Press release from PR Newswire
Standard Pacific Corp. Reports 2011 Third Quarter Results
Thursday, October 27, 2011
Standard Pacific Corp. Reports 2011 Third Quarter Results16:04 EDT Thursday, October 27, 2011Average active selling communities grow to 159 from 131 in Q3 2010 Net new orders up 38% vs. Q3 2010IRVINE, Calif., Oct. 27, 2011 /PRNewswire/ -- Standard Pacific Corp. (NYSE: SPF) announced results for the third quarter and nine months ended September 30, 2011.2011 Third Quarter HighlightsNet new orders of 764; flat compared to Q2 2011 and up 38% from Q3 2010Adjusted net income of $3.2 million* (net loss of $6.4 million including impairment charges, deposit write-offs and restructuring charges)Backlog of 848 homes; up 9% from Q2 2011 and up 40% from Q3 2010159 average active selling communities (11 new/10 closed out); up 4% from prior quarter and up 21% from Q3 2010Average selling price of $346 thousand; up 3% from Q2 2011Homebuilding revenues up 17% due to 16% increase in new home deliveries from Q3 2010Inventory impairment charges totaling $7.3 million in four communities; $1.7 million of deposit write-offsAdjusted gross margin from home sales of 18.8%* (15.8% including inventory impairments); down 120 basis points from Q2 2011 and 480 basis points from Q3 2010 Adjusted SG&A rate from home sales of 15.9%* (16.2% including restructuring charges); 190 basis point improvement from Q2 2011 and 170 basis point improvement from Q3 2010Restructuring charge of $0.6 million recognized in conjunction with the implementation of the Company's 10% G&A expense reduction plan Operating cash outflows of $78.5 million in Q3 2011, a $43.5 million improvement from $122.0 million in Q2 2011Excluding land purchases and development costs, cash inflows of $27.9 million* in Q3 2011 and $1.9 million* in Q2 2011Adjusted EBITDA of $28.4 million*, or 11.7%* of homebuilding revenues, in Q3 2011 ($91.9 million*, or 11.5%*, for LTM ended September 30, 2011)Cash balance of $451.2 million with $197 million available from revolving credit facility vs. $546.1 million in cash as of the end of Q3 2010 when the Company had no revolving credit facilityApproved land purchases of $55 million for 1,280 lots; down from $98.5 million for 1,493 lots in Q2 2011Ken Campbell, the Company's CEO commented, "Our 38% year-over-year order growth and increasing ASP are a reflection of the execution of our strategy to grow community count in desirable locations and increase our product mix within the move-up segment." Scott Stowell, the Company's President added, "Through our focus on community count growth and cost reduction over the last several years we have lowered our break-even absorption rate, better positioning the Company for profitability in what we expect to be an ongoing, difficult 2012 housing market."For the third quarter of 2011, the Company reported a net loss of $6.4 million, or $0.02 per share, on homebuilding revenues of $241.8 million compared to net income of $4.5 million, or $0.02 per share, on homebuilding revenues of $207.5 million in the 2010 third quarter. The net loss in the 2011 third quarter included $9.0 million of inventory impairment charges and deposit write-offs and $0.6 million of restructuring charges. Excluding these charges, the Company's adjusted net income was $3.2 million* in the 2011 third quarter.Homebuilding revenues increased 17% from $207.5 million for the 2010 third quarter to $241.8 million for the 2011 third quarter driven primarily by a 16% increase in new home deliveries to 697 homes. The Company's consolidated average home price for the 2011 third quarter was $346 thousand, which was up 3% over the prior quarter. Gross margin from home sales for the 2011 third quarter was 15.8% (18.8%* excluding $7.3 million of inventory impairment charges) versus 17.0% (20.0%* excluding $6.0 million of inventory impairment charges) for the prior quarter. The 120 basis point decline in the 2011 third quarter adjusted gross margin from home sales was driven by lower margins in substantially all of the Company's markets due to general price softening and a mix shift to more deliveries from lower margin projects. The impairments related to two homebuilding projects in Northern California totaling $5.7 million, one homebuilding project in Arizona for $0.8 million and one homebuilding project in the Carolinas for $0.8 million. Excluding inventory impairment charges and previously capitalized interest costs, gross margin from home sales for the 2011 third quarter was 26.6%* versus 27.9%* for the 2011 second quarter. The Company's 2011 third quarter SG&A expenses (including Corporate G&A) were $39.1 million compared to $38.4 million for the 2011 second quarter and included noncash stock-based compensation expenses of $2.6 million and $3.5 million, respectively. The Company's 2011 third quarter SG&A expenses included $0.6 million in restructuring charges related to the implementation of our plan to reduce the fixed portion of our G&A expenses for 2012 by 10% as compared to 2011. The Company's 2011 third quarter SG&A rate from home sales was 16.2% versus 17.6% for the 2010 third quarter. Excluding restructuring charges, the Company's 2011 third quarter SG&A rate was 15.9%*. The improvement in the Company's SG&A rate was primarily the result of a 17% increase in revenues from home sales, partially offset by higher sales and marketing costs associated with new community openings. The Company's G&A expenses (excluding incentive compensation and restructuring charges) were $22.8 million for the 2011 third quarter, and have remained stable, ranging from $22.4 million to $22.8 million per quarter since the 2010 first quarter.Net new orders (excluding joint ventures) for the 2011 third quarter increased 38% from the 2010 third quarter to 764 homes on a 21% increase in the number of average active selling communities from 131 to 159. The Company's monthly sales absorption rate for the 2011 third quarter was 1.6 per community compared to 1.4 per community for the 2010 third quarter and 1.7 per community for the 2011 second quarter. The Company's cancellation rate for the 2011 third quarter was 16%, compared to 19% for the 2010 third quarter and 14% for the 2011 second quarter. The total number of sales cancellations for the 2011 third quarter was 144, of which 81 cancellations related to homes in the Company's 2011 third quarter beginning backlog and 63 related to orders generated during the quarter. The dollar value of homes in backlog (excluding joint ventures) increased 42% to $304.8 million, or 848 homes, compared to $214.2 million, or 605 homes, for the 2010 third quarter, and increased 4% compared to $293.8 million, or 781 homes, for the 2011 second quarter. The increase in backlog value was driven primarily by a 38% increase in net new orders as compared to the prior year period. The Company used $78.5 million of cash in operating activities for the 2011 third quarter versus $67.4 million of cash used in operating activities in the 2010 third quarter. Cash flows used in operating activities for the 2011 third quarter included cash land purchases and land development costs of $74.7 million and $31.7 million, respectively, compared to $91.3 million and $22.3 million, respectively, for the 2010 third quarter. Excluding land and development costs, cash inflows from operating activities for the 2011 third quarter were $27.9 million* versus cash inflows of $46.1 million* in the 2010 third quarter. The decrease in cash inflows from operating activities (excluding land and development costs) as compared to the 2010 third quarter was primarily due to a $47 million decrease in cash flows attributable to the timing of the origination and sale of mortgage loans held for sale by the Company's financial services subsidiary, offset by the increase in cash inflows as a result of a 16% increase in deliveries compared to the prior year period. During the 2011 third quarter, the Company approved the purchase of $55 million of land, comprised of 1,280 lots. Approximately 46% of the land approved (based on land value) was for land located in California, 21% in Florida, 20% in Texas and 13% in the Carolinas. During the same period, the Company purchased $74.7 million of land, comprised of 1,682 lots. Approximately 62% of the land purchased (based on land value) is located in California and 24% in Florida, with the balance spread throughout the Company's other operations. Earnings Conference CallA conference call to discuss the Company's 2011 third quarter results will be held at 11:00 a.m. Eastern time October 28, 2011. The call will be broadcast live over the Internet and can be accessed through the Company's website at http://ir.standardpacifichomes.com. The call will also be accessible via telephone by dialing (888) 596-2581 (domestic) or (913) 312-0385 (international); Passcode: 1266541. The audio transmission with the slide presentation will be available on our website for replay within 2 to 3 hours following the live broadcast, and can be accessed by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international); Passcode: 1266541. About Standard PacificStandard Pacific, one of the nation's largest homebuilders, has built more than 114,000 homes during its 45-year history. The Company constructs homes within a wide range of price and size targeting a broad range of homebuyers. Standard Pacific operates in many of the largest housing markets in the country with operations in major metropolitan areas in California, Florida, Arizona, the Carolinas, Texas, Colorado and Nevada. For more information about the Company and its new home developments, please visit our website at: www.standardpacifichomes.com.This news release contains forward-looking statements. These statements include but are not limited to statements regarding new home orders, deliveries, backlog, average home price, revenue, break-even absorption rate, profitability, cash flow, liquidity, gross margins, overhead expenses and other costs; strategy; the opening of new communities; the dollar value and timing of anticipated land purchases; the availability of land opportunities and our ability to consummate these opportunities; our growth; product mix; and the future condition of the housing market. Forward-looking statements are based on our current expectations or beliefs regarding future events or circumstances, and you should not place undue reliance on these statements. Such statements involve known and unknown risks, uncertainties, assumptions and other factors many of which are out of the Company's control and difficult to forecast that may cause actual results to differ materially from those that may be described or implied. Such factors include but are not limited to: local and general economic and market conditions, including consumer confidence, employment rates, interest rates, the cost and availability of mortgage financing, and stock market, home and land valuations; the impact on economic conditions of terrorist attacks or the outbreak or escalation of armed conflict involving the United States; the cost and availability of suitable undeveloped land, building materials and labor; the cost and availability of construction financing and corporate debt and equity capital; our significant amount of debt and the impact of restrictive covenants in our debt agreements; our ability to repay our debt as it comes due; changes in our credit rating or outlook; the demand for and affordability of single-family homes; the supply of housing for sale; cancellations of purchase contracts by homebuyers; the cyclical and competitive nature of the Company's business; governmental regulation, including the impact of "slow growth" or similar initiatives; delays in the land entitlement process, development, construction, or the opening of new home communities; adverse weather conditions and natural disasters; environmental matters; risks relating to the Company's mortgage banking operations; future business decisions and the Company's ability to successfully implement the Company's operational and other strategies; litigation and warranty claims; and other risks discussed in the Company's filings with the Securities and Exchange Commission, including in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2010 and subsequent Quarterly Reports on Form 10-Q. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements. The Company nonetheless reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.Contact:Jeff McCall, EVP & CFO (949) 789-1655, firstname.lastname@example.org*Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.(Note: Tables Follow)KEY STATISTICS AND FINANCIAL DATA(1)As of or For the Three Months EndedSeptember 30,September 30,PercentageJune 30,Percentage20112010or % Change2011or % ChangeOperating Data(Dollars in thousands)Deliveries69759916%61014%Average selling price$346$3450%$3353%Home sale revenues$241,434$206,51617%$204,23618%Gross margin %15.8%23.5%(7.7%)17.0%(1.2%)Gross margin % from home sales (excluding impairments)*18.8%23.6%(4.8%)20.0%(1.2%)Gross margin % from home sales (excluding impairments and interest amortized to cost of home sales)*26.6%29.7%(3.1%)27.9%(1.3%)Inventory impairments and deposit write-offs$8,959$--$5,95950%Severance and other charges $631$--$2,178(71%)Incentive compensation expense$2,685$3,350(20%)$2,5057%Selling expenses$12,985$10,54423%$11,30615%G&A expenses (excluding severance and other charges)$22,823$22,4452%$22,4542%SG&A expenses$39,124$36,3398%$38,4432%SG&A % from home sales16.2%17.6%(1.4%)18.8%(2.6%)SG&A % from home sales (excluding severance and other charges)*15.9%17.6%(1.7%)17.8%(1.9%)Net new orders76455538%764-Average active selling communities15913121%1534%Monthly sales absorption rate per community1.61.414%1.7(6%)Cancellation rate16%19%(3%)14%2.0%Gross cancellations1441329%12912%Cancellations from current quarter sales635026%64(2%)Backlog (homes)84860540%7819%Backlog (dollar value)$304,846$214,23742%$293,8044%Cash flows (uses) from operating activities$(78,464)$(67,414)(16%)$(121,963)36%Cash flows (uses) from investing activities$4,254$(35,995)112%$(5,475)178%Cash flows (uses) from financing activities$21,884$(61,447)136%$12,93869%Land purchases (incl. seller financing and excl. JV investments)$74,736$94,672(21%)$92,171(19%)Adjusted Homebuilding EBITDA*$28,350$29,701(5%)$23,67820%Adjusted Homebuilding EBITDA Margin %*11.7%14.3%(2.6%)11.6%0.1%Homebuilding interest incurred$35,273$28,07026%$35,353(0%)Homebuilding interest capitalized to inventories owned$29,329$17,12671%$26,18612%Homebuilding interest capitalized to investments in JVs$1,694$687147%$1,723(2%)Interest amortized to cost of sales (incl. cost of land sales)$18,853$12,54650%$16,14617%As of September 30,June 30,PercentageDecember 31,Percentage20112011or % Change2010or % ChangeBalance Sheet Data(Dollars in thousands, except per share amounts)Homebuilding cash (including restricted cash)$451,192$507,207(11%)$748,754(40%)Inventories owned$1,450,827$1,382,7445%$1,181,69723%Lots owned and controlled26,82626,4032%23,54914%Homes under construction1,1931,00019%568110%Completed specs296330(10%)512(42%)Deferred tax asset valuation allowance$520,285$523,288(1%)$516,3661%Homebuilding debt$1,323,724$1,322,5640%$1,320,2540%Joint venture recourse debt$-$--$3,865(100%)Stockholders' equity$604,931$607,269(0%)$621,862(3%)Stockholders' equity per share (including if-converted preferred stock)*$1.77$1.78(1%)$1.83(3%)Total debt to book capitalization*69.5%69.1%0.4%68.5%1.0%Adjusted net homebuilding debt to total adjusted book capitalization*59.1%57.3%1.8%47.9%11.2%(1) All statistical numbers exclude unconsolidated joint ventures unless noted otherwise. *Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSThree Months EndedSeptember 30,Nine Months EndedSeptember 30,2011201020112010(Dollars in thousands, except per share amounts)(Unaudited)Homebuilding:Home sale revenues$241,434$206,516$589,369$698,138Land sale revenues3599504681,856Total revenues241,793207,466589,837699,994Cost of home sales(203,188)(157,677)(486,933)(543,400)Cost of land sales(359)(954)(473)(1,628)Total cost of sales(203,547)(158,631)(487,406)(545,028)Gross margin38,24648,835102,431154,966Gross margin %15.8%23.5%17.4%22.1%Selling, general and administrative expenses(39,124)(36,339)(109,828)(112,504)Income (loss) from unconsolidated joint ventures(455)1,801(1,091)1,141Interest expense(4,250)(10,257)(22,209)(32,721)Loss on early extinguishment of debt-(999)-(6,189)Other income (expense)(1,948)1,035(679)4,277Homebuilding pretax income (loss)(7,531)4,076(31,376)8,970Financial Services:Revenues3,5293,4307,1249,711Expenses(2,324)(2,721)(7,171)(8,026)Other income423098111Financial services pretax income1,247739511,796Income (loss) before income taxes(6,284)4,815(31,325)10,766Provision for income taxes(150)(272)(425)(633)Net income (loss)(6,434)4,543(31,750)10,133 Less: Net (income) loss allocated to preferred shareholder2,780(2,676)13,743(5,982)Net income (loss) available to common stockholders$(3,654)$1,867$(18,007)$4,151Income (Loss) Per Common Share:Basic$(0.02)$0.02$(0.09)$0.04Diluted$(0.02)$0.02$(0.09)$0.04Weighted Average Common Shares Outstanding:Basic194,311,129103,100,974193,686,614102,582,491Diluted194,311,129106,137,371193,686,614111,005,597Weighted average additional common shares outstandingif preferred shares converted to common shares147,812,786147,812,786147,812,786147,812,786CONDENSED CONSOLIDATED BALANCE SHEETSSeptember 30,December 31,20112010(Dollars in thousands)ASSETS(Unaudited)Homebuilding:Cash and equivalents$420,010$720,516Restricted cash31,18228,238Trade and other receivables18,4766,167Inventories:Owned1,450,8271,181,697Not owned61,60318,999Investments in unconsolidated joint ventures76,05873,861Deferred income taxes, net6,3209,269Other assets38,65038,175Total Homebuilding Assets2,103,1262,076,922Financial Services:Cash and equivalents11,33910,855Restricted cash1,7452,870Mortgage loans held for sale, net50,04930,279Mortgage loans held for investment, net10,3299,904Other assets5,2102,293Total Financial Services Assets78,67256,201Total Assets$2,181,798$2,133,123LIABILITIES AND EQUITYHomebuilding:Accounts payable$22,605$16,716Accrued liabilities176,698143,127Secured project debt and other notes payable3,8994,738Senior notes payable1,274,5321,272,977Senior subordinated notes payable45,29342,539Total Homebuilding Liabilities1,523,0271,480,097Financial Services:Accounts payable and other liabilities1,312820Mortgage credit facilities52,52830,344Total Financial Services Liabilities53,84031,164Total Liabilities1,576,8671,511,261Equity:Stockholders' Equity:Preferred stock, $0.01 par value; 10,000,000 shares authorized; 450,829 shares issued and outstanding at September 30, 2011 and December 31, 201055Common stock, $0.01 par value; 600,000,000 shares authorized; 198,456,463 and 196,641,551 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively1,9841,966Additional paid-in capital1,237,3041,227,292Accumulated deficit(624,102)(592,352)Accumulated other comprehensive loss, net of tax(10,260)(15,049)Total Equity604,931621,862Total Liabilities and Equity$2,181,798$2,133,123INVENTORIESSeptember 30,December 31,20112010(Dollars in thousands)Inventories Owned:(Unaudited) Land and land under development$ 971,662$ 801,681 Homes completed and under construction370,516281,780 Model homes108,64998,236 Total inventories owned$ 1,450,827$ 1,181,697Inventories Owned by Segment: California$ 889,362$ 727,317 Southwest281,601222,791 Southeast279,864231,589 Total inventories owned$ 1,450,827$ 1,181,697CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSThree Months EndedSeptember 30,Nine Months EndedSeptember 30,2011201020112010(Dollars in thousands)(Unaudited)Cash Flows From Operating Activities:Net income (loss)$(6,434)$4,543$(31,750)$10,133Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Loss on early extinguishment of debt - 999 - 6,189Amortization of stock-based compensation2,6353,1158,0948,598Inventory impairment charges and deposit write-offs8,959 - 14,918 - Other operating activities1,343(1,041)3,9011,589Changes in cash and equivalents due to:Trade and other receivables(816)579(12,309)(983)Mortgage loans held for sale(14,967)31,621(19,737)5,846Inventories - owned(67,719)(83,309)(261,777)(120,420)Inventories - not owned(4,859)(6,520)(17,659)(24,070)Other assets(2,341)(596)(313)108,846Accounts payable and accrued liabilities5,735(16,805)6,055(24,223)Net cash provided by (used in) operating activities(78,464)(67,414)(310,577)(28,495)Cash Flows From Investing Activities:Investments in unconsolidated homebuilding joint ventures(2,484)(35,152)(11,304)(37,434)Other investing activities6,738(843)6,034(1,020)Net cash provided by (used in) investing activities4,254(35,995)(5,270)(38,454)Cash Flows From Financing Activities:Change in restricted cash3,757(1,966)(1,819)(1,588)Principal payments on secured project debt and other notes payable(316)(24,160)(839)(83,407)Principal payments on senior and senior subordinated notes payable - (5,910) - (195,869)Proceeds from the issuance of senior notes payable - - - 300,000Payment of debt issuance costs - - (4,575)(5,506)Net proceeds from (payments on) mortgage credit facilities17,655(29,524)22,184(5,393)Other financing activities7881138742,481Net cash provided by (used in) financing activities21,884(61,447)15,82510,718Net increase (decrease) in cash and equivalents(52,326)(164,856)(300,022)(56,231)Cash and equivalents at beginning of period483,675704,184731,371595,559Cash and equivalents at end of period$431,349$539,328$431,349$539,328Cash and equivalents at end of period$431,349$539,328$431,349$539,328Homebuilding restricted cash at end of period31,18216,98331,18216,983Financial services restricted cash at end of period1,7452,8701,7452,870Cash and equivalents and restricted cash at end of period$464,276$559,181$464,276$559,181REGIONAL OPERATING DATAThree Months EndedSeptember 30, Nine MonthsEnded September 30, 20112010% Change20112010% ChangeNew homes delivered:California29523426%696826(16%)Arizona3745(18%)115154(25%)Texas1139519%285286(0%)Colorado2528(11%)6993(26%)Nevada26(67%)1215(20%)Florida12010317%293347(16%)Carolinas1058819%276306(10%)Consolidated total69759916%1,7462,027(14%)Unconsolidated joint ventures13128%2740(33%)Total (including joint ventures) 71061116%1,7732,067(14%)Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 20112010% Change20112010% Change(Dollars in thousands)Average selling prices of homes delivered:California$496$508(2%)$487$502(3%)Arizona195214(9%)204204-Texas281291(3%)290294(1%)Colorado3073022%3082964%Nevada192208(8%)194201(3%)Florida2021963%2001924%Carolinas226230(2%)225231(3%)Consolidated3463450%338344(2%)Unconsolidated joint ventures356456(22%)409467(12%)Total (including joint ventures)$347$347-$339$347(2%)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,20112010% Change20112010% ChangeNet new orders:California28622328%8318241%Arizona573946%136145(6%)Texas1177654%37627736%Colorado2426(8%)7577(3%)Nevada411(64%)726(73%)Florida1549857%41135615%Carolinas1228249%3443285%Consolidated total76455538%2,1802,0337%Unconsolidated joint ventures710(30%)2338(39%)Total (including joint ventures)77156536%2,2032,0716%Three Months EndedSeptember 30,Nine Months EndedSeptember 30,20112010% Change20112010% ChangeAverage number of selling communities during the period:California524613%504511%Arizona1010-99-Texas221638%211724%Colorado5425%55-Nevada11-11-Florida382836%362638%Carolinas312619%282512%Consolidated total15913121%15012817%Unconsolidated joint ventures 33-33-Total (including joint ventures)16213421%15313117%At September 30,20112010% ChangeHomesDollar ValueHomesDollar ValueHomesDollar Value(Dollars in thousands)Backlog:California254$145,043245$123,0834%18%Arizona5711,229388,18450%37%Texas19057,46810030,90790%86%Colorado3612,3623811,412(5%)8%Nevada3565112,220(73%)(75%)Florida18545,7818718,291113%150%Carolinas12332,3988620,14043%61%Consolidated total848304,846605214,23740%42%Unconsolidated joint ventures 140973,148(86%)(87%)Total (including joint ventures)849$305,255612$217,38539%40%At September 30,20112010% ChangeLots owned and controlled:California9,5279,646(1%)Arizona1,8601,982(6%)Texas4,1202,44868%Colorado71839283%Nevada1,1361,203(6%)Florida6,5545,00131%Carolinas2,9112,57813%Total (including joint ventures)26,82623,25015%Lots owned20,13917,46815%Lots optioned or subject to contract 5,3924,32025%Joint venture lots 1,2951,462(11%)Total (including joint ventures)26,82623,25015%Lots owned:Raw lots4,2023,37225%Lots under development4,3262,87850%Finished lots5,9825,9650%Under construction or completed homes1,9611,73013%Held for sale3,6683,5234%Total20,13917,46815%RECONCILIATION OF NON-GAAP FINANCIAL MEASURESEach of the below measures are non-GAAP financial measures and other companies may calculate such non-GAAP measures differently. Due to the significance of the GAAP components excluded, such measures should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP.The table set forth below reconciles the Company's net loss to net income excluding inventory impairment charges and deposit write-offs (net of a 39% income tax benefit), restructuring charges (net of a 39% income tax benefit), and the deferred tax asset valuation allowance related to these charges. We believe this measure is useful to management and investors as it provides perspective on the underlying operating performance of the business excluding these charges and provides comparability with the Company's peer group. Net income excluding inventory impairment charges and deposit write-offs (net of income tax benefit), restructuring charges (net of income tax benefit), and the deferred tax asset valuation allowance related to these charges for the three months ended September 30, 2011 is calculated as follows:Three Months EndedSeptember 30, 2011(Dollars in thousands)Net loss$(6,434)Add: Inventory impairment charges and deposit write-offs, net of income tax benefit5,465Add: Restructuring charges, net of income tax benefit385Add: Net deferred tax asset valuation allowance3,740Net income, as adjusted$3,156The table set forth below reconciles the Company's gross margin percentage from home sales to the gross margin percentage from home sales, excluding housing inventory impairment charges and interest amortized to cost of home sales. We believe these measures are useful to management and investors as they provide perspective on the underlying operating performance of the business excluding these charges and provide comparability with the Company's peer group.Three Months EndedSeptember 30, 2011GrossMargin %September 30, 2010GrossMargin %June 30, 2011GrossMargin %(Dollars in thousands)Home sale revenues$241,434$206,516$204,236Less: Cost of home sales(203,188)(157,677)(169,433)Gross margin from home sales38,24615.8%48,83923.6%34,80317.0%Add: Housing inventory impairment charges7,230-5,959Gross margin from home sales, excluding impairment charges45,47618.8%48,83923.6%40,76220.0%Add: Capitalized interest included in cost of home sales18,7767.8%12,5466.1%16,1087.9%Gross margin from home sales, excluding impairment charges and interest amortized to cost of home sales$64,25226.6%$61,38529.7%$56,87027.9%The table set forth below reconciles the Company's SG&A expenses to SG&A expenses excluding restructuring, severance and other charges related to management changes. We believe this measure is useful to management and investors as it provides perspective on the underlying operating performance of the business excluding these charges. Three Months EndedSeptember 30, 2011September 30, 2010June 30,2011(Dollars in thousands)Selling, general and administrative expenses$39,124$36,339$38,443Less: Restructuring, severance and other charges(631)-(2,178)Selling, general and administrative expenses, excluding restructuring, severance and other charges$38,493$36,339$36,265SG&A % from home sales, excluding restructuring, severance and other charges15.9%17.6%17.8%The table set forth below reconciles the Company's cash flows from operations to cash flows from operations excluding land purchases and development costs. We believe this measure is useful to management and investors to provide perspective on underlying cash flow generation excluding swings related to the timing of land purchases and development costs.Three Months EndedSeptember 30,2011September 30,2010June 30,2011(Dollars in thousands)Cash flows from (used in) operations$(78,464)$(67,414)$(121,963)Add: Cash land purchases74,73691,27292,171Add: Land development costs31,67322,28231,642Cash flows from operations (excluding land purchases and development costs)$27,945$46,140$1,850The table set forth below calculates EBITDA and Adjusted Homebuilding EBITDA. Adjusted Homebuilding EBITDA means net income (loss) (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) homebuilding interest expense (c) expensing of previously capitalized interest included in cost of sales, (d) impairment charges and deposit write-offs, (e) (gain) loss on early extinguishment of debt (f) homebuilding depreciation and amortization, (g) amortization of stock-based compensation, (h) income (loss) from unconsolidated joint ventures and (i) income (loss) from financial services subsidiary. Other companies may calculate Adjusted Homebuilding EBITDA (or similarly titled measures) differently. We believe Adjusted Homebuilding EBITDA information is useful to management and investors as one measure of the Company's ability to service debt and obtain financing. Adjusted Homebuilding EBITDA is a non-GAAP financial measure and due to the significance of the GAAP components excluded, should not be considered in isolation or as an alternative to net income, cash flow from operations or any other operating or liquidity performance measure prescribed by GAAP.Three Months EndedLTM Ended September 30,September 30,2011September 30,2010June 30,201120112010(Dollars in thousands)Net income (loss)$(6,434)$4,543$(10,519)$(53,607)$92,796Provision (benefit) for income taxes150272175(765)(95,930)Homebuilding interest amortized to cost of sales and interest expense23,10322,80323,59090,539117,692Homebuilding depreciation and amortization6874796632,5122,201Amortization of stock-based compensation2,6353,1153,53711,34414,203EBITDA20,14131,21217,44650,023130,962Add:Cash distributions of income from unconsolidated joint ventures---203,139Impairment charges and deposit write-offs8,959-5,95916,83611,192Loss on early extinguishment of debt-999-23,8399,663Less:Income (loss) from unconsolidated joint ventures(455)1,801(379)(1,066)874Income (loss) from financial services subsidiary1,205709106(154)1,927Adjusted Homebuilding EBITDA$28,350$29,701$23,678$91,938$152,155Homebuilding revenues$241,793$207,466$204,345$802,261$1,039,773Adjusted Homebuilding EBITDA Margin %11.7%14.3%11.6%11.5%14.6%The table set forth below reconciles net cash provided by (used in) operating activities, calculated and presented in accordance with GAAP, to Adjusted Homebuilding EBITDA:Three Months EndedLTM Ended September 30,September 30,2011September 30,2010June 30,201120112010(Dollars in thousands)Net cash provided by (used in) operating activities$(78,464)$(67,414)$(121,963)$(363,040)$81,170Add:Provision (benefit) for income taxes150272175(765)(95,930)Homebuilding interest amortized to cost of sales and interest expense23,10322,80323,59090,539117,692Excess tax benefits from share-based payment arrangements - - - - 324Less:Income (loss) from financial services subsidiary1,205709106(154)1,927Depreciation and amortization from financial services subsidiary17280233937753(Gain) loss on disposal of property and equipment1841(2)1821,237Net changes in operating assets and liabilities:Trade and other receivables816(579)10,3304,785(3,993)Mortgage loans held for sale14,967(31,621)15,06413,418(7,548)Inventories-owned67,71983,30988,912290,06335,883Inventories-not owned4,8596,5209,99021,45025,413Deferred income taxes, net of valuation allowance - - - - 96,562Other assets2,3415961,112(2,337)(110,433)Accounts payable and accrued liabilities(5,735)16,805(3,195)38,79016,932Adjusted Homebuilding EBITDA$28,350$29,701$23,678$91,938$152,155The table set forth below reconciles the Company's total consolidated debt to adjusted net homebuilding debt and provides the Company's total debt to book capitalization and adjusted net homebuilding debt to total adjusted book capitalization ratios. We believe that the adjusted net homebuilding debt to total adjusted book capitalization ratio is useful to management and investors as a measure of the Company's ability to obtain financing. For purposes of the ratio of adjusted net homebuilding debt to total adjusted book capitalization, total adjusted book capitalization is adjusted net homebuilding debt plus stockholders' equity. Adjusted net homebuilding debt excludes indebtedness included in liabilities from inventories not owned, indebtedness of the Company's financial services subsidiary and additionally reflects the offset of cash and equivalents.September 30,2011June 30,2011December 31,2010September 30,2010(Dollars in thousands)Total consolidated debt$1,376,252$1,357,437$1,350,598$1,252,388Less:Financial services indebtedness(52,528)(34,873)(30,344)(35,602)Homebuilding cash(451,192)(507,207)(748,754)(546,096)Adjusted net homebuilding debt872,532815,357571,500670,690Stockholders' equity604,931607,269621,862453,475Total adjusted book capitalization$1,477,463$1,422,626$1,193,362$1,124,165Total debt to book capitalization69.5%69.1%68.5%73.4%Adjusted net homebuilding debt to total adjusted book capitalization ratio59.1%57.3%47.9%59.7%The table set forth below calculates pro forma stockholders' equity per common share. The pro forma common shares outstanding include the if-converted Series B Preferred Stock, and excludes 3.9 million shares issued under a share lending agreement related to the Company's 6% Convertible Senior Subordinated Notes. The Company believes that the pro forma stockholders' equity per common share information is useful to management and investors as a measure to determine the book value per common share after giving effect of the issuance of preferred shares assuming full conversion to common stock and excluding shares outstanding under the share lending agreement. September 30,June 30,December 31,201120112010Actual common shares outstanding198,456,463197,779,108196,641,551Add: Conversion of preferred shares to common shares147,812,786147,812,786147,812,786Less: Common shares outstanding under share lending facility(3,919,904)(3,919,904)(3,919,904)Pro forma common shares outstanding342,349,345341,671,990340,534,433Stockholders' equity (actual amounts rounded to nearest thousand)$604,931,000$607,269,000$621,862,000Divided by pro forma common shares outstanding÷342,349,345÷341,671,990÷340,534,433Pro forma stockholders' equity per common share$1.77$1.78$1.83SOURCE Standard Pacific Corp.