Ryland reports Q1 net income of US$23.5M, up from US$22.1M a year earlier, on revenues up 30.7% to US$489.7M; closings up 12.5% to 1,470 units, new orders up 6.6% to 2,186 units

WESTLAKE VILLAGE, California , April 24, 2014 (press release) – The Ryland Group, Inc. (NYSE: RYL) today announced results for its quarter ended March 31, 2014. Items of note included:

  • Pretax earnings from continuing operations rose by 71.9 percent to $38.2 million for the quarter ended March 31, 2014, compared to $22.2 million for the quarter ended March 31, 2013;
  • Net income from continuing operations totaled $23.5 million, or $0.42 per diluted share, for the first quarter of 2014, compared to $22.0 million, or $0.43 per diluted share, for the same period in 2013;
  • Revenues totaled $489.7 million for the quarter ended March 31, 2014, representing a 30.7 percent increase from $374.7 million for the quarter ended March 31, 2013;
  • Closings increased 12.5 percent to 1,470 units for the quarter ended March 31, 2014, from 1,307 units for the same period in the prior year;
  • Average closing price increased 18.1 percent to $327,000 for the quarter ended March 31, 2014, from $277,000 for the same period in 2013;
  • Housing gross profit margin was 21.1 percent for the first quarter of 2014, compared to 19.4 percent for the first quarter of 2013;
  • New orders increased 6.6 percent to 2,186 units for the first quarter of 2014 from 2,051 units for the first quarter of 2013. New order dollars rose 20.5 percent to $729.4 million for the first quarter of 2014 from $605.1 million for the same period in 2013;
  • Backlog rose 6.6 percent to 3,342 units at March 31, 2014, from 3,135 units at March 31, 2013. The dollar value of the Company's backlog was $1.1 billion at March 31, 2014, a 21.7 percent increase from $907.1 million at March 31, 2013;
  • Active communities increased 18.8 percent to 297 communities at March 31, 2014, from 250 communities at March 31, 2013;
  • Controlled lots, including lots held in unconsolidated joint ventures, increased 1.8 percent to 39,482 lots at March 31, 2014, compared to 38,770 lots at December 31, 2013. Optioned lots were 35.9 percent of total lots controlled at March 31, 2014;
  • Selling, general and administrative expense totaled 13.0 percent of homebuilding revenues for the first quarter of 2014, compared to 13.9 percent for the first quarter of 2013;
  • Cash, cash equivalents and marketable securities totaled $609.1 million at March 31, 2014, compared to $631.2 million at December 31, 2013; and
  • Net debt-to-capital ratio was 45.3 percent at March 31, 2014, compared to 45.8 percent at December 31, 2013.

RESULTS FOR THE FIRST QUARTER OF 2014

For the quarter ended March 31, 2014, the Company reported net income from continuing operations of $23.5 million, or $0.42 per diluted share, compared to $22.0 million, or $0.43 per diluted share, for the same period in 2013.

The homebuilding segments reported pretax earnings of $46.2 million for the first quarter of 2014, compared to $23.5 million for the same period in 2013. This increase was primarily due to a rise in closing volume; higher housing gross profit margin; a reduced selling, general and administrative expense ratio; and a decline in interest expense.

Homebuilding revenues increased 32.5 percent to $481.5 million for the first quarter of 2014 from $363.5 million for the same period in 2013. This rise in homebuilding revenues was primarily attributable to a 12.5 percent increase in closings that totaled 1,470 units for the quarter ended March 31, 2014, compared to 1,307 units for the same period in the prior year, as well as to an 18.1 percent rise in average closing price, which was $327,000 for the first quarter of 2014, versus $277,000 for the same period in 2013. Homebuilding revenues for the first quarter of 2014 included $844,000 from land sales, which resulted in pretax earnings of $157,000, compared to homebuilding revenues for the first quarter of 2013 that included $2.1 million from land sales, which resulted in pretax earnings of $946,000.

New orders increased 6.6 percent to 2,186 units for the quarter ended March 31, 2014, from 2,051 units for the same period in 2013. The Company had an average monthly sales absorption rate of 2.5 homes per community for the quarter ended March 31, 2014, versus 2.8 homes per community for the quarter ended March 31, 2013, and an average cancellation rate of 15.3 percent for the quarter ended March 31, 2014, versus 15.4 percent for the same period in 2013. For the first quarter of 2014, new order dollars increased 20.5 percent to $729.4 million from $605.1 million for the first quarter of 2013. At March 31, 2014, backlog increased 6.6 percent to 3,342 units from 3,135 units at March 31, 2013. At the end of the first quarter of 2014, the dollar value of the Company's backlog was $1.1 billion, reflecting a 21.7 percent rise from the end of the first quarter of the prior year.

Housing gross profit margin was 21.1 percent for the quarter ended March 31, 2014, compared to 19.4 percent for the quarter ended March 31, 2013. This improvement in housing gross profit margin was primarily attributable to a relative decline in direct construction costs. For the first quarter of 2014, sales incentives and price concessions totaled 6.4 percent of housing revenues, compared to 7.9 percent for the same period in 2013.

Selling, general and administrative expense totaled 13.0 percent of homebuilding revenues for the first quarter of 2014, compared to 13.9 percent for the first quarter of 2013. This decrease in the selling, general and administrative expense ratio was primarily attributable to higher leverage that resulted from increased revenues.

The homebuilding segments recorded no interest expense during the first quarter of 2014, compared to $3.8 million during the first quarter of 2013. This decrease in interest expense from the first quarter of 2013 was primarily due to the capitalization of a greater amount of interest incurred during the first quarter of 2014, which resulted from a higher level of inventory under development.

For the quarter ended March 31, 2014, the financial services segment reported a pretax loss of $1.4 million, compared to pretax earnings of $4.3 million for the same period in 2013. This decline was primarily attributable to a decrease in secondary net gain percentage; higher expense related to estimates of ultimate insurance loss liability; increased personnel costs; and a decrease in locked loan pipeline, which was due to the reversal of the accelerated timing of loan locks during 2013, partially offset by a rise in origination volume and title income.

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 310,000 homes and financed more than 255,000 mortgages. The Company currently operates in 17 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,
            2014     2013
REVENUES        
  Homebuilding   $ 481,485   $ 363,501
  Financial services     8,198     11,179
      TOTAL REVENUES     489,683     374,680
               
EXPENSES        
  Cost of sales     379,999     292,336
  Selling, general and administrative     62,794     50,517
  Financial services     9,609     6,858
  Interest     -     3,762
      TOTAL EXPENSES     452,402     353,473
               
OTHER INCOME        
  Gain from marketable securities, net     404     705
  Other income     485     291
      TOTAL OTHER INCOME     889     996
Income from continuing operations before taxes     38,170     22,203
Tax expense     14,643     199
NET INCOME FROM CONTINUING OPERATIONS     23,527     22,004
               
Income from discontinued operations, net of taxes     -     113
               
NET INCOME   $ 23,527   $ 22,117
               
NET INCOME PER COMMON SHARE        
  Basic   $ 0.50   $ 0.48
  Diluted   $ 0.42   $ 0.43
               
AVERAGE COMMON SHARES        
OUTSTANDING        
  Basic     46,579,280     45,434,996
  Diluted     58,126,928     53,362,097
               
THE RYLAND GROUP, INC. and Subsidiaries        
CONSOLIDATED BALANCE SHEETS        
(in thousands, except share data)        
               
          March 31, 2014   December 31, 2013
          (Unaudited)    
               
ASSETS        
  Cash, cash equivalents and marketable securities        
    Cash and cash equivalents   $ 259,153     $ 227,986  
    Restricted cash     85,253       90,034  
    Marketable securities, available-for-sale     264,689       313,155  
    Total cash, cash equivalents and marketable securities     609,095       631,175  
  Housing inventories        
    Homes under construction     741,304       643,357  
    Land under development and improved lots     973,720       973,250  
    Consolidated inventory not owned     34,469       33,176  
    Total housing inventories     1,749,493       1,649,783  
  Property, plant and equipment     26,811       25,437  
  Mortgage loans held-for-sale     69,037       139,576  
  Net deferred taxes     174,071       185,904  
  Other     146,223       148,437  
  Assets of discontinued operations     -       30  
    TOTAL ASSETS     2,774,730       2,780,342  
               
LIABILITIES        
  Accounts payable     157,257       172,841  
  Accrued and other liabilities     191,097       212,680  
  Financial services credit facility     59,119       73,084  
  Debt     1,397,553       1,397,308  
  Liabilities of discontinued operations     -       504  
    TOTAL LIABILITIES     1,805,026       1,856,417  
               
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—46,866,216 shares at March 31, 2014        
      (46,234,809 shares at December 31, 2013)     46,866       46,235  
    Retained earnings     906,482       862,968  
    Accumulated other comprehensive loss     (964 )     (1,157 )
    TOTAL STOCKHOLDERS' EQUITY        
      FOR THE RYLAND GROUP, INC.     952,384       908,046  
  NONCONTROLLING INTEREST     17,320       15,879  
    TOTAL EQUITY     969,704       923,925  
    TOTAL LIABILITIES AND EQUITY   $ 2,774,730     $ 2,780,342  
                     
THE RYLAND GROUP, INC. and Subsidiaries        
SEGMENT INFORMATION (Unaudited)        
               
          Three months ended March 31,
            2014       2013  
EARNINGS (LOSS) BEFORE TAXES (in thousands)        
  Homebuilding        
    North   $ 10,794     $ 3,339  
    Southeast     14,857       7,205  
    Texas     7,847       5,023  
    West     12,728       7,906  
  Financial services     (1,411 )     4,321  
  Corporate and unallocated     (6,645 )     (5,591 )
  Discontinued operations     -       113  
      Total   $ 38,170     $ 22,316  
NEW ORDERS        
  Units        
    North     610       640  
    Southeast     635       704  
    Texas     507       389  
    West     434       318  
    Discontinued operations     -       1  
      Total     2,186       2,052  
  Dollars (in millions)        
    North   $ 190     $ 192  
    Southeast     192       177  
    Texas     165       117  
    West     182       119  
    Discontinued operations     -       -  
      Total   $ 729     $ 605  
CLOSINGS        
  Units        
    North     424       328  
    Southeast     446       439  
    Texas     351       271  
    West     249       269  
    Discontinued operations     -       8  
      Total     1,470       1,315  
  Average closing price (in thousands)        
    North   $ 314     $ 291  
    Southeast     284       239  
    Texas     316       284  
    West     442       313  
    Discontinued operations     -       312  
      Total   $ 327     $ 277  
OUTSTANDING CONTRACTS   March 31,    
  Units     2014       2013  
    North     1,018       931  
    Southeast     991       1,146  
    Texas     770       595  
    West     563       463  
    Discontinued operations     -       -  
      Total     3,342       3,135  
  Dollars (in millions)        
    North   $ 324     $ 285  
    Southeast     298       284  
    Texas     252       175  
    West     230       163  
    Discontinued operations     -       -  
      Total   $ 1,104     $ 907  
  Average price (in thousands)        
    North   $ 318     $ 306  
    Southeast     301       247  
    Texas     328       294  
    West     407       353  
    Discontinued operations     -       -  
      Total   $ 330     $ 289  
                       
THE RYLAND GROUP, INC. and Subsidiaries        
FINANCIAL SERVICES SUPPLEMENTAL INFORMATION (Unaudited)        
(in thousands, except origination data)        
               
          Three months ended March 31,
RESULTS OF OPERATIONS     2014       2013  
  REVENUES        
    Income from origination and sale of mortgage loans, net   $ 5,640     $ 8,986  
    Title, escrow and insurance     1,897       1,762  
    Interest and other     661       431  
      TOTAL REVENUES     8,198       11,179  
  EXPENSES     9,609       6,858  
  PRETAX (LOSS) EARNINGS   $ (1,411 )   $ 4,321  
               
OPERATIONAL DATA        
               
  Retail operations:        
    Originations (units)     704       714  
    Ryland Homes originations as a        
      percentage of total originations     100.0 %     100.0 %
    Ryland Homes origination capture rate     60.2 %     62.4 %
               
OTHER CONSOLIDATED SUPPLEMENTAL INFORMATION (Unaudited)        
(in thousands)   Three months ended March 31,
            2014       2013  
Interest incurred   $ 17,383     $ 16,805  
Interest capitalized during the period     17,111       12,894  
Amortization of capitalized interest included in cost of sales     10,470       11,114  
Depreciation and amortization     4,718       4,040

The Ryland Group, Inc.
Drew Mackintosh, VP
Investor Relations and Corporate Communications
(805) 367-3722

Source: The Ryland Group, Inc.

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