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Standard Pacific Corporation (SPF)

Q2 2008 Earnings Call

July 31, 2008 11:00 am ET


Jeffrey Peterson - Chairman, President, Chief Executive Officer

Andrew Parnes - Chief Financial Officer, Executive Vice President - Finance

Lloyd McKibbin – Senior Vice President and Treasurer


James Eustice - Churchill Pacific

Harlan Cherniak - Venner Capital

Tom Carroll - Imperial Capital

Alex Barron - Agency Trading Group

Buck Horne - Raymond James

James Wilson - JMP Securities

Lee Brading - Wachovia

David Goldberg - UBS

Andrew Brossa - Citadel

Susan Berliner - JPMorgan

Michael Rehaut - JPMorgan

Ivy Zelman - Zelman & Associates



Good day everyone and welcome to the Standard Pacific Homes second quarter conference call. Today’s call is being recorded. At this time, I would like to turn the conference over to Mr. Lloyd McKibbin, Senior Vice President and Treasurer.

Lloyd McKibbin

Thank you and good morning. Our formal presentation 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 a follow-up. We’ll also limit the entire call time to one hour.

Now I am 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:





Interest coverage ratio;

Capital and liquidity resources;

Joint venture exposure and debt;

Ability to weather the downturn and take advantage of potential strategic opportunities and values;

Potential impairments;

Level of spec homes;

Generation of sales and deliveries;

Management of starts;

Reduction of land acquisitions and land development spending;

And reduction of our overhead rates.

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 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 and interest rates. These and other risks are discussed in our press release of July 30, 2008. We refer you to this press release and our most recent annual report on Form 10-K and quarterly report on Form 10-Q for further information.

Copies of these documents are provided on our website, or from the company upon request. We suggest you click on these links after you have reviewed the slides and listened to the audio portion of our conference call. Clicking on the links during the slide show or conference call may cause you to a miss portion of the slide show or call.

The recorded presentation will be available for replay an hour after this call ends and will continue to be available until August 30, 2008. The audio portion may also be replayed by dialing 888-203-1112 and entering pass code number 1473292.

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 Peterson

Thank you Lloyd, and good morning. We appreciate your participation on today’s call. It’s been quite a while since we started our earnings call off on a positive note but today we are noting that we’ve closed the first phase of the MatlinPatterson equity infusion.

We would get into the specifics of the transaction in a moment but the impact of this event on the company has been profound. With the closing of the first phase, we ended the quarter with over $570 million of cash on our balance sheet, while the MatlinPatterson debt for warrant exchange contributed to the $156 million reduction in consolidated unsecured homebuilding debt for the quarter.

With the unwind of a number of joint ventures during the quarter, the details of which we will discuss later, we used nearly $63 million of operating cash. The company’s operating results continue to reflect very challenging market conditions which continue to erode.

While our net loss increased year-over-year to $248 million, our homebuilding segment pre-tax loss was lower at $185 million versus $244 million last year, due to a reduced level of impairments. The consolidated net loss was higher as a result of nearly $131 million deferred tax asset valuation charge recorded this quarter.

New home orders continue to slide and we’re down 21% year-over-year while our cancelation rate was in the mid 20% range, consistent with the first quarter of the year. We continue to make significant progress in reducing our joint venture exposure as evidenced by the $136 million reduction in JV debt during the quarter.

As I mentioned, we closed the first phase of the MatlinPatterson transaction on June 27 through the sale of 381 million of senior preferred stock at a common stock equivalent of $3.05 per share, which subject to shareholder approval will be convertible into 125 million common shares.

In addition, also on June 27, MatlinPatterson exchanged $128.5 million of company notes for a warrant to purchase 89.4 million common shares with an exercise price of $4.10 per share.

On July 21 and July 30, we announced the terms and schedule of the transferable rights offering to our existing shareholders to purchase 50 million shares of common stock at $3.05 per share. The rights offering is fully backstopped by MatlinPatterson.

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