Exhibit 99 | 
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News Release
| The Ryland Group, Inc.
www.ryland.com |
FOR IMMEDIATE RELEASE | CONTACT: | Drew Mackintosh, Director, Finance |
| | Investor Relations | (818) 223-7548 |
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| | Marya Jones, Director, Communications |
| | Media Relations | (818) 223-7591 |
RYLAND REPORTS DILUTED EPS OF $2.03 FOR THE SECOND QUARTER
CALABASAS, Calif. (July 19, 2006) – The Ryland Group, Inc. (NYSE: RYL), today announced results for its second quarter ended June 30, 2006. Highlights included:
· Diluted earnings of $2.03 per share for the quarter ended June 30, 2006, representing a decrease of 3.3 percent compared to the same period in the prior year;
· Consolidated revenues of $1.2 billion for the quarter ended June 30, 2006, an increase of 3.2 percent;
· Gross profit margins from home sales of 23.2 percent for the quarter ended June 30, 2006, compared to 24.5 percent for the quarter ended June 30, 2005;
· Closings of 3,803 for the quarter ended June 30, 2006, reflecting a decrease of 5.8 percent compared to the same period in the prior year;
· Average closing price for the quarter ended June 30, 2006, increased 8.5 percent to $295,000 from $272,000 for the same period in 2005;
· New order units in the second quarter of 2006 decreased 39.4 percent to 3,023 units from 4,988 units for the same period in 2005;
· Raised $250.0 million at 6.9 percent in May to replace $250.0 million of higher-rate debt in the third quarter of 2006;
· Shares of the Company’s common stock repurchased during the second quarter of 2006 totaled 1,815,000, or 3.9 percent of its weighted-average shares outstanding; and
· Anticipated diluted earnings per share for fiscal year 2006 is projected to be between $7.75 and $8.25 per share.
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RYLAND SECOND-QUARTER RESULTS
RESULTS FOR SECOND QUARTER 2006
The Company’s consolidated net earnings decreased 9.1 percent for the quarter ended June 30, 2006, to $94.8 million, or $2.03 per diluted share, compared to $104.3 million, or $2.10 per diluted share, for the same period in 2005.
The homebuilding segment reported pretax earnings of $157.6 million during the second quarter of 2006, representing an 8.3 percent decline, compared to $171.9 million in pretax earnings reported for the same period in 2005. The decrease from the prior year was primarily due to a decline in margins.
Homebuilding revenues rose $39.1 million, or 3.4 percent, to $1.2 billion for the second quarter of 2006, compared to $1.1 billion for the same period in 2005. This was primarily attributable to an 8.5 percent increase in the average closing price of a home, which rose to $295,000 for the quarter ended June 30, 2006, from $272,000 for the quarter ended June 30, 2005. Homebuilding revenues for the second quarter of 2006 included $29.2 million from land sales, compared to $38.2 million from land sales for the second quarter of 2005, which contributed net gains of $10.0 million and $13.6 million to pretax earnings in 2006 and 2005, respectively. Also included in revenues is $9.2 million of other income recognized in the second quarter of 2006 resulting from the termination of a $150.0 million treasury lock at 4.1 percent and a $100.0 million treasury lock at 4.2 percent.
For the second quarter of 2006, new order dollars decreased 40.0 percent to $890.9 million from $1,484.7 million in the second quarter of 2005. New orders of 3,023 units for the second quarter ended June 30, 2006, represented a decrease of 39.4 percent, compared to new orders of 4,988 units for the same period in 2005. The dollar value of the Company’s backlog at June 30, 2006, was $2.5 billion, a decrease of 17.8 percent from June 30, 2005. Backlog units at the end of the second quarter of 2006 decreased 22.6 percent to 8,151 from 10,534 at the end of the second quarter of 2005.
Gross profit margins from home sales averaged 23.2 percent for the second quarter of 2006, compared to 24.5 percent for the same period in 2005. Total gross profit margins, including land sales, decreased to 23.4 percent in the second quarter of 2006 from 24.9 percent during the second quarter of 2005. This decrease was primarily due to inventory write-downs totaling $20.0 million and increased sales discounts during the second quarter of 2006. Selling, general and administrative expenses, as a percentage of revenue, were 10.0 percent for the second quarter of 2006, versus 9.7 percent for the same period in 2005. This increase was primarily attributable to a rise in sales and marketing expenses. The homebuilding segment capitalized all interest incurred during the second quarter of 2006 due to development activity. The pretax homebuilding margin was 13.4 percent for the second quarter of 2006, compared to 15.1 percent for the second quarter of 2005.
Corporate expenses were $20.6 million for the second quarter of 2006, compared to $19.9 million for the same period in the prior year. Excluding stock option expense required by a change in accounting guidance, corporate expenses were $17.1 million, a decline of $2.8 million. The decrease was due to lower executive compensation expense resulting from lower earnings and a decline in stock price.
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RYLAND SECOND-QUARTER RESULTS
The Company’s financial services segment, which includes mortgage, title, escrow and insurance services, reported pretax earnings of $14.7 million for the second quarter of 2006, compared to pretax earnings of $16.2 million for the same period in 2005. This decrease was primarily due to a 4.4 percent decline in loans originated and to higher incentives resulting from a more competitive marketplace. The capture rate of mortgages originated for the Company’s homebuilding customers was 82.5 percent for the second quarter of 2006 and 82.9 percent for the second quarter of 2005.
RESULTS FOR THE FIRST HALF OF 2006
Consolidated net earnings for the six months ended June 30, 2006, increased 10.6 percent to a record $184.8 million, or $3.88 per diluted share, from $167.1 million, or $3.35 per diluted share, for the six months ended June 30, 2005.
The Company’s homebuilding segment reported pretax earnings of $306.5 million for the six months ended June 30, 2006, compared to $279.2 million for the same period in the prior year, representing an increase of 9.8 percent. Homebuilding revenues rose $236.6 million, or 11.9 percent, to $2.2 billion for the six months ended June 30, 2006, compared to $2.0 billion for the same period in 2005. Homebuilding revenues for the six months ended June 30, 2006, included $33.9 million from land sales, compared to $46.6 million from land sales for the six months ended June 30, 2005, contributing net gains of $11.4 million and $14.2 million to pretax earnings, respectively. The Company closed 7,357 homes during the six months ended June 30, 2006, representing the highest number of mid-year closings in its history and an increase of 2.5 percent over the prior year. New order dollars decreased 28.6 percent to $2.1 billion for the six months ended June 30, 2006, from $2.9 billion for the same period in 2005. New orders decreased 30.2 percent to 7,044 units for the six months ended June 30, 2006, from 10,090 units for the six months ended June 30, 2005.
Gross profit margins from home sales were 23.8 percent for the six months ended June 30, 2006, versus 23.9 percent for the same period in 2005. Selling, general and administrative expenses, as a percentage of revenue, were 10.1 percent for the six months ended June 30, 2006 and 2005. Interest expense was $128,000 for the six months ended June 30, 2006, compared to $435,000 for the six months ended June 30, 2005.
Corporate expenses were $37.1 million for the six months ended June 30, 2006, compared to $34.4 million for the same period in the prior year. Excluding stock option expense required by a change in accounting guidance, corporate expenses were $30.2 million, a decline of $4.2 million. The decrease was due to lower executive compensation expense resulting from lower earnings and a decline in stock price.
The Company’s financial services segment reported pretax earnings of $26.4 million for the six months ended June 30, 2006, compared to $24.6 million for the same period in the prior year.
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RYLAND SECOND-QUARTER RESULTS
DEBT REFINANCING
The Company raised $250.0 million at 6.9 percent in May to replace $250.0 million of higher-rate debt in the third quarter of 2006. On July 3, 2006, the Company redeemed $150.0 million of 9.1 percent senior subordinated notes, of which it owned $6.5 million. The Company intends to repay its outstanding $100.0 million of 8.0 percent senior notes due on August 15, 2006.
STOCK REPURCHASE PROGRAM
The Company repurchased 1,815,000 shares of its common stock during the second quarter of 2006 at a cost of $103.1 million. For the six months ended June 30, 2006, the Company repurchased 2,850,000 shares of its common stock at a cost of $175.0 million. Outstanding shares at June 30, 2006, were 44,254,440, versus 46,833,035 for June 30, 2005, a decrease of 5.5 percent. At June 30, 2006, the Company had authorization from its Board of Directors to purchase approximately $101.7 million of additional shares.
2006 EARNINGS GUIDANCE
The Company projects its diluted earnings per share to be between $7.75 and $8.25 for the fiscal year ending December 31, 2006.
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RYLAND SECOND-QUARTER RESULTS
With headquarters in Southern California, Ryland is one of the nation’s largest homebuilders and a leading mortgage-finance company. The Company currently operates in 28 markets across the country and has built more than 255,000 homes and financed more than 215,000 mortgages since its founding in 1967. Ryland is a Fortune 500 company listed on the New York Stock Exchange under the symbol “RYL.” Previous news releases may be obtained at 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,” “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 are subject to risks and uncertainties which include, among others:
· economic changes nationally or in the Company’s local markets, including volatility in interest rates, inflation, changes in consumer confidence levels and the state of the market for homes in general;
· the availability and cost of land;
· 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;
· 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.
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Five financial-statement pages follow.
