EXHIBIT 99.1
M.D.C. Holdings, Inc.
401(k) Savings Plan
Audited Financial Statements and Supplemental Schedule
Years Ended December 31, 2000 and 1999
M.D.C. Holdings, Inc.
401(k) Savings Plan
Years Ended December 31, 2000 and 1999
Contents
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Page
Report of Independent Auditors 1
Report of Independent Accountants 2
Financial Statements:
Statements of Net Assets Available for Benefits 3
Statements of Changes in Net Assets Available for Benefits 4
Notes to Financial Statements 5
Supplemental Schedule:
Schedule H, Line 4i - Schedule of Assets Held for Investment
Purposes at End of Year 10
Report of Independent Auditors
Board of Directors
MDC Holdings, Inc. 401(k) Savings Plan
We have audited the accompanying statement of net assets available for benefits
of MDC Holdings, Inc. 401(k) Savings Plan (the Plan) as of December 31, 2000,
and the related statement of changes in net assets available for benefits for
the year then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2000, and the change in its net assets available for benefits for
the year then ended, in conformity with accounting principles generally accepted
in the United States.
Our audit was performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
held for investment purposes at end of year as of December 31, 2000, is
presented for purposes of additional analysis and is not a required part of the
financial statements but is supplementary information required by the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in our audit of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
--------------------------
Ernst & Young LLP
Denver, Colorado
April 3, 2001
1
Report of Independent Accountants
To the Participants and Administrator
of MDC Holdings, Inc. 401(k) Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the M.D.C. Holdings, Inc. 401(k) Savings Plan (the "Plan") at December 31,
1999, and the changes in net assets available for benefits for the year then
ended, in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Plan's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
-------------------------------
PricewaterhouseCoopers LLP
Denver, Colorado
June 21, 2000
2
M.D.C. Holdings, Inc.
401(k) Savings Plan
Statements of Net Assets Available for Benefits
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December 31,
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2000 1999
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Assets
Investments, at fair value $ 30,124,794 $ 22,542,694
Contributions receivable:
Employer 2,474,038 1,961,124
Employee 141,750 118,730
-------------------- --------------------
Total contributions receivable 2,615,788 2,079,854
-------------------- --------------------
Net assets available for benefits $ 32,740,582 $ 24,622,548
==================== ====================
See accompanying notes to financial statements.
3
M.D.C. Holdings, Inc.
401(k) Savings Plan
Statements of Changes in Net Assets Available for Benefits
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Year Ended December 31,
--------------------------------------------
2000 1999
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Additions
Investment income:
Interest and dividends $ 310,442 $ 271,019
Net appreciation in fair value of investments 2,108,986 1,125,745
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Total investment income 2,419,428 1,396,764
Contributions:
Employer 2,634,380 1,961,124
Employee 5,568,617 4,879,974
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Total contributions 8,202,997 6,841,098
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Total additions 10,622,425 8,237,862
Deductions
Benefit payments 2,336,691 1,215,451
Transaction charges and administrative expenses 38,597 26,054
Participant notes receivable terminated due to withdrawal of
participants 129,103 17,618
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Total deductions 2,504,391 1,259,123
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Net increase in net assets available for benefits 8,118,034 6,978,739
Net assets available for benefits at beginning of year 24,622,548 17,643,809
-------------------- --------------------
Net assets available for benefits at end of year $ 32,740,582 $ 24,622,548
==================== ====================
See accompanying notes to financial statements.
4
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
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1. Description of Plan
The following description of the M.D.C. Holdings, Inc. 401(k) Savings
Plan (the "Plan") provides only general information. Participants should
refer to the Plan document for a more complete description of the Plan's
provisions.
General
The Plan is a defined contribution plan established effective January 1,
1992 and most recently restated effective July 1, 1998. All employees of
M.D.C. Holdings, Inc. (the "Company") become eligible to participate upon
completing six months of service and attaining the age of 21. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
Contributions
Participants may contribute an amount up to 15 percent, in whole
percentages, of their pretax annual compensation to a maximum amount of
$10,500 and $10,000 in 2000 and 1999, respectively, in accordance with
Internal Revenue Service regulations.
The Company may make matching contributions in a discretionary amount to be
determined by resolution of the Company's Board of Directors, on an annual
basis. The Company may make a discretionary profit sharing contribution
without regard to the current or accumulated net profits of the Company for
the taxable year ending with, or within, the plan year. The Company's
matching and profit sharing contributions may be made in cash or in shares
of M.D.C. Holdings, Inc. common stock.
Participant Accounts
Each participant's account is credited with the participant's contribution,
allocations of the Company's contributions, if any, and Plan earnings. Plan
earnings are allocated by fund based on the ratio of a participant's
account invested in a particular fund to all participants' investments in
that fund. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's account.
Vesting
The interest of any participant in contributions made by the Company, and
earnings thereon, will become vested to the extent of the following
percentages:
Years of Service Vested %
Less than 2 years 0%
After 2 years 40%
After 3 years 60%
After 4 years 80%
After 5 years 100%
5
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
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1. Description of Plan (continued)
If a participant dies, suffers disability or attains the normal retirement
age while still employed by the Company, the participant becomes 100%
vested without regard to length of service.
Investment Options
Upon enrollment in the Plan, a participant may direct contributions among
any of the thirteen investment options offered by the Plan. Participants
may change or transfer their investments at any time.
Payment of Benefits
A participant who has attained the age of 59 1/2, or has satisfied the
terms for a financial hardship, may elect to commence distributions
regardless of whether employed by the Company. The participant or
beneficiary may elect to receive a lump-sum distribution, an annuity, or a
combination of both. Distributions are subject to the applicable provisions
of the Plan document.
Participant Notes Receivable
Participants are permitted to borrow a portion of their vested benefits
under the Plan. Participants may borrow up to the lesser of (1) $50,000,
reduced by (a) the applicant's highest outstanding loan balance from the
Plan during the one year period ending on the day before the loan is made
and (b) the applicant's outstanding loan balance from the Plan on the day
before the loan is made, or (2) 50% of the present value of the
participant's non-forfeitable accrued benefit. Loan transactions are
treated as a transfer between the investment fund and the loan fund. The
loans are secured by the participant's account balance and bear interest at
a fixed rate equal to the current prime rate plus 100 basis points at the
date the application is approved. Interest rates on outstanding loans range
from 8.75% to 10.50%. Principal and interest are paid ratably through
monthly payroll deductions.
Forfeitures
Forfeitures result from non-vested benefit payments remaining in the Plan
for all terminated employees. Upon reaching the break-in-service, as
determined in the Plan document, amounts forfeited are added to the
forfeitures in the Plan. Forfeitures are available first to pay expenses of
administering the Plan, which would be otherwise payable by the Company,
and are then allocated to reduce future contributions made by the Company.
6
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
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2. Summary of Accounting Policies
Method of Accounting
The Plan's financial statements are prepared on the accrual basis of
accounting.
Investments
Shares of the EB Managed Guaranteed Investment Contract are stated at fair
value. Shares of registered investment companies are valued at quoted
market prices, which represent the net asset value of shares held by the
Plan at year-end. Shares of the Company's common stock are valued at their
quoted market price. Participant notes receivable are valued at cost, which
approximates fair value.
Realized gains and losses on sales of investments represent the difference
between the proceeds received and the cost of investments sold. The change
in the difference between the fair value and cost of investments is
combined with realized gains and losses on sales of investments and is
reported in the accompanying statements of changes in net assets available
for benefits as net appreciation in fair value of investments.
Use of Estimates
The preparation of these financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
Payment of Benefits
Benefits are recorded when paid.
Expenses
The Plan's administrative expenses are paid either by the Plan or the
Company, as provided by the Plan document.
Reclassifications
Certain amounts reported in the 1999 financial statements have been
reclassified to conform with the 2000 presentation.
3. Administration of Plan Assets
The Company administers the Plan. Investments of the Plan's assets and
payment of benefits are managed by KeyTrust Company National Association,
the Plan's trustee and record-keeper.
7
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
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4. Investments
The fair value of individual investments that represent five percent or
more of the Plan's net assets is as follows:
December 31,
------------------------------------------
2000 1999
------------------- -------------------
Fidelity Advisor Growth Opportunities Fund $ 3,474,840 $ 5,315,752
The Income Fund of America - 1,690,454
INVESCO Dynamics Fund 4,232,638 2,593,726
The Victory Stock Index Fund 3,855,977 4,458,048
EB Managed Guaranteed Investment Contract 3,516,480 3,234,547
M.D.C. Holdings, Inc. common stock 7,044,578 2,333,106
During 2000 and 1999, the Plan's investments (including investments
purchased, sold as well as held during the year) appreciated (depreciated)
in fair value as follows:
Year Ended December 31,
------------------------------------------
2000 1999
------------------- -------------------
Collective trust $ 288,468 $ 163,740
Mutual funds (2,131,253) 1,711,902
Common stock 3,951,771 (749,897)
------------------- -------------------
$ 2,108,986 $ 1,125,745
=================== ===================
5. Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of Plan
termination, participants will become 100 percent vested in their accounts.
6. Income Taxes
The Internal Revenue Service has determined and informed the Company by a
letter dated August 2, 1995, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code
("IRC"). The Plan has been amended since receiving the determination
letter. However, the Plan's administrator and tax counsel believe that the
Plan is designed and is currently being operated in compliance with the
applicable requirements of the IRC. In addition, the Plan's administrator
and tax counsel are not aware of any actions or series of events which have
occurred that might adversely affect the Plan's qualified status.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
8
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
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7. Reconciliations of Plan Financial Statements to the Form 5500
The Annual Return/Report of Employee Benefit Plan (the "Form 5500") is
prepared on the modified cash basis. Accordingly, certain balances included
on Schedule H, Parts I and II, of the Form 5500 differ from those included
in these financial statements. Contributions in the statements of changes
in net assets available for benefits differ from contributions on the Form
5500 by the amount of contributions accrued at December 31. Additionally,
net assets available for benefits include certain delinquent loans at
December 31. When a participant terminates employment, the participant has
90 days from the date of termination to repay any outstanding loan balance
in the participant's account. If the loan is not repaid, the participant
receives a deemed distribution that is reported on Form 1099 and is subject
to federal and state income taxes.
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500:
December 31,
------------------------------------------
2000 1999
------------------- -------------------
Net assets available for benefits, per financial statements $ 32,740,582 $ 24,622,548
Less: Employer contributions receivable (2,474,038) (1,961,124)
Employee contributions receivable (141,750) (118,730)
Deemed distributions (5,862) (18,466)
------------------- -------------------
Net assets available for benefits, per Form 5500 $ 30,118,932 $ 22,524,228
=================== ===================
8. Subsequent Event
At its March 2, 2001 meeting, the Company's Board of Directors approved
changes in the investment options available to the Plan's participants.
Additional fund options include The Victory U.S. Government Obligations
Fund, The American Funds Group American Fundamental Investors Fund, and the
PIMCO Total Return Fund. The Fidelity Advisor Growth Opportunities Fund,
The American Funds Group Bond Fund of America, and the EB Managed
Guaranteed Investment Contract options are no longer offered by the Plan.
9
M.D.C. Holdings, Inc. EIN 84-0622967
401(k) Savings Plan Plan 004
Schedule H, Line 4i - Schedule of Assets Held for
Investment Purposes at End of Year
December 31, 2000
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Description of investment including
Identity of issue, borrower, maturity date, rate of interest, Fair
lessor, or similar party collateral, par or maturity value Cost Value
------------------------------------ --------------------------------------------- -------------- -- -------------
The American Funds Group Europacific Growth Fund
$31.35/unit $ 1,022,442 $ 844,428
Fidelity Advisors Fidelity Advisor Growth Opportunities Fund
$34.15/unit 4,641,478 3,474,840
Franklin Strategic Series Franklin Small Cap Growth Fund
$39.33/unit 667,023 570,264
The American Funds Group The Income Fund of America
$15.94/unit 1,453,696 1,325,810
INVESCO Equity, Inc. INVESCO Dynamics Fund
$23.77/unit 4,309,893 4,232,638
Janus Investment Fund Janus Twenty Fund, Inc.
$54.80/unit 1,354,407 982,697
Janus Investment Fund Janus Balanced Fund
$21.42/unit 676,383 620,860
NeubergerBerman Management, Inc. NeubergerBerman Genesis Fund
$15.82/unit 924,043 1,050,256
The Victory Portfolios The Victory Stock Index Fund; Class A Shares
$21.38/unit 4,060,920 3,855,977
Washington Mutual Investors, Inc. Washington Mutual Investor Fund, Inc.
$29.03/unit 1,095,436 1,051,435
The American Funds Group The Bond Fund of America, Inc.
$12.79/unit 425,313 420,971
* Key Bank EB Money Market Fund
$1.00/unit 117,893 117,893
* Key Bank EB Managed Guaranteed Investment Contract
$14.81/unit 3,152,786 3,516,480
* M.D.C. Holdings, Inc. Common Stock
$32.95/share 3,340,052 7,044,578
Participant Notes Receivable Interest rates of 8.75% - 10.50% and
maturity dates of 1 to 15 years - - 1,015,667
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$ 30,124,794
=============
* Indicates an identified entity known to be a party-in-interest to the Plan.
10