Standard Pacific Corp. Reports 2015 Second Quarter Results

IRVINE, Calif., July 30, 2015 /PRNewswire/ -- Standard Pacific Corp. (NYSE: SPF) today announced results for the second quarter ended June 30, 2015.

2015 Second Quarter Highlights and Comparisons to 2014 Second Quarter

• Net new orders of 1,567, up 10%; Dollar value of net new orders up 26% (excluding Q2 2014 acquisition)
• Backlog of 2,572 homes, up 12%; Dollar value of backlog up 30%
• 203 average active selling communities, up 11%
• 1,305 new home deliveries, up 6%
• Average selling price of $532 thousand, up 11%
• Home sale revenues of $694.7 million, up 17%
• Gross margin from home sales of 24.6%, compared to 26.6%
• Operating margin from home sales of $90.8 million, or 13.1%, compared to $89.7 million, or 15.2%
• Net income of $57.2 million, or $0.14 per diluted share, vs. net income of $56.5 million, or $0.14 per diluted share
• $190.0 million of land purchases and development costs, compared to $212.0 million
• Results include $5.2 million of transaction costs related to the proposed merger with The Ryland Group, Inc.

Scott Stowell, the Company's President and Chief Executive Officer commented, "I am pleased with our solid financial performance in the 2015 second quarter.  Our results reflect a continuation of the housing market recovery and our focus on the execution of our strategy, with backlog value, the value of our orders, and home sale revenues up 30%, 26% and 17% respectively."

Orders.  Excluding the impact of the 99 homes in backlog we acquired in connection with our June 2014 acquisition of an Austin, Texas homebuilder, net new orders for the 2015 second quarter were up 10% from the 2014 second quarter, to 1,567 homes, with the dollar value of these orders up 26%, and the Company's monthly sales absorption rate was 2.6 per community for the 2015 second quarter, flat from both the 2014 second quarter and the 2015 first quarter.  The Company's cancellation rate for the 2015 second quarter was 15% compared to 14% for the 2014 second quarter and 11% for the 2015 first quarter.

Backlog.  The dollar value of homes in backlog increased 30% to $1.5 billion, or 2,572 homes, compared to $1.1 billion, or 2,304 homes, for the 2014 second quarter, and increased 15% compared to $1.3 billion, or 2,310 homes, for the 2015 first quarter.  The increase in year-over-year backlog value was driven primarily by our continued growth in orders and a 17% increase in the average selling price of the homes in backlog, reflecting the continued execution of our move-up homebuyer focused strategy and a favorable pricing environment in a majority of our markets.

Revenue.  Revenues from home sales for the 2015 second quarter increased 17%, to $694.7 million, as compared to the prior year period, resulting primarily from an 11% increase in the Company's average home price to $532 thousand, the highest quarterly average home price in Company history, and a 6% increase in new home deliveries.  The increase in average home price was primarily attributable to a shift to more move-up product and general price increases within a majority of our markets. 

Gross Margin.  Gross margin percentage from home sales for the 2015 second quarter was 24.6%, up 40 basis points from last quarter, consistent with the Company's expectations. 

Land.  During the 2015 second quarter, the Company spent $190.0 million on land purchases and development costs, compared to $212.0 million for the 2014 second quarter. The Company purchased $98.6 million of land, consisting of 1,283 homesites, of which 53% (based on homesites) is located in Florida, 23% in the Carolinas, 12% in the California and 12% in Texas.  As of June 30, 2015, the Company owned or controlled 36,034 homesites, of which 24,693 were owned and actively selling or under development, 7,168 were controlled or under option, and the remaining 4,173 homesites were held for future development or for sale.  The homesites owned that are actively selling or under development represent a 4.9x year supply based on the Company's deliveries for the trailing twelve months ended June 30, 2015.

Liquidity.  The Company ended the quarter with $497 million of available liquidity, including $77 million of unrestricted homebuilding cash and $420 million available to borrow under the revolving credit facility. The revolving credit facility has an accordion feature under which the aggregate commitment may be increased from $450 million to a maximum amount of $750 million, subject to the Company's future needs and the availability of additional bank capacity.  The Company's homebuilding debt to book capitalization as of June 30, 2015 and 2014 was 55.3% and 53.8%, respectively, and adjusted net homebuilding debt to adjusted book capitalization was 53.9%* and 51.6%*, respectively.  In addition, the Company's homebuilding debt to adjusted homebuilding EBITDA for the LTM period ending June 30, 2015 and 2014 was 4.4x* and 3.9x*, respectively.  

Proposed Merger with The Ryland Group, Inc.

During the second quarter of 2015, the Company entered into a merger agreement with The Ryland Group, Inc. ("Ryland").  Subject to the terms and conditions of the merger agreement, which was unanimously approved by the boards of directors of the Company and Ryland, the Company and Ryland have agreed that Ryland will merge with and into the Company in a "merger of equals," with the Company continuing as the surviving corporation, and the separate corporate existence of Ryland will cease.  Concurrent with the closing of the merger, each five shares of common stock issued and outstanding of the Company will be combined and converted into one issued and outstanding share of common stock of the surviving corporation and each share of common stock of Ryland issued and outstanding will be converted and exchangeable for 1.0191 issued and outstanding shares of common stock of the surviving corporation.  The proposed merger is subject to approval by the stockholders of the Company and Ryland and other customary closing conditions. The Company currently expects the transaction to close in early fall 2015.  As of June 30, 2015, the Company incurred transaction related fees totaling $5.2 million, which was reported in "other income (expense)" in the condensed consolidated statements of operations during the second quarter.

Earnings Conference Call

A conference call to discuss the Company's 2015 second quarter results will be held at 12:00 p.m. Eastern time July 31, 2015.  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 (800) 946-0720 (domestic) or (719) 325-2384 (international); Passcode: 2656006.  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: 2656006.  

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 new home orders; deliveries; backlog; absorption rates; cancellation rates; average home price; 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 the expected closing date of our proposed merger with The Ryland Group, Inc.  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, 2014 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.

Additional Information

In connection with the proposed transaction, Standard Pacific and Ryland will be filing documents with the SEC, including the filing by Standard Pacific of a registration statement on Form S-4, and Standard Pacific and Ryland intend to mail a joint proxy statement regarding the proposed merger to their respective stockholders that will also constitute a prospectus of Standard Pacific.  Before making any voting or investment decision, investors are urged to read the joint proxy statement/prospectus when it becomes available because it will contain important information about the proposed transaction.  You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC's website (www.sec.gov), by accessing Standard Pacific's website at www.standardpacifichomes.com under the heading "Investor Relations" and then under the link "SEC Filings" and from Standard Pacific by directing a request to Standard Pacific Corp., 15360 Barranca Parkway, Irvine, California 92618, Attention:  Secretary, and by accessing Ryland's website at www.ryland.com under the heading "Investors" and then under the link "SEC Filings" and from Ryland by directing a request to The Ryland Group, Inc., 3011 Townsgate Rd., Ste. 200, Westlake Village, California 91361, Attention:  Investor Relations.

Standard Pacific and Ryland and their respective directors and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction.  You can find information about Standard Pacific's directors and executive officers in its definitive proxy statement filed with the SEC on April 24, 2015.  You can find information about Ryland's directors and executive officers in its definitive proxy statement filed with the SEC on March 13, 2015.  Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holding or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.  You can obtain free copies of these documents from Standard Pacific and Ryland using the contact information above.

No Offer or Solicitation

The information in this communication is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, subscribe for or buy any securities or the solicitation of any vote or approval in any jurisdiction pursuant to or in connection with the proposed transactions or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law. 

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 adjusted 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 adjusted stockholders' equity per common share.  The Company believes that the adjusted 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 the pro forma 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 (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, including amortization of capitalized model costs, (g) amortization of stock-based compensation, (h) income (loss) from unconsolidated joint ventures and (i) income (loss) from financial services subsidiaries.  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.

Related Links

http://www.standardpacifichomes.com