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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, 1998
/ / 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 (SS 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 (14,768,385 shares) as of February 24,
1999, was $384,901,034. The number of shares of common stock of
The Ryland Group, Inc., outstanding on February 24, 1999, was 14,844,307.
1
DOCUMENTS INCORPORATED BY REFERENCE
Name of Document Location in Report
- ---------------- ------------------
Proxy Statement for 1999 Annual Meeting of Stockholders Parts I, III
Annual Report to Shareholders for the year ended
December 31, 1998 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
Form 10-K for the year-ended December 31, 1997 Part IV
2
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
3
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 21 markets in 14 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, title
and escrow services.
Homebuilding
- ------------
Markets
- ------- The homebuilding segment markets and builds homes that are
constructed on-site in three regions which comprise 21 markets across the
nation. The three regions are the North (consisting of the Mid-Atlantic and
Midwest), South (consisting of the Southeast and Southwest) and West. As of
December 31, 1998, the Company operated in the following metropolitan markets:
Region Major Markets Served
------ --------------------
North: Mid-Atlantic:
------------
Baltimore, Washington, D.C./Northern Virginia
Midwest:
-------
Chicago, Cincinnati, Indianapolis, Minneapolis
South: Southeast:
---------
Atlanta, Charlotte, Greenville, Orlando, West Florida
Southwest:
---------
Austin, San Antonio, Dallas, Houston,
West: West:
----
Denver, Phoenix, San Diego, Los Angeles,
San Jose, Bay Area/Sacramento
The Company markets detached and attached single family homes generally
targeted to the entry level, first-and second-time move-up home buyer, as well
as the active-adult retirement market 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 1998, the Company's average closing price
for its homes was $185,000.
During the last five 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
4
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 1998, the Company completed
the acquisition of The Regency Organization ("Regency"), a privately held
homebuilder with operations in Pasco, Hernando and Citrus Counties, Florida,
immediately north of the Company's existing Tampa Bay operations. The
acquisition afforded the Company the opportunity to gain market share in a
rapidly growing area of Florida and an immediate presence in the Florida
retirement market.
During the past year, the Company began the process of exiting three of its
smaller markets, Delaware Valley, Portland, and Salt Lake, which did not meet
its strategic objectives. In addition, several divisions were combined to
increase operating efficiencies.
Land Acquisition and Development
- -------------------------------- As of December 31, 1998, the Company
operated in approximately 250 communities in 21 metropolitan markets in 14
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, 1998, the Company had deposits and letters of credit
outstanding of $30.6 million in connection with option and land purchase
contracts having a total purchase price of $387.9 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.
5
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 as well as, active adult
retirement market 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. In the first quarter of 1998, the Company sold the majority of
its loan servicing portfolio. Future earnings from retail operations will be
negatively impacted by the sale. Operations of the financial services segment
include retail loan origination, loan servicing, title, escrow, homeowners
insurance and investment activities.
Retail Operations
Loan Origination
- ---------------- In 1998, 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 1998, RMC originated 8,412
loans totaling approximately $1.2 billion of which 70 percent were for
purchases of homes built by the Company and 30 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 the Company's
homebuilder loan production by deploying loan officers directly in the
Company's homebuilding
6
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 70 percent in 1998.
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 repositioning of the financial services segment in recent
years led to the sale of the majority of its loan servicing portfolio in the
first quarter of 1998. As a result, the Company primarily services loans that
it originates for only a short period of time prior to the sale of servicing
rights in the secondary market on a monthly or quarterly basis. As of
December 31, 1998, the Company's loan servicing portfolio was $301 million.
Future earnings of the financial services segment will be negatively impacted
due to reductions in loan servicing income attributable to the aforementioned
sale.
Title and Escrow Services
- ------------------------- Cornerstone Title Company, a wholly owned
subsidiary, provides title services primarily to the Company's customers. As
of December 31, 1998, Cornerstone had offices in Colorado, Delaware, Florida,
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 1998, Cornerstone
Title Company captured 96% 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.
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. 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 including
7
the land approval process, and continued review by senior management 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 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. The Company also 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, accessibility of subcontractors,
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-
8
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, 1998, the Company employed 2,119 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.
On July 31, 1998, Ryland Mortgage Company ("RMC") entered into a Plea
Agreement with the United States Attorney's Office for the Middle District of
Florida to resolve all charges in connection with an indictment previously
brought against RMC (the "Indictment"). The Indictment concerns actions in
1993 related to two of RMC's loan servicing contracts with the Resolution
Trust Corporation ("RTC"). Under the terms of the Plea Agreement, RMC paid
$3.5 million in restitution plus interest, as well as a fine of $4.2 million
and admitted responsibility for two charges of impeding the function of the
RTC.
As a result of the Indictment, the U.S. Department of Housing and Urban
Development ("HUD") previously had indicated that it was considering sanctions
against RMC, including possible withdrawal of RMC's right to participate in
the Federal Housing Administration ("FHA") loan program and originate FHA
loans. RMC previously entered into an agreement with HUD under which it was
allowed to originate loans and participate in the FHA loan program while HUD
considers what administrative action, if any, it will take as a result of the
resolution of the Indictment as RMC seeks to reach agreement on its ability to
continue to participate in the FHA loan program with representatives of HUD.
The Company also is exploring alternative arrangements in the event that RMC
is not successful in these efforts. Termination of RMC's right to participate
could be followed by similar exclusions from the loan programs of other RMC
investors. No assurance can be given regarding the results of these ongoing
discussions with HUD and its possible impact on RMC and its business.
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.
9
Item 4. Submission of Matters 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, 1998.
10
Separate Item: Executive Officers of the Registrant
Name Age Position (date elected to position)
Prior Business Experience
- ---------------------------------------------------------------------------
R. Chad Dreier 51 Chairman of the Board of Directors (1994), President
and Chief Executive Officer of the Company (1993).
Michael D. Mangan 42 Executive Vice President and Chief Financial Officer
of the Company (1994). Executive Vice President and
Group Chief Financial Officer of GMAC Mortgage
Corporation (1991-1994).
John M. Garrity 52 Senior Vice President of the Company (1995),
President of the South Region of Ryland Homes
(1996), President of the Southeast Region of Ryland
Homes (1994-1996). Division General Manager of Arvida
Homes (1992-1994).
Timothy J. Geckle 46 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 41 Senior Vice President, Human Resources of the Company
(1996). Vice President, Human Resources, United
States Fidelity & Guaranty Company (1991-1996).
Frank J. Scardina 50 Senior Vice President of the Company (1994),
President of West Region of Ryland Homes (1996),
President of California Region of Ryland Homes
(1994-1996).
Daniel G. Schreiner 41 Senior Vice President of the Company (1999),
President, Ryland Mortgage Company (1998).
President, Kaufman and Broad Mortgage Company
(1991-1998).
Kipling W. Scott 44 Senior Vice President of the Company (1995),
President of the North Region of Ryland Homes
(1997), President of Midwest Region of Ryland Homes
(1994-1997).
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 9 of the Proxy Statement for the 1999 Annual Meeting of
Stockholders.
11
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, 1998.
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, 1998.
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, 1998.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
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", Market Risk Summary, appearing on page 24
of the Annual Report to Shareholders for the year ended December 31, 1998.
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,
1998.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
During the fiscal years ended December 31, 1998 and 1997, there were no
disagreements between the Company and its accountants on any matter of
accounting principle or financial statement disclosure.
12
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information as to the Company's Directors is incorporated by reference from
pages 2 and 4 of the Company's Proxy Statement for its 1999 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
5 through 10 of the Company's Proxy Statement for its 1999 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 page 3
of the Company's Proxy Statement for its 1999 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.
13
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, 1998, are incorporated by reference
in Item 8:
Consolidated Statements of Earnings - years ended December 31, 1998,
1997, and 1996.
Consolidated Balance Sheets - December 31, 1998 and 1997.
Consolidated Statements of Stockholders' Equity - years ended
December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows - years ended December 31,
1998, 1997 and 1996.
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.
14
(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 November 4, 1993.
(Incorporated by reference from Registration Statement on
Form S-3, Registration No. 33-48071)
4.5 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)
4.6 Senior Notes dated as of June 10, 1996. (Incorporated by
reference from Registration Statement on Form S-3,
Registration No. 333-03791)
4.7 Senior Subordinated Notes dated as of April 13, 1998.
(Incorporated by reference from Registration Statement on
Form S-3, Registration No. 33-50933 and 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 * 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 * 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)
10.5 Second Amended and Restated Credit Agreement dated as of June 24,
1997, between The Ryland Group, Inc., and certain banks.
(Incorporated by reference from Form 10-K for the year ended
December 31, 1997)
15
(a) 3. Exhibits, continued
Exhibit No.
- ----------
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. (Incorporated by reference from Form 10-K for the year-
ended December 31, 1997)
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. (Incorporated by reference from Form 10-K for the year-
ended December 31, 1997)
10.10 * 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 * 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 * 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 * 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.
(Incorporated by reference from Form 10-K for the year ended
December 31, 1997)
10.14* Amendment No. 1 to the Executive and Director Deferred
Compensation Plan effective January 1, 1998. (Incorporated by
reference from Form 10-K for the year ended December 31, 1997)
10.15* Non-Employee Directors' Stock Unit Plan between The Ryland Group,
Inc. and the Board of Directors, effective January 1, 1998.
(Incorporated by reference from Form 10-K for the year ended
December 31, 1997)
11 Computation of Per Share Earnings.
(Filed herewith)
13 Annual Report to Shareholders for the year ended December
31, 1998.
(Filed herewith)
16
(a) 3. Exhibits, continued
Exhibit No.
- ----------
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)
* Executive Compensation Plan or Arrangement
(b) There were no reports on Form 8-K filed in the fourth quarter of 1998.
17
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
Description of Period Expenses Accounts Transfers Period (1)
Valuation allowance:
Homebuilding inventories
1998 $2,967 $4,188 $ 0 $ (922) $ 6,233
1997 3,052 580 0 (665) 2,967
1996 8,303 0 0 (5,251) 3,052
Valuation allowance:
Investment in and advances
to joint ventures
1998 $ 0 $1,000 $ 0 $ 0 $1,000
1997 6,500 0 0 (6,500) 0
1996 7,933 0 0 (1,433) 6,500
(1) Balances as of December 31, 1998, 1997 and 1996, represent valuation
allowances for assets to be disposed of.
18
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 10, 1999
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 10, 1999
R. Chad Dreier
Chief Executive Officer
Principal Financial Officer:
/s/ Michael D. Mangan March 10, 1999
Michael D. Mangan
Chief Financial Officer
Principal Accounting Officer:
/s/ David L. Fristoe March 10, 1999
David L. Fristoe
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;
Charlotte St. Martin; Leslie M. Frecon; John O. Wilson.
By: /s/ Michael D. Mangan March 10, 1999
Michael D. Mangan
As Attorney-in-Fact
19
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Sequentially
Numbered Pages
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INDEX OF EXHIBITS
11 Computation of Per Share Earnings 21
13 Annual Report to Shareholders for the year ended
December 31, 1998 22 - 55
21 Subsidiaries of the Registrant 56
23 Consent of Ernst & Young LLP, Independent Auditors 57
24 Power of Attorney 58
27 Financial Data Schedule 59
20