Revenues Up 21% to $818.6 Million
Net Orders Increase 14%
to 2,580; Net Order Value Up 32% to $1.09 Billion
Backlog
Value Increases 25% to $1.79 Billion
LOS ANGELES--(BUSINESS WIRE)--
KB Home (NYSE: KBH) today reported results for its first quarter ended
February 28, 2017.
"Building on our 2016 accomplishments, we delivered a solid financial
and operational performance in the first quarter and extended the upward
trajectory of our business," said Jeffrey Mezger, chairman, president
and chief executive officer. "With double-digit year-over-year growth in
deliveries, revenues, pretax income, net orders and backlog, we are
benefiting from the effective execution of our core business strategy
and a favorable housing environment supported by healthy demand and
constrained supply. We are seeing particular strength in California, our
largest market, where we had significant year-over-year improvement in
many key metrics. Company-wide, our operations are maintaining a strong
cadence that is producing more reliable, predictable results."
"We continue to progress on our returns-focused growth roadmap, which
includes expanding the scale of our business within our current
geographic footprint, increasing our operating income margin, generating
cash from operations to support a balanced approach to future growth,
reducing debt and improving our leverage ratio," said Mezger. "In
alignment with this strategy, we completed the early redemption of $100
million of our senior notes in the quarter using internally generated
cash. Based on the steadily increasing momentum we have sustained over
the past few years, and the positive start to 2017, we believe we are
well positioned to achieve our objectives for the year."
Three Months Ended February 28, 2017
(comparisons on a year-over-year basis)
-
Total revenues of $818.6 million increased 21%.
-
Deliveries grew 14% to 2,224 homes, with increases in each of the
Company's four regions.
-
Average selling price increased 6% to $364,600.
-
Homebuilding operating income rose 33% to $25.3 million, including
total inventory-related charges of $4.0 million. Inventory-related
charges in the 2016 first quarter totaled $2.0 million.
-
Homebuilding operating income margin increased 30 basis points to
3.1%. Excluding total inventory-related charges, homebuilding
operating income margin improved 50 basis points to 3.6%.
-
Housing gross profit margin decreased 140 basis points to
14.6%, which included 50 basis points of inventory-related
charges.
-
Adjusted housing gross profit margin, a metric that
excludes the amortization of previously capitalized
interest and inventory-related charges, declined 80 basis
points to 19.9%.
-
Selling, general and administrative expenses improved 160
basis points from 13.1% of housing revenues to 11.5%, a record
low first quarter ratio for the Company.
-
Financial services generated pretax income of $1.6 million, up from
$1.2 million.
-
The Company's recently formed mortgage banking joint venture with
Stearns Lending, LLC, which had no significant impact on the
current quarter results, is expected to be operational in most of
the Company's served markets by the end of the 2017 second
quarter, subject to obtaining all requisite regulatory approvals
and clearances.
-
Interest expense of $6.3 million included a charge of $5.7 million
associated with the Company's optional early redemption of $100
million in aggregate principal amount of its 9.100% Senior Notes due
2017, which was announced in December. The redemption was completed on
January 13, 2017.
-
Pretax income increased 34% to $21.5 million. Excluding the charges
related to inventory and the early extinguishment of debt, pretax
income grew 73% to $31.2 million.
-
Income tax expense of $7.2 million was favorably impacted by $1.1
million of federal energy tax credits, and represented an effective
tax rate of 33.6%. In the 2016 first quarter, the Company's effective
tax rate of 18.1% reflected a favorable tax-credit impact of $3.3
million.
-
Net income increased to $14.3 million, or $.15 per diluted share.
Backlog and Net Orders (comparisons on a
year-over-year basis)
-
Net orders for the quarter increased 14% to 2,580, and net order value
grew 32% to $1.09 billion.
-
In the Company's West Coast region, net order value increased 73%,
reflecting 49% growth in net orders and a 16% increase in the
average selling price of those orders.
-
Homes in backlog rose 11% to 4,776. Ending backlog value grew 25% to
$1.79 billion, the Company's highest first quarter backlog value since
2007.
-
The average selling price of homes in backlog increased 12%.
-
The cancellation rate as a percentage of beginning backlog for the
quarter improved to 18% from 21%, and as a percentage of gross orders
improved to 23% from 27%.
-
Average community count for the quarter decreased slightly to 238,
while the ending community count remained essentially flat at 240.
Balance Sheet as of February 28, 2017
(comparisons to November 30, 2016)
-
The Company had total liquidity of $595.9 million, including cash and
cash equivalents of $351.9 million and availability under its
unsecured revolving credit facility.
-
There were no cash borrowings outstanding under the Company's
unsecured revolving credit facility.
-
Inventories were $3.42 billion, with investments in land acquisition
and development totaling $302.1 million for the quarter.
-
Lots owned or controlled totaled 44,471, of which 80% were owned.
-
Notes payable decreased to $2.50 billion from $2.64 billion, largely
due to the early redemption of $100 million of senior notes using
internally generated cash.
-
The ratio of debt to capital was 59.1%, and the ratio of net debt to
capital was 55.3%.
Earnings Conference Call
The conference call to discuss the Company's first quarter 2017 earnings
will be broadcast live TODAY at 2:00 p.m. Pacific Time, 5:00 p.m.
Eastern Time. To listen, please go to the Investor Relations section of
the Company's website at www.kbhome.com.
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 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;
changes in existing tax laws or enacted corporate income tax rates; 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, 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 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 roadmap/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; Stearns
Lending, LLC's management of Home Community Mortgage's assets and
operations; whether we can operate a joint venture with Stearns Lending,
LLC, and the performance of any such mortgage banking joint venture once
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.
|
|
|
KB HOME
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
For the Three Months Ended February 28, 2017 and February 29, 2016
|
|
(In Thousands, Except Per Share Amounts - Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
February 28, 2017 |
|
February 29, 2016 |
|
Total revenues
|
|
$
|
818,596
|
|
|
$
|
678,371
|
|
|
Homebuilding:
|
|
|
|
|
|
Revenues
|
|
$
|
816,246
|
|
|
$
|
675,742
|
|
|
Costs and expenses
|
|
(790,969
|
)
|
|
(656,750
|
)
|
|
Operating income
|
|
25,277
|
|
|
18,992
|
|
|
Interest income
|
|
198
|
|
|
152
|
|
|
Interest expense
|
|
(6,307
|
)
|
|
(3,697
|
)
|
|
Equity in income (loss) of unconsolidated joint ventures
|
|
731
|
|
|
(603
|
)
|
|
Homebuilding pretax income
|
|
19,899
|
|
|
14,844
|
|
|
Financial services:
|
|
|
|
|
|
Revenues
|
|
2,350
|
|
|
2,629
|
|
|
Expenses
|
|
(819
|
)
|
|
(859
|
)
|
|
Equity in income (loss) of unconsolidated joint ventures
|
|
29
|
|
|
(587
|
)
|
|
Financial services pretax income
|
|
1,560
|
|
|
1,183
|
|
|
Total pretax income
|
|
21,459
|
|
|
16,027
|
|
|
Income tax expense
|
|
(7,200
|
)
|
|
(2,900
|
)
|
|
Net income
|
|
$
|
14,259
|
|
|
$
|
13,127
|
|
|
Earnings per share:
|
|
|
|
|
|
Basic
|
|
$
|
.17
|
|
|
$
|
.15
|
|
|
Diluted
|
|
$
|
.15
|
|
|
$
|
.14
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
Basic
|
|
85,122
|
|
|
89,239
|
|
|
Diluted
|
|
96,273
|
|
|
99,427
|
|
|
|
|
|
|
|
|
KB HOME
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(In Thousands - Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28,
2017
|
|
November 30,
2016
|
|
Assets
|
|
|
|
|
|
Homebuilding:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
351,880
|
|
|
$
|
592,086
|
|
Receivables
|
|
238,358
|
|
|
231,665
|
|
Inventories
|
|
3,423,344
|
|
|
3,403,228
|
|
Investments in unconsolidated joint ventures
|
|
64,916
|
|
|
64,016
|
|
Deferred tax assets, net
|
|
731,885
|
|
|
738,985
|
|
Other assets
|
|
96,679
|
|
|
91,145
|
|
|
|
4,907,062
|
|
|
5,121,125
|
|
Financial services
|
|
15,518
|
|
|
10,499
|
|
Total assets
|
|
$
|
4,922,580
|
|
|
$
|
5,131,624
|
|
|
|
|
|
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
Homebuilding:
|
|
|
|
|
|
Accounts payable
|
|
$
|
178,491
|
|
|
$
|
215,331
|
|
Accrued expenses and other liabilities
|
|
501,902
|
|
|
550,996
|
|
Notes payable
|
|
2,504,449
|
|
|
2,640,149
|
|
|
|
3,184,842
|
|
|
3,406,476
|
|
Financial services
|
|
1,278
|
|
|
2,003
|
|
Stockholders' equity
|
|
1,736,460
|
|
|
1,723,145
|
|
Total liabilities and stockholders' equity
|
|
$
|
4,922,580
|
|
|
$
|
5,131,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KB HOME
|
|
SUPPLEMENTAL INFORMATION
|
|
For the Three Months Ended February 28, 2017 and February 29, 2016
|
|
(In Thousands, Except Average Selling Price - Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
February 28, 2017 |
|
February 29, 2016 |
|
Homebuilding revenues:
|
|
|
|
|
|
Housing
|
|
$
|
810,947
|
|
|
$
|
672,646
|
|
|
Land
|
|
5,299
|
|
|
3,096
|
|
|
Total
|
|
$
|
816,246
|
|
|
$
|
675,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding costs and expenses:
|
|
|
|
|
|
Construction and land costs
|
|
|
|
|
|
Housing
|
|
$
|
692,787
|
|
|
$
|
564,828
|
|
|
Land
|
|
5,293
|
|
|
3,990
|
|
|
Subtotal
|
|
698,080
|
|
|
568,818
|
|
|
Selling, general and administrative expenses
|
|
92,889
|
|
|
87,932
|
|
|
Total
|
|
$
|
790,969
|
|
|
$
|
656,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
Interest incurred
|
|
$
|
44,394
|
|
|
$
|
46,251
|
|
|
Loss on early extinguishment of debt
|
|
5,685
|
|
|
—
|
|
|
Interest capitalized
|
|
(43,772
|
)
|
|
(42,554
|
)
|
|
Total
|
|
$
|
6,307
|
|
|
$
|
3,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
2,467
|
|
|
$
|
2,781
|
|
|
Amortization of previously capitalized interest
|
|
39,384
|
|
|
30,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average selling price:
|
|
|
|
|
|
West Coast |
|
$
|
587,200
|
|
|
$
|
558,800
|
|
|
Southwest
|
|
289,000
|
|
|
286,700
|
|
|
Central
|
|
275,500
|
|
|
260,200
|
|
|
Southeast
|
|
286,400
|
|
|
270,900
|
|
|
Total
|
|
$
|
364,600
|
|
|
$
|
344,400
|
|
|
|
|
KB HOME
|
|
SUPPLEMENTAL INFORMATION
|
|
For the Three Months Ended February 28, 2017 and February 29, 2016
|
|
(Dollars in Thousands - Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
February 28, 2017 |
|
February 29, 2016 |
|
Homes delivered:
|
|
|
|
|
|
|
|
|
West Coast |
|
|
|
|
606
|
|
|
508
|
|
Southwest
|
|
|
|
|
407
|
|
|
350
|
|
Central
|
|
|
|
|
861
|
|
|
765
|
|
Southeast
|
|
|
|
|
350
|
|
|
330
|
|
Total
|
|
|
|
|
2,224
|
|
|
1,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net orders:
|
|
|
|
|
|
|
|
|
West Coast |
|
|
|
|
826
|
|
|
555
|
|
Southwest
|
|
|
|
|
456
|
|
|
359
|
|
Central
|
|
|
|
|
960
|
|
|
901
|
|
Southeast
|
|
|
|
|
338
|
|
|
457
|
|
Total
|
|
|
|
|
2,580
|
|
|
2,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net order value:
|
|
|
|
|
|
|
|
|
West Coast |
|
|
|
|
$
|
583,503
|
|
|
$
|
337,611
|
|
Southwest
|
|
|
|
|
131,731
|
|
|
107,288
|
|
Central
|
|
|
|
|
274,883
|
|
|
253,215
|
|
Southeast
|
|
|
|
|
95,305
|
|
|
126,560
|
|
Total
|
|
|
|
|
$
|
1,085,422
|
|
|
$
|
824,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2017 |
|
February 29, 2016 |
|
|
Homes
|
|
Value
|
|
Homes
|
|
Value
|
|
Backlog data:
|
|
|
|
|
|
|
|
|
West Coast |
1,133
|
|
|
$
|
754,511
|
|
|
785
|
|
|
$
|
461,738
|
|
Southwest
|
853
|
|
|
241,917
|
|
|
614
|
|
|
174,381
|
|
Central
|
2,078
|
|
|
596,813
|
|
|
1,978
|
|
|
548,985
|
|
Southeast
|
712
|
|
|
200,323
|
|
|
908
|
|
|
248,403
|
|
Total
|
4,776
|
|
|
$
|
1,793,564
|
|
|
4,285
|
|
|
$
|
1,433,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KB HOME
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
For
the Three Months Ended February 28, 2017 and February 29, 2016
(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 adjusted housing gross profit margin and ratio of net debt
to capital, neither of which are calculated in accordance with generally
accepted accounting principles ("GAAP"). The Company believes these
non-GAAP financial measures are relevant and useful to investors in
understanding its operations and the leverage employed in 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 and the ratio of net debt to capital are not calculated in
accordance with GAAP, these financial measures 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 operating
performance and/or financial measures prescribed by GAAP. Rather, these
non-GAAP financial measures should be used to supplement their
respective most directly comparable GAAP financial measures 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 Ended
|
|
|
|
February 28, 2017 |
|
February 29, 2016 |
|
Housing revenues
|
|
$
|
810,947
|
|
|
$
|
672,646
|
|
|
Housing construction and land costs
|
|
(692,787
|
)
|
|
(564,828
|
)
|
|
Housing gross profits
|
|
118,160
|
|
|
107,818
|
|
|
Add: Amortization of previously capitalized interest (a)
|
|
38,873
|
|
|
30,206
|
|
|
Inventory-related charges (b)
|
|
4,008
|
|
|
1,179
|
|
|
Adjusted housing gross profits
|
|
$
|
161,041
|
|
|
$
|
139,203
|
|
|
Housing gross profit margin as a percentage of housing revenues
|
|
14.6
|
%
|
|
16.0
|
%
|
|
Adjusted housing gross profit margin as a percentage of housing
revenues
|
|
19.9
|
%
|
|
20.7
|
%
|
(a) Represents the amortization of previously capitalized interest
associated with housing operations.
(b) Represents inventory impairment and land option contract abandonment
charges associated with housing operations.
Adjusted housing gross profit margin is a non-GAAP financial measure,
which the Company calculates by dividing housing revenues less housing
construction and land costs excluding (1) amortization of previously
capitalized interest associated with housing operations and (2) housing
inventory impairment and land option contract abandonment charges (as
applicable) 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.
This non-GAAP financial measure isolates the impact that the
amortization of previously capitalized interest associated with housing
operations, and housing inventory impairment and land option contract
abandonment charges, have on housing gross profit margins, and allows
investors to make comparisons with the Company's competitors that adjust
housing gross profit margins in a similar manner. 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
amortization of previously capitalized interest associated with housing
operations, and housing inventory impairment and land option contract
abandonment charges. This financial measure assists management in making
strategic decisions regarding community location and product mix,
product pricing and construction pace.
KB HOME
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In
Thousands, Except Percentages - Unaudited)
Ratio of Net Debt to Capital
|
The following table reconciles the Company's ratio of debt to
capital calculated in accordance with GAAP to the non-GAAP
financial measure of the Company's ratio of net debt to capital:
|
|
|
|
|
|
|
|
|
|
February 28,
2017
|
|
November 30,
2016
|
|
Notes payable
|
|
$
|
2,504,449
|
|
|
$
|
2,640,149
|
|
|
Stockholders' equity
|
|
1,736,460
|
|
|
1,723,145
|
|
|
Total capital
|
|
$
|
4,240,909
|
|
|
$
|
4,363,294
|
|
|
Ratio of debt to capital
|
|
59.1
|
%
|
|
60.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
2,504,449
|
|
|
$
|
2,640,149
|
|
|
Less: Cash and cash equivalents
|
|
(351,880
|
)
|
|
(592,086
|
)
|
|
Net debt
|
|
2,152,569
|
|
|
2,048,063
|
|
|
Stockholders' equity
|
|
1,736,460
|
|
|
1,723,145
|
|
|
Total capital
|
|
$
|
3,889,029
|
|
|
$
|
3,771,208
|
|
|
Ratio of net debt to capital
|
|
55.3
|
%
|
|
54.3
|
%
|
|
|
|
|
|
|
|
|
The ratio of net debt to capital is a non-GAAP financial measure, which
the Company calculates by dividing notes payable, net of homebuilding
cash and cash equivalents, by capital (notes payable, net of
homebuilding cash and cash equivalents, plus stockholders' equity). The
most directly comparable GAAP financial measure is the ratio of debt to
capital. The Company believes the ratio of net debt to capital is a
relevant and useful financial measure to investors in understanding the
leverage employed in the Company's operations.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170323005437/en/
KB Home
Jill Peters, 310-893-7456
Investor Relations Contact
jpeters@kbhome.com
or
Susan
Martin, 310-231-4142
Media Contact
smartin@kbhome.com
Source: KB Home
News Provided by Acquire Media