Ryland Reports Results For The Fourth Quarter Of 2013

The Ryland Group, Inc. (NYSE: RYL) today announced results for its quarter ended December 31, 2013. Items of note included:
  • Net income from continuing operations totaled $72.3 million, or $1.27 per diluted share, for the fourth quarter of 2013, compared to net income of $28.9 million, or $0.56 per diluted share, for the same period in 2012;
  • Revenues totaled $696.7 million for the quarter ended December 31, 2013, representing a 58.3 percent increase from $440.1 million for the quarter ended December 31, 2012;
  • Closings increased 39.0 percent to 2,178 units for the quarter ended December 31, 2013, from 1,567 units for the same period in the prior year;
  • Backlog rose 9.8 percent to 2,626 units at December 31, 2013, from 2,391 units at December 31, 2012;
  • Average closing price increased 16.3 percent to $314,000 for the quarter ended December 31, 2013, from $270,000 for the same period in 2012;
  • Housing gross profit margin was 21.9 percent for the fourth quarter of 2013, compared to 20.0 percent for the fourth quarter of 2012;
  • New orders decreased 4.4 percent to 1,428 units for the fourth quarter of 2013 from 1,493 units for the fourth quarter of 2012. New orders increased 2.7 percent for the fourth quarter of 2013, excluding 102 backlog units attained in the acquisition of Trend Homes in the fourth quarter of 2012. New order dollars rose 10.2 percent to $469.4 million for the fourth quarter of 2013 from $425.9 million for the same period in 2012;
  • Controlled lots, including lots held in unconsolidated joint ventures, increased 35.5 percent to 38,770 lots at December 31, 2013, compared to 28,622 lots at December 31, 2012. Optioned lots were 39.3 percent of total lots controlled at December 31, 2013;
  • Selling, general and administrative expense totaled 11.3 percent of homebuilding revenues for the fourth quarter of 2013, compared to 13.4 percent for the fourth quarter of 2012;
  • Cash, cash equivalents and marketable securities totaled $631.2 million at December 31, 2013, compared to $614.6 million at December 31, 2012; and
  • Net debt-to-capital ratio was 45.8 percent at December 31, 2013, compared to 50.8 percent at December 31, 2012.

RESULTS FOR THE FOURTH QUARTER OF 2013

For the quarter ended December 31, 2013, the Company reported net income from continuing operations of $72.3 million, or $1.27 per diluted share, compared to net income of $28.9 million, or $0.56 per diluted share, for the same period in 2012. The Company had pretax charges primarily related to write-offs that totaled $952,000 and $300,000 for the quarters ended December 31, 2013 and 2012, respectively.

The homebuilding segments reported pretax earnings of $80.7 million for the fourth quarter of 2013, compared to pretax earnings of $32.1 million for the same period in 2012. 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 60.2 percent to $685.0 million for the fourth quarter of 2013 from $427.5 million for the same period in 2012. This rise in homebuilding revenues was primarily attributable to a 39.0 percent increase in closings that totaled 2,178 units for the quarter ended December 31, 2013, compared to 1,567 units for the same period in the prior year, as well as to a 16.3 percent rise in average closing price, which was $314,000 for the fourth quarter of 2013, versus $270,000 for the same period in 2012. Homebuilding revenues for the fourth quarter of 2013 included $778,000 from land sales, which resulted in pretax earnings of $84,000, compared to homebuilding revenues for the fourth quarter of 2012 that included $3.8 million from land sales, which resulted in pretax earnings of $981,000.

New orders decreased 4.4 percent to 1,428 units for the quarter ended December 31, 2013, from 1,493 units for the same period in 2012. The Company had an average monthly sales absorption rate of 1.7 homes per community for the quarter ended December 31, 2013, versus 2.1 homes per community for the quarter ended December 31, 2012, and an average cancellation rate of 20.0 percent for the quarter ended December 31, 2013, versus 17.9 percent for the same period in 2012. For the fourth quarter of 2013, new order dollars increased 10.2 percent to $469.4 million from $425.9 million for the fourth quarter of 2012. At December 31, 2013, backlog increased 9.8 percent to 2,626 units from 2,391 units at December 31, 2012. At the end of the fourth quarter of 2013, the dollar value of the Company’s backlog was $854.8 million, reflecting a 28.9 percent rise from the end of the fourth quarter of the prior year.

Housing gross profit margin was 21.9 percent for the quarter ended December 31, 2013, compared to 20.0 percent for the quarter ended December 31, 2012. This improvement in housing gross profit margin was primarily attributable to a relative decline in direct construction costs. For the fourth quarter of 2013, sales incentives and price concessions totaled 6.3 percent of housing revenues, compared to 8.7 percent for the same period in 2012.

Selling, general and administrative expense totaled 11.3 percent of homebuilding revenues for the fourth quarter of 2013, compared to 13.4 percent for the fourth quarter of 2012. 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 $238,000 of interest expense during the fourth quarter of 2013, compared to $5.1 million during the fourth quarter of 2012. This decrease in interest expense from the fourth quarter of 2012 was primarily due to the capitalization of a greater amount of interest incurred during the fourth quarter of 2013, which resulted from a higher level of inventory under development, partially offset by an overall increase in interest incurred on senior notes.

During the fourth quarter of 2013, the Company used $39.7 million of cash for operating activities, provided $49.4 million of cash from investing activities and provided $73.8 million of cash from financing activities, primarily related to borrowings against the financial services repurchase credit facility.

For the quarter ended December 31, 2013, the financial services segment reported pretax earnings of $2.1 million, compared to pretax earnings of $6.2 million for the same period in 2012. This decline was primarily attributable to decreases in locked loan pipeline volume and secondary net gain percentage, as well as to higher expense related to estimates of ultimate insurance loss liability, partially offset by increases in origination volume and title income.

ANNUAL RESULTS FOR 2013

For the year ended December 31, 2013, the Company reported net income from continuing operations of $379.1 million, or $6.79 per diluted share, compared to net income of $42.4 million, or $0.88 per diluted share, for the same period in 2012. There were no pretax charges related to early retirement of debt during the year ended December 31, 2013, compared to pretax charges that totaled $9.1 million during the same period in 2012. Additionally, the Company had pretax charges that totaled $2.0 million primarily related to write-offs for the year ended December 31, 2013, compared to pretax charges that totaled $6.3 million primarily related to inventory valuation adjustments and write-offs for the same period in 2012.

The homebuilding segments reported pretax earnings of $203.5 million for the year ended December 31, 2013, compared to pretax earnings of $63.9 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 write-offs; a reduced selling, general and administrative expense ratio; and a decline in interest expense.

Homebuilding revenues increased 64.4 percent to $2.1 billion for the year ended December 31, 2013, from $1.3 billion for the same period in 2012. This rise in homebuilding revenues was primarily attributable to a 46.1 percent increase in closings that totaled 7,027 units for the year ended December 31, 2013, compared to 4,809 units for the same period in the prior year, as well as to a 12.5 percent rise in average closing price, which was $296,000 for the year ended December 31, 2013, versus $263,000 for the same period in 2012. Homebuilding revenues for the year ended December 31, 2013, included $6.5 million from land sales, which resulted in pretax earnings of $1.7 million, compared to homebuilding revenues for the same period in 2012 that included $7.7 million from land sales, which resulted in pretax earnings of $2.5 million.

New orders increased 27.0 percent to 7,262 units for the year ended December 31, 2013, from 5,719 units for the same period in 2012. The Company had an average monthly sales absorption rate of 2.3 homes per community for the year ended December 31, 2013, versus 2.2 homes per community for the same period in 2012, and an average cancellation rate of 17.7 percent for the year ended December 31, 2013, versus 19.0 percent for the same period in 2012. For the year ended December 31, 2013, new order dollars increased 47.2 percent to $2.3 billion from $1.5 billion for the same period in 2012.

Housing gross profit margin was 20.8 percent for the year ended December 31, 2013, compared to 19.1 percent for the same period in 2012. This improvement in housing gross profit margin was primarily attributable to a relative decline in direct construction costs and to lower inventory valuation adjustments and write-offs, partially offset by increased land costs. For the year ended December 31, 2013, sales incentives and price concessions totaled 6.8 percent of housing revenues, compared to 9.6 percent for the same period in 2012.

Selling, general and administrative expense totaled 12.1 percent of homebuilding revenues for the year ended December 31, 2013, compared to 14.9 percent for the same period in 2012. 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 $8.4 million of interest expense during the year ended December 31, 2013, compared to $16.1 million during the same period in 2012. This decrease in interest expense from 2012 was primarily due to the capitalization of a greater amount of interest incurred during 2013, which resulted from a higher level of inventory under development, partially offset by an overall increase in interest incurred on senior notes.

For the year ended December 31, 2013, the financial services segment reported pretax earnings of $20.1 million, compared to pretax earnings of $13.1 million for the same period in 2012. This improvement was primarily attributable to increases in locked loan pipeline and origination volumes, as well as to a rise in title income, partially offset by increased personnel costs and by higher expense related to estimates of ultimate insurance loss liability.

OVERALL EFFECTIVE TAX RATE

The Company had an overall effective income tax benefit rate of 93.7 percent for the year ended December 31, 2013, compared to an overall effective income tax expense rate of 3.8 percent for the year ended December 31, 2012. Changes in overall effective income tax rates for the years ended December 31, 2013 and 2012, were primarily due to adjustments to the Company’s deferred tax asset valuation allowance. As of December 31, 2012, the balance of the Company’s deferred tax asset valuation allowance was $258.9 million, which the Company fully reversed in 2013.

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 305,000 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 any subsequent Quarterly report on Form 10-Q; and
  • other factors over which the Company has little or no control.
THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except share data)
             
Three months ended December 31, Twelve months ended December 31,
 

2013
      2012     2013       2012  
REVENUES
Homebuilding $ 684,974 $ 427,523 $ 2,089,375 $ 1,270,847
Financial services   11,683       12,612     51,380       37,619  
TOTAL REVENUES   696,657       440,135     2,140,755       1,308,466  
 
EXPENSES
Cost of sales 534,709 341,691 1,654,196 1,027,472
Selling, general and administrative 77,343 57,324 253,047 189,500
Financial services 9,579 6,445 31,312 24,477
Interest   238       5,133     8,358       16,118  
TOTAL EXPENSES   621,869       410,593     1,946,913       1,257,567  
 
OTHER INCOME (LOSS)
Gain from marketable securities, net 435 777 1,849 2,214
Loss related to early retirement of debt, net   -       -     -       (9,146 )
TOTAL OTHER INCOME (LOSS)   435       777     1,849       (6,932 )
Income from continuing operations before taxes 75,223 30,319 195,691 43,967
Tax expense (benefit)   2,917       1,372     (183,408 )     1,585  
NET INCOME FROM CONTINUING OPERATIONS   72,306       28,947     379,099       42,382  
 
(Loss) income from discontinued operations, net of taxes   (61 )     (374 )   106       (2,000 )
 
NET INCOME $ 72,245     $ 28,573   $ 379,205     $ 40,382  
 
NET INCOME (LOSS) PER COMMON SHARE
Basic
Continuing operations $ 1.56 $ 0.64 $ 8.22 $ 0.93
Discontinued operations   0.00       (0.01 )   0.00       (0.04 )
Total 1.56 0.63 8.22 0.89
Diluted
Continuing operations 1.27 0.56 6.79 0.88
Discontinued operations   0.00       (0.01 )   0.00       (0.04 )
Total $ 1.27 $ 0.55 $ 6.79 $ 0.84
 
AVERAGE COMMON SHARES
OUTSTANDING
Basic 46,216,025 45,115,000 45,966,307 44,761,178
Diluted 57,806,737 53,052,803 56,219,939 49,655,321
 
THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
         
December 31, 2013 December 31, 2012
 
 
ASSETS
Cash, cash equivalents and marketable securities
Cash and cash equivalents $ 227,986 $ 158,087
Restricted cash 90,034 70,893
Marketable securities, available-for-sale   313,155       385,625
Total cash, cash equivalents and marketable securities 631,175 614,605
Housing inventories
Homes under construction 643,357 459,269
Land under development and improved lots 969,755 573,975
Inventory held-for-sale 3,495 4,684
Consolidated inventory not owned   33,176       39,490
Total housing inventories 1,649,783 1,077,418
Property, plant and equipment 25,437 20,409
Mortgage loans held-for-sale 139,576 107,950
Net deferred taxes 185,904 -
Other 148,437 111,057
Assets of discontinued operations   30       2,480
TOTAL ASSETS   2,780,342       1,933,919
 
LIABILITIES
Accounts payable 172,841 124,797
Accrued and other liabilities 212,680 147,358
Financial services credit facility 73,084 -
Debt 1,397,308 1,134,468
Liabilities of discontinued operations   504       1,536
TOTAL LIABILITIES   1,856,417       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—46,234,809 shares at December 31, 2013
(45,175,053 shares at December 31, 2012) 46,235 45,175
Retained earnings 862,968 458,669
Accumulated other comprehensive (loss) income   (1,157 )     92
TOTAL STOCKHOLDERS' EQUITY
FOR THE RYLAND GROUP, INC.   908,046       503,936
NONCONTROLLING INTEREST   15,879       21,824
TOTAL EQUITY   923,925       525,760
TOTAL LIABILITIES AND EQUITY $ 2,780,342     $ 1,933,919
 
THE RYLAND GROUP, INC. and Subsidiaries
SEGMENT INFORMATION
             
Three months ended December 31, Twelve months ended December 31,
  2013       2012       2013       2012  
EARNINGS (LOSS) BEFORE TAXES (in thousands)
Homebuilding
North $ 20,909 $ 7,472 $ 52,440 $ 11,602
Southeast 28,623 9,274 65,510 18,566
Texas 15,258 7,436 39,030 22,984
West 15,931 7,892 46,546 10,732
Financial services 2,104 6,167 20,068 13,142
Corporate and unallocated (7,602 ) (7,922 ) (27,903 ) (33,059 )
Discontinued operations   (61 )     (374 )   106       (2,000 )
      Total   $ 75,162     $ 29,945     $ 195,797     $ 41,967  
NEW ORDERS
Units
North 412 410 2,245 1,571
Southeast 403 498 2,236 1,936
Texas 360 282 1,651 1,286
West 253 303 1,130 926
Discontinued operations   -       9     1       62  
Total   1,428       1,502       7,263       5,781  
Dollars (in millions)
North $ 127 $ 125 $ 695 $ 461
Southeast 117 120 618 454
Texas 111 78 510 345
West 114 103 451 285
Discontinued operations   -       2     -       14  
      Total   $ 469     $ 428     $ 2,274     $ 1,559  
CLOSINGS
Units
North 622 424 2,032 1,372
Southeast 721 531 2,315 1,576
Texas 494 348 1,514 1,242
West 341 264 1,166 619
Discontinued operations   -       11     8       88  
Total   2,178       1,578       7,035       4,897  
Average closing price (in thousands)
North $ 315 $ 298 $ 303 $ 286
Southeast 281 234 258 225
Texas 305 264 295 259
West 397 308 363 314
Discontinued operations   -       220     312       223  
      Total   $ 314     $ 270     $ 296     $ 262  
OUTSTANDING CONTRACTS December 31,
Units   2013       2012  
North 832 619
Southeast 802 881
Texas 614 477
West 378 414
Discontinued operations   -       7  
Total   2,626       2,398  
Dollars (in millions)
North $ 267 $ 188
Southeast 233 211
Texas 198 135
West 157 129
Discontinued operations   -       3  
Total $ 855     $ 666  
Average price (in thousands)
North $ 321 $ 305
Southeast 290 239
Texas 322 283
West 416 311
Discontinued operations   -       334  
      Total           $ 326     $ 278  
 
THE RYLAND GROUP, INC. and Subsidiaries
FINANCIAL SERVICES SUPPLEMENTAL INFORMATION
(in thousands, except origination data)
     
Three months ended December 31, Twelve months ended December 31,
RESULTS OF OPERATIONS   2013     2012   2013     2012
REVENUES
Income from origination and sale of mortgage loans, net $ 7,703 $ 9,723 $ 39,158 $ 28,634
Title, escrow and insurance 3,218 2,281 9,990 7,199
Interest and other   762     608   2,232     1,786
TOTAL REVENUES 11,683 12,612 51,380 37,619
EXPENSES   9,579     6,445   31,312     24,477
PRETAX EARNINGS $ 2,104   $ 6,167 $ 20,068   $ 13,142
 
OPERATIONAL DATA
 
Retail operations:
Originations (units) 1,224 962 4,007 3,039
Ryland Homes originations as a
percentage of total originations 100.0 % 99.9 % 99.9 % 99.9 %
Ryland Homes origination capture rate 66.6 % 67.5 % 66.3 % 68.1 %
                       
OTHER CONSOLIDATED SUPPLEMENTAL INFORMATION
(in thousands) Three months ended December 31, Twelve months ended December 31,
  2013     2012   2013     2012
Interest incurred $ 17,310 $ 16,829 $ 68,184 $ 59,503
Interest capitalized during the period 16,905 11,462 59,208 42,327
Amortization of capitalized interest included in cost of sales 15,209 12,845 52,362 40,612
Depreciation and amortization     6,041     4,903     20,517     15,399

Copyright Business Wire 2010

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