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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/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, 1997
/ / Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
[No Fee Required]
Commission File Number 1-8029
THE RYLAND GROUP, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-0849948
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
11000 Broken Land Parkway
Columbia, Maryland 21044
(Address of principal executive offices)
Registrant's telephone number, including area code: (410) 715-7000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, (Par Value $1.00) New York Stock Exchange
Common Share Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
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 (229.405 of this chapter) 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. / /
The aggregate market value of the Common Stock of The Ryland Group, Inc., held
by non-affiliates of the registrant (14,624,082 shares) as of March 2, 1998,
was $409,474,296. The number of shares of common stock of The Ryland Group,
Inc., outstanding on March 2, 1998, was 14,820,217.
DOCUMENTS INCORPORATED BY REFERENCE
Name of Document Location in Report
- ---------------- ------------------
Proxy Statement for 1998 Annual Meeting of Stockholders Parts I, III
Annual Report to Shareholders for the year ended
December 31, 1997 Parts II, IV
Form 8-K filed September 12, 1989 Part IV
Form 10-K for the year ended December 31, 1989 Part IV
Form 8-K filed August 6, 1992 Part IV
Form 10-K for the year ended December 31, 1990 Part IV
Form 10-Q for the quarter ended June 30, 1992 Part IV
Registration Statement on Form S-3, Registration 33-48071 Part IV
Form 10-Q for the quarter ended June 30, 1994 Part IV
Form 8-K filed October 24, 1996 Part IV
Registration Statement on Form S-3, Registration 333-03791 Part IV
Form 10-K for the year-ended December 31, 1995 Part IV
Form 8-K filed July 2, 1996 Part IV
Form 10-K for the year-ended December 31, 1996 Part IV
THE RYLAND GROUP, INC.
FORM 10-K
INDEX
Page
PART I. Number
------
Item 1. Business.....................................................4
Item 2. Properties...................................................9
Item 3. Legal Proceedings............................................9
Item 4. Submission of Matters to a Vote of Security Holders.........10
PART II.
Item 5. Market for the Company's Common Stock and Related
Stockholder Matters...........................................12
Item 6. Selected Financial Data.......................................12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk....12
Item 8. Financial Statements and Supplementary Data...................12
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure......................................12
PART III.
Item 10. Directors and Executive Officers of the Registrant............13
Item 11. Executive Compensation........................................13
Item 12. Security Ownership of Certain Beneficial Owners
and Management................................................13
Item 13. Certain Relationships and Related Transactions................13
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K...........................................14
SIGNATURES.................................................................19
INDEX OF EXHIBITS..........................................................20
PART I
Item 1. Business.
The Ryland Group, Inc. (the "Company"), is a leading national homebuilder and
mortgage-related financial services firm. Established in 1967, the Company
builds homes in 23 divisions in 20 states and is one of the largest single-
family on-site homebuilders in the United States. The Company's homebuilding
segment specializes in the sale and construction of single-family attached and
detached housing. The financial services segment, whose business is
conducted through Ryland Mortgage Company and its subsidiaries (RMC),
complements the Company's homebuilding activities by providing various
mortgage-related products and services for retail customers including loan
origination, loan servicing, title and escrow services. The financial
services segment also conducts investment activities.
Homebuilding
- ------------
Markets
- --------
The homebuilding segment markets and builds homes that are constructed on-site
in three regions which comprise 23 divisions across the nation. The three
regions are the North (consisting of the Mid-Atlantic and Midwest Divisions),
South (consisting of the Southeast and Southwest Divisions) and West. As of
December 31, 1997, the Company operated in the following metropolitan markets:
Region Major Markets Served
------ --------------------
North: Mid-Atlantic Divisions:
-----------------------
Baltimore, Delaware Valley/Philadelphia,
Washington, D.C./Northern Virginia
Midwest Divisions:
------------------
Chicago, Cincinnati, Indianapolis, Minneapolis
South: Southeast Divisions:
--------------------
Atlanta, Charlotte, Greenville, Orlando, Tampa
Southwest Divisions:
--------------------
Austin, Dallas, Houston, San Antonio
West: Western Divisions:
------------------
Denver, Los Angeles/Pacific Inland, Phoenix, Portland,
Salt Lake City, San Diego, San Jose Bay Area/Sacramento
The homebuilding segment sells under the name of Brock Homes in Southern
California (except for San Diego where the Company sells under the Ryland
Homes name), Larchmont Homes in Sacramento, California, Scott Felder Homes in
certain Texas communities and Ryland Homes in all other areas.
The Company markets detached and attached single family homes generally
targeted to the entry level, first-and second-time move-up home buyer through
a diverse product line tailored to local styles and preferences in each of its
geographic markets. The product line offered in a particular community is
determined in conjunction with the land acquisition process, and is dependent
upon a number of factors, including consumer preferences, competitive product
offerings and the cost of building lots in the community. In 1997, the
Company's average closing price for its homes was $182,000.
During the last four years, the Company has substantially updated its product
line and over the past year, the Company again introduced many new home
designs across the country. The Company generally outsources architectural
services to a network of architects to increase creativity and to ensure that
its home designs are consistent with local market preferences. In addition,
through flexible supply arrangements and construction methods, the Company has
significantly improved its ability to quickly bring new home designs to market
and modify existing products.
The Company's operations in each of its homebuilding markets may differ based
on a number of market-specific factors. These factors include regional
economic conditions and job growth, land availability and the local land
development process, consumer tastes, competition from other builders of new
homes and home resale activity. The Company considers each of these factors
when entering into new markets or determining the extent of its operations and
capital allocation in existing markets. During 1997, the Company completed
its first full year of operations in Portland, Oregon.
During the past year, due to economic uncertainties and competitive pressures
in the Mid-Atlantic region, the Company continued to reallocate capital out of
the Mid-Atlantic and into other regions where the Company believes it can
achieve higher returns.
Land Acquisition and Development
- --------------------------------
As of December 31, 1997, the Company operated in approximately 270 communities
in 23 metropolitan markets in 20 states. The Company's objective is to
control a portfolio of building lots sufficient to meet anticipated
homebuilding requirements for a period of two to three years. The land
acquisition process is controlled through a formal corporate land approval
committee to help ensure that transactions meet the Company's standards for
financial performance and risk. In the ordinary course of its homebuilding
business, the Company utilizes both direct acquisition and option contracts to
control building lots for use in the sale and construction of homes. The
Company's direct land acquisition activities include the bulk purchase of
finished building lots from land developers and the purchase of undeveloped,
entitled land from various third parties. The Company generally does not
purchase unentitled or unzoned land. Option contract agreements are generally
limited to finished building lots.
Although control of lot inventory through the use of option contracts
minimizes the Company's investment, such a strategy is not viable in certain
markets due to the absence of third party land developers. In other markets,
competitive conditions may preclude the Company from controlling quality
building lots solely through the use of option contracts. In such situations,
the Company may acquire undeveloped, entitled land and/or finished lots on a
bulk basis. The Company utilizes selective development of entitled land in
order to gain access to prime locations, increase margins and position the
Company as a leader in the community through its influence over the
community's character, layout and amenities.
As of December 31, 1997, the Company had deposits and letters of credit
outstanding of $29.8 million in connection with option and land purchase
contracts having a total purchase price of $310.8 million. These options and
commitments expire at various dates through 2001.
Materials Costs
- ---------------
Substantially all materials used in the construction of homes are available
from a number of sources, but may fluctuate in price due to various factors.
To increase purchasing efficiencies, the Company standardizes certain building
materials and products in its homes and may procure such products through
national supply contracts. The Company operates a plant in Maryland that
produces and ships rough lumber packages and trim materials to building sites
in its Baltimore, Maryland and Washington, D.C./Northern Virginia markets. In
other markets, the Company may purchase rough lumber packages from outside
suppliers where this is determined to be the most cost effective procurement
and construction approach.
Production Management and Subcontractors
- ----------------------------------------
Substantially all on-site construction is performed for a fixed price by
independent subcontractors selected on a competitive bid basis. The Company
generally requires a minimum of three competitive bids for each phase of
construction. Construction activities are supervised by the Company's
production supervisors who schedule and coordinate subcontractor work, monitor
quality and ensure compliance with local zoning and building codes. The
Company has an integrated financial and homebuilding management information
system which assists in scheduling production and controlling costs. Through
this system, the Company monitors the construction status and job costs
incurred for each home for each phase of construction. The system provides
for detailed budgeting and allows the Company to monitor and control actual
costs versus construction bids for each subcontractor. The Company has, on
occasion, experienced shortages of skilled labor in certain markets. If
shortages were to occur in the future, such shortages could result in longer
construction times and higher costs than those experienced in the past.
Marketing and Customer Service
- ------------------------------
The Company generally markets it's homes to entry level, first and second-time
move-up buyers through targeted product offerings in each of the communities
in which it operates. The Company's marketing strategy is determined during
the land acquisition and feasibility stage of a community's development. The
Company's homes are sold by employees and independent real estate brokers,
generally by showing furnished model homes. The Company reports a new order
when a customer's sales contract is approved, and records revenue from a sale
at closing. The Company normally commences construction of homes when a
customer has selected a lot and floor plan and has received preliminary
mortgage approval. However, construction of homes may begin prior to a sale to
satisfy market demand for completed homes and to facilitate construction
scheduling.
The Company provides each homeowner with a comprehensive one-year warranty at
the time of sale and a ten-year warranty covering loss related to structural
defects. The Company believes its warranty program meets or exceeds terms
customarily offered in the homebuilding industry.
Financial Services
- ------------------
The Company repositioned its financial services segment in recent years
through a strategy consisting of (1) focusing on retail mortgage loan
originations and improving the efficiency of these activities by establishing
regional operating centers (2) divesting of non-core assets and lines of
business, (3) leveraging its affiliation with the company's homebuilding
segment to increase its capture rate for builder loans and (4) reaching
mortgage customers directly at the point of sale through the use of
technology. Operations of the financial services segment include retail loan
origination, loan servicing, title, escrow, homeowners insurance and
investment activities.
RETAIL OPERATIONS
Loan Production
- ---------------
In 1997, the Company's mortgage origination operations consisted of both
builder loans, which are originated in connection with the sale of the
Company's homes, and spot loans, which are unrelated to the financing of homes
built by the Company. During 1997, RMC originated 7,248 loans totaling
approximately $1.0 billion of which 66 percent were for purchases of homes
built by the Company and 34 percent were for purchases of homes built by
others, purchases of existing homes, or for the refinancing of existing
mortgage loans. The Company has increased its focus on builder loan
production by deploying loan officers directly in the Company's homebuilding
communities and by utilizing traffic and prospect information generated by the
Company's homebuilding sales and marketing staff. RMC's capture rate of the
Company's homebuilding segment customers was 61 percent in 1997. The capture
rate declined early in 1997 as the Company transitioned to its new regional
operating centers, but increased to 68 percent for the fourth quarter of 1997.
The Company arranges various types of mortgage financing including
conventional, Federal Housing Administration (FHA) and Veterans Administration
(VA) mortgages with various fixed- and adjustable-rate features. The
Company's mortgage operations are approved by Federal Home Loan Mortgage
Corporation (FHLMC), Federal National Mortgage Association (FNMA) and
Government National Mortgage Association (GNMA).
Loan Servicing
- --------------
The Company services certain loans that it originates, as well as loans
originated by others. As of December 31, 1997, the Company's loan servicing
portfolio was $4.5 billion and included loans subserviced for others totaling
$1.3 billion. During 1997, the Company sold servicing rights in excess of
amounts originated during the year due to the economic conditions in the
market place. Future earnings of the financial services segment will be
negatively impacted due to reductions in loan servicing income attributable to
the aforementioned sales. The Company is currently evaluating a potential
sale of a significant portion of its remaining loan servicing portfolio.
Title and Escrow Services
- -------------------------
Cornerstone Title Company, a wholly owned subsidiary, provides title services
primarily to the Company's customers. As of December 31, 1997, Cornerstone
had offices in Delaware, Florida, Georgia, Illinois, Maryland, New Jersey,
Ohio, Texas and Virginia. The Company also operates an escrow Company in
California that performs escrow and loan closing functions primarily on homes
built by the Company. During 1997, Cornerstone Title Company captured 95% of
the title and escrow business related to settlement of the Company's homes in
those markets in which it operates.
INVESTMENT OPERATIONS
The Company's investment operations hold certain assets, primarily mortgage-
backed securities and notes receivable, which were obtained as a result of the
exercise of redemption rights on various mortgage-backed bonds previously
owned by the Company's limited-purpose subsidiaries. The Company earns a net
interest spread on the investment portfolio and may periodically realize gains
from the sale of mortgage-backed securities from the portfolio.
Limited-Purpose Subsidiaries
- ----------------------------
The Company's limited-purpose subsidiaries no longer issue mortgage-backed
bonds and mortgage-participation securities, but they continue to hold
collateral for previously issued mortgage-backed bonds in which the Company
maintains a residual interest. Revenues of the limited-purpose subsidiaries
consist of interest on mortgage collateral subject to bond indebtedness.
Expenses consist primarily of interest on the outstanding bonds and
amortization of deferred costs. Revenues, expenses and portfolio balances
continue to decline as the mortgage collateral pledged to secure the bonds
decreases due to scheduled principal payments, prepayments and exercises of
early redemption provisions. Revenues have approximated expenses for the last
three years.
Real Estate and Economic Conditions
- -----------------------------------
The Company is significantly affected by the cyclical nature of the
homebuilding industry, which is sensitive to fluctuations in economic
activity, interest rates and levels of consumer confidence, the effects of
which differ among the various geographic markets in which the Company
operates. Higher interest rates may affect the ability of buyers to qualify
for mortgage financing and decrease demand for new homes. As a result, the
Company's home sales and mortgage originations generally will be negatively
impacted by rising interest rates. Prepayments, which are higher in a falling
interest rate environment, reduce the value of loan servicing rights in the
Company's loan servicing portfolio. Movements in interest rates may also
affect the market value of the Company's investment portfolio. The Company's
business is also affected by local economic conditions, such as employment
rates and housing demand in the markets in which it builds homes.
Inventory risk can be substantial for homebuilders. The market value of land,
building lots and housing inventories can fluctuate significantly as a result
of changing market and economic conditions. In addition, inventory carrying
costs can be significant and can result in losses in poorly performing
projects or markets. The Company must, in the ordinary course of its
business, continuously seek and make acquisitions of land for expansion into
new markets as well as for replacement and expansion of land inventory within
its current markets. Although the Company employs various measures designed
to manage inventory risks, there can be no assurance that such measures will
be successful.
Competition
- -----------
The residential housing industry is highly competitive, and the Company
competes in each of its markets with a large number of national, regional and
local homebuilding companies. Some of these companies are larger than the
Company and have greater financial resources. In addition, the general
increase in the availability of capital and financing in recent years has made
it easier for both large and small homebuilders to expand and enter new
markets and has increased competition. In addition, the Company competes with
other housing alternatives including existing homes and rental housing.
Principal competitive factors in homebuilding are home price, design, quality,
reputation, relationship with developers, availability and location of lots
and availability of customer financing.
The financial services segment competes with other mortgage bankers to arrange
financing for home buyers and refinancing customers. Principal competitive
factors include interest rates and other features of mortgage loan products
available to the consumer.
Regulatory and Environmental Matters
- ------------------------------------
The homebuilding segment is subject to various local, state and federal
statutes, ordinances, rules and regulations concerning zoning, building
design, construction and similar matters, including local regulations which
impose restrictive zoning and density requirements in order to limit the
number of homes that can be built within the boundaries of a particular area.
The Company may also be subject to periodic delays in homebuilding projects
due to building moratoria in any of the areas in which it operates.
Generally, such moratoria relate to insufficient water or sewage facilities or
inadequate roads or local services.
The Company and its competitors are subject to a variety of local, state and
federal statutes, ordinances, rules and regulations concerning the protection
of health and the environment. The Company is also subject to a variety of
environmental conditions that can affect its business and its homebuilding
projects. The particular environmental laws which apply to any given
homebuilding site vary greatly according to the site's location, the site's
environmental condition and the present and former uses of the site, as well
as adjoining properties. Environmental laws and conditions may result in
delays, may cause the Company to incur substantial compliance and other costs,
and can prohibit or severely restrict homebuilding activity in certain
environmentally sensitive regions or areas.
The Company's financial services segment is subject to the rules and
regulations of HUD, FHA, VA, FNMA, FHLMC, and GNMA ("regulatory agencies")
with respect to originating, processing, selling and servicing mortgage loans.
In addition, there are other federal and state statutes and regulations
affecting such activities. These rules and regulations, among other things,
prohibit discrimination and establish underwriting guidelines which include
provisions for inspections and appraisals, require credit reports on
prospective borrowers and fix maximum loan amounts. Moreover, the Company is
required to submit to the regulatory agencies audited financial statements
annually, and each regulatory entity has its own financial requirements. The
Company's affairs are also subject to examination by the regulatory agencies
at all times to assure compliance with the applicable regulations, policies
and procedures. Mortgage origination activities are subject to the Equal
Credit Opportunity Act, Federal Truth-in-Lending Act and Real Estate
Settlement Procedures Act and the regulations promulgated thereunder which
prohibit discrimination and require the disclosure of certain information to
mortgagors concerning credit and settlement costs.
Employees
- ---------
At December 31, 1997, the Company employed 2,229 people. The Company
considers its employee relations to be good. No employees are represented by
a collective bargaining agreement.
Item 2. Properties
The Company leases office space for its corporate headquarters in Columbia,
Maryland. In addition, the Company leases office space in the various markets
in which it operates. The Company operates a building component plant in New
Windsor, Maryland.
Item 3. Legal Proceedings
Contingent liabilities may arise from the obligations incurred in the ordinary
course of business, or from the usual obligations of on-site housing producers
for the completion of contracts.
In 1995, one current and two former officers of Ryland Mortgage Company
("RMC") were notified that they were targets of a federal grand jury
investigation concerning alleged misappropriation of funds from the Resolution
Trust Corporation ("RTC") for activities during 1993. Subsequently, a federal
grand jury in Jacksonville, Florida returned indictments against RMC and the
three individuals. The indictments charge that RMC, acting through the three
individuals, conspired to defraud approximately $3.5 million from the RTC in
connection with the reconciliation of payments and disbursements handled by
RMC in its capacity as a servicer for certain mortgage servicing contracts
with the RTC. The prosecuting assistant United States attorney indicated that
the Company is responsible for restitution of the amount allegedly defrauded
and, if convicted on all counts, RMC could receive fines of a significant but
undetermined amount. RMC intends to vigorously defend the allegations
contained in the indictments. No prediction can be made at this time
regarding the result of the indictments or whether any civil action against
the Company may be initiated by the RTC or its successor.
The Company is party to various other legal proceedings generally incidental
to its businesses. Based on evaluation of these other matters and discussions
with counsel, management believes that liabilities to the Company arising from
these other matters will not have a material adverse effect on the financial
condition of the Company.
Item 4. Submission to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1997.
Separate Item: Executive Officers of the Registrant
Name Age Position (date elected to position)
Prior Business Experience
- ------------------------------------------------------------------------------
R. Chad Dreier 50 Chairman of the Board of the Company (1994),
President and Chief Executive Officer of the
Company (1993). Executive Vice President and Chief
Financial Officer of Kaufman and Broad Home
Corporation and Chairman of Kaufman and Broad
Mortgage Company (1986-1993).
John M. Garrity 51 Senior Vice President of the Company, President of
Southeast Region (1994) and President of the South
Region (1996). Division General Manager of Arvida
Homes (1992-1994).
Timothy J. Geckle 45 Senior Vice President, General Counsel and
secretary of the Company (1997). Vice President,
Deputy General Counsel (1995-1996). Corporate
Counsel (1991-1995).
Edward W. Gold 40 Senior Vice President of Human Resources of the
Company (1996). Vice President of Human Resources,
United States Fidelity & Guaranty Company
(1991-1996).
Michael D. Mangan 41 Executive Vice President and Chief Financial
Officer of the Company (1994). President of Ryland
Mortgage Company (1997). Executive Vice President
and Group Chief Financial Officer of GMAC Mortgage
Corporation (1991-1994).
Frank J. Scardina 49 Senior Vice President of the Company (1994),
President of West Region (1996) and President of
California Region (1994). Division President
(1993).
Kipling W. Scott 43 Senior Vice President of the Company, President of
Midwest Region (1994) and President of the North
Region (1997). Midwest Region Director of Land
Resources & Planning (1993). President of
Development Management Services, Inc. (1989-1993).
All officers are elected by the board of directors.
There are no family relationships, arrangements or understandings pursuant to
which any of the officers listed were elected. For a description of
employment and severance arrangements with certain executive officers of the
Company, see page 11 of the Proxy Statement for the 1998 Annual Meeting of
Stockholders.
PART II
Item 5. Market for the Company's Common Stock and Related Stockholder
Matters.
The information required by this item is incorporated by reference from the
section entitled "Common Stock Prices and Dividends" appearing on page 45 of
the Annual Report to Shareholders for the year ended December 31, 1997.
Item 6. Selected Financial Data.
The information required by this item is incorporated by reference from the
section entitled "Selected Financial Data" appearing on page 19 of the Annual
Report to Shareholders for the year ended December 31, 1997.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required by this item is incorporated by reference from the
section entitled "Management's Discussion and Analysis of Results of
Operations and Financial Condition" appearing on pages 20 through 24 of the
Annual Report to Shareholders for the year ended December 31, 1997.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exempt from this disclosure requirement due to market
capitalization of less than $2.5 billion on January 28, 1997.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is incorporated by reference from the
information appearing on pages 25 through 42 and from the section entitled
"Quarterly Financial Data and Common Stock Prices and Dividends" appearing on
page 45 of the Annual Report to Shareholders for the year ended December 31,
1997.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
During the fiscal years ended December 31, 1997 and 1996, there were no
disagreements between the Company and its accountants on any matter of
accounting principle or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information as to the Company's Directors is incorporated by reference from
pages 3 and 6 of the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders. Information as to the Company's executive officers is shown
under Part I as a separate item.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference from pages
7-12 of the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated by reference from pages
4 and 5 of the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders.
Item 13. Certain Relationships and Related Transactions.
There are no transactions, business relationships or indebtedness required to
be reported by the Company pursuant to this Item.
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 Ryland Group,
Inc., and Subsidiaries, included in the Annual Report to
Shareholders for the year ended December 31, 1997, are incorporated
by reference in Item 8:
Consolidated Statements of Earnings - years ended December 31, 1997,
1996, and 1995.
Consolidated Balance Sheets - December 31, 1997 and 1996.
Consolidated Statements of Stockholders' Equity - years ended
December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows - years ended December 31,
1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
(a) 2. Financial Statement Schedules. (filed herewith) Page No.
-------
Schedule II - Valuation and Qualifying Accounts............. 18
Schedules not listed above have been omitted because they are either
inapplicable or the required information has been given in the
financial statements or notes thereto.
(a) 3. Exhibits
Exhibit No.
----------
3.1 Charter of The Ryland Group, Inc., as amended.
(Incorporated by reference from Form 10-K for the year ended
December 31, 1989)
3.2 Bylaws of The Ryland Group, Inc., as amended.
(Incorporated by reference from Form 10-K for the year ended
December 31, 1996)
4.1 Rights Agreement dated as of October 18, 1996, between The
Ryland Group, Inc., and ChaseMellon Shareholder Services,
L.L.C. (Incorporated by reference from Form 8-K filed
October 24, 1996)
4.2 Articles Supplementary dated as of August 31, 1989.
(Incorporated by reference from Form 8-K filed September 12,
1989)
4.3 Indenture dated as of July 15, 1992, between The Ryland
Group, Inc., and Security Trust Company, N.A., as Trustee
(Incorporated by reference from Form 8-K filed August 6,
1992)
4.4 Senior Subordinated Notes dated as of July 23, 1992.
(Incorporated by reference from Form 8-K filed August 6,
1992)
4.5 Senior Subordinated Notes dated as of November 4, 1993.
(Incorporated by reference from Registration Statement on
Form S-3, Registration No. 33-48071)
4.6 Indenture dated as of June 28, 1996, between The Ryland
Group, Inc., and Chemical Bank, as Trustee.
(Incorporated by reference from Form 8-K filed July 2, 1996)
4.7 Senior Notes dated as of June 10, 1996. (Incorporated by
reference from Registration Statement on Form S-3,
Registration No. 333-03791)
10.1 Lease Agreement between Seventy Corporate Center Limited
Partnership and The Ryland Group, Inc., dated April 17, 1990.
(Incorporated by reference from Form 10-K for the year ended
December 31, 1990)
10.2(1) 1992 Equity Incentive Plan of The Ryland Group, Inc.
(Incorporated by reference from Form 10-Q for the quarter
ended June 30, 1992)
10.3(1) 1992 Non-Employee Director Equity Plan of The Ryland Group,
Inc., as amended. (Incorporated by reference from Form 10-Q
for the quarter ended June 30, 1994)
10.4 Restated Credit Agreement dated as of July 21, 1995, between
The Ryland Group, Inc., and certain banks.
(Incorporated by reference from Form 10-K for the year ended
December 31, 1995)
(a) 3. Exhibits, continued
Exhibit No.
----------
10.5 Second Amended and Restated Credit Agreement dated as of June
24, 1997, between The Ryland Group, Inc., and certain banks.
(Filed herewith)
10.6 Restated Loan and Security Agreement dated as of June 16,
1995, between Ryland Mortgage Company; Associates Mortgage
Funding Corporation; BankOne, Texas, N.A.; and certain
lenders. (Incorporated by reference from Form 10-K for the
year ended December 31, 1995)
10.7 First Amendment to Restated Loan and Security Agreement dated
as of June 3, 1996, between Ryland Mortgage Company,
Associate Mortgage Funding Corporation, BankOne, Texas, N.A.,
and certain lenders. (Incorporated by reference from Form
10-K for the year ended December 31, 1996)
10.8 Second Amendment to Restated Loan and Security Agreement
dated as of June 23, 1997, between Ryland Mortgage Company,
Associate Mortgage Funding Corporation, BankOne, Texas, N.A.,
and certain lenders. (Filed herewith)
10.9 Third Amendment to Restated Loan and Security Agreement dated
as of December 31, 1997, between Ryland Mortgage Company,
Associate Mortgage Funding Corporation, BankOne, Texas, N.A.,
and certain lenders. (Filed herewith)
10.10(1) Employment Agreement dated as of January 28, 1997, between
R. Chad Dreier and The Ryland Group, Inc. (Incorporated by
reference from Form 10-K for the year ended December 31,
1996)
10.11(1) Employment Agreement dated as of September 18, 1995 between
Michael D. Mangan and The Ryland Group, Inc. as amended and
restated as of January 28, 1997. (Incorporated by reference
from Form 10-K for the year ended December 31, 1996)
10.12(1) Senior Executive Severance Agreement dated as of January 28,
1997, between the executive officers of the Company and The
Ryland Group, Inc. (Incorporated by reference from Form 10-K
for the year ended December 31, 1996)
10.13(1) Executive and Director Deferred Compensation Plan, effective
as of January 1, 1997 between The Ryland Group, Inc. and
certain of its executive employees and Directors.
(Incorporated by reference from Form 10-K for the year ended
December 31, 1996)
10.14(1) Amendment and Restatement of the Executive and Director
Deferred Compensation Plan, as of March 1, 1997 between The
Ryland Group, Inc. and certain of its executive employees and
Directors. (Filed herewith)
10.15(1) Amendment No. 1 to the Executive and Director Deferred
Compensation Plan effective January 1, 1998.(Filed herewith)
10.16(1) Non-Employee Directors' Stock Unit Plan between The Ryland
Group, Inc. and the Board of Directors, effective January 1,
1998. (Filed herewith)
(a) 3 Exhibits, continued
Exhibit No.
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11 Statement Re Computation of Per Share Earnings.
(Filed herewith)
13 Annual Report to Shareholders for the year ended December 31,
1997. (Filed herewith)
21 Subsidiaries of the Registrant. (Filed herewith)
23 Consent of Ernst & Young LLP, Independent Auditors.
(Filed herewith)
24 Power of Attorney. (Filed herewith)
27. Financial Data Schedule. (Filed herewith)
(1)Executive Compensation Plan or Arrangement
(b) Reports on Form 8-K filed in the fourth quarter of 1997:
Form 8-K was filed with the Securities and Exchange Commission on
October 9, 1997 regarding the repurchase of Common Stock.
The Ryland Group, Inc., and Subsidiaries
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(dollar amounts in thousands)
Balance at Charged to Charged Deductions Balance at
Beginning Costs and to Other and End of
of Period Expenses Accounts Transfers (1) Period (2)
Description
Valuation allowance:
Homebuilding inventories
1997 $ 3,052 $ 580 $ 0 $ (665) $2,967
1996 8,303 0 0 (5,251) 3,052
1995 31,853 7,000 0 (30,550) 8,303
Valuation allowance:
Investment in and advances
to joint ventures
1997 $ 6,500 $ 0 $ 0 $ (6,500) $ 0
1996 7,933 0 0 (1,433) 6,500
1995 1,573 7,000 0 (640) 7,933
(1) In 1995, the Company adopted a new accounting standard, Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" (FASB 121).
As part of the implementation of FASB 121, the carrying basis of
inventories to be held and used was written down by the remaining amount
of valuation reserves provided under prior accounting rules. Deductions
for homebuilding inventories, prior to the adoption of FASB 121, were
generally related to normal inventory turnover resulting from home
closings or land sales.
(2) Balances as of December 31, 1997, 1996 and 1995, represent valuation
allowances for assets to be disposed of.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE RYLAND GROUP, INC.
By: /s/ R. Chad Dreier March 13, 1998
R. Chad Dreier, Chairman of the Board,
President, and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Principal Executive Officer:
/s/ R. Chad Dreier March 13, 1998
R. Chad Dreier
Chief Executive Officer
Principal Financial Officer:
/s/ Michael D. Mangan March 13, 1998
Michael D. Mangan
Chief Financial Officer
Principal Accounting Officer:
/s/ Stephen B. Cook March 13, 1998
Stephen B. Cook
Chief Accounting Officer
Majority of the Board of Directors: James A. Flick, Jr.; R. Chad Dreier;
Robert J. Gaw; Leonard M. Harlan; William L. Jews; William G. Kagler; John H.
Mullin, III; Charlotte St. Martin; John O. Wilson.
By: /s/ Michael D. Mangan March 13, 1998
Michael D. Mangan
As Attorney-in-Fact
Page Of
Sequentially
Numbered Pages
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INDEX OF EXHIBITS
10.5 Second Amended and Restated Credit Agreement dated 21-177
June 24, 1997, between The Ryland Group, Inc., and
certain banks.
10.8 Second Amendment to Restated Loan and Security Agreement 178-207
dated as of June 23, 1997, between Ryland Mortgage Company,
Associate Mortgage Funding Corporation, BankOne, Texas,
N.A., and certain lenders.
10.9 Third Amendment to Restated Loan and Security Agreement 208-217
dated as of December 31, 1997, between Ryland Mortgage Company,
Associate Mortgage Funding Corporation, BankOne, Texas, N.A.,
and certain lenders.
10.14(1) Amendment and Restatement of the Executive and Director 218-237
Deferred Compensation Plan, as of March 1, 1997 between The
Ryland Group, Inc. and certain of its executive employees
and directors.
10.15(1) Amendment No. 1 to the Executive and Director Deferred 238
Compensation Plan, effective January 1, 1998.
10.16(1) Non-Employee Directors' Stock Unit Plan between The 239-240
Ryland Group, Inc. and the Board of Directors, effective
January 1, 1998.
11 Statement Re Computation of Per Share Earnings 241
13 Annual Report to Shareholders for the year ended 242-276
December 31, 1997
21 Subsidiaries of the Registrant 277
23 Consent of Ernst & Young LLP, Independent Auditors 278
24 Power of Attorney 279
27 Financial Data Schedule 280
(1)Executive Compensation Plan or Arrangement
1