-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T5ajdvoNZGG3+WgppquR9KBvjpAEYsRNLxytpnxOhs47N1OFaQIR5aa3tCtlTRqs zSAsOMf2HqFjAenSdd5qTA== 0000898430-01-503508.txt : 20020410 0000898430-01-503508.hdr.sgml : 20020410 ACCESSION NUMBER: 0000898430-01-503508 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANDARD PACIFIC CORP /DE/ CENTRAL INDEX KEY: 0000878560 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 330475989 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10959 FILM NUMBER: 1787415 BUSINESS ADDRESS: STREET 1: 1565 W MACARTHUR BLVD CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7146684300 MAIL ADDRESS: STREET 1: 1565 W MACARTHUR BLVD CITY: COSTA MESA STATE: CA ZIP: 92626 10-Q 1 d10q.txt FORM 10-Q FOR PERIOD ENDING 09/30/2001 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to -------------------- -------------- Commission file number 1-10959 STANDARD PACIFIC CORP. (Exact name of registrant as specified in its charter) Delaware 33-0475989 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 15326 Alton Parkway, Irvine, CA 92618-2338 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (949) 789-1600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____. ----- APPLICABLE ONLY TO CORPORATE ISSUERS Registrant's shares of common stock outstanding at November 2, 2001: 29,357,957 STANDARD PACIFIC CORP. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 The consolidated financial statements included herein have been prepared by Standard Pacific Corp., without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information normally included in the financial statements prepared in accordance with generally accepted accounting principles has been omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. The financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2000. Unless the context otherwise requires, the terms "we," "us" and "ours" refer to Standard Pacific Corp. and its predecessors and subsidiaries. -1- STANDARD PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) (Unaudited)
Three Months Ended September 30, -------------------------------- 2001 2000 ------------ ------------ Homebuilding: Revenues $ 333,936 $ 302,005 Cost of sales 263,918 236,435 ----------- ----------- Gross margin 70,018 65,570 ----------- ----------- Selling, general and administrative expenses 31,269 25,479 Income from unconsolidated joint ventures 5,833 3,578 Interest expense 1,195 1,248 Amortization of goodwill 586 525 Other income 29 67 ----------- ----------- Homebuilding pretax income 42,830 41,963 ----------- ----------- Financial Services: Revenues 2,445 750 Expenses 2,096 1,062 Income from unconsolidated joint ventures 510 173 Other income 85 84 ----------- ----------- Financial services pretax income (loss) 944 (55) ----------- ----------- Income before taxes 43,774 41,908 Provision for income taxes (17,490) (16,728) ----------- ----------- Net Income $ 26,284 $ 25,180 =========== =========== Basic Net Income Per Share: Net Income Per Share $ 0.88 $ 0.86 =========== =========== Weighted average common shares outstanding 29,969,813 29,169,309 =========== =========== Diluted Net Income Per Share: Net Income Per Share $ 0.86 $ 0.85 =========== =========== Weighted average common and diluted shares outstanding 30,700,482 29,536,369 =========== ===========
The accompanying notes are an integral part of these consolidated statements. -2- STANDARD PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) (Unaudited)
Nine Months Ended September 30, ------------------------------- 2001 2000 ----------- ----------- Homebuilding: Revenues $ 944,603 $ 817,813 Cost of sales 735,829 658,803 ----------- ----------- Gross margin 208,774 159,010 ----------- ----------- Selling, general and administrative expenses 87,067 68,079 Income from unconsolidated joint ventures 13,738 11,537 Interest expense 3,619 2,502 Amortization of goodwill 1,757 1,514 Other income 153 157 ----------- ----------- Homebuilding pretax income 130,222 98,609 ----------- ----------- Financial Services: Revenues 5,930 1,769 Expenses 4,934 2,872 Income from unconsolidated joint ventures 1,151 515 Other income 280 205 ----------- ----------- Financial services pretax income (loss) 2,427 (383) ----------- ----------- Income before taxes 132,649 98,226 Provision for income taxes (52,882) (39,126) ----------- ----------- Net Income $ 79,767 $ 59,100 =========== =========== Basic Net Income Per Share: Net Income Per Share $ 2.65 $ 2.04 =========== =========== Weighted average common shares outstanding 30,118,236 28,978,815 =========== =========== Diluted Net Income Per Share: Net Income Per Share $ 2.59 $ 2.03 =========== =========== Weighted average common and diluted shares outstanding 30,828,929 29,145,438 =========== ===========
The accompanying notes are an integral part of these consolidated statements. -3- STANDARD PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts)
September 30, December 31, 2001 2000 --------------- ------------ (Unaudited) ASSETS Homebuilding: Cash and equivalents $ 964 $ 38,270 Mortgage notes receivable and accrued interest 1,924 1,744 Other notes and receivables, net 22,154 37,640 Inventories 1,139,395 843,103 Investments in and advances to unconsolidated joint ventures 91,028 90,166 Property and equipment, net 6,472 5,150 Deferred income taxes 21,949 17,289 Other assets 7,759 12,650 Goodwill, net 15,094 16,850 ---------- ---------- 1,306,739 1,062,862 ---------- ---------- Financial Services: Cash and equivalents 100 173 Mortgage loans held for sale 51,623 54,070 Other assets 1,596 1,681 ---------- ---------- 53,319 55,924 ---------- ---------- Total Assets $1,360,058 $1,118,786 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Homebuilding: Accounts payable $ 64,583 $ 70,372 Accrued liabilities 102,392 91,408 Revolving credit facility 132,200 - Trust deed notes payable 489 393 Senior notes payable 473,201 423,958 ---------- ---------- 772,865 586,131 ---------- ---------- Financial Services: Accounts payable and other liabilities 1,507 1,095 Mortgage warehouse line of credit 40,000 45,330 ---------- ---------- 41,507 46,425 ---------- ---------- Stockholders' Equity: Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued - - Common stock, $.01 par value; 100,000,000 shares authorized; 29,446,382 and 30,076,494 shares outstanding, respectively 294 301 Paid-in capital 279,147 292,223 Retained earnings 266,245 193,706 ---------- ---------- Total stockholders' equity 545,686 486,230 ---------- ---------- Total Liabilities and Stockholders' Equity $1,360,058 $1,118,786 ========== ========== The accompanying notes are an integral part of these consolidated balance sheets.
-4- STANDARD PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Nine Months Ended September 30, ------------------------------- 2001 2000 ----------- ----------- Cash Flows From Operating Activities: Net income $ 79,767 $ 59,100 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Income from unconsolidated joint ventures (13,738) (11,537) Depreciation and amortization 1,491 1,110 Amortization of goodwill 1,757 1,514 Changes in cash and equivalents due to: Receivables and accrued interest 17,753 (14,087) Inventories (283,816) (130,286) Deferred income taxes (4,660) 285 Other assets 5,465 1,483 Accounts payable (5,789) 13,778 Accrued liabilities 12,504 8,012 --------- --------- Net cash provided by (used in) operating activities (189,266) (70,628) --------- --------- Cash Flows From Investing Activities: Net cash paid for acquisition - (44,550) Investments in and advances to unconsolidated joint ventures (41,683) (98,662) Distributions and repayments from unconsolidated joint ventures 42,483 47,906 Net additions to property and equipment (2,788) (2,894) --------- --------- Net cash provided by (used in) investing activities (1,988) (98,200) --------- --------- Cash Flows From Financing Activities: Net proceeds from (payments on) revolving credit facility 132,200 53,800 Net proceeds from (payments on) mortgage warehouse line of credit (5,330) 6,355 Proceeds from the issuance of senior notes 48,615 123,125 Principal payments on senior notes and trust deed notes payable (191) (3,182) Dividends paid (7,228) (6,932) Repurchase of common shares (16,776) (5,386) Proceeds from the exercise of stock options 2,585 752 --------- --------- Net cash provided by (used in) financing activities 153,875 168,532 --------- --------- Net increase (decrease) in cash and equivalents (37,379) (296) Cash and equivalents at beginning of period 38,443 3,178 --------- --------- Cash and equivalents at end of period $ 1,064 $ 2,882 ========= ========= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 33,523 $ 23,481 Income taxes 62,183 37,780 Supplemental Disclosure of Noncash Activities: Inventory received as distributions from unconsolidated joint ventures $ 12,076 $ 12,737 Issuance of common stock in connection with acquisition - 15,792 Expenses capitalized in connection with the issuance of 8 1/2% senior notes due 2009 515 - Expenses capitalized in connection with the issuance of 9 1/2% senior notes due 2010 - 1,875 Income tax benefit credited in connection with stock option exercises 1,108 202
The accompanying notes are an integral part of these consolidated statements. -5- STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2001 1. Basis of Presentation --------------------- In the opinion of management, the financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2001 and December 31, 2000, and the results of operations and cash flows for the periods presented. 2. Inventories ----------- Inventories consisted of the following:
September 30, December 31, 2001 2000 ------------- ------------ (Dollars in thousands) Housing completed and under construction $ 467,634 $344,237 Land and land under development 600,129 443,325 Model homes 71,632 55,541 ---------- -------- $1,139,395 $843,103 ========== ========
3. Capitalization of Interest -------------------------- The following is a summary of homebuilding interest capitalized and expensed related to inventories for the three month and nine month periods ended September 30, 2001 and 2000.
Three Months Ended Nine Months Ended September 30, September 30, -------------------- --------------------- 2001 2000 2001 2000 ------- ------- ------- ------- (Dollars in thousands) Total homebuilding interest incurred $13,313 $10,786 $36,364 $27,640 Less: Homebuilding interest capitalized to inventories 12,118 9,538 32,745 25,138 ------- ------- ------- ------- Homebuilding interest expense $ 1,195 $ 1,248 $ 3,619 $ 2,502 ======= ======= ======= ======= Homebuilding interest previously capitalized to inventories, included in cost of sales $ 8,465 $ 8,565 $25,319 $19,480 ======= ======= ======= ======= Homebuilding interest capitalized in inventories $30,987 $27,044 ======= =======
-6- 4. Comprehensive Income -------------------- We adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), during 1998. SFAS 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of its balance sheet. We had no items of other comprehensive income in any period presented in the accompanying consolidated financial statements. 5. Recent Accounting Pronouncements -------------------------------- We adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") effective January 1, 2001. Under the provisions of SFAS 133, we are required to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and measure these instruments at fair value. The adoption of SFAS 133 did not have a material effect on our consolidated financial statements. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"). This Statement addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations," and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." All business combinations in the scope of this Statement are to be accounted for using one method, the purchase method. We will adopt SFAS 141 for all business combinations initiated after June 30, 2001. Also in June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." This pronouncement addresses, among other things, how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Goodwill would no longer be amortized but would be assessed at least annually for impairment using a fair value methodology. We will adopt SFAS 142 for all goodwill and other intangible assets acquired after June 30, 2001 and for all existing goodwill and other intangible assets beginning January 1, 2002. Upon adoption of SFAS 142 on January 1, 2002 we will cease recording amortization of goodwill which would increase net income in 2002 by approximately $1.9 million, net of income taxes, or approximately $0.06 per diluted share. Other than ceasing the amortization of goodwill, we do not anticipate that the adoption of SFAS 142 will have a significant effect on our financial position or the results of our operations as we do not currently anticipate any impairment charges for existing goodwill. In August 2001, the FASB issued Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 supersedes Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business (as previously defined in that Opinion). The provisions of SFAS 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001, with early application encouraged and generally to be applied prospectively. We do not expect the adoption of SFAS 144 to have a material impact on our financial condition or results of operations. -7- 6. Net Income Per Share -------------------- We compute net income per share in accordance with Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS 128"). This statement requires the presentation of both basic and diluted net income per share for financial statement purposes. Basic net income per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per share includes the effect of the potential shares outstanding, including dilutive stock options using the treasury stock method. The table set forth below reconciles the components of the basic net income per share calculation to diluted net income per share.
For the Three Months Ended September 30, ------------------------------------------------------------------------ 2001 2000 ---------------------------------- --------------------------------- Income Shares EPS Income Shares EPS --------- ----------- ----- -------- ----------- ------ (Dollars in thousands, except per share amounts) Basic Net Income Per Share: Income available to common stockholders $26,284 29,969,813 $0.88 $25,180 29,169,309 $0.86 Effect of dilutive stock options - 730,669 - 367,060 -------- ----------- -------- ----------- Diluted net income per share $26,284 30,700,482 $0.86 $25,180 29,536,369 $0.85 ======== =========== ====== ======== =========== ======
For the Nine Months Ended September 30, ------------------------------------------------------------------------ 2001 2000 ---------------------------------- --------------------------------- Income Shares EPS Income Shares EPS --------- ----------- ----- -------- ----------- ------ (Dollars in thousands, except per share amounts) Basic Net Income Per Share: Income available to common stockholders $79,767 30,118,236 $2.65 $59,100 28,978,815 $2.04 Effect of dilutive stock options - 710,693 - 166,623 -------- ----------- -------- ----------- Diluted net income per share $79,767 30,828,929 $2.59 $59,100 29,145,438 $2.03 ======== =========== ====== ======== =========== ======
-8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Selected Financial Information
Three Months Nine Months Ended September 30, Ended September 30, --------------------------- -------------------------- 2001 2000 2001 2000 -------- -------- -------- -------- (Dollars in thousands) Homebuilding: Revenues $333,936 $302,005 $944,603 $817,813 Cost of sales 263,918 236,435 735,829 658,803 -------- -------- -------- -------- Gross margin 70,018 65,570 208,774 159,010 -------- -------- -------- -------- Gross margin percentage 21.0% 21.7% 22.1% 19.4% -------- -------- -------- -------- Selling, general and administrative expenses 31,269 25,479 87,067 68,079 Income from unconsolidated joint ventures 5,833 3,578 13,738 11,537 Interest expense 1,195 1,248 3,619 2,502 Amortization of goodwill 586 525 1,757 1,514 Other income 29 67 153 157 -------- -------- -------- -------- Homebuilding pretax income 42,830 41,963 130,222 98,609 -------- -------- -------- -------- Financial Services: Revenues 2,445 750 5,930 1,769 Expenses 2,096 1,062 4,934 2,872 Income from unconsolidated joint ventures 510 173 1,151 515 Other income 85 84 280 205 -------- -------- -------- -------- Financial services pretax income (loss) 944 (55) 2,427 (383) -------- -------- -------- -------- Income before taxes $ 43,774 $ 41,908 $132,649 $ 98,226 ======== ======== ======== ======== EBITDA $ 59,061 $ 50,822 $162,630 $117,320 ======== ======== ======== ========
Operating Data
Three Months Nine Months Ended September 30, Ended September 30, --------------------------- -------------------------- 2001 2000 2001 2000 -------- -------- -------- -------- New homes delivered: Southern California 388 325 839 832 Northern California 121 209 473 577 -------- -------- -------- -------- Total California 509 534 1,312 1,409 -------- -------- -------- -------- Texas 158 148 479 379 Arizona 279 188 783 607 Colorado 89 33 279 33 -------- -------- -------- -------- Consolidated total 1,035 903 2,853 2,428 Unconsolidated joint ventures (California) 74 48 135 96 -------- -------- -------- -------- Total 1,109 951 2,988 2,524 ======== ======== ======== ======== Average selling price: California deliveries (excluding joint ventures) $413,336 $407,885 $445,247 $425,918 Texas deliveries $287,895 $294,509 $291,349 $280,337 Arizona deliveries $173,220 $163,847 $170,229 $165,600 Colorado deliveries $331,429 $263,073 $309,874 $263,073 Consolidated deliveries (excluding joint ventures) $322,417 $333,203 $330,692 $335,901 Unconsolidated joint venture deliveries (California) $511,825 $558,583 $528,857 $550,842
-9- Operating Data - (continued)
Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ------------------------ 2001 2000 2001 2000 --------- ----------- ---------- ----------- Net New Orders: Southern California 363 416 1,162 1,190 Northern California 89 186 304 794 --------- ----------- ---------- ----------- Total California 452 602 1,466 1,984 --------- ----------- ---------- ----------- Texas 122 201 451 526 Arizona 287 223 911 691 Colorado 69 49 259 49 --------- ----------- ---------- ----------- Consolidated total 930 1,075 3,087 3,250 Unconsolidated joint ventures (California) 43 38 249 122 --------- ----------- ---------- ----------- Total 973 1,113 3,336 3,372 ========= =========== ========== =========== Average selling communities during the quarter: Southern California 20 22 Northern California 14 13 Texas 29 28 Arizona 19 16 Colorado 9 7 Unconsolidated joint ventures (California) 7 3 --------- ----------- Total 98 89 ========= =========== At September 30, 2001 2000 --------- ----------- Backlog (in units): Southern California 737 700 Northern California 106 390 --------- ----------- Total California 843 1,090 --------- ----------- Texas 213 273 Arizona 545 411 Colorado 128 165 --------- ----------- Consolidated total 1,729 1,939 Unconsolidated joint ventures (California) 161 72 --------- ----------- Total 1,890 2,011 ========= =========== Backlog at quarter end (estimated dollar value in thousands) $665,521 $735,444 ========= =========== Building sites owned or controlled: California 9,301 9,082 Texas 2,524 2,762 Arizona 4,148 3,571 Colorado 1,988 1,977 --------- ----------- Total 17,961 17,392 ========= =========== Completed and unsold homes 166 98 ========= =========== Homes under construction 2,378 2,261 ========= ===========
-10- Net income for the 2001 third quarter increased 4 percent to $26.3 million, or $0.86 per diluted share, compared to $25.2 million, or $0.85 per diluted share, for the year earlier period. For the nine months ended September 30, 2001 net income increased 35 percent to $79.8 million, or $2.59 per diluted share, compared to $59.1 million, or $2.03 per diluted share, for the year earlier period. Third quarter earnings before interest, taxes, depreciation and amortization ("EBITDA") was up 16 percent to $59.0 million compared to $50.8 million for the 2000 third quarter. Our EBITDA margin was 17.7 percent for the 2001 third quarter, up 90 basis points over the 2000 third quarter. EBITDA for the first nine months of 2001 was $162.6 million compared to $117.3 million for the year earlier period, up 39 percent. Homebuilding Homebuilding pretax income was up 2 percent to $42.8 million for the three months ended September 30, 2001 compared to $42.0 million in the previous year period. The higher level of operating income was primarily attributable to an 11 percent increase in homebuilding revenues and a $2.3 million increase in joint venture income, which was partially offset by a 70 basis point decline in the homebuilding gross margin percentage. Homebuilding pretax income was up 32 percent to $130.2 million for the nine months ended September 30, 2001, generating a pretax margin of 13.8 percent, compared to $98.6 million and a 12.1 percent homebuilding pretax margin last year. Homebuilding revenues for the 2001 third quarter were $333.9 million compared to $302.0 million in the 2000 third quarter. The higher revenue total was due to a 15 percent increase in deliveries to 1,035 new homes (exclusive of joint ventures), which was partially offset by a 3 percent decrease in the average home price to $322,000. During the 2001 third quarter we delivered 583 new homes in California compared to 582 homes in the prior year period. Deliveries were up 24 percent in Southern California. Deliveries were down 42 percent in Northern California reflecting the slowing national economy and its impact on the technology sector. Deliveries were up 7 percent in Texas to 158 new homes reflecting an 8 percent increase in Dallas deliveries which was partially offset by a 4 percent decline in Austin deliveries, while deliveries in Arizona were up 48 percent to 279 new homes. Our Colorado division, which was acquired at the end of August 2000, delivered 89 new homes during the 2001 third quarter compared to 33 in the prior year period. Homebuilding revenues for the nine months ended September 30, 2001 were $944.6 million compared to $817.8 million for the year earlier period. The higher revenue total was attributable to an 18 percent increase in deliveries to 2,853 homes (exclusive of joint ventures) which was offset, in part, by a modest decline in the average home selling price to $331,000. During the 2001 third quarter the average home price in California was up slightly to $413,000. We have been successful in delivering a greater percentage of our homes in the $300,000 to $500,000 price range, however, during the 2001 third quarter we delivered 15 new homes that were priced over $1 million compared to 3 homes in the year earlier period which had the effect of slightly increasing the average home price in California. The effect of our price diversification efforts will become more apparent as our higher end projects are completed and delivered. The average home price in Texas was down 2 percent to $288,000 reflecting a greater percentage of deliveries in Dallas and Houston. The average home price in Arizona was up 6 percent to $173,000 due to changes in the delivery mix, and the average home price in Colorado was $331,000 for the quarter. The consolidated average home price for the 2001 fourth quarter is expected to be approximately $360,000 compared to $388,000 in the 2000 fourth quarter. The homebuilding gross margin percentage for the 2001 third quarter was down 70 basis points to 21.0 percent versus 21.7 percent in the year earlier quarter. The decline in the gross margin percentage -11- was driven principally by the drop in Northern California deliveries where new homes have generated above average margins. The margins generated in Texas and Arizona were off slightly from the levels achieved last year. For the nine months ended September 30, 2001, the homebuilding gross margin percentage was up 270 basis points to 22.1 percent compared to 19.4 percent in the year earlier period which was due primarily to the jump in California gross margins, including strong volume and margin contributions from Southern California. Looking forward, we anticipate our consolidated gross margin percentage to decline due to the slowing economy. Selling, general and administrative ("SG&A") expenses for the 2001 third quarter were 9.4 percent of revenues compared to 8.4 percent last year. SG&A expenses for the nine months ended September 30, 2001 were 9.2 percent of revenues versus 8.3 percent in the previous year period. The increase in SG&A expenses as a percentage of revenues was due primarily to higher levels of sales and marketing costs incurred as a result of changing housing market conditions combined with an increase in non-California deliveries which typically incur higher levels of selling costs as a percentage of revenues. Income from unconsolidated joint ventures for the 2001 third quarter was generated from the delivery of 74 homes compared to 48 deliveries in the same period last year. During the quarter, we began delivering homes from our first active adult neighborhood, a four-project development located in our Talega master-planned community in South Orange County. Additional land sales from our Talega land development joint venture are also planned for the 2001 fourth quarter. Net new home orders for the 2001 third quarter were down 13 percent from the year earlier period to 973 new homes compared to 1,113 in the prior year period. The decline in orders was the result of the slowing national economy. Orders were down 11 percent in Southern California on a 4 percent increase in community count, down 52 percent in Northern California on a 15 percent increase in community count, down 39 percent in Texas on a 4 percent decline in active selling communities and up 29 percent in Arizona on a 19 percent higher community count. Net new orders in Colorado totaled 69 homes for the 2001 third quarter from 9 active communities. We ended the 2001 third quarter with a backlog of 1,890 presold homes valued at an estimated $665.5 million compared to 2,011 homes valued at $735.4 million last year. Financial Services Revenues from our California region financial services subsidiary for the three and nine months ended September 30, 2001 were up 226 percent and 235 percent, respectively, over the prior year periods. The higher revenue totals were driven primarily by 83 percent and 117 percent increases in the dollar volume of loans sold during the three and nine month periods ended September 30, 2001 compared to the prior year periods, combined with improved margins recognized on the sale of loans and higher net interest income generated on loans held for sale. The increase in loan volume was due primarily to higher capture rates in our California projects. The rise in operating expenses during the three and nine months ended September 30, 2001 compared to the year earlier periods primarily reflects the higher origination and loan sale activity in California. The financial services joint venture income reflects the operating results of SPH Mortgage, our mortgage banking joint venture in Arizona and Texas with Wells Fargo Home Mortgage, and, for 2001, also reflects the operations of WRT Financial, our mortgage banking joint venture in Colorado. The increase in venture income was primarily attributable to higher delivery levels from these regions. Other financial services income represents earnings from our title insurance operation in Texas, which serves as a title insurance agent that offers title examination services. -12- Liquidity and Capital Resources Our homebuilding operations' principal uses of cash have been for operating expenses, land acquisitions, construction expenditures, market expansion (including acquisitions), principal and interest payments on debt, share repurchases and dividends to our shareholders. Cash requirements have been provided from internally generated funds and outside borrowings, including our bank revolving credit facility and public note offerings. Our mortgage banking subsidiary uses cash from internal funds, a parent line of credit and a mortgage credit facility to fund its mortgage lending operations. Based on our current business plan and our desire to carefully manage our leverage, we believe that these sources of cash, together with equity or equity-related capital sources, are sufficient to finance our current working capital requirements and other needs. We have a $450 million unsecured revolving credit facility with our bank group which matures July 31, 2004. The credit facility contains an option which allows us to increase the total aggregate commitment up to $475 million subject to the approval of the agent bank. This agreement also contains a borrowing base provision and financial covenants which may limit the amount we may borrow under the revolving credit facility. At September 30, 2001, we had borrowings of $132.2 million outstanding and had issued approximately $35.7 million of letters of credit under this facility. To fund mortgage loans originated by our financial services subsidiary, we have a $60 million mortgage credit facility with a bank. This facility, which was entered into on October 5, 2001, replaced our previous $40 million revolving mortgage warehouse facility and contains an option which allows us to increase the total aggregate commitment up to $90 million on a temporary basis between November 1, 2001 and January 31, 2002. Presold mortgage loans are sold to the bank for a short period of time (typically for 15 to 30 days), subject to our commitment to repurchase the mortgage loans, while the investor completes its administrative review of the applicable loan documents. Loans originated on a non-presold basis are typically sold to the bank for 15 to 60 days, subject to our commitment to repurchase the mortgage loans, before sale to third party investors. The facility, which has a current maturity date of October 5, 2002, also contains certain financial covenants. In January 2001, the Securities and Exchange Commission declared effective our $425 million universal shelf registration statement on Form S-3. The universal shelf registration statement permits the issuance from time to time of common stock, preferred stock, debt securities and warrants. Currently, $375 million of securities remain available for issuance under this universal shelf (including approximately $32.7 million of common stock registered on behalf of potential selling stockholders). In June 2001, we utilized a portion of our universal shelf and issued $50 million of 8 1/2% Senior Notes which mature on April 1, 2009. This note offering was an add-on to our previously issued 8 1/2% Senior Notes due 2009. These notes, which were issued at a discount to yield approximately 8.8 percent, are unsecured obligations and rank equally with our other existing senior unsecured indebtedness. The notes are redeemable at our option, in whole or in part, commencing April 1, 2004 at 104.25 percent of par, with the call price reducing ratably to par on April 1, 2007. Net proceeds after underwriting expenses were approximately $48.6 million and were used to repay a portion of the balance outstanding under our revolving credit facility. We will, under certain circumstances, be obligated to make an offer to purchase a portion of these notes in the event of certain asset sales. In addition, these notes contain other restrictive covenants which, among other things, impose certain limitations on our ability to (1) incur additional indebtedness, (2) create liens, (3) make restricted payments, and (4) sell assets. Also, upon a change in control we are required to make an offer to purchase these notes. From time to time, purchase money mortgage financing is used to finance land acquisitions. At September 30, 2001, we had approximately $489,000 outstanding in trust deed notes payable. -13- As a form of off balance sheet financing and for other strategic purposes, joint venture structures are used on selected projects. This type of structure, which typically includes obtaining secured development and construction financing, minimizes the use of funds from our revolving credit facility and other corporate financing sources. We plan to continue using these types of arrangements to finance the development of properties as opportunities arise. If the market value of the properties in certain of these joint ventures declines, we may be required to make capital contributions to these ventures to reduce amounts borrowed under the secured loans. We also utilize option contracts as a method of acquiring land. Option contracts generally require the payment of a non-refundable cash deposit for the right to acquire lots over a specified period of time at certain prices. Under certain lot option contracts, the purchase of the properties is contingent upon satisfaction of certain requirements by us and the land sellers. We paid approximately $7.2 million, or $0.24 per common share ($0.08 per common share per quarter), in dividends to our stockholders during the nine months ended September 30, 2001. Common stock dividends are paid at the discretion of our Board of Directors and are dependent upon various factors, including earnings, cash flows, capital requirements and operating and financial conditions, including our overall level of leverage. Additionally, our revolving credit facility and public notes impose restrictions on the amount of dividends we may be able to pay. On October 23, 2001, our Board of Directors declared a quarterly cash dividend of $0.08 per share of common stock. This dividend is to be paid on November 29, 2001 to shareholders of record on November 15, 2001. During the nine months ended September 30, 2001, we issued 219,088 shares of common stock pursuant to the exercise of stock options for total consideration of approximately $2.6 million. In April 2001, our Board of Directors approved a new $35 million stock repurchase plan which replaced our previously announced stock buyback plan. Through November 2, 2001, we have repurchased 943,000 shares of common stock for approximately $18.5 million under the new plan, leaving a balance of approximately $16.5 million available for future share repurchases. We have no other material commitments or off balance sheet financing arrangements that under current market conditions are expected to materially affect our future liquidity. -14- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks related to fluctuations in interest rates on our mortgage loans receivable, mortgage loans held for sale and outstanding debt. SPH Mortgage, WRT Financial and, to a lesser extent, Family Lending manage interest rate risk with respect to loan commitments and loans held for sale by preselling loans. Preselling loans consist of obtaining commitments (subject to certain conditions) from investors (in the case of SPH Mortgage and WRT Financial, typically from their financial institution partners) to purchase mortgage loans concurrently with extending interest rate locks to loan applicants. To enhance potential returns on the sale of mortgage loans, Family Lending also originates a portion of its mortgage loans on a non-presold basis. To hedge its interest rate risk associated with extending interest rate commitments to customers prior to selling loans to investors and holding closed loans following funding, Family Lending enters into forward sale commitments of mortgage-backed securities. Loans originated in this fashion are typically held by Family Lending and financed under its mortgage warehouse credit facility for 15 to 60 days before they are sold to third party investors. Family Lending utilizes the services of a third party advisory firm to assist with the implementation and execution of its hedging strategy for loans originated on a non-presold basis. While this hedging strategy should assist Family Lending in mitigating risk associated with originating loans on a non-presold basis, these instruments involve elements of market risk which could result in losses on loans originated in this manner if not hedged properly. Please see our Annual Report on Form 10-K for the year ended December 31, 2000 for further discussion related to our market risk exposure. -15- FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which represent our expectations or beliefs concerning future events, including, but not limited to, statements regarding: . the adoption and expected impact of recent accounting pronouncements; . expected average home prices; . anticipated slower absorption levels and lower margins; . expected joint venture land sales; . orders and our backlog of homes and their estimated sales value; . the sufficiency of our cash provided by internally generated funds, outside borrowings and the equity capital markets; . our planned continued use of joint ventures as a financing structure; . the likely effect on our future liquidity of our existing material commitments and off balance sheet financing arrangements; and . our exposure to market risks, including fluctuations in interest rates. Forward-looking statements are based on 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 our 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 of 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; . the demand for single-family homes; . cancellations of purchase contracts by homebuyers; . the cyclical and competitive nature of our 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 our mortgage banking operations, including hedging activities; . future business decisions and our ability to successfully implement our operational, growth and other strategies; . litigation and warranty claims; and . other risks discussed in our filings with the Securities and Exchange Commission, including in our most recent Annual Report on Form 10-K. We assume no, and hereby disclaim any, obligation to update any of the foregoing or any other forward-looking statements. We nonetheless reserve 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 report. 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. -16- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STANDARD PACIFIC CORP. (Registrant) Dated: November 12, 2001 By: /s/ Stephen J. Scarborough -------------------------- Stephen J. Scarborough Chief Executive Officer and Chairman of the Board Dated: November 12, 2001 By: /s/ Andrew H. Parnes -------------------- Andrew H. Parnes Senior Vice President - Finance and Chief Financial Officer -17- PART II OTHER INFORMATION Item 1. Legal proceedings None Item 2. Change in Securities None Item 3. Default upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Current Reports on Form 8-K None -18- -----END PRIVACY-ENHANCED MESSAGE-----