UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2004

OR

Commission File No. 1-8951

M.D.C. HOLDINGS, INC.

(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 [  ]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [  ]

As of April 30, 2004, 32,614,000 shares of M.D.C. Holdings, Inc. common stock were outstanding.

M.D.C. HOLDINGS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2004

INDEX

 (i) 

M.D.C. HOLDINGS, INC.

See notes to consolidated financial statements.

- 1 -

M.D.C. HOLDINGS, INC.

See notes to consolidated financial statements.

- 2 -

M.D.C. HOLDINGS, INC.

See notes to consolidated financial statements.

- 3 -

M.D.C. HOLDINGS, INC.

See notes to consolidated financial statements.

- 4 -

M.D.C. HOLDINGS, INC.

A. Presentation of Financial Statements

     The 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. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 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, 2004 and for all of the periods presented. 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, 2003. Certain reclassifications have been made in the 2003 financial statements to conform to the classifications used in the current year.

     The Company historically has experienced, and expects to continue to experience, variability in quarterly results. The consolidated statements of income are not necessarily indicative of the results to be expected for the full year.

B. Earnings Per Share

     The basic and diluted earnings per share calculations are shown below (in thousands, except per share amounts). Prior period earnings per share and weighted-average shares outstanding have been restated to reflect the effect of a 10% stock dividend declared on February 23, 2004.

C. Stockholders’ Equity

     Stock Dividend — On February 23, 2004, MDC’s board of directors declared a 10% stock dividend that was distributed on March 23, 2004 to shareowners of record on March 8, 2004. In accordance with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per Share,” basic and diluted net income per share amounts,

- 5 -

weighted-average shares outstanding, and dividends declared per share have been restated for all periods affected to reflect the effect of this stock dividend.

     Stock-Based Compensation — The Company has elected to account for stock-based compensation using the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25 and related interpretations. Stock options are granted at an exercise price that is not less than the fair market value of MDC’s common stock at the date of grant and, therefore, the Company recorded no compensation expense in the determination of net income for the three months ended March 31, 2004 and 2003. The following table illustrates the effect on net income and earnings per share if the fair value method prescribed by SFAS No. 123, as amended by SFAS No. 148, had been applied to all outstanding and unvested awards in the three month period ended March 31, 2004 and 2003 (in thousands, except per share amounts).

D. Interest Activity

     The Company capitalizes interest incurred on its corporate and homebuilding debt during the period of active development and through the completion of construction of its homebuilding inventories. Corporate and homebuilding interest incurred but not capitalized is reported as interest expense. Interest incurred by the financial services segment is charged to interest expense, which is deducted from interest income and reported as net interest income in Note F.

- 6 -

Interest activity, in total and by business segment, is shown below (in thousands).

E. Warranty Reserves

     Warranty reserves are reviewed quarterly, using historical data and other relevant information, to determine the reasonableness and adequacy of both the reserve and the per unit reserve amount originally included in cost of sales, as well as the timing of the reversal of the reserve. Warranty reserves are included in corporate and homebuilding accounts payable and accrued expenses in the consolidated balance sheets, and totaled $52,966,000 and $51,068,000, respectively, at March 31, 2004 and December 31, 2003. Warranty expense was $9,007,000 and $8,045,000 for the three months ended March 31, 2004 and 2003, respectively. Reserves carried over from prior years primarily are the result of the Company’s volume of homes closed increasing by over 200% in the last ten years, giving rise to continuing warranty reserves that exceed current expenditures. In addition, the carryover includes additional qualified settlement fund warranty reserves created pursuant to litigation settled in 1996. Warranty activity for the three months ended March 31, 2004 is shown below (in thousands).

- 7 -

F. 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).

- 8 -

G. Commitments and Contingencies

     The Company often is required to obtain bonds and letters of credit in support of its related obligations with respect to subdivision improvement, homeowners association dues and start-up expenses, warranty work, contractors license fees and earnest money deposits. At March 31, 2004, MDC had outstanding approximately $241,176,000 and $46,504,000 of performance bonds and letters of credit, respectively. In the event any such bonds or letters of credit are called, MDC would be obligated to reimburse the issuer of the bond or letter of credit.

H. Lines of Credit and Total Debt Obligations

     Lines of Credit – The Company has an unsecured revolving line of credit with a group of lenders for support of our homebuilding operations (the “Homebuilding Line”). As of April 8, 2004, the Company renewed the Homebuilding Line, increasing the aggregate commitment amount from $600,000,000 to $700,000,000, increasing the maximum amount available to $850,000,000 upon the Company’s request, subject to receipt of additional commitments from existing or additional participating lenders, and extending the maturity date to April 7, 2009. Pursuant to the terms of the Homebuilding Line, a term-out of the credit facility may commence prior to April 7, 2009 under certain circumstances. At March 31, 2004, the Company had no borrowings and $36,474,000 in letters of credit outstanding under the Homebuilding Line.

     At March 31, 2004, the Company’s mortgage lending bank line of credit (the “Mortgage Line”) had a borrowing limit of $175,000,000. The terms of the Mortgage Line are set forth in the Third Amended and Restated Warehousing Credit Agreement dated as of October 23, 2003. Available borrowings under the Mortgage Line are collateralized by mortgage loans and mortgage-backed certificates and are limited to the value of eligible collateral as defined. At March 31, 2004, $52,612,000 was borrowed and an additional $29,576,000 was collateralized and available to be borrowed. The Mortgage Line is cancelable upon 120 days notice.

     The Company’s debt obligations as of March 31, 2004 and December 31, 2003 are as follows (in thousands):

I. Consolidation of Variable Interest Entities

     In January 2003, the FASB issued its Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). A variable interest entity (“VIE”) is an entity that has (1) an insufficient amount of equity to absorb the entity’s expected losses; or (2) equity owners as a group that are not able to make decisions about the entity’s activities, do not have the obligation to absorb the entity’s expected losses or do not have the right to receive the entity’s expected residual returns. FIN 46 requires the consolidation

- 9 -

of a VIE when the Company will absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. FIN 46 applies to all VIEs effective this reporting period.

     In the normal course of business, we enter into lot option purchase contracts, generally through a deposit of cash or letter of credit, for the right to purchase land or lots at a future point in time with predetermined terms. Our liability with respect to option contracts generally is limited to forfeiture of the related non-refundable deposits or letters of credit, which totaled $30,048,000 at March 31, 2004. Pursuant to FIN 46, certain of these contracts are a variable interest for MDC in the entity with which the option purchase contract was entered “Land Seller VIE”. As of March 31, 2004, we have evaluated all outstanding lot option purchase contracts to which MDC is a party. Through this evaluation, we have requested financial information from the Land Seller VIEs, assessed the market conditions where we have contracted with the Land Seller VIEs, and evaluated whether we retain the risk of loss from the Land Seller VIE’s activities or are entitled to receive a majority of the Land Seller VIE’s residual returns, or both.

     Based on this evaluation, we have consolidated one Land Seller VIE from which the Company is purchasing undeveloped residential lots under an option contract in Nevada. This contract became effective in February 2004 and is structured as a bulk takedown that is scheduled to close in June 2004. Despite the relatively short duration of this contract, the consolidation of this VIE was driven by the recent extraordinary market conditions in Las Vegas, and the Company concluded that MDC retained the majority of the residual returns. Due to the limitation on our ability to obtain financial information from the Land Seller VIE, we have reflected the consolidation of this VIE as $10,990,000 in land under option contract, not owned (representing the estimated fair value of the land subject to the option purchase contract) and $10,890,000 in obligations related to land under option contract, not owned in our consolidated balance sheet at March 31, 2004. The Company’s non-refundable cash deposit related to this land option contract is $100,000.

- 10 -

J. Supplemental Guarantor Information

     The Company’s senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally by the following subsidiaries (collectively, the “Guarantor Subsidiaries”).

	•		M.D.C. Land Corporation
	•		RAH of Texas, LP
	•		RAH Texas Holdings, LLC
	•		Richmond American Construction, Inc.
	•		Richmond American Homes of Arizona, Inc.
	•		Richmond American Homes of California, Inc.
	•		Richmond American Homes of California (Inland Empire), Inc.
	•		Richmond American Homes of Colorado, Inc.
	•		Richmond American Homes of Delaware, Inc.
	•		Richmond American Homes of Florida, LP.
	•		Richmond American Homes of Illinois, Inc.
	•		Richmond American Homes of Maryland, Inc.
	•		Richmond American Homes of Nevada, Inc.
	•		Richmond American Homes of New Jersey, Inc.
	•		Richmond American Homes of Pennsylvania, Inc.
	•		Richmond American Homes of Texas, Inc.
	•		Richmond American Homes of Utah, Inc.
	•		Richmond American Homes of Virginia, Inc.
	•		Richmond American Homes of West Virginia, Inc.

     Subsid