Standard Pacific Corp. Reports 2007 Second Quarter Results

IRVINE, Calif., July 26 /PRNewswire-FirstCall/ -- Standard Pacific Corp. today reported the Company's unaudited 2007 second quarter operating results. The net loss for the quarter ended June 30, 2007 was $165.9 million, or $2.56 per diluted share, compared to net income of $96.5 million, or $1.44 per diluted share, in the year earlier period. Homebuilding revenues for the 2007 second quarter were $694.8 million versus $1.0 billion last year. The Company's results for the 2007 second quarter include non-cash pretax impairment charges of $306.0 million, or $2.91 per diluted share after tax, of which $223.2 million related to consolidated real estate inventories, $48.1 million related to the Company's share of joint venture inventory impairment charges, $5.3 million related to land deposit write-offs and $29.4 million related to goodwill impairments. Excluding the second quarter impairment charges, the Company's earnings would have been $0.35 per share.

"Challenging market conditions across most of the country continue to put pressure on our operating results," commented Stephen J. Scarborough, Chairman, CEO and President of the Company. "High levels of new and existing home inventory on the market, increasing mortgage interest rates, a tightening of lending standards and reduced housing affordability in many markets have all contributed to weak new home sales. This environment has resulted in significant price competition leading to margin erosion and further impairments of the Company's inventory holdings."

"During the quarter, net new home orders were down 9% year-over-year companywide. Orders were up 23% in California, while down 15% in the Southwest and down 22% in the Southeast. Our cancellation rate for the second quarter was 28% compared to 36% last year."

"In an ongoing effort to strengthen our balance sheet we continued to focus on closing our backlog, reducing our speculative home inventory and lowering our supply of owned and controlled land companywide, with the goal of reducing inventories, generating cash and paying down debt. During the quarter, we were able to reduce our spec homes under construction by 28% year- over-year and lower our total lot position by 24% from the year-ago level resulting in a continued reduction in our revolver borrowings, which are down $340 million over the last three quarters."

Mr. Scarborough concluded, "As mentioned above, our second quarter results reflect additional impairment charges. While difficult to predict going forward, it is possible that the Company will incur additional impairment charges until our markets stabilize, particularly with respect to the pricing of new homes. Because of the uncertainties now impacting the homebuilding industry, we will no longer be providing any earnings or operational guidance and are withdrawing our previous guidance, including guidance with respect to 2007 deliveries, revenues and margins."

Homebuilding Operations Three Months Ended June 30, 2007 2006 % Change (Dollars in thousands) Homebuilding pretax income (loss) (1): California $(171,520) $91,372 (288%) Southwest (73,096) 23,365 (413%) Southeast (24,649) 43,239 (157%) Corporate (1,100) (3,833) 71% Total homebuilding pretax income (loss) $(270,365) $154,143 (275%) Homebuilding revenues: California $293,363 $512,287 (43%) Southwest 248,471 243,927 2% Southeast 153,000 247,665 (38%) Total homebuilding revenues $694,834 $1,003,879 (31%) (1) Homebuilding pretax income (loss) for the three months ended June 30, 2007 includes a total of $306.0 million of non-cash pretax inventory, joint venture, deposit and goodwill impairment charges recorded in the following segments: $182.5 million in California, $88.1 million in the Southwest, and $35.4 million in the Southeast. Homebuilding pretax income (loss) for the three months ended June 30, 2006 includes a total of $21.2 million of non-cash pretax inventory, deposit and joint venture impairment charges recorded in the following segments: $20.0 million in California, $0.1 million in the Southwest, and $1.1 million in the Southeast.

Homebuilding pretax income for the 2007 second quarter decreased 275% to a $270.4 million pretax loss compared to pretax income of $154.1 million in the year earlier period. The decrease in pretax income was driven by a 31% decrease in homebuilding revenues to $694.8 million, a negative homebuilding gross margin percentage, a $60.6 million decrease in joint venture income (to a loss of $41.5 million), a 170 basis point increase in the Company's selling, general and administrative ("SG&A") expense rate and an $18.9 million increase in other expense. The Company's homebuilding operations for the 2007 second quarter included the following non-cash pretax charges: a $223.2 million inventory impairment charge; a $48.1 million charge related to the Company's share of joint venture inventory impairments; a $5.3 million charge related to the write-off of land option deposits and capitalized preacquisition costs for abandoned projects; and a $29.4 million goodwill impairment charge. The inventory impairment charge was included in cost of sales while both the land deposit write-offs and the goodwill impairment charge were included in other expense for the quarter.

The 31% decrease in homebuilding revenues for the 2007 second quarter was primarily attributable to a 38% decrease in new home deliveries (exclusive of joint ventures) and a 7% decrease in the Company's consolidated average home price to $349,000. These decreases were partially offset by a $108.9 million year-over-year increase in land sale revenues. Land sales totaled $111.7 million for the quarter and represented the sale of approximately 2,400 lots.

Three Months Ended June 30, 2007 2006 % Change New homes delivered: Southern California 194 526 (63%) Northern California 123 177 (31%) Total California 317 703 (55%) Arizona 314 275 14% Texas 369 574 (36%) Colorado 104 150 (31%) Nevada 11 - - Total Southwest 798 999 (20%) Florida 352 756 (53%) Carolinas 205 219 (6%) Total Southeast 557 975 (43%) Consolidated total 1,672 2,677 (38%) Unconsolidated joint ventures: Southern California 65 16 306% Northern California 24 34 (29%) Arizona - 5 (100%) Illinois 9 - - Total unconsolidated joint ventures 98 55 78% Total (including joint ventures) 1,770 2,732 (35%)

In California, consolidated new home deliveries decreased 55% during the 2007 second quarter as compared to the prior year period. Deliveries were off 63% in Southern California and 31% in Northern California reflecting the slowdown in order activity experienced throughout 2006 and into the first half of 2007.

In the Southwest, new home deliveries (exclusive of joint venture) were down 20% in the second quarter of 2007 compared to the year earlier period. Deliveries in Arizona during the 2007 second quarter increased 14% over the 2006 second quarter. While the Phoenix and Tucson markets have experienced declines in new home demand, including increased sales cancellation rates, these two divisions were able to convert a significant portion of their beginning backlog and standing completed homes into deliveries during the 2007 second quarter. New home deliveries were down 36% in Texas, driven primarily by a significant drop in demand in San Antonio. Deliveries from the Company's Dallas and Austin operations were off slightly year-over-year as demand softened moderately during the 2007 second quarter. In Colorado, deliveries were off 31% for the 2007 second quarter in what has continued to be a challenging environment.

New home deliveries in the Company's Southeast region were down 43% during the 2007 second quarter. This decrease was primarily due to a 53% year-over- year decline in Florida deliveries. The lower level of deliveries in Florida was due to weaker housing demand which began last year combined with an increase in the Company's cancellation rate in the state. In the Carolinas, deliveries were off 6% from the year earlier period driven by a 19% decrease in deliveries in Raleigh, which was partially offset by a modest increase in deliveries in Charlotte as compared to the year earlier period.

Three Months Ended June 30, 2007 2006 % Change Average selling prices of homes delivered: Southern California $768,000 $723,000 6% Northern California 545,000 747,000 (27%) Total California 682,000 729,000 (6%) Arizona 318,000 318,000 - Texas 230,000 192,000 20% Colorado 336,000 305,000 10% Nevada 321,000 - - Total Southwest 280,000 244,000 15% Florida 275,000 271,000 1% Carolinas 231,000 186,000 24% Total Southeast 258,000 252,000 2% Consolidated (excluding joint ventures) 349,000 374,000 (7%) Unconsolidated joint ventures 450,000 769,000 (41%) Total (including joint ventures) $354,000 $382,000 (7%)

During the 2007 second quarter, the Company's consolidated average home price decreased 7% to $349,000. The overall decrease was primarily due to changes in the Company's product and geographic mix combined with an increase in the level of incentives and discounts required to sell homes in California, Florida and Arizona, the Company's three largest markets.

The Company's average home price in California for the 2007 second quarter decreased 6% from the year earlier period driven by the increased use of incentives and discounts and the following regional changes. The 27% decrease in the average home price in Northern California was due primarily to an increase in the level of incentives and discounts used to sell homes, and to a lesser extent, a greater proportion of deliveries generated from the region's more affordable markets in Sacramento and the Central Valley. In Southern California, the average home price increased 6% primarily due to a greater delivery mix during the 2007 second quarter from the Company's Orange County division, which generally builds more expensive homes.

In the Southwest, the Company's average home price increased 15% over the year earlier period. The Company's average price in Arizona was flat year over year primarily reflecting the leveling off of price appreciation in Phoenix as a result of the increased use of incentives in 2007 as compared to the prior year period. The 20% increase in the Company's average price in Texas reflected a greater percentage of deliveries generated from our Dallas and Austin divisions compared to the year earlier period, where our homes are generally more expensive than in our San Antonio operation.

The Company's average home price in the Southeast was up 2% as compared to the year earlier period. In Florida, the average sales price was up 1% from the year ago period and primarily reflected a geographic and product mix shift within the state. The Company's average price was up 24% in the Carolinas from the year earlier period and primarily reflected a change in delivery mix towards larger, more expensive homes in both of our markets in the state.

Homebuilding Gross Margin Percentage

The Company's 2007 second quarter homebuilding gross margin percentage was down year-over-year to a negative 14.3% from 27.2% in the second quarter of 2006. The 2007 second quarter gross margin reflected a $223.2 million pretax inventory impairment charge, which related primarily to projects in California, Arizona, Nevada and Florida. Excluding the inventory impairment charge and land sales, the Company's 2007 second quarter homebuilding gross margin would have been 20.7% compared to an impairment adjusted year earlier gross margin of 27.7%. The 700 basis point decrease in the year-over-year gross margin percentage as adjusted was driven primarily by lower gross margins in California, Arizona and Florida. The lower gross margins in these markets was driven by increased incentives and discounts and generally falling home prices resulting from weakening demand during last year and this year, creating a much more competitive market for new homes, which, as noted above, put downward pressure on the Company's home prices. If market conditions deteriorate further, or the Company's competitors continue to lower prices to generate sales, the Company may have to reduce its home prices further or increase its discounts and concessions, which would negatively impact the Company's margins and potentially trigger additional inventory impairment charges.

SG&A Expenses

The Company's selling, general and administrative expense rate (including corporate G&A) for the 2007 second quarter increased 170 basis points to 14.0% of homebuilding revenues compared to 12.3% for the same period last year. The higher level of SG&A expenses as a percentage of homebuilding revenues was due primarily to a higher level of sales and marketing costs as a percentage of revenues, particularly advertising expenses and co-broker commissions, as a result of the Company's focus on generating sales in these challenging market conditions. These increases were partially offset by an absolute decrease in the Company's G&A expenses. The decrease in the Company's G&A expenses was principally due to a reduction in staff to better align our overhead with the weaker housing market combined with a decrease in incentive-based compensation.

Homebuilding Joint Ventures

The Company recognized a $41.5 million loss from unconsolidated joint ventures during the 2007 second quarter compared to income of $19.2 million in the year earlier period. The loss in the 2007 second quarter reflected a $48.1 million pretax charge related to the Company's share of joint venture inventory impairments. Excluding the impairment charges, the Company generated joint venture income of $6.6 million for the 2007 second quarter of which approximately $5.7 million was generated from profits related to land sales to other builders while approximately $0.9 million was generated from new home deliveries. Deliveries from the Company's unconsolidated homebuilding joint ventures totaled 98 new homes in the 2007 second quarter versus 55 last year.

Other Expense

Included in other expense for the three months ended June 30, 2007 and 2006 are pretax charges of approximately $5.3 million and $16.3 million, respectively, related to the write-off of option deposits and capitalized preacquisition costs for abandoned projects, and for the three months ended June 30, 2007, $29.4 million related to the impairment of goodwill. The goodwill impairment charge related to our Jacksonville and San Antonio acquisitions. We continue to carefully evaluate each land purchase in our acquisition pipeline in light of weakened market conditions and any decision to abandon additional land purchase transactions could lead to further deposit and capitalized preacquisition cost write-offs.

Three Months Ended June 30, 2007 2006 % Change Net new orders: Southern California 350 309 13% Northern California 176 117 50% Total California 526 426 23% Arizona 208 183 14% Texas 342 518 (34%) Colorado 120 116 3% Nevada 26 - - Total Southwest 696 817 (15%) Florida 238 345 (31%) Carolinas 256 289 (11%) Total Southeast 494 634 (22%) Consolidated total 1,716 1,877 (9%) Unconsolidated joint ventures: Southern California 153 51 200% Northern California 39 37 5% Illinois 7 4 75% Total unconsolidated joint ventures 199 92 116% Total (including joint ventures) 1,915 1,969 (3%) Average number of selling communities during the period: Southern California 38 36 6% Northern California 25 17 47% Total California 63 53 19% Arizona 25 28 (11%) Texas 45 37 22% Colorado 11 13 (15%) Nevada 4 - - Total Southwest 85 78 9% Florida 47 48 (2%) Carolinas 26 20 30% Total Southeast 73 68 7% Consolidated total 221 199 11% Unconsolidated joint ventures: Southern California 14 2 600% Northern California 7 5 40% Illinois 2 1 100% Total unconsolidated joint ventures 23 8 188% Total (including joint ventures) 244 207 18%

Net new orders companywide (excluding joint ventures) for the second quarter of 2007 totaled 1,716 homes, a 9% decrease from the 2006 second quarter. The Company's consolidated cancellation rate for the 2007 second quarter was 28% compared to 36% in the 2006 second quarter and 25% in the 2007 first quarter, while the Company's cancellation rate as a percentage of beginning backlog for the 2007 second quarter was 24% compared to 17% in the year earlier period. The overall decline in net new orders resulted from the decreasing demand for homes in Florida and Texas, and to a lesser extent a decline in orders in the Carolinas. These declines were offset in part by an increase in orders in California and Arizona. The lower level of demand in Florida and Texas and the generally weak level of demand in California and Arizona were primarily attributable to reduced housing affordability, higher mortgage interest rates, a tightening of underwriting standards for certain home loans and increased levels of new and existing homes for sale. These conditions have also contributed to an erosion of homebuyer confidence in these markets.

Net new orders in California (excluding joint ventures) for the 2007 second quarter increased 23% from the 2006 second quarter on a 19% higher community count. Net new home orders were up 13% year-over-year in Southern California on a 6% higher average community count. While order activity in Southern California improved on a year-over-year basis, net orders decreased 18% from the 2007 first quarter reflecting a weakening in demand particularly in the Inland Empire region of Southern California. In addition, the region's 2007 second quarter cancellation rate, while down from 45% a year ago, increased to 28% from 19% in the 2007 first quarter, driven by a jump in the Inland Empire cancellation rate. While conditions remain challenging in the Company's Northern California divisions, improved sales year-over-year are a result of our focus on increasing traffic and orders through a more competitive pricing strategy. The Company's cancellation rate of 25% for the 2007 second quarter was down from 33% in the year earlier period but up from the 10% rate in the 2007 first quarter.

Net new orders in the Southwest (excluding joint ventures) for the 2007 second quarter were down 15%. In Arizona, net new home orders were up 14% on an 11% lower average community count. Despite the increase in net new orders in Arizona, the Phoenix and Tucson markets continue to experience weak demand for new and existing homes. In addition, the Company's cancellation rate in Phoenix, while down sharply from the 2006 second quarter rate of 60%, still remains high relative to historical levels at 39% for the 2007 second quarter. In Texas, net new orders were down 34% on a 22% higher average community count. This decline was primarily due to the continued deterioration in the San Antonio market. This market, with its high concentration of first time buyers, has been adversely impacted by the tightening in mortgage credit underwriting standards, particularly with respect to subprime borrowers. To a lesser extent, the Company has experienced weakness in the Dallas market over the past few quarters, and more recently has seen a slight weakening in the Austin market over the past quarter. In Colorado, net new orders were up 3% on a 15% lower community count. In Nevada, we generated 26 new home orders from 4 communities in the Company's Las Vegas division, a market which has also experienced weakening demand for new homes.

In the Southeast, net new orders (excluding joint ventures) decreased 22% during the 2007 second quarter. The decrease in net new orders in the region was primarily due to a 31% decline in orders in Florida. The year-over-year decline in Florida order activity reflects continued erosion in buyer demand and an increase in the Company's cancellation rate to 37% for the 2007 second quarter from 32% last year. The most notable year-over-year change in Florida has been in the Company's Tampa division where housing market conditions began to change dramatically at the end of the 2006 second quarter. Since Tampa is the Company's largest division in Florida, the slowdown in that market has meaningfully impacted our statewide order totals. Net new orders in the Carolinas were down 11% on a 30% higher community count. While the Carolina markets have slowed somewhat recently, they still remain relatively healthy.

At June 30, Backlog (in homes): 2007 2006 % Change Southern California 532 824 (35%) Northern California 242 184 32% Total California 774 1,008 (23%) Arizona 398 1,455 (73%) Texas 551 920 (40%) Colorado 202 222 (9%) Nevada 36 - - Total Southwest 1,187 2,597 (54%) Florida 477 1,599 (70%) Carolinas 318 276 15% Total Southeast 795 1,875 (58%) Consolidated total 2,756 5,480 (50%) Unconsolidated joint ventures: Southern California 231 116 99% Northern California 75 57 32% Arizona - 20 (100%) Illinois 10 47 (79%) Total unconsolidated joint ventures 316 240 32% Total (including joint ventures) 3,072 5,720 (46%) Backlog (estimated Dollar value in thousands): Southern California $429,536 $660,427 (35%) Northern California 119,566 127,628 (6%) Total California 549,102 788,055 (30%) Arizona 122,701 483,398 (75%) Texas 132,451 194,595 (32%) Colorado 78,355 76,076 3% Nevada 10,048 - - Total Southwest 343,555 754,069 (54%) Florida 134,001 470,145 (71%) Carolinas 78,665 56,159 40% Total Southeast 212,666 526,304 (60%) Consolidated total 1,105,323 2,068,428 (47%) Unconsolidated joint ventures: Southern California 129,066 60,531 113% Northern California 51,454 41,274 25% Arizona - 6,021 (100%) Illinois 7,694 20,397 (62%) Total unconsolidated joint ventures 188,214 128,223 47% Total (including joint ventures) $1,293,537 $2,196,651 (41%)

The dollar value of the Company's backlog (excluding joint ventures) decreased 47% from the year earlier period to $1.1 billion at June 30, 2007, reflecting the meaningful slowdown in order activity the Company experienced during 2006 and into the first half of 2007.

At June 30, 2007 2006 % Change Building sites owned or controlled: Southern California 11,013 14,022 (21%) Northern California 5,795 8,082 (28%) Total California 16,808 22,104 (24%) Arizona 7,410 12,469 (41%) Texas 7,701 10,273 (25%) Colorado 1,013 1,318 (23%) Nevada 2,949 3,019 - Total Southwest 19,073 27,079 (30%) Florida 11,698 13,821 (15%) Carolinas 4,161 4,717 (12%) Illinois 158 220 (28%) Total Southeast 16,017 18,758 (15%) Total (including joint ventures) 51,898 67,941 (24%) Total building sites owned 31,745 38,650 (18%) Total building sites optioned or subject to contract 8,325 14,968 (44%) Total joint venture lots 11,828 14,323 (17%) Total (including joint ventures) 51,898 67,941 (24%)

Total building sites owned and controlled as of June 30, 2007 decreased 24% from the year earlier period, which reflects the Company's effort to generate cash and reduce its real estate inventories and to better align its land supply with the current level of new housing demand.

At June 30, 2007 2006 % Change Completed and unsold homes: Consolidated 623 425 47% Joint ventures 15 - - Total (including joint ventures) 638 425 50% Homes under construction: Consolidated 3,655 6,952 (47%) Joint ventures 922 735 25% Total (including joint ventures) 4,577 7,687 (40%)

The Company's number of completed and unsold homes (excluding joint ventures) as of June 30, 2007 increased 47% compared to the year earlier period while decreasing 19% from the 2007 first quarter. The higher year-over-year total was the result of weaker housing market conditions which contributed to an increase in the Company's cancellation rates during the latter half of 2006 and the first half of 2007 resulting in unintended completed spec homes. At the same time, the number of homes under construction as of June 30, 2007 decreased 47% (exclusive of joint ventures) from the year earlier period to 3,655 units in response to the Company's increased focus on managing the level of its speculative inventory and its desire to better match new construction starts with the lower sales volume.

Financial Services

In the 2007 second quarter, the Company's financial services subsidiary generated a nominal pretax profit of $187,000 compared to $744,000 in the year earlier period. The decrease in profitability was driven primarily by a 19% lower level of loan sales and a decrease in margins (in basis points) on loans sold. The decrease in loan sales was primarily the result of a 38% decrease in consolidated new home deliveries which was partially offset by increased capture rates.

Financial services joint venture income, which is derived from mortgage financing joint ventures with third party financial institutions operating in conjunction with the Company's homebuilding divisions in the Carolinas, and Tampa, Orlando and Southwestern Florida, was down 27% to $273,000. The lower level of joint venture income was due to the lower level of new home deliveries in 2007 combined with the transition of the Company's Colorado operations during 2006 from a joint venture arrangement to its wholly owned financial services subsidiary.

Earnings Conference Call

A conference call to discuss the Company's 2007 second quarter earnings will be held at 10:00 am Eastern time tomorrow, Friday, July 27, 2007. The call will be broadcast live over the Internet and can be accessed through the Company's website at http://standardpacifichomes.com/ir . The call will also be accessible via telephone by dialing (800) 811-8845 (domestic) or (913) 981- 4905 (international); Passcode: 2489753. The entire audio transmission with the synchronized slide presentation will also 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: 2489753.

Standard Pacific, one of the nation's largest homebuilders, has built homes for more than 97,000 families during its 41-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, Nevada and Illinois. The Company provides mortgage financing and title services to its homebuyers through its subsidiaries and joint ventures, Standard Pacific Mortgage, Inc., Home First Funding, SPH Home Mortgage, Universal Land Title of South Florida and SPH Title. For more information about the Company and its new home developments, please visit our website at: http://www.standardpacifichomes.com/.

This news release contains forward-looking statements. These statements include but are not limited to statements regarding: the Company's efforts to strengthen its balance sheet and it focus on closing backlog, reducing speculative home inventory, and lowering its supply of owned and controlled land; the Company's goal of reducing inventories, generating cash and paying down debt; orders and backlog; and housing market conditions. Forward-looking statements are based on 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; 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, including hedging activities; 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 December 31, 2006. The Company assumes no, and hereby disclaim 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.

* Excludes the Company's unconsolidated joint ventures. ** For a definition of Adjusted Homebuilding EBITDA and a reconciliation of net income (loss) to Adjusted Homebuilding EBITDA and cash flows from operating activities to Adjusted Homebuilding EBITDA, please see the Selected Financial Data included herewith. *** The Company's reported homebuilding gross margin for the 2007 second quarter was a negative $99.2 million, or a negative 14.3%, and after adding back the inventory impairment charge of $223.2 million and excluding $111.7 million of land sale revenues and $108.2 million related to land revenue cost of sales, the Company's homebuilding gross margin would have been $120.5 million, or 20.7%. STANDARD PACIFIC CORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, 2007 2006 % Change (Dollars in thousands, except per share amounts) Homebuilding: Revenues $694,834 $1,003,879 (31%) Cost of sales (794,052) (731,230) 9% Gross margin (99,218) 272,649 (136%) Selling, general and administrative expenses (97,032) (123,907) (22%) Income (loss) from unconsolidated joint ventures (41,457) 19,167 (316%) Other income (expense) (32,658) (13,766) 137% Homebuilding pretax income (loss) (270,365) 154,143 (275%) Financial Services: Revenues 4,102 5,649 (27%) Expenses (3,915) (4,905) (20%) Income from unconsolidated joint ventures 273 374 (27%) Other income 230 433 (47%) Financial services pretax income 690 1,551 (56%) Income (loss) before taxes (269,675) 155,694 (273%) (Provision) benefit for income taxes 103,756 (59,199) (275%) Net income (loss) $(165,919) $96,495 (272%) Earnings (Loss) Per Share: Basic $(2.56) $1.48 (273%) Diluted $(2.56) $1.44 (278%) Weighted Average Common Shares Outstanding: Basic 64,752,132 65,266,483 (1%) Diluted 64,752,132 67,006,759 (3%) Cash dividends per share $0.04 $0.04 Six Months Ended June 30, 2007 2006 % Change (Dollars in thousands, except per share amounts) Homebuilding: Revenues $1,393,169 $1,882,899 (26%) Cost of sales (1,422,299) (1,351,029) 5% Gross margin (29,130) 531,870 (105%) Selling, general and administrative expenses (197,906) (238,375) (17%) Income (loss) from unconsolidated joint ventures (80,714) 25,744 (414%) Other income (expense) (29,896) (12,502) 139% Homebuilding pretax income (loss) (337,646) 306,737 (210%) Financial Services: Revenues 9,679 9,793 (1%) Expenses (8,330) (9,112) (9%) Income from unconsolidated joint ventures 532 1,041 (49%) Other income 480 651 (26%) Financial services pretax income 2,361 2,373 (1%) Income (loss) before taxes (335,285) 309,110 (208%) (Provision) benefit for income taxes 128,575 (117,858) (209%) Net income (loss) $(206,710) $191,252 (208%) Earnings (Loss) Per Share: Basic $(3.20) $2.90 (210%) Diluted $(3.20) $2.82 (213%) Weighted Average Common Shares Outstanding: Basic 64,649,621 66,046,723 (2%) Diluted 64,649,621 67,911,393 (5%) Cash dividends per share $0.08 $0.08 SELECTED FINANCIAL DATA Three Months Ended June 30, 2007 2006 (Dollars in thousands) Net income (loss) $(165,919) $96,495 Net cash provided by (used in) operating activities $165,597 $(61,116) Net cash used in investing activities $(80,483) $(58,317) Net cash provided by (used in) financing activities $(80,529) $98,273 Adjusted Homebuilding EBITDA(1) $65,938 $205,496 Homebuilding SG&A as a percentage of homebuilding revenues 14.0% 12.3% Homebuilding interest incurred $31,501 $37,689 Homebuilding interest capitalized to inventories owned $27,835 $34,527 Homebuilding interest capitalized to investments in and advances to unconsolidated joint ventures $3,666 $3,162 Ratio of LTM Adjusted Homebuilding EBITDA to homebuilding interest incurred 3.2x 7.0x (1) Adjusted Homebuilding EBITDA means net income (loss) (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) expensing of previously capitalized interest included in cost of sales, (c) noncash impairment charges, (d) homebuilding depreciation and amortization, (e) amortization of stock-based compensation, (f) income (loss) from unconsolidated joint ventures and (g) 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 investors as one measure of the Company's ability to service debt and obtain financing. However, it should be noted that Adjusted Homebuilding EBITDA is not a U.S. generally accepted accounting principles ("GAAP") financial measure. Due to the significance of the GAAP components excluded, Adjusted Homebuilding EBITDA 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.

The tables set forth below reconcile net cash provided by (used in) operating activities and net income (loss), calculated and presented in accordance with GAAP, to Adjusted Homebuilding EBITDA:

Three Months Ended June 30, LTM Ended June 30, 2007 2006 2007 2006 (Dollars in thousands) Net cash provided by (used in) operating activities $165,597 $(61,116) $392,274 $(355,335) Add: Provision (benefit) for income taxes (103,756) 59,199 (176,393) 271,480 Expensing of previously capitalized interest included in cost of sales 28,047 18,571 104,020 69,869 Excess tax benefits from share- based payment arrangements 957 358 1,741 2,426 Less: Income (loss) from financial services subsidiary 187 744 6,096 2,762 Depreciation and amortization from financial services subsidiary 139 136 580 578 Loss on early extinguishment of debt - - - 5,938 Net changes in operating assets and liabilities: Trade and other receivables (8,967) (2,503) (10,907) (4,841) Mortgage loans held for sale (57,735) (23,164) (9,457) (29,209) Inventories-owned (57,170) 214,476 (162,312) 906,159 Inventories-not owned (5,418) (20,167) (20,200) 13,722 Deferred income taxes 75,470 7,192 226,096 21,683 Other assets 31,551 3,019 34,789 4,187 Accounts payable 1,828 5,063 23,463 6,385 Accrued liabilities (4,140) 5,448 65,244 (40,590) Adjusted Homebuilding EBITDA $65,938 $205,496 $461,682 $856,658 Three Months Ended June 30, LTM Ended June 30, 2007 2006 2007 2006 (Dollars in thousands) Net income (loss) $(165,919) $96,495 $(274,269) $442,520 Add: Cash distributions of income from unconsolidated joint ventures 3,265 25,012 34,254 99,561 Provision (benefit) for income taxes (103,756) 59,199 (176,393) 271,480 Expensing of previously capitalized interest included in cost of sales 28,047 18,571 104,020 69,869 Non-cash impairment charges 257,872 21,179 650,343 21,179 Homebuilding depreciation and amortization 1,802 1,662 7,613 6,425 Amortization of stock-based compensation 3,630 3,663 13,363 17,926 Less: Income (loss) from unconsolidated joint ventures (41,184) 19,541 (108,847) 69,540 Income (loss) from financial services subsidiary 187 744 6,096 2,762 Adjusted Homebuilding EBITDA $65,938 $205,496 $461,682 $856,658 BALANCE SHEET DATA (Dollars in thousands, except per share amounts) At June 30, 2007 2006 Stockholders' equity per share $24.08 $28.53 Ratio of total debt to total book capitalization (1) 55.9% 54.9% Ratio of adjusted net homebuilding debt to total book capitalization (2) 54.8% 53.3% Ratio of total debt to LTM adjusted homebuilding EBITDA (1) 4.3x 2.6x Ratio of adjusted net homebuilding debt to LTM adjusted homebuilding EBITDA (2) 4.1x 2.4x Homebuilding interest capitalized in inventories owned $141,491 $110,774 Homebuilding interest capitalized as a percentage of inventories owned 4.8% 3.1% (1) Total debt at June 30, 2007 and 2006 includes $76.8 million and $84.6 million, respectively, of indebtedness of the Company's financial services subsidiary and $12.3 million and $48.4 million, respectively, of indebtedness included in liabilities from inventories not owned. In addition, total debt at June 30, 2007 excludes $51.5 million of indebtedness included in trust deed and other notes payable related to a joint venture that was consolidated as of June 30, 2007. This indebtedness was excluded from the leverage calculation as the joint venture is less than an 80% owned subsidiary of the Company and is therefore excluded from our bank credit facilities and public note covenant calculations. (2) Net homebuilding debt reflects the offset of $3.4 and $4.8 million in cash and equivalents at June 30, 2007 and 2006, respectively, against homebuilding debt of $1,892.9 million and $2,100.1 million respectively. Adjusted net homebuilding debt at June 30, 2007 and 2006 is further adjusted to exclude $76.8 million and $84.6 million, respectively, of indebtedness of the Company's financial services subsidiary, $12.3 million and $48.4 million, respectively, of indebtedness included in liabilities from inventories not owned and $51.5 million of indebtedness included in trust deed and other notes payable related to a joint venture that was consolidated as of June 30, 2007 as discussed above in footnote 1. We believe that the adjusted net homebuilding debt to total book capitalization and adjusted net homebuilding debt to LTM adjusted homebuilding EBITDA ratios are useful to investors as a measure of the Company's ability to obtain financing. These are non-GAAP ratios and other companies may calculate these ratios differently. STANDARD PACIFIC CORP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) June 30, December 31, 2007 2006 ASSETS (unaudited) Homebuilding: Cash and equivalents $8,434 $17,376 Trade and other receivables 36,435 77,725 Inventories: Owned 2,940,069 3,268,788 Not owned 176,819 203,197 Investments in and advances to unconsolidated joint ventures 293,440 310,699 Deferred income taxes 285,328 185,268 Goodwill and other intangibles, net 72,671 102,624 Other assets 101,979 59,219 3,915,175 4,224,896 Financial Services: Cash and equivalents 13,904 14,727 Mortgage loans held for sale 83,387 254,958 Other assets 6,975 8,360 104,266 278,045 Total Assets $4,019,441 $4,502,941 LIABILITIES AND STOCKHOLDERS' EQUITY Homebuilding: Accounts payable $79,383 $109,444 Accrued liabilities 221,965 280,905 Liabilities from inventories not owned 74,708 83,149 Revolving credit facility 256,500 289,500 Trust deed and other notes payable 89,298 52,498 Senior notes payable 1,449,293 1,449,245 Senior subordinated notes payable 149,290 149,232 2,320,437 2,413,973 Financial Services: Accounts payable and other liabilities 3,261 4,404 Mortgage credit facilities 76,796 250,907 80,057 255,311 Total Liabilities 2,400,494 2,669,284 Minority Interests 57,565 69,287 Stockholders' Equity: Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued - - Common stock, $0.01 par value; 100,000,000 shares authorized; 64,848,454 and 64,422,548 shares outstanding, respectively 648 644 Additional paid-in capital 332,263 323,099 Retained earnings 1,230,041 1,446,043 Accumulated other comprehensive loss, net of tax (1,570) (5,416) Total Stockholders' Equity 1,561,382 1,764,370 Total Liabilities and Stockholders' Equity $4,019,441 $4,502,941