Ryland has $2.6 million loss for '95 Accounting change, slower sales blamed

operating net rose

February 07, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Stung by heightened competition in its core mid-Atlantic market and an accounting change, the Ryland Group Inc. yesterday reported a net loss for 1995 of $2.6 million.

The 31 cents per share loss, which Ryland had predicted in December because of the adoption of the accounting change, represents a stark contrast to the $24.5 million net income the Columbia-based company generated a year ago.

Ryland was forced to take a $27 million, after-tax noncash charge in adopting Financial Accounting Standards Board (FASB) No. 121, a measure that alters the value of a homebuilder's land inventories. On a pretax basis, the charge amounted to $45 million.

Excluding the accounting change, earnings from continuing operations for the year were $1.5 million.

"We're very pleased on the one hand, because our homebuilding operations are performing well, and they show real progress, resulting from better designs and land strategies," said R. Chad Dreier, president and chief executive officer. "On the other hand, we would have liked to have seen more sales volume."

In the fourth quarter of the year, Ryland posted a net loss of $23.8 million, $1.55 per share, resulting primarily from the FASB charge. Without the charge, Ryland would have generated earnings of $3.2 million.

The nation's third-largest homebuilder generated revenues of $1.6 billion for the year, a decline of 2 percent, and $448 million in the quarter, a gain of 2 percent.

Ryland's homebuilding segment produced a pretax loss of $47.5 million in 1995, and a $38.8 million pretax loss for the fourth quarter, both the result of the FASB charge. Excluding the charge, the segment would have posted a pretax annual loss of $2.5 million because of fewer sales and lower gross profit margins, down from $11 million in 1994.

In the quarter, its net income amounted to $6.2 million without the charge, a more than 150 percent gain from a year ago and its highest level since the third quarter of 1992, Mr. Dreier said. Sales were up 10.7 percent, to 1,762.

Ryland also unveiled plans to de-emphasize its operations in the mid-Atlantic area, where stiff competition has eroded its gross profit margins and less demand for traditional designs has weakened its market share.

"It's one of our biggest regions, in terms of capital allocated, but we're going to be more geographically diverse," Mr. Dreier said. "But there's more demographic growth elsewhere. It's a fact."

The mid-Atlantic area -- where Ry-land enjoys superior market knowledge and critical brand-name recognition -- will still account for 20 percent of its sales, he said. The region now accounts for a quarter of Ryland sales.

Ryland had some highlights in the quarter, including an increase in backlogs, new orders, closings and improvements in its gross profit margins, which rose to 13.1 percent. As Dec. 31, Ryland had a backlog of 2,744 contracts, a 7.5 percent gain compared with the same time last year. The total volume of those contracts rose to $477.3 million, a 12.4 percent gain.

But for the year, gross profit margins were 12.2 percent, a decline from 12.6 percent a year ago.

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