KB Home Announces Early Redemption of $350 Million of 8.00% Senior Notes Due 2020
October 23 2019 - 04:10PM
Business Wire
KB Home (NYSE: KBH) today announced that it will redeem all $350
million principal amount of its 8.00% Senior Notes due March 15,
2020 (“Notes”). The Company intends to complete this early
redemption using the net proceeds from its recent offering of $300
million of its 4.80% Senior Notes due 2029, together with cash on
hand.
“These transactions underscore how the continued execution on
our Returns-Focused Growth Plan has meaningfully strengthened both
our housing gross profit margin and our capital structure,” said
Jeffrey Mezger, chairman, president and chief executive officer.
“We expect a favorable impact to our gross margin in the future
from a nearly $14 million reduction in annual interest incurred on
our senior notes. In addition, we anticipate lowering our debt to
capital ratio, as well as reducing the overall effective interest
rate on our senior notes and more than doubling the weighted
average remaining life of these notes.”
“We are pleased with the success we have achieved under our Plan
and the strong operating cash flow that we have generated, which
has enabled us to both significantly grow our active inventory
since 2016 and, with the completion of this redemption, reduce our
senior notes outstanding by nearly $850 million,” continued Mezger.
“Going forward, we remain focused on profitably expanding our scale
while increasing returns in order to enhance long-term stockholder
value.”
The Notes will be redeemed in accordance with their terms, as
outlined in the redemption notice issued by U.S. Bank National
Association, the trustee for the Notes, and paid as described in
the notice. In its 2019 fourth quarter, the Company expects to
incur a charge of approximately $6.7 million associated with the
early redemption of the Notes.
About KB Home
KB Home (NYSE: KBH) is one of the largest and most recognized
homebuilders in the United States and has been building quality
homes for over 60 years. Today, KB Home operates in 38 markets
across eight states, serving a wide array of buyer groups. What
sets us apart is giving our customers the ability to personalize
their homes from homesites and floor plans to cabinets and
countertops, at a price that fits their needs. And as the first
builder ever to make every home we build ENERGY STAR® certified, KB
Home is able to not only design thoughtful living spaces but ones
that lower the cost of homeownership. We also work with our
customers every step of the way, building strong personal
relationships so they have a real partner in the homebuying process
and the experience is as simple and easy as possible. Learn more
about how we build homes built on relationships by visiting
kbhome.com.
Forward-Looking and Cautionary Statements
Certain matters discussed in this press release, including any
statements that are predictive in nature, depend upon or refer to
future events or conditions, include words such as “intends” and
similar expressions, or concern future market and economic
conditions, ongoing business strategies and prospects, our future
financial and operational performance, future debt issuances,
repurchases, or redemptions, 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 our current expectations
and projections about future events and are subject to risks,
uncertainties, and assumptions about our operations, economic and
market factors, and the homebuilding industry, among other things.
These statements are not guarantees of future performance, and we
have no specific policy or intention to update these 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; the
execution of any share repurchases pursuant to our board of
directors’ authorization; 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; any failure of lawmakers to agree on a
budget or appropriation legislation to fund the federal
government’s operations, and financial markets’ and businesses’
reactions to that failure; government actions, policies, programs
and regulations directed at or affecting the housing market
(including the Tax Cuts and Jobs Act (the “TCJA”), 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, including those resulting from regulatory
guidance and interpretations issued with respect to the TCJA;
changes in U.S. trade policies, including the imposition of tariffs
and duties on homebuilding materials and products, and related
trade disputes with and retaliatory measures taken by other
countries; the adoption of new or amended financial accounting
standards, including revenue recognition (ASC 606) and lease
accounting standards (ASC 842), and the guidance and/or
interpretations with respect thereto; the availability and cost of
land in desirable areas and our ability to timely develop acquired
land parcels and open new home communities; 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 and entering into new
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; income tax
expense volatility related to stock-based compensation; the ability
of our homebuyers to obtain residential mortgage loans and mortgage
banking services; the performance of mortgage lenders to our
homebuyers; the performance of KBHS Home Loans, LLC, our mortgage
banking joint venture with Stearns Ventures, LLC (“Stearns”); the
process and outcome of the voluntary bankruptcy filing involving
Stearns; information technology failures and data security
breaches; the possibility that the proposed offering of the Notes
will not close timely, or at all; and other events outside of our
control. Please see our Annual Report on Form 10-K for the fiscal
year ended November 30, 2018, our subsequent quarterly reports on
Form 10-Q and our other filings with the SEC for a further
discussion of these and other risks and uncertainties applicable to
our business.
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version on businesswire.com: https://www.businesswire.com/news/home/20191023005813/en/
Jill Peters, Investor Relations Contact (310) 893-7456 or
investorrelations@kbhome.com
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