<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to ____________
-------------
Commission file number 1-10959
STANDARD PACIFIC CORP.
(Exact name of registrant as specified in its charter)
Delaware 33-0475989
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15326 Alton Parkway, Irvine, CA 92618-2338
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (949) 789-1600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____.
---------
APPLICABLE ONLY TO CORPORATE ISSUERS
Registrant's shares of common stock outstanding at August 1, 2000: 28,702,280
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
The consolidated financial statements included herein have been prepared by
Standard Pacific Corp., without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information normally included in
the financial statements prepared in accordance with generally accepted
accounting principles has been omitted pursuant to such rules and regulations,
although we believe that the disclosures are adequate to make the information
presented not misleading. The financial statements should be read in conjunction
with the financial statements and notes thereto included in our Annual Report on
Form 10-K for the year ended December 31, 1999. Unless the context otherwise
requires, the terms "we", "us" and "our" refer to Standard Pacific Corp. and its
predecessors and subsidiaries.
-1-
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Homebuilding:
Revenues $ 283,689 $ 309,179
Cost of sales 232,163 256,043
------------- -------------
Gross margin 51,526 53,136
------------- -------------
Selling, general and administrative expenses 24,150 25,110
Income from unconsolidated joint ventures 7,052 266
Interest expense 825 236
Amortization of excess of cost over net assets acquired 495 495
Other income 55 62
------------- -------------
Homebuilding pretax income 33,163 27,623
------------- -------------
Financial Services:
Revenues 588 527
Income from unconsolidated joint venture 195 202
Other income 71 -
Expenses 992 775
------------- -------------
Financial services pretax income (loss) (138) (46)
------------- -------------
Income from continuing operations before income taxes 33,025 27,577
Provision for income taxes (13,002) (11,337)
------------- -------------
Income from continuing operations 20,023 16,240
Income (loss) from discontinued operation, net of income
taxes of $60 in 1999 - (83)
Gain on disposal of discontinued operation, net of income
taxes of $(425) in 1999 - 618
------------- -------------
Net Income $ 20,023 $ 16,775
============= =============
Basic Net Income Per Share:
Income per share from continuing operations $ 0.70 $ 0.55
Income (loss) per share from discontinued operation - (0.00)
Gain per share on disposal of discontinued operation - 0.02
------------- -------------
Net Income Per Share $ 0.70 $ 0.57
============= =============
Weighted average common shares outstanding 28,716,633 29,642,507
============= =============
Diluted Net Income Per Share:
Income per share from continuing operations $ 0.69 $ 0.54
Income (loss) per share from discontinued operation - (0.00)
Gain per share on disposal of discontinued operation - 0.02
------------- -------------
Net Income Per Share $ 0.69 $ 0.56
============= =============
Weighted average common and diluted shares outstanding 28,842,493 29,916,581
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- 2 -
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------
2000 1999
------------- ------------
<S> <C> <C>
Homebuilding:
Revenues $ 515,808 $ 523,659
Cost of sales 422,368 430,684
------------ ------------
Gross margin 93,440 92,975
------------ ------------
Selling, general and administrative expenses 42,600 45,335
Income from unconsolidated joint ventures 7,958 4,884
Interest expense 1,253 527
Amortization of excess of cost over net assets acquired 989 989
Other income 89 86
------------ ------------
Homebuilding pretax income 56,645 51,094
------------ ------------
Financial Services:
Revenues 1,018 1,112
Income from unconsolidated joint venture 343 400
Other income 121 -
Expenses 1,809 1,450
------------ ------------
Financial services pretax income (loss) (327) 62
------------ ------------
Income from continuing operations before income taxes 56,318 51,156
Provision for income taxes (22,399) (21,046)
------------ ------------
Income from continuing operations 33,919 30,110
Income (loss) from discontinued operation, net of income
taxes of $114 in 1999 - (159)
Gain on disposal of discontinued operation, net of income
taxes of $(425) in 1999 - 618
------------ ------------
Net Income $ 33,919 $ 30,569
============ ============
Basic Net Income Per Share:
Income per share from continuing operations $ 1.17 $ 1.02
Income (loss) per share from discontinued operation - (0.01)
Gain per share on disposal of discontinued operation - 0.02
------------ ------------
Net Income Per Share $ 1.17 $ 1.03
============ ============
Weighted average common shares outstanding 28,882,521 29,639,604
============ ============
Diluted Net Income Per Share:
Income per share from continuing operations $ 1.17 $ 1.01
Income (loss) per share from discontinued operation - (0.01)
Gain per share on disposal of discontinued operation - 0.02
------------ ------------
Net Income Per Share $ 1.17 $ 1.02
============ ============
Weighted average common and diluted shares outstanding 29,004,124 29,903,340
============ ============
</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>
June 30, December 31,
2000 1999
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Homebuilding:
Cash and equivalents $ 1,508 $ 2,865
Other notes and accounts receivable, net 14,401 10,489
Mortgage notes receivable and accrued interest 1,389 4,530
Inventories 763,339 699,489
Investments in and advances to unconsolidated joint ventures 72,592 49,116
Property and equipment, net 4,386 2,656
Deferred income taxes 14,462 12,738
Other assets 11,620 13,350
Excess of cost over net assets acquired, net 14,326 15,315
--------- ---------
898,023 810,548
--------- ---------
Financial Services:
Cash and equivalents 169 313
Mortgage loans held for sale 16,169 17,554
Other assets 935 1,553
--------- ---------
17,273 19,420
--------- ---------
Total Assets $ 915,296 $ 829,968
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable $ 50,743 $ 42,344
Accrued liabilities 66,670 69,437
Revolving credit facility 77,900 23,000
Trust deed notes payable 3,499 3,531
Senior notes payable 298,901 298,847
--------- ---------
497,713 437,159
--------- ---------
Financial Services:
Accounts payable and accrued liabilities 363 620
Mortgage warehouse line of credit 11,390 10,304
--------- ---------
11,753 10,924
--------- ---------
Stockholders' Equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized;
none issued - -
Common stock, $.01 par value; 100,000,000 shares authorized;
28,689,280 and 29,208,680 shares outstanding, respectively 287 292
Paid-in capital 273,365 278,701
Retained earnings 132,178 102,892
--------- ---------
Total stockholders' equity 405,830 381,885
--------- ---------
Total Liabilities and Stockholders' Equity $ 915,296 $ 829,968
========= =========
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
-4-
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------
2000 1999
----------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 33,919 $ 30,569
Adjustments to reconcile net income to net cash provided by (used in)
operating activities of continuing operations:
Discontinued operation - 159
Gain on disposal of discontinued operation - (618)
Income from unconsolidated joint ventures (7,958) (4,884)
Depreciation and amortization 722 620
Amortization of excess of cost over net assets acquired 989 989
Changes in cash and equivalents due to:
Receivables and accrued interest 614 22,797
Inventories (58,279) (27,064)
Deferred income taxes (1,724) (248)
Other assets 2,300 3,206
Accounts payable 8,399 2,520
Accrued liabilities (3,015) 114
----------- ------------
Net cash provided by (used in) operating activities of continuing operations (24,033) 28,160
----------- ------------
Cash Flows From Investing Activities:
Net additions to property and equipment (2,404) (623)
Investments in and advances to unconsolidated joint ventures (54,198) (16,235)
Distributions and repayments from unconsolidated joint ventures 33,163 17,395
Proceeds from the sale of discontinued operation - 8,798
----------- ------------
Net cash provided by (used in) investing activities (23,439) 9,335
----------- ------------
Cash Flows From Financing Activities:
Net proceeds from (payments on) revolving credit facility 54,900 (100,900)
Net proceeds from (payments on) mortgage warehouse line of credit 1,086 (6,127)
Net proceeds from the issuance of senior notes - 98,250
Principal payments on senior notes and trust deed notes payable (32) (36,238)
Dividends paid (4,634) (2,964)
Repurchase of common shares (5,386) -
Proceeds from the exercise of stock options 37 131
----------- ------------
Net cash provided by (used in) financing activities 45,971 (47,848)
----------- ------------
Net change in cash from discontinued operation - (38,130)
----------- ------------
Net increase (decrease) in cash and equivalents (1,501) (48,483)
Cash and equivalents at beginning of period 3,178 53,194
----------- ------------
Cash and equivalents at end of period $ 1,677 $ 4,711
=========== ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest - continuing operations $ 15,859 $ 16,018
Income taxes 25,280 27,374
Supplemental Disclosure of Noncash Activities:
Inventory received as a distribution from an unconsolidated joint venture $ 5,517 $ -
Expenses capitalized in connection with the issuance of the 8 1/2% senior
notes due 2009 - 1,750
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- 5 -
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
1. Basis of Presentation
---------------------
In the opinion of management, the financial statements reflect all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position as of June 30, 2000 and December 31, 1999,
and the results of operations and cash flows for the periods presented.
2. Capitalization of Interest
--------------------------
The following is a summary of interest capitalized and expensed related to
inventories for the three month and six month periods ended June 30, 2000 and
1999.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- ---------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Total interest incurred during the period $ 8,827 $ 8,625 $16,854 $17,354
Less: Interest capitalized as a cost of
real estate under development 8,002 8,389 15,600 16,827
------- ------- ------- -------
Interest expensed $ 825 $ 236 $ 1,254 $ 527
======= ======= ======= =======
Interest previously capitalized as a cost of
real estate under development, included
in cost of sales $ 5,913 $ 7,208 $10,915 $12,593
======= ======= ======= =======
Capitalized interest in ending
inventories $26,071 $19,389
======= =======
</TABLE>
3. Statement of Cash Flows
-----------------------
Cash flows from the discontinued operation have been presented as a
separate line item in the accompanying consolidated statements of cash flows.
The net change in cash for the discontinued operation presented in the
statements of cash flows for the six month period ended June 30, 1999 reflects
the net change in the cash balance of our former savings and loan subsidiary,
which was sold in May 1999.
4. 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.
-6-
<PAGE>
5. Reclassifications
-----------------
Certain reclassifications have been made to the 1999 consolidated financial
statements to conform with current period presentation.
6. 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 Three Months Ended June 30,
------------------------------------------------------------------------
2000 1999
---------------------------------- --------------------------------
Income Shares EPS Income Shares EPS
------- --------- ------- ------- ---------- -------
(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 $20,023 28,716,633 $0.70 $16,240 29,642,507 $0.55
Effect of dilutive stock options - 125,860 - 274,074
-------- ---------- ------- ----------
Diluted net income per share from
continuing operations $20,023 28,842,493 $0.69 $16,240 29,916,581 $0.54
======= ========== ========== ======= ========== =======
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
------------------------------------------------------------------------
2000 1999
---------------------------------- -------------------------------
Income Shares EPS Income Shares EPS
------- ---------- ------- ------- ---------- -------
(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 $33,919 28,882,521 $1.17 $30,110 29,639,604 $1.02
Effect of dilutive stock options - 121,603 - 263,736
------- ---------- ------- ----------
Diluted net income per share from
continuing operations $33,919 29,004,124 $1.17 $30,110 29,903,340 $1.01
======= ========== ======= ======= ========== ======
</TABLE>
-7-
<PAGE>
7. Discontinued Operations
-----------------------
In May 1997, the Board of Directors adopted a plan of disposition (the
"Plan") for our former 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 on May 31, 1999. An
after tax net gain of $618,000, or $.02 per diluted share, was recorded in the
1999 second quarter as a result of this sale. 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 have been segregated in the accompanying 1999 consolidated income
statements.
Interest income from the discontinued operation totaled approximately
$1,256,000 and $474,000 for the six month and three month periods ended June 30,
1999, respectively.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Selected Financial Information
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ---------------------------
2000 1999 2000 1999
------------- ------------ ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Homebuilding:
Revenues $ 283,689 $ 309,179 $ 515,808 $ 523,659
Cost of sales 232,163 256,043 422,368 430,684
--------- --------- --------- ---------
Gross margin 51,526 53,136 93,440 92,975
--------- --------- --------- ---------
Gross margin percentage 18.2% 17.2% 18.1% 17.8%
--------- --------- --------- ---------
Selling, general and administrative expenses 24,150 25,110 42,600 45,335
Income from unconsolidated joint ventures 7,052 266 7,958 4,884
Interest expense 825 236 1,253 527
Amortization of excess of cost over net assets acquired 495 495 989 989
Other income 55 62 89 86
--------- --------- --------- ---------
Homebuilding pretax income 33,163 27,623 56,645 51,094
--------- --------- --------- ---------
Financial Services:
Revenues 588 527 1,018 1,112
Income from unconsolidated joint venture 195 202 343 400
Other income 71 - 121 -
Expenses 992 775 1,809 1,450
--------- --------- --------- ---------
Financial services pretax income (loss) (138) (46) (327) 62
--------- --------- --------- ---------
Income from continuing operations before income taxes $ 33,025 $ 27,577 $ 56,318 $ 51,156
========= ========= ========= =========
<CAPTION>
Operating Data
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ---------------------------
2000 1999 2000 1999
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
New Homes Delivered:
Southern California 272 279 507 473
Northern California 194 284 368 452
--------- --------- --------- ---------
Total California 466 563 875 925
--------- --------- --------- ---------
Dallas 73 53 131 92
Austin 38 36 75 64
Houston 16 37 25 73
--------- --------- --------- ---------
Total Texas 127 126 231 229
--------- --------- --------- ---------
Arizona 236 228 419 416
--------- --------- --------- ---------
Consolidated total 829 917 1,525 1,570
Unconsolidated joint ventures (Southern California) 31 - 48 -
--------- --------- --------- ---------
Total 860 917 1,573 1,570
========= ========= ========= =========
Average Selling Price:
California deliveries (excluding joint ventures) $ 443,907 $ 428,783 $ 436,923 $ 434,007
Texas deliveries $ 284,827 $ 233,090 $ 271,257 $ 229,221
Arizona deliveries $ 168,649 $ 165,757 $ 166,387 $ 163,545
Combined (excluding joint ventures) $ 341,176 $ 336,496 $ 337,498 $ 332,473
Combined (including joint ventures) $ 363,875 $ 336,496 $ 351,750 $ 332,473
</TABLE>
-9-
<PAGE>
Operating Data - (continued)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------- -----------------
2000 1999 2000 1999
------ ----- ------ -----
<S> <C> <C> <C> <C>
Net New Orders:
Southern California 433 323 774 641
Northern California 280 277 608 553
----- --- ------ -----
Total California 713 600 1,382 1,194
----- --- ------ -----
Dallas 89 67 164 130
Austin 64 40 132 79
Houston 15 20 29 55
----- --- ------ -----
Total Texas 168 127 325 264
----- --- ------ -----
Arizona 225 197 468 401
----- --- ------ -----
Consolidated total 1,106 924 2,175 1,859
Unconsolidated joint ventures
(Southern California) 40 - 84 -
----- --- ------ -----
Total 1,146 924 2,259 1,859
===== === ====== =====
Average Selling Communities during
the quarter:
Southern California 23 20
Northern California 14 15
Texas 25 17
Arizona 15 12
Unconsolidated joint ventures
(Southern California) 3 -
-- --
Total 80 64
== ==
At June 30,
-----------------------
2000 1999
----------- ----------
Backlog (in units):
Southern California 609 545
Northern California 413 348
---------- --------
Total California 1,022 893
---------- --------
Dallas 116 89
Austin 96 52
Houston 8 13
---------- --------
Total Texas 220 154
---------- --------
Arizona 376 353
---------- --------
Consolidated total 1,618 1,400
Unconsolidated joint ventures
(Southern California) 82 -
---------- --------
Total backlog 1,700 1,400
========== ========
Backlog at quarter end (estimated
dollar value in thousands) $606,295 $478,304
========= ========
Building Sites Owned or
Controlled:
California 9,445 9,434
Texas 2,567 2,772
Arizona 3,597 4,125
--------- --------
Total 15,609 16,331
========= ========
</TABLE>
-10-
<PAGE>
Income from continuing operations for the 2000 second quarter increased 23
percent to $20,023,000, or $0.69 per diluted share, compared to $16,240,000, or
$0.54 per diluted share, for the year earlier period. For the six months ended
June 30, 2000, income from continuing operations increased 13 percent to
$33,919,000, or $1.17 per diluted share, compared to $30,110,000, or $1.01 per
diluted share, last year.
Net income for the 2000 second quarter including the discontinued operation
increased 19 percent to $20,023,000, or $0.69 per diluted share, compared to
$16,775,000, or $0.56 per diluted share, for the 1999 second quarter. Net income
for the first six months of 2000 including the discontinued operation was
$33,919,000, or $1.17 per diluted share, versus $30,569,000, or $1.02 per
diluted share, in the year earlier period. The discontinued operation in 1999
reflects our former savings and loan subsidiary, which was sold during the 1999
second quarter for an after tax gain of $618,000, or $0.02 per diluted share.
Second quarter 2000 earnings before interest, taxes, depreciation and
amortization ("EBITDA") was $36.7 million compared to $35.8 million for the same
period in 1999. EBITDA for the first six months of 2000 totaled $66.5 million
versus $67.3 million for the first half of 1999.
Homebuilding
Homebuilding pretax income was up 20 percent to $33.2 million for the three
months ended June 30, 2000 compared to $27.6 million last year. The higher level
of operating income was attributable to a 100 basis point improvement in the
homebuilding gross margin percentage and an increase of $6.8 million in joint
venture income, which included a gain of $5.1 million on the sale of land from
our Fullerton joint venture. These improvements were partially offset by an 8
percent decline in homebuilding revenues.
Homebuilding revenues for the 2000 second quarter were $283.7 million
compared to $309.2 million in the prior year second quarter. The lower revenue
total was due to a 9.6 percent decline in new home deliveries (exclusive of
joint ventures) which was partially offset by a 1.4 percent higher average home
selling price. During the 2000 second quarter we delivered 497 new homes in
California compared to 563 homes in the previous year period. Deliveries for the
quarter were up 9 percent in Southern California but down 32 percent in Northern
California. This expected moderation from the record setting volume generated
last year is due to fewer active selling communities and to our focus on
maximizing per home revenues and gross margins. On a full year basis, however,
we anticipate that deliveries in this important Northern California market will
still result in one of the highest levels achieved in the division's history.
Our Arizona division delivered 236 new homes compared to 228 homes in the year
earlier period. Deliveries in our Dallas and Austin divisions continued to
outpace previous periods as reflected by their 38 percent and 6 percent gains,
respectively, while deliveries in Houston declined by 21 homes. Homebuilding
revenues for the first six months of 2000 were $515.8 million compared to $523.7
million for the year earlier period. The modest decline in revenues was
attributable to a 2.9 percent lower number of new home deliveries (exclusive of
joint ventures) which was partially offset by a 1.5 percent higher average home
selling price.
During the 2000 second quarter the average home price in California was up
3.5 percent over the prior year to $444,000 primarily reflecting the upward
trend of new home prices in the state. The average home price in Texas was up 22
percent to $285,000 reflecting a greater percentage of deliveries from our
Dallas and Austin divisions where prices are generally higher than in Houston
and the delivery of larger more expensive homes in all three of our Texas
markets. The average home price in Arizona was up slightly during the quarter to
$169,000.
-11-
<PAGE>
The homebuilding gross margin percentage for the 2000 second quarter was up
100 basis points to 18.2 percent versus 17.2 percent in the year earlier
quarter. For the six months ended June 30, 2000, the homebuilding gross margin
percentage was up 30 basis points to 18.1 percent compared to the year earlier
period. The gross margin percentage improved in all three of our operating
regions during the 2000 second quarter. The higher second quarter gross margin
in California was primarily due to a general rise in home prices while labor and
material costs stabilized during the quarter. The improved margins in Texas and
Arizona are primarily attributable to higher delivery volumes and, in Austin,
rising home prices.
Selling, general and administrative expenses for the 2000 second quarter
were 8.5 percent of revenues, up from 8.1 percent in the year earlier quarter.
SG&A expenses for the first six months of 2000 were 8.3 percent of revenues,
down from 8.7 percent in the year earlier period. The fluctuation in SG&A
expenses as a percentage of revenues in the 2000 second quarter is primarily due
to the timing of certain sales and marketing costs incurred in connection with
the opening of new communities. During the 2000 second quarter we opened 22 new
communities compared to 9 in the year earlier period.
Income from unconsolidated joint ventures for the 2000 second quarter was
generated from the delivery of 31 homes from our three project joint venture in
Fullerton, California in Orange County and a $5.1 million gain on the sale of an
adjacent parcel of land. We anticipate recognizing additional joint venture
income through the balance of the year from land sales from the Talega venture
and from new home deliveries from the Fullerton venture.
Net new home orders for the 2000 second quarter were up 24 percent over the
year earlier period to a second quarter record of 1,146 new homes on a 25
percent increase in average community count. Orders were up 46 percent in
Southern California on a 30 percent increase in average community count, up 1
percent in Northern California on a 7 percent decrease in community count, up 32
percent in Texas on a 47 percent increase in active selling communities and up
14 percent in Arizona on a 25 percent higher community count. Net new orders for
the first half of 2000 totaled 2,259 homes versus 1,859 for the same period in
1999. The higher order levels contributed to an increase in our backlog to 1,700
presold homes with an estimated sales value of $606 million at June 30, 2000, up
27 percent from the backlog value at June 30, 1999. Assuming there are no
significant changes in the economy, consumer confidence or interest rates, we
expect to be in a position to increase unit deliveries in 2000.
Through the first half of the year we opened 35 new communities and are
scheduled to open approximately 25 new communities through the balance of the
year, of which approximately 16 will be located in California, 5 in Texas and 4
in Arizona. By the end of the year we expect to have opened approximately 100
new communities since the beginning of 1999.
Our diversified portfolio of buildable lots, which is consistent with our
general goal of maintaining a 3 to 4 year supply, totaled approximately 15,600
lots owned or controlled of which 9,400 were located in California, 2,600 in
Texas and 3,600 in Arizona.
-12-
<PAGE>
Financial Services
Revenues from our financial services subsidiary for the 2000 second quarter
were up 12 percent over the 1999 second quarter while the dollar volume of loans
sold during the quarter increased 43 percent. Financial services revenues for
the first six months of 2000 were down 8 percent from the year earlier period
while the dollar volume of loans sold during that period was up 27 percent. The
change in revenues relative to the higher loan sales volume reflects a
combination of the extremely competitive mortgage lending market this year
compared to last year and a reduction in net interest income on mortgages held
for sale. Higher mortgage interest rates have led to fewer loan refinancings
which have, in part, contributed to increased competitive pressures within the
mortgage banking market. In addition, a one-time gain was recognized in the 1999
first quarter from the pay-off of a commercial loan. The rise in operating
expenses for the three and six month periods compared to last year reflects the
increase in operating and overhead expenses from expanding our mortgage banking
operations in California.
The financial services joint venture income reflects the operating results
of SPH Mortgage, our mortgage banking joint venture in Arizona and Texas with
Wells Fargo Home Mortgage.
Other financial services income represents earnings from our title
insurance operation in Texas, which began serving as a title insurance agent and
offering title examination services in September 1999.
Recent Development
On April 14, 2000, we entered into a definitive agreement to acquire 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 $26.7 million, plus the assumption of indebtedness, which was
approximately $33.9 million at June 30, 2000. The acquisition consideration will
be payable in a combination of cash and Standard Pacific common stock, with
Writer's public shareholders being entitled to elect to receive up to the entire
purchase price in cash, subject to certain limitations. Writer is a longtime
homebuilder in the Denver metropolitan area, and more recently has expanded its
operations into the emerging Fort Collins/Northern Colorado market. For the year
ended December 31, 1999, Writer had revenues of $82 million and delivered 383
new homes. For the six months ended June 30, 2000, Writer had revenues of
approximately $37.3 million on deliveries of 153 new homes.
Under the terms of the proposed acquisition, Writer's stockholders will
receive, at their election, a combination of cash and/or Standard Pacific common
stock valued at $3.35 per share of Writer common stock. Not more than 60 percent
and not less than 50 percent of the aggregate consideration will be paid in
shares of Standard Pacific common stock. Standard Pacific's shares will be
valued based on their average trading price for a 20 day period prior to
consummation of the merger, provided that in no event will the shares be valued
at less than $11.00 per share or more than $13.50 per share. In the event the
option to elect cash is oversubscribed, Writer's directors, officers and 15
percent shareholders have agreed to accept shares of Standard Pacific common
stock.
Writer mailed a joint proxy statement/prospectus on July 27, 2000 giving
notice of the special meeting of its shareholders to be held on August 25, 2000
to vote upon the proposal to approve the merger. Consummation of the transaction
is subject to the approval of Writer's stockholders. No assurances can be given
that the transaction will be consummated.
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<PAGE>
Liquidity and Capital Resources
Our homebuilding operations' principal uses of cash have been for operating
expenses, land acquisitions, construction expenditures, market expansion
(including through acquisitions), principal and interest payments on debt, share
repurchases and dividends to our shareholders. Cash requirements have been
provided from internally generated funds and outside borrowings, including a
bank revolving credit facility and public note offerings. Our mortgage banking
subsidiary uses cash from internal funds and a mortgage warehouse credit
facility to fund its mortgage lending operations. Based on our current business
plan and our desire to carefully manage our leverage, we believe that these
sources of cash are sufficient to finance our current working capital
requirements and other needs.
We have a $450 million unsecured revolving credit facility with our bank
group which matures July 31, 2003. This agreement contains a borrowing base
provision and financial covenants which may limit the amount we may borrow under
the revolving credit facility. At June 30, 2000, we had borrowings of $77.9
million outstanding under this facility.
To fund mortgage loans through our financial services subsidiary, we have a
$40 million revolving mortgage warehouse credit facility with a bank. Mortgage
loans are generally held for a short period of time and are typically sold to
investors within 15 to 30 days following funding. Borrowings, which are LIBOR
based, are secured by the related mortgage loans held for sale. The facility,
which has a current maturity date of May 29, 2001, also contains certain
financial covenants.
In October 1998, the Securities and Exchange Commission declared effective
our $300 million universal shelf registration statement on Form S-3. The
universal shelf registration statement permits the issuance of common stock,
preferred stock, debt securities and warrants. We currently have $200 million
available under the universal shelf.
From time to time, purchase money mortgage financing is used to finance
land acquisitions. At June 30, 2000, we had approximately $3.5 million
outstanding in trust deed notes payable.
Additionally, as a form of off balance sheet financing and for other
strategic purposes, joint venture structures are used on selected projects. This
type of structure, in which the joint venture typically obtains secured
construction and development financing, minimizes the use of funds from our
revolving credit facility and other corporate financing sources. We plan to
continue using these types of arrangements to finance the development of
properties as opportunities arise.
We paid approximately $4.6 million, or $0.16 per common share ($0.08 per
common share per quarter), in dividends during the six months ended June 30,
2000. Common stock dividends are paid at the discretion of our Board of
Directors and are dependent upon various factors, including earnings, cash
flows, capital requirements and operating and financial conditions, including
our overall level of leverage. Additionally, our revolving credit facility and
public notes impose restrictions on the amount of dividends we may be able to
pay. On July 25, 2000, our Board of Directors declared a quarterly cash dividend
of $0.08 per share of common stock. This dividend is to be paid on August 28,
2000 to shareholders of record on August 14, 2000.
In April 2000, our Board of Directors increased the aggregate stock
repurchase limit of our previously announced stock buyback plan from $25 million
to $35 million. For the six months ended June 30, 2000, we repurchased 525,400
shares of common stock for approximately $5.4 million pursuant to this plan.
From the inception of the plan through June 30, 2000, we have repurchased an
aggregate of approximately 2.4 million shares of common stock for approximately
$20.2 million, leaving a balance of approximately $14.8 million available for
future share repurchases.
-14-
<PAGE>
We have no other material commitments or off balance sheet financing
arrangements that under current market conditions are expected to materially
affect our future liquidity.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks related to fluctuations in interest rates on
our mortgage loans receivable and bank debt. Both our mortgage banking
subsidiary, Family Lending, and our mortgage banking joint venture, SPH
Mortgage, seek to manage interest rate risk with respect to loan commitments and
loans held for sale by preselling loans on a best efforts basis. To enhance
potential returns on the sale of mortgage loans, Family Lending began selling a
portion of its mortgage loans on a non-presold basis during the quarter ended
March 31, 2000. To hedge its interest rate risk associated with extending
interest rate commitments to customers prior to selling loans to investors and
for holding closed loans following funding, Family Lending has entered into
forward sale commitments of mortgage-backed securities. While our hedging
strategy of buying and selling mortgage-backed securities should assist us in
mitigating risk associated with selling loans on a non-presold basis, these
instruments involve elements of market risk which could result in losses on
loans sold in this manner if not hedged properly. In January 2000, Family
Lending retained a third party advisory firm to assist with selling loans on a
non-presold basis and entering into forward sale commitments of mortgage-backed
securities.
Other than entering into forward sale commitments of mortgage-backed
securities described above, there have been no other material changes in our
market risk exposure since December 31, 1999. Please see our Annual Report on
Form 10-K for the year ended December 31, 1999 for further discussion related to
our market risk exposure.
-15-
<PAGE>
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, which represent our expectations or
beliefs concerning future events, including, but not limited to, statements
regarding:
. anticipated deliveries in the Northern California market for 2000;
. labor and material costs stabilizing;
. expected additional joint venture income from new home deliveries and land
sales during 2000;
. our backlog of homes and their estimated sales value;
. planned new home community openings;
. our prospects for continued growth in unit volume in 2000;
. the adequacy of our inventory of building sites;
. the sufficiency of our cash provided by internally generated funds and
outside borrowings;
. our planned continued use of joint ventures as a financing structure;
. the likely effect on our future liquidity of our existing material
commitments and off balance sheet financing arrangements; and
. our exposure to market risks, including fluctuations in interest rates.
We caution that these statements are further qualified by important factors
that could cause actual results to differ materially from those in the forward-
looking statements, including, without limitation, the following:
. changes in local and general economic and market conditions, including
consumer confidence;
. changes in interest rates and the availability of construction and mortgage
financing;
. changes in costs and availability of material, supplies and labor;
. the cyclical and competitive nature of homebuilding;
. the availability of debt and equity capital;
. changes in the availability of suitable undeveloped land at reasonable prices;
. governmental regulation; and
. adverse weather conditions and natural disasters.
Results actually achieved thus may differ materially from expected results
included in these and any other forward-looking statements contained herein.
Please see our Annual Report on Form 10-K for the year ended December 31, 1999
for a further discussion of these and other risks and uncertainties applicable
to our business.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STANDARD PACIFIC CORP.
(Registrant)
Dated: August 10, 2000 By: /s/ Stephen J. Scarborough
--------------------------------
Stephen J. Scarborough
Chief Executive Officer and
President
Dated: August 10, 2000 By: /s/ Andrew H. Parnes
--------------------------------
Andrew H. Parnes
Vice President - Finance,
Treasurer and Chief
Financial Officer
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<PAGE>
PART II OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Change in Securities
None
Item 3. Default upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At our Annual Meeting held on May 18, 2000, Standard Pacific's
stockholders re-elected Ronald R. Foell as a director. Standard
Pacific's stockholders also elected Michael C. Cortney and Jeffrey V.
Peterson as Class III directors. In addition, the term of office of the
following directors continued after the Annual Meeting: Arthur E.
Svendsen, Stephen J. Scarborough, Dr. James L. Doti, Douglas C. Jacobs,
Keith D. Koeller and Larry McNabb. Voting at the meeting was as
follows:
<TABLE>
<CAPTION>
Votes Votes Votes Broker
Matter Cast For Cast Against Withheld Non-Votes
--------------------------------------- ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
Election of Ronald R. Foell 25,946,269 - 595,544 -
Election of Michael C. Cortney 26,282,627 - 259,186 -
Election of Jeffrey V. Peterson 26,270,146 - 271,667 -
Approval of 2000 Stock Incentive Plan 17,985,960 2,626,491 163,315 5,766,047
Approval of Amended Management
Incentive Bonus Plan 24,677,729 1,711,474 152,610 -
</TABLE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) Current Reports on Form 8-K
Form 8-K dated July 24, 2000 reporting that the Registrant
issued a press release announcing its second quarter
results.
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