The Ryland Group (NYSE:RYL) after market close Wednesday reported a net loss for the first quarter ended March 31 of $75.3 million, (-$1.76 per diluted share), compared to a loss of $29.3 million (-$0.69 per diluted share) for the same period in 2008. Included in the loss were impairments, charges and joint venture write-offs totaling $49.4 million.
The loss was significantly higher than the $1.02 share Wall Street had been expecting, which briefly sent the stock down 2.5% to $23.50 in after-hours trading after it had been up 4.3% during the regular session. It was back up the closing price of $24.04 by 5 p.m.
Home building revenues decreased 35.2% to $259.0 million as closings dropped 32% to 1,049 units and the average closing price fell 3.9% to $247,000, both compared to the same quarter last year.
New orders tumbled 37.6% to 1,347 units with a value of $316.2 million, a decline of 39.9%. Inventory of houses started and unsold fell 21.6% to 501 units. Ryland did not report a cancellation rate.
Backlog at the quarter's end increased 19.1% to 1,857 units from 1,559 units at the end of last year but was down 46.7% from first quarter, 2008. Dollar value of backlog was up from yearend to $464.6 million but down 49.3% from the comparable quarter last year.
The company generated $171.7 million in cash from operations, including income tax refunds of $165.6 million, and had $534 million in home building cash at the end of the quarter. It repurchased $47.6 million of its senior notes for $35.9 million in the open market, resulting in a gain of $11.4 million. Ryland's net debt-to-total capital ratio was 22.0% on March 31.
Housing gross profit margins averaged 6.0%, excluding charges, down from for 11.9% for the same period in 2008, primarily due to price reductions that related to project closeouts and other home deliveries during the quarter.Including charges, housing gross profit margins averaged negative 13.1% for the quarter, compared to 5.2% for the same period in 2008.
SG&A minus severance and model abandonment charges totaled 15.6% of revenue in the quarter, down slightly from 16.0% for the same period in 2008. With the charges included, SG&A was 13.8% of revenue, down from 15.3% for the same period in 2008, due largely to cost-saving initiatives and lower marketing and advertising costs per unit, partially offset by a decline in revenues. In overall terms, SG&A was down $23.5 million from the same period in the prior year. Corporate overhead for the quarter was$9.1 million, including losses in the market value of benefit-plan investments.
Ryland's financial services segment reported pretax losses of $1.6 million, compared to pretax earnings of $6.6 million for the same period in 2008, primarily due to a 39.8% decline in mortgage originations.
The company repurchased $47.6 million of its senior notes for $35.9 million in the open market during the quarter, realizing a realated gain of $11.4 million. It amended its $550.0 million revolving credit facility resulting in a reduction of its borrowing capacity to $200.0 million and the modification of several of its covenants, which included "changing the definition of its consolidated tangible net worth covenant; amending its leverage ratio; changing its borrowing base; and establishing certain liquidity reserve accounts in the event that it fails to satisfy an interest coverage test and an adjusted cash flow from operations to interest incurred test. The credit agreement's maturity date of January 2011 remains unchanged, and the uncommitted accordion feature has been reduced to $300.0 million from $1.5 billion."
