-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q9GSztIlB8lins7EfuAodYJQU/LMKGKdsEQweaPg3bgFQ4+Z+WpCyR+t1P2WlaFh e/TsJaiEKM4y+iOYmXBuHg== 0000950150-01-500308.txt : 20010514 0000950150-01-500308.hdr.sgml : 20010514 ACCESSION NUMBER: 0000950150-01-500308 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RYLAND GROUP INC CENTRAL INDEX KEY: 0000085974 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 520849948 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08029 FILM NUMBER: 1630580 BUSINESS ADDRESS: STREET 1: 11000 BROKEN LAND PARKWAY CITY: COLUMBIA STATE: MD ZIP: 21044 BUSINESS PHONE: 4107157000 FORMER COMPANY: FORMER CONFORMED NAME: RYAN JAMES P CO DATE OF NAME CHANGE: 19720414 10-Q 1 a72362e10-q.txt FORM 10-Q QUARTERLY PERIOD ENDED MARCH 31, 2001 1 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, 2001 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 of incorporation) (I.R.S. Employer Identification Number) 24025 Park Sorrento, Suite 400 Calabasas, California 91302 818.223.7500 (Address and telephone number of principal executive offices) 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. [X] Yes [ ] 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 April 30, 2001, was 13,366,919. 2
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at March 31, 2001, (unaudited) and December 31, 2000 1-2 Consolidated Statements of Earnings for the Three Months Ended March 31, 2001 and 2000 (unaudited) 3 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 (unaudited) 4 Notes to Consolidated Financial Statements (unaudited) 5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14 INDEX OF EXHIBITS 15
3 PART I. FINANCIAL INFORMATION Item I. Financial Statements THE RYLAND GROUP, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (amounts in thousands, except share data)
March 31, December 31, 2001 2000 ---------- ----------- (unaudited) ASSETS Homebuilding Cash and cash equivalents $ 63,277 $ 135,371 Housing inventories: Homes under construction 529,920 451,723 Land under development and improved lots 387,317 436,682 ---------- ---------- Total inventories 917,237 888,405 Property, plant and equipment 37,339 35,577 Purchase price in excess of net assets acquired 19,507 19,947 Other 66,465 71,932 ---------- ---------- 1,103,825 1,151,232 ---------- ---------- Financial Services Cash and cash equivalents 11,031 6,830 Mortgage loans, held-for-sale 10,388 11,217 Mortgage-backed securities and notes receivable 77,556 84,600 Other 9,464 11,843 ---------- ---------- 108,439 114,490 ---------- ---------- Other Assets Collateral for bonds payable of limited-purpose subsidiaries 22,087 23,005 Net deferred taxes 33,734 34,858 Other 36,554 37,756 ---------- ---------- TOTAL ASSETS $1,304,639 $1,361,341 ========== ==========
See Notes to Consolidated Financial Statements. 1 4 THE RYLAND GROUP, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (amounts in thousands, except share data)
March 31, December 31, 2001 2000 ---------- ----------- (unaudited) LIABILITIES HOMEBUILDING Accounts payable and other liabilities $ 212,610 $ 254,949 Long-term debt 450,000 450,000 ---------- ---------- 662,610 704,949 ---------- ---------- FINANCIAL SERVICES Accounts payable and other liabilities 17,102 22,600 Short-term notes payable 76,457 82,563 ---------- ---------- 93,559 105,163 ---------- ---------- OTHER LIABILITIES Bonds payable of limited-purpose subsidiaries 20,012 21,250 Other 57,828 76,350 ---------- ---------- TOTAL LIABILITIES 834,009 907,712 ---------- ---------- STOCKHOLDERS' EQUITY Convertible preferred stock, $1 par value: Authorized - 1,400,000 shares Issued - 283,667 shares (295,018 for 2000) 284 295 Common stock, $1 par value: Authorized - 78,600,000 shares Issued - 13,287,090 shares (13,248,948 for 2000) 13,287 13,249 Paid-in capital 61,344 60,535 Retained earnings 394,402 379,006 Accumulated other comprehensive income 1,313 544 ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 470,630 453,629 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,304,639 $1,361,341 ========== ========== Stockholders' Equity Per Common Share $ 34.68 $ 33.49 ========== ==========
See Notes to Consolidated Financial Statements. 2 5 THE RYLAND GROUP, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) (amounts in thousands, except share data)
Three months ended March 31, ----------------------------- 2001 2000 ----------- ----------- REVENUES Homebuilding $ 503,043 $ 420,318 Financial services 11,116 8,694 ----------- ----------- Total revenues 514,159 429,012 ----------- ----------- EXPENSES Homebuilding: Cost of sales 417,723 352,981 Selling, general and administrative 52,246 43,178 Interest 3,451 2,546 ----------- ----------- Total homebuilding expenses 473,420 398,705 Financial services: General and administrative 4,886 5,183 Interest 2,804 2,793 ----------- ----------- Total financial services expenses 7,690 7,976 Corporate expenses 6,455 4,417 ----------- ----------- Total expenses 487,565 411,098 EARNINGS BEFORE TAXES 26,594 17,914 Tax expense 10,505 6,986 ----------- ----------- NET EARNINGS $ 16,089 $ 10,928 ============ =========== NET EARNINGS PER COMMON SHARE Basic $ 1.19 $ 0.80 Diluted $ 1.12 $ 0.78 AVERAGE COMMON SHARES OUTSTANDING Basic 13,340,204 13,449,381 Diluted 14,363,808 14,009,823
See Notes to Consolidated Financial Statements. 3 6 THE RYLAND GROUP, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (amounts in thousands)
Three months ended March 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 16,089 $ 10,928 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 6,900 5,623 Changes in assets and liabilities: Increase in inventories (28,832) (89,575) Net change in other assets, payables and other liabilities (55,194) (11,184) Decrease (increase) in mortgage loans held-for-sale 829 (10,155) Other operating activities, net (1,006) 21 --------- --------- Net cash used for operating activities (61,214) (94,342) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Net additions to property, plant and equipment (7,265) (7,004) Principal reduction of mortgage collateral 2,665 4,106 Principal reduction of mortgage-backed securities - available-for-sale 6,158 500 Principal reduction of mortgage-backed securities - held-to-maturity -- 1,977 Decrease in funds held by trustee 3,603 616 --------- --------- Net cash provided by investing activities 5,161 195 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash proceeds of long-term debt -- 132,000 Decrease in short-term notes payable (6,106) (8) Bond principal payments (4,872) (9,744) Common and preferred stock dividends (693) (747) Common stock repurchases (6,853) (14,185) Other financing activities, net 6,684 (499) --------- --------- Net cash (used for) provided by financing activities (11,840) 106,817 --------- --------- Net (decrease) increase in cash and cash equivalents (67,893) 12,670 Cash and cash equivalents at beginning of periods 142,201 69,926 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 74,308 $ 82,596 - ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest (net of capitalized interest) $ 7,075 $ 5,236 Cash paid for income taxes (net of refunds) $ 10,324 $ 7,411 - -----------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. 4 7 THE RYLAND GROUP, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (amounts in thousands, except share data) Note 1. Consolidated Financial Statements The consolidated financial statements include the accounts of The Ryland Group and its wholly owned subsidiaries ("the Company"). Intercompany transactions have been eliminated in consolidation. The consolidated balance sheet as of March 31, 2001, the consolidated statements of earnings for the three months ended March 31, 2001 and 2000, and the consolidated statements of cash flows for the three months ended March 31, 2001 and 2000, 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 Company's financial position, results of operations and cash flows at March 31, 2001, and for all periods presented, have been made. The consolidated balance sheet at December 31, 2000 is taken from the audited financial statements as of that date. Certain amounts in the consolidated statements have been reclassified to conform to the 2001 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 2000 annual report to its shareholders. The results of operations for the three months ended March 31, 2001, are not necessarily indicative of the operating results for the full year. Assets presented in the financial statements are net of any valuation allowances. The following table is a summary of capitalized interest:
2001 2000 -------- -------- Capitalized interest as of January 1 $ 33,494 $ 26,970 Interest capitalized 8,879 8,508 Interest amortized to cost of sales (6,018) (4,645) -------- -------- Capitalized interest as of March 31 $ 36,355 $ 30,833 ======== ========
Note 2. New Accounting Pronouncements FAS 133 On January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting for Derivative Instruments and Hedging Activities," as amended by FAS 137 and FAS 138, which is required to be adopted in fiscal years beginning after June 15, 2000. The statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset by a change in fair value of assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of the hedge is recognized in earnings. The adoption of the new statement did not have a significant impact on the earnings or financial position of the Company. 5 8 THE RYLAND GROUP, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (amounts in thousands, except share data) Note 3. Segment Information Operations of the Company consist of two business segments: homebuilding and financial services. The Company's homebuilding segment specializes in the sale and construction of single-family attached and detached housing in 21 markets. The financial services segment provides mortgage-related products and services for Ryland Homes' customers and also conducts investment activities. Corporate expenses represent the costs of corporate functions which support the business segments.
Three months ended March 31, 2001 2000 -------- -------- Earnings before taxes Homebuilding $ 29,623 $ 21,613 Financial services 3,426 718 Corporate and other (6,455) (4,417) -------- -------- Total $ 26,594 $ 17,914 ======== ========
Note 4. Earnings Per Share Reconciliation The following table sets forth the computation of basic and diluted earnings per share.
Three months ended March 31, 2001 2000 ------------ ------------ Numerator Net earnings $ 16,089 $ 10,928 Preferred stock dividends (157) (185) ------------ ------------ Numerator for basic earnings per share, available to common stockholders 15,932 10,743 Effect of dilutive securities, preferred stock dividends 157 185 ------------ ------------ Numerator for diluted earnings per share, available to common stockholders $ 16,089 $ 10,928 ============= ============ Denominator Denominator for basic earnings per share, weighted-average shares 13,340,204 13,449,381 Effect of dilutive securities: Stock options 658,927 140,854 Equity incentive plan 75,333 77,046 Conversion of preferred shares 289,344 342,542 ------------ ------------ Dilutive potential of common shares 1,023,604 560,442 Denominator for diluted earnings per share, adjusted weighted-average shares and assumed conversions 14,363,808 14,009,823 BASIC EARNINGS PER SHARE $ 1.19 $ 0.80 DILUTED EARNINGS PER SHARE $ 1.12 $ 0.78
6 9 THE RYLAND GROUP, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (amounts in thousands, except share data) Note 5. Commitments and Contingencies Refer to Part II, Other Information, Item 1, Legal Proceedings, of this document for updated information regarding the Company's commitments and contingencies. Note 6. Comprehensive Income Comprehensive income totaled $16.9 million and $10.8 million for the three months ended March 31, 2001 and 2000, respectively. Comprehensive income consists of net income and the increase or decrease in unrealized gains or losses on the Company's available-for-sale securities. Note 7. Financial Services Short-term Notes Payable In March 2001, the Company amended a revolving credit facility used to finance investment securities in the financial services segment. The agreement was extended through March 2002, bears interest at market rates, and is collateralized by investment portfolio securities. Borrowings outstanding under this facility were $40.5 million and $44.9 million at March 31, 2001, and December 31, 2000, respectively. 7 10 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS CONSOLIDATED For the first quarter of 2001, the Company reported consolidated net earnings from operations of $16.1 million, or $1.19 per share ($1.12 per share diluted). This compared with consolidated net earnings from operations of $10.9 million, or $0.80 per share ($0.78 per share diluted), for the first quarter of 2000. The homebuilding segment reported pretax earnings of $29.6 million for the first quarter of 2001, an $8 million increase over the $21.6 million reported for the first quarter of 2000. The increase over the prior year was attributable to a higher closing volume, a 7.9 percent increase in average sales price and an increase in gross profit margins. Pretax homebuilding margins increased 80 basis points to 5.9 percent in the first quarter of 2001 versus 5.1 percent for the first quarter of 2000. The financial services segment reported pretax earnings from operations of $3.4 million for the first quarter of 2001, compared to $0.7 million for the same period in 2000. The increase over the prior year was primarily attributable to a 34.2 percent increase in the number of originations, and a 68.9 percent increase in loan sales volume. Additionally, the closing volume from homebuilder originations that were financed by the Company increased to 77 percent in the first quarter of 2001 from 63 percent in the first quarter of 2000. Corporate expenses represent the cost of corporate functions which support the business segments. Corporate expenses of $6.5 million for the first quarter of 2001 were higher than the $4.4 million reported for the first quarter of 2000. The increase over the prior year was primarily attributable to increased incentive compensation expenses commensurate with higher pretax earnings. Although the Company's limited-purpose subsidiaries no longer issue mortgage-backed securities and mortgage-participation securities, they continue to hold collateral for previously issued mortgage-backed bonds in which the Company maintains a residual interest. Revenues, expenses, and portfolio balances continue to decline as the mortgage collateral pledged to secure the bonds decreases due to scheduled payments, prepayments, and exercises of early redemption provisions. Revenues have approximated expenses for the last two years. 8 11 HOMEBUILDING SEGMENT Results of operations from the homebuilding segment are summarized as follows: ($ amounts in thousands, except average closing price)
Three months ended March 31, 2001 2000 ---------- ---------- Revenues Residential $ 486,965 $ 411,449 Other 16,078 8,869 ---------- ---------- Total 503,043 420,318 Gross profit 85,320 67,337 Selling, general and administrative expenses 52,246 43,178 Interest expense 3,451 2,546 ---------- ---------- Homebuilding pretax earnings $ 29,623 $ 21,613 ========== ========== Operational unit data New orders (units) 3,970 3,172 Closings (units) 2,381 2,161 Outstanding contracts at March 31: Units 5,757 4,678 Dollar value $1,196,844 $ 878,849 Average closing price $ 205,000 $ 190,000
Homebuilding revenues increased 19.7 percent for the first quarter of 2001, compared with the same period last year, primarily due to a 10.2 percent increase in closings with 2,381 homes closed in the first quarter of 2001, compared with 2,161 homes closed in the first quarter of 2000, and a 7.9 percent increase in average closing price. Gross profit margins from home sales averaged 17.6 percent for the first quarter of 2001, an increase from 16.0 percent for the first quarter of 2000. The increase is attributable to the composition of closings for the period. New orders for the first quarter of 2001 increased 25.2 percent from the first quarter of the prior year to 3,970 homes. Sales per community were up 15.9 percent from the first quarter of 2000, and the Company operated in 21 additional active communities compared to the first quarter of last year. Outstanding contracts as of March 31, 2001, were 5,757, versus 4,678 at March 31, 2000, and 4,168 at December 31, 2000. Outstanding contracts represent the Company's backlog of homes sold but not yet closed, which are generally built and closed, subject to cancellation, over the subsequent two quarters. The value of outstanding contracts at March 31, 2001, was $1.2 billion, an increase of 36.2 percent from March 31, 2000, and an increase of 38.1 percent from December 31, 2000. Selling, general and administrative expenses, as a percentage of revenue, were 10.4 percent for the first quarter of 2001, versus 10.3 percent for the first 9 12 quarter of 2000. For the first quarter of 2001, interest expense was $3.5 million, an increase of $1 million from the first quarter of 2000. FINANCIAL SERVICES Results of operations of the Company's financial services segment are summarized as follows: (amounts in thousands)
Three months ended March 31, 2001 2000 ------- ------- Retail revenues Interest and net origination fees $ 313 $ 618 Net gains on sales of mortgages and servicing rights 4,983 2,807 Loan servicing 30 11 Title/escrow 2,449 2,049 ------- ------- Total retail revenue 7,775 5,485 Revenue from investment operations and limited-purpose subsidiaries 3,341 3,209 ------- ------- Total revenues $11,116 $ 8,694 Expenses General and administrative 4,886 5,183 Interest 2,804 2,793 ------- ------- Total expenses 7,690 7,976 ======= ======= Pretax earnings $ 3,426 $ 718 ======= =======
Pretax earnings by line of business were as follows: (amounts in thousands)
Three months ended March 31, 2001 2000 ------ ------ Retail $3,103 $ 123 Investments 323 595 ------ ------ Total $3,426 $ 718 ====== ======
10 13 OPERATIONAL DATA
THREE MONTHS ENDED MARCH 31, 2001 2000 ----- ------ Retail operations: Originations 1,754 1,307 Percent of Ryland Homes closings 97% 96% Ryland Homes capture rate 77% 63% Investment operations: Portfolio average balance (in millions) $78.6 $100.7
Revenues for the financial services segment increased $2.4 million, or 27.9 percent, to $11.1 million for the quarter ended March 31, 2001 from $8.7 million for the first quarter of 2000. Revenues from retail operations increased by $2.3 million to $7.8 million for the three months ended March 31, 2001, compared with the same period in 2000. The increase over the prior year was primarily attributable to increased gains from the sale of mortgages and mortgage servicing rights, partially offset by decreased financing income resulting from a reduction in the number of days loans were held for sale. Revenues from investment operations and limited-purpose subsidiaries were $3.3 million for the three-month period ended March 31, 2001, approximately the same as that reported for the same period in the prior year. General and administrative expenses were $4.9 million for the three months ended March 31, 2001, compared with $5.2 million for the period ended March 31, 2000. The decrease was primarily attributable to cost reductions made at the mortgage branch level, partially offset by increased incentive compensation expenses as a result of increased earnings. Interest expense was $2.8 million for the three months ended March 31, 2001 and 2000. Retail operations include residential mortgage origination; sales of mortgages and mortgage servicing rights; and title, escrow and homeowners insurance services for retail customers. Retail operations reported pretax earnings of $3.1 million for the first quarter of 2001, compared to $0.1 million for the same period in the prior year. Mortgage origination volume increased by 34.2 percent for the three months ended March 31, 2001, compared with the same period in 2000. The increase was primarily due to an increase of 14 percentage points in the Ryland Homes capture rate. Investment operations hold certain assets, mainly 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 from investment operations were $0.3 million for the three months ended March 31, 2001, versus $0.6 million for the same period in 2000. The decrease was essentially the result of decreases in the investment portfolio's average balance and its weighted-average coupon rate, which resulted in a decline in interest and other income. 11 14 FINANCIAL CONDITION AND LIQUIDITY Cash requirements for the Company's homebuilding and financial services segments are generally provided from outside borrowings and internally generated funds. The Company believes that its current sources of cash are sufficient to finance its current requirements. The homebuilding segment's borrowings include senior notes, senior subordinated notes, an unsecured revolving credit facility, and nonrecourse secured notes payable. Senior and senior subordinated notes outstanding totaled $450 million as of March 31, 2001 and December 31, 2000. The Company uses its unsecured revolving credit facility to finance increases in its homebuilding inventory and working capital. This facility matures in October 2003 and provides for borrowings up to $400 million. There were no borrowings under this facility as of March 31, 2001 and December 31, 2000. The Company had letters of credit outstanding under this facility totaling $84.2 million at March 31, 2001, and $55.7 million at December 31, 2000. To finance land purchases, the Company also uses seller-financed, nonrecourse secured notes payable. At March 31, 2001, such notes payable outstanding amounted to $2.7 million, compared with $1.9 million at December 31, 2000. Housing inventories increased to $917.2 million as of March 31, 2001, from $888.4 million at December 31, 2000. This increase reflects higher sold inventory levels, related to a significant increase in quarter-end backlog. The increase was funded with internally generated funds. The financial services segment uses cash generated from operations and borrowing arrangements to finance its operations. The financial services segment has borrowing arrangements that include a credit facility which provides up to $150 million for mortgage warehouse funding and matures in May 2002; repurchase agreement facilities aggregating $80 million; and a $45 million revolving credit facility which is used to finance investment portfolio securities. At March 31, 2001, and December 31, 2000, the combined borrowings of the financial services segment outstanding under all agreements totaled $76.5 million and $82.6 million, respectively. Mortgage loans, notes receivable, and mortgage-backed securities held by the financial services subsidiaries were pledged as collateral for previously issued mortgage-backed bonds, the terms of which provided for the retirement of all bonds from the proceeds of the collateral. The source of cash for the bond payments was received from the mortgage loans, notes receivable, and mortgage-backed securities. The Company has not guaranteed the debt of either its financial services segment or limited-purpose subsidiaries. During the three months ended March 31, 2001, the Company repurchased approximately 176,000 shares of its outstanding common stock at a cost of approximately $6.9 million. In February 2000, the Board of Directors approved the repurchase of up to one million shares of the Company's outstanding common stock. As of March 31, 2001, the Company had Board authorization to repurchase up to an additional 448,000 shares of its common stock. The Company's repurchase program has been funded primarily through internally generated funds. Note: Certain statements in Management's Discussion and Analysis of Financial Condition and Results of Operations may be "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 risks and uncertainties, such as the completion and profitability of sales reported; the market for homes generally and in areas where the Company operates; the availability and cost of land; changes in economic conditions and interest rates; the availability and increases in raw material and labor costs; consumer confidence; government regulations; and general competitive factors, all or each of which may cause actual results to differ materially. 12 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no other material changes in the Company's market risk from December 31, 2000. For information regarding the Company's market risk, refer to Form 10-K for the fiscal year ended December 31, 2000, of The Ryland Group, Inc. PART II. OTHER INFORMATION Item 1. Legal Proceedings Contingent liabilities may arise from obligations incurred in the ordinary course of business or from the usual obligations of on-site housing producers for the completion of contracts. Ryland Mortgage Company (RMC) received information from the Federal Deposit Insurance Corporation (FDIC) regarding outstanding claims related to mortgage servicing contracts which it entered into with the Resolution Trust Company during 1991 and 1992. RMC is investigating these claims. No prediction can be made, at this time, regarding the results of this investigation or whether the FDIC will initiate a civil action against RMC in connection with these claims. The Company is party to various 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 of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the first quarter of 2001. Item 6. Exhibits and Reports on Form 8-K A. Exhibits 12.1 Computation of Ratio of Earnings to Fixed Charges B. Reports on Form 8-K No reports on Form 8-K were filed during the first quarter of 2001. 13 16 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 11, 2001 By: /s/ Gordon A. Milne - ------------ ------------------------------------------------- Date Gordon A. Milne Senior Vice President and Chief Financial Officer (Principal Financial Officer) May 11, 2001 By: /s/ David L. Fristoe - ------------ ------------------------------------------------- Date David L. Fristoe Senior Vice President, Chief Information Officer, Controller, and Chief Accounting Officer (Principal Accounting Officer) 14 17 INDEX OF EXHIBITS A. Exhibits
Exhibit No. Page No. - ----------- -------- 10.12 Amended Repurchase Refinancing Agreement dated as of 16-22 March 30, 2001 between Ryland Mortgage Company; Associates Funding Corporation; Chase Manhattan Bank; and certain lenders. (filed herewith) 12.1 Computation of Ratio of Earnings to Fixed Charges 23 (filed herewith)
15 EX-10.12 2 a72362ex10-12.txt EXHIBIT 10.12 1 EXHIBIT 10.12 3/01 AMENDMENT (THE EIGHTH AMENDMENT) DATED AS OF MARCH 30, 2001 TO REPURCHASE FINANCING AGREEMENT DATED AS OF OCTOBER 9, 1996 AMONG ASSOCIATES FUNDING, INC. ("BORROWER") RYLAND MORTGAGE COMPANY ("GUARANTOR") THE CHASE MANHATTAN BANK ("CHASE"), AS AGENT ("AGENT") AND CERTAIN LENDERS $45,000,000 (ORIGINALLY $100,000,000) REVOLVING CREDIT FACILITY 16 2 INDEX "3/01 AMENDMENT"...........................................................1 "AGENT"....................................................................1 "BORROWER".................................................................1 "CHASE"....................................................................1 "COMPANIES"................................................................1 "GUARANTOR"................................................................1 "LENDERS"..................................................................1 "LOAN AGREEMENT"...........................................................1 "STATED TERMINATION DATE"..................................................1
17 3 TABLE OF CONTENTS Preamble........................................1 Recitals........................................1 Amendments......................................1 1. Amendment of Section 1.1.....................1 2. Conditions Precedent.........................1 3. Payment Terms................................2 4. Representations and Warranties...............2 5. Ratification.................................2 6. Miscellaneous................................2
18 4 3/01 AMENDMENT TO REPURCHASE FINANCING AGREEMENT PREAMBLE THIS 3/01 AMENDMENT TO REPURCHASE FINANCING AGREEMENT (the "3/01 AMENDMENT") entered into as of March 30, 2001, among ASSOCIATES FUNDING, INC., a Delaware corporation ("BORROWER"), RYLAND MORTGAGE COMPANY, an Ohio corporation ("GUARANTOR"), THE CHASE MANHATTAN BANK ("CHASE"), a New York banking corporation and successor by merger to Chase Bank of Texas, National Association, a national banking association formerly named Texas Commerce Bank National Association, as a lender and as agent for the lenders from time to time party thereto (in that capacity, the "AGENT"), and Chase, as currently the only lender party to the Loan Agreement (defined below) to amend (for the eighth time) the Loan Agreement, recites and provides as follows: RECITALS Borrower and Guarantor (the "COMPANIES") and Chase, as Agent and the only lender (the lenders thereunder being called the "LENDERS"), are party to the Repurchase Financing Agreement dated as of October 9, 1996 (as amended through the date of this amendment, the "LOAN AGREEMENT") providing for revolving credit loans of (originally) up to $100 million of principal lent and outstanding on any day during the term of the Loan Agreement, and previously amended to, among other things, reduce such limit to $35 million and subsequently (by the 9/00 Amendment to Repurchase Financing Agreement dated as of September 1, 2000) to increase it back up to $45 million. Terms defined in the Loan Agreement have the same meanings when used, unless otherwise defined, in this amendment. This amendment is for the purpose of extending the Stated Termination Date to March 29, 2002 and confirming and continuing existing agreements between the parties for accrual and payment of a facility fee. Accordingly, for valuable and acknowledged consideration, the parties to this amendment agree as follows: AMENDMENTS 1. AMENDMENT OF SECTION 1.1. SECTION 1.1 is amended by adding the following new definition, in alphabetical order: "3/01 AMENDMENT" means the 3/01 Amendment to Repurchase Financing Agreement dated as of March 30, 2001, executed by the parties hereto and amending this Agreement (for the eighth time). SECTION 1.1 is further amended by amending the following definitions to henceforth read as follows: "STATED TERMINATION DATE" means March 29, 2002. 2. CONDITIONS PRECEDENT. The Companies agree to forthwith deliver to the Agent: (a) counterparts of this amendment executed by all of the parties named below, (b) for any officer of either Company signing below on behalf of that Company but not included in certificates of incumbency for that Company delivered to the Agent before this amendment, a certificate of the secretary or assistant secretary of that Company about the due incumbency of that officer, and (c) if the Agent reasonably requires, resolutions of the directors of any Company authorizing this amendment 19 5 certified as accurate and complete by the secretary or assistant secretary of the appropriate Company. This amendment shall become effective as of the effective date of this amendment upon execution of this amendment by the Borrower and the Agent. 3. PAYMENT TERMS. Section 3.18 of the Loan Agreement is hereby amended in its entirety to henceforth read as follows: 3.18 FEES. The following fee is not compensation for the use, detention, or forbearance of money, is in addition to and not in lieu of interest and expenses otherwise described in the Loan Papers, is non-refundable, to the extent lawful, bears interest if not paid when due at the Default Rate, and is calculated on the basis of actual days (including the first but excluding the last) elapsed over a year of 360 days (or 365 or 366 days, as the case may be, if the calculation would otherwise result in exceeding the Maximum Amount and the payment were deemed to be interest notwithstanding the above provisions to the contrary), Borrower shall pay to The Chase Manhattan Bank a facility fee of twelve and one-half basis points (0.125%) per annum of the Commitment, due and payable in arrears on (A) April 1, 2001 (for the calendar quarter January-March 2001), (B) on the first day of each July, October, January and April thereafter (for the calendar quarter just ended) and (C) on the Termination Date (for the period from the date through which the last preceding payment was made to the Termination Date). 4. REPRESENTATIONS AND WARRANTIES. The Companies jointly and severally represent and warrant to Agent and Lenders that, as of the date of this amendment and on the date of its execution (a) the representations and warranties in the Loan Papers are true and correct in all material respects except to the extent that (i) a representation or warranty speaks to a specific date or (ii) the facts on which a representation or warranty is based have changed by transactions or conditions contemplated or permitted by the Loan Papers, and (b) no Default or Potential Default exists. 5. RATIFICATION. The Companies ratify and confirm (a) all provisions of the Loan Papers as amended by this amendment and (b) that all guaranties, assurances and Liens granted, conveyed, or assigned to Agent or Lenders under the Loan Papers -- including, but not limited to, the unconditional and irrevocable guaranty by the Guarantor of (i) the prompt payment of the Obligation at maturity, by acceleration or otherwise, and at all times after maturity in accordance with the Loan Papers, and (ii) the prompt performance of and compliance with every term, covenant, and condition of the Loan Papers when due, all as stated in Section 4.1 of the Loan Agreement -- as they may have been revised, extended, and amended, continue to guarantee, assure and secure the full payment and performance of the Obligation (including, without limitation, all amounts evidenced now or in the future by any note delivered under this amendment). 6. MISCELLANEOUS. All references in the Loan Papers to the "Loan Agreement" are to the Loan Agreement as heretofore amended and as amended by this amendment. This amendment is a "Loan Paper" referred to in the Loan Agreement, and the provisions relating to Loan Papers in the Loan Agreement are incorporated in this amendment by reference. Except as specifically amended and modified in this amendment, the Loan Agreement is unchanged and continues in full force 20 6 and effect. This amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document. All counterparts must be construed together to constitute one and the same instrument. This amendment binds and benefits the Companies, Agent, Lenders and their respective successors and permitted assigns. THIS AMENDMENT AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. The remainder of this page is intentionally blank; counterpart signature pages follow. 21 7 EXECUTED as of the day and year first stated above. ASSOCIATES FUNDING, INC. RYLAND MORTGAGE COMPANY By: /s/ SUSAN CASS By: /s/ SUSAN CASS --------------------------------- ---------------------------------- (Name) Susan Cass (Name) Susan Cass ------------------------------ ------------------------------- (Title) Senior Vice President and (Title) Senior Vice President and ----------------------------- ------------------------------ Chief Financial Officer Chief Financial Officer ----------------------------- ------------------------------ THE CHASE MANHATTAN BANK, as Agent and as a Lender By: /s/ CYNTHIA E. CRITES --------------------------------- (Name) Cynthia E. Crites ------------------------------ (Title) Vice President ----------------------------- 22 EX-12.1 3 a72362ex12-1.txt EXHIBIT 12.1 1 EXHIBIT 12.1 THE RYLAND GROUP, INC. STATEMENTS RE COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND THE YEARS ENDED DECEMBER 31, 2000, 1999, 1998, 1997, AND 1996
Three Months Ended 1996 1997 1998 1999 2000 03/31/01 -------- -------- -------- -------- -------- ------------ Consolidated pretax income(loss) from continuing operations 26,397 36,470 75,158 109,336 134,840 26,594 Share of distributed income of 50%-or-less-owned affiliates net of equity pickup 539 1,334 2,602 (263) (163) (34) Amortization of capitalized interest 17,035 21,581 20,645 19,027 27,581 6,018 Interest 90,529 74,950 63,410 52,764 62,610 15,134 Less interest capitalized during the period (16,975) (17,636) (18,601) (24,397) (34,105) (8,879) Net amortization of debt discount and premium and issuance expense 243 84 36 33 -- -- Interest portion of rental expense 3,394 3,541 4,709 4,522 6,065 1,782 -------- -------- -------- -------- -------- -------- EARNINGS 121,162 120,324 147,959 161,022 196,828 40,615 Interest 90,529 74,950 63,410 52,764 62,610 15,134 Net amortization of debt discount and premium and issuance expense 243 84 36 33 -- -- Interest portion of rental expense 3,394 3,541 4,709 4,522 6,065 1,782 Interest expense relating to guaranteed debt of 50%-or-less-owned affiliate -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Fixed Charges 94,166 78,575 68,155 57,319 68,675 16,916 Ratio of Earnings to Fixed Charges 1.29 1.53 2.17 2.81 2.87 2.40
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