IRVINE, Calif., Oct. 29 /PRNewswire-FirstCall/ -- Standard Pacific Corp. today reported the Company's unaudited 2008 third quarter operating results.
2008 Third Quarter Financial and Operating Highlights From Continuing and Discontinued Operations:
-- Homebuilding cash on balance sheet of $712 million; -- Homebuilding debt reduction of $10.4 million during the quarter; -- Cash flows generated from operating activities of $31.9 million; -- Homebuilding segment pretax loss from continuing operations of $388.3 million compared to $185.0 million last year; -- Consolidated net loss per diluted share of $2.53 vs. net loss per diluted share of $1.66 last year; -- Consolidated net loss of $368.8 million compared to a net loss of $119.7 million last year; -- $368.4 million of pretax charges related to inventory and joint venture impairments and land deposit write-offs coupled with an inability to record a $134.1 million net deferred tax benefit related to the losses incurred during the quarter; and -- Net loss of $9.7 million, or $0.07 per diluted share, excluding aggregate charges totaling $2.46 per diluted share** related to after-tax impairment and tax valuation allowance charges.
2008 Third Quarter Financial and Operating Highlights From Continuing Operations:
-- Homebuilding revenues of $400.3 million vs. $643.2 million last year; -- New home deliveries of 1,188*, down 24% from 1,569* last year; -- 921* net new home orders, down 32% from 1,350* last year; -- Cancellation rate of 26%*, down from 35%* in the prior year period and up slightly from 25%* for the 2008 second quarter; -- 35% reduction in completed and unsold sold homes from the prior year period to 374* homes at September 30, 2008; and -- Quarter-end backlog of 1,248* homes, valued at $395.7 million compared to 2,421* homes valued at $966.4 million a year ago.
The net loss for the quarter ended September 30, 2008 was $368.8 million, or $2.53 per diluted share, compared to a net loss of $119.7 million, or $1.66 per diluted share, in the year earlier period. Homebuilding revenues from continuing operations for the 2008 third quarter were $400.3 million versus $643.2 million last year. The Company's results for the 2008 third quarter included pretax impairment charges of $368.4 million. The impairment charges consisted of: $209.2 million related to ongoing consolidated real estate inventories; $58.0 million related to land sold or held for sale; $92.2 million related to the Company's share of joint venture impairment charges; and $8.9 million related to land deposit and capitalized preacquisition cost write-offs for abandoned projects. In addition, the 2008 third quarter operating results also included a noncash charge related to a net increase in the Company's deferred tax asset valuation allowance of $134.1 million, or $0.92 per diluted share. Excluding these charges, the Company generated a loss of $9.7 million, or $0.07 per diluted share.**
Jeffrey V. Peterson, Chairman, President and Chief Executive Officer stated, "While we continue to endure what appears to be one of the worst economic and housing environments the country has faced in recent memory, we are pleased to have closed the final phase of the MatlinPatterson equity recapitalization through a $153 million rights offering. The additional equity and cash liquidity has helped to fortify our balance sheet for these challenging times which are expected to persist for the foreseeable future. Our substantial cash position will help maintain valuable liquidity in the near term as well as provide strategic capital which can be deployed at the appropriate time to take advantage of what are expected to be attractive land and corporate opportunities."
Mr. Peterson continued, "Housing market conditions deteriorated further during the quarter as the growing level of foreclosure inventory combined with the tumultuous global financial markets, worsening economic conditions and record low consumer confidence further undermined the already weak housing market. It does not appear at this time that the earlier efforts by the Federal Government to stabilize the housing market across the country has had any meaningful impact. The further decline in new home demand is evidenced by slower order trends and further price reductions which have continued to trigger additional impairment charges."
"As we continue to navigate these tough times, we have intensified our efforts towards transformational changes within our organization. We believe we are working towards a more efficient operating structure, a lower manufacturing cost structure, and a more proficient sales and marketing organization, all with the goal of improving our award winning product platform and organization."
Equity Investment
As reported earlier, the Company completed its rights offering ("Rights Offering") pursuant to which each holder of our common stock as of the record date of July 28, 2008 was offered a right ("Right") to purchase up to such holder's pro rata share of approximately 50 million shares of our common stock at a per share price of $3.05 (equivalent to approximately 0.69 shares of common stock for each Right). The offer expired August 22, 2008 and rights to purchase approximately 27.2 million shares of common stock were exercised for a total subscription price of $82.9 million. As contemplated by the investment agreement with MatlinPatterson, they purchased from us (in the form of preferred stock) the 22.8 million shares of common stock not purchased by our stockholders in the Rights Offering for a total subscription price of $69.6 million. Further details about these transactions can be found in the Company's Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2008 and in the Company's forthcoming Report on Form 10-Q for the quarter ended September 30, 2008.
Inventory Reduction
As a result of the continued focus on inventory reduction initiatives, Standard Pacific's owned or controlled lot position stood at approximately 27,000 lots (including discontinued operations) at September 30, 2008, a 42% reduction from the year ago level and a 64% decrease from the peak lot count at December 31, 2005.
Joint Venture Update
The Company exited two Northern California joint ventures during the 2008 third quarter for aggregate net cash payments totaling approximately $3.3 million. The Company also made a $4.2 million loan remargin payment related to one Southern California joint venture during the 2008 third quarter. The Company continues to evaluate its homebuilding joint ventures and may exit additional joint ventures in the future, which may be accomplished by acquiring its partner's interest, disposing of its interest or other means.
Homebuilding Operations Three Months Ended September 30, 2008 2007 % Change (Dollars in thousands) Homebuilding revenues: California $209,813 $304,117 (31%) Southwest (1) 108,268 186,640 (42%) Southeast 82,259 152,462 (46%) Total homebuilding revenues $400,340 $643,219 (38%) Homebuilding pretax loss: California $(226,471) $(131,723) 72% Southwest (1) (109,389) (6,434) 1,600% Southeast (45,333) (45,677) (1%) Corporate (7,089) (1,141) 521% Total homebuilding pretax loss $(388,282) $(184,975) 110% Homebuilding pretax impairment charges: California $216,686 $147,321 47% Southwest (1) 109,659 14,440 659% Southeast 42,009 54,292 (23%) Total homebuilding pretax impairment charges $368,354 $216,053 70% (1) Excludes the Company's San Antonio and Tucson divisions, which are classified as discontinued operations.
The Company generated a homebuilding pretax loss from continuing operations for the 2008 third quarter of $388.3 million compared to a pretax loss of $185.0 million in the year earlier period. The increase in pretax loss was primarily the result of a $152.3 million, or 70%, increase in impairment charges, a 38% decrease in homebuilding revenues to $400.3 million, a $53.5 million increase in joint venture loss (to a loss of $91.9 million), and a reduction in its homebuilding gross margin percentage. These changes were partially offset by a $16.7 million decrease in the Company's absolute level of selling, general and administrative ("SG&A") expenses. The Company's homebuilding operations for the 2008 third quarter included the following pretax charges from continuing operations: a $267.2 million inventory impairment charge (including $58.0 million for land sold or held for sale); a $92.2 million charge related to the Company's share of joint venture impairments; and an $8.9 million charge related to the write-off of land option deposits and capitalized preacquisition costs for abandoned projects. The inventory impairment charges were included in cost of sales, while the land deposit and capitalized preacquisition cost write-offs were included in other income (expense).
Three Months Ended September 30, 2008 2007 % Change New homes delivered: Southern California 274 294 (7%) Northern California 161 172 (6%) Total California 435 466 (7%) Arizona (1) 132 218 (39%) Texas (1) 165 239 (31%) Colorado 62 89 (30%) Nevada 22 27 (19%) Total Southwest 381 573 (34%) Florida 220 305 (28%) Carolinas 152 225 (32%) Total Southeast 372 530 (30%) Consolidated total 1,188 1,569 (24%) Unconsolidated joint ventures: Southern California 41 79 (48%) Northern California 24 35 (31%) Illinois 1 4 (75%) Total unconsolidated joint ventures 66 118 (44%) Discontinued operations 14 128 (89%) Total (including joint ventures) 1,268 1,815 (30%) Average selling prices of homes delivered: Southern California $540,000 $711,000 (24%) Northern California 384,000 483,000 (20%) Total California 482,000 627,000 (23%) Arizona (1) 215,000 291,000 (26%) Texas (1) 291,000 253,000 15% Colorado 358,000 364,000 (2%) Nevada 278,000 299,000 (7%) Total Southwest 275,000 287,000 (4%) Florida 206,000 274,000 (25%) Carolinas 233,000 241,000 (3%) Total Southeast 217,000 260,000 (17%) Consolidated (excluding joint ventures) 332,000 379,000 (12%) Unconsolidated joint ventures 578,000 558,000 4% Total continuing operations (including joint ventures) $345,000 $391,000 (12%) Discontinued operations (including joint ventures) $176,000 $269,000 (35%) (1) Arizona and Texas exclude the Tucson and San Antonio divisions, which are classified as discontinued operations. Three Months Ended September 30, % Change 2008 2007 % Change Same Store Net new orders: Southern California 218 356 (39%) (32%) Northern California 122 164 (26%) (16%) Total California 340 520 (35%) (27%) Arizona (1) 100 150 (33%) (13%) Texas (1) 117 196 (40%) (49%) Colorado 54 79 (32%) (6%) Nevada 15 30 (50%) 0% Total Southwest 286 455 (37%) (31%) Florida 168 174 (3%) 1% Carolinas 127 201 (37%) (32%) Total Southeast 295 375 (21%) (17%) Consolidated total 921 1,350 (32%) (26%) Unconsolidated joint ventures: Southern California 23 108 (79%) (32%) Northern California 24 22 9% 118% Florida 3 - - - Illinois (1) 3 (133%) (167%) Total unconsolidated joint ventures 49 133 (63%) (13%) Discontinued operations 8 127 (94%) - Total (including joint ventures) 978 1,610 (39%) (22%) Average number of selling communities during the period: Southern California 37 41 (10%) Northern California 23 26 (12%) Total California 60 67 (10%) Arizona (1) 13 17 (24%) Texas (1) 29 25 16% Colorado 8 11 (27%) Nevada 2 4 (50%) Total Southwest 52 57 (9%) Florida 45 47 (4%) Carolinas 29 31 (6%) Total Southeast 74 78 (5%) Consolidated total 186 202 (8%) Unconsolidated joint ventures: Southern California 5 16 (69%) Northern California 4 8 (50%) Florida 1 - - Illinois 1 2 (50%) Total unconsolidated joint ventures 11 26 (58%) Discontinued operations - 25 (100%) Total (including joint ventures) 197 253 (22%) (1) Arizona and Texas exclude the Tucson and San Antonio divisions, which are classified as discontinued operations. At September 30, 2008 2007 % Change Backlog (in homes): Southern California 230 645 (64%) Northern California 154 234 (34%) Total California 384 879 (56%) Arizona (1) 140 269 (48%) Texas (1) 219 402 (46%) Colorado 103 192 (46%) Nevada 14 39 (64%) Total Southwest 476 902 (47%) Florida 261 346 (25%) Carolinas 127 294 (57%) Total Southeast 388 640 (39%) Consolidated total 1,248 2,421 (48%) Unconsolidated joint ventures: Southern California 25 209 (88%) Northern California 20 62 (68%) Florida 3 - - Illinois 1 9 (89%) Total unconsolidated joint ventures 49 280 (83%) Discontinued operations - 166 (100%) Total (including joint ventures) 1,297 2,867 (55%) Backlog (estimated dollar value in thousands): Southern California $117,962 $419,164 (72%) Northern California 59,928 111,465 (46%) Total California 177,890 530,629 (66%) Arizona (1) 30,413 76,752 (60%) Texas (1) 64,950 111,616 (42%) Colorado 31,609 73,386 (57%) Nevada 3,408 11,345 (70%) Total Southwest 130,380 273,099 (52%) Florida 57,880 89,072 (35%) Carolinas 29,507 73,578 (60%) Total Southeast 87,387 162,650 (46%) Consolidated total 395,657 966,378 (59%) Unconsolidated joint ventures: Southern California 21,924 117,848 (81%) Northern California 11,444 43,168 (73%) Florida 839 - - Illinois 1,236 7,873 (84%) Total unconsolidated joint ventures 35,443 168,889 (79%) Discontinued operations - 39,662 (100%) Total (including joint ventures) $431,100 $1,174,929 (63%) (1) Arizona and Texas exclude the Tucson and San Antonio divisions, which are classified as discontinued operations. At September 30, 2008 2007 % Change Building sites owned or controlled: Southern California 6,213 10,227 (39%) Northern California 3,536 5,588 (37%) Total California 9,749 15,815 (38%) Arizona (1) 2,407 4,367 (45%) Texas (1) 2,039 3,750 (46%) Colorado 423 869 (51%) Nevada 2,335 2,922 (20%) Total Southwest 7,204 11,908 (40%) Florida 7,696 10,236 (25%) Carolinas 2,436 4,239 (43%) Illinois 60 154 (61%) Total Southeast 10,192 14,629 (30%) Discontinued operations 6 4,678 (100%) Total (including joint ventures) 27,151 47,030 (42%) Building sites owned 19,757 25,528 (23%) Building sites optioned or subject to contract 3,401 6,649 (49%) Joint venture lots 3,987 10,175 (61%) Total continuing operations 27,145 42,352 (36%) Discontinued operations 6 4,678 (100%) Total (including joint ventures) 27,151 47,030 (42%) Completed and unsold homes: Consolidated (1) 374 571 (35%) Joint ventures (1) 17 23 (26%) Total continuing operations 391 594 (34%) Discontinued operations 2 79 (97%) Total 393 673 (42%) Spec homes under construction: Consolidated (1) 1,148 1,334 (14%) Joint ventures (1) 286 418 (32%) Total continuing operations 1,434 1,752 (18%) Discontinued operations - 71 (100%) Total 1,434 1,823 (21%) Total homes under construction (including specs): Consolidated (1) 2,143 3,280 (35%) Joint ventures (1) 327 648 (50%) Total continuing operations 2,470 3,928 (37%) Discontinued operations - 211 (100%) Total 2,470 4,139 (40%) (1) Arizona and Texas exclude the Tucson and San Antonio divisions, which are classified as discontinued operations. Homebuilding Gross Margin Percentage
The Company's 2008 third quarter homebuilding gross margin percentage from continuing operations (including land sales) was down year-over-year to a negative 51.6% from a negative 7.5% in the prior year period. The 2008 third quarter gross margin reflected a $267.2 million pretax inventory impairment charge related to 75 projects, of which $209.2 million related to current and future projects and $58.0 million related to land or lots that have been or are intended to be sold. These impairments related primarily to projects located in California, Nevada and Florida, and to a lesser degree, in Arizona, Colorado, the Carolinas and Texas. Excluding the housing inventory impairment charges from continuing operations, the Company's 2008 third quarter gross margin percentage from home sales would have been 14.3% versus 20.3% in 2007.** The 600 basis point decrease in the year-over-year as adjusted gross margin percentage was driven primarily by lower gross margins in California, Arizona and Florida, and to a lesser extent, Texas, Colorado and the Carolinas. The lower gross margins in these markets were driven by increased incentives and discounts resulting from weaker demand, more limited availability of mortgage credit, and an increased level of existing homes available for sale in the marketplace. These factors have continued to put downward pressure on home prices. Until market conditions stabilize, the Company may continue to incur additional inventory impairment charges.
Income Taxes
As a result of the continued downturn in the housing market and the uncertainty as to its magnitude and length, the Company recorded a noncash valuation allowance of $134.1 million, net of the reversal of a portion of the deferred tax asset valuation allowance discussed below, during the three months ended September 30, 2008 against the Company's net deferred tax assets in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," resulting in a total valuation allowance of $529.2 million at September 30, 2008. To the extent that the Company generates eligible taxable income in the future to utilize the tax benefits of the related deferred tax assets, it will be able to reduce its effective tax rate by reducing the valuation allowance.
During the three months ended September 30, 2008, the Company recognized an income tax benefit as a result of filing a $20.8 million refund claim related to our 2007 federal income tax return, which resulted in the reversal of a portion of the deferred tax asset valuation allowance.
As a result of the closing of the first phase of the MatlinPatterson transaction, the Company believes that an ownership change under Internal Revenue Code Section 382 ("Section 382") occurred during the 2008 second quarter. Accordingly, the Company may be limited on the use of certain tax attributes that relate to tax periods prior to the ownership change. As such, included in the total deferred tax valuation allowance of $529.2 million is a $39.8 million charge related to the potential Section 382 limitation on the Company's ability to carry 2008 tax losses back to 2006 for refund purposes. The Company is in the process of evaluating these potential carryback limitations, including potentially soliciting a private ruling from the IRS, and to the extent successful in subsequent quarters may result in the reversal of a portion of the current valuation allowance.
Earnings Conference Call
A conference call to discuss the Company's 2008 third quarter will be held at 11:00 am Eastern Time Thursday, October 30, 2008. 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) 661-5127 (domestic) or (913) 981-5524 (international); Passcode: 3541387. 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 (domestic) or (719) 457-0820 (international); Passcode: 3541387.
About Standard Pacific
Standard Pacific, one of the nation's largest homebuilders, has built homes for more than 100,000 families during its 42-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, Standard Pacific Mortgage, Inc., SPH Home 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 continuation of challenging housing market conditions; the near term liquidity and strategic capital provided by our cash position; our ability to take advantage of attractive land and corporate opportunities; a decline in demand and the ineffectiveness of governmental efforts to stabilize the housing market; our efforts to achieve transformational change to achieve a more efficient operating structure, a lower cost structure and a more proficient sales and marketing organization; the potential for exiting additional joint ventures; the potential for further inventory impairment charges and further deposit and capitalized preacquisition cost write-offs; that all or a portion of our tax valuation allowance could be unwound; the potential impact of future earnings or losses on our deferred tax valuation allowance; 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. 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 credit agreements, public notes, and private term loans and our ability to comply with their covenants; a negative change 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; new law restricting down payment assistance programs; 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, including hedging activities; 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, 2007 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:
Andrew H. Parnes, Executive Vice President-Finance & CFO (949) 789-1616,
Press Inquiries: Andrea Priest, (212) 355-4449, Joele Frank, Wilkinson Brimmer Katcher
* Excludes the Company's unconsolidated joint ventures and the Company's Tucson and San Antonio operations, which are included in discontinued operations. ** Please see "Reconciliation of Non-GAAP Financial Measures" below. (Note: Tables follow) STANDARD PACIFIC CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, 2008 2007 % Change (Dollars in thousands, except per share amounts) Homebuilding: Home sale revenues $394,942 $594,266 (34%) Land sale revenues 5,398 48,953 (89%) Total revenues 400,340 643,219 (38%) Cost of home sales (547,537) (589,219) (7%) Cost of land sales (59,375) (102,520) (42%) Total cost of sales (606,912) (691,739) (12%) Gross margin (206,572) (48,520) 326% Gross margin % (51.6%) (7.5%) Selling, general and administrative expenses (76,894) (93,621) (18%) Loss from unconsolidated joint ventures (91,937) (38,459) 139% Interest expense (3,938) - - Other income (expense) (8,941) (4,375) 104% Homebuilding pretax loss (388,282) (184,975) 110% Financial Services: Revenues 2,492 2,336 7% Expenses (3,106) (3,593) (14%) Income from unconsolidated joint ventures 284 248 15% Other income 17 155 (89%) Financial services pretax income (loss) (313) (854) (63%) Loss from continuing operations before income taxes (388,595) (185,829) 109% (Provision) benefit for income taxes 19,840 72,087 (72%) Loss from continuing operations (368,755) (113,742) 224% Loss from discontinued operations, net of income taxes (69) (5,924) (99%) Net loss (368,824) (119,666) 208% Less: Net loss allocated to preferred stockholders 164,728 - - Net loss available to common stockholders $(204,096) $(119,666) 71% Basic loss per share: Continuing operations $(2.53) $(1.58) 60% Discontinued operations - (0.08) (100%) Basic loss per share $(2.53) $(1.66) 52% Diluted loss per share: Continuing operations $(2.53) $(1.58) 60% Discontinued operations - (0.08) (100%) Diluted loss per share $(2.53) $(1.66) 52% Weighted average common shares outstanding: Basic 80,681,394 72,267,863 12% Diluted 145,800,364 72,267,863 102% Cash dividends per share $ - $0.04 (100%) Nine Months Ended September 30, 2008 2007 % Change (Dollars in thousands, except per share amounts) Homebuilding: Home sale revenues $1,145,608 $1,782,673 (36%) Land sale revenues 13,609 172,552 (92%) Total revenues 1,159,217 1,955,225 (41%) Cost of home sales (1,460,382) (1,715,486) (15%) Cost of land sales (97,704) (280,742) (65%) Total cost of sales (1,558,086) (1,996,228) (22%) Gross margin (398,869) (41,003) 873% Gross margin % (34.4%) (2.1%) Selling, general and administrative expenses (235,473) (278,770) (16%) Loss from unconsolidated joint ventures (130,322) (119,049) 9% Interest expense (3,938) - - Other income (expense) (21,484) (22,378) (4%) Homebuilding pretax loss (790,086) (461,200) 71% Financial Services: Revenues 10,897 12,015 (9%) Expenses (11,063) (11,923) (7%) Income from unconsolidated joint ventures 659 780 (16%) Other income 128 501 (74%) Financial services pretax income (loss) 621 1,373 (55%) Loss from continuing operations before income taxes (789,465) (459,827) 72% (Provision) benefit for income taxes (42,030) 179,025 (123%) Loss from continuing operations (831,495) (280,802) 196% Loss from discontinued operations, net of income taxes (2,005) (45,574) (96%) Net loss (833,500) (326,376) 155% Less: Net loss allocated to preferred stockholders 187,842 - - Net loss available to common stockholders $(645,658) $(326,376) 98% Basic loss per share: Continuing operations $(8.57) $(3.90) 120% Discontinued operations (0.02) (0.63) (97%) Basic loss per share $(8.59) $(4.53) 90% Diluted loss per share: Continuing operations $(8.57) $(3.90) 120% Discontinued operations (0.02) (0.63) (97%) Diluted loss per share $(8.59) $(4.53) 90% Weighted average common shares outstanding: Basic 75,155,044 72,120,101 4% Diluted 97,019,962 72,120,101 35% Cash dividends per share $ - $0.12 (100%) SELECTED FINANCIAL DATA Three Months Ended September 30, 2008 2007 (Dollars in thousands) Net income (loss) $(368,824) $(119,666) Net cash provided by (used in) operating activities $31,933 $(14,628) Net cash provided by (used in) investing activities $(11,111) $(38,465) Net cash provided by (used in) financing activities $121,014 $57,662 Adjusted Homebuilding EBITDA(1) $11,285 $63,742 Homebuilding SG&A as a percentage of homebuilding revenues 19.2% 14.6% Homebuilding interest incurred $33,328 $35,759 Homebuilding interest capitalized to inventories owned $27,790 $32,016 Homebuilding interest capitalized to investments in unconsolidated joint ventures $1,600 $3,743 Homebuilding interest expense $3,938 $ - Ratio of LTM Adjusted Homebuilding EBITDA to homebuilding interest incurred 0.5x 2.7x (1) 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) homebuilding depreciation and amortization, (f) amortization of stock-based compensation, (g) income (loss) from unconsolidated joint ventures and (h) 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 investors as one measure of the Company's 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. For the three and twelve months ended September 30, 2008 and 2007, EBITDA from continuing and discontinued operations was calculated as follows: Three Months Ended LTM Ended September 30, September 30, 2008 2007 2008 2007 (Dollars in thousands) Net income (loss) $(368,824) $(119,666) $(1,274,397) $(424,782) Add: Cash distributions of income from unconsolidated joint ventures 229 5,982 1,402 25,268 Provision (benefit) for income taxes (19,886) (75,379) 55,883 (268,344) Homebuilding interest expense 3,938 - 3,938 - Expensing of previously capitalized interest included in cost of sales 20,844 26,384 109,042 109,602 Impairment charges 276,105 181,702 938,986 774,346 Homebuilding depreciation and amortization 1,438 1,833 6,931 7,628 Amortization of stock-based compensation 5,174 3,177 20,671 13,753 Less: Income (loss) from unconsolidated joint ventures (91,653) (38,452) (209,703) (152,846) Income (loss) from financial services subsidiary (614) (1,257) 374 3,958 Adjusted Homebuilding EBITDA $11,285 $63,742 $71,785 $386,359
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, 2008 2007 2008 2007 (Dollars in thousands) Net cash provided by (used in) operating activities $31,933 $(14,628) $545,946 $523,782 Add: Provision (benefit) for income taxes (19,886) (75,379) 55,883 (268,344) Deferred tax valuation allowance (134,088) - (529,185) - Homebuilding interest expense 3,938 - 3,938 - Expensing of previously capitalized interest included in cost of sales 20,844 26,384 109,042 109,602 Excess tax benefits from share-based payment arrangements - 28 - 1,755 Gain (loss) on early extinguishment of debt - - (5,254) - Less: Income (loss) from financial services subsidiary (614) (1,257) 374 3,958 Depreciation and amortization from financial services subsidiary 188 182 837 617 Loss on disposal of property and equipment 901 - 2,340 - Net changes in operating assets and liabilities: Trade and other receivables 1,442 40,527 (40,315) 21,069 Mortgage loans held for sale 14,446 565 (22,969) (20,753) Inventories-owned (59,724) 57,908 (330,877) (306,886) Inventories-not owned 8,426 (4,744) 7,616 (22,695) Deferred income taxes 124,936 41,438 206,136 261,676 Other assets 18,669 37,908 (4,624) 51,120 Accounts payable 1,264 (35,145) 50,535 (8,798) Accrued liabilities (440) (12,195) 29,464 49,406 Adjusted Homebuilding EBITDA $11,285 $63,742 $71,785 $386,359 STANDARD PACIFIC CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) September 30, December 31, 2008 2007 ASSETS (unaudited) Homebuilding: Cash and equivalents $711,953 $219,141 Trade and other receivables 35,728 28,599 Inventories: Owned 1,626,398 2,059,235 Not owned 78,523 109,757 Investments in and advances to unconsolidated joint ventures 59,518 293,967 Deferred income taxes 7,183 143,995 Goodwill and other intangibles 35,522 35,597 Other assets 124,305 300,135 2,679,130 3,190,426 Financial Services: Cash and equivalents 9,197 12,413 Mortgage loans held for sale 60,983 155,340 Mortgage loans held for investment 12,341 10,973 Other assets 7,185 11,847 89,706 190,573 Assets of discontinued operations 1,651 19,727 Total Assets $2,770,487 $3,400,726 LIABILITIES AND STOCKHOLDERS' EQUITY Homebuilding: Accounts payable $65,346 $95,190 Accrued liabilities 201,820 280,513 Liabilities from inventories not owned 37,707 43,007 Revolving credit facility 52,500 90,000 Trust deed and other notes payable 71,542 34,714 Senior notes payable 1,312,973 1,400,344 Senior subordinated notes payable 148,693 249,350 1,890,581 2,193,118 Financial Services: Accounts payable and other liabilities 3,291 5,023 Mortgage credit facilities 65,110 164,172 68,401 169,195 Liabilities of discontinued operations 1,470 5,221 Total Liabilities 1,960,452 2,367,534 Minority Interests 21,909 38,201 Stockholders' Equity: Preferred stock, $0.01 par value; 10,000,000 shares authorized; 450,829 and 0 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively 5 - Common stock, $0.01 par value; 600,000,000 shares authorized; 100,526,035(1) and 72,689,595(1) shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively 1,005 727 Additional paid-in capital 964,404 340,067 Retained earnings (deficit) (166,620) 666,880 Accumulated other comprehensive loss, net of tax (10,668) (12,683) Total Stockholders' Equity 788,126 994,991 Total Liabilities and Stockholders' Equity $2,770,487 $3,400,726 (1) At September 30, 2008 and December 31, 2007, shares outstanding include 7,839,809 shares issued under a share lending facility related to our 6% convertible senior subordinated notes issued on Sept. 28, 2007. BALANCE SHEET DATA (Dollars in thousands, except per share amounts) At September 30, 2008 2007 Stockholders' equity per common share (1) $8.50 $22.07 Pro forma stockholders' equity per common share (2) $2.72 N/A Ratio of total debt to total book capitalization (3) 67.7% 59.7% Ratio of adjusted net homebuilding debt to total book capitalization (4) 52.7% 57.9% Ratio of total debt to LTM adjusted homebuilding EBITDA (3) 23.0x 5.5x Ratio of adjusted net homebuilding debt to LTM adjusted homebuilding EBITDA (4) 12.2x 5.1x Homebuilding interest capitalized in inventories owned $172,048 $148,649 Homebuilding interest capitalized as a percentage of inventories owned 10.6% 5.3% (1) At September 30, 2008 and 2007, common shares outstanding exclude 7,839,809 shares and 6,000,000 shares, respectively, issued under a share lending facility related to our 6% convertible senior subordinated notes issued on September 28, 2007. (2) The pro forma common shares outstanding include the as-converted Series B Preferred Stock and the Warrant (assuming a cashless exercise) at the mandatory exercise prices. In addition, this calculation excludes 7,839,809 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 investors as a measure to determine the book value per common share after giving effect of the issuance of Preferred Shares and Warrant to MatlinPatterson assuming full conversion to common stock. This is a non-GAAP financial measure and due to the significance of items adjusted and excluded from this calculation, such measure should not be considered in isolation or as an alternative to operating performance measures. The following table reconciles actual common shares outstanding to pro forma common shares outstanding and calculates pro forma stockholders' equity per share at September 30, 2008: Actual common shares outstanding 100,526,035 Add: Conversion of Preferred shares to common shares 147,812,786 Add: Common shares issued under cashless exercise of the Warrant 49,546,048 Less: Common shares outstanding under share lending facility 7,839,809 Pro forma common shares outstanding 290,045,060 Stockholders' equity (actual amounts rounded to nearest thousand) $788,126,000 Divided by pro forma common shares outstanding / 290,045,060 Pro forma stockholders' equity per common share $2.72 (3) Total debt at September 30, 2008 and 2007 includes $65.1 million and $83.2 million, respectively, of indebtedness of the Company's financial services subsidiary and $3.5 million and $11.4 million, respectively, of indebtedness included in liabilities from inventories not owned. In addition, total debt at September 30, 2007 excludes $59.7 million of indebtedness included in trust deed and other notes payable related to a joint venture that was consolidated as of September 30, 2007. This indebtedness was excluded from the leverage calculation as the joint venture is less than an 80% owned subsidiary of the Company and was therefore excluded from our bank credit facilities and public note covenant calculations. (4) 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 in excess of $5 million. 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 the Company's ability to obtain financing. These are non-GAAP ratios and other companies may calculate these ratios differently. For purposes of the ratio of adjusted net homebuilding debt to total book capitalization, total book capitalization is adjusted net homebuilding debt plus stockholders' equity. Adjusted net homebuilding debt is calculated as follows: At September 30, 2008 2007 (Dollars in thousands) Total consolidated debt $1,654,318 $2,120,073 Less: Indebtedness included in liabilities from inventories not owned 3,500 11,432 Financial services indebtedness 65,110 83,163 Consolidated joint venture indebtedness - 59,705 Homebuilding cash in excess of $5 million 706,961 - Adjusted net homebuilding debt $878,747 $1,965,773 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES***
The table set forth below reconciles the Company's earnings (loss) for the three months ended September 30, 2008 to earnings (loss) excluding the after-tax impairment and deferred tax asset valuation charges:
Three Months Ended September 30, 2008 Net Income (Loss) Shares EPS (Dollars in thousands, except per share amounts) Net income (loss) $(368,824) 145,800,364 $(2.53) Add: Impairment charges, net of income taxes 225,064 145,800,364 1.54 Add: Deferred tax asset valuation allowance 134,088 145,800,364 0.92 Net income (loss), as adjusted $(9,672) 145,800,364 $(0.07)
The table set forth below reconciles the Company's homebuilding gross margin percentage and gross margin percentage from home sales for the three months ended September 30, 2008 and 2007, excluding housing inventory impairment charges:
Three Months Ended September 30, Gross Gross 2008 Margin % 2007 Margin % (Dollars in thousands) Homebuilding gross margin $(206,572) (51.6%) $(48,520) (7.5%) Less: Land sale revenues 5,398 48,953 Add: Cost of land sales 59,375 102,520 Gross margin from home sales (152,595) (38.6%) 5,047 0.8% Add: Housing inventory impairment charges 209,228 115,848 Gross margin from home sales, as adjusted $56,633 14.3% $120,895 20.3% *** We believe that the measures described above which exclude the effect of impairment and tax valuation charges are useful to investors as they provide investors with a perspective on the underlying operating performance of the business by isolating the impact of charges related to inventory impairments, land deposit and capitalized preacquisition cost writeoffs for abandoned projects and the tax valuation allowance. However, it should be noted that such measures are not GAAP financial measures. 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.
