The Ryland Group, Inc. (NYSE: RYL) today announced results
for its quarter ended June 30, 2015. Items of note
included:
- Net income increased 33.0 percent to
$42.6 million, or $0.75 per diluted share, for the second quarter
of 2015 from $32.0 million, or $0.57 per diluted share, for the
second quarter of 2014;
- Pretax earnings rose 27.5 percent to
$66.5 million for the quarter ended June 30, 2015, compared to
$52.2 million for the quarter ended June 30, 2014;
- Revenues totaled $653.6 million for the
quarter ended June 30, 2015, representing a 13.2 percent
increase from $577.4 million for the quarter ended June 30,
2014;
- New orders increased 7.1 percent to
2,387 units for the second quarter of 2015, compared to the second
quarter of 2014, and new order dollars rose 6.8 percent to $813.0
million for the second quarter of 2015, compared to the same period
in 2014;
- Backlog rose 6.4 percent to 4,116 units
at June 30, 2015, from June 30, 2014. The dollar value of
the Company’s backlog was $1.4 billion at June 30, 2015, an
8.3 percent increase from June 30, 2014;
- Average closing price increased 5.4
percent to $351,000 for the quarter ended June 30, 2015, from
$333,000 for the same period in 2014;
- Selling, general and administrative
expense totaled 10.9 percent of homebuilding revenues for the
second quarter of 2015, compared to 11.8 percent for the second
quarter of 2014;
- Active communities increased 12.1
percent to 344 communities at June 30, 2015, from 307
communities at June 30, 2014;
- Net debt-to-capital ratio was 45.6
percent at June 30, 2015, compared to 43.3 percent at
December 31, 2014; and
- Transaction costs related to the
proposed merger with Standard Pacific totaled $3.6 million during
the second quarter of 2015.
RESULTS FOR THE SECOND QUARTER OF 2015
For the quarter ended June 30, 2015, the Company reported
net income of $42.6 million, or $0.75 per diluted share, compared
to $32.0 million, or $0.57 per diluted share, for the same period
in 2014.
The homebuilding segments reported pretax earnings of $67.9
million for the second quarter of 2015, compared to $59.9 million
for the same period in 2014. This increase in pretax earnings was
primarily due to a rise in revenues and to a reduction in selling,
general and administrative expense as a percentage of homebuilding
revenues, partially offset by a lower housing gross profit
margin.
For the second quarter of 2015, homebuilding revenues increased
12.5 percent to $637.0 million from $566.2 million for the same
period in 2014. The rise in homebuilding revenues was attributable
to a 6.7 percent increase in closings that totaled 1,814 units for
the quarter ended June 30, 2015, compared to 1,700 units for
the same period in the prior year, as well as to a 5.4 percent
increase in average closing price to $351,000 for the second
quarter of 2015 from $333,000 for the same period in 2014.
Homebuilding revenues for the second quarter of 2015 included
$645,000 from land sales, which resulted in pretax earnings of
$211,000, compared to homebuilding revenues for the second quarter
of 2014 that included $756,000 from land sales, which resulted in
pretax earnings of $76,000.
New orders increased 7.1 percent to 2,387 units for the quarter
ended June 30, 2015, from 2,228 units for the same period in 2014.
The Company had an average monthly sales absorption rate of 2.3
homes per community for the quarter ended June 30, 2015,
versus 2.5 homes per community for the quarter ended June 30,
2014, and a cancellation rate of 15.4 percent for the quarter ended
June 30, 2015, versus 17.6 percent for the same period in
2014. For the second quarter of 2015, new order dollars rose 6.8
percent to $813.0 million from $761.2 million for the second
quarter of 2014. At June 30, 2015, backlog increased 6.4
percent to 4,116 units from 3,870 units at June 30, 2014. The
dollar value of the Company’s backlog was $1.4 billion at
June 30, 2015, reflecting an 8.3 percent rise from $1.3
billion at June 30, 2014.
Housing gross profit margin was 20.4 percent for the quarter
ended June 30, 2015, compared to 21.2 percent for the quarter
ended June 30, 2014. This decline in housing gross profit
margin was primarily driven by the mix of closings within the
Company’s markets during the second quarter of 2015, compared to
the same period in the prior year, as well as to an increase in
land costs. Sales incentives and price concessions were flat at 6.7
percent of housing revenues for the quarters ended June 30, 2015
and 2014.
Selling, general and administrative expense totaled 10.9 percent
of homebuilding revenues for the second quarter of 2015, compared
to 11.8 percent for the second quarter of 2014. This decrease was
primarily attributable to improved leverage that resulted from
increased revenues.
For the quarter ended June 30, 2015, the financial services
segment reported pretax earnings of $8.8 million, compared to a
pretax loss of $1.9 million for the quarter ended June 30,
2014. This increase in pretax earnings was primarily attributable
to higher locked loan and origination volumes during the second
quarter of 2015, compared to the same period in 2014, and a
decrease in litigation expense related to the Countrywide
settlement in the prior year.
RESULTS FOR THE FIRST SIX MONTHS OF 2015
For the six months ended June 30, 2015, the Company
reported net income of $69.1 million, or $1.22 per diluted share,
compared to $55.6 million, or $0.99 per diluted share, for the same
period in 2014.
The homebuilding segments reported pretax earnings of $112.0
million for the first six months of 2015, compared to $106.2
million for the same period in 2014. This increase was primarily
due to a rise in revenues and to a reduced selling, general and
administrative expense ratio, partially offset by a lower housing
gross profit margin.
Homebuilding revenues increased 9.0 percent to $1.1 billion for
the first six months of 2015 from $1.0 billion for the same period
in 2014. The rise in homebuilding revenues was attributable to a
3.4 percent increase in closings that totaled 3,277 units for the
six months ended June 30, 2015, compared to 3,170 units for
the same period in the prior year, as well as to a 5.2 percent rise
in average closing price to $347,000 for the first six months of
2015 from $330,000 for the same period in 2014. Homebuilding
revenues for the first six months of 2015 included $4.1 million
from land sales, which resulted in pretax earnings of $928,000,
compared to homebuilding revenues for the first six months of 2014
that included $1.6 million from land sales, which resulted in
pretax earnings of $233,000.
New orders increased 8.2 percent to 4,776 units for the six
months ended June 30, 2015, from 4,414 units for the same
period in 2014. The Company had an average monthly sales absorption
rate of 2.3 homes per community for the six months ended
June 30, 2015, versus 2.5 homes per community for the six
months ended June 30, 2014, and a cancellation rate of 15.3
percent for the six months ended June 30, 2015, versus 16.5
percent for the same period in 2014. For the first six months of
2015, new order dollars increased 9.1 percent to $1.6 billion from
$1.5 billion for the first six months of 2014.
Housing gross profit margin was 20.1 percent for the six months
ended June 30, 2015, compared to 21.2 percent for the six
months ended June 30, 2014. This decline in housing gross
profit margin was primarily attributable to the mix of closings
within the Company's markets during 2015. For the first six months
of 2015, sales incentives and price concessions totaled 7.1 percent
of housing revenues, compared to 6.6 percent for the same period in
2014.
Selling, general and administrative expense totaled 11.7 percent
of homebuilding revenues for the first six months of 2015, compared
to 12.4 percent for the first six months of 2014. This decrease was
primarily attributable to higher leverage that resulted from
increased revenues.
For the six months ended June 30, 2015, the financial
services segment reported pretax earnings of $13.9 million,
compared to a pretax loss of $3.3 million for the same period in
2014. This increase was primarily attributable to higher locked
loan and origination volumes; a decrease in litigation expense; and
a reduction in financial services expense that related to a change
in the estimate of ultimate insurance loss liability in the prior
year.
PROPOSED MERGER WITH STANDARD PACIFIC CORP.
On June 14, 2015, the Company entered into an Agreement and Plan
of Merger (the "Merger Agreement") with Standard Pacific. Subject
to the terms and conditions of the Merger Agreement, Standard
Pacific and the Company have agreed that the Company will merge
with and into Standard Pacific in a “merger of equals,” with
Standard Pacific continuing as the surviving corporation (the
“Surviving Corporation”), and the separate corporate existence of
the Company will cease (the "Merger"). Subject to the terms and
conditions of the Merger Agreement, which was unanimously approved
by the boards of directors of Standard Pacific and the Company, if
the Merger is completed, each five shares of common stock issued
and outstanding of Standard Pacific will be combined and converted
into one issued and outstanding share of common stock of the
Surviving Corporation and each share of common stock of the Company
issued and outstanding will be converted and exchangeable for
1.0191 issued and outstanding shares of common stock of the
Surviving Corporation. The proposed merger is subject to approval
by the shareholders of the Company and Standard Pacific and other
customary closing conditions. The Company currently expects the
transaction to close in early Fall 2015. During the second quarter
of 2015, the Company incurred transaction related fees totaling
$3.6 million, which was reported in "Other (expense) income" within
the Consolidated Statements of Earnings.
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
315,000 homes and financed more than 260,000 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 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:
- risk relating to the Company's pending
merger with Standard Pacific, including uncertainties as to the
timing of the merger, the possibility that various closing
conditions for the transaction may not be satisfied or waived, and
Standard Pacific’s and the Company’s business may suffer as a
result of the uncertainty surrounding the transaction;
- economic changes nationally or in the
Company’s local markets, including volatility and increases in
interest rates, the impact of, and changes in, governmental
stimulus, tax and deficit reduction programs, inflation, changes in
consumer demand and confidence levels and the state of the market
for homes in general;
- changes and developments in the
mortgage lending market, including revisions to underwriting
standards for borrowers and lender requirements for originating and
holding mortgages, changes in government support of and
participation in such market, and delays or changes in terms and
conditions for the sale of mortgages originated by the
Company;
- the availability and cost of land and
the future value of land held or under development;
- increased land development costs on
projects under development;
- shortages of skilled labor or raw
materials used in the production of homes;
- increased prices for labor, land and
materials used in the production of homes;
- increased competition;
- failure to anticipate or react to
changing consumer preferences in home design;
- increased costs and delays in land
development or home construction resulting from adverse weather
conditions or other factors;
- potential delays or increased costs in
obtaining necessary permits as a result of changes to laws,
regulations or governmental policies (including those that affect
zoning, density, building standards, the environment and the
residential mortgage industry);
- delays in obtaining approvals from
applicable regulatory agencies and others in connection with the
Company’s communities and land activities;
- changes in the Company’s effective tax
rate and assumptions and valuations related to its tax
accounts;
- the risk factors set forth in the
Company’s most recent Annual Report on Form 10-K and any
subsequent Quarterly Report on Form 10-Q; and
- other factors over which the Company
has little or no control.
NO OFFER OR SOLICITATION
The information in this communication is for informational
purposes only and is neither an offer to purchase, nor a
solicitation of an offer to sell, subscribe for or buy any
securities or the solicitation of any vote or approval in any
jurisdiction pursuant to or in connection with the proposed
transactions or otherwise, nor shall there be any sale, issuance or
transfer of securities in any jurisdiction in contravention of
applicable law. No offer of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended, and otherwise in accordance
with applicable law.
IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed merger, Standard Pacific has
filed with the SEC a registration statement on Form S-4 on July 2,
2015, that includes a preliminary joint proxy statement of Standard
Pacific and Ryland that also constitutes a preliminary prospectus
of the Surviving Corporation. The registration statement is not
complete and will be further amended. Ryland and Standard Pacific
will make the definitive joint proxy statement/prospectus available
to their respective stockholders. Investors are urged to read
the definitive joint proxy statement/prospectus when it becomes
available, because it will contain important information. The
registration statement, joint proxy statement/prospectus and other
documents filed by Ryland and Standard Pacific with the SEC are
available free of charge at the SEC’s website (www.sec.gov) and from Ryland and Standard Pacific.
In addition, security holders are able to obtain free copies of the
registration statement and the joint proxy statement/prospectus
from Ryland by going to its investor relations page of its
corporate website at http://www.ryland.com and from Standard Pacific on
its investor relations page of its corporate website at
http://standardpacifichomes.com.
PARTICIPANTS IN THE SOLICITATION
Ryland, Standard Pacific, their respective directors, executive
officers and employees may be deemed to be participants in the
solicitation of proxies from Ryland’s and Standard Pacific’s
stockholders in connection with the proposed transaction.
Information about the directors and executive officers of Ryland
and their ownership of Ryland stock is set forth in Ryland’s annual
report on form 10-K for the fiscal year ended December 31, 2014,
which was filed with the SEC on February 25, 2015, and its proxy
statement for its 2015 annual meeting of stockholders, which was
filed with the SEC on March 13, 2015. Information regarding
Standard Pacific’s directors and executive officers is contained in
Standard Pacific’s report on Form 10-K for the fiscal year ended
December 31, 2014, which was filed with the SEC on February 23,
2015, and its proxy statement for its 2015 annual general meeting
of stockholders, which was filed with the SEC on April 24, 2015.
These documents can be obtained free of charge from the sources
indicated above. Certain directors, executive officers and
employees of Ryland and Standard Pacific may have direct or
indirect interests in the transaction due to securities holdings,
vesting of equity awards and rights to severance payments.
Additional information regarding the participants in the
solicitation of Ryland and Standard Pacific stockholders is
included in the joint proxy statement/prospectus.
THE RYLAND GROUP, INC. and
Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(in thousands, except share data)
Three Months EndedJune 30, Six Months EndedJune 30,
2015 2014
2015 2014
REVENUES
Homebuilding
$ 637,046 $ 566,244
$ 1,142,045 $ 1,047,729 Financial services
16,589 11,145
28,989
19,343
TOTAL REVENUES 653,635
577,389
1,171,034 1,067,072
EXPENSES Cost of sales
507,036 446,191
912,327
826,190 Selling, general and administrative
69,278 67,020
133,448 129,814 Financial services
7,895
13,079
15,229 22,688
TOTAL
EXPENSES 584,209 526,290
1,061,004 978,692
OTHER (EXPENSE)
INCOME Gain from marketable securities, net
173 429
318 833 Other (expense) income
(3,055 )
675
(2,463 ) 1,160
TOTAL
OTHER (EXPENSE) INCOME (2,882 ) 1,104
(2,145 ) 1,993 Income before taxes
66,544 52,203
107,885 90,373 Tax expense
23,942 20,161
38,826
34,804
NET INCOME $ 42,602
$ 32,042
$ 69,059 $
55,569
NET INCOME PER COMMON SHARE Basic
$
0.91 $ 0.68
$ 1.48 $ 1.19 Diluted
$
0.75 $ 0.57
$ 1.22 $ 0.99
AVERAGE COMMON SHARES
OUTSTANDING
Basic
46,706,437 46,914,902
46,579,660 46,747,403
Diluted
58,273,600 58,430,828
58,174,063 58,312,226
THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, 2015 December
31, 2014
(Unaudited) ASSETS Cash, cash equivalents
and marketable securities Cash and cash equivalents
$
279,980 $ 521,195 Restricted cash
18,277 35,720
Marketable securities, available-for-sale
17,791
17,845 Total cash, cash equivalents and
marketable securities
316,048 574,760 Housing inventories
Homes under construction
905,513 764,853 Land under
development and improved lots
1,341,584 1,250,159
Consolidated inventory not owned
29,720
30,811 Total housing inventories
2,276,817 2,045,823
Property, plant and equipment
35,814 30,566 Mortgage loans
held-for-sale
129,790 153,366 Net deferred taxes
84,448 91,766 Other
178,829
155,808
TOTAL ASSETS 3,021,746
3,052,089
LIABILITIES Accounts payable
212,127 205,397 Accrued and other liabilities
210,015
215,221 Financial services credit facilities
122,607 129,389
Debt
1,295,953 1,403,079
TOTAL LIABILITIES 1,840,702
1,953,086
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—46,849,340 shares at June 30, 2015 (46,296,045 shares at
December 31, 2014)
46,849 46,296 Retained earnings
1,121,462 1,039,076
Accumulated other comprehensive loss
(896 )
(799 )
TOTAL STOCKHOLDERS’ EQUITY FOR THE
RYLAND GROUP, INC.
1,167,415 1,084,573
NONCONTROLLING INTEREST
13,629 14,430
TOTAL
EQUITY 1,181,044 1,099,003
TOTAL LIABILITIES AND EQUITY $ 3,021,746
$ 3,052,089
THE RYLAND
GROUP, INC. and Subsidiaries SEGMENT INFORMATION
(Unaudited) Three Months EndedJune 30, Six Months
EndedJune 30,
2015 2014
2015 2014
EARNINGS (LOSS) BEFORE TAXES (in thousands)
Homebuilding North
$ 17,755 $ 14,954
$
29,294 $ 25,748 Southeast
19,856 17,263
32,499
32,120 Texas
8,791 9,576
15,520 17,423 West
21,454 18,145
34,641 30,873 Financial services
8,777 (1,909 )
13,899 (3,320 ) Corporate and
unallocated
(10,089 ) (5,826 )
(17,968
) (12,471 ) Total
$ 66,544
$ 52,203
$ 107,885
$ 90,373
NEW ORDERS Units North
645 657
1,352 1,267 Southeast
681 670
1,371 1,305 Texas
467 453
942 960 West
594 448
1,111 882
Total
2,387 2,228
4,776
4,414
Dollars (in millions) North
$ 206 $ 208
$ 432 $ 399 Southeast
215 218
431 410 Texas
166 152
326 317
West
226 183
438
365 Total
$ 813 $ 761
$ 1,627 $ 1,491
CLOSINGS Units North
553 473
975 897
Southeast
522 487
949 933 Texas
358 389
692 740 West
381 351
661
600 Total
1,814 1,700
3,277 3,170
Average closing
price (in thousands) North
$ 322 $ 325
$
321 $ 320 Southeast
318 288
319 286 Texas
356 322
347 319 West
433 417
427 427
Total
$ 351 $ 333
$ 347 $ 330
OUTSTANDING
CONTRACTS June 30,
Units 2015 2014 North
1,174 1,202 Southeast
1,205 1,174 Texas
802
834 West
935 660 Total
4,116
3,870
Dollars (in millions) North
$ 375 $ 378 Southeast
393 376 Texas
280
279 West
359 266 Total
$
1,407 $ 1,299
Average price (in
thousands) North
$ 320 $ 315 Southeast
326
320 Texas
349 335 West
384 403
Total
$ 342
$ 336
THE RYLAND GROUP, INC. and
Subsidiaries SUPPLEMENTAL INFORMATION (Unaudited)
FINANCIAL SERVICES SUPPLEMENTAL INFORMATION
(in thousands, except origination data) Three Months
EndedJune 30, Six Months EndedJune 30,
2015 2014
2015 2014
RESULTS OF OPERATIONS REVENUES
Income from origination and sale of mortgage loans, net
$
13,445 $ 8,475
$ 23,219 $ 14,115 Title, escrow
and insurance
2,618 2,235
4,733 4,132 Interest and
other
526 435
1,037
1,096
TOTAL REVENUES
16,589 11,145
28,989 19,343 EXPENSES
7,895
13,079
15,229 22,688 OTHER INCOME
83 25
139 25 PRETAX EARNINGS (LOSS)
$ 8,777 $ (1,909 )
$ 13,899 $ (3,320 )
OPERATIONAL DATA Retail operations: Originations (units)
1,053 835
1,867 1,539
Ryland Homes originations as a percentage
of total originations
99.9 % 99.9 %
99.8 % 99.9 % Ryland
Homes origination capture rate
65.4 % 60.4 %
64.2 % 60.3 %
OTHER CONSOLIDATED
SUPPLEMENTAL INFORMATION Three Months EndedJune 30, Six Months
EndedJune 30, (in thousands)
2015 2014
2015 2014 Interest incurred
$ 16,085 $
17,435
$ 32,578 $ 34,818 Interest capitalized during
the period
15,777 17,172
31,840 34,283
Amortization of capitalized interest
included in cost of sales
12,243 11,776
22,036 22,246 Depreciation and
amortization
5,695 5,413
10,497 10,131
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The Ryland Group, Inc.Gordon Milne, 805-367-3720
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