Standard Pacific Corp. Reports 2010 Second Quarter Results

IRVINE, Calif., July 29, 2010 /PRNewswire-FirstCall/ -- Standard Pacific Corp. (NYSE: SPF) today announced operating results for its second quarter ended June 30, 2010.  

2010 Second Quarter Highlights and Comparisons to the 2009 Second Quarter

• Net income of $10.7 million vs. a net loss of $23.1 million
  • 2010 net income of $15.9 million*, excluding $5.2 million charge related to debt repurchases
• Earnings per share of $0.04 vs. a loss per share of $0.10
• Homebuilding revenues of $317.2 million, up 9% from $289.7 million
• 891 new home deliveries (excluding joint ventures), down 5% from 942 homes (up from 537 homes in the 2010 first quarter)
• Average home price of $355,000, up 18% from $302,000
• Gross margin from home sales of 20.9% vs. 18.5%* (2009 second quarter gross margin excludes $13.1 million of inventory impairment charges)
• Homebuilding SG&A rate from home sales of 13.7% vs. 14.6%* (2010 second quarter includes $6.4 million in incentive-based compensation vs. $0.4 million last year; 2009 second quarter also excludes $4.6 million of restructuring charges)
• Net new orders (excluding joint ventures) down 38% to 719 homes on a 12% decline in average community count (down 5% from 759 homes in the 2010 first quarter)
• Backlog value (excluding joint ventures) down 23% to $237.7 million vs. $308.5 million
  • 649 homes in backlog, down 34% from 982 homes
• Cash flow from operating activities of $5.3 million vs. $68.6 million
  • $79.4 million of cash land purchases in 2010 vs. $4.2 million in 2009
• Homebuilding cash balance of $710.4 million vs. $573.0 million
• Adjusted net homebuilding debt to total capitalization ratio of 54.2%* vs. 67.0%*

The Company generated net income of $10.7 million, or $0.04 per diluted share, for the 2010 second quarter compared to a net loss of $23.1 million, or $0.10 per diluted share, for the year earlier period.  The primary drivers of the improved operating performance for the 2010 second quarter were higher revenues, higher gross margins, higher average sales prices and lower asset impairments and overhead costs. The 2009 second quarter results included $21.3 million of asset impairment charges and $5.5 million of restructuring charges.  The 2010 second quarter included a $5.2 million charge related to the early extinguishment of debt and did not include any asset impairments.  Excluding the loss on the early extinguishment of debt, the Company generated net income of $15.9 million*, or $0.05* per diluted share, for the 2010 second quarter.

Homebuilding revenues for the 2010 second quarter were $317.2 million, up 9% from $289.7 million for the 2009 second quarter.  The increase in homebuilding revenues was driven primarily by an 18% increase in consolidated average home price to $355,000, largely due to the delivery of more higher priced California homes during the quarter as compared to the 2009 second quarter.  The increase in average home price was offset in part by a 5% decline in new home deliveries to 891 homes (exclusive of joint ventures).  

Gross margin from home sales for the 2010 second quarter was 20.9% versus an adjusted gross margin from home sales for the year earlier period of 18.5%* (2009 second quarter excludes $13.1 million of inventory impairments).  The 240 basis point improvement in the 2010 second quarter gross margin from home sales was driven primarily by lower direct construction costs and price increases in California.  Excluding impairments (of which there were none in the 2010 second quarter) and previously capitalized interest costs, gross margin from home sales for the 2010 second quarter was 27.5%* versus 25.3%* for the 2009 second quarter.    

The Company's 2010 second quarter SG&A expenses (including Corporate G&A) were $43.4 million compared to $46.0 million for the 2009 second quarter.  The Company's 2010 second quarter SG&A rate from home sales was 13.7% versus an adjusted rate of 14.6%* (2009 second quarter excludes $4.6 million in restructuring charges).  The reduction in the Company's SG&A rate was primarily the result of lower personnel, model and stock option costs, and an 11% increase in revenues from home sales.  These cost reductions were offset by a $6.0 million increase in the accrual for incentive-based compensation (which is primarily linked to the Company's EBITDA), from $0.4 million for the 2009 second quarter to $6.4 million for the 2010 second quarter ($2.0 million of which related to stock-based compensation).  

During the 2010 second quarter, the Company further improved its liquidity and its debt maturity schedule by issuing $300 million of 8 3/8% senior unsecured notes due May 2018.  The net proceeds from the offering were used to, among other things, redeem $185.3 million of the Company's outstanding senior notes due 2010, 2011 and 2013 and to refinance $103.0 million in other indebtedness that was previously repaid by the Company.  As a result of these redemptions, the Company incurred a $5.2 million charge during the 2010 second quarter, which was included in gain (loss) on early extinguishment of debt.

The Company generated $5.3 million of cash flow from operating activities for the 2010 second quarter versus $68.6 million for the year earlier period.  The decline in cash flows as compared to the 2009 second quarter was driven primarily by a $75.2 million increase in cash land purchases in the 2010 second quarter, which was partially offset by an increase in homebuilding revenues.  Cash flow from operations for the three months ended June 30, 2010 and 2009 included $79.4 million and $4.2 million, respectively, of cash land purchases.  Excluding cash land purchases and lot sales, cash flow from operating activities for the 2010 second quarter was $84.3 million* versus $65.2 million* in the year earlier period.  

Net new orders (excluding joint ventures) for the 2010 second quarter decreased 38% from the 2009 second quarter to 719 homes on a 12% decline in the number of average active selling communities from 144 to 127.  The Company's monthly sales absorption rate for the 2010 second quarter was 1.9 per community compared to 2.7 per community for the 2009 second quarter.  The Company's cancellation rate for the 2010 second quarter was 15% versus 16% for the 2009 second quarter and 15% for the 2010 first quarter.  The total number of sales cancellations for the 2010 second quarter was 130, of which 76 cancellations related to homes in the Company's 2010 second quarter beginning backlog and 54 related to orders generated during the quarter.  

The dollar value of the Company's backlog (excluding joint ventures) decreased 23% to $237.7 million, or 649 homes, compared to $308.5 million, or 982 homes, for the 2009 second quarter.  The decrease in backlog value was driven primarily by a 38% decrease in net new orders, which was offset in part by a 17% increase in average home price in backlog from $314,000 to $366,000.  

During the 2010 second quarter, the Company approved (but has not yet consummated) the purchase of $198 million of land, comprised of approximately 2,900 lots, 22% of which are finished, 14% partially developed and 64% raw.  Approximately 61% of the approved lot purchases are transactions with developers and 11% with banks.  During the same period, the Company purchased approximately 1,875 lots valued at $103 million ($79.4 million of which were cash purchases).  Approximately 78% of the $103 million in land purchases related to land located in California, with the balance spread throughout the Company's other operations.  As of June 30, 2010, the Company had outstanding approximately $270 million of approved land purchases and option contracts, of which $126 million is expected to be purchased in 2010 and $144 million expected to be purchased in 2011 and beyond.

Ken Campbell, the Company's President and CEO commented, "I am pleased that our strategy appears to be working well.  Our average sales price is moving up.  The gross margins in our backlog are steady.  The average gross margin we are earning on new communities, although still a small percentage of the total, is above our older communities."  Mr. Campbell continued, "Achieving this level of profitability at these sales rates bodes particularly well for our financial performance when the market begins to recover.  I am looking forward to that recovery.... anxiously."

Earnings Conference Call

A conference call to discuss the Company's 2010 second quarter will be held at 11:00 a.m. Eastern time July 30, 2010.  The call will be broadcast live over the Internet and can be accessed through the Company's website at http://standardpacifichomes.com/ir.  The call will also be accessible via telephone by dialing (888) 211-7449 (domestic) or (913) 312-0857 (international); Passcode: 6415332.  The entire audio transmission with the synchronized slide presentation will be available on our website for replay within 2 to 3 hours following the live broadcast, and can be accessed by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international); Passcode: 6415332.

About Standard Pacific

Standard Pacific, one of the nation's largest homebuilders, has built more than 110,000 homes during its 44-year history.  The Company constructs homes within a wide range of price and size targeting a broad range of homebuyers.  Standard Pacific operates in many of the largest housing markets in the country with operations in major metropolitan areas in California, Florida, Arizona, the Carolinas, Texas, Colorado and Nevada.  For more information about the Company and its new home developments, please visit our website at: www.standardpacifichomes.com.

This news release contains forward-looking statements.  These statements include but are not limited to statements regarding new home orders, deliveries, backlog, average home price, revenue, strategy, profitability, cash flow, liquidity, gross margins, overhead expenses and other costs; the dollar value and timing of anticipated land purchases; the availability of land opportunities that meet our return threshold, and our ability to consummate these opportunities; and the future condition of the housing market.  Forward-looking statements are based on our current expectations or beliefs regarding future events or circumstances, and you should not place undue reliance on these statements.  Such statements involve known and unknown risks, uncertainties, assumptions and other factors many of which are out of the Company's control and difficult to forecast that may cause actual results to differ materially from those that may be described or implied.  Such factors include but are not limited to:  local and general economic and market conditions, including consumer confidence, employment rates, interest rates, the cost and availability of mortgage financing, and stock market, home and land valuations; the impact on economic conditions of terrorist attacks or the outbreak or escalation of armed conflict involving the United States; the cost and availability of suitable undeveloped land, building materials and labor; the cost and availability of construction financing and corporate debt and equity capital; our significant amount of debt and the impact of restrictive covenants in our debt agreements; our ability to repay our debt as it comes due; changes in our credit rating or outlook; the demand for and affordability of single-family homes; the supply of housing for sale; cancellations of purchase contracts by homebuyers; the cyclical and competitive nature of the Company's business; governmental regulation, including the impact of "slow growth" or similar initiatives; delays in the land entitlement process, development, construction, or the opening of new home communities; adverse weather conditions and natural disasters; environmental matters; risks relating to the Company's mortgage banking operations; future business decisions and the Company's ability to successfully implement the Company's operational and other strategies; litigation and warranty claims; and other risks discussed in the Company's filings with the Securities and Exchange Commission, including in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2009 and subsequent Quarterly Reports on Form 10-Q.  The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements.  The Company nonetheless reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release.  No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

Contact:

John Stephens, SVP & CFO (949) 789-1641, [email protected]

*Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.

(Note: Tables follow)

(1) All statistical numbers exclude unconsolidated joint ventures and discontinued operations unless noted otherwise.

*Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Each of the below measures are not GAAP financial measures and other companies may calculate such non-GAAP measures differently.  Due to the significance of the GAAP components excluded, such measures should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP.

The table set forth below reconciles the Company's net income to net income excluding the loss on early extinguishment of debt.  We believe this measure is useful to management and investors as it provides perspective on the underlying operating performance of the business excluding this charge and provides comparability with the Company's peer group.  Net income excluding the loss on early extinguishment of debt for the three months ended June 30, 2010 is calculated as follows (dollars in thousands):

The table set forth below reconciles the Company's homebuilding gross margin percentage to the gross margin percentage from home sales, excluding housing inventory impairment charges and interest amortized to cost of home sales.  We believe these measures are useful to management and investors as they provide perspective on the underlying operating performance of the business excluding these charges and provide comparability with the Company's peer group.

The table set forth below reconciles the Company's SG&A expenses to SG&A expenses excluding restructuring charges.  We believe these measures are useful to management and investors as they provide perspective on the underlying operating performance of the business excluding these charges.  

The table set forth below reconciles the Company's cash flows from operations to cash flows from operations excluding land purchases and proceeds from land sales.  We believe this measure is useful to management and investors to provide perspective on underlying cash flow generation excluding swings related to the timing of land purchases and land sales.

The table set forth below reconciles the Company's total consolidated debt to adjusted net homebuilding debt and provides the Company's total debt to book capitalization and adjusted net homebuilding debt to total adjusted book capitalization ratios.  We believe that the adjusted net homebuilding debt to total adjusted book capitalization ratio is useful to management and investors as a measure of the Company's ability to obtain financing.  For purposes of the ratio of adjusted net homebuilding debt to total adjusted book capitalization, total adjusted book capitalization is adjusted net homebuilding debt plus stockholders' equity.  Adjusted net homebuilding debt excludes indebtedness included in liabilities from inventories not owned, indebtedness of the Company's financial services subsidiary and additionally reflects the offset of cash and equivalents.  

The table set forth below calculates pro forma stockholders' equity per common share.  The pro forma common shares outstanding include the if-converted Series B Preferred Stock.  In addition, this calculation excludes 3.9 million shares issued under a share lending agreement related to the Company's 6% Convertible Senior Subordinated Notes issued on September 28, 2007.  The Company believes that the pro forma stockholders' equity per common share information is useful to management and investors as a measure to determine the book value per common share after giving effect of the issuance of preferred shares assuming full conversion to common stock and excluding shares outstanding under the share lending agreement.  The following table reconciles actual common shares outstanding to pro forma common shares outstanding used to calculate pro forma stockholders' equity per share:

The table set forth below calculates EBITDA and Adjusted Homebuilding EBITDA.  Adjusted Homebuilding EBITDA means net income (loss) (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) homebuilding interest expense (c) expensing of previously capitalized interest included in cost of sales, (d) impairment charges, (e) (gain) loss on early extinguishment of debt (f) homebuilding depreciation and amortization, (g) amortization of stock-based compensation, (h) income (loss) from unconsolidated joint ventures and (i) income (loss) from financial services subsidiary.  Other companies may calculate Adjusted Homebuilding EBITDA (or similarly titled measures) differently.  We believe Adjusted Homebuilding EBITDA information is useful to management and investors as one measure of the Company's ability to service debt and obtain financing.  Adjusted Homebuilding EBITDA is a non-GAAP financial measure and due to the significance of the GAAP components excluded, should not be considered in isolation or as an alternative to net income, cash flow from operations or any other operating or liquidity performance measure prescribed by GAAP.

The table set forth below reconciles net cash provided by (used in) operating activities, from continuing and discontinued operations, calculated and presented in accordance with GAAP, to Adjusted Homebuilding EBITDA:

SOURCE Standard Pacific Corp.