<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 November 3, 2000: 29,975,127
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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 "ours" 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 September 30,
-------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Homebuilding:
Revenues $ 302,005 $ 297,089
Cost of sales 236,435 244,204
----------- -----------
Gross margin 65,570 52,885
----------- -----------
Selling, general and administrative expenses 25,479 24,592
Income from unconsolidated joint ventures 3,578 264
Interest expense 1,248 501
Amortization of excess of cost over net assets acquired 525 495
Other income (loss) 67 (2)
----------- -----------
Homebuilding pretax income 41,963 27,559
----------- -----------
Financial Services:
Revenues 750 500
Income from unconsolidated joint venture 173 175
Other income 84 43
Expenses 1,062 798
----------- -----------
Financial services pretax income (loss) (55) (80)
----------- -----------
Income before income taxes 41,908 27,479
Provision for income taxes (16,728) (11,298)
----------- -----------
Net Income $ 25,180 $ 16,181
=========== ===========
Basic Net Income Per Share:
Net Income Per Share $ 0.86 $ 0.55
=========== ===========
Weighted average common shares outstanding 29,169,309 29,642,671
=========== ===========
Diluted Net Income Per Share:
Net Income Per Share $ 0.85 $ 0.54
=========== ===========
Weighted average common and diluted shares outstanding 29,536,369 29,813,430
=========== ===========
</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>
Nine Months Ended September 30,
-----------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Homebuilding:
Revenues $ 817,813 $ 820,748
Cost of sales 658,803 674,889
----------- -----------
Gross margin 159,010 145,859
----------- -----------
Selling, general and administrative expenses 68,079 69,927
Income from unconsolidated joint ventures 11,537 5,148
Interest expense 2,502 1,027
Amortization of excess of cost over net assets acquired 1,514 1,484
Other income 157 84
----------- -----------
Homebuilding pretax income 98,609 78,653
----------- -----------
Financial Services:
Revenues 1,769 1,616
Income from unconsolidated joint venture 515 575
Other income 205 43
Expenses 2,872 2,253
----------- ----------
Financial services pretax income (loss) (383) (19)
----------- ----------
Income from continuing operations before income taxes 98,226 78,634
Provision for income taxes (39,126) (32,343)
----------- -----------
Income from continuing operations 59,100 46,291
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 $ 59,100 $ 46,750
=========== ===========
Basic Net Income Per Share:
Income per share from continuing operations $ 2.04 $ 1.56
Income (loss) per share from discontinued operation - (0.01)
Gain per share on disposal of discontinued operation - 0.02
----------- -----------
Net Income Per Share $ 2.04 $ 1.57
=========== ===========
Weighted average common shares outstanding 28,978,815 29,648,808
=========== ===========
Diluted Net Income Per Share:
Income per share from continuing operations $ 2.03 $ 1.55
Income (loss) per share from discontinued operation - (0.01)
Gain per share on disposal of discontinued operation - 0.02
----------- -----------
Net Income Per Share $ 2.03 $ 1.56
=========== ===========
Weighted average common and diluted shares outstanding 29,145,438 29,880,122
=========== ===========
</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
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Homebuilding:
Cash and equivalents $ 2,324 $ 2,865
Other notes and accounts receivable, net 24,200 10,489
Mortgage notes receivable and accrued interest 1,350 4,530
Inventories 906,705 699,489
Investments in and advances to unconsolidated joint ventures 98,672 49,116
Property and equipment, net 4,917 2,656
Deferred income taxes 13,816 12,738
Other assets 15,026 13,350
Excess of cost over net assets acquired, net 17,436 15,315
------------- -------------
1,084,446 810,548
------------- -------------
Financial Services:
Cash and equivalents 558 313
Mortgage loans held for sale 21,482 17,554
Other assets 876 1,553
------------- -------------
22,916 19,420
------------- -------------
Total Assets $1,107,362 $829,968
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable $ 60,238 $ 42,344
Accrued liabilities 83,623 69,437
Revolving credit facility 76,800 23,000
Trust deed notes payable 349 3,531
Senior notes payable 423,929 298,847
------------- -------------
644,939 437,159
------------- -------------
Financial Services:
Accounts payable and accrued liabilities 350 620
Mortgage warehouse line of credit 16,659 10,304
------------- -------------
17,009 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; 29,924,053 and
29,208,680 shares outstanding, respectively 299 292
Paid-in capital 290,053 278,701
Retained earnings 155,062 102,892
------------- -------------
Total stockholders' equity 445,414 381,885
------------- -------------
Total Liabilities and Stockholders' Equity $1,107,362 $829,968
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
-4-
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------
2000 1999
--------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 59,100 $ 46,750
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 (11,537) (5,148)
Depreciation and amortization 1,110 913
Amortization of excess of cost over net assets acquired 1,514 1,484
Changes in cash and equivalents due to:
Receivables and accrued interest (14,087) 25,199
Inventories (130,286) (56,932)
Deferred income taxes 285 (1,867)
Other assets 1,483 2,567
Accounts payable 13,778 11,812
Accrued liabilities 8,012 1,914
--------- --------
Net cash provided by (used in) operating activities of
continuing operations (70,628) 26,233
--------- --------
Cash Flows From Investing Activities:
Net cash paid for acquisition (44,550) -
Net additions to property and equipment (2,894) (796)
Investments in and advances to unconsolidated joint ventures (98,662) (29,914)
Distributions and repayments from unconsolidated joint ventures 47,906 28,546
Proceeds from the sale of discontinued operation - 8,798
--------- --------
Net cash provided by (used in) investing activities (98,200) 6,634
--------- --------
Cash Flows From Financing Activities:
Net proceeds from (payments on) revolving credit facility 53,800 (94,200)
Net proceeds from (payments on) mortgage warehouse line of credit 6,355 (6,436)
Net proceeds from the issuance of senior notes 123,125 98,250
Principal payments on senior notes and trust deed notes payable (3,182) (37,256)
Dividends paid (6,932) (4,447)
Repurchase of common shares (5,386) (267)
Proceeds from the exercise of stock options 752 215
--------- --------
Net cash provided by (used in) financing activities 168,532 (44,141)
--------- --------
Net change in cash from discontinued operation - (38,130)
--------- --------
Net increase (decrease) in cash and equivalents (296) (49,404)
Cash and equivalents at beginning of period 3,178 53,194
--------- --------
Cash and equivalents at end of period $ 2,882 $ 3,790
========= ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest - continuing operations $ 23,481 $ 22,087
Income taxes 37,780 41,629
Supplemental Disclosure of Noncash Activities:
Issuance of common stock in connection with acquisition $ 15,792 $ -
Inventory received as a distribution from an unconsolidated 12,737 -
joint venture
Expenses capitalized in connection with the issuance of
the 9 1/2% senior notes due 2010 1,875 -
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
SEPTEMBER 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 September 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 nine month periods ended September 30, 2000
and 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------- --------------------------------------
2000 1999 2000 1999
----------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Total interest incurred during the period $ 10,786 $ 9,137 $ 27,640 $ 26,490
Less: Interest capitalized as a cost of
real estate under development 9,538 8,636 25,138 25,463
----------------- ---------------- --------------- ----------------
Interest expensed $ 1,248 $ 501 $ 2,502 $ 1,027
================= ================ =============== ================
Interest previously capitalized as a
cost of real estate under development,
included in cost of sales $ 8,565 $ 6,540 $ 19,480 $ 19,133
================= ================ =============== ================
Capitalized interest in ending
inventories $ 27,044 $ 21,485
=============== ================
</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 nine month period ended September 30, 1999
reflects the net change in the cash balance of our former savings and loan
subsidiary, which was sold in May 1999.
4. 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.
-6-
<PAGE>
5. 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. Reclassifications
-----------------
Certain reclassifications have been made to the 1999 consolidated financial
statements to conform with current period presentation.
7. 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 September 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 $25,180 29,169,309 $0.86 $16,181 29,642,671 $0.55
Effect of dilutive stock options - 367,060 - 170,759
---------- ---------- ---------- ----------
Diluted net income per share from
continuing operations $25,180 29,536,369 $0.85 $16,181 29,813,430 $0.54
========== ========== =========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 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 $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>
-7-
<PAGE>
8. 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
and 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.
9. 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.
10. 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 for the nine month period ended September 30, 1999.
-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 Nine Months Ended
September 30, September 30,
--------------------------- -------------------------
2000 1999 2000 1999
---------- ---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Homebuilding:
Revenues $302,005 $297,089 $817,813 $820,748
Cost of sales 236,435 244,204 658,803 674,889
------------- ----------- ----------- -----------
Gross margin 65,570 52,885 159,010 145,859
------------- ----------- ----------- -----------
Gross margin percentage 21.7% 17.8% 19.4% 17.8%
------------- ----------- ----------- -----------
Selling, general and administrative expenses 25,479 24,592 68,079 69,927
Income from unconsolidated joint ventures 3,578 264 11,537 5,148
Interest expense 1,248 501 2,502 1,027
Amortization of excess of cost over net assets acquired 525 495 1,514 1,484
Other income (expense) 67 (2) 157 84
------------- ----------- ----------- -----------
Homebuilding pretax income 41,963 27,559 98,609 78,653
------------- ----------- ----------- -----------
Financial Services:
Revenues 750 500 1,769 1,616
Income from unconsolidated joint venture 173 175 515 575
Other income 84 43 205 43
Expenses 1,062 798 2,872 2,253
------------- ----------- ----------- -----------
Financial services pretax income (loss) (55) (80) (383) (19)
------------- ----------- ----------- -----------
Income from continuing operations before income taxes $ 41,908 $ 27,479 $ 98,226 $ 78,634
============= =========== =========== ===========
</TABLE>
Operating Data
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
---------- ----------- --------- ------------
<S> <C> <C> <C> <C>
New Homes Delivered:
Southern California 325 307 832 780
Northern California 209 258 577 710
----------- ---------- ----------- -----------
Total California 534 565 1,409 1,490
----------- ---------- ----------- -----------
Dallas 86 48 217 140
Austin 45 38 120 102
Houston 17 20 42 93
----------- ---------- ----------- -----------
Total Texas 148 106 379 335
----------- ---------- ----------- -----------
Arizona 188 201 607 617
Colorado 33 - 33 -
----------- ---------- ----------- -----------
Consolidated total 903 872 2,428 2,442
Unconsolidated joint ventures (Southern California) 48 - 96 -
----------- ---------- ----------- -----------
Total 951 872 2,524 2,442
=========== ========== =========== ===========
Average Selling Price:
California deliveries (excluding joint ventures) $407,885 $420,621 $425,918 $428,931
Texas deliveries $294,509 $242,243 $280,337 $233,341
Arizona deliveries $163,847 $161,265 $165,600 $162,802
Colorado deliveries $263,073 $ - $263,073 $ -
Combined (excluding joint ventures) $333,203 $339,155 $335,901 $334,859
Combined (including joint ventures) $344,579 $339,155 $344,076 $334,859
</TABLE>
-9-
<PAGE>
Operating Data - (continued)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net New Orders:
Southern California 416 323 1,190 964
Northern California 186 224 794 777
------------ ------------ ------------ -----------
Total California 602 547 1,984 1,741
------------ ------------ ------------ -----------
Dallas 112 53 276 183
Austin 69 34 201 113
Houston 20 20 49 75
------------ ------------ ------------ -----------
Total Texas 201 107 526 371
------------ ------------ ------------ -----------
Arizona 223 177 691 578
Colorado 49 - 49 -
------------ ------------ ------------ -----------
Consolidated total 1,075 831 3,250 2,690
Unconsolidated joint ventures (Southern California) 38 25 122 25
------------ ------------ ------------ -----------
Total 1,113 856 3,372 2,715
============ ============ ============ ===========
Average Selling Communities during the quarter:
Southern California 22 22
Northern California 13 16
Texas 28 19
Arizona 16 12
Colorado 7 -
Unconsolidated joint ventures (Southern California) 3 2
------------ ------------
Total 89 71
============ ============
At September 30,
-----------------------------------
2000 1999
--------------- ------------
Backlog (in units):
Southern California 700 561
Northern California 390 314
--------------- ------------
Total California 1,090 875
--------------- ------------
Dallas 142 94
Austin 120 47
Houston 11 13
--------------- ------------
Total Texas 273 154
--------------- ------------
Arizona 411 329
Colorado 165 -
--------------- ------------
Consolidated total 1,939 1,358
Unconsolidated joint ventures (Southern California) 72 25
--------------- ------------
Total backlog 2,011 1,383
=============== ============
Backlog at quarter end (estimated dollar
Value in thousands) $735,444 $472,103
=============== ============
Building Sites Owned or Controlled:
California 9,082 9,084
Texas 2,762 2,317
Arizona 3,571 4,146
Colorado 1,977 -
--------------- ------------
Total 17,392 15,547
=============== ============
</TABLE>
-10-
<PAGE>
Net income for the 2000 third quarter increased 56 percent to $25,180,000,
or $0.85 per diluted share, compared to $16,181,000 or $0.54 per diluted share,
for the year earlier period. For the nine months ended September 30, 2000,
income from continuing operations increased 28 percent to $59,100,000 or $2.03
per diluted share, compared to $46,291,000, or $1.55 per diluted share, last
year.
Net income for the nine months ended September 30, 2000 including the
discontinued operation was $59,100,000, or $2.03 per diluted share, versus
$46,750,000, or $1.56 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.
Third quarter 2000 earnings before interest, taxes, depreciation and
amortization ("EBITDA") was $50.8 million compared to $35.1 million for the same
period in 1999. EBITDA for the nine months ended September 30, 2000 totaled
$117.3 million versus $102.4 million for the same period last year.
Homebuilding
Homebuilding pretax income was up 52 percent to $42.0 million for the three
months ended September 30, 2000 compared to $27.6 million last year. The higher
level of operating income was primarily attributable to a 390 basis point
improvement in the homebuilding gross margin percentage, a $3.3 million increase
in joint venture income and a 2 percent rise in homebuilding revenues.
Homebuilding revenues for the 2000 third quarter were $302.0 million
compared to $297.1 million in the prior year third quarter. The higher revenue
total was due to a 3.6 percent increase in deliveries to 903 new homes
(exclusive of joint ventures) which was partially offset by a 1.8 percent
decrease in the average home selling price to $333,000. During the 2000 third
quarter we delivered 582 new homes in California compared to 565 homes in the
previous year period. Deliveries for the quarter were up 22 percent in Southern
California but down 19 percent in Northern California due to fewer active
selling communities. For the full year, we anticipate that Northern California
deliveries will reach one of the highest levels achieved in the division's
history, and more importantly, the level of profitability anticipated in the Bay
Area in 2000 is expected to exceed the record results achieved in 1999. Our
Arizona division delivered 188 new homes compared to 201 homes in the year
earlier period. We expect full year deliveries in our Arizona division to be in
line with the strong levels achieved in 1999. New home deliveries were up 40
percent in Texas fueled by 79 percent and 18 percent gains, respectively, in
Dallas and Austin. Our newest operating division in Colorado delivered 33 new
homes for the period from August 25 through September 30, 2000.
Homebuilding revenues for the nine months ended September 30, 2000 were
$817.8 million compared to $820.7 million for the year earlier period. The
modest decrease in revenues was attributable to a 1 percent decline in the
number of new home deliveries (exclusive of joint ventures) which was partially
offset by a slightly higher average home selling price.
During the 2000 third quarter the average home price in California of
$408,000 was 3 percent lower than the year earlier period which was primarily
due to a change in product mix. The average home price in Texas was up 22
percent to $295,000 reflecting the delivery of larger, more expensive homes.
The average home price in Arizona was up slightly during the quarter to $164,000
and the average selling price in Colorado was $263,000 for the quarter. The
consolidated average home price for the 2000 fourth quarter is expected to
increase at least 10 percent over the third quarter average due to the delivery
of larger homes in California, but is expected to be modestly lower in 2001 due
to the delivery of more homes in Texas, Arizona and Colorado.
-11-
<PAGE>
The homebuilding gross margin percentage for the 2000 third quarter was up
390 basis points to 21.7 percent versus 17.8 percent in the year earlier
quarter. The significant increase in the gross margin percentage was driven
principally by a jump in California gross margins while the Arizona and Texas
gross margin percentages were generally in line with the prior year level. Home
prices in California continued to climb due to strong housing demand while labor
and material costs remained relatively stable during the quarter. For the nine
months ended September 30, 2000, the homebuilding gross margin percentage was up
160 basis points to 19.4 percent compared to the year earlier period.
Selling, general and administrative expenses for the 2000 third quarter
were 8.4 percent of revenues, up slightly from 8.3 percent in the year earlier
quarter. SG&A expenses for the nine months ended September 30, 2000 were 8.3
percent of revenues, down from 8.5 percent in the year earlier period. The
fluctuation in SG&A expenses as a percentage of revenues during these periods
are primarily due to the timing of certain sales and marketing costs incurred in
connection with the opening of new communities.
Income from unconsolidated joint ventures for the 2000 third quarter was
generated from the delivery of 48 homes from our three-project joint venture in
Fullerton, California in Orange County. We anticipate recognizing additional
joint venture income in the 2000 fourth quarter from the delivery of
approximately 60 new homes from the Fullerton venture while next year we have
the capacity to deliver approximately 150 to 175 homes from this venture. We
expect to commence selling activities during the second quarter of 2001 at our
first active adult community, an approximate 300 unit, three-project joint
venture in the Talega master plan community in San Clemente, California.
Deliveries are expected to begin in the third quarter of next year and could
total between 100 and 125 new homes in 2001. In addition, we expect to begin
delivering homes in the 2001 second quarter from an 82-unit joint venture in the
city of San Francisco. 2001 deliveries from this venture could potentially
range between 50 to 60 new homes. Additionally, land sales from the Talega land
development joint venture are also planned for fiscal 2001.
Amortization of costs over net assets acquired for the 2000 third quarter
reflects a slight increase over the prior year period as it includes
approximately one month of amortization related to the Colorado acquisition
which closed during the 2000 third quarter.
Net new home orders for the 2000 third quarter were up 30 percent over the
year earlier period to a third quarter record of 1,113 new homes on a 25 percent
increase in average community count. Orders were up 30 percent in Southern
California on a 4 percent increase in average community count, down 17 percent
in Northern California on a 19 percent decrease in community count, up 88
percent in Texas on a 47 percent increase in active selling communities and up
26 percent in Arizona on a 33 percent higher community count. New orders in
Colorado totaled 49 homes for the period from August 25 through September 30,
2000. Net new orders for the first three quarters of 2000 totaled 3,372 homes
versus 2,715 for the same period in 1999. The higher order levels contributed
to an increase in our backlog to 2,011 presold homes with an estimated sales
value of $735 million at September 30, 2000, up 56 percent from the backlog
value at September 30, 1999. Also, the September 30, 2000 backlog reflects the
addition of 149 presold homes acquired in connection with the third quarter
acquisition in Colorado.
Through the first nine months of the year we opened 44 new communities and
are scheduled to open approximately 14 new communities through the balance of
the year, of which approximately 9 will be located in California, 3 in Texas and
2 in Colorado. By the end of the year we expect to have approximately 90 to 95
active selling communities compared to 68 communities at the end of 1999. For
the 2001 fiscal year, we currently anticipate opening approximately 60 to 65 new
communities, of which approximately 35 will be located in California, 7 in
Texas, 12 in Arizona and 10 in Colorado. During 2001 we expect the number of
active selling communities to fluctuate between 90 to 125 subdivisions.
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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
2001.
Financial Services
Revenues from our financial services subsidiary for the 2000 third quarter
were up 50 percent over the 1999 third quarter while the dollar volume of loans
sold during the quarter increased 76 percent. Financial services revenues for
the first three quarters of 2000 were up 9 percent from the year earlier period
while the dollar volume of loans sold during that period was up 45 percent. The
relatively smaller increase in revenues compared 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 nine 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 August 25, 2000, we expanded into the Denver and Fort Collins, Colorado
markets with the acquisition of 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, plus the
assumption of approximately $37.5 million of indebtedness. The acquisition
consideration was paid in a combination of cash and Standard Pacific common
stock. In connection 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.
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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.
In September 2000, we amended our $450 million unsecured revolving credit
facility with our bank group, to among other things, extend the maturity date
one year to July 31, 2004 and revise certain financial and other covenants.
Additionally, the amended credit facility contains an option which allows us to
increase the total aggregate commitment up to $475 million subject to the
approval of the agent bank. This agreement also contains a borrowing base
provision and financial covenants which may limit the amount we may borrow under
the revolving credit facility. At September 30, 2000, we had borrowings of $76.8
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 $75 million
available under the universal shelf.
In September 2000, we utilized a portion of our universal shelf and 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. 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. In addition, upon a change in control we are required to make an offer
to purchase these notes.
From time to time, purchase money mortgage financing is used to finance
land acquisitions. At September 30, 2000, we had approximately $349,000
outstanding in trust deed notes payable.
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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 $6.9 million, or $0.24 per common share ($0.08 per
common share per quarter), in dividends during the nine months ended September
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 October 24, 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
November 23, 2000 to shareholders of record on November 9, 2000.
During the nine months ended September 30, 2000, 81,375 shares of common
stock were issued pursuant to the exercise of stock options for aggregate
consideration of approximately $752,000.
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 nine months ended September 30, 2000, we repurchased
525,400 shares of common stock for approximately $5.4 million under the plan.
From the inception of the plan through September 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.
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, have generally sought to manage interest rate risk with respect to
loan commitments and loans held for sale by preselling loans. 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
holding closed loans following funding, Family Lending has entered into forward
sale commitments of mortgage-backed securities. While Family Lending's hedging
strategy of buying and selling mortgage-backed securities should assist Family
Lending in mitigating risk associated with originating 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 mandatory delivery basis (which requires Family Lending to pay a fee if the
loan is not closed) 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 the
nature of 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.
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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 and the level of profitability in the Northern
California market for 2000;
. anticipated deliveries in the Arizona market for 2000;
. expected average home price for the fourth quarter of 2000 and 2001;
. expected fourth quarter 2000 and 2001 joint venture sales, deliveries, land
sales and income;
. orders and our backlog of homes and their estimated sales value;
. planned new home community openings and the expected number of active selling
communities;
. our prospects for growth in unit volume in 2001;
. 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.
Forward-looking statements are based on current expectations or beliefs
regarding future events or circumstances, and you should not place undue
reliance on these statements. Such statements involve known and unknown risks,
uncertainties, assumptions and other factors -- many of which are out of our
control and difficult to forecast -- that may cause actual results to differ
materially from those that may be described or implied. Such factors include
but are not limited to:
. local and general economic and market conditions, including consumer
confidence, employment rates, interest rates, the cost and availability of
mortgage financing, and stock market, home and land valuations;
. the cost and availability of suitable undeveloped land, building materials
and labor;
. the cost and availability of construction financing and corporate debt and
equity capital;
. the demand for single-family homes;
. cancellations of purchase contracts by homebuyers;
. the cyclical and competitive nature of our business;
. governmental regulation, including the impact of "slow growth" or similar
initiatives;
. delays in the land entitlement process, development, construction, or the
opening of new home communities;
. adverse weather conditions and natural disasters;
. environmental matters;
. risks relating to our mortgage banking operations, including hedging
activities;
. future business decisions and our ability to successfully implement our
operational, growth and other strategies;
. litigation and warranty claims; and
. other risks discussed in our filings with the Securities and Exchange
Commission, including in our Annual Report on Form 10-K for the year ended
December 31, 1999.
We assume no, and hereby disclaim any, obligation to update any of the
foregoing or any other forward-looking statements. In addition, while we
reserve the right to make such updates from time to time, no such update shall
be deemed to (a) indicate that other statements not addressed by such update
remain correct or (b) create an obligation to provide any other updates.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STANDARD PACIFIC CORP.
(Registrant)
Dated: November 13, 2000 By: /s/ Stephen J. Scarborough
--------------------------
Stephen J. Scarborough
Chief Executive Officer and
President
Dated: November 13, 2000 By: /s/ Andrew H. Parnes
--------------------------
Andrew H. Parnes
Vice President - Finance,
Treasurer and Chief
Financial Officer
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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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Ninth Amended and Restated Revolving Credit Agreement dated
as of September 26, 2000, among the Registrant, Bank of
America, National Association, Bank One, NA, Guaranty
Federal Bank, F.S.B., Bank United, Fleet National Bank, PNC
Bank, National Association, Comerica Bank, Sanwa Bank
California, Union Bank of California, SunTrust Bank and
AmSouth Bank.
10.2 Second Supplemental Indenture, dated as of September 5,
2000, by and between the Registrant and Bank One Trust
Company, N.A., as Trustee, with Form of Note attached,
incorporated by reference to Exhibit 4.1 of the Registrant's
Current Report on Form 8-K dated September 7, 2000.
27. Financial Data Schedule.
(b) Current Reports on Form 8-K
(i) Form 8-K dated August 28, 2000 reporting that the Registrant
issued a press release announcing it had completed the
acquisition of The Writer Corporation.
(ii) Form 8-K dated September 7, 2000 reporting that the
Registrant filed a Prospectus Supplement, dated September 5,
2000, and accompanying Prospectus, dated October 23, 1998,
relating to the offering of $125,000,000 principal amount of
the Registrant's 9 1/2% Senior Notes due 2010. In
connection with this note offering, certain exhibits related
to this transaction were filed with this Form 8-K.
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