Standard Pacific Corp., Irvine, Calif. (NYSE:SPF) on Thursday after market close reported net income of $10.7 million ($0.04 per diluted share), for the second quarter ended June 30. The gain compared to a net loss of $23.1 million, (-$0.10 per diluted share), for the same quarter in 2009.
Analysts were expecting a profit of two cents per share. Shares of SPF closed up 1% at $3.91 Thursday and were up another 2% at $3.99 in after hours trading shortly after 5 p.m.
The gain came despite a $5.2 million charge related to early extinguishment of debt. There were no asset impairments. In comparison, the company took$21.3 million in impairments and a $5.5 million restructuring charge in the prior-year period.
Home building revenues were up 9% to $317.2 million despite a 5% decline in closings to 891. The gain was due to a higher average price, up 18% to $355,000, due to a shift in product mix to higher-priced homes in California.
New orders declined 38% from the 2009 quarter to 719 homes as community count fell by 12% from 144 to 127 and the monthly sales absorption rate fell to 1.9 per community compared to 2.7 per community for the 2009 second quarter. Standard Pacific did not report an average new order price. The cancellation rate was 15% versus 16% for the 2009 second quarter and 15% for the 2010 first quarter.
Backlog was down 34% to 649 homes with a value of $237.7 million, down 23% from the prior-year quarter.
Gross margin from home sales improved to 20.9% compared to 18.5% in the 2009 quarter, excluding $13.1 million of inventory impairment charges for that period. Home building SG&A of $43.4 million was down from $46 million in last year's quarter and was 13.7% of sales compared to 14.6%.
Cash flow was down considerably, from $68.6 million in last year's quarter to $5.3 million this year, primarily due to $75.2 million increase in land purchases made during this year's quarter. Standard Pacific purchased approximately 1,875 lots valued at $103 million ($79.4 million of which were for cash). Approximately 78% of the $103 million in purchases was for land located in California, with the balance spread throughout the company's other operations. As a result, the company's land position is roughly flat with last year's quarter at, including owned, optioned and joint ventures,21,853 lots versus 22,012 at the end of last year's quarter. Of that, 16,944 lots are owned, 3,943 are optioned or contracted for and 975 are in JVs.
At the end of the quarter, the company approved but has not yet consummated the purchase of $198 million of land, comprised of approximately 2,900 lots, 22% of which are finished, 14% partially developed and 64% raw.Approximately 61% of the approved lot purchases are transactions with developers and 11% with banks. As of quarter's end, the company had outstanding approximately $270 million of approved land purchases and option contracts, of which $126 million is expected to be purchased in 2010 and$144 million expected to be purchased in 2011 and beyond.
During the quarter, the company issued $300 million of 8 3/8% senior unsecured notes due May 2018. The proceeds were used primarily to redeem$185.3 million of senior notes due 2010, 2011 and 2013 and to refinance $103.0 million in other indebtedness that was previously repaid by the company.
Ken Campbell, Standard Pacific CEO, said, "Our average sales price is moving up. The gross margins in our backlog are steady. The average gross margin we are earning on new communities, although still a small percentage of the total, is above our older communities."
He continued, "Achieving this level of profitability at these sales rates bodes particularly well for our financial performance when the market begins to recover. I am looking forward to that recovery ... anxiously."
Standard Pacific ended the quarter with $710.4 million in home building cash, up from $573 million at the end of last year's quarter, and an adjusted net debt-to-cap ratio of 54.2%, down from 67%. Total consolidated debt was listed at $1.3 billion, up from $1.16 billion at the end of this year's first quarter.