Standard Pacific Corp. (NYSE:SPF) late Wednesday reported a second-quarter loss of $248.2 million (-$3.82 per share), including pretax impairment charges of $149.2 million, a non-cash charge of $130.9 million related to deferred tax assets and a $9.1 million charge related to the early retirement of debt.
The loss was nearly three times the -$1.26 per share expected by analysts.The company's debt-to-capitalization ratio increased to 61.9% from 55.9% at the end of 2007's second quarter. It ended the quarter with $572.4 million in cash on its balance sheet.
Home building revenues from continuing operations fell 38% to $410.6 million as new-home deliveries fell 19% to 1,237 and orders dropped 21% to 1,241.The cancellation rate came in at 25%, down from 28% in last year's second quarter but up marginally from 24% in the first quarter.
The average selling price for the company's homes fell 10% to $327,000, but some regions experienced far higher drops. The average price in Southern California dropped 40% to $457,00; 28% to $236,000 in Arizona; 24% to $413,000 in Northern California; and 22% to $215,000 in Florida. The declines were attributed to incentives, discounts and price cuts as well as a change in the geographic delivery mix, particularly in Southern California as the company unloaded inventory in the less-expensive Inland Empire.
The company said it had reduced its inventory of completed and unsold homes by 22% to 421. Backlog for the company fell 41% to 1,515 homes and backlog value fell 51% to $522.5 million. Completed and unsold homes, including joint ventures, fell 31% to 441, spec homes under construction fell 30% to1,457 and total homes under construction were down 40% to ,753.
"It is clear that the housing market and the broader U.S. economy remain challenged and continue to deteriorate further," said Jeffrey V. Peterson, chairman, president and CEO. The company also stated in its earnings release that, "Sales absorption rates in June 2008 were weaker than the prior two months, and thus far the company has seen these slower trends continue into July 2008. 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."
Gross margins eroded further during the quarter, moving from a negative 13.6% to a negative 18.3%. SG&A, meanwhile, rose 550 basis points, or5.5 percentage points, to 19.3% of home building revenues from 13.8% during last year's second quarter.
Standard Pacific's financial services subsidiary generated a pretax loss of approximately $1.4 million compared to pretax income of $187,000 in the year earlier period. The decrease in profitability was driven primarily by a 40% lower level of loans sold during the 2008 second quarter.
The company also recorded a $17.8 million loss from unconsolidated joint ventures during the quarter, down from $41.4 million in the year earlier period, including a $14.3 million pretax charge related primarily to the Company's share of joint venture impairments related to 8 projects located primarily in California. Deliveries from the Company's unconsolidated homebuilding joint ventures totaled 57 new homes in the quarter versus 98 in the prior year period.
Standard Pacific continued its efforts to reduce its joint venture exposure.It purchased and unwound two Southern California joint ventures during the quarter for aggregate net cash payments totaling approximately $53.0 million and the assumption of approximately $47.7 million of joint venture debt. It also with a partner unwound a third Southern California joint venture whereby each partner purchased approximately 50% of the lots from the joint venture, of which the Company paid approximately $30.3 million. The company also made a $775,000 loan remargin payment related to one Southern California joint venture during the quarter. As a result of these and other actions, the Company saw its absolute level of joint venture debt decrease by $136.6 million during the 2008 second quarter to $507.3 million.
After the close of the quarter, Standard Pacific exited two Northern California joint ventures that had joint venture debt totaling $29.3 million for a combined payment of approximately $3.3 million.
The company closed the first phase of its $530 million equity commitment from MatlinPatterson Global Advisors LLC and amended its revolving credit facility and term loans (the "Credit Facilities") during the quarter, which resulted in a reduction in aggregate home building debt by $156.3 million, net of approximately $47.7 million of project specific debt assumed in conjunction with the unwinding of one Southern California joint venture, and ended the 2008 second quarter with $572.4 million of homebuilding cash on its balance sheet.
"The additional equity, including the debt for warrant exchange, will meaningfully strengthen the Company's balance sheet enabling us to more effectively weather the current downturn and positioning us to better compete as market conditions improve," said Peterson. "In connection with the MatlinPatterson transaction, the company restructured its bank credit facilities to provide increased flexibility and headroom during these difficult housing conditions."
Learn more about markets featured in this article: Los Angeles, CA.