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 and an unsecured revolving credit facility. Senior and senior subordinated notes outstanding totaled $308
million as of December 31, 1998 and December 31, 1997. On April 13, 1998, the Company issued $100 million of 8.25 percent senior subordinated notes due April 1, 2008. The net proceeds from this issuance were initially used to repay outstanding amounts under the revolving credit facility and to repay short-term notes payable. On July 15, 1998, the Company borrowed funds under its revolving credit facility to retire its $100 million, 10.5 percent, senior subordinated notes due 2002 at the stated call price of 103.9 percent of par.
The Company uses its unsecured revolving credit facility to finance increases in its homebuilding inventory and working capital. This facility, which matures in July 2000, provides for total borrowings of up to $300 million. There were no outstanding borrowings under this facility as of December 31, 1998 or as of December 31, 1997. The Company had letters of credit outstanding under this facility totaling $34 million at December 31, 1998 and $22 million at December 31, 1997.
Housing inventories increased to $642 million as of December 31, 1998 from $555 million as of the end of 1997. The increase reflects higher sold inventory related to the significant increase in year-end backlog, additional inventory investment in certain markets and the acquisition of Regency. The increase in inventory was funded with internally generated funds and higher accounts payable.
The financial services segment uses cash generated from operations and borrowing arrangements to finance its operations. A bank credit facility agreement, which matures on June 1, 2000, provides up to $260 million for mortgage warehouse funding and $30 million for working capital advances. Other borrowing arrangements as of December 31, 1998 included repurchase agreement facilities aggregating $370 million, and a $100 million revolving credit facility used to finance investment portfolio securities. At December 31, 1998 and December 31, 1997, the combined borrowings of the financial services segment outstanding under all agreements were $223 million and $341 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 Company has not guaranteed the debt of the financial
services segment or the limited-purpose subsidiaries.
During 1998, the Company repurchased approximately 353,000 shares of its outstanding common stock at a cost of approximately
$7 million. As of December 31, 1998, the Company had Board authorization to repurchase up to an additional 958,400 shares of
its common stock. The Company's stock repurchase program has been funded through internally generated funds.
