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Forum List » Business News and Headlines SEC Filings, Earing Reports, Press Releases  
The Ryland Group Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 7, 2012 03:21PM
The Ryland Group Inc. (RYL) filed Quarterly Report for the period ended 2012-06-30. Highlight of Business Operations:Mortgage loans held-for-sale and forward-delivery contracts are based on quoted market prices of similar instruments (Level 2). Interest rate lock commitments (“IRLCs”) are valued at their aggregate market price premium or deficit, plus a servicing premium, multiplied by the projected close ratio (Level 3). The market price premium or deficit is based on quoted market prices of similar instruments; the servicing premium is based on contractual investor guidelines for each product; and the projected close ratio is determined utilizing an external modeling system, widely used within the industry, to estimate customer behavior at an individual loan level. At June 30, 2012, contractual principal amounts of mortgage loans held-for-sale totaled $59.6 million, compared to $79.7 million at December 31, 2011. The fair values of mortgage loans held-for-sale and IRLCs were included in “Other” assets within the Consolidated Balance Sheets, and forward-delivery contracts were included in “Other” assets and “Accrued and other liabilities” within the Consolidated Balance Sheets. Gains realized on the conversion of IRLCs to loans totaled $5.9 million and $3.8 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $9.8 million and $6.5 million for the six-month periods ended June 30, 2012 and 2011, respectively. Increases in the fair value of the locked loan pipeline totaled $1.5 million and $543,000 for the three-month periods ended June 30, 2012 and 2011, respectively, and $2.1 million and $1.8 million for the six-month periods ended June 30, 2012 and 2011, respectively. Offsetting these items, losses from forward-delivery contracts used to hedge IRLCs totaled $3.4 million and $2.0 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $3.9 million and $2.2 million for the six-month periods ended June 30, 2012 and 2011, respectively. Net gains and losses related to forward-delivery contracts and IRLCs were included in “Financial services” revenues within the Consolidated Statements of Earnings.The Company’s net income from continuing operations totaled $6.0 million, or $0.14 per diluted share, for the three months ended June 30, 2012, compared to a net loss from continuing operations of $9.8 million, or $0.22 per diluted share, for the same period in 2011. This increase for the second quarter of 2012, compared to the same period in 2011, was primarily due to a rise in closing volume; higher housing gross profit margin, including lower inventory and other valuation adjustments; a decline in interest expense; and a reduced selling, general and administrative expense ratio. Pretax charges related to inventory and other valuation adjustments and write-offs totaled $385,000 and $5.8 million for the quarters ended June 30, 2012 and 2011, respectively. The Company continued its progress toward profitability by raising gross margins through ongoing investments in new, more profitable communities; completing less desirable communities; and lowering expense ratios. Homebuilding revenues increased 38.9 percent to $284.6 million for the second quarter of 2012 from $204.9 million for the same period in 2011 primarily due to a 35.6 percent rise in closings and to a 2.4 percent increase in average closing price. Homebuilding revenues for the second quarter of 2012 included $947,000 from land sales, which resulted in pretax earnings of $330,000, compared to homebuilding revenues for the second quarter of 2011 that included $1.2 million from land sales, which resulted in a pretax loss of $160,000. Gross profit margin from land sales was 34.8 percent for the three months ended June 30, 2012, compared to negative 13.5 percent for the same period in 2011. Fluctuations in revenues and gross profit percentages from land sales resulted from local market conditions and changing land portfolios. The Company generally purchases land and lots with the intent to build homes on those lots and sell them; however, it occasionally sells a portion of its land to other homebuilders or third parties. Homebuilding revenues increased 34.9 percent to $494.1 million for the first six months of 2012 from $366.4 million for the same period in 2011 primarily due to a 31.1 percent rise in closings and to a 2.8 percent increase in average closing price. Homebuilding revenues for the first six months of 2012 included $1.7 million from land sales, which resulted in pretax earnings of $629,000, compared to homebuilding revenues for the first six months of 2011 that included $1.4 million from land sales, which resulted in a pretax loss of $144,000. Gross profit margin from land sales was 37.9 percent for the six months ended June 30, 2012, compared to negative 10.4 percent for the same period in 2011. Fluctuations in revenues and gross profit percentages from land sales resulted from local market conditions and changing land portfolios. For the three months ended June 30, 2012, the financial services segment reported pretax earnings of $2.9 million, compared to $2.1 million for the same period in 2011. Revenues for the financial services segment increased 32.5 percent to $9.2 million for the three months ended June 30, 2012, compared to $6.9 million for the same period in the prior year. This improvement was primarily attributable to an increase in locked pipeline and origination volumes and to higher title income. For the three months ended June 30, 2012, financial services expense totaled $6.2 million, versus $4.9 million for the same period in 2011. This increase was primarily attributable to higher legal and personnel expenses and to interest related to the financial services credit facility that was entered into during December 2011. For the three months ended June 30, 2012 and 2011, the capture rates of mortgages originated for customers of the Company’s homebuilding operations were 69.8 percent and 78.6 percent, respectively.
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