Standard Pacific Corp. Reports 2014 Second Quarter Results

IRVINE, Calif., July 31, 2014 /PRNewswire/ -- Standard Pacific Corp. (NYSE: SPF) today announced results for the second quarter ended June 30, 2014.

2014 Second Quarter Highlights and Comparisons to the 2013 Second Quarter

• Net income of $56.5 million, or $0.14 per diluted share, vs. $43.1 million, or $0.11 per diluted share
• Pretax income of $91.8 million, up 80%
• Net new orders of 1,524, up 1%; Dollar value of net new orders up 10%
• Backlog of 2,304 homes, up 1%; Dollar value of backlog up 20%
• 183 average active selling communities, up 12%
• Home sale revenues of $591.7 million, up 36%
• Average selling price of $479 thousand, up 21%
• 1,236 new home deliveries, up 13%
• Gross margin from home sales of 26.6%, compared to 23.7%
• Operating margin from home sales of $89.7 million, or 15.2%, compared to $48.2 million, or 11.1%
• $212.0 million of land purchases and development costs, compared to $311.2 million

Scott Stowell, the Company's President and Chief Executive Officer stated, "Our 2014 second quarter performance reflects the strength of our positioning and the continued execution of our strategy. Our early efforts to build a strong land position and to create an innovative product portfolio for the move-up homebuyer, combined with the unwavering focus of our team on constructing well built homes and providing an exceptional customer experience, have all contributed to our 80% increase in pretax profit and our solid operating margin, which was 15.2% for the 2014 second quarter."      

Revenue.  Revenues from home sales for the 2014 second quarter increased 36%, to $591.7 million, as compared to the prior year period, resulting primarily from a 21% increase in the Company's average home price to $479 thousand, the highest quarterly average home price in the Company's nearly 50 year history, and a 13% increase in new home deliveries.  The increase in average home price was primarily attributable to a shift to more move-up product, a continued reduction in the use of sales incentives, and general price increases within a majority of the Company's markets.  The increase in new home deliveries was driven by a 6% year-over-year increase in the number of homes in beginning backlog expected to close during the quarter and a 30% increase in speculative homes sold and closed compared to the prior year period. 

Orders.  Net new orders for the 2014 second quarter were up slightly from the 2013 second quarter, to 1,524 homes, with the dollar value of these orders up 10%.  The Company's monthly sales absorption rate was 2.8 per community (2.6 per community excluding the impact of the acquisition of 99 homes under contract for sale in Austin, Texas) for the 2014 second quarter, compared to 2.5 per community for the 2014 first quarter. The increase in sales absorption rate from the 2014 first quarter to the 2014 second quarter was consistent with the seasonality we typically experience in our business. The Company's cancellation rate for the 2014 second quarter was 14%, compared to 11% for the 2013 second quarter and 14% for the 2014 first quarter.  Our 2014 second quarter cancellation rate remains well below our average historical cancellation rate of approximately 21% over the last 10 years.    

Backlog.  The dollar value of homes in backlog increased 20% to $1.1 billion, or 2,304 homes, compared to $947.6 million, or 2,272 homes, for the 2013 second quarter, and increased 14% compared to $1.0 billion, or 2,016 homes, for the 2014 first quarter.  The increase in year-over-year backlog value was driven primarily by an 18% increase in the average selling price of the homes in backlog, reflecting the continued execution of our move-up buyer focused strategy and pricing opportunities in select markets.

Land.  During the 2014 second quarter, the Company spent $212.0 million on land purchases and development costs, compared to $311.2 million for the 2013 second quarter. The Company purchased $113.0 million of land, 1,309 homesites, of which 40% (based on homesites) was located in Florida, 28% in Texas, 16% in California, 13% in the Carolinas and 3% in Colorado.  As of June 30, 2014, the Company owned or controlled 35,948 homesites, of which 24,104 were owned and actively selling or under development, 7,174 were controlled or under option, and the remaining 4,670 homesites were held for future development or for sale.  The homesites owned that are actively selling or under development represent a 5.0 year supply based on the Company's deliveries for the trailing twelve months ended June 30, 2014.

Liquidity.  The Company ended the quarter with $570 million of available liquidity, including $130 million of unrestricted homebuilding cash and a $440 million untapped revolving credit facility. The untapped revolving credit facility was amended on July 31, 2014 to, among other things, extend the maturity date to July 2018, increase the aggregate commitment to $450 million, and expand the accordion feature to permit the aggregate commitment to be increased to a maximum amount of $750 million, subject to the Company's future needs and the availability of additional bank capacity.  The credit facility's financial covenants were not altered in connection with the amendment. The Company's homebuilding debt to book capitalization as of June 30, 2014 and 2013 was 53.8% and 53.5%, respectively, and adjusted net homebuilding debt to adjusted book capitalization was 51.6%* and 52.0%*, respectively.  In addition, the Company's homebuilding debt to adjusted homebuilding EBITDA for the LTM period ending June 30, 2014 and 2013 was 4.1x* and 5.8x*, respectively.

Earnings Conference Call

A conference call to discuss the Company's 2014 second quarter results will be held at 12:00 p.m. Eastern time August 1, 2014.  The call will be broadcast live over the Internet and can be accessed through the Company's website at http://ir.standardpacifichomes.com.  The call will also be accessible via telephone by dialing (877) 723-9523 (domestic) or (719) 325-4749 (international); Passcode: 6252778.  The audio transmission with the slide presentation will 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: 6252778.

About Standard Pacific

Standard Pacific Homes (NYSE: SPF) has been building beautiful, high-quality homes and neighborhoods since its founding in Southern California in 1965.  With a trusted reputation for quality craftsmanship, an outstanding customer experience and exceptional architectural design, the Company utilizes its decades of land acquisition, development and homebuilding expertise to successfully navigate today's complex landscape to acquire and build desirable communities in locations that meet the high expectations of the Company's targeted move-up homebuyers.  Currently offering new homes in major metropolitan areas in Arizona, California, Colorado, Florida, North Carolina, South Carolina, and Texas, we invite you to learn more about us by visiting standardpacifichomes.com.

This news release contains forward-looking statements.  These statements include but are not limited to statements regarding the strength of our land position and product portfolio; construction quality and customer experience; new home orders; deliveries; backlog; absorption rates; average home price; pricing power; revenue; profitability; cash flow; liquidity; gross margin; operating margin; product mix; land supply; the benefit of, and execution on, our strategy; our future cash needs and the availability of additional bank commitments; and our future performance.  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, 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 debt agreements; our ability to repay our debt as it comes due; changes 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; 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; 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, 2013 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:
Jeff McCall, EVP & CFO (949) 789-1655, [email protected]

*Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.

(Note: Tables Follow)

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Each of the below measures are non-GAAP financial measures and other companies may calculate such non-GAAP measures differently.  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.

The table set forth below reconciles the Company's gross margin percentage from home sales to the gross margin percentage from home sales, excluding interest amortized to cost of home sales.  We believe these measures are useful to management and investors as they provide perspective on the underlying operating performance of the business excluding these charges and provide comparability with the Company's peer group.

The table set forth below reconciles the Company's total consolidated debt to adjusted net homebuilding debt and provides the Company's total consolidated debt to book capitalization and adjusted net homebuilding debt to total adjusted book capitalization ratios.  In addition, the table set forth below calculates homebuilding debt to adjusted homebuilding EBITDA.  We believe these ratios are useful to management and investors as a measure of the Company's ability to obtain financing.  For purposes of the ratio of adjusted net homebuilding debt to total adjusted book capitalization, total adjusted book capitalization is adjusted net homebuilding debt plus stockholders' equity.  Adjusted net homebuilding debt excludes indebtedness of the Company's financial services subsidiary and additionally reflects the offset of cash and equivalents. 

The table set forth below calculates pro forma stockholders' equity per common share. The Company believes that the pro forma stockholders' equity per common share information is useful to management and investors as a measure to determine the book value per common share after giving effect to the conversion of our outstanding preferred shares assuming full conversion to common stock.

The table set forth below calculates EBITDA and Adjusted Homebuilding EBITDA. 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 the Company's ability to service debt and obtain financing. Adjusted Homebuilding EBITDA is a non-GAAP financial measure and due to the significance of the GAAP components excluded, 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.

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:

SOURCE Standard Pacific Corp.