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SPF > SEC Filings for SPF > Form 10-Q on 1-Nov-2013All Recent SEC Filings

Show all filings for STANDARD PACIFIC CORP /DE/

Form 10-Q for STANDARD PACIFIC CORP /DE/


1-Nov-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                          Nine Months
                                                Ended September 30,                  Ended September 30,
                                              2013               2012              2013              2012
                                                   (Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues                         $     511,059     $     317,389     $   1,300,493     $     812,578
Land sale revenues                                   697             1,152             7,665             4,537
Total revenues                                   511,756           318,541         1,308,158           817,115
Cost of home sales                              (381,694 )        (253,344 )        (993,809 )        (647,525 )
Cost of land sales                                  (672 )          (1,092 )          (7,671 )          (4,458 )
Total cost of sales                             (382,366 )        (254,436 )      (1,001,480 )        (651,983 )
Gross margin                                     129,390            64,105           306,678           165,132
Gross margin percentage                             25.3 %            20.1 %            23.4 %            20.2 %
Selling, general and administrative
expenses                                         (61,939 )         (43,121 )        (162,831 )        (122,765 )
Income (loss) from unconsolidated joint
ventures                                             (32 )             (39 )           1,249            (2,707 )
Interest expense                                       -            (1,669 )               -            (5,816 )
Other income (expense)                               301               117             2,624             4,708
Homebuilding pretax income                        67,720            19,393           147,720            38,552

Financial Services:
Revenues                                           5,839             5,218            18,927            14,249
Expenses                                          (3,590 )          (2,777 )         (10,394 )          (7,952 )
Other income                                         167                70               420               217
Financial services pretax income                   2,416             2,511             8,953             6,514

Income before taxes                               70,136            21,904           156,673            45,066
Provision for income taxes                       (11,201 )            (194 )         (32,778 )            (570 )
Net income                                        58,935            21,710           123,895            44,496
  Less: Net income allocated to
preferred shareholder                            (14,166 )          (9,100 )         (40,353 )         (18,980 )
  Less: Net income allocated to unvested
restricted stock                                     (90 )             (22 )            (169 )             (31 )
Net income available to common
stockholders                               $      44,679     $      12,588     $      83,373     $      25,485

Income Per Common Share:
Basic                                      $        0.16     $        0.06     $        0.34     $        0.13
Diluted                                    $        0.15     $        0.05     $        0.31     $        0.12

Weighted Average Common Shares
Outstanding:
Basic                                        276,966,995       204,485,294       244,998,581       198,469,130
Diluted                                      314,897,098       235,273,648       283,189,878       210,441,932

Weighted average additional common
shares outstanding
if preferred shares converted to common
shares                                        87,812,786       147,812,786       118,582,017       147,812,786

Total weighted average diluted common
shares outstanding
if preferred shares converted to common
shares                                       402,709,884       383,086,434       401,771,895       358,254,718

Net cash provided by (used in) operating
activities                                 $      22,808     $     (72,418 )   $    (126,396 )   $    (171,136 )
Net cash provided by (used in) investing
activities                                 $      (2,296 )   $     (95,704 )   $    (129,150 )   $    (103,595 )
Net cash provided by (used in) financing
activities                                 $     261,980     $     348,696     $     272,119     $     343,665
Adjusted Homebuilding EBITDA (1)           $     101,953     $      51,523     $     248,152     $     125,101


__________________


(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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Table of Contents

(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               Nine Months
                                                September 30,             Ended September 30,
                                             2013          2012           2013           2012
                                                          (Dollars in thousands)

Net cash provided by (used in) operating
activities                                 $  22,808     $ (72,418 )   $ (126,396 )   $ (171,136 )
Add:
Provision (benefit) for income taxes,
net of deferred component                    (16,105 )         194        (15,711 )          570
Homebuilding interest amortized to cost
of sales and interest expense                 30,322        28,747         88,869         75,934
Less:
Income from financial services
subsidiary                                     2,249         2,441          8,533          6,297
Depreciation and amortization from
financial services subsidiary                     33            32             89             76
Loss on disposal of property and
equipment                                          -            12             16             15
Net changes in operating assets and
liabilities:
Trade and other receivables                  (11,186 )       4,681          8,462         12,143
Mortgage loans held for sale                 (32,221 )      18,119        (44,179 )       14,016
Inventories-owned                             84,352        70,645        314,375        185,832
Inventories-not owned                         21,990         7,191         31,700         10,690
Other assets                                  (1,655 )        (999 )         (401 )         (922 )
Accounts payable                              (7,235 )         (82 )       (6,855 )        1,371
Accrued liabilities                           13,165        (2,070 )        6,926          2,991
Adjusted Homebuilding EBITDA               $ 101,953     $  51,523     $  248,152     $  125,101

Three and Nine Months Ended September 30, 2013 Compared to Three and Nine Months Ended September 30, 2012

Overview

The positive performance we achieved during the first half of 2013 continued into the third quarter. Net income for the quarter was $58.9 million, or $0.15 per diluted share (including an $11.2 million provision for income taxes) as compared to $21.7 million, or $0.05 per diluted share (including a $0.2 million provision for income taxes) for the 2012 third quarter. Pretax income for the quarter was $70.1 million, compared to $21.9 million for the prior year period. New home deliveries, new order dollar value, home sale revenues and homes in backlog were up 41%, 38%, 61% and 55%, respectively, year-over-year and our average selling price of homes delivered was $420 thousand, a 14% increase from the third quarter of 2012. We also continued to see significant expansion in our gross margin from home sales, which rose to 25.3% for the quarter, a 510 basis point increase from the 2012 third quarter, and a 160 basis point increase from the 2013 second quarter.

For the nine months ended September 30, 2013, we reported net income of $123.9 million, or $0.31 per diluted share, which included a provision for income taxes of $32.8 million. Net income for the nine months ended September 30, 2012 was $44.5 million, or $0.12 per diluted share, which included a provision for income taxes of $0.6 million. Pretax income for the nine months ended September 30, 2013 was $156.7 million, compared to $45.1 million in the prior year period.

We remain focused on acquiring and developing strategically located and appropriately priced land and on designing and building 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 towards the end of fiscal 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 when compared to historical norms, we believe we continue to be well positioned to take advantage of the long-term housing recovery.

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Homebuilding

                                     Three Months Ended            Nine Months Ended
                                        September 30,                September 30,
                                     2013          2012           2013           2012
                                                  (Dollars in thousands)
Homebuilding revenues:
California                         $ 273,711     $ 183,177     $   701,909     $ 445,634
Southwest                             97,736        61,638         270,157       181,872
Southeast                            140,309        73,726         336,092       189,609
Total homebuilding revenues        $ 511,756     $ 318,541     $ 1,308,158     $ 817,115

Homebuilding pretax income:
California                         $  47,888     $  12,513     $   100,298     $  27,037
Southwest                             10,159         4,080          25,212         7,951
Southeast                              9,673         2,800          22,210         3,564
Total homebuilding pretax income   $  67,720     $  19,393     $   147,720     $  38,552

Homebuilding pretax income for the 2013 third quarter was $67.7 million compared to $19.4 million in the year earlier period. The improvement in our financial performance was primarily the result of a 61% increase in home sale revenues, a 510 basis point improvement in gross margin from home sales and the operating leverage inherent in our business.

For the nine months ended September 30, 2013, we reported homebuilding pretax income of $147.7 million compared to $38.6 million in the year earlier period. The improvement in our financial performance was primarily the result of a 60% increase in home sale revenues, a 330 basis point improvement in gross margin from home sales, a $5.8 million decrease in interest expense and the operating leverage inherent in our business.

Revenues

Home sale revenues increased 61%, from $317.4 million for the 2012 third quarter
to $511.1 million for the 2013 third quarter, resulting from a 41% increase in
new home deliveries and a 14% increase in our consolidated average home price to
$420 thousand. Home sale revenues increased 60%, from $812.6 million for the
nine months ended September 30, 2012 to $1,300.5 million for the nine months
ended September 30, 2013, resulting from a 41% increase in new home deliveries
and a 14% increase in our consolidated average home price to $399 thousand.

                                 Three Months Ended          Nine Months Ended
                                   September 30,               September 30,
                               2013    2012   % Change    2013     2012    % Change
New homes delivered:
     California                  467    363        29%    1,286      904        42%
     Arizona                      51     66      (23%)      171      176       (3%)
     Texas                       170    107        59%      458      368        24%
     Colorado                     36     33         9%      117       80        46%
     Nevada                       -      -          -        -         9     (100%)
          Total Southwest        257    206        25%      746      633        18%
     Florida                     285    151        89%      707      411        72%
     Carolinas                   208    141        48%      520      370        41%
          Total Southeast        493    292        69%    1,227      781        57%
                Total          1,217    861        41%    3,259    2,318        41%

The increase in new home deliveries for the 2013 third quarter was driven primarily by a 62% 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               Nine Months Ended
                                                           September 30,                    September 30,
                                                     2013       2012     % Change     2013       2012     % Change
Average selling prices of homes delivered:                             (Dollars in thousands)
       California                                  $    586   $    505        16%   $    541   $    489        11%
       Arizona                                          286        204        40%        260        206        26%
       Texas                                            385        328        17%        379        307        23%
       Colorado                                         484        399        21%        439        386        14%
       Nevada                                            -          -          -          -         192         -
              Total Southwest                           379        299        27%        361        287        26%
       Florida                                          283        256        11%        269        244        10%
       Carolinas                                        284        241        18%        279        238        17%
              Total Southeast                           284        249        14%        273        241        13%
                     Total                         $    420   $    369        14%   $    399   $    351        14%

The year over year increases in our consolidated average home price reflects general price increases within the majority of our markets and a decrease in the use of sales incentives.

Gross Margin

Our 2013 third quarter gross margin percentage from home sales increased to 25.3% compared to 20.2% in the 2012 third quarter. For the nine months ended September 30, 2013, our gross margin percentage from home sales increased to 23.6% compared to 20.3% for the prior year period. The year over year increases in our gross margin percentage from home sales were primarily attributable to price increases and a higher proportion of deliveries from our profitable new communities.

SG&A Expenses

Our 2013 third quarter SG&A expenses (including Corporate G&A) were $61.9 million compared to $43.1 million for the prior year period, down 150 basis points as a percentage of home sale revenues to 12.1%, compared to 13.6% for the 2012 third quarter. For the nine months ended September 30, 2013, our SG&A expenses (including Corporate G&A) were $162.8 million compared to $122.8 million for the prior year period, down 260 basis points as a percentage of home sale revenues to 12.5%, compared to 15.1% for the prior year period. The improvement in our SG&A rate was primarily the result of the increase in home sale revenues and the operating leverage inherent in our business.

Other Income (Expense)

Other income (expense) for the nine months ended September 30, 2013 and 2012 was primarily attributable to the receipt of property insurance claim settlements of approximately $3.5 million and $4.1 million, respectively. Other income (expense) for the nine months ended September 30, 2013 also included approximately $1.2 million of transaction costs incurred during the 2013 second quarter in connection with our acquisition of a group of approximately 30 current and future communities from a homebuilder in the Southeast.

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Table of Contents

Operating Data

                                                  Three Months Ended                         Nine Months Ended
                                                     September 30,                             September 30,
                                                                         %                                         %
                                                                     Absorption                                Absorption
                                         2013     2012    % Change   Change (1)    2013     2012    % Change   Change (1)
Net new orders (2):
      California                           386      417       (7%)         (4%)    1,381    1,169        18%          31%
      Arizona                               95       61        56%        (22%)      248      237         5%        (19%)
      Texas                                154      132        17%        (14%)      612      424        44%         (4%)
      Colorado                              29       45      (36%)        (44%)      156      113        38%          18%
      Nevada                                -         -          -            -       -         6     (100%)           -
            Total Southwest                278      238        17%        (17%)    1,016      780        30%         (7%)
      Florida                              274      174        57%          46%    1,010      568        78%          64%
      Carolinas                            172      160         8%          18%      613      514        19%          35%
            Total Southeast                446      334        34%          34%    1,623    1,082        50%          52%
            Total                        1,110      989        12%           4%    4,020    3,031        33%          27%


__________________


(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.

                                                   Three Months Ended             Nine Months Ended
                                                     September 30,                  September 30,
                                               2013      2012     % Change    2013      2012     % Change
Average number of selling communities
during the period:
    California                                     48        50       (4%)        46        51      (10%)
    Arizona                                        10         5       100%         9         7        29%
    Texas                                          30        22        36%        30        20        50%
    Colorado                                        8         7        14%         7         6        17%
         Total Southwest                           48        34        41%        46        33        39%
    Florida                                        41        38         8%        40        37         8%
    Carolinas                                      31        34       (9%)        31        35      (11%)
         Total Southeast                           72        72         -         71        72       (1%)
         Total                                    168       156         8%       163       156         4%

Net new orders for the 2013 third quarter increased ญญ12%, to 1,110 homes, from the prior year period on an 8% increase in average active selling communities. Our monthly sales absorption rate for the 2013 third quarter was 2.2 per community, compared to 2.1 per community for the 2012 third quarter and 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 of 30 communities from a homebuilder in the Southeast) for the 2013 second quarter. The decrease in sales absorption rate from the 2013 second to third quarter is consistent with the seasonality we typically experience in our business. Our cancellation rate for the three months ended September 30, 2013 was 20%, compared to 14% for the 2012 third quarter and 11% for the 2013 second quarter. Our 2013 third quarter cancellation rate increased from the historically low levels we experienced in the prior quarter and the prior year period, but was consistent with our average historical cancellation rate over the last 10 years. Our cancellation rate (excluding cancellations from current quarter sales) for homes in beginning backlog was 6.5% for the 2013 third quarter, a 90 basis point reduction from the prior year period.

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Table of Contents

                                                                                     At September 30,
                                                              2013                         2012                       % Change
Backlog ($ in thousands):                            Homes      Dollar Value      Homes      Dollar Value      Homes      Dollar Value
        California                                       535   $      341,743         439   $      217,549         22%              57%
        Arizona                                          154           50,512         118           28,357         31%              78%
        Texas                                            358          158,863         205           74,736         75%             113%
        Colorado                                         114           56,528          66           26,406         73%             114%
                Total Southwest                          626          265,903         389          129,499         61%             105%
        Florida                                          669          250,241         319           81,950        110%             205%
        Carolinas                                        335          106,261         247           69,741         36%              52%
                Total Southeast                        1,004          356,502         566          151,691         77%             135%
                Total                                  2,165   $      964,148       1,394   $      498,739         55%              93%

The dollar value of our backlog as of September 30, 2013 increased 93% from the year earlier period to $964.1 million, or 2,165 homes. Our consolidated average home price in backlog of $445 thousand as of September 30, 2013 reflected an increase of 24% compared to September 30, 2012, reflecting the continued execution of our move-up homebuyer focused strategy, 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 at the end of the 2013 third quarter was 26.7% as compared to 20.9% at the end of the 2012 third quarter.

                                                             At September 30,
                                                        2013      2012     % Change
Homesites owned and controlled:
         California                                      9,979     9,806         2%
         Arizona                                         2,291     1,844        24%
         Texas                                           4,468     4,451         0%
         Colorado                                        1,216       669        82%
         Nevada                                          1,124     1,124          -
                   Total Southwest                       9,099     8,088        13%
         Florida                                        11,409     8,211        39%
         Carolinas                                       5,156     4,049        27%
                   Total Southeast                      16,565    12,260        35%
                   Total (including joint ventures)     35,643    30,154        18%

         Homesites owned                                26,936    23,974        12%
         Homesites optioned or subject to contract       8,192     5,605        46%
         Joint venture homesites (1)                       515       575      (10%)
                   Total (including joint ventures)     35,643    30,154        18%

Homesites owned:
         Raw lots                                        6,101     4,503        35%
         Homesites under development                     8,549     8,773       (3%)
         Finished homesites                              6,871     5,304        30%
         Under construction or completed homes           3,061     2,170        41%
         Held for sale                                   2,354     3,224      (27%)
                   Total                                26,936    23,974        12%


__________________


(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 September 30, 2013 increased 18% from . . .

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