(Source: PRNewswire-FirstCall)
IRVINE, Calif., July 22, 2009 /PRNewswire-FirstCall/ -- Standard Pacific Corp. today announced operating results for its second quarter ended June 30, 2009. Homebuilding revenues from continuing operations for the 2009 second quarter were $289.7 million, down 29% from $410.6 million last year. The Company generated a net loss of $23.1 million, or $0.10 per diluted share, versus a net loss of $249.0 million, or $3.44 per diluted share, for the year earlier period. The 2009 second quarter results included asset impairment charges of $21.3 million, of which $13.1 million related to real estate inventories and $8.2 million related to a joint venture. Impairment related charges for the 2008 second quarter totaled $149.2 million. The 2009 second quarter results also included $5.5 million in restructuring charges and an $8.9 million charge related to the Company's deferred tax asset valuation allowance. Excluding asset impairment and restructuring charges, the Company generated 2009 second quarter net income of approximately $2.2 million*, or $0.01 per diluted share.*
During the quarter the Company generated $68.6 million of cash flows from operating activities, driven primarily from a $95.3 million decrease in inventories that was largely attributable to a 48% reduction in the number of completed spec homes (excluding podium projects). These cash flows were partially offset by other changes in working capital. The Company reduced its homebuilding debt during the quarter by $136.0 million (after assuming $25.2 million of secured project debt in connection with a joint venture unwind) and ended the quarter with $573.0 million of homebuilding cash (including $4.2 million of restricted cash). The debt reduction was driven primarily by the repayment of the remaining $124.6 million balance of the Company's 5 1/8% senior notes and the repayment of $10.0 million of credit facility indebtedness. The Company's homebuilding restricted cash balance decreased by $120.8 million during the quarter as a result of the Company meeting its bank credit facility cash flow coverage requirement.
The Company's 2009 second quarter selling, general and administrative ("SG&A") expenses decreased $33.1 million, or 42%, from the year earlier period resulting in an SG&A rate of 15.9% versus 19.3% in the prior year period. Excluding restructuring charges, the Company's 2009 second quarter SG&A rate was 14.3%* versus 19.1%* for the 2008 second quarter despite a 29% decrease in revenues.
Ken Campbell, President and CEO stated, "We are pleased with the progress we have made to date, particularly with respect to reducing our SG&A - both in absolute dollars and as a percent of revenues. Our SG&A reductions demonstrate our ability to vary our costs in line with our sales volumes, a capability that may get tested further if the recession continues for an extended period of time. We are also pleased with the $69 million of cash flows generated from operations during the quarter that resulted largely from the reduction of our completed spec inventory levels and improved order and delivery activity. These were improvements we told investors we were going to make, so I guess it's not a big surprise, but all of us here at Standard Pacific feel good about our progress to date."
Mr. Campbell added, "While we still obviously have not achieved the level of profitability that we ultimately need, we are a lot closer than we were a couple of quarters ago and believe that we are in pretty good shape in the short run because of our higher backlog level. However, if we need to adjust further, we will."
Homebuilding Operations
The Company generated a homebuilding pretax loss from continuing operations for the 2009 second quarter of $24.3 million compared to a pretax loss of $185.9 million in the year earlier period. The Company's homebuilding pretax loss from continuing operations for the 2009 second quarter included $21.3 million of asset impairment charges and $5.3 million in restructuring charges. The decrease in pretax loss was primarily the result of a $127.9 million decrease in impairment charges, a $33.1 million decrease in the Company's SG&A expenses (which included approximately $4.6 million in restructuring charges related to severance and facilities reductions), a $12.2 million decrease in joint venture loss and a $13.0 million decrease in other expense. These changes were partially offset by a 29% decrease in homebuilding revenues to $289.7 million (due to a 24% decrease in new home deliveries to 942 homes and an 8% decline in our consolidated average home price to $302,000) and the expensing of $11.7 million of non-capitalized interest expense during the 2009 second quarter.
Gross Margin
The Company's homebuilding gross margin percentage from continuing operations (including land sales) for the 2009 second quarter was 13.5% compared to a negative 18.5% in the prior year period. The 2009 second quarter gross margin included $13.1 million in inventory impairment charges related to 10 projects. The impairments, which were included in cost of sales, related primarily to four projects in California totaling $8.2 million. Excluding the housing inventory impairment charges from continuing operations, the Company's 2009 second quarter gross margin from home sales would have been 18.5%* versus 12.9%* for the 2008 second quarter. The 560 basis point increase in the year-over-year adjusted gross margin was driven primarily by higher margins in California and lower direct construction costs as a result of value engineering and the rebidding of contracts. These factors were partially offset by lower home prices.
Restructuring
The Company's 2009 second quarter results included approximately $5.3 million in homebuilding restructuring charges related to severance ($3.0 million) and lease terminations and fixed asset write offs ($2.3 million), of which approximately $4.6 million was included in the Company's SG&A expenses and $0.7 million in other expense. Since December 31, 2008, the Company has reduced its total headcount by 33%, or 425 employees.
Net New Orders and Backlog
Net new orders (excluding joint ventures and discontinued operations) for the 2009 second quarter decreased 6% from the 2008 second quarter to 1,169 new homes on a 29% decrease in the number of average active selling communities from the prior year period. The Company's cancellation rate for the three months ended June 30, 2009 was 16%, down from 24% for the 2009 first quarter and 25% for the 2008 second quarter. The Company's sales absorption rate for the 2009 second quarter was 2.7 per month per community, up from the prior year second quarter rate of 2.0 per month per community, and up from 1.5 per month per community for the 2009 first quarter. The improvement in the Company's sales absorption rate during the quarter as compared to the 2008 second quarter was due to increases in most of its markets on a per community basis with absorption rates particularly stronger in California and Arizona.
As a result of the improved order trends experienced during the 2009 second quarter, the dollar value of the Company's backlog (excluding joint ventures) increased 45% from the 2009 first quarter to $308.5 million, or 982 homes.
Joint Ventures
During the 2009 second quarter the Company unwound one Southern California joint venture for a $1.1 million cash payment and the assumption of approximately $25.2 million of secured project debt. The Company also made a $9.1 million loan remargin payment related to another Southern California joint venture. As of June 30, 2009, the Company's unconsolidated joint ventures had $361.1 million in outstanding borrowings, $112.1 million of which were recourse to the Company, and remaining land takedown obligations of approximately $21.1 million related to a single unconsolidated joint venture. In addition, the Company recorded an $8.2 million impairment charge during the quarter related to its remaining investment in its North Las Vegas joint venture.
Income Taxes
The Company recorded a noncash valuation allowance of $8.9 million against the net deferred tax asset created as a result of the net loss generated during the three months ended June 30, 2009. As of June 30, 2009, the total deferred tax valuation allowance was $682.2 million.
*Please see "Reconciliation of Non-GAAP Financial Measures" on page 10. KEY STATISTICS AND FINANCIAL DATA** As of or For The Three Months Ended % or % or June 30, June 30, Percentage March 31, Percentage 2009 2008 Change 2009 Change (Dollars in thousands, except average selling price) Operating Data: Deliveries (1) 942 1,237 (24%) 687 37% Average selling price (1) $302,000 $327,000 (8%) $300,000 1% Homebuilding revenues $289,672 $410,634 (29%) $209,535 38% Gross margin % 13.5% (18.5%) 32.0% 3.9% 9.6% Gross margin % from home sales (excluding impairments) 18.5% 12.9% 5.6% 17.4% 1.1% Impairments $21,270 $149,185 (86%) $30,805 (31%) Restructuring charges $5,504 $913 503% $14,119 (61%) SG&A % 15.9% 19.3% (3.4%) 25.0% (9.1%) SG&A % (excluding restructuring charges) 14.3% 19.1% (4.8%) 19.3% (5.0%) Net new orders (1) 1,169 1,241 (6%) 734 59% Monthly sales absorption rate per community (1) 2.7 2.0 35% 1.5 80% Cancellation rate (1) 16% 25% (9%) 24% (8%) Average active selling communities (1) 144 203 (29%) 158 (9%) Backlog (homes) (1) 982 1,515 (35%) 689 43% Backlog (dollar value) (1) $308,540 $522,484 (41%) $212,208 45% Cash flows (uses) from operating activities $68,595 $(62,852) (209%) $128,998 (47%) Cash flows (uses) from investing activities $(10,128) $18,923 (154%) $(1,500) 575% Cash flows (uses) from financing activities $(32,681) $278,151 (112%) $(204,723) (84%) Land purchases, net $7,857 $19,819 (60%) $680 1055% Adjusted Homebuilding EBITDA (2) $33,139 $(10,859) (405%) $7,260 356% As of % or % or June 30, March 31, Percentage December 31, Percentage 2009 2009 Change 2008 Change (Dollars in thousands, except per share amounts) Balance Sheet Data: Homebuilding cash (including restricted cash) $573,038 $668,300 (14%) $626,379 (9%) Inventories owned $1,115,556 $1,195,483 (7%) $1,262,521 (12%) Building sites owned or controlled 22,012 22,775 (3%) 24,136 (9%) Homes under Construction (1) 1,041 999 4% 1,326 (21%) Completed specs (excluding podium projects) (1) 258 500 (48%) 589 (56%) Completed specs - podium projects (1) 193 104 86% - - Deferred tax asset valuation allowance $682,186 $673,274 1% $654,107 4% Homebuilding debt $1,275,300 $1,411,290 (10%) $1,486,437 (14%) Joint venture recourse debt $112,141 $157,492 (29%) $173,894 (36%) Stockholders' equity $346,512 $361,028 (4%) $407,941 (15%) Stockholders' equity per share (including as-converted preferred stock) (3) $1.44 $1.50 (4%) $1.70 (15%) Total debt to book capitalization (4) 79.3% 80.2% (0.9%) 79.2% 0.1% Adjusted net homebuilding debt to book capitalization (5) 67.1% 67.4% (0.3%) 68.0% (0.9%) **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 second quarter will be held at 1:00 p.m. Eastern Time Thursday, July 23, 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 (888) 791-4315 (domestic) or (913) 981-5567 (international); Passcode: 5410511. 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: 5410511.
About Standard Pacific
Standard Pacific, one of the nation's largest homebuilders, has built more than 105,000 homes 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: our ability to align our cost structure with demand for new homes; trends in new home orders and deliveries; our progress toward achieving profitability; 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. 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.
