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Standard Pacific Corp. (SPF)

Q4 2009 Earnings Call

February 4, 2010 1:00 pm ET


John M. Stephens – Chief Financial Officer & Senior Vice President

Scott D. Stowell – Chief Operating Officer

John P. Babel – Senior Vice President, General Counsel & Secretary

Kenneth Lind Campbell – President, Chief Executive Officer & Director


Ivy Zelman – Zelman & Associates

David Goldberg – UBS

Michael Rehaut – JP Morgan

Susan Berliner – JP Morgan

James Wilson – JMP Securities

Adam Rudiger – Wells Fargo

[Alex Baron – Housing Research Center]

Joel Locker – FBN Securities

Buck Horne ��� Raymond James

[Ed Holstack] – Alliance Bernstein



Welcome to the Standard Pacific Homes fourth quarter conference call. Today’s conference is being recorded. At this time I would like to turn the conference over to Mr. John Stephens, Chief Financial Officer.

John M. Stephens

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 accompanying slide presentation contains forward-looking statements. Such forward-looking statements include but are not limited to statements about our outlook, markets, new home orders, absorption rates, deliveries, pricing, backlogs, spec homes, our ability to obtain financing, consummate land purchases and rebuild our land portfolio, acquisition opportunities, cost reduction initiatives, profitability impairments, trends in our gross margins and other measures, cash flows, the sufficiency of our liquidities to support growth and withstand further market declines, the value of our deferred tax assets and an anticipated tax refund.

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 or are 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 February 3, 2010. We refer you to this press release and our most recent quarterly report on Form 10Q and our annual report on Form 10K.

The recorded presentation will be available for reply today two to three hours after this call ends and will continue to be available until March 7th. The audio portion may also be replayed by dialing 888-203-1122 and entering pass code number 8400892. Also joining us on the call this morning are Scott Stowell, our COO and John Babel, our General Counsel. I will now turn the call over to Ken Campbell our CEO.

Kenneth Lind Campbell

This marks the one year anniversary for Ken here so we’ll see if I can do any better than I did last time. I think three days after my last call the stock went to something like $0.65 a share so maybe we’ll do better this time. I hope everybody liked the harpsichord music there while you were on hold, we had to pay extra for that so I hope that everybody enjoyed it. As we’ve promised in the past we’d give you a weather update at the beginning of the call and I must admit that it is sunny and 70 degrees outside. Although, full disclosure, we’re a full disclosure kind of place, it did rain last week so it’s not perfect here. I even hear it’s going to rain later.

Today, what we’re going to try and do is once again engage in what we might call risky behavior which is trying to basically increase the amount of transparency in our numbers. One of the things I learned over the course of the year is I think there is more transparency available both to us internally in terms of understand our business and externally in terms of helping our shareholders on the outside understand our business and maybe more specifically helping the analyst community out there to help our shareholders understand the business.

I guess I have to admit that the questions and the analysis done by the analysts has helped me as well because to the extent that you guys ask questions and I don’t know the answers I have to go back and figure it out so I guess that’s why analysts make so much money, because they’re good at that kind of thing. Anyway, we’re going to try and make your job easier with the obvious risk that the more transparency there is the harder it is to hide. Oh well, here we go.

The last little point I have to make is a little bit of humor that we sprinkle around, we’re going to continue to do despite the fact that some of our former shareholders aren’t so happy about it. I had one friend in Ohio say I sounded a little bit too serious on my last call and he’s the president of the local Steelworks Union so I’m going to try and make it a little more fun because one thing you don’t want to do is make the steelworks angry. So apologies to those who were hoping for a much more serious scripted discussion here.

I guess the headline or the highlight has to be the net income. Although the total net income of around $83 million was driven largely by this sort of tax benefit that the government decided to give us. But separate from that if you sort of clear away all the noise the tax benefits, and the impairments, and the restructuring costs we’ll talk about a little bit later, we still managed to get our nose above water so making a little bit of money, although it’s a little bit, is better than losing money so we’re happy about the fact that we got our nose above water.

Hopefully you’ve come to expect these king of core operating margins. I guess our core operating margin is sort of in the 4% neighborhood or in the 11% neighborhood if you exclude the interest. Core operating margin being our gross margin less our SG&A. I think you have to go to the core operating margin to understand our performance because different builders put different numbers in different rows. So anyway, we’re happy about that.

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