KB Home Reports 2007 Fourth Quarter and Full Year ResultsLOS ANGELES, Jan 08, 2008 (BUSINESS WIRE) -- KB Home (NYSE: KBH), one of America's largest homebuilders, today
reported financial results for its fourth quarter and fiscal year
ended November 30, 2007. Results include:
-- Revenues totaled $2.07 billion for the quarter ended November
30, 2007, down from $3.01 billion in the corresponding quarter
of 2006, primarily reflecting lower housing revenues. Fourth
quarter 2007 housing revenues of $2.02 billion were 31% lower
than in the year-earlier period. This decline reflected a 22%
year-over-year decrease in new home deliveries to 8,132 in the
fourth quarter of 2007 from 10,386 in the 2006 fourth quarter,
and a 12% year-over-year decrease in the average selling price
to $247,800 in 2007 from $280,000 in 2006.
-- The Company reported a loss from continuing operations before
income taxes of $399.0 million for the quarter ended November
30, 2007 due to pretax, non-cash charges of $403.4 million
associated with inventory and joint venture impairments and
the abandonment of certain land option contracts. In the
year-earlier quarter, the Company posted a loss from
continuing operations before income taxes of $171.1 million
due to $343.3 million of pretax, non-cash impairment and
abandonment charges.
-- During the fourth quarter of 2007, the Company recorded an
after-tax, non-cash charge of $514.2 million to establish a
valuation allowance related to its deferred tax assets in
accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." The valuation
allowance is reflected as a charge to fourth quarter income
tax expense and a reduction of the Company's deferred tax
assets as of November 30, 2007. Including the valuation
allowance, the Company recorded a net loss of $772.7 million
or $9.99 per diluted share in the fourth quarter of 2007. In
the fourth quarter of 2006, the Company's net loss totaled
$49.6 million or $.64 per diluted share.
-- The Company delivered 23,743 new homes in fiscal year 2007,
down 26% from the 32,124 new homes it delivered in fiscal year
2006. Revenues totaled $6.42 billion in fiscal year 2007,
decreasing 32% from $9.38 billion in fiscal year 2006,
reflecting fewer new home deliveries and a 9% year-over-year
decline in the average selling price to $261,600 from
$287,700. The Company posted a loss from continuing operations
of $1.41 billion in fiscal year 2007 due to non-cash charges
associated with inventory and joint venture impairments and
land option contract abandonments; goodwill impairment; and
the deferred tax assets valuation allowance. In fiscal year
2006, the Company generated income from continuing operations
of $392.9 million. Including the results of its French
discontinued operations, the Company posted a net loss of
$929.4 million or $12.04 per diluted share in fiscal year 2007
and net income of $482.4 million or $5.82 per diluted share in
fiscal year 2006.
-- The Company continued to generate positive cash flows in the
2007 fourth quarter, ending the year with a cash balance of
$1.33 billion at November 30, 2007. The Company increased its
cash balance by $625.2 million from November 30, 2006 in
addition to reducing debt by $758.5 million. Furthermore, the
Company had no borrowings outstanding under its $1.5 billion
revolving credit facility as of November 30, 2007. The
Company's ratio of debt to total capital was 53.9% at November
30, 2007 compared to 50.0% at November 30, 2006. Net of cash,
the ratio of debt to total capital improved 12.1 percentage
points to 31.1% at November 30, 2007 from 43.2% at November
30, 2006.
"The challenging market conditions we experienced through the
first three quarters of 2007 continued during the fourth quarter,"
said Jeffrey Mezger, president and chief executive officer. "Several
factors weighed on the entire housing industry this year, including a
persistent oversupply of new and resale homes available for sale,
increased foreclosure activity, heightened competition for home sales,
reduced home affordability, turmoil in the mortgage and credit
markets, and decreased consumer confidence in purchasing homes."
"KB Home's results for the 2007 fourth quarter and full year
reflect the impact of these difficult industry conditions as well as
our strategic actions to restructure our operations to better align
with significantly reduced housing market activity," Mezger noted. "We
recorded additional impairment and abandonment charges in the fourth
quarter as slowing sales rates and downward pressure on home prices
and gross margins reduced the fair value of certain inventory
positions and prompted us to reassess our strategy concerning certain
projects."
"The inventory impairments we incurred during the housing downturn
have produced substantial deferred tax assets," Mezger continued. "As
a result of the continued downturn in the housing market and the
uncertainty as to its length and magnitude, we recorded a valuation
allowance on certain deferred tax assets. This resulted in a
substantial non-cash charge in the fourth quarter. To the extent that
we generate sufficient taxable income in the future to utilize the tax
benefits of the related deferred tax assets, we expect to see a
reduction in our effective tax rate as the valuation allowance is
reversed."
Total revenues of $2.07 billion for the quarter ended November 30,
2007 decreased 31% from $3.01 billion for the corresponding quarter of
2006, primarily due to lower housing revenues in all of the Company's
geographic operating segments. Fourth quarter housing revenues fell
31% to $2.02 billion in 2007 from $2.91 billion in 2006 due to a 22%
year-over-year decrease in new home deliveries and a 12%
year-over-year decline in the overall average selling price. The
Company delivered 8,132 new homes with an average price of $247,800 in
the fourth quarter of 2007 compared to 10,386 new homes with an
average price of $280,000 in the year-earlier quarter. Land sale
revenues totaled $50.3 million in the fourth quarter of 2007 compared
to $96.6 million in the fourth quarter of 2006.
The Company's homebuilding business recorded fourth quarter
operating losses of $331.6 million in 2007 and $160.5 million in 2006,
driven by losses from both housing operations and land sales. Within
housing operations, the 2007 fourth quarter loss was primarily due to
pretax, non-cash charges of $290.3 million for inventory impairments
and land option contract abandonments, $15.2 million for impairments
related to future land sales, and compressed operating margins
resulting from competitive pressures. Largely as a result of the
inventory impairment and abandonment charges, the Company's housing
gross margin fell to a negative 4.3% in the 2007 fourth quarter from a
positive 9.1% in the year-earlier quarter. Excluding these charges,
the Company's fourth quarter housing gross margin would have been
10.1% in 2007 and 17.4% in 2006. The Company recorded losses on land
sales of $16.4 million and $94.1 million in the fourth quarters of
2007 and 2006, respectively, including pretax, non-cash impairment
charges related to planned future land sales. The Company's equity in
pretax loss of unconsolidated joint ventures totaled $89.2 million and
$28.7 million in the fourth quarters of 2007 and 2006, respectively,
including impairment charges of $97.9 million in 2007 and $39.3
million in 2006. Taken together, these charges and the valuation
allowance for deferred tax assets produced a net loss of $772.7
million or $9.99 per diluted share for the 2007 fourth quarter
compared to a net loss of $49.6 million or $.64 per diluted share in
the fourth quarter of 2006.
"We took several decisive actions during 2007 to generate cash
flow, reduce debt levels and strengthen our balance sheet," said
Mezger. "These actions included reducing inventory and community
count, trimming our workforce, consolidating or exiting
underperforming markets, increasing liquidity and opportunistically
selling our French operations near the recent market peak in that
country. Overall, we reduced debt by $759 million in 2007 and
increased our cash balance by $625 million. At November 30, 2007, we
had $1.33 billion in cash, surpassing our previous guidance by more
than $300 million, with no borrowings outstanding under our $1.5
billion revolving credit facility. Our ratio of net debt to capital
stood at 31.1% at November 30, 2007, even after accounting for the
deferred tax assets valuation allowance. This represents a significant
improvement from our 43.2% ratio at the end of 2006 and is well ahead
of our targeted range."
"Notwithstanding our current cash and capital resources, the
impact of the impairments and deferred tax assets valuation allowance
required us to obtain a waiver under our revolving credit facility
relating to a consolidated tangible net worth covenant," said Mezger.
"To address our covenant compliance for future periods, we are
currently working with our bank partners to amend our credit facility
covenants. We have a long-standing and positive working relationship
with our bank group and, based on preliminary discussions, we expect
to enter into an amendment by the end of the first quarter of 2008."
The Company's homebuilding operations generated 2,574 net orders
in the fourth quarter of 2007, down 32% from 3,763 net orders in the
prior year's fourth quarter. All of the Company's geographic operating
segments generated negative year-over-year net order comparisons. The
decline in net orders reflected a year-over-year decrease in the
number of new home communities the Company operates as well as the
difficult market conditions. The Company's 2007 fourth quarter
cancellation rate of 58% was unchanged from that of the year-earlier
quarter but was higher than the 50% rate reported in the 2007 third
quarter. Backlog at November 30, 2007 totaled 6,322 units,
representing potential future housing revenues of approximately $1.50
billion. These backlog levels were down 40% and 47%, respectively,
from 10,575 backlog units and approximately $2.83 billion backlog
value at November 30, 2006. The lower backlog levels reflect declining
net orders for the past several quarters and lower average selling
prices.
"We believe 2008 will be another tough year for the homebuilding
industry," said Mezger. "However, we will continue our efforts from
the past year to strengthen our balance sheet, streamline our cost
structure, align our organization with expected reduced delivery
volumes, and sharpen our operating disciplines and strategies. We
believe this approach will provide KB Home with a solid financial
position on which it can leverage its geographic diversity and proven
built-to-order business model to capitalize on growth opportunities
that will develop as housing markets stabilize."
For the year ended November 30, 2007, the Company delivered 23,743
new homes, down 26% from the 32,124 new homes it delivered in 2006.
The Company's revenues decreased 32% to $6.42 billion in fiscal year
2007 from $9.38 billion a year earlier, reflecting a reduction in new
home deliveries and a 9% year-over-year decline in the average selling
price to $261,600 in 2007 from $287,700 in 2006. The Company posted a
loss from continuing operations of $1.41 billion or $18.33 per diluted
share in fiscal year 2007 due to pretax, non-cash charges of $1.41
billion for inventory and joint venture impairments and land option
contract abandonments, $107.9 million for goodwill impairments, and a
$514.2 million after-tax, non-cash valuation allowance charge
associated with the Company's deferred tax assets. In fiscal year
2006, the Company's income from continuing operations totaled $392.9
million or $4.74 per diluted share, reflecting $431.2 million of
similar pretax, non-cash inventory and joint venture impairment and
abandonment charges. Including the results from its French
discontinued operations, the Company posted a net loss of $929.4
million or $12.04 per diluted share in fiscal year 2007 and net income
of $482.4 million or $5.82 per diluted share in fiscal year 2006. The
French discontinued operations contributed after-tax income of $485.4
million or $6.29 per diluted share in fiscal year 2007, including a
$438.1 million after-tax gain realized on the sale of the operations,
and $89.4 million or $1.08 per diluted share in fiscal year 2006.
The Conference Call on the Fourth Quarter 2007 earnings will be
broadcast live TODAY at 9:00 a.m. Pacific Standard Time, 12:00 p.m.
Eastern Standard Time. To listen, please go to the Investor Relations
section of the Company's website 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
13 states, building communities from coast to coast. KB Home 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. In addition, our ability to amend our credit facility
covenants as stated in this release depends on the willingness of our
lenders to enter into such amendment on mutually acceptable terms, a
risk factor that is beyond our control. If we are unable to amend our
credit facility covenants and are unable to maintain compliance with
such covenants, our lenders may declare us to be in default under the
credit facility and could suspend our ability to borrow under the
credit facility, demand that we compensate them for waiving such
default and/or exercise additional remedies under the terms of the
credit facility that could have an adverse affect on our business.
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, 2007 and
2006
(In Thousands, Except Per Share Amounts)
Twelve Months
--------------------------
2007 2006 (a)
------------ ------------
Total revenues $ 6,416,526 $ 9,380,083
============ ============
Homebuilding:
Revenues $ 6,400,591 $ 9,359,843
Costs and expenses (7,758,926) (8,789,527)
------------ ------------
Operating income (loss) (1,358,335) 570,316
Interest income 28,636 5,503
Loss on early redemption/interest
expense, net of amounts capitalized (12,990) (16,678)
Equity in pretax loss of unconsolidated
joint ventures (151,917) (20,830)
------------ ------------
Homebuilding pretax income (loss) (1,494,606) 538,311
------------ ------------
Financial services:
Revenues 15,935 20,240
Expenses (4,796) (5,923)
Equity in pretax income of unconsolidated
joint venture 22,697 19,219
------------ ------------
Financial services pretax income 33,836 33,536
------------ ------------
Income (loss) from continuing operations
before income taxes (1,460,770) 571,847
Income tax benefit (expense) 46,000 (178,900)
------------ ------------
Income (loss) from continuing operations (1,414,770) 392,947
Income from discontinued operations, net of
income taxes 47,252 89,404
Gain on sale of discontinued operations,
net of income taxes 438,104 -
------------ ------------
Net income (loss) $ (929,414) $ 482,351
============ ============
Basic earnings (loss) per share
Continuing operations $ (18.33) $ 4.99
Discontinued operations 6.29 1.13
------------ ------------
Basic earnings (loss) per share $ (12.04) $ 6.12
============ ============
Diluted earnings (loss) per share
Continuing operations $ (18.33) $ 4.74
Discontinued operations 6.29 1.08
------------ ------------
Diluted earnings (loss) per share $ (12.04) $ 5.82
============ ============
Basic average shares outstanding 77,172 78,829
============ ============
Diluted average shares outstanding 77,172 82,856
============ ============
Three Months
--------------------------
2007 2006 (a)
------------ ------------
Total revenues $ 2,070,580 $ 3,011,672
============ ============
Homebuilding:
Revenues $ 2,065,349 $ 3,005,044
Costs and expenses (2,396,964) (3,165,495)
------------ ------------
Operating income (loss) (331,615) (160,451)
Interest income 9,754 2,356
Loss on early redemption/interest expense,
net of amounts capitalized - -
Equity in pretax loss of unconsolidated
joint ventures (89,190) (28,675)
------------ ------------
Homebuilding pretax income (loss) (411,051) (186,770)
------------ ------------
Financial services:
Revenues 5,231 6,628
Expenses (1,272) (1,294)
Equity in pretax income of unconsolidated
joint venture 8,139 10,294
------------ ------------
Financial services pretax income 12,098 15,628
------------ ------------
Income (loss) from continuing operations
before income taxes (398,953) (171,142)
Income tax benefit (expense) (373,700) 91,200
------------ ------------
Income (loss) from continuing operations (772,653) (79,942)
Income from discontinued operations, net of
income taxes - 30,300
Gain on sale of discontinued operations, net
of income taxes - -
------------ ------------
Net income (loss) $ (772,653) $ (49,642)
============ ============
Basic earnings (loss) per share
Continuing operations $ (9.99) $ (1.04)
Discontinued operations - 0.40
------------ ------------
Basic earnings (loss) per share $ (9.99) $ (0.64)
============ ============
Diluted earnings (loss) per share
Continuing operations $ (9.99) $ (1.04)
Discontinued operations - 0.40
------------ ------------
Diluted earnings (loss) per share $ (9.99) $ (0.64)
============ ============
Basic average shares outstanding 77,330 77,069
============ ============
Diluted average shares outstanding 77,330 77,069
============ ============
(a) Certain prior year amounts have been reclassified to conform to
current year classifications.
KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands)
November 30, November 30,
2007 2006 (a)
------------ ------------
Assets
Homebuilding:
Cash and cash equivalents $ 1,325,255 $ 700,041
Receivables 295,739 224,077
Inventories 3,312,420 5,751,643
Investments in unconsolidated joint
ventures 297,010 381,242
Deferred income taxes 222,458 430,806
Goodwill 67,970 177,333
Other assets 140,712 160,197
------------ ------------
5,661,564 7,825,339
Financial services 44,392 44,024
Assets of discontinued operations - 1,394,375
------------ ------------
Total assets $ 5,705,956 $ 9,263,738
============ ============
Liabilities and Stockholders' Equity
Homebuilding:
Accounts payable $ 699,851 $ 626,243
Accrued expenses and other liabilities 975,828 1,600,617
Mortgages and notes payable 2,161,794 2,920,334
------------ ------------
3,837,473 5,147,194
Financial services 17,796 26,276
Liabilities of discontinued operations - 1,167,520
Stockholders' equity 1,850,687 2,922,748
------------ ------------
Total liabilities and stockholders' equity $ 5,705,956 $ 9,263,738
============ ============
(a) Certain prior year amounts have been reclassified to conform to
current year classifications.
KB HOME
SUPPLEMENTAL INFORMATION
For the Twelve Months and Three Months Ended November 30, 2007 and
2006
(In Thousands)
Twelve Months
------------------------
Homebuilding revenues: 2007 2006
----------- -----------
Housing $6,211,563 $9,243,236
Land 189,028 116,607
----------- -----------
Total $6,400,591 $9,359,843
=========== ===========
Twelve Months
------------------------
Costs and expenses: 2007 2006
----------- -----------
Construction and land costs
Housing $6,563,082 $7,456,003
Land 263,297 210,016
----------- -----------
Subtotal 6,826,379 7,666,019
Selling, general and administrative
expenses 824,621 1,123,508
Goodwill impairments 107,926 -
----------- -----------
Total $7,758,926 $8,789,527
=========== ===========
Twelve Months
------------------------
Loss on early redemption/interest expense: 2007 2006
----------- -----------
Interest incurred $ 186,560 $ 237,752
Loss on early redemption 12,990 -
Interest capitalized (186,560) (221,074)
----------- -----------
Loss on early redemption/interest
expense $ 12,990 $ 16,678
=========== ===========
Twelve Months
------------------------
Other information: 2007 2006
----------- -----------
Depreciation and amortization $ 19,752 $ 20,532
Amortization of previously capitalized
interest 171,496 143,249
=========== ===========
Three Months
------------------------
Homebuilding revenues: 2007 2006
----------- -----------
Housing $2,015,076 $2,908,454
Land 50,273 96,590
----------- -----------
Total $2,065,349 $3,005,044
=========== ===========
Three Months
------------------------
Costs and expenses: 2007 2006
----------- -----------
Construction and land costs
Housing $2,101,598 $2,643,358
Land 66,716 190,643
----------- -----------
Subtotal 2,168,314 2,834,001
Selling, general and administrative
expenses 228,650 331,494
Goodwill impairments - -
----------- -----------
Total $2,396,964 $3,165,495
=========== ===========
Three Months
------------------------
Loss on early redemption/interest expense: 2007 2006
----------- -----------
Interest incurred $ 38,140 $ 74,556
Loss on early redemption - -
Interest capitalized (38,140) (74,556)
----------- -----------
Loss on early redemption/interest
expense $ - $ -
=========== ===========
Three Months
------------------------
Other information: 2007 2006
----------- -----------
Depreciation and amortization $ 4,491 $ 5,341
Amortization of previously capitalized
interest 71,538 61,607
=========== ===========
KB HOME
SUPPLEMENTAL INFORMATION
For the Twelve Months and Three Months Ended November 30, 2007 and
2006
Twelve Months Three Months
-------------------- --------------------
Average sales price: 2007 2006 2007 2006
-------- ---------- -------- ----------
West Coast $433,600 $ 489,500 $391,200 $ 482,200
Southwest 258,500 306,900 236,800 276,500
Central 167,800 159,800 164,400 158,800
Southeast 229,400 244,300 222,300 237,900
-------- ---------- -------- ----------
Total $261,600 $ 287,700 $247,800 $ 280,000
======== ========== ======== ==========
Twelve Months Three Months
-------------------- --------------------
Unit deliveries: 2007 2006 2007 2006
-------- ---------- -------- ----------
West Coast 4,957 7,213 1,860 2,505
Southwest 4,855 7,011 1,476 1,848
Central 6,310 9,613 2,214 3,106
Southeast 7,621 8,287 2,582 2,927
-------- ---------- -------- ----------
Total 23,743 32,124 8,132 10,386
======== ========== ======== ==========
Unconsolidated joint
ventures: 127 4 95 -
======== ========== ======== ==========
Twelve Months Three Months
-------------------- --------------------
Net orders: 2007 2006 2007 2006
-------- ---------- -------- ----------
West Coast 4,532 4,574 679 772
Southwest 3,631 4,113 482 576
Central 5,266 7,723 660 1,156
Southeast 6,061 6,049 753 1,259
-------- ---------- -------- ----------
Total 19,490 22,459 2,574 3,763
======== ========== ======== ==========
Unconsolidated joint
ventures: 282 58 9 34
======== ========== ======== ==========
November 30, 2007 November 30, 2006
-------------------- --------------------
Backlog data: Backlog Backlog Backlog Backlog
Units Value Units Value
-------- ---------- -------- ----------
(Dollars in thousands)
West Coast 1,190 $ 466,726 1,615 $ 819,795
Southwest 1,306 313,120 2,530 708,206
Central 2,011 312,952 3,055 487,223
Southeast 1,815 406,037 3,375 811,533
-------- ---------- -------- ----------
Total 6,322 $1,498,835 10,575 $2,826,757
======== ========== ======== ==========
Unconsolidated joint
ventures: 209 $ 80,523 54 $ 20,292
======== ========== ======== ==========
SOURCE: KB Home
KB Home
Investor Contact:
Kelly Masuda, 310-893-7434
kmasuda@kbhome.com
or
Media Contact:
Heather Reeves, 310-231-4142
hreeves-x@kbhome.com