KB Home
Mar 19, 2014

KB Home Reports 2014 First Quarter Results

Revenues Increase 11% to $450.7 Million; Average Selling Price Up 12%
Net Income Increases to $10.6 Million or $.12 Per Diluted Share
Net Order Value Grows 18%; Backlog Value Up 21% to $851.6 Million

LOS ANGELES--(BUSINESS WIRE)-- KB Home (NYSE: KBH), one of the nation's largest and most recognized homebuilders, today reported results for its first quarter ended February 28, 2014. Highlights and developments include the following:

Three Months Ended February 28, 2014

Backlog and Net Orders

Balance Sheet

Management Comments

"We are pleased by our first quarter results," said Jeffrey Mezger, president and chief executive officer. "Building on the momentum and the full-year profitability our business achieved in 2013, we posted net income in the first quarter for the first time since 2007, along with higher average selling prices, increased revenues, expanded gross margins and improved operating leverage. We believe this performance reflects the continued success of our strategic initiatives, and gives us a firm foundation to deliver on our financial objectives for the year."

"As we continue to execute on our business strategies, increasing the number of communities we operate will be a key factor in driving higher revenues and profits this year," said Mezger. "Through our substantial investments in land and land development over the past few years, we believe we have created a solid platform for growth. In the current quarter, our double-digit percentage increase in community count helped us generate net order growth, and we are actively working to open additional new home communities. We are entering the spring selling season positioned with more communities open in attractive locations across the country, and we are confident that our balanced approach to sales price and pace, combined with our focus on both top-line growth and profitability, will produce strong results in the coming quarters."

Earnings Conference Call

The conference call on the first quarter 2014 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. As a leader in utilizing state-of-the-art sustainable building practices, all KB homes are highly energy efficient and meet strict ENERGY STAR® guidelines. This helps to lower monthly utility costs for homeowners, which the company demonstrates with its proprietary KB Home Energy Performance Guide® (EPG®). KB Home has been named both an ENERGY STAR Partner of the Year Sustained Excellence Award winner and WaterSense® Partner of the Year for three consecutive years by the EPA. 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 the following: general economic, employment and business conditions; population growth, household formations and demographic trends; adverse market conditions, including an increased supply of unsold homes, declining home prices and greater foreclosure and short sale activity, among other things, that could negatively affect our consolidated financial statements, including due to additional impairment or land option contract abandonment charges, lower revenues and operating and other losses; conditions in the capital, credit and financial 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, maturity schedule 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 project financing, on favorable terms; our compliance with the terms and covenants of our revolving credit facility; weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; competition for home sales from other sellers of new and resale homes, including lenders and other 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 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, programs intended to modify existing mortgage loans and to prevent mortgage foreclosures and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies), the homebuilding industry, or construction activities; decisions regarding federal fiscal and monetary policies, including those relating to taxation, government spending, interest rates and economic stimulus measures; the availability and cost of land in desirable areas; our warranty claims experience with respect to homes previously delivered and actual warranty costs incurred, including our warranty claims and costs experience at certain of our communities in Florida; 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 strategies and initiatives with respect to product, geographic and market positioning (including our efforts to expand our inventory base/pipeline with desirable land positions or interests at reasonable cost and to expand our community count, open additional new home communities for sales and sell higher-priced homes and more design options, and our operational and investment concentration in markets in California), revenue growth, asset optimization (including by effectively balancing home sales prices and sales pace in our new home communities), asset activation, local field management and talent investment, and overhead reduction and cost management; consumer traffic to our new home communities and consumer interest in our product designs and offerings, particularly from higher-income consumers; cancellations and our ability to realize our backlog by converting net orders to home deliveries; our home sales and delivery performance, particularly in key markets in California; the manner in which our homebuyers are offered and whether they 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; the ability of Home Community Mortgage to become operational in all of our served markets, and its performance upon becoming operational; 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 28, 2014 and 2013

(In Thousands, Except Per Share Amounts — Unaudited)

Three Months
2014   2013
Total revenues $ 450,687   $ 405,219  
Revenues $ 448,267 $ 402,816
Costs and expenses (430,548 ) (402,362 )
Operating income 17,719 454
Interest income 168 204
Interest expense (11,276 ) (15,240 )
Equity in income (loss) of unconsolidated joint ventures 2,590   (435 )
Homebuilding pretax income (loss) 9,201   (15,017 )
Financial services:
Revenues 2,420 2,403
Expenses (852 ) (835 )
Equity in income (loss) of unconsolidated joint ventures (6 ) 1,091  
Financial services pretax income 1,562   2,659  
Total pretax income (loss) 10,763 (12,358 )
Income tax expense (200 ) (100 )
Net income (loss) $ 10,563   $ (12,458 )
Earnings (loss) per share:
Basic $ .13   $ (.16 )
Diluted $ .12   $ (.16 )
Weighted average shares outstanding:
Basic 83,745   79,401  
Diluted 93,946   79,401  

(In Thousands — Unaudited)

February 28, November 30,
2014 2013
Cash and cash equivalents $ 303,269 $ 530,095
Restricted cash 42,083 41,906
Receivables 87,355 75,749
Inventories 2,634,944 2,298,577
Investments in unconsolidated joint ventures 60,648 130,192
Other assets 110,487   107,076
3,238,786 3,183,595
Financial services 9,386   10,040
Total assets $ 3,248,172   $ 3,193,635
Liabilities and stockholders' equity
Accounts payable $ 138,213 $ 148,282
Accrued expenses and other liabilities 386,085 356,176
Mortgages and notes payable 2,175,190   2,150,498
2,699,488 2,654,956
Financial services 2,350 2,593
Stockholders' equity 546,334   536,086
Total liabilities and stockholders' equity $ 3,248,172   $ 3,193,635

For the Three Months Ended February 28, 2014 and 2013

(In Thousands — Unaudited)

Three Months
2014   2013
Homebuilding revenues:
Housing $ 440,127 $ 402,816
Land 8,140    
Total $ 448,267   $ 402,816  
Three Months
2014 2013
Costs and expenses:
Construction and land costs
Housing $ 362,106 $ 343,265
Land 7,168    
Subtotal 369,274 343,265
Selling, general and administrative expenses 61,274   59,097  
Total $ 430,548   $ 402,362  
Three Months
2014 2013
Interest expense:
Interest incurred $ 39,280 $ 33,422
Interest capitalized (28,004 ) (18,182 )
Total $ 11,276   $ 15,240  
Three Months
2014 2013
Other information:
Depreciation and amortization $ 2,067 $ 1,436
Amortization of previously capitalized interest 17,485   18,705  

For the Three Months Ended February 28, 2014 and 2013


Three Months
2014   2013
Average sales price:
West Coast $ 525,200 $ 404,900
Southwest 286,400 227,400
Central 210,400 186,500
Southeast 256,300   220,300
Total $ 305,200   $ 271,300
Three Months
2014 2013
Homes delivered:
West Coast 346 509
Southwest 161 140
Central 595 571
Southeast 340   265
Total 1,442   1,485
Three Months - Units Three Months - Value
2014 2013 2014 2013
Net orders (dollars in thousands):
West Coast 506 530 $ 299,283 $ 261,342
Southwest 181 199 48,388 43,706
Central 757 653 168,973 133,492
Southeast 321   289   83,528   68,263
Total 1,765   1,671   $ 600,172   $ 506,803
February 28, 2014 February 28, 2013
Backlog Homes Backlog Value Backlog Homes Backlog Value
Backlog data (dollars in thousands):
West Coast 580 $ 328,676 705 $ 287,970
Southwest 208 57,648 242 54,604
Central 1,510 320,926 1,231 235,759
Southeast 582   144,303   585   125,560
Total 2,880   $ 851,553   2,763   $ 703,893

For the Three Months Ended February 28, 2014 and 2013

(In Thousands, Except Percentages — Unaudited)


Company management's discussion of the results presented in this press release may include information about the Company's adjusted housing gross profit margin 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 adjusted housing gross profit margin 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.


Adjusted Housing Gross Profit Margin


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 adjusted housing gross profit margin:

  Three Months
2014   2013
Housing revenues $ 440,127 $ 402,816
Housing construction and land costs (362,106 ) (343,265 )
Housing gross profits 78,021 59,551
Add: Land option contract abandonment charges 433
Water intrusion-related charges   1,674  
Adjusted housing gross profits $ 78,454   $ 61,225  
Housing gross profit margin as a percentage of housing revenues 17.7 % 14.8 %
Adjusted housing gross profit margin as a percentage of housing revenues 17.8 % 15.2 %

Adjusted housing gross profit margin is a non-GAAP financial measure, which the Company calculates by dividing housing revenues less land option contract abandonment charges and water intrusion-related charges (as applicable) 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 adjusted housing gross profit margin 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 adjusted housing gross profit margin relevant and useful because it represents a profitability measure that may be compared to a prior period without regard to variability of land option contract abandonment charges and water intrusion-related charges.

KB Home
Katoiya Marshall, Investor Relations Contact
Susan Martin, Media Contact

Source: KB Home

News Provided by Acquire Media