Standard Pacific Reports a $21.9M Loss in 4th QTR

Standard Pacific Corp., Irvine, Calif. (NYSE:SPF), after market close Wednesday reported a net loss of $21.9 million, or $0.08 per diluted share, for the fourth quarter of 2010. The loss missed analyst expecations for a flat quarter.

The loss compared to net income of $82.7 million, or $0.31 per diluted share, for the year earlier period, which included a $94.1 million tax benefit. The 2010 fourth-quarter loss included a $23.8 million charge related to the early extinguishment of debt and $2.3 million of asset impairments.

Home building revenues for the quarter dropped 37% from a year earlier to $212.4 million, driven primarily by a 34% decline in new home deliveries to 619 homes offset partly by a 7% increase in consolidated average home price to $340,000. The increase in average home price was largely due to the delivery of more higher priced homes in California and a reduction in deliveries in Florida and Arizona as compared to the 2009 fourth quarter.

Net new orders (excluding joint ventures) for the 2010 fourth quarter decreased 22% from the 2009 fourth quarter to 428 homes. Average selling communities rose 8% to 134. The monthly sales absorption rate for the quarter was 1.1 per community compared to 1.5 per community for the 2009 quarter. The cancellation rate was 23% versus 21% for the 2009 fourth quarter and 19% for the 2010 third quarter.

Backlog at quarter's end dropped 30.9% to 499 homes with a dollar value of $137.4 million, down 34%, both compared to the same quarter last year. The company said the decrease in backlog value was driven primarily by a 22% drop in net new orders and a 4% decline in average home price in backlog from $347,000 to $332,000.

Gross margin was 22.2% versus 18.1% for the year earlier period. SG&A expenses (including corporate G&A) were $38.0 million compared to $49.4 million for the 2009 fourth quarter and included noncash stock-based compensation expenses of $3.3 million and $5.6 million, respectively. The company's 2010 fourth quarter SG&A rate from home sales was 18.1% versus 16.5% for the 2009 fourth quarter.

During the quarter, Standard Pacific issued $275 million of 8 3/8% senior notes due 2018 and $400 million of 8 3/8% senior notes due 2021. The proceeds of approximately $666.8 million were used to repurchase or repay $575.7 million in notes due between 2012 and 2015 and to extinguish a $24.5 million liability associated with the termination of the company's Term Loan B interest rate swap arrangement.

As a result of these transactions, the company recognized a $23.8 million charge from the early extinguishment of debt, $21.7 million of which was a cash charge related to tender premiums and other related costs and $2.1 million related to the write-off of deferred debt issuance costs. As a result of these refinancing transactions, the company reduced the principal amount of its debt maturing prior to September 2016 from approximately $665 million to $89 million and eliminated substantially all of the restrictive covenants governing the 2012, 2014, and 2015 notes.

Also during the quarter, the company approved (but had not yet consummated) the purchase of $45.0 million of land, comprised of approximately 1,400 lots, 13% finished and 87% raw. During the same period, Standard Pacific purchased approximately 750 lots valued at $33.6 million. Approximately 36% were in California and 38% in Texas, with the balance spread throughout the company's other operations.

Lot count at quarter's end, minus joint ventures, was 17,650 owned lots and 4,451 held under option. There were 1,448 lots owned or controlled by JVs. During the year ended December 31, 2010, Standard Pacific purchased approximately 5,400 lots valued at $315.4 million ($282.4 million of which were land purchases and $33.0 million were acquired through an investment in a joint venture).

The company ended the quarter, and the year, with $720.5 million in home building cash and equivalents, up from $587.21 million a year prior, and $1.273 billion in senior notes payable and $42.5 million in senior subordinated notes payable, up from $993 million and down from $104.2 million at the close of the prior year.

The net loss for the year 2010 was $11.7 million, or $0.05 per share, vs. a net loss of $13.8 million, or $0.06 per share in 2009. Home building revenues for 2010 were $912.4 million compared to $1,166.4 million for the prior year. New home deliveries were down 24% to 2,646; net new orders for the year were down 26% to 2,461.

"Before land spends and debt refinancing costs, we generated $10 million of cash flows from operations for the quarter and over $200 million for 2010 despite weaker homebuyer demand," said Ken Campbell, president and CEO. "During the quarter we also successfully completed the refinancing of $576 million of our pre-September 2016 debt, which was reduced from $665 million to less than $90 million. This refinance, coupled with the proceeds from our recent equity issuance, provides us with a substantial amount of capital and liquidity to continue our land acquisition strategy over the next few years. As a result of our land buying efforts, we expect to open over 55 new communities in 2011, 35 of which are slated for the first half of the year."

Shares of SPF closed down a bit over 1%, or five cents, at $4.43 and were inactive on the after hours market.

Wells Fargo Securities home building analyst Carl Reichardt saw positives in the earnings report. "With above expected closings and weak orders, SPF's backlog is depressed in our view at just 414 units. SPF is not alone on this front. However, SPF has differentiated itself with its peer-group leading gross margin of 23.1% this quarter. We believe SPF was less aggressive chasing volume in 2010 and as a result has maintained profitability in core homebuilding. With little price elasticity in the field, we believe these higher margins position the company better than most in reconstructing sustainable profitability."