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  

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