================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 1-8951
M.D.C. HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 84-0622967
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
3600 South Yosemite Street, Suite 900 80237
Denver, Colorado (Zip code)
(Address of principal executive offices)
(303) 773-1100
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of May 3, 1999, 22,274,000 shares of M.D.C. Holdings, Inc.
common stock were outstanding.
================================================================================
<PAGE>
M.D.C. HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
Page
No.
----
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Balance Sheets as of March 31, 1999 (Unaudited)
and December 31, 1998......................... 1
Statements of Income (Loss) (Unaudited) for the
three months ended March 31, 1999 and 1998.... 3
Statements of Cash Flows (Unaudited) for the
three months ended March 31, 1999 and 1998.... 4
Notes to Condensed Consolidated Financial
Statements (Unaudited)........................ 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 8
Part II. Other Information
Item 1. Legal Proceedings.............................. 17
Item 4. Submission of Matters to a Vote of Shareowners. 17
Item 5. Other Information.............................. 17
Item 6. Exhibits and Reports on Form 8-K............... 17
<PAGE>
M.D.C. HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
ASSETS (Unaudited)
<S> <C> <C>
Corporate
Cash and cash equivalents................... $ 2,591 $ 2,460
Property and equipment, net................. 2,693 2,901
Deferred income taxes....................... 17,078 17,949
Deferred debt issue costs, net.............. 2,542 2,589
Other assets, net........................... 6,135 5,670
---------- -----------
31,039 31,569
Homebuilding
Cash and cash equivalents................... 7,505 7,279
Home sales and other accounts receivable.... 15,136 12,771
Inventories, net
Housing completed or under construction... 336,431 294,104
Land and land under development........... 239,036 217,180
Prepaid expenses and other assets, net...... 57,765 58,981
---------- -----------
655,873 590,315
Financial Services
Cash and cash equivalents................... 404 340
Mortgage loans held in inventory, net....... 68,718 84,548
Other assets, net........................... 6,232 7,241
---------- -----------
75,354 92,129
Total Assets.......................... $ 762,266 $ 714,013
========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
-1-
<PAGE>
M.D.C. HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
LIABILITIES (Unaudited)
<S> <C> <C>
Corporate
Accounts payable and accrued expenses........ $ 26,441 $ 32,378
Income taxes payable......................... 16,691 14,568
Senior notes, net............................ 174,351 174,339
----------- -----------
217,483 221,285
Homebuilding
Accounts payable and accrued expenses........ 137,438 131,374
Line of credit............................... 43,000 21,871
Notes payable................................ 1,176 866
----------- -----------
181,614 154,111
Financial Services
Accounts payable and accrued expenses........ 14,301 12,152
Line of credit............................... 32,832 28,334
----------- -----------
47,133 40,486
Total Liabilities...................... 446,230 415,882
----------- -----------
COMMITMENTS AND CONTINGENCIES................... - - - -
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 25,000,000
shares authorized; none issued............. - - - -
Common stock, $.01 par value; 100,000,000
shares authorized; 28,123,000 and
27,858,000 shares issued, respectively,
at March 31, 1999 and December 31, 1998.... 281 279
Additional paid-in capital................... 179,047 175,160
Retained earnings............................ 172,939 160,291
Accumulated comprehensive income............. 2,980 1,785
----------- -----------
355,247 337,515
Less treasury stock, at cost; 5,850,000 and
5,876,000 shares, respectively,
at March 31, 1999 and December 31, 1998.... (39,211) (39,384)
----------- -----------
Total Stockholders' Equity............. 316,036 298,131
----------- -----------
Total Liabilities and Stockholders'
Equity............................... $ 762,266 $ 714,013
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
-2-
<PAGE>
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
----------- -----------
REVENUES
<S> <C> <C>
Homebuilding................................... $ 289,880 $ 238,597
Financial Services............................. 6,914 4,671
Corporate...................................... 331 233
----------- -----------
Total Revenues............................. 297,125 243,501
----------- -----------
COSTS AND EXPENSES
Homebuilding................................... 264,726 224,453
Financial Services............................. 3,366 2,646
Corporate general and administrative........... 6,305 3,512
Corporate and homebuilding interest............ - - - -
----------- -----------
Total Costs and Expenses................... 274,397 230,611
----------- -----------
Income before income taxes and extraordinary item. 22,728 12,890
Provision for income taxes........................ (8,977) (4,962)
----------- -----------
Income before extraordinary item.................. 13,751 7,928
Extraordinary loss from early extinguishment of
debt, net of income tax benefit of $9,587....... - - (15,314)
----------- -----------
NET INCOME (LOSS)................................. 13,751 (7,386)
Unrealized holding gains on securities arising
during the period, net.......................... 1,195 1,081
----------- -----------
COMPREHENSIVE INCOME (LOSS)....................... $ 14,946 $ (6,305)
=========== ===========
EARNINGS PER SHARE
Basic
Income before extraordinary item........... $ .62 $ .44
=========== ===========
Net Income (Loss).......................... $ .62 $ (.41)
=========== ===========
Diluted
Income before extraordinary item........... $ .61 $ .37
=========== ===========
Net Income (Loss).......................... $ .61 $ (.31)
=========== ===========
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic.......................................... 22,102 17,919
=========== ===========
Diluted........................................ 22,565 22,392
=========== ===========
DIVIDENDS PAID PER SHARE.......................... $ .05 $ .03
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE>
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
----------- -----------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss)............................... $ 13,751 $ (7,386)
Adjustments to reconcile net income (loss) to
net cash used in operating activities
Loss from the early extinguishment of debt. - - 24,901
Depreciation and amortization.............. 3,918 4,171
Deferred income taxes...................... 871 (79)
Net changes in assets and liabilities
Home sales and other accounts
receivable......................... (2,365) (7,659)
Homebuilding inventories............. (63,481) (34,549)
Mortgage loans held in inventory..... 15,830 (9,024)
Accounts payable and accrued expenses
and income taxes payable........... 4,126 14,479
Prepaid expenses and other assets.... 2,490 (5,443)
Other, net................................. 632 (1,427)
----------- -----------
Net cash used in operating activities............ (24,228) (22,016)
----------- -----------
FINANCING ACTIVITIES
Lines of credit
Advances................................... 293,898 248,800
Principal payments......................... (268,271) (223,153)
Notes payable
Principal payments......................... (435) (6,765)
Senior notes
Proceeds from issuance..................... - - 171,541
Repurchase and defeasance.................. - - (152,000)
Premium on repurchase and defeasance....... - - (17,592)
Dividend payments................................ (1,103) (538)
Proceeds from stock issuance..................... 560 1,104
----------- -----------
Net cash provided by financing activities........ 24,649 21,397
----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................... 421 (619)
Cash and cash equivalents
Beginning of period........................ 10,079 11,678
----------- -----------
End of period.............................. $ 10,500 $ 11,059
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE>
M.D.C. HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A. Presentation of Financial Statements
The condensed consolidated financial statements of M.D.C. Holdings,
Inc. ("MDC" or the "Company," which refers to M.D.C. Holdings, Inc. and its
subsidiaries) have been prepared, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. These statements reflect
all adjustments (including all normal recurring accruals) which, in the opinion
of management, are necessary to present fairly the financial position, results
of operations and cash flows of MDC as of March 31, 1999 and for all of the
periods presented. These statements are condensed and do not include all of the
information required by generally accepted accounting principles in a full set
of financial statements. These statements should be read in conjunction with
MDC's financial statements and notes thereto included in MDC's Annual Report on
Form 10-K for its fiscal year ended December 31, 1998.
Certain reclassifications have been made in the 1998 financial
statements to conform to the classifications used in the current year.
B. Corporate and Homebuilding Interest Activity (in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Interest capitalized in homebuilding inventory, beginning of period. $ 26,332 $ 37,991
Interest incurred................................................... 4,720 5,772
Interest expensed................................................... - - - -
Previously capitalized interest included in cost of sales........... (6,519) (8,217)
----------- -----------
Interest capitalized in homebuilding inventory, end of period....... $ 24,533 $ 35,546
=========== ===========
</TABLE>
C. Stockholders' Equity
In the fourth quarter of 1998, all $28,000,000 outstanding principal
amount of the Company's 8 3/4% convertible subordinated notes due 2005 (the
"Convertible Subordinated Notes") converted into approximately 3,612,900 shares
of MDC common stock at a conversion price of $7.75 per share.
D. Extraordinary Item
Net income for 1998 included an extraordinary loss of $15,314,000, net
of an income tax benefit of $9,587,000, recognized in connection with the
Company's repurchase and defeasance of the remaining $152,000,000 principal
amount of 11 1/8% senior notes due 2003 (the "Old Senior Notes").
-5-
<PAGE>
E. Information on Business Segments
The Company operates in two business segments: homebuilding and
financial services. A summary of the Company's segment information is shown
below (in thousands).
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Homebuilding
Home sales..................................................... $ 288,084 $ 232,763
Land sales..................................................... 1,386 5,527
Other revenues................................................. 410 307
----------- -----------
289,880 238,597
----------- -----------
Home cost of sales............................................. 234,748 196,269
Land cost of sales............................................. 1,039 3,106
Asset impairment charges....................................... - - - -
Marketing...................................................... 16,883 15,250
General and administrative..................................... 12,056 9,828
----------- -----------
264,726 224,453
Homebuilding Operating Profit............................... 25,154 14,144
----------- -----------
Financial Services
Mortgage Lending Revenues
Net interest income............................................ 661 531
Origination fees............................................... 2,503 1,865
Gains on sales of mortgage servicing........................... 1,263 235
Gains on sales of mortgage loans, net.......................... 2,340 2,004
Mortgage servicing and other................................... 147 30
Asset Management Revenues........................................ - - 6
----------- -----------
6,914 4,671
General and Administrative Expenses.............................. 3,366 2,646
----------- -----------
Financial Services Operating Profit......................... 3,548 2,025
----------- -----------
Total Operating Profit.............................................. 28,702 16,169
----------- -----------
Corporate
Interest and other revenues.................................... (331) (233)
General and administrative..................................... 6,305 3,512
----------- -----------
Net Corporate Expenses...................................... 5,974 3,279
----------- -----------
Income Before Income Taxes and Extraordinary Item................... $ 22,728 $ 12,890
=========== ===========
</TABLE>
-6-
<PAGE>
F. Earnings Per Share
Pursuant to SFAS 128, the computation of diluted earnings per share
takes into account the effect of dilutive stock options and, for the quarter
ended March 31, 1998, assumed the conversion into MDC common stock of all of the
$28,000,000 outstanding principal amount of the Convertible Subordinated Notes
at a conversion price of $7.75 per share of MDC common stock. The basic and
diluted earnings per share calculations are shown below (in thousands, except
per share amounts).
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Basic Earnings Per Share
Income before extraordinary item........................... $ 13,751 $ 7,928
Extraordinary (loss), net of taxes......................... - - (15,314)
----------- -----------
Net income (loss)...................................... $ 13,751 $ (7,386)
=========== ===========
Basic weighted-average shares outstanding.................. 22,102 17,919
=========== ===========
Per share amounts
Income before extraordinary item....................... $ .62 $ .44
Extraordinary (loss), net of taxes..................... - - (.85)
----------- ----------
Net income (loss)...................................... $ .62 $ (.41)
=========== ==========
Diluted Earnings Per Share
Income before extraordinary item........................... $ 13,751 $ 7,928
Conversion of Convertible Subordinated Notes............... - - 391
----------- -----------
Adjusted income before extraordinary item.................. 13,751 8,319
Extraordinary (loss), net of taxes......................... - - (15,314)
----------- -----------
Adjusted net income (loss)............................. $ 13,751 $ (6,995)
=========== ===========
Basic weighted-average shares outstanding.................. 22,102 17,919
Stock options, net......................................... 463 860
Conversion of Convertible Subordinated Notes............... - - 3,613
----------- -----------
Diluted weighted-average shares outstanding............ 22,565 22,392
=========== ===========
Per share amounts
Income before extraordinary item....................... $ .61 $ .37
Extraordinary (loss), net of taxes..................... - - (.68)
----------- ----------
Net income (loss)...................................... $ .61 $ (.31)
=========== ==========
</TABLE>
G. Supplemental Disclosure Of Cash Flow Information (in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash paid during the period for
Interest....................................... $ 7,559 $ 2,885
Income taxes................................... $ 6,570 $ 4,439
Non-cash investing and financing activities
Land purchases financed by seller.............. $ 745 $ - -
Land sales financed by MDC..................... $ 43 $ 283
</TABLE>
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
INTRODUCTION
M.D.C. Holdings, Inc. is a Delaware Corporation originally incorporated
in Colorado in 1972. We refer to M.D.C. Holdings, Inc. as the "Company" or as
"MDC" in this Form 10-Q. The "Company" or "MDC" includes our subsidiaries unless
we state otherwise. MDC's primary business is owning and managing subsidiary
companies that build and sell homes under the name "Richmond American Homes." We
also own and manage HomeAmerican Mortgage Corporation ("HomeAmerican"), which
originates mortgage loans primarily for MDC's home buyers.
RESULTS OF OPERATIONS
The table below summarizes MDC's results of operations (in thousands,
except per share amounts).
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
---------- -----------
<S> <C> <C>
Revenues............................................................. $ 297,125 $ 243,501
Income Before Income Taxes and Extraordinary Item.................... $ 22,728 $ 12,890
Income Before Extraordinary Item..................................... $ 13,751 $ 7,928
Net Income (Loss).................................................... $ 13,751 $ (7,386)
Earnings Per Share
Basic
Income before extraordinary item............................. $ .62 $ .44
Net income (loss)............................................ $ .62 $ (.41)
` Diluted
Income before extraordinary item............................. $ .61 $ .37
Net income (loss)............................................ $ .61 $ (.31)
</TABLE>
Revenues for the first quarter of 1999 increased by $53,624,000,
compared with the same period in 1998, primarily due to increased home sales
revenues resulting from (1) a 14% increase in home closings to 1,447 units; and
(2) a higher average selling price per home closed. These increases partially
were offset by a reduction of $4,141,000 in land sales revenues in the first
quarter of 1999, compared with the same period in 1998.
Income before extraordinary item increased 73% in the first quarter of
1999, compared with the first quarter of 1998. This increase primarily was a
result of increased operating profit from the Company's homebuilding segment,
due to the home sales revenue increase described above and a 280 basis point
increase in Home Gross Margins (as hereinafter defined).
Net income for 1998 included an extraordinary loss of $15,314,000, net
of an income tax benefit of $9,587,000, recognized in connection with the
Company's repurchase and defeasance of the then remaining $152,000,000 principal
amount of the Old Senior Notes.
-8-
<PAGE>
Homebuilding Segment
The table below sets forth information relating to the Company's
homebuilding segment (dollars in thousands).
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
------------ ------------
<S> <C> <C>
Home Sales Revenues............................... $ 288,084 $ 232,763
Operating Profit.................................. $ 25,154 $ 14,144
Average Selling Price Per Home Closed............. $ 199.1 $ 183.3
Home Gross Margins................................ 18.5% 15.7%
Excluding Interest in Home Cost of Sales....... 20.7% 18.6%
Orders For Homes, net (units)
Colorado................................... 845 910
California................................. 393 310
Arizona.................................... 525 521
Nevada..................................... 128 142
Virginia................................... 267 264
Maryland................................... 88 129
------------ ------------
Total................................ 2,246 2,276
============ ============
Homes Closed (units)
Colorado................................... 502 480
California................................. 223 181
Arizona.................................... 386 326
Nevada..................................... 141 90
Virginia................................... 120 122
Maryland................................... 75 71
------------ ------------
Total................................ 1,447 1,270
============ ============
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
----------- ------------ ----------
<S> <C> <C> <C>
Backlog (units)
Colorado................................... 1,698 1,355 1,310
California................................. 496 326 399
Arizona.................................... 835 696 588
Nevada..................................... 133 146 147
Virginia................................... 401 254 353
Maryland................................... 166 153 241
------------ ------------ -----------
Total................................ 3,729 2,930 3,038
============ ============ ===========
Estimated Sales Value................ $ 750,000 $ 580,000 $ 570,000
============ ============ ===========
Active Subdivisions
Colorado................................... 48 45 51
California................................. 19 21 14
Arizona.................................... 22 24 26
Nevada..................................... 10 9 8
Virginia................................... 16 20 23
Maryland................................... 11 11 16
------------ ------------ -----------
Total................................ 126 130 138
============ ============ ===========
</TABLE>
-9-
<PAGE>
Home Sales Revenues and Homes Closed - Home sales revenues for the
quarter ended March 31, 1999 were the highest first quarter revenues in the
Company's history and were 24% higher than home sales revenues for the same
period in 1998. The improved revenues were a result of increased home closings
and a higher average selling price per home closed, as further discussed below.
Home closings increased 14% in the first quarter of 1999, compared with
the first quarter of 1998. This increase primarily was due to higher home
closings in Nevada (a 57% increase), Arizona (an 18% increase), and Southern
California (a 20% increase), where levels of homes under contract but not yet
delivered ("Backlog") at the beginning of 1999 were higher than at the beginning
of 1998.
Average Selling Price Per Home Closed - The average selling price per
home closed increased in the first quarter of 1999, compared with the same
period in 1998 primarily as a result of (1) a greater number of homes closed in
relatively higher-priced subdivisions in Southern California and Nevada; (2) a
higher proportion of detached homes closed in Virginia, which generally have
higher selling prices than townhomes; and (3) selling price increases in certain
of the Company's markets, particularly in Southern California and Colorado.
Home Gross Margins - We define "Home Gross Margins" to mean home sales
revenues less cost of goods sold (which primarily includes land and construction
costs, capitalized interest, financing costs, and a reserve for warranty
expense) as a percent of home sales revenues. During the first quarter of 1999
Home Gross Margins increased 280 basis points, compared with the same period in
1998. The increase largely was due to (1) in Colorado, selling price increases
and reduced incentives offered to home buyers due to the continued strong demand
for new homes in this market; (2) reduced levels of interest in home cost of
sales, as discussed below; and (3) initiatives implemented in each of the
Company's markets designed to improve operating efficiency, control costs and
increase rates of return.
Future growth in Home Gross Margins may be impacted adversely by (1)
increased competition; (2) increases in the costs of subcontracted labor,
finished lots, building materials and other resources, to the extent that market
conditions prevent the recovery of increased costs through higher selling
prices; (3) adverse weather; and (4) shortages of subcontractor labor. See
"Forward Looking Statements" below.
Interest in Home Cost of Sales - Interest in home cost of sales as a
percent of home sales revenues decreased to 2.2% in the first quarter of 1999,
compared with 2.9% for the same period in 1998. The reduction primarily resulted
from lower levels of capitalized interest in homebuilding inventories at the
beginning of 1999, compared with the beginning of 1998. Despite an increase in
the Company's homebuilding inventories, interest capitalized in homebuilding
inventories at the beginning of 1999 decreased to $26,332,000, compared with
$37,991,000 at the beginning of 1998, due to lower levels of interest incurred
over the last year resulting from (1) lower effective interest rates on the
Company's outstanding debt primarily resulting from the January 1998 refinancing
of the Old Senior Notes; and (2) the continued reduction in homebuilding and
corporate debt levels.
Orders for Homes and Backlog - The Company received 2,246 orders for
homes during the first quarter of 1999, compared with last year's record 2,276
first quarter home orders. First quarter 1999 home orders were approximately 8%
higher on a "same store" basis than home orders for the same period in 1998,
including a 25% increase in March. The strong 1999 first quarter home orders
compared favorably with the same period in 1998 despite difficult year-over-year
comparisons as 1998 home orders increased 68% on a same store basis compared
with home orders received in the same period in 1997. First quarter 1999 home
orders particularly were strong in Virginia and Arizona, which increased 29% and
27%, respectively, on a same store basis as a result of the increased demand for
homes in these markets.
-10-
<PAGE>
The Company received approximately 690 orders for homes in April 1999,
representing an increase of 20% (approximately 31% on a same store basis) over
the 576 home orders received in April 1998.
As a result of the high level of home orders in the last quarter of
1998 and the first quarter of 1999, the Company's Backlog at March 31, 1999
increased by 23% to 3,729 units with an estimated sales value of $750,000,000,
compared with a Backlog of 3,038 units with an estimated sales value of
$570,000,000 at March 31, 1998. Assuming no significant change in market
conditions or mortgage interest rates, the Company expects approximately 70% of
its March 31, 1999 Backlog to close under existing sales contracts during the
remainder of 1999. The remaining 30% of the homes in Backlog are not expected to
close under existing contracts due to cancellations. See "Forward-Looking
Statements" below.
Marketing - Marketing expenses (which include amortization of deferred
marketing, model home expenses, sales commissions and other costs) totalled
$16,883,000 for the first quarter of 1999, compared with $15,250,000 for the
same period in 1998. The increase in 1999 primarily was volume related,
resulting from higher (1) marketing-related salaries and benefits; (2) sales
commissions; (3) deferred marketing costs amortized in connection with the
increased number of home closings and; (4) product advertising and other costs
incurred in connection with the Company's expanded operations. These expenses
declined as a percentage of home sales revenues to 5.9% in the first quarter of
1999 from 6.5% in the first quarter of 1998.
General and Administrative - General and administrative expenses
increased to $12,056,000 during the first quarter of 1999, compared with
$9,828,000 during the same period in 1998, primarily due to increased
compensation costs resulting from MDC's increased profitability and expanded
homebuilding operations. These expenses were approximately 4.2% of home sales
revenues for both the first quarters of 1999 and 1998.
Land Inventory
The table below shows the carrying value of land and land under
development, by market, the total number of lots owned and lots controlled under
option agreements, and total option deposits (dollars in thousands).
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
----------- ----------- -----------
<S> <C> <C> <C>
Colorado................................ $ 49,869 $ 53,720 $ 54,927
California.............................. 121,560 100,754 49,300
Arizona................................. 22,101 25,178 33,324
Nevada.................................. 25,550 20,027 17,753
Virginia................................ 10,962 11,292 17,585
Maryland................................ 8,994 6,209 14,007
----------- ----------- -----------
Total.............................. $ 239,036 $ 217,180 $ 186,896
=========== =========== ===========
Total Lots Owned........................ 9,144 8,925 8,297
Total Lots Controlled Under Option...... 6,734 7,729 5,366
----------- ----------- -----------
Total Lots Owned and Controlled... 15,878 16,654 13,663
=========== =========== ===========
Total Option Deposits................... $ 10,907 $ 12,500 $ 6,341
=========== =========== ===========
</TABLE>
-11-
<PAGE>
Financial Services Segment
The table below sets forth information relating to HomeAmerican's
operations (in thousands).
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Gains on Sales of Mortgage Loans, net............... $ 2,340 $ 2,004
Gains on Sales of Mortgage Servicing, net........... $ 1,263 $ 235
Operating Profit.................................... $ 3,548 $ 2,026
Principal Amount of Originations and Purchases
MDC home buyers................................ $ 161,723 $ 141,123
Spot........................................... 12,287 11,990
Correspondent.................................. 12,074 40,678
----------- -----------
Total...................................... $ 186,084 $ 193,791
=========== ===========
Capture Rate........................................ 69% 73%
=========== ===========
</TABLE>
HomeAmerican's operating profit for the first quarter of 1999
increased, compared with the same period in 1998, primarily due to (1) a
$1,364,000 increase in gains from sales of mortgage loans and mortgage servicing
rights; and (2) a $638,000 increase in origination fees. These increases
partially were offset by higher general and administrative expenses resulting
from the increased mortgage lending activity.
HomeAmerican's loan originations increased by 14% in the first quarter
of 1999, compared with the same period in 1998. This improvement primarily was
due to increases in the Company's home closings. HomeAmerican continues to
benefit from the Company's homebuilding growth as MDC home buyers were the
source of over 90% of the principal amount of mortgage loans originated by
HomeAmerican in the first quarter of 1999.
Mortgage loans originated by HomeAmerican for MDC home buyers as a
percentage of total MDC home closings ("Capture Rate") decreased to 69% for the
first quarter of 1999, compared with 73% for the same period in 1998, due to an
increase in the number of mortgage loans brokered by HomeAmerican for
origination by outside lending institutions for MDC home buyers with sub-prime
credit. These brokered mortgage loans are excluded from the computation of
the Capture Rate. Mortgage loans brokered by HomeAmerican as a percentage of
total MDC home closings increased to 10.3% for the first quarter of 1999,
compared with 4.6% for the same period in 1998.
Forward Sales Commitments - HomeAmerican's operations are affected by,
among other things, changes in mortgage interest rates. HomeAmerican utilizes
forward mortgage securities contracts to manage the interest rate risk on its
fixed-rate mortgage loans owned and rate-locked mortgage loans in the pipeline.
Such contracts are the only significant financial derivative instrument utilized
by MDC.
Other Operating Results
Interest Expense - The Company capitalizes interest on its homebuilding
inventories during the period of active development and through the completion
of construction. Corporate and homebuilding interest incurred but not
capitalized is reflected as interest expense and totalled zero for both the
first quarters of 1999 and 1998.
-12-
<PAGE>
Corporate and homebuilding interest incurred decreased by 18% to
$4,720,000 for the first quarter of 1999, compared with $5,772,000 for the same
period in 1998, primarily due to lower levels of outstanding debt in 1999.
For a reconciliation of interest incurred, capitalized and expensed,
see Note B to the Company's Condensed Consolidated Financial Statements.
Corporate General and Administrative Expenses - Corporate general and
administrative expenses totalled $6,305,000 during the first quarter of 1999,
compared with $3,512,000 during the first quarter of 1998 primarily due to (1)
greater compensation expense in 1999 related to the Company's increased
profitability and expanding operations; (2) the recognition in 1998 of an
$836,000 offset to health insurance expense for the reversal of reserves no
longer required; and (3) approximately $800,000 in non-recurring expenses
primarily resulting from the development of new processes, controls and computer
systems relative to the Company's "best practices" endeavors.
"Year 2000" Issue. The Company began assessing the possible impact of
the Year 2000 ("Y2K") issue on its business operations in 1997. The issue arises
because of information technology ("IT") which utilizes a two digit date field.
Y2K introduces the potential for errors and miscalculations related to IT and
non-IT systems which were not designed to accommodate a date of year 2000 and
beyond.
The Company has identified the following six phases in its Y2K
remediation program: (1) assessment of the Y2K capabilities of its IT and non-IT
systems; (2) acquisition of new IT and non-IT systems or modification of
existing IT and non-IT systems to meet Y2K requirements; (3) testing; (4)
evaluation of efforts to meet Y2K requirements; (5) adjustments as identified in
the evaluation phase; and (6) implementation and integration of modified IT and
non-IT systems into the Company's business operations.
The Company has completed all six phases with respect to its
homebuilding information system and believes this system has been Y2K compliant
since the third quarter of 1998. Management information systems for the
Company's financial services activities have been assessed, acquired, tested and
evaluated, and require further adjustment. Implementation of these adjusted
systems is expected to be completed in the third quarter of 1999. Given the
nature of the homebuilding industry, the Company is only minimally dependent
upon non-IT systems such as telephone, security systems and time clocks. With
respect to such non-IT systems, the Company is in various phases ranging from
the assessment phase to the implementation phase, and all phases are expected to
be completed by the fourth quarter of 1999.
The Company is presently evaluating other potential Y2K issues. As part
of this evaluation, the Company has requested and received representations from
certain financial institutions and third party vendors which indicate their
progress toward Y2K compliance. The Company has sent Y2K compliance surveys to
certain significant subcontractors, vendors and municipalities and has received
responses to approximately 60% of the surveys. To date, the survey responses
have not indicated any Y2K compliance issues that would result in a material
affect on the Company's financial position or results of operations.
The Company incurred costs for outside consultants and internal
costs in the first quarter of 1999 and all of 1998 and 1997 related to Y2K which
aggregated approximately $775,000, and future consulting and internal costs
are expected to be approximately $75,000 during the balance of 1999. These
costs, which are expensed as incurred, have been and will continue to be funded
from operations.
-13-
<PAGE>
The costs incurred through March 31, 1999 did not have a material affect on the
Company's financial position or results of operations.
The Company could be impacted materially by widespread economic or
financial market disruptions or by Y2K computer system failures at government
agencies on which the Company is dependent for utilities, zoning, building
permits and related items. However, the most likely worst-case Y2K scenario
would include isolated instances of construction delays caused by the Company's
inability to secure building permits, zoning and utilities as well as closing
delays caused by the inability of home buyers to obtain financing. In addition,
there could be isolated instances of subcontractors experiencing construction
delays due to their inability to secure building materials on a timely basis.
The Company typically uses several subcontractors within a given trade. As a
result, the Company believes that it will be able to replace subcontractors that
may not be able to perform due to Y2K deficiencies.
The Company believes that, based upon its assessment of the Y2K
phenomena, certain subcontractors, vendors and government agencies may encounter
Y2K problems that impact the Company and that may require MDC to take alternate
or additional steps. In order to address Y2K concerns which may originate from
subcontractors, third party vendors and governmental agencies, the Company
intends to prepare contingency plans by the end of the third quarter of 1999.
See "Forward-Looking Statements" below.
Income Taxes - The Internal Revenue Service ("IRS") has completed its
examinations of the Company's federal income tax returns for the years 1991
through 1995 and has proposed adjustments to the taxable income reflected in
such returns. The Company is protesting certain of these proposed adjustments.
The IRS currently is examining the Company's federal income tax returns for the
years 1996 and 1997. No audit report has been issued by the IRS in connection
with this latter examination. In the opinion of management adequate provision
has been made for additional income taxes and interest, if any, which may arise
as a result of these examinations.
MDC's overall effective income tax rate of 39.5% and 38.5% for the
first quarters of 1999 and 1998, respectively, differed from the federal
statutory rate of 35% primarily due to the impact of state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
MDC uses its liquidity and capital resources to, among other things,
(1) support its operations, including its inventories of homes, home sites and
land; (2) provide working capital; and (3) provide mortgage loans for its home
buyers. Liquidity and capital resources are generated internally from operations
and from external sources.
Capital Resources
The Company's capital structure is a combination of (1) permanent
financing, represented by stockholders' equity; (2) long-term financing,
represented by its publicly traded 8 3/8% senior notes due 2008 (the "New Senior
Notes"); and (3) current financing, primarily lines of credit, as discussed
below. The Company believes that its current financial condition is both
balanced to fit its current operating structure and adequate to satisfy its
current and near-term capital requirements. See "Forward-Looking Statements"
below.
-14-
<PAGE>
MDC anticipates acquiring finished lots and partially developed land
for use in its future homebuilding operations during the remainder of 1999. The
Company currently intends to acquire a portion of the land inventories required
in future periods through takedowns of lots subject to option contracts entered
into in prior periods and under new option contracts. The use of option
contracts lessens the Company's land-related risk and improves liquidity.
Because of increased demand for partially developed and finished lots in certain
of the markets where the Company builds homes, the Company's ability to acquire
lots using option contracts has been reduced or has become more expensive. See
"Forward-Looking Statements" below.
Based upon its current capital resources and additional credit
available under existing credit agreements, MDC anticipates that it has adequate
financial resources to satisfy its current and near-term capital requirements,
including the acquisition of land. The Company believes that it can meet its
long-term capital needs (including meeting future debt payments and refinancing
or paying off other long-term debt as it becomes due) from operations and
external financing sources, assuming that no significant adverse changes in the
Company's business occur as a result of the various risk factors described
elsewhere in this report. See "Forward-Looking Statements" below.
Lines of Credit and Other
Homebuilding - The Company maintains a $300,000,000 unsecured revolving
line of credit (the "Homebuilding Line") with a group of banks to support its
homebuilding operations. The Homebuilding Line matures on June 30, 2003,
although, pursuant to the terms of the related credit agreement, a term-out of
this credit may commence earlier under certain circumstances. At March 31, 1999,
$43,000,000 was borrowed and $8,389,000 in letters of credit were outstanding
under the Homebuilding Line.
Mortgage Lending - To provide funds to originate and purchase mortgage
loans and to finance these mortgage loans on a short-term basis, HomeAmerican
utilizes its mortgage lending bank line of credit (the "Mortgage Line"). These
mortgage loans normally are sold within 40 days after origination or purchase.
During the first quarters of 1999 and 1998, HomeAmerican sold $201,642,000 and
$184,325,000, respectively, principal amount of mortgage loans and mortgage
certificates to unaffiliated purchasers.
Available borrowings under the Mortgage Line are collateralized by
mortgage loans and mortgage-backed certificates and are limited to the value of
eligible collateral, as defined. The aggregate amount available under the
Mortgage Line at March 31, 1999 was $51,000,000. At March 31, 1999, $32,832,000
was borrowed and an additional $18,168,000 was collateralized and available to
be borrowed. The Mortgage Line is cancelable upon 90 days' notice.
General - The agreements for the Company's senior notes and bank lines
of credit require compliance with certain representations, warranties and
covenants. These agreements are on file with the Securities and Exchange
Commission and are listed in the Exhibit Table in Part IV of MDC's Annual Report
on Form 10-K for its fiscal year ended December 31, 1998. The Company believes
that it is in compliance with these representations, warranties and covenants.
The financial covenants contained in the loan agreement for the
Company's principal homebuilding line of credit include a leverage test and a
consolidated tangible net worth test. Under the leverage test, generally MDC's
consolidated indebtedness is not permitted to exceed 2.15 times MDC's "adjusted
consolidated tangible net worth," as defined in the loan agreement. Under the
consolidated net worth test, MDC's "tangible net worth," as defined, must not be
less than $170,000,000 plus 50% of "consolidated net income," as defined, after
January 1, 1996.
-15-
<PAGE>
The Company's New Senior Notes indenture does not contain financial
covenants. However, there are covenants that limit transactions with affiliates,
limit the amount of additional indebtedness that MDC may incur, restrict certain
payments on, or the redemptions of the Company's securities, restrict certain
sales of assets and limit incurring liens. In addition, under certain
circumstances, in the event of a change of control (generally a sale, transfer,
merger or acquisition of MDC or substantially all of its assets), MDC may be
required to offer to repurchase the New Senior Notes.
Pursuant to the Mortgage Line, HomeAmerican must maintain a
"consolidated tangible net worth," as defined in the Mortgage Line, of at least
$5,000,000 and may only pay up to 50% of its net income to MDC in the form of
dividends.
Consolidated Cash Flow
During the first quarters of 1999 and 1998, the Company used
$24,228,000 and $22,016,000, respectively, of cash in its operating activities,
primarily due to increases in homebuilding and mortgage loan inventories in
conjunction with its expanded homebuilding operations. The Company financed
these operating cash requirements primarily through borrowings on its bank lines
of credit.
OTHER
Forward-Looking Statements
Certain statements in this Form 10-Q Quarterly Report, the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 1998, the
Company's Annual Report to Shareowners, as well as statements made by the
Company in periodic press releases, oral statements made by the Company's
officials to analysts and shareowners in the course of presentations about the
Company and conference calls following quarterly earnings releases, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by the
forward-looking statements. Such factors include, among other things, (1)
general economic and business conditions; (2) interest rate changes; (3) the
relative stability of debt and equity markets; (4) competition; (5) the
availability and cost of land and other raw materials used by the Company in its
homebuilding operations; (6) demographic changes; (7) shortages and the cost of
labor; (8) weather related slowdowns; (9) slow growth initiatives; (10) building
moratoria; (11) governmental regulation, including the interpretation of tax,
labor and environmental laws; (12) changes in consumer confidence and
preferences; (13) required accounting changes; (14) the impact on the Company of
Y2K compliance by the Company and its vendors, suppliers and subcontractors and
by various governmental and regulatory agencies; and (15) other factors over
which the Company has little or no control.
-16-
<PAGE>
M.D.C. HOLDINGS, INC.
FORM 10-Q
PART II
ITEM 1. LEGAL PROCEEDINGS.
The Company and certain of its subsidiaries and affiliates have been
named as defendants in various claims, complaints and other legal actions
arising in the normal course of business. In the opinion of management, the
outcome of these matters will not have a material adverse effect upon the
financial condition, results of operations or cash flows of the Company.
Because of the nature of the homebuilding business, and in the ordinary
course of its operations, the Company from time to time may be subject to
product liability claims.
The Company is not aware of any litigation, matter or pending claim
against the Company which would result in material contingent liabilities
related to environmental hazards or asbestos.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREOWNERS.
No meetings of the Company's stockholders were held during the first
quarter of 1999.
ITEM 5. OTHER INFORMATION.
On April 26, 1999, the Company's board of directors declared a dividend
of five cents per share for the quarter ended March 31, 1999, representing an
increase of one cent per share, or 25%, compared with the dividend for the
quarter ended March 31, 1998. Future dividend payments are subject to the
discretion of the Company's board of directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit:
10.1 Independent Contractor Agreement between Mizel
Design and Development Company and M.D.C.
Holdings, Inc. effective as of January 1, 1999.
27 Financial Data Schedule.
-17-
<PAGE>
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed by the
Registrant during the period covered by this
Quarterly Report on Form 10-Q.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 3, 1999 M.D.C. HOLDINGS, INC.
----------- (Registrant)
By: /s/ Paris G. Reece III
-----------------------
Paris G. Reece III,
Senior Vice President,
Chief Financial Officer and
Principal Accounting Officer
-18-
EXHIBIT 10.1
INDEPENDENT CONTRACTOR AGREEMENT
THIS AGREEMENT (the "Agreement") is effective as of the 1st day of
January, 1999 and is between MIZEL DESIGN AND DECORATING COMPANY ("Consultant")
and M.D.C. HOLDINGS, INC. (the "Company").
1. Engagement. The Company hereby engages Consultant as an independent
contractor to perform the services specified in Paragraph 3 below for the
Company.
2. Term. The term of this Agreement shall be for a period beginning on
January 1, 1999 and ending December 31, 1999, unless previously terminated
pursuant to Paragraph 8 below. This Agreement shall be automatically renewed on
January 1 of each successive year for a one year term unless previously
terminated by either party pursuant to Paragraph 8 below.
3. Responsibilities. Commencing on January 1, 1999, Consultant shall
perform consulting services as are reasonably requested by the Company in those
areas described on Exhibit A attached hereto and incorporated by this reference.
Consultant shall be responsible and report to the Company's Chief Operating
Officer at the Company's Denver, Colorado headquarters.
4. Best Efforts. Consultant shall use its best efforts to competently
and expeditiously perform its responsibilities under this Agreement. Consultant
shall, while on Company premises, and at all other times while performing its
responsibilities under this Agreement, observe, abide by and comply with all
corporate policies and procedures of the Company. Consultant shall not commit
any act or make any statements which would be damaging to the reputation and
good will of the Company.
5. Obligations of the Company. During the term of this Agreement, the
Company shall reimburse Consultant for all reasonable business expenses incurred
by Consultant's personnel in connection with performance of Consultant's
services. Reimbursement of such expenses shall be made and documented in
accordance with Company's normal expense reimbursement policies and procedures.
6. Compensation. Subject to paragraph 8.d. below, Consultant shall be
paid $10,000.00 per month for the term of this Agreement. Payments hereunder
shall be made semi-monthly, two weeks in arrears.
7. Confidentiality of Information. Consultant recognizes and
acknowledges that it will have access to certain confidential information of the
Company, its subsidiaries and affiliated companies, and that such information
constitutes valuable, special and unique property of the Company, its
subsidiaries and affiliated companies. Consultant agrees that, during its
engagement by the Company and after the termination of such
1
<PAGE>
engagement (voluntarily or involuntarily), it will not use, disclose or
otherwise permit, and will take all reasonable precautions to prevent any
person, firm, corporation, or other entity, access to the confidential
information of the Company, except to authorized representatives of the Company,
its subsidiaries and affiliated or related companies, and except as authorized
by the Company.
8. Termination.
a. The Company shall have the right to terminate Consultant's
engagement hereunder immediately, without liability or damages, upon the
occurrence of any one of the following:
(i) In the event Consultant engages in fraud, dishonesty or any
other act of misconduct; or
(ii) In the event of a material breach by Consultant of any of
the terms of this Agreement.
b. The Company or Consultant may terminate this Agreement for any
reason, with or without cause, upon thirty days prior notice.
c. In the event of termination pursuant to this Paragraph 8,
Consultant's compensation for the month in which termination occurs shall be pro
rated to the date of actual termination.
9. Dispute. In the event of a dispute, controversy or claim arising out
of or relating to this Agreement, such matter shall be settled by arbitration in
Denver, Colorado, such arbitration to be conducted before a panel of three
arbitrators, one of whom shall be appointed by the Company, one by Consultant,
and the third to be appointed by the first two arbitrators. The arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association, except with respect to the selection of arbitrators which shall be
conducted as provided for in this Paragraph 9. Judgment upon the award rendered
by the arbitrators shall be final and binding on the parties and may be entered
in any court having jurisdiction thereof. The arbitrators shall divide all costs
incurred in conducting their arbitration in their final award in accordance with
what they deem just and equitable under the circumstances. In an appropriate
case, the arbitrators shall be entitled to order equitable remedies.
10. Independent Contractor Status. The relationship of the Consultant
to the Company shall be that of an independent contractor. Nothing in this
Agreement is intended or shall be construed to create an employer-employee
relationship, joint venture relationship or partnership, expressly or by
implication. It is expressly understood and agreed that the payments
contemplated by this agreement are to be considered and treated as payment for
services rendered to the Company by Consultant as an independent contractor and
the Company shall have no responsibility whatsoever to Consultant with respect
to vacation pay, sick
2
<PAGE>
leave, medical benefits, retirement benefits, disability benefits, unemployment
benefits or any other employer or fringe benefit. Consultant shall be
responsible for all local, state, federal and self-employment taxes on the
payments made to him by the Company.
11. Miscellaneous.
a. Consultant may not assign any of its rights or obligations under
this Agreement.
b. Failure to insist upon strict compliance with any provisions
hereof shall not be deemed a waiver of such provision or any other provision
hereof.
c. The invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any other provision.
d. As to the subject matter of this Agreement, there are no oral
agreements or understandings which limit, expand, or otherwise pertain to these
matters. This Agreement includes the entire agreement between the parties hereto
relative to the subject matter hereof and supersedes all prior understandings
and agreements with respect thereto.
e. Any notice which is required or permitted to be given under
this Agreement shall be given by personal delivery or certified mail, return
receipt requested, and directed to the respective party at its last known
address. Unless and until changed, the address of the parties shall be as
follows:
TO: Company
M.D.C. Holdings, Inc.
3600 S. Yosemite Street, #900
Denver, Colorado 80237
Attention: Chief Operating Officer
TO: Consultant
Mizel Design and Decorating Company
Suite 810
3600 S. Yosemite Street
Denver, Colorado 80237
Attention: Carol Mizel
All notices shall be deemed given on the date of personal delivery or, if mailed
postage prepaid by certified mail, return receipt requested, on the date of
delivery appearing on the return receipt therefor.
3
<PAGE>
f. This Agreement cannot be changed or modified except by a written
instrument executed by both parties.
g. This Agreement shall be deemed to have been made and shall be
construed and interpreted in accordance with the laws of the state of Colorado.
h. This Agreement shall be binding upon and shall inure to the
benefit of the parties and their successors and permitted assigns.
IN WITNESS WHEREOF, the undersigned parties have caused this agreement
to be executed as of the day and year first above written.
Signed:
CONSULTANT:
MIZEL DESIGN AND DECORATING COMPANY
By: /s/ Carol Mizel Date: April 28, 1999
------------------------ ------------------------
Title: Owner
------------------------
M.D.C. HOLDINGS, INC.
By: /s/ Paris G. Reece III Date: April 27, 1999
------------------------ -----------------------
Title: Sr. Vice President
------------------------
4
<PAGE>
Exhibit A.
Consultant's responsibilities shall include services with respect to the
following:
1. Corporate and Consumer Marketing
2. Merchandising
3. Interior Design and Space Planning
4. Human Resources Development
5. Product
6. Project Genesis
7. Meetings
8. Such other matters as may be requested by the Company's
Senior Management
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from MDC
Holdings, Inc. consolidated financial statements included in its Form 10-Q for
the quarter ended March 31, 1999 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 10,500
<SECURITIES> 0
<RECEIVABLES> 15,136
<ALLOWANCES> 0
<INVENTORY> 575,467
<CURRENT-ASSETS> 0
<PP&E> 2,693
<DEPRECIATION> 0
<TOTAL-ASSETS> 762,266
<CURRENT-LIABILITIES> 0
<BONDS> 251,359
0
0
<COMMON> 281
<OTHER-SE> 315,755
<TOTAL-LIABILITY-AND-EQUITY> 762,266
<SALES> 289,880
<TOTAL-REVENUES> 297,125
<CGS> (264,726)
<TOTAL-COSTS> (268,092)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,728
<INCOME-TAX> (8,977)
<INCOME-CONTINUING> 13,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,751
<EPS-PRIMARY> .62
<EPS-DILUTED> .61
</TABLE>
