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SPF > SEC Filings for SPF > Form 10-Q on 26-Jul-2013All Recent SEC Filings

Show all filings for STANDARD PACIFIC CORP /DE/

Form 10-Q for STANDARD PACIFIC CORP /DE/


26-Jul-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Results of Operations
                         Selected Financial Information
                                  (Unaudited)

                                            Three Months Ended June 30,           Six Months Ended June 30,
                                              2013               2012              2013              2012
                                                   (Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues                         $     434,308     $     274,872     $     789,434     $     495,189
Land sale revenues                                 4,373                 ?             6,968             3,385
Total revenues                                   438,681           274,872           796,402           498,574
Cost of home sales                              (331,503 )        (218,586 )        (612,115 )        (394,181 )
Cost of land sales                                (4,416 )               ?            (6,999 )          (3,366 )
Total cost of sales                             (335,919 )        (218,586 )        (619,114 )        (397,547 )
Gross margin                                     102,762            56,286           177,288           101,027
Gross margin percentage                             23.4 %            20.5 %            22.3 %            20.3 %
Selling, general and administrative
expenses                                         (54,598 )         (41,952 )        (100,892 )         (79,644 )
Income (loss) from unconsolidated joint
ventures                                             147            (1,146 )           1,281            (2,668 )
Interest expense                                       ?            (1,617 )               ?            (4,147 )
Other income (expense)                            (1,247 )             307             2,323             4,591
Homebuilding pretax income                        47,064            11,878            80,000            19,159

Financial Services:
Revenues                                           7,411             5,405            13,088             9,031
Expenses                                          (3,482 )          (2,915 )          (6,804 )          (5,175 )
Other income                                         151                84               253               147
Financial services pretax income                   4,080             2,574             6,537             4,003

Income before taxes                               51,144            14,452            86,537            23,162
Provision for income taxes                        (8,008 )            (189 )         (21,577 )            (376 )
Net income                                        43,136            14,263            64,960            22,786
  Less: Net income allocated to
preferred shareholder                            (14,293 )          (6,130 )         (23,991 )          (9,807 )
  Less: Net income allocated to unvested
restricted stock                                     (66 )             (15 )             (82 )             (12 )
Net income available to common
stockholders                               $      28,777     $       8,118     $      40,887     $      12,967

Income Per Common Share:
Basic                                      $        0.12     $        0.04     $        0.18     $        0.07
Diluted                                    $        0.11     $        0.04     $        0.16     $        0.06

Weighted Average Common Shares
Outstanding:
Basic                                        243,171,726       195,746,733       228,749,443       195,427,992
Diluted                                      281,708,696       201,340,622       267,274,060       200,564,039

Weighted average additional common
shares outstanding
if preferred shares converted to common
shares                                       120,779,819       147,812,786       134,221,626       147,812,786

Total weighted average diluted common
shares outstanding
if preferred shares converted to common
shares                                       402,488,515       349,153,408       401,495,686       348,376,825

Net cash provided by (used in) operating
activities                                 $     (90,743 )   $     (56,600 )   $    (149,204 )   $     (98,718 )
Net cash provided by (used in) investing
activities                                 $    (125,253 )   $      (5,545 )   $    (126,854 )   $      (7,891 )
Net cash provided by (used in) financing
activities                                 $      10,319     $     (11,638 )   $      10,139     $      (5,031 )
Adjusted Homebuilding EBITDA (1)           $      82,376     $      41,810     $     146,199     $      73,578


__________________


(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 and deposit write-offs, (e) gain (loss) on early extinguishment of debt, (f) homebuilding depreciation and amortization, (g) amortization of stock-based compensation, (h) income (loss) from unconsolidated joint ventures and (i) 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 management and investors as one 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 cash flows from operations or any other liquidity performance measure prescribed by GAAP.

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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,
                                                2013                 2012               2013              2012
                                                                   (Dollars in thousands)

Net cash provided by (used in) operating
activities                                 $      (90,743 )     $      (56,600 )   $     (149,204 )     $ (98,718 )
Add:
Provision for income taxes, net of
deferred component                                    199                  189                394             376
Homebuilding interest amortized to cost
of sales and interest expense                      30,662               26,082             58,547          47,187
Less:
Income from financial services
subsidiary                                          3,929                2,490              6,284           3,856
Depreciation and amortization from
financial services subsidiary                          28                   28                 56              44
Loss on disposal of property and
equipment                                               1                    3                 16               3
Net changes in operating assets and
liabilities:
Trade and other receivables                        10,732                  471             19,648           7,462
Mortgage loans held for sale                      (11,818 )              4,430            (11,958 )        (4,103 )
Inventories-owned                                 156,993               70,986            230,023         115,187
Inventories-not owned                               4,770                  872              9,710           3,499
Other assets                                        3,083                1,105              1,254              77
Accounts payable                                   (1,198 )              3,368                380           1,453
Accrued liabilities                               (16,346 )             (6,572 )           (6,239 )         5,061
Adjusted Homebuilding EBITDA               $       82,376       $       41,810     $      146,199       $  73,578

Three and Six Months Ended June 30, 2013 Compared to Three and Six Months Ended June 30, 2012

Overview

Our 2013 second quarter reflected a continuation of the positive operating performance we achieved during the 2013 first quarter and fiscal 2012, resulting from the continued execution of our strategy and the housing market recovery. During the 2013 second quarter, new home deliveries, net new orders, home sale revenues and homes in backlog were up 34%, 37%, 58% and 79%, respectively, as compared to the year earlier period. Net income for the 2013 second quarter was $43.1 million, or $0.11 per diluted share, which included a provision for income taxes of $8.0 million. Net income for the 2012 second quarter was $14.3 million, or $0.04 per diluted share, which included a provision for income taxes of $0.2 million. Pretax income for the 2013 second quarter was $51.1 million compared to $14.5 million in the year earlier period. Our average selling price of homes delivered for the 2013 second quarter was $397 thousand, an 18% increase from the prior year period, our gross margin from home sales was 23.7%, a 320 basis point increase, and our SG&A rate from home sales was 12.6%, a 270 basis point improvement.

During the quarter we were also able to continue to find new land opportunities that met our underwriting criteria. We spent approximately $299.0 million on land and land development and acquired approximately 2,885 homesites. Included within our second quarter land spend was the acquisition of 30 current and future communities (five actively selling in Florida) from a homebuilder in the Southeast. The acquisition strengthened our move-up position in Florida and the Carolinas, giving us control of approximately 3,000 homesites (1,500 owned and 1,500 under contract for future purchase). Our 2013 second quarter operating results included 122 net new orders (119 resulting from homes under contract at the time of the transaction) and nine new home deliveries. We remain focused on acquiring and developing strategically located and appropriately priced land and continue to design and build the highly desirable, amenity-rich communities and homes that appeal to the move-up and luxury home buying segments that we believe will afford us the best opportunity to maximize margin while obtaining an appropriate return on inventory.

As we move through the second half of 2013, we believe we are well positioned to benefit from our strong land position and the improved housing market. The low level of single family housing construction over the past several years, combined with the low level of available resale and new home inventory, suggest that demand should continue to outpace supply in most of our markets in the near term. When this supply constraint is combined with what are generally attractive affordability levels in most of our markets

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when compared to historical norms, we believe we continue to be well positioned for success, despite the recent uptick in mortgage interest rates.

  Homebuilding

                                               Three Months Ended June 30,           Six Months Ended June 30,
                                                2013                 2012              2013               2012
                                                                   (Dollars in thousands)
Homebuilding revenues:
California                                 $      229,008       $      147,087     $     428,198       $  262,457
Southwest                                          93,017               64,115           172,421          120,234
Southeast                                         116,656               63,670           195,783          115,883
Total homebuilding revenues                $      438,681       $      274,872     $     796,402       $  498,574

Homebuilding pretax income:
California                                 $       30,002       $        8,955     $      52,410       $   14,524
Southwest                                           8,542                2,109            15,053            3,871
Southeast                                           8,520                  814            12,537              764
Total homebuilding pretax income           $       47,064       $       11,878     $      80,000       $   19,159

Homebuilding pretax income for the 2013 second quarter was $47.1 million compared to $11.9 million in the year earlier period. The improvement in our financial performance was primarily the result of a 58% increase in home sale revenues, a 320 basis point improvement in gross margin from home sales and the operating leverage inherent in our business.

Revenues

Home sale revenues increased 58%, from $274.9 million for the 2012 second
quarter to $434.3 million for the 2013 second quarter, resulting from a 34%
increase in new home deliveries and an 18% increase in our consolidated average
home price to $397 thousand.

                                Three Months Ended June 30,       Six Months Ended June 30,
                                2013        2012     % Change    2013       2012     % Change
New homes delivered:
     California                     419       316         33%       819        541        51%
     Arizona                         57        64       (11%)       120        110         9%
     Texas                          155       137         13%       288        261        10%
     Colorado                        38        23         65%        81         47        72%
     Nevada                          ?          6      (100%)        ?           9     (100%)
          Total Southwest           250       230          9%       489        427        15%
     Florida                        239       134         78%       422        260        62%
     Carolinas                      187       135         39%       312        229        36%
          Total Southeast           426       269         58%       734        489        50%
                Total             1,095       815         34%     2,042      1,457        40%

The increase in new home deliveries was driven primarily by a 70% increase in the number of homes in beginning backlog expected to close during the quarter as compared to the year earlier period, partially offset by a decrease in speculative homes sold and closed in the quarter.

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                                                      Three Months Ended June 30,           Six Months Ended June 30,
                                                      2013         2012      % Change     2013         2012      % Change
                                                                           (Dollars in thousands)
Average selling prices of homes delivered:
       California                                  $      538    $     465        16%   $     515    $     479         8%
       Arizona                                            249          206        21%         249          207        20%
       Texas                                              399          300        33%         375          299        25%
       Colorado                                           441          377        17%         419          377        11%
       Nevada                                              ?           194         ?           ?           192         ?
              Total Southwest                             371          279        33%         352          282        25%
       Florida                                            261          230        13%         260          237        10%
       Carolinas                                          289          244        18%         275          236        17%
              Total Southeast                             273          237        15%         266          237        12%
                     Total                         $      397    $     337        18%   $     387    $     340        14%

Our consolidated average home price for the 2013 second quarter was up 18%, to $397 thousand, compared to the year earlier period. This reflects general price increases within the majority of our markets and a decrease in the use of sales incentives.

Gross Margin

Our 2013 second quarter gross margin percentage from home sales increased to 23.7% compared to 20.5% in the 2012 second quarter. The 320 basis point year over year increase in our gross margin percentage from home sales was primarily attributable to price increases, a mix shift to higher margin communities, and improved margins from speculative homes sold and delivered during the quarter.

SG&A Expenses

Our 2013 second quarter SG&A expenses (including Corporate G&A) were $54.6 million compared to $42.0 million for the prior year period, down 270 basis points as a percentage of home sale revenues to 12.6%, compared to 15.3% for the 2012 second quarter. The improvement in our SG&A rate was primarily the result of a 58% increase in home sale revenues and the operating leverage inherent in our business.

Other Income (Expense)

  Other income (expense) for the 2013 second quarter was primarily attributable
to transaction costs incurred in connection with the acquisition of a group of
approximately 30 current and future communities from a homebuilder in the
Southeast. Other income (expense) for the six months ended June 30, 2013 and
2012 also benefitted from property insurance claim settlements received of
approximately $3.5 million and $4.1 million, respectively.

Operating Data

                                             Three Months Ended June 30,                Six Months Ended June 30,
                                                                        %                                         %
                                                                    Absorption                                Absorption
                                        2013     2012    % Change   Change (1)    2013     2012    % Change   Change (1)
Net new orders (2):
      California                          513      425        21%          39%      995      752        32%          50%
      Arizona                              78       93      (16%)        (35%)      153      176      (13%)        (13%)
      Texas                               216      151        43%         (5%)      458      292        57%           5%
      Colorado                             65       42        55%          16%      127       68        87%          60%
      Nevada                               ?         1     (100%)            ?       ?         6     (100%)            ?
            Total Southwest               359      287        25%        (12%)      738      542        36%           3%
      Florida                             443      208       113%          87%      736      394        87%          72%
      Carolinas                           201      188         7%          25%      441      354        25%          41%
            Total Southeast               644      396        63%          63%    1,177      748        57%          60%
            Total                       1,516    1,108        37%          31%    2,910    2,042        43%          39%


__________________


(1) Represents the percentage change of net new orders per average number of selling communities during the period.

(2) Net new orders are new orders for the purchase of homes during the period, less cancellations of existing contracts during such period.

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                                            Three Months Ended June
                                                      30,               Six Months Ended June 30,
                                                                 %                            %
                                            2013      2012     Change    2013      2012     Change
Average number of selling communities
during the period:
    California                                 46        53     (13%)       46        52     (12%)
    Arizona                                     9         7       29%        8         8        ?
    Texas                                      30        20       50%       30        20       50%
    Colorado                                    8         6       33%        7         6       17%
         Total Southwest                       47        33       42%       45        34       32%
    Florida                                    41        36       14%       39        36        8%
    Carolinas                                  30        35     (14%)       31        35     (11%)
         Total Southeast                       71        71        ?        70        71      (1%)
         Total                                164       157        4%      161       157        3%

Net new orders for the 2013 second quarter increased 37%, to 1,516 homes, from the prior year period on a 4% increase in average active selling communities. Our monthly sales absorption rate for the 2013 second quarter was 3.1 per community (2.8 per community excluding the impact of the 119 homes under contract in Florida that we purchased in connection with the acquisition described above), up from 2.4 per community for the 2012 second quarter and 2.9 per community for the 2013 first quarter. Our cancellation rate for the three months ended June 30, 2013 was 11%, compared to 11% for the 2012 second quarter and 10% for the 2013 first quarter. Our cancellation rate (excluding cancellations from current quarter sales) for homes in beginning backlog for the 2013 and 2012 second quarter was 5% and 7%, respectively.

                                                                                     At June 30,
                                                            2013                        2012                      % Change
                                                   Homes      Dollar Value     Homes      Dollar Value     Homes      Dollar Value
Backlog ($ in thousands):
        California                                     616   $      366,617        385   $      191,654        60%              91%
        Arizona                                        110           36,330        123           25,648      (11%)              42%
        Texas                                          374          156,036        180           62,773       108%             149%
        Colorado                                       121           57,425         54           21,317       124%             169%
                Total Southwest                        605          249,791        357          109,738        69%             128%
        Florida                                        680          220,621        296           76,986       130%             187%
        Carolinas                                      371          110,555        228           61,316        63%              80%
                Total Southeast                      1,051          331,176        524          138,302       101%             139%
                Total                                2,272   $      947,584      1,266   $      439,694        79%             116%

The dollar value of our backlog as of June 30, 2013 increased 116% from the year earlier period to $947.6 million, or 2,272 homes. Our consolidated average home price in backlog of $417 thousand as of June 30, 2013 increased 20% compared to June 30, 2012, reflecting the continued execution of our strategy to focus on the move-up buyer, the shift to more to-be-built homes that have a longer construction cycle, and pricing opportunities in select markets. The estimated gross margin of our homes in backlog was 25.2% at the end of the quarter as compared to 20.7% at the end of the 2012 second quarter.

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                                                               At June 30,
                                                        2013      2012     % Change
Homesites owned and controlled:
         California                                     10,150     8,926        14%
         Arizona                                         1,975     1,820         9%
         Texas                                           5,220     4,038        29%
         Colorado                                        1,268       690        84%
         Nevada                                          1,124     1,124          ?
                   Total Southwest                       9,587     7,672        25%
         Florida                                        10,481     6,937        51%
         Carolinas                                       4,908     4,222        16%
                   Total Southeast                      15,389    11,159        38%
                   Total (including joint ventures)     35,126    27,757        27%

         Homesites owned                                27,497    21,369        29%
         Homesites optioned or subject to contract       7,039     5,176        36%
         Joint venture homesites (1)                       590     1,212      (51%)
                   Total (including joint ventures)     35,126    27,757        27%


Homesites owned:
         Raw lots                                        7,300     3,570       104%
         Homesites under development                     8,027     6,582        22%
         Finished homesites                              5,865     5,464         7%
         Under construction or completed homes           2,908     2,089        39%
         Held for sale                                   3,397     3,664       (7%)
                   Total                                27,497    21,369        29%


__________________


(1) Joint venture homesites represent our expected share of land development joint venture homesites and all of the homesites of our homebuilding joint ventures.

Total homesites owned and controlled as of June 30, 2013 increased 27% from the year earlier period and 14% from the 30,767 homesites owned and controlled as of December 31, 2012. We purchased $236.0 million of land (2,885 homesites) during the 2013 second quarter, of which 36% (based on homesites) was located in Florida, 31% in the Carolinas and 16% in California, with the balance spread throughout our other markets. As of June 30, 2013, we owned or controlled 35,126 homesites, of which 22,182 are owned and actively selling or under development, 7,629 are controlled or under option, and the remaining 5,315 homesites are held for future development or for sale. The homesites owned that are actively selling or under development represent a 5.7 year supply based on the Company's deliveries for the trailing twelve months ended June 30, 2013.

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