Exhibit 99.1
News Release
STANDARD PACIFIC CORP. REPORTS THIRD QUARTER FINANCIAL RESULTS
Financial and Operating Highlights – 2006 Third Quarter versus 2005 Third Quarter
| | • | | Earnings per share of $0.47 versus $1.37 last year |
| | • | | Net income of $30.8 million compared to $96.4 million last year |
| | • | | Homebuilding revenues of $834 million versus $937 million last year |
| | • | | 2,254* new home deliveries versus 2,751* last year |
| | • | | Homebuilding gross margin of 19.1% (24.8%** excluding the $47.7 million inventory impairment charge) versus 27.1% in 2005 |
| | • | | Adjusted Homebuilding EBITDA*** of $139.1 million, and an EBITDA margin of 16.7% |
| | • | | LTM return on average equity of 21.3% |
| | • | | 1,200* net new home orders versus 2,888* last year and quarter-end backlog of 4,426* homes |
| | • | | Backlog valued at $1.6 billion* compared to $2.7 billion* last year |
Fourth Quarter Guidance for 2006 revised to $0.90 to $1.00 per share.
IRVINE, CALIFORNIA, October 26, 2006, Standard Pacific Corp. (NYSE:SPF) today reported the Company’s 2006 third quarter operating results. Net income for the quarter ended September 30, 2006 was $30.8 million, or $0.47 per diluted share, compared to $96.4 million, or $1.37 per diluted share, in the year earlier period. Homebuilding revenues were $834.1 million for the 2006 third quarter versus $936.7 million last year. The Company’s results for the 2006 third quarter include a non-cash pretax impairment charge of $48.7 million, or $0.46 per share after tax, of which $47.7 million related to consolidated real estate inventories while $1.0 million related to our share of joint venture inventory. In addition, the Company wrote off $10.0 million of option deposits and preacquisition costs for abandoned projects, or $0.09 per share after tax, for the quarter.
Stephen J. Scarborough, Chairman and Chief Executive Officer, stated, “Our financial operating results and new home order levels for the third quarter reflect the further weakening of demand for new homes in many of our markets. Accordingly, we have adjusted our business plan for 2006 to reflect lower absorption rates and gross margins. We are targeting approximately 10,200 to 10,300 deliveries, excluding 350 joint venture homes, homebuilding revenues of approximately $3.8 billion, and earnings of $4.20 to $4.30 per share. For the fourth quarter we are projecting approximately 2,800 to 2,900
| * | Excludes the Company’s unconsolidated joint ventures. |
| ** | The Company’s reported homebuilding gross margin was $158.9 million, or 19.1%, and after adding back the inventory impairment charge of $47.7 million, the Company’s homebuilding gross margin would have been $206.6 million, or 24.8%. |
| *** | For a definition of Adjusted Homebuilding EBITDA and a reconciliation of net income to Adjusted Homebuilding EBITDA and cash flows from operating activities to Adjusted Homebuilding EBITDA, please see the Selected Financial Data included herewith. |
1
deliveries, excluding 220 joint venture homes, and homebuilding revenues of approximately $1.1 billion, with earnings guidance of $0.90 to $1.00 per share. Our guidance for the balance of 2006 does not reflect additional inventory impairment charges or write-offs of deposits and capitalized preacquisition costs for abandoned projects. Our regular quarterly project budget update and inventory impairment analysis could lead to additional charges if market conditions change or we are not able to achieve our projected absorption rates with our existing pricing structure. In addition, we continue to evaluate land controlled in our pipeline which could lead to additional deposit and cost write-offs.”
Mr. Scarborough continued, “We continue to adjust our operating strategy in light of market conditions with an emphasis on strengthening our balance sheet. First and foremost, we are actively refining our pricing strategies to find the right balance between volume, profitability and cash flow generation. We have further reduced the level of expenditures for land this year and we are expecting to see a meaningful reduction in the amount of land acquired next year. In fact, we have reduced our position of owned and controlled building sites 11% year-over-year to 63,500 lots, including a year-over-year reduction of over 27% in our Southern California lot position. Moreover, the $26 million of deposit and cost write-offs during the last two quarters have resulted in future cash flow savings of $280 million related to Company projects and $144 million for joint ventures. In addition, we continue to carefully manage our starts to appropriately match production with our sales levels. And finally, we are adjusting our fixed cost structure to better align our overhead with lower volume levels, while at the same time pursuing increased operating efficiencies in an effort to reduce our production costs.”
Homebuilding Operations
Homebuilding pretax income for the 2006 third quarter decreased 70% to $45.8 million from $153.3 million in the year earlier period. The decrease in pretax income was driven by an 11% decrease in homebuilding revenues to $834.1 million, an 800 basis point lower homebuilding gross margin percentage, a 170 basis point increase in our SG&A rate, an $8.5 million decrease in joint venture income and a $2.1 million increase in other expense. The Company’s homebuilding operations for the 2006 third quarter includes a non-cash pretax inventory impairment charge of $47.7 million, which is included in cost of sales, a $1.0 million pretax inventory impairment charge related to one of the Company’s unconsolidated joint ventures, which is included in joint venture income, and a $10.0 million pretax charge related to the write-off of option deposits and preacquisition costs for abandoned projects, which is included in other expense.
Homebuilding revenues for the 2006 third quarter decreased 11% to $834.1 million from $936.7 million last year. The decrease in revenues was primarily attributable to an 18% decrease in new home deliveries (exclusive of joint ventures), partially offset by a 9% increase in our consolidated average home price to $368,000.
The 18% decrease in new home deliveries companywide was influenced by the following regional changes. During the 2006 third quarter, the Company delivered 505 new homes in California (exclusive of joint ventures), a 30% decrease from the 2005 third quarter. Deliveries were off 7% in Southern California to 396 new homes (excluding 1 joint venture delivery) reflecting the slowdown in order activity earlier this year, combined with an increase in the region’s cancellation rate during the same time period. Deliveries were down 63% in Northern California to 109 new homes (excluding 29 joint venture deliveries), and primarily reflects the slowdown in new home demand that began to surface in the region in the second half of 2005. In Florida, the Company delivered 583 new homes in the third quarter of 2006, representing a 34% year-over-year decline. The lower Florida delivery total was due to a weakening in housing demand beginning last year combined with an increase in the state’s cancellation rate. In Arizona, the Company delivered 362 homes (excluding 9 joint venture deliveries) during the 2006 third quarter, a 26% decrease from the 2005 third quarter. The lower level of new home deliveries was due to a weakening in housing demand which surfaced last year as well as a significant jump in the
2
Phoenix division’s cancellation rate during the second and third quarters of 2006. In the Carolinas, deliveries were up 6% to 262 new homes driven by an increase in deliveries in Charlotte, offset in part by a decrease in deliveries in Raleigh. New home deliveries were up 42% in Texas to 440 new homes, driven by improved market conditions in Dallas and Austin earlier in the year, combined with the delivery of 173 homes from our San Antonio division which began delivering homes in August 2005. Deliveries were off 6% in Colorado to 102 new homes for the quarter.
During the 2006 third quarter, the Company’s average home price increased 9% to $368,000. The Company’s regional average home prices changed as follows. Our average home price in California was $737,000 for the third quarter of 2006, a 12% increase from the year earlier period. The higher average home price was primarily due to a greater delivery mix of more expensive homes from the Company’s Orange County, Ventura, and San Diego divisions in Southern California. Our average price in Florida was up 20% from the year ago period to $289,000, and primarily reflects the impact of general price increases throughout the state experienced last year and, to a lesser degree, a shift in product mix. Our average price in Arizona was up 41% to $305,000, primarily reflecting the strong level of price appreciation experienced in Phoenix during most of 2005. Our average price was up 22% in the Carolinas and primarily reflected a change in delivery mix towards larger, more expensive homes and, to a lesser degree, general price appreciation. Our average price in Texas of $210,000 was virtually flat with the prior year average home price. Companywide, we expect that our full-year average new home price will increase approximately $26,000, or 7%, to $373,000 in 2006. We are projecting a 2006 fourth quarter average home price of $394,000, up 12% over the 2005 fourth quarter average. The expected increase in the 2006 fourth quarter and full year average home prices primarily reflect the significant appreciation in new home prices experienced in the Phoenix and Florida markets in 2005 and the more moderate level of price appreciation experienced in the California markets over the same time period.
The Company’s 2006 third quarter homebuilding gross margin percentage was down 800 basis points year-over-year to 19.1%. The 2006 third quarter gross margin reflects a $47.7 million inventory impairment charge which related to projects in California, Florida and Nevada. Excluding the inventory impairment charge, our homebuilding gross margin would have been 24.8%, or down 230 basis points year-over-year. The decrease in the year-over-year gross margin percentage, as adjusted, was driven primarily by lower gross margins in Southern and Northern California offset, in part, by a higher gross margin percentage in Arizona. The Company’s gross margin percentage was down slightly in Florida. In addition, margins in the Carolinas and Texas continued to improve. The higher gross margin percentage in Arizona reflected our ability to raise home prices during most of 2005 as a result of healthy housing demand during the year while the lower margins in California and Florida reflect softer market conditions that surfaced last year. Our homebuilding gross margin percentage for the 2006 fourth quarter is expected to be approximately 20% to 21%, while our margin for the full year is expected to be in the range of 23% to 24%.
Selling, general and administrative expenses (including corporate G&A) for the 2006 third quarter increased 170 basis points to 13.4% of homebuilding revenues, which was slightly below our guidance for the quarter, and compared to 11.7% last year. The higher level of SG&A expenses as a percentage of homebuilding revenues was primarily due to: (1) increased levels of sales and marketing expenses, including outside sales commissions and advertising, needed to generate sales in light of the general slowdown in new housing demand in our largest markets, (2) the shifting geographic mix of our deliveries, where our non-California operations generally incur higher levels of SG&A expenses as a percentage of revenues, and (3) overhead incurred in connection with our start-up operations in Bakersfield and the Central Valley of California and Las Vegas. These increases were partially offset by a decrease in incentive-based compensation. Our projected SG&A rate for 2006 is expected to be approximately 12.5% to 13.0%, while the 2006 fourth quarter rate is expected to be approximately 12.0%.
3
Income from unconsolidated joint ventures was down $8.5 million for the 2006 third quarter to $5.2 million. For the quarter, approximately $4.1 million of joint venture income was generated from land sales to other builders while $1.1 million was generated from new home deliveries. Deliveries from the Company’s unconsolidated homebuilding joint ventures totaled 40 new homes in the 2006 third quarter versus 58 last year. For 2006, we are projecting approximately $40 million in total joint venture income of which $16 million is expected to be generated from approximately 350 new home deliveries and approximately $24 million is projected from profits from joint venture land sales to other builders. For the 2006 fourth quarter, we are projecting approximately $9 million in total venture income, of which $6 million is expected to be generated from the delivery of approximately 220 joint venture homes and approximately $3 million is projected from venture land sale income.
Other expense for the 2006 third quarter includes a pretax charge of approximately $10.0 million related to the write-off of deposits and capitalized preacquisition costs for abandoned projects.
Net new orders companywide (excluding joint ventures) for the third quarter of 2006 totaled 1,200 homes, a 58% decrease from the 2005 third quarter, while gross orders were off 32% year-over-year. The Company’s consolidated cancellation rate for the 2006 third quarter was 50% of gross orders during the quarter compared to 18% last year, while the Company’s cancellation rate as a percentage of beginning backlog for the quarter was 22% compared to 9% last year. The overall decline in unit orders resulted from the continued slowing of demand for homes in the Company’s three largest markets, California, Florida and Arizona. The declining level of demand in these markets is generally attributable to reduced housing affordability, higher mortgage interest rates, and increased levels of new and existing homes for sale. These conditions have contributed to an erosion of homebuyer confidence in these markets.
Net new home orders were off 72% year-over-year in Southern California on a 28% higher average community count. The lower level of sales activity in Southern California was due to: (1) a deterioration in buyer demand across all divisions in the region, and (2) a more than doubling of our cancellation rate. In Northern California, net new home orders were down 59% on a 67% higher average community count. Like Southern California, the year-over-year decrease during the quarter reflected a continued decline in demand for new homes which began in the latter half of 2005, combined with a 50% increase in the region’s cancellation rate.
Net new home orders were down 74% in Florida on a flat community count. The following factors contributed to the year-over-year decrease in Florida order activity: (1) further deterioration in buyer demand, and (2) a fourfold increase in our cancellation rate.
In Arizona, net new home orders were down 74% on an 93% higher average community count. The Phoenix market is experiencing extremely challenging market conditions for new and existing homes as evidenced by the continued surge in our cancellation rate during the 2006 third quarter and the increasing need for meaningful incentives to sell homes.
Orders were down 17% in the Carolinas on an 11% higher community count, and down 17% in Texas on a 28% higher average community count. In Colorado, orders were down 44% on a 25% higher community count. Housing market conditions in the Company’s Texas and Carolina markets have slowed somewhat recently but still are at relatively healthy levels, while housing market conditions in Colorado remain challenging.
The 2006 third quarter backlog of 4,426 presold homes (excluding 255 joint venture homes) was valued at $1.6 billion (excluding $141 million of joint venture backlog), a decrease of 39% from the September 30, 2005 backlog value, reflecting the slowdown in order activity during 2006, including the increase in our cancellation rate, particularly in the second and third quarters.
4
The Company ended the quarter with 213 active selling communities (excluding 11 joint venture communities), a 20% increase over the year earlier period. The Company is projecting to open approximately 15 new communities during the fourth quarter for a full year total of 88 compared to 92 last year. The revised new community opening target for the year reflects adjustments in almost all of our markets primarily as a result of the meaningful slowing of housing demand in our three largest markets. The Company is targeting approximately 220 communities by the end of 2006, representing a 22% year-over-year increase.
Financial Services
In the 2006 third quarter, the Company’s financial services subsidiary generated pretax income of $881,000 compared to $862,000 in the year earlier period. The slight increase in profitability was driven primarily by an increase in margins (in basis points) on loans sold, which was partially offset by a slightly lower level of loan sales and a decline in the amount of net interest income earned on loans held for sale.
Financial services joint venture income, which is derived from mortgage banking joint ventures with third party financial institutions operating in conjunction with our homebuilding divisions in the Carolinas, and Tampa, Orlando and Southwestern Florida, was down 42% to $394,000. The lower level of income was due to the declining level of new home deliveries combined with the transition this year of the Company’s Colorado operations from a joint venture arrangement to the Company’s wholly owned financial services subsidiary.
Income Taxes
The Company’s effective income tax rate for the 2006 third quarter was 34.9% versus 37.8% for the year earlier period. The lower tax rate was attributable to the better than anticipated impact of the IRC Section 199 Domestic Production Activities Deduction which was effective for tax years beginning in 2005. Going forward the Company anticipates that its effective income tax rate will be in the range of 37% to 38%.
Earnings Conference Call
A conference call to discuss the Company’s 2006 third quarter earnings will be held at 11:00 am Eastern time tomorrow, Friday, October 27, 2006. The call will be broadcast live over the Internet and can be accessed through the Company’s website athttp://standardpacifichomes.com/ir . The call will also be accessible via telephone by dialing (800) 811-0667. The entire audio transmission with the synchronized slide presentation will also 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 (Passcode: 4303484).
Standard Pacific, one of the nation’s largest homebuilders, has built homes for more than 90,000 families during its 40-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 its subsidiaries and joint ventures, Family Lending Services, SPH Home Mortgage, Home First Funding, Universal Land Title of South Florida and SPH Title. For more information about the Company and its new home developments, please visit our website at: www.standardpacifichomes.com.
5
This news release contains forward-looking statements. These statements include but are not limited to statements regarding: management’s focus on managing the Company’s balance sheet, cash flows and liquidity, while strategically positioning the Company for the future; expected lower absorption rates and gross margins; adjusting the Company’s operating strategy, with an emphasis on strengthening the balance sheet; refinement of the Company’s pricing strategy; reduction of land expenditures; adjustment of the Company’s fixed cost structure and pursuit of operating efficiencies; expected new community openings and active subdivisions; the Company’s expected earnings, earnings per share, deliveries, revenues and income tax rate; the Company’s expected SG&A rate; expected average home prices; expected homebuilding gross margins; and expected joint venture income and deliveries. Forward-looking statements are based on 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 our 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; 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 our 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 our mortgage banking operations, including hedging activities; future business decisions and our ability to successfully implement our operational, growth and other strategies; litigation and warranty claims; and other risks discussed in our filings with the Securities and Exchange Commission, including in our Annual Report on Form 10-K for the year ended December 31, 2005. We assume no, and hereby disclaim any, obligation to update any of the foregoing or any other forward-looking statements. We nonetheless reserve 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:
Andrew H. Parnes, Executive Vice President-Finance & CFO (949) 789-1616,aparnes@stanpac.com or Lloyd H. McKibbin, Vice President & Treasurer (949) 789-1603,lmckibbin@stanpac.com.
(end of text, tables follow)
6
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Homebuilding: | | | | | | | | | | | | | | | | |
Revenues | | $ | 834,113 | | | $ | 936,687 | | | $ | 2,717,012 | | | $ | 2,725,366 | |
Cost of sales | | | (675,171 | ) | | | (682,794 | ) | | | (2,026,200 | ) | | | (1,992,349 | ) |
| | | | | | | | | | | | | | | | |
Gross margin | | | 158,942 | | | | 253,893 | | | | 690,812 | | | | 733,017 | |
| | | | | | | | | | | | | | | | |
Selling, general and administrative expenses | | | (111,449 | ) | | | (109,476 | ) | | | (349,824 | ) | | | (306,611 | ) |
Income from unconsolidated joint ventures | | | 5,153 | | | | 13,670 | | | | 30,897 | | | | 31,170 | |
Other expense | | | (6,801 | ) | | | (4,751 | ) | | | (19,303 | ) | | | (946 | ) |
| | | | | | | | | | | | | | | | |
Homebuilding pretax income | | | 45,845 | | | | 153,336 | | | | 352,582 | | | | 456,630 | |
| | | | | | | | | | | | | | | | |
Financial Services: | | | | | | | | | | | | | | | | |
Revenues | | | 5,910 | | | | 4,750 | | | | 16,146 | | | | 13,344 | |
Expenses | | | (5,029 | ) | | | (3,888 | ) | | | (14,584 | ) | | | (11,105 | ) |
Income from unconsolidated joint ventures | | | 394 | | | | 676 | | | | 1,435 | | | | 1,617 | |
Other income | | | 299 | | | | 154 | | | | 950 | | | | 466 | |
| | | | | | | | | | | | | | | | |
Financial services pretax income | | | 1,574 | | | | 1,692 | | | | 3,947 | | | | 4,322 | |
| | | | | | | | | | | | | | | | |
Income before taxes | | | 47,419 | | | | 155,028 | | | | 356,529 | | | | 460,952 | |
Provision for income taxes | | | (16,572 | ) | | | (58,652 | ) | | | (134,430 | ) | | | (174,860 | ) |
| | | | | | | | | | | | | | | | |
Net Income | | $ | 30,847 | | | $ | 96,376 | | | $ | 222,099 | | | $ | 286,092 | |
| | | | | | | | | | | | | | | | |
Earnings Per Share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.48 | | | $ | 1.42 | | | $ | 3.39 | | | $ | 4.23 | |
Diluted | | $ | 0.47 | | | $ | 1.37 | | | $ | 3.31 | | | $ | 4.09 | |
Weighted Average Common Shares Outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 64,321,003 | | | | 67,868,420 | | | | 65,465,162 | | | | 67,615,046 | |
Diluted | | | 65,688,060 | | | | 70,293,506 | | | | 67,068,937 | | | | 70,002,180 | |
Cash dividends per share | | $ | 0.04 | | | $ | 0.04 | | | $ | 0.12 | | | $ | 0.12 | |
7
Selected Operating Data
| | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2006 | | 2005 | | 2006 | | 2005 |
New homes delivered: | | | | | | | | | | | | |
Southern California | | | 396 | | | 426 | | | 1,373 | | | 1,224 |
Northern California | | | 109 | | | 294 | | | 454 | | | 953 |
| | | | | | | | | | | | |
Total California | | | 505 | | | 720 | | | 1,827 | | | 2,177 |
| | | | | | | | | | | | |
Arizona | | | 362 | | | 487 | | | 996 | | | 1,461 |
Texas | | | 440 | | | 310 | | | 1,446 | | | 658 |
Colorado | | | 102 | | | 108 | | | 362 | | | 338 |
| | | | | | | | | | | | |
Total Southwest | | | 904 | | | 905 | | | 2,804 | | | 2,457 |
| | | | | | | | | | | | |
Florida | | | 583 | | | 879 | | | 2,056 | | | 2,538 |
Carolinas | | | 262 | | | 247 | | | 717 | | | 681 |
| | | | | | | | | | | | |
Total Southeast | | | 845 | | | 1,126 | | | 2,773 | | | 3,219 |
| | | | | | | | | | | | |
Consolidated total | | | 2,254 | | | 2,751 | | | 7,404 | | | 7,853 |
| | | | | | | | | | | | |
Unconsolidated joint ventures: | | | | | | | | | | | | |
Southern California | | | 1 | | | 4 | | | 44 | | | 44 |
Northern California | | | 29 | | | 49 | | | 69 | | | 159 |
Arizona | | | 9 | | | 5 | | | 20 | | | 10 |
Illinois | | | 1 | | | — | | | 1 | | | — |
| | | | | | | | | | | | |
Total unconsolidated joint ventures | | | 40 | | | 58 | | | 134 | | | 213 |
| | | | | | | | | | | | |
Total (including joint ventures) | | | 2,294 | | | 2,809 | | | 7,538 | | | 8,066 |
| | | | | | | | | | | | |
Average selling prices of homes delivered: | | | | | | | | | | | | |
Southern California | | $ | 747,000 | | $ | 645,000 | | $ | 712,000 | | $ | 682,000 |
Northern California | | $ | 701,000 | | $ | 681,000 | | $ | 746,000 | | $ | 671,000 |
Total California | | $ | 737,000 | | $ | 660,000 | | $ | 720,000 | | $ | 677,000 |
Arizona | | $ | 305,000 | | $ | 216,000 | | $ | 295,000 | | $ | 208,000 |
Texas | | $ | 210,000 | | $ | 211,000 | | $ | 197,000 | | $ | 219,000 |
Colorado | | $ | 320,000 | | $ | 339,000 | | $ | 312,000 | | $ | 324,000 |
Total Southwest | | $ | 261,000 | | $ | 229,000 | | $ | 247,000 | | $ | 227,000 |
Florida | | $ | 289,000 | | $ | 240,000 | | $ | 274,000 | | $ | 227,000 |
Carolinas | | $ | 199,000 | | $ | 163,000 | | $ | 188,000 | | $ | 158,000 |
Total Southeast | | $ | 261,000 | | $ | 223,000 | | $ | 251,000 | | $ | 213,000 |
Consolidated (excluding joint ventures) | | $ | 368,000 | | $ | 339,000 | | $ | 365,000 | | $ | 346,000 |
Unconsolidated joint ventures | | $ | 616,000 | | $ | 716,000 | | $ | 736,000 | | $ | 710,000 |
Total (including joint ventures) | | $ | 372,000 | | $ | 347,000 | | $ | 372,000 | | $ | 355,000 |
Net new orders: | | | | | | | | | | | | |
Southern California | | | 190 | | | 686 | | | 1,006 | | | 1,926 |
Northern California | | | 62 | | | 153 | | | 293 | | | 654 |
| | | | | | | | | | | | |
Total California | | | 252 | | | 839 | | | 1,299 | | | 2,580 |
| | | | | | | | | | | | |
Arizona | | | 128 | | | 487 | | | 799 | | | 1,479 |
Texas | | | 321 | | | 388 | | | 1,418 | | | 944 |
Colorado | | | 60 | | | 108 | | | 332 | | | 368 |
Nevada | | | 4 | | | — | | | 4 | | | — |
| | | | | | | | | | | | |
Total Southwest | | | 513 | | | 983 | | | 2,553 | | | 2,791 |
| | | | | | | | | | | | |
Florida | | | 203 | | | 787 | | | 999 | | | 2,591 |
Carolinas | | | 232 | | | 279 | | | 756 | | | 883 |
| | | | | | | | | | | | |
Total Southeast | | | 435 | | | 1,066 | | | 1,755 | | | 3,474 |
| | | | | | | | | | | | |
Consolidated total | | | 1,200 | | | 2,888 | | | 5,607 | | | 8,845 |
| | | | | | | | | | | | |
Unconsolidated joint ventures: | | | | | | | | | | | | |
Southern California | | | 21 | | | 36 | | | 83 | | | 120 |
Northern California | | | 24 | | | 37 | | | 78 | | | 113 |
Arizona | | | — | | | 36 | | | — | | | 42 |
Illinois | | | 10 | | | — | | | 25 | | | — |
| | | | | | | | | | | | |
Total unconsolidated joint ventures | | | 55 | | | 109 | | | 186 | | | 275 |
| | | | | | | | | | | | |
Total (including joint ventures) | | | 1,255 | | | 2,997 | | | 5,793 | | | 9,120 |
| | | | | | | | | | | | |
8
Selected Operating Data (continued)
| | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2006 | | 2005 | | 2006 | | 2005 |
Average number of selling communities during the period: | | | | | | | | |
Southern California | | 37 | | 29 | | 35 | | 27 |
Northern California | | 20 | | 12 | | 17 | | 14 |
| | | | | | | | |
Total California | | 57 | | 41 | | 52 | | 41 |
| | | | | | | | |
Arizona | | 29 | | 15 | | 28 | | 14 |
Texas | | 37 | | 29 | | 38 | | 26 |
Colorado | | 15 | | 12 | | 13 | | 12 |
Nevada | | 1 | | — | | — | | — |
| | | | | | | | |
Total Southwest | | 82 | | 56 | | 79 | | 52 |
| | | | | | | | |
Florida | | 50 | | 50 | | 48 | | 53 |
Carolinas | | 20 | | 18 | | 19 | | 19 |
| | | | | | | | |
Total Southeast | | 70 | | 68 | | 67 | | 72 |
| | | | | | | | |
Consolidated total | | 209 | | 165 | | 198 | | 165 |
| | | | | | | | |
Unconsolidated joint ventures: | | | | | | | | |
Southern California | | 4 | | 2 | | 2 | | 2 |
Northern California | | 6 | | 3 | | 5 | | 3 |
Arizona | | — | | 1 | | — | | 1 |
Illinois | | 1 | | — | | 1 | | — |
| | | | | | | | |
Total unconsolidated joint ventures | | 11 | | 6 | | 8 | | 6 |
| | | | | | | | |
Total (including joint ventures) | | 220 | | 171 | | 206 | | 171 |
| | | | | | | | |
| | | |
| | | | | | | At September 30, |
| | | | | | | 2006 | | 2005 |
Backlog (in homes): | | | | | | | | |
Southern California | | | | | | 618 | | 1,403 |
Northern California | | | | | | 137 | | 440 |
| | | | | | | | |
Total California | | | | | | 755 | | 1,843 |
| | | | | | | | |
Arizona | | | | | | 1,221 | | 1,474 |
Texas | | | | | | 801 | | 981 |
Colorado | | | | | | 180 | | 241 |
Nevada | | | | | | 4 | | — |
| | | | | | | | |
Total Southwest | | | | | | 2,206 | | 2,696 |
| | | | | | | | |
Florida | | | | | | 1,219 | | 2,856 |
Carolinas | | | | | | 246 | | 367 |
| | | | | | | | |
Total Southeast | | | | | | 1,465 | | 3,223 |
| | | | | | | | |
Consolidated total | | | | | | 4,426 | | 7,762 |
| | | | | | | | |
Unconsolidated joint ventures: | | | | | | | | |
Southern California | | | | | | 136 | | 101 |
Northern California | | | | | | 52 | | 73 |
Arizona | | | | | | 11 | | 35 |
Illinois | | | | | | 56 | | — |
| | | | | | | | |
Total unconsolidated joint ventures | | | | | | 255 | | 209 |
| | | | | | | | |
Total (including joint ventures) | | | | | | 4,681 | | 7,971 |
| | | | | | | | |
9
Selected Operating Data (continued)
| | | | | | |
| | | At September 30, |
| | | 2006 | | 2005 |
Backlog (estimated dollar value in thousands): | | | | | | |
Southern California | | $ | 501,103 | | $ | 955,601 |
Northern California | | | 86,148 | | | 309,943 |
| | | | | | |
Total California | | | 587,251 | | | 1,265,544 |
| | | | | | |
Arizona | | | 407,363 | | | 387,134 |
Texas | | | 173,457 | | | 177,827 |
Colorado | | | 64,406 | | | 79,244 |
Nevada | | | 1,666 | | | — |
| | | | | | |
Total Southwest | | | 646,892 | | | 644,205 |
| | | | | | |
Florida | | | 355,417 | | | 722,114 |
Carolinas | | | 51,289 | | | 59,142 |
| | | | | | |
Total Southeast | | | 406,706 | | | 781,256 |
| | | | | | |
Consolidated total | | | 1,640,849 | | | 2,691,005 |
| | | | | | |
Unconsolidated joint ventures: | | | | | | |
Southern California | | | 72,138 | | | 73,303 |
Northern California | | | 39,253 | | | 52,561 |
Arizona | | | 3,312 | | | 9,982 |
Illinois | | | 26,025 | | | — |
| | | | | | |
Total unconsolidated joint ventures | | | 140,728 | | | 135,846 |
| | | | | | |
Total (including joint ventures) | | $ | 1,781,577 | | $ | 2,826,851 |
| | | | | | |
Building sites owned or controlled: | | | | | | |
Southern California | | | 11,858 | | | 16,356 |
Northern California | | | 7,837 | | | 6,035 |
| | | | | | |
Total California | | | 19,695 | | | 22,391 |
| | | | | | |
Arizona | | | 11,666 | | | 12,524 |
Texas | | | 9,550 | | | 13,417 |
Colorado | | | 1,293 | | | 1,694 |
Nevada | | | 3,037 | | | 380 |
| | | | | | |
Total Southwest | | | 25,546 | | | 28,015 |
| | | | | | |
Florida | | | 13,775 | | | 15,207 |
Carolinas | | | 4,269 | | | 5,780 |
Illinois | | | 219 | | | — |
| | | | | | |
Total Southeast | | | 18,263 | | | 20,987 |
| | | | | | |
Total | | | 63,504 | | | 71,393 |
| | | | | | |
Total building sites owned | | | 37,609 | | | 35,547 |
Total building sites optioned | | | 13,196 | | | 26,630 |
Total joint venture lots | | | 12,699 | | | 9,216 |
| | | | | | |
Total (including joint ventures) | | | 63,504 | | | 71,393 |
| | | | | | |
Completed and unsold homes: | | | | | | |
Consolidated | | | 623 | | | 247 |
Joint ventures | | | 5 | | | — |
| | | | | | |
Total (including joint ventures) | | | 628 | | | 247 |
| | | | | | |
Homes under construction: | | | | | | |
Consolidated | | | 5,657 | | | 7,649 |
Joint ventures | | | 718 | | | 374 |
| | | | | | |
Total (including joint ventures) | | | 6,375 | | | 8,023 |
| | | | | | |
10
Selected Financial Data
| | | | | | | | |
| | | Three Months Ended
September 30, | |
| | | 2006 | | | 2005 | |
| | | (Dollars in thousands) | |
Net income | | $ | 30,847 | | | $ | 96,376 | |
Net cash provided by (used in) operating activities | | $ | (146,136 | ) | | $ | (129,163 | ) |
Net cash provided by (used in) investing activities | | $ | (30,161 | ) | | $ | (93,716 | ) |
Net cash provided by (used in) financing activities | | $ | 172,929 | | | $ | 227,461 | |
Adjusted Homebuilding EBITDA(1) | | $ | 139,063 | | | $ | 181,021 | |
Homebuilding SG&A as a percentage of homebuilding revenues | | | 13.4 | % | | | 11.7 | % |
Homebuilding interest incurred | | $ | 38,998 | | | $ | 25,302 | |
Homebuilding interest capitalized to inventories owned | | $ | 35,821 | | | $ | 23,322 | |
Homebuilding interest capitalized to investments in and advances to unconsolidated joint ventures | | $ | 3,177 | | | $ | 1,980 | |
Ratio of LTM Adjusted Homebuilding EBITDA to homebuilding interest incurred | | | 6.0 | x | | | 8.6 | x |
| (1) | Adjusted Homebuilding EBITDA means net income (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) expensing of previously capitalized interest included in cost of sales, (c) material noncash impairment charges, if any, (d) homebuilding depreciation and amortization, (e) amortization of stock-based compensation, (f) income from unconsolidated joint ventures and (g) income 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 investors as a measure of our ability to service debt and obtain financing. However, it should be noted that Adjusted Homebuilding EBITDA is not a U.S. generally accepted accounting principles (“GAAP”) financial measure. Due to the significance of the GAAP components excluded, Adjusted Homebuilding EBITDA 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 tables set forth below reconcile net cash provided by (used in) operating activities and net income, calculated and presented in accordance with GAAP, to Adjusted Homebuilding EBITDA:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | LTM Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
| | | (Dollars in thousands) | |
Net cash provided by (used in) operating activities | | $ | (146,136 | ) | | $ | (129,163 | ) | | $ | (372,308 | ) | | $ | 16,715 | |
Add: | | | | | | | | | | | | | | | | |
Income taxes | | | 16,572 | | | | 58,652 | | | | 229,400 | | | | 261,677 | |
Expensing of previously capitalized interest included in cost of sales | | | 20,802 | | | | 14,325 | | | | 76,346 | | | | 64,260 | |
Excess tax benefits from share-based payment arrangements | | | 14 | | | | — | | | | 2,440 | | | | — | |
Less: | | | | | | | | | | | | | | | | |
Income from financial services subsidiary | | | 881 | | | | 862 | | | | 2,781 | | | | 3,345 | |
Depreciation and amortization from financial services subsidiary | | | 147 | | | | 148 | | | | 577 | | | | 569 | |
Loss on early extinguishment of debt | | | — | | | | 5,938 | | | | — | | | | 5,938 | |
Net changes in operating assets and liabilities: | | | | | | | | | | | | | | | | |
Trade and other receivables | | | 20,412 | | | | (31,592 | ) | | | 17,954 | | | | 33,943 | |
Inventories-owned | | | 201,410 | | | | 271,143 | | | | 849,352 | | | | 432,436 | |
Inventories-not owned | | | (1,177 | ) | | | 12,650 | | | | (13,031 | ) | | | (3,614 | ) |
Deferred income taxes | | | 5,858 | | | | 4,562 | | | | 22,979 | | | | 15,729 | |
Other assets | | | 21,577 | | | | 1,278 | | | | 24,486 | | | | 11,894 | |
Accounts payable | | | (2,884 | ) | | | 1,747 | | | | 1,754 | | | | (15,694 | ) |
Accrued liabilities | | | 3,643 | | | | (15,633 | ) | | | (21,314 | ) | | | (40,269 | ) |
| | | | | | | | | | | | | | | | |
Adjusted Homebuilding EBITDA | | $ | 139,063 | | | $ | 181,021 | | | $ | 814,700 | | | $ | 767,225 | |
| | | | | | | | | | | | | | | | |
11
| | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | LTM Ended
September 30, |
| | | 2006 | | 2005 | | 2006 | | 2005 |
| | | (Dollars in thousands) |
Net income | | $ | 30,847 | | $ | 96,376 | | $ | 376,991 | | $ | 424,928 |
Add: | | | | | | | | | | | | |
Cash distributions of income from unconsolidated joint ventures | | | 14,968 | | | 21,739 | | | 92,790 | | | 50,205 |
Income taxes | | | 16,572 | | | 58,652 | | | 229,400 | | | 261,677 |
Expensing of previously capitalized interest included in cost of sales | | | 20,802 | | | 14,325 | | | 76,346 | | | 64,260 |
Material noncash impairment charges | | | 57,697 | | | — | | | 78,876 | | | — |
Homebuilding depreciation and amortization | | | 1,818 | | | 1,706 | | | 6,537 | | | 4,811 |
Amortization of stock-based compensation | | | 2,787 | | | 3,431 | | | 17,282 | | | 10,753 |
Less: | | | | | | | | | | | | |
Income from unconsolidated joint ventures | | | 5,547 | | | 14,346 | | | 60,741 | | | 46,064 |
Income from financial services subsidiary | | | 881 | | | 862 | | | 2,781 | | | 3,345 |
| | | | | | | | | | | | |
Adjusted Homebuilding EBITDA | | $ | 139,063 | | $ | 181,021 | | $ | 814,700 | | $ | 767,225 |
| | | | | | | | | | | | |
Balance Sheet Data
(Dollars in thousands, except per share amounts)
| | | | | | | | |
| | | At September 30, | |
| | | 2006 | | | 2005 | |
Stockholders’ equity per share | | $ | 28.91 | | | $ | 23.84 | |
Ratio of total debt to total book capitalization(1) | | | 56.4 | % | | | 50.7 | % |
Ratio of adjusted net homebuilding debt to total book capitalization(2) | | | 54.9 | % | | | 48.8 | % |
Ratio of total debt to LTM adjusted homebuilding EBITDA(1) | | | 2.9 | x | | | 2.2 | x |
Ratio of adjusted net homebuilding debt to LTM adjusted homebuilding EBITDA(2) | | | 2.8 | x | | | 2.0 | x |
Homebuilding interest capitalized in inventories owned | | $ | 125,793 | | | $ | 77,276 | |
Homebuilding interest capitalized as a percentage of inventories owned | | | 3.4 | % | | | 2.6 | % |
| (1) | Total debt at September 30, 2006 and 2005 includes $95.9 million and $83.0 million, respectively, of indebtedness of the Company’s financial services subsidiary and $39.9 million and $35.2 million, respectively, of indebtedness included in liabilities from inventories not owned. |
| (2) | Net homebuilding debt reflects the offset of $0.2 million and $2.8 million in cash and equivalents at September 30, 2006 and 2005, respectively, against homebuilding debt of $2,265.7 million and $1,552.4 million, respectively. Adjusted net homebuilding debt at September 30, 2006 and 2005 is further adjusted to exclude $95.9 million and $83.0 million, respectively, of indebtedness of the Company’s financial services subsidiary and $39.9 million and $35.2 million, respectively, of indebtedness included in liabilities from inventories not owned. We believe that the adjusted net homebuilding debt to total book capitalization and adjusted net homebuilding debt to LTM adjusted homebuilding EBITDA ratios are useful to investors as a measure of our ability to obtain financing. These are non-GAAP ratios and other companies may calculate these ratios differently. |
12
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | | | | | | |
| | | September 30,
2006 | | | December 31, 2005 |
| | | (Unaudited) | | | |
| ASSETS | | | | | | | |
Homebuilding: | | | | | | | |
Cash and equivalents | | $ | 5,226 | | | $ | 18,824 |
Trade and other receivables | | | 57,303 | | | | 74,986 |
Inventories: | | | | | | | |
Owned | | | 3,748,098 | | | | 2,928,850 |
Not owned | | | 293,985 | | | | 590,315 |
Investments in and advances to unconsolidated joint ventures | | | 341,272 | | | | 285,760 |
Deferred income taxes | | | 65,090 | | | | 58,681 |
Goodwill and other intangibles, net | | | 122,070 | | | | 120,396 |
Other assets | | | 93,186 | | | | 60,052 |
| | | | | | | |
| | | 4,726,230 | | | | 4,137,864 |
| | | | | | | |
Financial Services: | | | | | | | |
Cash and equivalents | | | 7,152 | | | | 9,799 |
Mortgage loans held for sale | | | 104,705 | | | | 129,835 |
Other assets | | | 5,979 | | | | 3,344 |
| | | | | | | |
| | | 117,836 | | | | 142,978 |
| | | | | | | |
Total Assets | | $ | 4,844,066 | | | $ | 4,280,842 |
| | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
Homebuilding: | | | | | | | |
Accounts payable | | $ | 105,415 | | | $ | 115,082 |
Accrued liabilities | | | 289,469 | | | | 345,294 |
Liabilities from inventories not owned | | | 115,633 | | | | 48,737 |
Revolving credit facility | | | 593,800 | | | | 183,100 |
Trust deed and other notes payable | | | 73,438 | | | | 97,031 |
Senior notes payable | | | 1,449,221 | | | | 1,099,153 |
Senior subordinated notes payable | | | 149,204 | | | | 149,124 |
| | | | | | | |
| | | 2,776,180 | | | | 2,037,521 |
| | | | | | | |
Financial Services: | | | | | | | |
Accounts payable and other liabilities | | | 3,076 | | | | 2,246 |
Mortgage credit facilities | | | 95,892 | | | | 123,426 |
| | | | | | | |
| | | 98,968 | | | | 125,672 |
| | | | | | | |
Total Liabilities | | | 2,875,148 | | | | 2,163,193 |
| | | | | | | |
Minority Interests | | | 109,392 | | | | 378,490 |
Stockholders’ Equity: | | | | | | | |
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued | | | — | | | | — |
Common stock, $0.01 par value; 100,000,000 shares authorized; 64,327,586 and 67,129,010 shares outstanding, respectively | | | 643 | | | | 671 |
Additional paid-in capital | | | 317,995 | | | | 405,638 |
Retained earnings | | | 1,547,034 | | | | 1,332,850 |
Accumulated other comprehensive loss | | | (6,146 | ) | | | — |
| | | | | | | |
Total Stockholders’ Equity | | | 1,859,526 | | | | 1,739,159 |
| | | | | | | |
Total Liabilities and Stockholders’ Equity | | $ | 4,844,066 | | | $ | 4,280,842 |
| | | | | | | |
13
