The Ryland Group Inc. late today (April 25) reported a net loss of $24.4 million (-$0.58 per share) for the first quarter of 2007, compared to earnings of $90 million for the same period last year. The company also said it did not now expect to achieve its previous 2007 guidance and that it would not be able to provide further guidance at this time.
Ryland reported an even bigger loss for its home building business, which, on a pre-tax basis, was $32.2 million in the red. The company attributed the loss to "a decline in closings and margins, which included the impact of inventory valuation adjustments and write-offs and a goodwill impairment charge."
Home building revenue fell 34.5% , a total of $364.5 million, to $691.4 million for the first quarter of 2007, compared to $1.1 billion for the same period in 2006. Closings were off 35.2%, which was partially offset by an increase in the average closing price of a home, which rose to $298,000 for the quarter ended March 31, 2007, from $295,000 for the same period last year.
Home building revenues included $4.0 million from land sales, compared to$4.7 million from land sales for the first quarter of 2006, which contributed net gains of $500,000 and $1.4 million to pretax earnings in2007 and 2006, respectively.
New orders fell 25.7% to 2,989 units from 4,021 units for the same period in 2006. New order dollars were off 26.2% to $872.6 million from $1.2 billion during last year's first quarter.
Backlog at the end of the first quarter of 2007 decreased 45.2% to 4,893 units from 8,931 units at the end of the first quarter of 2006. The dollar value of the Company's backlog at March 31, 2007, was $1.5 billion, reflecting a decline of 46.3% from March 31, 2006.
Gross profit margins from home sales averaged 9.2% (18.7% prior to valuation adjustments), compared to 24.4% for the same period in 2006. Total gross profit margins, including land sales, decreased to 9.2% in the first quarter of 2007 from 24.3% in the first quarter of 2006. This decrease was primarily due to inventory valuation adjustments and write- offs, as well as to increased sales incentives relating to home deliveries for the first quarter.
Home building selling, general and administrative expenses, as a percentage of home building revenue, were 13.9%, compared to 10.4 percent for the same period in 2006. This increase was primarily attributable to a goodwill impairment charge of $15.4 million, which was reflected in the current quarter, and to declining leverage. The homebuilding segments capitalized all interest incurred during the first quarter of 2007 due to development activity.
Corporate expenses were $6.5 million for the first quarter of 2007, compared to $15.0 million for the same period in the prior year. This decrease was primarily due to lower compensation expense that resulted from a decline in earnings and stock price.
The Company's financial services segment, which includes mortgage, title, escrow and insurance services, reported pretax earnings of $8.0 million for the first quarter of 2007, compared to pretax earnings of $11.5 million for the same period in 2006. The decline was primarily attributable to a 35.0% decrease in the number of mortgages originated due to a slowdown in the homebuilding market, offset by a 2.0% increase in average loan size. The capture rate of mortgages originated for the Company's homebuilding customers was 79.1% for the first quarter of 2007, compared to 80.3% for the same period in 2006.
For the three months ended March 31, 2007, the Company repurchased 895,000 shares of its common stock at a cost of $43.4 million. Outstanding shares at March 31, 2007, were 41,957,355, versus 45,735,280 at March 31, 2006, representing a decrease of 8.3 percent. In December 2006, the Company's Board of Directors authorized the purchase of additional shares totaling $175.0 million. At March 31, 2007, the Company had approximately $158.2 million remaining under this authorization.