Note 3 - Business Acquisition

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Business Combination Disclosure [Text Block]

3. Business Acquisition

On October 1, 2015, pursuant to the terms and conditions of the Amended and Restated Agreement and Plan of Merger, dated as of June 14, 2015 (the "Merger Agreement"), between Standard Pacific Corp. ("Standard Pacific") and The Ryland Group, Inc. ("Ryland"), Ryland merged with and into Standard Pacific (the "Merger"), with Standard Pacific continuing as the surviving corporation.  At the same time Standard Pacific changed its name to CalAtlantic Group, Inc. The primary purpose for our merger with Ryland was to gain both geographic and product diversification and expand our reach and enhance our growth prospects across the homebuilding spectrum, from entry level to luxury. In addition, the merger was intended to create production, purchasing and other synergies intended to result in cost savings and efficiencies.

Based on an evaluation of the provisions of ASC Topic 805,

Business Combinations

("ASC 805"), Standard Pacific was determined to be the acquirer for accounting purposes. Under ASC 805, Standard Pacific is treated as having acquired Ryland in an all-stock transaction for an estimated total purchase price of approximately $2.0 billion. The total purchase price was allocated to Ryland's assets and liabilities based upon fair values as determined by the Company, as follows (in thousands):

Cash and cash equivalents	$	268,517
Inventories		2,404,765
Investments in unconsolidated joint ventures		13,821
Deferred income taxes		120,615
Homebuilding other assets		77,124
Financial services assets, excluding cash		144,889
Goodwill		970,185
Total assets		3,999,916
Accounts payable and accrued liabilities		(495,425	)
Secured project debt and other notes payables		(22,213	)
Senior notes payable		(1,291,541	)
Financial services liabilities		(124,619	)
Additional paid-in capital		(93,834	)
Total purchase price	$	1,972,284

During the 2016 first quarter the Company completed a valuation of the 1.625% convertible senior notes assumed in the merger with Ryland and determined that the value associated with the conversion feature was $93.8 million, which is included in additional paid-in capital in the accompanying condensed consolidated balance sheet as of September 30, 2016. In connection with the valuation of the conversion feature, the related deferred tax asset was reduced by approximately $35.9 million, with a corresponding increase in goodwill. The $970.2 million of goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, and it is not deductible for income tax purposes. As of the merger date, goodwill primarily consisted of the following: (i) expected production, purchasing and other synergies resulting from the merger, (ii) savings in corporate and divisional overhead costs, (iii) the benefit of the combination of the best components of the operating practices of both legacy companies, (iv) the benefit of the combination of the best employees of each legacy company, (v) expected expanded opportunities for growth through greater geographic and customer segment diversity.

The following presents summarized unaudited supplemental pro forma operating results as if Ryland had been included in the Company's Condensed Consolidated Statements of Operations as of January 1, 2015.

	Three Months Ended September 30, 2015		Nine Months Ended September 30, 2015
	(Dollars in thousands)
Home sale revenues	$	1,318,885	$	3,619,912
Pretax income	$	142,352	$	383,655

The supplemental pro forma operating results have been determined after adjusting the operating results of Ryland to reflect additional amortization that would have been recorded assuming the fair value adjustment to intangible assets had been applied beginning January 1, 2015. Certain other adjustments, including those related to conforming accounting policies and adjusting acquired inventory to fair value, have not been reflected in the supplemental pro forma operating results due to the impracticability of estimating such impacts.