KB Home
Dec 20, 2012

KB Home Reports 2012 Fourth Quarter and Full Year Results

Fourth Quarter Revenues Increase 20%; Earnings Per Share of $.10

Backlog Value Up 35% to $618.6 Million, Reflecting Growth in All Homebuilding Regions

LOS ANGELES--(BUSINESS WIRE)-- KB Home (NYSE: KBH), one of the nation's largest and most recognized homebuilders, today reported results for its fourth quarter and fiscal year ended November 30, 2012. Highlights and developments include the following:

Three Months Ended November 30, 2012

Twelve Months Ended November 30, 2012

Backlog and Net Orders

Balance Sheet

Management Comments

"Our results for the fourth quarter reflect year-over-year and sequential improvement in most of our key operational and financial metrics," said Jeffrey Mezger, president and chief executive officer. "We increased our deliveries and generated solid top-line growth, a higher housing gross profit margin and continued improvement in our selling, general and administrative expense ratio, all of which translated to higher homebuilding operating income. In addition to improved execution on our business strategies, we benefited from better housing market conditions and increased demand for larger homes with more design options, which drove our average selling prices higher in all of our regions. Although our fourth quarter community count decreased from the prior year and impacted our overall net order growth, our net orders on a per-community basis strengthened. By leveraging the investments in land and land development we have made and plan to make next year, we expect to significantly increase the number of new home communities we have open for sales in 2013.

"Furthermore, we are encouraged by the success of our ‘going on offense' initiatives and the improvements we are seeing in housing markets across the country, most notably in California," continued Mezger. "The tightening supply of homes available for sale, high housing affordability and favorable mortgage interest rate environment are driving increased demand and providing us with more opportunities to generate greater revenues. We anticipate housing demand will continue to strengthen, particularly as more households facing rising rental costs consider the benefits of homeownership and emerge from the sidelines. Although the strength of the economy and pending federal budget decisions are important considerations that could potentially disrupt the housing recovery and cause us to shift our current plans, we believe that, with our higher backlog, more community openings on the horizon, and the continued improvement we are expecting in our performance as we move ahead, we are well positioned to be profitable for 2013."

Earnings Conference Call

The conference call on the fourth quarter 2012 earnings will be broadcast live TODAY at 8:30 a.m. Pacific Standard Time, 11:30 a.m. Eastern Standard 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 the most recent 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 equity, credit, capital or other financial markets or other external financing sources, including raising capital through the public or private issuance of common stock, debt or other securities, and/or obtaining a credit facility or project financing, on favorable terms; 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; decisions by lawmakers on federal fiscal policies, including those relating to taxation and government spending; 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 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 for sales and sell higher-priced homes and design options, and our operational and investment concentration in markets in California and Texas), revenue growth, asset optimization, and overhead and other cost reduction strategies; consumer traffic to our new home communities and consumer interest in our product designs; home purchase contract cancellations and our ability to realize our backlog; our home sales and delivery performance in key markets in California and Texas; 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 performance of Nationstar Mortgage as our preferred mortgage lender; 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.

KB HOME

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Twelve Months and Three Months Ended November 30, 2012 and 2011

(In Thousands, Except Per Share Amounts)

       
Twelve Months Three Months
2012     2011 2012     2011
Total revenues $ 1,560,115   $ 1,315,866   $ 578,201   $ 479,872  
Homebuilding:
Revenues $ 1,548,432 $ 1,305,562 $ 574,377 $ 475,746
Costs and expenses (1,568,688 ) (1,408,636 ) (558,815 ) (474,911 )
Operating income (loss) (20,256 ) (103,074 ) 15,562 835
Interest income 518 871 155 95
Interest expense (69,804 ) (49,204 ) (15,989 ) (12,302 )
Equity in income (loss) of unconsolidated joint ventures (394 ) (55,839 ) (357 ) 26  
Homebuilding pretax loss (89,936 ) (207,246 ) (629 ) (11,346 )
Financial services:
Revenues 11,683 10,304 3,824 4,126
Expenses (2,991 ) (3,512 ) (754 ) (1,031 )
Equity in income (loss) of unconsolidated joint venture 2,191   19,286   (17 ) 19,662  
Financial services pretax income 10,883   26,078   3,053   22,757  
Total pretax income (loss) (79,053 ) (181,168 ) 2,424 11,411
Income tax benefit 20,100   2,400   5,300   2,500  
Net income (loss) $ (58,953

)

$ (178,768 ) $ 7,724   $ 13,911  
Basic earnings (loss) per share $ (.76

)

$ (2.32 ) $ .10   $ .18  
Diluted earnings (loss) per share $ (.76

)

$ (2.32 ) $ .10   $ .18  
Basic average shares outstanding 77,106   77,043   77,103   77,159  
Diluted average shares outstanding 77,106   77,043   78,282   77,197  
 

KB HOME

CONSOLIDATED BALANCE SHEETS

(In Thousands)

       

November 30,
2012

November 30,
2011

Assets
Homebuilding:
Cash and cash equivalents $ 524,765 $ 415,050
Restricted cash 42,362 64,481
Receivables 64,821 66,179
Inventories 1,706,571 1,731,629
Investments in unconsolidated joint ventures 123,674 127,926
Other assets 95,050   75,104
2,557,243 2,480,369
Financial services 4,455   32,173
Total assets $ 2,561,698   $ 2,512,542
 
Liabilities and stockholders' equity
Homebuilding:
Accounts payable $ 118,544 $ 104,414
Accrued expenses and other liabilities 340,345 374,406
Mortgages and notes payable 1,722,815   1,583,571
2,181,704 2,062,391
Financial services 3,188 7,494
Stockholders' equity 376,806   442,657
Total liabilities and stockholders' equity $ 2,561,698   $ 2,512,542
 

KB HOME

SUPPLEMENTAL INFORMATION

For the Twelve Months and Three Months Ended November 30, 2012 and 2011

(In Thousands)

       
Twelve Months Three Months
2012     2011 2012     2011
Homebuilding revenues:
Housing $ 1,548,432 $ 1,305,299 $ 574,377 $ 475,636
Land   263     110  
Total $ 1,548,432   $ 1,305,562   $ 574,377   $ 475,746  
 
Twelve Months Three Months
2012 2011 2012 2011
Costs and expenses:
Construction and land costs
Housing $ 1,317,529 $ 1,129,785 $ 492,594 $ 405,899
Land   200     1  
Subtotal 1,317,529 1,129,985 492,594 405,900
Selling, general and administrative expenses 251,159 247,886 66,221 75,576
Loss (gain) on loan guaranty   30,765     (6,565 )
Total $ 1,568,688   $ 1,408,636   $ 558,815   $ 474,911  
 
Twelve Months Three Months
2012 2011 2012 2011
Interest expense:
Interest incurred $ 122,379 $ 115,649 $ 33,105 $ 27,548
Loss (gain) on early extinguishment of debt 10,278 (3,612 )
Interest capitalized (62,853 ) (62,833 ) (17,116 ) (15,246 )
Total $ 69,804   $ 49,204   $ 15,989   $ 12,302  
 
Twelve Months Three Months
2012 2011 2012 2011
Other information:
Depreciation and amortization $ 4,638 $ 4,181 $ 1,341 $ 885
Amortization of previously capitalized interest 78,630   79,338   29,721   26,592  
 

KB HOME

SUPPLEMENTAL INFORMATION

For the Twelve Months and Three Months Ended November 30, 2012 and 2011

       
Twelve Months Three Months
2012     2011 2012     2011
Average sales price:
West Coast $ 388,300 $ 335,500 $ 405,400 $ 358,300
Southwest 193,900 165,800 219,500 179,100
Central 170,100 171,500 179,500 173,100
Southeast 206,200   195,500   219,900   192,900
Total $ 246,500   $ 224,600   $ 270,700   $ 238,400
 
Twelve Months Three Months
2012 2011 2012 2011
Homes delivered:
West Coast 1,945 1,757 765 656
Southwest 683 843 170 270
Central 2,566 2,155 843 706
Southeast 1,088   1,057   344   363
Total 6,282   5,812   2,122   1,995
 
Twelve Months Three Months
2012 2011 2012 2011
Net orders:
West Coast 2,166 2,017 619 490
Southwest 663 907 140 172
Central 2,697 2,480 485 517
Southeast 1,177   1,228   313   315
Total 6,703   6,632   1,557   1,494
 
November 30, 2012 November 30, 2011
Backlog Homes Backlog Value Backlog Homes Backlog Value
Backlog data (dollars in thousands):
West Coast 684 $ 248,790 463 $ 161,987
Southwest 183 40,206 203 37,071
Central 1,149 204,473 1,018 168,512
Southeast 561   125,157   472   91,380
Total 2,577   $ 618,626   2,156   $ 458,950
 

KB HOME
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
For the Twelve Months and Three Months Ended November 30, 2012 and 2011
(In Thousands, Except Percentages)

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 profit 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 profit 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 Profit Margin, Excluding Inventory Impairment and Land Option Contract Abandonment Charges

The following table reconciles the Company's housing gross profit margin calculated in accordance with GAAP to the non-GAAP financial measure of the Company's housing gross profit margin, excluding inventory impairment and land option contract abandonment charges:

    Twelve Months     Three Months
2012     2011 2012     2011
Housing revenues $ 1,548,432 $ 1,305,299 $ 574,377 $ 475,636
Housing construction and land costs (1,317,529 ) (1,129,785 ) (492,594 ) (405,899 )
Housing gross profits 230,903 175,514 81,783 69,737
Add: Inventory impairment and land option contract abandonment charges 28,533   25,740   5,621   2,284  
Housing gross profits, excluding inventory impairment and land option contract abandonment charges $ 259,436   $ 201,254   $ 87,404   $ 72,021  
Housing gross profit margin as a percentage of housing revenues 14.9 % 13.4 % 14.2 % 14.7 %
Housing gross profit margin, excluding inventory impairment and land option contract abandonment charges, as a percentage of housing revenues 16.8 % 15.4 % 15.2 % 15.1 %
 

Housing gross profit 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 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 profit margin. The Company believes housing gross profit 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 profits the Company generated specifically on the homes delivered during a given period and enhances the comparability of housing gross profit margin 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 profit 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
kmarshall@kbhome.com
or
Susan Martin, Media Contact
(310) 231-4142
smartin@kbhome.com

Source: KB Home

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