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Standard Pacific Corp. (SPF)

Q4 2008 Earnings Call

February 17, 2009 11:00 am ET


Kenneth Campbell III – Chairman, President and Chief Executive Officer

Andrew H. Parnes – Chief Financial Officer and Executive Vice President, Finance

Scott Stowell – Chief Operating Officer


Ivy Zelman – Zelman & Associates

Michael Rehaut – JP Morgan

Dave Goldberg – UBS

Larry Taylor – Credit Suisse

Susan Berliner – JP Morgan

Joel Locker – FTN Securities

Alex Barron – Agency Trading Group

Buck Horne – Raymond James

[Cheryl VanWinkle] – [Independence United]

[Keith Limey] – Goldman Sachs



Good afternoon and welcome to the Standard Pacific Homes fourth quarter conference call. This conference is being recorded. At this time I'd like to turn the conference over to Mr. Andy Parnes, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Andrew H. Parnes

Thank you and good morning. Our formal presentation will be followed by a question-and-answer period. Now I'm going to read a notice regarding forward-looking statements. This conference call and the accompanied slide presentation contain forward-looking statements. Such forward-looking statements may include but are not limited to statements about our outlook, markets, tax refunds, cost reductions, expected absorption rates and pricing, borrowing capacity, liquidity for our joint venture needs, expected joint venture loan pay downs, and potential re-margin obligations and unwinds, number of spec homes and orders in backlog.

In general any statements contained in these materials that are not statements of historical fact should be considered forward-looking statements. We assume no obligation to update these or any other forward-looking statements.

We caution you that forward-looking statements involve risks and uncertainties and there are a number of factors that could cause our actual results to differ materially from those that are contained in or implied by these statements. These factors include but are not limited to local and general economic and market conditions, including consumer confidence, employment rates, interest rates the availability of mortgage financing and the supply of homes for sale in the market.

These and other risks are discussed in our press release on February 13, 2009. We refer you to this press release and our most recent annual report on 10-K and quarterly report on 10-Q for further information.

The recorded presentation will be available for replay today an hour after this call ends and will continue to be available until March 20, 2009. The audio portion may also be replayed by dialing 888-203-1112 and entering pass code number 7018740.

Joining me on the call this morning are Ken Campbell, our CEO and Scott Stowell, our COO. I will now turn the call over to Ken.

Kenneth Campbell III

Good morning everybody. This is my first go at this with Standard Pacific so hopefully I'll get the standards set low enough and I can improve on it going forward. I'm going to skip the industry update part of this thing. Most of you have listened to other home building people do their earnings announcements. It turns out we're operating in the same market as they are and have – pretty much running into the same issues. So if you need an industry update we can forward the replay numbers for the other guys for you; same kind of story.

One of the things, I guess I have to excuse myself for in the beginning, if there's a little bit too much, sounds a little loose or I crack the occasional joke, if you're in the business of home building in the United States you need to find humor and things to laugh about wherever you can.

So I'm just going to move forward. The only thing I'll say about the sort of the state of the industry is I think maybe there'll be a slight lift, positive lift now that the government's decided that they're not going to provide much help to homeowners. Nobody's going to sort of wait until it comes.

So there might be a little improvement because they told everybody they're not going to do much, but I think it's going to be a blip in any event and not something to go long on. I'll go through some of the highlights I think that people have the slides.

So I think the cash balance is an important asset for us. At the end of the year we had something like $625 million. We also have a tax refund coming in the not too distant future something north of 100. I think it's closer to 114. That's obviously better than starting without a lot of cash requirements.

We have a couple hundred million dollars of debt to pay off this year. Similar amounts later, we'll get into that in more detail, but so we have plenty of time and some assets to use to get through the winter here. We also have as we'll talk later maybe a couple 100 too many spec homes, which will further help our cash situation, but as I say we'll get into that later.

The cash thing plays right into sort of a big comment I'd like to make on strategy. When the initial investment came into Standard Pacific from Matlin Patterson, I'm pretty sure the thought was that there would be enough cash to take advantage of the asset buying opportunities that we expected to show up this year.

I think the market has gotten worse since June of last year. We expected it to get worse than Matlin Patterson; it's gotten worse than we expected. The good news is that we put enough money in so that after adjusting the cost structure I think we could use the money to increase our runway.

The bad news is it means we have now less money available to take advantage of acquisition opportunities. We still think there's acquisition opportunities out there in particularly maybe the second half of this year and the first half of next, but it's not clear at this point how much money Standard Pacific has available to spend on those.

I think the next six months will be helpful in figuring out whether we have too much cash or not enough and we'll get through the spring selling season, if there is one, and we will have finished adjusting our cost structure or we will have taken the next step and we'll talk about that more later. So we'll have an idea of what our costs are and what our revenues are and then we can reassess where we are, whether or not we need to get some more capital to take advantage of the opportunities or not. Obviously, I think given where the market is today we probably need to conserve our cash. We just may need to get a financial partner of some sort, we'll see.

As I think everybody knows or a lot of people know that at this point we had spent a lot of time looking at acquiring the assets of Technical Olympic. When we finished our due diligence and sort of revised what we thought our view of value of that business was they basically rejected our offer. And so the talks with TOUSA have stopped for the most part.

I don’t expect that they will come back but I'm not too concerned. Although we spent some money looking at it, just because we lost a few million dollars, spent a few million dollars, doesn’t mean we ought to move ahead and acquire it at the wrong price and I think that there will be plenty of good opportunities to buy land in the future. So I'm not concerned about missing the chance of a lifetime.

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