Profits at Ryland dip but orders point to upturn


January 31, 1991|By Timothy J. Mullaney

The Ryland Group Inc. of Columbia said yesterday that its fourth-quarter profits fell 78 percent, reflecting the weakness of the market for new homes. But the statistics that the second-biggest homebuilder in the nation released along with the earnings might contain early signs of an industry recovery.

Ryland said it earned about $3.9 million, or 26 cents a share in primary earnings and 24 cents per fully diluted share, during the last three months of 1990. In 1989, it earned $1.31 a primary share and $1.20 a fully diluted share during the fourth quarter.

Primary earnings per share count only shares of common stock. Fully diluted earnings count the common stock and other securities that are convertible into common stock.

But new orders for Ryland's homes recovered sharply in some parts of the country during the quarter from their depressed levels of earlier this year. Though orders for Ryland Homes in the mid-Atlantic region fell 35 percent or more during some quarters earlier in 1990, the fourth-quarter orders were down only 3 percent from 1989.

Orders also showed smaller declines during the fourth quarter in the Florida market. But orders in the Midwest and Southwest fell sharply during the fourth quarter after posting stronger results earlier in the year. Overall orders were down 11 percent from the fourth quarter of 1989. In the third quarter, orders fell 35 percent.

The modest recovery in new orders didn't keep fourth-quarter earnings from falling because it can take several months for Ryland's customers to obtain mortgages and complete the purchase of their homes. Because Ryland doesn't get paid until the deals are completed, recovering orders wouldn't show up in the revenue and profit columns until early 1991.

Even if the recovery in orders doesn't prove to be illusory, that change isn't likely to help first-quarter profits much. The number of outstanding contracts -- homes sold but not yet settled -- was still down 36 percent at the end of the year.

The fourth-quarter numbers gave Ryland a 1990 profit of $21.8 million, down more than 50 percent from 1989's operating profit. In addition, Ryland had a $14 million special profit in 1989 from an accounting change, making 1990's numbers look still weaker by comparison.

Fourth-quarter net earnings included $3.7 million from land sales, as Ryland tried to get rid of land it didn't think it could build homes on profitably. Also included were charges of $7.3 million for forfeited funds and inventory write-downs, as well as operational closings and consolidations.

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