Standard Pacific's positive earnings for the fourth quarter of 2009 might have been thanks to the net operating loss carryback extension, but it still felt good, said CEO Ken Campbell.
"When you clear away all the noise, we still managed to get our nose above water. So making a little bit of money is better than losing a little bit of money," said the ever candid Campbell during Thursday's earnings call with analysts.
In the end, Standard Pacific booked net income of $82.7 million, $0.31 per share, for its 2009 fourth quarter compared with a net loss of $397.8 million, or $1.65 per share, in the same quarter of 2008. The company's tax refund was for $94.1 million.
Hampering profits was $11.2 million of impairment charges related primarily to a few developments that are aberrations, and not indicative of more to come, he said. "I don't think it's an indication of the view that the market is deteriorating or that prices are going down or sales are going down."
For instance, $7 million of the $11 million came from one small development of six houses that had been priced at $8 million, and now the sales price has been dropped by more than $1 million each.
Another was related to a podium the company had on its books for $38 million that was sold for $35 million, creating a $3 million impairment.
"We promise not to start any more $8 million houses this year," said Campbell. "And we are not going to sell any podium projects."
Sales numbers were another sore point. Deliveries were down 18% from the same quarter in 2008, as was the average selling price by 3%. Net new orders were essentially flat from 2008. However, the company is selling more homes per community, 1.5 a month in 2009 versus one a month in 2008, but the company's community count has fallen.
According to Campbell, the company has mothballed 52 communities. Roughly 10 are for sale while the rest are awaiting a time when the company can develop them and sell homes at a profit. The company has chosen to keep the land because it doesn't need the cash that would be generated by selling it at a loss and executives think it will be profitable in the future.
"That's the trade-off we've made," said Campbell.
The company has not been able to buy enough new cheaper land to replace the communities it has sold through, the only goal Campbell said he didn't achieve over the past year. He said land wasn't available at a price that the company could build on and net a 20% return.
"We are still focused on trying to load up on land, and I think the pipeline is looking pretty good," said Campbell. "So I think we will be able to do better at that."
"It's really hard to make land purchases work out, at least it is for us," said Campbell. "Although the land opportunity, I don't think, will be as good as I originally thought. [But] I still think the next 12 to 18 months is going to be a good time to buy land, and we are still on that track, so the strategy has not changed."
A 1.1% uptick in sales, general, and administrative expenses for the quarter to 16.1% was partially due to a $7 million increase in incentive compensation, $4 million of it related to stock options that are exercisable in one-third increments over the next three years.
Standard Pacific is predicting 2010 sales will be flat with 2009, but, so far, this year's numbers are improved, said Campbell.
"January is better. I think our orders are more than 10% above where they were last year."