The Ryland Group (NYSE:RYL) after market close Wednesday reported a net loss of $241.6 million, or $5.70 per diluted share, for the second quarter of 2008, due in part to write-downs of $180.4 million and a $124 million charge to deferred tax assets. The loss compared to a loss of $52.4 million, or$1.25 per diluted share, for the same period in 2007.
Home building revenues fell 34.6% to $472.3 million as closings dropped 25.7% to 1,828 and average closing prices fell 13% from second-quarter, 2007 levels to $254,000. New orders were down 18.9%, to 2,045, and new order dollars were off 27.8% to $502.9 million.
The home building segments reported a pretax loss of $187.1 million during the second quarter of 2008, compared to a pretax loss of $91.5 million for the same period in 2007. This decrease was primarily due to the impact of inventory valuation adjustments and write-offs; a decline in closings and margins; and higher relative selling, general and administrative expenses.
Home building revenues decreased 34.6 percent to $472.3 million for the second quarter of 2008, compared to $722.6 million for the same period in 2007. This decline was primarily attributable to closings totaling 1,828 units for the second quarter ended June 30, 2008, reflecting a 25.7 percent decrease from closings totaling 2,461 units for the same period in the prior year, and to a 13.0 percent decrease in the average closing price of a home, which dropped to $254,000 for the quarter ended June 30, 2008, from $292,000 for the same period in 2007.
Backlog at quarter's end increased 6.2% to 3,702 units from 3,485 units at the end of the first quarter but was down 25.3 percent% from 4,953 units at the end of the second quarter of 2007. The dollar value of backlog was$955.8 million, up 4.3% from March 31, 2008 but down 34.5% from June 30, 2007. Inventory of houses started and unsold declined 17.4% from year end2007 to 680 units at the end of the second quarter.
Housing gross profit margins sank to a negative 18.2% including the write-downs but averaged 12.5% prior to inventory and joint venture valuation adjustments and write-offs, compared to 19.0% for the same period in 2007. The company attributed the decline to"inventory valuation adjustments and write-offs, as well as to increased sales incentives that related to home deliveries for the second quarter of 2008."
Selling, general and administrative expenses (SG&A), as a percentage of home building revenue, rose to 13.8% for the second quarter of 2008, compared to 11.5% for the same period in 2007. The company attributed the rise to "a decline in revenues as well as to a rise in marketing and advertising costs per unit."
The financial services segment reported pretax earnings of $5.5 million for the second quarter of 2008, compared to pretax earnings of $9.8 million for the same period in 2007. This decrease was due to a 23.5% decline in the number of mortgages originated and a 13.8% decrease in average loan size.The capture rate of mortgages was 82.9% for the second quarter of 2008, compared to 79.9% for the same period in 2007.
Ryland ended the quarter with $199.4 million in cash and no borrowings on its revolver, which it amended last month to reduce borrowing capacity from $750.0 million to $550.0 million modify several of its covenants, including a reduction in the minimum consolidated tangible net worth covenant to $600.0 million. It ended the quarter with a debt-to-capital ratio of 41%.