UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
------------- -------------
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 of (I.R.S. Employer
of incorporation or organization) Identification No.)
11000 Broken Land Parkway, Columbia, Maryland 21044
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(410) 715-7000
---------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of
common stock of The Ryland Group, Inc. outstanding on May 9, 1997 was
15,911,796.
THE RYLAND GROUP, INC.
FORM 10-Q
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
March 31, 1997 (unaudited) and
December 31, 1996 1-2
Consolidated Statements of Earnings
for the three months ended
March 31, 1997 and 1996 (unaudited) 3
Consolidated Statements of Cash Flows
for the three months ended March 31,
1997 and 1996 (unaudited) 4
Notes to Consolidated Financial
Statements (unaudited) 5-7
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition 8-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
INDEX OF EXHIBITS 16
CONSOLIDATED BALANCE SHEETS
The Ryland Group, Inc. and subsidiaries
(amounts in thousands, except share data)
March 31, December 31,
1997 1996
--------- ------------
(unaudited)
ASSETS
Homebuilding:
Cash and cash equivalents $ 28,696 $ 27,852
Housing inventories:
Homes under construction 350,159 336,782
Land under development and improved lots 221,898 237,808
------- -------
Total inventories 572,057 574,590
Property, plant and equipment 30,751 31,560
Purchase price in excess of net assets acquired 20,285 20,543
Other assets 43,175 40,739
------- -------
694,964 695,284
======= =======
Financial Services:
Cash and cash equivalents 1,299 856
Mortgage loans held for sale 95,961 180,149
Mortgage-backed securities and notes receivable 149,892 143,508
Mortgage servicing rights 9,715 9,903
Other assets 43,356 48,015
------- -------
300,223 382,431
------- -------
Other Assets:
Collateral for bonds payable of
limited-purpose subsidiaries 192,931 214,443
Net deferred taxes 30,842 31,806
Other 20,586 14,560
------- -------
Total assets $ 1,239,546 $ 1,338,524
=========== ===========
CONSOLIDATED BALANCE SHEETS
The Ryland Group, Inc. and subsidiaries
(amounts in thousands, except share data)
March 31, December 31,
1997 1996
--------- ------------
(unaudited)
LIABILTIES
Homebuilding:
Accounts payable and other liabilties $ 72,900 $ 84,651
Long-term debt 380,939 354,267
------- -------
453,839 438,918
------- -------
Financial Services:
Accounts payable and other liabilties 12,683 18,754
Short-term notes payable 241,588 325,650
------- -------
- -
254,271 344,404
------- -------
Other Liabilities:
Bonds payable of limited purpose
subsidiaries 186,229 206,891
Other 34,180 37,862
------- -------
Total liabilties 928,519 1,028,075
------- ---------
STOCKHOLDERS' EQUITY
Convertible preferred stock, $1 par value:
Authorzed - 1,400,000 shares
Issued - 838,683 shares (861,741 for 1996) 839 862
Common stock, $1 par value:
Authorized - 78,600,000 shares
Issued - 15,905,499 shares (15,852,729 for 1996) 15,906 15,853
Paid-in capital 115,438 116,652
Retained earnings 183,635 184,678
Net unrealized gain on mortgage-backed securities 2,314 2,758
Due from RSOP Trust (7,105) (10,354)
-------- --------
Total stockholders' equity 311,027 310,449
------- -------
Total liabilities and stockholders' equity $ 1,239,546 $ 1,338,524
========= =========
Stockholders' equity per common share $ 18.89 $ 19.00
========= =========
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
The Ryland Group, Inc. and subsidiaries
(amounts in thousands, except share data)
Three months ended March 31,
1997 1996
------------ -----------
- -------
Revenues:
Homebuilding:
Residential revenue $ 281,778 $ 294,808
Other revenue 23,891 2,867
------- -------
Total homebuilding revenue 305,669 297,675
Financial services 19,313 21,769
Limited-purpose subsidiaries 4,538 7,989
------- -------
Total revenues 329,520 327,433
------- -------
Expenses:
Homebuilding:
Cost of sales 263,066 257,043
Interest 5,936 5,794
Selling, general and administrative 34,268 33,497
------- -------
Total homebuilding expenses 303,270 296,334
Financial services:
Interest 3,897 5,799
General and administrative 11,846 12,742
------ ------
Total financial services expenses 15,743 18,541
Limited-purpose subsidiaries expenses 4,538 7,989
Corporate expenses 3,076 3,004
------- ------
Total expenses 326,627 325,868
Earnings before taxes 2,893 1,565
Tax expense 1,157 626
------- -------
Net earnings $ 1,736 $ 939
======= =======
Net earnings per common share:
Primary $ 0.08 $ 0.03
Fully diluted (1) $ 0.08 $ 0.03
Average common shares outstanding:
Primary 16,001,000 15,924,000
Fully diluted (1) 16,001,000 15,924,000
(1) For the three months March 31, 1997 and 1996 conversion of preferred
shares in not assumed due to antidilutive effect.
See notes to consolidated financial statements.
The Ryland Group, Inc. and subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Three months ended March 31,
1997 1996
------------ ---------
Cash flows from operating activities:
Net earnings $ 1,736 $ 939
Adjustments to reconcile net earnings
to net cash provided by (used for)
operating activities:
Depreciation and amortization 5,994 7,820
Decrease (increase) in inventories 2,533 (39,716)
Net change in other assets,
payables and other liabilities (26,015) (17,614)
Equity in earnings of/distributions
from unconsolidated joint ventures (1,387) 765
Decrease (increase) in mortgage
loans held for sale 84,188 (12,570)
Increase in mortgage-backed
securities-trading - (7,437)
-------- --------
Net cash provided by (used for)
operating activities 67,049 (67,813)
-------- --------
Cash flows from investing activities:
Net additions to property, plant
and equipment (3,689) (4,870)
Principal reduction of
mortgage collateral 13,522 18,685
Principal reduction of
mortgage-backed securities
-available-for-sale 4,345 13,995
Principal reduction of
mortgage-backed securities-
held-to-maturity 3,240 5,054
(Increase) decrease in funds held
by trustee (5,990) 5,981
Other investing activities, net (266) (1,641)
------- -------
Net cash provided by investing activities 11,162 37,204
------- -------
Cash flows from financing activities:
Cash proceeds of long-term debt 37,500 54,006
Reduction of long-term debt (10,828) (16,938)
(Decrease) increase in short-term
notes payable (84,063) 11,590
Bond principal payments (20,850) (41,109)
Common and preferred stock dividends (2,847) (2,863)
Other financing activities, net 4,164 3,788
-------- -------
Net cash (used for) provided by
financing activities (76,924) 8,474
-------- -------
Net increase (decrease) in cash and cash equivalents 1,287 (22,135)
Cash and cash equivalents at beginning of year 28,708 55,992
-------- --------
Cash and cash equivalents at end of period $ 29,995 $ 33,857
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest
(net of capitalized interest) $ 18,119 $ 21,194
Cash paid for income taxes
(net of refunds received) $ 46 $ (2,989)
See notes to consolidated financial statements.
The Ryland Group, Inc. and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(amounts in thousands, except for share data, in all notes)
Note 1. Segment Information
Three months ended March 31,
1997 1996
----------- ---------
Pretax earnings:
Homebuilding $ 2,399 $ 1,341
Financial services 3,570 3,228
Corporate and other (3,076) (3,004)
------- -------
Total $ 2,893 $ 1,565
======= =======
The Ryland Group, Inc. and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 2. Consolidated Financial Statements
The consolidated financial statements include the accounts of The Ryland
Group, Inc. and its wholly owned subsidiaries (the "Company"). Intercompany
transactions have been eliminated in consolidation.
The consolidated balance sheet as of March 31, 1997, the consolidated
statements of earnings for the three months ended March 31, 1997 and 1996, and
the consolidated statements of cash flows for the three months ended March 31,
1997 and 1996 have been prepared by the Company, without audit. In the
opinion of management, all adjustments, which include normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows at March 31, 1997, and for all periods presented,
have been made. The consolidated balance sheet at December 31, 1996 is taken
from the audited financial statements as of that date. Certain amounts in the
consolidated statements have been reclassified to conform to the 1997
presentation.
Certain information and footnote disclosures normally included in the
financial statements have been condensed or omitted. These financial
statements should be read in conjunction with the financial statements and
related notes included in the Company's 1996 annual report to shareholders.
The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the operating results for the full year.
Assets presented in the financial statements are net of any valuation
allowances.
Primary net earnings per common share is computed by dividing net earnings,
after considering preferred stock dividend requirements, by the weighted
average number of common shares outstanding considering dilutive common
equivalent shares. Common equivalent shares relating to stock options are
computed using the treasury stock method.
Fully diluted net earnings per common share additionally gives effect to the
assumed conversion of the preferred shares held by The Ryland Group, Inc.
Retirement and Stock Ownership Plan Trust (the "RSOP Trust") into common
stock, as well as the amount of the additional RSOP Trust contribution
required to fund the difference between the RSOP Trust's earnings from
preferred share dividends and the RSOP Trust's potential earnings from common
share dividends after an assumed conversion. However, the effect of the RSOP
Trust was not dilutive for the quarters ended March 31, 1997 and 1996.
The Ryland Group, Inc. and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(unaudited)
Note 3. New Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125 (FASB 125), "Accounting for Transfers
and Servicing of Financial Assets and Extinquishments of Liabilities." The
Company adopted FASB 125 on January 1, 1997. The adoption did not have a
significant impact on the Company's financial statements for the first quarter
of 1997.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (FASB 128), "Earnings Per Share," which
is required to be adopted for annual financial statement periods ending after
December 15, 1997. Earlier application is not permitted. FASB 128 requires
companies to change the method currently used to compute earnings per share
and to restate all prior periods. Primary earnings per share will be replaced
with a new calculation called basic EPS. Basic EPS will be calculated by
dividing net income less preferred stock dividends by the weighted average
common shares outstanding, thereby excluding the dilutive effect of common
stock equivalents.
In addition, fully diluted earnings per share will be renamed diluted EPS.
Under diluted EPS, the dilutive effect of options will continue to be
calculated using the treasury stock method. However, the treasury stock
method will be applied using the average market price for the period rather
than the higher of the average market price or the ending market price.
If the provisions of FASB 128 had been applied to the calculation of primary
and fully diluted earnings per share for the quarters ended March 31, 1997 and
March 31, 1996, there would have been no impact on the reported EPS amounts
for those periods. FASB 128 is also not expected to have a significant impact
on earnings per share for the 1997 year.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
CONSOLIDATED
For the first quarter of 1997, the Company reported consolidated net earnings
of $1.7 million, or $.08 per share, compared with 1996 first quarter
consolidated net earnings of $.9 million, or $.03 per share.
The Company's homebuilding segment recorded pretax earnings of $2.4 million
for the first quarter of 1997, compared with pretax earnings of $1.3 million
for the same period last year. The pretax earnings increase of $1.1 million
was due to pretax gains of $4.8 million from land sales which more than offset
the impact of a lower volume of closings.
The Company's financial services segment reported pretax earnings of $3.6
million for the first quarter of 1997, compared with $3.2 million for the same
period in 1996. The increase of $.4 million was due to higher investment
earnings which were partially offset by a decrease in retail earnings.
The Company's limited-purpose subsidiaries no longer issue mortgage-backed
securities 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, expenses and portfolio balances
continue to decline as the mortgage collateral pledged to secure the bonds
decreases due to scheduled payments, prepayments and exercises of early
redemption provisions.
HOMEBUILDING SEGMENT
The Company's homebuilding segment reported pretax earnings of $2.4 million
for the first quarter of 1997, compared with pretax earnings of $1.3 million
for the same period last year.
Results of operations of the Company's homebuilding segment are summarized as
follows ($ amounts in thousands, except average closing price):
Three months ended March 31,
1997 1996
------------ ---------
Revenues
Residential $281,778 $294,808
Other 23,891 2,867
-------- -------
Total $305,669 $297,675
Gross profit 42,603 40,632
Selling, general and
administrative expenses 34,268 33,497
Interest expense 5,936 5,794
-------- --------
Pretax earnings $ 2,399 $ 1,341
======== ========
Operational Unit Data:
New Orders (units) 2,474 2,403
Closings (units) 1,575 1,733
Outstanding contracts at
March 31,
Units 3,094 3,414
Dollar Value $566,125 $608,990
Average Closing Price $179,000 $170,000
Homebuilding revenues amounted to $306 million for the first quarter of 1997,
up 2.7 percent over last year. Residential revenues, which exclude land sales,
amounted to $282 million, down 4.4 percent from the same period last year, as
the decrease in closings was only partially offset by an increase in the
average closing price. The decline in first-quarter closings reflects the
lower year-end 1996 backlog due to a decline in new orders last year.
The gross profit margin for the first quarter of 1997 was 13.9 percent, up
from the 13.6 percent reported for the first quarter of 1996. The improvement
is attributable to the aforementioned gains from land sales. Excluding land
sales, gross profit margins were 13.1 percent, a decline from last year's
first quarter, but improved compared with the 12.7 percent reported for the
fourth quarter of 1996. Lower margins in the highly competitive Mid-Atlantic
region continued to negatively affect the Company's overall gross margins as
did the increased use of sales incentives in certain markets.
Total homebuilding new orders for the first quarter of 1997 were 2,474, an
increase of 3.0 percent from the first quarter of 1996 with growth in both new
and existing markets. New orders increased in the Mid-Atlantic, Southeast and
Southwest regions, and excluding 1996 sales in Columbus, Ohio where the
Company closed its operations last year, the Midwest region also reported
increased new orders for the first quarter. New orders in the West region
were down 3 percent due to declines in the Denver and Los Angeles/Pacific
Inland markets.
Outstanding contracts at March 31, 1997 were 3,094 compared with 3,414 at
March 31, 1996 and 2,195 at December 31, 1996. Outstanding contracts
represent the Company's backlog of sold but not closed homes, which generally
are built and closed, subject to cancellations, over the next two quarters.
The value of outstanding contracts as of March 31, 1997 was $566.1 million, a
decrease of 7.0 percent from March 31, 1996 and an increase of 39.7 percent
from December 31, 1996.
Selling, general and administrative expenses as a percent of revenues were
11.2 percent for the first quarter of 1997 compared with 11.3 percent for the
same period of 1996. The increase in expenses of $.8 million was attributable
to costs associated with land sales as well as increases in sales and
marketing expenses.
Interest expense for the first quarter of 1997 increased $.1 million compared
with the same period of 1996 due to a higher cost of funds. The increase in
the cost of funds was partially offset by a decline in average homebuilding
borrowings compared with the quarter ended March 31, 1996. The decrease in
borrowings was attributable to a decline in average inventories, primarily due
to a decrease in unsold homes under construction.
FINANCIAL SERVICES
The financial services segment reported pretax earnings of $3.6 million for
the first quarter of 1997, compared with $3.2 million for the first quarter of
1996.
Pretax earnings by line of business were as follows (amounts in thousands):
Three months
ended March 31,
1997 1996
---- ----
Retail $ 1,466 $ 1,862
Investments 2,104 1,366
------- -------
Total $ 3,570 $ 3,228
======= =======
The decline in retail earnings was primarily attributable to the impact of
lower mortgage originations which was mitigated by a reduction in general and
administrative expenses. Investment earnings for the first quarter of 1997
increased $.7 million as a result of income related to the redemption of
certain securities and increased income due to a higher average portfolio
balance.
Revenues and expenses for the financial services segment were as follows:
Three months
ended March 31,
1997 1996
---- -----
Revenues:
Interest and
net origination fees $ 1,635 $ 4,198
Net gains on sales of mortgages
and servicing rights 5,143 5,551
Loan servicing 6,668 7,430
Title/escrow 1,253 1,198
-------- --------
Total retail revenues 14,699 18,377
Revenues from investment
operations 4,614 3,392
-------- -------
Total revenues 19,313 21,769
Expenses:
General and administrative 11,846 12,742
Interest 3,897 5,799
-------- --------
Total expenses 15,743 18,541
-------- --------
Pretax earnings $ 3,570 $ 3,228
======== ========
Revenues for the financial services segment decreased for the first quarter of
1997 primarily due to decreased origination activity. Revenues from loan
servicing declined primarily as a result of lower revenue per loan due to
changes in the portfolio product mix. Investment revenues increased primarily
due to a higher average portfolio balance. General and administrative expenses
were down primarily due to cost savings related to the disposition of the
wholesale business in 1996. Interest expense decreased as a result of a lower
level of warehouse borrowings required to fund the lower origination volume.
Retail Operations:
- ------------------
Retail operations include mortgage origination, loan servicing and
title/escrow services for retail customers.
A summary of origination activities is as follows:
Three months
ended March 31,
1997 1996
---- ----
Dollar volume of mortgages
originated (in millions) $ 183 $ 484
Number of mortgages originated 1,343 3,784
Percentage of total closings:
Ryland Homes closings 62% 30%
Other closings 38% 70%
------ ------
100% 100%
Mortgage origination volume decreased by 65 percent in the first quarter
compared with the first quarter of last year. This decrease is attributable
to the sale of the wholesale mortgage operations which was completed in May
1996 and a general decline in retail origination volume, including lower
closing volume from the homebuilding segment and lower refinancing activity.
The Company earns interest on mortgages held for sale and pays interest on
borrowings secured by the mortgages. Significant data related to these
activities are as follows:
Three months
ended March 31,
1997 1996
---- ----
Net interest earned
(in thousands) $1,138 $1,551
Average balance of
mortgages held for sale
(in millions) $92 $235
Net interest spread 5.0% 2.7%
Net interest earned decreased due to a decline in the average balance of
mortgages held for sale partially offset by a higher net interest spread.
The Company services loans that it originates as well as loans originated by
others and subservices loans for others. Loan servicing portfolio balances
were as follows at March 31, (in billions):
1997 1996
---- ----
Originated $1.9 $2.4
Acquired 2.9 3.4
Subserviced 1.1 .2
---- ----
Total portfolio $5.9 $6.0
==== ====
The decreases in the originated and acquired portfolio balances are
attributable to normal mortgage prepayment activity and servicing sales from
the originated portfolio in excess of amounts originated.
Investment Operations:
- ----------------------
The Company's investment operations hold certain assets, primarily mortgage-
backed securities, 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. Pretax earnings for the three months
ended March 31, were as follows (in thousands):
Three months
ended March 31,
1997 1996
---- ----
Interest and other income $ 4,614 $ 3,392
Interest and other expenses 2,510 2,026
------- -------
Pretax earnings $ 2,104 $ 1,366
======= =======
Significant data from the investment operations are as follows:
Three months
ended March 31,
1997 1996
---- ----
Net interest earned
(in thousands) $ 1,508 $ 1,026
Average balance outstanding
(in millions) $ 144 $ 111
Net interest spread 4.3% 3.9%
Investment earnings for the three months ended March 31, 1997 and 1996
included $.8 million and $.6 million, respectively, in gains related to the
redemption of certain securities. The Company earns a net interest spread on
the investment portfolio from the difference between the interest rates on the
mortgage-backed securities and the related borrowing rates. The increase in
the net interest earned between periods is primarily due to an increase in the
average investment portfolio balance.
FINANCIAL CONDITION AND LIQUIDITY
The Company generally provides for the cash requirements of the homebuilding
and financial services businesses from outside borrowings and internally
generated funds. The Company believes that its current sources of cash are
sufficient to finance its requirements.
The homebuilding segment borrowings include senior notes, senior subordinated
notes, an unsecured revolving credit facility, and nonrecourse secured notes
payable. Senior and senior subordinated notes outstanding totaled $308
million as of March 31, 1997 and $318 million as of December 31, 1996. Senior
notes amounting to $10 million matured and were paid off in January 1997. The
Company uses its unsecured revolving credit facility to finance increases in
its homebuilding inventory and changes in working capital. This facility
provides for total borrowings of up to $300 million and the outstanding
borrowings as of March 31, 1997 were $70 million, compared with $34 million as
of December 31, 1996. In addition, the Company had letters of credit
outstanding under this facility totaling $16.7 million at March 31, 1997 and
$18.3 million at December 31, 1996. To finance land purchases, the Company
may also use seller-financed, non-recourse secured notes payable. At March
31, 1997, such notes payable outstanding amounted to $2.3 million, compared
with $1.5 million at December 31, 1996.
Housing inventories decreased to $572.1 million as of March 31, 1997, from
$574.6 million as of the end of 1996. This decrease is primarily attributable
to a reduction in unsold homes under construction which was partially offset
by an increase in the backlog of homes sold but not closed.
The financial services segment uses cash generated from operations and
borrowing arrangements to finance its operations. The bank facility provides
up to $325 million for mortgage warehouse funding and $40 million for working
capital advances. Other borrowing arrangements as of March 31, 1997 included
repurchase agreement facilities aggregating $625 million, a $100 million
revolving credit facility used to finance investment portfolio securities and
a $35 million credit facility to be used for the short-term financing of
optional bond redemptions. At March 31, 1997 and December 31, 1996, the
combined borrowings of the financial services segment outstanding under all
agreements were $241.6 million and $325.7 million, respectively.
Mortgage loans, notes receivable, and mortgage-backed securities held by the
limited-purpose subsidiaries are pledged as collateral for the issued bonds,
the terms of which provide for the retirement of all bonds from the proceeds
of the collateral. The source of cash for the bond payments is cash received
from the mortgage loans, notes receivable and mortgage-backed securities.
The Ryland Group, Inc. has not guaranteed the debt of the financial services
segment or limited-purpose subsidiaries.
On April 30, 1997 the Company's board of directors authorized the repurchase
of up to 10 percent of its outstanding common shares and in a related move,
approved a reduction in the quarterly dividend from $.15 per share to $.04 per
share which will more closely align the Company's dividend yield with that of
other public homebuilders. The share repurchase program, which will be funded
through a combination of the dividend reduction and internally generated
funds, was initiated to enhance shareholder value and is not expected to have
a material impact on the Company's leverage or balance sheet. As of May 12,
1997, the Company had repurchased approximately 132,000 shares.
Note: Certain statements in Management's Discussion and Analysis of Results
of Operations and Financial Condition are "forward-looking statements" within
the meaning of the Private Securities Litigation Act of 1995. Forward-looking
statements are based on various factors and assumptions that include known and
unknown risks and uncertainties, changes in economic conditions and interest
rates, increases in raw material and labor costs, and general competitive
factors, that may cause actual results to differ materially.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company was advised in 1995 that one current and two former officers of a
subsidiary, Ryland Mortgage Company ("RMC") had been notified that they were
targets of a federal grand jury investigation concerning alleged
misappropriation of funds from the Resolution Trust Corporation ("RTC"). The
company was advised that the investigation related to alleged overpayments to
RMC of approximately $3.5 million under three mortgage servicing contracts
with the RTC. In July 1996, the RTC (acting through its successor, the FDIC)
requested reimbursement from RMC of the alleged overpayments, interest thereon
and additional amounts relating to other mortgage servicing contracts. On May
7, 1997, a federal grand jury in Jacksonville, Florida returned an indictment
against RMC and the three targeted individuals. The indictment charges 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 press release issued by the
U.S. Department of Justice in connection with the indictment indicated that if
convicted on all counts, RMC could receive fines of up to $1.5 million.
RMC intends to vigorously defend the allegations contained in the indictment.
No prediction can be made at this time regarding the results of the indictment
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.
Page Number
-----------
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
11 Statement Re computation of earnings
per share (filed herewith) 17
27 Financial Data Schedule (filed herewith) 18
B. Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and Exchange Commission
during the three months ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE RYLAND GROUP, INC.
----------------------
Registrant
May 15, 1997 By: /s/ Michael D. Mangan
- ------------ ---------------------
Date Michael D. Mangan,
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
May 15, 1997 By: /s/ Stephen B. Cook
- ------------ -------------------
Date Stephen B. Cook, Vice President
and Corporate Controller
(Principal Accounting Officer)
INDEX OF EXHIBITS
A. Exhibits Page of
Sequentially
Exhibit No. Numbered Pages
- ---------- --------------
11 Statement Re computation of earnings
per share (filed herewith) 17
27 Financial Data Schedule
(filed herewith) 18
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(amounts in thousands, except share data)
Three months ended March 31,
1997 1996
----------- ---------
Primary:
Net earnings $ 1,736 $ 939
Adjustment for dividends
on convertible preferred shares (463) (510)
----------- -----------
Adjusted net earnings $ 1,273 $ 429
============ ============
Weighted average common
shares outstanding 15,878,377 15,728,283
Common stock equivalents:
Stock Options 1,591 25,364
Employee incentive plans 121,411 170,417
----------- ----------
Total 16,001,379 15,924,064
=========== ===========
Primary earnings per common share $0.08 $0.03
=========== =============
Fully Diluted: (1)
Net earnings $ 1,736 $ 939
Adjustment for dividends
on convertible preferred shares (463) (510)
------------ ------------
Adjusted net earnings $ 1,273 $ 429
============ =============
Weighted average common
shares outstanding 15,878,377 15,728,283
Common stock equivalents:
Stock Options 1,591 25,364
Employee incentive plans 121,411 170,417
------------ -------------
Total 16,001,379 15,924,064
=========== =============
Fully diluted earnings per common share $ 0.08 $ 0.03
=========== =============
(1) For the three months ended March 31, 1997 and 1996, no adjustments have
been made for incremental dividends on preferred stock or to common stock
equivalents for convertible preferred stock as these adjustments would be
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
RYLAND GROUP INC. FORM 10-Q FOR THE PERIOD ENDED 3/31/97 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 29,995
<SECURITIES> 149,892
<RECEIVABLES> 95,961
<ALLOWANCES> 0
<INVENTORY> 572,057
<CURRENT-ASSETS> 0
<PP&E> 30,751
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,239,546
<CURRENT-LIABILITIES> 0
<BONDS> 427,817
0
839
<COMMON> 15,906
<OTHER-SE> 294,282
<TOTAL-LIABILITY-AND-EQUITY> 1,239,546
<SALES> 305,669
<TOTAL-REVENUES> 329,520
<CGS> 263,066
<TOTAL-COSTS> 309,225
<OTHER-EXPENSES> 3,076
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,326
<INCOME-PRETAX> 2,893
<INCOME-TAX> 1,157
<INCOME-CONTINUING> 1,736
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,736
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
