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%
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 HomeJill Peters, Investor Relations Contact(310) 893-7456 or
jpeters@kbhome.comorSusan Martin, Media Contact(310) 231-4142 or
smartin@kbhome.com
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