LOS ANGELES--(BUSINESS WIRE)--June 27, 2008--KB Home (NYSE: KBH),
one of America's largest homebuilders, today reported financial
results for its second quarter ended May 31, 2008. Results include:
-- Revenues totaled $639.1 million in the second quarter of 2008,
down from $1.41 billion in the second quarter of 2007, largely
due to lower housing revenues. Second-quarter housing revenues
of $636.7 million declined from $1.30 billion in the
year-earlier quarter, reflecting a 41% decrease in homes
delivered and a 17% decline in the average selling price. The
Company delivered 2,810 homes at an average selling price of
$226,600 in the second quarter of 2008 compared to 4,776 homes
delivered in the year-earlier quarter at an average selling
price of $271,600.
-- The Company reported a net loss of $255.9 million or $3.30 per
diluted share for the quarter ended May 31, 2008, after
recognizing pretax, non-cash charges of $176.5 million for
inventory and joint venture impairments and the abandonment of
certain land option contracts, and $24.6 million for goodwill
impairment. The net loss also reflected a $98.9 million
valuation allowance charge against the net deferred tax assets
generated during the quarter. For the year-earlier quarter,
the Company reported a net loss of $148.7 million or $1.93 per
diluted share, which included pretax, non-cash charges of
$308.2 million associated with impairments and abandonments,
partially offset by income of $25.5 million, or $.33 per
diluted share, associated with the Company's French
discontinued operations that were sold in July 2007.
-- The Company's cash balance at May 31, 2008 totaled $1.31
billion compared to $390.6 million at May 31, 2007. Its ratio
of debt to total capital was 62.9% at May 31, 2008 compared to
50.3% at May 31, 2007. Net of cash, the Company's ratio of
debt to total capital was 40.2% at May 31, 2008 compared to
46.6% at May 31, 2007. During the first half of 2008, the
Company generated positive cash flows from its operations, a
trend that the Company expects will continue in the second
half of the year.
-- At May 31, 2008, the Company's backlog totaled 6,233 homes,
representing potential future housing revenues of
approximately $1.47 billion. These measures declined 54% and
61%, respectively, from the 13,672 backlog homes and
approximately $3.74 billion in backlog value at May 31, 2007.
Company-wide net orders for new homes in the 2008 second
quarter decreased 42% to 4,200 from 7,265 in the year-earlier
quarter, reflecting a 37% year-over-year decrease in the
Company's number of active communities. The Company's
cancellation rate in the second quarter of 2008 was 27%, an
improvement from 53% in the first quarter of 2008 and 34% in
the second quarter of 2007.
-- On June 12, 2008, the Company announced that it would redeem
all of its outstanding 7 3/4% senior subordinated notes due
2010 in the aggregate principal amount of $300 million. The
redemption date is July 14, 2008 and the redemption price is
101.938% of the principal amount, plus all accrued interest to
the date of redemption.
Housing market conditions remain difficult for the homebuilding
industry, with inventories of unsold homes expanding as foreclosures
rise to record highs, and consumer confidence continuing to
deteriorate amid signs of weakness in the general economy, said
Jeffrey Mezger, president and chief executive officer. Persistently
poor demand for new homes during the second quarter amplified pricing
pressures and diminished asset values in many of our served markets,
requiring us to recognize additional non-cash charges for inventory
and joint venture impairments, abandonments and the write-off of
goodwill, all of which significantly reduced our operating results.
Despite substantially lower home prices, relatively low interest rates
and an abundance of choices, potential new home buyers remain
reluctant to purchase a home. But as housing affordability continues
to improve, we expect today's hesitant buyers to become a healthy
source of demand for new homes, fueling the eventual housing market
recovery.
The Company's total revenues of $639.1 million in the quarter
ended May 31, 2008 decreased 55% from $1.41 billion in the
year-earlier quarter, reflecting lower housing and land sale revenues.
Housing revenues of $636.7 million in the 2008 second quarter declined
51% from $1.30 billion in the prior year's second quarter due to a 41%
year-over-year decrease in homes delivered to 2,810 from 4,776 and a
17% year-over-year decrease in the average selling price to $226,600
from $271,600. The steep decline in homes delivered was due in large
part to a 37% reduction in active communities as the Company continues
to strategically trim inventory in line with reduced market demand.
Land sale revenues in the second quarter of 2008 totaled $.4 million,
down from $112.6 million in the second quarter of 2007.
The Company's homebuilding business generated operating losses of
$262.4 million in the second quarter of 2008 and $263.0 million in the
second quarter of 2007. Within the Company's housing operations, the
current quarter loss was largely due to the recognition of pretax,
non-cash charges of $167.1 million for inventory impairments and land
option contract abandonments, and $24.6 million for goodwill
impairment, as well as a decline in margins due to competitive pricing
pressures. In the year-earlier quarter, the loss within housing
operations reflected inventory impairment and abandonment charges of
$244.5 million. The Company's housing gross margin fell to a negative
17.5% in the second quarter of 2008 from a negative 3.9% in the second
quarter of 2007. Excluding inventory-related non-cash charges, the
housing gross margin would have been 8.7% in the current quarter and
14.9% in the second quarter of 2007. Land sales generated a loss of
$7.4 million in the second quarter of 2008, including $7.3 million of
impairment charges related to planned future land sales. That compares
to a loss of $18.5 million in the second quarter of 2007, which
included $22.4 million of similar impairment charges. Reflecting the
Company's continuing efforts to adjust its overhead to match the lower
volume of its homes delivered and corresponding decrease in revenues,
the Company reduced its selling, general and administrative expenses
by $74.5 million, or 38%, to $119.1 million in the second quarter of
2008 from $193.6 million in the year-earlier quarter.
For the 2008 second quarter, the Company reported a net loss of
$255.9 million, or $3.30 per diluted share, including a charge of
$98.9 million to record a full valuation allowance against the net
deferred tax assets resulting from its current quarter loss. As of May
31, 2008, the Company's valuation allowance on deferred tax assets
exceeded $720 million. The valuation allowance is required under
generally accepted accounting principles. For tax purposes, however,
this potential tax benefit may be carried forward for up to 20 years.
To the extent the Company generates taxable income in the future, it
expects to be able to reverse the valuation allowance and reduce its
effective tax rate on that future income. The Company's net loss of
$148.7 million, or $1.93 per diluted share, in the second quarter of
2007 included income of $25.5 million or $.33 per diluted share from
its discontinued French operations that were sold in July 2007.
Net new home orders totaled 4,200 in the second quarter of 2008,
decreasing 42% from 7,265 net orders in the second quarter of 2007.
The decrease was largely due to a lower community count in 2008, the
result of the Company's strategic efforts to lower inventory over the
past several quarters in alignment with market conditions.
Second-quarter net new home orders were nearly triple the 1,449 net
orders reported in the first quarter of 2008. In addition, the second
quarter year-over-year net new home order comparison improved from the
steep 75% year-over-year decline in the first quarter of 2008. The
improved comparison reflected, in part, the impact of a lower
cancellation rate in the 2008 second quarter. The Company's
cancellation rate improved to 27% in the second quarter of 2008 from
53% in the first quarter of 2008 and 34% in the second quarter of
2007. Homes in backlog at May 31, 2008 decreased 54% on a
year-over-year basis to 6,233, reflecting year-over-year decreases
ranging from 46% to 65% in each of the Company's geographic operating
regions. Backlog value declined 61% on a year-over-year basis to
approximately $1.47 billion, reflecting fewer homes in backlog and
lower average selling prices.
We have significantly reduced inventory and debt levels at KB
Home over the past several quarters, while building a sizable cash
balance, said Mezger. I believe the Company is well positioned to
successfully navigate through the current housing environment and to
capitalize on new opportunities that emerge. As of the end of the
second quarter, we have tremendous financial liquidity and
flexibility, with $1.31 billion in cash on our balance sheet, nearly
$1.1 billion of borrowing capacity available under our bank credit
facility, and a leverage ratio, net of cash, at the low end of our
targeted range. Seizing a strategic opportunity available to us
through the strength of our cash position, we recently decided to call
for the redemption of our $300 million 7 3/4% senior subordinated
notes, which will lower our debt level further. We will continue with
our stated objective of maintaining a strong balance sheet and being
prudent with respect to land investments and other expenditures for
the foreseeable future, while focusing on initiatives designed to
expedite our return to profitability.
KB Home continues to build on its reputation as a leader and
innovator in the homebuilding industry by addressing its environmental
footprint, said Mezger. Recently, we were recognized by Calvert
Asset Management and the Boston College Institute for Responsible
Investment as the nation's #1 Green Homebuilder. Achieving this
recognition differentiates KB Home in the marketplace, especially from
resale homes, which we see as our biggest source of competition. In
addition, eight of our divisions recently received the Environmental
Protection Agency's 2008 ENERGY STAR® Leadership in Housing Award in
recognition of their efforts to build more energy-efficient new homes.
We intend to expand on these accomplishments through our My Home. My
Earth.™ initiatives and similar efforts as we pursue our goal of
becoming a leading environmentally friendly national homebuilder.
Company-wide revenues for the six months ended May 31, 2008
totaled $1.43 billion, down 49% from $2.80 billion for the six months
ended May 31, 2007. Homes delivered in the first six months of fiscal
2008 declined 42% year-over-year to 5,738, and the average selling
price decreased 12% year-over-year to $237,600. The Company generated
a net loss of $524.1 million, or $6.77 per diluted share, in the first
half of fiscal 2008, including pretax, non-cash charges of $400.5
million for inventory and joint venture impairments and land option
contract abandonments and $24.6 million for goodwill impairment. The
net loss also reflected a $198.9 million valuation allowance charge
against the deferred tax asset. For the first half of fiscal 2007, the
Company posted a net loss of $121.1 million, or $1.57 per diluted
share, including pretax, non-cash charges of $316.9 million for
inventory and joint venture impairments and land option contract
abandonments, and income of $42.3 million, or $.55 per diluted share,
from the Company's French discontinued operations.
The Conference Call on the Second Quarter 2008 earnings will be
broadcast live TODAY at 8:30 a.m. Pacific Daylight Time, 11:30 a.m.
Eastern Daylight Time. To listen, please go to the Investor Relations
section of the Company's website at kbhome.com.
KB Home, one of the nation's largest homebuilders, has been
building quality homes for families for more than 50 years.
Headquartered in Los Angeles, the Company has operating divisions in
nine states, building communities from coast to coast. KB Home, ranked
the #1 homebuilder in FORTUNE magazine's 2008 list of America's Most
Admired Companies®, is a Fortune 500 company listed on the New York
Stock Exchange under the ticker symbol KBH. For more information
about any of KB Home's new home communities or complete mortgage
services offered through Countrywide KB Home Loans, call 888-KB-HOMES
or visit kbhome.com.
Certain matters discussed in this press release, including any
statements that are predictive in nature or concern future market and
economic conditions, business and prospects, our future financial and
operational performance, or our future actions and their expected
results are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are based on current expectations and projections about
future events and are not guarantees of future performance. We do not
have a specific policy or intent of updating or revising
forward-looking statements. Actual events and results may differ
materially from those expressed or forecasted in forward-looking
statements due to a number of factors. The most important risk factors
that could cause our actual performance and future events and actions
to differ materially from such forward-looking statements include, but
are not limited to: general economic and business conditions; adverse
market conditions that could result in additional inventory
impairments, abandonment charges or goodwill impairments; material
prices and availability; labor costs and availability; changes in
interest rates; our debt level; declines in consumer confidence;
increases in competition; weather conditions, significant natural
disasters and other environmental factors; government regulations; the
availability and cost of land in desirable areas; government
investigations and shareholder lawsuits regarding our past stock
option grant practices and the restatement of certain of our financial
statements; other legal or regulatory proceedings or claims;
conditions in the capital, credit (including consumer mortgage lending
standards) and homebuilding markets; the ability and/or willingness of
participants in our unconsolidated joint ventures to fulfill their
obligations; our ability to access our available capacity under our
unsecured revolving credit facility; and other events outside of our
control. Please see our periodic reports and other filings with the
Securities and Exchange Commission for a further discussion of these
and other risks and uncertainties applicable to our business.
KB HOME
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months and Three Months Ended May 31, 2008 and 2007
(In Thousands, Except Per Share Amounts - Unaudited)
Six Months Three Months
-------------------------- ------------------------
2008 2007 2008 2007
------------ ------------ ---------- ------------
Total revenues $ 1,433,289 $ 2,802,046 $ 639,065 $ 1,413,208
============ ============ ========== ============
Homebuilding:
Revenues $ 1,428,402 $ 2,794,635 $ 637,094 $ 1,409,986
Costs and
expenses (1,939,754) (3,054,491) (899,475) (1,672,990)
------------ ------------ ---------- ------------
Operating loss (511,352) (259,856) (262,381) (263,004)
Interest income 22,554 10,268 9,522 5,600
Equity in loss of
unconsolidated
joint ventures (45,361) (41,700) (5,483) (39,495)
------------ ------------ ---------- ------------
Homebuilding
pretax loss (534,159) (291,288) (258,342) (296,899)
------------ ------------ ---------- ------------
Financial services:
Revenues 4,887 7,411 1,971 3,222
Expenses (2,232) (2,411) (1,113) (1,071)
Equity in income
of
unconsolidated
joint venture 8,302 10,191 2,154 3,396
------------ ------------ ---------- ------------
Financial
services
pretax income 10,957 15,191 3,012 5,547
------------ ------------ ---------- ------------
Loss from
continuing
operations before
income taxes (523,202) (276,097) (255,330) (291,352)
Income tax benefit
(expense) (900) 112,600 (600) 117,200
------------ ------------ ---------- ------------
Loss from
continuing
operations (524,102) (163,497) (255,930) (174,152)
Income from
discontinued
operations, net of
income taxes - 42,348 - 25,466
------------ ------------ ---------- ------------
Net loss $ (524,102) $ (121,149) $(255,930) $ (148,686)
============ ============ ========== ============
Basic earnings
(loss) per share:
Continuing
operations $ (6.77) $ (2.12) $ (3.30) $ (2.26)
Discontinued
operations - 0.55 - 0.33
------------ ------------ ---------- ------------
Basic loss per
share $ (6.77) $ (1.57) $ (3.30) $ (1.93)
============ ============ ========== ============
Diluted earnings
(loss) per share:
Continuing
operations $ (6.77) $ (2.12) $ (3.30) $ (2.26)
Discontinued
operations - 0.55 - 0.33
------------ ------------ ---------- ------------
Diluted loss
per share $ (6.77) $ (1.57) $ (3.30) $ (1.93)
============ ============ ========== ============
Basic average
shares outstanding 77,413 77,046 77,462 77,102
============ ============ ========== ============
Diluted average
shares outstanding 77,413 77,046 77,462 77,102
============ ============ ========== ============
KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands - Unaudited)
May 31, November 30,
2008 2007
---------- ------------
Assets
Homebuilding:
Cash and cash equivalents $1,305,077 $1,325,255
Receivables 190,010 295,739
Inventories 2,608,823 3,312,420
Investments in unconsolidated joint
ventures 294,504 297,010
Deferred income taxes 222,458 222,458
Goodwill 43,400 67,970
Other assets 123,500 140,712
---------- ------------
4,787,772 5,661,564
Financial services 53,236 44,392
---------- ------------
Total assets $4,841,008 $5,705,956
========== ============
Liabilities and stockholders' equity
Homebuilding:
Accounts payable $ 609,989 $ 699,851
Accrued expenses and other liabilities 778,261 975,828
Mortgages and notes payable 2,161,220 2,161,794
---------- ------------
3,549,470 3,837,473
Financial services 17,109 17,796
Stockholders' equity 1,274,429 1,850,687
---------- ------------
Total liabilities and stockholders' equity $4,841,008 $5,705,956
========== ============
KB HOME
SUPPLEMENTAL INFORMATION
For the Six Months and Three Months Ended May 31, 2008 and 2007
(In Thousands - Unaudited)
Six Months Three Months
------------------------ ----------------------
Homebuilding revenues: 2008 2007 2008 2007
----------- ----------- --------- -----------
Housing $1,363,433 $2,670,624 $636,719 $1,297,366
Land 64,969 124,011 375 112,620
----------- ----------- --------- -----------
Total $1,428,402 $2,794,635 $637,094 $1,409,986
=========== =========== ========= ===========
Six Months Three Months
------------------------ ----------------------
Costs and expenses: 2008 2007 2008 2007
----------- ----------- --------- -----------
Construction and
land costs
Housing $1,520,091 $2,508,766 $748,098 $1,348,306
Land 148,390 146,918 7,742 131,099
----------- ----------- --------- -----------
Subtotal 1,668,481 2,655,684 755,840 1,479,405
Selling, general and
administrative
expenses 246,703 398,807 119,065 193,585
Goodwill impairment 24,570 - 24,570 -
----------- ----------- --------- -----------
Total $1,939,754 $3,054,491 $899,475 $1,672,990
=========== =========== ========= ===========
Six Months Three Months
------------------------ ----------------------
Interest expense: 2008 2007 2008 2007
----------- ----------- --------- -----------
Interest incurred $ 76,905 $ 102,889 $ 38,403 $ 51,340
Interest capitalized (76,905) (102,889) (38,403) (51,340)
----------- ----------- --------- -----------
Total $ - $ - $ - $ -
=========== =========== ========= ===========
Six Months Three Months
------------------------ ----------------------
Other information: 2008 2007 2008 2007
----------- ----------- --------- -----------
Depreciation and
amortization $ 6,341 $ 10,334 $ 2,958 $ 5,096
Amortization of
previously
capitalized
interest 54,898 53,598 26,322 27,825
=========== =========== ========= ===========
KB HOME
SUPPLEMENTAL INFORMATION
For the Six Months and Three Months Ended May 31, 2008 and 2007
(Unaudited)
Six Months Three Months
-------------------- --------------------
Average sales price: 2008 2007 2008 2007
-------- ---------- -------- ----------
West Coast $362,300 $ 470,800 $331,400 $ 471,600
Southwest 236,700 273,500 229,100 264,100
Central 170,000 166,300 171,800 171,800
Southeast 216,400 235,900 205,300 233,300
-------- ---------- -------- ----------
Total $237,600 $ 269,400 $226,600 $ 271,600
======== ========== ======== ==========
Six Months Three Months
-------------------- --------------------
Homes delivered: 2008 2007 2008 2007
-------- ---------- -------- ----------
West Coast 1,217 1,845 603 950
Southwest 1,274 2,246 534 1,061
Central 1,762 2,663 863 1,236
Southeast 1,485 3,158 810 1,529
-------- ---------- -------- ----------
Total 5,738 9,912 2,810 4,776
======== ========== ======== ==========
Unconsolidated joint
ventures 149 19 74 11
======== ========== ======== ==========
Six Months Three Months
-------------------- --------------------
Net orders: 2008 2007 2008 2007
-------- ---------- -------- ----------
West Coast 1,516 3,140 977 1,673
Southwest 946 2,545 760 1,437
Central 1,195 3,236 964 1,903
Southeast 1,992 4,088 1,499 2,252
-------- ---------- -------- ----------
Total 5,649 13,009 4,200 7,265
======== ========== ======== ==========
Unconsolidated joint
ventures 179 194 131 109
======== ========== ======== ==========
May 31, 2008 May 31, 2007
-------------------- --------------------
Backlog data: Backlog Backlog Backlog Backlog
Homes Value Homes Value
-------- ---------- -------- ----------
(Dollars in thousands)
West Coast 1,489 $ 516,073 2,910 $1,357,973
Southwest 978 222,279 2,829 733,211
Central 1,444 260,404 3,628 633,775
Southeast 2,322 467,141 4,305 1,012,098
-------- ---------- -------- ----------
Total 6,233 $1,465,897 13,672 $3,737,057
======== ========== ======== ==========
Unconsolidated joint
ventures 239 $ 101,748 229 $ 84,773
======== ========== ======== ==========
CONTACT: KB Home
Kelly Masuda, Investor Relations
(310) 893-7434 or kmasuda@kbhome.com
or
Lindsay Stephenson, Media Contact
(310) 231-4142 or lstephenson@kbhome.com
SOURCE: KB Home