COSTA MESA — Standard Pacific L.P., suffering the effects of the deteriorated market for new home sales in California, saw its earnings plummet 88% and its revenue fall 41% for the third quarter.
The Costa Mesa home builder earned $1.1 million, or 4 cents per limited partnership unit, on revenue of $53 million, down dramatically from last year's third-quarter net income of $9.2 million, or 34 cents per unit, on revenue of $90.1 million.
The third quarter also was sluggish for the publicly traded limited partnership because deals on many houses it expected to sell in the third quarter actually closed in the second quarter, an unusually active period for the company considering the general state of the economy, said April J. Morris, the company's vice president for finance.
Through the first nine months, Standard Pacific struggled as other home builders did. Its net income dropped 79% to $9.5 million, or 35 cents per unit, for the nine-month period from $44.8 million, or $1.63 per unit, for the same period last year. Its revenue fell 27% to $219.3 million from $300 million last year.
But Morris and other company executives said they feel good about the company's performance and its prospects for the future.
"We are very pleased with the results because a number of home builders are not making any money in the current economic environment," she said.
In the face of the recession, Standard Pacific continued to concentrate on building houses in the $200,000- to $400,000-price range, and that effort has given the company more new orders in the first nine months--774--than it had all of last year, said Arthur E. Svendsen, the company's chairman and managing general partner.
New orders translate into more building, more revenue and more profits for the company in the near future.
Of the new orders, 352 remained to be completed at the end of September. A year earlier, the backlog was 365 houses.
While the financial results represent "the bad news," the new orders suggest that the company, and perhaps the industry, is "pretty much at the bottom of the cycle," said Ron Foell, the company's president.
The new orders mean that more houses will be built and sold in the next few quarters, and the company's income and revenue should increase, Foell said.
"From what the economists nationally tell us, we're in a recovery mode, albeit a very slow one," he said. Statewide, he said, few new homes remain built and unsold, another indication that new home sales should soon increase.
The housing slump has been damaging or destroying many home builders and developers, especially privately owned ones.
"If you look at dozens of private financial statements as I have, you would not be surprised at lower earnings. Its shockingly normal," said industry analyst Sanford Goodkin, head of KPMG Peat Marwick's Goodkin Group consulting unit in La Jolla.
Publicly traded companies such as Standard Pacific are "much better positioned" to survive downturns, he said, because they can raise money through stock offerings and other financings and don't have to rely on banks, as private firms must. Banks, partly under pressure from tougher regulators, have sharply curtailed construction and development loans.
Standard Pacific, in addition, has "quite excellent" management and a good reputation as a builder, Goodkin said.
The company is just about where its executives expected it to be after the first three quarters, Morris said.
It actually sold fewer homes--648--in the first nine months this year than it did in the same period last year when 829 homes were sold. But last year's sales were spurred by a backlog of 585 new orders existing at the start of the year. This year began with only 239 orders for new houses, Foell said.
The slower market for new houses has not deterred Standard Pacific from going forward with its plan to convert from a publicly traded limited partnership to a publicly held corporation. Holders of limited partnership units will meet Dec. 6 to vote on the proposal. If the change is approved, the company will complete the conversion at the end of the year, Morris said.
The company's results were also affected by reserves of about $800,000 that it set aside to pay for the relocation of a subsidiary's Buena Park plant to Greensboro, N.C. In addition, the division, Panel Concepts L.P. in Santa Ana, has offered to relocate employees, but fewer than six of up to 60 employees have applied for the transfer so far, Morris said.
Panel Concepts makes movable acoustical office partitions in its Santa Ana plant and office furniture in its Buena Park plant. The parent company also owns Standard Pacific Savings, a Newport Beach savings and loan that provides financing for many of those who buy the parent company's homes.