<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to
---------- ----------
Commission file number 1-10959
STANDARD PACIFIC CORP.
(Exact name of registrant as specified in its charter)
Delaware 33-0475989
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1565 W. MacArthur Blvd., Costa Mesa, CA 92626
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (714) 668-4300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_].
APPLICABLE ONLY TO CORPORATE ISSUERS
Registrant's shares of common stock outstanding at November 6, 1998: 29,637,980
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information normally
included in the financial statements prepared in accordance with generally
accepted accounting principles has been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. The financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997.
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues $ 194,130 $ 177,150
Cost of sales 158,290 149,572
---------- ----------
Gross margin 35,840 27,578
---------- ----------
Selling, general and administrative expenses 15,475 16,158
Income from unconsolidated joint ventures 50 1,148
Interest expense 316 1,109
Amortization of excess of cost over net assets acquired 328 -
Other income (expense) (122) 201
---------- ----------
Income from continuing operations before income taxes
and extraordinary charge 19,649 11,660
Provision for income taxes (8,137) (4,786)
---------- ----------
Income from continuing operations before extraordinary charge 11,512 6,874
Income (loss) from discontinued operations, net of income
taxes of $26 and $(255), respectively (36) 367
Extraordinary charge from early extinguishment of debt, net
of income taxes of $753 (1,106) -
---------- ----------
Net Income $ 10,370 $ 7,241
========== ==========
Basic Net Income Per Share:
Income from continuing operations $ 0.39 $ 0.24
Income (loss) from discontinued operations (0.00) 0.01
Extraordinary charge from early extinguishment of debt (0.04) -
---------- ----------
Net Income Per Share $ 0.35 $ 0.25
========== ==========
Weighted average common shares outstanding 29,767,204 29,508,917
========== ==========
Diluted Net Income Per Share:
Income from continuing operations $ 0.38 $ 0.23
Income (loss) from discontinued operations (0.00) 0.01
Extraordinary charge from early extinguishment of debt (0.04) -
---------- ----------
Net Income Per Share $ 0.34 $ 0.24
========== ==========
Weighted average common and diluted shares outstanding 30,108,783 29,835,195
========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated condensed statements.
2
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues $ 444,182 $ 429,030
Cost of sales 361,470 364,775
---------- ----------
Gross margin 82,712 64,255
---------- ----------
Selling, general and administrative expenses 37,339 38,869
Income from unconsolidated joint ventures 1,725 2,665
Interest expense 904 3,956
Amortization of excess of cost over net assets acquired 817 -
Other income (expense) (62) 664
---------- ----------
Income from continuing operations before income taxes
and extraordinary charge 45,315 24,759
Provision for income taxes (18,790) (10,163)
---------- ----------
Income from continuing operations before extraordinary charge 26,525 14,596
Income (loss) from discontinued operations, net of income
taxes of $71 and $(578), respectively (143) 829
Extraordinary charge from early extinguishment of debt, net
of income taxes of $904 (1,328) -
---------- ----------
Net Income $ 25,054 $ 15,425
========== ==========
Basic Net Income Per Share:
Income from continuing operations $ 0.89 $ 0.49
Income (loss) from discontinued operations (0.01) 0.03
Extraordinary charge from early extinguishment of debt (0.04) -
---------- ----------
Net Income Per Share $ 0.84 $ 0.52
========== ==========
Weighted average common shares outstanding 29,730,912 29,476,413
========== ==========
Diluted Net Income Per Share:
Income from continuing operations $ 0.88 $ 0.49
Income (loss) from discontinued operations (0.01) 0.03
Extraordinary charge from early extinguishment of debt (0.04) -
---------- ----------
Net Income Per Share $ 0.83 $ 0.52
========== ==========
Weighted average common and diluted shares outstanding 30,065,401 29,749,635
========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated condensed statements.
3
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 8,013 $ 8,381
Mortgage notes receivable and accrued interest 24,112 12,095
Other notes and accounts receivable, net 11,856 11,686
Inventories:
Real estate in process of development and completed model homes 655,404 448,951
Real estate held for sale - 2,897
Property and equipment, net of accumulated depreciation
and amortization of $3,990 and $3,570, respectively 3,796 2,515
Investments in and advances to unconsolidated joint ventures 30,293 26,217
Deferred income taxes 10,813 12,136
Other assets 8,311 7,455
Excess of cost over net assets acquired, net 17,788 6,605
-------- --------
Total assets of continuing operations 770,386 538,938
-------- --------
Net assets of discontinued operations 8,104 8,727
-------- --------
Total Assets $778,490 $547,665
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 68,694 $ 49,582
Unsecured notes payable 178,750 19,000
Trust deed notes payable 6,050 17,174
10 1/2% senior notes due 2000 19,637 78,800
8 1/2% senior notes due 2007, net 99,367 99,331
8% senior notes due 2008, net 99,354 -
-------- --------
Total liabilities 471,852 263,887
-------- --------
Stockholders' Equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized;
none issued - -
Common stock, $.01 par value; 100,000,000 shares authorized;
29,767,280 and 29,637,281 shares outstanding, respectively 298 296
Paid-in capital 284,896 283,525
Retained earnings (deficit) 21,444 (43)
-------- --------
Total stockholders' equity 306,638 283,778
-------- --------
Total Liabilities and Stockholders' Equity $778,490 $547,665
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated condensed balance sheets.
4
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 25,054 $ 15,425
Adjustments to reconcile net income to net cash provided by
(used in) operating activities of continuing operations:
(Income) loss from discontinued operations 143 (829)
Extraordinary charge from early extinguishment of debt 1,328 -
Depreciation and amortization 355 405
Amortization of excess of cost over net assets acquired 817 -
Changes in cash and equivalents due to:
Receivables and accrued interest (2,121) (1,164)
Inventories (163,630) 3,985
Deferred income taxes 1,804 (2,575)
Other, net 1,086 8,273
Accounts payable and accrued expenses 15,808 15,857
--------- --------
Net cash provided by (used in) operating activities by
continuing operations (119,356) 39,377
--------- --------
Cash Flows From Investing Activities:
Net cash paid for acquisitions (58,635) (65,842)
Net additions to property and equipment (1,130) (1,623)
Investments in and advances to unconsolidated joint ventures (4,076) (22,994)
Sales (purchases) of investment securities - 5,329
Proceeds from the sale of discontinued operations 1,087 -
--------- --------
Net cash provided by (used in) investing activities (62,754) (85,130)
--------- --------
Cash Flows From Financing Activities:
Net proceeds from (payments on) bank credit facility 159,750 (24,100)
Net proceeds from the issuance of 8 1/2% senior notes - 96,931
Net proceeds from the issuance of 8% senior notes 97,571 -
Payments on senior notes and trust deed notes payable (72,776) (25,308)
Dividends paid (3,567) (2,948)
Repurchase of common shares - (2,124)
Proceeds from the exercise of stock options 764 1,222
--------- --------
Net cash provided by (used in) financing activities 181,742 43,673
--------- --------
Net cash provided by (used in) discontinued operations (4,653) 34,235
--------- --------
Net increase (decrease) in cash and equivalents (5,021) 32,155
Cash and equivalents at beginning of period 53,337 16,234
--------- --------
Cash and equivalents at end of period $ 48,316 $ 48,389
========= ========
Summary of Cash Balances:
Continuing operations $ 8,013 $ 3,173
Discontinued operations 40,303 45,216
--------- --------
$ 48,316 $ 48,389
========= ========
</TABLE>
The accompanying notes are an integral part of
these consolidated condensed statements.
5
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------
1998 1997
-------- --------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest - continuing operations $17,347 $13,621
Income taxes 11,240 3,883
Supplemental Disclosures of Noncash Activities:
Trust deed note receivable issued in connection with the
sale of land $10,253 $ -
Land acquisitions financed by purchase money trust deeds 1,161 8,014
Expenses capitalized in connection with the issuance of
the 8 1/2% senior notes due 2007 - 2,375
Expenses capitalized in connection with the issuance of
the 8% senior notes due 2008 1,750 -
Income tax benefit credited in connection with shares of
common stock issued pursuant to stock options exercised 609 397
</TABLE>
The accompanying notes are an integral part of
these consolidated condensed statements.
6
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Dollar amounts presented in tables are in thousands, except per share amounts)
1. Basis of Presentation
---------------------
In the opinion of management, the financial statements reflect all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position as of September 30, 1998 and December 31, 1997, and the
results of operations and cash flows for the periods presented.
2. Capitalization of Interest
--------------------------
The following is a summary of interest capitalized and expensed related to real
estate inventories for the nine-month and three-month periods ended September
30, 1998 and 1997:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
1998 1997 1998 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Total interest incurred during the period $19,719 $12,362 $7,165 $4,247
Less: Interest capitalized as a cost of
real estate under development 18,815 8,406 6,849 3,138
------- ------- ------ ------
Interest expense $ 904 $ 3,956 $ 316 $1,109
======= ======= ====== ======
Interest previously capitalized as a
cost of real estate under development,
included in cost of sales $15,330 $17,321 $5,866 $7,131
======= ======= ====== ======
Capitalized interest in ending inventories $17,197 $16,227
======= =======
</TABLE>
3. Recent Accounting Pronouncements
--------------------------------
The Company is required to adopt Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information" (FAS
131) no later than the fourth quarter of this year. As this is a footnote
disclosure requirement only, there should be no impact on the consolidated
financial position and results of operations.
4. Reclassifications
-----------------
Certain reclassifications have been made to the 1997 financial statements to
conform with current period presentation.
7
<PAGE>
5. Net Income Per Share
--------------------
Effective December 31, 1997 the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings per Share" (FAS 128). This statement
requires the presentation of both basic and diluted net income per share for
financial statement purposes. Basic net income per share is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding. Diluted net income per share includes the effect
of the potential shares outstanding, including dilutive stock options using the
treasury stock method. The table following reconciles the components of the
basic net income per share calculation to diluted net income per share.
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
------------------------------------------------------
1998 1997
-------------------------- --------------------------
Income Shares EPS Income Shares EPS
------- ---------- ----- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Basic Net Income Per Share:
Income available to common
stockholders before
discontinued operations
and extraordinary charge $11,512 29,767,204 $0.39 $ 6,874 29,508,917 $0.24
Effect of dilutive stock options - 341,579 - 326,278
------------------- -------------------
Diluted net income per share
from continuing operations
and before extraordinary charge $11,512 30,108,783 $0.38 $ 6,874 29,835,195 $0.23
========================== ==========================
<CAPTION>
For the Nine Months Ended September 30,
------------------------------------------------------
1998 1997
-------------------------- --------------------------
Income Shares EPS Income Shares EPS
------- ---------- ----- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Basic Net Income Per Share:
Income available to common
stockholders before
discontinued operations
and extraordinary charge $26,525 29,730,912 $0.89 $14,596 29,476,413 $0.49
Effect of dilutive stock options - 334,489 - 273,222
------------------- -------------------
Diluted net income per share
from continuing operations
and before extraordinary charge $26,525 30,065,401 $0.88 $14,596 29,749,635 $0.49
========================== ==========================
</TABLE>
6. Acquisition
-----------
On August 31, 1998, the Company acquired a portion of the assets of UDC Home's
("UDC") Phoenix, Arizona single-family homebuilding operation for approximately
$59 million in cash. The acquisition was financed under the Company's unsecured
revolving credit facility. With this acquisition, the Company purchased or
assumed the rights to acquire over 2,000 single-family lots located in 13
communities in the Phoenix Metropolitan area, of which seven communities were
active subdivisions at the close of the transaction. In addition, the
acquisition included UDC's senior management team.
The acquisition has been accounted for as a purchase, and accordingly, the
purchase price has been allocated to the net assets acquired based upon their
estimated fair market values as of the date of acquisition and are included in
the accompanying consolidated condensed balance sheets. In addition, the excess
of the purchase price over the estimated fair value of net assets acquired
totaled $12 million, which has been recorded as excess of cost over net assets
acquired in the accompanying consolidated condensed balance sheets and is being
amortized on a straight-line basis over 12 years.
8
<PAGE>
7. 10 1/2% Senior Notes due 2000
-----------------------------
On September 30, 1998, the Company completed its tender offer and consent
solicitation for a portion of its 10 1/2% Senior Notes due 2000. In connection
with the tender offer, the Company repurchased and retired approximately $31.5
million of its 10 1/2% Senior Notes. With the successful completion of the
consent solicitation, certain restrictive financial covenants have been modified
or eliminated under the Indenture. Also, in May 1998, the Company repurchased
and retired approximately $7.7 million of its 10 1/2% Senior Notes due 2000
through a series of open market purchases. In aggregate, the Company incurred an
after tax extraordinary charge for the early extinguishment of debt, including
transaction costs, of approximately $1.1 million and $1.3 million for the three-
month and nine-month periods ended September 30, 1998, respectively.
Accordingly, these transactions have been accounted for as an extraordinary
charge, net of income taxes, in the accompanying consolidated condensed
statements of income.
8. Discontinued Operations
-----------------------
In May 1997, the Company's Board of Directors adopted a plan of disposition (the
"Plan") for the Company's savings and loan subsidiary ("Savings"). Pursuant to
the Plan, the Company sold substantially all of Savings' mortgage loan portfolio
in June 1997. The proceeds from the sale of the mortgages were used to pay off
substantially all of the outstanding balances of Federal Home Loan Bank advances
with the remaining amount temporarily invested until the savings deposits are
sold along with Savings' remaining assets. In August 1998, the Company entered
into a definitive agreement to sell the remainder of Savings' business,
including Savings' charter. The definitive agreement is subject to a number of
conditions including approval of the transaction by the Office of Thrift
Supervision ("OTS"). As a result, Savings has been accounted for as a
discontinued operation and the results of its operations and net assets have
been segregated in the accompanying consolidated condensed financial statements.
Management currently estimates that both the disposition of Savings under the
Plan and the operating results of Savings for the period through the disposition
will not result in a significant gain or loss to the Company.
Additionally, the discontinued operations in 1997 include the Company's former
office furniture subsidiary, Panel Concepts, Inc. ("Panel"), which was sold in
December 1997. The assets and liabilities of Savings and Panel have been
classified in the accompanying consolidated condensed balance sheets as "Net
assets of discontinued operations" for the respective periods presented.
Interest income and product sales from these discontinued operations aggregated
$2,543,000 and $25,866,000 for the nine-month periods ended September 30, 1998
and 1997, respectively, and $844,000 and $7,637,000 for the three-month periods
ended September 30, 1998 and 1997, respectively.
9
<PAGE>
The components of net assets of discontinued operations included in the
accompanying consolidated condensed balance sheets as of September 30, 1998 and
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Dollars in thousands)
<S> <C> <C>
Assets:
Cash and equivalents $40,303 $44,956
Investment securities available for sale 16,217 22,559
Mortgage notes receivable and accrued interest, net 301 317
Property and equipment, net of accumulated
depreciation and amortization of $518 and $598,
respectively 71 98
Deferred income taxes 158 1,273
Investment in FHLB stock 8,841 8,465
Other assets 97 108
------- -------
Total assets--discontinued operations $65,988 $77,776
------- -------
Liabilities:
Savings accounts $51,360 $50,230
FHLB advances 5,000 18,000
Accounts payable and accrued expenses 1,524 819
------- -------
Total liabilities--discontinued operations 57,884 69,049
------- -------
Net assets of discontinued operations $ 8,104 $ 8,727
======= =======
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
A comparative summary of homebuilding operating results for the nine-month and
three-month periods ended September 30, 1998 and 1997 is as follows (dollar
amounts in thousands):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $444,182 $429,030 $194,130 $177,150
Cost of sales 361,470 364,775 158,290 149,572
-------- -------- -------- --------
Gross margin 82,712 64,255 35,840 27,578
-------- -------- -------- --------
Gross margin percentage 18.6% 15.0% 18.5% 15.6%
-------- -------- -------- --------
Selling, general and administrative expenses 37,339 38,869 15,475 16,158
Income from unconsolidated joint ventures 1,725 2,665 50 1,148
Interest expense 904 3,956 316 1,109
Amortization of excess of cost over net assets acquired 817 - 328 -
Other income (expense) (62) 664 (122) 201
-------- -------- -------- --------
Income from continuing operations before income taxes
and extraordinary charge $ 45,315 $ 24,759 $ 19,649 $ 11,660
======== ======== ======== ========
</TABLE>
A summary of key homebuilding operating data for the nine-month and three-month
periods ended and as of September 30, 1998 and 1997 is as follows (dollar
amounts in thousands, except average selling prices):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
New Homes Delivered:
Southern California 649 650 304 246
Northern California 330 485 128 216
-------- -------- -------- --------
Total California 979 1,135 432 462
-------- -------- -------- --------
Dallas/Austin 214 158 79 50
Houston 123 118 48 45
-------- -------- -------- --------
Total Texas 337 276 127 95
-------- -------- -------- --------
Phoenix 37 - 37 -
-------- -------- -------- --------
Consolidated total 1,353 1,411 596 557
Unconsolidated joint ventures (California) 35 46 1 17
-------- -------- -------- --------
Total 1,388 1,457 597 574
======== ======== ======== ========
Average Selling Price:
California deliveries (excluding joint ventures) $368,203 $328,610 $368,207 $341,048
Texas deliveries $215,016 $190,551 $215,157 $186,567
Arizona deliveries $179,611 $ - $179,611 $ -
Combined (excluding joint ventures) $324,891 $301,605 $323,886 $314,700
Combined (including joint ventures) $325,013 $303,923 $323,962 $318,565
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, 1998 September 30, 1998
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net New Orders:
Southern California 1,103 702 242 230
Northern California 455 522 152 114
-------- -------- -------- --------
Total California 1,558 1,224 394 344
-------- -------- -------- --------
Dallas/Austin 246 168 70 64
Houston 127 146 31 51
-------- -------- -------- --------
Total Texas 373 314 101 115
-------- -------- -------- --------
Phoenix 46 - 46 -
-------- -------- -------- --------
Consolidated total 1,977 1,538 541 459
Unconsolidated joint ventures (California) 10 53 2 21
-------- -------- -------- --------
Total 1,987 1,591 543 480
======== ======== ======== ========
<CAPTION>
As of September 30,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Backlog (in units):
Southern California 724 249
Northern California 276 224
-------- --------
Total California 1,000 473
-------- --------
Dallas/Austin 98 72
Houston 56 57
-------- --------
Total Texas 154 129
-------- --------
Phoenix 400 -
-------- --------
Consolidated total 1,554 602
Unconsolidated joint ventures (California) 2 31
-------- --------
Total backlog (in units) 1,556 633
======== ========
Backlog at Quarter End (in dollars) $500,937 $210,242
======== ========
Active Selling Communities at Quarter End:
California 34 24
Texas 18 18
Arizona 8 -
Joint ventures (California) 1 3
-------- --------
Total 61 45
======== ========
Building Sites Owned or Controlled:
California 8,981 6,962
Texas 2,010 1,701
Arizona 2,243 -
-------- --------
Total 13,234 8,663
======== ========
</TABLE>
12
<PAGE>
Income from continuing operations before an extraordinary charge for the quarter
ended September 30, 1998 increased 68 percent to $11,512,000, or $0.38 per
diluted share, compared to $6,874,000, or $0.23 per diluted share for the year
earlier period. For the nine-month period ended September 30, 1998, income from
continuing operations before an extraordinary charge increased 82 percent to
$26,525,000, or $0.88 per diluted share, from $14,596,000, or $0.49 per diluted
share for the year earlier period. The significant increase in earnings was
fueled primarily by continued improvement in homebuilding gross margins for both
the three-month and nine-month periods ended September 30, 1998, while increased
deliveries also contributed to additional earnings growth in the third quarter
of 1998. This performance reflects the strong California housing market in the
first three quarters of 1998 and the Company's inventory of well located lots
throughout the state.
Homebuilding revenues for the 1998 third quarter increased 10 percent to $194.1
million over the year earlier period, a new third quarter high. Deliveries of
597 new homes (including one from the Company's unconsolidated joint venture),
also a third quarter high, increased 22 percent from 490 new home deliveries
(including 17 deliveries from the Company's unconsolidated joint ventures) in
the 1997 third quarter. For the nine-month period ended September 30, 1998
homebuilding revenues increased 4 percent to $444.2 million compared to $429.0
million in the year earlier period despite a 5 percent decline in new home
deliveries from 1,457 (including 46 new homes from the Company's unconsolidated
joint ventures) in 1997 to 1,388 new homes (including 35 new homes from the
Company's unconsolidated joint venture) for the same period in 1998. The rise
in homebuilding revenues from the prior year third quarter was the result of
$12.3 million attributable to an increase in the number of new homes delivered
coupled with a $5.5 million increase as a result of a 3 percent increase in the
average selling price of new homes delivered. The $15.2 million increase in
homebuilding revenues for the nine-month period ended September 30, 1998
resulted primarily from a $31.5 million increase in average selling price of new
homes delivered, which was partially offset by a $17.5 million reduction in
revenues due to a decline in the number of new homes delivered. Excluding
Arizona new home deliveries, revenues and deliveries increased 6 percent and 14
percent, respectively, for the 1998 third quarter over the year earlier period.
The decline in new home deliveries for the nine-month period ended September 30,
1998 compared to the same period in 1997 was attributable to the anticipated
reduction in the number of new homes available for delivery due to the timing of
new project openings in the first half of 1998, as well as construction delays
experienced in the first quarter of 1998 due to inclement weather conditions.
The average selling price of new homes delivered rose to $323,886 and $324,891
for the three-month and nine-month periods ended September 30, 1998,
respectively, compared to $314,700 and $301,605 for the same periods in 1997.
The rise in the average selling price of new homes of 3 percent and 8 percent
for the third quarter and nine months ended September 30, 1998, respectively,
over the comparable 1997 periods was primarily attributable to the strong move-
up market in California and the Company's emphasis on higher-end product.
The average cost of new homes delivered declined by less than 1 percent in the
1998 third quarter compared to the same period in 1997 which was the result of
delivering 37 new homes from the recently acquired Arizona division, which
delivers homes at a significantly lower average cost per unit than in California
and Texas. Excluding Arizona deliveries, the average cost of new homes
delivered increased 2 percent from the 1997 third quarter. For the nine-month
period ended September 30, 1998, the average cost of new homes delivered rose 3
percent from the year earlier period. These increases were the result of a
greater proportion of higher-end product delivered in 1998 versus 1997.
The homebuilding gross margin percentage increased 290 basis points to 18.5
percent for the third quarter of 1998 compared to 15.6 percent for the 1997
third quarter. For the nine-month period ended September 30, 1998, the
homebuilding gross margin percentage improved 360 basis points to 18.6 percent
compared to 15.0 percent for the year earlier period. The improvements in the
gross margin percentage reflect the strong California housing market in the
first three quarters of 1998 and the Company's ability to raise its home prices.
13
<PAGE>
Selling, general and administrative expenses as a percentage of revenues for the
three-month and nine-month periods ended September 30, 1998 were 8.0 percent and
8.4 percent, respectively, compared to 9.1 percent for the same periods in the
prior year. The decrease in 1998 over the corresponding periods in 1997 was
primarily the result of a reduction in selling costs as a percentage of revenues
due to the improved housing market in California and the benefit of higher
revenues on a base of semi-fixed general and administrative costs.
Interest expense for the three-month and nine-month periods ended September 30,
1998 declined approximately $793,000 and $3.1 million, respectively, to $316,000
and $904,000 over the year earlier periods. The decrease in the amount of
interest expensed in 1998 over the prior year periods was the result of
capitalizing more interest to inventory as a result of an increase in projects
under development in 1998 as compared to the year earlier periods.
Amortization of excess of cost over net assets acquired relates to the September
30, 1997 acquisition of Duc Development Company, a privately held northern
California homebuilder, and the recently completed acquisition of a portion of
UDC Homes' Phoenix, Arizona single-family operation on August 31, 1998. The
excess of cost over net assets acquired is being amortized over seven and 12
year periods, respectively.
Net income for the third quarter including discontinued operations and the
extraordinary charge increased 43 percent to $10,370,000, or $0.34 per diluted
share, compared to $7,241,000, or $0.24 per diluted share for the 1997 third
quarter. Net income for the nine months ended September 30, 1998 including
discontinued operations and the extraordinary charge increased 62 percent to
$25,054,000, or $0.83 per diluted share, versus $15,425,000, or $0.52 per
diluted share for the year earlier period. The discontinued operations in 1998
reflect the Company's savings and loan subsidiary, which is pending disposition
pursuant to a definitive sale agreement executed in August, 1998. The
discontinued operations in 1997 also include the Company's former office
furniture subsidiary which was sold at the end of 1997. Management currently
does not anticipate a significant gain or loss from the operations or
disposition of the thrift.
On August 31, 1998, the Company acquired certain assets of UDC Homes' Phoenix,
Arizona single-family operation for approximately $59 million in cash. The
acquisition was financed under the Company's unsecured revolving credit facility
and has been accounted for under the purchase method of accounting. In
connection with this acquisition, the Company purchased or assumed the rights to
acquire over 2,000 single-family lots located in 13 communities in the Phoenix
Metropolitan area, of which seven communities were active subdivisions at the
close of the transaction.
Although the Company's net new home orders in California slowed somewhat in
September, the Company generated a record number of net new orders for the 1998
third quarter which, at 543 homes, represents a 13 percent increase over a
previous record 1997 third quarter total. Excluding the Arizona orders in the
1998 third quarter, net new home orders would have been 4 percent higher than
the prior year period. The Company enters the fourth quarter with a backlog of
1,556 presold homes, which represents approximately $500.9 million in revenues,
up 138 percent over the total backlog value entering last year's fourth quarter.
The September 30, 1998 backlog includes 400 presold homes, with an estimated
sales value of $63 million, from the Company's Arizona operation. Excluding the
Arizona backlog, the dollar value of presold homes at the end of the third
quarter would have been 108 percent higher than the prior year total. The
Company is expecting to open approximately 56 new home communities during the
next twelve months.
14
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's principal uses of cash have been for operating expenses, land
acquisitions, construction expenditures, market expansion, principal and
interest payments on debt and dividends to shareholders. Cash requirements were
provided from internally generated funds and outside borrowings, including the
Company's revolving credit facility and public debt offerings. Management
believes that these sources of cash, including capital available through the
public debt and equity markets, are sufficient to finance its current working
capital requirements and other needs.
In February 1998, the Company issued $100 million of 8% Senior Notes due
February 15, 2008 (the "8% Senior Notes"). The 8% Senior Notes were issued at a
discount to yield approximately 8.1 percent. These notes are senior unsecured
obligations of the Company and rank pari passu with the Company's other existing
senior unsecured indebtedness. The 8% Senior Notes contain restrictive
covenants which, among other things, impose certain limitations on the ability
of the Company to (i) incur additional indebtedness, (ii) create liens, (iii)
make restricted payments, as defined, and (iv) sell assets. The 8% Senior Notes
are redeemable at the option of the Company, in whole or in part, commencing
February 15, 2003 at 104 percent of par, with the call price reducing ratably to
par on February 15, 2006. Net proceeds to the Company after offering expenses
were approximately $97.3 million. Approximately $54.3 million of the net
proceeds were used to repay the indebtedness outstanding under the revolving
credit facility on the date of closing (February 10, 1998), with the balance of
the net proceeds used (i) to fund the $20 million sinking fund payment on March
1, 1998 on the Company's 10 1/2% Senior Notes, (ii) to repay an $11.2 million
trust deed note payable in April of 1998 and (iii) for general corporate
purposes.
Borrowings outstanding under the Company's unsecured revolving credit facility
(the "Revolving Credit Facility") totaled $178.8 million at September 30, 1998
versus $19.0 million at December 31, 1997. In July 1998, the Company and its
bank group amended the Revolving Credit Facility to, among other things,
increase the commitment to $400 million and reduce the cost of borrowings and
other fees. The Revolving Credit Facility has a current maturity date of July
31, 2002.
The Company made its second $20 million sinking fund payment on its 10 1/2%
Senior Notes on March 1, 1998. In May 1998, the Company repurchased, and
simultaneously retired, approximately $7.7 million of its 10 1/2% Senior Notes
through open market purchases. On September 30, 1998, the Company repurchased
and retired approximately $31.5 million of its 10 1/2% Senior Notes in
connection with its tender offer and consent solicitation. In connection with
the successful completion of the consent solicitation, certain restrictive
financial covenants have been modified or eliminated under the Indenture.
Together with open market purchases and the tender offer, the Company incurred
an after tax extraordinary charge for the early extinguishment of debt,
including transaction costs, aggregating approximately $1.1 million and $1.3
million for the three-month and nine-month periods ended September 30, 1998,
respectively. As of September 30, 1998, approximately $19.6 million of the 10
1/2% Senior Notes remained outstanding.
To finance land purchases, the Company may utilize, among its other sources,
purchase money mortgage financing of which approximately $6.1 million was
outstanding for this purpose as of September 30, 1998 compared to $17.2 million
as of December 31, 1997.
Additionally, the Company has utilized joint venture structures whereby these
joint ventures have obtained secured construction financing. This type of
structure minimizes the use of funds from the Company's Revolving Credit
Facility and other financing sources. The Company plans to continue using this
type of arrangement to finance the development of properties as opportunities
arise.
15
<PAGE>
The Company did not repurchase any shares of its common stock during the nine-
month period ended September 30, 1998 related to the previously announced common
stock repurchase program. However, in response to the recent market decline in
equity valuations, including the price of the Company's common stock, the
Company purchased 129,300 shares of its common stock in October 1998 for
approximately $1.2 million. Since the inception of the Company's stock buyback
plan, the Company has repurchased an aggregate of 1,415,050 shares of its common
stock for approximately $9.5 million, leaving a balance of approximately $10.5
million available under the repurchase program.
On October 28, 1998, the Company's Board of Directors declared a quarterly cash
dividend of $.05 per share of common stock. The Board of Directors decided to
increase the cash dividend by 25 percent as a result of continued growth in the
Company's operating results. The dividend will be payable on November 24, 1998
to shareholders of record on November 10, 1998.
For the nine months ended September 30, 1998, the Company has issued 129,999
shares of common stock pursuant to the exercise of employee stock options for
aggregate proceeds of approximately $764,000.
The Company recently filed, and had declared effective by the Securities and
Exchange Commission, a $300 million universal shelf registration statement on
Form S-3. The universal shelf registration statement permits the Company to
issue, from time to time, up to an aggregate of $300 million of its common
stock, preferred stock, debt securities and warrants as market conditions
permit.
Year 2000 Issue
- ---------------
The "Year 2000 issue" is a general term used to describe the problems which may
arise from the inability of many existing computer systems to properly recognize
a year that begins with "20" instead of the familiar "19." If not corrected,
many computer applications could fail or miscalculate the data being processed.
The Company utilizes a number of computer information systems in conjunction
with its homebuilding and mortgage banking operations. The Company's California
divisions recently completed their computer software conversion to a JD Edwards
applications system ("JD Edwards Conversion") that is Year 2000 compliant. This
software application addresses the operating needs of the purchasing, contract
management, accounts payable and accounting functions within the homebuilding
segment. The Arizona homebuilding operation is already utilizing a year 2000
compliant version of the JD Edwards software package. The Texas operations are
currently operating their homebuilding and accounting systems on a separate year
2000 compliant software application. With respect to the Company's mortgage
banking operations, a service bureau is being utilized by Family Lending
Services, Inc. for its application systems, and the service bureau has advised
the Company that the systems are year 2000 compliant. The financial institution
partner in the Company's mortgage banking joint venture has advised the Company
that the joint venture's computer information systems will be year 2000
compliant by year-end 1998.
In connection with the JD Edwards Conversion, the Company also upgraded its
hardware, including but not limited to, procuring a new AS400 mid-range
computer, installing a Company-wide computer area network, and making numerous
upgrades to various personal computer operating systems. As a result, management
believes that all of the Company's computer hardware, including personal
computer operating systems and peripheral equipment, is also year 2000
compliant.
In addition, the Company has evaluated, or is in the process of assessing, all
other non-information technology internal office systems. The Company
anticipates that this assessment will be completed by the middle of 1999.
16
<PAGE>
The Company is in the process of surveying its significant vendors,
subcontractors, suppliers and financial institutions to assess their state of
readiness for the Year 2000. Third parties significant to the Company's
operations include the Company's bank group, escrow and title companies,
subcontractors and suppliers, and a third-party payroll service. Responses
and non-responses will be reviewed over the next few quarters, with this part of
the Company's Year 2000 evaluation anticipated to be completed by the middle of
1999. The Company cannot currently determine to what extent the Year 2000 issue
will affect these third parties and, consequently, the Company.
The Company has engaged a third party to review the Company's computer operating
systems with respect to the Year 2000 issue as well as the Company's Year 2000
plan. The Company currently does not have a Year 2000 contingency plan. However,
it will be developing a plan which is anticipated to be complete by the middle
of 1999.
The Company proceeded with the JD Edwards Conversion and network upgrade as part
of its normal course of business as there was a need to upgrade the existing
information systems irrespective of the Year 2000 issue. Including the cost of
the JD Edwards Conversion and network upgrade, management estimates that the
Company has expended approximately $1.2 million on addressing Year 2000 issues
to date and estimates that it will incur approximately an additional $500,000 in
such costs.
At present, management does not believe the Year 2000 issue will have a material
adverse effect on the business operations or financial performance of the
Company. There can be no assurance, however, that the Year 2000 issue will not
adversely affect the Company and its business.
17
<PAGE>
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
This Quarterly Report on Form 10-Q contains "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which represent
the Company's expectations or beliefs concerning future events, including, but
not limited to, statements regarding the following: the expected opening of 56
new home communities during the next twelve months; the homebuilding segment's
backlog of homes; the sufficiency of cash available from internally generated
funds, outside borrowings and the public debt and equity markets to finance the
Company's current working capital requirements and other needs; the expected
gain or loss resulting from the operation of Savings prior to sale and from the
sale of Savings; the Year 2000 compliance of the Company's computer systems and
non-information technology internal office systems; the time periods within
which the Company's contingency plan, assessment of non-information systems, and
evaluation of third-party compliance will be completed; estimated additional
costs of Year 2000 compliance and the expected impact of the Year 2000 issue on
the Company. The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those in the forward looking statements, including, without limitation, the
following: change in the demand for new homes attributable to the cyclical and
competitive nature of the homebuilding business; changes in general economic
conditions, including further adverse developments in Asian economies and
financial markets; changes in consumer confidence; adverse local market
conditions; uncertainty in or changes in the continued availability of suitable
undeveloped land at reasonable prices; existing and changing governmental
regulations, including regulations concerning environmental matters, the
permitting process for home construction, and mortgage banking; increases in
prevailing interest rates; the level of real estate taxes and energy costs; the
cost and availability of materials and labor; the availability of construction
financing and home mortgage financing attractive to the purchasers of homes; the
availability of financing to homebuilders; inclement weather and other natural
disasters; the Year 2000 compliance of third parties, such as governmental
authorities, the Company's bank group, vendors and subcontractors; inaccuracies
in the representations made to the Company by third parties with respect to the
Year 2000 compliance of the Company's computer and other office systems. Results
actually achieved thus may differ materially from expected results included in
these and any other forward looking statements contained herein.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STANDARD PACIFIC CORP.
(Registrant)
Dated: November 12, 1998 By: \s\ Arthur E. Svendsen
----------------------------
Arthur E. Svendsen
Chairman of the Board and
Chief Executive Officer
Dated: November 12, 1998 By: \s\ Andrew H. Parnes
----------------------------
Andrew H. Parnes
Vice President of Finance,
Treasurer and Principal Financial
and Accounting Officer
19
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Change in Securities and Use of Proceeds.
The Company and United States Trust Company of New York, a
company organized under the laws of the State of New York (the
"Trustee"), are parties to an Indenture dated as of April 1, 1992
(the "Indenture"). Pursuant to an Officer's Certificate dated
March 5, 1993 (the "Series Supplement"), and in accordance with
the terms of the Indenture, the Company established and issued a
series of Securities denominated the "10 1/2% Senior Notes due
2000" (the "Securities").
Pursuant to the terms of the Indenture, the Company and the
Trustee entered in a First Supplemental Indenture dated as of
September 15, 1998 (the "First Supplemental Indenture"). The
First Supplemental Indenture became effective on September 30,
1998.
The general effect of the First Supplemental Indenture was to
delete certain financial and negative convenants from the terms
of the Series Supplement. Under the terms of the First
Supplemental Indenture, the following Sections of the Series
Supplement were deleted in their entirety: Section 3(l)(i)
(Maintenance of Consolidated Net Worth), Section 3(l)(ii)
(Limitation on Additional Indebtedness), Section 3(l)(iii)
(Limitation on Liens), Section 3(l)(iv) (Limitation on Restricted
Payments) and Section 3(l)(v) (Limitation on Asset Sales). The
First Supplemental Indenture also renumbered certain Sections and
amended or deleted various covenants, definitions and related
provisions of the Indenture, the Series Supplement and the
Securities to make certain other changes consistent with the
foregoing.
Item 3. Default upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
In connection with the execution and delivery of the First
Supplemental Indenture referenced in Item 2, above, the Company
sought the consent of the holders of the Securities pursuant to
a tender offer and consent solicitation. Of the $51,108,000 in
principal amount of Securities outstanding at the time of the
consent solicitation, the holders of $30,487,000 in principal
amount of Securities consented to the proposed amendments set
forth in the First Supplemental Indenture.
Item 5. Other Information
None
20
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4. First Supplemental Indenture, dated as of September 15,
1998, between the Company and United States Trust Company of
New York, as trustee, relating to the Company's 10 1/2%
Senior Notes due 2000.
10. Asset Purchase Agreement, dated August 13, 1998, by and
among UDC Homes, Inc., UDC Homes Construction, Inc., Shea
Homes Limited Partnership, Standard Pacific of Arizona,
Inc., Standard Pacific Construction, Inc, and Standard
Pacific Corp, incorporated by reference to Exhibit 2.1 of
the Company's Current Report on Form 8-K dated August 28,
1998.
27. Financial Data Schedule.
(b) Current Reports on Form 8-K
(i) Form 8-K dated August 28, 1998 reporting (i) the acquisition
of a portion of UDC Homes, Inc.'s Arizona single-family
homebuilding operations, (ii) the Company's execution of a
definitive agreement to sell the Company's savings and loan
subsidiary, Standard Pacific Savings, F.A. and (iii) the
Company's cash tender offer for all of its outstanding 10
1/2% Senior Notes due 2000.
(ii) Form 8-K dated September 30, 1998 reporting that the Company
had successfully completed its tender offer and consent
solicitation for its outstanding 10 1/2% Senior Notes due
2000.
21
<PAGE>
STANDARD PACIFIC CORP.
______________
First Supplemental Indenture
dated as of September 15 1998
__________________
with respect to:
Indenture
Dated as of April 1, 1992
United States Trust Company of New York
as Trustee
<PAGE>
FIRST SUPPLEMENTAL INDENTURE dated as of September 15, 1998 (this
"Supplemental Indenture") between STANDARD PACIFIC CORP., a Delaware corporation
(the "Company") and UNITED STATES TRUST COMPANY OF NEW YORK, a banking company
organized under the laws of the State of New York, as trustee (the "Trustee")
for the securities issued under the Indenture dated as of April 1, 1992 (the
"Indenture") between the Company and the Trustee.
Recitals
--------
A. Pursuant to an Officer's Certificate dated March 5, 1993 (the "Series
Supplement"), and in accordance with the terms of the Indenture, the Company
established and issued a series of Securities denominated the "10 1/2% Senior
Notes due 2000" (the "Securities"). Securities in the aggregate principal
amount of $51,108,000 are outstanding on the date of this Supplemental
Indenture.
B. In accordance with Section 9.02 of the Indenture, the Company has
obtained the written consent of the Holders of at least a majority in principal
amount of the Securities to certain amendments to the Series Supplement, and, to
the extent the Series Supplement is incorporated therein, the Indenture.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually covenanted and
agreed as follows:
Agreements
----------
Section 1. Defined Terms. Capitalized terms not otherwise defined herein
-------------
shall have the meanings ascribed to them in the Indenture.
Section 2. Condition to Effectiveness. This Supplemental Indenture shall
--------------------------
become effective only upon the acceptance by the Company of, and payment by the
Company for, at least a majority in principal amount of the outstanding
Securities pursuant to the terms of the Company's Offer to Purchase and Consent
Solicitation Statement dated September 1, 1998, as such offer may be amended
from time to time (the "Offer"). The date of the effectiveness of this
Supplemental Indenture shall be denominated herein the "Effective Date." Upon
the occurrence of the Effective Date, the Company shall provide to the Trustee
an officer's certificate certifying that the Effective Date has occurred.
Section 3. Amendment to Series Supplement and Indenture.
--------------------------------------------
(a) The final sentence of existing Section 3(i) of the Series Supplement
is hereby amended to provide in its entirety as follows:
The Company may reduce the principal amount of Notes to be redeemed by
subtracting 100% of the principal amount of any Notes that the Company has
delivered to
2
<PAGE>
the Trustee for cancellation other than pursuant to the terms
of this paragraph (i) or has acquired.
(b) Existing Section 3(l) of the Series Supplement is hereby amended by
deleting therefrom the following provisions in their entirety:
<TABLE>
<CAPTION>
Existing Section Number Caption
----------------------- -------
<S> <C>
Section 3(l)(i) Maintenance of Consolidated Net Worth
Section 3(l)(ii) Limitation on Additional Indebtedness
Section 3(l)(iii) Limitations on Liens
Section 3(l)(iv) Limitation on Restricted Payments
Section 3(l)(v) Limitation on Asset Sales
</TABLE>
(c) Each of the following provisions of existing Section 3(l) of the
Series Supplement is hereby renumbered as indicated below:
<TABLE>
<CAPTION>
Existing Section Number New Section Number Caption
----------------------- ------------------ -------
<C> <C> <S>
3(l)(vi) 3(l)(i) Transactions with Affiliates
and Related Persons
3(l)(vii) 3(l)(ii) Limitation on Payment
Restrictions Affecting
Restricted Subsidiaries
</TABLE>
(d) Existing Section 3(l)(viii) of the Series Supplement is hereby amended
to provide in is entirety as follows:
(iii) Restrictions on Permitting Certain Restricted Subsidiary to
Become an Unrestricted Subsidiary. The Company may permit any Restricted
Subsidiary to be designated as an Unrestricted Subsidiary or any
Unrestricted Subsidiary to be designated as a Restricted Subsidiary;
provided, however, that the Company shall not permit Standard Pacific of
Texas, Inc. to be designated as an Unrestricted Subsidiary. Promptly after
the adoption of any Board Resolution designating a Restricted Subsidiary as
an Unrestricted Subsidiary or an Unrestricted Subsidiary as a Restricted
Subsidiary, a copy thereof shall be filed with the Trustee, together with
an Officers' Certificate stating that the provisions of this paragraph
(l)(iii) have been complied with in connection with such designation.
(e) Existing Section 3(l)(ix) of the Series Supplement is hereby amended
to provide in its entirety as follows:
(iv) Preservation of Existence. Subject to paragraph (l)(v) and 5.01
of the Indenture, the Company shall do or cause to be done all things
necessary to preserve and
3
<PAGE>
keep in full force and effect its existence as a corporation and will
refrain from taking any action that would cause its existence as a
corporation to cease, including without limitation any action that would
result in its liquidation, winding up or dissolution.
(f) Existing Section 3(l)(x) of the Series Supplement is hereby amended to
provide in is entirety as follows:
(v) Successor Corporation. The Company shall not consolidate with or
merge with or into any other person or convey, transfer or lease its
properties and assets substantially as an entirety to any person, unless
(A) the Company shall be the surviving corporation or, if the Company is
not the surviving corporation, such other person shall be a corporation
organized under the laws of the United States or any state thereof or the
District of Columbia and expressly assumes, by execution of an indenture
supplemental to the Indenture, all the obligations of the Company under the
Indenture and the Notes, (B) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing, (C) the Consolidated Net Worth of the obligor of the Notes
immediately after such transaction (exclusive of any adjustments to
Consolidated Net Worth relating to transaction costs and accounting
adjustments resulting from such transaction) is not less than the
Consolidated Net Worth of the Company immediately prior such transaction
and (D) the Company shall have delivered to the Trustee (I) an Officers'
Certificate stating that such consolidation, merger, conveyance, transfer
or lease, and if a supplemental indenture is required in connection with
such transaction, such supplemental indenture, comply with this paragraph
(v) and that all conditions precedent provided for relating to such
transaction have been satisfied and (II) an Opinion of Counsel stating that
such consolidation, merger, conveyance, transfer or lease, and if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with clause (A) of this paragraph (v).
(g) Existing Section 3(l)(xi) of the Series Supplement is hereby
renumbered as Section 3(l)(vi) of the Series Supplement.
(h) Each of the following provisions of existing Section 3 of the Series
Supplement is hereby renumbered as indicated below:
<TABLE>
<CAPTION>
Existing Section Number New Section Number Caption
----------------------- ------------------ -------
<C> <C> <S>
3(l) (second reference) 3(m) Additional Events of Default
3(m) 3(n) Certain Definitions
</TABLE>
(i) All references to paragraph (l)(viii) in the definition of
"Unrestricted Subsidiary" set forth in existing Section 3(m) of the Series
Supplement (amended Section 3(n)) are hereby amended to references to paragraph
(l)(iii).
(j) The definitions of "Average Life," "Consolidated Tangible Net Worth,"
Consolidated Net Income," "Homebuilding Joint Venture," "Net Income," "Net
Proceeds," and
4
<PAGE>
"Unrestricted Subsidiary Investment" set forth in existing Section 3(m) of the
Series Supplement (amended Section 3(n)) are hereby deleted in their entirety.
Section 4. Amendment to Securities and Form of Security. Pursuant to
--------------------------------------------
Section 12 of the Securities, the Securities and the form of security attached
to the Series Supplement are hereby amended as follows to conform to the above-
referenced amendments to the Indenture and the Series Supplement.
(a) The first sentence of existing Section 4 of the Securities and form of
Security is hereby amended to provide in its entirety as follows:
The Company issued the Notes under an Indenture dated as of April 1,
1992 (as amended from time to time in accordance with the terms thereof,
the "Indenture").
(b) The second sentence of existing Section 4 of the Securities and form of
Security is hereby amended to provide in its entirety as follows:
The terms of the Notes include those stated in the Indenture, those
made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code (S)(S) 77aaa-77bbbb) (the "Act") as in effect on the date of
the Indenture and as may be amended from time to time, those incorporated
by reference into the Indenture pursuant to an Officers' Certificate of the
company dated March 5, 1993 (the "Officers' Certificate") delivered
pursuant to Sections 2.01 and 2.03(a) of the Indenture, and those
amendments to the Indenture and the Officers' Certificate made by the First
Supplemental Indenture dated as of September 15, 1998 between the Company
and the Trustee.
(c) The second sentence of existing Section 6 of the Securities and form of
Security is hereby amended to provide in its entirety as follows:
The Company may reduce the principal amount of Notes to be redeemed by
subtracting 100% of the principal amount of any Notes that the Company has
delivered to the Trustee for cancellation other than pursuant to the terms
of the mandatory redemption.
(d) Section 9 of the Securities and form of Security is amended by deleting
such Section therefrom in its entirety and replacing such Section with the
following:
[Intentionally Omitted]
Section 5. Effective Date of this Supplemental Indenture. This
---------------------------------------------
Supplemental Indenture shall be effective as of the Effective Date.
Section 6. Indenture Ratified. Except as hereby otherwise expressly
------------------
provided, the Indenture is in all respects ratified and confirmed, and all the
terms, provisions and conditions thereof shall be and remain in full force and
effect.
5
<PAGE>
Section 7. Counterparts. This Supplemental Indenture may be executed in
------------
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 8. Supplemental Indenture is an Amendment to Indenture and
-------------------------------------------------------
Series Supplement. This Supplemental Indenture is an amendment to the Indenture
- -----------------
and the Series Supplement. The Indenture, the Series Supplement and this
Supplemental Indenture shall be read together from and after the Effective
Date. This Supplemental Indenture shall not be deemed to affect the rights
under the Indenture of the Holders of securities of any other series other than
the Securities.
Section 9. Governing Law. This Supplemental Indenture shall be governed
-------------
by and construed in accordance with the internal laws of the State of New York.
[Remainder of Page Intentionally Blank]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.
STANDARD PACIFIC CORP.
By: /s/ CLAY A. HALVORSEN
--------------------------
Name: Clay A. Halvorsen
Title: Vice President
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ LOUIS P. YOUNG
--------------------------
Name: Louis P. Young
Title: Vice President
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUL-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 8,013 0
<SECURITIES> 0 0
<RECEIVABLES> 35,968 0
<ALLOWANCES> 0 0
<INVENTORY> 655,404 0
<CURRENT-ASSETS> 0<F1> 0
<PP&E> 7,786 0
<DEPRECIATION> 3,990 0
<TOTAL-ASSETS> 778,490 0
<CURRENT-LIABILITIES> 0<F1> 0
<BONDS> 218,358 0
0 0
0 0
<COMMON> 298 0
<OTHER-SE> 306,340 0
<TOTAL-LIABILITY-AND-EQUITY> 778,490 0
<SALES> 194,130 444,182
<TOTAL-REVENUES> 194,130 444,182
<CGS> 158,290 361,470
<TOTAL-COSTS> 174,093 399,626
<OTHER-EXPENSES> 122 62
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 316 904
<INCOME-PRETAX> 19,649 45,315
<INCOME-TAX> 8,137 18,790
<INCOME-CONTINUING> 11,512 26,525
<DISCONTINUED> (36) (143)
<EXTRAORDINARY> (1,106) (1,328)
<CHANGES> 0 0
<NET-INCOME> 10,370 25,054
<EPS-PRIMARY> 0.35 0.84
<EPS-DILUTED> 0.34 0.83
<FN>
<F1>AMOUNTS FOR CURRENT ASSETS AND CURRENT LIABILITIES ARE NOT PRESENTED HERE AS
THE BALANCE SHEET PRESENTED IS UNCLASSIFIED.
</FN>
</TABLE>
