Note 21 - Supplemental Guarantor Information

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

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

	September 30, 2019
					Non-
			Guarantor		Guarantor		Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries		Entries			MDC
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents	$	279,346	$	5,992	$	-	$	-		$	285,338
Restricted cash		-		16,325		-		-			16,325
Trade and other receivables		4,444		54,084		-		-			58,528
Inventories:
Housing completed or under construction		-		1,204,641		-		-			1,204,641
Land and land under development		-		1,191,036		-		-			1,191,036
Total inventories		-		2,395,677		-		-			2,395,677
Intercompany receivables		2,050,173		4,159		-		(2,054,332	)		-
Investment in subsidiaries		390,631		-		-		(390,631	)		-
Property and equipment, net		23,583		40,090		-		-			63,673
Operating lease right-of-use asset		24,970		6,281		-		-			31,251
Deferred tax asset, net		28,080		-		-		(368	)		27,712
Prepaid and other assets		12,682		33,713		-		-			46,395
Total homebuilding assets		2,813,909		2,556,321		-		(2,445,331	)		2,924,899
Financial Services:
Cash and cash equivalents		-		-		46,790		-			46,790
Marketable securities		-		-		52,876		-			52,876
Intercompany receivables		-		-		33,122		(33,122	)		-
Mortgage loans held-for-sale, net		-		-		117,020		-			117,020
Other assets		-		-		16,626		368			16,994
Total financial services assets		-		-		266,434		(32,754	)		233,680
Total Assets	$	2,813,909	$	2,556,321	$	266,434	$	(2,478,085	)	$	3,158,579
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	31	$	79,012	$	-	$	-		$	79,043
Accrued liabilities		45,525		139,717		-		4,054			189,296
Operating lease liabilities		25,606		6,281		-		-			31,887
Advances and notes payable to parent and subsidiaries		36,896		2,041,070		-		(2,077,966	)		-
Revolving credit facility		15,000		-		-		-			15,000
Senior notes, net		989,050		-		-		-			989,050
Total homebuilding liabilities		1,112,108		2,266,080		-		(2,073,912	)		1,304,276
Financial Services:
Accounts payable and other liabilities		-		-		66,085		(4,054	)		62,031
Advances and notes payable to parent and subsidiaries		-		-		9,488		(9,488	)		-
Mortgage repurchase facility		-		-		90,471		-			90,471
Total financial services liabilities		-		-		166,044		(13,542	)		152,502
Total Liabilities		1,112,108		2,266,080		166,044		(2,087,454	)		1,456,778
Equity:
Total Stockholders' Equity		1,701,801		290,241		100,390		(390,631	)		1,701,801
Total Liabilities and Stockholders' Equity	$	2,813,909	$	2,556,321	$	266,434	$	(2,478,085	)	$	3,158,579

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
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 September 30, 2019
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	750,274		$	-		$	-		$	750,274
Cost of sales		-			(609,316	)		-			-			(609,316	)
Inventory impairments		-			-			-			-			-
Gross profit		-			140,958			-			-			140,958
Selling, general, and administrative expenses		(21,476	)		(71,111	)		-			(129	)		(92,716	)
Equity income of subsidiaries		65,311			-			-			(65,311	)		-
Interest and other income		2,173			460			-			(297	)		2,336
Other expense		7			(1,894	)		-			-			(1,887	)
Homebuilding pretax income (loss)		46,015			68,413			-			(65,737	)		48,691
Financial Services:
Financial services pretax income		-			-			13,689			426			14,115
Income before income taxes		46,015			68,413			13,689			(65,311	)		62,806
(Provision) benefit for income taxes		4,565			(13,596	)		(3,195	)		-			(12,226	)
Net income	$	50,580		$	54,817		$	10,494		$	(65,311	)	$	50,580
Other comprehensive income related to available-for-sale securities, net of tax		-			-			-			-			-
Comprehensive income	$	50,580		$	54,817		$	10,494		$	(65,311	)	$	50,580

	Three Months Ended September 30, 2018
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	766,027		$	-		$	-		$	766,027
Cost of sales		-			(619,248	)		-			-			(619,248	)
Inventory impairments		-			(11,098	)		-			-			(11,098	)
Gross profit		-			135,681			-			-			135,681
Selling, general, and administrative expenses		(16,172	)		(67,406	)		-			55			(83,523	)
Equity income of subsidiaries		64,345			-			-			(64,345	)		-
Interest and other income		2,013			261			-			(321	)		1,953
Other expense		7			(1,135	)		-			-			(1,128	)
Homebuilding pretax income (loss)		50,193			67,401			-			(64,611	)		52,983
Financial Services:
Financial services pretax income		-			-			14,171			266			14,437
Income before income taxes		50,193			67,401			14,171			(64,345	)		67,420
(Provision) benefit for income taxes		3,199			(14,039	)		(3,188	)		-			(14,028	)
Net income	$	53,392		$	53,362		$	10,983		$	(64,345	)	$	53,392
Other comprehensive income related to available-for-sale securities, net of tax		-			-			-			-			-
Comprehensive income	$	53,392		$	53,362		$	10,983		$	(64,345	)	$	53,392

Supplemental Condensed Combining Statement of Operations

	Nine Months Ended September 30, 2019
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	2,130,396		$	-		$	-		$	2,130,396
Home and land cost of sales		-			(1,724,040	)		-			-			(1,724,040	)
Inventory impairments		-			(610	)		-			-			(610	)
Gross profit		-			405,746			-			-			405,746
Selling, general, and administrative expenses		(53,042	)		(204,271	)		-			(376	)		(257,689	)
Equity income of subsidiaries		180,875			-			-			(180,875	)		-
Interest and other income		7,301			981			-			(791	)		7,491
Other expense		22			(4,210	)		-			-			(4,188	)
Homebuilding pretax income (loss)		135,156			198,246			-			(182,042	)		151,360
Financial Services:
Financial services pretax income		-			-			40,216			1,167			41,383
Income before income taxes		135,156			198,246			40,216			(180,875	)		192,743
(Provision) benefit for income taxes		10,567			(48,362	)		(9,225	)		-			(47,020	)
Net income	$	145,723		$	149,884		$	30,991		$	(180,875	)	$	145,723
Other comprehensive income related to available for sale securities, net of tax		-			-			-			-			-
Comprehensive income	$	145,723		$	149,884		$	30,991		$	(180,875	)	$	145,723

	Nine Months Ended September 30, 2018
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	2,123,323		$	-		$	-		$	2,123,323
Home and land cost of sales		-			(1,722,283	)		-			-			(1,722,283	)
Inventory impairments		-			(11,848	)		-			-			(11,848	)
Gross profit		-			389,192			-			-			389,192
Selling, general, and administrative expenses		(45,599	)		(190,464	)		-			(372	)		(236,435	)
Equity income of subsidiaries		186,855			-			-			(186,855	)		-
Interest and other income		5,569			871			4			(858	)		5,586
Other expense		22			(2,584	)		-			-			(2,562	)
Homebuilding pretax income (loss)		146,847			197,015			4			(188,085	)		155,781
Financial Services:
Financial services pretax income		-			-			37,557			1,230			38,787
Income before income taxes		146,847			197,015			37,561			(186,855	)		194,568
(Provision) benefit for income taxes		9,208			(38,998	)		(8,723	)		-			(38,513	)
Net income	$	156,055		$	158,017		$	28,838		$	(186,855	)	$	156,055
Other comprehensive income related to available for sale securities, net of tax		-			-			-			-			-
Comprehensive income	$	156,055		$	158,017		$	28,838		$	(186,855	)	$	156,055

Supplemental Condensed Combining Statement of Cash Flows

	Nine Months Ended September 30, 2019
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(30,842	)	$	(58,179	)	$	55,903		$	-		$	(33,118	)
Net cash provided by (used in) investing activities		(61,906	)		(19,333	)		(4,137	)		61,185			(24,191	)
Financing activities:
Payments from (advances to) subsidiaries		-			88,869			(27,684	)		(61,185	)		-
Mortgage repurchase facility		-			-			(26,344	)		-			(26,344	)
Dividend payments		(54,337	)		-			-			-			(54,337	)
Issuance of shares under stock-based compensation programs, net		16,304			-			-			-			16,304
Net cash provided by (used in) financing activities		(38,033	)		88,869			(54,028	)		(61,185	)		(64,377	)
Net increase (decrease) in cash and cash equivalents		(130,781	)		11,357			(2,262	)		-			(121,686	)
Cash and cash equivalents:
Beginning of period		410,127			10,960			49,052			-			470,139
End of period	$	279,346		$	22,317		$	46,790		$	-		$	348,453

	Nine Months Ended September 30, 2018
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(6,232	)	$	(99,100	)	$	46,086		$	-		$	(59,246	)
Net cash provided by (used in) investing activities		(65,259	)		(19,135	)		(3,892	)		114,514			26,228
Financing activities:
Payments from (advances to) subsidiaries		-			117,644			(3,130	)		(114,514	)		-
Mortgage repurchase facility		-			-			(21,556	)		-			(21,556	)
Dividend payments		(50,733	)		-			-			-			(50,733	)
Issuance of shares under stock-based compensation programs, net		9,859			-			-			-			9,859
Net cash provided by (used in) financing activities		(40,874	)		117,644			(24,686	)		(114,514	)		(62,430	)
Net increase (decrease) in cash and cash equivalents		(112,365	)		(591	)		17,508			-			(95,448	)
Cash and cash equivalents:
Beginning of period		468,718			13,051			32,471			-			514,240
End of period	$	356,353		$	12,460		$	49,979		$	-		$	418,792