EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

News Release

STANDARD PACIFIC CORP. REPORTS 2007 FOURTH QUARTER AND FISCAL YEAR LOSS

Company Generates Substantial Cash, Reduces Debt

IRVINE, CALIFORNIA, February 4, 2008, Standard Pacific Corp. (NYSE:SPF) today reported the Company’s unaudited 2007 fourth quarter and fiscal year operating results.

2007 Fourth Quarter Financial and Operating Highlights From Continuing and Discontinued Operations:

 

  •  

Cash flows from operating activities of $348 million;

 

  •  

Homebuilding cash on balance sheet of $219 million compared to $5 million at Sept. 30, 2007;

 

  •  

Homebuilding debt reduction of $251.1 million during the 2007 fourth quarter;

 

  •  

Loss per share of $6.80 vs. loss per share of $1.53 last year;

 

  •  

Net loss of $440.9 million compared to a net loss of $98.4 million last year;

 

  •  

Earnings per share of $0.07, excluding fourth quarter after-tax impairment and tax valuation allowance charges totaling $6.87 per share;

 

  •  

$433.5 million of pretax charges related to inventory, joint venture and goodwill impairments and land deposit write-offs (including $40.6 million related to discontinued operations) and a $180.5 million noncash charge related to the establishment of a valuation allowance for the Company’s deferred tax asset;

 

  •  

Substantially exited Tucson and San Antonio markets as part of right-sizing footprint; and

 

  •  

Tax refund of approximately $235 million expected during first quarter of 2008 as a result of NOL carryback for federal income taxes.

2007 Fourth Quarter Financial and Operations Highlights From Continuing Operations Resulted in the Following:

 

  •  

Homebuilding revenues of $933.6 million vs. $1.2 billion last year;

 

  •  

New home deliveries of 2,150*, down 23% from 2,804* last year;

 

  •  

1,002* net new home orders, down 11% from 1,129* last year;

 

  •  

Cancellation rate of 37%* versus 44%* last year;

 

  •  

Quarter-end backlog of 1,279* homes, valued at $443 million compared to 2,443* homes valued at $885 million a year ago.

The net loss for the quarter ended Dec. 31, 2007 was $440.9 million, or $6.80 per share, compared to a net loss of $98.4 million, or $1.53 per share, in the year earlier period. Homebuilding revenues from continuing operations for the 2007 fourth quarter were $933.6 million versus $1.2 billion last year.

The Company’s results for the 2007 fourth quarter include pretax impairment charges (including discontinued operations) of $433.5 million, or $265.2 million or $4.09 per share after tax, related to homebuilding market conditions, including the Company’s rationalization of its homebuilding portfolio as it implements its plan to work its way through today’s challenging environment. The impairment charges consisted of: $96.1 million related to ongoing consolidated real estate inventories; $211.4 million related to land sold or held for sale; $77.8 million related to the Company’s share of joint venture inventory impairment charges; $11.8 million related to land deposit and capitalized preacquisition cost write-offs for abandoned projects; and $36.4 million related to goodwill impairment charges. In addition, the fourth quarter operating results also included a noncash charge of $180.5 million, or $2.78 per share, related to a deferred tax asset valuation allowance that was established in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”(“FAS 109”). Excluding these charges, the Company’s earnings would have been $0.07 per share.**

“In the face of unprecedented housing market conditions, Standard Pacific delivered measurable progress on our plan to generate cash, pay down debt and improve our liquidity position,” commented Stephen J. Scarborough, Chairman, Chief Executive and President of the Company. “We reduced inventory levels and generated cash across a number of different fronts. We exceeded our home delivery target for the fourth quarter. We also sold lots in a number of markets in order to generate cash from both sale proceeds and from our ability to monetize the loss on sale through NOL carrybacks for federal income tax purposes. In addition, we tightened our geographic footprint by substantially exiting two non-core markets, Tucson and San Antonio. Finally, we continued to adjust and improve the Company’s overhead and cost structure to right-size the organization and produce homes more efficiently.”

Mr. Scarborough went on to state that, “As we enter 2008, we anticipate that housing market conditions will continue to weaken, resulting in a decrease in companywide deliveries. In response, we plan to cut new home starts, new community openings and spends for land acquisitions and site development costs, and continue to balance overhead to sales levels. Based on our current view of market conditions, we expect to generate positive cash flow during the year even after paying off the remaining balance of the 2008 senior notes.”

Cash Generation and Debt Reduction Results

Standard Pacific ended the year with more than $219 million of homebuilding cash on its balance sheet while reducing the balance outstanding under the Company’s revolving credit facility during the 2007 fourth quarter by more than $163 million to $90 million. In addition, the Company began to retire its $150 million of 6 1/2% senior notes due October 1, 2008 through the open market purchase in the fourth quarter of $24 million of those notes, and the Company paid down its trust deed notes payable by nearly $66 million. As a result of Standard Pacific’s NOL carrybacks for federal income taxes, the Company expects to receive a tax refund of approximately $235 million during the 2008 first quarter.

Inventory Reduction

As a result of the aforementioned inventory reduction initiatives, Standard Pacific’s owned or controlled lot position stood at approximately 35,000 lots (including discontinued operations) at Dec. 31, 2007, a 43% reduction from the year ago level and a 53% decrease from the peak lot count at Dec. 31, 2005.

 

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Joint Venture Project Rationalization

The Company also made meaningful progress with respect to its joint ventures. The Company exited six joint ventures during the fourth quarter for aggregate net cash payments totaling approximately $3.0 million. In addition, the Company accelerated the take down of lots from one Southern California venture while acquiring its share of unstarted lots from another Southern California joint venture, both moves to maximize tax cash flow benefits. As a result of these actions, combined with activity in previous quarters, the Company saw its absolute level of joint venture debt (including discontinued operations) decline year over year by 39% to $771 million. Since the end of 2006, the Company has reduced the number of lots in its joint ventures (including discontinued operations) by 45%. Looking ahead, the Company will continue to carefully monitor its joint venture portfolio. During the fourth quarter Standard Pacific made joint venture loan remargin payments of approximately $46 million; the Company estimates its share of additional remargin obligations currently to be $45 million to $55 million, based on present asset values. These amounts, which are reflected in the Company’s cash flow projections, do not reflect the impact of any further reductions in asset values which may continue until market conditions stabilize and also do not reflect additional ordinary course joint venture capital contributions, also reflected in our cash flow projections, related to acquisition, development and construction costs, loan step downs, and loan maturities. In addition, during the fourth quarter we unwound the joint venture in California that we mentioned in our last earnings release by acquiring the interest of our joint venture partners and paying off approximately $40 million of the related joint venture debt. Over the course of this downturn the Company may find it necessary to exit additional joint ventures, which may be accomplished by acquiring our partner’s interest, disposing of our interest or other means. We are not currently in discussions with any of our joint venture partners to acquire their interests.

Credit Facility

As a result of the impact of the $180.5 million FAS 109 deferred tax asset valuation allowance charge the Company was required to take for the quarter ended Dec. 31, 2007, the Company was not in compliance with the consolidated tangible net worth covenant contained in its $900 Million Revolving Credit Facility, $100 million Term Loan A and $225 million Term Loan B as of the end of the quarter. The Company sought and obtained from its bank group a waiver of any default arising from the noncompliance through March 30, 2008. The Company intends to commence further discussions with its banks to amend its covenant package.

Financial and Operating Results – 2007 Fiscal Year vs. 2006 Fiscal Year

The net loss for the year ended Dec. 31, 2007 was $767.3 million, or $11.85 per share, compared to net income of $123.7 million, or $1.85 per share, for 2006. Homebuilding revenues for the year were $2.9 billion versus $3.7 billion last year. The Company’s fiscal year results included pretax impairment charges (including discontinued operations) of $1,092.7 million, or $670.7 million or $10.36 per share after tax, delineated as follows: $456.1 million for ongoing consolidated real estate inventories; $336.0 million for land sold or held for sale; $211.8 million for the Company’s share of joint venture inventory impairment charges; $23.1 million for land deposit and capitalized preacquisition cost write-offs for abandoned projects; and $65.8 million for goodwill impairment charges. The 2007 full year results also included a noncash charge of $180.5 million, or $2.79 per share, for the deferred tax asset valuation allowance discussed above. Excluding the after-tax impairment and tax valuation charges totaling $13.15 per share, the Company’s earnings for 2007 would have been $1.30 per share.**

 

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Homebuilding Operations

 

     Three Months Ended December 31,     Year Ended December 31,  
     2007     2006     % Change     2007     2006    % Change  
     (Dollars in thousands)  

Homebuilding revenues:

              

California

    $ 602,457     $ 615,521     (2% )   $ 1,484,047     $ 1,931,164    (23% )

Southwest (1)

      166,156       294,408     (44% )     793,455       853,653    (7% )

Southeast

      164,995       253,678     (35% )     611,331       955,653    (36% )
                                           

Total homebuilding revenues

    $ 933,608     $ 1,163,607     (20% )   $ 2,888,833     $ 3,740,470    (23% )
                                           

Homebuilding pretax income (loss)(2):

              

California

    $ (197,338 )   $ (153,442 )   29%     $ (524,856 )   $ 45,914    (1,243% )

Southwest (1)

      (113,460 )     (16,897 )   571%       (165,685 )     41,195    (502% )

Southeast

      (73,687 )     26,423     (379% )     (150,808 )     130,267    (216% )

Corporate

      (794 )     14,321     (106% )     (5,130 )     3,436    (249% )
                                           

Total homebuilding pretax income (loss)

    $ (385,279 )   $ (129,595 )   197%     $ (846,479 )   $ 220,812    (483% )
                                           

 

  (1) Excludes the Company’s San Antonio and Tucson divisions, which are classified as discontinued operations.
  (2) Homebuilding pretax income (loss) from continuing operations for the three months and year ended Dec. 31, 2007 includes a total of $393.0 million and $984.6 million, respectively, of pretax inventory, joint venture, land option deposit, and goodwill impairment charges recorded in the following segments: $196.5 million and $578.0 million, respectively, in California, $114.4 million and $211.1 million, respectively, in the Southwest, and $82.1 million and $195.5 million, respectively, in the Southeast. Homebuilding pretax income (loss) for the three months and year ended Dec. 31, 2006 includes a total of $255.9 million and $334.9 million, respectively, of pretax inventory, deposit, joint venture and goodwill impairment charges recorded in the following segments: $203.7 million and $264.0 million, respectively, in California, $41.3 million and $47.5 million, respectively, in the Southwest, and $10.9 million and $23.4 million, respectively, in the Southeast.

The Company generated a homebuilding pretax loss from continuing operations for the 2007 fourth quarter of $385.3 million compared to a pretax loss of $129.6 million in the year earlier period. The increase in pretax loss was driven by a 20% decrease in homebuilding revenues to $933.6 million, a negative 17.0% homebuilding gross margin percentage, a $36.3 million increase in joint venture loss (to a loss of $71.0 million) and an $18.4 million increase in other expense, which was partially offset by a $5.3 million decrease in the Company’s absolute level of selling, general and administrative (“SG&A”) expenses. The Company’s homebuilding operations for the 2007 fourth quarter included the following pretax charges from continuing operations: a $276.2 million inventory impairment charge including $180.1 million for land sold or held for sale; a $68.5 million charge related to the Company’s share of joint venture inventory impairments; an $11.8 million charge related to the write-off of land option deposits and capitalized preacquisition costs for abandoned projects; and a $36.4 million goodwill impairment charge. The inventory impairment charges were included in cost of sales while the land deposit and capitalized preacquisition cost write-offs and goodwill impairment charges were included in other expense for the quarter.

The 20% decrease in homebuilding revenues for the 2007 fourth quarter was primarily attributable to a 23% decrease in new home deliveries (exclusive of joint ventures) and, to a lesser extent, a 6% decrease in the Company’s consolidated average home price to $384,000. These decreases were partially offset by a $90.2 million year-over-year increase in land sale revenues. Land sale revenues from continuing operations totaled $108.5 million for the 2007 fourth quarter and represented the disposition of approximately 2,600 lots, which were primarily in the Bay area, Phoenix, Tampa and Las Vegas, and which exclude lots sold related to the Company’s Tucson and San Antonio operations which were classified as discontinued operations. Including our Tucson and San Antonio divisions, total companywide land sale revenues for the 2007 fourth quarter totaled approximately $145.3 million related to the disposal of approximately 5,900 lots that had a net book value of approximately $328.7 million.

 

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     Three Months Ended December 31,        Year Ended December 31,  
     2007    2006    % Change        2007    2006    % Change  

New homes delivered:

                   

Southern California

    712    687    4%        1,476    2,060    (28% )

Northern California

    261    189    38%        713    643    11%  
                                   

Total California

    973    876    11%        2,189    2,703    (19% )
                                   

Arizona (1)

    167    545    (69% )      1,029    1,400    (27% )

Texas (1)

    235    334    (30% )      984    1,100    (11% )

Colorado

    118    104    13%        388    466    (17% )

Nevada

    25    —      —          68    —      —    
                                   

Total Southwest

    545    983    (45% )      2,469    2,966    (17% )
                                   

Florida

    299    654    (54% )      1,314    2,710    (52% )

Carolinas

    333    291    14%        946    1,008    (6% )
                                   

Total Southeast

    632    945    (33% )      2,260    3,718    (39% )
                                   

Consolidated total

    2,150    2,804    (23% )      6,918    9,387    (26% )
                                   

Unconsolidated joint ventures:

                    

Southern California

    146    49    198%        348    93    274%  

Northern California

    41    49    (16% )      123    118    4%  

Illinois

    3    40    (93% )      28    41    (32% )
                                   

Total unconsolidated joint ventures

    190    138    38%        499    252    98%  
                                   

Discontinued operations

    161    283    (43% )      634    1,124    (44% )
                                   

Total (including joint ventures)

    2,501    3,225    (22% )      8,051    10,763    (25% )
                                   

 

  (1) Texas and Arizona exclude the San Antonio and Tucson divisions, which are classified as discontinued operations.

In California, new home deliveries (exclusive of joint ventures) increased 11% during the 2007 fourth quarter as compared to the prior year period. Deliveries were up 4% in Southern California, reflecting an increase in order activity in the region in the latter half of 2007 as compared to the year earlier period. Deliveries increased 38% in Northern California and were driven by an increase in order trends experienced throughout 2007 in this region as compared to the extremely low level of orders generated in the year earlier period.

In the Southwest, new home deliveries (exclusive of joint venture) decreased 45% in the fourth quarter of 2007 compared to the year earlier period. Deliveries in Arizona were down 69% in the 2007 fourth quarter reflecting the decrease in order activity in 2007 combined with a significant decrease in our backlog levels in the state due to high cancellation rates experienced during the latter half of 2006. New home deliveries were off 30% in Texas, driven primarily by a significant drop in demand in the Dallas market, and to a lesser extent, a decline in deliveries from our Austin operation. In Colorado, deliveries increased 13% for the 2007 fourth quarter in what has continued to be a challenging housing market.

New home deliveries in the Company’s Southeast region declined 33% during the 2007 fourth quarter compared to the year earlier period. This decrease was primarily due to a 54% year-over-year decline in Florida deliveries due to weaker housing demand experienced throughout the state, which resulted in high cancellation rates during 2007. In the Carolinas, deliveries increased 14% driven primarily by a 43% increase in deliveries from our Raleigh division, which was offset in part by a modest decline in deliveries from our Charlotte operation during the 2007 fourth quarter as compared to the year earlier period.

 

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     Three Months Ended December 31,     Year Ended December 31,  
     2007    2006    % Change     2007    2006    % Change  

Average selling prices of homes delivered:

                 

Southern California

    $ 575,000    $ 732,000    (21% )   $ 651,000    $ 718,000    (9% )

Northern California

      440,000      594,000    (26% )     498,000      701,000    (29% )
                                        

Total California

      538,000      702,000    (23% )     601,000      714,000    (16% )
                                        

Arizona (1)

      245,000      301,000    (19% )     304,000      299,000    2%  

Texas (1)

      254,000      243,000    5%       253,000      242,000    5%  

Colorado

      367,000      315,000    17%       355,000      312,000    14%  

Nevada

      309,000      —      —         316,000      —      —    
                                        

Total Southwest

      278,000      283,000    (2% )     292,000      280,000    4%  
                                        

Florida

      238,000      295,000    (19% )     267,000      279,000    (4% )

Carolinas

      235,000      204,000    15%       232,000      193,000    20%  
                                        

Total Southeast

      237,000      267,000    (11% )     253,000      255,000    (1% )
                                        

Consolidated (excluding joint ventures)

      384,000      408,000    (6% )     377,000      395,000    (5% )

Unconsolidated joint ventures

      652,000      587,000    11%       565,000      689,000    (18% )
                                        

Total continuing operations (including joint ventures)

    $ 406,000    $ 417,000    (3% )   $ 390,000    $ 403,000    (3% )
                                        

Discontinued operations (including joint ventures)

    $ 205,000    $ 212,000    (3% )   $ 200,000    $ 183,000    9%  
                                        

 

  (1) Texas and Arizona exclude the San Antonio and Tucson divisions, which are classified as discontinued operations.

During the 2007 fourth quarter, the Company’s consolidated average home price from continuing operations (excluding joint ventures) decreased 6% to $384,000 compared to the year earlier period. The overall decrease was due primarily to the level of incentives and discounts required to sell homes in most of our markets partially offset by changes in the Company’s geographic mix during the 2007 fourth quarter as compared to the prior year period.

The Company’s average home price in California for the 2007 fourth quarter decreased 23% from the year earlier period driven by the increased use of incentives and discounts and the following regional changes. In Southern California our average home price was off 21% compared to the prior year period primarily due to increased incentives and discounts required to generate sales coupled with an increase in deliveries in the 2007 fourth quarter from our more affordable Los Angeles and Bakersfield divisions. This decrease in average price was offset in part by a slightly higher proportion of deliveries generated from the Company’s Orange County division, which generally delivers more expensive homes (including the delivery of 6 homes during the 2007 fourth quarter from a high-end coastal project where sales prices were in the $6 million to $8 million range). In Northern California, the average home price was down 26% as a result of the increased level of incentives and discounts used to sell homes combined with a greater distribution of deliveries from the Company’s more affordable Sacramento and Central Valley markets during the 2007 fourth quarter.

In the Southwest, the Company’s average home price was off 2% from the year earlier period. The Company’s average price in Arizona decreased 19% year-over-year reflecting increased incentives utilized in the 2007 fourth quarter. In Texas, the average price increased 5% as compared to the year earlier period reflecting an increase in our average home price in our Dallas division due to a shift in product mix. The 17% increase in average price in Colorado was also the result of a shift in product mix.

The Company’s average home price in the Southeast for the 2007 fourth quarter decreased 11% from the year earlier period. In Florida, the average sales price was down 19% from the year ago period and primarily reflected the increase in the level of incentives and discounts used to sell homes across all of the Company’s Florida markets, and to a lesser degree, geographic and product mix shift within the state. The Company’s

 

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average price was up 15% in the Carolinas from the 2006 fourth quarter which primarily reflected a change in product mix towards larger, more expensive homes.

Homebuilding Gross Margin Percentage

The Company’s 2007 fourth quarter homebuilding gross margin percentage from continuing operations (including land sales) was down year-over-year to a negative 17.0% from a positive 4.1% in the prior year period. The 2007 fourth quarter gross margin reflected a $276.2 million pretax inventory impairment charge related to 62 projects, of which $96.1 million related to ongoing projects while $180.1 million related to land or lots that have been or are intended to be sold to third parties. These impairments related primarily to projects located in California, Arizona, Florida and Nevada. Our gross margin from home sales from continuing operations was $20.5 million, or 2.5%, for the 2007 fourth quarter versus $90.2 million, or 7.9%, for the year earlier period. Excluding the housing inventory impairment charges of $96.1 million and $140.1 million, respectively, for the three month periods ended Dec. 31, 2007 and 2006, the Company’s 2007 fourth quarter gross margin from home sales would have been $116.6 million, or 14.1%, versus $230.3 million, or 20.1% in 2006.** The 600 basis point decrease in the year-over-year gross margin percentage as adjusted was driven primarily by lower gross margins in California, Arizona and Florida. The lower gross margins in these markets were driven by increased incentives and discounts resulting from weaker demand during last year and this year related to decreased affordability, more limited availability of mortgage credit, and an increased level of new and existing homes available for sale in the marketplace. These factors have created a much more competitive market for new homes, which has continued to put downward pressure on home prices. Until market conditions stabilize, the Company may continue to incur additional inventory impairment charges.

SG&A Expenses

The Company’s SG&A expense rate from continuing operations (including corporate G&A) for the 2007 fourth quarter increased 190 basis points to 11.7% of homebuilding revenues compared to 9.8% for the same period last year. The higher level of SG&A expenses as a percentage of homebuilding revenues was due primarily to a lower level of revenues to spread these costs over as well as due to a higher level of sales and marketing costs as a percentage of revenues as a result of the Company’s focus on generating sales in these challenging market conditions and an increase in stock-based compensation expense. These increases were partially offset by a reduction in personnel costs to better align our overhead with the weaker housing market as well as due to a reduction in the level of profit-based incentive compensation expense in 2007.

Homebuilding Joint Ventures

The Company recognized a $71.0 million loss from unconsolidated joint ventures during the 2007 fourth quarter compared to loss of $34.7 million in the year earlier period. The loss in the 2007 fourth quarter reflected a $68.5 million pretax charge related to the Company’s share of joint venture inventory impairments related to 22 projects located primarily in California and Arizona, and to a lesser degree Texas and Illinois. Excluding the impairment charges, the Company incurred a joint venture loss of $2.5 million for the 2007 fourth quarter,** of which approximately $3.7 million of loss was generated from land development activity while approximately $1.2 million of income was generated from new home deliveries. Deliveries from the Company’s unconsolidated homebuilding joint ventures included in continuing operations totaled 190 new homes in the 2007 fourth quarter versus 138 last year.

 

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Other Expense

Included in other expense for the three months ended Dec. 31, 2007 and 2006 are pretax charges of approximately $11.8 million and $25.9 million, respectively, related to the write-off of option deposits and capitalized preacquisition costs for abandoned projects. Also included in other expense for the three months ended Dec. 31, 2007 and 2006 are goodwill impairment charges of approximately $36.4 million and $6.2 million, respectively, related to four and two divisions, respectively. These charges were partially offset by a $2.8 million gain related to the early extinguishment of $24 million of the Company’s 6 1/2% senior notes due 2008 through open market purchases. The Company continues to carefully evaluate each land purchase in its acquisition pipeline in light of weakened market conditions and any decision to abandon additional land purchase transactions could lead to further deposit and capitalized preacquisition cost write-offs. Until market conditions stabilize, the Company may also incur additional goodwill impairment charges.

 

     Three Months Ended December 31,        Year Ended December 31,  
     2007    2006    % Change        2007    2006    % Change  

Net new orders:

                    

Southern California

    243    293    (17% )      1,377    1,246    11%  

Northern California

    148    151    (2% )      735    444    66%  
                                   

Total California

    391    444    (12% )      2,112    1,690    25%  
                                   

Arizona (1)

    92    53    74%        593    720    (18% )

Texas (1)

    134    183    (27% )      844    1,038    (19% )

Colorado

    49    72    (32% )      363    404    (10% )

Nevada

    15    7    114%        86    11    682%  
                                   

Total Southwest

    290    315    (8% )      1,886    2,173    (13% )
                                   

Florida

    173    132    31%        837    1,131    (26% )

Carolinas

    148    238    (38% )      862    994    (13% )
                                   

Total Southeast

    321    370    (13% )      1,699    2,125    (20% )
                                   

Consolidated total

    1,002    1,129    (11% )      5,697    5,988    (5% )
                                   

Unconsolidated joint ventures:

                    

Southern California

    58    62    (6% )      392    124    216%  

Northern California

    9    40    (78% )      110    118    (7% )

Illinois

    —      2    (100% )      16    27    (41% )
                                   

Total unconsolidated joint ventures

    67    104    (36% )      518    269    93%  
                                   

Discontinued operations

    84    165    (49% )      522    860    (39% )
                                   

Total (including joint ventures)

    1,153    1,398    (18% )      6,737    7,117    (5% )
                                   

Average number of selling communities during the period:

                    

Southern California

    42    38    11%        39    36    8%  

Northern California

    27    22    23%        25    18    39%  
                                   

Total California

    69    60    15%        64    54    19%  
                                   

Arizona (1)

    18    22    (18% )      18    22    (18% )

Texas (1)

    30    21    43%        25    21    19%  

Colorado

    10    14    (29% )      11    14    (21% )

Nevada

    4    2    100%        4    1    300%  
                                   

Total Southwest

    62    59    5%        58    58    —    
                                   

Florida

    48    47    2%        47    48    (2% )

Carolinas

    31    22    41%        27    20    35%  
                                   

Total Southeast

    79    69    14%        74    68    9%  
                                   

Consolidated total

    210    188    12%        196    180    9%  
                                   

Unconsolidated joint ventures:

                    

Southern California

    17    5    240%        14    3    367%  

Northern California

    6    6    —          7    5    40%  

Illinois

    2    2    —          2    1    100%  
                                   

Total unconsolidated joint ventures

    25    13    92%        23    9    156%  
                                   

Discontinued operations

    20    24    (17% )      25    23    9%  
                                   

Total (including joint ventures)

    255    225    13%        244    212    15%  
                                   

 

  (1) Texas and Arizona exclude the San Antonio and Tucson divisions, which are classified as discontinued operations.

 

8

Net new orders companywide (excluding joint ventures) for the 2007 fourth quarter decreased 11% to 1,002 new homes. The Company’s consolidated cancellation rate for the 2007 fourth quarter was 37% compared to 44% in the 2006 fourth quarter and 35% in the 2007 third quarter, while the Company’s cancellation rate as a percentage of beginning backlog for the 2007 fourth quarter was 25% compared to 22% in the year earlier period. The overall decrease in net new orders during the 2007 fourth quarter resulted primarily from decreases in orders in Texas, the Carolinas and Colorado, and to a lesser extent, a decline in California. These decreases were partially offset by modest order increases in Florida and Arizona. Our absolute sales absorption rates continue to reflect difficult housing conditions in most of our markets, resulting from reduced housing affordability, higher mortgage interest rates, and the growing levels of completed new and existing homes available for sale, including an increasing level of foreclosure properties in the marketplace. These conditions have been magnified by the tightening of available mortgage credit for homebuyers, including increased pricing for jumbo loans and the substantial reduction in availability of “Alt-A” mortgage products. All of these conditions have resulted in a declining home price environment which has contributed to an erosion of homebuyer confidence.

Net new orders in California (excluding joint ventures) for the 2007 fourth quarter decreased 12% from the 2006 fourth quarter on a 15% higher community count. Net new home orders were down 17% year-over-year in Southern California on an 11% higher average community count. The decrease was due to weaker overall housing demand and a slight increase in the cancellation rate to 41% in the 2007 fourth quarter, compared to 36% in the 2006 fourth quarter and 37% in the 2007 third quarter. Net new orders were down 2% year-over-year in Northern California on a 23% higher community count. The Company’s cancellation rate in Northern California of 38% for the 2007 fourth quarter was up meaningfully from 25% in the year earlier period and up modestly from the 34% cancellation rate experienced in the 2007 third quarter.

Net new orders in the Southwest (excluding joint ventures) for the 2007 fourth quarter were down 8% year-over-year. While still at depressed levels, net new home orders in Arizona were up 74% on an 18% lower average community count, which was primarily the result of a decrease in the level of cancellations in the 2007 fourth quarter as compared to the year earlier period. In particular, the Company’s cancellation rate in Phoenix, while down sharply from the 2006 fourth quarter rate of 84%, still remains high relative to historical levels at 37% for the 2007 fourth quarter. In Texas, net new orders were down 27% on a 43% higher average community count reflecting weakness experienced in the Dallas market over the past year and softer demand experienced in the Austin market over the last few quarters. In Colorado, net new orders were down 32% on a 29% lower community count. In Nevada, the housing market continues to be sluggish as demonstrated by the marginal level of new home orders generated from 4 communities in the Company’s Las Vegas division.

In the Southeast, net new orders (excluding joint ventures) decreased 13% during the 2007 fourth quarter from the year earlier period. Despite the 31% increase in net new orders in Florida during the 2007 fourth quarter, the Florida market continues to experience erosion in buyer demand, a tightening in mortgage credit underwriting standards and an increased level of available homes on the market. Our cancellation rate in Florida decreased to 38% for the 2007 fourth quarter which was down substantially from 64% a year ago, and down from 49% in the 2007 third quarter. Net new orders in the Carolinas were off 38% on a 41% higher community count as a result of a more recent slowing in housing demand in these markets.

 

9

     At December 31,  
     2007    2006    % Change  

Backlog (in homes):

         

Southern California

      176      224    (21% )

Northern California

      127      99    28%  
                    

Total California

      303      323    (6% )
                    

Arizona (1)

      194      630    (69% )

Texas (1)

      301      441    (32% )

Colorado

      123      148    (17% )

Nevada

      29      11    164%  
                    

Total Southwest

      647      1,230    (47% )
                    

Florida

      220      697    (68% )

Carolinas

      109      193    (44% )
                    

Total Southeast

      329      890    (63% )
                    

Consolidated total

      1,279      2,443    (48% )
                    

Unconsolidated joint ventures:

         

Southern California

      94      128    (27% )

Northern California

      24      43    (44% )

Illinois

      5      18    (72% )
                    

Total unconsolidated joint ventures

      123      189    (35% )
                    

Discontinued operations

      44      201    (78% )
                    

Total (including joint ventures)

      1,446      2,833    (49% )
                    

Backlog (estimated dollar value in thousands):

         

Southern California

    $ 106,648    $ 187,062    (43% )

Northern California

      57,165      59,392    (4% )
                    

Total California

      163,813      246,454    (34% )
                    

Arizona (1)

      50,091      215,653    (77% )

Texas (1)

      92,030      111,425    (17% )

Colorado

      44,311      57,867    (23% )

Nevada

      8,160      4,086    100%  
                    

Total Southwest

      194,592      389,031    (50% )
                    

Florida

      52,787      206,313    (74% )

Carolinas

      31,476      43,042    (27% )
                    

Total Southeast

      84,263      249,355    (66% )
                    

Consolidated total

      442,668      884,840    (50% )
                    

Unconsolidated joint ventures:

         

Southern California

      60,255      63,503    (5% )

Northern California

      15,773      31,517    (50% )

Illinois

      5,978      10,700    (44% )
                    

Total unconsolidated joint ventures

      82,006      105,720    (22% )
                    

Discontinued operations

      8,099      40,095    (80% )
                    

Total (including joint ventures)

    $ 532,773    $ 1,030,655    (48% )
                    

 

  (1) Texas and Arizona exclude the San Antonio and Tucson divisions, which are classified as discontinued operations.

The dollar value of the Company’s backlog (excluding joint ventures) decreased 50% from the year earlier period to $442.7 million at Dec. 31, 2007, reflecting a slowdown in order activity and increased cancellation rates experienced during 2007 as well as a shorter average escrow period for home sales.

 

10

     At December 31,  
     2007    2006    % Change  

Building sites owned or controlled:

         

Southern California

    7,235    13,096    (45% )

Northern California

    4,579    6,976    (34% )
                

Total California

    11,814    20,072    (41% )
                

Arizona (1)

    2,997    8,269    (64% )

Texas (1)

    3,370    4,718    (29% )

Colorado

    771    1,078    (28% )

Nevada

    2,390    3,037    (21% )
                

Total Southwest

    9,528    17,102    (44% )
                

Florida

    8,462    12,226    (31% )

Carolinas

    3,885    4,177    (7% )

Illinois

    62    179    (65% )
                

Total Southeast

    12,409    16,582    (25% )
                

Discontinued operations

    1,007    6,935    (85% )
                

Total (including joint ventures)

    34,758    60,691    (43% )
                

Building sites owned

    21,371    31,275    (32% )

Building sites optioned or subject to contract

    5,619    9,282    (39% )

Joint venture lots

    6,761    13,199    (49% )
                

Total continuing operations

    33,751    53,756    (37% )

Discontinued operations

    1,007    6,935    (85% )
                

Total (including joint ventures)

    34,758    60,691    (43% )
                

 

  (1) Texas and Arizona exclude the San Antonio and Tucson divisions, which are classified as discontinued operations.

Total building sites owned and controlled as of Dec. 31, 2007 decreased 43% from the year earlier period, which reflects the Company’s efforts to generate cash and reduce its real estate inventories and to better align its land supply with the current level of new housing demand. These efforts were furthered by the sale of approximately 5,900 lots during the 2007 fourth quarter, including the sale of substantially all of our Tucson and San Antonio assets, and the Company’s decision to abandon certain land option contracts.

 

     At December 31,  
     2007    2006    % Change  

Completed and unsold homes:

         

Consolidated (1)

    695    699    (1% )

Joint ventures (1)

    45    9    400%  
                

Total continuing operations

    740    708    5%  
                

Discontinued operations

    54    101    (47% )
                

Total

    794    809    (2% )
                

Spec homes under construction:

         

Consolidated (1)

    1,089    1,380    (21% )

Joint ventures (1)

    368    490    (25% )
                

Total continuing operations

    1,457    1,870    (22% )
                

Discontinued operations

    31    179    (83% )
                

Total

    1,488    2,049    (27% )
                

Total homes under construction (including specs):

         

Consolidated (1)

    2,085    3,335    (37% )

Joint ventures (1)

    440    675    (35% )
                

Total continuing operations

    2,525    4,010    (37% )
                

Discontinued operations

    64    331    (81% )
                

Total

    2,589    4,341    (40% )
                

 

  (1) Texas and Arizona exclude the San Antonio and Tucson divisions, which are classified as discontinued operations.

 

11

The Company’s number of completed and unsold homes from continuing operations (excluding joint ventures) as of Dec. 31, 2007 increased 22% from September 30, 2007 to 695 homes, but decreased 1% compared to the peak at Dec. 31, 2006 as a result of the Company’s efforts to move completed spec homes. The number of homes under construction from continuing operations (exclusive of joint ventures) as of Dec. 31, 2007 decreased 37% from the year earlier period to 2,085 units in response to the Company’s increased focus on managing the level of its speculative inventory and its desire to better match new construction starts with lower sales volume.

Financial Services

In the 2007 fourth quarter, the Company’s financial services subsidiary generated pretax income of approximately $540,000 compared to pretax income of $3.9 million in the year earlier period. The decrease in profitability was driven primarily by a 27% lower level of loan sales partially offset by an increase in margins (in basis points) on loans sold. The decrease in loan sales was primarily the result of a decrease in new home deliveries in the markets in which it operates.

For the 2007 fourth quarter, financial services joint venture income, which is derived from mortgage financing joint ventures with third party financial institutions operating in conjunction with the Company’s homebuilding divisions in the Carolinas, and Tampa, Orlando and Southwestern Florida, was down 43% to $270,000. The lower level of joint venture income was due to the lower level of new home deliveries in 2007 combined with the transition of the Company’s Colorado operations during 2006 from a joint venture arrangement to its wholly owned financial services subsidiary.

Income Taxes

As a result of the continued downturn in the housing market and the uncertainty as to its magnitude and length, the Company recorded a valuation allowance on its net deferred tax asset in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” The valuation allowance resulted in a $180.5 million noncash charge in the 2007 fourth quarter. To the extent that the Company generates eligible taxable income in the future to utilize the tax benefits of the related deferred tax assets, the Company will be able to reduce its effective tax rate by reducing the valuation allowance. Conversely, any future operating losses generated by the Company would increase the deferred tax valuation allowance and adversely impact our income tax provision.

Discontinued Operations

During the fourth quarter of 2007, the Company sold substantially all of its Tucson and San Antonio assets. The Company is actively marketing the remaining assets of these divisions for sale and it is the Company’s intention to have exited these markets within the next year. The results of operations of the Company’s Tucson and San Antonio divisions have been classified as discontinued operations in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and prior periods have been reclassified to conform with current year presentation.

Net loss from discontinued operations for the three months ended Dec. 31, 2007 and 2006 was $26.5 million and $24.1 million, respectively, of which $19.6 million for the 2007 fourth quarter related to the loss on the disposal. Discontinued operations included homebuilding revenues of $68.7 million and $58.5 million for the three months ended Dec. 31, 2007 and 2006, respectively, and $182.1 million and $198.7 million for the years ended Dec. 31, 2007 and 2006, respectively. These divisions generated pretax losses of $41.5 million and $37.8 million for the fourth quarters of 2007 and 2006, respectively, and pretax losses of $112.0 million and $35.3 million, respectively, for the years then ended.

 

12

During the fourth quarter and year ended Dec. 31, 2007, the Company recorded the following pretax charges related to its discontinued operations: $31.3 million and $86.7 million, respectively, of inventory impairment charges; $9.3 million and $9.5 million, respectively, of charges related to the Company’s share of joint venture inventory impairments; and approximately $0 and $524,000, respectively, of charges related to the write-off of land option deposits and capitalized preacquisition costs for abandoned projects.

During the fourth quarter and year ended Dec. 31, 2006, the Company recorded the following pretax charges related to its discontinued operations: $21.1 million and $21.2 million, respectively, of inventory impairment charges; approximately $414,000 and $1.1 million, respectively, of charges related to the write-off of land option deposits and capitalized preacquisition costs for abandoned projects and $13.3 million related to goodwill impairment charges for the fourth quarter and year ended Dec. 31, 2007.

Earnings Conference Call

A conference call to discuss the Company’s 2007 fourth quarter and fiscal year earnings will be held at 11:00 am Eastern time tomorrow, Tuesday, February 5, 2008. The call will be broadcast live over the Internet and can be accessed through the Company’s website at http://standardpacifichomes.com/ir. The call will also be accessible via telephone by dialing (866) 237-3252 (domestic) or (719) 457-1018 (international); Passcode: 979199. The entire audio transmission with the synchronized slide presentation will also be available on our website for replay within 2 to 3 hours following the live broadcast, and can be accessed by dialing (888) 348-4629 (domestic) or (719) 884-8882 (international); Passcode: 979199.

About Standard Pacific

Standard Pacific, one of the nation’s largest homebuilders, has built homes for more than 101,000 families during its 41-year history. The Company constructs homes within a wide range of price and size targeting a broad range of homebuyers. Standard Pacific operates in many of the largest housing markets in the country with operations in major metropolitan areas in California, Florida, Arizona, the Carolinas, Texas, Colorado and Nevada. The Company provides mortgage financing and title services to its homebuyers through its subsidiaries and joint ventures, Standard Pacific Mortgage, Inc., SPH Home Mortgage, Universal Land Title of South Florida and SPH Title. For more information about the Company and its new home developments, please visit our website at: www.standardpacifichomes.com.

This news release contains forward-looking statements. These statements include but are not limited to statements regarding: our expected first quarter tax refund; that housing market conditions will continue to decline in 2008 resulting in a decrease in Company deliveries; our plan to cut new home starts, new community openings and spends for land acquisition and site development costs in 2008; our plan to continue to balance overhead to sales levels; that we expect to generate positive cash flow during the year even after paying off the balance of our 2008 senior notes; that we may make open market purchases of our 2008 senior notes; our intent to commence discussions with our bank group to amend our loan covenants; our evaluation of land purchases and the potential for further deposit and capitalized preacquisition cost write-offs; the potential for further goodwill impairment charges; the potential impact of future earnings or losses on our deferred tax valuation allowance; additional joint venture loan remargining obligations; the extent to which we expect to exit additional joint ventures; our strategy of balancing margins, volume and cash flow generation; our focus on managing starts and other cash outflows; our efforts to right-size the Company; the potential need for additional inventory impairment charges; orders and backlog; and housing market conditions. Forward-looking statements are based on our current expectations or beliefs regarding future events or circumstances, and you should not place undue reliance on these statements. Such statements involve known and unknown risks, uncertainties, assumptions and other factors — many of which are out of the Company’s control and difficult to forecast — that may cause actual results to differ materially from those that may be described or implied. Such factors include but are not limited to: local and general economic and market conditions, including consumer confidence, employment rates, interest rates, the cost and availability of mortgage financing, and stock market, home and land valuations; the impact on economic conditions of terrorist attacks or the outbreak or escalation of armed conflict involving the United States; the cost and availability of suitable undeveloped land, building materials and labor; the cost and availability of construction financing and corporate debt and equity

 

13

capital; the demand for and affordability of single-family homes; the supply of housing for sale; cancellations of purchase contracts by homebuyers; the cyclical and competitive nature of the Company’s business; governmental regulation, including the impact of “slow growth” or similar initiatives; delays in the land entitlement process, development, construction, or the opening of new home communities; adverse weather conditions and natural disasters; environmental matters; risks relating to the Company’s mortgage banking operations, including hedging activities; future business decisions and the Company’s ability to successfully implement the Company’s operational and other strategies; litigation and warranty claims; and other risks discussed in the Company’s filings with the Securities and Exchange Commission, including in the Company’s Annual Report on Form 10-K for the year ended Dec. 31, 2006 and subsequent Quarterly Reports on Form 10-Q. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements. The Company nonetheless reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

Contact:

Andrew H. Parnes, Executive Vice President-Finance & CFO (949) 789-1616, aparnes@stanpac.com or Lloyd H. McKibbin, Vice President & Treasurer (949) 789-1603, lmckibbin@stanpac.com.

 

* Excludes the Company’s unconsolidated joint ventures and the Company’s Tucson and San Antonio operations, which are included in discontinued operations.
** Please see “Reconciliation of Non-GAAP Financial Measures” below.

###

(Note: Tables follow)

 

14

STANDARD PACIFIC CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     Three Months Ended December 31,     Year Ended December 31,  
     2007     2006     %
Change		     2007     2006      %
Change		  
     (Dollars in thousands, except per share amounts)  

Homebuilding:

              

Home sale revenues

    $ 825,151     $ 1,145,372     (28 %)   $ 2,607,824     $ 3,710,059      (30 %)

Land sale revenues

      108,457       18,235     495 %     281,009       30,411      824 %
                                             

Total revenues

      933,608       1,163,607     (20 %)     2,888,833       3,740,470      (23 %)
                                             

Cost of home sales

      (804,670 )     (1,055,192 )   (24 %)     (2,520,157 )     (2,950,922 )    (15 %)

Cost of land sales

      (287,798 )     (60,955 )   372 %     (568,539 )     (76,179 )    646 %
                                             

Total cost of sales

      (1,092,468 )     (1,116,147 )   (2 %)     (3,088,696 )     (3,027,101 )    2 %
                                             

Gross margin

      (158,860 )     47,460     (435 %)     (199,863 )     713,369      (128 %)
                                             

Gross margin %

      (17.0 %)     4.1 %       (6.9 %)     19.1 %   
                                     

Selling, general and administrative expenses

      (109,211 )     (114,492 )   (5 %)     (387,981 )     (441,960 )    (12 %)

Income (loss) from unconsolidated joint ventures

      (70,976 )     (34,710 )   104 %     (190,025 )     (3,870 )    4,810 %

Other expense

      (46,232 )     (27,853 )   66 %     (68,610 )     (46,727 )    47 %
                                             

Homebuilding pretax income (loss)

      (385,279 )     (129,595 )   197 %     (846,479 )     220,812      (483 %)
                                             

Financial Services:

              

Revenues

      4,662       8,721     (47 %)     16,677       24,866      (33 %)

Expenses

      (4,122 )     (4,854 )   (15 %)     (16,045 )     (19,438 )    (17 %)

Income from unconsolidated joint ventures

      270       476     (43 %)     1,050       1,911      (45 %)

Other income

      110       274     (60 %)     611       872      (30 %)
                                             

Financial services pretax income (loss)

      920       4,617     (80 %)     2,293       8,211      (72 %)
                                             

Income (loss) from continuing operations before taxes

      (384,359 )     (124,978 )   208 %     (844,186 )     229,023      (469 %)

(Provision) benefit for income taxes

      (30,022 )     50,635     (159 %)     149,003       (82,930 )    (280 %)
                                             

Income (loss) from continuing operations

      (414,381 )     (74,343 )   457 %     (695,183 )     146,093      (576 %)

Loss from discontinued operations, net of income taxes

      (6,966 )     (24,063 )   (71 %)     (52,540 )     (22,400 )    135 %

Loss from disposal of discontinued operations, net of income taxes

      (19,550 )     —       —         (19,550 )     —        —    
                                             

Net income (loss)

    $ (440,897 )   $ (98,406 )   348 %   $ (767,273 )   $ 123,693      (720 %)
                                             

Basic earnings (loss) per share:

              

Continuing operations

    $ (6.39 )   $ (1.16 )   451 %   $ (10.74 )   $ 2.24      (579 %)

Discontinued operations

      (0.41 )     (0.37 )   11 %     (1.11 )     (0.34 )    226 %
                                             

Basic earnings (loss) per share

    $ (6.80 )   $ (1.53 )   344 %   $ (11.85 )   $ 1.90      (724 %)
                                             

Diluted earnings (loss) per share:

              

Continuing operations

    $ (6.39 )   $ (1.16 )   451 %   $ (10.74 )   $ 2.19      (590 %)

Discontinued operations

      (0.41 )     (0.37 )   11 %     (1.11 )     (0.34 )    226 %
                                             

Diluted earnings (loss) per share

    $ (6.80 )   $ (1.53 )   344 %   $ (11.85 )   $ 1.85      (741 %)
                                             

Weighted average common shares outstanding:

              

Basic

      64,849,786       64,363,447     1 %     64,750,482       65,187,469      (1 %)

Diluted

      64,849,786       64,363,447     1 %     64,750,482       66,756,286      (3 %)

Cash dividends per share

    $ —       $ 0.04     (100 %)   $ 0.12     $ 0.16      (25 %)

 

15

SELECTED FINANCIAL DATA

 

     Three Months Ended
December 31,		  
     2007     2006  
     (Dollars in thousands)  

Net income (loss)

    $ (440,897 )   $ (98,406 )

Net cash provided by (used in) operating activities

    $ 347,983     $ 216,207  

Net cash provided by (used in) investing activities

    $ (39,712 )   $ (24,888 )

Net cash provided by (used in) financing activities

    $ (103,617 )   $ (171,594 )

Adjusted Homebuilding EBITDA(1)

    $ 77,846     $ 165,750  

Homebuilding SG&A as a percentage of homebuilding revenues

      11.7 %     9.8 %

Homebuilding interest incurred

    $ 34,814     $ 39,736  

Homebuilding interest capitalized to inventories owned

    $ 30,991     $ 37,698  

Homebuilding interest capitalized to investments in and advances to unconsolidated joint ventures

    $ 3,823     $ 2,038  

Ratio of LTM Adjusted Homebuilding EBITDA to homebuilding interest incurred

      2.2x       4.8x  

 

(1) Adjusted Homebuilding EBITDA means net income (loss) (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) expensing of previously capitalized interest included in cost of sales, (c) impairment charges, (d) homebuilding depreciation and amortization, (e) amortization of stock-based compensation, (f) income (loss) from unconsolidated joint ventures and (g) income (loss) from financial services subsidiary. Other companies may calculate Adjusted Homebuilding EBITDA (or similarly titled measures) differently. We believe Adjusted Homebuilding EBITDA information is useful to investors as one measure of the Company’s ability to service debt and obtain financing. However, it should be noted that Adjusted Homebuilding EBITDA is not a U.S. generally accepted accounting principles (“GAAP”) financial measure. Due to the significance of the GAAP components excluded, Adjusted Homebuilding EBITDA should not be considered in isolation or as an alternative to net income, cash flow from operations or any other operating or liquidity performance measure prescribed by GAAP. For the three months and year ended Dec. 31, 2006 and 2007, EBITDA from continued and discontinued operations was calculated as follows:

 

     Three Months Ended
December 31,		     Year Ended December 31,  
     2007     2006     2007     2006  
     (Dollars in thousands)  

Net income (loss)

    $ (440,897 )   $ (98,406 )   $ (767,273 )   $ 123,693  

Add:

         

Cash distributions of income from unconsolidated joint ventures

      631       9,183       16,716       75,422  

Provision (benefit) for income taxes

      15,000       (64,390 )     (188,954 )     70,040  

Expensing of previously capitalized interest included in cost of sales

      55,337       33,757       131,182       88,933  

Impairment charges

      355,707       249,156       880,898       328,032  

Homebuilding depreciation and amortization

      2,229       2,162       7,695       7,163  

Amortization of stock-based compensation

      10,339       3,942       20,150       16,539  

Less:

         

Income (loss) from unconsolidated joint ventures

      (80,040 )     (34,212 )     (198,674 )     (1,880 )

Income (loss) from financial services subsidiary

      540       3,866       632       5,428  
                                

Adjusted Homebuilding EBITDA

    $ 77,846     $ 165,750     $ 298,456     $ 706,274  
                                

 

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The table set forth below reconciles net cash provided by (used in) operating activities, from continued and discontinued operations, calculated and presented in accordance with GAAP, to Adjusted Homebuilding EBITDA:

 

     Three Months Ended
December 31,		     Year Ended
December 31,		  
     2007     2006     2007     2006  
     (Dollars in thousands)  

Net cash provided by (used in) operating activities

    $ 347,983     $ 216,207     $ 655,558     $ (290,580 )

Add:

         

Provision (benefit) for income taxes

      15,000       (64,390 )     (188,954 )     70,040  

Deferred tax valuation allowance

      (180,480 )     —         (180,480 )     —    

Expensing of previously capitalized interest included in cost of sales

      55,337       33,757       131,182       88,933  

Excess tax benefits from share-based payment arrangements

      —         257       1,498       2,697  

Gain on early extinguishment of debt

      2,765       —         2,765       —    

Less:

         

Income (loss) from financial services subsidiary

      540       3,866       632       5,428  

Depreciation and amortization from financial services subsidiary

      239       152       703       582  

Loss on sale of property and equipment

      1,439       —         1,439       —    

Net changes in operating assets and liabilities:

         

Trade and other receivables

      (45,730 )     20,422       (45,083 )     2,739  

Mortgage loans held for sale

      71,388       150,253       (99,618 )     125,123  

Inventories-owned

      (358,366 )     (265,927 )     (399,325 )     610,944  

Inventories-not owned

      (784 )     (13,030 )     (10,449 )     (89,929 )

Deferred income taxes

      (5,757 )     120,178       135,741       126,587  

Other assets

      163,788       (30,815 )     245,723       (189 )

Accounts payable

      17,874       (4,029 )     13,105       5,638  

Accrued liabilities

      (2,954 )     6,885       39,567       60,281  
                                

Adjusted Homebuilding EBITDA

    $ 77,846     $ 165,750     $ 298,456     $ 706,274  
                                

 

17

STANDARD PACIFIC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     December 31,  
     2007     2006  
     (unaudited)        

ASSETS

     

Homebuilding:

     

Cash and equivalents

    $ 219,141     $ 17,356  

Trade and other receivables

      28,599       72,654  

Inventories:

     

Owned

      2,059,235       3,101,636  

Not owned

      109,757       199,757  

Investments in and advances to unconsolidated joint ventures

      293,967       301,635  

Deferred income taxes

      143,995       185,268  

Goodwill and other intangibles, net

      35,597       90,387  

Other assets

      300,135       57,128  
                
     3,190,426       4,025,821  
                

Financial Services:

     

Cash and equivalents

      12,413       14,727  

Mortgage loans held for sale

      155,340       254,958  

Mortgage loans held for investment

      10,973       —  

Other assets

      11,847       8,360  
                
     190,573       278,045  
                

Assets of discontinued operations

      19,727       199,075  
                

Total Assets

    $ 3,400,726     $ 4,502,941  
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Homebuilding:

     

Accounts payable

    $ 95,190     $ 102,767  

Accrued liabilities

      280,513       277,154  

Liabilities from inventories not owned

      43,007       82,999  

Revolving credit facility

      90,000       289,500  

Trust deed and other notes payable

      34,714       52,499  

Senior notes payable

      1,400,344       1,449,245  

Senior subordinated notes payable

      249,350       149,232  
                
     2,193,118       2,403,396  
                

Financial Services:

     

Accounts payable and other liabilities

      5,023       4,404  

Mortgage credit facilities

      164,172       250,907  
                
     169,195       255,311  
                

Liabilities of discontinued operations

      5,221       10,577  
                

Total Liabilities

      2,367,534       2,669,284  
                

Minority Interests

      38,201       69,287  

Stockholders’ Equity:

     

Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued

      —       —  

Common stock, $0.01 par value; 200,000,000 shares authorized;

     

72,689,595(1) and 64,422,548 shares outstanding, respectively

      727       644  

Additional paid-in capital

      340,067       323,099  

Retained earnings

      666,880       1,446,043  

Accumulated other comprehensive loss, net of tax

      (12,683 )     (5,416 )
                

Total Stockholders’ Equity

      994,991       1,764,370  
                

Total Liabilities and Stockholders’ Equity

    $ 3,400,726     $ 4,502,941  
                

 

  (1) At Dec. 31, 2007, shares outstanding include 7,839,809 shares issued under a share lending facility related to our 6% convertible senior subordinated notes issued on September 28, 2007.

 

18

BALANCE SHEET DATA

(Dollars in thousands, except per share amounts)

 

     At December 31,  
     2007     2006  

Stockholders’ equity per share (1)

    $ 15.34     $ 27.39  

Ratio of total debt to total book capitalization (2)

      66.2 %     55.5 %

Ratio of adjusted net homebuilding debt to total book capitalization (3)

      61.1 %     52.2 %

Ratio of total debt to LTM adjusted homebuilding EBITDA (2)

      6.5x       3.1x  

Ratio of adjusted net homebuilding debt to LTM adjusted homebuilding EBITDA (3)

      5.2x       2.7x  

Homebuilding interest capitalized in inventories owned

    $ 126,158     $ 129,734  

Homebuilding interest capitalized as a percentage of inventories owned

      6.1 %     4.0 %

 

  (1) At Dec. 31, 2007, shares outstanding exclude 7,839,809 shares issued under a share lending facility related to our 6% convertible senior subordinated notes issued on September 28, 2007.
  (2) Total debt at Dec. 31, 2007 and 2006 includes $164.2 million and $250.9 million, respectively, of indebtedness of the Company’s financial services subsidiary and $11.4 million and $13.4 million, respectively, of indebtedness included in liabilities from inventories not owned.
  (3) Adjusted net homebuilding debt excludes indebtedness included in liabilities from inventories not owned, indebtedness of the Company’s financial services subsidiary and additionally reflects the offset of cash and equivalents in excess of $5 million. We believe that the adjusted net homebuilding debt to total book capitalization and adjusted net homebuilding debt to LTM adjusted homebuilding EBITDA ratios are useful to investors as a measure of the Company’s ability to obtain financing. These are non-GAAP ratios and other companies may calculate these ratios differently. For purposes of the ratio of adjusted net homebuilding debt to total book capitalization, total book capitalization is adjusted net homebuilding debt plus stockholders’ equity. Adjusted net homebuilding debt is calculated as follows:

 

     At December 31,
     2007    2006
     (Dollars in thousands)

Total consolidated debt

    $ 1,950,012    $ 2,204,937

Less:

      

Indebtedness included in liabilities from inventories not owned

      11,432      13,405

Financial services indebtedness

      164,172      250,907

Homebuilding cash in excess of $5 million

      214,148      12,376
             

Adjusted net homebuilding debt

    $ 1,560,260    $ 1,928,249
             

 

19

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES***

The tables set forth below reconcile the Company’s earnings (loss) for 2007 to earnings (loss) excluding the after-tax impairment and tax valuation charges:

 

     Three Months Ended December 31, 2007  
     Net Income (Loss)      Shares    EPS  
     (Dollars in thousands, except per share amounts)  

Net income (loss)

    $ (440,897 )    64,849,786    $ (6.80 )

Impairment charges, after tax

      265,211      64,849,786      4.09  

Deferred tax valuation allowance

      180,480      64,849,786      2.78  
                    

Net income (loss), as adjusted

    $ 4,794      64,849,786    $ 0.07  
                    
     Year Ended December 31, 2007  
     Net Income (Loss)      Shares    EPS  
     (Dollars in thousands, except per share amounts)  

Net income (loss)

    $ (767,273 )    64,750,482    $   (11.85 )

Impairment charges, after tax

      670,743      64,750,482      10.36  

Deferred tax valuation allowance

      180,480      64,750,482      2.79  
                    

Net income (loss), as adjusted

    $ 83,950      64,750,482    $ 1.30  
                    

The tables set forth below reconcile the Company’s gross margin from home sales for the three months ended Dec. 31, 2007 and 2006, excluding pretax impairment charges:

 

     Three Months Ended December 31,
     2007     Gross
margin %		    2006     Gross
margin %
     (Dollars in thousands)

Home sale revenues

    $ 825,151        $ 1,145,372    

Cost of home sales

      (804,670 )        (1,055,192 )  
                     

Gross margin from home sales

      20,481       2.5%      90,180       7.9%
                     

Add: Housing inventory impairment charges

      96,079          140,144    
                     

Gross margin from home sales, as adjusted

    $ 116,560     14.1%    $ 230,324     20.1%
                     

The tables set forth below reconcile the Company’s income (loss) from homebuilding and land development joint ventures for the three months ended Dec. 31, 2007, excluding pretax impairment charges:

 

     Three Months Ended December 31, 2007  
     Homebuilding     Land
Development		     Total  
     (Dollars in thousands)  

Loss from joint ventures

    $ (22,119 )   $ (48,858 )   $ (70,977 )

Joint venture inventory impairment charges

      23,311       45,203       68,514  
                        

Income (loss) from joint ventures, as adjusted

    $ 1,192     $ (3,655 )   $ (2,463 )
                        

 

*** We believe that the measures described above which exclude the effect of impairment and tax valuation charges are useful to investors as they provide investors with a perspective on the underlying operating performance of the business by isolating the impact of charges related to inventory impairments, land deposit and capitalized preacquisition cost writeoffs for abandoned projects, goodwill impairment charges and the tax valuation allowance. However, it should be noted that such measures are not GAAP financial measures. Due to the significance of the GAAP components excluded, such measures should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP.

 

 

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