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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 1-8951
M.D.C. HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 84-0622967
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
3600 South Yosemite Street, Suite 900 80237
Denver, Colorado (Zip code)
(Address of principal executive offices)
(303) 773-1100
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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
As of August 1, 2001, 24,252,000 shares of M.D.C. Holdings, Inc.
common stock were outstanding.
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M.D.C. HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001
INDEX
Page
No.
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Part I. Financial Information:
Item 1. Condensed Consolidated Financial Statements:
Balance Sheets as of June 30, 2001 (Unaudited)
and December 31, 2000....................... 1
Statements of Income and Other Comprehensive
Income (Unaudited) for the three and
six months ended June 30, 2001 and 2000..... 3
Statements of Cash Flows (Unaudited) for the
six months ended June 30, 2001 and 2000..... 4
Notes to Financial Statements (Unaudited)..... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk........................... 19
Part II. Other Information:
Item 1. Legal Proceedings............................. 20
Item 4. Submission of Matters to a Vote of
Shareowners................................. 20
Item 5. Other Information............................. 20
Item 6. Exhibits and Reports on Form 8-K.............. 20
(i)
M.D.C. HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2001 2000
-------------- --------------
ASSETS (Unaudited)
Corporate
Cash and cash equivalents................................................... $ 25,313 $ 8,411
Property and equipment, net................................................. 3,113 3,069
Deferred income taxes....................................................... 35,639 31,821
Deferred debt issue costs, net.............................................. 2,066 2,180
Other assets, net........................................................... 7,584 8,039
-------------- --------------
73,715 53,520
-------------- --------------
Homebuilding
Cash and cash equivalents................................................... 5,826 5,265
Home sales and other accounts receivable.................................... 7,670 4,713
Inventories, net
Housing completed or under construction................................... 562,861 443,512
Land and land under development........................................... 397,704 388,711
Prepaid expenses and other assets, net...................................... 51,727 51,631
-------------- --------------
1,025,788 893,832
-------------- --------------
Financial Services
Cash and cash equivalents................................................... 449 439
Mortgage loans held in inventory............................................ 116,216 107,151
Other assets, net........................................................... 3,601 6,656
-------------- --------------
120,266 114,246
-------------- --------------
Total Assets.......................................................... $ 1,219,769 $ 1,061,598
============== ==============
See notes to condensed consolidated financial statements.
-1-
M.D.C. HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
June 30, December 31,
2001 2000
-------------- --------------
LIABILITIES (Unaudited)
Corporate
Accounts payable and accrued expenses........................................ $ 46,676 $ 50,843
Income taxes payable......................................................... 2,021 9,558
Senior notes, net............................................................ 174,473 174,444
-------------- --------------
223,170 234,845
-------------- --------------
Homebuilding
Accounts payable and accrued expenses........................................ 186,582 164,660
Line of credit............................................................... 147,000 90,000
-------------- --------------
333,582 254,660
-------------- --------------
Financial Services
Accounts payable and accrued expenses........................................ 21,313 15,404
Line of credit............................................................... 69,807 74,459
-------------- --------------
91,120 89,863
-------------- --------------
Total Liabilities...................................................... 647,872 579,368
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COMMITMENTS AND CONTINGENCIES................................................... - - - -
-------------- --------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 25,000,000 shares authorized; none issued... - - - -
Common stock, $.01 par value; 100,000,000 shares authorized; 31,430,000 and
30,755,000 shares issued, respectively, at June 30, 2001 and
December 31, 2000.......................................................... 314 308
Additional paid-in capital................................................... 289,024 266,337
Retained earnings............................................................ 348,019 282,893
Accumulated other comprehensive income....................................... 33 167
-------------- --------------
637,390 549,705
Less treasury stock, at cost; 7,208,000 and 7,426,000 shares, respectively,
at June 30, 2001 and December 31, 2000..................................... (65,493) (67,475)
-------------- --------------
Total Stockholders' Equity............................................. 571,897 482,230
-------------- --------------
Total Liabilities and Stockholders' Equity............................. $ 1,219,769 $ 1,061,598
============== ==============
See notes to condensed consolidated financial statements.
-2-
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Income and Other Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
REVENUES
Homebuilding.......................................... $ 499,010 $ 411,942 $ 910,106 $ 752,951
Financial services.................................... 8,998 7,430 17,339 13,304
Corporate............................................. 227 275 512 550
----------- ----------- ----------- -----------
Total Revenues.................................... 508,235 419,647 927,957 766,805
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Homebuilding.......................................... 429,024 359,584 786,189 655,122
Financial services.................................... 4,272 3,450 8,409 6,875
Corporate general and administrative.................. 11,510 8,515 21,916 17,069
----------- ----------- ----------- -----------
Total Costs and Expenses.......................... 444,806 371,549 816,514 679,066
----------- ----------- ----------- -----------
Income before income taxes............................... 63,429 48,098 111,443 87,739
Provision for income taxes............................... (24,586) (19,289) (43,317) (37,909)
----------- ----------- ----------- -----------
NET INCOME............................................... 38,843 28,809 68,126 49,830
Unrealized holding gains (losses) on securities arising
during the period..................................... 126 (89) (241) (127)
Less reclassification adjustment for (gains) losses
included in net income................................ 171 (76) 107 (3,450)
----------- ----------- ----------- -----------
Net gains (losses) recognized in other comprehensive
income during the period, net of deferred income taxes 297 (165) (134) (3,577)
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE INCOME............................... $ 39,140 $ 28,644 $ 67,992 $ 46,253
=========== =========== =========== ===========
EARNINGS PER SHARE
Basic................................................. $ 1.61 $ 1.22 $ 2.86 $ 2.08
=========== =========== =========== ===========
Diluted............................................... $ 1.56 $ 1.20 $ 2.76 $ 2.05
=========== =========== =========== ===========
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic................................................. 24,062 23,625 23,820 23,969
=========== =========== =========== ===========
Diluted............................................... 24,832 24,004 24,665 24,292
=========== =========== =========== ===========
DIVIDENDS PAID PER SHARE................................. $ .07 $ .06 $ .13 $ .12
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
-3-
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months
Ended June 30,
--------------------------
2001 2000
----------- -----------
OPERATING ACTIVITIES
Net income........................................................... $ 68,126 $ 49,830
Adjustments to reconcile net income to net cash used in operating
activities
Depreciation and amortization.................................. 11,541 8,691
Deferred income taxes.......................................... (3,818) (5,640)
Homebuilding asset impairment charge........................... - - 800
Net changes in assets and liabilities
Home sales and other accounts receivable.................. (2,957) (4,543)
Homebuilding inventories.................................. (128,342) (117,891)
Prepaid expenses and other assets......................... (8,368) (8,473)
Mortgage loans held in inventory.......................... (9,065) 14,050
Accounts payable and accrued expenses .................... 29,448 11,049
Other, net..................................................... 4,850 (2,068)
----------- -----------
Net cash used in operating activities................................ (38,585) (54,195)
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FINANCING ACTIVITIES
Lines of credit
Advances....................................................... 895,000 699,537
Principal payments............................................. (842,652) (642,200)
Dividend payments.................................................... (3,001) (2,669)
Stock repurchases.................................................... - - (22,851)
Proceeds from exercise of stock options.............................. 6,711 2,231
----------- -----------
Net cash provided by financing activities............................ 56,058 34,048
----------- -----------
Net increase (decrease) in cash and cash equivalents................. 17,473 (20,147)
Cash and cash equivalents
Beginning of period............................................ 14,115 38,930
----------- -----------
End of period.................................................. $ 31,588 $ 18,783
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See notes to condensed consolidated financial statements.
-4-
M.D.C. HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A. Presentation of Financial Statements
The condensed consolidated financial statements of M.D.C. Holdings,
Inc. ("MDC" or the "Company," which refers to M.D.C. Holdings, Inc. and its
subsidiaries) have been prepared, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. These statements reflect
all adjustments (including all normal recurring accruals), which, in the opinion
of management, are necessary to present fairly the financial position, results
of operations and cash flows of MDC as of June 30, 2001 and for all of the
periods presented. These statements are condensed and do not include all of the
information required by generally accepted accounting principles in a full set
of financial statements. These statements should be read in conjunction with
MDC's financial statements and notes thereto included in MDC's Annual Report on
Form 10-K for its fiscal year ended December 31, 2000.
B. Corporate and Homebuilding Interest Activity (in thousands)
Three Months Six Months
Ended June 30, Ended June 30,
---------------------------- ---------------------------
2001 2000 2001 2000
----------- ------------ ----------- -----------
Interest capitalized in homebuilding
inventory, beginning of period....... $ 19,770 $ 17,615 $ 19,417 $ 17,406
Interest incurred....................... 5,727 5,711 11,759 10,492
Interest expensed....................... - - - - - - - -
Previously capitalized interest included
in cost of sales..................... (5,994) (5,289) (11,673) (9,861)
----------- ----------- ----------- -----------
Interest capitalized in homebuilding
inventory, end of period............. $ 19,503 $ 18,037 $ 19,503 $ 18,037
=========== =========== =========== ===========
C. Earnings Per Share
The basic and diluted earnings per share calculations are shown below
(in thousands, except per share amounts).
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Basic Earnings Per Share
Net income....................................... $ 38,843 $ 28,809 $ 68,126 $ 49,830
=========== =========== =========== ===========
Basic weighted-average shares outstanding........ 24,062 23,625 23,820 23,969
=========== =========== =========== ===========
Per share amounts................................ $ 1.61 $ 1.22 $ 2.86 $ 2.08
=========== =========== =========== ===========
Diluted Earnings Per Share
Net income....................................... $ 38,843 $ 28,809 $ 68,126 $ 49,830
=========== =========== =========== ===========
Basic weighted-average shares outstanding........ 24,062 23,625 23,820 23,969
Stock options, net............................... 770 379 845 323
----------- ----------- ----------- -----------
Diluted weighted-average shares outstanding...... 24,832 24,004 24,665 24,292
=========== =========== =========== ===========
Per share amounts................................ $ 1.56 $ 1.20 $ 2.76 $ 2.05
=========== =========== =========== ===========
-5-
D. Information on Business Segments
The Company operates in two business segments: homebuilding and
financial services. A summary of the Company's segment information is shown
below (in thousands).
Three Months Six Months
Ended June 30, Ended June 30,
---------------------------- ---------------------------
2001 2000 2001 2000
----------- ------------ ----------- -----------
Homebuilding
Home sales......................... $ 497,406 $ 407,459 $ 907,126 $ 736,910
Land sales......................... 413 3,050 759 4,543
Other revenues..................... 1,191 1,433 2,221 11,498
----------- ----------- ----------- -----------
499,010 411,942 910,106 752,951
----------- ----------- ----------- -----------
Home cost of sales................. 379,572 317,067 694,009 576,894
Land cost of sales................. 194 1,356 457 2,355
Asset impairment charge............ - - 800 - - 800
Marketing expenses................. 27,064 23,163 49,917 41,847
General and administrative expenses 22,194 17,198 41,806 33,226
----------- ----------- ----------- -----------
429,024 359,584 786,189 655,122
----------- ----------- ----------- -----------
Homebuilding Operating Profit.. 69,986 52,358 123,917 97,829
----------- ----------- ----------- -----------
Financial Services
Revenues
Interest........................... 914 571 1,455 1,063
Origination fees................... 4,467 3,242 8,152 6,038
Gains on sales of mortgage servicing 719 1,372 2,402 1,829
Gains on sales of mortgage loans, net 2,936 2,092 5,510 4,092
Mortgage servicing and other....... (38) 153 (180) 282
----------- ----------- ----------- -----------
8,998 7,430 17,339 13,304
General and Administrative Expenses.. 4,272 3,450 8,409 6,875
----------- ----------- ----------- -----------
Financial Services Operating
Profit....................... 4,726 3,980 8,930 6,429
----------- ----------- ----------- -----------
Total Operating Profit................. 74,712 56,338 132,847 104,258
----------- ----------- ----------- -----------
Corporate
Interest and other revenues........ 227 275 512 550
General and administrative expenses (11,510) (8,515) (21,916) (17,069)
----------- ----------- ----------- -----------
Net Corporate Expenses......... (11,283) (8,240) (21,404) (16,519)
----------- ----------- ----------- -----------
Income Before Income Taxes.............. $ 63,429 $ 48,098 $ 111,443 $ 87,739
=========== =========== =========== ===========
-6-
E. Supplemental Disclosure of Cash Flow Information (in thousands)
Six Months
Ended June 30,
2001 2000
------------ ------------
Cash paid during the period for
Interest.................................................... $ 11,365 $ 10,517
Income taxes................................................ $ 45,126 $ 31,998
F. Stockholders' Equity
Stock Repurchase Programs - On January 24, 2000, the MDC board of
directors authorized the repurchase of up to 1,000,000 shares of MDC common
stock. On February 21, 2000, the MDC board of directors authorized the
repurchase of up to 2,000,000 additional shares of MDC common stock. The Company
repurchased a total of 1,931,800 shares of MDC common stock under these programs
through December 31, 2000. The per share prices, including commissions, for
these repurchases ranged from $13.53 to $22.02 with an average cost of $15.96.
There were no repurchases during the six months ended June 30, 2001. At June 30,
2001, the Company held 7,208,000 shares of treasury stock with an average
purchase price of $9.09.
Stock Dividend - On January 22, 2001, MDC's board of directors approved
the payment of a 10% stock dividend that was distributed on February 16, 2001 to
shareowners of record on February 5, 2001. In accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share," basic and diluted
net income per share amounts and weighted-average shares outstanding have been
restated for the quarter and the six months ended June 30, 2000 to reflect the
effect of this stock dividend. In addition, stockholders' equity has been
adjusted to reflect the stock dividend as if it had been paid on December 31,
2000.
Stock Contributions - In the second quarter and first half of 2001, the
Company committed to contribute $1,000,000 and $2,000,000, respectively, to the
M.D.C. Holdings, Inc. Charitable Foundation (the "Foundation"), a Delaware
not-for-profit corporation that was incorporated on September 30, 1999. Pursuant
to this commitment, in April and June 2001, respectively, 28,145 and 29,744
shares of MDC common stock valued at a total of $2,000,000 were transferred to
the Foundation. No contributions were made in the first half of 2000. The
Foundation is a charitable organization with the primary purpose of supporting
non-profit charities in communities where the Company conducts its business.
Certain directors and officers of the Company are the trustees and officers of
the Foundation.
G. Sale of Investments
During the quarter and six months ended June 30, 2001, net income
included realized pre-tax losses of $465,000 and $291,000, respectively, less
applicable tax benefits of $294,000 and $184,000, respectively, from the sale of
certain investments by the Company's captive insurance subsidiary, compared with
gains of $209,000 and $9,521,000, respectively, less applicable taxes of
$133,000 and $6,071,000, respectively, for the comparable periods in 2000.
-7-
H. Lines of Credit
Homebuilding - In October 1999, the homebuilding line of credit (the
"Homebuilding Line") was amended and restated (the "Amended and Restated Credit
Agreement") to extend the maturity date to September 30, 2004 and increase the
maximum amount available from $300,000,000 to $450,000,000 upon the Company's
request, requiring additional commitments from existing or additional
participant lenders. Commitments under the Homebuilding Line increased from
$300,000,000 to $413,000,000 in 2000 and to $438,000,000 in April 2001.
Commitments increased to $450,000,000 in June 2001 with the addition of two new
banks to the lending group. Pursuant to the terms of the Amended and Restated
Credit Agreement, a term-out of this credit may commence prior to September 30,
2004 under certain circumstances. At June 30, 2001, $147,000,000 was borrowed
and $10,697,000 in letters of credit were outstanding under the Homebuilding
Line.
Mortgage Lending - In June 2001, the Company modified the terms of its
mortgage lending bank line of credit (the "Mortgage Line"), increasing the
available borrowings from $100,000,000 to $125,000,000. Available borrowings
under the Mortgage Line are collateralized by mortgage loans and mortgage-backed
certificates and are limited to the value of eligible collateral, as defined. At
June 30, 2001, $69,807,000 was borrowed and an additional $31,093,000 was
collateralized and available to be borrowed. The Mortgage Line is cancellable
upon 90 days' notice.
I. Derivative Instruments and Hedging Activities
HomeAmerican Mortgage Corporation (a wholly owned subsidiary of M.D.C.
Holdings, Inc.) originates mortgage loans that generally are sold forward and
subsequently are delivered to a third-party purchaser within approximately 40
days. Forward commitments are used for non-trading purposes to sell mortgage
loans and hedge interest rate risk on rate-locked mortgage loans in process that
have not closed. Other than these forward commitments, the Company does not
utilize interest rate swaps, forward option contracts on foreign currencies or
commodities, or other types of derivative financial instruments.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") was
issued. In June 2000, Statement of Financial Accounting Standards No. 138,
"Accounting for Certain Derivative Instruments and Hedging Activities, an
Amendment of FASB Statement No. 133" ("SFAS 138") was issued. SFAS 133 and SFAS
138 address the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging activities. The
Company adopted SFAS 133 and SFAS 138 on January 1, 2001. The adoption of SFAS
133 and SFAS 138 did not have a material effect on the Company's financial
position or results of operations.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
INTRODUCTION
M.D.C. Holdings, Inc. is a Delaware Corporation. We refer to M.D.C.
Holdings, Inc. as the "Company" or as "MDC" in this Form 10-Q. The
"Company" or "MDC" includes our subsidiaries unless we state otherwise. MDC's
primary business is owning and managing subsidiary companies that build and sell
homes under the name "Richmond American Homes." We also own and manage
HomeAmerican Mortgage Corporation ("HomeAmerican"), which originates mortgage
loans primarily for MDC's home buyers. In addition, MDC provides title agency
services through American Home Title and Escrow Company ("American Home Title")
and offers insurance through American Home Insurance Agency, Inc. ("American
Home Insurance") to MDC's home buyers.
RESULTS OF OPERATIONS
The table below summarizes MDC's results of operations (in thousands,
except per share amounts).
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Revenues.................................... $ 508,235 $ 419,647 $ 927,957 $ 766,805
Income Before Income Taxes.................. $ 63,429 $ 48,098 $ 111,443 $ 87,739
Net Income.................................. $ 38,843 $ 28,809 $ 68,126 $ 49,830
Earnings Per Share
Basic.................................. $ 1.61 $ 1.22 $ 2.86 $ 2.08
Diluted................................ $ 1.56 $ 1.20 $ 2.76 $ 2.05
Revenues for the second quarter and first half of 2001 increased by
$88,588,000 and $161,152,000, respectively, compared with the same periods in
2000, primarily due to increased homebuilding revenues resulting from higher
home closings and significant increases in average selling price per home
closed. Revenues for the first six months of 2000 included gains of $9,521,000
realized on sales of certain investments by MDC's captive insurance subsidiary.
Income before income taxes increased 32% and 27%, respectively, in the
second quarter and first half of 2001, compared with the same periods in 2000.
These increases primarily were a result of higher operating profit from the
Company's homebuilding segment, due to the increase in homebuilding revenues
described above and 150 and 180 basis point increases, respectively, in Home
Gross Margins (as defined below) for the second quarter and first half of 2001
compared with the same periods in 2000. These increases partially were offset by
the $9,521,000 investment gains in the first half of 2000, discussed above.
-9-
Homebuilding Segment
The table below sets forth information relating to the Company's
homebuilding segment (dollars in thousands).
Three Months Six Months
Ended June 30, Ended June 30,
------------------------------- -------------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
Home Sales Revenues........................... $ 497,406 $ 407,459 $ 907,126 $ 736,910
Operating Profit.............................. $ 69,986 $ 52,358 $ 123,917 $ 97,829
Average Selling Price Per Home Closed......... $ 258.5 $ 218.9 $ 246.3 $ 216.0
Home Gross Margins............................ 23.7% 22.2% 23.5% 21.7%
Excluding Interest in Home Cost of Sales... 24.9% 23.4% 24.8% 23.0%
Orders For Homes, net (units)
Colorado............................... 639 615 1,607 1,466
California............................. 414 445 855 857
Arizona................................ 534 456 1,266 913
Nevada................................. 162 199 430 432
Virginia............................... 144 186 364 464
Maryland............................... 80 71 178 157
------------- ------------- ------------- -------------
Total.............................. 1,973 1,972 4,700 4,289
============= ============= ============= =============
Homes Closed (units)
Colorado............................... 671 798 1,300 1,450
California............................. 375 299 615 518
Arizona................................ 513 364 1,011 689
Nevada................................. 169 166 328 288
Virginia............................... 136 158 306 322
Maryland............................... 60 76 123 145
------------- ------------- ------------- -------------
Total.............................. 1,924 1,861 3,683 3,412
============= ============= ============= =============
June 30, December 31, June 30,
2001 2000 2000
------------- ------------- -------------
Backlog (units)
Colorado............................... 1,692 1,385 1,642
California............................. 748 508 596
Arizona................................ 1,065 747 676
Nevada................................. 300 198 281
Virginia............................... 386 328 432
Maryland............................... 181 126 191
------------- ------------- -------------
Total.............................. 4,372 3,292 3,818
============= ============= =============
Backlog Estimated Sales Value................. $ 1,110,000 $ 775,000 $ 840,000
============= ============= =============
Active Subdivisions
Colorado............................... 61 48 46
California............................. 25 29 25
Arizona................................ 29 27 28
Nevada................................. 7 10 10
Virginia............................... 11 12 13
Maryland............................... 4 7 7
------------- ------------- -------------
Total.............................. 137 133 129
============= ============= =============
-10-
Home Sales Revenues - Home sales revenues in the second quarter and
first half of 2001 were 22% and 23% higher, respectively, than home sales
revenues for the same periods in 2000. The improved revenues primarily were a
result of increased home closings and higher average selling prices per home
closed, as further discussed below.
Homes Closed - Home closings in the second quarter and first half of
2001 were 3% and 8% higher, respectively, than in the same periods in 2000. Home
closings in the second quarter and first half of 2001 particularly were strong
in (1) Phoenix (increases of 70% and 83%, respectively), Southern California
(increases of 17% and 13%, respectively) and Nevada (increases of 2% and 14%,
respectively) as a result of the strong demand for new homes in these markets;
and (2) Northern California (increases of 41% and 30%, respectively), where the
Company has almost doubled the number of active subdivisions since June 2000.
Home closings decreased in the second quarter and first half of 2001 in
Colorado, compared with the same periods in 2000, primarily due to lower home
orders resulting from fewer active subdivisions, many of which were nearing
close-out, in the second half of 2000.
Average Selling Price Per Home Closed - The average selling price per
home closed in the second quarter and first half of 2001 increased $39,600 and
$30,300, respectively, compared with the same periods in 2000, as each of the
Company's markets realized higher average selling prices. The increases
primarily were due to (1) the ability to increase sales prices due to the strong
demand for new homes in most of the Company's markets; (2) a greater number of
homes closed in higher-priced subdivisions in California, where average selling
prices exceeded $400,000; and (3) increased sales per home from the Company's
design centers in Colorado, Virginia, Southern California, Phoenix, Las Vegas
and Northern California.
Home Gross Margins - We define "Home Gross Margins" to mean home sales
revenues less cost of goods sold (which primarily includes land and construction
costs, capitalized interest, financing costs, and a reserve for warranty
expense) as a percent of home sales revenues. Home Gross Margins for the 2001
second quarter and first half increased 150 and 180 basis points, respectively,
compared with the same periods in 2000. The increases largely were due to (1)
selling price increases in most of the Company's markets; (2) increased sales of
higher-margin products through the Company's design centers; (3) a reduction of
previous estimates of costs to complete land development and homes in certain
projects in Phoenix, California and Colorado; (4) in Maryland, fewer
under-performing subdivisions in 2001 and management's continued efforts to
improve profitability; and (5) ongoing initiatives in each of the Company's
markets designed to improve operating efficiency, control costs and increase
rates of return. The impact of these increases partially was offset by, among
other things, the rising cost of land.
Future Home Gross Margins may be impacted adversely by (1) an increase
in competition; (2) increases in the costs of subcontracted labor, finished
lots, building materials and other resources, to the extent that market
conditions prevent the recovery of increased costs through higher selling
prices; (3) adverse weather; and (4) shortages of subcontractor labor, finished
lots and other resources. Looking forward to the balance of 2001, we currently
anticipate that Home Gross Margins in the third and fourth quarters may be lower
than the record level achieved in the 2001 second quarter, but should exceed
22%. See "Forward-Looking Statements" below.
-11-
Orders for Homes and Backlog - Orders for homes in the second quarter
of 2001 were approximately the same as for the comparable period in 2000. In the
first six months of 2001, home orders were 10% higher than the first six months
of 2000. Home orders in the second quarter of 2001 particularly were strong in
Phoenix, due to a greater number of active subdivisions and the continued strong
demand for new homes in that market. Home orders in Southern California,
Virginia and Nevada decreased in the second quarter of 2001, compared with the
same period in 2000, primarily due to a temporary reduction in the number of
active subdivisions in these markets.
Homes under contract but not yet delivered ("Backlog") at June 30, 2001
was 4,372 units with an estimated sales value of $1,110,000,000, compared with a
Backlog of 3,818 units with an estimated sales value of $840,000,000 at June 30,
2000. Assuming no significant change in market conditions or mortgage interest
rates, the Company expects approximately 70% to 75% of its June 30, 2001 Backlog
to close under existing sales contracts during the second half of 2001 and first
quarter of 2002. The remaining 25% to 30% of the homes in Backlog are not
expected to close under existing contracts due to cancellations. See
"Forward-Looking Statements" below.
The Company received 602 orders for homes in July 2001, compared with
779 orders for July 2000. The July 2001 decrease primarily is attributable to
(1) a reduced number of active subdivisions in Virginia and Nevada; (2) four new
subdivision grand openings in Northern California in July 2000, which produced
an average of 14 orders per subdivision, compared with five orders per
subdivision in 2001; and (3) a slower sales pace in Colorado, compared with the
unseasonably strong demand in July 2000, primarily resulting from a significant
number of new subdivisions selling without model homes, competition from an
increasing resale home inventory and a general slowing in the new home market in
Denver and northern Colorado. The Company anticipates opening a total of eight
new subdivisions in Virginia and Nevada in the next 90 days. In addition, the
Company plans to have over 40 new model homes open in Denver and northern
Colorado before the end of 2001. See "Forward-Looking Statements" below.
Other Revenues - Other revenues of $11,498,000 for the first half of
2000 included net pre-tax gains realized on the sales of certain investments by
MDC's captive insurance subsidiary of $9,521,000.
Marketing - Marketing expenses (which include sales commissions,
advertising, amortization of deferred marketing costs, model home expenses and
other costs) totalled $27,064,000 and $49,917,000, respectively, for the quarter
and six months ended June 30, 2001, compared with $23,163,000 and $41,847,000,
respectively, for the same periods in 2000. The increases in 2001 primarily were
volume related, resulting from higher sales commissions, product advertising and
other costs incurred in connection with the Company's increased home sale
revenues. Notwithstanding the increased costs, marketing expenses decreased as a
percentage of home sales revenues for the quarter and six months ended June 30,
2001 to 5.4% and 5.5%, respectively, compared to 5.7% for the comparable periods
in 2000.
General and Administrative - General and administrative expenses
increased to $22,194,000 and $41,806,000, respectively, during the second
quarter and first half of 2001, compared with $17,198,000 and $33,226,000,
respectively, for the same periods in 2000, primarily due to increased
compensation and other overhead costs associated with expanded operations in
most of the Company's markets.
-12-
Land Inventory
The table below shows the carrying value of land and land under
development, by market, the total number of lots owned and lots controlled under
option agreements, and total option deposits (dollars in thousands).
June 30, December 31, June 30,
2001 2000 2000
----------- ----------- -----------
Colorado.................................. $ 155,508 $ 126,524 $ 81,365
California................................ 110,528 149,088 149,012
Arizona................................... 57,195 50,937 43,412
Nevada.................................... 32,454 26,546 23,975
Virginia.................................. 34,401 29,596 10,838
Maryland.................................. 7,618 6,020 5,679
----------- ----------- -----------
Total................................ $ 397,704 $ 388,711 $ 314,281
=========== =========== ===========
Total Lots Owned (excluding lots in
work-in-process)........................ 12,439 11,633 10,400
Total Lots Controlled Under Option........ 7,746 8,131 8,314
----------- ----------- -----------
Total Lots Owned and Controlled
(excluding lots in work-in-process).. 20,185 19,764 18,714
=========== =========== ===========
Total Cash Option Deposits................ $ 14,651 $ 10,838 $ 6,922
=========== =========== ===========
Financial Services Segment
The table below sets forth information relating to HomeAmerican's
operations (in thousands).
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Loan Origination Fees....................... $ 4,467 $ 3,242 $ 8,152 $ 6,038
Gains on Sales of Mortgage Servicing, net... $ 719 $ 1,372 $ 2,402 $ 1,829
Gains on Sales of Mortgage Loans, net....... $ 2,936 $ 2,092 $ 5,510 $ 4,092
Operating Profit............................ $ 4,726 $ 3,980 $ 8,930 $ 6,429
Principal Amount of Loan Originations
MDC home buyers.......................... $ 288,875 $ 206,964 $ 519,164 $ 375,932
Spot..................................... 19,226 3,777 28,430 7,837
----------- ----------- ----------- -----------
Total.............................. $ 308,101 $ 210,741 $ 547,594 $ 383,769
=========== =========== =========== ===========
Principal Amount of Loans Brokered
MDC home buyers.......................... $ 57,296 $ 62,876 $ 110,858 $ 112,622
Spot..................................... 3,839 1,217 7,094 2,391
----------- ----------- ----------- -----------
Total.............................. $ 61,135 $ 64,093 $ 117,952 $ 115,013
=========== =========== =========== ===========
Capture Rate................................ 74% 63% 73% 64%
=========== =========== =========== ===========
Including brokered loans................. 86% 79% 85% 80%
=========== =========== =========== ===========
-13-
HomeAmerican's operating profit for the second quarter and first half
of 2001 increased, compared with the same periods in 2000, due to higher gains
on sales of mortgage loans, as well as higher origination fee income. The
principal amount of originated and brokered loans increased by $94,402,000 and
$166,764,000, respectively, in the second quarter and first half of 2001,
compared with the same periods in 2000. These improvements primarily were due to
the Company's higher home closings and an increase in HomeAmerican's Capture
Rate (as defined below). HomeAmerican continues to benefit from the Company's
homebuilding growth, as MDC home buyers were the source of approximately 94% and
95%, respectively, of the principal amount of mortgage loans originated and
brokered by HomeAmerican in the second quarter and first half of 2001.
Mortgage loans originated by HomeAmerican for MDC home buyers as a
percentage of total MDC home closings ("Capture Rate") increased to 74% and 73%,
respectively, for the quarter and six months ended June 30, 2001, compared with
63% and 64%, respectively, for the same periods in 2000. HomeAmerican also
brokers mortgage loans originated by outside lending institutions for MDC home
buyers. These brokered loans, for which HomeAmerican receives a fee, have been
excluded from the computation of the Capture Rate. If brokered loans were
included, the Capture Rate would have been 86% and 85%, respectively, for the
second quarter and first half of 2001, compared with 79% and 80%, respectively,
for the same periods in 2000.
Forward Sales Commitments - HomeAmerican's operations are affected by
changes in mortgage interest rates. HomeAmerican utilizes forward mortgage
securities contracts to manage the interest rate risk on its fixed-rate mortgage
loans owned and rate-locked mortgage loans in the pipeline. These contracts are
the only significant financial derivative instruments utilized by MDC.
Other Operating Results
Interest Expense - The Company capitalizes interest on its homebuilding
inventories during the period of active development and through the completion
of construction. Corporate and homebuilding interest incurred but not
capitalized is reflected as interest expense and totalled zero for the second
quarter and first half of both 2001 and 2000. For a reconciliation of interest
incurred, capitalized and expensed, see Note B to the Company's Condensed
Consolidated Financial Statements.
Corporate General and Administrative Expenses - Corporate general and
administrative expenses totalled $11,510,000 and $21,916,000, respectively,
during the second quarter and first half of 2001, compared with $8,515,000 and
$17,069,000, respectively, for the same periods of 2000. The increases in the
2001 periods primarily were due to (1) greater compensation-related costs in
2001 principally resulting from the Company's higher profitability and increased
homebuilding activities; and (2) $1,000,000 and $2,000,000, respectively, of
contributions to the M.D.C. Holdings, Inc. Charitable Foundation in the second
quarter and first six months of 2001 (see Note F to the Company's Condensed
Consolidated Financial Statements).
Income Taxes - MDC's overall effective income tax rates of 38.8% and
38.9% for the second quarter and first half of 2001, respectively, compared with
40.1% and 43.2%, respectively, for the same periods in 2000, differed from the
federal statutory rate of 35% primarily due to the impact of state income taxes.
In addition, in the first half of 2000, the investment gains of $9,521,000,
discussed under "Results of Operations" above, were subject to taxation at both
the subsidiary level and corporate level, resulting in taxes at an effective
rate of 64%.
-14-
LIQUIDITY AND CAPITAL RESOURCES
MDC uses its liquidity and capital resources to (1) support its
operations, including its inventories of homes, home sites and land; (2) provide
working capital; and (3) provide mortgage loans for its home buyers. Liquidity
and capital resources are generated internally from operations and from external
sources. The Company currently has an effective registration statement that
would allow the Company to issue up to $300,000,000 of equity, debt or hybrid
securities.
Capital Resources
The Company's capital structure is a combination of (1) permanent
financing, represented by stockholders' equity; (2) long-term financing,
represented by its publicly traded 8 3/8% senior notes due 2008 (the "Senior
Notes") and its homebuilding line of credit; and (3) current financing,
primarily its mortgage lending line of credit. The Company believes that its
current financial condition is both balanced to fit its current operating
structure and adequate to satisfy its current and near-term capital
requirements. See "Forward-Looking Statements" below.
Based upon its current capital resources and additional liquidity
available under existing credit agreements, MDC anticipates that it has adequate
financial resources to satisfy its current and near-term capital requirements,
including the acquisition of land. The Company believes that it can meet its
long-term capital needs (including meeting future debt payments and refinancing
or paying off other long-term debt as it becomes due) from operations and
external financing sources, assuming that no significant adverse changes in the
Company's business occur as a result of the various risk factors described
elsewhere in this report. See "Forward-Looking Statements" below.
Lines of Credit and Other
Homebuilding - The Company maintains an unsecured revolving line of
credit with a group of lenders to support its homebuilding operations (the
"Homebuilding Line"). In October 1999, the terms of the Homebuilding Line were
amended and restated (the "Amended and Restated Credit Agreement") to extend the
maturity date to September 30, 2004 and increase the maximum amount available
from $300,000,000 to $450,000,000 upon the Company's request, requiring
additional commitments from existing or additional participant lenders.
Commitments under the Homebuilding Line increased from $300,000,000 to
$413,000,000 in 2000 and to $438,000,000 in April 2001. Commitments increased to
$450,000,000 in June 2001 with the addition of two new banks to the lending
group. Pursuant to the terms of the Amended and Restated Credit Agreement, a
term-out of this credit may commence prior to September 30, 2004 under certain
circumstances. At June 30, 2001, $147,000,000 was borrowed and $10,697,000 in
letters of credit were outstanding under the Homebuilding Line.
Mortgage Lending - To provide funds to originate and purchase mortgage
loans and to finance these mortgage loans on a short-term basis, HomeAmerican
utilizes its mortgage lending bank line of credit (the "Mortgage Line"). These
mortgage loans are pooled into GNMA, FNMA and FHLMC pools, or retained as whole
loans, and subsequently sold in the open market on a spot basis or pursuant to
mortgage loan sale commitments, generally within 40 days after origination.
During the first six months of 2001 and 2000, HomeAmerican sold $537,280,000 and
$397,025,000, respectively, principal amount of mortgage loans and
mortgage-backed certificates to unaffiliated purchasers.
In June 2001, the Company modified the terms of its Mortgage Line,
increasing the available borrowings from $100,000,000 to $125,000,000. Available
borrowings under the Mortgage Line are
-15-
collateralized by mortgage loans and mortgage-backed certificates and are
limited to the value of eligible collateral, as defined. At June 30, 2001,
$69,807,000 was borrowed and an additional $31,093,000 was collateralized and
available to be borrowed. The Mortgage Line is cancellable upon 90 days' notice.
General - The agreements for the Company's Senior Notes and bank lines
of credit require compliance with certain representations, warranties and
covenants. The Company believes that it is in compliance with these
representations, warranties and covenants. The agreements containing these
representations, warranties and covenants, other than the Mortgage Line, are on
file with the Securities and Exchange Commission and are listed in the Exhibit
Table in Part IV of MDC's Annual Report on Form 10-K for its fiscal year ended
December 31, 2000.
The financial covenants contained in the Amended and Restated Credit
Agreement include a leverage test and a consolidated tangible net worth test.
Under the leverage test, generally MDC's consolidated indebtedness is not
permitted to exceed 2.15 (subject to downward adjustment in certain
circumstances) times MDC's "adjusted consolidated tangible net worth," as
defined. Under the consolidated tangible net worth test, MDC's "tangible net
worth," as defined, must not be less than the sum of $238,000,000 and 50% of
"consolidated net income," as defined, after December 31, 1998. In addition,
"consolidated tangible net worth," as defined, must not be less than
$150,000,000.
The Company's Senior Notes indenture does not contain financial
covenants. However, there are covenants that limit transactions with affiliates,
limit the amount of additional indebtedness that MDC may incur, restrict certain
payments on, or the redemptions of, the Company's securities, restrict certain
sales of assets and limit incurring liens. In addition, under certain
circumstances, in the event of a change of control (generally a sale, transfer,
merger or acquisition of MDC or substantially all of its assets), MDC may be
required to offer to repurchase the Senior Notes. The Senior Notes are not
secured.
MDC Common Stock Repurchase Programs
On January 24, 2000, MDC's board of directors authorized the repurchase
of up to 1,000,000 shares of MDC common stock. On February 21, 2000, MDC's board
of directors authorized the repurchase of up to 2,000,000 additional shares of
MDC common stock. The Company repurchased a total of 1,931,800 shares of MDC
common stock under these programs through December 31, 2000. The per share
prices, including commissions, for these repurchases ranged from $13.53 to
$22.02 with an average cost of $15.96. There were no repurchases during the six
months ended June 30, 2001. At June 30, 2001, the Company held 7,208,000 shares
of treasury stock with an average purchase price of $9.09.
Consolidated Cash Flow
During the first six months of 2001 and 2000, the Company used
$38,585,000 and $54,195,000, respectively, of cash in its operating activities,
primarily to finance increases in homebuilding inventories related to its
expanded homebuilding operations. In addition, in the first half of 2000, the
Company used $22,851,000 to repurchase 1,552,900 shares of MDC common stock. The
Company financed these operating cash requirements and stock repurchases
primarily through borrowings on its bank lines of credit.
-16-
IMPACT OF INFLATION, CHANGING PRICES AND ECONOMIC CONDITIONS
Real estate and residential housing prices are affected by inflation,
which can cause increases in the price of land, raw materials and subcontracted
labor. Unless these increased costs are recovered through higher sales prices,
Home Gross Margins would decrease. If interest rates increase, construction and
financing costs, as well as the cost of borrowings, also would increase, which
can result in lower Home Gross Margins. Increases in home mortgage interest
rates make it more difficult for MDC's customers to qualify for home mortgage
loans, potentially decreasing home sales volume. Increases in interest rates
also may affect adversely the volume of mortgage loan originations.
The volatility of interest rates could have an adverse effect on MDC's
future operations and liquidity. An increase in interest rates may affect
adversely the demand for housing and the availability of mortgage financing and
may reduce the credit facilities offered to MDC by banks, investment bankers and
mortgage bankers. See "Forward-Looking Statements" below.
MDC's business also is affected significantly by general economic
conditions and, particularly, the demand for new homes in the markets in which
it builds.
ISSUANCE OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In July 2001, Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142") was issued. Under SFAS 142,
goodwill and indefinite lived intangible assets are no longer amortized but are
reviewed annually for impairment. Separable intangible assets that are not
deemed to have an indefinite life will continue to be amortized over their
useful lives. The amortization provisions of SFAS 142 apply to goodwill and
intangible assets acquired after June 30, 2001. For goodwill and intangible
assets acquired prior to July 1, 2001, SFAS 142 must be adopted as of January 1,
2002. The Company has determined that SFAS 142 will not have a material effect
on the Company's financial position or results of operations. See
"Forward-Looking Statements" below.
In July 2001, Statement of Financial Accounting Standards No. 141,
"Business Combinations" ("SFAS 141") was issued. SFAS 141 eliminates the
pooling-of-interests method of accounting for business combinations except for
qualifying business combinations that were initiated prior to July 1, 2001, and
further clarifies the criteria to recognize intangible assets separately from
goodwill. SFAS 141 is effective for any business combination completed after
June 30, 2001, and did not have a material effect on the Company's financial
position or results of operation.
In September 2000, Statement of Financial Accounting Standards No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("SFAS 140") was issued. SFAS 140 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. SFAS 140 is effective for recognition and
reclassification of collateral and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000 and
is effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after March 31, 2001. The adoption of SFAS 140 did not
have a material impact on the Company's financial position or results of
operations.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") was
issued. In June 2000, Statement of Financial Accounting Standards No. 138,
"Accounting for Certain Derivative Instruments and Hedging Activities, an
-17-
Amendment of FASB Statement No. 133" ("SFAS 138") was issued. SFAS 133 and SFAS
138 address the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging activities. The
only significant financial derivative instruments utilized by MDC are forward
mortgage securities contracts used by HomeAmerican. The Company adopted SFAS 133
and SFAS 138 on January 1, 2001. The adoption of SFAS 133 and SFAS 138 did not
have a material effect on the Company's financial position or results of
operations.
OTHER
Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q, the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 2000, the
Company's Annual Report to Shareowners, as well as statements made by the
Company in periodic press releases, oral statements made by the Company's
officials to analysts and shareowners in the course of presentations about the
Company and conference calls following quarterly earnings releases, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by the
forward-looking statements. Such factors include, among other things, (1)
general economic and business conditions; (2) interest rate changes; (3) the
relative stability of debt and equity markets; (4) competition; (5) the
availability and cost of land and other raw materials used by the Company in its
homebuilding operations; (6) demographic changes; (7) shortages and the cost of
labor; (8) weather related slowdowns; (9) the availability of public utilities
in certain markets; (10) slow growth initiatives; (11) building moratoria; (12)
governmental regulation, including the interpretation of tax, labor and
environmental laws; (13) changes in consumer confidence and preferences; (14)
required accounting changes; and (15) other factors over which the Company has
little or no control.
-18-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risks related to fluctuations in
interest rates on mortgage loans receivable and debt. The Company utilizes
forward sale commitments to mitigate some of the risk associated with
HomeAmerican's mortgage loan portfolio. Other than these forward commitments,
the Company does not utilize interest rate swaps, forward option contracts on
foreign currencies or commodities, or other types of derivative financial
instruments.
HomeAmerican originates mortgage loans that generally are sold forward
and subsequently are delivered to a third-party purchaser within approximately
40 days. Forward commitments are used for non-trading purposes to sell mortgage
loans and hedge interest rate risk on rate-locked mortgage loans in process that
have not closed. Due to this hedging philosophy, the market risk associated with
these mortgages is minimal.
The Company utilizes both short-term and long-term debt in its
financing strategy. For fixed rate debt, changes in interest rates generally
affect the fair value of the debt instrument, but not the Company's earnings or
cash flows. Conversely, for variable rate debt, changes in interest rates
generally do not impact the fair value of the debt instrument, but may affect
the Company's future earnings and cash flows. The Company does not have an
obligation to prepay fixed rate debt prior to maturity and, as a result,
interest rate risk and changes in fair value should not have a significant
impact on the fixed rate debt until the Company would be required to refinance
such debt.
As of June 30, 2001, short-term debt was $69,807,000, which consisted
of MDC's Mortgage Line. The Mortgage Line is collateralized by residential
mortgage loans. The Company borrows on a short-term basis from banks under
committed lines of credit that bear interest at prevailing market rates.
Long-term debt obligations outstanding, their maturities and estimated
fair value at June 30, 2001 are as follows (dollars in thousands).
Maturities through December 31,
--------------------------------------------------------------- Estimated
2001 2002 2003 2004 2005 Thereafter Total Fair Value
---------- --------- ---------- --------- ---------- ---------- --------- ----------
Fixed Rate Debt............ $ - - $ - - $ - - $ - - $ - - $ 175,000 $ 175,000 $ 174,563
Average Interest Rate
units)................ - - - - - - - - - - 8.38% 8.38%
Variable Rate Debt......... $ - - $ - - $ - - $ 147,000 $ - - $ - - $ 147,000 $ 147,000
Average Interest Rate... - - - - - - 5.23% - - - - 5.23%
The Company believes that its overall balance sheet structure has
repricing and cash flow characteristics that mitigate the impact of interest
rate movements.
-19-
M.D.C. HOLDINGS, INC.
FORM 10-Q
PART II
ITEM 1. LEGAL PROCEEDINGS.
- ------ -----------------
The Company and certain of its subsidiaries and affiliates have been
named as defendants in various claims, complaints and other legal actions
arising in the normal course of business. In the opinion of management, the
outcome of these matters will not have a material adverse effect upon the
financial condition, results of operations or cash flows of the Company.
Because of the nature of the homebuilding business, and in the ordinary
course of its operations, the Company from time to time may be subject to
product liability claims.
The Company is not aware of any litigation, matter or pending claim
against the Company that would result in material contingent liabilities related
to environmental hazards or asbestos.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREOWNERS.
- ------ ----------------------------------------------
MDC held its Annual Meeting of Shareowners (the "Meeting") on
May 21, 2001. At the Meeting, (1) Larry A. Mizel and Herbert T. Buchwald
were re-elected as Class I Directors for three-year terms, expiring in 2004;
(2) the M.D.C. Holdings, Inc. 2001 Equity Incentive Plan was approved; and
(3) the M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors
was approved.
ITEM 5. OTHER INFORMATION.
- ------ -----------------
On July 23, 2001, the Company's board of directors declared a dividend
of seven cents per share for the quarter ended June 30, 2001, payable August 22,
2001 to shareowners of record on August 8, 2001. Future dividend payments are
subject to the discretion of the Company's board of directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------ --------------------------------
(a) Exhibit:
None.
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed by the
Registrant during the period covered by this
Quarterly Report on Form 10-Q.
-20-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 3, 2001 M.D.C. HOLDINGS, INC.
--------------
(Registrant)
By: /s/ Paris G. Reece III
--------------------------------
Paris G. Reece III,
Executive Vice President,
Chief Financial Officer and
Principal Accounting Officer
-21-