(Source: PRNewswire-FirstCall)
IRVINE, Calif., May 7, 2009 /PRNewswire-FirstCall/ -- Standard Pacific Corp. today announced operating results for its first quarter ended March 31, 2009. Homebuilding revenues from continuing operations for the 2009 first quarter were $209.5 million, down 40% from $348.2 million last year. The Company generated a net loss of $49.5 million, or $0.21 per diluted share, versus a net loss of $216.9 million, or $3.00 per diluted share, for the year earlier period. The 2009 first quarter results included asset impairment charges of $30.8 million, of which $28.7 million related to real estate inventories and $2.1 million related to lot option deposits. Impairment related charges for the 2008 first quarter totaled $192.3 million. The 2009 first quarter results also included $14.1 million in restructuring charges related to division consolidation and headcount reductions, and a $19.2 million charge related to the Company's deferred tax asset valuation allowance. Excluding asset impairment and restructuring charges, the Company's 2009 first quarter loss was approximately $2.8 million*, or $0.01 per diluted share.*
During the quarter the Company generated $129.0 million of cash flows from operating activities, driven primarily from the receipt of a $114.5 million federal income tax refund and a $41.1 million decrease in inventories related to a reduction in the number of homes under construction and a decrease in land purchases. These cash flows were partially offset by a $7.3 million payment to exit a joint venture, operating losses and other changes in working capital. The Company ended the 2009 first quarter with $668.3 million of homebuilding cash (including restricted cash), a $41.9 million increase from December 2008. The Company reduced its homebuilding debt during the quarter by $75.1 million primarily through the repayment of $35 million of its bank credit facilities and the purchase at a discount of $26.9 million of its senior notes. On April 1, 2009, the Company repaid the remaining $124.6 million balance of its 5 1/8% senior notes due 2009.
Ken Campbell, President and CEO stated, "While we continue to endure the effects of the same lousy housing market that all of the other homebuilders are trying to operate in, we made significant progress in reducing our cost structure to better align our business with the decline in demand for new homes. The improvement in our overhead was achieved by reducing our headcount from nearly 1,300 employees at the end of December 2008 to less than 900 at the end of April 2009 - a 69% reduction from the peak in June 2006. Since June 2006, we have reduced our operating division count from 24 to nine."
Mr. Campbell continued, "Although we saw improvement in new home orders as compared to the anemic levels experienced during the 2008 fourth quarter, we remain intently focused on preserving cash by controlling our expenses, carefully managing new home starts and reducing speculative inventory levels."
Homebuilding Operations
The Company generated a homebuilding pretax loss from continuing operations for the 2009 first quarter of $47.8 million compared to a pretax loss of $217.1 million in the year earlier period. The Company's homebuilding pretax loss from continuing operations for the 2009 first quarter included $30.8 million of asset impairment charges and $13.6 million in restructuring charges. The decrease in pretax loss was primarily the result of a $161.5 million decrease in impairment charges, a $27.1 million decrease in the Company's SG&A expenses (which included approximately $12.0 million in restructuring charges related to severance and division consolidations), a $23.7 million decrease in joint venture loss (to income of $3.1 million) and a $3.9 million increase in other income, which included a $5.3 million gain related to the early extinguishment of a portion of the Company's 2010 and 2011 senior notes. These changes were partially offset by a 40% decrease in homebuilding revenues to $209.5 million (due to a 34% decrease in new home deliveries and a 10% decline in our consolidated average home price) and the expensing of $11.0 million of non-capitalized interest expense during the 2009 first quarter.
Gross Margin
Weak housing demand and declining home prices continued to pressure the Company's gross margins. For the 2009 first quarter, the Company's homebuilding gross margin percentage from continuing operations (including land sales) was 3.9% compared to a negative 33.8% in the prior year period. The 2009 first quarter gross margin included $28.7 million in inventory impairment charges related to 13 projects, of which $26.3 million related to current and future projects and $2.4 million related to land intended to be sold. The impairments, which were included in cost of sales, related primarily to two projects in California totaling $19.6 million. Excluding the housing inventory impairment charges from continuing operations, the Company's 2009 first quarter gross margin from home sales would have been 17.4%* versus 15.1%* for the 2008 first quarter. The 230 basis point increase in the year-over-year gross margin was driven largely by higher margins in California, the lower land basis in inventories due to impairments taken during 2008, and our efforts to reduce direct construction costs through rebidding of contracts and value engineering. These factors were partially offset by lower home prices. Until market conditions stabilize, the Company may continue to incur additional inventory impairment charges.
Restructuring and SG&A
The Company's 2009 first quarter results included approximately $14.1 million in restructuring charges related to division consolidations and related headcount and facilities reductions, of which approximately $12.0 million was included in the Company's selling, general and administrative ("SG&A") expenses, $1.0 million in cost of sales, $0.6 million in other expense and $0.5 million in loss from discontinued operations. The charges included approximately $10.3 million of severance costs and approximately $3.8 million related to lease terminations and fixed asset write-offs. In connection with the restructuring, the Company reduced its total headcount by 30%, or 380 employees, from December 31, 2008 through the end of April 2009, and since December 31, 2007, the Company has reduced its workforce by over 50%, or nearly 1,000 employees. From December 31, 2007 through the end of April 2009, the Company has also reduced its division count from 20 to nine, down from 24 at its peak.
Excluding restructuring charges, the Company's 2009 first quarter SG&A rate would have been 19.3%* versus 22.3%* for the 2008 first quarter. The 300 basis point decrease in the Company's year-over-year SG&A rate was primarily due to a decrease in personnel costs as a result of reductions in headcount, a reduction in advertising and marketing expenses, and a decrease in the level of incentive compensation expense.
Net New Orders
Net new orders (excluding joint ventures and discontinued operations) for the 2009 first quarter decreased 41% to 734 new homes. The Company's cancellation rate for the three months ended March 31, 2009 was 24%, down from 33% for the 2008 fourth quarter and flat when compared with the 2008 first quarter. The Company's sales absorption rate for the 2009 first quarter was 1.5 per month per community, down from the prior year first quarter of 2.0 per month per community, but up from the depressed sales pace of 1.0 per month per community for the 2008 fourth quarter. The improvement in the Company's sales absorption rate from the 2008 fourth quarter reflects seasonality, a decrease in the Company's cancellation rate and the impact of historically low interest rates and increased affordability. Notwithstanding the improvement during the quarter, sales absorption rates remain low relative to historical rates and reflect the challenging housing market.
Joint Venture Update
During the 2009 first quarter the Company exited its Chicago joint venture for a $7.3 million cash payment, resulting in the elimination of $19.8 million of joint venture recourse debt. As of March 31, 2009, the Company's unconsolidated joint ventures had $406.4 million in outstanding borrowings, $157.5 million of which were recourse to the Company. In addition, as of such date, the Company had remaining land takedown obligations of approximately $21.2 million related to a single unconsolidated joint venture.
Income Taxes
The Company recorded a noncash valuation allowance of $19.2 million during the three months ended March 31, 2009 against its net deferred tax asset, resulting in a total cumulative allowance of $673.3 million at March 31, 2009.
*Please see "Reconciliation of Non-GAAP Financial Measures" on page 10. KEY STATISTICS AND FINANCIAL DATA** Three Months Ended March 31, % or Percentage 2009 2008 Change (Dollars in thousands, except average selling price) Operating Data: Deliveries (1) 687 1,036 (34%) Average selling price (1) $ 300,000 $ 334,000 (10%) Homebuilding revenues $ 209,535 $ 348,243 (40%) Gross margin % 3.9% (33.8%) 37.7% Gross margin % (excluding impairments) 17.4% 15.1% 2.3% Impairments $ 30,805 $ 192,345 (84%) Restructuring charges $ 14,119 $ 2,486 468% SG&A % 25.0% 22.8% 2.2% SG&A % (excluding restructuring charges) 19.3% 22.3% (3.0%) Net new orders (1) 734 1,245 (41%) Monthly sales absorption rate per community (1) 1.5 2.0 (25%) Cancellation rate (1) 24% 24% 0% Average active selling communities (1) 158 205 (23%) Backlog (homes) (1) 689 1,488 (54%) Backlog (dollar value) (1) $212,208 $505,550 (58%) Cash flows from operating activities $128,998 $228,882 (44%) Cash flows (uses) from investing activities $(1,500) $8,608 (117%) Cash uses from financing activities $(204,723) $(128,173) 60% Land purchases, net $680 $91,892 (99%) Adjusted EBITDA (2) $7,260 $(6,487) (212%) % or March 31, December 31, Percentage 2009 2008 Change (Dollars in thousands, except per share amounts) Balance Sheet Data: Homebuilding cash (including restricted cash) $668,300 $626,379 7% Inventories owned $1,195,483 $1,262,521 (5%) Building sites owned or controlled 22,775 24,136 (6%) Completed specs (excluding podium projects) (1) 500 589 (15%) Completed specs - podium projects (1) 104 - - Deferred tax asset valuation allowance $673,274 $654,107 3% Homebuilding debt $1,411,290 $1,486,437 (5%) Joint venture recourse debt $157,492 $173,894 (9%) Stockholders' equity $361,028 $407,941 (11%) Stockholders' equity per share (including as-converted preferred stock) (3) $1.50 $1.70 (12%) Total debt to book capitalization (4) 80.2% 79.2% 1.0% Adjusted net homebuilding debt to book capitalization (5) 67.4% 68.0% (0.6%)
**Please see "Notes to Key Statistics and Financial Data" beginning on page 11.
Earnings Conference Call
A conference call to discuss the Company's 2009 first quarter will be held at 2:00 pm Eastern Time Friday, May 8, 2009. 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 (800) 753-9048 (domestic) or (913) 312-1453 (international); Passcode: 9809341. 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: 9809341.
About Standard Pacific
Standard Pacific, one of the nation's largest homebuilders, has built homes for more than 105,000 families during its 43-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. The Company provides mortgage financing and title services to its homebuyers through Standard Pacific Mortgage and SPH Title. For more information about the Company and its new home developments, please visit our website at: http://www.standardpacifichomes.com/.
This news release contains forward-looking statements. These statements include but are not limited to statements regarding: the alignment of our cost structure with demand for new homes; trends in new home orders; our ability to preserve cash, control our expenses, manage new home starts and reduce speculative inventory levels; the potential for further inventory impairment charges; and orders and backlog. 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.
