<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A-1
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED*)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF
1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-8951
------------------------
M.D.C. HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
(303) 773-1100
(Registrant's telephone number, including area code)
------------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
Title of each class THE PACIFIC STOCK EXCHANGE INC.
Name of each exchange on which registered
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
------------------------
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 ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
As of February 7, 1994, 18,947,000 shares of M.D.C. Holdings, Inc. Common
Stock were outstanding, and the aggregate market value of the shares (based upon
the closing price on that date of the shares on the New York Stock Exchange,
Inc. as reported on the Composite Tape) held by non-affiliates was approximately
$96,883,000.
- - ------------------------
*Previously paid
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
M.D.C. HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Financial Statements:
Report of Independent Accountants....................................................................... F-2
Consolidated Balance Sheets as of December 31, 1993 and December 31, 1992............................... F-3
Consolidated Statements of Income for the three years ended December 31, 1993........................... F-5
Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1993............. F-6
Consolidated Statements of Cash Flows for the three years ended December 31, 1993....................... F-7
Notes to Consolidated Financial Statements.............................................................. F-9
Financial Statement Schedules
Schedule II -- Amounts receivable from related parties and underwriters, promoters and employees other
than related parties................................................................................. F-39
Schedule VIII -- Valuation and other qualifying accounts.............................................. F-40
Schedule IX -- Short-term borrowings.................................................................. F-41
Schedule XII -- Mortgage loans........................................................................ F-42
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
M.D.C. Holdings, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of M.D.C. Holdings, Inc. and its subsidiaries at December 31, 1993 and
1992, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company'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 generally accepted auditing
standards 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.
As discussed in Note K to the financial statements, the Company changed its
method of accounting for income taxes in 1992.
/s/ Price Waterhouse
- - ---------------------------------------------
PRICE WATERHOUSE
Los Angeles, California
February 10, 1994
F-2
<PAGE>
M.D.C. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Corporate
Cash and cash equivalents.......................................................... $ 42,443 $ 35,993
Investments and marketable securities, net......................................... 765 13,026
Property and equipment, net........................................................ 10,432 10,774
Deferred income taxes.............................................................. 8,100 4,697
Deferred issue costs, net.......................................................... 11,233 1,028
Other assets, net.................................................................. 3,200 3,535
----------- -----------
76,173 69,053
----------- -----------
Home Building
Cash and cash equivalents.......................................................... 18,479 23,329
Trade and other accounts receivable................................................ 5,423 4,610
Investment in metropolitan district bonds.......................................... 13,795 5,095
Inventories, net
Housing completed or under construction.......................................... 201,023 132,752
Land and land under development.................................................. 192,881 206,583
Prepaid expenses and other assets, net............................................. 48,863 41,392
----------- -----------
480,464 413,761
----------- -----------
Mortgage Lending
Cash and cash equivalents.......................................................... 1,505 1,180
Restricted cash.................................................................... 3,400 5,972
Accrued interest and other assets, net............................................. 2,571 3,941
Mortgage loans held in inventory, net.............................................. 68,065 57,026
----------- -----------
75,541 68,119
----------- -----------
Asset Management
Cash and cash equivalents.......................................................... 576 526
Mortgage Collateral, net, and related assets....................................... 134,166 275,467
Equity CMO Interests, net.......................................................... 6,427 16,930
Investment in CMO Bond............................................................. -- 6,704
Other loans and assets, net........................................................ 3,519 8,384
----------- -----------
144,688 308,011
----------- -----------
Total Assets................................................................... $ 776,866 $ 858,944
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
M.D.C. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Corporate
Accounts payable and accrued expenses.............................................. $ 20,846 $ 21,330
Income taxes payable............................................................... 28,711 18,592
Notes payable...................................................................... 3,624 6,342
Senior Notes, net.................................................................. 187,199 --
Subordinated Notes, net............................................................ 38,213 62,958
Deferred income taxes.............................................................. -- 748
----------- -----------
278,593 109,970
----------- -----------
Home Building
Accounts payable and accrued expenses.............................................. 70,741 50,140
Lines of credit.................................................................... 24,645 28,688
Notes payable...................................................................... 59,641 57,732
Restructured Notes Payable, net.................................................... 2,854 131,681
----------- -----------
157,881 268,241
----------- -----------
Mortgage Lending
Accounts payable and accrued expenses.............................................. 8,487 8,038
Line of credit..................................................................... 29,500 31,030
----------- -----------
37,987 39,068
----------- -----------
Asset Management
Accounts payable and accrued expenses.............................................. 3,051 12,282
Lines of credit.................................................................... -- 7,404
CMO bonds, net, and related liabilities............................................ 123,500 256,347
----------- -----------
126,551 276,033
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes K, L and N)..................................... -- --
Total Liabilities................................................................ 601,012 693,312
----------- -----------
MINORITY INTEREST.................................................................... -- 1,450
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 25,000,000 shares authorized; none issued......... -- --
Common Stock, $.01 par value; 100,000,000 shares authorized; 20,914,000 and
20,425,000 shares issued, respectively, at December 31, 1993 and 1992............. 209 204
Additional paid-in capital......................................................... 133,455 132,332
Retained earnings.................................................................. 57,879 32,162
----------- -----------
191,543 164,698
Less treasury stock, at cost; 2,664,000 and 103,000 shares, respectively, at
December 31, 1993 and 1992........................................................ (15,689) (516)
----------- -----------
Total Stockholders' Equity....................................................... 175,854 164,182
----------- -----------
Total Liabilities and Stockholders' Equity....................................... $ 776,866 $ 858,944
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
M.D.C. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES:
Home Building............................................................ $ 596,813 $ 423,131 $ 319,077
Mortgage Lending......................................................... 19,725 19,344 10,343
Asset Management......................................................... 33,162 66,597 89,526
Corporate................................................................ 2,376 2,496 3,286
----------- ----------- -----------
Total Revenues......................................................... 652,076 511,568 422,232
----------- ----------- -----------
COSTS AND EXPENSES:
Home Building............................................................ 574,317 405,570 319,511
Mortgage Lending......................................................... 12,217 10,114 7,648
Asset Management......................................................... 24,166 57,897 76,666
Corporate general and administrative..................................... 14,890 18,108 19,621
Corporate and home building interest..................................... 11,454 13,359 12,905
----------- ----------- -----------
Total Expenses......................................................... 637,044 505,048 436,351
----------- ----------- -----------
Income (loss) before income taxes, extraordinary gain (loss) and cumulative
effect of accounting change............................................... 15,032 6,520 (14,119)
Provision (benefit) for income taxes....................................... 4,976 1,755 (1,216)
----------- ----------- -----------
Income (loss) before extraordinary gain (loss) and cumulative effect of
accounting change......................................................... 10,056 4,765 (12,903)
Extraordinary gain (loss) from early extinguishment of debt, net of income
taxes (benefit) of: 1993, $9,967; 1992, ($1,346); 1991, $7,629............ 15,823 (2,613) 14,809
Cumulative effect of accounting change..................................... -- 1,700 --
----------- ----------- -----------
NET INCOME................................................................. $ 25,879 $ 3,852 $ 1,906
----------- ----------- -----------
----------- ----------- -----------
EARNINGS (LOSS) PER SHARE
Income (loss) before extraordinary gain (loss) and cumulative effect of
accounting change....................................................... $ .45 $ .22 $ (.62)
Extraordinary gain (loss) from early extinguishment of debt.............. .71 (.12) .71
Cumulative effect of accounting change................................... -- .08 --
----------- ----------- -----------
Net Income............................................................... $ 1.16 $ .18 $ .09
----------- ----------- -----------
----------- ----------- -----------
WEIGHTED-AVERAGE SHARES OUTSTANDING........................................ 22,340 21,850 20,985
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
M.D.C. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
----------- ----------- --------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCES -- JANUARY 1, 1990.......................... $ 202 $ 131,858 $ 30,741 $ (5,540) $ 157,261
Shares issued...................................... -- 2 (4,222) 5,044 824
Net unrealized gain on marketable securities....... -- -- 497 -- 497
Net income......................................... -- -- 1,906 -- 1,906
----- ----------- --------- ---------- -----------
BALANCES -- DECEMBER 31, 1991........................ 202 131,860 28,922 (496) 160,488
Shares issued...................................... 2 241 -- -- 243
Shares reacquired.................................. -- -- -- (20) (20)
Net unrealized loss on marketable securities....... -- -- (612) -- (612)
Non-qualified stock options exercised.............. -- 231 -- -- 231
Net income......................................... -- -- 3,852 -- 3,852
----- ----------- --------- ---------- -----------
BALANCES -- DECEMBER 31, 1992........................ 204 132,332 32,162 (516) 164,182
Shares issued...................................... 5 430 -- -- 435
Shares reacquired.................................. -- -- -- (15,173) (15,173)
Net unrealized loss on marketable securities....... -- -- (162) -- (162)
Non-qualified stock options exercised.............. -- 693 -- -- 693
Net income......................................... -- -- 25,879 -- 25,879
----- ----------- --------- ---------- -----------
BALANCES -- DECEMBER 31, 1993........................ $ 209 $ 133,455 $ 57,879 $ (15,689) $ 175,854
----- ----------- --------- ---------- -----------
----- ----------- --------- ---------- -----------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
M.D.C. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income............................................................... $ 25,879 $ 3,852 $ 1,906
Adjustments To Reconcile Net Income To Net Cash Provided By Operating
Activities:
Extraordinary (gain) loss from early extinguishment of debt............ (25,790) 3,959 (22,438)
Gains on sale of mortgage-related assets............................... (7,505) (8,169) --
Depreciation and amortization.......................................... 8,038 8,161 8,073
Asset valuation reserves............................................... -- -- 11,500
Equity CMO Interest valuation adjustments.............................. 3,100 3,529 3,229
Net Changes In Assets And Liabilities:
Mortgage loans held in inventory....................................... (8,773) (1,839) (19,223)
Home building inventories.............................................. (45,252) 4,516 25,909
Receivables............................................................ 3,489 2,709 9,429
Accounts payable and accrued expenses.................................. 25,262 26,089 17,859
Deferred income taxes.................................................. (4,151) (20,696) (8,280)
Other, net............................................................. (8,534) (5,750) (2,891)
----------- ----------- -----------
Net Cash Provided By (Used In) Operating Activities........................ (34,237) 16,361 25,073
----------- ----------- -----------
INVESTING ACTIVITIES:
Mortgage Collateral
Principal payments and prepayments..................................... $ 95,209 $ 209,996 $ 122,058
Sales.................................................................. 47,060 82,528 3,420
Distributions of Capital From Equity CMO Interests....................... 7,403 13,648 4,486
CMO Bond
Purchase............................................................... -- (7,367) --
Principal payments..................................................... 7,114 709 --
Changes in Investments and Marketable Securities, net.................... 12,000 (12,000) --
Changes in Investment in Metropolitan District Bonds..................... (8,700) (2,700) --
Changes in Restricted Cash............................................... 13,071 7,847 (7,007)
Other, net............................................................... (4,076) (1,780) (1,318)
----------- ----------- -----------
Net Cash Provided By Investing Activities.................................. 169,081 290,881 121,639
----------- ----------- -----------
FINANCING ACTIVITIES:
CMO Bonds -- Principal Payments.......................................... $ (139,658) $ (281,326) $ (109,849)
Lines of Credit
Advances............................................................... 352,410 165,911 145,083
Principal payments..................................................... (365,387) (150,462) (157,519)
Senior and Subordinated Notes
Net Proceeds........................................................... 204,013 -- --
Repurchase............................................................. -- -- (6,225)
Payments............................................................... (54,498) -- --
Notes Payable
Borrowings............................................................. 79,329 38,960 44,186
Principal payments..................................................... (93,236) (63,959) (60,797)
Restructured Notes Payable principal payments and repurchase............. (99,704) (4,194) (1,050)
Treasury stock purchase.................................................. (15,173) -- --
Other.................................................................... (965) 223 2
----------- ----------- -----------
Net Cash Used In Financing Activities...................................... (132,869) (294,847) (146,169)
----------- ----------- -----------
Net Increase In Cash And Cash Equivalents.................................. 1,975 12,395 543
Cash And Cash Equivalents
Beginning Of Year........................................................ 61,028 48,633 48,090
----------- ----------- -----------
End Of Year.............................................................. $ 63,003 $ 61,028 $ 48,633
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
M.D.C. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the period for:
Interest, net of amounts capitalized......................................... $ 29,499 $ 66,962 $ 86,728
Income taxes................................................................. 8,245 4,186 2,818
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Home building land inventory purchases financed by seller...................... $ 13,250 $ 8,213 $ 7,224
Home building land inventory sales financed by MDC............................. 2,835 2,392 700
Sale of mortgage-related assets, subject to related liabilities
Mortgage Collateral and related assets....................................... -- 92,305 --
CMO bonds and related liabilities............................................ -- 91,300 --
Settlement of civil claims
Mortgage Collateral and related assets....................................... -- 98,927 --
CMO bonds and related liabilities............................................ -- 71,550 --
Notes payable and other liabilities.......................................... -- 23,490 --
Purchase of metropolitan district bonds in exchange for reduction in
receivables................................................................... -- 2,395 --
Abandonment of properties collateralizing non-recourse notes payable
Inventories.................................................................. -- 590 8,762
Rental properties............................................................ -- -- 14,276
Notes payable................................................................ -- 500 29,831
Accrued interest and other liabilities....................................... -- 130 1,470
Home building land inventory purchased from a 50%-owned joint venture and
financed by the joint venture................................................. -- -- 7,680
Issuance of 1,000,000 shares of treasury stock to Executive Life in connection
with a partnership transaction................................................ -- -- 822
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of
M.D.C. Holdings, Inc. ("MDC" or the "Company") include the accounts of MDC and
its wholly-owned and majority-owned subsidiaries. Investments in 50% or less
owned limited partnerships, joint ventures and ownership interests ("CMO
Ownership Interests") in collateralized mortgage obligation ("CMO bonds")
issuances are accounted for using the equity method. All significant
intercompany balances and transactions have been eliminated in consolidation.
In the home building segment of its operations, MDC designs, constructs and
sells residential housing and, to a lesser extent, acquires and develops land
for use in its home building operations and for sale to others.
MDC's mortgage lending operations are conducted by HomeAmerican Mortgage
Corporation ("HomeAmerican"), which provides mortgage loans for MDC home buyers
as well as for others. Substantially all of the mortgage loans originated by
HomeAmerican, as well as mortgage loans purchased from unaffiliated loan
correspondents, subsequently are sold to private investors. Additionally,
HomeAmerican sells mortgage loan servicing.
MDC's mortgage-related asset management operations enable MDC to (i) manage
the day-to-day operations of Asset Investors Corporation ("Asset Investors");
(ii) manage the day-to-day operations of Commercial Assets, Inc.; (iii) invest
in CMO Ownership Interests; and (iv) own interests in various other investments.
HOME BUILDING.
INVENTORIES. Inventories are stated at the lower of cost or net realizable
value and include interest capitalized during the period of active development
and through the completion of construction. Construction-related overhead and
salaries are capitalized and allocated proportionately to projects actively
being developed. Land and related costs are transferred to housing inventory
when construction commences.
Net realizable value is based on the Company's plans for development and
build out of each project using estimated sales prices less estimated costs to
complete (which includes interest anticipated to be capitalized during active
development) and sell the project. Net realizable value does not purport, for a
specific project, to represent the current sales price that the Company could
obtain from third parties for such properties and projects at their current
stage of development. Management believes that its assumptions as to projected
demand are reasonable based on present economic conditions and that financing
will be available to enable the Company to realize the carrying value of its
home building inventories consistent with its plans for build out and
development. At December 31, 1993 and 1992, inventory valuation reserves
totalled $40,829,000 and $47,100,000, respectively.
REVENUE AND PROFIT RECOGNITION. Revenues from real estate sales are
recognized when a sufficient down payment has been received, financing has been
arranged, title, possession and other attributes of ownership have been
transferred to the buyer and the Company is not obligated to perform significant
additional activities after the sale.
MORTGAGE LENDING.
RESTRICTED CASH. Restricted cash represents cash pledged to support certain
letters of credit.
MORTGAGE LOANS HELD IN INVENTORY. The Company generally purchases forward
commitments to deliver mortgage loans held for sale. Mortgage loans held in
inventory are stated at the lower of
F-9
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
aggregate cost or market based upon such commitments for loans to be delivered
into such commitments or prevailing market for uncommitted loans. Gains or
losses on mortgage loans held in inventory are realized when the loans are sold.
REVENUE RECOGNITION. Loan origination fees in excess of origination costs
incurred and loan commitment fees are deferred until the related loans are sold.
Loan servicing fees are recorded as revenue when the mortgage loan payments are
received. Revenues from the sale of mortgage loan servicing are recognized when
title and all risks and rewards of ownership have irrevocably passed to the
buyer and there are no significant unresolved contingencies.
ASSET MANAGEMENT.
RESTRICTED CASH. Restricted cash represents mortgage loan principal and
interest receipts held pending distribution to holders of CMO bonds.
EQUITY CMO INTERESTS. MDC owns a 49.999% ownership interest in seven CMO
Ownership Interests which are accounted for on the equity method (collectively,
"Equity CMO Interests"). Each ownership interest includes one or more
variable-rate bond classes for which the interest rate is reset monthly or
quarterly based on the London interbank offered rate ("LIBOR") on Eurodollar
deposits.
MDC's Equity CMO Interests are carried at the lower of cost or undiscounted
projected excess cash flow ("Projected Excess Cash Flow"). Projected Excess Cash
Flow is computed using estimates of future mortgage principal prepayment rates
and LIBOR, assuming that the CMO bonds will be redeemed at the latter of the
first optional redemption date or the date on which the Projected Excess Cash
Flow becomes negative. These estimates of mortgage prepayment rates and LIBOR
are based upon published rates which the Company believes to be reasonable over
the economic life of the CMO Ownership Interests. The amount of Projected Excess
Cash Flow the Company anticipates it will receive from its Equity CMO Interests
is uncertain and may be subject to wide variation from the actual excess cash
flows received depending primarily upon the rate and timing of prepayments on
the underlying mortgage collateral and changes in LIBOR.
To the extent Projected Excess Cash Flow is less than carrying cost, a
valuation adjustment is recorded. These valuation adjustments provide for
estimated losses to be recognized by the related CMO Ownership Interests
subsequent to the date on which the valuation adjustments were taken, and the
Company's share of such losses have been, and will in the future be, charged
against these valuation adjustments as they occur.
MORTGAGE COLLATERAL AND RELATED ASSETS. Mortgage Collateral (as defined in
Note F) and other mortgage-related assets held for long-term investment are
recorded at cost (outstanding principal balance, net of unamortized premium or
discount). Mortgage certificates are repaid through the pass through of
principal payments from the mortgage loans collateralizing these certificates
or, in the event of default by the borrower, proceeds from the sale of the
underlying property and/or mortgage insurance proceeds. Conventional mortgage
loans collateralizing CMO bonds have private mortgage insurance.
AMORTIZATION OF PREMIUMS AND DISCOUNTS. Premiums and discounts on Mortgage
Collateral and original issue discounts on CMO bonds are amortized over their
respective estimated lives based upon a method which provides a constant
effective yield and assumes an estimated principal prepayment rate which is
adjusted prospectively for actual experience.
F-10
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GENERAL.
CASH AND CASH EQUIVALENTS. The Company periodically invests funds not
immediately required for operating purposes in highly liquid, short-term
investments such as commercial paper and repurchase agreements which are
included in cash and cash equivalents in the Consolidated Balance Sheet and
Consolidated Statement of Cash Flows.
INVESTMENTS AND MARKETABLE SECURITIES. Investments and marketable
securities consist of (i) investments in marketable preferred shares carried at
cost, which approximates market; and (ii) other marketable equity securities
which are carried at market. The marketable preferred shares are readily salable
instruments which will be redeemed pursuant to their terms within a maximum of
49 days from acquisition. Dividend income from these investments is recorded as
earned.
PROPERTY AND EQUIPMENT. Property and equipment is carried at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
related assets.
INCOME TAXES. Effective as of January 1, 1992, the Company adopted the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," which supersedes SFAS No. 96.
EARNINGS PER SHARE. Earnings per share is computed by dividing net income
by the weighted-average number of common and common equivalent shares
outstanding. The difference between primary and fully-diluted earnings per share
is not significant for any of the periods presented.
RECLASSIFICATIONS. Certain amounts in the 1992 and 1991 consolidated
financial statements have been reclassified to conform to the 1993 presentation.
F-11
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B. INFORMATION ON BUSINESS SEGMENTS
The Company operates in three business segments: home building, mortgage
lending and asset management. A summary of the Company's segment information is
shown below (in thousands).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Home Building
Home sales.................................................................. $ 587,887 $ 417,190 $ 316,229
Land sales.................................................................. 7,441 5,800 2,584
Other revenues.............................................................. 1,485 141 264
---------- ---------- ----------
596,813 423,131 319,077
---------- ---------- ----------
Home cost of sales.......................................................... 504,136 355,012 266,961
Land cost of sales.......................................................... 7,864 5,826 1,916
Inventory valuation reserves................................................ -- -- 11,000
Marketing................................................................... 34,820 26,203 21,147
General and administrative.................................................. 27,497 18,529 18,487
---------- ---------- ----------
574,317 405,570 319,511
---------- ---------- ----------
Operating Profit (Loss)................................................... 22,496 17,561 (434)
---------- ---------- ----------
Mortgage Lending
Interest revenues........................................................... 4,769 5,000 3,990
Origination fees............................................................ 6,171 4,195 2,859
Sale of mortgage servicing.................................................. 4,235 8,359 2,004
Gains (losses) on sales of mortgage loans, net.............................. 2,864 267 (189)
Mortgage servicing and other................................................ 1,686 1,523 1,679
---------- ---------- ----------
19,725 19,344 10,343
---------- ---------- ----------
Interest expense............................................................ 1,631 1,733 1,371
General and administrative.................................................. 10,586 8,381 6,277
---------- ---------- ----------
12,217 10,114 7,648
---------- ---------- ----------
Operating Profit.......................................................... 7,508 9,230 2,695
---------- ---------- ----------
Asset Management
Interest revenues........................................................... 21,722 56,167 81,330
Gains on sales of mortgage-related assets................................... 7,505 8,169 --
Management fees and other................................................... 5,073 3,399 9,334
---------- ---------- ----------
34,300 67,735 90,664
---------- ---------- ----------
Interest expense............................................................ 18,118 50,513 75,943
Equity in losses (earnings) of Equity CMO Interests, net.................... 3,100 4,166 (5,856)
General and administrative.................................................. 2,948 3,218 6,579
---------- ---------- ----------
24,166 57,897 76,666
---------- ---------- ----------
Operating Profit.......................................................... 10,134 9,838 13,998
---------- ---------- ----------
Corporate
Other revenues.............................................................. 2,376 2,496 3,286
---------- ---------- ----------
Interest expense............................................................ 12,592 14,497 14,043
Asset valuation reserves.................................................... -- -- 500
General and administrative.................................................. 14,890 18,108 19,121
---------- ---------- ----------
27,482 32,605 33,664
---------- ---------- ----------
Net Corporate Expenses.................................................... (25,106) (30,109) (30,378)
---------- ---------- ----------
Intersegment Eliminations
Asset management interest revenue........................................... (1,138) (1,138) (1,138)
---------- ---------- ----------
Corporate interest expense.................................................. (1,138) (1,138) (1,138)
---------- ---------- ----------
-- -- --
---------- ---------- ----------
Income (Loss) Before Income Taxes, Extraordinary Gain (Loss) And Cumulative
Effect of Accounting Change.................................................. $ 15,032 $ 6,520 $ (14,119)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-12
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B. INFORMATION ON BUSINESS SEGMENTS (CONTINUED)
Identifiable segment assets at December 31, 1993 and 1992 totalled
$484,354,000 and $420,212,000, respectively, in the home building segment;
$75,541,000 and $68,119,000, respectively, in the mortgage lending segment;
$152,897,000 and $316,149,000, respectively, in the asset management segment;
and $76,173,000 and $69,053,000, respectively, in corporate. These assets, net
of intersegment eliminations of ($12,099,000) and ($14,589,000), respectively,
at December 31, 1993 and 1992, totalled $776,866,000 and $858,944,000,
respectively.
Corporate general and administrative expenses consist principally of
salaries and other administrative expenses which are not identifiable to a
specific segment. Transfers between segments are recorded at cost. Capital
expenditures and related depreciation and amortization for the years ended
December 31, 1993, 1992 and 1991 were not material.
C. PURCHASE OF ASSETS
In December 1993, as part of the use of proceeds in the 1993 Offering
described in Note H, the Company purchased from Base Assets Trust ("Base
Assets") (i) 1,990 shares (19.9%) of Richmond Homes, Inc. I (the Company's
consolidated affiliate which conducts substantially all of the Company's home
building activities in Colorado, "Richmond Homes") common stock; (ii) 1,400
shares of Class A Preferred Stock of Richmond Homes; (iii) a general partnership
interest in Rock Creek Investment Partnership, a partnership in which Richmond
Homes is also a partner; and (iv) 2,560,866 shares of Common Stock of MDC
(collectively, the "Base Assets Purchase Securities").
MDC paid $16,038,000 in cash for all of the Base Assets Purchase Securities
other than the shares of Common Stock of MDC. The consideration paid for the
Base Assets Purchase Securities, other than the shares of Common Stock of MDC,
was allocated to the assets received to the extent of their fair value. The
consideration paid in excess of the fair value was accounted for as a part of
the reacquisition price of the Restructured Notes Payable which were repurchased
in related transactions. See Note H. The per share purchase price for the shares
of MDC Common Stock was approximately $5.93 which was based on closing prices of
the Company's Common Stock reported on the New York Stock Exchange for certain
trading days preceding the closing date of the 1993 Offering. Upon completion of
the purchase by MDC of the Base Assets Purchase Securities, MDC owned 65% of the
outstanding Richmond Homes common stock and 100% of the Richmond Homes preferred
stock outstanding at December 31, 1993.
On February 2, 1994, MDC acquired the remaining 35% of the outstanding
shares of Richmond Homes common stock which was owned by Messrs. Larry A. Mizel
(Chairman of the Board and Chief Executive Officer of the Company) and David D.
Mandarich (Executive Vice President -- Real Estate of the Company). In exchange
for these shares of Richmond Homes common stock, Messrs. Mizel and Mandarich
were issued an aggregate of 608,695 shares of Common Stock of MDC. As of
February 2, 1994, MDC owns 100% of the equity of Richmond Homes.
F-13
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
D. MORTGAGE LOANS HELD IN INVENTORY
Mortgage loans held in inventory consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
--------- ---------
<S> <C> <C>
First mortgage loans
Conventional...................................................... $ 32,182 $ 25,359
FHA and VA........................................................ 36,913 32,793
--------- ---------
69,095 58,152
Less
Unamortized discounts............................................. (177) (420)
Deferred fees..................................................... (205) (142)
Allowance for loan losses......................................... (648) (564)
--------- ---------
Total........................................................... $ 68,065 $ 57,026
--------- ---------
--------- ---------
</TABLE>
Mortgage loans held in inventory consist primarily of loans collateralized
by first mortgages and deeds of trust due over periods of up to 30 years. The
weighted-average effective yield on mortgage loans held in inventory was
approximately 7.1% and 8.0%, respectively, at December 31, 1993 and 1992.
E. EQUITY CMO INTERESTS
The unaudited condensed financial information of the Equity CMO Interests is
set forth below. The information provided includes 100% of the gross assets and
liabilities comprising these interests (in thousands).
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
<S> <C> <C>
Condensed Combined Summarized Financial Condition (100%)
Assets................................................................... $ 422,338 $ 758,282
Liabilities.............................................................. 398,048 710,616
----------- -----------
Net Assets............................................................... $ 24,290 $ 47,666
----------- -----------
----------- -----------
MDC's Share of Net Assets (Net of Valuation Allowances of $5,718 and $6,903
at December 31, 1993 and 1992, respectively).............................. $ 6,427 $ 16,930
----------- -----------
----------- -----------
</TABLE>
F-14
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
E. EQUITY CMO INTERESTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1992 1991
---------- ---------- -----------
<S> <C> <C> <C>
Condensed Combined Operating Results (100%)
Earnings before premium/discount amortization
Interest and other revenues............................................. $ 51,231 $ 90,532 $ 127,920
Interest and other expenses............................................. 40,330 69,277 101,476
---------- ---------- -----------
10,901 21,255 26,444
Premium/discount amortization............................................. (19,471) (27,377) (8,273)
---------- ---------- -----------
Net Earnings (Loss)......................................................... $ (8,570) $ (6,122) $ 18,171
---------- ---------- -----------
---------- ---------- -----------
Equity in Earnings (Losses) of Equity CMO Interests Before Valuation
Adjustments $ -- $ (637) $ 9,085
Valuation Adjustments....................................................... (3,100) (3,529) (3,229)
---------- ---------- -----------
Equity in Earnings (Losses) of Equity CMO Interests, Net of Valuation
Adjustments................................................................ $ (3,100) $ (4,166) $ 5,856
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
MDC's share of Net Losses for the years ended December 31, 1993 and 1992 was
$4,285,000 and $3,061,000, respectively, of which $4,285,000 and $2,424,000 was
charged against valuation allowances.
F. MORTGAGE COLLATERAL AND RELATED ASSETS AND CMO BONDS AND RELATED LIABILITIES
CMO bonds consist of borrowings from mortgage-backed bond issuers
(representing portions of the net proceeds of CMO bonds) as well as CMO bonds
issued by the asset management segment and other non-related entities. CMO bonds
are collateralized by mortgage loans and investments in mortgage certificates
guaranteed by the Government National Mortgage Association ("GNMA") and mortgage
certificates issued and guaranteed by the Federal National Mortgage Association
("FNMA") (such mortgage loans and mortgage certificates collateralizing CMO
bonds collectively are referred to as "Mortgage Collateral"). Principal and
interest payments on CMO bonds are payable only from the cash flow from the
Mortgage Collateral plus any reinvestment income earned (cash flows from the
Mortgage Collateral are reinvested until the next payment date of such CMO
bonds). MDC and its other subsidiaries and affiliates are not guarantors, nor
are they otherwise obligated, with respect to such CMO bonds. The cash flow from
the Mortgage Collateral relating to each CMO issuance and the reinvestment
income thereon are held by a trustee prior to making distributions required by
the related indenture. Each CMO issuance is redeemable prior to stated maturity
at the option of the issuer thereof, pursuant to the terms of related indenture.
F-15
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
F. MORTGAGE COLLATERAL AND RELATED ASSETS AND CMO BONDS AND RELATED
LIABILITIES (CONTINUED)
The following assets and liabilities are held by trustees (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
<S> <C> <C>
Assets
Restricted cash................................................ $ 15,071 $ 25,658
Interest and other receivables................................. 1,428 2,367
Mortgage-backed securities
FNMA certificates............................................ 22,962 48,274
GNMA certificates............................................ 56,590 121,496
Conventional mortgage loans.................................... 36,135 76,215
Unamortized discounts and premiums, net........................ (1,189) (3,103)
Other assets................................................... 3,169 4,560
----------- -----------
Total Mortgage Collateral and Related Assets..................... 134,166 275,467
----------- -----------
Liabilities
Accounts payable and accrued interest.......................... 3,470 5,494
CMO bonds...................................................... 120,818 252,693
Unamortized discounts.......................................... (788) (1,840)
----------- -----------
Total CMO Bonds and Related Liabilities.......................... 123,500 256,347
----------- -----------
Net Assets....................................................... $ 10,666 $ 19,120
----------- -----------
----------- -----------
</TABLE>
The weighted-average effective yield on the Mortgage Collateral was
approximately 9.9% at December 31, 1993 and 1992. CMO bonds mature through 2019
and bear interest at weighted-average rates of 10.0% and 10.5%, respectively, at
December 31, 1993 and 1992.
The timing of principal payments on CMO bonds is uncertain and is dependent
on the regular principal payments and prepayments of principal on the Mortgage
Collateral and the adequacy of both the reserve funds and the remaining coverage
under the primary blanket mortgage insurance policies. Prepayment rates will
vary widely depending on long-term mortgage interest rates.
In 1993, MDC sold, at a premium, Mortgage Collateral totalling $44,735,000.
The proceeds from these sales were utilized to redeem in full the related
outstanding CMO bonds which totalled $44,375,000. These sales, net of
redemptions, resulted in pre-tax gains totalling $2,129,000.
In 1992, MDC sold, at a premium, Mortgage Collateral totalling $73,345,000.
The proceeds from these sales were utilized to redeem in full the related
outstanding CMO bonds which totalled $74,021,000. Additionally, in 1992, the
Company sold, at a premium, Mortgage Collateral and related assets totalling
$92,305,000 subject to the related CMO bonds and related liabilities totalling
$91,300,000. The above sales resulted in pre-tax gains totalling $8,169,000. The
redemption of the $74,021,000 of CMO bonds resulted in an aggregate
extraordinary loss on the early extinguishment of debt of $2,851,000, net of an
income tax benefit of $1,469,000.
G. LINES OF CREDIT
HOME BUILDING. The aggregate amount of MDC's home building bank lines of
credit at December 31, 1993 was $65,000,000. Available borrowings under these
bank lines of credit are collateralized by home building inventories and are
limited to the value of "eligible collateral" (as defined in the credit
agreements). At December 31, 1993, $24,645,000 was borrowed and an additional
$35,418,000 was collateralized and available to be borrowed. At December 31,
1993, the weighted-average interest rate of the lines of credit was 7.0%.
F-16
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
G. LINES OF CREDIT (CONTINUED)
MORTGAGE LENDING. The aggregate amount available under MDC's mortgage
lending bank line of credit at December 31, 1993, was $75,000,000. Available
borrowings under this bank line of credit are collateralized by mortgage loans
and mortgage-backed certificates and are limited to the value of "eligible
collateral" (as defined in the credit agreement). At December 31, 1993,
$29,500,000 was borrowed and an additional $21,631,000 was collateralized and
available to be borrowed. The mortgage lending line of credit is cancellable
upon 90 days' notice. At December 31, 1993, the weighted-average interest rate
of the line was 2.6%.
GENERAL. The agreements for the Company's bank lines of credit include
representations, warranties and covenants, the most restrictive of which require
that (i) the Company maintain certain financial ratios and minimum stockholders'
equity of $140,000,000; (ii) no proceedings exist which may have a material
adverse effect on the Company; and (iii) there be no material adverse change in
the financial condition of the Company which would impair the Company's ability
to repay loans.
H. NOTES PAYABLE
SENIOR NOTES AND SUBORDINATED NOTES. The Senior Notes (as hereafter
defined) and the senior subordinated and subordinated notes (collectively, the
"Subordinated Notes") consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
----------- ---------
<S> <C> <C>
Senior Notes
11 1/8% Senior Notes due December 2003 (effective rate 12.3%)... $ 187,199 $ --
----------- ---------
----------- ---------
Subordinated Notes
8 3/4% Convertible Subordinated Notes due December 2005,
convertible into Common Stock at $7.75 per common share
(effective rate 9.5%).......................................... $ 28,000 $ --
6.64% Subordinated Fixed-Rate Notes due April 1998 (effective
rate 6.7%)..................................................... 10,213 10,208
7% Subordinated Notes due April 1993............................ -- 1,331
10 1/2% Subordinated Notes due April 1995....................... -- 327
11 1/4% Senior Subordinated Notes due May 1996.................. -- 51,092
----------- ---------
$ 38,213 $ 62,958
----------- ---------
----------- ---------
</TABLE>
In December 1993, the Company completed a private placement (the "1993
Offering") of $190,000,000 principal amount of 11 1/8% Senior Notes due 2003
(the "Senior Notes") and $28,000,000 principal amount of 8 3/4% Convertible
Subordinated Notes due 2005 (the "Convertible Subordinated Notes"). The Senior
Notes were sold at 98.525% of par value. The Convertible Subordinated Notes were
sold at par value and are convertible into MDC Common Stock at an initial
conversion price of $7.75 per share, subject to adjustment upon certain events.
A portion of the proceeds of the 1993 Offering was utilized to redeem the
11 1/4% senior subordinated notes due May 1996 at par value, resulting in an
extraordinary loss on the early extinguishment of debt of $855,000, net of an
income tax benefit of $538,000.
The Senior Notes are guaranteed, fully and unconditionally, and jointly and
severally on an unsecured subordinated basis (the "Guaranties") by most of the
Company's home building segment subsidiaries (the "Guarantors"). The Guaranties
are subordinated to all Guarantor Senior Indebtedness as defined in the
indenture pursuant to which the Senior Notes are issued (the "Senior Notes
F-17
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
H. NOTES PAYABLE (CONTINUED)
Indenture"). In addition, the Senior Notes are secured by a first priority
pledge of the capital stock of most of the Guarantors plus the capital stock of
HomeAmerican. The Senior Notes Indenture contains certain covenants which, among
other things, limit (i) the incurrence of additional Indebtedness (as defined)
by the Company and Restricted Subsidiaries (as defined); (ii) the payment of
dividends; (iii) the repurchase of capital stock or subordinated indebtedness;
(iv) the making of certain other distributions, loans and investments; (v) the
ability to create certain Liens (as defined); (vi) the creation of restrictions
on the ability of the Restricted Subsidiaries to make payments to the Company;
and (vii) the ability to enter into transactions with Affiliates (as defined) or
merge, consolidate or transfer substantially all of the Company's or a
Guarantor's assets. At December 31, 1993, the Company was in compliance with all
covenants.
The Company, as of April 1, 1993, exchanged its $10,230,000 principal amount
subordinated exchangeable variable-rate notes due July 1994 for five-year
subordinated fixed-rate notes. The new notes bear interest at 6.64%, payable
quarterly, and mature on April 1, 1998. The Company also redeemed its $355,000
principal amount 10 1/2% subordinated notes due April 1995 at par on March 31,
1993. On April 15, 1993, the Company's 7% subordinated notes totalling
$1,355,000 matured and were paid in full.
During 1991, MDC repurchased $21,850,000 principal amount of its
Subordinated Notes, resulting in extraordinary gains on the early extinguishment
of debt of $9,479,000, net of income taxes of $4,696,000.
RESTRUCTURED NOTES PAYABLE. All of the restructured notes payable (the
"Restructured Notes Payable") outstanding were repurchased by the Company in
December 1993 and January 1994 with a portion of the proceeds from the 1993
Offering. The consideration paid for the Restructured Notes Payable plus certain
reacquisition costs described in Note C resulted in an extraordinary gain on the
early extinguishment of debt of $16,708,000, net of income taxes of $10,526,000.
Beginning January 1, 1992, interest was payable on the Restructured Notes
Payable on a quarterly basis based upon the number of home sales closed by MDC's
home building segment ($1,750 of interest per home sale closed up to 3,000 in a
year and $2,500 of interest for each additional home sale closed in such year).
OTHER NOTES PAYABLE. Notes payable other than the notes discussed above
consist principally of loans collateralized by real estate, mortgage loans and a
building. These notes bear interest at rates ranging from 7.0% to 10.5%.
GENERAL. The aggregate net carrying value of the assets collateralizing all
of the aforementioned debt totalled approximately $140,000,000 at December 31,
1993.
The following table sets forth the scheduled principal payments on notes
payable at December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1994..................................................... $ 28,684
1995..................................................... 16,412
1996..................................................... 9,109
1997..................................................... 3,030
1998..................................................... 13,321
Thereafter............................................... 223,722
</TABLE>
F-18
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
I. STOCKHOLDERS' EQUITY
STOCK OPTIONS.
In April 1993, the Board of Directors of the Company adopted incentive plans
(the "Plans") to replace the 1983 Incentive Stock Option Plan and the 1983
Non-Qualified Stock Option Plan, each of which expired in January 1993. At the
Annual Meeting of Stockholders held June 18, 1993, the Plans were approved. A
summary of the Plans follows:
EMPLOYEE EQUITY INCENTIVE PLAN. The Employee Equity Incentive Plan (the
"Employee Plan") provides for an initial authorization of 2,100,000 shares of
Common Stock for issuance thereunder plus an additional annual authorization
equal to 10% of the then authorized shares of Common Stock under the Employee
Plan as of each succeeding annual anniversary of the effective date of the
Employee Plan. Under the Employee Plan, the Company may grant awards of
restricted stock, incentive and non-statutory stock options and dividend
equivalents, or any combination thereof, to officers and employees of the
Company or any of its subsidiaries. The incentive stock options granted under
this plan are exercisable at prices greater than or equal to the market value on
the date of grant over periods of up to six years. Non-statutory options granted
under this plan have discretionary exercise prices and are exercisable over
periods of up to six years.
DIRECTOR EQUITY INCENTIVE PLAN. Under the Director Equity Incentive Plan
(the "Director Plan"), non-employee directors of the Company will be entitled to
receive stock options. The Director Plan provides for an initial authorization
of 300,000 shares of Common Stock for issuance thereunder plus an additional
annual authorization of shares equal to 10% of the then authorized shares of
Common Stock under the Director Plan. Each option granted under the Director
Plan will expire five years from the date of grant. The option exercise price
must be equal to 100% of the fair market value of the Common Stock on the date
of grant of the option.
A summary of the changes in options during each of the three years ended
December 31, 1993 is as follows (in shares of MDC Common Stock):
<TABLE>
<S> <C>
Outstanding -- January 1, 1991(1)...................................... 2,481,745
Exercised at $.28125................................................. (5,000)
Granted -- prices ranging from $.8125 to $1.625...................... 1,040,514
Cancelled............................................................ (971,989)
----------
Outstanding -- December 31, 1991....................................... 2,545,270
Exercised at prices ranging from $.28125 to $1.875................... (256,850)
Granted -- prices ranging from $3.00 to $3.375....................... 490,000
Cancelled............................................................ (179,983)
----------
Outstanding -- December 31, 1992....................................... 2,598,437
Exercised at prices ranging from $.28125 to $1.875................... (489,938)
Granted at prices ranging from $3.875 to $6.000...................... 1,185,000
Cancelled............................................................ (92,125)
----------
Outstanding -- December 31, 1993....................................... 3,201,374
----------
----------
Exercise prices of outstanding options at December 31, 1993............ $.28125 to
$ 6.000
----------
----------
Exercisable at December 31, 1993....................................... 1,861,124
----------
----------
Reserved for issuance at December 31, 1993............................. 1,265,000
----------
----------
<FN>
- - ------------------------
(1) In February 1991, the Company exchanged approximately 452,000 in
outstanding options for new options under similar programs. The new
options are exercisable at the closing price of the Company's Common Stock
on the New York Stock Exchange, Inc. on the date of the exchange.
</TABLE>
F-19
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
I. STOCKHOLDERS' EQUITY (CONTINUED)
STOCK ISSUANCE.
In connection with a 1991 partnership transaction between the Company and
Executive Life Insurance Company ("Executive Life"), 1,000,000 shares of MDC
Common Stock held in treasury were issued by MDC to Executive Life as additional
consideration for participating in the partnership. A charge to retained
earnings of $4,222,000 was recorded for the difference between the estimated
market value of the shares and their cost basis.
J. INTEREST
Interest activity is set forth below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Interest capitalized in home building inventory, beginning of
year............................................................ $ 48,440 $ 58,383 $ 63,290
Interest incurred
Corporate and home building.................................... 25,505 24,802 25,534
Mortgage lending............................................... 1,631 1,733 1,371
Asset management............................................... 18,118 50,513 75,943
Interest expense
Corporate and home building.................................... (11,454) (13,359) (12,905)
Mortgage lending............................................... (1,631) (1,733) (1,371)
Asset management............................................... (18,118) (50,513) (75,943)
Previously capitalized home building interest included in
Cost of sales.................................................. (19,810) (21,339) (13,719)
Abandonment of properties...................................... -- (47) (3,817)
----------- ----------- -----------
Interest capitalized in home building inventory, end of year..... $ 42,681 $ 48,440 $ 58,383
----------- ----------- -----------
----------- ----------- -----------
Home building inventories, end of year........................... $ 393,904 $ 339,335 $ 340,346
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
K. INCOME TAXES
As discussed in Note A, the Company adopted SFAS No. 109 effective January
1, 1992. The cumulative effect of this change in accounting for income taxes is
$1,700,000, determined as of January 1, 1992, and is reported separately in the
Consolidated Statements of Income for the year ended December 31, 1992. Income
taxes for the year ended December 31, 1991 are presented under SFAS No. 96.
Total income tax expense (benefit) has been allocated as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Tax expense (benefit) on income (loss) before income taxes,
extraordinary gain (loss) and cumulative effect of
accounting change.......................................... $ 4,976 $ 1,755 $ (1,216)
Extraordinary gain (loss)................................... 9,967 (1,346) 7,629
Stockholders' equity for compensation expense............... (693) (231) --
--------- --------- ---------
$ 14,250 $ 178 $ 6,413
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-20
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
K. INCOME TAXES (CONTINUED)
The significant components of income tax expense (benefit) on income (loss)
before income taxes, extraordinary gain (loss) and cumulative effect of
accounting change consist of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Current Tax Expense (Benefit)
Federal............................................................. $ 6,485 $ 10,371 $ (733)
State............................................................... 853 1,070 447
--------- --------- ---------
Total Current..................................................... 7,338 11,441 (286)
--------- --------- ---------
Deferred Tax Expense (Benefit)
Federal............................................................. (1,933) (9,736) (472)
State............................................................... (429) 50 (458)
--------- --------- ---------
Total Deferred.................................................... (2,362) (9,686) (930)
--------- --------- ---------
Total Income Tax Expense (Benefit).................................... $ 4,976 $ 1,755 $ (1,216)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income tax expense (benefit) differs from the amount which
would be computed by applying the statutory federal income tax rate of 35% in
1993 and 34% in 1992 and 1991 to pre-tax income before extraordinary gain (loss)
and cumulative effect of accounting change, as a result of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Tax expense (benefit) computed at statutory rate........................ $ 5,261 $ 2,216 $ (4,800)
Increase (reduction) due to:
Losses of minority-owned affiliate resulting in no tax benefit........ -- -- 2,156
Reduction in deferred tax asset valuation allowance................... -- (461) --
Permanent differences between financial statement income and taxable
income............................................................... (559) (621) 862
State income tax, net of federal benefit.............................. 274 708 220
Adjustments to prior years' income taxes.............................. -- 108 265
Other................................................................. -- (195) 81
--------- --------- ---------
Income Tax Expense (Benefit)............................................ $ 4,976 $ 1,755 $ (1,216)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-21
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
K. INCOME TAXES (CONTINUED)
The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
--------- ---------
<S> <C> <C>
Gross Deferred Tax Assets:
Investment in partnerships, Equity CMO Interests and other
non-consolidated subsidiaries.................................... $ 5,538 $ 10,991
Reserve for losses................................................ 6,845 7,965
Inventory valuation reserves...................................... 8,200 7,833
CMO impairment.................................................... 2,199 2,718
Accrued liabilities............................................... 2,594 1,852
Property and equipment............................................ 919 1,027
Other assets, additional costs capitalized for tax purposes....... 1,825 --
--------- ---------
Total gross deferred tax assets................................. 28,120 32,386
Less valuation allowance.......................................... (2,939) (2,939)
--------- ---------
Net deferred tax assets......................................... 25,181 29,447
--------- ---------
Deferred Tax Liabilities:
Inventory, additional costs capitalized for financial statement
purposes......................................................... 12,163 21,295
Discount on notes receivable...................................... 3,182 2,759
Deferred revenue, principally due to installment sales............ 1,736 1,181
Other............................................................. -- 263
--------- ---------
Total gross deferred tax liabilities............................ 17,081 25,498
--------- ---------
Net Deferred Tax Asset.............................................. $ 8,100 $ 3,949
--------- ---------
--------- ---------
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1993 and
1992 was $2,939,000. The December 31, 1992 amount reflects a decrease of
$461,000 from the valuation allowance at January 1, 1992 of $3,400,000.
M.D.C. Holdings, Inc. and its wholly-owned subsidiaries file a consolidated
federal income tax return (the "MDC Consolidated Return"). Richmond Homes filed
(or will file) separate consolidated federal income tax returns for the periods
from December 28, 1989 through February 2, 1994 (the "Richmond Homes
Consolidated Returns").
The Internal Revenue Service (the "IRS") has completed its examinations of
the MDC Consolidated Returns for the years 1984 through 1987 and has proposed
certain adjustments to the taxable income reflected in such returns. The Company
currently is protesting many of these proposed adjustments through the IRS
appeals process and believes that the amount of these adjustments will be
reduced as a result. In the opinion of management, adequate provision has been
made for additional income taxes and interest which may arise as a result of the
proposed adjustments.
The IRS currently is examining the MDC Consolidated Returns for the years
1988 through 1990 and the Richmond Homes Consolidated Returns for the years 1989
and 1990. No reports have been issued by the IRS in connection with these
examinations. In the opinion of management, adequate provision has been made for
additional income taxes and interest which may arise as a result of these
examinations.
F-22
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
L. LEGAL PROCEEDINGS
SETTLEMENT OF WESTERN SAVINGS CIVIL MATTERS.
In December 1993, the Resolution Trust Corporation (the "RTC"), acting in
its corporate capacity and as receiver for Western Savings and Loan Association
("Western"), gave its final administrative approval to an agreement-in-principle
executed between MDC and the RTC in February 1993 which provides for a
settlement and mutual release of all potential civil claims between the parties
and related persons relating to any of the Company's past transactions with
Western.
Under the terms of the approved agreement-in-principle, MDC would (i) pay to
the RTC approximately $3,700,000 in cash plus certain interest thereon; and (ii)
release its related potential claims against the RTC and Western. MDC had fully
reserved for this settlement as of December 31, 1992 and does not anticipate any
adverse effect on the Company's operations or financial position. The settlement
remains subject to the negotiation of formal settlement documents acceptable to
both MDC and the RTC and a court order determining that the settlement precludes
the filing of cross-claims against MDC by various third parties.
THRIFT INDUSTRY INVESTIGATIONS.
The Company understands that investigations are being conducted by Federal
grand juries and other government agencies in various states with regard to the
failures of a number of thrifts with which MDC had business transactions during
the period 1983 through mid-1988. The Company and its affiliates have received
and responded to subpoenas requesting documents and information in connection
with certain investigations and may in the future receive additional inquiries
or subpoenas. No indictments or charges have been brought against the Company or
any of its officials by any grand jury investigating the failure of any savings
and loan institutions. Although the Company believes there is no basis for the
imposition of criminal or civil liability in connection therewith, were any
indictment or charge to be brought against the Company, there could be a
material adverse effect upon the Company's financial position and liquidity.
OTHER.
The Company and certain of its subsidiaries and affiliates have been named
as defendants in various other claims, complaints and 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 of the Company.
M. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
CASH AND CASH EQUIVALENTS. For cash and cash equivalents, the carrying
value is a reasonable estimate of fair value.
INVESTMENTS AND MARKETABLE SECURITIES, NET. Investments in marketable
equity securities are carried on the balance sheet at market value.
INVESTMENT IN METROPOLITAN DISTRICT BONDS. Investments in metropolitan
district bonds are carried on the balance sheet at cost, which approximates
market value. Accordingly, the carrying value of the investments is a reasonable
estimate of the fair value.
MORTGAGE LOANS HELD IN INVENTORY. The Company generally purchases forward
commitments to deliver mortgage loans held for sale. For loans which have no
forward commitments, loans held in inventory are stated at market. Accordingly,
the carrying value is a reasonable estimate of fair value.
F-23
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
M. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
MORTGAGE COLLATERAL AND RELATED ASSETS AND CMO BONDS AND RELATED
LIABILITIES. Mortgage Collateral and related assets which are estimated not to
be salable (under terms in indentures governing the CMO Ownership Interest)
within one year are valued at par plus (minus) the discounted estimated value of
the remaining cash flow (cash deficit) to be realized (paid) by MDC over the
remaining economic life of the CMO Ownership Interest.
Mortgage Collateral and related assets which are estimated to be salable
(under terms in indentures governing the CMO Ownership Interest) within one
year, at a profit or to minimize a loss, are valued at the estimated value of
the Mortgage Collateral (less any costs necessary to effect the sale and
subsequent call of the related CMO bonds) plus (minus) the discounted estimated
value of the remaining cash flow (cash deficit) to be realized (paid) by MDC
from December 31, 1993 to the date of estimated sale.
CMO bonds and related liabilities are valued at call or settlement value
(generally face value).
The cash flow estimates used in determining the fair value for the Mortgage
Collateral and related assets assume the liquidation of the CMO bonds and
related liabilities at call or settlement dates.
EQUITY CMO INTERESTS. Equity CMO Interests are valued at discounted
estimates of projected excess cash flow determined under assumptions for
prepayment speeds, LIBOR and discount rates consistent with those used by
traders of residual interests in valuing similar instruments.
INVESTMENT IN CMO BOND. Investment in the CMO Bond is valued at discounted
estimates of projected excess cash flow determined under assumptions for
prepayment speeds, LIBOR and discount rates consistent with those used by
traders of residual interests in valuing similar instruments.
NOTES PAYABLE AND LINES OF CREDIT. The Company's notes payable and lines of
credit are at floating rates or at fixed rates which approximate current market
rates and have relatively short-term maturities. Accordingly, the carrying value
is a reasonable estimate of fair value.
RESTRUCTURED NOTES PAYABLE. Cash flows related to the Restructured Notes
Payable were contingent on home sales closed each year by the Company and the
sale of certain lots in Colorado. The Company could not accurately predict for
the next eight years all of the factors which would have impacted principal and
interest payments under the Restructured Notes Payable, including, among other
factors, (i) the levels of activity in the national or regional housing markets;
(ii) the number of home closings the Company would achieve each year; or (iii)
which specific lots would be sold. These uncertainties, among other things, made
it difficult to determine reasonable approximate yearly principal and interest
payments on the Restructured Notes Payable and to determine an appropriate rate
at which to discount such principal and interest payments from the Restructured
Notes Payable. Accordingly, the Company concluded that the determination of an
estimate of the fair value of these Restructured Notes Payable was not
practicable.
As discussed in Note H, all of the Restructured Notes Payable were
repurchased by the Company in December 1993 and January 1994 at a discount to
carrying value, resulting in an extraordinary gain on the early extinguishment
of debt of $16,708,000, net of income taxes of $10,526,000.
SENIOR NOTES AND SUBORDINATED NOTES. Senior Notes and Subordinated Notes
are valued based on dealer quotes.
F-24
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
M. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
------------------------ ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents................................... $ 63,003 $ 63,003 $ 61,028 $ 61,028
Investments and marketable securities, net.................. 765 765 13,026 13,026
Investment in metropolitan district bonds................... 13,795 13,795 5,095 5,095
Mortgage loans held in inventory............................ 68,065 68,065 57,026 57,026
Mortgage Collateral, net, and related assets................ 134,166 128,824 275,467 268,932
Equity CMO Interests, net................................... 6,427 4,789 16,930 12,502
Investment in CMO Bond...................................... -- -- 6,704 7,024
Financial liabilities for which it is practicable to estimate
fair value:
Notes payable............................................... 63,265 63,265 64,074 64,074
Lines of credit............................................. 54,145 54,145 67,122 67,122
Senior Notes................................................ 187,199 195,700 -- --
Subordinated Notes.......................................... 38,213 39,011 62,958 54,743
CMO bonds, net, and related liabilities..................... 123,500 123,500 256,347 256,347
Financial liabilities for which it is not practicable to
estimate fair value:
Restructured Notes Payable.................................. 2,854 -- 131,681 --
</TABLE>
N. COMMITMENTS
To reduce exposure to fluctuations in interest rates, HomeAmerican makes
commitments to originate (buy) and sell loans and mortgage-backed securities. At
December 31, 1993, commitments by HomeAmerican to originate mortgage loans
totalled $34,243,000 at market rates of interest. At December 31, 1993,
unexpired forward commitments to sell loans totalled $75,610,000.
MDC leases office space, equipment and certain of its model show homes under
noncancellable operating leases. Future minimum rental payments for leases with
initial terms in excess of one year are $2,824,000 in 1994; $1,916,000 in 1995;
$1,381,000 in 1996; $719,000 in 1997; $494,000 in 1998 and $122,000 thereafter.
Rent expense was $2,956,000, $2,731,000 and $2,952,000 in 1993, 1992 and 1991,
respectively.
O. SUPPLEMENTAL GUARANTOR INFORMATION
The Senior Notes are unconditionally guaranteed on an unsecured subordinated
basis, jointly and severally, by Richmond American Homes of California, Inc.,
Richmond American Homes of Maryland, Inc., Richmond American Homes of Nevada,
Inc., Richmond American Homes of Virginia, Inc., Richmond American Homes, Inc.,
Richmond Homes, Inc. I and Richmond Homes, Inc. II (collectively, the
"Guarantors"). The Guaranties are subordinated to all Guarantor Senior
Indebtedness (as defined in the Senior Notes Indenture). Supplemental combining
financial information is presented below.
F-25
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING BALANCE SHEET
DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Corporate
Cash and cash equivalents.................. $ 42,443 $ -- $ -- $ -- $ 42,443
Investments and marketable securities,
net....................................... 761 4 765
Investments in subsidiaries................ 191,462 23,009 15,030 (229,501) --
Advances and notes receivable -- Parent and
subsidiaries.............................. 260,931 37 91,348 (352,316) --
Property and equipment, net................ 10,432 10,432
Deferred income taxes...................... 8,100 8,100
Deferred issue costs, net.................. 11,233 11,233
Other assets, net.......................... 2,715 485 3,200
--------- ----------- -------------- ----------- ------------
519,977 31,146 106,867 (581,817) 76,173
--------- ----------- -------------- ----------- ------------
Home Building
Cash and cash equivalents.................. 17,792 687 18,479
Trade and other accounts receivable........ 41 9,059 213 (3,890) 5,423
Investment in metropolitan district
bonds..................................... 11,400 2,395 13,795
Inventories, net
Housing completed or under
construction............................ 187,796 13,227 201,023
Land and land under development.......... (1,530) 153,068 40,252 1,091 192,881
Prepaid expenses and other assets, net..... 1,312 39,728 5,400 2,423 48,863
--------- ----------- -------------- ----------- ------------
11,223 409,838 59,779 (376) 480,464
--------- ----------- -------------- ----------- ------------
Mortgage Lending
Cash and cash equivalents.................. 1,505 1,505
Restricted cash............................ 3,400 3,400
Accrued interest and other assets, net..... 2,571 2,571
Mortgage loans held in inventory, net...... 68,065 68,065
--------- ----------- -------------- ----------- ------------
-- -- 75,541 -- 75,541
--------- ----------- -------------- ----------- ------------
Asset Management
Cash and cash equivalents.................. 576 576
Mortgage Collateral, net, and related
assets.................................... 134,166 134,166
Equity CMO Interests, net.................. 6,427 6,427
Other loans and assets, net................ 3,519 3,519
--------- ----------- -------------- ----------- ------------
-- -- 144,688 -- 144,688
--------- ----------- -------------- ----------- ------------
Total Assets............................. $ 531,200 $ 440,984 $ 386,875 $(582,193) $ 776,866
--------- ----------- -------------- ----------- ------------
--------- ----------- -------------- ----------- ------------
</TABLE>
F-26
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING BALANCE SHEET
DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Corporate
Accounts payable and accrued expenses...... $ 20,564 $ -- $ 282 $ -- $ 20,846
Advances and notes payable -- Parent and
subsidiaries.............................. 68,342 176,576 120,800 (365,718) --
Income taxes payable....................... 26,635 2,076 28,711
Notes payable.............................. 3,624 3,624
Senior Notes, net.......................... 187,199 187,199
Subordinated Notes, net.................... 38,213 38,213
--------- ----------- -------------- ----------- ------------
344,577 178,652 121,082 (365,718) 278,593
--------- ----------- -------------- ----------- ------------
Home Building
Accounts payable and accrued expenses...... 864 62,768 6,800 309 70,741
Lines of credit............................ 24,645 24,645
Notes payable.............................. 7,051 40,548 12,042 59,641
Restructured Notes Payable, net............ 2,854 2,854
--------- ----------- -------------- ----------- ------------
10,769 127,961 18,842 309 157,881
--------- ----------- -------------- ----------- ------------
Mortgage Lending
Accounts payable and accrued expenses...... 12,375 (3,888) 8,487
Line of credit............................. 29,500 29,500
--------- ----------- -------------- ----------- ------------
-- -- 41,875 (3,888) 37,987
--------- ----------- -------------- ----------- ------------
Asset Management
Accounts payable and accrued expenses...... 3,051 3,051
CMO bonds, net, and related liabilities.... 123,500 123,500
--------- ----------- -------------- ----------- ------------
-- -- 126,551 -- 126,551
--------- ----------- -------------- ----------- ------------
Total Liabilities........................ 355,346 306,613 308,350 (369,297) 601,012
--------- ----------- -------------- ----------- ------------
STOCKHOLDERS' EQUITY
Preferred stock............................ 20,475 10 (20,485) --
Common Stock............................... 209 19 124 (143) 209
Additional paid-in capital................. 133,455 99,725 128,075 (227,800) 133,455
Retained earnings.......................... 57,879 14,152 (49,675) 35,523 57,879
Less treasury stock........................ (15,689) (9) 9 (15,689)
--------- ----------- -------------- ----------- ------------
Total Stockholders' Equity............... 175,854 134,371 78,525 (212,896) 175,854
--------- ----------- -------------- ----------- ------------
Total Liabilities and Stockholders'
Equity.................................. $ 531,200 $ 440,984 $ 386,875 $(582,193) $ 776,866
--------- ----------- -------------- ----------- ------------
--------- ----------- -------------- ----------- ------------
</TABLE>
F-27
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING BALANCE SHEET
DECEMBER 31, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Corporate
Cash and cash equivalents.................. $ 35,993 $ -- $ -- $ -- $ 35,993
Investments and marketable securities,
net....................................... 13,026 13,026
Investments in subsidiaries................ 152,781 19,989 21,989 (194,759) --
Advances and notes receivable -- Parent and
subsidiaries.............................. 228,426 95,199 (323,625) --
Property and equipment, net................ 10,774 10,774
Deferred income taxes...................... 4,697 4,697
Deferred issue costs, net.................. 1,028 1,028
Other assets, net.......................... 3,535 3,535
--------- ----------- -------------- ----------- ------------
445,563 24,686 117,188 (518,384) 69,053
--------- ----------- -------------- ----------- ------------
Home Building
Cash and cash equivalents.................. 22,502 827 23,329
Trade and other accounts receivable........ 10,647 414 (6,451) 4,610
Investment in metropolitan district
bonds..................................... 2,700 2,395 5,095
Inventories, net
Housing completed or under
construction............................ 123,019 9,787 (54) 132,752
Land and land under development.......... (2,568) 165,646 42,960 545 206,583
Prepaid expenses and other assets, net..... 34,325 7,067 41,392
--------- ----------- -------------- ----------- ------------
132 358,534 61,055 (5,960) 413,761
--------- ----------- -------------- ----------- ------------
Mortgage Lending
Cash and cash equivalents.................. 1,180 1,180
Restricted cash............................ 5,972 5,972
Accrued interest and other assets, net..... 3,941 3,941
Mortgage loans held in inventory, net...... 57,026 57,026
--------- ----------- -------------- ----------- ------------
-- -- 68,119 -- 68,119
--------- ----------- -------------- ----------- ------------
Asset Management
Cash and cash equivalents.................. 526 526
Mortgage Collateral, net, and related
assets.................................... 275,467 275,467
Equity CMO Interests, net.................. 16,930 16,930
Investment in CMO Bond..................... 6,704 6,704
Other loans and assets, net................ 8,384 8,384
--------- ----------- -------------- ----------- ------------
-- -- 308,011 -- 308,011
--------- ----------- -------------- ----------- ------------
Total Assets............................. $ 445,695 $ 383,220 $ 554,373 $(524,344) $ 858,944
--------- ----------- -------------- ----------- ------------
--------- ----------- -------------- ----------- ------------
</TABLE>
F-28
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING BALANCE SHEET
DECEMBER 31, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Corporate
Accounts payable and accrued expenses...... $ 21,330 $ -- $ -- $ -- $ 21,330
Advances and notes payable -- Parent and
subsidiaries.............................. 30,909 149,659 144,603 (325,171) --
Income taxes payable....................... 17,275 1,317 18,592
Notes payable.............................. 6,342 6,342
Subordinated Notes, net.................... 62,958 62,958
Deferred income taxes...................... 748 748
--------- ----------- -------------- ----------- ------------
139,562 150,976 144,603 (325,171) 109,970
--------- ----------- -------------- ----------- ------------
Home Building
Accounts payable and accrued expenses...... 43,084 6,322 734 50,140
Lines of credit............................ 2,034 26,654 28,688
Notes payable.............................. 8,236 37,037 12,459 57,732
Restructured Notes Payable, net............ 131,681 131,681
--------- ----------- -------------- ----------- ------------
141,951 106,775 18,781 734 268,241
--------- ----------- -------------- ----------- ------------
Mortgage Lending
Accounts payable and accrued expenses...... 14,489 (6,451) 8,038
Line of credit............................. 31,030 31,030
--------- ----------- -------------- ----------- ------------
-- -- 45,519 (6,451) 39,068
--------- ----------- -------------- ----------- ------------
Asset Management
Accounts payable and accrued expenses...... 12,282 12,282
Lines of credit............................ 7,404 7,404
CMO bonds, net, and related liabilities.... 256,347 256,347
--------- ----------- -------------- ----------- ------------
-- -- 276,033 -- 276,033
--------- ----------- -------------- ----------- ------------
Total Liabilities........................ 281,513 257,751 484,936 (330,888) 693,312
--------- ----------- -------------- ----------- ------------
MINORITY INTEREST............................ -- -- 50 1,400 1,450
--------- ----------- -------------- ----------- ------------
STOCKHOLDERS' EQUITY
Preferred stock............................ 18,900 10 (18,910) --
Common Stock............................... 204 19 124 (143) 204
Additional paid-in capital................. 132,332 99,760 116,050 (215,810) 132,332
Retained earnings.......................... 32,162 6,790 (46,788) 39,998 32,162
Less treasury stock, at cost............... (516) (9) 9 (516)
--------- ----------- -------------- ----------- ------------
Total Stockholders' Equity............... 164,182 125,469 69,387 (194,856) 164,182
--------- ----------- -------------- ----------- ------------
Total Liabilities and Stockholders'
Equity.................................. $ 445,695 $ 383,220 $ 554,373 $(524,344) $ 858,944
--------- ----------- -------------- ----------- ------------
--------- ----------- -------------- ----------- ------------
</TABLE>
F-29
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Home Building................................ $ 244 $ 571,059 $ 43,029 $ (17,519) $ 596,813
Mortgage Lending............................. 19,725 19,725
Asset Management............................. 34,535 (1,373) 33,162
Corporate other revenues..................... 2,082 280 14 2,376
Equity in earnings of subsidiaries........... 26,257 5,277 (31,534) --
--------- ----------- --------------- ----------- ------------
Total Revenues............................. 28,583 576,336 97,569 (50,412) 652,076
--------- ----------- --------------- ----------- ------------
COSTS AND EXPENSES:
Home Building................................ (1,258) 552,025 36,448 (12,898) 574,317
Mortgage Lending............................. 12,217 12,217
Asset Management............................. 24,166 24,166
Corporate general and administrative......... 14,757 133 14,890
Corporate and home building interest......... 52 9,460 3,712 (1,770) 11,454
--------- ----------- --------------- ----------- ------------
Total Expenses............................... 13,551 561,485 76,676 (14,668) 637,044
--------- ----------- --------------- ----------- ------------
Income before income taxes and extraordinary
gain.......................................... 15,032 14,851 20,893 (35,744) 15,032
Provision (benefit) for income taxes........... 4,976 5,806 7,428 (13,234) 4,976
--------- ----------- --------------- ----------- ------------
Income before extraordinary gain............... 10,056 9,045 13,465 (22,510) 10,056
Extraordinary gain from early extinguishment of
debt, net of income taxes..................... 15,823 15,823
--------- ----------- --------------- ----------- ------------
NET INCOME..................................... $ 25,879 $ 9,045 $ 13,465 $ (22,510) $ 25,879
--------- ----------- --------------- ----------- ------------
--------- ----------- --------------- ----------- ------------
</TABLE>
F-30
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Home Building................................ $ -- $ 403,037 $ 37,338 $ (17,244) $ 423,131
Mortgage Lending............................. 19,344 19,344
Asset Management............................. 67,738 (1,141) 66,597
Corporate other revenues..................... 2,540 1,831 (1,875) 2,496
Equity in earnings of subsidiaries........... 9,451 4,130 (13,581) --
--------- ----------- -------------- ----------- ------------
Total Revenues............................. 11,991 407,167 126,251 (33,841) 511,568
--------- ----------- -------------- ----------- ------------
COSTS AND EXPENSES:
Home Building................................ 388,473 33,479 (16,382) 405,570
Mortgage Lending............................. 10,114 10,114
Asset Management............................. 57,897 57,897
Corporate general and administrative......... 18,310 (89) (113) 18,108
Corporate and home building interest......... 698 8,932 4,869 (1,140) 13,359
--------- ----------- -------------- ----------- ------------
Total Expenses............................. 19,008 397,405 106,270 (17,635) 505,048
--------- ----------- -------------- ----------- ------------
Income (loss) before income taxes,
extraordinary gain (loss) and cumulative
effect of accounting change................... (7,017) 9,762 19,981 (16,206) 6,520
Provision (benefit) for income taxes........... (3,426) 3,385 7,780 (5,984) 1,755
--------- ----------- -------------- ----------- ------------
Income (loss) before extraordinary gain (loss)
and cumulative effect of accounting change.... (3,591) 6,377 12,201 (10,222) 4,765
Extraordinary gain (loss) from early
extinguishment of debt, net of income taxes... 7,443 238 (2,851) (7,443) (2,613)
Cumulative effect of accounting change......... 1,700 1,700
--------- ----------- -------------- ----------- ------------
NET INCOME..................................... $ 3,852 $ 8,315 $ 9,350 $ (17,665) $ 3,852
--------- ----------- -------------- ----------- ------------
--------- ----------- -------------- ----------- ------------
</TABLE>
F-31
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Home Building................................ $ -- $ 310,794 $ 22,753 $ (14,470) $ 319,077
Mortgage Lending............................. 10,343 10,343
Asset Management............................. 90,643 (1,117) 89,526
Corporate other revenues..................... 3,713 1,920 (2,347) 3,286
Equity in earnings of subsidiaries........... 19,265 989 (20,254) --
--------- ----------- -------------- ----------- ------------
Total Revenues............................. 22,978 311,783 125,659 (38,188) 422,232
--------- ----------- -------------- ----------- ------------
COSTS AND EXPENSES:
Home Building................................ (3,150) 307,943 27,966 (13,248) 319,511
Mortgage Lending............................. 7,648 7,648
Asset Management............................. 76,666 76,666
Corporate general and administrative......... 18,856 924 (159) 19,621
Corporate and home building interest......... 402 10,222 6,216 (3,935) 12,905
--------- ----------- -------------- ----------- ------------
Total Expenses............................. 16,108 318,165 119,420 (17,342) 436,351
--------- ----------- -------------- ----------- ------------
Income (loss) before income taxes and
extraordinary gain............................ 6,870 (6,382) 6,239 (20,846) (14,119)
Provision (benefit) for income taxes........... 5,933 (316) 3,340 (10,173) (1,216)
--------- ----------- -------------- ----------- ------------
Income (loss) before extraordinary gain........ 937 (6,066) 2,899 (10,673) (12,903)
Extraordinary gain from early extinguishment of
debt, net of income taxes..................... 969 5,330 8,510 14,809
--------- ----------- -------------- ----------- ------------
NET INCOME (LOSS).............................. $ 1,906 $ (6,066) $ 8,229 $ (2,163) $ 1,906
--------- ----------- -------------- ----------- ------------
--------- ----------- -------------- ----------- ------------
</TABLE>
F-32
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES.............. $ (5,410) $ (10,084) $ (13,562) $ (5,181) $ (34,237)
--------- ----------- -------------- ----------- ------------
INVESTING ACTIVITIES:
Mortgage Collateral
Principal payments and prepayments............. 801 94,408 95,209
Sales.......................................... 47,060 47,060
Distributions of capital from Equity CMO
Interests....................................... 7,403 7,403
CMO Bond Principal payments...................... 7,114 7,114
Changes in investments and marketable securities,
net............................................. 12,000 12,000
Changes in investment in metropolitan district
bonds........................................... (8,700) (8,700)
Proceeds from affiliate debt maturity............ 20 1,750 (1,770) --
Affiliate notes receivable....................... 6,406 4,120 (10,526) --
Changes in restricted cash....................... 13,071 13,071
Other, net....................................... (3,054) (318) (704) (4,076)
--------- ----------- -------------- ----------- ------------
Net Cash Provided By (Used In) Investing
Activities...................................... 6,652 503 174,222 (12,296) 169,081
--------- ----------- -------------- ----------- ------------
FINANCING ACTIVITIES:
Net increase (reduction) in borrowings from
Parent and subsidiaries......................... (20,758) 26,761 (11,346) 5,343 --
CMO bonds -- principal payments.................. (139,658) (139,658)
Lines of credit
Advances....................................... 2,887 349,523 352,410
Principal payments............................. (4,921) (351,532) (8,934) (365,387)
Senior and Subordinated Notes
Net proceeds................................... 204,013 204,013
Payments....................................... (54,518) 20 (54,498)
Notes payable
Borrowings..................................... 75,493 3,836 79,329
Principal payments............................. (3,903) (85,010) (4,323) (93,236)
Maturity of affiliate owned debt................. (1,750) 1,750 --
Affiliate notes payable.......................... (10,256) 10,256 --
Restructured Notes Payable principal payments and
repurchases..................................... (99,704) (99,704)
Treasury stock purchase.......................... (15,173) (15,173)
Other, net....................................... (965) (108) 108 (965)
--------- ----------- -------------- ----------- ------------
Net Cash Provided By (Used In) Financing
Activities........................................ 5,208 4,871 (160,425) 17,477 (132,869)
--------- ----------- -------------- ----------- ------------
Net Increase (Decrease) In Cash And Cash
Equivalents....................................... 6,450 (4,710) 235 1,975
Cash And Cash Equivalents
Beginning Of Year................................ 35,993 22,502 2,533 61,028
--------- ----------- -------------- ----------- ------------
End Of Year...................................... $ 42,443 $ 17,792 $ 2,768 $ -- $ 63,003
--------- ----------- -------------- ----------- ------------
--------- ----------- -------------- ----------- ------------
</TABLE>
F-33
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES........................................ $ (10,657) $ 21,514 $ 3,716 $ 1,788 $ 16,361
--------- ----------- -------------- ----------- ------------
INVESTING ACTIVITIES:
Mortgage Collateral
Principal payments and prepayments............. 833 209,163 209,996
Sales.......................................... 82,528 82,528
Distributions of capital from Equity CMO
Interests....................................... 13,648 13,648
CMO Bond
Purchase....................................... (7,367) (7,367)
Principal payments............................. 709 709
Changes in investments and marketable securities,
net............................................. (12,000) (12,000)
Changes in investment in metropolitan district
bonds........................................... (2,700) (2,700)
Changes in restricted cash....................... 7,847 7,847
Affiliate notes receivable
Advances....................................... (22,500) 22,500 --
Repayments..................................... 12,298 16,491 (28,789) --
Other, net....................................... (598) (738) (444) (1,780)
--------- ----------- -------------- ----------- ------------
Net Cash Provided By (Used In) Investing
Activities........................................ (3,000) 95 300,075 (6,289) 290,881
--------- ----------- -------------- ----------- ------------
FINANCING ACTIVITIES:
Net increase (reduction) in borrowings from
Parent and subsidiaries......................... 34,959 (1,618) (31,542) (1,799) --
CMO bonds -- principal payments.................. (281,326) (281,326)
Lines of Credit
Advances....................................... 16,309 136,608 12,994 165,911
Principal payments............................. (20,228) (129,332) (902) (150,462)
Notes payable
Borrowings..................................... 38,604 356 38,960
Principal payments............................. (7,421) (53,795) (2,743) (63,959)
Notes payable -- Affiliate
Advances....................................... 22,500 (22,500) --
Principal payments............................. (28,789) 28,789 --
Restructured Notes Payable principal payments.... (4,194) (4,194)
Other............................................ 223 223
--------- ----------- -------------- ----------- ------------
Net Cash Provided By (Used In) Financing
Activities........................................ 19,648 (15,822) (303,163) 4,490 (294,847)
--------- ----------- -------------- ----------- ------------
Net Increase (Decrease) In Cash And Cash
Equivalents....................................... 5,991 5,787 628 (11) 12,395
Cash And Cash Equivalents
Beginning Of Year................................ 30,002 16,715 1,905 11 48,633
--------- ----------- -------------- ----------- ------------
End Of Year...................................... $ 35,993 $ 22,502 $ 2,533 $ -- $ 61,028
--------- ----------- -------------- ----------- ------------
--------- ----------- -------------- ----------- ------------
</TABLE>
F-34
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
MDC SUBSIDIARIES SUBSIDIARIES ENTRIES MDC
--------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES........................................ $ (2,725) $ 44,011 $ (14,315) $ (1,898) $ 25,073
--------- ----------- -------------- ----------- ------------
INVESTING ACTIVITIES:
Mortgage Collateral
Principal payments and prepayments............. 2 832 121,224 122,058
Sales.......................................... 3,420 3,420
Distributions of capital from Equity CMO
Interests....................................... 4,486 4,486
Changes in restricted cash....................... (7,007) (7,007)
Affiliate notes receivable
Advances....................................... (13,000) (3,682) (753) 17,435 --
Repayments..................................... 12,516 1,268 (13,784) --
Sale of subsidiary to affiliate.................. (7,900) 7,900 --
Other, net....................................... (316) (586) (416) (1,318)
--------- ----------- -------------- ----------- ------------
Net Cash Provided By (Used In) Investing
Activities........................................ (8,698) 4,464 122,222 3,651 121,639
--------- ----------- -------------- ----------- ------------
FINANCING ACTIVITIES:
Net increase (reduction) in borrowings from
Parent and subsidiaries......................... 11,967 (2,628) (12,071) 2,732 --
CMO bonds -- Principal payments.................. (109,849) (109,849)
Lines of Credit
Advances....................................... 26,298 108,454 10,331 145,083
Principal payments............................. (28,953) (128,566) (157,519)
Senior and Subordinated Notes repurchase......... (1,790) (4,435) (6,225)
Notes payable
Borrowings..................................... 36,367 7,819 44,186
Principal payments............................. (2,235) (54,682) (3,880) (60,797)
Notes payable -- Affiliate
Borrowings..................................... 13,000 (13,000) --
Principal payments............................. (13,784) 13,784 --
Restructured Notes Payable principal payments.... (1,050) (1,050)
Treasury stock sale.............................. 822 (822) --
Other............................................ 2 1 (1) 2
--------- ----------- -------------- ----------- ------------
Net Cash Provided By (Used In) Financing
Activities........................................ 5,061 (41,839) (107,649) (1,742) (146,169)
--------- ----------- -------------- ----------- ------------
Net Increase (Decrease) In Cash And Cash
Equivalents....................................... (6,362) 6,636 258 11 543
Cash And Cash Equivalents
Beginning Of Year................................ 36,364 10,079 1,647 48,090
--------- ----------- -------------- ----------- ------------
End Of Year...................................... $ 30,002 $ 16,715 $ 1,905 $ 11 $ 48,633
--------- ----------- -------------- ----------- ------------
--------- ----------- -------------- ----------- ------------
</TABLE>
F-35
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
O. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Investments in subsidiaries are accounted for on the equity method for
purposes of the supplemental information.
RELATED PARTIES. The Guarantors are members of a group of affiliated
companies and have transactions and relationships with members of the group.
MDC charges the Guarantors for a share of its general and administrative
expenses, which amounted to $2,654,000, $2,552,000 and $2,787,000, respectively,
in 1993, 1992 and 1991.
MDC pays costs associated with litigation and other significant claims
against the Guarantors as it considers such costs to be a general corporate
expense. Amounts paid by MDC on behalf of the Guarantors amounted to
approximately $3,481,000, $1,620,000, and $1,475,000, respectively, in 1993,
1992 and 1991.
Advances and notes receivable/payable -- Parent (M.D.C. Holdings, Inc.) and
subsidiaries consists, among other things, of ongoing activities relating to the
Guarantors' participation in MDC's cash management system and current and
deferred income taxes.
INCOME TAXES. In accordance with the provisions of SFAS No. 109, the
subsidiaries report their results of operations as if they were separate
taxpayers. The current tax liabilities and deferred income tax assets and
liabilities of the wholly-owned Guarantors are reported in the financial
statements in the Advances and notes receivable/payable -- Parent and
subsidiaries accounts.
P. RELATED PARTY TRANSACTIONS
MDC has transacted business with affiliated companies, certain officers and
directors of the Company.
MDC has agreements with Asset Investors and Commercial Assets to advise them
on various facets of their business and to manage their day-to-day operations
subject to the supervision of their respective boards of directors. MDC earned
management fees and administration fees from these agreements which are included
in asset management revenues of $597,000 and $1,583,000, respectively, during
1993, $1,001,000 and $1,565,000, respectively, during 1992 and $7,353,000 and
$1,348,000, respectively, during 1991.
The Company acquired certain assets from Messrs. Mizel and Mandarich in
February 1994. See Note C.
On December 28, 1989, MDC granted loans to Messrs. Mizel and Mandarich to
purchase shares of common stock of Richmond Homes. The loans, which mature in
1999, bear interest at 8.0% and are unsecured. At both December 31, 1993 and
1992, $840,000 of such loans were outstanding. Interest income of $67,000 was
recognized on these loans in each of 1993, 1992 and 1991.
The Company utilizes the services of companies owned by two former employees
of the Company, one of whom is the brother-in-law of a current officer of the
Company. During 1993, 1992 and 1991, the Company paid $11,557,000, $9,268,000
and $8,228,000, respectively, for plumbing, door and millwork services provided
by these companies.
The Company leases office space and furniture to certain organizations in
which certain officers and/or directors of the Company have an ownership
interest. The rental revenue from those leases totalled $259,000, $200,000 and
$156,000, respectively, in 1993, 1992 and 1991.
F-36
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
P. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company utilizes in the ordinary course of business the services of a
marketing and communications firm which is owned by the brother-in-law of an
officer and director of the Company. Total fees paid for advertising and
marketing design services were $246,000, $134,000 and $205,000, respectively, in
1993, 1992 and 1991.
Q. DISPOSITIONS
During the third quarter of 1991, MDC, in two separate transactions,
transferred rental properties which collateralized an aggregate of $23,132,000
principal amount of non-recourse notes to the RTC. The non-recourse notes had
been sold during 1988 to Western Savings. The RTC took control of Western
Savings in June 1989. As part of the agreement between MDC and the RTC, certain
guaranties entered into between MDC and Western Savings with respect to these
and other loans sold to Western Savings during 1988 and 1989 were settled, and
the mortgage loan servicing rights for certain mortgage loans serviced by
HomeAmerican on behalf of the RTC were transferred to the RTC. The transactions,
among other things, required a net cash payment of $1,123,000 to the RTC.
HomeAmerican recognized an $800,000 pre-tax gain on the transfer of the mortgage
loan servicing rights and MDC recorded (i) a $500,000 asset valuation reserve on
the rental properties; and (ii) an extraordinary gain on the early
extinguishment of debt (i.e., the non-recourse notes) of $5,330,000, net of
income taxes of $2,933,000.
In December 1991, MDC deeded (i.e., abandoned) $8,762,000 carrying value of
inactive land inventories located in Virginia, which collateralized a $7,895,000
principal amount non-recourse note payable and additional related liabilities,
to the note holder.
F-37
<PAGE>
M.D.C. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
R. SUMMARIZED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
Unaudited summarized quarterly consolidated financial information for the
two years ended December 31, 1993 is as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------------
FOURTH THIRD SECOND FIRST
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1993
Revenues...................................................... $ 185,343 $ 191,191 $ 159,657 $ 115,885
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income before extraordinary gain and cumulative effect of
accounting change............................................ $ 2,904 $ 3,223 $ 3,014 $ 915
Extraordinary gain............................................ 15,823 -- -- --
----------- ----------- ----------- -----------
Net Income................................................ $ 18,727 $ 3,223 $ 3,014 $ 915
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings Per Share
Income before extraordinary gain............................ $ .13 $ .14 $ .14 $ .04
Extraordinary gain.......................................... .71 -- -- --
----------- ----------- ----------- -----------
Net Income................................................ $ .84 $ .14 $ .14 $ .04
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted-Average Shares Outstanding........................... 22,359 22,431 22,337 22,231
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
1992
Revenues...................................................... $ 139,255 $ 139,147 $ 131,713 $ 101,453
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income before extraordinary loss and cumulative effect of
accounting change............................................ $ 487 $ 734 $ 1,498 $ 2,046
Extraordinary loss............................................ (122) (47) -- (2,444)
Cumulative effect of accounting change........................ -- -- -- 1,700
----------- ----------- ----------- -----------
Net Income................................................ $ 365 $ 687 $ 1,498 $ 1,302
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings (Loss) Per Share
Income before extraordinary loss and cumulative effect of
accounting change.......................................... $ .03 $ .03 $ .07 $ .09
Extraordinary loss.......................................... (.01) -- -- (.11)
Cumulative effect of accounting change...................... -- -- -- .08
----------- ----------- ----------- -----------
Net Income................................................ $ .02 $ .03 $ .07 $ .06
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted-Average Shares Outstanding........................... 21,901 21,875 21,810 21,787
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
F-38
<PAGE>
M.D.C. HOLDINGS, INC. AND SUBSIDIARIES
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER
THAN RELATED PARTIES
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COLUMN D COLUMN E
COLUMN A COLUMN B COLUMN C -------------------------- --------------------------
- - ----------------------------------------- ------------- -----------
DEDUCTIONS BALANCE AT
BALANCE AT -------------------------- END OF PERIOD
BEGINNING OF AMOUNTS AMOUNTS --------------------------
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
- - ----------------------------------------- ------------- ----------- ----------- ------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Michael H. Feinstein (1)............... $ 223 $ -- $ -- $ -- $ 223 $ --
David D. Mandarich (2)................. 210 -- -- -- -- 210
Larry A. Mizel (3)..................... 630 -- -- -- -- 630
Year ended December 31, 1992
Michael H. Feinstein (1)............... 223 -- -- -- 223 --
David D. Mandarich (2)................. 210 -- -- -- -- 210
Larry A. Mizel (3)..................... 630 -- -- -- -- 630
Premier Building Group, Inc. .......... 122 -- 120 2 -- --
Year Ended December 31, 1991
Michael H. Feinstein (1)............... 223 -- -- -- -- 223
David D. Mandarich (2)................. 210 -- -- -- -- 210
Larry A. Mizel (3)..................... 630 -- -- -- -- 630
Premier Building Group, Inc. .......... 150 -- 28 -- 122 --
<FN>
- - ------------------------
(1) The Company loaned Michael H. Feinstein (a Senior Vice President and
Treasurer until his resignation in 1993) $262,000 under two notes. As of
January 31, 1994, $14,000 remained outstanding under these two notes.
(2) The Company loaned David D. Mandarich, Executive Vice President-Real
Estate, $210,000 to acquire 875 shares of the common stock of Richmond
Homes. The note bears interest at 8% per annum with interest payable
annually. The note requires that if Mr. Mandarich sells any of the 875
shares of common stock of Richmond Homes (with certain exceptions), the
proceeds will be used to pay any unpaid interest and principal then
outstanding. All unpaid principal and interest is due and payable December
1999.
(3) The Company loaned Larry A. Mizel, Chairman of the Board and Chief
Executive Officer, $630,000 to acquire 2,625 shares of the common stock of
Richmond Homes. The note bears interest at 8% per annum with interest
payable annually. Mr. Mandarich subsequently purchased from Mr. Mizel 292
shares of Richmond Homes common stock (at the price Mr. Mizel paid MDC for
such shares). Mr. Mizel continues to be obligated to MDC on the entire
amount of the note. All unpaid principal and interest is due and payable
December 1999.
</TABLE>
F-39
<PAGE>
M.D.C. HOLDINGS, INC. AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND OTHER QUALIFYING ACCOUNTS
DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COLUMN C COLUMN D
COLUMN A COLUMN B ------------------------ ------------------------ COLUMN E
------------------------------ ------------ ----------
ADDITIONS DEDUCTIONS
------------------------ ------------------------
BALANCE AT CHARGED TO CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER ALLOWANCES OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS UTILIZED ACCOUNTS PERIOD
------------------------------ ------------ ----------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Inventories -- Housing
Completed or Under
Construction and Land and
Land Under Development
Net Realizable Value
Allowances:
Year Ended December 31:
1993.................... $ 47,100 $ 2,345 $ -- $ 8,427 $ 189 $ 40,829
1992.................... 58,908 -- -- 11,808 -- 47,100
1991.................... 66,188 11,000 -- 18,280(1) -- 58,908
Equity CMO Interests Valuation
Allowance
Year Ended December 31:
1993...................... 6,903 3,100(2) -- 4,285(3) -- 5,718
1992...................... 5,798 3,529(2) -- 2,424(3) -- 6,903
1991...................... 2,569 3,229(2) -- -- -- 5,798
Asset Management Other Loans
Allowance for Loan Losses
Year Ended December 31:
1993...................... 914 -- -- 268 -- 646
1992...................... 12,418 (800) -- 203 10,501(4) 914
1991...................... 11,616 1,214 -- 412 -- 12,418
<FN>
- - ------------------------
(1) Includes $8,550,000 of net realizable value allowances utilized in
connection with the deeding (i.e., abandoning) of inactive land
inventories in Virginia which collateralized a non-recourse note payable.
(2) The net difference between the provision recorded and the allowances
utilized is charged or credited to equity in earnings of Equity CMO
Interests.
(3) Beginning July 1, 1992, all net losses associated with Equity CMO
Interests have been offset by a utilization of Equity CMO Interest
valuation allowances.
(4) Amount is comprised of loan loss and other allowances which were offset
against the related assets in conjunction with the settlement of a civil
suit in 1992.
</TABLE>
F-40
<PAGE>
M.D.C. HOLDINGS, INC. AND SUBSIDIARIES
SCHEDULE IX
SHORT-TERM BORROWINGS
DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- - ------------------------------------------------ ----------- ------------- ----------- ----------- ---------------
MAXIMUM AVERAGE WEIGHTED-
AMOUNT AMOUNT AVERAGE
BALANCE AT WEIGHTED- OUTSTANDING OUTSTANDING INTEREST RATE
END OF AVERAGE DURING THE DURING THE DURING THE
CATEGORY OF AGGREGATE SHORT-TERM BORROWINGS PERIOD INTEREST RATE PERIOD (A) PERIOD (B) PERIOD (C)
- - ------------------------------------------------ ----------- ------------- ----------- ----------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Notes payable -- banks........................ $ 54,145 4.61% $ 75,092 $ 63,459 5.43%
Holders of repurchase agreements.............. -- -- 27,356 11,614 3.54
Year ended December 31, 1992
Notes payable -- banks........................ 59,718 5.59 78,866 71,473 6.09
Holders of repurchase agreements.............. 7,404 3.88 8,904 6,270 3.83
Year ended December 31, 1991
Notes payable -- banks........................ 62,134 6.52 82,732 71,298 8.39
Holders of repurchase agreements.............. 902 5.35 2,252 1,641 6.14
<FN>
- - ------------------------
(A) Maximum amount outstanding during the period is based on month-end
balances.
(B) Average amount outstanding during the period is computed based on the
average of the daily balances outstanding during the year.
(C) Weighted-average interest rate during the period is computed by dividing
the actual short-term interest incurred by the average short-term
borrowings outstanding.
</TABLE>
F-41
<PAGE>
M.D.C. HOLDINGS, INC. AND SUBSIDIARIES
SCHEDULE XII
MORTGAGE LOANS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
COLUMN F
COLUMN A COLUMN B COLUMN C COLUMN D ----------- COLUMN G COLUMN H
- - ---------------------------------------- ------------- --------- -------- ---------- -----------
PERIODIC FACE AMOUNT AGGREGATE PRINCIPAL
NUMBER OF MATURITY PAYMENT OF PRINCIPAL SUBJECT TO
DESCRIPTION (1) LOANS INTEREST RATE DATE TERMS MORTGAGES AMOUNT (2) DELINQUENCY
- - ---------------------------------------- --------- ------------- --------- -------- ----------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
MORTGAGE LOANS HELD IN
INVENTORY
Single-Family Mortgages:
First Mortgages
Conventional
$ 0- 49,999...................... 7 6.500%-7.625% 2009-2024 $ 305 $ --
50,000- 99,999...................... 58 3.375-13.875 2009-2024 4,333 --
100,000-149,999...................... 86 4.750-8.000 2009-2024 10,612 --
150,000-199,999...................... 66 4.125-8.000 2009-2024 11,177 --
200,000-249,999...................... 23 3.875-7.500 2023-2024 4,842 --
250,000-299,999...................... 1 7.375-7.375 2024-2024 250 --
300,000-349,999...................... 2 6.875-7.500 2023-2024 663 --
FHA/VA
$ 0- 49,999...................... 35 5.000-8.000 2009-2024 1,491 --
50,000- 99,999...................... 257 5.000-8.000 2008-2024 19,419 --
100,000-149,999...................... 96 4.500-8.000 2008-2024 11,674 --
150,000-199,999...................... 25 5.000-8.000 2023-2024 4,329 --
--- ---------- -----
656 69,095 --
Discounts and Deferrals on Single-Family
Mortgages.............................. -- (382 ) --
--- ---------- -----
Total -- Mortgage Loans Held in
Inventory.............................. 656 68,713 --
--- ---------- -----
OTHER MORTGAGE LOANS
First Mortgages
$ 0- 49,999...................... 2 8.000%-8.000% 2007-2007 46 --
50,000- 99,999...................... 3 9.000-9.875 1991-2016 248 164
100,000-149,999...................... 2 10.000-10.750 1992-2018 241 241
150,000-199,999...................... 1 7.500-7.500 1997-1997 153 --
250,000-299,999...................... 1 8.000-8.000 1993-1993 250 250
Second Mortgages
$ 0- 49,999...................... 21 7.000-12.000 1990-2021 243 63
50,000- 99,999...................... 2 7.000-8.000 1994-1998 130 --
100,000-149,999...................... 1 9.000-9.000 1997-1997 107 --
Discounts on Second Mortgages........... (129 ) --
Construction Loans:
$ 0- 49,999...................... 18 0.000-10.000 1994-1994 588 --
50,000- 99,999...................... 9 0.000-10.000 1994-1994 572 --
100,000-149,000...................... 2 0.000-7.000 1994-1994 225 --
900,000-949,000...................... 1 6.000-6.000 1995-1995 923 --
Commercial Loans:
$200,000-249,999...................... 1 11.000-11.000 1994-1994 235 225
250,000-499,999...................... 1 7.500-7.500 1996-1996 376 --
Commercial Loans Exceeding 3% of total
Column G:
Secured by Developed Land............. -- -- --
Secured by Undeveloped Land........... -- -- --
--- ---------- -----
Total -- Other Mortgage Loans........... 65 4,208 943
--- ---------- -----
Total................................... 721 $ 72,921 $ 943
--- ---------- -----
--- ---------- -----
</TABLE>
F-42
<PAGE>
M.D.C. HOLDINGS, INC. AND SUBSIDIARIES
SCHEDULE XII
MORTGAGE LOANS
DECEMBER 31, 1993
A summary of changes in mortgage loans is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period............................................. $ 63,388 $ 60,550 $ 42,468
----------- ----------- -----------
Additions during period
New loans (3)............................................................ 709,498 566,857 345,842
Loans purchased (3)...................................................... 551 387 484
Amortization of discounts................................................ -- 23 14
----------- ----------- -----------
710,049 567,267 346,340
----------- ----------- -----------
Deductions during period
Mortgage loans sold (3).................................................. 695,966 560,866 325,049
Collections of principal................................................. 4,616 2,801 1,955
Foreclosures and write-offs.............................................. (66) 762 1,254
----------- ----------- -----------
700,516 564,429 328,258
----------- ----------- -----------
Balance at close of period................................................. $ 72,921 $ 63,388 $ 60,550
----------- ----------- -----------
----------- ----------- -----------
<FN>
- - ------------------------
(1) The carrying value of the mortgage loans has been reduced to the fair
market value of the underlying collateral.
(2) The aggregate carrying value of the mortgage loans reflected above is
approximately $1,531,000 less than their basis for Federal income tax
purposes.
(3) Net of related discounts.
</TABLE>
F-43
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS
The Company's Certificate of Incorporation provides for three classes of
directors with staggered terms of office. Nominees of each class serve for terms
of three years and until election and qualification of their successors or until
their resignation, death, disqualification or removal from office.
The Board of Directors consists of seven members, including two Class I
directors whose terms expire in 1995, two Class II directors whose terms expire
in 1996 and three Class III directors whose terms expire in 1994. At the
Meeting, three Class III directors are to be elected to three-year terms
expiring in 1997. The nominees for the Class III directors are Messrs. Steven J.
Borick, David D. Mandarich and Larry A. Mizel, all of whom presently serve on
the Board of Directors of the Company.
Certain information with respect to Messrs. Borick, Mandarich and Mizel, the
nominees for election, and the continuing directors of the Company, furnished in
part by each such person, appears below.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
POSITIONS AND OFFICES WITH THE COMPANY OWNED AS OF MAY PERCENTAGE OF
NAME AGE AND OTHER PRINCIPAL OCCUPATIONS 2, 1994 (1)(2) CLASS *
- - ------------------------- --- ---------------------------------------------------- --------------- -------------
<S> <C> <C> <C> <C>
NOMINEES:
CLASS III
TERMS EXPIRE IN 1994
Steven J. Borick 41 President, Texakota, Inc.and a General Partner in 75,000 **
Texakota Oil Company
David D. Mandarich 46 Executive Vice President -- Real Estate of the 1,415,738 7.2%
Company
Larry A. Mizel 51 Chairman of the Board and Chief Executive Officer of 4,173,602(3) 21.4%
the Company and Chairman of the Board of Asset
Investors Corporation and Commercial Assets, Inc.
CONTINUING DIRECTORS:
CLASS II
TERMS EXPIRE IN 1996
Gilbert Goldstein 75 Principal in the law firm of Gilbert Goldstein, P.C. 190,151 1.0%
William B. Kemper 56 Private real estate investor 85,000 **
CLASS I
TERMS EXPIRE IN 1995
Spencer I. Browne 44 President and Chief Operating Officer of the Company 625,599 3.2%
and President, Chief Executive Officer and a
Director of Asset Investors Corporation and
Commercial Assets, Inc.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
POSITIONS AND OFFICES WITH THE COMPANY OWNED AS OF MAY PERCENTAGE OF
NAME AGE AND OTHER PRINCIPAL OCCUPATIONS 2, 1994 (1)(2) CLASS *
- - ------------------------- --- ---------------------------------------------------- --------------- -------------
<S> <C> <C> <C> <C>
Herbert T. Buchwald 63 Principal in the law firm of Herbert T. Buchwald, 10,526 **
P.A. and President and Chairman of the Board of
Directors of BPR Management Corporation
<FN>
- - ------------------------
* The percentage shown includes shares of Common Stock actually owned and
shares of Common Stock which the person had the right to acquire within 60
days of May 2, 1994. In calculating the percentage of ownership, all
shares of Common Stock which the person had the right to acquire within 60
days of May 2, 1994 are deemed to be outstanding for the purpose of
computing the percentage of shares of Common Stock owned by such person
but are not deemed to be outstanding for the purpose of computing the
percentage of shares of Common Stock owned by any other person.
** Represents less than one percent of the outstanding shares of Common
Stock.
(1) Includes, where applicable, shares of Common Stock owned by such person's
minor children and spouse and by other related individuals or entities
over whose shares such person has custody.
(2) Includes the following shares of Common Stock which such persons had the
right to acquire within 60 days of May 2, 1994 by the exercise of stock
options at prices ranging from $.28125 to $6.60 per share: Gilbert
Goldstein 140,000, William B. Kemper 75,000, Steven J. Borick 75,000,
Larry A. Mizel 494,191, Spencer I. Browne 335,205 and David D. Mandarich
605,244.
(3) Includes 5,000 shares held jointly by Mr. Mizel's wife and her brother and
sister, 1,115 shares owned by Mr. Mizel's minor children and 405,314
shares of Common Stock with respect to which Mr. Mizel may be considered
the "beneficial owner," as defined under the Securities Exchange Act of
1934 (the "1934 Act"), because he is a beneficiary of certain trusts which
own all of the outstanding stock of CVentures, Inc., a corporation which
controls the voting of these shares of Common Stock. Mr. Mizel is a
director and officer of CVentures, Inc. Also includes 194,032 shares of
Common Stock owned by certain trusts for the benefit of Mr. Mizel and
certain members of his immediate family, over which shares Mr. Mizel does
not exercise voting control, although he has a limited power of
appointment allowing him to direct the trustee to gift all or a portion of
such shares to any person other than himself, members of his family or a
creditor. Mr. Mizel disclaims beneficial ownership of the 194,032 shares.
</TABLE>
OTHER INFORMATION RELATING TO DIRECTORS
The following is a brief description of the business experience during the
past five years of each member and nominee for the Board of Directors of the
Company.
Steven J. Borick has been the president of Texakota, Inc., an oil and gas
exploration and development company, and a general partner in Texakota Oil
Company, a private oil and gas partnership, for more than the past five years.
He also is a director of Superior Industries International, Inc., a New York
Stock Exchange-listed manufacturer of automobile accessories, and the Company's
100%-owned subsidiary, Richmond Homes, Inc. I (individually or collectively with
its subsidiaries, "Richmond Homes"). For additional information concerning
Richmond Homes and its relationship with the Company, see "Certain Relationships
and Related Transactions" below. Mr. Borick has been a director of the Company
since April 1987 and is a member of the Audit Committee and chairman of the
Compensation Committee.
David D. Mandarich was elected as Executive Vice President -- Real Estate of
the Company in April 1993 and appointed a director of the Company in March 1994.
From April 1989 to April 1993,
2
<PAGE>
Mr. Mandarich served as a consultant to the Company. In April 1990, Mr.
Mandarich was elected as chairman of the board of directors of Richmond Homes.
Mr. Mandarich was the President of the Company from May 1986, the Chief
Operating Officer of the Company from December 1983 and a director of the
Company from September 1980 until his resignation from these positions in April
1989.
Larry A. Mizel has served as Chairman of the Board of Directors of the
Company for more than the past five years. He was elected Chief Executive
Officer of the Company in February 1988. Mr. Mizel served as President of the
Company from April 1989 until December 1989. Mr. Mizel also serves as a director
of Richmond Homes. Prior to February 1992, Mr. Mizel served as a director and/or
officer of some of the Company's other subsidiaries. In addition, Mr. Mizel is
the chairman of the board of directors of OMNIBANCORP, a Denver-based bank
holding company, and its nine wholly-owned subsidiary banks (collectively,
"OMNIBANCORP"). Mr. Mizel also is chairman of the board of directors of Asset
Investors Corporation ("Asset Investors"), a New York Stock Exchange-listed real
estate investment trust, and Commercial Assets, Inc. ("Commercial Assets"), an
American Stock Exchange-listed real estate investment trust. Asset Investors and
Commercial Assets are managed by an indirect, wholly-owned subsidiary of the
Company. Asset Investors generates substantially all of its income through a
portfolio of ownership interests in issuances of residential mortgage loan
securitizations and a 27.5% ownership interest in Commercial Assets. Commercial
Assets generates its income through the ownership and management of a portfolio
of ownership interests in commercial securitizations. For additional information
concerning Asset Investors and Commercial Assets, see "Certain Relationships and
Related Transactions" below. Mr. Mizel has been a director of the Company since
January 1972 and is a member of the Legal Committee.
Gilbert Goldstein has been engaged in private law practice for more than the
past five years. Since 1989, Mr. Goldstein has been the principal in the law
firm of Gilbert Goldstein, P.C. and, prior to that time, he was a member of the
law firm of Goldstein & Armour, P.C. See "Certain Relationships and Related
Transactions" below. Mr. Goldstein has been a director of the Company since
January 1976. Mr. Goldstein also is the chairman of the Legal Committee and is a
member of the Compensation Committee.
William B. Kemper has been engaged in private real estate investments, real
estate development and property management since May 1982. Prior to May 1982, he
was president of Gold Crown, Inc., a real estate development company. Mr. Kemper
serves as a director of OMNIBANCORP and some of its nine wholly-owned subsidiary
banks. Mr. Kemper has been a director of the Company since January 1972. He is
chairman of the Audit Committee and is a member of the Compensation Committee
Spencer I. Browne has served as President of the Company since May 1990 and
as Chief Operating Officer of the Company since December 1989. Mr. Browne served
as Acting President from December 1989 to May 1990, as Executive Vice President
from April 1988 to December 1989, as General Counsel from February 1984 to
December 1989 and as a Senior Vice President from January 1987 to April 1988. He
also serves as an officer and/or director of some of the Company's subsidiaries.
Mr. Browne has served as president and chief executive officer of Asset
Investors since August 1988 and as a director of Asset Investors since September
1988. He served as executive vice president of Asset Investors from August 1987
to July 1988, as secretary from October 1986 to July 1988 and as a vice
president from its inception in October 1986 until August 1987. Mr. Browne has
served as president, chief executive officer and a director of Commercial Assets
since its organization in 1993. He also serves on the boards of directors of
M.D.C. Mortgage Funding Corporation II, a wholly-owned subsidiary of the
Company, Asset Investors Funding Corporation and Asset Investors Mortgage
Funding Corporation, both wholly-owned subsidiaries of Asset Investors, all of
which have a class of securities registered pursuant to Section 12 of the 1934
Act or are subject to the requirements of Section 15(d) of the 1934 Act. Mr.
Browne has been a director of the Company since May 1990 and is a member of the
Legal Committee.
Herbert T. Buchwald has been a principal in the law firm of Herbert T.
Buchwald, P.A. and president and chairman of the board of directors of BPR
Management Corporation, a property
3
<PAGE>
management company located in Denver, Colorado, for more than the past five
years. Mr. Buchwald was appointed to the Company's Board of Directors in March
1994 and is a member of the Audit Committee.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors, the members of which
currently are Messrs. Borick, Buchwald and Kemper and during 1993 consisted of
Messrs. Borick and Kemper, met ten times during 1993. The Audit Committee is
chaired by Mr. Kemper and is responsible for reviewing and approving the scope
of the annual audit undertaken by the Company's independent accountants and
meets with them to review the progress and results of their work as well as
their resulting recommendations. The Audit Committee recommends to the Board of
Directors the appointment of, has direct access to and reviews the fees of the
Company's independent accountants. In connection with the internal accounting
controls of the Company, the Audit Committee reviews internal audit procedures
and reporting systems.
The Director of Internal Audit for the Company reports directly to the Audit
Committee on, among other things, the Company's compliance with certain Company
procedures which are designed to enhance management's consideration of all
aspects of major transactions involving the Company. The Audit Committee has
direct control over staffing and compensation of the internal audit department.
Additionally, the Audit Committee reviews annually a program formulated by
management to monitor compliance with the Company's Corporate Code of Conduct.
On at least a quarterly basis, the Company's Chief Financial Officer reports
directly to the Audit Committee on significant accounting issues.
The Compensation Committee consists currently of Messrs. Goldstein, Kemper
and Borick. During 1993, the Compensation Committee met six times. The
Compensation Committee is chaired by Mr. Borick and is active in approving the
design of executive compensation plans, reviewing salaries, bonuses and other
forms of compensation for officers and key employees of the Company,
establishing salaries, benefits and other forms of compensation for new
employees and in other compensation and personnel areas as the Board of
Directors from time to time may request. For a discussion of the criteria
utilized and factors considered by the Compensation Committee in reviewing and
making recommendations with respect to executive compensation, see "Report of
the Compensation Committee" below.
The Company has no executive or nominating committees. Procedures for
nominating persons for election to the Board of Directors are contained in the
Company's Bylaws.
During 1993, the Board of Directors held 12 regularly scheduled board
meetings and 14 special board meetings (five of which were telephonic). In
addition, the directors considered Company matters and had numerous
communications with the Chairman of the Board of Directors and others wholly
apart from the formal meetings. In 1993, all of the Company's directors attended
at least 75% of the total number of meetings of the Board of Directors and of
the committees of the Board of Directors on which they served.
4
<PAGE>
EXECUTIVE OFFICERS
Set forth below are the names and offices held by the executive officers of
the Company as of May 2, 1994. The executive officers of the Company are elected
annually and hold office until their successors are duly elected and qualified.
Biographical information on Messrs. Mizel, Browne and Mandarich, who serve as
directors and executive officers of the Company, is set forth in "Directors"
above. Biographical information on the other executive officers of the Company
is set forth below.
<TABLE>
<CAPTION>
NAME OFFICES HELD AS OF MAY 2, 1994
- - ------------------------ ---------------------------------------------------------------------------
<S> <C>
Larry A. Mizel Chairman of the Board of Directors and Chief Executive Officer
Spencer I. Browne President, Chief Operating Officer and a Director
David D. Mandarich Executive Vice President -- Real Estate and a Director
Paris G. Reece III A Vice President, Secretary, Treasurer, Chief Financial Officer and
Principal Accounting Officer
John J. Heaney A Vice President
</TABLE>
Paris G. Reece III, 40, was elected as a Vice President of the Company in
August 1988, as Secretary in February 1990, as Chief Financial Officer of the
Company in June 1990 and as Treasurer in September 1993. Mr. Reece also is an
officer of most of the Company's subsidiaries. From November 1977 until August
1988, Mr. Reece was employed by Occidental Petroleum Corporation, a New York
Stock Exchange-listed company headquartered in Los Angeles, California, where he
served in various capacities in the corporate tax department, most recently as
the director of tax planning.
John J. Heaney, 45, was elected as a Vice President of the Company in May
1989 and is responsible for the Company's treasury functions. Mr. Heaney is also
an officer and/or director of some of the Company's subsidiaries. Mr. Heaney
joined Wood Bros. Homes, Inc. ("Wood") in February 1981 as vice president and
treasurer and served in those positions until the Company acquired Wood in
January 1986.
COMPLIANCE WITH SECTION 16(A) OF THE 1934 ACT. The Company's executive
officers and directors are required under Section 16(a) of the 1934 Act to file
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company with the Securities and Exchange
Commission and the New York and Pacific Stock Exchanges. Copies of those reports
also must be furnished to the Company. Based solely upon a review of the copies
of reports furnished to the Company and written representations that no other
reports were required, the Company believes that during the year ended December
31, 1993, except as set forth below, all required reports have been filed. One
report for Mr. Mizel reporting the acquisition of Common Stock in August 1993 by
Mr. Mizel's wife and her sister and brother as joint tenants upon the
termination of a trust of which such joint tenants were beneficiaries was filed
in March 1994. Mr. Mizel may be deemed an indirect beneficial owner of these
shares. Three reports reporting nine transactions by Mr. Kemper were filed late.
All other reports were filed timely.
5
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the Chief
Executive Officer and the four remaining most highly paid executive officers for
the three fiscal years ended December 31, 1993.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SHARES
----------------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (2) OPTIONS (#) COMPENSATION (3)
- - -------------------------------------- --------- ----------- ----------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Larry A. Mizel, 1993 $ 540,000 $ 300,000 $ 100,000 350,000 $ 2,249
Chairman of the Board of Directors 1992 540,000 250,000 N/A 100,000 800
and Chief Executive Officer 1991 540,000 225,000 N/A 100,000 N/A
Spencer I. Browne, 1993 380,000 300,000 N/A 350,000 2,249
President, Chief Operating Officer 1992 290,000 250,000 N/A 100,000 800
and a Director 1991 270,000 225,000 N/A 100,000 N/A
David D. Mandarich, 1993 432,000 300,000 N/A 350,000 3,239
Executive Vice President -- Real 1992 432,000 250,000 N/A 100,000 2,935
Estate (1) and a Director 1991 432,000 225,000 N/A 551,914 N/A
Paris G. Reece III, 1993 155,000 110,000 N/A 0 2,249
a Vice President, Secretary, 1992 140,000 85,000 N/A 0 800
Treasurer, Chief Financial Officer 1991 129,600 65,000 N/A 20,000 N/A
and Principal Accounting Officer
John J. Heaney, 1993 102,000 44,000 N/A 0 2,226
a Vice President 1992 100,000 40,000 N/A 0 800
1991 95,000 35,000 N/A 15,000 N/A
<FN>
- - ------------------------
(1) In 1989, the Company entered into a consulting agreement (the "Consulting
Agreement") with Mr. Mandarich. During the two years ended December 31,
1992 and through March 1993, Mr. Mandarich served as a consultant to the
Company. The Consulting Agreement, with an original expiration date of
December 31, 1991, provided, among other things, for (i) the Company to
pay Mr. Mandarich a fee for such services of $40,000 per month (a rate
equal to his former salary), which subsequently was reduced to $36,000 per
month effective January 1, 1991; (ii) the payment of an annual bonus to
Mr. Mandarich in an amount to be determined by the Company's Board of
Directors; (iii) the grant of a five-year option to purchase 250,000
shares of Common Stock at a price of $2.75 per share; and (iv) a severance
benefit of $480,000 upon the first to occur of the expiration of the
Consulting Agreement or the termination (without cause) of consultancy
services thereunder. In addition, the Consulting Agreement provided for
certain indemnification and death and disability benefits. The Company and
Mr. Mandarich orally agreed to extend the consulting arrangement on the
same terms as set forth in the Consulting Agreement from January 1992
until April 1993, at which time Mr. Mandarich was elected Executive Vice
President -- Real Estate of the Company. The Consulting Agreement,
together with the specific severance arrangement provided therein, was
terminated in connection with this election. Richmond Homes paid $9,000
and $112,500 of Mr. Mandarich's fees and bonus, respectively, in 1991;
$216,000 and $125,000 of his fees and bonus, respectively, in 1992; and
$216,000 and $150,000 of his fees and bonus, respectively, in 1993 for
services rendered to Richmond Homes during these periods.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
(2) Amount represents a reimbursement for estimated additional income taxes to
be incurred by Mr. Mizel in future years in connection with the grant of
certain non-qualified stock options in prior years which were intended to
be granted as incentive stock options.
(3) The amounts disclosed in this column include:
(a) Company contributions under the Company's 401(k) plan on behalf of
each of the named executive officers in the amounts of $2,249 for Messrs.
Mizel, Browne and Reece, $2,226 for Mr. Heaney and $1,259 for Mr.
Mandarich for fiscal 1993; and $800 each for fiscal 1992; and
(b) contributions on behalf of Mr. Mandarich by Richmond Homes pursuant to
its 401(k) plan of $1,980 for fiscal 1993 and $2,135 for fiscal 1992.
</TABLE>
N/A: Disclosure is not applicable under the Securities and Exchange Commission's
rules.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1993 to
the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
---------------------------------- AT ASSUMED ANNUAL RATES OF
SHARES PERCENT OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS GRANTED EMPLOYEES IN FISCAL PRICE EXPIRATION --------------------------
NAME (#)(1) YEAR (2) ($/SH) DATE 5% 10%
- - ------------------------ --------------- --------------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry A. Mizel 333,334 30.0% $ 6.00 11/10/98 $ 552,564 $ 1,221,022
16,666 1.5 6.60 11/10/98 30,390 67,153
Spencer I. Browne 333,334 30.0 6.00 11/10/98 552,564 1,221,022
16,666 1.5 6.00 11/10/99 34,008 77,153
David D. Mandarich 333,334 30.0 6.00 11/10/98 552,564 1,221,022
16,666 1.5 6.00 11/10/99 34,008 77,153
Paris G. Reece III 0 0 N/A N/A N/A N/A
John J. Heaney 0 0 N/A N/A N/A N/A
<FN>
- - ------------------------
(1) (i) Options granted in 1993 are exercisable, as to 100,000 shares of
Common Stock for each named officer who received options, 33 1/3% on July
1, 1994 and cumulatively as to an additional 33 1/3% on each of July 1,
1995 and 1996; and (ii) as to 250,000 shares of Common Stock for each
named officer who received options, 33 1/3% when the Common Stock price
exceeds $9.00 per share for 20 of 30 consecutive business days,
cumulatively as to an additional 33 1/3% when the Common Stock price
exceeds $11.00 per share for 20 of 30 consecutive business days and
cumulatively as to the remaining 33 1/3% when the Common Stock price
exceeds $13.50 per share for 20 of 30 consecutive business days. The
closing price of the Common Stock on the New York Stock Exchange on the
date of grant was $6.00.
(2) The Company granted options representing 1,110,000 shares of Common Stock
to employees in fiscal 1993.
</TABLE>
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1993
by the named executive officers and the value of such officers' unexercised
options at December 31, 1993.
<TABLE>
<CAPTION>
SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR END (1) AT FISCAL YEAR END (1)
ACQUIRED ON VALUE ---------------------- --------------------------
NAME EXERCISE REALIZED EXERCISED UNEXERCISED EXERCISED UNEXERCISED
- - ------------------------ ----------- ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Larry A. Mizel 67,563 $ 398,118 448,361 387,500 $ 2,277,551 $ 134,141
Spencer I. Browne 73,125 427,449 288,125 388,750 1,361,973 141,484
David D. Mandarich 41,250 193,359 571,914 388,750 2,731,252 141,484
Paris G. Reece III 7,500 41,953 32,500 5,000 173,828 25,313
John J. Heaney 21,250 112,891 0 3,750 0 18,984
<FN>
- - ------------------------
(1) The closing price of the Common Stock on December 31, 1993 on the New York
Stock Exchange was $5.875.
</TABLE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE
ACT THAT MIGHT INCORPORATE FUTURE FILINGS, IN WHOLE OR IN PART, THE FOLLOWING
REPORT AND THE PERFORMANCE GRAPHS SHALL NOT BE INCORPORATED BY REFERENCE INTO
ANY SUCH FILING.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") of
the Company is comprised solely of non-employee directors and is responsible for
setting executive compensation policies and determining the compensation paid to
executive officers of the Company.
The Company's executive compensation programs are intended to enable the
Company to attract, retain and reward highly-qualified executives while
maintaining a strong and direct link between executive pay, the Company's
financial performance and total shareowner return. The Committee believes that
officers and certain other key employees should have a significant stake in the
Company's stock price performance under programs which link executive
compensation to shareowner return.
There are three main components of the executive compensation program at the
Company: base salaries, annual bonuses and stock-based long-term incentives. The
Committee believes that the Company has a highly-experienced executive team and
that success in its principal markets has the potential to make the Company a
target for other companies seeking proven executives. Furthermore, the Company's
management philosophy calls for maintaining relatively few middle management
employees in order to speed decision making and to operate more efficiently. As
a result of this philosophy, in recent years, base salaries for the Company's
executive officers have been targeted at or above the average rates paid by
competitors to enable the Company to retain its skilled executives. Nonetheless,
the Committee believes, based upon the studies of a major independent human
resources consulting firm retained by the Committee, that the Company's overall
management costs are lower than other, similarly-sized companies. Base salaries
are reviewed annually and are adjusted based on individual performance, average
salary increases in the industry and the going rate for similar positions at
comparable companies. The Chief Executive Officer received no salary increase
during 1993 or 1992. It should also be noted that Mr. Mandarich earned 50% of
his compensation for 1993 as Chairman of the Board of Richmond Homes.
The Company maintains an annual bonus program under which executive officers
and other key management employees have the opportunity to earn cash bonuses.
The bonus program is intended to motivate and reward officers and other
employees for the attainment of the Company's annual profit and other financial
performance goals, as determined by the Committee. Largely in response to
8
<PAGE>
difficult economic conditions in its principal markets in the late 1980's and
early 1990's as compounded by threatened litigation arising from the failures of
a number of thrift institutions with which the Company had dealings, the Company
engaged in a major restructuring program which was largely completed in 1991.
The Company built on the results of this restructuring in returning the Company
to profitability through a number of major accomplishments in 1992 and 1993,
culminating with the completion of a $218 million private debt offering in
December 1993, which have greatly enhanced the Company's balance sheet and
financial flexibility. In order to meet the Company's objectives during this
period, in addition to the consideration of the Company's actual financial
performance in comparison to its budgeted goals, the Committee has weighed
heavily the executive officers' specific contributions to these accomplishments
as a factor in determining the amount of cash bonuses. With the restructuring
completed and a substantially strengthened operation in place, the Committee
intends to place primary emphasis on key financial measures, primarily operating
income, and the performance of each executive officer in his particular area of
executive responsibility in determining future annual cash bonus amounts for
such executive officers.
In April 1994, the Committee adopted, subject to shareowner approval, the
M.D.C. Holdings, Inc. Executive Officer Performance-Based Compensation Plan for
years beginning in 1995, although the performance-based objectives outlined in
this plan may be utilized as a guide for determining cash bonus amounts for
certain executive officers in 1994. This plan is designed to (i) provide Messrs.
Mizel, Browne and Mandarich, the Company's most senior executives, annual
incentive compensation based on achievement of specific performance objectives
linked to shareowner return; and (ii) meet the requirements for exemption from
limits on the ability of the Company to deduct executive compensation.
It is the Committee's practice periodically to grant stock options to
executive officers and other key management employees. The Committee believes
that stock options serve to link closely management and shareowner interests and
motivate executives to make long-term decisions and investments that will serve
to increase the long-term total return to shareowners. Vesting provisions also
serve to provide long-term incentives to retain key executive officers. Awards
of stock options for executive officers are intended to be consistent with
competitive practice, with the ultimate value received by option holders
directly linked to increases in the Company's stock price. When making grants of
stock options, the Committee also considers financial performance, shareowner
dilution and past grant practices.
CEO COMPENSATION
Mr. Mizel's compensation has been determined according to the principles
described above. Mr. Mizel's salary for 1993 was $540,000 which was the same as
in 1992 and 1991. The Compensation Committee approved a bonus of $300,000 for
Mr. Mizel for 1993, which was based upon the following factors: (i) the fact
that Mr. Mizel has not had a salary increase in six years (his salary was
decreased by $60,000 per year in 1991); (ii) the successful completion of the
Company's private placement of debt and the resulting simplification of the
Company's capital structure; and (iii) the Company's improved financial results
for 1993 relative to both the Company's 1992 financial results and projections
in its 1993 business plan. The Compensation Committee also granted options to
acquire 350,000 shares of the Company's Common Stock to Mr. Mizel in 1993. This
grant was made pursuant to the Compensation Committee's objectives to increase
the link between management's incentives and shareowner value. All options were
granted at exercise prices at or above the fair market value of the Common Stock
on the date of grant.
COMPENSATION COMMITTEE
Steven J. Borick, Chairman
Gilbert Goldstein
William B. Kemper
9
<PAGE>
PERFORMANCE GRAPHS
Set forth below is a graph comparing the yearly change in the cumulative
total return of the Common Stock with the cumulative total return of the
Standard & Poor's 500 Stock Index and with that of a peer group over the
five-year period ending on December 31, 1993. During 1988, the Company initiated
a major restructuring of its operations which was largely completed in 1991. To
reflect the results of these restructuring efforts, a second graph has been
provided which compares the yearly change in the cumulative total return of the
Common Stock with the cumulative total return of the Standard & Poor's 500 Stock
Index and with that of the peer group for the three years following December 31,
1990. It is assumed in the graphs that $100 was invested (i) in the Common
Stock; (ii) in the stock of the companies in the Standard & Poor's 500 Index;
and (iii) in the stocks of the peer group companies just prior to the
commencement of the period (December 31, 1988 in the first graph and December
31, 1990 in the second graph) and that all dividends received within a quarter
were reinvested in that quarter. The peer group index is composed of the
following peer companies: Centex Corporation, PHM Corporation, U.S. Home
Corporation, Standard Pacific Corp., The Ryland Group, Inc., Toll Brothers,
Inc., Kaufman and Broad Home Corporation, J.M. Peters Company, Inc., Lennar
Corporation and UDC Homes Inc.
Note: The stock price performance shown on the following graphs is not
necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN OF MDC COMMON STOCK,
THE S&P 500 INDEX AND A SELECTED PEER GROUP
FIVE YEARS
<TABLE>
<CAPTION>
JAN. 1, 1989 DEC. 31, 1989 DEC. 31, 1990 DEC. 31, 1991 DEC. 31, 1992 DEC. 31, 1993
--------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
S&P 100 132 128 166 179 197
Peer Group 100 106 67 139 161 210
MDC 100 50 9 68 150 214
</TABLE>
10
<PAGE>
THREE YEARS
<TABLE>
<CAPTION>
JAN. 1, 1991 DEC. 31, 1991 DEC. 31, 1992 DEC. 31, 1993
--------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
S&P 100 130 140 155
Peer Group 100 200 229 316
MDC 100 750 1,650 2,350
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors is comprised
of the following non-employee directors: Steven J. Borick (chairman), Gilbert
Goldstein and William B. Kemper. During fiscal 1993, Gilbert Goldstein, P.C., of
which Mr. Goldstein is the sole shareholder, performed services for the Company
in the ordinary course of business for which it received compensation from the
Company. For a discussion of the services provided and the compensation
received, see "Certain Relationships and Related Transactions" below.
DIRECTOR COMPENSATION
Each director who is not an officer of the Company is paid $3,000 per month
and $750 for each Board of Directors meeting and each meeting of the Audit and
Compensation Committees and is reimbursed for expenses related to his attendance
at Board of Directors and committee meetings. Mr. Borick received fees of $750
per month and a lump sum payment of $10,000 from Richmond Homes for services as
a Richmond Homes director and $750 for services rendered during the year on
Richmond Homes' compensation committee. The $750 monthly fee Mr. Borick receives
for serving as a Richmond Homes director was increased to $1,500 per month
commencing January 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth those persons known by the Company to have owned
beneficially 5% or more of the outstanding shares of Common Stock individually
and the number of shares beneficially owned by the Company's named officers
individually and by all of the Company's officers and directors as a group, each
as of May 2, 1994. The information as to beneficial ownership is based upon
statements furnished to the Company by such persons. Information with respect to
the beneficial
11
<PAGE>
ownership of shares of Common Stock held by each of the directors of the
Company, one of whom beneficially owns more than 5% of the outstanding shares of
Common Stock, is set forth in "Directors" above.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
OWNED PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIALLY CLASS (2)
- - -------------------------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
Manufacturers Life Insurance Company ........................................... 1,866,666(3) 9.8%
200 Bloor Street East
Toronto, Ontario, CANADA M4W 1E5
Paris G. Reece III ............................................................. 45,000(4) *
3600 South Yosemite St., #900
Denver, Colorado 80237
John J. Heaney ................................................................. 39,946(4) *
3600 South Yosemite St., #900
Denver, Colorado 80237
All officers and directors as a group
(9 persons).................................................................... 6,660,562 32.0%
<FN>
- - ------------------------
* Less than 1%.
(1) The address of Mr. Mizel, the director who beneficially owns more than 5%
of the outstanding shares of Common Stock (see "Directors" above), is 3600
South Yosemite Street, #900, Denver, Colorado 80237.
(2) In calculating the percentage of ownership, all shares of Common Stock
which the identified person or group had the right to acquire within 60
days of May 2, 1994, by the exercise of options and warrants, are deemed
to be outstanding for the purpose of computing the percentage of the
shares of Common Stock owned by such person or group but are not deemed to
be outstanding for the purpose of computing the percentage of the shares
of Common Stock owned by any other person.
(3) Based upon information in a Schedule 13G filed with the Commission on
February 14, 1989, Manufacturers Life Insurance Company exercises sole
voting and dispositive power over all such shares.
(4) Includes the following shares of Common Stock which such persons had the
right to acquire within 60 days of May 2, 1994 by the exercise of stock
options ranging in prices from $.28125 to $.8125 per share: Mr. Reece
37,500 and Mr. Heaney 3,750.
</TABLE>
No change in control of the Company has occurred since the beginning of the
last fiscal year. The Company knows of no arrangement the operation of which
may, at a subsequent date, result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The principal offices of the Company are located in approximately 69,900
square feet in a building owned by the Company. OMNIBANCORP, of which certain
officers and/or directors of the Company are officers, directors and/or
shareowners (including Larry A. Mizel, who is the Chairman of the Board and the
largest shareholder of both the Company and OMNIBANCORP), is a tenant of the
building. OMNIBANCORP leases approximately 16,200 square feet in the building
for which it paid rent, including for parking, of approximately $236,500,
including retroactive rent adjustments, in 1993. The lease, which expires on May
31, 1995, provides OMNIBANCORP with the right to renew the lease for up to 18
successive five-year periods at the lower of the current lease rate or a "market
value rental rate" (as defined in the lease). Approximately 5,300 square feet in
the building is leased by various affiliates of Mr. Mizel for which they
collectively paid rent, including for parking, of approximately $22,500 in 1993.
12
<PAGE>
The Company and certain of its subsidiaries maintain accounts in Omnibank
Southeast, which is located in the same building as the Company. During 1993,
Messrs. Mizel and Kemper were officers and/or directors and shareholders, and
Messrs. Browne and Goldstein were shareholders, of OMNIBANCORP, the holding
company which owns Omnibank Southeast.
The Company provides a self-funded contributory medical plan (the "Medical
Plan") for its eligible employees through Pacific Mutual Insurance Company
("Pacific Mutual"). The Company also permits participation in the Medical Plan
by Mr. Kemper. Prior to April 1, 1993, several employees (such employees are
herein referred to as "Affiliate Participants") of two entities affiliated with
Mr. Mizel (Woodhaven Management Company Limited Liability Company, which is 90%
owned by LaM Financial Holdings, Ltd., a limited partnership in which CVentures,
Inc. is the general partner, and CVentures, Inc.) also participated in the
Medical Plan. Under the Medical Plan's funding arrangement, the Company makes
payments to a trust in order to provide funds for the future payments of medical
claims. Funds are transferred weekly by the trust to reimburse Pacific Mutual
for the amount of claims paid. The Company maintains reinsurance up to an annual
stop loss limit of $100,000 on any one participant's claims and an annual
aggregate stop loss limit of 125% of the total expected claims for the Medical
Plan. Covered employees share the required Medical Plan premium costs with the
Company through semi-monthly payroll deductions, whereas Mr. Kemper contributes
(and, prior to April 1, 1993, the Affiliate Participants contributed) 100% of
the required premiums. Premiums paid by the Affiliate Participants and Mr.
Kemper for the Medical Plan's fiscal year ended February 28, 1994 exceeded
medical claims paid by the Company on behalf of such Affiliate Participants and
Mr. Kemper.
During 1993, the Company and Richmond Homes paid Premier Building Group,
Inc. ("Premier"), a company in which Mr. Mandarich's brother-in-law is an owner
and the vice president, approximately $11,557,000 for plumbing, door and
millwork services.
Effective January 1, 1992, the Company entered into a one-year agreement
(which is automatically renewed for successive one-year periods, unless
terminated by either party prior to the end of any annual term and remains in
effect) with Gilbert Goldstein, P.C., of which Gilbert Goldstein, a director of
the Company, is the sole shareholder. Under the terms of the agreement, Mr.
Goldstein acts as a consultant to the Company on legal matters and, in return,
the Company (i) pays Mr. Goldstein's firm $7,500 per month for a minimum of 80
hours per month in legal services; (ii) pays Mr. Goldstein's firm $150 per hour
for services performed in excess of 80 hours in any month; (iii) provides office
space with an estimated annual rental value of $15,600 in the Company's office
building at 3600 South Yosemite Street; and (iv) provides one full-time
secretary (in 1993, this secretary received an annual salary of $27,000 plus
benefits). Payment of $90,000 was made directly to Mr. Goldstein's firm in 1993
in connection with this agreement.
During 1993, the Company and Richmond Homes paid to PageWorks + Tri Design
("PageWorks"), a marketing and communications firm, approximately $246,000 for
advertising and marketing design services. PageWorks is owned by the
brother-in-law of Mr. Mizel.
HomeAmerican has made loans to certain officers and employees of the Company
in the ordinary course of its business. Such loans were made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and did not involve more
than the normal risk of collectibility or present other unfavorable features.
ASSET INVESTORS CORPORATION
Financial Asset Management Corporation ("Asset Management") is an indirect,
wholly-owned subsidiary of the Company formed to provide advisory and management
services to Asset Investors. Asset Management has entered into a management
agreement (the "Management Agreement") with Asset Investors, which was amended
and renewed as of January 1, 1994. Pursuant to the Management Agreement, Asset
Management advises Asset Investors on various facets of its business and manages
its day-to-day operations, subject to the supervision of Asset Investors' board
of directors. As of May 2, 1994, three of the five directors of Asset Investors
were Independent Directors (as defined in Asset Investors' Bylaws). Asset
Management receives compensation, based in large part on the performance
13
<PAGE>
of Asset Investors, for its management services. During 1993, Asset Management
earned management and CMO administration fees of $592,000 and $1,582,000,
respectively. Larry A. Mizel, chairman of the board of directors of the Company
and Asset Investors, and Spencer I. Browne, president and a director of the
Company and president, chief executive officer and a director of Asset
Investors, are the beneficial owners of 1.28% and 1.30%, respectively, of the
outstanding common stock of Asset Investors. In addition, the Company is the
beneficial owner of approximately 1.1% of the outstanding shares of common stock
of Asset Investors.
COMMERCIAL ASSETS, INC.
In August 1993, Asset Investors formed Commercial Assets to acquire and
manage a portfolio of ownership interests in commercial securitizations. As of
May 2, 1994, three of the five directors of Commercial Assets were Independent
Directors (as defined in Commercial Assets' Bylaws). In October 1993, Asset
Investors distributed approximately 70% of the shares of Commercial Assets to
the Asset Investors shareowners as a dividend. Asset Investors owns
approximately 27.5% of the common stock of Commercial Assets. The Company
currently owns approximately 0.8% of Commercial Assets' outstanding common
stock. Asset Management has entered into a management agreement with Commercial
Assets. Pursuant to the Commercial Assets management agreement, Asset Management
receives an incentive fee, which is based on the performance of Commercial
Assets, administration fees and fees for other management services. The
incentive fee is based on Commercial Assets' income as determined under
applicable provisions of the Internal Revenue Code. Asset Management earned
$5,000 in fees from Commercial Assets through December 31, 1993. Mr. Mizel, the
chairman of the board of directors, and Mr. Browne, president, chief executive
officer and a director of Commercial Assets, are beneficial owners of 1.9% and
1.5%, respectively, of the outstanding common stock of Commercial Assets.
RICHMOND HOMES
In December 1989, the Company sold most of the real estate and related
assets used in its Colorado home building and land development operations and
certain other assets to Richmond Homes for notes and preferred and common stock.
Pursuant to agreements entered into between the Company and Richmond Homes at
that time, Richmond Homes also was required to purchase certain additional
property (the "Additional Property") from the Company. During 1993, $3,267,000
of Additional Property was purchased for $2,905,000 in notes and $362,000 in
cash. At December 31, 1993, Richmond Homes had $142,781,000 principal amount of
notes payable (including the RAHC Loan which is discussed below) outstanding to
the Company at interest rates, excluding contingent interest (which generally
accrues based on $1,500 per home closed up to 1,500 homes per year and $1,750
for each home closed in excess of 1,500 homes, not to exceed an interest rate of
12% per annum), ranging from 0% to prime plus 2.5% and maturity dates ranging
from January 1994 through December 2000. The notes are secured by common stock,
mortgages on property and other assets of Richmond Homes which had an
approximate book value of $127,000,000 at December 31, 1993.
On February 2, 1994, the Company acquired 35% of the outstanding shares of
Richmond Homes common stock (the only remaining shares of Richmond Homes not
then owned by the Company) from Messrs. Mizel and Mandarich. Messrs. Mizel and
Mandarich had purchased the shares in December 1989. In exchange for their
shares of Richmond Homes, Messrs. Mizel and Mandarich received an aggregate of
608,695 shares of MDC Common Stock based upon a purchase price determined by an
appraisal. The Company now owns 100% of Richmond Homes. As of May 2, 1994,
Messrs. Mizel and Mandarich owed $559,920 and $280,080, respectively, to the
Company under unsecured promissory notes (which bear interest at 8%, payable
annually in December, and which mature in December 1999) which were issued to
the Company in February 1994 in exchange for an aggregate of $840,000 in notes
held by the Company which were executed by Messrs. Mizel and Mandarich in
connection with their 1989 purchase from the Company of the Richmond Homes
shares. The Company recognized interest income of $67,000 on the exchanged notes
in 1993.
Richmond Homes and the Company entered into various other agreements,
including agreements which outline the terms under which certain accrued and
contingent liabilities and future
14
<PAGE>
performance obligations with respect to the assets sold to Richmond Homes would
be shared between Richmond Homes and the Company. In addition, under written
arrangements for 1993, (i) the Company provided data processing services and
supplies to Richmond Homes, for which it charged Richmond Homes $162,000; (ii)
the Company provided certain administrative services (principally tax and legal
services) to Richmond Homes, for which it charged Richmond Homes $138,000; and
(iii) Richmond Homes provided certain construction management, warranty and
other services to the Company, for which it charged the Company $41,000. These
agreements were cancelled in February 1994 when Richmond Homes became a
wholly-owned subsidiary. The Company also leased certain space in its building
to Richmond Homes for rent of $24,000 in 1993.
The Company has issued a $100,000 letter of credit to an insurance company
to facilitate Richmond Homes' participation in the Company's home buyers'
structural warranty program. The Company and Richmond Homes also entered into a
separate agreement whereby Richmond Homes reimburses the Company for all costs
associated with Richmond Homes' participation in this warranty program. Richmond
Homes granted the Company a secured interest in real estate as collateral for
the $100,000 letter of credit.
In November 1992, Richmond Homes and M.D.C. Development and Pipeline
Company, a wholly-owned subsidiary of the Company (formerly named Richmond
American Homes of Colorado, Inc., "RAHC"), entered into a Loan Agreement (the
"RAHC Loan") pursuant to which RAHC loaned Richmond Homes the original principal
amount of $22,500,000. The RAHC Loan provides for monthly payments of interest
at a rate of 2.5% per annum over the prime rate (8.5% at December 31, 1993) and
payments of principal in quarterly installments, which commenced November 1,
1993, of $1,000,000. The RAHC Loan also provides for certain payments of
contingent interest to RAHC from the sale of the property which was developed
with the proceeds of the RAHC Loan. A commitment fee of $1,125,000, payable in
annual installments of $225,000 beginning in November 1992, was required with
respect to the RAHC Loan. The RAHC Loan is partially secured by junior liens on
certain of Richmond Homes' properties and the stock of Richmond Homes
Investments, Inc. IV ("Richmond Homes Investments"), a wholly-owned investment
subsidiary of Richmond Homes. The proceeds of the RAHC Loan were used as
follows: (i) $15,000,000 was disbursed to pay in full a $15,000,000 promissory
note executed by Richmond Homes to RAHC in connection with the 1989
restructuring; (ii) $5,512,000 was used to pay off the $6,000,000 line of credit
from the Company to Richmond Homes; and (iii) the remaining $1,988,000 was used
for certain development costs for Colorado home building projects. The RAHC Loan
is not a revolving line of credit and is due on December 31, 1997.
In November 1992, M.D.C. Land Corporation, a wholly-owned subsidiary of the
Company, granted to Richmond Homes rolling options to purchase 179 developed
lots in the Piney Creek development in Arapahoe County, Colorado, for which
Richmond Homes paid option deposits totalling $100,000. In May 1993, 120 lots in
a Piney Creek development were added to the rolling options. The terms of the
options required, upon purchase, initial payments ranging from $18,000 to
$50,000 per lot, with an average of approximately $27,000 per lot. As of
December 31, 1993, 76 lots had been purchased under these options for payments
totalling $1,906,000. The option agreements were cancelled in February 1994 when
Richmond Homes became a wholly-owned subsidiary.
In addition, in November 1992, Richmond Homes Investments granted the
Company an option to acquire up to $14,600,000 principal amount of the Company's
senior subordinated notes due in 1996 (the "MDC 1996 Notes"), which are owned by
Richmond Homes Investments, at a price equal to 83% of the principal amount of
such MDC 1996 Notes. The Company paid $110,000 to acquire the option. In
December 1993, the Company terminated the option and exchanged with Richmond
Homes Investments the MDC 1996 Notes for a 12.375% $14,600,000 principal amount
note due December 2004. No gain or loss was recorded in the exchange.
During 1993, subsidiaries of the Company sold to Richmond Homes water and
sewer taps for approximately $699,000 and land for approximately $190,000.
The Company guarantees certain bank indebtedness of Richmond Homes, which
bank indebtedness had an outstanding principal balance of approximately
$17,702,000 at December 31, 1993.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) 1. FINANCIAL STATEMENTS.
The following consolidated financial statements of the Company and its
subsidiaries are included in Part II, Item 8:
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
M.D.C. Holdings, Inc. and Subsidiaries
Report of Independent Accountants....................................................................... F-2
Consolidated Balance Sheets as of December 31, 1993 and 1992............................................ F-3
Consolidated Statements of Income for the three years ended December 31, 1993........................... F-5
Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1993............. F-6
Consolidated Statements of Cash Flows for the three years ended December 31, 1993....................... F-7
Notes to Consolidated Financial Statements.............................................................. F-9
</TABLE>
(A) 2. FINANCIAL STATEMENT SCHEDULES.
The following financial statement schedules of the Company and its
subsidiaries are included in Part II, Item 8:
<TABLE>
<S> <C>
M.D.C. Holdings, Inc. and Subsidiaries
Schedule II -- Amounts Receivable From Related Parties and Underwriters, Promoters
and Employees Other Than Related Parties.......................................... F-39
Schedule VIII -- Valuation and Other Qualifying Accounts........................... F-40
Schedule IX -- Short-Term Borrowings............................................... F-41
Schedule XII -- Mortgage Loans..................................................... F-42
</TABLE>
Except for the schedules set forth above, all other schedules are omitted
because they are not applicable, not material, not required or the required
information is included in the applicable financial statements or notes thereto.
Financial statements for certain unconsolidated partnerships and joint
ventures owned 50% or less by the Company or its subsidiaries, which are
accounted for on the equity method, have been omitted because they do not,
individually, or in the aggregate, constitute a significant subsidiary.
(A) 3. EXHIBITS.
<TABLE>
<C> <S>
3.1(a) Form of Amendment to the Certificate of Incorporation of M.D.C. Holdings, Inc.
(hereinafter sometimes referred to as "MDC", the "Company" or the
"Registrant") regarding director liability, filed with the Delaware Secretary
of State on July 1, 1987 (incorporated by reference to Exhibit 3.1(a) of the
Company's Quarterly Report on Form 10-Q dated June 30, 1987).*
3.1(b) Form of Certificate of Incorporation of MDC, as amended (incorporated herein
by reference to Exhibit 3.1(b) of the Company's Quarterly Report on Form 10-Q
dated June 30, 1987).*
3.2(a) Form of Amendment to the Bylaws of MDC regarding indemnification adopted by
its Board of Directors and effective as of March 20, 1987 (incorporated herein
by reference to Exhibit 3.2(a) of the Company's Quarterly Report on Form 10-Q
dated June 30, 1987).*
3.2(b) Form of Bylaws of MDC, as amended (incorporated herein by reference to Exhibit
3.2(b) of the Company's Quarterly Report on Form 10-Q dated June 30, 1987).*
</TABLE>
16
<PAGE>
<TABLE>
<C> <S>
4.1 Form of Certificate for shares of the Company's common stock (incorporated
herein by reference to Exhibit 4.1 of the Company's Registration Statement on
Form S-3, Registration No. 33-426).*
4.2(a) Form of Indenture, dated as of June 15, 1984, between the Company and The
Royal Bank and Trust Company, with respect to the Company's Subordinated
Exchangeable Variable Rate Notes (the "1984 RBTC Indenture") (incorporated
herein by reference to Exhibit 4.3 of the Company's Registration Statement on
Form S-2, Registration No. 2-90744).*
4.2(b) First Supplemental Indenture, dated as of June 20, 1985, to the 1984 RBTC
Indenture (incorporated herein by reference to Exhibit 4.13(a) of the
Company's Registration Statement on Form S-3, Registration No. 33-426).*
4.2(c) Form of the Company's Subordinated Exchangeable Variable Rate Notes (filed as
Exhibits A and B to Exhibit 4.13 and incorporated herein by reference to
Exhibit 4.3 of the Company's Registration Statement on Form S-2, Registration
No. 2-90744).*
4.3 Note Purchase Agreement, dated as of December 13, 1985, among the Company,
Yosemite Financial, Inc., a Colorado corporation and a wholly-owned subsidiary
of the Company, and City Investing Company Liquidating Trust, including
exhibits (incorporated herein by reference to Exhibit 4.26 of the Company's
Registration Statement on Form S-2, Registration No. 33-2734).*
4.4(a) Form of Senior Notes Indenture, dated as of December 15, 1993, by and among
the Company, the Guarantors and Pledgors named therein and First Bank National
Association, a National Association, as Trustee, with respect to the Company's
11 1/8% Senior Notes due 2003, including form of Senior Note (the "Senior
Notes Indenture") (incorporated herein by reference to Exhibit 4.1 of the
Company's Form 8-K dated January 11, 1994).*
4.4(b) First Supplemental Indenture, dated as of February 2, 1994, to the Senior
Notes Indenture.**
4.5 Form of Convertible Notes Indenture, dated as of December 15, 1993, by and
between the Company and First Bank National Association, a National
Association, as Trustee, with respect to the Company's 8 3/4% Convertible
Subordinated Notes due 2005, including form of Convertible Note (incorporated
herein by reference to Exhibit 4.2 of the Company's Form 8-K dated January 11,
1994).*
4.6 Form of Senior Notes Registration Rights Agreement, dated as of December 28,
1993, by and among the Company, the Guarantors named therein and the
Purchasers who are signatories thereto, with respect to the Company's Senior
Notes (incorporated herein by reference to Exhibit 4.3 of the Company's Form
8-K dated January 11, 1994).*
4.7 Form of Convertible Notes Registration Rights Agreement, dated as of December
28, 1993, by and between the Company and the Purchasers who are signatories
thereto, with respect to the Company's Convertible Subordinated Notes
(incorporated herein by reference to Exhibit 4.4 of the Company's Form 8-K
dated January 11, 1994).*
10.1(a) The Company's 1983 Incentive Stock Option Plan (incorporated herein by
reference to Exhibit 10.4 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1982).*
10.1(b) 1987 Amendments to the Incentive Stock Option Plan of MDC (incorporated herein
by reference to Exhibit 10.1(a) of the Company's Annual Report on Form 10-K
for the year ended December 31, 1986).*
</TABLE>
17
<PAGE>
<TABLE>
<C> <S>
10.1(c) 1988 Amendment to the 1983 Incentive Stock Option Plan of MDC (incorporated
herein by reference to Exhibit 19.3(a) of the Company's Quarterly Report on
Form 10-Q dated June 30, 1988).*
10.2(a) The Company's 1983 Non-Qualified Stock Option Plan (incorporated herein by
reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1983).*
10.2(b) 1988 Amendment to the 1983 Non-Qualified Stock Option Plan of MDC
(incorporated herein by reference to Exhibit 10.2(b) of the Company's
Quarterly Report on Form 10-Q dated June 30, 1988).*
10.3 The Company's Employee Equity Incentive Plan (incorporated herein by reference
to Exhibit A of the Company's Proxy Statement dated May 14, 1993 relating to
the 1993 Annual Meeting of Stockholders).*
10.4 The Company's Director Equity Incentive Plan (incorporated herein by reference
to Exhibit B of the Company's Proxy Statement dated May 14, 1993 relating to
the 1993 Annual Meeting of Stockholders).*
10.5(a) Amended Management Agreement between Asset Investors Corporation ("AIC") and
Financial Asset Management Corporation ("FAMC") dated as of January 1, 1990
(incorporated herein by reference to Exhibit 10.8(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1989).*
10.5(b) Amended Management Agreement between AIC and FAMC dated as of January 1, 1991
(incorporated herein by reference to Exhibit 19 of the Company's Quarterly
Report on Form 10-Q dated June 30, 1991).*
10.5(c) Amended Management Agreement between AIC and FAMC dated as of January 1, 1992
(incorporated herein by reference to Exhibit 10.3(c) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1991).*
10.6 CMO Participation Agreement among the Company, M.D.C. Asset Investors, Inc.
and Yosemite Financial, Inc. (incorporated herein by reference to Exhibit 10.6
of M.D.C. Asset Investors, Inc.'s Registration Statement on Form S-11,
Registration No. 33-9557).*
10.7(a) Form of Indemnity Agreement entered into between the Registrant and each
member of its Board of Directors as of March 20, 1987 (incorporated herein by
reference to Exhibit 19.1 of the Company's Quarterly Report on Form 10-Q dated
June 30, 1987).*
10.7(b) Form of Indemnity Agreement entered into between the Registrant and certain
officers of the Registrant on various dates during 1988 and early 1989
(incorporated herein by reference to Exhibit 10.18(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1988).*
10.7(c) Form of Indemnity Agreement entered into between the Registrant and John J.
Heaney dated as of May 12, 1989 (incorporated herein by reference to Exhibit
10.17 to the Company's Annual Report on Form 10-K for the year ended December
31, 1990).*
10.7(d) Form of Agreement, relating to the advancement of expenses and
indemnification, entered into between the Registrant and each of its current
and former officers and directors named in certain securities litigation
(incorporated herein by reference to Exhibit 10.18(c) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1988).*
</TABLE>
18
<PAGE>
<TABLE>
<C> <S>
10.8(a) Secured Promissory Note between Richmond American Homes of Colorado, Inc. II
(now Richmond Homes, Inc. I; "Richmond Homes") and the Company, M.D.C. Land
Corporation ("Land"), Richmond Homes Limited ("Limited"), Richmond American
Homes of Colorado, Inc. ("Rocky I"), Richmond American Homes of Texas, Inc.
("Texas") and Yosemite Financial, Inc. ("Yosemite") dated December 28, 1989,
in the amount of $121,105,234 (incorporated herein by reference to Exhibit 1
of the Company's Form 8-K dated December 28, 1989).*
10.8(b) Colorado Mortgage and Security Agreement made as of the 28th day of December,
1989, by and among Richmond Homes and the Company, Land, Limited, Rocky I,
Texas and Yosemite (incorporated herein by reference to Exhibit 2 of the
Company's Form 8-K dated December 28, 1989).*
10.8(c) Indemnification Agreement by and among the Company and Larry A. Mizel
("Mizel") and David D. Mandarich ("Mandarich") dated December 21, 1989
(incorporated herein by reference to Exhibit 9 of the Company's Form 8-K dated
December 28, 1989).*
10.8(d) Letter Agreement among Land and Mizel and Mandarich dated December 27, 1989
(incorporated herein by reference to Exhibit 11 of the Company's Form 8-K
dated December 28, 1989).*
10.9 Promissory Note in the amount of $559,920 from Mizel to the Company dated
February 2, 1994.**
10.10 Promissory Note in the amount of $280,080 from Mandarich to the Company dated
February 2, 1994.**
10.11 Fifth Amendment to Piney Creek Development Co. Joint Venture Agreement dated
June 13, 1991 by and between Commercial Federal Bank and Land (incorporated
herein by reference to Exhibit 10.25 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991).*
10.12 Letter Agreement dated September 17, 1991 by and between Gilbert Goldstein,
P.C. and the Company (incorporated herein by reference to Exhibit 10.26 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1991).*
10.13(a) Loan Agreement dated November 30, 1992 between Rocky I and Richmond Homes
(incorporated herein by reference to Exhibit 10.27(a) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992).*
10.13(b) Amended and Restated Promissory Note dated November 30, 1992 between Richmond
Homes and Rocky I for $22,500,000 (incorporated herein by reference to Exhibit
10.27(b) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992).*
10.13(c) Pledge Agreement dated November 30, 1992 between Richmond Homes and Rocky I
(incorporated herein by reference to Exhibit 10.27(c) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992).*
10.14(a) MDC 401(k) Savings Plan (incorporated herein by reference to Exhibit 10.31(a)
to the Company's Annual Report on Form 10-K for the year ended December 31,
1992).*
10.14(b) Richmond Homes 401(k) Savings Plan (incorporated herein by reference to
Exhibit 10.31(b) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).*
10.15(a) Purchase Agreement dated as of December 6, 1993 by and between the Company and
the Base Assets Trust (incorporated herein by reference to Exhibit (c)(2) of
the Company's Form 8-K dated December 6, 1993).*
</TABLE>
19
<PAGE>
<TABLE>
<C> <S>
10.15(b) Amendment to Purchase Agreement dated as of December 10, 1993 by and between
the Company and the Base Assets Trust (incorporated herein by reference to
Exhibit (c)(3) of the Company's Form 8-K dated December 6, 1993).*
10.16(a) Option Agreement dated as of December 6, 1993 by and among the Company and
Mizel and Mandarich (incorporated herein by reference to Exhibit (c)(4) of the
Company's Form 8-K dated December 6, 1993).*
10.16(b) First Amendment to Option Agreement dated December 20, 1993 by and among the
Company and Mizel and Mandarich.**
21 Subsidiaries of the Company.**
23 Consent of Price Waterhouse.
99 Agreement and Plan of Merger dated February 2, 1994 between Richmond
Acquisitions, Inc. and Richmond Homes.**
<FN>
- - ------------------------
*Incorporated herein by reference.
**Previously filed with original 1993 Form 10-K.
</TABLE>
(B) REPORTS ON FORM 8-K.
On December 6, 1993, a Form 8-K was filed for certain Item 5 events
thereunder.
On January 11, 1994, a Form 8-K was filed for certain Item 5 events
thereunder.
On March 28, 1994, a Form 8-K was filed for certain Item 5 events
thereunder.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to its Form
10-K to be signed on this 2nd day of May, 1994 on its behalf by the undersigned,
thereunto duly authorized.
M.D.C. HOLDINGS, INC.
(Registrant)
By: /s/ PARIS G. REECE III
--------------------------------------
Paris G. Reece III
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND PRINCIPAL ACCOUNTING
OFFICER
21
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (no. 2-96464)
of M.D.C. Holdings, Inc. of our report dated February 10, 1994 appearing
on page F-2 of this Form 10-K.
/s/ Price Waterhouse
- - --------------------
PRICE WATERHOUSE
Los Angeles, California
April 29, 1994
