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Standard Pacific Corp. Reports Operating Results (10-Q)

October 26, 2012 | About:
10qk

10qk

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Standard Pacific Corp. (SPF) filed Quarterly Report for the period ended 2012-09-30.

Standard Pacific Corp has a market cap of $1.64 billion; its shares were traded at around $6.9 with a P/E ratio of 59.2 and P/S ratio of 1.9.

Highlight of Business Operations:

Three and Nine Months Ended September 30, 2012 Compared to Three and Nine Months Ended September 30, 2011 Overview Our 2012 third quarter reflected a continuation of the positive momentum we experienced during the first two quarters and further progress against our strategy. New home deliveries, net new orders, homebuilding revenues and homes in backlog were up 24%, 29%, 32%, and 64%, respectively, as compared to the year earlier period. Net income for the quarter was $21.7 million, or $0.05 per diluted share, compared to a net loss of $6.4 million, or $0.02 per diluted share, in the year earlier period. Homebuilding pretax income for the quarter was $19.4 million compared to a pretax loss of $7.5 million in the year earlier period. Our improved financial and operating results reflect the continued execution of our strategy, which includes the construction of well built, innovatively designed, and energy efficient homes targeted at the “move-up” homebuyer, our focus on increasing base prices, reducing sales incentives and controlling costs, and the operating leverage inherent in our business. During the 2012 third quarter, we received approximately $245 million in net proceeds from a convertible senior notes offering and approximately $72 million in net proceeds from a common stock issuance. In October 2012, we amended our undrawn revolving credit facility to, among other things, increase the total aggregate commitment to $350 million. With $474 million of unrestricted homebuilding cash and the availability under the revolving credit facility, we believe we have ample liquidity to continue the progress we have made against our strategy.

For the nine months ended September 30, 2012, we reported homebuilding pretax income of $38.6 million compared to a pretax loss of $31.4 million in the year earlier period. The improvement in our financial performance was primarily the result of a 38% increase in home sale revenues, a 70 basis point improvement in gross margin from home sales excluding inventory impairment charges, a $16.4 million decrease in interest expense, a $13.2 million decrease in inventory impairment charges and improved SG&A leverage. Revenues Home sale revenues increased 31%, from $241.4 million for the 2011 third quarter to $317.4 million for the 2012 third quarter, as a result of a 24% increase in new home deliveries and a 7% increase in our consolidated average home price to $369 thousand. Home sale revenues increased 38%, from $589.4 million for the nine months ended September 30, 2011 to $812.6 million for the nine months ended September 30, 2012, as a result of a 33% increase in new home deliveries and a 4% increase in our consolidated average home price to $351 thousand.

Home sale revenues increased 31%, from $241.4 million for the 2011 third quarter to $317.4 million for the 2012 third quarter, as a result of a 24% increase in new home deliveries and a 7% increase in our consolidated average home price to $369 thousand. Home sale revenues increased 38%, from $589.4 million for the nine months ended September 30, 2011 to $812.6 million for the nine months ended September 30, 2012, as a result of a 33% increase in new home deliveries and a 4% increase in our consolidated average home price to $351 thousand.

We believe that the measure described above, which excludes inventory impairment charges, is useful to our management and investors as it provides a perspective on the underlying operating performance of the business by isolating our results from home sales and excluding impairment charges and provides comparability with information presented by the Company s peer group. However, it should be noted that such measure is not a GAAP financial measure and other companies in the homebuilding industry may calculate this measure differently. Due to the significance of the GAAP components excluded, such measure should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP. -31- Table of Contents SG&A Expenses Our 2012 third quarter SG&A expenses (including Corporate G&A) were $43.1 million compared to $39.1 million for the prior year period, down 260 basis points as a percentage of home sale revenues to 13.6%, compared to 16.2% for the 2011 third quarter. The improvement in our SG&A rate was primarily the result of a 31% increase in home sale revenues and the operating leverage inherent in our business. For the nine months ended September 30, 2012, our SG&A expenses (including Corporate G&A) were $122.8 million compared to $109.8 million for the prior year period, down 350 basis points as a percentage of home sale revenues to 15.1%, compared to 18.6% for the prior year period. The improvement in our SG&A rate was primarily the result of a 38% increase in home sale revenues and the operating leverage inherent in our business. Additionally, our SG&A expenses for the nine months ended September 30, 2011 included $3.4 million of restructuring, severance and other charges, whereas 2012 included no such charges. Interest Expense For the three and nine months ended September 30, 2012, we expensed $1.7 million and $5.8 million, respectively, of interest costs related to the portion of our debt in excess of our qualified assets. For the three and nine months ended September 30, 2011, we expensed $4.3 million and $22.2 million, respectively, of interest costs. The decline in our year-over-year interest expense was primarily the result of an increase in the amount of qualified assets we owned 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.

We continue to closely monitor new home starts based on sales volume and the number of completed and unsold homes. As of September 30, 2012, the number of completed unsold homes (excluding joint ventures) decreased 28% from the year earlier period. Total homes under construction (excluding joint ventures) as of September 30, 2012 increased 26% compared to the year earlier period as a result of a 29% increase in the number of homes sold in the third quarter of 2012 compared to 2011. Financial Services In the 2012 third quarter our financial services subsidiary reported pretax income of approximately $2.4 million compared to $1.2 million in the year earlier period. The improvement was driven primarily by a $1.3 million decrease in loan loss reserve expense related to indemnification and repurchase reserves, from $1.5 million for the 2011 third quarter to $0.2 million for the 2012 third quarter, and a 34% increase in the dollar volume of loans closed and sold, partially offset by a decrease in margins. -34- Table of Contents The following table details information regarding loan originations and related credit statistics for our mortgage financing operations:

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