Home builder Standard Pacific Corp. reported a 26 percent increase in third-quarter earnings to a record $2.16 per share compared to $1.72 last year. Net income, at $74.6 million, was up 29 percent from the third quarter of 2003, and home-building revenues were up 39 percent to a record $866 million.
Standard Pacific Corp. also reported 2,353 new home deliveries, up 5 percent from third-quarter 2003, and a record 2,474 new home orders, up 15 percent year-over-year. At the end of the third-quarter of this year, Standard Pacific had a backlog of 6,956 homes, valued at $2.4 billion. This backlog is up 51 percent from the end of the third quarter in 2003.
Stephen J. Scarborough, chairman and CEO, said, “These record results were achieved despite the series of severe hurricanes, which impacted our Southeastern region and resulted in delivery delays of nearly 300 homes during the third quarter. In addition, our strong year-over-year increase in earnings per share this quarter is on top of a 153 percent increase in earnings per share in last year’s third quarter.
“And based on the strength of our record orders and backlog, we are on target to generate record fourth-quarter earnings of approximately $3.65 per share, a year over year increase of 57 percent. For the (fourth) quarter we expect to deliver over 3,000 homes with revenues in excess of $1 billion for the first time in the company’s history, leveraging our strong position in California, Florida and Arizona.”
Scarborough also announced that the company is increasing its 2004 earnings guidance for the full year to $8.75 per share. “Our earnings target would result in a 44 percent increase over our full year 2003 per share earnings and generate a projected return on average equity of 26.5 percent for the year. The increased full-year guidance for 2004 reflects the earnings impact resulting from the delay of approximately 425 deliveries from our Southeastern region in the third and fourth quarters due to the severe hurricane season this year,” he said. For the full year, the company expects 9,025 deliveries, excluding 250 homes in joint ventures, and home-building revenues of approximately $3.3 billion, a 43 percent year-over-year increase.
“While we are looking forward to a strong finish to 2004 we are even more excited about our outlook for next year during which we expect to deliver nearly 12,000 new homes, representing a nearly 30 percent jump over this year’s projected delivery total,” he said. “For 2005, California deliveries should be on par with the record-setting volume level forecast this year.
“Of particular note, we expect to see unit-volume increases in every division in our Southwest and Southeast regions next year. And for the first time in our 38-year history, we expect to deliver more homes in a state other than California, with Florida targeted to generate nearly 4,000 deliveries in 2005, up over 50 percent year over year. This broad-based growth in unit volume outside California, led by our rapid growth in Florida, is making significant and increasing bottom line contributions and clearly demonstrates the success of our balanced growth strategy.”
The company announced initial guidance for 2005 earnings per share in the range of $9.80 to $10 on home-building revenues of $3.8 billion. The projected 13 percent increase in revenues is being driven by a 30 percent increase in deliveries to 11,725 new homes, excluding 225 homes in joint ventures. During 2005, the company expects the average home price to decrease by over 10 percent to $325,000, due primarily to the increase in deliveries outside of California, the company announced. Scarborough also said that the company’s home-building gross margin will continue to be in the 24 percent range with the assumption that home prices remain relatively stable.
“We continue to pursue growth in our existing markets and expansion opportunities into new markets with strong upside potential. Consistent with this strategy we entered the Tucson market in August through the acquisition of Kemmerly Homes whose operating platform and management team is positioned to meaningfully expand volume and market share. Additionally, an integral part of our growth strategy is maintaining a strong land position and balance sheet. We currently control over 50,000 lots companywide, a three to four year supply, which allows us to be patient and opportunistic while maximizing our flexibility in how we deploy our capital,” he said.
Home-building pretax income for the 2004 third quarter increased 27 percent to $119.1 million from $93.6 million in the year earlier period. The increase in pretax income was driven by a 39 percent increase in home-building revenues and a 130 basis point improvement in the company’s home-building gross margin percentage. These positive factors were partially offset by a $9.3 million decrease in joint venture income and a 90 basis point increase in the company’s SG&A rate.
Home-building revenues for the 2004 third quarter increased 39 percent to $865.8 million from $623.9 million last year. The increase in revenues was attributable to an 11 percent increase in new home deliveries (exclusive of joint ventures) combined with a 26 percent increase in the company’s consolidated average home price to $376,000.
During the 2004 third quarter, the Company delivered 864 new homes in California (exclusive of joint ventures), a 19 percent increase over the 2003 third quarter. Including joint ventures, California deliveries were up 3 percent to 917 homes. Deliveries were off 24 percent in Southern California to 552 new homes, which included no joint-venture deliveries this year versus 110 last year, while deliveries were up 121 percent in Northern California to 365 new homes (including 50 homes from the company’s new operations in Sacramento and 53 joint venture deliveries).
In Florida, housing market conditions remained healthy but the company’s ability to deliver homes was impacted by the series of severe hurricanes that hit the state of Florida during the third quarter. The hurricanes resulted in a delay in the delivery of approximately 200 homes for the third quarter. Nevertheless, the company delivered 605 new homes in the third quarter of 2004, up 4 percent, including 89 homes from the company’s new operations in Jacksonville.
The company delivered 409 homes (including 8 homes from the company’s new Tucson division, which includes one joint venture delivery) during the third quarter in Arizona, down 10 percent from the 2003 third quarter reflecting the timing of new home deliveries during the year including a more even distribution of deliveries over the full year. Housing demand in Phoenix, the nation’s second-largest metropolitan housing market, continues to remain strong and for the full year the company is projecting a 7 percent increase in new home deliveries.
In the Carolinas, deliveries were off 8 percent to 130 new homes. This region was also impacted by severe weather, which resulted in the delay of approximately 60 homes during the quarter. New home deliveries were up 48 percent in Texas and up 103 percent in Colorado. While economic and housing market conditions remain relatively weak in Texas, the company has successfully introduced several lower-priced new home projects resulting in an increase in absorption rates year-over-year. In Colorado, gradually improving economic conditions, combined with a similar introduction of more affordable housing, have contributed to the increased level of new home deliveries.
During the 2004 third quarter, the company’s average home price was up 26 percent year-over-year to $376,000. The higher selling price was driven primarily by a 30 percent increase in the company’s average price in California to $651,000 (exclusive of joint ventures) and from an increase in the percentage of deliveries from the company’s California operations compared to the year earlier period. The higher price in California represents the impact of general price increases experienced in the state and a change in mix during the 2004 third quarter compared to the prior year.
The company’s average price in Florida was $217,000, up 19 percent from the year ago period, which also reflects general price increases, a shift in mix, and the addition of Jacksonville, which had an average home price of $240,000. The company’s average price in Arizona was down 1 percent to $177,000 and up 16 percent in the Carolinas to $160,000. Both changes were primarily the result of shifts in the company’s product mix. The company’s average prices in Texas and Colorado were down 12 percent and 3 percent, respectively, reflecting the company’s increasing emphasis on more affordable homes in these regions.
For the full year, we expect that the company’s average home price will increase approximately 20 percent from the prior year to $365,000 as a result of higher average prices in California and Florida, partially offset by lower average prices in Texas and Colorado due to a shift to more affordable homes. We expect that the company’s 2004 fourth quarter average home price will be approximately $370,000.
New orders for the quarter increased 15 percent to a record 2,474 new homes (including 61 joint venture orders) on a 27 percent increase in average community count. The company’s cancellation rate for the quarter declined to 18 percent from 20 percent in the year earlier period. In Southern California, net new home orders were down 12 percent for the quarter due in large part to the significant level of price appreciation over the past few years.
The company’s expectation is that absorption rates will, over time, return to a more normalized pace which is reflected in our outlook for this region in the coming year. In Northern California, new home orders continued to reflect healthy demand for new homes and were up slightly over the year earlier period on the same number of active selling communities. The Northern California total for the 2004 third quarter includes 89 orders from 4 communities from our new Sacramento division.
In Florida, orders were up 53 percent on a 70 percent higher community count despite the record hurricane activity during the quarter. The lower sales rate per community during the quarter also reflects a conscious decision by the company to reduce the number of new homes for sale due to the strong backlog levels in our Florida markets. The company is generally experiencing strong demand for new housing throughout its Florida markets. The total for the 2004 third quarter also includes 76 orders from 13 communities from Coppenbarger Homes in Jacksonville, which was acquired in October 2003. In Arizona, third quarter orders were up 11 percent year-over-year notwithstanding an 11 percent decline in the number of active selling communities.
While housing demand in Arizona continued to be strong, the company has been regulating the release of new homes for sale in Phoenix to maximize gross margins and to better align sales with our backlog and production capabilities that have been constrained by the record setting permit level in the greater Phoenix metropolitan area. The total for the third quarter this year also includes 46 orders from 5 communities from our new Tucson division, which we acquired in August 2004.
Orders were up 14 percent in the Carolinas on a 75 percent higher community count, up 19 percent in Colorado on a 17 percent higher community count and up 29 percent in Texas on a 17 percent higher community count. In Texas and the Carolinas, order levels still reflect the impact of generally sluggish economic conditions on the demand for new housing while the company’s positive order trends in Colorado reflect gradually improving economic conditions.
The record level of new home orders for the 2004 third quarter resulted in a record third-quarter backlog of 6,956 presold homes (including 158 joint-venture homes) valued at an estimated $2.4 billion (including $105 million of joint venture backlog), an increase of 51 percent from the Sept. 30, 2003 backlog value.
The company ended the quarter with 168 active selling communities, a 31 percent increase over the year earlier period. The higher community count resulted from the opening of 74 new communities during the first three quarters of 2004 (compared to 50 during the same time last year) including 25 new communities during the third quarter. The company is planning to open approximately 20 new communities during the balance of the year and is targeting a year-end community count of approximately 170 to 180 active subdivisions, approximately 16 percent higher than at the end of 2003.
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