Standard Pacific Corp. Reports 2010 Third Quarter Results

Oct 26, 2010, 16:15 ET from Standard Pacific Corp.

IRVINE, Calif., Oct. 26, 2010 /PRNewswire-FirstCall/ -- Standard Pacific Corp. (NYSE: SPF) today announced operating results for its third quarter ended September 30, 2010.  

2010 Third Quarter Highlights and Comparisons to the 2009 Third Quarter

  • Net income of $4.5 million vs. a net loss of $23.8 million
    • 2010 net income of $5.5 million*, excluding $1.0 million charge related to debt repurchase
  • Earnings per share of $0.02 vs. a loss per share of $0.10
  • Homebuilding revenues of $207.5 million, down 37% from $327.4 million
  • 599 new home deliveries (excluding joint ventures), down 33% from 893 homes
  • Average home price of $345,000, up 14% from $302,000
  • Gross margin from home sales of 23.6% vs. 18.6%
  • Homebuilding SG&A rate from home sales of 17.6% vs. 15.6%* (2009 third quarter excludes $1.5 million of restructuring charges)
    • SG&A expenses down $7.4 million from 2009 third quarter
  • Net new orders (excluding joint ventures) down 38% to 555 homes on a 2% decline in average community count (down 23% from 719 homes in the 2010 second quarter)
  • Backlog value (excluding joint ventures) down 35% to $214.2 million vs. $329.7 million
    • 605 homes in backlog, down 39% from 995 homes
  • Cash outflows from operating activities of $67 million vs. cash inflows of $113 million
    • $91.3 million of cash land purchases in 2010 vs. $21.6 million in 2009
  • Homebuilding cash balance of $546 million vs. $807 million

Ken Campbell, the Company's President and CEO commented, "I am pleased to announce our second consecutive quarter of profitability in an extremely challenging housing market.  Our ability to generate a profit at a delivery rate of 1.5 homes per community per month bodes well for us when the housing market returns to any level of normalcy.  Consistent with our strategy, our gross margins have also held steady and our average sales price is up meaningfully over the prior year period."  Mr. Campbell continued, "Unfortunately it appears that the nation's economic recovery may take longer than many anticipated.  We will continue to manage through this downturn with a focus on rebuilding our land portfolio, while keeping an eye on maintaining the proper balance between new investment and liquidity."

The Company generated net income of $4.5 million, or $0.02 per diluted share, for the 2010 third quarter compared to a net loss of $23.8 million, or $0.10 per diluted share, for the year earlier period.  The primary drivers of the improved operating performance for the 2010 third quarter were higher gross margins, higher average sales prices, lower asset impairments and lower overhead costs. The 2009 third quarter results included $7.7 million of inventory impairment charges related to land sales, an $8.8 million charge related to the early extinguishment of debt and $1.3 million of restructuring charges.  The 2010 third quarter included a $1.0 million charge related to the early extinguishment of debt and did not include any inventory impairments.  Excluding the loss on the early extinguishment of debt, the Company generated net income of $5.5 million*, or $0.02* per diluted share, for the 2010 third quarter.

Homebuilding revenues for the 2010 third quarter were $207.5 million, down 37% from $327.4 million for the 2009 third quarter.  The decrease in homebuilding revenues was driven primarily by a 33% decline in new home deliveries, offset in part by a 14% increase in consolidated average home price to $345,000 as compared to the 2009 third quarter.  The increase in average home price was largely due to the delivery of more higher priced homes in Southern California and a reduction in deliveries in Florida as compared to the 2009 third quarter.

Gross margin from home sales for the 2010 third quarter was 23.6% versus 18.6% for the year earlier period.  The 500 basis point improvement in the 2010 third quarter gross margin from home sales was driven primarily by lower direct construction costs and higher margins in substantially all of our markets, and price increases in Southern California.  Excluding previously capitalized interest costs, gross margin from home sales for the 2010 third quarter was 29.7%* versus 24.3%* for the 2009 third quarter.    

The Company's 2010 third quarter SG&A expenses (including Corporate G&A) were $36.3 million compared to $43.7 million for the 2009 third quarter, which included noncash stock-based compensation charges of $3.1 million and $1.7 million, respectively.  The Company's 2010 third quarter SG&A rate from home sales was 17.6% versus an adjusted rate of 15.6%* for the 2009 third quarter (2009 third quarter excludes $1.5 million in restructuring charges).  The increase in the Company's SG&A rate was primarily the result of a 23% decrease in revenues from home sales.

The Company's 2010 third quarter income tax provision was $2.1 million, which was fully offset by a noncash reversal of its deferred tax asset valuation allowance for the same amount.  In addition, during the three and nine months ended September 30, 2010, the Company recorded a noncash reduction of its deferred tax asset of $4.8 million and $14.1 million, respectively, and a corresponding noncash reduction of its deferred tax asset valuation allowance related to built-in losses realized during these periods that were in excess of the Section 382 annual limitation.  As of September 30, 2010, the Company had a $516.1 million deferred tax asset valuation allowance.

The Company used $67.4 million of cash flows from operating activities for the 2010 third quarter versus generating $112.6 million of cash flows from operating activities in the year earlier period.  The decline in cash flows from operations as compared to the 2009 third quarter was driven primarily by a $69.7 million increase in cash land purchases in the 2010 third quarter and a $119.9 million decrease in homebuilding revenues (including a $56.6 million decrease in land sale revenues).  Cash flow from operations for the three months ended September 30, 2010 and 2009 included $91.3 million and $21.6 million, respectively, of cash land purchases.  Excluding cash land purchases and land sales, cash flow from operating activities for the 2010 third quarter was $22.9 million* versus $77.9 million*  in the year earlier period.  

Net new orders (excluding joint ventures) for the 2010 third quarter decreased 38% from the 2009 third quarter to 555 homes on a 2% decline in the number of average active selling communities from 134 to 131.  The Company's monthly sales absorption rate for the 2010 third quarter was 1.4 per community compared to 2.2 per community for the 2009 third quarter.  The Company's cancellation rate for the 2010 third quarter was 19% versus 15% for both the 2009 third quarter and the 2010 second quarter.  The total number of sales cancellations for the 2010 third quarter was 132, of which 82 cancellations related to homes in the Company's 2010 third quarter beginning backlog and 50 related to orders generated during the quarter.  

The dollar value of the Company's backlog (excluding joint ventures) decreased 35% to $214.2 million, or 605 homes, compared to $329.7 million, or 995 homes, for the 2009 third quarter.  The decrease in backlog value was driven primarily by a 38% decrease in net new orders, which was offset in part by a 7% increase in average home price in backlog from $331,000 to $354,000.  

During the 2010 third quarter, the Company approved (but has not yet consummated) the purchase of $93 million of land, comprised of approximately 2,000 lots, 32% of which are finished, 43% partially developed and 25% raw.  During the same period, the Company purchased approximately 1,800 lots valued at $127 million ($91 million of which were cash purchases and $32 million were acquired through an investment in a joint venture).  Approximately 73% of the $127 million in land purchases related to land located in California, with the balance spread throughout the Company's other operations.  For the nine months ended September 30, 2010, the Company purchased approximately 4,600 lots valued at $281 million.  

Earnings Conference Call

A conference call to discuss the Company's 2010 third quarter will be held at 12:00 p.m. Eastern time October 27, 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) 747-4660 (domestic) or (913) 312-1500 (international); Passcode: 3684458 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: 3684458.

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, jstephens@stanpac.com

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

(Note: Tables Follow)

KEY STATISTICS AND FINANCIAL DATA(1)

As of or For the Three Months Ended

September 30, 2010

September 30, 2009

Percentage or % Change

June 30, 2010

Percentage or % Change

Operating Data

(Dollars in thousands, except average selling price)

Deliveries

599

893

(33%)

891

(33%)

Average selling price

$

345,000

$

302,000

14%

$

355,000

(3%)

Homebuilding revenues

$

207,466

$

327,411

(37%)

$

317,159

(35%)

Gross margin %

23.5%

13.0%

10.5%

20.9%

2.6%

Gross margin % from home sales (excluding impairments)*

23.6%

18.6%

5.0%

20.9%

2.7%

Gross margin % from home sales (excluding impairments

    and interest amortized to cost of home sales)*

29.7%

24.3%

5.4%

27.5%

2.2%

Impairments and write-offs

$

-

$

7,814

(100%)

$

-

-

Restructuring charges (excluding debt refinance)

$

-

$

1,315

(100%)

$

-

-

SG&A %

17.5%

13.3%

4.2%

13.7%

3.8%

SG&A % (excluding restructuring charges and land sales)*

17.6%

15.6%

2.0%

13.7%

3.9%

Net new orders

555

893

(38%)

719

(23%)

Average active selling communities

131

134

(2%)

127

3%

Monthly sales absorption rate per community

1.4

2.2

(36%)

1.9

(26%)

Cancellation rate

19%

15%

4%

15%

4%

Cancellations from beginning backlog

82

92

(11%)

76

8%

Cancellations from current quarter sales

50

71

(30%)

54

(7%)

Backlog (homes)

605

995

(39%)

649

(7%)

Backlog (dollar value)

$

214,237

$

329,661

(35%)

$

237,708

(10%)

Cash flows (uses) from operating activities

$

(67,414)

$

112,572

(160%)

$

5,349

(1360%)

Cash flows (uses) from investing activities

$

(35,995)

$

(9,241)

290%

$

(1,451)

2381%

Cash flows (uses) from financing activities

$

(61,447)

$

(147,732)

(58%)

$

114,028

(154%)

Land purchases (incl. seller financing and excl. JV investments)

$

94,672

$

21,595

338%

$

103,278

(8%)

Land sale proceeds

$

940

$

56,273

(98%)

$

447

110%

Adjusted Homebuilding EBITDA*

$

29,701

$

31,749

(6%)

$

51,104

(42%)

Adjusted Homebuilding EBITDA Margin %*

14.3%

9.7%

4.6%

16.1%

(1.8%)

Homebuilding interest incurred

$

28,070

$

26,218

7%

$

27,730

1%

Homebuilding interest capitalized to inventories owned

$

17,126

$

12,836

33%

$

16,515

4%

Homebuilding interest capitalized to investments in JVs

$

687

$

749

(8%)

$

736

(7%)

Interest amortized to cost of sales (incl. cost of land sales)

$

12,546

$

23,048

(46%)

$

21,325

(41%)

As of

September 30, 2010

June 30, 2010

Percentage or % Change

December 31, 2009

Percentage or % Change

Balance Sheet Data

(Dollars in thousands, except per share amounts)

Homebuilding cash (including restricted cash)

$

546,096

$

710,385

(23%)

$

602,222

(9%)

Inventories owned

$

1,151,599

$

1,057,238

9%

$

986,322

17%

Building sites owned or controlled

23,250

21,853

6%

19,191

21%

Homes under construction

886

1,003

(12%)

934

(5%)

Completed specs

391

293

33%

282

39%

Deferred tax asset valuation allowance

$

516,133

$

523,041

(1%)

$

534,596

(3%)

Homebuilding debt

$

1,216,786

$

1,239,623

(2%)

$

1,156,726

5%

Joint venture recourse debt

$

7,819

$

34,636

(77%)

$

38,835

(80%)

Stockholders' equity

$

453,475

$

447,710

1%

$

435,798

4%

Stockholders' equity per share (including if-converted

    preferred stock)*

$

1.81

$

1.78

2%

$

1.75

3%

Total debt to book capitalization*

73.4%

74.5%

(1.1%)

73.4%

0.0%

Adjusted net homebuilding debt to total adjusted

    book capitalization*

59.7%

54.2%

5.5%

56.0%

3.7%

(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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

September 30,

Nine Months Ended

September 30,

2010

2009

2010

2009

(Dollars in thousands, except per share amounts)

(Unaudited)

Homebuilding:

Home sale revenues

$

206,516

$

269,873

$

698,138

$

760,312

Land sale revenues

950

57,538

1,856

66,306

Total revenues

207,466

327,411

699,994

826,618

Cost of home sales

(157,677)

(219,641)

(543,400)

(661,211)

Cost of land sales

(954)

(65,147)

(1,628)

(75,578)

Total cost of sales

(158,631)

(284,788)

(545,028)

(736,789)

Gross margin

48,835

42,623

154,966

89,829

Gross margin %

23.5%

13.0%

22.1%

10.9%

Selling, general and administrative expenses

(36,339)

(43,695)

(112,504)

(142,100)

Income (loss) from unconsolidated joint ventures

1,801

(1,960)

1,141

(4,449)

Interest expense

(10,257)

(12,633)

(32,721)

(35,409)

Loss on early extinguishment of debt

(999)

(8,824)

(6,189)

(3,457)

Other income (expense)

1,035

(305)

4,277

(1,309)

Homebuilding pretax income (loss)

4,076

(24,794)

8,970

(96,895)

Financial Services:

Revenues

3,430

3,762

9,711

10,095

Expenses

(2,721)

(2,753)

(8,026)

(9,009)

Income from unconsolidated joint ventures

-

-

-

119

Other income

30

19

111

108

Financial services pretax income

739

1,028

1,796

1,313

Income (loss) from continuing operations before income taxes

4,815

(23,766)

10,766

(95,582)

Provision for income taxes

(272)

(33)

(633)

(298)

Income (loss) from continuing operations  

4,543

(23,799)

10,133

(95,880)

Loss from discontinued operations, net of income taxes

-

(45)

-

(569)

Net income (loss)

4,543

(23,844)

10,133

(96,449)

 Less: Net (income) loss allocated to preferred stockholder

(2,676)

14,500

(5,982)

59,022

Net income (loss) available to common stockholders

$

1,867

$

(9,344)

$

4,151

$

(37,427)

Basic income (loss) per common share:

Continuing operations

$

0.02

$

(0.10)

$

0.04

$

(0.40)

Discontinued operations

-

-

-

-

Basic income (loss) per common share

$

0.02

$

(0.10)

$

0.04

$

(0.40)

Diluted income (loss) per common share:

Continuing operations

$

0.02

$

(0.10)

$

0.04

$

(0.40)

Discontinued operations

-

-

-

-

Diluted income (loss) per common share

$

0.02

$

(0.10)

$

0.04

$

(0.40)

Weighted average common shares outstanding:

Basic

103,100,974

95,250,351

102,582,491

93,731,253

Diluted

106,137,371

95,250,351

111,005,597

93,731,253

Weighted average additional common shares outstanding if preferred shares converted to common shares

147,812,786

147,812,786

147,812,786

147,812,786

REGIONAL OPERATING DATA

Three Months Ended September 30,

Nine Months Ended September 30,

2010

2009

2010

2009

Homes

Avg. Selling Price

Homes

Avg. Selling Price

Homes

Avg. Selling Price

Homes

Avg. Selling Price

New homes delivered:

California

234

$

508,000

347

$

442,000

826

$

502,000

948

$

429,000

Arizona

45

214,000

75

202,000

154

204,000

209

210,000

Texas

95

291,000

82

269,000

286

294,000

328

279,000

Colorado

28

302,000

37

312,000

93

296,000

113

305,000

Nevada

6

208,000

5

226,000

15

201,000

13

226,000

Florida

103

196,000

235

181,000

347

192,000

603

189,000

Carolinas

88

230,000

112

216,000

306

231,000

308

218,000

Consolidated total

599

345,000

893

302,000

2,027

344,000

2,522

301,000

Unconsolidated joint ventures

12

456,000

15

548,000

40

467,000

92

524,000

Discontinued operations

-

-

1

130,000

-

-

4

201,000

Total (including joint ventures)

611

$

347,000

909

$

306,000

2,067

$

347,000

2,618

$

309,000

Three Months Ended September 30,

Nine Months Ended September 30,

2010

2009

2010

2009

Homes

Avg. Selling Communities

Homes

Avg. Selling Communities

Homes

Avg. Selling Communities

Homes

Avg. Selling Communities

Net new orders:

California

223

46

377

49

824

45

1,139

52

Arizona

39

10

79

7

145

9

235

9

Texas

76

16

96

19

277

17

335

19

Colorado

26

4

34

6

77

5

95

6

Nevada

11

1

2

2

26

1

10

2

Florida

98

28

189

28

356

26

617

33

Carolinas

82

26

116

23

328

25

365

24

Consolidated total

555

131

893

134

2,033

128

2,796

145

Unconsolidated joint ventures

10

3

28

5

38

3

167

8

Discontinued operations

-

-

1

-

-

-

3

-

Total (including joint ventures)

565

134

922

139

2,071

131

2,966

153

At September 30,

2010

2009

Backlog ($ in thousands):

Homes

Value

Homes 

Value

California

245

$

123,083

424

$

190,185

Arizona

38

8,184

102

21,815

Texas

100

30,907

137

42,849

Colorado

38

11,412

60

18,022

Nevada

11

2,220

1

213

Florida

87

18,291

161

31,457

Carolinas

86

20,140

110

25,120

Consolidated total

605

214,237

995

329,661

Unconsolidated joint ventures

7

3,148

22

10,722

Total (including joint ventures)

612

$

217,385

1,017

$

340,383

At September 30,

2010

2009

Building sites owned or controlled:

California

9,646

7,740

Arizona

1,982

1,925

Texas

2,448

1,676

Colorado

392

261

Nevada

1,203

1,906

Florida

5,001

4,856

Carolinas

2,578

1,656

Total (including joint ventures)

23,250

20,020

Building sites owned

17,468

15,516

Building sites optioned or subject to contract

4,320

2,543

Joint venture lots

1,462

1,961

Total (including joint ventures)

23,250

20,020

Building sites owned:

Raw lots

5,080

3,792

Lots under development

3,469

2,537

Finished lots

7,189

7,142

Under construction or completed homes

1,730

2,045

Total

17,468

15,516

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2010

December 31, 2009

(Dollars in thousands)

ASSETS

(Unaudited)

Homebuilding:

Cash and equivalents

$

529,113

$

587,152

Restricted cash

16,983

15,070

Trade and other receivables

13,673

12,676

Inventories:

Owned

1,151,599

986,322

Not owned

17,278

11,770

Investments in unconsolidated joint ventures

79,481

40,415

Deferred income taxes, net

10,791

9,431

Other assets

29,537

131,086

1,848,455

1,793,922

Financial Services:

Cash and equivalents

10,215

8,407

Restricted cash

2,870

3,195

Mortgage loans held for sale, net

36,134

41,048

Mortgage loans held for investment, net

10,378

10,818

Other assets

3,528

3,621

63,125

67,089

Total Assets

$

1,911,580

$

1,861,011

LIABILITIES AND EQUITY

Homebuilding:

Accounts payable and accrued liabilities

$

204,375

$

222,550

Secured project debt and other notes payable

4,857

59,531

Senior notes payable

1,109,848

993,018

Senior subordinated notes payable

102,081

104,177

1,421,161

1,379,276

Financial Services:

Accounts payable and other liabilities

1,342

1,436

Mortgage credit facilities

35,602

40,995

36,944

42,431

Total Liabilities

1,458,105

1,421,707

Equity:

Stockholders' Equity:

Preferred stock, $0.01 par value; 10,000,000 shares authorized; 450,829 shares

issued and outstanding at September 30, 2010 and December 31, 2009, respectively

5

5

Common stock, $0.01 par value; 600,000,000 shares authorized; 107,147,906

and 105,293,180 shares issued and outstanding at September 30, 2010 and

December 31, 2009, respectively

1,071

1,053

Additional paid-in capital

1,040,270

1,030,664

Accumulated deficit

(570,495)

(580,628)

Accumulated other comprehensive loss, net of tax

(17,376)

(15,296)

  Total Stockholders' Equity

453,475

435,798

Noncontrolling Interests

-

3,506

Total Equity

453,475

439,304

Total Liabilities and Equity

$

1,911,580

$

1,861,011

September 30, 2010

December 31, 2009

(Dollars in thousands)

Inventories Owned:

(Unaudited)

Land and land under development

$        741,607

$        564,516

Homes completed and under construction

312,971

316,323

Model homes

97,021

105,483

  Total inventories owned

$     1,151,599

$        986,322

Inventories Owned by Segment:

California

$        720,696

$        618,336

Southwest

209,576

196,279

Southeast

221,327

171,707

  Total inventories owned

$     1,151,599

$        986,322

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 September 30, 2010 is calculated as follows (dollars in thousands):

Net income

$

4,543

Add: Loss on early extinguishment of debt

999

Net income, as adjusted

5,542

  Less: Adjusted net income allocated to preferred stockholder

(3,265)

Adjusted net income available to common stockholders

$

2,277

Diluted earnings per common share

$

0.02

Weighted average diluted common shares outstanding

106,137,371

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.

Three Months Ended

September 30, 2010

Gross Margin %

September 30 2009

Gross Margin %

June 30, 2010

Gross Margin %

(Dollars in thousands)

Homebuilding gross margin

$

48,835

23.5%

$

42,623

13.0%

$

66,268

20.9%

Less: Land sale revenues

(950)

(57,538)

(450)

Add: Cost of land sales

954

65,147

421

Gross margin from home sales

48,839

23.6%

50,232

18.6%

66,239

20.9%

Add: Housing inventory impairment charges

-

-

-

Gross margin from home sales, excluding

 impairment charges

48,839

23.6%

50,232

18.6%

66,239

20.9%

Add: Capitalized interest included in cost

  of home sales

12,546

6.1%

15,383

5.7%

20,943

6.6%

Gross margin from home sales, excluding

  impairment charges and interest amortized

  to cost of home sales

$

61,385

29.7%

$

65,615

24.3%

$

87,182

27.5%

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.  

Three Months Ended

September 30, 2010

September 30, 2009 

June 30, 2010

(Dollars in thousands)

Selling, general and administrative expenses

$

36,339

$

43,695

$

43,413

Less: Restructuring charges

-

(1,495)

-

Selling, general and administrative expenses,  excluding  restructuring charges

$

36,339

$

42,200

$

43,413

SG&A % from home sales, excluding restructuring charges

17.6%

15.6%

13.7%

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued)

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.

Three Months Ended

September 30, 2010

September 30, 2009

June 30, 2010

(Dollars in thousands)

Cash flows from (used in) operations

$

(67,414)

$

112,572

$

5,349

Add: Cash land purchases

91,272

21,595

79,364

Less: Land sale proceeds

(940)

(56,273)

(447)

Cash flows from operations (excluding land purchases and land sales)

$

22,918

$

77,894

$

84,266

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.  

September 30, 2010

June 30, 2010

December 31, 2009

September 30, 2009

(Dollars in thousands)

Total consolidated debt

$

1,252,388

$

1,304,749

$

1,199,621

$

1,490,134

Less:

Indebtedness included in liabilities from inventories not owned

-

-

(1,900)

-

Financial services indebtedness

(35,602)

(65,126)

(40,995)

(38,798)

Homebuilding cash

(546,096)

(710,385)

(602,222)

(806,766)

Adjusted net homebuilding debt

670,690

529,238

554,504

644,570

Stockholders' equity

453,475

447,710

435,798

349,591

Total adjusted book capitalization

$

1,124,165

$

976,948

$

990,302

$

994,161

Total debt to book capitalization

73.4%

74.5%

73.4%

81.0%

Adjusted net homebuilding debt to total adjusted book capitalization ratio

59.7%

54.2%

56.0%

64.8%

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:

September 30,

2010

June 30,

2010

March 31,

2010

December 31,

2009

Actual common shares outstanding

107,147,906

106,957,421

106,165,483

105,293,180

Add: Conversion of preferred shares to common shares

147,812,786

147,812,786

147,812,786

147,812,786

Less: Common shares outstanding under share lending facility

(3,919,904)

(3,919,904)

(3,919,904)

(3,919,904)

Pro forma common shares outstanding

251,040,788

250,850,303

250,058,365

249,186,062

Stockholders' equity (actual amounts rounded to nearest thousand)

$

453,475,000

$

447,710,000

$

434,568,000

$

435,798,000

Divided by pro forma common shares outstanding

÷

251,040,788

÷

250,850,303

÷

250,058,365

÷

249,186,062

Pro forma stockholders' equity per common share

$

1.81

$

1.78

$

1.74

$

1.75

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued)

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.

Three Months Ended

LTM Ended September 30,

September 30,

2010

September 30,

2009

June 30,

2010

2010

2009

(Dollars in thousands)

Net income (loss)

$

4,543

$

(23,844)

$

10,661

$

92,796

$

(494,292)

Provision (benefit) for income taxes

272

-

272

(95,930)

(47,678)

Homebuilding interest amortized to cost of sales and interest expense

22,803

35,681

31,804

117,692

129,526

Homebuilding depreciation and amortization

479

672

539

2,201

3,356

Amortization of stock-based compensation

3,115

1,651

3,519

14,203

8,037

EBITDA

31,212

14,160

46,795

130,962

(401,051)

Add:

Cash distributions of income from unconsolidated joint ventures

-

-

-

3,139

1,530

Impairment charges

-

7,814

-

11,192

472,734

(Gain) loss on early extinguishment of debt

999

8,824

5,190

9,663

7,813

Less:

Income (loss) from unconsolidated joint ventures

1,801

(1,960)

(226)

874

(25,542)

Income (loss) from financial services subsidiary

709

1,009

1,107

1,927

1,180

Adjusted Homebuilding EBITDA

$

29,701

$

31,749

$

51,104

$

152,155

$

105,388

Homebuilding revenues

$

207,466

$

327,411

$

317,159

$

1,039,773

$

1,203,017

Adjusted Homebuilding EBITDA Margin %

14.3%

9.7%

16.1%

14.6%

8.8%

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:

Three Months Ended

LTM Ended September 30,

September 30,

2010

September 30,

2009

June 30,

2010

2010

2009

(Dollars in thousands)

Net cash provided by (used in) operating activities

$

(67,414)

$

112,572

$

5,349

$

81,170

$

375,353

Add:

Provision (benefit) for income taxes

272

-

272

(95,930)

(47,678)

Deferred tax valuation allowance

6,908

(9,278)

13,603

107,250

(162,280)

Homebuilding interest amortized to cost of sales and interest expense

22,803

35,681

31,804

117,692

129,526

Excess tax benefits from share-based payment arrangements

-

-

-

324

-

Less:

Income (loss) from financial services subsidiary

709

1,009

1,107

1,927

1,180

Depreciation and amortization from financial services subsidiary

280

169

153

753

700

(Gain) loss on disposal of property and equipment

1

1

-

1,237

3,230

Net changes in operating assets and liabilities:

Trade and other receivables

(579)

(2,191)

(6,518)

(3,993)

(15,287)

Mortgage loans held for sale

(31,621)

(16,071)

34,319

(7,548)

(20,039)

Inventories-owned

83,309

(103,969)

(3,715)

35,883

(303,581)

Inventories-not owned

6,520

324

6,488

25,413

(5,715)

Deferred income taxes

(7,180)

9,277

(13,875)

(11,320)

169,218

Other assets

596

1,997

(1,030)

(110,433)

(91,100)

Accounts payable and accrued liabilities

17,077

4,586

(14,333)

17,564

82,081

Adjusted Homebuilding EBITDA

$

29,701

$

31,749

$

51,104

$

152,155

$

105,388

SOURCE Standard Pacific Corp.



RELATED LINKS

http://www.standardpacifichomes.com