Standard Pacific CEO: FY08 to be cash flow positive
Standard Pacific Corp. (NYSE: SPF) CEO Stephen Scarborough said he believes the single-family home builder will finish 2008 with a cash-flow positive balance sheet. However, he warned that the first quarter, which is “traditionally a lower volume period,” will likely have negative cash flow. Scarborough made the comments during a midday conference call.
“We have taken productive steps to strengthen our cash position in 2007,” Scarborough said. “We will continue to maintain our focus on cash generation and cash management in 2008 by generating sales and deliveries, balancing our price volume and margin objectives, managing starts, minimizing land acquisitions, reducing land development spending and unnecessary overhead through staff reductions and division consolidations.”
Late Monday night, Standard Pacific reported better-than-expected results excluding several pretax impairment charges, as the seller of single-family attached and detached homes in the United States waded through the housing downturn. In a press release, Standard Pacific revealed that it expects a tax refund of about $235 million in cash during the first quarter.
For the three months ended Dec. 31, 2007, Irvine, Calif.-based small cap, which also provides mortgage financing and title services to its homebuyers through its subsidiaries and joint ventures booked a net loss of $440.9 million, or $6.80 per share, compared with a net loss of $98.4 million, or $1.53 per share, in the fourth quarter last year. Excluding extensive pretax impairment charges, the company would have recorded profit of $0.07 per share.
The consensus of eight analysts polled by Thomson Financial was a loss of $0.89 per share.
The company's pretax impairment charges (including discontinued operations) were $433.5 million, or $265.2 million or $4.09 per share after tax, related to homebuilding market conditions and the company’s implementation of its plan to combat the challenging macro environment.
Homebuilding revenues from continuing operations for the quarter were $933.6 million, above the $749.68 million six analysts polled by Thomson Financial were on average forecasting. The current quarter’s results compares with revenues of $1.2 billion for the fourth quarter last year.
New home deliveries were down 23% to 2,150 from 2,804 last year, while net new home orders were down 11% to 1,002 from 1,129 last year. The company experienced a cancellation rate of 37% for the quarter, compared with a rate of 44% last year.
Standard Pacific’s quarter-end backlog stood at 1,279 homes, valued at $443 million compared with 2,443 homes valued at $885 million a year ago.
Despite the macro hardships, Standard Pacific did increase its cash position on the balance sheet and increased cash flow from operating activities for the quarter. The company exited six joint ventures during the fourth quarter for aggregate net cash payments totaling approximately $3 million. In addition, Standard Pacific accelerated the take down of lots from one Southern California venture while acquiring its share of unstarted lots from another Southern California joint venture, both moves to maximize tax cash flow benefits.
Cash flows from operating activities were $348 million, while homebuilding cash on balance sheet was $219 million compared with $5 million at Sept. 30, 2007.
Going forward, Standard Pacific’s management said it anticipates housing market conditions to continue to weaken, resulting in a decrease in companywide deliveries. In response, the company says it plans to cut new home starts, new community openings and spending for land acquisitions and site development costs, and continue to balance overhead to sales levels.
Based on its current view of market conditions, the company said it expects to generate positive cash flow during the year.
“Despite the impressive free cash flow, we remain concerned about the company’s liquidity position moving forward, given that completed/in-progress unsold homes are approximately 10.4/community, among the highest level in the group,” UBS analyst David Goldberg wrote in a research note this morning. “We would view a reduction in this favorably, as it would generate significant capital to meet near-term requirements.”
Shares of Standard Pacific (SPF) popped 1.74%, or $0.54, to $5.14 at 1:33 p.m. ET. Shares of Standard Pacific have been trading in the range of $1.47 to $30.20 for the past 52 weeks.
