Ryland Reports Results for the Fourth Quarter of 2012
Ryland Reports Results for the Fourth Quarter of 2012
Business Wire
WESTLAKE VILLAGE, Calif. -- January 29, 2013
The Ryland Group, Inc. (NYSE: RYL), today announced results for its quarter
ended December 31, 2012. Items of note included:
* Net income from continuing operations totaled $28.9 million, or $0.56 per
diluted share, for the quarter ended December 31, 2012;
* New orders increased 64.1 percent to 1,493 units for the fourth quarter of
2012 from 910 units for the fourth quarter of 2011. New order dollars rose
82.0 percent to $425.9 million for the fourth quarter of 2012 from $234.0
million for the same period in 2011;
* Closings increased 58.9 percent to 1,567 units for the quarter ended
December 31, 2012, compared to 986 units for the same period in the prior
year;
* Backlog rose 61.4 percent to 2,391 units at December 31, 2012, from 1,481
units at December 31, 2011;
* Active communities increased 12.8 percent to 238 communities at December
31, 2012, from 211 communities at December 31, 2011;
* Revenues totaled $440.1 million for the quarter ended December 31, 2012,
representing a 68.3 percent increase from $261.4 million for the quarter
ended December 31, 2011;
* Average closing price increased 5.9 percent to $270,000 for the quarter
ended December 31, 2012, from $255,000 for the same period in 2011;
* Housing gross profit margin was 20.0 percent for the fourth quarter of
2012, compared to 18.1 percent for the fourth quarter of 2011;
* Selling, general and administrative expense (including corporate) totaled
13.4 percent of homebuilding revenues for the fourth quarter of 2012,
compared to 16.4 percent for the fourth quarter of 2011;
* Cash, cash equivalents and marketable securities totaled $614.6 million at
December 31, 2012, with no outstanding borrowings against the Company’s
$75.0 million financial services credit facility; and
* Net debt-to-capital ratio was 50.8 percent at December 31, 2012, compared
to 36.7 percent at December 31, 2011.
RESULTS FOR THE FOURTH QUARTER OF 2012
For the quarter ended December 31, 2012, the Company reported net income from
continuing operations of $28.9 million, or $0.56 per diluted share, compared
to net income of $1.3 million, or $0.03 per diluted share, for the same period
in 2011. There were no pretax charges related to early retirement of debt for
the quarter ended December 31, 2012, compared to $274,000 for the quarter
ended December 31, 2011. The Company had pretax charges related to feasibility
cost write-offs that totaled $300,000 for the quarter ended December 31, 2012,
compared to $1.1 million of inventory and other valuation adjustments and
write-offs for the same period in 2011.
The homebuilding segments reported pretax earnings of $32.1 million for the
fourth quarter of 2012, compared to pretax earnings of $7.0 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; and a reduced selling, general and
administrative expense ratio, partially offset by higher interest expense.
Homebuilding revenues increased 67.7 percent to $427.5 million for the fourth
quarter of 2012, compared to $254.9 million for the same period in 2011. This
rise in homebuilding revenues was primarily attributable to a 58.9 percent
increase in closings that totaled 1,567 units for the quarter ended December
31, 2012, compared to 986 units for the same period in the prior year, as well
as to a 5.9 percent increase in average closing price, which was $270,000 for
the fourth quarter of 2012, versus $255,000 for the same period in 2011.
Homebuilding revenues for the fourth quarter of 2012 included $3.8 million
from land sales, which resulted in pretax earnings of $981,000, compared to
homebuilding revenues for the fourth quarter of 2011 that included $3.1
million from land sales, which resulted in pretax earnings of $228,000.
New orders increased 64.1 percent to 1,493 units for the quarter ended
December 31, 2012, compared to new orders of 910 units for the same period in
2011. The Company had an average monthly sales absorption rate of 2.1 homes
per community for the quarter ended December 31, 2012, versus 1.4 homes per
community for the quarter ended December 31, 2011, and an average cancellation
rate of 17.9 percent for the quarter ended December 31, 2012, versus 21.4
percent for the same period in 2011. For the fourth quarter of 2012, new order
dollars increased 82.0 percent to $425.9 million from $234.0 million for the
fourth quarter of 2011. At December 31, 2012, backlog increased 61.4 percent
to 2,391 units from 1,481 units at December 31, 2011. At the end of the fourth
quarter of 2012, the dollar value of the Company’s backlog was $663.4 million,
reflecting a 73.8 percent rise from the end of the prior year.
Housing gross profit margin was 20.0 percent for the quarter ended December
31, 2012, compared to 18.1 percent for the quarter ended December 31, 2011.
This improvement in housing gross profit margin was primarily attributable to
a decline in direct construction and land costs; higher leverage of direct
overhead expense due to an increase in the number of homes delivered; lower
inventory and other valuation adjustments and write-offs; and reduced sales
incentives and price concessions. For the fourth quarter of 2012, sales
incentives and price concessions totaled 8.7 percent, compared to 10.7 percent
for the same period in 2011.
Selling, general and administrative expense, including corporate, totaled 13.4
percent of homebuilding revenues for the fourth quarter of 2012, compared to
16.4 percent for the fourth quarter of 2011. This decrease in the selling,
general and administrative expense ratio was primarily attributable to higher
leverage resulting from increased revenues and to the impact of cost-saving
initiatives, partially offset by higher compensation expense primarily due to
the impact of fluctuations in the Company’s stock price.
The homebuilding segments recorded $5.1 million of interest expense during the
fourth quarter of 2012, compared to $3.9 million during the fourth quarter of
2011. This increase in interest expense from the fourth quarter of 2011 was
primarily due to interest incurred on additional senior notes issued in 2012,
partially offset by the capitalization of a greater amount of interest
incurred during the fourth quarter of 2012, which resulted from a higher level
of inventory under development.
During the fourth quarter of 2012, the Company used $129.8 million of cash for
operating activities, provided $117.6 million of cash from investing
activities and used $56.4 million of cash for financing activities.
For the quarter ended December 31, 2012, the financial services segment
reported pretax earnings of $6.2 million, compared to $437,000 for the same
period in 2011. This improvement was primarily attributable to increases in
locked loan pipeline and origination volumes, higher title income and lower
indemnification expense, partially offset by a rise in 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 loss from discontinued operations totaled $374,000, or $0.01
per diluted share, for the quarter ended December 31, 2012, compared to a net
loss of $451,000, or $0.01 per diluted share, for the same period in 2011.
ANNUAL RESULTS FOR 2012
For the year ended December 31, 2012, the Company reported net income from
continuing operations of $42.4 million, or $0.88 per diluted share, compared
to a net loss of $29.9 million, or $0.67 per diluted share, for the same
period in 2011. Pretax charges related to early retirement of debt totaled
$9.1 million and $1.6 million for the years ended December 31, 2012 and 2011,
respectively. The Company had pretax charges related to inventory and other
valuation adjustments and write-offs that totaled $6.3 million and $17.3
million for the years ended December 31, 2012 and 2011, respectively.
The homebuilding segments reported pretax earnings of $63.9 million for the
year ended December 31, 2012, compared to a pretax loss of $16.8 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 47.3 percent to $1.3 billion for the year
ended December 31, 2012, compared to $862.6 million for the same period in
2011. This rise in homebuilding revenues was primarily attributable to a 40.9
percent increase in closings that totaled 4,809 units for the year ended
December 31, 2012, compared to 3,413 units for the same period in 2011, as
well as to a 4.8 percent increase in average closing price, which was $263,000
for the year ended December 31, 2012, versus $251,000 for the same period in
2011. Homebuilding revenues for the year ended December 31, 2012, included
$7.7 million from land sales, which resulted in pretax earnings of $2.5
million, compared to homebuilding revenues for the same period in 2011 that
included $5.4 million from land sales, which resulted in pretax earnings of
$426,000.
New orders increased 51.8 percent to 5,719 units for the year ended December
31, 2012, compared to new orders of 3,767 units for the same period in 2011.
The Company had an average monthly sales absorption rate of 2.2 homes per
community for the year ended December 31, 2012, versus 1.5 homes per community
for the year ended December 31, 2011, and an average cancellation rate of 19.0
percent for the year ended December 31, 2012, versus 20.2 percent for the same
period in 2011. For the year ended December 31, 2012, new order dollars
increased 61.9 percent to $1.5 billion from $954.0 million for the same period
in 2011.
Housing gross profit margin was 19.1 percent for the year ended December 31,
2012, compared to 16.7 percent for the same period in 2011. This improvement
in housing gross profit margin was primarily attributable to a decline in
direct construction and land costs; higher leverage of direct overhead expense
due to an increase in the number of homes delivered; lower inventory and other
valuation adjustments and write-offs; and reduced sales incentives and price
concessions. For the year ended December 31, 2012, sales incentives and price
concessions totaled 9.6 percent, compared to 11.2 percent for the same period
in 2011.
Selling, general and administrative expense, including corporate, totaled 14.9
percent of homebuilding revenues for the year ended December 31, 2012,
compared to 18.3 percent for the same period in 2011. This decrease in the
selling, general and administrative expense ratio was primarily attributable
to higher leverage resulting from increased revenues and to the impact of
cost-saving initiatives, partially offset by higher compensation expense
primarily due to the impact of fluctuations in the Company’s stock price.
The homebuilding segments recorded $16.1 million of interest expense for the
year ended December 31, 2012, compared to $18.3 million for the same period in
2011. This decrease in interest expense from 2011 was primarily due to the
capitalization of a greater amount of interest incurred during 2012, which
resulted from a higher level of inventory under development, partially offset
by interest incurred on additional senior notes issued in 2012.
For the year ended December 31, 2012, the financial services segment reported
pretax earnings of $13.1 million, compared to $5.7 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 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 loss from discontinued operations totaled $2.0 million, or
$0.04 per diluted share, for the year ended December 31, 2012, compared to a
net loss of $20.9 million, or $0.47 per diluted share, for the same period in
2011.
OVERALL EFFECTIVE TAX RATE
The Company had an overall effective income tax expense rate of 3.8 percent
for the year ended December 31, 2012, compared to an overall effective income
tax benefit rate of 5.3 percent for the year ended December 31, 2011. For the
years ended December 31, 2012 and 2011, the Company recorded a net valuation
allowance decrease of $11.6 million and an increase of $16.6 million,
respectively, against its deferred tax assets. As of December 31, 2012, the
balance of the Company’s deferred tax valuation allowance was $258.9 million.
FINANCIAL SERVICES CREDIT FACILITY
In December 2012, Ryland Mortgage Company and its subsidiaries and RMC
Mortgage Corporation (collectively referred to as “RMC”) renewed its $75.0
million repurchase credit facility with JPMorgan Chase Bank, N.A. This
facility is used to fund, and is secured by, mortgages originated by RMC,
pending the sale of those mortgages by RMC. This facility will expire in
December 2013. At December 31, 2012, the Company had no outstanding borrowings
against this credit facility.
TREND HOMES ACQUISITION
In December 2012, the Company acquired the Phoenix, Arizona, operations and
assets of Trend Homes. This acquisition has provided the Company with an
ongoing successful operation in that market and 1,020 additional lots and
homes. For the quarter and year ended December 31, 2012, there were 113 new
orders and 21 closings related to this acquisition.
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
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,
2012 2011 2012 2011
REVENUES
Homebuilding $ 427,523 $ 254,912 $ 1,270,847 $ 862,604
Financial 12,612 6,533 37,619 26,927
services
TOTAL 440,135 261,445 1,308,466 889,531
REVENUES
EXPENSES
Cost of sales 341,691 209,127 1,027,472 726,956
Selling,
general and 57,324 41,852 189,500 158,045
administrative
Financial 6,445 6,096 24,477 21,188
services
Interest 5,133 3,874 16,118 18,348
TOTAL 410,593 260,949 1,257,567 924,537
EXPENSES
OTHER INCOME
(LOSS)
Gain from
marketable 777 592 2,214 3,882
securities,
net
Loss related
to early - (274 ) (9,146 ) (1,608 )
retirement of
debt, net
TOTAL
OTHER 777 318 (6,932 ) 2,274
INCOME
(LOSS)
Income (loss)
from continuing 30,319 814 43,967 (32,732 )
operations
before taxes
Tax expense 1,372 (449 ) 1,585 (2,865 )
(benefit)
NET INCOME
(LOSS) FROM 28,947 1,263 42,382 (29,867 )
CONTINUING
OPERATIONS
Loss from
discontinued (374 ) (451 ) (2,000 ) (20,883 )
operations, net
of taxes
NET INCOME $ 28,573 $ 812 $ 40,382 $ (50,750 )
(LOSS)
NET INCOME
(LOSS) PER
COMMON SHARE
Basic
Continuing $ 0.64 $ 0.03 $ 0.93 $ (0.67 )
operations
Discontinued (0.01 ) (0.01 ) (0.04 ) (0.47 )
operations
Total 0.63 0.02 0.89 (1.14 )
Diluted
Continuing 0.56 0.03 0.88 (0.67 )
operations
Discontinued (0.01 ) (0.01 ) (0.04 ) (0.47 )
operations
Total $ 0.55 $ 0.02 $ 0.84 $ (1.14 )
AVERAGE COMMON
SHARES
OUTSTANDING
Basic 45,115,000 44,410,279 44,761,178 44,357,470
Diluted 53,052,803 45,074,734 49,655,321 44,357,470
THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, 2012 December 31,
2011
ASSETS
Cash, cash equivalents and marketable
securities
Cash and cash equivalents $ 155,692 $ 159,113
Restricted cash 70,893 57,049
Marketable securities, 388,020 347,016
available-for-sale
Total cash, cash equivalents and 614,605 563,178
marketable securities
Housing inventories
Homes under construction 459,269 319,476
Land under development and improved 573,975 413,569
lots
Inventory held-for-sale 4,684 11,015
Consolidated inventory not owned 39,490 51,400
Total housing inventories 1,077,418 795,460
Property, plant and equipment 20,409 19,920
Mortgage loans held-for-sale 107,950 82,351
Other 111,057 82,911
Assets of discontinued operations 2,480 35,324
TOTAL ASSETS 1,933,919 1,579,144
LIABILITIES
Accounts payable 124,797 74,327
Accrued and other liabilities 147,358 140,930
Financial services credit facility - 49,933
Debt 1,134,468 823,827
Liabilities of discontinued operations 1,536 6,217
TOTAL LIABILITIES 1,408,159 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—45,175,053 shares at
December 31, 2012
(44,413,594 shares at December 31, 45,175 44,414
2011)
Retained earnings 458,669 405,109
Accumulated other comprehensive income 92 164
TOTAL STOCKHOLDERS' EQUITY
FOR THE RYLAND GROUP, INC. 503,936 449,687
NONCONTROLLING INTEREST 21,824 34,223
TOTAL EQUITY 525,760 483,910
TOTAL LIABILITIES AND EQUITY $ 1,933,919 $ 1,579,144
THE RYLAND GROUP, INC. and Subsidiaries
SEGMENT INFORMATION
Three months ended December Twelve months ended
31, December 31,
2012 2011 2012 2011
EARNINGS (LOSS)
BEFORE TAXES (in
thousands)
Homebuilding
North $ 7,472 $ 557 $ 11,602 $ (9,054 )
Southeast 9,274 1,874 18,566 (11,676 )
Texas 7,436 3,987 22,984 9,243
West 7,892 611 10,732 (5,326 )
Financial 6,167 437 13,142 5,739
services
Corporate and (7,922 ) (6,652 ) (33,059 ) (21,658 )
unallocated
Discontinued (374 ) (451 ) (2,000 ) (20,883 )
operations
Total $ 29,945 $ 363 $ 41,967 $ (53,615 )
NEW ORDERS
Units
North 410 254 1,571 1,190
Southeast 498 299 1,936 1,172
Texas 282 275 1,286 1,077
West 303 82 926 328
Discontinued 9 5 62 187
operations
Total 1,502 915 5,781 3,954
Dollars (in
millions)
North $ 125 $ 73 $ 461 $ 326
Southeast 120 66 454 253
Texas 78 68 345 272
West 103 27 285 103
Discontinued 2 2 14 39
operations
Total $ 428 $ 236 $ 1,559 $ 993
CLOSINGS
Units
North 424 306 1,372 1,107
Southeast 531 298 1,576 988
Texas 348 289 1,242 1,044
West 264 93 619 274
Discontinued 11 54 88 214
operations
Total 1,578 1,040 4,897 3,627
Average closing
price (in
thousands)
North $ 298 $ 274 $ 286 $ 271
Southeast 234 220 225 218
Texas 264 257 259 251
West 308 304 314 293
Discontinued 220 229 223 208
operations
Total $ 270 $ 254 $ 262 $ 249
OUTSTANDING December 31,
CONTRACTS
Units 2012 2011
North 619 420
Southeast 881 521
Texas 477 433
West 414 107
Discontinued 7 33
operations
Total 2,398 1,514
Dollars (in
millions)
North $ 188 $ 121
Southeast 211 111
Texas 135 112
West 129 38
Discontinued 3 7
operations
Total $ 666 $ 389
Average price (in
thousands)
North $ 305 $ 288
Southeast 239 214
Texas 283 258
West 311 353
Discontinued 334 220
operations
Total $ 278 $ 257
THE RYLAND GROUP, INC. and Subsidiaries
FINANCIAL SERVICES SUPPLEMENTAL INFORMATION
(in thousands, except origination data)
Three months ended Twelve months ended
December 31, December 31,
RESULTS OF OPERATIONS 2012 2011 2012 2011
REVENUES
Income from
origination and $ 9,723 $ 4,287 $ 28,634 $ 19,873
sale of mortgage
loans, net
Title, escrow and 2,281 1,575 7,199 5,895
insurance
Interest and 608 671 1,786 1,159
other
TOTAL REVENUES 12,612 6,533 37,619 26,927
EXPENSES 6,445 6,096 24,477 21,188
PRETAX EARNINGS $ 6,167 $ 437 $ 13,142 $ 5,739
OPERATIONAL DATA
Retail operations:
Originations 962 711 3,039 2,556
(units)
Ryland Homes
originations as a
percentage of
total 99.9 % 99.9 % 99.9 % 100.0 %
originations
Ryland Homes
origination 67.5 % 73.0 % 68.1 % 75.7 %
capture rate
OTHER CONSOLIDATED
SUPPLEMENTAL
INFORMATION
(in thousands) Three months ended Twelve months ended
December 31, December 31,
2012 2011 2012 2011
Interest incurred $ 16,829 $ 14,066 $ 59,503 $ 56,635
Interest capitalized 11,462 9,940 42,327 38,032
during the period
Amortization of
capitalized interest 12,845 10,010 40,612 32,068
included in cost of
sales
Depreciation and 4,903 2,833 15,399 11,312
amortization
Contact:
The Ryland Group, Inc.
Drew Mackintosh, VP, Investor Relations and Corporate Communications
805-367-3722
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