Ryland Reports Results for the Second Quarter of 2008

CALABASAS, Calif.--(Business Wire)--
The Ryland Group, Inc. (NYSE:RYL), today announced results for its
second quarter ended June 30, 2008. Items of note included:

-- Cash balance of $199.4 million as of June 30, 2008;

-- Provided $37.1 million of cash from operations for the quarter
ended June 30, 2008;

-- Net debt-to-total capital ratio was 41.0 percent at June 30,
2008;

-- Pretax charges for inventory and other valuation adjustments
were $134.6 million, joint venture impairments were $35.9
million and option deposits and feasibility write-offs were
$9.9 million;

-- Noncash tax charge of $124.0 million was recorded by the
Company for a valuation allowance related to its deferred tax
assets during the quarter ended June 30, 2008;

-- Loss of $5.70 per share for the quarter ended June 30, 2008,
including inventory valuation adjustments and write-offs,
joint venture impairments and an income tax charge, compared
to a loss of $1.25 per share for the same period in 2007;

-- Consolidated revenues of $487.9 million for the quarter ended
June 30, 2008, reflected a decrease of 34.4 percent from the
quarter ended June 30, 2007;

-- Housing gross profit margins averaged 12.5 percent prior to
inventory and joint venture valuation adjustments and
write-offs for the quarter ended June 30, 2008, compared to
19.0 percent for the same period in 2007. Subsequent to these
adjustments, housing gross profit margins averaged negative
18.2 percent for the second quarter of 2008, compared to 4.6
percent for the same period in 2007;

-- Closings totaled 1,828 units for the quarter ended June 30,
2008, reflecting a 25.7 percent decrease from the same period
in the prior year;

-- New orders in the second quarter of 2008 declined 18.9 percent
to 2,045 units from 2,521 units in the second quarter of 2007;

-- Backlog increased 6.2 percent to 3,702 units at June 30, 2008,
from 3,485 units at March 31, 2008; and

-- Inventory of houses started and unsold declined by 17.4
percent to 680 units at June 30, 2008, from 823 units at
December 31, 2007.

RESULTS FOR THE SECOND QUARTER OF 2008

For the second quarter ended June 30, 2008, the Company reported a
consolidated net loss of $241.6 million, or $5.70 per diluted share,
compared to a loss of $52.4 million, or $1.25 per diluted share, for
the same period in 2007. The Company had inventory and other valuation
adjustments, joint venture impairments, and option deposit and
feasibility write-offs totaling $180.4 million, as well as a noncash
tax charge of $124.0 million, during the second quarter ended June 30,
2008.

The homebuilding 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.

Homebuilding 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. Homebuilding revenues for the second quarter of 2008 included
$8.6 million from land sales, compared to $3.0 million from land sales
for the second quarter of 2007, which contributed net gains of
$124,000 and $595,000 to pretax earnings in 2008 and 2007,
respectively.

New orders of 2,045 units for the quarter ended June 30, 2008,
represented a decrease of 18.9 percent, compared to new orders of
2,521 units for the same period in 2007. For the second quarter of
2008, new order dollars declined 27.8 percent to $502.9 million from
$696.8 million for the second quarter of 2007. Backlog at the end of
the second quarter of 2008 increased 6.2 percent to 3,702 units from
3,485 units at March 31, 2008, and decreased 25.3 percent from 4,953
units at the end of the second quarter of 2007. At June 30, 2008, the
dollar value of the Company's backlog was $955.8 million, reflecting
an increase of 4.3 percent from March 31, 2008, and a decrease of 34.5
percent from June 30, 2007.

Housing gross profit margins averaged 12.5 percent prior to
inventory and joint venture valuation adjustments and write-offs for
the quarter ended June 30, 2008, compared to 19.0 percent for the same
period in 2007. Subsequent to these adjustments, housing gross profit
margins averaged negative 18.2 percent for the second quarter of 2008,
compared to 4.6 percent for the same period in 2007. This decrease was
primarily due 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. The gross profit margin from land
sales was 1.5 percent for the second quarter ended June 30, 2008,
compared to 20.0 percent for the same period in 2007. Selling, general
and administrative expenses, as a percentage of homebuilding revenue,
were 13.8 percent for the second quarter of 2008, compared to 11.5
percent for the same period in 2007. This increase was primarily
attributable to a decline in revenues, as well as to a rise in
marketing and advertising costs per unit. For the second quarter ended
June 30, 2008, selling, general and administrative expense dollars
decreased $17.7 million from the same period in the prior year. The
homebuilding segments capitalized all interest incurred during the
second quarters of 2008 and 2007.

Corporate expenses were $8.1 million for the second quarter of
2008, compared to $7.1 million for the same period in the prior year.
This increase was primarily due to a $1.1 million decline in the
market value of investments included within the Company's benefit
plans.

The Company's financial services segment, which includes mortgage,
title, escrow and insurance services, 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 primarily
attributable to a 23.5 percent decline in the number of mortgages
originated, due to a slowdown in the homebuilding market, and to a
13.8 percent decrease in average loan size. The capture rate of
mortgages originated for the Company's homebuilding customers was 82.9
percent for the second quarter of 2008, compared to 79.9 percent for
the same period in 2007.

RESULTS FOR THE FIRST HALF OF 2008

For the six months ended June 30, 2008, the Company reported a
consolidated net loss of $271.0 million, or $6.40 per diluted share,
compared to a loss of $76.9 million, or $1.82 per diluted share, for
the same period in 2007. The Company had inventory and other valuation
adjustments, joint venture impairments, and option deposit and
feasibility write-offs totaling $208.4 million, as well as a noncash
tax charge of $124.0 million, for the six months ended June 30, 2008.

The homebuilding segments reported a pretax loss of $230.8 million
during the first six months of 2008, compared to a pretax loss of
$123.7 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.

Homebuilding revenues decreased 38.3 percent to $871.9 million for
the first six months of 2008, compared to $1.4 billion for the same
period in 2007. This decline was primarily attributable to closings
totaling 3,371 units for the six months ended June 30, 2008,
reflecting a 29.2 percent decrease from closings totaling 4,763 units
for the same period in the prior year, and to a 13.6 percent decrease
in the average closing price of a home, which dropped to $255,000 for
the six-month period ended June 30, 2008, from $295,000 for the
six-month period ended June 30, 2007. Homebuilding revenues for the
first six months of 2008 included $11.5 million from land sales,
compared to $7.0 million from land sales for the first six months of
2007, which contributed net gains of $1.1 million to pretax earnings
in 2008 and 2007.

New orders of 4,204 units for the six months ended June 30, 2008,
represented a decrease of 23.7 percent, compared to new orders of
5,510 units for the same period in 2007. For the first six months of
2008, new order dollars declined 34.4 percent to $1.0 billion from
$1.6 billion for the first six months of 2007.

Housing gross profit margins averaged 12.2 percent prior to
inventory and joint venture valuation adjustments and write-offs for
the six months ended June 30, 2008, compared to 18.8 percent for the
same period in 2007. Subsequent to these adjustments, housing gross
profit margins averaged negative 7.4 percent for the first half of
2008, compared to 8.3 percent for the same period in 2007. This
decrease was primarily due to inventory valuation adjustments and
write-offs, as well as to increased sales incentives that related to
home deliveries for the first half of 2008. The gross profit margin
from land sales was 9.4 percent for the six months ended June 30,
2008, compared to 12.8 percent for the same period in 2007. Selling,
general and administrative expenses, as a percentage of homebuilding
revenue, were 14.8 percent for the first six months of 2008, compared
to 12.6 percent for the same period in 2007. This increase was
primarily attributable to a decline in revenues, as well as to a rise
in marketing and advertising costs per unit, partially offset by a
$15.4 million goodwill impairment charge in the first quarter of 2007.
For the first six months ended June 30, 2008, selling, general and
administrative expense dollars decreased $49.7 million, versus the
same period in the prior year. The homebuilding segments capitalized
all interest incurred during the six-month periods ended June 30, 2008
and 2007.

Corporate expenses were $17.2 million for the first six months of
2008, compared to $13.6 million for the same period in the prior year.
This increase was primarily due to a $3.1 million decline in the
market value of investments included within the Company's benefit
plans.

The Company's financial services segment, which includes mortgage,
title, escrow and insurance services, reported pretax earnings of
$12.1 million for the first six months ended June 30, 2008, compared
to pretax earnings of $17.8 million for the same period in 2007. This
decrease was primarily attributable to a 27.1 percent decline in the
number of mortgages originated, due to a slowdown in the homebuilding
market, and to a 13.5 percent decrease in average loan size, partially
offset by a $3.2 million gain related to the 2008 implementation of
Staff Accounting Bulletin No. 109, which requires servicing rights
related to interest rate lock commitments to be recorded at fair
value. The capture rate of mortgages originated for the Company's
homebuilding customers was 82.6 percent for the first six months of
2008, compared to 79.5 percent for the same period in 2007.

AMENDED CREDIT FACILITY

In June 2008, the Company amended its revolving credit facility by
reducing its borrowing capacity from $750.0 million to $550.0 million
and by modifying several of its covenants, which included decreasing
the base amount for the minimum consolidated tangible net worth
covenant to $600.0 million; adjusting the permitted leverage ratio and
the ratio of unsold land to its consolidated tangible net worth; and
changing its pricing structure. The facility's maturity date of
January 2011 and the uncommitted accordion feature remained unchanged.
There were no borrowings against this facility at June 30, 2008.

NONCASH TAX CHARGE FOR A DEFERRED TAX VALUATION ALLOWANCE

During the second quarter of 2008, the Company recorded a noncash
tax charge of $124.0 million for a valuation allowance related to its
deferred tax assets. This was reflected as a charge to income tax
expense and resulted in a reduction of the Company's deferred tax
assets. Consequently, the Company's effective tax rate was 27.3
percent for the quarter ended June 30, 2008, compared to an effective
tax benefit rate of 41.0 percent for the same period in 2007. Due to
the uncertainty of current market conditions, the Company is unable to
provide precise annual effective rate guidance at this time.

Headquartered in Southern California, Ryland is one of the
nation's largest homebuilders and a leading mortgage-finance company.
Since its founding in 1967, Ryland has built more than 275,000 homes
and financed more than 235,000 mortgages. The Company currently
operates in 17 states and 21 homebuilding divisions across the country
and is listed on the New York Stock Exchange under the symbol "RYL."
For more information, please visit www.ryland.com.

Note: Certain statements in this press release may be regarded as
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, and may qualify for the safe
harbor provided for in Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements represent the
Company's expectations and beliefs concerning future events, and no
assurance can be given that the future results described in this press
release will be achieved. These forward-looking statements can
generally be identified by the use of statements that include words
such as "anticipate," "believe," "estimate," "expect," "foresee,"
"goal," "intend," "likely," "may," "plan," "project," "should,"
"target," "will" or other similar words or phrases. All
forward-looking statements contained herein are based upon information
available to the Company on the date of this press release. Except as
may be required under applicable law, the Company does not undertake
any obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise.

These forward-looking statements are subject to risks,
uncertainties and other factors, many of which are outside of the
Company's control, that could cause actual results to differ
materially from the results discussed in the forward-looking
statements. The factors and assumptions upon which any forward-looking
statements herein are based are subject to risks and uncertainties
which include, among others:

-- economic changes nationally or in the Company's local markets,
including volatility and increases in interest rates,
inflation, changes in consumer demand and confidence levels
and the state of the market for homes in general;

-- instability and uncertainty in the mortgage lending market,
including revisions to underwriting standards for borrowers;

-- the availability and cost of land and the future value of land
held or under development;

-- increased land development costs on projects under
development;

-- shortages of skilled labor or raw materials used in the
production of houses;

-- increased prices for labor, land and raw materials used in the
production of houses;

-- increased competition;

-- failure to anticipate or react to changing consumer
preferences in home design;

-- increased costs and delays in land development or home
construction resulting from adverse weather conditions;

-- potential delays or increased costs in obtaining necessary
permits as a result of changes to laws, regulations, or
governmental policies (including those that affect zoning,
density, building standards and the environment);

-- delays in obtaining approvals from applicable regulatory
agencies and others in connection with the Company's
communities and land activities;

-- changes in the Company's effective tax rate and assumptions
and valuations related to its tax accounts;

-- the risk factors set forth in the Company's most recent Annual
Report on Form 10-K; and

-- other factors over which the Company has little or no control.

-0-
*T
THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(in thousands, except share data)

Three months ended June Six months ended June 30,
30,
2008 2007 2008 2007
------------ ------------ ------------ ------------

REVENUES
Homebuilding $ 472,283 $ 722,578 $ 871,883 $ 1,413,941
Financial
services 15,598 21,156 32,164 40,907
------------ ------------ ------------ ------------
TOTAL
REVENUES 487,881 743,734 904,047 1,454,848
------------ ------------ ------------ ------------

EXPENSES
Cost of sales 558,742 731,420 931,143 1,359,214
(Earnings)
loss from
unconsolidated
joint ventures 35,606 (84) 42,707 (119)
Selling,
general and
administrative 65,062 82,762 128,847 178,577
Financial
services 10,112 11,364 20,091 23,092
Corporate 8,130 7,097 17,196 13,550
------------ ------------ ------------ ------------
TOTAL
EXPENSES 677,652 832,559 1,139,984 1,574,314
------------ ------------ ------------ ------------

Earnings (loss)
before taxes (189,771) (88,825) (235,937) (119,466)

Tax expense
(benefit) 51,868 (36,394) 35,018 (42,590)
------------ ------------ ------------ ------------

NET EARNINGS
(LOSS) $ (241,639) $ (52,431) $ (270,955) $ (76,876)
------------ ------------ ------------ ------------

NET EARNINGS
(LOSS) PER COMMON
SHARE
Basic $ (5.70) $ (1.25) $ (6.40) $ (1.82)
Diluted (5.70) (1.25) (6.40) (1.82)

AVERAGE COMMON
SHARES
OUTSTANDING
Basic 42,421,753 42,010,783 42,326,968 42,248,112
Diluted 42,421,753 42,010,783 42,326,968 42,248,112
*T

-0-
*T
THE RYLAND GROUP, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

June 30, December 31,
2008 2007
----------- ------------
(Unaudited)

ASSETS
Cash and cash equivalents $ 199,356 $ 243,614
Housing inventories
Homes under construction 726,640 717,992
Land under development and improved
lots 705,024 949,726
Inventory held-for-sale 81,360 69,225
Consolidated inventory not owned 60,328 76,734
----------- ------------
Total inventories 1,573,352 1,813,677
Property, plant and equipment 65,908 75,538
Net deferred taxes 86,971 158,065
Other 235,798 260,426
----------- ------------
TOTAL ASSETS 2,161,385 2,551,320
----------- ------------

LIABILITIES
Accounts payable 128,942 114,050
Accrued and other liabilities 334,502 404,545
Debt 791,615 839,080
----------- ------------
TOTAL LIABILITIES 1,255,059 1,357,675
----------- ------------

MINORITY INTEREST 53,322 68,919
----------- ------------

STOCKHOLDERS' EQUITY
Common stock, $1.00 par value:
Authorized - 200,000,000 shares
Issued - 42,485,267 shares at June 30,
2008
(42,151,085 shares at December 31,
2007) 42,485 42,151
Retained earnings 806,859 1,078,521
Accumulated other comprehensive income 3,660 4,054
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 853,004 1,124,726
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,161,385 $2,551,320
----------- ------------
*T

-0-
*T
THE RYLAND GROUP, INC. and Subsidiaries
SEGMENT INFORMATION (Unaudited)

Three months ended June 30, Six months ended June 30,
2008 2007 2008 2007
---------------- ---------- -------------- ----------
EARNINGS (LOSS)
BEFORE TAXES
(in thousands)
Homebuilding
North $ (69,973) $ 20,714 $ (86,236) $ 29,162
Southeast (55,977) 8,010 (59,987) 16,866
Texas (3,286) 8,984 (3,830) 14,916
West (57,891) (129,228) (80,761) (184,675)
Financial
services 5,486 9,792 12,073 17,815
Corporate and
unallocated (8,130) (7,097) (17,196) (13,550)
---------------- ---------- -------------- ----------
Total $(189,771) $ (88,825) $(235,937) $(119,466)

----------------------------------------------------------------------

NEW ORDERS
Units
North 524 653 1,129 1,489
Southeast 536 705 1,186 1,494
Texas 668 682 1,221 1,511
West 317 481 668 1,016
---------------- ---------- -------------- ----------
Total 2,045 2,521 4,204 5,510

------------------------------------------------------
Dollars (in
millions)
North $ 142 $ 210 $ 307 $ 479
Southeast 136 195 288 426
Texas 145 139 262 313
West 80 153 172 351
---------------- ---------- -------------- ----------
Total $ 503 $ 697 $ 1,029 $ 1,569

----------------------------------------------------------------------

CLOSINGS
Units
North 563 699 986 1,306
Southeast 535 725 1,046 1,482
Texas 446 659 833 1,243
West 284 378 506 732
---------------- ---------- -------------- ----------
Total 1,828 2,461 3,371 4,763

------------------------------------------------------
Average
closing
price (in
thousands)
North $ 288 $ 320 $ 286 $ 318
Southeast 248 303 253 308
Texas 215 214 216 215
West 258 351 264 362
---------------- ---------- -------------- ----------
Total $ 254 $ 292 $ 255 $ 295

----------------------------------------------------------------------

OUTSTANDING June 30,
CONTRACTS
Units 2008 2007
-------------------------
North 1,109 1,340
Southeast 1,086 1,651
Texas 1,064 1,288
West 443 674
-------------- ----------
Total 3,702 4,953

-------------------------
Dollars (in
millions)
North $ 323 $ 450
Southeast 281 496
Texas 238 274
West 114 239
-------------- ----------
Total $ 956 $ 1,459

-------------------------
Average price
(in
thousands)
North $ 291 $ 334
Southeast 259 301
Texas 223 212
West 257 354
-------------- ----------
Total $ 258 $ 294
----------------------------------------------------------------------
*T

-0-
*T
THE RYLAND GROUP, INC. and Subsidiaries
FINANCIAL SERVICES SUPPLEMENTAL INFORMATION (Unaudited)
(in thousands, except origination data)

Three months Six months ended
ended June 30, June 30,
RESULTS OF OPERATIONS 2008 2007 2008 2007
-------- -------- -------- --------

Revenues
Net gains on sales of
mortgages $ 7,236 $ 8,105 $14,574 $15,319
Origination fees 4,187 6,470 7,954 12,230
Title/escrow/insurance 3,873 6,378 9,007 12,903
Interest and other 302 203 629 455
-------- -------- -------- --------
Total revenues 15,598 21,156 32,164 40,907
General and administrative
expenses 10,112 11,364 20,091 23,092
-------- -------- -------- --------
Pretax earnings $ 5,486 $ 9,792 $12,073 $17,815
-------- -------- -------- --------

OPERATIONAL DATA

Retail operations:
Originations (units) 1,413 1,848 2,597 3,562
Ryland Homes closings as a
percentage of total closings 99.5% 99.5% 99.3% 99.5%
Ryland Homes origination
capture rate 82.9% 79.9% 82.6% 79.5%

Investment operations:
Mortgage-backed securities and
notes receivable average
balance $ 366 $ 419 $ 377 $ 490
*T

The Ryland Group, Inc.
Drew Mackintosh, Vice President, Investor Relations
818-223-7548
or
Marya Barlow, Director, Communications
818-223-7591

Copyright Business Wire 2008