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Deliveries Up 21% and Revenues Increase 29%
Net Loss Narrows Significantly
Three Months Ended
Net Orders and Backlog
Balance Sheet
Financial Services
Management Comments
"Reflecting the improving trends in the economy, including recent job
growth and higher consumer confidence, we are seeing signs that the
overall housing market is stabilizing and beginning to recover," said
"While we are encouraged by the recent positive economic and housing
market trends, our operational and financial results for the first
quarter were mixed," continued Mezger. "We ended the quarter with a
higher backlog compared to a year ago, although our orders moderated. At
the same time, we posted growth in our deliveries and revenues and
reduced our net loss significantly from the prior year. The strategic
actions we implemented toward the end of last year, and plan to continue
to emphasize this year, should have a more pronounced impact as the year
unfolds. We believe these steps, along with the benefits of working with
our new preferred mortgage lender,
Earnings Conference Call
The Conference Call on the First Quarter 2012 earnings will be broadcast
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About
Forward-Looking and Cautionary Statements
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, employment and business conditions; adverse market conditions
that could result in additional impairments or abandonment charges and
operating losses, including an oversupply of unsold homes, declining
home prices and increased foreclosure and short sale activity, among
other things; conditions in the capital and credit markets (including
residential consumer mortgage lending standards, the availability of
residential consumer mortgage financing and mortgage foreclosure rates);
material prices and availability; labor costs and availability; changes
in interest rates; inflation; our debt level, including our ratio of
debt to total capital, and our ability to adjust our debt level and
structure and to access the credit, capital or other financial markets
or other external financing sources; weak or declining consumer
confidence, either generally or specifically with respect to purchasing
homes; competition for home sales from other sellers of new and existing
homes, including sellers of homes obtained through foreclosures or short
sales; weather conditions, significant natural disasters and other
environmental factors; government actions, policies, programs and
regulations directed at or affecting the housing market (including, but
not limited to, the Dodd-Frank Act, tax credits, tax incentives and/or
subsidies for home purchases, tax deductions for residential consumer
mortgage interest payments and property taxes, tax exemptions for
profits on home sales, and programs intended to modify existing mortgage
loans and to prevent mortgage foreclosures), the homebuilding industry,
or construction activities; the availability and cost of land in
desirable areas; our warranty claims experience with respect to homes
previously delivered and actual warranty costs incurred; legal or
regulatory proceedings or claims; our ability to access capital; our
ability to use/realize the net deferred tax assets we have generated;
our ability to successfully implement our current and planned product,
geographic and market positioning (including, but not limited to, our
efforts to expand our inventory base/pipeline with desirable land
positions or interests at reasonable cost and to open new communities,
and our increasing operational and investment concentration in markets
in
|
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended (In Thousands, Except Per Share Amounts - Unaudited) |
|||||||||||||||
| Three Months | |||||||||||||||
| 2012 | 2011 | ||||||||||||||
| Total revenues | $ |
254,558 |
$ | 196,940 | |||||||||||
| Homebuilding: | |||||||||||||||
| Revenues | $ | 251,895 | $ | 195,301 | |||||||||||
| Costs and expenses | (283,044 | ) | (243,159 | ) | |||||||||||
| Operating loss | (31,149 | ) | (47,858 | ) | |||||||||||
| Interest income | 135 | 383 | |||||||||||||
| Interest expense | (16,286 | ) | (11,439 | ) | |||||||||||
| Equity in loss of unconsolidated joint ventures | (72 | ) | (55,837 | ) | |||||||||||
| Homebuilding pretax loss | (47,372 | ) | (114,751 | ) | |||||||||||
| Financial services: | |||||||||||||||
| Revenues | 2,663 | 1,639 | |||||||||||||
| Expenses | (835 | ) | (865 | ) | |||||||||||
| Equity in income (loss) of unconsolidated joint venture | 142 | (149 | ) | ||||||||||||
| Financial services pretax income | 1,970 | 625 | |||||||||||||
| Total pretax loss | (45,402 | ) | (114,126 | ) | |||||||||||
| Income tax expense | (400 | ) | (400 | ) | |||||||||||
| Net loss | $ | (45,802 | ) | $ | (114,526 | ) | |||||||||
| Basic and diluted loss per share | $ | (.59 | ) | $ | (1.49 | ) | |||||||||
| Basic and diluted average shares outstanding | 77,090 | 76,974 | |||||||||||||
|
CONSOLIDATED BALANCE SHEETS (In Thousands - Unaudited) |
||||||||||
|
|
November 30, | |||||||||
| 2012 | 2011 | |||||||||
| Assets | ||||||||||
| Homebuilding: | ||||||||||
| Cash and cash equivalents | $ | 304,171 | $ | 415,050 | ||||||
| Restricted cash | 63,890 | 64,481 | ||||||||
| Receivables | 72,442 | 66,179 | ||||||||
| Inventories | 1,748,377 | 1,731,629 | ||||||||
| Investments in unconsolidated joint ventures | 121,307 | 127,926 | ||||||||
| Other assets | 87,948 | 75,104 | ||||||||
| 2,398,135 | 2,480,369 | |||||||||
| Financial services | 7,938 | 32,173 | ||||||||
| Total assets | $ | 2,406,073 | $ | 2,512,542 | ||||||
| Liabilities and stockholders' equity | ||||||||||
| Homebuilding: | ||||||||||
| Accounts payable | $ | 80,900 | $ | 104,414 | ||||||
| Accrued expenses and other liabilities | 337,786 | 374,406 | ||||||||
| Mortgages and notes payable | 1,587,414 | 1,583,571 | ||||||||
| 2,006,100 | 2,062,391 | |||||||||
| Financial services | 6,105 | 7,494 | ||||||||
| Stockholders' equity | 393,868 | 442,657 | ||||||||
| Total liabilities and stockholders' equity | $ | 2,406,073 | $ | 2,512,542 | ||||||
|
SUPPLEMENTAL INFORMATION
For the Three Months Ended (In Thousands - Unaudited) |
|||||||||||||
| Three Months | |||||||||||||
| Homebuilding revenues: | 2012 | 2011 | |||||||||||
| Housing | $ | 251,895 | $ | 195,223 | |||||||||
| Land | - | 78 | |||||||||||
| Total | $ |
251,895 |
$ | 195,301 | |||||||||
| Three Months | |||||||||||||
| Costs and expenses: | 2012 | 2011 | |||||||||||
| Construction and land costs | |||||||||||||
| Housing | $ | 227,358 | $ | 170,671 | |||||||||
| Land | - | 125 | |||||||||||
| Subtotal | 227,358 | 170,796 | |||||||||||
| Selling, general and administrative expenses | 55,686 | 49,605 | |||||||||||
| Loss on loan guaranty | - | 22,758 | |||||||||||
| Total | $ |
283,044 |
$ | 243,159 | |||||||||
|
|
|||||||||||||
| Three Months | |||||||||||||
| Interest expense: | 2012 | 2011 | |||||||||||
| Interest incurred | $ | 28,408 | $ | 29,549 | |||||||||
| Loss (gain) on early extinguishment of debt | 2,003 | (3,612 | ) | ||||||||||
| Interest capitalized | (14,125 | ) | (14,498 | ) | |||||||||
| Total | $ | 16,286 | $ | 11,439 | |||||||||
| Three Months | |||||||||||||
| Other information: | 2012 | 2011 | |||||||||||
| Depreciation and amortization | $ | 971 | $ | 1,148 | |||||||||
| Amortization of previously capitalized interest | 12,669 | 11,424 | |||||||||||
|
SUPPLEMENTAL INFORMATION
For the Three Months Ended (Unaudited) |
|||||||||||||||||||
| Three Months | |||||||||||||||||||
| Average sales price: | 2012 | 2011 | |||||||||||||||||
|
|
$ | 340,600 | $ | 320,400 | |||||||||||||||
| Southwest | 185,800 | 147,500 | |||||||||||||||||
| Central | 164,800 | 166,700 | |||||||||||||||||
| Southeast | 189,200 | 194,300 | |||||||||||||||||
| Total | $ | 219,000 | $ | 205,700 | |||||||||||||||
|
|
|||||||||||||||||||
| Three Months | |||||||||||||||||||
| Homes delivered: | 2012 | 2011 | |||||||||||||||||
|
|
309 | 224 | |||||||||||||||||
| Southwest | 170 | 158 | |||||||||||||||||
| Central | 487 | 363 | |||||||||||||||||
| Southeast | 184 | 204 | |||||||||||||||||
| Total | 1,150 | 949 | |||||||||||||||||
| Unconsolidated joint ventures | - | 1 | |||||||||||||||||
| Three Months | |||||||||||||||||||
| Net orders: | 2012 | 2011 | |||||||||||||||||
|
|
289 | 404 | |||||||||||||||||
| Southwest | 140 | 206 | |||||||||||||||||
| Central | 547 | 448 | |||||||||||||||||
| Southeast | 221 | 244 | |||||||||||||||||
| Total | 1,197 | 1,302 | |||||||||||||||||
| Unconsolidated joint ventures | - | - | |||||||||||||||||
|
|
|
||||||||||||||||||
| Backlog data: |
|
Backlog Value |
|
Backlog Value | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
|
|
443 | $ | 150,638 | 383 | $ | 126,258 | |||||||||||||
| Southwest | 173 | 32,139 | 187 | 27,970 | |||||||||||||||
| Central | 1,078 | 177,998 | 778 | 132,164 | |||||||||||||||
| Southeast | 509 | 99,176 | 341 | 67,242 | |||||||||||||||
| Total | 2,203 | $ | 459,951 | 1,689 | $ | 353,634 | |||||||||||||
| Unconsolidated joint ventures | - | $ | - | - | $ | - | |||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
For
the Three Months Ended
(In
Thousands, Except Percentages - Unaudited)
This press release contains, and Company management's discussion of the results presented in this press release may include, information about the Company's housing gross margin, excluding inventory impairment and land option contract abandonment charges, which is not calculated in accordance with generally accepted accounting principles ("GAAP"). The Company believes this non-GAAP financial measure is relevant and useful to investors in understanding its operations, and may be helpful in comparing the Company with other companies in the homebuilding industry to the extent they provide similar information. However, because the housing gross margin, excluding inventory impairment and land option contract abandonment charges is not calculated in accordance with GAAP, this measure may not be completely comparable to other companies in the homebuilding industry and, thus, should not be considered in isolation or as an alternative to the operating and financial performance measures prescribed by GAAP. Rather, this non-GAAP financial measure should be used to supplement its respective most directly comparable GAAP financial measure in order to provide a greater understanding of the factors and trends affecting the Company's operations.
Housing Gross Margin, Excluding Inventory Impairment and Land Option Contract Abandonment Charges
The following table reconciles the Company's housing gross margin calculated in accordance with GAAP to the non-GAAP financial measure of the Company's housing gross margin, excluding inventory impairment and land option contract abandonment charges:
| Three Months | ||||||||||||
| 2012 | 2011 | |||||||||||
| Housing revenues | $ | 251,895 | $ | 195,223 | ||||||||
| Housing construction and land costs | (227,358) | (170,671) | ||||||||||
| Housing gross margin | 24,537 | 24,552 | ||||||||||
| Add: Inventory impairment and land option contract abandonment charges | 6,572 | 1,703 | ||||||||||
| Housing gross margin, excluding inventory impairment | ||||||||||||
| and land option contract abandonment charges | $ | 31,109 | $ | 26,255 | ||||||||
| Housing gross margin as a percentage of housing revenues | 9.7% | 12.6% | ||||||||||
| Housing gross margin, excluding inventory impairment | ||||||||||||
| and land option contract abandonment charges, as a percentage of housing revenues | 12.3% | 13.4% | ||||||||||
Housing gross margin, excluding inventory impairment and land option contract abandonment charges, is a non-GAAP financial measure, which the Company calculates by dividing housing revenues less housing construction and land costs before pretax, noncash inventory impairment and land option contract abandonment charges associated with housing operations recorded during a given period, by housing revenues. The most directly comparable GAAP financial measure is housing gross margin. The Company believes housing gross margin, excluding inventory impairment and land option contract abandonment charges, is a relevant and useful financial measure to investors in evaluating the Company's performance as it measures the gross profit the Company generated specifically on the homes delivered during a given period and enhances the comparability of housing gross margins between periods. This financial measure assists management in making strategic decisions regarding product mix, product pricing and construction pace. The Company also believes investors will find housing gross margin, excluding inventory impairment and land option contract abandonment charges, relevant and useful because it represents a profitability measure that may be compared to a prior period without regard to variability of charges for inventory impairments or land option contract abandonments.
(310)
893-7446 or kmarshall@kbhome.com
or
(310) 231-4142 or smartin@kbhome.com
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