Ryland Reports Results for the Third Quarter of 2009
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CALABASAS, Calif.--(BUSINESS WIRE)-- The Ryland Group, Inc. (NYSE: RYL), today announced results for its third quarter ended September 30, 2009. Items of note included:
-- Loss per share was $1.20 for the quarter ended September 30, 2009,
including inventory and other valuation adjustments and write-offs of
$39.1 million, or $0.89 per share, compared to a loss of $1.54 per share
for the same period in 2008;
-- Housing gross profit margins averaged 10.8 percent, excluding inventory
and other valuation adjustments, for the quarter ended September 30,
2009, compared to 7.8 percent for the quarter ended June 30, 2009, and
11.8 percent for the quarter ended September 30, 2008. Including
inventory and other valuation adjustments, housing gross profit margins
averaged negative 0.2 percent for the third quarter of 2009, compared to
0.8 percent for the same period in 2008;
-- New orders in the third quarter of 2009 declined 1.1 percent to 1,270
units from 1,284 units in the third quarter of 2008, even though active
communities declined 32.5 percent at the end of the current quarter to
197 communities from 292 communities at September 30, 2008;
-- Closings totaled 1,323 units for the quarter ended September 30, 2009,
reflecting a 34.4 percent decrease from the same period in the prior
year;
-- Consolidated revenues of $327.8 million for the quarter ended September
30, 2009, reflected a decrease of 39.7 percent from the quarter ended
September 30, 2008;
-- Cash, cash equivalents and marketable securities totaled $744.3 million
as of September 30, 2009;
-- Cash flows from operations totaled $40.7 million for the quarter ended
September 30, 2009;
-- Net debt-to-capital ratio was 17.1 percent at September 30, 2009 (net
debt-to-capital ratio is calculated as debt, net of cash, cash
equivalents and marketable securities, divided by the sum of debt and
total stockholders' equity, net of cash, cash equivalents and marketable
securities); and
-- Inventory of houses started and unsold decreased by 30.0 percent to 447
units at September 30, 2009, from 639 units at December 31, 2008.
For the third quarter ended September 30, 2009, the Company reported a consolidated net loss of $52.5 million, or $1.20 per diluted share, compared to a loss of $65.7 million, or $1.54 per diluted share, for the same period in 2008. The Company had pretax charges for inventory and other valuation adjustments, and write-offs that totaled $39.1 million, or $0.89 per share, during the third quarter ended September 30, 2009, compared to $64.8 million for the same period in 2008.
The homebuilding segments reported a pretax loss of $48.5 million during the third quarter of 2009, compared to a pretax loss of $72.4 million for the same period in 2008. This reduction was primarily due to lower inventory valuation adjustments and write-offs, partially offset by declines in closings and home prices.
Homebuilding revenues decreased 40.0 percent to $315.8 million for the third quarter of 2009, compared to $526.2 million for the same period in 2008. This decline was primarily attributable to fewer closings and lower sales prices. Closings totaled 1,323 units for the third quarter ended September 30, 2009, compared to 2,017 units for the same period in the prior year, reflecting a 34.4 percent decrease. For the quarter ended September 30, 2009, the average closing price of a home declined by 6.3 percent to $238,000 from $254,000 for the same period in 2008. Homebuilding revenues for the third quarter of 2009 included $545,000 from land sales, which contributed net pretax losses of $42,000, compared to revenues of $13.9 million from land sales for the third quarter of 2008, which contributed net pretax losses of $7.2 million.
New orders of 1,270 units for the quarter ended September 30, 2009, represented a decrease of 1.1 percent, compared to new orders of 1,284 units for the same period in 2008. The Company sold 2.0 homes per community in the third quarter ended September 30, 2009, versus 1.4 homes per community for the same period in 2008. For the third quarter of 2009, new order dollars declined 7.7 percent to $300.3 million from $325.3 million for the third quarter of 2008. Backlog at the end of the third quarter of 2009 decreased 2.1 percent to 2,429 units from 2,482 units at June 30, 2009, and declined 18.2 percent from 2,969 units at the end of the third quarter of 2008. At September 30, 2009, the dollar value of the Company's backlog was $592.7 million, reflecting a decrease of 2.5 percent from June 30, 2009, and a decline of 22.9 percent from September 30, 2008.
Housing gross profit margins averaged 10.8 percent, excluding inventory and other valuation adjustments, for the quarter ended September 30, 2009, compared to 7.8 percent for the quarter ended June 30, 2009, and 11.8 percent for the quarter ended September 30, 2008. Including inventory and other valuation adjustments, housing gross profit margins averaged negative 0.2 percent for the third quarter of 2009, compared to 0.8 percent for the same period in 2008. Selling, general and administrative expenses were 12.3 percent of revenue for the third quarter of 2009, compared to 11.6 percent of revenue for the same period in 2008. This increase in the selling, general and administrative expense ratio was primarily attributable to a decline in revenues, partially offset by cost-saving initiatives and lower marketing and advertising expenditures per unit. Selling, general and administrative expense dollars for the third quarter ended September 30, 2009, decreased $22.4 million from the same period in the prior year. The homebuilding segments recorded $4.6 million of interest expense during the third quarter of 2009, while all interest incurred during the third quarter of 2008 was capitalized.
Corporate expense was $4.5 million for the third quarter of 2009, compared to $14.3 million for the same period in 2008. This decrease was primarily due to a $1.9 million gain in the market value of retirement plan investments for the third quarter of 2009, compared to a $1.8 million loss for the same period in 2008, and to a lower executive compensation expense.
During the third quarter of 2009, the Company provided $40.7 million of cash from operations. It used $1.5 million of cash for investing activities and $3.2 million of cash for financing activities.
For the three months ended September 30, 2009, the financial services segment reported pretax losses of $618,000, compared to pretax earnings of $6.0 million for the same period in 2008. This decrease was attributable to higher loan indemnification expense and to a 31.8 percent decline in the number of mortgages originated due to homebuilding market trends, partially offset by increased net gains on mortgages, on a per-unit basis, primarily due to product mix and lower general and administrative expenses.
RESULTS FOR THE FIRST NINE MONTHS OF 2009
For the nine months ended September 30, 2009, the Company reported a consolidated net loss of $201.5 million, or $4.65 per diluted share, compared to a loss of $336.7 million, or $7.94 per diluted share, for the same period in 2008. The Company recorded inventory and other valuation adjustments, joint venture impairments, and option deposit and feasibility write-offs that totaled $135.9 million, or $3.14 per share, during the nine months ended September 30, 2009, compared to $273.2 million for the same period in 2008.
The homebuilding segments reported a pretax loss of $190.3 million during the first nine months of 2009, compared to a pretax loss of $303.2 million for the same period in 2008. This reduction was primarily due to lower inventory and other valuation adjustments and write-offs, partially offset by declines in closings and home prices.
Homebuilding revenues decreased 40.2 percent to $836.4 million for the first nine months of 2009, compared to $1.4 billion for the same period in 2008. This decline was primarily attributable to fewer closings and lower sales prices. Closings totaled 3,463 units for the nine months ended September 30, 2009, compared to 5,388 units for the same period in the prior year, reflecting a 35.7 percent decrease. The average closing price of a home declined by 5.5 percent to $241,000 for the nine-month period ended September 30, 2009, from $255,000 for the same period in 2008. Homebuilding revenues for the first nine months of 2009 included $958,000 from land sales, which contributed net pretax losses of $247,000, compared to revenues of $25.4 million from land sales for the first nine months of 2008, which contributed net pretax losses of $6.2 million.
Housing gross profit margins averaged 8.4 percent, excluding inventory and other valuation adjustments and write-offs, for the nine months ended September 30, 2009, compared to 12.1 percent for the same period in 2008. This decrease was primarily due to price reductions that related to project closeouts and other home deliveries during the first nine months of 2009. Including inventory and other valuation adjustments, housing gross profit margins averaged negative 7.3 percent for the first nine months of 2009, compared to negative 4.4 percent for the same period in 2008. Selling, general and administrative expenses were 13.9 percent of revenue for the nine months ended September 30, 2009, compared to 13.6 percent of revenue for the same period in 2008. This increase in the selling, general and administrative expense ratio was primarily attributable to a decline in revenues, partially offset by cost-saving initiatives and lower marketing and advertising expenditures per unit. Selling, general and administrative expense dollars for the nine months ended September 30, 2009, decreased $73.3 million from the same period in the prior year. The homebuilding segments recorded $7.5 million of interest expense during the nine-month period ended September 30, 2009, while all interest incurred during the nine-month period ended September 30, 2008, was capitalized.
Corporate expense was $22.0 million for the first nine months of 2009, compared to $31.5 million for the same period in 2008. This decrease was primarily due to a $2.0 million gain in the market value of retirement plan investments for the first nine months of 2009, compared to a $4.0 million loss for the same period in 2008, and to a lower executive compensation expense.
For the nine months ended September 30, 2009, the financial services segment reported pretax losses of $1.1 million, compared to pretax earnings of $18.1 million for the same period in 2008. This decrease was primarily attributable to higher loan indemnification expense, a 36.5 percent decline in the number of mortgages originated due to homebuilding market trends, and a $1.2 million sale of insurance renewal rights in 2008, partially offset by lower general and administrative expenses.
OVERALL EFFECTIVE TAX RATE
The Company's effective tax rate was 0.8 percent for the quarter ended September 30, 2009, compared to an effective tax benefit rate of 18.5 percent for the same period in 2008. The change in tax rate was primarily attributable to a noncash tax charge of $20.7 million in 2009 related to the Company's deferred tax valuation allowance. The effective tax rate is not expected to change significantly during the remainder of the year.
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 285,000 homes and financed more than 240,000 mortgages. The Company currently operates in 15 states and 19 homebuilding divisions 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 government
stimulus plans, inflation, changes in consumer demand and confidence
levels and the state of the market for homes in general;
-- instability and uncertainty in the mortgage lending market, including
revisions to underwriting standards for borrowers;
-- 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
houses;
-- increased prices for labor, land and raw materials used in the
production of houses;
-- 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;
-- 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 and the
environment);
-- 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 September Nine months ended September 30,
30,
2009 2008 2009 2008
REVENUES
Homebuilding $ 315,760 $ 526,236 $ 836,364 $ 1,398,119
Financial 12,075 17,608 28,869 49,772
services
TOTAL 327,835 543,844 865,233 1,447,891
REVENUES
EXPENSES
Cost of sales 321,104 537,555 902,765 1,468,698
(Earnings)
loss from (167 ) (82 ) (230 ) 42,625
unconsolidated
joint ventures
Selling,
general and 38,698 61,120 116,663 189,967
administrative
Financial 12,693 11,631 29,954 31,722
services
Corporate 4,457 14,299 22,042 31,495
Interest 4,643 - 7,452 -
TOTAL 381,428 624,523 1,078,646 1,764,507
EXPENSES
OTHER INCOME
Gain from
marketable 1,502 - 1,738 -
securities,
net
Income related
to early - - 10,573 -
retirement of
debt, net
TOTAL OTHER 1,502 - 12,311 -
INCOME
Loss before (52,091 ) (80,679 ) (201,102 ) (316,616 )
taxes
Tax expense 391 (14,961 ) 391 20,057
(benefit)
NET LOSS $ (52,482 ) $ (65,718 ) $ (201,493 ) $ (336,673 )
NET LOSS PER
COMMON SHARE
Basic $ (1.20 ) $ (1.54 ) $ (4.65 ) $ (7.94 )
Diluted (1.20 ) (1.54 ) (4.65 ) (7.94 )
AVERAGE COMMON
SHARES
OUTSTANDING
Basic 43,808,159 42,606,667 43,341,643 42,420,301
Diluted 43,808,159 42,606,667 43,341,643 42,420,301
THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, December 31,
2009 2008
(Unaudited)
ASSETS
Cash, cash equivalents and marketable securities
Cash and cash equivalents $ 235,204 $ 389,686
Restricted cash 99,878 30,000
Marketable securities, available-for-sale 409,256 3,573
Total cash, cash equivalents and marketable 744,338 423,259
securities
Housing inventories
Homes under construction 456,523 464,810
Land under development and improved lots 327,590 547,318
Inventory held-for-sale 68,728 68,971
Consolidated inventory not owned 4,369 15,218
Total housing inventories 857,210 1,096,317
Property, plant and equipment 27,833 41,558
Current taxes receivable, net - 160,681
Other 107,123 140,019
TOTAL ASSETS 1,736,504 1,861,834
LIABILITIES
Accounts payable 107,572 73,464
Accrued and other liabilities 224,995 259,947
Debt 856,510 789,245
TOTAL LIABILITIES 1,189,077 1,122,656
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--43,813,835 shares at September 30, 2009
(42,754,467 shares at December 31, 2008) 43,814 42,754
Retained earnings 495,861 679,317
Accumulated other comprehensive income 3,719 3,291
TOTAL STOCKHOLDERS' EQUITY
FOR THE RYLAND GROUP, INC. 543,394 725,362
NONCONTROLLING INTEREST 4,033 13,816
TOTAL EQUITY 547,427 739,178
TOTAL LIABILITIES AND EQUITY $ 1,736,504 $ 1,861,834
THE RYLAND GROUP, INC. and Subsidiaries
SEGMENT INFORMATION (Unaudited)
Three months ended September 30, Nine months ended September 30,
2009 2008 2009 2008
LOSS BEFORE
TAXES (in
thousands)
Homebuilding
North $ (9,924 ) $ (35,734 ) $ (59,648 ) $ (121,970 )
Southeast (33,004 ) (4,321 ) (87,258 ) (64,308 )
Texas (1,770 ) (14,917 ) (5,021 ) (18,747 )
West (3,820 ) (17,385 ) (38,359 ) (98,146 )
Financial (618 ) 5,977 (1,085 ) 18,050
services
Corporate
and (2,955 ) (14,299 ) (9,731 ) (31,495 )
unallocated
Total $ (52,091 ) $ (80,679 ) $ (201,102 ) $ (316,616 )
NEW ORDERS
Units
North 341 446 1,316 1,575
Southeast 376 321 1,164 1,507
Texas 334 312 1,217 1,533
West 219 205 636 873
Total 1,270 1,284 4,333 5,488
Dollars(in
millions)
North $ 92 $ 120 $ 344 $ 427
Southeast 83 83 259 371
Texas 77 72 277 334
West 48 50 141 222
Total $ 300 $ 325 $ 1,021 $ 1,354
CLOSINGS
Units
North 432 603 1,131 1,589
Southeast 361 610 898 1,656
Texas 349 484 988 1,317
West 181 320 446 826
Total 1,323 2,017 3,463 5,388
Average
closing
price (in
thousands)
North $ 263 $ 284 $ 263 $ 285
Southeast 227 254 238 253
Texas 227 219 224 217
West 226 248 229 258
Total $ 238 $ 254 $ 241 $ 255
OUTSTANDING September 30,
CONTRACTS
Units 2009 2008
North 759 952
Southeast 665 797
Texas 698 892
West 307 328
Total 2,429 2,969
Dollars (in
millions)
North $ 207 $ 272
Southeast 152 209
Texas 167 203
West 67 85
Total $ 593 $ 769
Average
price (in
thousands)
North $ 273 $ 285
Southeast 228 262
Texas 239 228
West 218 259
Total $ 244 $ 259
THE RYLAND GROUP, INC. and Subsidiaries
FINANCIAL SERVICES SUPPLEMENTAL INFORMATION (Unaudited)
(in thousands, except origination data)
Three months ended Nine months ended September
September 30, 30,
RESULTS OF OPERATIONS 2009 2008 2009 2008
REVENUES
Net gains on sales of $ 6,502 $ 8,705 $ 14,770 $ 23,279
mortgages
Origination fees 3,107 4,646 7,755 12,600
Title/escrow/insurance 2,309 3,847 5,966 12,854
Interest and other 157 410 378 1,039
TOTAL REVENUES 12,075 17,608 28,869 49,772
EXPENSES 12,693 11,631 29,954 31,722
PRETAX EARNINGS (LOSS) $ (618 ) $ 5,977 $ (1,085 ) $ 18,050
OPERATIONAL DATA
Retail operations:
Originations (units) 1,066 1,562 2,640 4,159
Ryland Homes closings
as a percentage of 100.0 % 99.6 % 100.0 % 99.4 %
total closings
Ryland Homes
origination capture 85.8 % 82.8 % 82.2 % 82.7 %
rate
Investment operations:
Mortgage-backed
securities and notes $ 274 $ 369 $ 290 $ 374
receivable average
balance
THE RYLAND GROUP, INC. and Subsidiaries
NON-GAAP FINANCIAL DISCLOSURE RECONCILIATION (Unaudited)
(in thousands)
Three months ended September Nine months ended September 30,
30,
2009 2008 2009 2008
GROSS MARGINS
HOUSING $ 315,215 $ 512,305 $ 835,406 $ 1,372,719
REVENUES
HOUSING COST
OF SALES
Cost of 281,223 451,642 765,584 1,207,028
sales
Valuation
adjustments 34,748 56,618 130,538 225,433
and
write-offs
TOTAL
HOUSING 315,971 508,260 896,122 1,432,461
COST OF
SALES
GROSS $ (756 ) $ 4,045 $ (60,716 ) $ (59,742 )
MARGINS
GROSS MARGIN (0.2 ) % 0.8 % (7.3 ) % (4.4 ) %
PERCENTAGE
GROSS
MARGINS, $ 33,992 $ 60,663 $ 69,822 $ 165,691
excluding
impairments
GROSS MARGIN
PERCENTAGE, 10.8 % 11.8 % 8.4 % 12.1 %
excluding
impairments
Gross margins on home sales excluding inventory valuation adjustments is a
non-GAAP financial measure, and is defined by the Company as revenue from home
sales less costs of homes sold excluding the Company's inventory valuation
adjustments recorded during the period. Management finds this to be a useful
measure in evaluating the Company's performance because it discloses the profit
the Company generates on homes it actually delivered during the period, as the
inventory valuation adjustments relate, in part, to inventory that was not
delivered during the period. It assists the Company's management in making
strategic decisions regarding its construction pace, product mix and product
pricing based upon the profitability it generated on homes the Company currently
delivers or sells. The Company believes investors will also find gross margins
on home sales excluding inventory valuation adjustments to be important and
useful because it discloses a profitability measure that can be compared to a
prior period without regard to the variability of inventory valuation
adjustments. In addition, to the extent that the Company's competitors provide
similar information, disclosure of its gross margins on home sales excluding
inventory valuation adjustments helps readers of the Company's financial
statements compare profits to its competitors with regard to the homes they
deliver in the same period. In addition, because gross margins on home sales is
a financial measure that is not calculated in accordance with GAAP, it may not
be completely comparable to similarly titled measures of the Company's
competitors due to potential differences in methods of calculation and charges
being excluded.
Source: The Ryland Group, Inc.
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