Standard Pacific Corp (SPF)

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Standard Pacific Corp. (SPF)

Q3 2009 Earnings Call

October 30, 2009 1:00 pm ET

Executives

Lloyd McKibbin - Senior Vice President and Treasurer

Kenneth Lind Campbell - President, Chief Executive Officer, Director

John M. Stephens - Chief Financial Officer, Senior Vice President

Scott D. Stowell - Chief Operating Officer

Analysts

Alan Ratner - Zelman & Associates

David Goldberg - UBS

Michael Rehaut – JP Morgan

Susan Berliner – JP Morgan

Jim Wilson - JMP Securities

Alex Barron – Agency Trading Group

John Reardon - Craw Whedon

Presentation

Operator

Good day, everyone and welcome to the Standard Pacific Homes third quarter conference call. Today’s conference is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Lloyd McKibbin, Treasurer. Please go ahead, sir.

Lloyd McKibbin

Thank you and good morning. Our formal presentation will be followed by a question-and-answer period. I will now 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, new home orders, absorption rates, pricing, deliveries, backlog, number of spec homes, impairments, liquidity, cash flows, cost reduction, including through operational restructuring, inventory reduction, supply chain improvement, value engineering and the implementation of best practices, profitability, the potential benefit we may realize from our deferred tax asset, our ability to extend project-specific financing, acquisition opportunities, and the condition of the housing market. 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 of October 29, 2009. We refer you to this press release and our most recent quarterly report on form 10-Q and our annual report on form 10-K.

The recorded presentation will be available for replay today two to three hours after this call ends and will continue to be available until November 30th. The audio portion may also be replayed by dialing 888-203-1112 and entering pass code number 5369884.

Sitting in the call this morning are Ken Campbell, our CEO; Scott Stowell, our COO; John Stephens, our CFO. Also joining us is John Babel, our General Counsel.

I will now turn the call over to Ken.

Kenneth Lind Campbell

Good morning or good afternoon, everybody. I like to start every one of these calls with an update on the weather here in Irvine, since generally that’s always going to be good news, and so it’s in the 70s here in Irvine. It happens to also be in the 70s in every market that we are building homes today, except one. So we are reviewing whether or not to keep that community open at the time. I guess it’s also pretty nice in New York, so maybe we don’t really get bragging rights here.

I was going to go through a list of my personal pet peeves on the call because I think that would be a little more interesting than listening to a CEO talk about a homebuilder but I have been told by our General Counsel that that’s probably inappropriate and I’ve been told by others that they don’t really give a hoot about my personal pet peeves.

So we will try to go through the pitch, the description of our results as quickly as we can, which is not easy since I like to talk a lot. But hopefully we will get your questions a little quicker than usual, since they are always more interesting than what I have to say.

The one little thing I like to mention though, I am very thankful that neither of the L.A. teams made it into the World Series because the office is already a little challenging on some days but if L.A. was playing New York, I was going to get bombarded with like who are you rooting for, and I’m rooting for the Yankees, so that would have been bad. Now I don’t have to tell you who I was going to root for.

Okay, so -- highlights here going into it are all pretty straightforward. A lot of this was in the press release but we did manage to make a lot of progress on the debt restructuring. We reduced it by $80 million or so by exchanging some debt for equity, mostly, and then we also managed to move some debt out from 2013 to 2016. What that managed to do for us was to sort of remove what I would call any sort of tension or pressure over the next few years. You know, we are down to having $300 million or something of total debt due before 2013 and given the amount of cash that we are generating at this point from current operations, we don’t really see that as an issue anymore. And we’ve also got the JV recourse debt down to $45 million and not to mention the fact that we have $80 million of equity in those joint ventures, so a lot of progress on dealing with debt and any concerns we might have about our ability to deal with that.

The gross margins sort of hung in there, is what I would say. You know, relatively strong, maybe some emphasis on the word relatively. Obviously we need that number to go up to get back to where we want to be but it’s not going down. It’s inching up a little bit or handing in there. And this is on basically flat sales prices. It turned out this time that ASP was actually flat I think from the prior quarter, like $302,000, something like that. It also on a same-store basis, it’s slightly up but I mean slightly. So it might be up 1% or something, so basically the ASP is a pretty good indication this time of what our average sales price actually is. That is not usually the case.

Anyway, our SG&A, although it went up a bit as a percentage, you know we kept -- the spending was pretty flat. Our deliveries went down a little bit so we ended up with a slightly higher percentage. I think that that will actually head in the other direction a little bit in the fourth quarter due to sort of deliveries in about the same level and maybe a slight up-tick in some margins and a slight down-tick in actual SG&A spending.

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