Ryland Group reports Q1 net income of US$22.1M, up from net loss of US$5.1M a year earlier, on revenues up 73.6% to US$374.7M; new orders up 54.4% to 2,051 units

WESTLAKE VILLAGE, California , April 24, 2013 (press release) – The Ryland Group, Inc. (NYSE: RYL), today announced results for its quarter ended March 31, 2013. Items of note included:

  • Net income from continuing operations totaled $22.0 million, or $0.43 per diluted share, for the quarter ended March 31, 2013, compared to a net loss of $3.0 million, or $0.07 per diluted share, for the same period in 2012;
  • Revenues totaled $374.7 million for the quarter ended March 31, 2013, representing a 73.6 percent increase from $215.9 million for the quarter ended March 31, 2012;
  • New orders increased 54.4 percent to 2,051 units for the first quarter of 2013 from 1,328 units for the first quarter of 2012. New order dollars rose 75.3 percent to $605.1 million for the first quarter of 2013 from $345.1 million for the same period in 2012;
  • Average monthly sales absorption rate was 2.8 homes per community for the quarter ended March 31, 2013, versus 2.1 homes per community for the quarter ended March 31, 2012;
  • Closings increased 60.4 percent to 1,307 units for the quarter ended March 31, 2013, compared to 815 units for the same period in the prior year;
  • Backlog rose 57.2 percent to 3,135 units at March 31, 2013, from 1,994 units at March 31, 2012;
  • Active communities increased 19.6 percent to 250 communities at March 31, 2013, from 209 communities at March 31, 2012;
  • Average closing price increased 8.2 percent to $277,000 for the quarter ended March 31, 2013, from $256,000 for the same period in 2012;
  • Housing gross profit margin was 19.4 percent for the first quarter of 2013, compared to 17.5 percent for the first quarter of 2012;
  • Selling, general and administrative expense totaled 13.8 percent of homebuilding revenues for the first quarter of 2013, compared to 17.8 percent for the first quarter of 2012;
  • Cash, cash equivalents and marketable securities totaled $614.6 million at March 31, 2013, with no outstanding borrowings against the Company’s $75.0 million financial services credit facility; and
  • Net debt-to-capital ratio was 49.0 percent at March 31, 2013, compared to 50.8 percent at December 31, 2012.

RESULTS FOR THE FIRST QUARTER OF 2013

For the quarter ended March 31, 2013, the Company reported net income from continuing operations of $22.0 million, or $0.43 per diluted share, compared to a net loss of $3.0 million, or $0.07 per diluted share, for the same period in 2012. The Company had pretax charges that totaled $213,000 primarily related to preacquisition feasibility cost write-offs for the quarter ended March 31, 2013, compared to pretax charges that totaled $2.1 million primarily related to inventory valuation adjustments for the same period in 2012.

The homebuilding segments reported pretax earnings of $23.8 million for the first quarter of 2013, compared to pretax earnings of $1.1 million for the same period in 2012. This increase was primarily due to a rise in closing volume; higher housing gross profit margin, including lower inventory valuation adjustments; and a reduced selling, general and administrative expense ratio.

Homebuilding revenues increased 73.5 percent to $363.5 million for the first quarter of 2013, compared to $209.5 million for the same period in 2012. This rise in homebuilding revenues was primarily attributable to a 60.4 percent increase in closings that totaled 1,307 units for the quarter ended March 31, 2013, compared to 815 units for the same period in the prior year, as well as to an 8.2 percent higher average closing price, which was $277,000 for the first quarter of 2013, versus $256,000 for the same period in 2012. Homebuilding revenues for the first quarter of 2013 included $2.1 million from land sales, which resulted in pretax earnings of $946,000, compared to homebuilding revenues for the first quarter of 2012 that included $712,000 from land sales, which resulted in pretax earnings of $299,000.

New orders increased 54.4 percent to 2,051 units for the quarter ended March 31, 2013, compared to new orders of 1,328 units for the same period in 2012. The Company had an average monthly sales absorption rate of 2.8 homes per community for the quarter ended March 31, 2013, versus 2.1 homes per community for the quarter ended March 31, 2012, and an average cancellation rate of 15.4 percent for the quarter ended March 31, 2013, versus 18.0 percent for the same period in 2012. For the first quarter of 2013, new order dollars increased 75.3 percent to $605.1 million from $345.1 million for the first quarter of 2012. At March 31, 2013, backlog increased 57.2 percent to 3,135 units from 1,994 units at March 31, 2012. At the end of the first quarter of 2013, the dollar value of the Company’s backlog was $907.1 million, reflecting a 75.1 percent rise from the end of the first quarter of the prior year. For the quarter ended March 31, 2013, there were 58 new orders and 44 closings related to the acquisition of Trend Homes in December 2012.

Housing gross profit margin was 19.4 percent for the quarter ended March 31, 2013, compared to 17.5 percent for the quarter ended March 31, 2012. This improvement in housing gross profit margin was primarily attributable to lower inventory valuation adjustments; higher leverage of direct overhead expense due to an increase in the number of homes delivered and to a higher average closing price; and a relative decline in direct construction costs, partially offset by higher land costs. For the first quarter of 2013, sales incentives and price concessions totaled 7.9 percent of housing revenues, compared to 10.9 percent for the same period in 2012.

Selling, general and administrative expense totaled 13.8 percent of homebuilding revenues for the first quarter of 2013, compared to 17.8 percent for the first quarter of 2012. This decrease in the selling, general and administrative expense ratio was primarily attributable to higher leverage resulting from increased revenues.

The homebuilding segments recorded $3.8 million of interest expense during the first quarter of 2013, compared to $3.6 million during the first quarter of 2012. This increase in interest expense from the first quarter of 2012 was primarily due to interest incurred on additional senior notes issued in 2012, partially offset by the capitalization of a greater amount of interest incurred during the first quarter of 2013, which resulted from a higher level of inventory under development.

During the first quarter of 2013, the Company used $8.2 million of cash for operating activities, provided $21.5 million of cash from investing activities and provided $10.9 million of cash from financing activities.

For the quarter ended March 31, 2013, the financial services segment reported pretax earnings of $4.3 million, compared to $645,000 for the same period in 2012. This improvement was primarily attributable to increases in locked loan pipeline and origination volumes and to higher title income, partially offset by a rise in indemnification and personnel expenses.

Headquartered in Southern California, Ryland is one of the nation’s largest homebuilders and a leading mortgage-finance company. Since its founding in 1967, Ryland has built more than 300,000 homes and financed more than 250,000 mortgages. The Company currently operates in 14 states across the country and is listed on the New York Stock Exchange under the symbol “RYL.” For more information, please visit www.ryland.com.

Note: Certain statements in this press release may be regarded as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and may qualify for the safe harbor provided for in Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent the Company’s expectations and beliefs concerning future events, and no assurance can be given that the future results described in this press release will be achieved. These forward-looking statements can generally be identified by the use of statements that include words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “foresee,” “goal,” “intend,” “likely,” “may,” “plan,” “project,” “should,” “target,” “will” or other similar words or phrases. All forward-looking statements contained herein are based upon information available to the Company on the date of this press release. Except as may be required under applicable law, the Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. The factors and assumptions upon which any forward-looking statements herein are based are subject to risks and uncertainties which include, among others:

  • economic changes nationally or in the Company’s local markets, including volatility and increases in interest rates, the impact of, and changes in, governmental stimulus, tax and deficit reduction programs, inflation, changes in consumer demand and confidence levels and the state of the market for homes in general;
  • changes and developments in the mortgage lending market, including revisions to underwriting standards for borrowers and lender requirements for originating and holding mortgages, changes in government support of and participation in such market, and delays or changes in terms and conditions for the sale of mortgages originated by the Company;
  • the availability and cost of land and the future value of land held or under development;
  • increased land development costs on projects under development;
  • shortages of skilled labor or raw materials used in the production of homes;
  • increased prices for labor, land and materials used in the production of homes;
  • increased competition;
  • failure to anticipate or react to changing consumer preferences in home design;
  • increased costs and delays in land development or home construction resulting from adverse weather conditions or other factors;
  • potential delays or increased costs in obtaining necessary permits as a result of changes to laws, regulations or governmental policies (including those that affect zoning, density, building standards, the environment and the residential mortgage industry);
  • delays in obtaining approvals from applicable regulatory agencies and others in connection with the Company’s communities and land activities;
  • changes in the Company’s effective tax rate and assumptions and valuations related to its tax accounts;
  • the risk factors set forth in the Company’s most recent Annual Report on Form 10-K; and
  • other factors over which the Company has little or no control.
THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(in thousands, except share data)
 
   

Three months ended March 31,

    2013   2012
REVENUES        
Homebuilding   $ 363,501   $ 209,535  
Financial services     11,179     6,334  
TOTAL REVENUES     374,680     215,869  
         
EXPENSES        
Cost of sales     292,336     172,690  
Selling, general and administrative     50,226     37,388  
Financial services     6,858     5,689  
Interest     3,762     3,569  
TOTAL EXPENSES     353,182     219,336  
         
OTHER INCOME        
Gain from marketable securities, net     705     446  
TOTAL OTHER INCOME     705     446  
         
Income (loss) from continuing operations before taxes     22,203     (3,021 )
Tax expense     199     -  
         
NET INCOME (LOSS) FROM CONTINUING OPERATIONS     22,004     (3,021 )
         
Income (loss) from discontinued operations, net of taxes     113     (2,087 )
         
NET INCOME (LOSS)   $ 22,117   $ (5,108 )
         
NET INCOME (LOSS) PER COMMON SHARE        
Basic        
Continuing operations   $ 0.48   $ (0.07 )
Discontinued operations     0.00     (0.04 )
Total     0.48     (0.11 )
Diluted        
Continuing operations     0.43     (0.07 )
Discontinued operations     0.00     (0.04 )
Total   $ 0.43   $ (0.11 )
         

AVERAGE COMMON SHARES OUTSTANDING

       
Basic     45,434,996     44,473,870  
Diluted     53,361,805     44,473,870  
 
 
THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
   

March 31, 2013

 

December 31, 2012

    (Unaudited)    
         
ASSETS        
Cash, cash equivalents and marketable securities        
Cash and cash equivalents   $ 179,917     $ 155,692
Restricted cash     71,604       70,893
Marketable securities, available-for-sale     363,058       388,020
Total cash, cash equivalents and marketable securities     614,579       614,605
Housing inventories        
Homes under construction     546,142       459,269
Land under development and improved lots     570,095       573,975
Inventory held-for-sale     7,182       4,684
Consolidated inventory not owned     33,944       39,490
Total housing inventories     1,157,363       1,077,418
Property, plant and equipment     21,139       20,409
Mortgage loans held-for-sale     57,568       107,950
Other     113,924       111,057
Assets of discontinued operations     536       2,480
TOTAL ASSETS     1,965,109       1,933,919
         
LIABILITIES        
Accounts payable     117,135       124,797
Accrued and other liabilities     156,807       147,358
Debt     1,133,160       1,134,468
Liabilities of discontinued operations     1,258       1,536
TOTAL LIABILITIES     1,408,360       1,408,159
         
EQUITY        
STOCKHOLDERS' EQUITY        
Preferred stock, $1.00 par value:        
Authorized—10,000 shares Series A Junior        
Participating Preferred, none outstanding     -       -
Common stock, $1.00 par value:        
Authorized—199,990,000 shares        
Issued—45,688,050 shares at March 31, 2013        
(45,175,053 shares at December 31, 2012)     45,688       45,175
Retained earnings     494,464       458,669
Accumulated other comprehensive (loss) income     (32 )     92
TOTAL STOCKHOLDERS' EQUITY        
FOR THE RYLAND GROUP, INC.     540,120       503,936
NONCONTROLLING INTEREST     16,629       21,824
TOTAL EQUITY     556,749       525,760
TOTAL LIABILITIES AND EQUITY   $ 1,965,109     $ 1,933,919
 
 
THE RYLAND GROUP, INC. and Subsidiaries
SEGMENT INFORMATION (Unaudited)
 
   

Three months ended March 31,

    2013   2012
EARNINGS (LOSS) BEFORE TAXES (in thousands)        
Homebuilding        
North   $ 3,383     $ (1,622 )
Southeast     7,340       891  
Texas     5,050       3,525  
West     7,991       (1,726 )
Financial services     4,321       645  
Corporate and unallocated     (5,882 )     (4,734 )
Discontinued operations     113       (2,087 )
Total   $ 22,316     $ (5,108 )
NEW ORDERS        
Units        
North     640       411  
Southeast     704       417  
Texas     389       373  
West     318       127  
Discontinued operations     1       29  
Total     2,052       1,357  
Dollars (in millions)        
North   $ 192     $ 116  
Southeast     177       93  
Texas     117       96  
West     119       40  
Discontinued operations     -       6  
Total   $ 605     $ 351  
CLOSINGS        
Units        
North     328       224  
Southeast     439       265  
Texas     271       244  
West     269       82  
Discontinued operations     8       33  
Total     1,315       848  
Average closing price (in thousands)        
North   $ 291     $ 277  
Southeast     239       214  
Texas     284       259  
West     313       330  
Discontinued operations     312       210  
Total   $ 277     $ 254  
OUTSTANDING CONTRACTS   March 31,
Units   2013   2012
North     931       607  
Southeast     1,146       673  
Texas     595       562  
West     463       152  
Discontinued operations     -       29  
Total     3,135       2,023  
Dollars (in millions)        
North   $ 285     $ 175  
Southeast     284       147  
Texas     175       145  
West     163       51  
Discontinued operations     -       6  
Total   $ 907     $ 524  
Average price (in thousands)        
North   $ 306     $ 288  
Southeast     247       219  
Texas     294       257  
West     353       336  
Discontinued operations     -       219  
Total   $ 289     $ 259  
 
 
THE RYLAND GROUP, INC. and Subsidiaries
FINANCIAL SERVICES SUPPLEMENTAL INFORMATION (Unaudited)
(in thousands, except origination data)
 
   

Three months ended March 31,

RESULTS OF OPERATIONS   2013   2012
REVENUES        
Income from origination and sale of mortgage loans, net   $ 8,986     $ 4,624  
Title, escrow and insurance     1,762       1,264  
Interest and other     431       446  
TOTAL REVENUES     11,179       6,334  
EXPENSES     6,858       5,689  
PRETAX EARNINGS   $ 4,321     $ 645  
         
OPERATIONAL DATA        
         
Retail operations:        
Originations (units)     714       552  

Ryland Homes originations as a percentage of total originations

    100.0 %     99.8 %
Ryland Homes origination capture rate     62.4 %     72.5 %
         
OTHER CONSOLIDATED SUPPLEMENTAL INFORMATION (Unaudited)        
(in thousands)  

Three months ended March 31,

    2013   2012
Interest incurred   $ 16,805     $ 14,181  
Interest capitalized during the period     12,894       10,253  
Amortization of capitalized interest included in cost of sales     11,114       7,819  
Depreciation and amortization     4,040       3,001  
 

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