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Standard Pacific Corp. (SPF)

May 21, 2013 2:55 pm ET


Scott D. Stowell - Chief Executive Officer, President, Director and Chairman of Executive Committee

Jeffrey J. McCall - Chief Financial Officer, Principal Accounting Officer and Executive Vice President


Michael Jason Rehaut - JP Morgan Chase & Co, Research Division


Michael Jason Rehaut - JP Morgan Chase & Co, Research Division

All right. We're going to continue with the next presentation if you go on and find your seats. So again good afternoon. My name is Mike Rehaut, homebuilding and building products analyst for JPMorgan and the equity research group. Really thrilled to have so far a great first day for our Sixth Annual Homebuilding & Building Products Conference.

Tomorrow, we have another packed day, a little bit more heavy on the building products side of the equation, not by design just by how the scheduling worked out. Also a couple of homebuilders presenting tomorrow as well, those being Meritage Homes and D.R. Horton. We also have a great lunch speaker tomorrow for those, if you haven't seen the schedule, in CEO of the Chase Mortgage Finance business, Kevin Watters. So looking forward to hearing his comments on the industry.

But right now, we have Standard Pacific Homes and CEO Scott Stowell and CFO Jeff McCall. As in previous presentations, hopefully, the prepared remarks will be roughly 20 minutes, so there's plenty of time for Q&A. Scott and Jeff have really created a great position for the company, continuing on some of the strategic planning from the previous management team or at least on a CEO level -- Scott has been with the company for many, many years, in terms of positioning the company over the next several years from a longer-term land view. And the fruits of that planning has already coming out in spades so far this year.

And without any further ado, I'll turn it over to Scott.

Scott D. Stowell

Thank you, Mike. We're delighted to be here. With me today is Jeff McCall. As Mike said, he's our Chief Financial Officer. But before I begin the presentation, I promised our General Counsel that I would handle a couple of housekeeping items. So wanted to just have everybody direct your attention to the Standard Pacific Safe Harbor statement. The presentation may contain some forward-looking statements, including future financial and operational performance and actual results may differ. And for information regarding the risk factors in our business, you can see the company's SEC filings Form 10-K and 10-Q under the Risk Factors.

So with that, for those of who may not know Standard Pacific very well, I wanted to give you just a brief overview. We are the 10th largest homebuilder if you measure size by revenue with nearly a 50-year history in California. We delivered over 115,000 homes since our founding in 1965 and 3,600 homes during the last 12 months. We're actively building in 24 markets in 162 communities in 8 states with strong long-term housing demand supported by a strong land inventory, as Mike mentioned, where we own and control over 32,000 lots.

We are a builder-developer, and it's our development expertise that's contributed to our strong margins. So with our roots in California as a builder-developer, we've spent the last 5 years developing and building this competency throughout our entire company and across all our markets. We have the second-highest ASP in the group with a brand recognized for building high-quality homes to a move-up homebuyer.

Before we jump into company specific strategy and performance, I'd like to just spend a minute reviewing some of the housing market drivers and why I feel that we are well positioned heading into this recovery. We shared the macro view that the national new home sales will return to the long-term trend line of somewhere between 800,000 and 1 million home sales. The unanswered question is when and how fast will the recovery occur.

Based on the current 2013 projections of somewhere around 450,000 new home sales, we're only halfway back to the trend line. And if you assumed a 20% growth rate, it would take less than 4 years to return -- to get there. Now that's not unprecedented. You'll notice in this dark blue box there, where we've listed the past 5 housing recoveries, they each averaged about a 25% seasonally annually adjusted growth rate. So 20% is actually on the low end of that range. So we believe that builders who are well positioned in the early innings of the recovery are going to benefit from this strong growth trajectory.

Now employment growth is one of the most important drivers of housing demand. That's no news to anybody here at this conference. Job growth in each of our markets is expected to outperform the national average on a percentage basis, in some cases, by a significant amount. And if you also note that in the largest housing markets, California, Texas and Florida, the volume of the job growth is also very high. And that's a particular benefit in supply constrained California.

According to John Burns, the single-family permit activity is expected to grow at an annual compounded rate of about 22% between 2013 and 2015. Many of our markets are projected to exceed that national rate by a significant amount. If you'll note, Phoenix is projected to grow 20 -- excuse me, 42%; the Inland Empire, 37%; and South Florida, 32%.

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