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Basch Report
Jax Daily Record Thursday, Oct. 11, 201805:20 AM EST

The Basch Report: KB Home has big plans for Jacksonville

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CEO of national homebuilder says purchase of Landon Homes gives company control of more than 2,000 lots.
by: Mark Basch Contributing Writer

After acquiring Landon Homes in July, KB Home is expecting big growth in Jacksonville, CEO Jeffrey Mezger said in the Los Angeles-based homebuilder’s quarterly conference call.

“We are currently the fourth-largest builder in this market based on deliveries, and our position will be enhanced in 2019 and beyond with this acquisition,” Mezger said.

“Our local team is moving quickly, having completed the rebranding to KB Home and the introduction of our product in all but one active community that we acquired,” he said.

Mezger said the assets of Jacksonville-based Landon gave KB “2,100 lots that we now own or control across 17 communities, eight of which are open today and nine communities which will open over the next 18 to 21 months.”

When the deal was announced in July, KB said it acquired 700 lots from Landon. A KB spokeswoman said last week the 2,100 lots Mezger cited include future opportunities resulting from the Landon deal.

In response to analysts’ questions, Mezger explained why KB targeted Landon.

“If you look at Jacksonville, it’s a great story in that their product was aligned with ours. We like our floor plans better, but the footages and the price points were similar, and the geographic complement of where they were open versus where we were open was also very good,” he said.

Mezger said KB already had “a great business in Jacksonville” and it was quickly able to “plug and play” its business into the Landon communities.

“Right now, we’re fourth in Jacksonville. We don’t want to be fourth. We’d rather be first, second, third and this will help us to get there. So, it’s really a pretty quick hit deal at a very reasonable price.”

KB has not disclosed the terms of the deal.

KB reported revenue for its third quarter ended Aug. 31 rose 7 percent to $1.23 billion, and its earnings per share rose by 36 cents to 87 cents.

Taylor Morrison enters Jacksonville

Another national homebuilder targeting Jacksonville is Taylor Morrison Home Corp., which entered the market last week by completing its acquisition of AV Homes.

AV Homes, headquartered in Scottsdale, Arizona, as is Taylor Morrison, operated in five communities but four of them overlapped with existing Taylor Morrison operations.

The $963 million acquisition gives Taylor Morrison entry into the Jacksonville market.

In a memo to employees in late September, AV Homes CEO Roger Cregg said Jacksonville employees will be able to continue working in their current offices because Taylor Morrison doesn’t have operations in the area.

He also tried to assure employees that the deal will be positive for them.

“As we near close, Taylor Morrison is planning ‘Day One’ celebrations for our arrival — something I believe is a true testament to the type of organization we will be joining. Taylor Morrison is known for their people-first focus, and I know they are delighted to be welcoming us into the special culture they have created,” Cregg said.

Kelly retiring as CSX chairman

CSX Corp. announced Friday that Chairman Edward Kelly is retiring from the board of directors in January.

Kelly has served on the board since 2002 and became chairman in March 2017, when the late Hunter Harrison joined the Jacksonville-based railroad company as CEO.

Previous CEO Michael Ward also had served as chairman of the board.

Kelly will be succeeded as chairman by John Zillmer, former CEO of Fortune 500 company Univar Inc.

Zillmer joined CSX’s board when Harrison came in as part of a sweeping overhaul of management and the board of directors.

In a news release, CSX Chief Executive James Foote said Kelly “guided us with exceptional skill through many turbulent moments” during his tenure as chairman.

International Baler names Biazis CEO

Jacksonville-based International Baler Corp. last week named Victor Biazis as president and CEO.

Biazis had been running a Ponte Vedra Beach-based industrial adhesives company he founded called Coastal Industrial Products.

Biazis succeeds William Nielsen at International Baler, with Nielsen returning to his previous role as chief financial officer.

Nielsen has been chief financial officer of the publicly traded manufacturer of baling equipment since 1994. He became CEO in January 2017 after previous chief executive Roger Griffin resigned.

Synnex closes Convergys deal

Synnex Corp. last week closed its $2.8 billion acquisition of Convergys Corp.

California-based Synnex is merging the operations of Convergys into its outsourced customer service business called Concentrix.

With the merger, Concentrix will operate 275 offices in more than 40 countries, with 225,000 employees.

Cincinnati-based Convergys said when the merger was announced in June that it had about 1,000 employees in Jacksonville, but employment levels have varied over the years as customer contracts were won and lost.

The Jacksonville operations trace their roots to a business created by AT&T in 1983 to handle shareholder services after the court-ordered breakup of the telephone company.

As that business expanded to handle outsourced customer services for other companies, it employed more than 4,000 at its peak.

Analyst downgrades Landstar System

Landstar System Inc.’s stock has been trending down since reaching a record high a month ago, but one analyst still downgraded the Jacksonville-based trucking company last week.

Wolfe Research analyst Scott Group downgraded his rating on Landstar from “peer perform” to “underperform” as he lowered ratings on eight trucking stocks.

“While Landstar has underperformed recently, the stock is still up 13 percent year-to-date, outperforming our overall coverage and the S&P 500,” Group said in his research report.

“Landstar has by far the most exposure to the spot market and thus has seen very strong revenue and earnings growth this year. However, truckload spot rates have recently inflected negative year over year and thus we see increasing earnings risk for Landstar going forward.”

Group also said “about one-third of Landstar’s revenue is tied to flatbed and thus levered in part to the housing market where we expect incremental weakness given rising rates.”

Landstar’s stock had fallen from a record high of $128.70 on Sept. 11 to $115.71 Friday before Group’s downgrade

Group lowered his rating on the entire trucking sector from “market weight” to “market underweight,” based on expectations that earnings will peak next year.

“While freight fundamentals have been terrific over the past year, we expect fundamentals to moderate over the next couple of years given increasingly tough comps, moderating stimulus from tax reform by late 2019, and rising rates and overall inflation,” he said.

International Speedway earnings rise on event timing

Daytona Beach-based International Speedway Corp. last week reported a big increase in third-quarter earnings, helped by events held this year but not in the third quarter of 2017.

The company, which operates the Daytona International Speedway and 12 other motor sports facilities, reported revenue rose 21 percent in the quarter ended Aug. 31 to $159.3 million, and adjusted earnings rose by 20 cents to 26 cents a share.

Several events in the third quarter contributed to the higher revenue, including NASCAR race events in Chicago that took place in the fourth quarter last year and the Ferrari World Finals race at Daytona International Speedway, which was not held there in 2017.

The company also is benefiting from new venues opening at its One Daytona retail, dining and entertainment complex adjacent to the Daytona Beach speedway.

In a news release, CEO Lesa France Kennedy said the higher third-quarter results were in line with the company’s expectations.
 

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