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| SPF > SEC Filings for SPF > Form 10-Q on 27-Jul-2012 | All Recent SEC Filings |
27-Jul-2012
Quarterly Report
Results of Operations
Selected Financial Information
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues $ 274,872 $ 204,236 $ 495,189 $ 347,935
Land sale revenues ? 109 3,385 109
Total revenues 274,872 204,345 498,574 348,044
Cost of home sales (218,586 ) (169,433 ) (394,181 ) (283,745 )
Cost of land sales ? (114 ) (3,366 ) (114 )
Total cost of sales (218,586 ) (169,547 ) (397,547 ) (283,859 )
Gross margin 56,286 34,798 101,027 64,185
Gross margin percentage 20.5 % 17.0 % 20.3 % 18.4 %
Selling, general and administrative
expenses (41,952 ) (38,443 ) (79,644 ) (70,704 )
Loss from unconsolidated joint ventures (1,146 ) (379 ) (2,668 ) (636 )
Interest expense (1,617 ) (7,444 ) (4,147 ) (17,959 )
Other income (expense) 307 977 4,591 1,269
Homebuilding pretax income (loss) 11,878 (10,491 ) 19,159 (23,845 )
Financial Services:
Revenues 5,405 2,535 9,031 3,595
Expenses (2,915 ) (2,429 ) (5,175 ) (4,847 )
Other income 84 41 147 56
Financial services pretax income (loss) 2,574 147 4,003 (1,196 )
Income (loss) before income taxes 14,452 (10,344 ) 23,162 (25,041 )
Provision for income taxes (189 ) (175 ) (376 ) (275 )
Net income (loss) 14,263 (10,519 ) 22,786 (25,316 )
Less: Net (income) loss allocated to
preferred shareholder (6,130 ) 4,554 (9,807 ) 10,968
Less: Net (income) loss allocated to
unvested restricted stock (15 ) ? (12 ) ?
Net income (loss) available to common
stockholders $ 8,118 $ (5,965 ) $ 12,967 $ (14,348 )
Income (Loss) Per Common Share:
Basic $ 0.04 $ (0.03 ) $ 0.07 $ (0.07 )
Diluted $ 0.04 $ (0.03 ) $ 0.06 $ (0.07 )
Weighted Average Common Shares
Outstanding:
Basic 195,746,733 193,577,324 195,427,992 193,369,182
Diluted 201,340,622 193,577,324 200,564,039 193,369,182
Weighted average additional common
shares outstanding
if preferred shares converted to common
shares 147,812,786 147,812,786 147,812,786 147,812,786
Total weighted average diluted common
shares outstanding
if preferred shares converted to common
shares 349,153,408 341,390,110 348,376,825 341,181,968
Net cash provided by (used in) operating
activities $ (56,600 ) $ (121,963 ) $ (98,718 ) $ (232,113 )
Net cash provided by (used in) investing
activities $ (5,545 ) $ (5,475 ) $ (7,891 ) $ (9,524 )
Net cash provided by (used in) financing
activities $ (11,638 ) $ 12,938 $ (5,031 ) $ (6,059 )
Adjusted Homebuilding EBITDA (1) $ 41,810 $ 23,678 $ 73,578 $ 34,696
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(1) continued
The table set forth below reconciles net cash provided by (used in) operating activities, calculated and presented in accordance with GAAP, to Adjusted Homebuilding EBITDA:
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
(Dollars in thousands)
Net cash provided by (used in) operating
activities $ (56,600 ) $ (121,963 ) $ (98,718 ) $ (232,113 )
Add:
Provision for income taxes 189 175 376 275
Homebuilding interest amortized to cost
of sales and interest expense 26,082 23,590 47,187 45,085
Less:
Income (loss) from financial services
subsidiary 2,490 106 3,856 (1,252 )
Depreciation and amortization from
financial services subsidiary 28 233 44 576
(Gain) loss on disposal of property and
equipment 3 (2 ) 3 ?
Net changes in operating assets and
liabilities:
Trade and other receivables 471 10,330 7,462 11,493
Mortgage loans held for sale 4,430 15,064 (4,103 ) 4,770
Inventories-owned 70,986 88,912 115,187 194,058
Inventories-not owned 872 9,990 3,499 12,800
Other assets 1,105 1,112 77 (2,028 )
Accounts payable 3,368 (793 ) 1,453 138
Accrued liabilities (6,572 ) (2,402 ) 5,061 (458 )
Adjusted Homebuilding EBITDA $ 41,810 $ 23,678 $ 73,578 $ 34,696
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Three and Six Months Ended June 30, 2012 Compared to Three and Six Months Ended June 30, 2011
Overview
Our 2012 second quarter reflected a continuation of the positive momentum we experienced during the first quarter, with new home deliveries up 34%, revenues up 35%, net new orders up 45%, and homes in backlog up 62% as compared to the year earlier period. Net income for the quarter was $14.3 million, or $0.04 per diluted share, compared to a net loss of $10.5 million, or $0.03 per diluted share, in the second quarter of 2011. The $24.8 million year over year improvement in net income is attributable to several factors, including the continued execution of our strategy of constructing well built, innovatively designed, and energy efficient homes targeted at the discriminating "move-up" homebuyer; our focus on increasing base prices, reducing sales incentives and controlling costs; and the operating leverage inherent in our business. With over $292 million of unrestricted homebuilding cash and the additional amounts that remain available under our revolving credit facility, we believe we have ample liquidity to continue the progress we have made against our strategy.
Homebuilding
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
(Dollars in thousands)
Homebuilding revenues:
California $ 147,087 $ 113,737 $ 262,457 $ 192,647
Southwest 64,115 47,153 120,234 82,932
Southeast 63,670 43,455 115,883 72,465
Total homebuilding revenues $ 274,872 $ 204,345 $ 498,574 $ 348,044
Homebuilding pretax income (loss):
California $ 8,583 $ (413 ) $ 16,715 $ (2,534 )
Southwest 1,947 (3,647 ) 2,980 (7,534 )
Southeast 652 (2,385 ) (75 ) (6,104 )
Corporate 696 (4,046 ) (461 ) (7,673 )
Total homebuilding pretax income (loss) $ 11,878 $ (10,491 ) $ 19,159 $ (23,845 )
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Homebuilding pretax income for the 2012 second quarter was $11.9 million compared to a pretax loss of $10.5 million in the year earlier period. The improvement in our financial performance was primarily the result of a 35% increase in home sale revenues, a $6.0 million decrease in inventory impairment charges and a $5.8 million decrease in interest expense.
For the six months ended June 30, 2012, we reported homebuilding pretax income of $19.2 million compared to a pretax loss of $23.8 million in the year earlier period. The improvement in our financial performance was primarily the result of a 42% increase in home sale revenues, a $13.8 million decrease in interest expense and a $6.0 million decrease in inventory impairment charges.
Revenues
Home sale revenues increased 35%, from $204.2 million for the 2011 second
quarter to $274.9 million for the 2012 second quarter, as a result of a 34%
increase in new home deliveries and a 1% increase in our consolidated average
home price to $337 thousand. Home sale revenues increased 42%, from $347.9
million for the six months ended June 30, 2011 to $495.2 million for the six
months ended June 30, 2012, as a result of a 39% increase in new home deliveries
and a 2% increase in our consolidated average home price to $340 thousand.
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 % Change 2012 2011 % Change
New homes delivered:
California 316 231 37% 541 401 35%
Arizona 64 43 49% 110 78 41%
Texas 137 96 43% 261 172 52%
Colorado 23 27 (15%) 47 44 7%
Nevada 6 5 20% 9 10 (10%)
Total Southwest 230 171 35% 427 304 40%
Florida 134 111 21% 260 173 50%
Carolinas 135 97 39% 229 171 34%
Total Southeast 269 208 29% 489 344 42%
Consolidated total 815 610 34% 1,457 1,049 39%
Unconsolidated joint ventures (1) 10 6 67% 14 14 ?
Total (including joint ventures)
(1) 825 616 34% 1,471 1,063 38%
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The increase in new home deliveries (exclusive of joint ventures) was driven primarily by a 55% increase in the number of homes in backlog at the beginning of the quarter as compared to the year earlier period and a 13% increase in speculative homes sold and delivered during the quarter to 285 homes, compared to 253 homes.
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 % Change 2012 2011 % Change
(Dollars in thousands)
Average selling prices of homes
delivered:
California $ 465 $ 492 (5%) $ 479 $ 480 (0%)
Arizona 206 211 (2%) 207 209 (1%)
Texas 300 299 0% 299 297 1%
Colorado 377 307 23% 377 309 22%
Nevada 194 198 (2%) 192 195 (2%)
Total Southwest 279 275 1% 282 272 4%
Florida 230 195 18% 237 198 20%
Carolinas 244 225 8% 236 223 6%
Total Southeast 237 209 13% 237 211 12%
Consolidated 337 335 1% 340 332 2%
Unconsolidated joint ventures
(1) 426 549 (22%) 436 459 (5%)
Total (including joint
ventures) (1) $ 338 $ 337 0% $ 341 $ 333 2%
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Our consolidated average home price (excluding joint ventures) for the 2012 second quarter was essentially flat when compared to the year earlier period. This reflects a product mix shift to more move-up homes within our Florida and Colorado markets and general price increases in the Carolinas, offset by a decrease in average home prices in California, primarily as a result of a higher percentage of deliveries from our more affordable Inland Empire and Sacramento communities.
Gross Margin
Our 2012 second quarter gross margin percentage from home sales increased to 20.5% compared to 17.0% in the 2011 second quarter which included $6.0 million of housing inventory impairment charges. Excluding inventory impairment charges, our 2011 second quarter adjusted gross margin percentage from home sales was 20.0%. The increase in our gross margin percentage from home sales, excluding inventory impairment charges, was primarily attributable to the improvement in gross margins from speculative homes sold and delivered during the quarter, partially offset by an increase in previously capitalized interest included in cost of home sales. For the first six months of 2012, our gross margin percentage from home sales was 20.4% versus 18.4% (20.2% excluding inventory impairment charges) for the prior year period. Please see the table set forth below reconciling this non-GAAP measure to our gross margin from home sales.
The table set forth below reconciles our homebuilding gross margin and gross margin percentage for the three and six months ended June 30, 2011 to gross margin and gross margin percentage from home sales, excluding housing inventory impairment charges:
Three Months
Ended Gross Six Months Ended Gross
June 30, 2011 Margin % June 30, 2011 Margin %
(Dollars in thousands)
Home sale revenues $ 204,236 $ 347,935
Less: Cost of home sales (169,433) (283,745)
Gross margin from home sales 34,803 17.0% 64,190 18.4%
Add: Inventory impairment 5,959 5,959
charges
Gross margin from home $ 40,762 $ 70,149
sales, as adjusted 20.0% 20.2%
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SG&A Expenses
Our 2012 second quarter SG&A expenses (including Corporate G&A) were $42.0 million compared to $38.4 million for the prior year period which included approximately $2.2 million of severance and other charges incurred in connection with the change in our Chief Financial Officer position. Excluding these charges, our 2011 second quarter adjusted SG&A rate from home sales was 17.8% (please see the table set forth below reconciling this non-GAAP measure to our SG&A rate from home sales) versus a SG&A rate from home sales of 15.3% in the 2012 second quarter. The 250 basis point improvement in our adjusted SG&A rate was primarily the result of a 35% increase in home sale revenues and the operating leverage inherent in our business. Our SG&A expenses for the six months ended June 30, 2011 also included $0.6 million of severance charges recorded during the 2011 first quarter in connection with restructuring efforts to adjust our workforce to align with lower sales volume.
The table set forth below reconciles our SG&A expenses and SG&A rate from home sales for the three and six months ended June 30, 2011 to our SG&A expenses and SG&A rate from home sales, excluding severance and other charges related to the change in our Chief Financial Officer:
Three
Months Six Months
Ended SG&A Ended SG&A
June 30, as a % of June 30, as a % of
2011 home sales 2011 home sales
(Dollars in thousands)
Selling, general and $ 38,443 $ 70,704
administrative expenses 18.8% 20.3%
Less: Severance and other (2,178) (2,739)
charges (1.0%) (0.8%)
Selling, general and
administrative expenses,
excluding severance and $ 36,265 $ 67,965
other charges 17.8% 19.5%
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Unconsolidated Joint Ventures
We recognized a $1.1 million loss from unconsolidated joint ventures during the 2012 second quarter compared to a $0.4 million loss in the year earlier period. The 2012 second quarter loss from unconsolidated joint ventures was primarily attributable to our share of loss related to a Southern California land development joint venture. Please see Note 9 to our accompanying condensed consolidated financial statements for further discussion.
Interest Expense
For the three and six months ended June 30, 2012, we expensed $1.6 million and $4.1 million, respectively, of interest costs related to the portion of our debt in excess of our qualified assets. For the three and six months ended June 30, 2011, we expensed $7.4 million and $18.0 million, respectively, of interest costs. The decline in our year-over-year interest expense was primarily the result of an increase in the level of qualified assets during the 2012 periods compared to the prior year periods. To the extent our debt exceeds our qualified assets in the future, we will continue to be required to expense a portion of the interest related to such debt.
Operating Data
Three Months Ended June 30, Six Months Ended June 30,
% %
Absorption Absorption
2012 2011 % Change Change (1) 2012 2011 % Change Change (1)
Net new orders (2):
California 425 313 36% 36% 752 545 38% 30%
Arizona 93 33 182% 222% 176 79 123% 151%
Texas 151 139 9% 14% 292 259 13% 18%
Colorado 42 25 68% 40% 68 51 33% 11%
Nevada 1 2 (50%) ? 6 3 100% ?
Total Southwest 287 199 44% 53% 542 392 38% 46%
Florida 208 142 46% 42% 394 257 53% 45%
Carolinas 188 110 71% 46% 354 222 59% 23%
Total Southeast 396 252 57% 44% 748 479 56% 34%
Consolidated total 1,108 764 45% 41% 2,042 1,416 44% 34%
Unconsolidated joint ventures
(3) 16 8 100% 200% 24 16 50% 50%
Total (including joint
ventures) 1,124 772 46% 43% 2,066 1,432 44% 34%
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(2) Net new orders are new orders for the purchase of homes during the period, less cancellations of existing contracts during such period.
(3) Numbers presented regarding unconsolidated joint ventures reflect total net new orders of such joint ventures.
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 % Change 2012 2011 % Change
Average number of selling communities
during the period:
California 53 53 ? 52 49 6%
Arizona 7 8 (13%) 8 9 (11%)
Texas 20 21 (5%) 20 21 (5%)
Colorado 6 5 20% 6 5 20%
Nevada ? 1 (100%) ? 1 (100%)
Total Southwest 33 35 (6%) 34 36 (6%)
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