-----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, UNDfd0tHJlYWHOyzPIomm86NX/M3+vDGRmcPAdy4iAZ+TxzfoquQsZlUEmFjy1Et 8ICDvnG/tte350uMLVWraQ== 0001017062-00-002571.txt : 20001227 0001017062-00-002571.hdr.sgml : 20001227 ACCESSION NUMBER: 0001017062-00-002571 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001221 ITEM INFORMATION: FILED AS OF DATE: 20001226 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: 8-K SEC ACT: SEC FILE NUMBER: 001-10959 FILM NUMBER: 795421 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 8-K 1 0001.txt FORM 8-K DATED DECEMBER 21, 2000 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): December 21, 2000 STANDARD PACIFIC CORP. (Exact Name of Registrant as Specified in Charter) Delaware 1-10959 33-0475989 (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) 15326 Alton Parkway Irvine, California 92618 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (949) 789-1600 Not Applicable (Former Name or Former Address, if Changed Since Last Report) ================================================================================ INFORMATION TO BE INCLUDED IN THE REPORT Item 5. Other Events. We intend to file a shelf registration statement on Form S-3 registering $350 million of our debt securities, preferred stock, common stock and warrants. The debt securities to be offered from time to time under the shelf registration statement may be guaranteed by our direct and indirect wholly owned subsidiaries. As a result, Rule 3-10 (f) of Regulation S-X promulgated under the Securities Exchange Act of 1934 requires that condensed consolidating financial information with respect to the guaranteeing and non- guaranteeing subsidiaries be included in our financial statements. We have added this financial information as footnote 15 to our financial statement as set forth below. These financial statements will be incorporated by reference in our shelf registration statement and are set forth herein for that purpose. 1 Report of Independent Public Accountants To the Stockholders and Board of Directors of Standard Pacific Corp.: We have audited the accompanying consolidated balance sheets of STANDARD PACIFIC CORP. (a Delaware corporation) and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Standard Pacific Corp. and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/Arthur Andersen LLP Orange County, California January 21, 2000 (except with respect to the matter discussed in Note 15, as to which the date is December 21, 2000) 2 STANDARD PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts)
Nine Months Ended September 30, Year Ended December 31, ---------------------- ---------------------------------- 2000 1999 1999 1998 1997 ---------- ---------- ---------- ---------- ---------- (Unaudited) Homebuilding: Revenues............... $ 817,813 $ 820,748 $1,198,831 $ 759,612 $ 584,571 Cost of sales.......... 658,803 674,889 986,793 618,448 490,876 ---------- ---------- ---------- ---------- ---------- Gross margin......... 159,010 145,859 212,038 141,164 93,695 ---------- ---------- ---------- ---------- ---------- Selling, general and administrative expenses.............. 68,079 69,927 99,971 61,691 52,141 Income from unconsolidated joint ventures.............. 11,537 5,148 6,201 4,158 3,787 Interest expense....... 2,502 1,027 1,519 1,168 4,981 Amortization of excess of cost over net assets acquired....... 1,514 1,484 1,979 1,312 245 Other income (expense)............. 157 84 (712) 168 822 ---------- ---------- ---------- ---------- ---------- Homebuilding pretax income.............. 98,609 78,653 114,058 81,319 40,937 ---------- ---------- ---------- ---------- ---------- Financial Services: Revenues............... 1,769 1,616 2,257 1,403 171 Income from unconsolidated joint venture............... 515 575 783 -- -- Other income........... 205 43 105 -- -- Expenses............... 2,872 2,253 3,140 1,828 62 ---------- ---------- ---------- ---------- ---------- Financial services pretax income (loss).............. (383) (19) 5 (425) 109 ---------- ---------- ---------- ---------- ---------- Income from continuing operations before income taxes and extraordinary charge... 98,226 78,634 114,063 80,894 41,046 Provision for income taxes.................. (39,126) (32,343) (46,492) (33,490) (17,070) ---------- ---------- ---------- ---------- ---------- Income from continuing operations before extraordinary charge... 59,100 46,291 67,571 47,404 23,976 Income (loss) from discontinued operations, net of income taxes of $0, $114, $114, $111 and $(1,034), respectively........... -- (159) (159) (199) 48 Gain on disposal of discontinued operations, net of income taxes of $(425) in 1999 and $(51) in 1997.......... -- 618 618 -- 3,302 Extraordinary charge from early extinguishment of debt, net of income taxes of $904 in 1998........... -- -- -- (1,328) -- ---------- ---------- ---------- ---------- ---------- Net Income.............. $ 59,100 $ 46,750 $ 68,030 $ 45,877 $ 27,326 ========== ========== ========== ========== ========== Basic Net Income Per Share: Income per share from continuing operations............ $ 2.04 $ 1.56 $ 2.28 $ 1.59 $ 0.82 Income (loss) per share from discontinued operations............ -- (0.01) (0.01) (0.01) 0.00 Gain per share on disposal of discontinued operations............ -- 0.02 0.02 -- 0.11 Extraordinary charge per share from early extinguishment of debt.................. -- -- -- (0.04) -- ---------- ---------- ---------- ---------- ---------- Net Income Per Share... $ 2.04 $ 1.57 $ 2.29 $ 1.54 $ 0.93 ========== ========== ========== ========== ========== Weighted average common shares outstanding........... 28,978,815 29,648,808 29,597,669 29,714,431 29,504,477 ========== ========== ========== ========== ========== Diluted Net Income Per Share: Income per share from continuing operations............ $ 2.03 $ 1.55 $ 2.27 $ 1.58 $ 0.81 Income (loss) per share from discontinued operations............ -- (0.01) (0.01) (0.01) 0.00 Gain per share on disposal of discontinued operations............ -- 0.02 0.02 -- 0.11 Extraordinary charge per share from early extinguishment of debt.................. -- -- -- (0.04) -- ---------- ---------- ---------- ---------- ---------- Net Income Per Share... $ 2.03 $ 1.56 $ 2.28 $ 1.53 $ 0.92 ========== ========== ========== ========== ========== Weighted average common and diluted shares outstanding.... 29,145,438 29,880,122 29,795,263 30,050,078 29,807,702 ========== ========== ========== ========== ==========
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, ------------- ----------------- 2000 1999 1998 ------------- -------- -------- (Unaudited) ASSETS Homebuilding: Cash and equivalents......................... $ 2,324 $ 2,865 $ 13,413 Other notes and accounts receivable, net..... 24,200 10,489 25,279 Mortgage notes receivable and accrued interest.................................... 1,350 4,530 5,061 Inventories.................................. 906,705 699,489 713,446 Investments in and advances to unconsolidated joint ventures.............................. 98,672 49,116 38,405 Property and equipment, net.................. 4,917 2,656 3,512 Deferred income taxes........................ 13,816 12,738 10,784 Other assets................................. 15,026 13,350 8,210 Excess of cost over net assets acquired, net......................................... 17,436 15,315 17,293 ---------- -------- -------- 1,084,446 810,548 835,403 ---------- -------- -------- Financial Services: Cash and equivalents......................... 558 313 1,651 Mortgage loans held for sale................. 21,482 17,554 19,341 Other assets................................. 876 1,553 1,920 ---------- -------- -------- 22,916 19,420 22,912 ---------- -------- -------- Net assets of discontinued operations.......... -- -- 8,047 ---------- -------- -------- Total Assets............................... $1,107,362 $829,968 $866,362 ========== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Homebuilding: Accounts payable............................. $60,238 $ 42,344 $ 22,015 Accrued liabilities.......................... 83,623 69,437 63,777 Revolving credit facility.................... 76,800 23,000 204,900 Trust deed notes payable..................... 349 3,531 21,187 Senior notes payable......................... 423,929 298,847 218,382 ---------- -------- -------- 644,939 437,159 530,261 ---------- -------- -------- Financial Services: Accounts payable and other liabilities....... 350 620 596 Mortgage warehouse line of credit............ 16,659 10,304 10,826 ---------- -------- -------- 17,009 10,924 11,422 ---------- -------- -------- Stockholders' Equity: Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued.............. -- -- -- Common stock, $.01 par value; 100,000,000 shares authorized; 29,924,053, 29,208,680 and 29,629,480 shares outstanding at September 30, 2000, December 31, 1999 and 1998, respectively.......................... 299 292 296 Paid-in capital.............................. 290,053 278,701 283,598 Retained earnings............................ 155,062 102,892 40,785 ---------- -------- -------- Total stockholders' equity................... 445,414 381,885 324,679 ---------- -------- -------- Total Liabilities and Stockholders' Equity.................................... $1,107,362 $829,968 $866,362 ========== ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. 4 STANDARD PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in thousands, except per share amounts)
Common Years Ended December 31, 1997, 1998 Number of Stock Retained and 1999 and for the Nine Months Ended Common Par Paid-In Earnings September 30, 2000 Shares Value Capital (Deficit) -------------------------------------- ---------- ------ -------- --------- Balance, December 31, 1996............. 29,629,981 $296 $283,331 $(23,238) Exercise of stock options and related income tax benefit.................... 292,100 3 2,315 -- Repurchase of common shares............ (284,800) (3) (2,121) -- Cash dividends declared ($0.14 per share)................................ -- -- -- (4,131) Net income............................. -- -- -- 27,326 ---------- ---- -------- -------- Balance, December 31, 1997............. 29,637,281 296 283,525 (43) Exercise of stock options and related income tax benefit.................... 131,500 1 1,383 -- Repurchase of common shares............ (139,301) (1) (1,310) -- Cash dividends declared ($0.17 per share)................................ -- -- -- (5,049) Net income............................. -- -- -- 45,877 ---------- ---- -------- -------- Balance, December 31, 1998............. 29,629,480 296 283,598 40,785 Exercise of stock options and related income tax benefit.................... 33,000 1 321 -- Repurchase of common shares............ (453,800) (5) (5,218) -- Cash dividends declared ($0.20 per share)................................ -- -- -- (5,923) Net income............................. -- -- -- 68,030 ---------- ---- -------- -------- Balance, December 31, 1999............. 29,208,680 292 278,701 102,892 ---------- ---- -------- -------- Exercise of stock options and related income tax benefit.................... 81,375 1 954 -- Issuance of common shares in connection with acquisition...................... 1,159,398 11 15,781 -- Repurchase of common shares............ (525,400) (5) (5,383) -- Cash dividends declared ($0.24 per share)................................ -- -- -- (6,930) Net income............................. -- -- -- 59,100 ---------- ---- -------- -------- Balance, September 30, 2000 (Unaudited)........................... 29,924,053 $299 $290,053 $155,062 ========== ==== ======== ========
The accompanying notes are an integral part of these consolidated statements. 5 STANDARD PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Nine Months Ended September 30, Year Ended December 31, ------------------ ------------------------------- 2000 1999 1999 1998 1997 --------- ------- --------- ---------- -------- (Unaudited) Cash Flows from Operating Activities: Net income.............. $ 59,100 $46,750 $ 68,030 $ 45,877 $ 27,326 Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations: Discontinued operations........... -- 159 159 199 (48) Gain on disposal of discontinued operations........... -- (618) (618) -- (3,302) Extraordinary charge from early extinguishment of debt................. -- -- -- 1,328 -- Income from unconsolidated joint ventures............. (11,537) (5,148) (6,201) (4,158) (3,787) Loss on disposal of property and equipment............ -- -- 620 -- -- Depreciation and amortization......... 1,110 913 1,238 918 586 Amortization of excess of cost over net assets acquired...... 1,514 1,484 1,979 1,312 245 Changes in cash and equivalents due to: Receivables and accrued interest... (14,087) 25,199 17,108 (26,087) (1,804) Inventories......... (130,286) (56,932) 14,059 (193,242) (615) Deferred income taxes.............. 285 (1,867) (1,954) 1,833 4,345 Other assets........ 1,483 2,567 (3,023) (703) 4,555 Accounts payable.... 13,778 11,812 20,329 2,883 6,796 Accrued liabilities........ 8,012 1,914 5,468 30,624 14,287 --------- ------- --------- ---------- -------- Net cash provided by (used in) operating activities of continuing operations.. (70,628) 26,233 117,194 (139,216) 48,584 --------- ------- --------- ---------- -------- Cash Flows from Investing Activities: Cash paid for acquisitions........... (44,550) -- -- (59,279) (65,842) Investments in and advances to unconsolidated joint ventures............... (98,662) (29,914) (44,095) (16,651) (22,598) Distributions and reimbursements from unconsolidated joint ventures............... 47,906 28,546 39,585 8,621 1,053 Net additions to property and equipment.............. (2,894) (796) (1,002) (1,439) (1,264) Sales of investment securities............. -- -- -- -- 5,329 Proceeds from the sale of discontinued operations............. -- 8,798 8,798 1,087 8,379 --------- ------- --------- ---------- -------- Net cash provided by (used in) investing activities............. (98,200) 6,634 3,286 (67,661) (74,943) --------- ------- --------- ---------- -------- Cash Flows from Financing Activities: Net proceeds from (payments on) revolving credit facility........ 53,800 (94,200) (181,900) 185,900 (38,300) Net proceeds from (payments on) mortgage warehouse line of credit................. 6,355 (6,436) (522) 10,826 -- Proceeds from the issuance of senior notes payable.......... 123,125 98,250 98,250 97,571 96,931 Principal payments on senior notes and trust deed notes payable..... (3,182) (37,256) (37,293) (75,148) (27,707) Dividends paid.......... (6,932) (4,447) (5,923) (5,049) (4,131) Repurchase of common shares................. (5,386) (267) (5,223) (1,311) (2,124) Proceeds from exercise of stock options....... 752 215 245 771 1,705 --------- ------- --------- ---------- -------- Net cash provided by (used in) financing activities............. 168,532 (44,141) (132,366) 213,560 26,374 --------- ------- --------- ---------- -------- Net change in cash from discontinued operations............. -- (38,130) (38,130) (6,826) 37,088 --------- ------- --------- ---------- -------- Net increase (decrease) in cash and equivalents............ (296) (49,404) (50,016) (143) 37,103 Cash and equivalents at beginning of period.... 3,178 53,194 53,194 53,337 16,234 --------- ------- --------- ---------- -------- Cash and equivalents at end of period.......... $ 2,882 $ 3,790 $ 3,178 $ 53,194 $ 53,337 ========= ======= ========= ========== ========
The accompanying notes are an integral part of these consolidated statements. 6 STANDARD PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued) (Dollars in thousands)
Nine Months Ended September 30, Year Ended December 31, --------------- ----------------------- 2000 1999 1999 1998 1997 ------- ------- ------- ------- ------- (Unaudited) Summary of Cash Balances: Continuing operations................ $ 2,882 $ 3,790 $ 3,178 $15,064 $ 8,381 Discontinued operations.............. -- -- -- 38,130 44,956 ------- ------- ------- ------- ------- $ 2,882 $ 3,790 $ 3,178 $53,194 $53,337 ======= ======= ======= ======= ======= Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest--continuing operations.... $23,481 $22,087 $32,248 $24,995 $17,698 Income taxes....................... 37,780 41,629 54,699 19,890 15,500 Supplemental Disclosures of Noncash Activities: Land acquisitions financed by purchase money trust deeds.......... $ -- $ -- $ -- $18,670 $19,214 Issuance of common stock in connection with acquisition......... 15,792 -- -- -- -- Inventory received as a distribution from an unconsolidated joint venture............................. 12,737 -- -- -- -- Expenses capitalized in connection with the issuance of 8 1/2% senior notes due 2007...................... -- -- -- -- 2,377 Expenses capitalized in connection with the issuance of 8% senior notes due 2008............................ -- -- -- 1,750 -- Expenses capitalized in connection with the issuance of 8 1/2% senior notes due 2009...................... -- 1,750 1,750 -- -- Expenses capitalized in connection with the issuance of the 9 1/2% senior notes due 2010............... 1,875 -- -- -- -- Income tax benefit credited in connection with shares of common stock issued pursuant to stock options exercised................... 202 68 77 613 613
The accompanying notes are an integral part of these consolidated statements. 7 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Company Organization and Operations Standard Pacific Corp., a Delaware corporation, operates primarily as a geographically diversified builder of single-family homes for use as primary residences with operations throughout the major metropolitan markets in California, Texas and Arizona. Unless the context otherwise requires, the terms "we", "us" and "our" refer to Standard Pacific Corp. and its subsidiaries. In 1998, Family Lending Services, Inc. ("Family Lending"), our wholly-owned mortgage banking subsidiary, began offering financing primarily to our California homebuyers. Additionally, we offer mortgage loans to our Arizona and Texas homebuyers through SPH Mortgage, a mortgage banking joint venture with Wells Fargo Bank (formerly Norwest Mortgage). In 1999, through a newly- formed subsidiary, SPH Title, Inc., we began serving as a title insurance agent in Texas offering title examination services to our Texas homebuyers. For the year ended December 31, 1999, approximately 64 percent, 13 percent and 23 percent of home deliveries (including the unconsolidated joint ventures) were from California, Texas and Arizona, respectively. There have been periods of time in California where economic growth has slowed and the average sales price of homes in certain areas in California in which we do business have declined. There can be no assurance that home sales prices will not decline in the future. 2. Summary of Significant Accounting Policies a. Basis of Presentation The consolidated financial statements include the accounts of Standard Pacific Corp. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in unconsolidated joint ventures in which we have less than a controlling interest are accounted for using the equity method. b. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. c. Segment Reporting Effective December 31, 1998, we adopted Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" (FAS 131). Under the provisions of FAS 131, our operating segments consist of homebuilding and mortgage banking. These two segments are segregated in the accompanying consolidated financial statements under "Homebuilding" and "Financial Services," respectively. d. Cash and Equivalents For purposes of the consolidated statements of cash flows, cash and equivalents include cash on hand, demand deposits, and all highly liquid short-term investments, including interest bearing securities purchased with a remaining maturity of three months or less. 8 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) e. Mortgage Loans Held for Sale Mortgage loans held for sale are reported at the lower of cost or market on an aggregate basis. We estimate the market value of our loans held for sale based on quoted market prices for similar loans. Loan origination fees, net of the related direct origination costs, and loan discount points are deferred as an adjustment to the carrying value of the related mortgage loans held for sale and are recognized into income upon the sale of mortgage loans. f. Real Estate Inventories We capitalize direct carrying costs, including interest, property taxes and related development costs to real estate under development. Field construction supervision and related direct overhead are also included in the capitalized cost of real estate inventories. General and administrative costs are expensed as incurred. We assess the recoverability of real estate inventories in accordance with the provisions of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of" (FAS 121). FAS 121 requires long-lived assets, including real estate inventories, that are expected to be held and used in operations to be carried at the lower of cost or, if impaired, the fair value of the asset, rather than its net realizable value. Long-lived assets to be disposed of should be reported at the lower of carrying amount or fair value less cost to sell. g. Capitalization of Interest We follow the practice of capitalizing interest to real estate inventories during the period of development in accordance with Financial Accounting Standards No. 34, "Capitalization of Interest Cost." Interest capitalized as a cost of real estate under development is included in cost of sales as related units are sold. The following is a summary of interest capitalized and expensed from continuing operations for the following periods:
Nine Months Ended September 30, Year Ended December 31, ----------------- ----------------------- 2000 1999 1999 1998 1997 -------- -------- ------- ------- ------- (Unaudited) (Dollars in thousands) Total interest incurred during the year................................ $ 27,640 $ 26,490 $35,151 $29,010 $17,026 Less: Interest capitalized as a cost of real estate under development.... 25,138 25,463 33,632 27,842 12,045 -------- -------- ------- ------- ------- Interest expense..................... $ 2,502 $ 1,027 $ 1,519 $ 1,168 $ 4,981 ======== ======== ======= ======= ======= Interest previously capitalized as a cost of real estate under development, included in cost of sales............................... $ 19,480 $ 19,133 $27,401 $26,399 $23,475 ======== ======== ======= ======= ======= Capitalized interest in ending inventories......................... $ 27,044 $ 21,485 $21,386 $15,155 $13,712 ======== ======== ======= ======= =======
h. Property and Equipment Property and equipment is recorded at cost, net of accumulated depreciation and amortization of $5,477,000 and $4,204,000 as of December 31, 1999 and 1998, respectively. Depreciation and amortization is recorded using the straight-line method over the estimated useful lives of the assets which typically ranges between 3 and 10 years. 9 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) i. Income Taxes We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This statement requires a liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered. j. Excess of Cost Over Net Assets Acquired The excess amount paid for business acquisitions over the net fair value of assets acquired and liabilities assumed has been capitalized in the accompanying consolidated balance sheets and is being amortized on a straight- line basis over periods ranging from 7 to 12 years. Accumulated amortization was $3,535,000 and $1,557,000 as of December 31, 1999 and 1998, respectively. (See Note 4) k. Revenue Recognition Revenues of residential housing are recorded after construction is completed, required down payments are received and title passes. We recognize loan origination fees and expenses, and gains and losses on loans when the related mortgage loans are sold. Our current policy is to sell all mortgage loans originated. Mortgage loan interest is accrued only so long as it is deemed collectible. l. Warranty Costs Estimated future warranty costs are charged to cost of sales in the period when the revenues from home closings are recognized. m. Net Income Per Share We compute net income per share in accordance with Statement of Financial Accounting Standards No. 128 "Earnings per Share" (FAS 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 Nine Months Ended September 30, ------------------------------------------------------- 2000 1999 ------------------------------ ------------------------ Income Shares EPS Income Shares EPS ------- ---------- ----------- ------- ---------- ----- (Unaudited) (Dollars in thousands, except per share amounts) Basic Net Income Per Share: Income available to common stockholders from continuing operations............ $59,100 28,978,815 $2.04 $46,291 29,648,808 $1.56 Effect of dilutive stock options................ -- 166,623 -- 231,314 ------- ---------- ------- ---------- Diluted net income per share from continuing operations............. $59,100 29,145,438 $2.03 $46,291 29,880,122 $1.55 ======= ========== ===== ======= ========== =====
10 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31, -------------------------------------------------------------------------- 1999 1998 1997 ------------------------ ------------------------ ------------------------ Income Shares EPS Income Shares EPS Income Shares EPS ------- ---------- ----- ------- ---------- ----- ------- ---------- ----- (Dollars in thousands, except per share amounts) Basic Net Income Per Share: Income available to common stockholders from continuing operations before extraordinary charge.. $67,571 29,597,669 $2.28 $47,404 29,714,431 $1.59 $23,976 29,504,477 $0.82 Effect of dilutive stock options................ -- 197,594 -- 335,647 -- 303,225 ------- ---------- ------- ---------- ------- ---------- Diluted income per share from continuing operations before extraordinary charge................. $67,571 29,795,263 $2.27 $47,404 30,050,078 $1.58 $23,976 29,807,702 $0.81 ======= ========== ===== ======= ========== ===== ======= ========== =====
n. Comprehensive Income We adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (FAS 130), during 1998. FAS 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. o. Recent Accounting Pronouncement In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). Under the provisions of FAS 133, we will be required to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and measure these instruments at fair value. We are required to adopt FAS 133 effective January 1, 2001. We have not yet quantified the impact of adopting FAS 133. p. Reclassifications Certain items in prior period financial statements have been reclassified to conform with current year presentation. 11 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. Investments in Unconsolidated Joint Ventures Summarized financial information related to our joint ventures accounted for under the equity method are as follows:
At December 31, ----------------- 1999 1998 -------- -------- (Dollars in thousands) Assets: Cash................................................... $ 7,478 $ 8,450 Trust deed notes receivable............................ -- 37,856 Real estate in process of development and completed model homes........................................... 278,068 175,830 Other assets........................................... 22,950 596 -------- -------- $308,496 $222,732 ======== ======== Liabilities and Equity: Accounts payable and accrued expenses.................. $ 39,704 $ 33,007 Construction loans and trust deed notes payable........ 144,370 78,747 General obligation assessment bonds.................... 44,928 31,539 Equity................................................. 79,494 79,439 -------- -------- $308,496 $222,732 ======== ========
Our share of equity shown above was approximately $36.1 million and $36.9 million at December 31, 1999 and 1998, respectively.
Year Ended December 31, ----------------------- 1999 1998 1997 ------- ------- ------- (Dollars in thousands) Revenues............................................ $43,642 $54,219 $24,427 Cost of revenues.................................... 33,101 41,588 17,591 ------- ------- ------- Net earnings of joint ventures...................... $10,541 $12,631 $ 6,836 ======= ======= =======
Our share of earnings in the joint ventures detailed above varies, but in no case is our share of earnings greater than 50 percent. In addition, there are some joint ventures to which we are a party whose sole purpose is to develop finished lots for sale to the joint venture's partners. We and our partners then purchase the lots from the joint venture to construct homes thereon. We do not anticipate recording any income or loss from these joint ventures as the related lots will be sold to us and other partners at cost. 4. Acquisitions On August 31, 1998, we acquired a portion of the assets of Shea Homes' Phoenix, Arizona single-family homebuilding operation (which had recently been acquired from UDC Homes, Inc.) for approximately $59 million in cash. The acquisition was financed under our unsecured revolving credit facility. At closing, we purchased or assumed the rights to acquire over 2,000 single- family lots located in 13 communities in the Phoenix Metropolitan area, of which seven communities were active subdivisions, and acquired a backlog of 400 presold homes. In addition, we retained UDC's Arizona senior management team and many of the existing staff. 12 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) On September 30, 1997, we acquired all of the outstanding common stock of Duc Development Company ("Duc"), a privately held Northern California homebuilding company, for approximately $16 million. In connection with this acquisition, we acquired certain other real estate assets related to Duc's operations for approximately $55 million in cash and the assumption of approximately $8 million of debt. Both acquisitions have been accounted for using the purchase method of accounting, and accordingly, the purchase price has been allocated to the net assets acquired based upon their estimated fair market values as of the date of acquisition. The excess of the purchase price over the estimated fair value of net assets acquired totaled approximately $12 million and $6.85 million for the Arizona and Northern California acquisitions, respectively. The excess purchase price has been recorded as excess of cost over net assets acquired in the accompanying consolidated balance sheets and is being amortized on a straight-line basis over periods ranging from 7 to 12 years. 5. Revolving Credit Facility and Trust Deed Notes Payable a. Revolving Credit Facility In August 1999, we amended our unsecured revolving credit facility (the "Facility") with our bank group to, among other things, increase the commitment to $450 million, extend the maturity date to July 31, 2003 and revise certain financial and other covenants. The Facility contains covenants which require, among other things, the maintenance of certain amounts of tangible stockholders' equity, limitations on leverage, and minimum interest coverage, as defined. The Facility also contains a borrowing base provision which may limit the amount we may borrow under the credit facility. At December 31, 1999, we had borrowings of $23 million outstanding under this Facility. Additionally, we had approximately $12 million in letters of credit outstanding at December 31, 1999. Interest rates charged under this Facility include LIBOR and prime rate pricing options. In addition, there are fees charged on the commitment and unused portion of the Facility, as defined. As of December 31, 1999, and throughout the year, we were in compliance with the covenants of the Facility. b. Trust Deed Notes Payable At December 31, 1999 and 1998, trust deed notes payable primarily consisted of trust deeds on land purchases. At December 31, 1999, the weighted average interest rate on these trust deeds was approximately 6.2 percent. c. Borrowings and Maturities The following summarizes the borrowings outstanding under the unsecured revolving credit facility (excluding senior notes--see Note 6) and trust deed notes payable during the three years ended December 31:
1999 1998 1997 -------- -------- ------- (Dollars in thousands) Maximum borrowings outstanding during the year at month end................................. $237,022 $244,808 $98,295 Average outstanding balance during the year... $131,850 $ 97,349 $45,395 Weighted average interest rate for the year... 6.5% 6.9% 7.3% Weighted average interest rate on borrowings outstanding at year end...................... 7.2% 7.0% 7.9%
13 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Maturities of the revolving credit facility, trust deed notes payable and senior notes payable (see Note 6 below) are as follows:
Year Ended December 31, ------------ (Dollars in thousands) 2000............................................................ $ 3,531 2001............................................................ -- 2002............................................................ -- 2003............................................................ 23,000 2004............................................................ -- Thereafter...................................................... 298,847 -------- $325,378 ========
6. Senior Notes Payable Senior notes payable consist of the following:
September 30, December 31, ------------- ----------------- 2000 1999 1998 ------------- -------- -------- (Unaudited) (Dollars in thousands) 10 1/2% Senior Notes due 2000............... $ -- $ -- $ 19,637 8 1/2% Senior Notes due 2007, net........... 99,474 99,432 99,379 8% Senior Notes due 2008, net............... 99,455 99,415 99,366 8 1/2% Senior Notes due 2009................ 100,000 100,000 -- 9 1/2% Senior Notes due 2010................ 125,000 -- -- -------- -------- -------- $423,929 $298,847 $218,382 ======== ======== ========
In 1993, we issued $100 million principal amount of 10 1/2% Senior Notes due March 1, 2000 (the "10 1/2% Senior Notes"). Under the original terms of the 10 1/2% Senior Notes, we did not have the option to redeem these notes prior to their scheduled maturities. However, we were required to make annual mandatory sinking fund payments sufficient to retire 20 percent of the original aggregate principal amount of these notes ($20 million per year) commencing on March 1, 1997, at a redemption price of 100 percent of the principal amount, with the balance of the notes to be retired on March 1, 2000. We made two $20 million sinking fund payments on the 10 1/2% Senior Notes in March 1997 and 1998. In May 1998, we repurchased and retired approximately $7.7 million of our 10 1/2% Senior Notes due 2000 through a series of open market purchases. In addition, on September 30, 1998, we completed a tender offer and consent solicitation for a portion of our 10 1/2% Senior Notes due 2000. In connection with this tender offer, we repurchased and retired approximately $31.5 million of our 10 1/2% Senior Notes. With the successful completion of the consent solicitation, certain restrictive financial covenants were modified or eliminated under the indenture. In aggregate, we incurred an after tax extraordinary charge for the early extinguishment of debt, including transaction costs, of approximately $1.3 million for the year ended December 31, 1998. On March 1, 1999, we repaid the balance of the 10 1/2% Senior Notes outstanding ($19.6 million) under the annual sinking fund payment provision of the indenture. In June 1997, we issued $100 million of 8 1/2% Senior Notes due June 15, 2007 (the "8 1/2% Senior Notes"). The 8 1/2% Senior Notes were issued at a discount to yield approximately 8.6 percent and have been reflected net of the unamortized discount in the accompanying consolidated balance sheets. Interest is due and payable on June 15 and December 15 of each year until maturity. These notes are redeemable at our option, in whole or in part, commencing June 15, 2002 at a price of 104.25 percent of par value, with the call price reducing ratably to par on June 15, 2005. Net proceeds after offering expenses were approximately $96.9 million. 14 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In February 1998, we issued $100 million of 8% Senior Notes due February 15, 2008 (the "8% Senior Notes"). The 8% Senior Notes were issued at a discount to yield approximately 8.1 percent. Interest is due and payable on February 15 and August 15 of each year until maturity. These notes are redeemable at our option, in whole or in part, commencing February 15, 2003 at 104.00 percent of par, with the call price reducing ratably to par on February 15, 2006. Net proceeds after offering expenses were approximately $97.3 million. In April 1999, we issued $100 million of 8 1/2% Senior Notes which mature April 1, 2009 (the "8 1/2% Senior Notes due 2009"). The 8 1/2% Senior Notes due 2009 were issued at par with interest due and payable on April 1 and October 1 of each year until maturity. The 8 1/2% Senior Notes due 2009 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 $98.3 million and were used to repay a portion of the balance outstanding under our revolving credit facility. Both 8 1/2% Senior Note issuances and the 8% Senior Notes (the "Notes") are senior unsecured obligations and rank equally with our other existing senior unsecured indebtedness. We will, under certain circumstances, be obligated to make an offer to purchase a portion of the Notes in the event of our failure to maintain a minimum consolidated net worth (other than with respect to the 8 1/2% Senior Notes due 2009) and in the event of certain asset sales. In addition, the 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. In addition, upon a change in control we are required to make an offer to purchase these Notes. As of December 31, 1999, we were in compliance with the covenants under the Notes. 7. Mortgage Warehouse Line of Credit Our financial services subsidiary maintains a revolving mortgage warehouse credit facility (the "Mortgage Warehouse Facility") with a bank to finance its mortgage loans held for sale. In May 1999, the commitment under this facility was increased from $15 million to $40 million. Borrowings under the Mortgage Warehouse Facility, which are LIBOR based and have a maturity date of May 31, 2000, are secured by the related mortgage loans held for sale. Maximum borrowings outstanding under this facility during 1999 and 1998 were $10,304,000 and $10,826,000, respectively. Average borrowings outstanding during the years ended December 31, 1999 and 1998 were $4,299,000 and $1,870,000, respectively. The weighted average interest rate of the Mortgage Warehouse Facility during the years ended December 31, 1999 and 1998 was 6.2 percent. In addition, the Mortgage Warehouse Facility requires our financial services subsidiary to comply with certain financial covenants, including, but not limited to, a minimum net worth requirement, a total liabilities to tangible net worth ratio and a minimum cash flow requirement. Family Lending was in compliance with the net worth covenant and the leverage covenant of the Mortgage Warehouse Facility as of and throughout the year ended December 31, 1999. Family Lending received a waiver from the bank for the minimum cash flow requirement through its current maturity date. 8. Disclosures about Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate: Cash and Equivalents--The carrying amount is a reasonable estimate of fair value. These assets primarily consist of short term investments and demand deposits. Mortgage Notes Receivable--Mortgage notes receivable consist of first and second mortgages on single-family residences and trust deed notes receivable originated from land sales. Fair values are determined based upon discounted cash flows of the applicable instruments. 15 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Mortgage Loans Held for Sale--These consist primarily of first mortgages on single-family residences. Fair value of these loans is based on quoted market prices for similar loans. Revolving Credit Facility and Mortgage Warehouse Line of Credit--The carrying amounts of these credit obligations approximate market value because of the frequency of repricing the borrowings (generally every 7 to 90 days). Trust Deed Notes Payable--These notes are primarily for purchase money deeds of trust on land acquired. As of December 31, 1999, these notes have remaining maturity dates of less than one year. The rates of interest paid on these notes approximate the current rates available for secured real estate financing with similar terms and maturities, therefore, carrying amounts approximate fair value. 10 1/2% Senior Notes due 2000--This issue was publicly traded on the New York Stock Exchange. Consequently, the fair value of this issue was based on its quoted market price at year end. 8 1/2% Senior Notes due 2007--This issue is publicly traded on the New York Stock Exchange. As a result, the fair value of this issue was based on its quoted market price at year end. 8% Senior Notes due 2008--This issue is publicly traded over the counter and its fair value was based upon the value of its last trade at year end. 8 1/2% Senior Notes due 2009--This issue is also publicly traded over the counter and its fair value was based upon the value of its last trade at year end. The estimated fair values of financial instruments from continuing operations are as follows:
At December 31, ---------------------------------- 1999 1998 ---------------- ----------------- Carrying Fair Carrying Fair Amount Value Amount Value -------- ------- -------- -------- (Dollars in thousands) Financial assets: Homebuilding: Cash and equivalents................. $ 2,865 $ 2,865 $ 13,413 $ 13,413 Mortgage notes receivable............ 4,530 3,969 5,061 4,827 Financial services: Cash and equivalents................. 313 313 1,651 1,651 Mortgage loans held for sale......... 17,554 18,192 19,341 20,314 Financial liabilities: Homebuilding: Revolving credit facility............ $ 23,000 $23,000 $204,900 $204,900 Trust deed notes payable............. 3,531 3,531 21,187 21,187 10 1/2% Senior Notes due 2000........ -- -- 19,637 20,054 8 1/2% Senior Notes due 2007......... 99,432 92,500 99,379 100,375 8% Senior Notes due 2008............. 99,415 90,250 99,366 97,890 8 1/2% Senior Notes due 2009......... 100,000 92,750 -- -- Financial services: Mortgage warehouse line of credit.... 10,304 10,304 10,826 10,826
16 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 9. Commitments and Contingencies We lease office facilities under noncancelable operating leases. Future minimum rental payments on operating leases, net of related subleases, having an initial term in excess of one year as of December 31, 1999 are as follows:
Year Ended December 31, ----------------------- (Dollars in thousands) 2000................................................ $ 2,251 2001................................................ 2,257 2002................................................ 1,676 2003................................................ 1,433 2004................................................ 1,299 Thereafter.......................................... 4,646 ------- Subtotal.......................................... 13,562 Less--Sublease income............................... (833) ------- Net rental obligations............................ $12,729 =======
Rent expense from continuing operations under noncancelable operating leases, net of sublease income, for the three years ended December 31, 1999 was approximately $1,065,000, $838,000 and $397,000, respectively. We are subject to the usual obligations associated with entering into contracts for the purchase of land and improved homesites. Land purchase and option contracts for the purchase of land typically allow us the ability to acquire portions of properties when we are ready to build homes thereon. Purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by us and the sellers. Mortgage loans in process for which interest rates were committed to borrowers totaled approximately $1.3 million at December 31, 1999 and carried a weighted average interest rate of approximately 7.6 percent. Interest rate risks related to these obligations are generally mitigated by Family Lending preselling the loans to its investors. We are party to claims and litigation proceedings arising in the normal course of business. Although the legal responsibility and financial impact with respect to certain claims and litigation cannot presently be ascertained, we do not believe that these matters will result in us making a payment of monetary damages that, in the aggregate, would have a material impact on our financial position, results of operations or liquidity. It is possible that the reserves provided for by us with respect to such claims and litigation could change in the near term. 10. Income Taxes The provision for income taxes for continuing operations includes the following components:
Year Ended December 31, ------------------------ 1999 1998 1997 ------- ------- ------- (Dollars in thousands) Current: Federal......................................... $40,891 $24,940 $12,909 State........................................... 9,136 4,160 3,471 ------- ------- ------- 50,027 29,100 16,380 ------- ------- ------- Deferred: Federal......................................... (3,272) 3,931 535 State........................................... (263) 459 155 ------- ------- ------- (3,535) 4,390 690 ------- ------- ------- Provision for income taxes for continuing operations and before extraordinary charge....... $46,492 $33,490 $17,070 ======= ======= =======
17 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The components of our deferred income tax asset (liability) from continuing operations is as follows:
At December 31, ------------------------ 1999 1998 ----------- ----------- (Dollars in thousands) Inventory adjustments............................ $ 1,391 $ 2,663 Financial accruals............................... 10,756 8,628 State income taxes............................... 2,855 2,115 Nondeductible purchase price..................... (2,568) (2,747) Amortization of excess of cost over net assets acquired........................................ 165 27 Other............................................ 139 98 ----------- ----------- $12,738 $ 10,784 =========== ===========
At December 31, 1999, we had a consolidated net deferred tax asset of approximately $12.7 million. A significant portion of this asset's realization is dependent upon our ability to generate sufficient taxable income in future years. Although realization is not assured, management believes it is more likely than not that the net deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced or if tax rates are lowered. The effective tax rate differs from the Federal statutory rate of 35 percent due to the following items:
Year Ended December 31, -------------------------- 1999 1998 1997 -------- ------- ------- (Dollars in thousands) Financial income from continuing operations before income taxes and extraordinary charge............ $114,063 $80,894 $41,046 ======== ======= ======= Provision for income taxes at statutory rate...... $ 39,922 $28,313 $14,366 Increases (decreases) in tax resulting from: State income taxes.............................. 5,976 4,648 2,481 Nondeductible amortization of excess of cost over net assets acquired....................... 394 399 100 Other........................................... 200 130 123 -------- ------- ------- Provision for income taxes for continuing operations and before extraordinary charge....... $ 46,492 $33,490 $17,070 ======== ======= ======= Effective tax rate for continuing operations...... 40.8% 41.4% 41.6% ======== ======= =======
11. Stock Option Plan In 1991, we adopted the 1991 Employee Stock Incentive Plan (the "Plan") pursuant to which officers, directors and employees are eligible to receive options to purchase shares of common stock. Under the Plan the maximum number of shares of stock that may be issued is one million. On May 13, 1997, our shareholders approved the 1997 Stock Incentive Plan (the "1997 Plan"). Under the 1997 Plan, the maximum number of shares of stock that may be issued is two million. Options are typically granted to purchase shares at prices equal to the fair market value of the shares at the date of grant. The options typically vest over a one to four year period and are generally exercisable for a 10 year period. When the options are exercised, the proceeds are credited to equity along with the related income tax benefits, if any. 18 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following is a summary of the transactions relating to the two respective Plans for the years ended December 31, 1999, 1998 and 1997:
1999 1998 1997 ------------------- ------------------- ------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price --------- -------- --------- -------- --------- -------- Options outstanding, beginning of year...... 2,188,990 $11.55 958,990 $ 7.99 928,590 $6.30 Granted................. 358,000 11.46 1,382,500 13.50 343,000 10.70 Exercised............... (33,000) 7.42 (131,500) 5.86 (292,100) 5.81 Canceled................ (87,000) 13.29 (21,000) 12.57 (20,500) 7.83 --------- ------ --------- ------ --------- ----- Options outstanding, end of year................ 2,426,990 $11.53 2,188,990 $11.55 958,990 $7.99 ========= ====== ========= ====== ========= ===== Options exercisable at end of year............ 770,991 450,490 360,990 ========= ========= ========= Options available for future grant........... 53,275 323,775 1,685,275 ========= ========= =========
The following information is provided pursuant to the requirements of Statement of Financial Accounting Standards No. 123 "Accounting for Stock- Based Compensation" (FAS 123). The fair value of each option granted during the three years in the period ended December 31, 1999 is estimated using the Black--Scholes option-pricing model on the date of grant using the following weighted average assumptions:
1999 1998 1997 ------- ------- ------- Dividend yield.................................... 1.75% 1.52% 1.31% Expected volatility............................... 44.65% 40.99% 43.80% Risk-free interest rate........................... 5.95% 5.18% 6.17% Expected life..................................... 5 years 5 years 5 years
The 2,426,990 options outstanding as of December 31, 1999 have exercise prices between $5.38 and $17.63, with a weighted average exercise price of $11.53 and a weighted average remaining contractual life of 8.02 years. As of December 31, 1999, 770,991 of these options are exercisable with a weighted average exercise price of $10.57. The weighted average fair value of options granted during the years ended December 31, 1999, 1998 and 1997 was $4.68, $5.35 and $6.55, respectively. During the years ended December 31, 1999, 1998 and 1997, no compensation expense was recognized related to the stock options granted, however, had compensation expense been determined consistent with FAS 123 for 1999, 1998 and 1997 grants under the stock-based compensation plan, net income and diluted net income per share for the years ended December 31, 1999, 1998 and 1997 would approximate the pro forma amounts below:
Year Ended December 31, -------------------------------------------------- 1999 1998 1997 ---------------- ---------------- ---------------- As Pro As Pro As Pro Reported Forma Reported Forma Reported Forma -------- ------- -------- ------- -------- ------- (Dollars in thousands, except per share amounts) Net income.............. $68,030 $65,614 $45,877 $44,210 $27,326 $27,100 Diluted net income per common share........... $ 2.28 $ 2.20 $ 1.53 $ 1.47 $ 0.92 $ 0.91
The effects of applying FAS 123 in this pro forma disclosure are not indicative of future amounts. 19 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 12. Stockholder Rights Plan and Common Stock Repurchase Plan Standard Pacific has a stockholder rights agreement (the "Agreement") in place. Under the Agreement, one right is granted for each share of outstanding common stock. Each right entitles the holder, in certain takeover situations, as defined, and after paying the exercise price (currently $40), to purchase common stock having a market value equal to two times the exercise price. Also, if we merge into another corporation, or if 50 percent or more of our assets are sold, the rightholders may be entitled, upon payment of the exercise price, to buy common shares of the acquiring corporation at a 50 percent discount from the then current market value. In either situation, these rights are not available to the acquiring party. However, these exercise features will not be activated if the acquiring party makes an offer to acquire all of our outstanding shares at a price which is judged by the Board of Directors to be fair to all of our stockholders. The rights may be redeemed by Standard Pacific's Board of Directors under certain circumstances at the rate of $.01 per right. The rights will expire on December 31, 2001, unless earlier redeemed or exchanged. In July 1995, the Board of Directors authorized the repurchase of up to $10 million of our common stock. In January 1997, the Board increased the repurchase limit to $20 million, which was subsequently increased to $25 million in October 1999. For the year ended December 31, 1999, Standard Pacific repurchased 453,800 shares of common stock for an aggregate price of approximately $5.2 million. Since the inception of the stock repurchase program and through the year ended December 31, 1999, Standard Pacific has repurchased approximately 1.9 million shares of common stock for approximately $14.9 million, leaving a balance of approximately $10.1 million available for future repurchases. 13. Discontinued Operations In May 1997, the Board of Directors adopted a plan of disposition (the "Plan") for our savings and loan subsidiary ("Savings"). Pursuant to the Plan, we sold substantially all of Savings' mortgage loan portfolio in June 1997. The proceeds from the sale of the mortgages were used to pay off substantially all of the outstanding balances of Federal Home Loan Bank advances with the remaining amount temporarily invested until the savings deposits were sold along with Savings' remaining assets. The gain generated from the sale of this mortgage loan portfolio, net of related expenses, was not material. In August 1998, we entered into a definitive agreement to sell the remainder of Savings' business, including Savings' charter, which closed in May 1999. An after tax net gain of $618,000, or $0.02 per diluted share, has been reflected in the accompanying consolidated statements of income. Proceeds from the sale of Savings were approximately $8.8 million before transaction and other related costs. Savings has been accounted for as a discontinued operation and the results of its operations and net assets have been segregated in the accompanying consolidated financial statements. Interest income from Savings aggregated $1,256,000, $3,451,000 and $12,395,000 for the years ended December 31, 1999, 1998 and 1997, respectively. In December 1997, we sold all of the outstanding stock of Panel Concepts, Inc. ("Panel") to a third party. A net gain of approximately $3.3 million, or $.11 per diluted share, has been reflected in the accompanying consolidated statements of income. Proceeds from the sale of Panel were approximately $9.5 million before transaction and other related costs. In addition, certain non- operating assets of Panel totaling approximately $9 million were distributed to us prior to the closing. Panel has also been accounted for as a discontinued operation and, accordingly, the results of its operations have been segregated in the accompanying consolidated statements of income. In addition, since the sale of Panel was completed before the end of 1997, there are no assets or liabilities included in the accompanying consolidated balance sheets. Product sales from Panel totaled $19,689,000 for the year ended December 31, 1997. 20 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The components of net assets of discontinued operations, all of which relates to Savings, included in the consolidated balance sheet at December 31, 1998 are as follows:
At December 31, 1998 --------------- (Dollars in thousands) Assets: Cash and equivalents........................................... $38,130 Investment securities available for sale....................... 15,649 Accrued interest receivable.................................... 244 Property and equipment, net.................................... 62 Deferred income taxes.......................................... 274 Investment in FHLB stock....................................... 8,971 Other assets................................................... 73 ------- Total assets--discontinued operation........................... $63,403 ------- Liabilities: Savings accounts............................................... $53,878 Accounts payable and accrued expenses.......................... 1,478 ------- Total liabilities--discontinued operation...................... 55,356 ------- Net assets of discontinued operation........................... $ 8,047 =======
21 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 14. Results of Quarterly Operations (Unaudited)
First Second Third Fourth Quarter Quarter Quarter Quarter Total(1) -------- -------- -------- -------- ---------- (Dollars in thousands, except per share amounts) 1999: Revenues................. $214,480 $309,179 $297,089 $378,083 $1,198,831 Income from continuing operations before income taxes and extraordinary charge.................. 23,579 27,577 27,479 35,428 114,063 Income (loss) from discontinued operation, net of income taxes..... (77) (83) -- -- (159) Gain on disposal of discontinued operation, net of income taxes..... -- 618 -- -- 618 Net income............... 13,794 16,775 16,181 21,280 68,030 Diluted Net Income Per Share: Income per share from continuing operations.. $ 0.46 $ 0.54 $ 0.54 $ 0.72 $ 2.27 Income (loss) per share from discontinued operation.............. (0.00) (0.00) -- -- (0.01) Gain on disposal of discontinued operation.............. -- 0.02 -- -- 0.02 -------- -------- -------- -------- ---------- Net income per share.... $ 0.46 $ 0.56 $ 0.54 $ 0.72 $ 2.28 ======== ======== ======== ======== ========== 1998: Revenues................. $ 96,911 $153,141 $194,130 $315,431 $ 759,612 Income from continuing operations before income taxes and extraordinary charge.................. 8,325 17,340 19,649 35,579 80,894 Income (loss) from discontinued operation, net of income taxes..... (65) (42) (36) (56) (199) Extraordinary charge from early extinguishment of debt, net of income taxes................... -- (222) (1,106) -- (1,328) Net income............... 4,768 9,915 10,370 20,823 45,877 Diluted Net Income Per Share: Income per share from continuing operations.. $ 0.16 $ 0.34 $ 0.38 $ 0.70 $ 1.58 Income (loss) per share from discontinued operation.............. (0.00) (0.00) (0.00) (0.00) (0.01) Extraordinary charge from early extinguishment of debt................... -- (0.01) (0.04) -- (0.04) -------- -------- -------- -------- ---------- Net income per share.... $ 0.16 $ 0.33 $ 0.34 $ 0.70 $ 1.53 ======== ======== ======== ======== ==========
- -------- (1) Some amounts do not add across due to rounding differences in quarterly amounts. 22 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 15. Supplemental Guarantor Information The condensed consolidating financial information set forth below is being provided in the event that we elect to issue publicly-traded indebtedness guaranteed by our wholly owned subsidiaries. As used below, the term "Potential Guarantor Subsidiaries" means all of our existing wholly owned subsidiaries. The term "Non-Guarantor Subsidiaries" means our former savings and loan subsidiary for each of the three years in the period ended December 31, 1999 and for the nine month period ended September 30, 1999, and our former office furniture subsidiary during the year ended December 31, 1997. Investments in subsidiaries are presented using the equity method of accounting. Condensed Consolidating Balance Sheet September 30, 2000 (Unaudited)
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ ---------- (Dollars in thousands) ASSETS Homebuilding: Cash and equivalents... $ 2,307 $ 17 $ -- $ -- $ 2,324 Other notes and accounts receivable, net................... 7,817 16,383 -- -- 24,200 Mortgage notes receivable and accrued interest...... 1,256 94 -- -- 1,350 Investments in and advances to (from) subsidiaries.......... 323,343 (139,412) (183,931) -- Inventories............ 626,845 279,860 -- -- 906,705 Investments in and advances to unconsolidated joint ventures.............. 65,798 32,874 -- -- 98,672 Property and equipment, net........ 3,865 1,052 -- -- 4,917 Deferred income taxes................. 13,507 -- -- 309 13,816 Other assets........... 12,448 2,578 -- -- 15,026 Excess of cost over net assets acquired, net................... 3,914 13,522 -- -- 17,436 ---------- -------- ----- --------- ---------- 1,061,100 206,968 -- (183,622) 1,084,446 ---------- -------- ----- --------- ---------- Financial Services: Cash and equivalents... -- 558 -- -- 558 Mortgage loans held for sale.............. -- 21,482 -- -- 21,482 Advances to (from) Parent................ -- 4,592 -- (4,592) -- Other assets........... -- 876 -- -- 876 ---------- -------- ----- --------- ---------- -- 27,508 -- (4,592) 22,916 ---------- -------- ----- --------- ---------- Total Assets......... $1,061,100 $234,476 $ -- $(188,214) $1,107,362 ========== ======== ===== ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Homebuilding: Accounts payable....... $ 42,620 $ 17,618 $ -- $ -- $ 60,238 Accrued liabilities.... 72,337 12,269 -- (983) 83,623 Revolving credit facility.............. 76,800 -- -- -- 76,800 Trust deed notes payable............... -- 349 -- -- 349 Senior notes payable... 423,929 -- -- -- 423,929 ---------- -------- ----- --------- ---------- 615,686 30,236 -- (983) 644,939 ---------- -------- ----- --------- ---------- Financial Services: Accounts payable and accrued liabilities... -- 350 -- -- 350 Mortgage warehouse line of credit........ -- 16,659 -- -- 16,659 ---------- -------- ----- --------- ---------- -- 17,009 -- -- 17,009 ---------- -------- ----- --------- ---------- Total Stockholders' Equity 445,414 187,231 -- (187,231) 445,414 ---------- -------- ----- --------- ---------- Total Liabilities and Stockholders' Equity................ $1,061,100 $234,476 $ -- $(188,214) $1,107,362 ========== ======== ===== ========= ==========
23 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Balance Sheet December 31, 1999
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ -------- (Dollars in thousands) ASSETS Homebuilding: Cash and equivalents.. $ 2,856 $ 9 $ -- $ -- $ 2,865 Other notes and accounts receivable, net.................. 5,086 5,403 -- -- 10,489 Mortgage notes receivable and accrued interest..... 4,407 123 -- -- 4,530 Investments in and advances to (from) subsidiaries......... 195,504 (77,861) -- (117,643) -- Inventories........... 533,615 165,874 -- -- 699,489 Investments in and advances to unconsolidated joint ventures............. 30,234 18,882 -- -- 49,116 Property and equipment, net....... 1,896 760 -- -- 2,656 Deferred income taxes................ 12,438 -- -- 300 12,738 Other assets.......... 12,341 1,009 -- -- 13,350 Excess of cost over net assets acquired, net.................. 4,648 10,667 -- -- 15,315 -------- -------- ----- --------- -------- 803,025 124,866 -- (117,343) 810,548 -------- -------- ----- --------- -------- Financial Services: Cash and equivalents.. -- 313 -- -- 313 Mortgage loans held for sale............. -- 17,554 -- -- 17,554 Advances to (from) Parent............... -- 2,561 -- (2,561) -- Other assets.......... -- 1,553 -- -- 1,553 -------- -------- ----- --------- -------- -- 21,981 -- (2,561) 19,420 -------- -------- ----- --------- -------- Total Assets........ $803,025 $146,847 $ -- $(119,904) $829,968 ======== ======== ===== ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Homebuilding: Accounts payable...... $ 33,712 $ 8,632 $ -- $ -- $ 42,344 Accrued liabilities... 63,211 6,837 -- (611) 69,437 Revolving credit facility............. 23,000 -- -- -- 23,000 Trust deed notes payable.............. 2,370 1,161 -- -- 3,531 Senior notes payable.. 298,847 -- -- -- 298,847 -------- -------- ----- --------- -------- 421,140 16,630 -- (611) 437,159 -------- -------- ----- --------- -------- Financial Services: Accounts payable and accrued liabilities.. -- 620 -- -- 620 Mortgage warehouse line of credit....... -- 10,304 -- -- 10,304 -------- -------- ----- --------- -------- -- 10,924 -- -- 10,924 -------- -------- ----- --------- -------- Total Stockholders' Equity 381,885 119,293 -- (119,293) 381,885 -------- -------- ----- --------- -------- Total Liabilities and Stockholders' Equity............. $803,025 $146,847 $ -- $(119,904) $829,968 ======== ======== ===== ========= ========
24 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Balance Sheet December 31, 1998
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ -------- (Dollars in thousands) ASSETS Homebuilding: Cash and equivalents.. $ 13,402 $ 11 $ -- $ -- $ 13,413 Other notes and accounts receivable, net.................. 20,471 4,808 -- -- 25,279 Mortgage notes receivable and accrued interest..... 4,888 173 -- -- 5,061 Investments in and advances to (from) subsidiaries......... 172,211 (127,469) (44,742) -- Inventories........... 586,203 127,243 -- -- 713,446 Investments in and advances to unconsolidated joint ventures............. 15,309 23,096 -- -- 38,405 Property and equipment, net....... 2,688 824 -- -- 3,512 Deferred income taxes................ 10,784 -- -- -- 10,784 Other assets.......... 7,787 423 -- -- 8,210 Excess of cost over net assets acquired, net.................. 5,627 11,666 -- -- 17,293 -------- --------- ------ -------- -------- 839,370 40,775 -- (44,742) 835,403 -------- --------- ------ -------- -------- Financial Services: Cash and equivalents.. -- 1,651 -- -- 1,651 Mortgage loans held for sale............. -- 19,341 -- -- 19,341 Advances to (from) Parent............... -- -- -- -- -- Other assets.......... -- 1,920 -- -- 1,920 -------- --------- ------ -------- -------- -- 22,912 -- -- 22,912 -------- --------- ------ -------- -------- Net assets of discontinued operation.............. -- -- 8,047 -- 8,047 -------- --------- ------ -------- -------- Total Assets........ $839,370 $ 63,687 $8,047 $(44,742) $866,362 ======== ========= ====== ======== ======== Homebuilding: Accounts payable...... $ 14,188 $ 7,827 $ -- $ -- $ 22,015 Accrued liabilities... 57,195 6,582 -- -- 63,777 Revolving credit facility............. 204,900 -- -- -- 204,900 Trust deed notes payable.............. 20,026 1,161 -- -- 21,187 Senior notes payable.. 218,382 -- -- -- 218,382 -------- --------- ------ -------- -------- 514,691 15,570 -- -- 530,261 -------- --------- ------ -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Financial Services: Accounts payable and accrued liabilities.. -- 596 -- -- 596 Mortgage warehouse line of credit....... -- 10,826 -- -- 10,826 -------- --------- ------ -------- -------- -- 11,422 -- -- 11,422 -------- --------- ------ -------- -------- Total Stockholders' Equity................. 324,679 36,695 8,047 (44,742) 324,679 -------- --------- ------ -------- -------- Total Liabilities and Stockholders' Equity............... $839,370 $ 63,687 $8,047 $(44,742) $866,362 ======== ========= ====== ======== ========
25 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Income Statement Nine Months Ended September 30, 2000 (Unaudited)
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ -------- (Dollars in thousands) Homebuilding: Revenues.............. $601,220 $216,593 $ -- $ -- $817,813 Cost of sales......... 479,627 179,176 -- -- 658,803 -------- -------- ----- ----- -------- Gross margin........ 121,593 37,417 -- -- 159,010 -------- -------- ----- ----- -------- Selling, general and administrative expenses............. 46,088 22,156 -- (165) 68,079 Income from unconsolidated joint ventures............. 43 11,494 -- -- 11,537 Interest expense...... 2,080 422 -- -- 2,502 Amortization of excess of cost over net assets acquired...... 734 780 -- -- 1,514 Other income.......... 102 55 -- -- 157 -------- -------- ----- ----- -------- Homebuilding pretax income............. 72,836 25,608 -- 165 98,609 -------- -------- ----- ----- -------- Financial Services: Revenues.............. -- 1,769 -- -- 1,769 Income from unconsolidated joint venture.............. -- 515 -- -- 515 Other income (expense)............ (204) 574 -- (165) 205 Expenses.............. -- 2,872 -- -- 2,872 -------- -------- ----- ----- -------- Financial services pretax income (loss)............. (204) (14) -- (165) (383) -------- -------- ----- ----- -------- Income before income taxes.................. 72,632 25,594 -- -- 98,226 Provision for income taxes.................. (28,931) (10,195) -- -- (39,126) -------- -------- ----- ----- -------- Net Income.............. $ 43,701 $ 15,399 $ -- $ -- $ 59,100 ======== ======== ===== ===== ========
26 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Income Statement Nine Months Ended September 30, 1999 (Unaudited)
Standard Potential Non- Pacific Guarantor Guarantor Intercompany Corp. Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ -------- (Dollars in thousands) Homebuilding: Revenues.............. $634,315 $186,433 $ -- $-- $820,748 Cost of sales......... 521,329 153,560 -- -- 674,889 -------- -------- ----- ---- -------- Gross margin........ 112,986 32,873 -- -- 145,859 -------- -------- ----- ---- -------- Selling, general and administrative expenses............. 51,127 18,896 -- (96) 69,927 Income from unconsolidated joint ventures............. 6 5,142 -- -- 5,148 Interest expense...... 932 95 -- -- 1,027 Amortization of excess of cost over net assets acquired...... 734 750 -- -- 1,484 Other income.......... 12 72 -- -- 84 -------- -------- ----- ---- -------- Homebuilding pretax income............. 60,211 18,346 -- 96 78,653 -------- -------- ----- ---- -------- Financial Services: Revenues.............. -- 1,616 -- -- 1,616 Income from unconsolidated joint venture.............. (8) 583 -- -- 575 Other income.......... (43) 182 -- (96) 43 Expenses.............. -- 2,253 -- -- 2,253 -------- -------- ----- ---- -------- Financial services pretax income (loss)............. (51) 128 -- (96) (19) -------- -------- ----- ---- -------- Income from continuing operations before income taxes........... 60,160 18,474 -- -- 78,634 Provision for income taxes.................. (24,744) (7,599) -- -- (32,343) -------- -------- ----- ---- -------- Income from continuing operations............. 35,416 10,875 -- -- 46,291 Income (loss) from discontinued operation, net of income taxes.... -- -- (159) -- (159) Gain on disposal of discontinued operation, net of income taxes.... 618 -- -- -- 618 -------- -------- ----- ---- -------- Net Income.............. $ 36,034 $ 10,875 $(159) $-- $ 46,750 ======== ======== ===== ==== ========
27 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Income Statement Year Ended December 31, 1999
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ ---------- (Dollars in thousands) Homebuilding: Revenues.............. $951,981 $246,850 $ -- $ -- $1,198,831 Cost of sales......... 783,646 203,147 -- -- 986,793 -------- -------- ----- ----- ---------- Gross margin........ 168,335 43,703 -- -- 212,038 -------- -------- ----- ----- ---------- Selling, general and administrative expenses............. 74,964 25,152 -- (145) 99,971 Income from unconsolidated joint ventures............. 7 6,194 -- -- 6,201 Interest expense...... 1,372 147 -- -- 1,519 Amortization of excess of cost over net assets acquired...... 979 1,000 -- -- 1,979 Other income.......... (818) 106 -- -- (712) -------- -------- ----- ----- ---------- Homebuilding pretax income............. 90,209 23,704 -- 145 114,058 -------- -------- ----- ----- ---------- Financial Services: Revenues.............. -- 2,257 -- -- 2,257 Income from unconsolidated joint venture.............. (10) 793 -- -- 783 Other income.......... (105) 355 -- (145) 105 Expenses.............. -- 3,140 -- -- 3,140 -------- -------- ----- ----- ---------- Financial services pretax income (loss)............. (115) 265 -- (145) 5 -------- -------- ----- ----- ---------- Income from continuing operations before income taxes........... 90,094 23,969 -- -- 114,063 Provision for income taxes.................. (37,021) (9,471) -- -- (46,492) -------- -------- ----- ----- ---------- Income from continuing operations............. 53,073 14,498 -- -- 67,571 Income (loss) from discontinued operation, net of income taxes.... -- -- (159) -- (159) Gain on disposal of discontinued operation, net of income taxes.... 618 -- -- -- 618 -------- -------- ----- ----- ---------- Net Income.............. $ 53,691 $ 14,498 $(159) $ -- $ 68,030 ======== ======== ===== ===== ==========
28 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Income Statement Year Ended December 31, 1998
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ -------- (Dollars in thousands) Homebuilding: Revenues.............. $581,729 $177,883 $ -- $ -- $759,612 Cost of sales......... 472,777 145,671 -- -- 618,448 -------- -------- ----- ----- -------- Gross margin........ 108,952 32,212 -- -- 141,164 -------- -------- ----- ----- -------- Selling, general and administrative expenses............. 44,601 17,087 -- 3 61,691 Income from unconsolidated joint ventures............. -- 4,158 -- -- 4,158 Interest expense...... 1,154 14 -- -- 1,168 Amortization of excess of cost over net assets acquired...... 979 333 -- -- 1,312 Other income.......... 75 93 -- -- 168 -------- -------- ----- ----- -------- Homebuilding pretax income............. 62,293 19,029 -- (3) 81,319 -------- -------- ----- ----- -------- Financial Services: Revenues.............. -- 1,403 -- -- 1,403 Income from unconsolidated joint venture.............. -- -- -- -- -- Other income.......... -- (3) -- 3 -- Expenses.............. -- 1,828 -- -- 1,828 -------- -------- ----- ----- -------- Financial services pretax income (loss)............. -- (428) -- 3 (425) -------- -------- ----- ----- -------- Income from continuing operations before income taxes and extraordinary charge... 62,293 18,601 -- -- 80,894 Provision for income taxes.................. (26,061) (7,429) -- -- (33,490) -------- -------- ----- ----- -------- Income from continuing operations before extraordinary charge... 36,232 11,172 -- -- 47,404 Income (loss) from discontinued operation, net of income taxes.... -- -- (199) -- (199) Gain on disposal of discontinued operation, net of income taxes.... -- -- -- -- -- Extraordinary charge from early extinguishment of debt, net of income taxes.... (1,328) -- -- -- (1,328) -------- -------- ----- ----- -------- Net Income.............. $ 34,904 $ 11,172 $(199) $ -- $ 45,877 ======== ======== ===== ===== ========
29 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Income Statement Year Ended December 31, 1997
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ -------- (Dollars in thousands) Homebuilding: Revenues.............. $460,154 $124,417 $ -- $ -- $584,571 Cost of sales......... 385,843 105,033 -- -- 490,876 -------- -------- ----- ----- -------- Gross margin........ 74,311 19,384 -- -- 93,695 -------- -------- ----- ----- -------- Selling, general and administrative expenses............. 41,763 10,378 -- -- 52,141 Income from unconsolidated joint ventures............. -- 3,787 -- -- 3,787 Interest expense...... 3,856 1,125 -- -- 4,981 Amortization of excess of cost over net assets acquired...... 245 -- -- -- 245 Other income.......... 160 662 -- -- 822 -------- -------- ----- ----- -------- Homebuilding pretax income............. 28,607 12,330 -- -- 40,937 -------- -------- ----- ----- -------- Financial Services: Revenues.............. -- 171 -- -- 171 Income from unconsolidated joint venture.............. -- -- -- -- -- Other income.......... -- -- -- -- -- Expenses.............. -- 62 -- -- 62 -------- -------- ----- ----- -------- Financial services pretax income (loss)............. -- 109 -- -- 109 -------- -------- ----- ----- -------- Income from continuing operations before income taxes........... 28,607 12,439 -- -- 41,046 Provision for income taxes.................. (12,347) (4,723) -- -- (17,070) -------- -------- ----- ----- -------- Income from continuing operations............. 16,260 7,716 -- -- 23,976 Income (loss) from discontinued operation, net of income taxes.... -- -- 48 -- 48 Gain on disposal of discontinued operation, net of income taxes.... 3,302 -- -- -- 3,302 -------- -------- ----- ----- -------- Net Income.............. $ 19,562 $ 7,716 $ 48 $ -- $ 27,326 ======== ======== ===== ===== ========
30 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 2000 (Unaudited)
Potential Non- Standard Guarantor Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------ ------------ --------- (Dollars in thousands) Cash Flows From Operating Activities: Net cash provided by (used in) operating activities of continuing operations............ $ (67,959) $ (2,669) $ -- $ -- $ (70,628) --------- -------- ------- ------- --------- Cash Flows From Investing Activities: Net cash paid for acquisition........... (44,550) -- -- -- (44,550) Net additions to property and equipment............. (2,771) (123) -- -- (2,894) Investments in and advances to unconsolidated joint ventures.............. (50,888) (47,774) -- -- (98,662) Distributions and reimbursements from unconsolidated joint ventures.............. 2,630 45,276 -- -- 47,906 --------- -------- ------- ------- --------- Net cash provided by (used in) investing activities............ (95,579) (2,621) -- -- (98,200) --------- -------- ------- ------- --------- Cash Flows From Financing Activities: Net proceeds from (payments on) revolving credit facility.............. 53,800 -- -- -- 53,800 Net proceeds from (payments on) mortgage warehouse line of credit................ -- 6,355 -- -- 6,355 Proceeds from the issuance of senior notes payable......... 123,125 -- -- -- 123,125 Principal payments on senior notes and trust deed notes payable.... (2,370) (812) -- -- (3,182) Dividends paid......... (6,932) -- -- -- (6,932) Repurchase of common shares................ (5,386) -- -- -- (5,386) Proceeds from the exercise of stock options............... 752 -- -- -- 752 --------- -------- ------- ------- --------- Net cash provided by (used in) financing activities............ 162,989 5,543 -- -- 168,532 --------- -------- ------- ------- --------- Net increase (decrease) in cash and equivalents........... (549) 253 -- -- (296) Cash and equivalents at beginning of year..... 2,856 322 -- -- 3,178 --------- -------- ------- ------- --------- Cash and equivalents at end of year........... $ 2,307 $ 575 $ -- $ -- $ 2,882 ========= ======== ======= ======= =========
31 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 1999 (Unaudited)
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ -------- (Dollars in thousands) Cash Flows From Operating Activities: Net cash provided by (used in) operating activities of continuing operations............ $ 33,801 $ (7,568) $ -- $ -- $ 26,233 -------- -------- -------- ------ -------- Cash Flows From Investing Activities: Net additions to property and equipment............. (688) (108) -- -- (796) Investments in and advances to unconsolidated joint ventures.............. (13,966) (15,948) -- -- (29,914) Distributions and reimbursements from unconsolidated joint ventures.............. -- 28,546 -- -- 28,546 Proceeds from the sale of discontinued operations............ 8,798 -- -- -- 8,798 -------- -------- -------- ------ -------- Net cash provided by (used in) investing activities............ (5,856) 12,490 -- -- 6,634 -------- -------- -------- ------ -------- Cash Flows From Financing Activities: Net proceeds from (payments on) revolving credit facility.............. (94,200) -- -- -- (94,200) Net proceeds from (payments on) mortgage warehouse line of credit................ -- (6,436) -- -- (6,436) Proceeds from the issuance of senior notes payable......... 98,250 -- -- -- 98,250 Principal payments on senior notes and trust deed notes payable.... (37,256) -- -- -- (37,256) Dividends paid......... (4,447) -- -- -- (4,447) Repurchase of common shares................ (267) -- -- -- (267) Proceeds from the exercise of stock options............... 215 -- -- -- 215 -------- -------- -------- ------ -------- Net cash provided by (used in) financing activities............ (37,705) (6,436) -- -- (44,141) -------- -------- -------- ------ -------- Net change in cash from discontinued operations............ -- -- (38,130) -- (38,130) -------- -------- -------- ------ -------- Net increase (decrease) in cash and equivalents........... (9,760) (1,514) (38,130) -- (49,404) Cash and equivalents at beginning of year..... 13,402 1,662 38,130 -- 53,194 -------- -------- -------- ------ -------- Cash and equivalents at end of year........... $ 3,642 $ 148 $ -- $ -- $ 3,790 ======== ======== ======== ====== ========
32 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Statement of Cash Flows Year Ended December 31, 1999
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ --------- (Dollars in thousands) Cash Flows From Operating Activities: Net cash provided by (used in) operating activities of continuing operations continuing operations............ $ 128,221 $(11,027) $ -- $ -- $ 117,194 --------- -------- ------- ----- --------- Cash Flows From Investing Activities: Investments in and advances to unconsolidated joint ventures.............. (14,918) (29,177) -- -- (44,095) Distributions and reimbursements from unconsolidated joint ventures.............. -- 39,585 -- -- 39,585 Net additions to property and equipment............. (803) (199) -- -- (1,002) Proceeds from the sale of discontinued operations............ 8,798 -- -- -- 8,798 --------- -------- ------- ----- --------- Net cash provided by (used in) investing activities............ (6,923) 10,209 -- -- 3,286 --------- -------- ------- ----- --------- Cash Flows From Financing Activities: Net proceeds from (payments on) revolving credit facility.............. (181,900) -- -- -- (181,900) Net proceeds from (payments on) mortgage warehouse line of credit................ -- (522) -- -- (522) Proceeds from the issuance of senior notes payable......... 98,250 -- -- -- 98,250 Principal payments on senior notes and trust deed notes payable.... (37,293) -- -- -- (37,293) Dividends paid......... (5,923) -- -- -- (5,923) Repurchase of common shares................ (5,223) -- -- -- (5,223) Proceeds from the exercise of stock options............... 245 -- -- -- 245 --------- -------- ------- ----- --------- Net cash provided by (used in) financing activities............ (131,844) (522) -- -- (132,366) --------- -------- ------- ----- --------- Net change in cash from discontinued operations............ -- -- (38,130) -- (38,130) --------- -------- ------- ----- --------- Net increase (decrease) in cash and equivalents........... (10,546) (1,340) (38,130) -- (50,016) Cash and equivalents at beginning of year..... 13,402 1,662 38,130 -- 53,194 --------- -------- ------- ----- --------- Cash and equivalents at end of year........... $ 2,856 $ 322 $ -- $ -- $ 3,178 ========= ======== ======= ===== =========
33 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Statement of Cash Flows Year Ended December 31, 1998
Potential Non- Standard Guarantor Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------ ------------ --------- (Dollars in thousands) Cash Flows From Operating Activities: Net cash provided by (used in) operating activities of continuing operations............ $(131,163) $(8,053) $ -- $ -- $(139,216) --------- ------- ------- ------- --------- Cash Flows From Investing Activities: Net cash paid for acquisitions.......... (59,279) -- -- -- (59,279) Investments in and advances to unconsolidated joint ventures.............. (5,867) (10,784) -- -- (16,651) Distributions and reimbursements from unconsolidated joint ventures.............. -- 8,621 -- -- 8,621 Net additions to property and equipment............. (1,139) (300) -- -- (1,439) Proceeds from the sale of discontinued operations............ 1,087 -- -- -- 1,087 --------- ------- ------- ------- --------- Net cash provided by (used in) investing activities............ (65,198) (2,463) -- -- (67,661) --------- ------- ------- ------- --------- Cash Flows From Financing Activities: Net proceeds from (payments on) revolving credit facility.............. 185,900 -- -- -- 185,900 Net proceeds from (payments on) mortgage warehouse line of credit................ -- 10,826 -- -- 10,826 Proceeds from the issuance of senior notes payable......... 97,571 -- -- -- 97,571 Principal payments on senior notes and trust deed notes payable.... (75,148) -- -- -- (75,148) Dividends paid......... (5,049) -- -- -- (5,049) Repurchase of common shares................ (1,311) -- -- -- (1,311) Proceeds from the exercise of stock options............... 771 -- -- -- 771 --------- ------- ------- ------- --------- Net cash provided by (used in) financing activities............ 202,734 10,826 -- -- 213,560 --------- ------- ------- ------- --------- Net change in cash from discontinued operations............ -- -- (6,826) -- (6,826) --------- ------- ------- ------- --------- Net increase (decrease) in cash and equivalents........... 6,373 310 (6,826) -- (143) Cash and equivalents at beginning of year..... 7,029 1,352 44,956 -- 53,337 --------- ------- ------- ------- --------- Cash and equivalents at end of year........... $ 13,402 $ 1,662 $38,130 $ -- $ 53,194 ========= ======= ======= ======= =========
34 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Statement of Cash Flows Year Ended December 31, 1997
Potential Standard Guarantor Non-Guarantor Intercompany Pacific Corp. Subsidiaries Subsidiaries Eliminations Total ------------- ------------ ------------- ------------ -------- (Dollars in thousands) Cash Flows From Operating Activities: Net cash provided by (used in) operating activities of continuing operations............ $ 38,230 $ 13,468 $(3,114) $ -- $ 48,584 -------- -------- ------- ------ -------- Cash Flows From Investing Activities: Net cash paid for acquisitions.......... (65,842) -- -- -- (65,842) Investments in and advances to unconsolidated joint ventures.............. (9,442) (13,156) -- -- (22,598) Distributions and reimbursements from unconsolidated joint ventures.............. -- 1,053 -- -- 1,053 Net additions to property and equipment............. (1,206) (58) -- -- (1,264) Sale of investment securities............ 5,329 -- -- -- 5,329 Proceeds from the sale of discontinued operations............ 8,379 -- -- -- 8,379 -------- -------- ------- ------ -------- Net cash provided by (used in) investing activities............ (62,782) (12,161) -- -- (74,943) -------- -------- ------- ------ -------- Cash Flows From Financing Activities: Net proceeds from (payments on) revolving credit facility.............. (38,300) -- -- -- (38,300) Proceeds from the issuance of senior notes payable......... 96,931 -- -- -- 96,931 Principal payments on senior notes and trust deed notes payable.... (27,707) -- -- -- (27,707) Dividends paid......... (4,131) -- -- -- (4,131) Repurchase of common shares................ (2,124) -- -- -- (2,124) Proceeds from the exercise of stock options............... 1,705 -- -- -- 1,705 -------- -------- ------- ------ -------- Net cash provided by (used in) financing activities............ 26,374 -- -- -- 26,374 -------- -------- ------- ------ -------- Net change in cash from discontinued operations............ -- -- 37,088 -- 37,088 -------- -------- ------- ------ -------- Net increase (decrease) in cash and equivalents........... 1,822 1,307 33,974 -- 37,103 Cash and equivalents at beginning of year..... 5,207 45 10,982 -- 16,234 -------- -------- ------- ------ -------- Cash and equivalents at end of year........... $ 7,029 $ 1,352 $44,956 $ -- $ 53,337 ======== ======== ======= ====== ========
35 STANDARD PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 16. Subsequent Events (Unaudited) a. Acquisition On August 25, 2000, we acquired The Writer Corporation, a publicly traded Denver-based homebuilder ("Writer"), for a purchase price of $3.35 per share of Writer common stock, or a total of approximately $26 million (excluding transaction costs), plus the assumption of indebtedness, which was approximately $37.5 million. The acquisition consideration was paid in a combination of cash, totaling approximately $10.2 million, and 1,159,398 shares of Standard Pacific common stock. The cash component of the acquisition was financed under our unsecured revolving credit facility. With this acquisition, we purchased or assumed the rights to acquire approximately 2,000 single-family lots located in the Denver and Fort Collins areas, which included 11 active subdivisions at the close of the transaction. In addition, we acquired a backlog of 149 pre-sold homes and retained Writer's management team and staff. The acquisition has been accounted for using the purchase method of accounting, and accordingly, the purchase price has been allocated to the net assets acquired based upon their estimated fair values as of the date of the acquisition. The excess of purchase price over the estimated fair value of net assets acquired totaled approximately $3.6 million. The excess purchase price has been recorded as excess of cost over net assets acquired in the accompanying consolidated balance sheet and is being amortized on a straight- line basis over 10 years. The results of operations of Writer have been included in the accompanying statements of income for the period from August 25, 2000 through September 30, 2000. b. 9 1/2% Senior Notes due 2010 In September 2000, we issued $125 million of 9 1/2% Senior Notes which mature on September 15, 2010. These notes, which were issued at par, are unsecured obligations and rank equally with our other existing senior unsecured indebtedness. Interest is due and payable on March 15 and September 15 of each year until maturity. The notes are redeemable at our option, in whole or in part, commencing September 15, 2005 at 104.75 percent of par, with the call price reducing ratably to par on September 15, 2008. Net proceeds after underwriting expenses were approximately $123.1 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. 36 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: December 22, 2000 STANDARD PACIFIC CORP. /s/ Clay A. Halvorsen By: _________________________________ Clay A. Halvorsen Vice President, General Counsel and Secretary 37 EXHIBIT INDEX
Exhibit No. Document ----------- -------- N/A
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