Company Introduces Plan for Returns-Focused Growth
Sets Three-Year Financial Targets Including Housing Revenues Greater
than $5 Billion;
Return on Invested Capital in Excess of 10%;
Net Debt-to-Capital Ratio of 40% to 50%
LOS ANGELES--(BUSINESS WIRE)--
KB Home (NYSE: KBH) held its 2016 Investor Conference in Los Angeles
yesterday, where management outlined its roadmap for accelerating the
Company's profitable growth, increasing its return on invested capital
and achieving its targeted net leverage ratio.
"Our core strategy is to establish a top five position in our served
markets by building communities that offer a compelling combination of
affordability, choice and personalization," said Jeffrey Mezger,
chairman, president and chief executive officer. "As we grow our
business, we intend to remain focused on our current geographic
footprint, offering products in desirable locations and at price points
that are primarily designed to appeal to first-time and first move-up
buyers, which together have represented more than 80% of our deliveries
over the past 15 years."
"As housing market conditions continue to improve, we are seeing demand
strengthen among our core customer segments, and we believe we are well
positioned to capitalize on this trend," continued Mezger. Our target is
to grow annual deliveries and achieve revenues in excess of $5 billion
by 2019. As a result and along with our plans to realize substantial tax
cash savings from our deferred tax asset, sell certain land positions
and continue to reactivate communities, we are confident that we can
internally generate the cash flow needed to support our future growth,
increase our return on invested capital and achieve our leverage ratio
objective. We have a compelling strategy, and an achievable set of
targets with the potential to produce a meaningful increase in long-term
stockholder value," concluded Mezger.
At the Investor Conference, the Company presented financial targets for
its 2019 and 2017 fiscal years, as well as an update to its expectations
for the 2016 fourth quarter.
2019 Targets
The Company's three-year targets are as follows:
-
Housing revenues greater than $5 billion.
-
Operating income margin of 8% to 9%.
-
Return on invested capital in excess of 10%.
-
Return on equity in the low-to-mid double-digit range.
-
Net debt-to-capital ratio of 40% to 50%.
2017 Targets
The Company's financial targets for 2017, representing the first
milestone toward achieving its three-year targets, are as follows:
-
Housing revenues of $3.8 billion to $4.2 billion.
-
Average selling price of $370,000 to $385,000.
-
Operating income margin of 5.7% to 6.3%.
-
Average community count approximately flat relative to 2016.
2016 Fourth Quarter Update
The Company reaffirmed its previously disclosed financial targets for
the 2016 fourth quarter. The Company also announced its decision to sell
more than 20 land parcels (over 2,000 lots) that no longer fit into its
business plans, rather than sell and build homes on the parcels as
previously intended. These parcels include land in excess of near-term
requirements; land where the Company now believes the necessary
incremental investment in development is not justified; land located in
areas outside of the Company's served markets; and land entitled for
certain product types that are not aligned with the Company's primary
offerings. The majority of these land parcels are located in the
Company's Southeast region. In light of this decision, the Company
provided a range of estimated 2016 fourth quarter inventory-related
charges of $30 million to $40 million.
In addition, the Company announced that net orders for the first six
weeks of its 2016 fourth quarter increased 14% year over year. The
Company noted that net order growth for the full 2016 fourth quarter may
vary from its quarter-to-date performance due to, among other factors,
its previously stated expectation for average community count to decline
by 8% year over year for its 2016 fourth quarter.
Webcast Replay Information
A replay of the Investor Conference webcast and copies of slide
presentations are available in the Investor Relations section of the
Company's website at www.kbhome.com.
To access the materials, select the 2016 Investor Conference link under
the Events and Presentations section. The webcast and slide
presentations will be available until November 18, 2016.
About KB Home
KB Home (NYSE: KBH) is one of the largest and most recognized
homebuilders in the United States and an industry leader in
sustainability, building innovative and highly energy- and
water-efficient new homes. Founded in 1957 and the first homebuilder
listed on the New York Stock Exchange, the Company has built nearly
600,000 homes for families from coast to coast. Distinguished by its
personalized homebuilding approach, KB Home lets each buyer choose their
lot location, floor plan, décor choices, design features and other
special touches that matter most to them. To learn more about KB Home,
call 888-KB-HOMES, visit www.kbhome.com
or connect on Facebook.com/KBHome
or Twitter.com/KBHome.
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;
conditions in the capital, credit and financial markets; our ability to
access external financing sources and raise capital through the issuance
of common stock, debt or other securities, and/or project financing, on
favorable terms; material and trade costs and availability; changes in
interest rates; our debt level, including our ratio of debt to capital,
and our ability to adjust our debt level and maturity schedule; our
compliance with the terms of our revolving credit facility; volatility
in the market price of our common stock; weak or declining consumer
confidence, either generally or specifically with respect to purchasing
homes; competition from other sellers of new and resale homes; weather
events, significant natural disasters and other climate and
environmental factors, including the severe prolonged drought and
related water-constrained conditions in the southwest United States and
California; government actions, policies, programs and regulations
directed at or affecting the housing market (including the Dodd-Frank
Act, tax benefits associated with purchasing and owning a home, 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; the
availability and cost of land in desirable areas; our warranty claims
experience with respect to homes previously delivered and actual
warranty costs incurred; costs and/or charges arising from regulatory
compliance requirements or from legal, arbitral or regulatory
proceedings, investigations, claims or settlements, including
unfavorable outcomes in any such matters resulting in actual or
potential monetary damage awards, penalties, fines or other direct or
indirect payments, or injunctions, consent decrees or other voluntary or
involuntary restrictions or adjustments to our business operations or
practices that are beyond our current expectations and/or accruals; 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 related to our product, geographic and market
positioning (including our plans to transition out of the Metro
Washington, D.C. area); gaining share and scale in our served markets;
our operational and investment concentration in markets in California;
consumer interest in our new home communities and products, particularly
from first-time and first move-up homebuyers and higher-income
consumers; our ability to generate orders and convert our backlog of
orders to home deliveries and revenues, particularly in key markets in
California; our ability to successfully implement our returns-focused
growth strategy and achieve the associated revenue, margin,
profitability, cash flow, community reactivation, land sales, business
growth, asset efficiency, return on invested capital, return on equity,
net debt-to-capital ratio and other financial and operational targets
and objectives; the ability of our homebuyers to obtain residential
mortgage loans and mortgage banking services; the performance of
mortgage lenders to our homebuyers; completing the wind-down of Home
Community Mortgage as planned, and the management of its assets and
operations during the wind-down process; whether we can establish a
joint venture or other relationship with a mortgage banking services
provider; 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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20161019005415/en/
KB Home
Jill Peters, Investor Relations Contact
(310) 893-7456
or jpeters@kbhome.com
or
Susan
Martin, Media Contact
(310) 231-4142 or smartin@kbhome.com
Source: KB Home
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