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Note 21 - Supplemental Guarantor Information

6 Months Ended

Jun. 30, 2019

Supplemental Guarantor Information [Text Block]

21.	Supplemental Guarantor Information

Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the following subsidiaries (collectively, the "Guarantor Subsidiaries"), which are 100%-owned subsidiaries of the Company:

●

M.D.C. Land Corporation

●

RAH of Florida, Inc.

●

Richmond American Construction, Inc.

●

Richmond American Homes of Arizona, Inc.

●

Richmond American Homes of Colorado, Inc.

●

Richmond American Homes of Florida, LP

●

Richmond American Homes of Illinois, Inc.

●

Richmond American Homes of Maryland, Inc.

●

Richmond American Homes of Nevada, Inc.

●

Richmond American Homes of New Jersey, Inc.

●

Richmond American Homes of Oregon, Inc.

●

Richmond American Homes of Pennsylvania, Inc.

●

Richmond American Homes of Utah, Inc.

●

Richmond American Homes of Virginia, Inc.

●

Richmond American Homes of Washington, Inc.

The senior note indentures do not provide for a suspension of the guarantees, but do provide that any Guarantor may be released from its guarantee so long as (1) no default or event of default exists or would result from release of such guarantee, (2) the Guarantor being released has consolidated net worth of less than 5% of the Company’s consolidated net worth as of the end of the most recent fiscal quarter, (3) the Guarantors released from their guarantees in any year-end period comprise in the aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of the Company’s consolidated net worth as of the end of the most recent fiscal quarter, (4) such release would not have a material adverse effect on the homebuilding business of the Company and its subsidiaries and (5) the Guarantor is released from its guarantee(s) under all Specified Indebtedness (other than by reason of payment under its guarantee of Specified Indebtedness). Upon delivery of an officers’ certificate and an opinion of counsel stating that all conditions precedent provided for in the indenture relating to such transactions have been complied with and the release is authorized, the guarantee will be automatically and unconditionally released. “Specified Indebtedness” means indebtedness under the senior notes, the Company’s Indenture dated as of December 3, 2002, the Revolving Credit Facility, and any refinancing, extension, renewal or replacement of any of the foregoing.

We have determined that separate, full financial statements of the Guarantor Subsidiaries would not be material to investors and, accordingly, supplemental financial information for the Guarantor and Non-Guarantor Subsidiaries is presented below.

Supplemental Condensed Combining Balance Sheet

	June 30, 2019
					Non-
			Guarantor		Guarantor		Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries		Entries			MDC
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents	$	384,094	$	5,967	$	-	$	-		$	390,061
Restricted cash		-		12,911		-		-			12,911
Trade and other receivables		1,203		53,577		-		-			54,780
Inventories:
Housing completed or under construction		-		1,071,181		-		-			1,071,181
Land and land under development		-		1,156,009		-		-			1,156,009
Total inventories		-		2,227,190		-		-			2,227,190

Intercompany receivables		1,959,457		7,632		-		(1,967,089	)		-
Investment in subsidiaries		331,164		-		-		(331,164	)		-
Property and equipment, net		23,830		39,058		-		-			62,888
Operating lease right-of-use asset		25,333		6,267		-		-			31,600
Deferred tax asset, net		29,765		-		-		(324	)		29,441
Prepaid and other assets		11,678		35,498		-		-			47,176
Total homebuilding assets		2,766,524		2,388,100		-		(2,298,577	)		2,856,047

Financial Services:
Cash and cash equivalents		-		-		56,829		-			56,829
Marketable securities		-		-		48,105		-			48,105
Intercompany receivables		-		-		22,199		(22,199	)		-
Mortgage loans held-for-sale, net		-		-		109,337		-			109,337
Other assets		-		-		15,455		324			15,779
Total financial services assets		-		-		251,925		(21,875	)		230,050
Total Assets	$	2,766,524	$	2,388,100	$	251,925	$	(2,320,452	)	$	3,086,097

LIABILITIES AND EQUITY

Homebuilding:
Accounts payable	$	5	$	58,981	$	-	$	-		$	58,986
Accrued liabilities		46,771		136,774		-		2,955			186,500
Operating lease liabilities		25,973		6,267		-		-			32,240
Advances and notes payable to parent and subsidiaries		28,941		1,950,653		-		(1,979,594	)		-
Revolving credit facility		15,000		-		-		-			15,000
Senior notes, net		988,683		-		-		-			988,683
Total homebuilding liabilities		1,105,373		2,152,675		-		(1,976,639	)		1,281,409

Financial Services:
Accounts payable and other liabilities		-		-		63,453		(2,955	)		60,498
Advances and notes payable to parent and subsidiaries		-		-		9,694		(9,694	)		-
Mortgage repurchase facility		-		-		83,039		-			83,039
Total financial services liabilities		-		-		156,186		(12,649	)		143,537
Total Liabilities		1,105,373		2,152,675		156,186		(1,989,288	)		1,424,946

Equity:
Total Stockholders' Equity		1,661,151		235,425		95,739		(331,164	)		1,661,151
Total Liabilities and Stockholders' Equity	$	2,766,524	$	2,388,100	$	251,925	$	(2,320,452	)	$	3,086,097

Supplemental Condensed Combining Balance Sheet

	December 31, 2018
					Non-
			Guarantor		Guarantor		Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries		Entries			MDC
	Dollars in thousands
ASSETS
Homebuilding:
Cash and cash equivalents	$	410,127	$	4,597	$	-	$	-		$	414,724
Restricted cash		-		6,363		-		-			6,363
Trade and other receivables		758		52,224		-		-			52,982
Inventories:
Housing completed or under construction		-		952,436		-		-			952,436
Land and land under development		-		1,180,558		-		-			1,180,558
Total inventories		-		2,132,994		-		-			2,132,994

Intercompany receivables		1,735,342		7,369		-		(1,742,711	)		-
Investment in subsidiaries		455,848		-		-		(455,848	)		-
Property and equipment, net		23,896		34,271		-		-			58,167
Deferred tax assets, net		36,168		-		-		1,010			37,178
Metropolitan district bond securities (related party)		-		-		-		-			-
Other assets		12,234		33,560		-		-			45,794
Total Homebuilding Assets		2,674,373		2,271,378		-		(2,197,549	)		2,748,202

Financial Services:
Cash and cash equivalents		-		-		49,052		-			49,052
Marketable securities		-		-		40,879		-			40,879
Intercompany receivables		-		-		22,346		(22,346	)		-
Mortgage loans held-for-sale, net		-		-		149,211		-			149,211
Other assets		-		-		14,743		(1,010	)		13,733
Total Financial Services Assets		-		-		276,231		(23,356	)		252,875
Total Assets	$	2,674,373	$	2,271,378	$	276,231	$	(2,220,905	)	$	3,001,077

LIABILITIES AND EQUITY

Homebuilding:
Accounts payable	$	-	$	50,505	$	-	$	-		$	50,505
Accrued liabilities		65,691		125,387		-		5,169			196,247
Advances and notes payable to parent and subsidiaries		29,715		1,727,248		295		(1,757,258	)		-
Revolving credit facility		15,000		-		-		-			15,000
Senior notes, net		987,967		-		-		-			987,967
Total Homebuilding Liabilities		1,098,373		1,903,140		295		(1,752,089	)		1,249,719

Financial Services:
Accounts payable and accrued liabilities		-		-		63,712		(5,169	)		58,543
Advances and notes payable to parent and subsidiaries		-		-		7,799		(7,799	)		-
Mortgage repurchase facility		-		-		116,815		-			116,815
Total Financial Services Liabilities		-		-		188,326		(12,968	)		175,358
Total Liabilities		1,098,373		1,903,140		188,621		(1,765,057	)		1,425,077

Equity:
Total Stockholders' Equity		1,576,000		368,238		87,610		(455,848	)		1,576,000
Total Liabilities and Stockholders' Equity	$	2,674,373	$	2,271,378	$	276,231	$	(2,220,905	)	$	3,001,077

Supplemental Condensed Combining Statement of Operations

Three Months Ended June 30, 2019

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Homebuilding:

Revenues
$ - $ 732,844 $ - $ - $ 732,844

Cost of sales
- (590,172 ) - - (590,172 )

Inventory impairments
- - - - -

Gross margin
- 142,672 - - 142,672

Selling, general, and administrative expenses
(14,128 ) (68,459 ) - (125 ) (82,712 )

Equity income of subsidiaries
63,399 - - (63,399 ) -

Interest and other income
2,719 366 - (321 ) 2,764

Other expense
8 (1,118 ) - - (1,110 )

Homebuilding pretax income (loss)
51,998 73,461 - (63,845 ) 61,614

Financial Services:

Financial services pretax income
- - 12,271 446 12,717

Income before income taxes
51,998 73,461 12,271 (63,399 ) 74,331

(Provision) benefit for income taxes
2,595 (19,502 ) (2,831 ) - (19,738 )

Net income
$ 54,593 $ 53,959 $ 9,440 $ (63,399 ) $ 54,593

Other comprehensive income related to available-for-sale securities, net of tax
- - - - -

Comprehensive income
$ 54,593 $ 53,959 $ 9,440 $ (63,399 ) $ 54,593

Three Months Ended June 30, 2018

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Homebuilding:

Revenues
$ - $ 749,608 $ - $ - $ 749,608

Cost of sales
- (606,403 ) - - (606,403 )

Inventory impairments
- (200 ) - - (200 )

Gross margin
- 143,005 - - 143,005

Selling, general, and administrative expenses
(16,619 ) (64,729 ) - (223 ) (81,571 )

Equity income of subsidiaries
75,341 - - (75,341 ) -

Interest and other income
1,783 292 2 (303 ) 1,774

Other expense
8 (879 ) - - (871 )

Homebuilding pretax income (loss)
60,513 77,689 2 (75,867 ) 62,337

Financial Services:

Financial services pretax income
- - 13,753 526 14,279

Income before income taxes
60,513 77,689 13,755 (75,341 ) 76,616

(Provision) benefit for income taxes
3,386 (12,867 ) (3,236 ) - (12,717 )

Net income
$ 63,899 $ 64,822 $ 10,519 $ (75,341 ) $ 63,899

Other comprehensive income related to available-for-sale securities, net of tax
- - - - -

Comprehensive income
$ 63,899 $ 64,822 $ 10,519 $ (75,341 ) $ 63,899

Supplemental Condensed Combining Statement of Operations

Six Months Ended June 30, 2019

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Homebuilding:

Revenues
$ - $ 1,380,122 $ - $ - $ 1,380,122

Home and land cost of sales
- (1,114,724 ) - - (1,114,724 )

Inventory impairments
- (610 ) - - (610 )

Gross margin
- 264,788 - - 264,788

Selling, general, and administrative expenses
(31,566 ) (133,160 ) - (247 ) (164,973 )

Equity income of subsidiaries
115,564 - - (115,564 ) -

Interest and other income
5,128 521 - (494 ) 5,155

Other expense
15 (2,316 ) - - (2,301 )

Homebuilding pretax income (loss)
89,141 129,833 - (116,305 ) 102,669

Financial Services:

Financial services pretax income
- - 26,527 741 27,268

Income before income taxes
89,141 129,833 26,527 (115,564 ) 129,937

(Provision) benefit for income taxes
6,002 (34,766 ) (6,030 ) - (34,794 )

Net income
$ 95,143 $ 95,067 $ 20,497 $ (115,564 ) $ 95,143

Other comprehensive income related to available for sale securities, net of tax
- - - - -

Comprehensive income
$ 95,143 $ 95,067 $ 20,497 $ (115,564 ) $ 95,143

Six Months Ended June 30, 2018

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Homebuilding:

Revenues
$ - $ 1,357,296 $ - $ - $ 1,357,296

Home and land cost of sales
- (1,103,035 ) - - (1,103,035 )

Inventory impairments
- (750 ) - - (750 )

Gross margin
- 253,511 - - 253,511

Selling, general, and administrative expenses
(29,427 ) (123,058 ) - (427 ) (152,912 )

Equity income of subsidiaries
122,510 - - (122,510 ) -

Interest and other income
3,556 610 4 (537 ) 3,633

Other expense
15 (1,449 ) - - (1,434 )

Other-than-temporary impairment of marketable securities
- - - - -

Homebuilding pretax income (loss)
96,654 129,614 4 (123,474 ) 102,798

Financial Services:

Financial services pretax income
- - 23,386 964 24,350

Income before income taxes
96,654 129,614 23,390 (122,510 ) 127,148

(Provision) benefit for income taxes
6,009 (24,959 ) (5,535 ) - (24,485 )

Net income
$ 102,663 $ 104,655 $ 17,855 $ (122,510 ) $ 102,663

Other comprehensive income related to available for sale securities, net of tax
- - - - -

Comprehensive income
$ 102,663 $ 104,655 $ 17,855 $ (122,510 ) $ 102,663

Supplemental Condensed Combining Statement of Cash Flows

Six Months Ended June 30, 2019

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Net cash provided by (used in) operating activities
$ (22,861 ) $ 26,173 $ 52,353 $ - $ 55,665

Net cash provided by (used in) investing activities
15,136 (13,363 ) (120 ) (15,572 ) (13,919 )

Financing activities:

Payments from (advances to) subsidiaries
- (4,892 ) (10,680 ) 15,572 -

Mortgage repurchase facility
- - (33,776 ) - (33,776 )

Dividend payments
(35,636 ) - - - (35,636 )

Proceeds from exercise of stock options
17,328 - - - 17,328

Net cash provided by (used in) financing activities
(18,308 ) (4,892 ) (44,456 ) 15,572 (52,084 )

Net increase (decrease) in cash and cash equivalents
(26,033 ) 7,918 7,777 - (10,338 )

Cash and cash equivalents:

Beginning of period
410,127 10,960 49,052 - 470,139

End of period
$ 384,094 $ 18,878 $ 56,829 $ - $ 459,801

Six Months Ended June 30, 2018

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Net cash provided by (used in) operating activities
$ (3,430 ) $ (96,911 ) $ 44,153 $ - $ (56,188 )

Net cash provided by (used in) investing activities
(63,986 ) (12,786 ) (2,218 ) 113,740 34,750

Financing activities:

Payments from (advances to) subsidiaries
- 108,964 4,776 (113,740 ) -

Mortgage repurchase facility
- - (31,521 ) - (31,521 )

Dividend payments
(33,793 ) - - - (33,793 )

Proceeds from the exercise of stock options
5,835 - - - 5,835

Net cash provided by (used in) financing activities
(27,958 ) 108,964 (26,745 ) (113,740 ) (59,479 )

Net increase (decrease) in cash and cash equivalents
(95,374 ) (733 ) 15,190 - (80,917 )

Cash and cash equivalents:

Beginning of period
468,718 13,051 32,471 - 514,240

End of period
$ 373,344 $ 12,318 $ 47,661 $ - $ 433,323