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Ryland filed it's 10Q yesterday, and as I thought, they are running very thin on cash. They reported $85 million of cash in their press release, but failed to mention in that same release that much of the money came from drawing down $117 million from a credit line. Without the credit line draw down they would have ended the quarter with negative cash generated. They would save about $75 million a quarter if they stopped trying to fool those that may not know better by buying their stock back and issuing dividends. That money is much, much better used in marketing to take sales share from their competitors, or even offering incentives to get people to buy houses. Which which you rather have as a shareholder, a piece of a percent greater accretion from the stock buyback and a few pennies dividend, or a company that successfully reduces it's overpriced, high carrying cost inventory or reduces it's life threatening debt?
As a little tiny aside, they noted that they lost an additional $37.3 million on option contracts, which they classified as a non-cash charge. Sure it's non-cash this quarter from an accounting perspective, because they wasted the cash in past quarters. Remember, the cash flow statements have the impairment charges added back in, even though the impairments are still representative of cash gone, just cash from previous periods - and ultimately value from the company.
Of course, the entire beleaguered sector is trading up as I type this, including Ryland - currently at $25.85, up $0.35. Using book value comparables, it comps out to about $13.66. Obviously, there are those who haven't read my last two posts on Ryland. The disconnect between Ryland's actual value and its current momentum driven market price exists. If you think the Ryland research was interesting, you'll probably love what I come up with on Lennar, and be mildly amused with the analysis on MBIA, the monoline insurer, first mentioned as suspect on this blog in September.
