KB Home
Mar 23, 2012

KB Home Reports First Quarter 2012 Results

Deliveries Up 21% and Revenues Increase 29%

Net Loss Narrows Significantly

LOS ANGELES--(BUSINESS WIRE)-- KB Home (NYSE: KBH), one of America's premier homebuilders, today reported results for its first quarter ended February 29, 2012. Highlights and developments include the following:

Three Months Ended February 29, 2012

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 Jeffrey Mezger, president and chief executive officer. "The pace of the recovery is uneven, however, with certain local markets showing greater strength and more normalized activity than other areas where a rebound will take longer to manifest. We expect that the housing market in general will gradually strengthen as the economy continues to advance."

"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, Nationstar Mortgage, in the coming quarters will generate further momentum in our business and, when combined with a stronger housing environment, should enable us to achieve profitability later this year."

Earnings Conference Call

The Conference Call on the First Quarter 2012 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 www.kbhome.com.

About KB Home

KB Home is one of the largest and most recognized homebuilding companies in the United States. Since its founding in 1957, the Company has built more than half a million quality homes. KB Home's signature Built to Order™ approach lets each buyer customize their new home from lot location to floor plan and design features. In addition to meeting strict ENERGY STAR® guidelines, all KB homes are highly energy efficient to help lower monthly utility costs for homeowners, which the Company demonstrates with its proprietary KB Home Energy Performance Guide™ (EPG). A leader in utilizing state-of-the-art sustainable building practices, KB Home was named the #1 Green Homebuilder in a 2010 study by Calvert Investments and the #1 Homebuilder on FORTUNE magazine's 2011 World's Most Admired Companies list. Los Angeles-based KB Home was the first homebuilder listed on the New York Stock Exchange, and trades under the ticker symbol "KBH." For more information about KB Home's new home communities, call 888-KB-HOMES or visit www.kbhome.com.

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 California and Texas), revenue growth, and overhead and other cost reduction strategies; consumer traffic to our new home communities and consumer interest in our product designs; the manner in which our homebuyers are offered and are able to obtain residential consumer mortgage loans and mortgage banking services, including from our preferred mortgage lender, Nationstar Mortgage; the process of transitioning our preferred mortgage lending relationship to Nationstar Mortgage and the performance of Nationstar Mortgage with respect to that relationship; information technology failures and data security breaches; 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.



For the Three Months Ended February 29, 2012 and February 28, 2011

 (In Thousands, Except Per Share Amounts - Unaudited)

Three Months
2012 2011
Total revenues $


$ 196,940  
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  



(In Thousands - Unaudited)

February 29, November 30,
2012 2011
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
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



For the Three Months Ended February 29, 2012 and February 28, 2011

(In Thousands - Unaudited)

Three Months
Homebuilding revenues: 2012 2011
Housing $ 251,895 $ 195,223
Land   -     78  
Total $


  $ 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 $


  $ 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  



For the Three Months Ended February 29, 2012 and February 28, 2011


Three Months
Average sales price: 2012 2011
West Coast $ 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
West Coast 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
West Coast 289 404
Southwest 140 206
Central 547 448
Southeast   221   244
Total   1,197   1,302
Unconsolidated joint ventures   -   -
February 29, 2012 February 28, 2011
Backlog data: Backlog Homes Backlog Value Backlog Homes Backlog Value
(Dollars in thousands)
West Coast 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 - $ -   - $ -

For the Three Months Ended February 29, 2012 and February 28, 2011
(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.

KB Home
Katoiya Marshall, Investor Relations Contact
(310) 893-7446 or kmarshall@kbhome.com
Susan Martin, Media Contact
(310) 231-4142 or smartin@kbhome.com

Source: KB Home

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