LOS ANGELES--(BUSINESS WIRE)--March 28, 2008--KB Home (NYSE:KBH),
one of America's largest homebuilders, today reported financial
results for its first quarter ended February 29, 2008. Results
include:
-- Revenues totaled $794.2 million in the first quarter of 2008,
down 43% from $1.39 billion in the year-earlier quarter.
Housing revenues of $726.7 million for the quarter ended
February 29, 2008 declined 47% from the corresponding period
of 2007, reflecting a 43% decrease in homes delivered and a 7%
decline in the average selling price. The Company delivered
2,928 homes at an average selling price of $248,200 in the
first quarter of 2008 compared to 5,136 homes at an average
selling price of $267,400 in the first quarter of 2007.
-- For the first quarter of 2008, the Company reported a loss
from continuing operations before income taxes of $267.9
million, including pretax, non-cash charges of $223.9 million
associated with inventory and joint venture impairments and
the abandonment of certain land option contracts. For the
first quarter of 2007, the Company reported income from
continuing operations before income taxes totaling $15.3
million, including $8.7 million of pretax, non-cash
inventory-related impairment and abandonment charges. The
Company generated a net loss, including the effect of a $100.0
million deferred tax valuation allowance charge, of $268.2
million, or $3.47 per diluted share, in the first quarter of
2008. This compared to net income of $27.5 million, or $.34
per diluted share, in the year-earlier period, including
income of $16.8 million, or $.21 per diluted share, from the
Company's French discontinued operations.
-- The Company's cash balance of $1.32 billion at February 29,
2008 was largely unchanged from the balance at November 30,
2007. The Company's ratio of debt to total capital was 58.0%
at February 29, 2008, compared to 53.9% at November 30, 2007.
Net of cash, the ratio of debt to total capital was 35.1% at
February 29, 2008, compared to 31.1% at November 30, 2007 and
46.2% at February 28, 2007.
-- On January 25, 2008, the Company entered into an amendment to
the unsecured revolving credit facility it has with various
banks. The amendment lowered the minimum consolidated tangible
net worth the Company is required to maintain from $2.0
billion to $1.0 billion and reduced the aggregate commitment
under the credit facility from $1.5 billion to $1.3 billion.
The amendment did not change the November 2010 maturity date
of the credit facility. At February 29, 2008, the Company had
no borrowings outstanding under the credit facility. Including
its cash balance, the Company's liquidity was more than $2.3
billion at February 29, 2008.
-- The Company's backlog at February 29, 2008 totaled 4,843
homes, representing potential future housing revenues of
approximately $1.23 billion. These backlog measures declined
57% and 59%, respectively, from the Company's 11,183 backlog
homes and $3.04 billion in backlog value at February 28, 2007.
Company-wide first quarter net orders for homes decreased 75%
to 1,449 in 2008 from 5,744 net orders in the same period of
2007, exacerbated by a significant reduction in the number of
active selling communities. The Company's cancellation rate
improved to 53% in the first quarter of 2008 compared to 58%
in the fourth quarter of 2007. The Company's cancellation rate
was 34% in the first quarter of 2007.
-- As previously announced, KB Home has been ranked the #1
homebuilder in FORTUNE magazine's list of America's Most
Admired Companies®. KB Home ranked first in every category
measured. It is the second time in three years that KB Home
has received this honor.
"Our first quarter financial results reflect the persistently
challenging conditions in U.S. housing markets and the strategic
measures we have taken over the past several months to streamline our
land positions and reduce the number of communities where we operate,"
said Jeffrey Mezger, president and chief executive officer. "Our
industry continues to confront a growing oversupply of new and resale
homes, tight mortgage lending conditions and a highly competitive
pricing environment. These conditions drove down sale prices and
further compressed margins in the first quarter of 2008, prompting us
to recognize additional impairment charges and abandon certain land
option contracts that no longer made financial sense. Until prices
stabilize and consumer confidence returns, we believe inventory levels
will remain significantly out of balance with demand. We do not
anticipate meaningful improvement in these conditions in the near
term, as it is likely to take some time for the market to absorb the
current excess housing supply and for consumer confidence to improve."
"During the quarter," Mezger continued, "we operated with
significantly fewer communities than a year ago due to our concerted
efforts throughout last year and into the current year to reduce
inventory, consolidate or exit underperforming markets, and re-size
our business to align with market realities and a slower sales pace.
Looking forward, we will continue to evaluate our land investments and
market positioning to provide a strong, competitive and geographically
diverse foundation for growth when the housing markets recover."
Total revenues of $794.2 million for the quarter ended February
29, 2008 decreased 43% from $1.39 billion for the year-earlier
quarter, reflecting lower housing revenues, which fell 47% to $726.7
million from $1.37 billion for the first quarter of 2007. The
year-over-year decline in housing revenues was due to both fewer
deliveries and a lower average selling price. The Company delivered
2,928 homes in the first quarter of 2008, down 43% from the 5,136
homes delivered in the first quarter of 2007. The decline in
deliveries was largely due to the Company operating approximately 38%
fewer active selling communities as a result of its strategy to reduce
inventory levels in light of market conditions. The Company's first
quarter average selling price declined 7% to $248,200 in 2008 from
$267,400 in 2007, mainly due to decreases in the West Coast and
Southwest regions. Land sale revenues of $64.6 million in the first
quarter of 2008, which occurred primarily in the Southwest region,
increased from $11.4 million in the corresponding quarter of 2007.
The Company's homebuilding business generated an operating loss of
$249.0 million in the first quarter of 2008, driven by losses from
both housing operations and land sales. In the first quarter of 2007,
operating income from the Company's homebuilding business totaled $3.1
million. Within housing operations, the 2008 first quarter loss was
primarily due to pretax, non-cash charges of $110.3 million for
inventory impairments and land option contract abandonments, and
compressed operating margins resulting from competitive pressures. In
the 2007 first quarter, pretax, non-cash inventory impairment and
abandonment charges totaled $5.5 million. Largely as a result of the
inventory impairment and abandonment charges, the Company's housing
gross margin fell to a negative 6.2% in the 2008 first quarter from a
positive 15.5% in the year-earlier quarter. Excluding inventory
impairment and abandonment charges, the Company's first quarter
housing gross margin would have been 9.0% in 2008 and 15.9% in 2007.
Land sales generated losses of $76.1 million in the first quarter of
2008, including pretax, non-cash impairment charges of $77.2 million
related to planned future land sales, compared to losses of $4.4
million, including impairment charges of $3.2 million in the first
quarter of 2007. The Company's equity in loss of unconsolidated joint
ventures totaled $39.9 million in the first quarter of 2008, including
impairment charges of $36.4 million, compared to a loss of $2.2
million in the first quarter of 2007. The Company reported a net loss
of $268.2 million, or $3.47 per diluted share, in the first quarter of
2008, including a $100.0 million charge to record a deferred tax
valuation allowance. The Company was unable to record a deferred tax
benefit that would have reduced the net loss in the first quarter of
2008 due to the uncertainty of its realization. In the first quarter
of 2007, net income totaled $27.5 million or $.34 per diluted share.
The Company's net orders for homes totaled 1,449 in the first
quarter of 2008, down 75% from 5,744 net orders in the same period of
2007. This decrease was principally due to a lower community count in
2008 resulting from the Company's strategic decisions to reduce
inventory in light of market conditions. The Company's cancellation
rate improved to 53% in the first quarter of 2008 from 58% in the
fourth quarter of 2007. The Company's cancellation rate was 34% in the
first quarter of 2007. Homes in backlog at February 29, 2008 decreased
57% on a year-over-year basis to 4,843 homes and backlog value
declined 59% on a year-over-year basis to $1.23 billion.
"As the housing market's turbulence continues, our top priorities
at KB Home are to maintain a strong balance sheet and position the
Company for the long-term," said Mezger. "Our disciplined focus during
the first quarter on delivering backlog, monetizing non-strategic
inventory positions and curtailing spending produced a quarter-end
cash balance in excess of $1.3 billion, essentially unchanged from our
2007 year-end. We also ended the quarter with substantial available
borrowing capacity and a leverage ratio, net of cash, well below our
targeted range. In 2008, we will continue to focus on generating
additional positive cash flows and on enhancing our strong financial
position which we believe will provide us with a distinct competitive
advantage and a foundation to strategically reinvest in our business
when the housing markets begin to stabilize."
"It will likely take some time for markets to recover," Mezger
noted, "but we remain confident that favorable demographics and
continued household growth will generate strong, long-term demand for
housing. We believe our focus on sound operating disciplines and
maintaining a strong balance sheet should position us to capitalize on
this anticipated future housing demand in the markets we serve. We
believe in our current approach and long-term potential and are
extremely pleased that our many strengths were recently recognized by
FORTUNE magazine. For the second time in the past three years, we were
ranked #1 among homebuilders in FORTUNE magazine's list of America's
Most Admired Companies®. We believe this top ranking is a reflection
of our strong commitment to our customers, shareholders and
employees."
The Conference Call on the First 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 Web site at http://www.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 9
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 http://www.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; 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; 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 Three Months Ended February 29, 2008 and February 28, 2007
(In Thousands, Except Per Share Amounts - Unaudited)
Three Months
--------------------------
2008 2007
------------ ------------
Total revenues $ 794,224 $ 1,388,838
============ ============
Homebuilding:
Revenues $ 791,308 $ 1,384,649
Costs and expenses (1,040,279) (1,381,501)
------------ ------------
Operating income (loss) (248,971) 3,148
Interest income 13,032 4,668
Equity in loss of unconsolidated
joint ventures (39,878) (2,205)
------------ ------------
Homebuilding pretax income (loss) (275,817) 5,611
------------ ------------
Financial services:
Revenues 2,916 4,189
Expenses (1,119) (1,340)
Equity in income of unconsolidated
joint venture 6,148 6,795
------------ ------------
Financial services pretax income 7,945 9,644
------------ ------------
Income (loss) from continuing
operations before income taxes (267,872) 15,255
Income tax expense (300) (4,600)
------------ ------------
Income (loss) from continuing
operations (268,172) 10,655
Income from discontinued operations,
net of income taxes - 16,882
------------ ------------
Net income (loss) $ (268,172) $ 27,537
============ ============
Basic earnings (loss) per share
Continuing operations $ (3.47) $ 0.14
Discontinued operations - 0.22
------------ ------------
Basic earnings (loss) per share $ (3.47) $ 0.36
============ ============
Diluted earnings (loss) per share
Continuing operations $ (3.47) $ 0.13
Discontinued operations - 0.21
------------ ------------
Diluted earnings (loss) per share $ (3.47) $ 0.34
============ ============
Basic average shares outstanding 77,363 76,988
============ ============
Diluted average shares outstanding 77,363 80,593
============ ============
KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands - Unaudited)
February 29, November 30,
2008 2007
------------ ------------
Assets
Homebuilding:
Cash and cash equivalents $ 1,316,949 $ 1,325,255
Receivables 191,352 295,739
Inventories 2,853,908 3,312,420
Investments in unconsolidated joint
ventures 281,273 297,010
Deferred income taxes 222,458 222,458
Goodwill 67,970 67,970
Other assets 126,927 140,712
------------ ------------
5,060,837 5,661,564
Financial services 49,219 44,392
------------ ------------
Total assets $ 5,110,056 $ 5,705,956
============ ============
Liabilities and Stockholders' Equity
Homebuilding:
Accounts payable $ 596,109 $ 699,851
Accrued expenses and other liabilities 773,359 975,828
Mortgages and notes payable 2,161,818 2,161,794
------------ ------------
3,531,286 3,837,473
Financial services 14,255 17,796
Stockholders' equity 1,564,515 1,850,687
------------ ------------
Total liabilities and stockholders' equity $ 5,110,056 $ 5,705,956
============ ============
KB HOME
SUPPLEMENTAL INFORMATION
For the Three Months Ended February 29, 2008 and February 28, 2007
(In Thousands - Unaudited)
Three Months
------------------------
Homebuilding revenues: 2008 2007
----------- -----------
Housing $ 726,714 $1,373,258
Land 64,594 11,391
----------- -----------
Total $ 791,308 $1,384,649
=========== ===========
Three Months
------------------------
Costs and expenses: 2008 2007
----------- -----------
Construction and land costs
Housing $ 771,993 $1,160,461
Land 140,648 15,818
----------- -----------
Subtotal 912,641 1,176,279
Selling, general and administrative
expenses 127,638 205,222
----------- -----------
Total $1,040,279 $1,381,501
=========== ===========
Three Months
------------------------
Interest expense: 2008 2007
----------- -----------
Interest incurred $ 38,502 $ 51,549
Interest capitalized (38,502) (51,549)
----------- -----------
Interest expense $ - $ -
=========== ===========
Three Months
------------------------
Other information: 2008 2007
----------- -----------
Depreciation and amortization $ 3,383 $ 5,238
Amortization of previously capitalized
interest 28,576 25,773
=========== ===========
KB HOME
SUPPLEMENTAL INFORMATION
For the Three Months Ended February 29, 2008 and February 28, 2007
(Unaudited)
Three Months
--------------------
Average sales price: 2008 2007
-------- ----------
West Coast $392,600 $ 470,400
Southwest 242,100 281,700
Central 168,400 161,400
Southeast 229,800 238,200
-------- ----------
Total $248,200 $ 267,400
======== ==========
Three Months
--------------------
Homes delivered: 2008 2007
-------- ----------
West Coast 614 895
Southwest 740 1,185
Central 899 1,427
Southeast 675 1,629
-------- ----------
Total 2,928 5,136
======== ==========
Unconsolidated Joint
Ventures: 75 8
======== ==========
Three Months
--------------------
Net orders: 2008 2007
-------- ----------
West Coast 539 1,467
Southwest 186 1,108
Central 231 1,333
Southeast 493 1,836
-------- ----------
Total 1,449 5,744
======== ==========
Unconsolidated Joint
Ventures: 48 85
======== ==========
February 29, 2008 February 28, 2007
------------------- --------------------
Backlog data: Backlog Backlog Backlog Backlog
Homes Value Homes Value
------- ---------- -------- ----------
(Dollars in thousands)
West Coast 1,115 $ 438,505 2,187 $1,054,825
Southwest 752 179,114 2,453 640,856
Central 1,343 236,725 2,961 494,429
Southeast 1,633 376,872 3,582 846,070
------- ---------- -------- ----------
Total 4,843 $1,231,216 11,183 $3,036,180
======= ========== ======== ==========
Unconsolidated Joint
Ventures: 182 $ 77,196 131 $ 42,401
======= ========== ======== ==========
CONTACT: KB Home
Kelly Masuda, Investor Relations, 310-893-7434
kmasuda@kbhome.com
or
Lindsay Stephenson, Media Contact, 310-231-4142
lstephenson@kbhome.com
SOURCE: KB Home