31, 2023 and 2022, respectively. This was a result of a increase in loan originations for the year ended December 31, 2023.
Investing Cash Flow Activities
For the year ended December 31, 2023, net cash provided by investing activities was $469.4 million compared with cash used of $585.9 million in the prior year. The primary driver of this increase in cash from investing activities relates to the maturities of marketable securities of $1.7 billion in 2023 compared to only $100.0 million in 2022. The increase was partially
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offset by $1.2 billion in cash used in the purchase of marketable securities during the current year, compared to $656.8 million in the prior year.
Financing Cash Flow Activities
For the year ended December 31, 2023, net cash used in financing activities was $105.3 million compared with net cash used in financing activities of $206.1 million in the prior year. The primary driver of this decrease in cash used by financing activities was the cash provided by the increase of the mortgage repurchase facility of $29.2 million as of December 31, 2023 compared to cash used to decrease the mortgage repurchase facility of $80.5 million in the prior year. This was driven by an increase in loan originations in the last month of the year ended December 31, 2023 as compared to the prior year. Cash used to fund dividend payments increased year-over year as a result of an increase in the cash dividend declared per share in Q3 2023.
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of a