EX-99.1 3 0003.txt M.D.C. Holdings, Inc. 401(k) Savings Plan Financial Statements and Additional Information December 31, 1999 and 1998 M.D.C. Holdings, Inc. 401(k) Savings Plan Index -------------------------------------------------------------------------------- Page Financial Statements: Report of Independent Accountants 1 Statement of Net Assets Available for Benefits 2 Statement of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4-9 Additional Information: Schedule I - Schedule of Assets Held for Investment Purposes 10 Schedule II - Schedule of Reportable Transactions 11 Report of Independent Accountants To the Participants and Administrator of the M.D.C. 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 1998, and the changes in net assets available for benefits for the years 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 audits. We conducted our audits 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 audits provide a reasonable basis for the opinion expressed above. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are 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. These supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Denver, Colorado June 21, 2000 M.D.C. Holdings, Inc. 401(k) Savings Plan Statement of Net Assets Available for Benefits --------------------------------------------------------------------------------
December 31, ------------------------------------------- 1999 1998 ------------------ ------------------ Assets Investments at fair value $ 21,739,229 $ 15,574,144 Participant notes receivable 803,465 463,831 Contributions receivable Employer 1,961,124 1,497,447 Employee 118,730 108,387 ------------------ ------------------ Total contributions receivable 2,079,854 1,605,834 ------------------ ------------------ Net assets available for benefits $ 24,622,548 $ 17,643,809 ================== ==================
See accompanying Notes to Financial Statements. 2 M.D.C. Holdings, Inc. 401(k) Savings Plan Statement of Changes in Net Assets Available for Benefits --------------------------------------------------------------------------------
December 31, ------------------------------------------- 1999 1998 ------------------ ------------------ Additions to net assets available for benefits attributed to: Investment income Interest and dividends $ 271,019 $ 218,929 Net appreciation in fair value of investments 1,125,745 2,212,608 ------------------ ------------------ Total investment income 1,396,764 2,431,537 Contributions Employer 1,961,124 1,423,748 Employee 4,879,974 3,153,261 ------------------ ------------------ Total contributions 6,841,098 4,577,009 ------------------ ------------------ Total additions 8,237,862 7,008,546 Deductions from net assets available for benefits attributed to: Benefit payments (1,215,451) (1,379,509) Transaction charges and administrative expenses (26,054) (6,565) Participant notes receivable terminated due to withdrawal of participants (17,618) (23,186) ------------------ ------------------ Total deductions (1,259,123) (1,409,260) ------------------ ------------------ Net increase in net assets available for benefits 6,978,739 5,599,286 Net assets available for benefits at beginning of year 17,643,809 12,044,523 ------------------ ------------------ Net assets available for benefits at end of year $ 24,622,548 $ 17,643,809 ================== ==================
See accompanying Notes to Financial Statements. 3 M.D.C. Holdings, Inc. 401(k) Savings Plan Notes to Financial Statements -------------------------------------------------------------------------------- 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 amended 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 $10,000 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. Forfeited balances of terminated participants' non-vested accounts are used first to pay the expenses to administer the Plan, and are then allocated to reduce future contributions by the Company. 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% 4 M.D.C. Holdings, Inc. 401(k) Savings Plan Notes to Financial Statements -------------------------------------------------------------------------------- 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 currently direct contributions among any of the following investment options: o EuroPacific Growth Fund - a fund which seeks long-term capital growth by investing in companies based outside the U.S. o Fidelity Advisor Growth Opportunities Fund - a fund which seeks capital growth by investing primarily in common stocks and securities convertible into common stocks. o The Income Fund of America - a fund which seeks current income and, secondarily, growth of capital. o INVESCO Dynamics Fund - a fund which seeks long-term capital appreciation by investing in equity securities of mid-sized core growth companies. o NeubergerBerman Genesis Fund - a fund which seeks capital appreciation by investing primarily in equity securities of companies with small market capitalization. o The Victory Stock Index Fund; Class A Shares - a fund which seeks to provide long-term capital appreciation by attempting to match the performance of the Standard & Poor's 500 Composite Stock Price Index. o Washington Mutual Investor Fund, Inc. - a fund which seeks current income and an opportunity for growth of principal. o The Bond Fund of America, Inc. - a fund which seeks a high level of current income as is consistent with preservation of capital. o EB Managed Guaranteed Investment Contract - a fund which seeks a reasonable level of income together with stability of capital by investing in a diversified portfolio of insurance companies and other investment contracts. o M.D.C. Stock Fund - funds are invested solely in shares of M.D.C. Holdings, Inc. common stock. Participants may change or transfer their investments at any time. 5 M.D.C. Holdings, Inc. 401(k) Savings Plan Notes to Financial Statements -------------------------------------------------------------------------------- 1. Description of Plan (continued) 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 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%. Principal and interest is paid ratably through monthly payroll deductions. 2. Summary of Accounting Policies Method of Accounting The Plan's financial statements are prepared on the accrual basis of accounting, and reflect management's estimates and assumptions, such as those regarding fair value, that affect the recorded amounts. Significant estimates used are discussed in the notes to financial statements. Investments Shares of the EB Managed Guaranteed Investment Contract are valued at the contract value of the underlying insurance contracts. 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. Use of Estimates The preparation of these financial statements in conformity with generally accepted accounting principles 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. 6 M.D.C. Holdings, Inc. 401(k) Savings Plan Notes to Financial Statements -------------------------------------------------------------------------------- 2. Summary of Accounting Policies (continued) Reclassifications Certain reclassifications of prior year information have been made to conform with current year presentation. New Accounting Pronouncement In September 1999, the American Institute of Certified Public Accountants issued Statement of Position 99-3, Accounting for and Reporting of Certain Defined Contribution Plan Investments and Other Disclosure Matters ("SOP 99-3"). SOP 99-3 eliminates certain disclosure requirements for certain defined contribution investments. SOP 99-3 is effective for plan years ending after December 15, 1999. Accordingly, the Company has elected to adopt SOP 99-3, and these financials statements reflect the resulting changes herein. 3. Administration of Plan Assets The Company administers the Plan. Investments of Plan assets and payment of benefits were previously managed under contract with CIGNA Retirement and Investment Services ("CIGNA"), the Plan's former trustee and record-keeper. During 1998, the Company appointed KeyTrust as the Plan's trustee and record-keeper. There was a two month "black-out" period during the transition when no activity occurred. The transfer of Plan assets from CIGNA to KeyTrust was completed in July of 1998, and participants re-allocated their account balances to the new investment options. 4. Investments Investments that represent five percent or more of the Plan's net assets are separately identified below.
December 31, ----------------------------------------- 1999 1998 ----------------- ------------------- Fidelity Advisor Growth Opportunities Fund units, 113,925; 110,071 $ 5,315,752 $ 5,529,960 The Income Fund of America units, 107,399; 106,938 1,690,454 1,854,298 INVESCO Dynamics Fund units, 100,299; N/A 2,593,726 N/A The Victory Stock Index Fund; Class A Shares units, 182,483; 136,953 4,458,048 2,908,888 EB Managed Guaranteed Investment Contract units, 237,834; 227,688 3,234,547 2,926,706 M.D.C. Stock Fund shares, 148,700; 73,470 2,333,106 1,587,878
7 M.D.C. Holdings, Inc. 401(k) Savings Plan Notes to Financial Statements -------------------------------------------------------------------------------- 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. Therefore, no provision for income taxes has been included in the Plan's financial statements. 7. Reconciliation 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, Part I and II of the Form 5500 differ from those included in these financial statements. Contributions in the statement 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 ending net asset balances are reconciled as follows:
December 31, ------------------------------------------ 1999 1998 ----------------- ------------------ Net assets, per Form 5500 $ 22,524,228 $ 16,037,975 Add: Employer contributions receivable 1,961,124 1,497,447 Employee contributions receivable 118,730 108,387 Deemed distributions 18,466 - ----------------- ------------------ Net assets, per financial statements $ 24,622,548 $ 17,643,809 ================= ==================
8 8. 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 to offset contributions or to pay Plan expenses, which would be otherwise payable by the Company, in accordance with the Plan document. At December 31, 1999 and 1998, forfeited non-vested accounts included in the Plan's investment in the EB Managed Guaranteed Investment Contract totaled $35,708 and $18,553, respectively. These accounts will be used to pay Plan expenses. Company contributions were reduced by $26,054 and $71,483 from forfeited non-vested accounts in 1999 and 1998, respectively. 9 M.D.C. Holdings, Inc. Additional Information 401(k) Savings Plan Schedule I Schedule of Assets Held for Investment Purposes December 31, 1999 -------------------------------------------------------------------------------------------------------------------
Description of investment including Identity of issue, borrower, maturity date, rate of interest, Current lessor, or similar party collateral, par or maturity value Cost Value The American Funds Group EuroPacific Growth Fund $42.66/unit $ 546,184 $ 679,819 Fidelity Advisors Fidelity Advisor Growth Opportunities Fund $46.66/unit 5,478,461 5,315,752 The American Funds Group The Income Fund of America $15.74/unit 1,938,877 1,690,454 INVESCO Equity, Inc. INVESCO Dynamics Fund $25.86/unit 1,872,804 2,593,726 NeubergerBerman Management, Inc. NeubergerBerman Genesis Fund $13.17/unit 431,866 467,312 The Victory Portfolios The Victory Stock Index Fund; Class A Shares $24.43/unit 4,028,045 4,458,048 Washington Mutual Investors, Inc. Washington Mutual Investor Fund, Inc. $29.56/unit 836,382 747,198 The American Funds Group The Bond Fund of America, Inc. $12.98/unit 225,144 219,267 * Key Bank EB Managed Guaranteed Investment Contract $13.60/unit 3,033,178 3,234,547 Participant Notes Receivable Interest rates of 8.75% - 10.00% and maturity dates of 1 to 15 years 803,465 803,465 * M.D.C. Holdings, Inc. M.D.C. Common Stock $15.69/share 2,544,397 2,333,106 ---------------------------------- $ 21,738,803 $ 22,542,694 ================================== * Indicates an identified entity known to be a party-in-interest to the Plan.
10 M.D.C. Holdings, Inc. Additional Information 401(k) Savings Plan Schedule II Form 5500 - Schedule of Reportable Transactions Year Ended December 31, 1999 ----------------------------------------------------------------------------------------------------------------------------
Current Expense value of incurred asset on Identity of Purchase Selling with Cost of transaction Net gain party involved Description of asset Date price price transaction asset date or (loss) Fidelity Advisors Purchases into Fidelity Advisor Growth Series $1,619,138 N/A N/A $1,619,138 $1,619,138 $ - Opportunities Fund Fidelity Advisors Sales from Fidelity Advisor Growth Series N/A $1,483,902 N/A 1,407,566 1,483,902 76,336 Opportunities Fund INVESCO Equity, Purchases into INVESCO Inc. Dynamics Fund Series 1,815,998 N/A N/A 1,815,998 1,815,998 - INVESCO Equity, Sales from INVESCO Inc. Dynamics Fund Series N/A 236,816 N/A 197,167 236,816 39,649 The Victory Purchases into The Portfolios Victory Stock Index Series 1,751,069 N/A N/A 1,751,069 1,751,069 - Fund; Class A Shares The Victory Sales from The Victory Portfolios Stock Index Fund; Class Series N/A 700,243 N/A 673,981 700,243 26,262 A Shares * M.D.C. Holdings, Purchases of M.D.C. Inc. Common Stock Series 318,154 N/A N/A 318,154 318,154 - * M.D.C. Holdings, Sales of M.D.C. Common Inc. Stock Series N/A 352,775 N/A 318,539 352,775 34,236 * Indicates an identified entity known to be a party-in-interest to the Plan.
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