<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 21, 2000
STANDARD PACIFIC CORP.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-10959 33-0475989
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
15326 Alton Parkway Irvine, California 92618
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (949) 789-1600
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
We intend to file a shelf registration statement on Form S-3 registering $350
million of our debt securities, preferred stock, common stock and warrants.
The debt securities to be offered from time to time under the shelf
registration statement may be guaranteed by our direct and indirect wholly
owned subsidiaries. As a result, Rule 3-10 (f) of Regulation S-X promulgated
under the Securities Exchange Act of 1934 requires that condensed
consolidating financial information with respect to the guaranteeing and non-
guaranteeing subsidiaries be included in our financial statements. We have
added this financial information as footnote 15 to our financial statement as
set forth below. These financial statements will be incorporated by reference
in our shelf registration statement and are set forth herein for that purpose.
1
<PAGE>
Report of Independent Public Accountants
To the Stockholders and Board of Directors of Standard Pacific Corp.:
We have audited the accompanying consolidated balance sheets of STANDARD
PACIFIC CORP. (a Delaware corporation) and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Standard Pacific Corp. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/Arthur Andersen LLP
Orange County,
California
January 21, 2000
(except with respect
to the matter
discussed in Note 15,
as to which the date
is December 21, 2000)
2
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------------- ----------------------------------
2000 1999 1999 1998 1997
---------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Homebuilding:
Revenues............... $ 817,813 $ 820,748 $1,198,831 $ 759,612 $ 584,571
Cost of sales.......... 658,803 674,889 986,793 618,448 490,876
---------- ---------- ---------- ---------- ----------
Gross margin......... 159,010 145,859 212,038 141,164 93,695
---------- ---------- ---------- ---------- ----------
Selling, general and
administrative
expenses.............. 68,079 69,927 99,971 61,691 52,141
Income from
unconsolidated joint
ventures.............. 11,537 5,148 6,201 4,158 3,787
Interest expense....... 2,502 1,027 1,519 1,168 4,981
Amortization of excess
of cost over net
assets acquired....... 1,514 1,484 1,979 1,312 245
Other income
(expense)............. 157 84 (712) 168 822
---------- ---------- ---------- ---------- ----------
Homebuilding pretax
income.............. 98,609 78,653 114,058 81,319 40,937
---------- ---------- ---------- ---------- ----------
Financial Services:
Revenues............... 1,769 1,616 2,257 1,403 171
Income from
unconsolidated joint
venture............... 515 575 783 -- --
Other income........... 205 43 105 -- --
Expenses............... 2,872 2,253 3,140 1,828 62
---------- ---------- ---------- ---------- ----------
Financial services
pretax income
(loss).............. (383) (19) 5 (425) 109
---------- ---------- ---------- ---------- ----------
Income from continuing
operations before
income taxes and
extraordinary charge... 98,226 78,634 114,063 80,894 41,046
Provision for income
taxes.................. (39,126) (32,343) (46,492) (33,490) (17,070)
---------- ---------- ---------- ---------- ----------
Income from continuing
operations before
extraordinary charge... 59,100 46,291 67,571 47,404 23,976
Income (loss) from
discontinued
operations, net of
income taxes of
$0, $114, $114, $111
and $(1,034),
respectively........... -- (159) (159) (199) 48
Gain on disposal of
discontinued
operations, net of
income taxes of
$(425) in 1999 and
$(51) in 1997.......... -- 618 618 -- 3,302
Extraordinary charge
from early
extinguishment of debt,
net of income taxes of
$904 in 1998........... -- -- -- (1,328) --
---------- ---------- ---------- ---------- ----------
Net Income.............. $ 59,100 $ 46,750 $ 68,030 $ 45,877 $ 27,326
========== ========== ========== ========== ==========
Basic Net Income Per
Share:
Income per share from
continuing
operations............ $ 2.04 $ 1.56 $ 2.28 $ 1.59 $ 0.82
Income (loss) per
share from
discontinued
operations............ -- (0.01) (0.01) (0.01) 0.00
Gain per share on
disposal of
discontinued
operations............ -- 0.02 0.02 -- 0.11
Extraordinary charge
per share from early
extinguishment of
debt.................. -- -- -- (0.04) --
---------- ---------- ---------- ---------- ----------
Net Income Per Share... $ 2.04 $ 1.57 $ 2.29 $ 1.54 $ 0.93
========== ========== ========== ========== ==========
Weighted average
common shares
outstanding........... 28,978,815 29,648,808 29,597,669 29,714,431 29,504,477
========== ========== ========== ========== ==========
Diluted Net Income Per
Share:
Income per share from
continuing
operations............ $ 2.03 $ 1.55 $ 2.27 $ 1.58 $ 0.81
Income (loss) per
share from
discontinued
operations............ -- (0.01) (0.01) (0.01) 0.00
Gain per share on
disposal of
discontinued
operations............ -- 0.02 0.02 -- 0.11
Extraordinary charge
per share from early
extinguishment of
debt.................. -- -- -- (0.04) --
---------- ---------- ---------- ---------- ----------
Net Income Per Share... $ 2.03 $ 1.56 $ 2.28 $ 1.53 $ 0.92
========== ========== ========== ========== ==========
Weighted average
common and diluted
shares outstanding.... 29,145,438 29,880,122 29,795,263 30,050,078 29,807,702
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
------------- -----------------
2000 1999 1998
------------- -------- --------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Homebuilding:
Cash and equivalents......................... $ 2,324 $ 2,865 $ 13,413
Other notes and accounts receivable, net..... 24,200 10,489 25,279
Mortgage notes receivable and accrued
interest.................................... 1,350 4,530 5,061
Inventories.................................. 906,705 699,489 713,446
Investments in and advances to unconsolidated
joint ventures.............................. 98,672 49,116 38,405
Property and equipment, net.................. 4,917 2,656 3,512
Deferred income taxes........................ 13,816 12,738 10,784
Other assets................................. 15,026 13,350 8,210
Excess of cost over net assets acquired,
net......................................... 17,436 15,315 17,293
---------- -------- --------
1,084,446 810,548 835,403
---------- -------- --------
Financial Services:
Cash and equivalents......................... 558 313 1,651
Mortgage loans held for sale................. 21,482 17,554 19,341
Other assets................................. 876 1,553 1,920
---------- -------- --------
22,916 19,420 22,912
---------- -------- --------
Net assets of discontinued operations.......... -- -- 8,047
---------- -------- --------
Total Assets............................... $1,107,362 $829,968 $866,362
========== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable............................. $60,238 $ 42,344 $ 22,015
Accrued liabilities.......................... 83,623 69,437 63,777
Revolving credit facility.................... 76,800 23,000 204,900
Trust deed notes payable..................... 349 3,531 21,187
Senior notes payable......................... 423,929 298,847 218,382
---------- -------- --------
644,939 437,159 530,261
---------- -------- --------
Financial Services:
Accounts payable and other liabilities....... 350 620 596
Mortgage warehouse line of credit............ 16,659 10,304 10,826
---------- -------- --------
17,009 10,924 11,422
---------- -------- --------
Stockholders' Equity:
Preferred stock, $.01 par value; 10,000,000
shares authorized; none issued.............. -- -- --
Common stock, $.01 par value; 100,000,000
shares authorized; 29,924,053, 29,208,680
and 29,629,480 shares outstanding at
September 30, 2000, December 31, 1999 and
1998, respectively.......................... 299 292 296
Paid-in capital.............................. 290,053 278,701 283,598
Retained earnings............................ 155,062 102,892 40,785
---------- -------- --------
Total stockholders' equity................... 445,414 381,885 324,679
---------- -------- --------
Total Liabilities and Stockholders'
Equity.................................... $1,107,362 $829,968 $866,362
========== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
4
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Common
Years Ended December 31, 1997, 1998 Number of Stock Retained
and 1999 and for the Nine Months Ended Common Par Paid-In Earnings
September 30, 2000 Shares Value Capital (Deficit)
-------------------------------------- ---------- ------ -------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1996............. 29,629,981 $296 $283,331 $(23,238)
Exercise of stock options and related
income tax benefit.................... 292,100 3 2,315 --
Repurchase of common shares............ (284,800) (3) (2,121) --
Cash dividends declared ($0.14 per
share)................................ -- -- -- (4,131)
Net income............................. -- -- -- 27,326
---------- ---- -------- --------
Balance, December 31, 1997............. 29,637,281 296 283,525 (43)
Exercise of stock options and related
income tax benefit.................... 131,500 1 1,383 --
Repurchase of common shares............ (139,301) (1) (1,310) --
Cash dividends declared ($0.17 per
share)................................ -- -- -- (5,049)
Net income............................. -- -- -- 45,877
---------- ---- -------- --------
Balance, December 31, 1998............. 29,629,480 296 283,598 40,785
Exercise of stock options and related
income tax benefit.................... 33,000 1 321 --
Repurchase of common shares............ (453,800) (5) (5,218) --
Cash dividends declared ($0.20 per
share)................................ -- -- -- (5,923)
Net income............................. -- -- -- 68,030
---------- ---- -------- --------
Balance, December 31, 1999............. 29,208,680 292 278,701 102,892
---------- ---- -------- --------
Exercise of stock options and related
income tax benefit.................... 81,375 1 954 --
Issuance of common shares in connection
with acquisition...................... 1,159,398 11 15,781 --
Repurchase of common shares............ (525,400) (5) (5,383) --
Cash dividends declared ($0.24 per
share)................................ -- -- -- (6,930)
Net income............................. -- -- -- 59,100
---------- ---- -------- --------
Balance, September 30, 2000
(Unaudited)........................... 29,924,053 $299 $290,053 $155,062
========== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ -------------------------------
2000 1999 1999 1998 1997
--------- ------- --------- ---------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net income.............. $ 59,100 $46,750 $ 68,030 $ 45,877 $ 27,326
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities of
continuing operations:
Discontinued
operations........... -- 159 159 199 (48)
Gain on disposal of
discontinued
operations........... -- (618) (618) -- (3,302)
Extraordinary charge
from early
extinguishment of
debt................. -- -- -- 1,328 --
Income from
unconsolidated joint
ventures............. (11,537) (5,148) (6,201) (4,158) (3,787)
Loss on disposal of
property and
equipment............ -- -- 620 -- --
Depreciation and
amortization......... 1,110 913 1,238 918 586
Amortization of excess
of cost over net
assets acquired...... 1,514 1,484 1,979 1,312 245
Changes in cash and
equivalents due to:
Receivables and
accrued interest... (14,087) 25,199 17,108 (26,087) (1,804)
Inventories......... (130,286) (56,932) 14,059 (193,242) (615)
Deferred income
taxes.............. 285 (1,867) (1,954) 1,833 4,345
Other assets........ 1,483 2,567 (3,023) (703) 4,555
Accounts payable.... 13,778 11,812 20,329 2,883 6,796
Accrued
liabilities........ 8,012 1,914 5,468 30,624 14,287
--------- ------- --------- ---------- --------
Net cash provided by
(used in) operating
activities of
continuing operations.. (70,628) 26,233 117,194 (139,216) 48,584
--------- ------- --------- ---------- --------
Cash Flows from Investing
Activities:
Cash paid for
acquisitions........... (44,550) -- -- (59,279) (65,842)
Investments in and
advances to
unconsolidated joint
ventures............... (98,662) (29,914) (44,095) (16,651) (22,598)
Distributions and
reimbursements from
unconsolidated joint
ventures............... 47,906 28,546 39,585 8,621 1,053
Net additions to
property and
equipment.............. (2,894) (796) (1,002) (1,439) (1,264)
Sales of investment
securities............. -- -- -- -- 5,329
Proceeds from the sale
of discontinued
operations............. -- 8,798 8,798 1,087 8,379
--------- ------- --------- ---------- --------
Net cash provided by
(used in) investing
activities............. (98,200) 6,634 3,286 (67,661) (74,943)
--------- ------- --------- ---------- --------
Cash Flows from Financing
Activities:
Net proceeds from
(payments on) revolving
credit facility........ 53,800 (94,200) (181,900) 185,900 (38,300)
Net proceeds from
(payments on) mortgage
warehouse line of
credit................. 6,355 (6,436) (522) 10,826 --
Proceeds from the
issuance of senior
notes payable.......... 123,125 98,250 98,250 97,571 96,931
Principal payments on
senior notes and trust
deed notes payable..... (3,182) (37,256) (37,293) (75,148) (27,707)
Dividends paid.......... (6,932) (4,447) (5,923) (5,049) (4,131)
Repurchase of common
shares................. (5,386) (267) (5,223) (1,311) (2,124)
Proceeds from exercise
of stock options....... 752 215 245 771 1,705
--------- ------- --------- ---------- --------
Net cash provided by
(used in) financing
activities............. 168,532 (44,141) (132,366) 213,560 26,374
--------- ------- --------- ---------- --------
Net change in cash from
discontinued
operations............. -- (38,130) (38,130) (6,826) 37,088
--------- ------- --------- ---------- --------
Net increase (decrease)
in cash and
equivalents............ (296) (49,404) (50,016) (143) 37,103
Cash and equivalents at
beginning of period.... 3,178 53,194 53,194 53,337 16,234
--------- ------- --------- ---------- --------
Cash and equivalents at
end of period.......... $ 2,882 $ 3,790 $ 3,178 $ 53,194 $ 53,337
========= ======= ========= ========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
--------------- -----------------------
2000 1999 1999 1998 1997
------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Summary of Cash Balances:
Continuing operations................ $ 2,882 $ 3,790 $ 3,178 $15,064 $ 8,381
Discontinued operations.............. -- -- -- 38,130 44,956
------- ------- ------- ------- -------
$ 2,882 $ 3,790 $ 3,178 $53,194 $53,337
======= ======= ======= ======= =======
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for:
Interest--continuing operations.... $23,481 $22,087 $32,248 $24,995 $17,698
Income taxes....................... 37,780 41,629 54,699 19,890 15,500
Supplemental Disclosures of Noncash
Activities:
Land acquisitions financed by
purchase money trust deeds.......... $ -- $ -- $ -- $18,670 $19,214
Issuance of common stock in
connection with acquisition......... 15,792 -- -- -- --
Inventory received as a distribution
from an unconsolidated joint
venture............................. 12,737 -- -- -- --
Expenses capitalized in connection
with the issuance of 8 1/2% senior
notes due 2007...................... -- -- -- -- 2,377
Expenses capitalized in connection
with the issuance of 8% senior notes
due 2008............................ -- -- -- 1,750 --
Expenses capitalized in connection
with the issuance of 8 1/2% senior
notes due 2009...................... -- 1,750 1,750 -- --
Expenses capitalized in connection
with the issuance of the 9 1/2%
senior notes due 2010............... 1,875 -- -- -- --
Income tax benefit credited in
connection with shares of common
stock issued pursuant to stock
options exercised................... 202 68 77 613 613
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
7
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Company Organization and Operations
Standard Pacific Corp., a Delaware corporation, operates primarily as a
geographically diversified builder of single-family homes for use as primary
residences with operations throughout the major metropolitan markets in
California, Texas and Arizona. Unless the context otherwise requires, the
terms "we", "us" and "our" refer to Standard Pacific Corp. and its
subsidiaries.
In 1998, Family Lending Services, Inc. ("Family Lending"), our wholly-owned
mortgage banking subsidiary, began offering financing primarily to our
California homebuyers. Additionally, we offer mortgage loans to our Arizona
and Texas homebuyers through SPH Mortgage, a mortgage banking joint venture
with Wells Fargo Bank (formerly Norwest Mortgage). In 1999, through a newly-
formed subsidiary, SPH Title, Inc., we began serving as a title insurance
agent in Texas offering title examination services to our Texas homebuyers.
For the year ended December 31, 1999, approximately 64 percent, 13 percent
and 23 percent of home deliveries (including the unconsolidated joint
ventures) were from California, Texas and Arizona, respectively. There have
been periods of time in California where economic growth has slowed and the
average sales price of homes in certain areas in California in which we do
business have declined. There can be no assurance that home sales prices will
not decline in the future.
2. Summary of Significant Accounting Policies
a. Basis of Presentation
The consolidated financial statements include the accounts of Standard
Pacific Corp. and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Investments in unconsolidated
joint ventures in which we have less than a controlling interest are accounted
for using the equity method.
b. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
c. Segment Reporting
Effective December 31, 1998, we adopted Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and Related
Information" (FAS 131). Under the provisions of FAS 131, our operating
segments consist of homebuilding and mortgage banking. These two segments are
segregated in the accompanying consolidated financial statements under
"Homebuilding" and "Financial Services," respectively.
d. Cash and Equivalents
For purposes of the consolidated statements of cash flows, cash and
equivalents include cash on hand, demand deposits, and all highly liquid
short-term investments, including interest bearing securities purchased with a
remaining maturity of three months or less.
8
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
e. Mortgage Loans Held for Sale
Mortgage loans held for sale are reported at the lower of cost or market on
an aggregate basis. We estimate the market value of our loans held for sale
based on quoted market prices for similar loans. Loan origination fees, net of
the related direct origination costs, and loan discount points are deferred as
an adjustment to the carrying value of the related mortgage loans held for
sale and are recognized into income upon the sale of mortgage loans.
f. Real Estate Inventories
We capitalize direct carrying costs, including interest, property taxes and
related development costs to real estate under development. Field construction
supervision and related direct overhead are also included in the capitalized
cost of real estate inventories. General and administrative costs are expensed
as incurred.
We assess the recoverability of real estate inventories in accordance with
the provisions of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of"
(FAS 121). FAS 121 requires long-lived assets, including real estate
inventories, that are expected to be held and used in operations to be carried
at the lower of cost or, if impaired, the fair value of the asset, rather than
its net realizable value. Long-lived assets to be disposed of should be
reported at the lower of carrying amount or fair value less cost to sell.
g. Capitalization of Interest
We follow the practice of capitalizing interest to real estate inventories
during the period of development in accordance with Financial Accounting
Standards No. 34, "Capitalization of Interest Cost." Interest capitalized as a
cost of real estate under development is included in cost of sales as related
units are sold. The following is a summary of interest capitalized and
expensed from continuing operations for the following periods:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- -----------------------
2000 1999 1999 1998 1997
-------- -------- ------- ------- -------
(Unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total interest incurred during the
year................................ $ 27,640 $ 26,490 $35,151 $29,010 $17,026
Less: Interest capitalized as a cost
of real estate under development.... 25,138 25,463 33,632 27,842 12,045
-------- -------- ------- ------- -------
Interest expense..................... $ 2,502 $ 1,027 $ 1,519 $ 1,168 $ 4,981
======== ======== ======= ======= =======
Interest previously capitalized as a
cost of real estate under
development, included in cost of
sales............................... $ 19,480 $ 19,133 $27,401 $26,399 $23,475
======== ======== ======= ======= =======
Capitalized interest in ending
inventories......................... $ 27,044 $ 21,485 $21,386 $15,155 $13,712
======== ======== ======= ======= =======
</TABLE>
h. Property and Equipment
Property and equipment is recorded at cost, net of accumulated depreciation
and amortization of $5,477,000 and $4,204,000 as of December 31, 1999 and
1998, respectively. Depreciation and amortization is recorded using the
straight-line method over the estimated useful lives of the assets which
typically ranges between 3 and 10 years.
9
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
i. Income Taxes
We account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This statement
requires a liability approach for measuring deferred taxes based on temporary
differences between the financial statement and tax bases of assets and
liabilities existing at each balance sheet date using enacted tax rates for
years in which taxes are expected to be paid or recovered.
j. Excess of Cost Over Net Assets Acquired
The excess amount paid for business acquisitions over the net fair value of
assets acquired and liabilities assumed has been capitalized in the
accompanying consolidated balance sheets and is being amortized on a straight-
line basis over periods ranging from 7 to 12 years. Accumulated amortization
was $3,535,000 and $1,557,000 as of December 31, 1999 and 1998, respectively.
(See Note 4)
k. Revenue Recognition
Revenues of residential housing are recorded after construction is
completed, required down payments are received and title passes.
We recognize loan origination fees and expenses, and gains and losses on
loans when the related mortgage loans are sold. Our current policy is to sell
all mortgage loans originated. Mortgage loan interest is accrued only so long
as it is deemed collectible.
l. Warranty Costs
Estimated future warranty costs are charged to cost of sales in the period
when the revenues from home closings are recognized.
m. Net Income Per Share
We compute net income per share in accordance with 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 set forth below reconciles the
components of the basic net income per share calculation to diluted net income
per share.
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
-------------------------------------------------------
2000 1999
------------------------------ ------------------------
Income Shares EPS Income Shares EPS
------- ---------- ----------- ------- ---------- -----
(Unaudited)
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic Net Income Per
Share:
Income available to
common stockholders
from continuing
operations............ $59,100 28,978,815 $2.04 $46,291 29,648,808 $1.56
Effect of dilutive stock
options................ -- 166,623 -- 231,314
------- ---------- ------- ----------
Diluted net income per
share from continuing
operations............. $59,100 29,145,438 $2.03 $46,291 29,880,122 $1.55
======= ========== ===== ======= ========== =====
</TABLE>
10
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1999 1998 1997
------------------------ ------------------------ ------------------------
Income Shares EPS Income Shares EPS Income Shares EPS
------- ---------- ----- ------- ---------- ----- ------- ---------- -----
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Net Income Per
Share:
Income available to
common stockholders
from continuing
operations before
extraordinary charge.. $67,571 29,597,669 $2.28 $47,404 29,714,431 $1.59 $23,976 29,504,477 $0.82
Effect of dilutive stock
options................ -- 197,594 -- 335,647 -- 303,225
------- ---------- ------- ---------- ------- ----------
Diluted income per share
from
continuing operations
before extraordinary
charge................. $67,571 29,795,263 $2.27 $47,404 30,050,078 $1.58 $23,976 29,807,702 $0.81
======= ========== ===== ======= ========== ===== ======= ========== =====
</TABLE>
n. Comprehensive Income
We adopted Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (FAS 130), during 1998. FAS 130 requires that an
enterprise (a) classify items of other comprehensive income by their nature in
a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of its balance sheet. We had no items of other
comprehensive income in any period presented in the accompanying consolidated
financial statements.
o. Recent Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). Under the provisions of FAS 133, we will be
required to recognize all derivatives as either assets or liabilities in the
consolidated balance sheets and measure these instruments at fair value. We
are required to adopt FAS 133 effective January 1, 2001. We have not yet
quantified the impact of adopting FAS 133.
p. Reclassifications
Certain items in prior period financial statements have been reclassified
to conform with current year presentation.
11
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Investments in Unconsolidated Joint Ventures
Summarized financial information related to our joint ventures accounted
for under the equity method are as follows:
<TABLE>
<CAPTION>
At December 31,
-----------------
1999 1998
-------- --------
(Dollars in
thousands)
<S> <C> <C>
Assets:
Cash................................................... $ 7,478 $ 8,450
Trust deed notes receivable............................ -- 37,856
Real estate in process of development and completed
model homes........................................... 278,068 175,830
Other assets........................................... 22,950 596
-------- --------
$308,496 $222,732
======== ========
Liabilities and Equity:
Accounts payable and accrued expenses.................. $ 39,704 $ 33,007
Construction loans and trust deed notes payable........ 144,370 78,747
General obligation assessment bonds.................... 44,928 31,539
Equity................................................. 79,494 79,439
-------- --------
$308,496 $222,732
======== ========
</TABLE>
Our share of equity shown above was approximately $36.1 million and $36.9
million at December 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998 1997
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Revenues............................................ $43,642 $54,219 $24,427
Cost of revenues.................................... 33,101 41,588 17,591
------- ------- -------
Net earnings of joint ventures...................... $10,541 $12,631 $ 6,836
======= ======= =======
</TABLE>
Our share of earnings in the joint ventures detailed above varies, but in
no case is our share of earnings greater than 50 percent.
In addition, there are some joint ventures to which we are a party whose
sole purpose is to develop finished lots for sale to the joint venture's
partners. We and our partners then purchase the lots from the joint venture to
construct homes thereon. We do not anticipate recording any income or loss
from these joint ventures as the related lots will be sold to us and other
partners at cost.
4. Acquisitions
On August 31, 1998, we acquired a portion of the assets of Shea Homes'
Phoenix, Arizona single-family homebuilding operation (which had recently been
acquired from UDC Homes, Inc.) for approximately $59 million in cash. The
acquisition was financed under our unsecured revolving credit facility. At
closing, we 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, and acquired a backlog of
400 presold homes. In addition, we retained UDC's Arizona senior management
team and many of the existing staff.
12
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On September 30, 1997, we acquired all of the outstanding common stock of
Duc Development Company ("Duc"), a privately held Northern California
homebuilding company, for approximately $16 million. In connection with this
acquisition, we acquired certain other real estate assets related to Duc's
operations for approximately $55 million in cash and the assumption of
approximately $8 million of debt.
Both acquisitions have been accounted for using the purchase method of
accounting, 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. The excess of the purchase price over the estimated fair value
of net assets acquired totaled approximately $12 million and $6.85 million for
the Arizona and Northern California acquisitions, respectively. The excess
purchase price has been recorded as excess of cost over net assets acquired in
the accompanying consolidated balance sheets and is being amortized on a
straight-line basis over periods ranging from 7 to 12 years.
5. Revolving Credit Facility and Trust Deed Notes Payable
a. Revolving Credit Facility
In August 1999, we amended our unsecured revolving credit facility (the
"Facility") with our bank group to, among other things, increase the
commitment to $450 million, extend the maturity date to July 31, 2003 and
revise certain financial and other covenants. The Facility contains covenants
which require, among other things, the maintenance of certain amounts of
tangible stockholders' equity, limitations on leverage, and minimum interest
coverage, as defined. The Facility also contains a borrowing base provision
which may limit the amount we may borrow under the credit facility. At
December 31, 1999, we had borrowings of $23 million outstanding under this
Facility. Additionally, we had approximately $12 million in letters of credit
outstanding at December 31, 1999. Interest rates charged under this Facility
include LIBOR and prime rate pricing options. In addition, there are fees
charged on the commitment and unused portion of the Facility, as defined.
As of December 31, 1999, and throughout the year, we were in compliance
with the covenants of the Facility.
b. Trust Deed Notes Payable
At December 31, 1999 and 1998, trust deed notes payable primarily consisted
of trust deeds on land purchases. At December 31, 1999, the weighted average
interest rate on these trust deeds was approximately 6.2 percent.
c. Borrowings and Maturities
The following summarizes the borrowings outstanding under the unsecured
revolving credit facility (excluding senior notes--see Note 6) and trust deed
notes payable during the three years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Maximum borrowings outstanding during the year
at month end................................. $237,022 $244,808 $98,295
Average outstanding balance during the year... $131,850 $ 97,349 $45,395
Weighted average interest rate for the year... 6.5% 6.9% 7.3%
Weighted average interest rate on borrowings
outstanding at year end...................... 7.2% 7.0% 7.9%
</TABLE>
13
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Maturities of the revolving credit facility, trust deed notes payable and
senior notes payable (see Note 6 below) are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
(Dollars in
thousands)
<S> <C>
2000............................................................ $ 3,531
2001............................................................ --
2002............................................................ --
2003............................................................ 23,000
2004............................................................ --
Thereafter...................................................... 298,847
--------
$325,378
========
</TABLE>
6. Senior Notes Payable
Senior notes payable consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
------------- -----------------
2000 1999 1998
------------- -------- --------
(Unaudited)
(Dollars in thousands)
<S> <C> <C> <C>
10 1/2% Senior Notes due 2000............... $ -- $ -- $ 19,637
8 1/2% Senior Notes due 2007, net........... 99,474 99,432 99,379
8% Senior Notes due 2008, net............... 99,455 99,415 99,366
8 1/2% Senior Notes due 2009................ 100,000 100,000 --
9 1/2% Senior Notes due 2010................ 125,000 -- --
-------- -------- --------
$423,929 $298,847 $218,382
======== ======== ========
</TABLE>
In 1993, we issued $100 million principal amount of 10 1/2% Senior Notes
due March 1, 2000 (the "10 1/2% Senior Notes"). Under the original terms of
the 10 1/2% Senior Notes, we did not have the option to redeem these notes
prior to their scheduled maturities. However, we were required to make annual
mandatory sinking fund payments sufficient to retire 20 percent of the
original aggregate principal amount of these notes ($20 million per year)
commencing on March 1, 1997, at a redemption price of 100 percent of the
principal amount, with the balance of the notes to be retired on March 1,
2000. We made two $20 million sinking fund payments on the 10 1/2% Senior
Notes in March 1997 and 1998. In May 1998, we repurchased and retired
approximately $7.7 million of our 10 1/2% Senior Notes due 2000 through a
series of open market purchases. In addition, on September 30, 1998, we
completed a tender offer and consent solicitation for a portion of our 10 1/2%
Senior Notes due 2000. In connection with this tender offer, we repurchased
and retired approximately $31.5 million of our 10 1/2% Senior Notes. With the
successful completion of the consent solicitation, certain restrictive
financial covenants were modified or eliminated under the indenture. In
aggregate, we incurred an after tax extraordinary charge for the early
extinguishment of debt, including transaction costs, of approximately $1.3
million for the year ended December 31, 1998. On March 1, 1999, we repaid the
balance of the 10 1/2% Senior Notes outstanding ($19.6 million) under the
annual sinking fund payment provision of the indenture.
In June 1997, we issued $100 million of 8 1/2% Senior Notes due June 15,
2007 (the "8 1/2% Senior Notes"). The 8 1/2% Senior Notes were issued at a
discount to yield approximately 8.6 percent and have been reflected net of the
unamortized discount in the accompanying consolidated balance sheets. Interest
is due and payable on June 15 and December 15 of each year until maturity.
These notes are redeemable at our option, in whole or in part, commencing June
15, 2002 at a price of 104.25 percent of par value, with the call price
reducing ratably to par on June 15, 2005. Net proceeds after offering expenses
were approximately $96.9 million.
14
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In February 1998, we 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. Interest is due and payable on
February 15 and August 15 of each year until maturity. These notes are
redeemable at our option, in whole or in part, commencing February 15, 2003 at
104.00 percent of par, with the call price reducing ratably to par on February
15, 2006. Net proceeds after offering expenses were approximately $97.3
million.
In April 1999, we issued $100 million of 8 1/2% Senior Notes which mature
April 1, 2009 (the "8 1/2% Senior Notes due 2009"). The 8 1/2% Senior Notes
due 2009 were issued at par with interest due and payable on April 1 and
October 1 of each year until maturity. The 8 1/2% Senior Notes due 2009 are
redeemable at our option, in whole or in part, commencing April 1, 2004 at
104.25 percent of par, with the call price reducing ratably to par on April 1,
2007. Net proceeds after underwriting expenses were approximately $98.3
million and were used to repay a portion of the balance outstanding under our
revolving credit facility.
Both 8 1/2% Senior Note issuances and the 8% Senior Notes (the "Notes") are
senior unsecured obligations and rank equally with our other existing senior
unsecured indebtedness. We will, under certain circumstances, be obligated to
make an offer to purchase a portion of the Notes in the event of our failure
to maintain a minimum consolidated net worth (other than with respect to the 8
1/2% Senior Notes due 2009) and in the event of certain asset sales. In
addition, the Notes contain other restrictive covenants which, among other
things, impose certain limitations on our ability to (1) incur additional
indebtedness, (2) create liens, (3) make restricted payments, and (4) sell
assets. In addition, upon a change in control we are required to make an offer
to purchase these Notes. As of December 31, 1999, we were in compliance with
the covenants under the Notes.
7. Mortgage Warehouse Line of Credit
Our financial services subsidiary maintains a revolving mortgage warehouse
credit facility (the "Mortgage Warehouse Facility") with a bank to finance its
mortgage loans held for sale. In May 1999, the commitment under this facility
was increased from $15 million to $40 million. Borrowings under the Mortgage
Warehouse Facility, which are LIBOR based and have a maturity date of May 31,
2000, are secured by the related mortgage loans held for sale. Maximum
borrowings outstanding under this facility during 1999 and 1998 were
$10,304,000 and $10,826,000, respectively. Average borrowings outstanding
during the years ended December 31, 1999 and 1998 were $4,299,000 and
$1,870,000, respectively. The weighted average interest rate of the Mortgage
Warehouse Facility during the years ended December 31, 1999 and 1998 was 6.2
percent. In addition, the Mortgage Warehouse Facility requires our financial
services subsidiary to comply with certain financial covenants, including, but
not limited to, a minimum net worth requirement, a total liabilities to
tangible net worth ratio and a minimum cash flow requirement. Family Lending
was in compliance with the net worth covenant and the leverage covenant of the
Mortgage Warehouse Facility as of and throughout the year ended December 31,
1999. Family Lending received a waiver from the bank for the minimum cash flow
requirement through its current maturity date.
8. Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate:
Cash and Equivalents--The carrying amount is a reasonable estimate of
fair value. These assets primarily consist of short term investments and
demand deposits.
Mortgage Notes Receivable--Mortgage notes receivable consist of first
and second mortgages on single-family residences and trust deed notes
receivable originated from land sales. Fair values are determined based
upon discounted cash flows of the applicable instruments.
15
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Mortgage Loans Held for Sale--These consist primarily of first mortgages
on single-family residences. Fair value of these loans is based on quoted
market prices for similar loans.
Revolving Credit Facility and Mortgage Warehouse Line of Credit--The
carrying amounts of these credit obligations approximate market value
because of the frequency of repricing the borrowings (generally every 7 to
90 days).
Trust Deed Notes Payable--These notes are primarily for purchase money
deeds of trust on land acquired. As of December 31, 1999, these notes have
remaining maturity dates of less than one year. The rates of interest paid
on these notes approximate the current rates available for secured real
estate financing with similar terms and maturities, therefore, carrying
amounts approximate fair value.
10 1/2% Senior Notes due 2000--This issue was publicly traded on the New
York Stock Exchange. Consequently, the fair value of this issue was based
on its quoted market price at year end.
8 1/2% Senior Notes due 2007--This issue is publicly traded on the New
York Stock Exchange. As a result, the fair value of this issue was based on
its quoted market price at year end.
8% Senior Notes due 2008--This issue is publicly traded over the counter
and its fair value was based upon the value of its last trade at year end.
8 1/2% Senior Notes due 2009--This issue is also publicly traded over
the counter and its fair value was based upon the value of its last trade
at year end.
The estimated fair values of financial instruments from continuing
operations are as follows:
<TABLE>
<CAPTION>
At December 31,
----------------------------------
1999 1998
---------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Homebuilding:
Cash and equivalents................. $ 2,865 $ 2,865 $ 13,413 $ 13,413
Mortgage notes receivable............ 4,530 3,969 5,061 4,827
Financial services:
Cash and equivalents................. 313 313 1,651 1,651
Mortgage loans held for sale......... 17,554 18,192 19,341 20,314
Financial liabilities:
Homebuilding:
Revolving credit facility............ $ 23,000 $23,000 $204,900 $204,900
Trust deed notes payable............. 3,531 3,531 21,187 21,187
10 1/2% Senior Notes due 2000........ -- -- 19,637 20,054
8 1/2% Senior Notes due 2007......... 99,432 92,500 99,379 100,375
8% Senior Notes due 2008............. 99,415 90,250 99,366 97,890
8 1/2% Senior Notes due 2009......... 100,000 92,750 -- --
Financial services:
Mortgage warehouse line of credit.... 10,304 10,304 10,826 10,826
</TABLE>
16
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Commitments and Contingencies
We lease office facilities under noncancelable operating leases. Future
minimum rental payments on operating leases, net of related subleases, having
an initial term in excess of one year as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
(Dollars in thousands)
<S> <C>
2000................................................ $ 2,251
2001................................................ 2,257
2002................................................ 1,676
2003................................................ 1,433
2004................................................ 1,299
Thereafter.......................................... 4,646
-------
Subtotal.......................................... 13,562
Less--Sublease income............................... (833)
-------
Net rental obligations............................ $12,729
=======
</TABLE>
Rent expense from continuing operations under noncancelable operating
leases, net of sublease income, for the three years ended December 31, 1999
was approximately $1,065,000, $838,000 and $397,000, respectively.
We are subject to the usual obligations associated with entering into
contracts for the purchase of land and improved homesites. Land purchase and
option contracts for the purchase of land typically allow us the ability to
acquire portions of properties when we are ready to build homes thereon.
Purchase of properties under these contracts is generally contingent upon
satisfaction of certain requirements by us and the sellers.
Mortgage loans in process for which interest rates were committed to
borrowers totaled approximately $1.3 million at December 31, 1999 and carried
a weighted average interest rate of approximately 7.6 percent. Interest rate
risks related to these obligations are generally mitigated by Family Lending
preselling the loans to its investors.
We are party to claims and litigation proceedings arising in the normal
course of business. Although the legal responsibility and financial impact
with respect to certain claims and litigation cannot presently be ascertained,
we do not believe that these matters will result in us making a payment of
monetary damages that, in the aggregate, would have a material impact on our
financial position, results of operations or liquidity. It is possible that
the reserves provided for by us with respect to such claims and litigation
could change in the near term.
10. Income Taxes
The provision for income taxes for continuing operations includes the
following components:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1999 1998 1997
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Current:
Federal......................................... $40,891 $24,940 $12,909
State........................................... 9,136 4,160 3,471
------- ------- -------
50,027 29,100 16,380
------- ------- -------
Deferred:
Federal......................................... (3,272) 3,931 535
State........................................... (263) 459 155
------- ------- -------
(3,535) 4,390 690
------- ------- -------
Provision for income taxes for continuing
operations and before extraordinary charge....... $46,492 $33,490 $17,070
======= ======= =======
</TABLE>
17
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The components of our deferred income tax asset (liability) from continuing
operations is as follows:
<TABLE>
<CAPTION>
At December 31,
------------------------
1999 1998
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Inventory adjustments............................ $ 1,391 $ 2,663
Financial accruals............................... 10,756 8,628
State income taxes............................... 2,855 2,115
Nondeductible purchase price..................... (2,568) (2,747)
Amortization of excess of cost over net assets
acquired........................................ 165 27
Other............................................ 139 98
----------- -----------
$12,738 $ 10,784
=========== ===========
</TABLE>
At December 31, 1999, we had a consolidated net deferred tax asset of
approximately $12.7 million. A significant portion of this asset's realization
is dependent upon our ability to generate sufficient taxable income in future
years. Although realization is not assured, management believes it is more
likely than not that the net deferred tax asset will be realized. The amount
of the deferred tax asset considered realizable, however, could be reduced in
the near term if estimates of future taxable income are reduced or if tax
rates are lowered.
The effective tax rate differs from the Federal statutory rate of 35
percent due to the following items:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 1997
-------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Financial income from continuing operations before
income taxes and extraordinary charge............ $114,063 $80,894 $41,046
======== ======= =======
Provision for income taxes at statutory rate...... $ 39,922 $28,313 $14,366
Increases (decreases) in tax resulting from:
State income taxes.............................. 5,976 4,648 2,481
Nondeductible amortization of excess of cost
over net assets acquired....................... 394 399 100
Other........................................... 200 130 123
-------- ------- -------
Provision for income taxes for continuing
operations and before extraordinary charge....... $ 46,492 $33,490 $17,070
======== ======= =======
Effective tax rate for continuing operations...... 40.8% 41.4% 41.6%
======== ======= =======
</TABLE>
11. Stock Option Plan
In 1991, we adopted the 1991 Employee Stock Incentive Plan (the "Plan")
pursuant to which officers, directors and employees are eligible to receive
options to purchase shares of common stock. Under the Plan the maximum number
of shares of stock that may be issued is one million. On May 13, 1997, our
shareholders approved the 1997 Stock Incentive Plan (the "1997 Plan"). Under
the 1997 Plan, the maximum number of shares of stock that may be issued is two
million.
Options are typically granted to purchase shares at prices equal to the
fair market value of the shares at the date of grant. The options typically
vest over a one to four year period and are generally exercisable for a 10
year period. When the options are exercised, the proceeds are credited to
equity along with the related income tax benefits, if any.
18
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is a summary of the transactions relating to the two
respective Plans for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year...... 2,188,990 $11.55 958,990 $ 7.99 928,590 $6.30
Granted................. 358,000 11.46 1,382,500 13.50 343,000 10.70
Exercised............... (33,000) 7.42 (131,500) 5.86 (292,100) 5.81
Canceled................ (87,000) 13.29 (21,000) 12.57 (20,500) 7.83
--------- ------ --------- ------ --------- -----
Options outstanding, end
of year................ 2,426,990 $11.53 2,188,990 $11.55 958,990 $7.99
========= ====== ========= ====== ========= =====
Options exercisable at
end of year............ 770,991 450,490 360,990
========= ========= =========
Options available for
future grant........... 53,275 323,775 1,685,275
========= ========= =========
</TABLE>
The following information is provided pursuant to the requirements of
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-
Based Compensation" (FAS 123).
The fair value of each option granted during the three years in the period
ended December 31, 1999 is estimated using the Black--Scholes option-pricing
model on the date of grant using the following weighted average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Dividend yield.................................... 1.75% 1.52% 1.31%
Expected volatility............................... 44.65% 40.99% 43.80%
Risk-free interest rate........................... 5.95% 5.18% 6.17%
Expected life..................................... 5 years 5 years 5 years
</TABLE>
The 2,426,990 options outstanding as of December 31, 1999 have exercise
prices between $5.38 and $17.63, with a weighted average exercise price of
$11.53 and a weighted average remaining contractual life of 8.02 years. As of
December 31, 1999, 770,991 of these options are exercisable with a weighted
average exercise price of $10.57. The weighted average fair value of options
granted during the years ended December 31, 1999, 1998 and 1997 was $4.68,
$5.35 and $6.55, respectively.
During the years ended December 31, 1999, 1998 and 1997, no compensation
expense was recognized related to the stock options granted, however, had
compensation expense been determined consistent with FAS 123 for 1999, 1998
and 1997 grants under the stock-based compensation plan, net income and
diluted net income per share for the years ended December 31, 1999, 1998 and
1997 would approximate the pro forma amounts below:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-------- ------- -------- ------- -------- -------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income.............. $68,030 $65,614 $45,877 $44,210 $27,326 $27,100
Diluted net income per
common share........... $ 2.28 $ 2.20 $ 1.53 $ 1.47 $ 0.92 $ 0.91
</TABLE>
The effects of applying FAS 123 in this pro forma disclosure are not
indicative of future amounts.
19
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Stockholder Rights Plan and Common Stock Repurchase Plan
Standard Pacific has a stockholder rights agreement (the "Agreement") in
place. Under the Agreement, one right is granted for each share of outstanding
common stock. Each right entitles the holder, in certain takeover situations,
as defined, and after paying the exercise price (currently $40), to purchase
common stock having a market value equal to two times the exercise price.
Also, if we merge into another corporation, or if 50 percent or more of our
assets are sold, the rightholders may be entitled, upon payment of the
exercise price, to buy common shares of the acquiring corporation at a 50
percent discount from the then current market value. In either situation,
these rights are not available to the acquiring party. However, these exercise
features will not be activated if the acquiring party makes an offer to
acquire all of our outstanding shares at a price which is judged by the Board
of Directors to be fair to all of our stockholders. The rights may be redeemed
by Standard Pacific's Board of Directors under certain circumstances at the
rate of $.01 per right. The rights will expire on December 31, 2001, unless
earlier redeemed or exchanged.
In July 1995, the Board of Directors authorized the repurchase of up to $10
million of our common stock. In January 1997, the Board increased the
repurchase limit to $20 million, which was subsequently increased to $25
million in October 1999. For the year ended December 31, 1999, Standard
Pacific repurchased 453,800 shares of common stock for an aggregate price of
approximately $5.2 million. Since the inception of the stock repurchase
program and through the year ended December 31, 1999, Standard Pacific has
repurchased approximately 1.9 million shares of common stock for approximately
$14.9 million, leaving a balance of approximately $10.1 million available for
future repurchases.
13. Discontinued Operations
In May 1997, the Board of Directors adopted a plan of disposition (the
"Plan") for our savings and loan subsidiary ("Savings"). Pursuant to the Plan,
we 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 were sold
along with Savings' remaining assets. The gain generated from the sale of this
mortgage loan portfolio, net of related expenses, was not material. In August
1998, we entered into a definitive agreement to sell the remainder of Savings'
business, including Savings' charter, which closed in May 1999. An after tax
net gain of $618,000, or $0.02 per diluted share, has been reflected in the
accompanying consolidated statements of income. Proceeds from the sale of
Savings were approximately $8.8 million before transaction and other related
costs. 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 financial statements.
Interest income from Savings aggregated $1,256,000, $3,451,000 and
$12,395,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
In December 1997, we sold all of the outstanding stock of Panel Concepts,
Inc. ("Panel") to a third party. A net gain of approximately $3.3 million, or
$.11 per diluted share, has been reflected in the accompanying consolidated
statements of income. Proceeds from the sale of Panel were approximately $9.5
million before transaction and other related costs. In addition, certain non-
operating assets of Panel totaling approximately $9 million were distributed
to us prior to the closing. Panel has also been accounted for as a
discontinued operation and, accordingly, the results of its operations have
been segregated in the accompanying consolidated statements of income. In
addition, since the sale of Panel was completed before the end of 1997, there
are no assets or liabilities included in the accompanying consolidated balance
sheets.
Product sales from Panel totaled $19,689,000 for the year ended December
31, 1997.
20
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The components of net assets of discontinued operations, all of which
relates to Savings, included in the consolidated balance sheet at December 31,
1998 are as follows:
<TABLE>
<CAPTION>
At December 31,
1998
---------------
(Dollars in
thousands)
<S> <C>
Assets:
Cash and equivalents........................................... $38,130
Investment securities available for sale....................... 15,649
Accrued interest receivable.................................... 244
Property and equipment, net.................................... 62
Deferred income taxes.......................................... 274
Investment in FHLB stock....................................... 8,971
Other assets................................................... 73
-------
Total assets--discontinued operation........................... $63,403
-------
Liabilities:
Savings accounts............................................... $53,878
Accounts payable and accrued expenses.......................... 1,478
-------
Total liabilities--discontinued operation...................... 55,356
-------
Net assets of discontinued operation........................... $ 8,047
=======
</TABLE>
21
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. Results of Quarterly Operations (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total(1)
-------- -------- -------- -------- ----------
(Dollars in thousands, except per share
amounts)
<S> <C> <C> <C> <C> <C>
1999:
Revenues................. $214,480 $309,179 $297,089 $378,083 $1,198,831
Income from continuing
operations before income
taxes and extraordinary
charge.................. 23,579 27,577 27,479 35,428 114,063
Income (loss) from
discontinued operation,
net of income taxes..... (77) (83) -- -- (159)
Gain on disposal of
discontinued operation,
net of income taxes..... -- 618 -- -- 618
Net income............... 13,794 16,775 16,181 21,280 68,030
Diluted Net Income Per
Share:
Income per share from
continuing operations.. $ 0.46 $ 0.54 $ 0.54 $ 0.72 $ 2.27
Income (loss) per share
from discontinued
operation.............. (0.00) (0.00) -- -- (0.01)
Gain on disposal of
discontinued
operation.............. -- 0.02 -- -- 0.02
-------- -------- -------- -------- ----------
Net income per share.... $ 0.46 $ 0.56 $ 0.54 $ 0.72 $ 2.28
======== ======== ======== ======== ==========
1998:
Revenues................. $ 96,911 $153,141 $194,130 $315,431 $ 759,612
Income from continuing
operations before income
taxes and extraordinary
charge.................. 8,325 17,340 19,649 35,579 80,894
Income (loss) from
discontinued operation,
net of income taxes..... (65) (42) (36) (56) (199)
Extraordinary charge from
early extinguishment of
debt, net of income
taxes................... -- (222) (1,106) -- (1,328)
Net income............... 4,768 9,915 10,370 20,823 45,877
Diluted Net Income Per
Share:
Income per share from
continuing operations.. $ 0.16 $ 0.34 $ 0.38 $ 0.70 $ 1.58
Income (loss) per share
from discontinued
operation.............. (0.00) (0.00) (0.00) (0.00) (0.01)
Extraordinary charge
from early
extinguishment of
debt................... -- (0.01) (0.04) -- (0.04)
-------- -------- -------- -------- ----------
Net income per share.... $ 0.16 $ 0.33 $ 0.34 $ 0.70 $ 1.53
======== ======== ======== ======== ==========
</TABLE>
--------
(1) Some amounts do not add across due to rounding differences in quarterly
amounts.
22
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. Supplemental Guarantor Information
The condensed consolidating financial information set forth below is being
provided in the event that we elect to issue publicly-traded indebtedness
guaranteed by our wholly owned subsidiaries. As used below, the term
"Potential Guarantor Subsidiaries" means all of our existing wholly owned
subsidiaries. The term "Non-Guarantor Subsidiaries" means our former savings
and loan subsidiary for each of the three years in the period ended December
31, 1999 and for the nine month period ended September 30, 1999, and our
former office furniture subsidiary during the year ended December 31, 1997.
Investments in subsidiaries are presented using the equity method of
accounting.
Condensed Consolidating Balance Sheet
September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Homebuilding:
Cash and equivalents... $ 2,307 $ 17 $ -- $ -- $ 2,324
Other notes and
accounts receivable,
net................... 7,817 16,383 -- -- 24,200
Mortgage notes
receivable and
accrued interest...... 1,256 94 -- -- 1,350
Investments in and
advances to (from)
subsidiaries.......... 323,343 (139,412) (183,931) --
Inventories............ 626,845 279,860 -- -- 906,705
Investments in and
advances to
unconsolidated joint
ventures.............. 65,798 32,874 -- -- 98,672
Property and
equipment, net........ 3,865 1,052 -- -- 4,917
Deferred income
taxes................. 13,507 -- -- 309 13,816
Other assets........... 12,448 2,578 -- -- 15,026
Excess of cost over
net assets acquired,
net................... 3,914 13,522 -- -- 17,436
---------- -------- ----- --------- ----------
1,061,100 206,968 -- (183,622) 1,084,446
---------- -------- ----- --------- ----------
Financial Services:
Cash and equivalents... -- 558 -- -- 558
Mortgage loans held
for sale.............. -- 21,482 -- -- 21,482
Advances to (from)
Parent................ -- 4,592 -- (4,592) --
Other assets........... -- 876 -- -- 876
---------- -------- ----- --------- ----------
-- 27,508 -- (4,592) 22,916
---------- -------- ----- --------- ----------
Total Assets......... $1,061,100 $234,476 $ -- $(188,214) $1,107,362
========== ======== ===== ========= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable....... $ 42,620 $ 17,618 $ -- $ -- $ 60,238
Accrued liabilities.... 72,337 12,269 -- (983) 83,623
Revolving credit
facility.............. 76,800 -- -- -- 76,800
Trust deed notes
payable............... -- 349 -- -- 349
Senior notes payable... 423,929 -- -- -- 423,929
---------- -------- ----- --------- ----------
615,686 30,236 -- (983) 644,939
---------- -------- ----- --------- ----------
Financial Services:
Accounts payable and
accrued liabilities... -- 350 -- -- 350
Mortgage warehouse
line of credit........ -- 16,659 -- -- 16,659
---------- -------- ----- --------- ----------
-- 17,009 -- -- 17,009
---------- -------- ----- --------- ----------
Total Stockholders'
Equity 445,414 187,231 -- (187,231) 445,414
---------- -------- ----- --------- ----------
Total Liabilities and
Stockholders'
Equity................ $1,061,100 $234,476 $ -- $(188,214) $1,107,362
========== ======== ===== ========= ==========
</TABLE>
23
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Homebuilding:
Cash and equivalents.. $ 2,856 $ 9 $ -- $ -- $ 2,865
Other notes and
accounts receivable,
net.................. 5,086 5,403 -- -- 10,489
Mortgage notes
receivable and
accrued interest..... 4,407 123 -- -- 4,530
Investments in and
advances to (from)
subsidiaries......... 195,504 (77,861) -- (117,643) --
Inventories........... 533,615 165,874 -- -- 699,489
Investments in and
advances to
unconsolidated joint
ventures............. 30,234 18,882 -- -- 49,116
Property and
equipment, net....... 1,896 760 -- -- 2,656
Deferred income
taxes................ 12,438 -- -- 300 12,738
Other assets.......... 12,341 1,009 -- -- 13,350
Excess of cost over
net assets acquired,
net.................. 4,648 10,667 -- -- 15,315
-------- -------- ----- --------- --------
803,025 124,866 -- (117,343) 810,548
-------- -------- ----- --------- --------
Financial Services:
Cash and equivalents.. -- 313 -- -- 313
Mortgage loans held
for sale............. -- 17,554 -- -- 17,554
Advances to (from)
Parent............... -- 2,561 -- (2,561) --
Other assets.......... -- 1,553 -- -- 1,553
-------- -------- ----- --------- --------
-- 21,981 -- (2,561) 19,420
-------- -------- ----- --------- --------
Total Assets........ $803,025 $146,847 $ -- $(119,904) $829,968
======== ======== ===== ========= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable...... $ 33,712 $ 8,632 $ -- $ -- $ 42,344
Accrued liabilities... 63,211 6,837 -- (611) 69,437
Revolving credit
facility............. 23,000 -- -- -- 23,000
Trust deed notes
payable.............. 2,370 1,161 -- -- 3,531
Senior notes payable.. 298,847 -- -- -- 298,847
-------- -------- ----- --------- --------
421,140 16,630 -- (611) 437,159
-------- -------- ----- --------- --------
Financial Services:
Accounts payable and
accrued liabilities.. -- 620 -- -- 620
Mortgage warehouse
line of credit....... -- 10,304 -- -- 10,304
-------- -------- ----- --------- --------
-- 10,924 -- -- 10,924
-------- -------- ----- --------- --------
Total Stockholders'
Equity 381,885 119,293 -- (119,293) 381,885
-------- -------- ----- --------- --------
Total Liabilities
and Stockholders'
Equity............. $803,025 $146,847 $ -- $(119,904) $829,968
======== ======== ===== ========= ========
</TABLE>
24
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ --------
(Dollars in thousands)
ASSETS
<S> <C> <C> <C> <C> <C>
Homebuilding:
Cash and equivalents.. $ 13,402 $ 11 $ -- $ -- $ 13,413
Other notes and
accounts receivable,
net.................. 20,471 4,808 -- -- 25,279
Mortgage notes
receivable and
accrued interest..... 4,888 173 -- -- 5,061
Investments in and
advances to (from)
subsidiaries......... 172,211 (127,469) (44,742) --
Inventories........... 586,203 127,243 -- -- 713,446
Investments in and
advances to
unconsolidated joint
ventures............. 15,309 23,096 -- -- 38,405
Property and
equipment, net....... 2,688 824 -- -- 3,512
Deferred income
taxes................ 10,784 -- -- -- 10,784
Other assets.......... 7,787 423 -- -- 8,210
Excess of cost over
net assets acquired,
net.................. 5,627 11,666 -- -- 17,293
-------- --------- ------ -------- --------
839,370 40,775 -- (44,742) 835,403
-------- --------- ------ -------- --------
Financial Services:
Cash and equivalents.. -- 1,651 -- -- 1,651
Mortgage loans held
for sale............. -- 19,341 -- -- 19,341
Advances to (from)
Parent............... -- -- -- -- --
Other assets.......... -- 1,920 -- -- 1,920
-------- --------- ------ -------- --------
-- 22,912 -- -- 22,912
-------- --------- ------ -------- --------
Net assets of
discontinued
operation.............. -- -- 8,047 -- 8,047
-------- --------- ------ -------- --------
Total Assets........ $839,370 $ 63,687 $8,047 $(44,742) $866,362
======== ========= ====== ======== ========
<S> <C> <C> <C> <C> <C>
Homebuilding:
Accounts payable...... $ 14,188 $ 7,827 $ -- $ -- $ 22,015
Accrued liabilities... 57,195 6,582 -- -- 63,777
Revolving credit
facility............. 204,900 -- -- -- 204,900
Trust deed notes
payable.............. 20,026 1,161 -- -- 21,187
Senior notes payable.. 218,382 -- -- -- 218,382
-------- --------- ------ -------- --------
514,691 15,570 -- -- 530,261
-------- --------- ------ -------- --------
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Financial Services:
Accounts payable and
accrued liabilities.. -- 596 -- -- 596
Mortgage warehouse
line of credit....... -- 10,826 -- -- 10,826
-------- --------- ------ -------- --------
-- 11,422 -- -- 11,422
-------- --------- ------ -------- --------
Total Stockholders'
Equity................. 324,679 36,695 8,047 (44,742) 324,679
-------- --------- ------ -------- --------
Total Liabilities and
Stockholders'
Equity............... $839,370 $ 63,687 $8,047 $(44,742) $866,362
======== ========= ====== ======== ========
</TABLE>
25
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Income Statement
Nine Months Ended September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Homebuilding:
Revenues.............. $601,220 $216,593 $ -- $ -- $817,813
Cost of sales......... 479,627 179,176 -- -- 658,803
-------- -------- ----- ----- --------
Gross margin........ 121,593 37,417 -- -- 159,010
-------- -------- ----- ----- --------
Selling, general and
administrative
expenses............. 46,088 22,156 -- (165) 68,079
Income from
unconsolidated joint
ventures............. 43 11,494 -- -- 11,537
Interest expense...... 2,080 422 -- -- 2,502
Amortization of excess
of cost over net
assets acquired...... 734 780 -- -- 1,514
Other income.......... 102 55 -- -- 157
-------- -------- ----- ----- --------
Homebuilding pretax
income............. 72,836 25,608 -- 165 98,609
-------- -------- ----- ----- --------
Financial Services:
Revenues.............. -- 1,769 -- -- 1,769
Income from
unconsolidated joint
venture.............. -- 515 -- -- 515
Other income
(expense)............ (204) 574 -- (165) 205
Expenses.............. -- 2,872 -- -- 2,872
-------- -------- ----- ----- --------
Financial services
pretax income
(loss)............. (204) (14) -- (165) (383)
-------- -------- ----- ----- --------
Income before income
taxes.................. 72,632 25,594 -- -- 98,226
Provision for income
taxes.................. (28,931) (10,195) -- -- (39,126)
-------- -------- ----- ----- --------
Net Income.............. $ 43,701 $ 15,399 $ -- $ -- $ 59,100
======== ======== ===== ===== ========
</TABLE>
26
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Income Statement
Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Standard Potential Non-
Pacific Guarantor Guarantor Intercompany
Corp. Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Homebuilding:
Revenues.............. $634,315 $186,433 $ -- $-- $820,748
Cost of sales......... 521,329 153,560 -- -- 674,889
-------- -------- ----- ---- --------
Gross margin........ 112,986 32,873 -- -- 145,859
-------- -------- ----- ---- --------
Selling, general and
administrative
expenses............. 51,127 18,896 -- (96) 69,927
Income from
unconsolidated joint
ventures............. 6 5,142 -- -- 5,148
Interest expense...... 932 95 -- -- 1,027
Amortization of excess
of cost over net
assets acquired...... 734 750 -- -- 1,484
Other income.......... 12 72 -- -- 84
-------- -------- ----- ---- --------
Homebuilding pretax
income............. 60,211 18,346 -- 96 78,653
-------- -------- ----- ---- --------
Financial Services:
Revenues.............. -- 1,616 -- -- 1,616
Income from
unconsolidated joint
venture.............. (8) 583 -- -- 575
Other income.......... (43) 182 -- (96) 43
Expenses.............. -- 2,253 -- -- 2,253
-------- -------- ----- ---- --------
Financial services
pretax income
(loss)............. (51) 128 -- (96) (19)
-------- -------- ----- ---- --------
Income from continuing
operations before
income taxes........... 60,160 18,474 -- -- 78,634
Provision for income
taxes.................. (24,744) (7,599) -- -- (32,343)
-------- -------- ----- ---- --------
Income from continuing
operations............. 35,416 10,875 -- -- 46,291
Income (loss) from
discontinued operation,
net of income taxes.... -- -- (159) -- (159)
Gain on disposal of
discontinued operation,
net of income taxes.... 618 -- -- -- 618
-------- -------- ----- ---- --------
Net Income.............. $ 36,034 $ 10,875 $(159) $-- $ 46,750
======== ======== ===== ==== ========
</TABLE>
27
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Income Statement
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Homebuilding:
Revenues.............. $951,981 $246,850 $ -- $ -- $1,198,831
Cost of sales......... 783,646 203,147 -- -- 986,793
-------- -------- ----- ----- ----------
Gross margin........ 168,335 43,703 -- -- 212,038
-------- -------- ----- ----- ----------
Selling, general and
administrative
expenses............. 74,964 25,152 -- (145) 99,971
Income from
unconsolidated joint
ventures............. 7 6,194 -- -- 6,201
Interest expense...... 1,372 147 -- -- 1,519
Amortization of excess
of cost over net
assets acquired...... 979 1,000 -- -- 1,979
Other income.......... (818) 106 -- -- (712)
-------- -------- ----- ----- ----------
Homebuilding pretax
income............. 90,209 23,704 -- 145 114,058
-------- -------- ----- ----- ----------
Financial Services:
Revenues.............. -- 2,257 -- -- 2,257
Income from
unconsolidated joint
venture.............. (10) 793 -- -- 783
Other income.......... (105) 355 -- (145) 105
Expenses.............. -- 3,140 -- -- 3,140
-------- -------- ----- ----- ----------
Financial services
pretax income
(loss)............. (115) 265 -- (145) 5
-------- -------- ----- ----- ----------
Income from continuing
operations before
income taxes........... 90,094 23,969 -- -- 114,063
Provision for income
taxes.................. (37,021) (9,471) -- -- (46,492)
-------- -------- ----- ----- ----------
Income from continuing
operations............. 53,073 14,498 -- -- 67,571
Income (loss) from
discontinued operation,
net of income taxes.... -- -- (159) -- (159)
Gain on disposal of
discontinued operation,
net of income taxes.... 618 -- -- -- 618
-------- -------- ----- ----- ----------
Net Income.............. $ 53,691 $ 14,498 $(159) $ -- $ 68,030
======== ======== ===== ===== ==========
</TABLE>
28
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Income Statement
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Homebuilding:
Revenues.............. $581,729 $177,883 $ -- $ -- $759,612
Cost of sales......... 472,777 145,671 -- -- 618,448
-------- -------- ----- ----- --------
Gross margin........ 108,952 32,212 -- -- 141,164
-------- -------- ----- ----- --------
Selling, general and
administrative
expenses............. 44,601 17,087 -- 3 61,691
Income from
unconsolidated joint
ventures............. -- 4,158 -- -- 4,158
Interest expense...... 1,154 14 -- -- 1,168
Amortization of excess
of cost over net
assets acquired...... 979 333 -- -- 1,312
Other income.......... 75 93 -- -- 168
-------- -------- ----- ----- --------
Homebuilding pretax
income............. 62,293 19,029 -- (3) 81,319
-------- -------- ----- ----- --------
Financial Services:
Revenues.............. -- 1,403 -- -- 1,403
Income from
unconsolidated joint
venture.............. -- -- -- -- --
Other income.......... -- (3) -- 3 --
Expenses.............. -- 1,828 -- -- 1,828
-------- -------- ----- ----- --------
Financial services
pretax income
(loss)............. -- (428) -- 3 (425)
-------- -------- ----- ----- --------
Income from continuing
operations before
income taxes and
extraordinary charge... 62,293 18,601 -- -- 80,894
Provision for income
taxes.................. (26,061) (7,429) -- -- (33,490)
-------- -------- ----- ----- --------
Income from continuing
operations before
extraordinary charge... 36,232 11,172 -- -- 47,404
Income (loss) from
discontinued operation,
net of income taxes.... -- -- (199) -- (199)
Gain on disposal of
discontinued operation,
net of income taxes.... -- -- -- -- --
Extraordinary charge
from early
extinguishment of debt,
net of income taxes.... (1,328) -- -- -- (1,328)
-------- -------- ----- ----- --------
Net Income.............. $ 34,904 $ 11,172 $(199) $ -- $ 45,877
======== ======== ===== ===== ========
</TABLE>
29
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Income Statement
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Homebuilding:
Revenues.............. $460,154 $124,417 $ -- $ -- $584,571
Cost of sales......... 385,843 105,033 -- -- 490,876
-------- -------- ----- ----- --------
Gross margin........ 74,311 19,384 -- -- 93,695
-------- -------- ----- ----- --------
Selling, general and
administrative
expenses............. 41,763 10,378 -- -- 52,141
Income from
unconsolidated joint
ventures............. -- 3,787 -- -- 3,787
Interest expense...... 3,856 1,125 -- -- 4,981
Amortization of excess
of cost over net
assets acquired...... 245 -- -- -- 245
Other income.......... 160 662 -- -- 822
-------- -------- ----- ----- --------
Homebuilding pretax
income............. 28,607 12,330 -- -- 40,937
-------- -------- ----- ----- --------
Financial Services:
Revenues.............. -- 171 -- -- 171
Income from
unconsolidated joint
venture.............. -- -- -- -- --
Other income.......... -- -- -- -- --
Expenses.............. -- 62 -- -- 62
-------- -------- ----- ----- --------
Financial services
pretax income
(loss)............. -- 109 -- -- 109
-------- -------- ----- ----- --------
Income from continuing
operations before
income taxes........... 28,607 12,439 -- -- 41,046
Provision for income
taxes.................. (12,347) (4,723) -- -- (17,070)
-------- -------- ----- ----- --------
Income from continuing
operations............. 16,260 7,716 -- -- 23,976
Income (loss) from
discontinued operation,
net of income taxes.... -- -- 48 -- 48
Gain on disposal of
discontinued operation,
net of income taxes.... 3,302 -- -- -- 3,302
-------- -------- ----- ----- --------
Net Income.............. $ 19,562 $ 7,716 $ 48 $ -- $ 27,326
======== ======== ===== ===== ========
</TABLE>
30
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Potential Non-
Standard Guarantor Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------ ------------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net cash provided by
(used in) operating
activities of
continuing
operations............ $ (67,959) $ (2,669) $ -- $ -- $ (70,628)
--------- -------- ------- ------- ---------
Cash Flows From
Investing Activities:
Net cash paid for
acquisition........... (44,550) -- -- -- (44,550)
Net additions to
property and
equipment............. (2,771) (123) -- -- (2,894)
Investments in and
advances to
unconsolidated joint
ventures.............. (50,888) (47,774) -- -- (98,662)
Distributions and
reimbursements from
unconsolidated joint
ventures.............. 2,630 45,276 -- -- 47,906
--------- -------- ------- ------- ---------
Net cash provided by
(used in) investing
activities............ (95,579) (2,621) -- -- (98,200)
--------- -------- ------- ------- ---------
Cash Flows From
Financing Activities:
Net proceeds from
(payments on)
revolving credit
facility.............. 53,800 -- -- -- 53,800
Net proceeds from
(payments on) mortgage
warehouse line of
credit................ -- 6,355 -- -- 6,355
Proceeds from the
issuance of senior
notes payable......... 123,125 -- -- -- 123,125
Principal payments on
senior notes and trust
deed notes payable.... (2,370) (812) -- -- (3,182)
Dividends paid......... (6,932) -- -- -- (6,932)
Repurchase of common
shares................ (5,386) -- -- -- (5,386)
Proceeds from the
exercise of stock
options............... 752 -- -- -- 752
--------- -------- ------- ------- ---------
Net cash provided by
(used in) financing
activities............ 162,989 5,543 -- -- 168,532
--------- -------- ------- ------- ---------
Net increase (decrease)
in cash and
equivalents........... (549) 253 -- -- (296)
Cash and equivalents at
beginning of year..... 2,856 322 -- -- 3,178
--------- -------- ------- ------- ---------
Cash and equivalents at
end of year........... $ 2,307 $ 575 $ -- $ -- $ 2,882
========= ======== ======= ======= =========
</TABLE>
31
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net cash provided by
(used in) operating
activities of
continuing
operations............ $ 33,801 $ (7,568) $ -- $ -- $ 26,233
-------- -------- -------- ------ --------
Cash Flows From
Investing Activities:
Net additions to
property and
equipment............. (688) (108) -- -- (796)
Investments in and
advances to
unconsolidated joint
ventures.............. (13,966) (15,948) -- -- (29,914)
Distributions and
reimbursements from
unconsolidated joint
ventures.............. -- 28,546 -- -- 28,546
Proceeds from the sale
of discontinued
operations............ 8,798 -- -- -- 8,798
-------- -------- -------- ------ --------
Net cash provided by
(used in) investing
activities............ (5,856) 12,490 -- -- 6,634
-------- -------- -------- ------ --------
Cash Flows From
Financing Activities:
Net proceeds from
(payments on)
revolving credit
facility.............. (94,200) -- -- -- (94,200)
Net proceeds from
(payments on) mortgage
warehouse line of
credit................ -- (6,436) -- -- (6,436)
Proceeds from the
issuance of senior
notes payable......... 98,250 -- -- -- 98,250
Principal payments on
senior notes and trust
deed notes payable.... (37,256) -- -- -- (37,256)
Dividends paid......... (4,447) -- -- -- (4,447)
Repurchase of common
shares................ (267) -- -- -- (267)
Proceeds from the
exercise of stock
options............... 215 -- -- -- 215
-------- -------- -------- ------ --------
Net cash provided by
(used in) financing
activities............ (37,705) (6,436) -- -- (44,141)
-------- -------- -------- ------ --------
Net change in cash from
discontinued
operations............ -- -- (38,130) -- (38,130)
-------- -------- -------- ------ --------
Net increase (decrease)
in cash and
equivalents........... (9,760) (1,514) (38,130) -- (49,404)
Cash and equivalents at
beginning of year..... 13,402 1,662 38,130 -- 53,194
-------- -------- -------- ------ --------
Cash and equivalents at
end of year........... $ 3,642 $ 148 $ -- $ -- $ 3,790
======== ======== ======== ====== ========
</TABLE>
32
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net cash provided by
(used in) operating
activities of
continuing operations
continuing
operations............ $ 128,221 $(11,027) $ -- $ -- $ 117,194
--------- -------- ------- ----- ---------
Cash Flows From
Investing Activities:
Investments in and
advances to
unconsolidated joint
ventures.............. (14,918) (29,177) -- -- (44,095)
Distributions and
reimbursements from
unconsolidated joint
ventures.............. -- 39,585 -- -- 39,585
Net additions to
property and
equipment............. (803) (199) -- -- (1,002)
Proceeds from the sale
of discontinued
operations............ 8,798 -- -- -- 8,798
--------- -------- ------- ----- ---------
Net cash provided by
(used in) investing
activities............ (6,923) 10,209 -- -- 3,286
--------- -------- ------- ----- ---------
Cash Flows From
Financing Activities:
Net proceeds from
(payments on)
revolving credit
facility.............. (181,900) -- -- -- (181,900)
Net proceeds from
(payments on) mortgage
warehouse line of
credit................ -- (522) -- -- (522)
Proceeds from the
issuance of senior
notes payable......... 98,250 -- -- -- 98,250
Principal payments on
senior notes and trust
deed notes payable.... (37,293) -- -- -- (37,293)
Dividends paid......... (5,923) -- -- -- (5,923)
Repurchase of common
shares................ (5,223) -- -- -- (5,223)
Proceeds from the
exercise of stock
options............... 245 -- -- -- 245
--------- -------- ------- ----- ---------
Net cash provided by
(used in) financing
activities............ (131,844) (522) -- -- (132,366)
--------- -------- ------- ----- ---------
Net change in cash from
discontinued
operations............ -- -- (38,130) -- (38,130)
--------- -------- ------- ----- ---------
Net increase (decrease)
in cash and
equivalents........... (10,546) (1,340) (38,130) -- (50,016)
Cash and equivalents at
beginning of year..... 13,402 1,662 38,130 -- 53,194
--------- -------- ------- ----- ---------
Cash and equivalents at
end of year........... $ 2,856 $ 322 $ -- $ -- $ 3,178
========= ======== ======= ===== =========
</TABLE>
33
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Potential Non-
Standard Guarantor Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------ ------------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net cash provided by
(used in) operating
activities of
continuing
operations............ $(131,163) $(8,053) $ -- $ -- $(139,216)
--------- ------- ------- ------- ---------
Cash Flows From
Investing Activities:
Net cash paid for
acquisitions.......... (59,279) -- -- -- (59,279)
Investments in and
advances to
unconsolidated joint
ventures.............. (5,867) (10,784) -- -- (16,651)
Distributions and
reimbursements from
unconsolidated joint
ventures.............. -- 8,621 -- -- 8,621
Net additions to
property and
equipment............. (1,139) (300) -- -- (1,439)
Proceeds from the sale
of discontinued
operations............ 1,087 -- -- -- 1,087
--------- ------- ------- ------- ---------
Net cash provided by
(used in) investing
activities............ (65,198) (2,463) -- -- (67,661)
--------- ------- ------- ------- ---------
Cash Flows From
Financing Activities:
Net proceeds from
(payments on)
revolving credit
facility.............. 185,900 -- -- -- 185,900
Net proceeds from
(payments on) mortgage
warehouse line of
credit................ -- 10,826 -- -- 10,826
Proceeds from the
issuance of senior
notes payable......... 97,571 -- -- -- 97,571
Principal payments on
senior notes and trust
deed notes payable.... (75,148) -- -- -- (75,148)
Dividends paid......... (5,049) -- -- -- (5,049)
Repurchase of common
shares................ (1,311) -- -- -- (1,311)
Proceeds from the
exercise of stock
options............... 771 -- -- -- 771
--------- ------- ------- ------- ---------
Net cash provided by
(used in) financing
activities............ 202,734 10,826 -- -- 213,560
--------- ------- ------- ------- ---------
Net change in cash from
discontinued
operations............ -- -- (6,826) -- (6,826)
--------- ------- ------- ------- ---------
Net increase (decrease)
in cash and
equivalents........... 6,373 310 (6,826) -- (143)
Cash and equivalents at
beginning of year..... 7,029 1,352 44,956 -- 53,337
--------- ------- ------- ------- ---------
Cash and equivalents at
end of year........... $ 13,402 $ 1,662 $38,130 $ -- $ 53,194
========= ======= ======= ======= =========
</TABLE>
34
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Potential
Standard Guarantor Non-Guarantor Intercompany
Pacific Corp. Subsidiaries Subsidiaries Eliminations Total
------------- ------------ ------------- ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net cash provided by
(used in) operating
activities of
continuing
operations............ $ 38,230 $ 13,468 $(3,114) $ -- $ 48,584
-------- -------- ------- ------ --------
Cash Flows From
Investing Activities:
Net cash paid for
acquisitions.......... (65,842) -- -- -- (65,842)
Investments in and
advances to
unconsolidated joint
ventures.............. (9,442) (13,156) -- -- (22,598)
Distributions and
reimbursements from
unconsolidated joint
ventures.............. -- 1,053 -- -- 1,053
Net additions to
property and
equipment............. (1,206) (58) -- -- (1,264)
Sale of investment
securities............ 5,329 -- -- -- 5,329
Proceeds from the sale
of discontinued
operations............ 8,379 -- -- -- 8,379
-------- -------- ------- ------ --------
Net cash provided by
(used in) investing
activities............ (62,782) (12,161) -- -- (74,943)
-------- -------- ------- ------ --------
Cash Flows From
Financing Activities:
Net proceeds from
(payments on)
revolving credit
facility.............. (38,300) -- -- -- (38,300)
Proceeds from the
issuance of senior
notes payable......... 96,931 -- -- -- 96,931
Principal payments on
senior notes and trust
deed notes payable.... (27,707) -- -- -- (27,707)
Dividends paid......... (4,131) -- -- -- (4,131)
Repurchase of common
shares................ (2,124) -- -- -- (2,124)
Proceeds from the
exercise of stock
options............... 1,705 -- -- -- 1,705
-------- -------- ------- ------ --------
Net cash provided by
(used in) financing
activities............ 26,374 -- -- -- 26,374
-------- -------- ------- ------ --------
Net change in cash from
discontinued
operations............ -- -- 37,088 -- 37,088
-------- -------- ------- ------ --------
Net increase (decrease)
in cash and
equivalents........... 1,822 1,307 33,974 -- 37,103
Cash and equivalents at
beginning of year..... 5,207 45 10,982 -- 16,234
-------- -------- ------- ------ --------
Cash and equivalents at
end of year........... $ 7,029 $ 1,352 $44,956 $ -- $ 53,337
======== ======== ======= ====== ========
</TABLE>
35
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsequent Events (Unaudited)
a. Acquisition
On August 25, 2000, we acquired The Writer Corporation, a publicly traded
Denver-based homebuilder ("Writer"), for a purchase price of $3.35 per share
of Writer common stock, or a total of approximately $26 million (excluding
transaction costs), plus the assumption of indebtedness, which was
approximately $37.5 million. The acquisition consideration was paid in a
combination of cash, totaling approximately $10.2 million, and 1,159,398
shares of Standard Pacific common stock. The cash component of the acquisition
was financed under our unsecured revolving credit facility. With this
acquisition, we purchased or assumed the rights to acquire approximately 2,000
single-family lots located in the Denver and Fort Collins areas, which
included 11 active subdivisions at the close of the transaction. In addition,
we acquired a backlog of 149 pre-sold homes and retained Writer's management
team and staff.
The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the purchase price has been allocated to the net
assets acquired based upon their estimated fair values as of the date of the
acquisition. The excess of purchase price over the estimated fair value of net
assets acquired totaled approximately $3.6 million. The excess purchase price
has been recorded as excess of cost over net assets acquired in the
accompanying consolidated balance sheet and is being amortized on a straight-
line basis over 10 years. The results of operations of Writer have been
included in the accompanying statements of income for the period from August
25, 2000 through September 30, 2000.
b. 9 1/2% Senior Notes due 2010
In September 2000, we issued $125 million of 9 1/2% Senior Notes which
mature on September 15, 2010. These notes, which were issued at par, are
unsecured obligations and rank equally with our other existing senior
unsecured indebtedness. Interest is due and payable on March 15 and
September 15 of each year until maturity. The notes are redeemable at our
option, in whole or in part, commencing September 15, 2005 at 104.75 percent
of par, with the call price reducing ratably to par on September 15, 2008. Net
proceeds after underwriting expenses were approximately $123.1 million and
were used to repay a portion of the balance outstanding under our revolving
credit facility. We will, under certain circumstances, be obligated to make an
offer to purchase a portion of these notes in the event of certain asset
sales. In addition, these notes contain other restrictive covenants which,
among other things, impose certain limitations on our ability to (1) incur
additional indebtedness, (2) create liens, (3) make restricted payments, and
(4) sell assets. Also, upon a change in control we are required to make an
offer to purchase these notes.
36
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: December 22, 2000
STANDARD PACIFIC CORP.
/s/ Clay A. Halvorsen
By: _________________________________
Clay A. Halvorsen
Vice President, General Counsel
and Secretary
37
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Document
----------- --------
<C> <S>
N/A
</TABLE>
38
