Standard Pacific Corp. (NYSE:SPF) after market close on Wednesday reported a$368.8 million loss (-$2.53 per diluted share) for the third quarter ended Sept. 30 as the company took $368.4 million in land and joint venture related charges.
The write-downs included a $267.2 million inventory impairment charge, including $58.0 million for land sold or held for sale; a $92.2 million charge related to the company's share of joint venture impairments; and an$8.9 million charge related to the write-off of land option deposits and capitalized preacquisition costs for abandoned projects.
Standard Pacific also took a $134.1 million charge against deferred tax assets, much of that based on the company's determination that the recapitalization by private equity firm MatlinPatterson, which closed during the quarter, constituted a change in ownership that will disallow certain tax carry-backs against 2008 losses.
Investors voted on the results with their feet, sending shares of SPF down 14% to $2.68 in heavy trading shortly after 3:30 p.m. amid a strong rally in the rest of the builder group that sent Mertiage Homes (NYSE:MTH) up a whopping 20.5% and M/I, which also reported a loss Thursday morning, up more than 12.5%. As of Oct. 15, more than 27% of SPF shares were held in short positions.
Home building revenues of fell 37.8% from year-ago levels to $400.3 million as new home deliveries dropped 24% to 1,188 and average selling prices fell 12% to $345,000. Declines in average prices varied widely by region, with only Texas posting an increase, which was 15%. Arizona led the declines at 26%, followed by Florida at 25% and California at 23%. Declines in average prices at discontinued operations, including joint ventures, dropped 35% to $176,000.
New home orders were down 32% from last year's third quarter to 921. The cancellation rate was 26%, up slightly from the previous quarter but below the 35% rate of third quarter, 2007.
Backlog at quarter's end was 1,248 homes with an aggregate value of $395.7 million, down from 2,421 homes at a value of $966.4 million a year ago.
Completed but unsold homes, including joint ventures and discontinued operations, fell 42% to 393. Spec homes under construction, also including joint ventures, were down 21% to 1,434, with 1,148 attributed to the company's consolidated operations.
Standard Pacific's owned or controlled lot position stood at approximately 27,000 lots (including discontinued operations) at quarter's end, a 42% below a year ago and 64% below peak lot count at the end of 2005.
"Housing market conditions deteriorated further during the quarter as the growing level of foreclosure inventory combined with the tumultuous global financial markets, worsening economic conditions and record low consumer confidence further undermined the already weak housing market," said Jeffrey V. Peterson, chairman, president and CEO. "It does not appear at this time that the earlier efforts by the Federal Government to stabilize the housing market across the country has had any meaningful impact. The further decline in new home demand is evidenced by slower order trends and further price reductions which have continued to trigger additional impairment charges."
The company ended the quarter with home building cash of $712 million on its balance sheet. It reduced home building debt by $10.4 million during the quarter and generated a cash flow of $31.9 million. SG&A was cut by$16.7 million but rose to 19.2% of home building revenues from 14.6% in last year's third quarter.
The company's gross margin fell to a negative 51.6% during the quarter, compared to a negative 7.5% a year earlier. The debt-to-capital ratio rose to 67.7% in this year's quarter from 59.7% at the end of the comparable period last year.
"While we continue to endure what appears to be one of the worst economic and housing environments the country has faced in recent memory, we are pleased to have closed the final phase of the MatlinPatterson equity recapitalization through a $153 million rights offering," said Peterson. "The additional equity and cash liquidity has helped to fortify our balance sheet for these challenging times which are expected to persist for the foreseeable future. Our substantial cash position will help maintain valuable liquidity in the near term as well as provide strategic capital which can be deployed at the appropriate time to take advantage of what are expected to be attractive land and corporate opportunities."
Regarding deferred tax assets, the company stated, "As a result of the closing of the first phase of the MatlinPatterson transaction, the Company believes that an ownership change under Internal Revenue Code Section 382 ("Section 382") occurred during the 2008 second quarter. Accordingly, the Company may be limited on the use of certain tax attributes that relate to tax periods prior to the ownership change. As such, included in the total deferred tax valuation allowance of $529.2 million is a $39.8 million charge related to the potential Section 382 limitation on the Company's ability to carry 2008 tax losses back to 2006 for refund purposes. The Company is in the process of evaluating these potential carryback limitations, including potentially soliciting a private ruling from the IRS, and to the extent successful in subsequent quarters may result in the reversal of a portion of the current valuation allowance."