Standard Pacific Homes' second-quarter results even surprised CEO Ken Campbell.
"We weren't sure we would have a spring selling season, and we did," Campbell told investors during a Thursday afternoon call. "New orders were only down 6% from last year, which was, quite frankly, a surprise to me."
In addition, the company was able to reduce losses for the quarter to $23 million or $0.10 a share. If it weren't for impairments, the company would have had $0.01 per share profit. That number is more significant considering Standard Pacific mothballed 29% of its communities. The remaining communities are absorbing 2.7 sales a month.
Standard Pacific also successfully generated cash over the quarter. Selling off excess speculative home count was responsible for plumping the company's cash on hand to $575 million even after paying back debt.
"I think this quarter is confirmation that if we say we're going to do something, we are going to do it," Campbell said.
Frankness and shoot-from-the hip responses have become trademarks for Campbell, a corporate turnaround specialist placed in the position last December by MatlinPatterson Global Advisors, which invested heavily in the builder last year.
Campbell immediately began slicing the company's ranks down to size to meet the market demand, lowering the company's SG&A costs by 42% from last year, netting an enviable SG&A rate to revenue of 14.3%, excluding restructuring costs and 15.9% including them. That compares with 19.3% during the same quarter last year.
The current quarter is likely to be slower, Campbell said. Early sales numbers have dropped by about 15%, but that's a typical slowdown between spring and summer selling seasons, he said. "We had a spring selling season, and now it appears we will have a summer selling season."
As a result, the company has reached its immediate goal--not losing money. Obviously, breakeven isn't as good as making a profit, but it beats losing $1.2 billion, he said.
The sales uptick has slowed company cutbacks for now. "I thought we would make significant additional adjustments, but we didn't," he said, adding that it will be revisited at year's end.
The company's next immediate task will be to "fine-tune" its debt, probably in the next few weeks, Campbell said. The first target is to move out the due dates for between $125 and $150 million in debt beyond 2013 either through negotiations with major bondholders or, less likely, the issuance of a new note, he said.
The company's revolving issues with its line of credit and term loans are also in his crosshairs for change soon, including modifying some covenants "to make our life a little easier."
"We are pretty far down the road" toward that as well, he said.
The company is also moving to set itself up to begin on next year's goal too, picking up good land at better prices. "We still believe in 2010 there are going to be some good opportunities to buy land," Campbell said. Sooner or later, banks are going to have to start selling. "They can't hold their breath forever."
"We have ramped up our efforts in getting into the loop" to find the right land opportunities, he said. "We have hired a senior fellow who has been working the street for a year or two looking out for land opportunities," he continued, adding that the new hire has a lot of experience with California land.
After six months of cuts and general executive upheaval and operating improvements, Campbell said he is happy with the management team now in place.
"I think the gang here proved that they could perform among the best of the home builders," he said. "We have proved it to ourselves, and now that we know we can be one of the best, I think that will provide the confidence needed to stay there. We haven't spent our entire history being one of the best home builders, but I think we are going to stay there."