-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gz/NRCG3L9klw0J9SeC6qCCBoHG4DK4CKT0JATaLnUtcqU3sZgkViR2eSlCcacQC Rxh2XRD2nRm0Jwv/l82BIg== 0000773141-01-500005.txt : 20010807 0000773141-01-500005.hdr.sgml : 20010807 ACCESSION NUMBER: 0000773141-01-500005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MDC HOLDINGS INC CENTRAL INDEX KEY: 0000773141 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 840622967 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08951 FILM NUMBER: 1698593 BUSINESS ADDRESS: STREET 1: 3600 S YOSEMITE ST STE 900 CITY: DENVER STATE: CO ZIP: 80237 BUSINESS PHONE: 3037731100 MAIL ADDRESS: STREET 1: 3600 S YOSEMITE ST STREET 2: SUITE 900 CITY: DENVER STATE: CO ZIP: 80237 10-Q 1 form10q6_01.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended 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. ================================================================================ M.D.C. HOLDINGS, INC. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001 INDEX Page No. ---- 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 -------------- -------------- 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) ----------- ----------- 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 =========== ===========
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- -----END PRIVACY-ENHANCED MESSAGE-----