Revenues Up 24% to $1.0 Billion; Diluted
Earnings Per Share Rise 94% to $.33Net Order Value Increases
15% to $1.4 Billion; Backlog Value Grows 19% to $2.2
Billion
KB Home (NYSE: KBH) today reported results for its second
quarter ended May 31, 2017.
“Our strong second quarter performance, particularly our 24%
revenue growth, reflects our ongoing efforts to increase the scale
of our business and continue the steady operational execution that
are driving improvements in our profits, returns and other
financial metrics,” said Jeffrey Mezger, chairman, president and
chief executive officer. “Specifically, we produced measurable
expansion of our operating income margin which, combined with our
backlog growing to $2.2 billion, positions us for continued
meaningful improvement in our results. Looking forward, we remain
committed to delivering value to our customers and stockholders
and, based on the advancements we have made in the first half of
the year, as well as our positive outlook, we are raising our 2017
full-year financial targets.”
“The housing market recovery continues on a steady path,
supported by favorable industry fundamentals,” said Mezger. “Recent
improvements in consumer sentiment and employment, combined with
relatively low mortgage interest rates, are signaling further
strength in the demand for housing. At the same time, the supply of
available homes in many areas across the country remains
insufficient to satisfy current needs. Given these dynamics in most
of our served markets, and our present backlog level, we believe we
are well positioned for continued growth with our strong product
offerings, compelling customer value proposition and desirable
community locations.”
Three Months Ended May 31, 2017
(comparisons on a year-over-year basis)
- Total revenues grew 24% to $1.00
billion.
- Deliveries rose 11% to 2,580 homes,
with double-digit increases in three of the Company’s four
regions.
- Average selling price increased 11% to
$385,900.
- Homebuilding operating income rose 91%
to $49.6 million. This included inventory-related charges of $6.0
million, compared to $11.7 million in the prior year.
- Homebuilding operating income margin
increased 180 basis points to 5.0%. Excluding inventory-related
charges, homebuilding operating income margin improved 90 basis
points to 5.6%.
- Housing gross profits increased 23% to
$153.3 million, and the related housing gross profit margin was
15.4%.
- Housing gross profit margin excluding
inventory-related charges was 16.0%, representing a year-over-year
decrease of 30 basis points.
- Adjusted housing gross profit margin, a
metric that excludes the amortization of previously capitalized
interest and inventory-related charges, increased 30 basis points
to 21.0%.
- Selling, general and administrative
expenses improved 120 basis points to 10.4% of housing revenues
from 11.6%, marking a second quarter record for the Company.
- Land sales generated profits of $.2
million, compared to losses of $5.4 million that mainly resulted
from land sale impairments associated with the wind down of the
Company’s Metro Washington, D.C. operations in 2016.
- All interest incurred was capitalized,
which resulted in no interest expense, compared to $2.0 million of
interest expense.
- Financial services pretax income rose
to $2.8 million, up from $1.5 million, mainly due to income from
the Company’s recently formed mortgage banking joint venture with
Stearns Lending, LLC, which was operational in all of the Company’s
served markets outside of California as of May 31, 2017. The joint
venture, KBHS Home Loans, LLC, became operational in California
earlier this month.
- Pretax income increased 110% to $52.0
million. Excluding inventory-related charges, pretax income grew
59% to $58.0 million.
- Income tax expense was $20.2 million,
and represented an effective tax rate of 38.9%, compared to
37.1%.
- Net income more than doubled to $31.8
million, or $.33 per diluted share.
Six Months Ended May 31, 2017
(comparisons on a year-over-year basis)
- Total revenues increased 22% to $1.82
billion.
- Deliveries grew 12% to 4,804
homes.
- Average selling price advanced 9% to
$376,100.
- Homebuilding operating income increased
67% to $74.8 million.
- Inventory-related charges totaled $10.0
million, compared to $13.7 million.
- Net income rose 60% to $46.0 million,
and earnings per diluted share advanced 58% to $.49 from $.31.
Backlog and Net Orders (comparisons on
a year-over-year basis)
- Net order value grew 15% to $1.38
billion on a 5% increase in net orders to 3,416, primarily
reflecting strength in the Company’s West Coast and Southwest
regions.
- In the West Coast region, net order
value increased 23%; in the Southwest region, net order value
advanced 19%.
- Company-wide, net orders per community
averaged 4.8 per month, up 7%.
- Ending backlog value grew 19% to $2.18
billion, with homes in backlog up 8% to 5,612 and the average
selling price of those homes rising 11%.
- The cancellation rate as a percentage
of beginning backlog for the quarter improved to 19% from 21%, and
as a percentage of gross orders remained steady at 21%.
- Average community count for the quarter
decreased 2% to 238, reflecting a decrease in the Company’s
Southeast region that was largely offset by increases in its other
three regions. Ending community count was down 2% to 236.
Balance Sheet as of May 31, 2017
(comparisons to November 30, 2016)
- The Company had total liquidity of
$591.2 million, including cash and cash equivalents of $348.6
million and availability under its unsecured revolving credit
facility.
- There were no cash borrowings
outstanding under the Company’s unsecured revolving credit
facility.
- Inventories increased to $3.49 billion,
with investments in land acquisition and development totaling
$706.6 million for the six months ended May 31, 2017.
- Lots owned or controlled aggregated to
45,085, with 80% owned.
- Notes payable decreased to $2.51
billion from $2.64 billion, primarily due to the early redemption
of $100 million of senior notes in the 2017 first quarter using
internally generated cash.
- The ratio of debt to capital improved
to 58.6%, and the ratio of net debt to capital was 54.9%.
Earnings Conference Call
The conference call to discuss the Company’s second 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
plan 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; the performance of KBHS Home
Loans, LLC, our mortgage banking joint venture with Stearns
Lending, LLC; 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 and Six Months Ended
May 31, 2017 and 2016
(In Thousands, Except Per Share Amounts –
Unaudited)
Three Months Ended May 31, Six Months
Ended May 31, 2017 2016 2017 2016
Total
revenues $ 1,002,794 $ 811,050 $ 1,821,390
$ 1,489,421
Homebuilding: Revenues $ 1,000,072 $
808,462 $ 1,816,318 $ 1,484,204 Costs and expenses (950,513 )
(782,524 ) (1,741,482 ) (1,439,274 ) Operating income 49,559 25,938
74,836 44,930 Interest income 202 134 400 286 Interest expense —
(1,970 ) (6,307 ) (5,667 ) Equity in income (loss) of
unconsolidated joint ventures (596 ) (825 ) 135 (1,428 )
Homebuilding pretax income 49,165 23,277 69,064
38,121
Financial services: Revenues 2,722
2,588 5,072 5,217 Expenses (816 ) (871 ) (1,635 ) (1,730 ) Equity
in income (loss) of unconsolidated joint ventures 911 (197 )
940 (784 ) Financial services pretax income 2,817
1,520 4,377 2,703
Total pretax income
51,982 24,797 73,441 40,824 Income tax expense (20,200 ) (9,200 )
(27,400 ) (12,100 )
Net income $ 31,782 $ 15,597
$ 46,041 $ 28,724
Earnings per share:
Basic $ .37 $ .18 $ .54 $ .33
Diluted $ .33 $ .17 $ .49 $ .31
Weighted average shares outstanding: Basic 85,445
84,196 85,285 86,704
Diluted
97,732 94,720 96,975 97,060
KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands – Unaudited)
May 31,2017 November 30,2016
Assets Homebuilding: Cash and cash equivalents $
348,588 $ 592,086 Receivables 234,712 231,665 Inventories 3,488,204
3,403,228 Investments in unconsolidated joint ventures 64,000
64,016 Deferred tax assets, net 711,885 738,985 Other assets 99,996
91,145 4,947,385 5,121,125
Financial services 11,410
10,499
Total assets $ 4,958,795 $ 5,131,624
Liabilities and stockholders’ equity
Homebuilding: Accounts payable $ 186,993 $ 215,331 Accrued
expenses and other liabilities 487,836 550,996 Notes payable
2,510,121 2,640,149 3,184,950 3,406,476
Financial
services 1,457 2,003
Stockholders’ equity 1,772,388
1,723,145
Total liabilities and stockholders’ equity
$ 4,958,795 $ 5,131,624
KB HOME
SUPPLEMENTAL INFORMATION
For the Three Months and Six Months Ended
May 31, 2017 and 2016
(In Thousands, Except Average Selling
Price – Unaudited)
Three Months Ended May 31, Six Months
Ended May 31, 2017 2016 2017 2016
Homebuilding
revenues: Housing $ 995,660 $ 807,408 $ 1,806,607 $ 1,480,054
Land 4,412 1,054 9,711 4,150 Total $
1,000,072 $ 808,462 $ 1,816,318 $ 1,484,204
Homebuilding costs and expenses:
Construction and land costs Housing $ 842,377 $ 682,303 $ 1,535,164
$ 1,247,131 Land 4,219 6,411 9,512 10,401
Subtotal 846,596 688,714 1,544,676 1,257,532 Selling,
general and administrative expenses 103,917 93,810
196,806 181,742 Total $ 950,513 $ 782,524
$ 1,741,482 $ 1,439,274
Interest expense: Interest incurred $ 43,344 $ 46,258 $
87,738 $ 92,509 Loss on early extinguishment of debt — — 5,685 —
Interest capitalized (43,344 ) (44,288 ) (87,116 ) (86,842 ) Total
$ — $ 1,970 $ 6,307 $ 5,667
Other information: Depreciation and amortization $
2,347 $ 2,821 $ 4,814 $ 5,602 Amortization of previously
capitalized interest 50,471 35,557 89,855
66,239
Average selling price: West
Coast $ 631,000 $ 570,200 $ 611,100 $ 564,800 Southwest 289,400
284,900 289,200 285,700 Central 289,000 264,000 282,800 262,300
Southeast 289,600 278,400 288,100 275,200
Total $ 385,900 $ 346,700 $ 376,100 $
345,600
KB HOME
SUPPLEMENTAL INFORMATION
For the Three Months and Six Months Ended
May 31, 2017 and 2016
(Dollars in Thousands – Unaudited)
Three Months Ended May 31, Six Months Ended
May 31, 2017 2016 2017 2016
Homes delivered:
West Coast 730 581 1,336 1,089 Southwest 436 392 843 742 Central
1,005 906 1,866 1,671 Southeast 409 450 759
780 Total 2,580 2,329 4,804 4,282
Net orders: West Coast 1,065 995 1,891 1,550
Southwest 629 541 1,085 900 Central 1,275 1,210 2,235 2,111
Southeast 447 503 785 960 Total 3,416
3,249 5,996 5,521
Net order
value: West Coast $ 705,358 $ 572,882 $ 1,288,861 $ 910,493
Southwest 184,802 155,337 316,533 262,625 Central 368,007 328,242
642,890 581,457 Southeast 125,345 146,541 220,650
273,101 Total $ 1,383,512 $ 1,203,002 $
2,468,934 $ 2,027,676 May 31, 2017 May
31, 2016 Homes Value Homes Value
Backlog data: West Coast
1,468 $ 999,269 1,199 $ 703,346 Southwest 1,046 300,530 763 218,047
Central 2,348 674,406 2,282 638,052 Southeast 750 207,211
961 269,657 Total 5,612 $ 2,181,416
5,205 $ 1,829,102
KB HOMERECONCILIATION OF NON-GAAP
FINANCIAL MEASURES(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 May 31, Six Months
Ended May 31, 2017 2016 2017 2016 Housing revenues $
995,660 $ 807,408 $ 1,806,607 $ 1,480,054 Housing construction and
land costs (842,377 ) (682,303 ) (1,535,164 ) (1,247,131 ) Housing
gross profits 153,283 125,105 271,443 232,923 Add:
Inventory-related charges (a) 6,001 6,384 10,009
7,563 Housing gross profits excluding
inventory-related charges 159,284 131,489 281,452 240,486 Add:
Amortization of previously capitalized interest (b) 49,345
35,551 88,218 65,757 Adjusted housing gross
profits $ 208,629 $ 167,040 $ 369,670 $
306,243 Housing gross profit margin 15.4 % 15.5 % 15.0 %
15.7 % Housing gross profit margin excluding inventory-related
charges 16.0 % 16.3 % 15.6 % 16.2 % Adjusted housing gross profit
margin 21.0 % 20.7 % 20.5 % 20.7 % (a)
Represents inventory impairment and land option contract
abandonment charges associated with housing operations. (b)
Represents the amortization of previously
capitalized interest 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) housing
inventory impairment and land option contract abandonment charges
(as applicable) recorded during a given period and (2) amortization
of previously capitalized interest associated with housing
operations, 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 housing
inventory impairment and land option contract abandonment charges,
and the amortization of previously capitalized interest associated
with housing operations, 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 housing inventory impairment and
land option contract abandonment charges, and amortization of
previously capitalized interest associated with housing operations.
This financial measure assists management in making strategic
decisions regarding community location and product mix, product
pricing and construction pace.
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:
May 31,2017 November 30,2016 Notes
payable $ 2,510,121 $ 2,640,149 Stockholders’ equity 1,772,388
1,723,145 Total capital $ 4,282,509 $
4,363,294 Ratio of debt to capital 58.6 % 60.5 %
Notes payable $ 2,510,121 $ 2,640,149 Less: Cash and cash
equivalents (348,588 ) (592,086 ) Net debt 2,161,533 2,048,063
Stockholders’ equity 1,772,388 1,723,145 Total
capital $ 3,933,921 $ 3,771,208 Ratio of net debt to
capital 54.9 % 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/20170627005419/en/
KB HomeJill Peters, Investor Relations Contact310-893-7456 or
jpeters@kbhome.comorSusan Martin, Media Contact310-231-4142 or
smartin@kbhome.com
KB Home (NYSE:KBH)
Historical Stock Chart
From Mar 2024 to Apr 2024
KB Home (NYSE:KBH)
Historical Stock Chart
From Apr 2023 to Apr 2024