Ryland Reports Results for the Third Quarter of 2012

  Ryland Reports Results for the Third Quarter of 2012

Business Wire

WESTLAKE VILLAGE, Calif. -- October 24, 2012

The Ryland Group, Inc. (NYSE: RYL) today announced results for its quarter
ended September 30, 2012. Items of note included:

  *Net income from continuing operations totaled $10.4 million, or $0.21 per
    diluted share, for the quarter ended September 30, 2012. Net income from
    continuing operations included the impact of early retirement of debt
    costs of $9.1 million and valuation adjustments and write-offs of $3.5
    million, and totaled $23.1 million, or $0.45 per diluted share, for the
    third quarter of 2012, excluding these items;
  *New orders increased 55.8 percent to 1,500 units for the third quarter of
    2012 from 963 units for the third quarter of 2011. For the third quarter
    of 2012, new order dollars rose 61.3 percent to $393.4 million from $243.9
    million for the same period in 2011;
  *Closings increased 37.4 percent to 1,312 units for the quarter ended
    September 30, 2012, compared to 955 units for the same period in the prior
    year;
  *Backlog rose 58.3 percent to 2,465 units at September 30, 2012, from 1,557
    units at September 30, 2011;
  *Active communities increased 11.4 percent to 235 communities at September
    30, 2012, from 211 communities at September 30, 2011;
  *Revenues totaled $358.7 million for the quarter ended September 30, 2012,
    representing a 44.3 percent increase from $248.6 million for the quarter
    ended September 30, 2011;
  *Average closing price increased 4.8 percent to $264,000 for the quarter
    ended September 30, 2012, from $252,000 for the same period in 2011;
  *Housing gross profit margin was 20.0 percent, excluding valuation
    adjustments and write-offs, for the third quarter of 2012, compared to
    17.8 percent for the third quarter of 2011. Including valuation
    adjustments and write-offs, housing gross profit margin was 19.1 percent
    for the third quarter of 2012, compared to 17.7 percent for the same
    period in the prior year;
  *Debt issuance of $250.0 million of 5.4 percent senior notes due October
    2022;
  *Redemption of $167.2 million of 6.9 percent senior notes due June 2013;
  *Selling, general and administrative expense (including corporate) totaled
    13.8 percent of homebuilding revenues for the third quarter of 2012,
    compared to 18.4 percent for the third quarter of 2011;
  *Cash, cash equivalents and marketable securities totaled $799.7 million at
    September 30, 2012; and
  *Net debt-to-capital ratio was 41.2 percent at September 30, 2012, compared
    to 36.7 percent at December 31, 2011.

RESULTS FOR THE THIRD QUARTER OF 2012

For the quarter ended September 30, 2012, the Company reported net income from
continuing operations of $10.4 million, or $0.21 per diluted share, compared
to a net loss of $3.9 million, or $0.09 per diluted share, for the same period
in 2011. Pretax charges related to early retirement of debt totaled $9.1
million and $477,000 during the quarters ended September 30, 2012 and 2011,
respectively. Additionally, the Company had pretax charges related to
valuation adjustments and write-offs that totaled $3.5 million and $1.3
million for the quarters ended September 30, 2012 and 2011, respectively.

The homebuilding segments reported pretax earnings of $20.8 million for the
third quarter of 2012, compared to pretax earnings of $910,000 for the same
period in 2011. 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, partially
offset by higher valuation adjustments and write-offs.

Homebuilding revenues increased 44.7 percent to $349.2 million for the third
quarter of 2012, compared to $241.3 million for the same period in 2011. This
rise in homebuilding revenues was primarily attributable to a 37.4 percent
increase in closings that totaled 1,312 units for the quarter ended September
30, 2012, compared to 955 units for the same period in the prior year. For the
quarter ended September 30, 2012, the average closing price of a home
increased 4.8 percent to $264,000 from $252,000 for the same period in 2011.
Homebuilding revenues for the third quarter of 2012 included $2.2 million from
land sales, which resulted in pretax earnings of $935,000, compared to
homebuilding revenues for the third quarter of 2011 that included $931,000
from land sales, which resulted in pretax earnings of $342,000.

New orders increased 55.8 percent to 1,500 units for the quarter ended
September 30, 2012, compared to new orders of 963 units for the same period in
2011. The Company had an average monthly sales absorption rate of 2.3 homes
per community for the quarter ended September 30, 2012, versus 1.6 homes per
community for the quarter ended September 30, 2011, and an average
cancellation rate of 19.9 percent for the quarter ended September 30, 2012,
versus 20.1 percent for the same period in 2011. For the third quarter of
2012, new order dollars increased 61.3 percent to $393.4 million from $243.9
million for the third quarter of 2011. At September 30, 2012, backlog
increased 58.3 percent to 2,465 units from 1,557 units at September 30, 2011.
For the third quarter of 2012, the dollar value of the Company’s backlog was
$661.2 million, reflecting a 65.5 percent rise from the same period in the
prior year.

Housing gross profit margin was 20.0 percent, excluding valuation adjustments
and write-offs, for the quarter ended September 30, 2012, compared to 17.8
percent for the quarter ended September 30, 2011. Including valuation
adjustments and write-offs, housing gross profit margin was 19.1 percent for
the third quarter of 2012, compared to 17.7 percent for the third quarter of
2011. This improvement in housing gross profit margin was primarily
attributable to a decline in direct construction costs; higher leverage of
direct overhead expense due to an increase in the number of homes delivered;
and reduced sales incentives and price concessions, partially offset by higher
valuation adjustments and write-offs. For the third quarter of 2012, sales
incentives and price concessions totaled 9.1 percent, compared to 10.9 percent
for the same period in 2011.

Selling, general and administrative expense, including corporate, totaled 13.8
percent of homebuilding revenues for the third quarter of 2012, compared to
18.4 percent for the third quarter of 2011. This decrease in the selling,
general and administrative expense ratio was primarily attributable to higher
leverage resulting from increased revenues, cost-saving initiatives and a rise
in the market value of retirement plan investments, partially offset by higher
compensation expense primarily due to the impact of fluctuations in the
Company’s stock price.

The homebuilding segments recorded $3.2 million of interest expense during the
third quarter of 2012, compared to $4.0 million during the third quarter of
2011. This decrease in interest expense from the third quarter of 2011 was
primarily due to the capitalization of a greater amount of interest incurred
during the third quarter of 2012, which resulted from a higher level of
inventory-under-development and to lower interest incurred on senior notes
related to the repurchase of 6.9 percent senior notes in July 2012 and the
issuance of 5.4 percent senior notes in September 2012.

During the third quarter of 2012, the Company used $16.0 million of cash for
operating activities, invested $200.7 million of cash primarily received from
the proceeds of a debt issuance and provided $85.7 million, net, from new
financing.

For the quarter ended September 30, 2012, the financial services segment
reported pretax earnings of $3.4 million, compared to $2.0 million for the
same period in 2011. 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, personnel and legal expenses
and by interest related to the financial services credit facility that was
entered into during December 2011.

The Company’s net income from discontinued operations totaled $238,000, or
$0.01 per diluted share, for the quarter ended September 30, 2012, compared to
a net loss of $17.4 million, or $0.39 per diluted share, for the same period
in 2011.

RESULTS FOR THE FIRST NINE MONTHS OF 2012

For the nine months ended September 30, 2012, the Company reported net income
from continuing operations of $13.4 million, or $0.30 per diluted share,
compared to a net loss of $31.1 million, or $0.70 per diluted share, for the
same period in 2011. Pretax charges related to early retirement of debt
totaled $9.1 million and $1.3 million during the nine months ended September
30, 2012 and 2011, respectively. Additionally, the Company had pretax charges
related to inventory and other valuation adjustments and write-offs that
totaled $6.0 million and $16.2 million for the nine months ended September 30,
2012 and 2011, respectively.

The homebuilding segments reported pretax earnings of $31.8 million for the
first nine months of 2012, compared to a pretax loss of $23.8 million for the
same period in 2011. This increase was primarily due to a rise in closing
volume; higher housing gross profit margin, including lower inventory and
other valuation adjustments and write-offs; a decline in interest expense; and
a reduced selling, general and administrative expense ratio.

Homebuilding revenues increased 38.8 percent to $843.3 million for the first
nine months of 2012, compared to $607.7 million for the same period in 2011.
This rise in homebuilding revenues was primarily attributable to a 33.6
percent increase in closings that totaled 3,242 units for the nine-month
period ended September 30, 2012, compared to 2,427 units for the same period
in the prior year. For the nine months ended September 30, 2012, the average
closing price of a home increased 4.0 percent to $259,000 from $249,000 for
the same period in 2011. Homebuilding revenues for the first nine months of
2012 included $3.9 million from land sales, which resulted in pretax earnings
of $1.6 million, compared to homebuilding revenues for the first nine months
of 2011 that included $2.3 million from land sales, which resulted in pretax
earnings of $198,000.

New orders increased 47.9 percent to 4,226 units for the nine months ended
September 30, 2012, compared to new orders of 2,857 units for the same period
in 2011. The Company had an average monthly sales absorption rate of 2.2 homes
per community for the nine months ended September 30, 2012, versus 1.6 homes
per community for the nine months ended September 30, 2011, and an average
cancellation rate of 19.4 percent for the nine months ended September 30,
2012, versus 19.7 percent for the same period in 2011. For the first nine
months of 2012, new order dollars increased 55.4 percent to $1.1 billion from
$720.0 million for the first nine months of 2011.

Housing gross profit margin was 19.2 percent, excluding inventory valuation
adjustments and write-offs, for the nine months ended September 30, 2012,
compared to 17.3 percent for the nine months ended September 30, 2011.
Including inventory valuation adjustments and write-offs, housing gross profit
margin was 18.6 percent for the first nine months of 2012, compared to 16.1
percent for the first nine months of 2011. This improvement in housing gross
profit margin was primarily attributable to a decline in land and direct
construction costs; lower inventory and other valuation adjustments and
write-offs; higher leverage of direct overhead expense due to an increase in
the number of homes delivered; and reduced sales incentives and price
concessions. For the first nine months of 2012, sales incentives and price
concessions totaled 10.0 percent, compared to 11.3 percent for the same period
in 2011.

Selling, general and administrative expense, including corporate, totaled 15.7
percent of homebuilding revenues for the first nine months of 2012, compared
to 19.1 percent for the first nine months of 2011. This decrease in the
selling, general and administrative expense ratio was primarily attributable
to higher leverage resulting from increased revenues, cost-saving initiatives
and a rise in the market value of retirement plan investments, partially
offset by higher compensation expense primarily due to the impact of
fluctuations in the Company’s stock price. The homebuilding segments recorded
$11.0 million of interest expense during the first nine months of 2012,
compared to $14.5 million during the first nine months of 2011. This decrease
in interest expense from the first nine months of 2011 was primarily due to
the capitalization of a greater amount of interest incurred during the first
nine months of 2012, which resulted from a higher level of
inventory-under-development and to lower interest incurred on senior notes
related to the repurchase of 6.9 percent senior notes in July 2012 and the
issuance of 5.4 percent senior notes in September 2012.

For the nine-month period ended September 30, 2012, the financial services
segment reported pretax earnings of $7.0 million, compared to $5.3 million for
the same period in 2011. 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 legal, personnel and indemnification
expenses and by interest related to the financial services credit facility
that was entered into during December 2011.

The Company’s net loss from discontinued operations totaled $1.6 million, or
$0.04 per diluted share, for the nine-month period ended September 30, 2012,
compared to a net loss of $20.4 million, or $0.46 per diluted share, for the
same period in 2011.

DEBT OFFERING AND REDEMPTION

During the third quarter of 2012, the Company paid $177.2 million to redeem
and repurchase all of its 6.9 percent senior notes, which were due June 2013
and totaled $167.2 million, resulting in a loss of $9.1 million. In addition,
the Company issued $250.0 million of 5.4 percent senior notes due October
2022. The Company will use the $246.6 million in net proceeds that it received
from this offering for general corporate purposes, which may include the
purchase of marketable securities.

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 13 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, including continued competition and price pressure
    from distressed home sales;
  *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
    Form10-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,
                  2012          2011           2012          2011       
REVENUES
Homebuilding     $ 349,196        $ 241,339        $ 843,324        $ 607,692
Financial         9,497         7,227          25,007        20,394     
services
TOTAL REVENUES    358,693       248,566        868,331       628,086    
                                                                    
EXPENSES
Cost of sales      281,961          199,139          685,781          517,829
Selling,
general and        48,281           44,388           132,176          116,193
administrative
Financial          6,111            5,198            18,032           15,092
services
Interest          3,236         3,952          10,985        14,474     
TOTAL EXPENSES    339,589       252,677        846,974       663,588    
                                                                    
OTHER (LOSS)
INCOME
Gain from
marketable         472              680              1,437            3,290
securities,
net
Loss related
to early          (9,146     )   (477       )    (9,146     )   (1,334     )
retirement of
debt, net
TOTAL OTHER       (8,674     )   203            (7,709     )   1,956      
(LOSS) INCOME
Income (loss)
from
continuing         10,430           (3,908     )     13,648           (33,546    )
operations
before taxes
Tax expense       23            (18        )    213           (2,416     )
(benefit)
NET INCOME
(LOSS) FROM       10,407        (3,890     )    13,435        (31,130    )
CONTINUING
OPERATIONS
                                                                    
Income (loss)
from
discontinued      238           (17,423    )    (1,626     )   (20,432    )
operations,
net of taxes
                                                                    
NET INCOME       $ 10,645       $ (21,313    )   $ 11,809       $ (51,562    )
(LOSS)
                                                                    
NET INCOME
(LOSS) PER
COMMON SHARE
Basic
Continuing       $ 0.23           $ (0.09      )   $ 0.30           $ (0.70      )
operations
Discontinued      0.01          (0.39      )    (0.04      )   (0.46      )
operations
Total              0.24             (0.48      )     0.26             (1.16      )
Diluted
Continuing         0.21             (0.09      )     0.30             (0.70      )
operations
Discontinued      0.01          (0.39      )    (0.04      )   (0.46      )
operations
Total            $ 0.22           $ (0.48      )   $ 0.26           $ (1.16      )
                                                                    
AVERAGE COMMON
SHARES
OUTSTANDING
Basic              44,825,943       44,408,594       44,643,139       44,339,168
Diluted            52,653,824       44,408,594       45,163,680       44,339,168


THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
                                                          
                                        September 30, 2012   December 31, 2011
                                        (Unaudited)
                                                             
ASSETS
Cash, cash equivalents and marketable
securities
Cash and cash equivalents               $     224,217        $    159,363
Restricted cash                               66,933              56,799
Marketable securities,                       508,510           347,016
available-for-sale
Total cash, cash equivalents and              799,660             563,178
marketable securities
Housing inventories
Homes under construction                      459,427             319,476
Land under development and improved           443,996             413,569
lots
Inventory held-for-sale                       6,665               11,015
Consolidated inventory not owned             43,606            51,400
Total housing inventories                     953,694             795,460
Property, plant and equipment                 20,621              19,920
Other                                         175,820             165,262
Assets of discontinued operations            5,470             35,324
TOTAL ASSETS                                 1,955,265         1,579,144
                                                             
LIABILITIES
Accounts payable                              107,351             74,327
Accrued and other liabilities                 159,590             140,930
Financial services credit facility            58,457              49,933
Debt                                          1,130,673           823,827
Liabilities of discontinued                  1,828             6,217
operations
TOTAL LIABILITIES                            1,457,899         1,095,234
                                                             
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—44,987,573 shares at September
30, 2012 (44,413,594 shares at                44,988              44,414
December 31, 2011)
Retained earnings                             426,551             405,109
Accumulated other comprehensive              244               164
income
TOTAL STOCKHOLDERS' EQUITY FOR THE           471,783           449,687
RYLAND GROUP, INC.
NONCONTROLLING INTEREST                      25,583            34,223
TOTAL EQUITY                                 497,366           483,910
TOTAL LIABILITIES AND EQUITY            $     1,955,265     $    1,579,144


THE RYLAND GROUP, INC. and Subsidiaries
SEGMENT INFORMATION (Unaudited)
                                                              
                Three months ended September 30,   Nine months ended September
                                                   30,
                  2012           2011          2012        2011    
EARNINGS
(LOSS) BEFORE
TAXES (in
thousands)
Homebuilding
North           $  3,956          $  614           $  4,130        $ (9,611  )
Southeast          5,904             (924     )       9,292          (13,550 )
Texas              7,239             3,479            15,548         5,256
West               3,728             (2,259   )       2,840          (5,937  )
Financial          3,386             2,029            6,975          5,302
services
Corporate and      (13,783  )        (6,847   )       (25,137  )     (15,006 )
unallocated
Discontinued      238            (17,423  )      (1,626   )   (20,432 )
operations
Total          $  10,668       $  (21,331  )   $  12,022     $ (53,978 )
NEW ORDERS
Units
North              367               304              1,161          936
Southeast          584               293              1,438          873
Texas              296               264              1,004          802
West               253               102              623            246
Discontinued      7              45             53          182     
operations
Total             1,507          1,008         4,279       3,039   
Dollars (in
millions)
North           $  105            $  83            $  336          $ 253
Southeast          135               64               334            187
Texas              82                66               267            204
West               71                31               182            76
Discontinued      2              10             12          38      
operations
Total          $  395          $  254         $  1,131      $ 758     
CLOSINGS
Units
North              408               314              948            801
Southeast          426               277              1,045          690
Texas              334               292              894            755
West               144               72               355            181
Discontinued      10             60             77          160     
operations
Total             1,322          1,015         3,319       2,587   
Average
closing price
(in
thousands)
North           $  291            $  272           $  281          $ 270
Southeast          224               216              220            218
Texas              263               251              257            248
West               312               306              318            287
Discontinued      268            205            223         201     
operations
Total          $  264          $  249         $  258        $ 246     
OUTSTANDING                                        September 30,
CONTRACTS
Units                                                2012        2011    
North                                                 633            472
Southeast                                             914            520
Texas                                                 543            447
West                                                  375            118
Discontinued                                         9           82      
operations
Total                                                2,474       1,639   
Dollars (in
millions)
North                                              $  190          $ 132
Southeast                                             215            111
Texas                                                 149            118
West                                                  107            39
Discontinued                                         3           18      
operations
Total                                              $  664        $ 418     
Average price
(in
thousands)
North                                              $  300          $ 280
Southeast                                             236            213
Texas                                                 274            264
West                                                  285            329
Discontinued                                         270         219     
operations
Total                                         $  268        $ 255     


THE RYLAND GROUP, INC. and Subsidiaries
FINANCIAL SERVICES SUPPLEMENTAL INFORMATION (Unaudited)
(in thousands, except origination data)
                                                             
                 Three months ended September     Nine months ended September
                 30,                              30,
RESULTS OF         2012          2011          2012          2011   
OPERATIONS
REVENUES
Income from
origination
and sale of      $  7,185         $  5,450        $  18,911        $  15,586
mortgage
loans, net
Title, escrow       1,917            1,592           4,918            4,320
and insurance
Interest and       395           185           1,178         488    
other
TOTAL REVENUES      9,497            7,227           25,007           20,394
EXPENSES           6,111         5,198         18,032        15,092 
PRETAX           $  3,386       $  2,029       $  6,975       $  5,302  
EARNINGS
                                                                   
OPERATIONAL
DATA
                                                                   
Retail
operations:
Originations        778              673             2,077            1,845
(units)
Ryland Homes
originations
as a                100.0            100.0           99.9             100.0
percentage of
total
originations
Ryland Homes
origination         64.4    %        72.5    %       68.3    %        76.8   %
capture rate
                                                           
OTHER
CONSOLIDATED
SUPPLEMENTAL
INFORMATION
(Unaudited)
(in thousands)   Three months ended September     Nine months ended September
                 30,                              30,
                   2012          2011          2012          2011   
Interest         $  13,567        $  13,847       $  42,674        $  42,569
incurred
Interest
capitalized         10,088           9,894           30,865           28,092
during the
period
Amortization
of capitalized
interest            10,135           8,767           27,767           22,058
included in
cost of sales
Depreciation
and               4,063         3,056        10,496        8,479  
amortization


THE RYLAND GROUP, INC. and Subsidiaries
NON-GAAP FINANCIAL DISCLOSURE RECONCILIATION
(in thousands)
                                                              
                 Three months ended September 30,    Nine months ended
                                                     September 30,
                   2012           2011           2012       2011    
HOUSING GROSS
MARGINS
HOUSING          $  346,965        $  240,408        $ 839,434     $ 605,382
REVENUES
LAND AND
OTHER              2,231          931            3,890      2,310   
REVENUES
TOTAL
HOMEBUILDING        349,196           241,339          843,324       607,692
REVENUES
                                                                   
HOUSING COST
OF SALES
Cost of sales       277,428           197,642          678,307       500,407
Valuation
adjustments        3,237          291            5,148      7,427   
and
write-offs
TOTAL HOUSING       280,665           197,933          683,455       507,834
COST OF SALES
                                                                   
LAND AND
OTHER COST OF
SALES
Cost of sales       1,296             589              2,326         2,112
Valuation
adjustments        -              617            -          7,883   
and
write-offs
TOTAL LAND          1,296             1,206            2,326         9,995
COST OF SALES
                                                                   
TOTAL
HOMEBUILDING        281,961           199,139          685,781       517,829
COST OF SALES
                                                                   
HOUSING GROSS    $  66,300         $  42,475         $ 155,979     $ 97,548
MARGINS
HOUSING GROSS
MARGIN              19.1     %        17.7     %       18.6    %     16.1    %
PERCENTAGE
                                                                   
HOUSING GROSS
MARGINS,
excluding
inventory        $  69,537         $  42,766         $ 161,127     $ 104,975
valuation
adjustments
and
write-offs
HOUSING GROSS
MARGIN
PERCENTAGE,
excluding
inventory         20.0     %      17.8     %     19.2    %   17.3    %
valuation
adjustments
and
write-offs

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.

Contact:

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