THE RYLAND GROUP, INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
(amounts in thousands, except share data, in all notes unless
otherwise noted)
NOTE K: STOCKHOLDERS' EQUITY
Preferred Stock
On August 31, 1989, the Company sold 1,267,327 shares of non-transferable convertible
preferred stock, par value $1.00, to the RSOP Trust for $31.5625 per share, or an
aggregate purchase price of approximately $40,000.
Each share of preferred stock pays an annual cumulative dividend of $2.21. During 1998,
1997 and 1996, the Company paid $1,000, $1,630 and $1,974, respectively, in dividends on
the preferred stock. Each share of preferred stock is entitled to a number of votes equal
to the shares into which it is convertible, and the holders of the preferred stock
generally vote together with the common stockholders on all matters.
Under the RSOP Trust, at the option of the trustee, the Company may be obligated to
redeem the preferred stock to satisfy distribution obligations to or investment elections
of participants. For purposes of these redemptions, the value of each share of preferred
stock is determined monthly by an independent appraiser, with a minimum guaranteed value
of $25.25 per share. The Company may issue common stock to satisfy this redemption
obligation, with any excess redemption price to be paid in cash. At December 31, 1998 and
1997, the maximum cash obligation for such redemptions was shown outside of stockholders'
equity as part of other liabilities. This obligation is calculated assuming that all
preferred shares outstanding were submitted for redemption.
Based upon the appraised value of each share of preferred stock ($39.37 and $38.69) and
the market value of each share of common stock ($28.88 and $23.50) at December 31, 1998
and 1997, respectively, the redemption obligation at December 31, 1998 and 1997 was $4,376
and $7,618, respectively. During 1998 and 1997, 73,415 and 110,027 shares of preferred
stock, respectively, were converted into shares of common stock, and 12,674 and 248,881
shares of preferred stock, respectively, were retired (See Note L).
Common Share Purchase Rights
In 1996, the Company adopted a revised shareholder rights plan under which the Company
distributed one common share purchase right for each share of common stock outstanding on
January 13, 1997. Each right entitles the holder to purchase one share of common stock at
an exercise price of $70. The rights become exercisable 10 business days after any party
acquires or announces an offer to acquire 20 percent or more of the Company's common
stock. The rights expire January 13, 2007, and are redeemable at $0.01 per right at any
time before 10 business days following the time that any party acquires 20 percent or more
of the Company's common stock.
In the event the Company enters into a merger or other business combination, or if a
substantial amount of its assets are sold after the time that the rights become
exercisable, the rights provide that the holder will receive, upon exercise, shares of the
common stock of the surviving or acquiring company having a market value of twice the
exercise price. Until the earlier of the time that the rights become exercisable, are
redeemed or expire, the Company will issue one right with each new share of common stock
issued.
