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Standard Pacific Corp. (SPF)

Q3 2008 Earnings Call

October 30, 2008 11:00 am ET


Lloyd McKibbin – Senior Vice President and Treasurer

Jeffrey V. Peterson - Chairman, President & Chief Executive Officer

Andrew H. Parnes - Chief Financial Officer & Executive Vice President, Finance


Ivy Zelman - Zelman & Associates

Michael Rehaut - JP Morgan

Dave Goldberg - UBS

Susan Berliner - JP Morgan

Larry Taylor - Credit Suisse

James Wilson - JMP Securities

Alex Barron - Agency Trading Group

Joel Locker - FTN Securities

John Sykes - Nomura

Tom Koch – Turnaround Capital



Good day, ladies and gentlemen and welcome to the Standard Pacific Homes third quarter earnings conference call. One note, that today’s conference is being recorded. I would like to turn this call over to Mr. Lloyd McKibbin, SVP and Treasurer. Please go ahead.

Lloyd McKibbin

Thank you and good morning. Our formal presentation today will be followed by a question and answer period. Out of respect for your time, we will ask that each caller be limited to one question and one follow up. We will also limit the entire call time to one hour. Now I’m going to read a notice regarding forward looking statements.

This conference call and the accompanying slide presentation contain forward looking statements. Such forward looking statements may include but are not limited to statements about our outlook, markets, orders and backlog, a continuation of challenging market conditions, the ability to incur further debt and make restrictive payment, a sufficiency of funds in our unrestricted subsidiaries to cover joint venture capital needs , potential joint bench or re-margin obligations and unwinds, control of specular starts and homes, expense reduction initiatives including costs of sales, sales and marketing and G&A, cash flow generation going forward in the sufficiency of our cash position and balance sheet.

In general, any statements contained in these materials that are not statements of historical facts 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 the actual results to differ materially from those that are contained in or implied by these statements.

These statures include but are not limited to local and general economic market conditions including consumer confidence, employment rate, interest rates, the availability of mortgage financing ,and the supply of homes for sale on the market. These and other risks are discussed in our press release of October 29, 2008. We refer you to this press release and our most recent annual report on form 10-K and quarterly report form 10-Q for further information.

Copies of these documents are provided on our website at or from the company upon request. We suggest that you click on these links after you have reviewed the slides and listened to the audio portion of our conference call today. Clicking on the links on the slideshow during the conference call may cause you to miss a portion of the slideshow or call. The recorded presentation will be available for replay an hour after this call ends and will continue to be available until November 30, 2008. The audio portion may also be replayed by dialing 888-203-1112 and entering pass code number 3541387.

Our presenters this morning are Jeff Peterson, Chairman, President and CEO, and Andy Parnes, Executive Vice President and CFO. I will now turn the call over to Jeff.

Jeffrey V. Peterson

Thank you, Lloyd and good morning to everyone. While we continue to endure what appears to be one of the worst economic and housing environments the country has faced in recent memory, we’re please to have closed the final phase of the Matlin-Paterson equity recapitalization through a $153 million rights offering.

The additional equity in cash liquidity has helped to fortify our balance sheet for these challenging times which are expected to persist for the foreseeable future. We ended the quarter with $712 million of cash on our balance sheet and we generated nearly $32 million of cash flow from operating activities for the quarter. Housing market conditions have deteriorated further during the quarter as the growing level of foreclosure inventory combined with the tumultuous global financial markets, worsening economic conditions and a record low in consumer confidence, further undermine the already weak housing market. It does not appear at this time that the earlier efforts by the federal government to stabilize the housing market across the country have had any meaningful impact.

As you may be aware, most of the major public home builders are proposing that congress must adopt a viable solution to arrest the crisis in housing. This proposal includes two components; a true tax credit, and a mortgage rate subsidy similar to those implemented in the early 1970’s to address the housing market at that time.

The further decline in new home demand is in evidence by our slower work trends which were off 32% year over year and further price reductions which resulted in impairment charges aggregating $368 million for the quarter. In all, our home building segment lost $388 million pre-tax for the quarter which contributed to a consolidated net loss of $369 million or $2.53 a share.

As I mentioned earlier, in September we completed a $50 million share rights offering which resulted in an additional equity infusion of $153 million. Our existing shareholders acquired 27.2 million shares while Matlin-Paterson acquired 22.8 million common equivalent shares pursuant to their back stop of the rights offering.

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