8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_______________________

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

July 21, 2004

Date of Report
(Date of earliest event reported)

THE RYLAND GROUP, INC.

(Exact Name of Registrant as Specified in Charter)

Maryland	001-08029	52-0849948
(State or Other Jurisdiction of	(Commission File Number)	(IRS Employer Identification No.)
Incorporation)
24025 Park Sorrento, Suite 400, Calabasas, California		91302
(Address of Principal Executive Offices)		(ZIP Code)

Registrant’s telephone number, including area code: (818) 223-7500

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

TABLE OF CONTENTS

	Item 9. Regulation FD Disclosure; and
	Item 12. Results of Operations and Financial Condition
SIGNATURES
EXHIBIT INDEX
Press Release dated July 21, 2004

Item 9. Regulation FD Disclosure; and

Item 12. Results of Operations and Financial Condition

On July 21, 2004, The Ryland Group, Inc. announced financial results for the three and six months ended June 30, 2004. A copy of this press release is attached hereto as Exhibit 99. The information in Exhibit 99 is being furnished pursuant to both Items 9 and 12 of Form 8-K.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	THE RYLAND GROUP, INC.
Date: July 21, 2004	By:	/s/ David L. Fristoe
		David L. Fristoe
		Senior Vice President, Corporate Controller and Chief Accounting Officer

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EXHIBIT INDEX

Exhibit Number	Description
99	Press release dated July 21, 2004

EX-99

Exhibit 99

	The Ryland Group, Inc.
News Release	www.ryland.com

FOR IMMEDIATE RELEASE	CONTACT:	Cathey Lowe, Senior Vice President, Finance
		Investor Relations          (818) 223-7530
		Melissa Bailey, Vice President, Communications
		Media Relations          (818) 223-7590

RYLAND REPORTS 49 PERCENT INCREASE IN SECOND-QUARTER EPS,
INCREASES EARNINGS GUIDANCE FOR 2004

CALABASAS, Calif. (July 21, 2004) — The Ryland Group, Inc. (NYSE: RYL), today announced record results for its second quarter ended June 30, 2004, including the highest second-quarter consolidated net earnings, revenues, new orders, backlog and earnings per share in its history. Highlights include:

• Diluted earnings of $3.03 per share for the quarter ended June 30, 2004, representing an increase of 49.3 percent over the same period in the prior year

• Revenues of $918.5 million for the quarter ended June 30, 2004, reflecting an increase of 9.4 percent over the quarter ended June 30, 2003

• Gross profit margins from home sales of 24.7 percent for the quarter ended June 30, 2004, compared to 21.8 percent for the quarter ended June 30, 2003

• Record second-quarter new orders of 4,761, signifying a 2.2 percent increase over the quarter ended June 30, 2003, with 3.6 percent fewer communities

• Record backlog units of 9,004, up 17.0 percent at June 30, 2004, compared to June 30, 2003, and dollar backlog at $2.4 billion, up 35.8 percent from June 30, 2003, the highest quarter-end backlog in the Company’s history

• The repurchase of 462,000 shares of Ryland common stock during the second quarter of 2004

• Increased earnings guidance for the fiscal year ending December 31, 2004. Earnings are expected to exceed $12.00 per share.

RECORD RESULTS HIGHLIGHT SECOND QUARTER

     The Company’s consolidated net earnings for the three months ended June 30, 2004, represented a second-quarter record at $76.5 million, or $3.03 per diluted share, compared to consolidated net earnings of $54.0 million, or $2.03 per diluted share, for the second quarter of 2003.

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RYLAND SECOND-QUARTER RESULTS

     The homebuilding segment reported second-quarter pretax earnings of $127.2 million, which represents a 46.4 percent rise over the $86.9 million reported for the second quarter of 2003. The increase over the prior year was primarily attributable to higher average closing prices of homes sold and increased margins on homes closed.

     Homebuilding revenues rose $83.1 million, or 10.2 percent, to $899.3 million for the second quarter of 2004, compared to the same period in the prior year. This was the result of an 11.7 percent increase in the average closing price of a home from $223,000 for the quarter ended June 30, 2003, to $249,000 for the quarter ended June 30, 2004. Homebuilding revenues for the second quarter of 2004 included $18.7 million from land sales, compared to $6.0 million for the second quarter of 2003, which contributed net gains of $5.1 million and $0.5 million to pretax earnings in 2004 and 2003, respectively.

     New orders of 4,761 for the second quarter of 2004 represented a 2.2 percent increase, compared to new orders of 4,657 for the second quarter of 2003. The Company operated in 318 active communities at June 30, 2004, compared to 330 active communities at June 30, 2003. The Company expects its community count to increase 7.0 percent from second-quarter levels by the end of 2004, with the most significant increases coming in the Las Vegas and Washington markets. The Company’s backlog at the end of the second quarter of 2004 increased to 9,004 outstanding contracts from 7,696 outstanding contracts at June 30, 2003, a rise of 17.0 percent. The dollar value of the Company’s backlog at June 30, 2004, was $2.4 billion, or an increase of 35.8 percent over that of June 30, 2003.

     Gross profit margins from home sales averaged 24.7 percent in the second quarter of 2004, compared to 21.8 percent in the second quarter of 2003. The improvement in gross margins was attributable to sales prices increasing at a greater rate than costs and a change in mix, as a higher percentage of closings during the quarter came from higher margin markets. Selling, general and administrative expenses, as a percentage of revenue, were 10.6 percent in the second quarter of 2004 versus 10.8 percent for the same period in 2003. Interest expense for the second quarter of 2004 was $210,000 compared to interest expense of $2.2 million in the second quarter of 2003. This decrease was attributable to a rise in capitalized interest, which resulted from increased development activity, partially offset by a reduction in interest earned on cash investments. The pretax homebuilding margin was 14.1 percent in the second quarter of 2004, compared to 10.6 percent in the second quarter of 2003.

     Corporate expenses were $15.8 million for the second quarter of 2004, compared to $14.5 million for the same period in the prior year. The rise in corporate expenses was primarily attributable to increased incentive compensation, which was due to improvement in the Company’s financial results.

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RYLAND SECOND-QUARTER RESULTS

     The Company’s financial services segment, which includes Ryland Mortgage Company and its title, escrow and insurance services, reported pretax earnings of $13.0 million for the second quarter of 2004, compared to $17.7 million for the same period last year. This decrease was attributable to a more competitive marketplace and an increase in less profitable adjustable-rate mortgage product. The number of mortgage origination dollars was flat as average price increases offset a unit value decline during the second quarter of 2004. The capture rate of mortgages originated for homebuilding customers was 84.9 percent in the second quarter of 2004, compared to 87.8 percent in the second quarter of 2003.

NEW RECORDS ESTABLISHED FOR THE FIRST HALF OF 2004

     Consolidated net earnings for the six months ended June 30, 2004, increased 39.8 percent to a record $128.9 million, or $5.08 per diluted share, from $92.2 million, or $3.46 per diluted share, for the six months ended June 30, 2003.

     The Company’s homebuilding segment reported pretax earnings of $213.1 million for the six months ended June 30, 2004, compared to $149.7 million for the same period in the prior year. Homebuilding revenues rose $180.0 million to $1,637.3 million for the six months ended June 30, 2004, compared to $1,457.3 million for the same period in the previous year. Homebuilding revenues for the six months ended June 30, 2004, included revenues of $22.5 million from land sales, compared to $8.0 million for the six months ended June 30, 2003, contributing net gains of $5.5 million and $1.0 million to pretax earnings, respectively. The Company closed 6,568 homes for the six months ended June 30, 2004, compared to 6,589 homes closed for the six months ended June 30, 2003. New orders were 9,731 for the six months ended June 30, 2004, representing an increase of 9.1 percent, compared to 8,917 for the six months ended June 30, 2003.

     Housing gross profit margins rose to 23.6 percent for the six months ended June 30, 2004, versus 21.3 percent for the same period in 2003. Selling, general and administrative expenses, as a percentage of revenue, were 10.6 percent for the six months ended June 30, 2004, versus 10.8 percent for the corresponding period in 2003. Compared to the results for the six months ended June 30, 2003, interest expense decreased $3.2 million to $0.2 million in 2004. This was primarily due to a rise in capitalized interest, which resulted from increased development activity, partially offset by a reduction in interest earnings on cash investments.

     The financial services segment, which includes Ryland Mortgage Company and its title, escrow and insurance services, reported pretax earnings of $23.3 million for the six months ended June 30, 2004, compared with pretax earnings of $30.1 million for the same period last year.

STOCK REPURCHASE PROGRAM

     The Company repurchased 462,000 shares of its common stock during the second quarter of 2004. At June 30, 2004, the Company had Board authorization to purchase an additional 976,600 shares.

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RYLAND SECOND-QUARTER RESULTS

UPDATED 2004 EARNINGS GUIDANCE

     The Company anticipates that earnings for the fiscal year ending December 31, 2004, will exceed $12.00 per share.

     With headquarters in Southern California, Ryland is one of the nation’s largest homebuilders and a leading mortgage-finance company. The Company currently operates in 27 markets across the country and has built more than 225,000 homes and financed more than 190,000 mortgages since its founding in 1967. Ryland is a Fortune 500 company listed on the New York Stock Exchange under the symbol “RYL.” Previous news releases may be obtained at 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. Forward-looking statements are subject to risks and uncertainties which include, among others:

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

• the availability and cost of land;

• 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;

• 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); or

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

# # #

Five financial-statement pages follow.

CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
The Ryland Group, Inc. and subsidiaries
(in thousands, except share data)

	Three months ended June 30,				Six months ended June 30,
	2004		2003		2004		2003
REVENUES
Homebuilding	$	899,251	$	816,168	$	1,637,295	$	1,457,335
Financial services		19,270		23,863		35,825		42,372
TOTAL REVENUES		918,521		840,031		1,673,120		1,499,707
EXPENSES
Homebuilding
Cost of sales		676,628		639,170		1,250,437		1,147,005
Selling, general and administrative		95,212		87,885		173,540		157,190
Interest		210		2,236		210		3,401
Total homebuilding expenses		772,050		729,291		1,424,187		1,307,596
Financial services
General and administrative		5,963		5,876		11,967		11,491
Interest		298		320		581		804
Total financial services expenses		6,261		6,196		12,548		12,295
Corporate expenses		15,802		14,472		26,756		26,125
TOTAL EXPENSES		794,113		749,959		1,463,491		1,346,016
Earnings before taxes		124,408		90,072		209,629		153,691
Tax expense		47,898		36,028		80,708		61,476
NET EARNINGS	$	76,510	$	54,044	$	128,921	$	92,215
NET EARNINGS PER COMMON SHARE
Basic	$	3.19	$	2.17	$	5.38	$	3.68
Diluted	$	3.03	$	2.03	$	5.08	$	3.46
AVERAGE COMMON SHARES OUTSTANDING
Basic		23,959,181		24,961,543		23,965,291		25,058,679
Diluted		25,280,743		26,599,952		25,381,457		26,635,256

CONSOLIDATED BALANCE SHEETS
The Ryland Group, Inc. and subsidiaries
(in thousands, except share data)

	June 30,		December 31,
	2004		2003
	(unaudited)
ASSETS
Homebuilding
Cash and cash equivalents	$	40,400	$	314,518
Housing inventories
Homes under construction		983,715		734,280
Land under development and improved lots		628,318		602,504
Consolidated inventory not owned		112,586		59,868
Total inventories		1,724,619		1,396,652
Property, plant and equipment		46,314		40,853
Purchase price in excess of net assets acquired		18,185		18,185
Other		52,654		59,432
		1,882,172		1,829,640
Financial Services
Cash and cash equivalents		10,166		2,186
Mortgage-backed securities and notes receivable		22,923		26,260
Other		25,540		39,824
		58,629		68,270
Other Assets
Net deferred taxes		37,566		37,443
Other		85,100		72,237
TOTAL ASSETS		2,063,467		2,007,590
LIABILITIES
Homebuilding
Accounts payable and other liabilities		364,363		366,131
Long-term debt		540,500		540,500
		904,863		906,631
Financial Services
Accounts payable and other liabilities		17,016		23,376
Short-term notes payable		22,720		26,254
		39,736		49,630
Other Liabilities		144,939		170,136
TOTAL LIABILITIES		1,089,538		1,126,397
MINORITY INTEREST		80,019		56,651
STOCKHOLDERS’ EQUITY
Common stock, $1.00 par value:
Authorized — 80,000,000 shares
Issued — 23,706,438 shares (24,276,247 for 2003)		23,706		24,276
Retained earnings		869,204		799,135
Accumulated other comprehensive income		1,000		1,131
TOTAL STOCKHOLDERS’ EQUITY		893,910		824,542
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,063,467	$	2,007,590

SEGMENT INFORMATION (unaudited)
The Ryland Group, Inc. and subsidiaries
(in thousands)

	Three months ended						Six months ended
	June 30,						June 30,
	2004			2003			2004			2003
Earnings before taxes
Homebuilding	$	127,201		$	86,877		$	213,108		$	149,739
Financial services		13,009			17,667			23,277			30,077
Corporate		(15,802	)		(14,472	)		(26,756	)		(26,125	)
Total	$	124,408		$	90,072		$	209,629		$	153,691

HOMEBUILDING OPERATIONAL DATA (unaudited)
The Ryland Group, Inc. and subsidiaries

	North		Texas		Southeast		West		Total
For the three months ended June 30,
New Orders (units)
2004		1,165		997		1,463		1,136		4,761
2003		1,282		1,016		1,396		963		4,657
Closings (units)
2004		1,180		621		1,043		686		3,530
2003		1,161		834		956		688		3,639
Average Closing Price (in thousands)
2004	$	280	$	170	$	226	$	304	$	249
2003	$	256	$	157	$	205	$	269	$	223
For the six months ended June 30,
New Orders (units)
2004		2,578		2,023		2,908		2,222		9,731
2003		2,463		2,027		2,646		1,781		8,917
Closings (units)
2004		2,082		1,144		1,954		1,388		6,568
2003		2,122		1,463		1,766		1,238		6,589
Average Closing Price (in thousands)
2004	$	275	$	171	$	225	$	293	$	246
2003	$	253	$	158	$	203	$	260	$	220
Outstanding Contracts at June 30,
Units
2004		2,234		1,688		3,177		1,905		9,004
2003		2,087		1,523		2,671		1,415		7,696
Dollars (in millions)
2004	$	698	$	286	$	765	$	631	$	2,380
2003	$	543	$	247	$	569	$	393	$	1,752
Average Price (in thousands)
2004	$	312	$	169	$	241	$	331	$	264
2003	$	260	$	162	$	213	$	278	$	228

FINANCIAL SERVICES SUPPLEMENTAL INFORMATION (unaudited)
The Ryland Group, Inc. and subsidiaries
($s in thousands)

	Three months ended June 30,						Six months ended June 30,
RESULTS OF OPERATIONS	2004			2003			2004			2003
Revenues
Net gains on sales of mortgages and mortgage servicing rights	$	10,695		$	15,405		$	20,585		$	26,958
Title/escrow/insurance		5,146			4,413			9,666			8,050
Net origination fees		2,482			2,715			3,656			4,470
Interest
Mortgage-backed securities and notes receivable		756			1,144			1,527			2,407
Other		191			238			391			482
Total interest		947			1,382			1,918			2,889
Other		—			(52	)		—			5
Total revenues		19,270			23,863			35,825			42,372
Expenses
General and administrative		5,963			5,876			11,967			11,491
Interest		298			320			581			804
Total expenses		6,261			6,196			12,548			12,295
Pretax earnings	$	13,009		$	17,667		$	23,277		$	30,077
OPERATIONAL DATA
Retail operations:
Originations (units)		2,805			3,061			5,200			5,484
Ryland Homes closings as a percentage of total closings		98.7	%		98.7	%		98.9	%		98.5	%
Ryland Homes origination capture rate		84.9	%		87.8	%		84.6	%		86.7	%
Investment operations:
Mortgage-backed securities and notes receivable average balance	$	22,723		$	35,036		$	23,542		$	36,882