Revenues Totaled $914.0 Million Gross Margin
Up 100 Basis Points Pretax Income Grew 19% to $67.8 Million;
Diluted Earnings Per Share Increased to $.55 Liquidity Increased to
$1.36 Billion, Driven by Positive Operating Cash Flow
KB Home (NYSE: KBH) today reported results for its second
quarter ended May 31, 2020. The Company’s results were
significantly impacted by the severe economic and social
disruptions resulting from the COVID-19 pandemic and the extensive
and restrictive public health measures implemented during the
period to contain and combat the outbreak.
“As the COVID-19 pandemic escalated into a national emergency, a
high priority was protecting the health and well-being of our
employees, customers, and business partners, and their families,
and we took decisive actions in order to do so. We temporarily
closed our communities in mid-March, then shifted where permitted
to a restricted, appointment-only basis in April, and finally,
opened more broadly to the public beginning in mid-May, following
appropriate safety protocols,” said Jeffrey Mezger, Chairman,
President and Chief Executive Officer. “Though these measures
significantly disrupted our business, we generated solid financial
results in the second quarter, with year-over-year growth across
several key metrics. Most notable of these were the 100-basis point
increase in our housing gross profit margin and the expansion of
our pretax income.”
“The prolonged stay-at-home public health orders, resulting
economic shutdown and our conservative approach to navigating the
uncertain environment significantly impacted our orders during the
quarter. However, following a low point in April, we are very
encouraged by the resilience of housing market demand. We
experienced steady and significant improvement in our order trends
beginning in May, which was further fueled by welcoming walk-in
traffic to our communities. This improvement has accelerated
dramatically in the first three weeks of June during which time we
have achieved a modestly positive year-over-year comparison, as
orders have returned to more normalized levels,” concluded
Mezger.
Three Months Ended May 31, 2020
(comparisons on a year-over-year basis)
- Revenues totaled $914.0 million, compared to $1.02
billion.
- Homes delivered were 2,499, compared to 2,768.
- Average selling price was $364,100, compared to $367,700.
- Homebuilding operating income of $51.6 million was down
slightly. At the same time, homebuilding operating income margin
increased 60 basis points to 5.7%. Excluding inventory-related
charges of $4.4 million and severance charges of $6.7 million
associated with workforce reductions in the current quarter and
$4.3 million of inventory-related charges in the year-earlier
quarter, this metric improved 140 basis points to 6.9%.
- Housing gross profit margin increased 100 basis points to
18.2%, with increases in three of the Company’s four regions.
Excluding inventory-related charges, the housing gross profit
margin expanded to 18.7% from 17.6%.
- The housing gross profit margin improvement primarily reflected
a mix shift of homes delivered and lower relative amortization of
previously capitalized interest, partly offset by reduced operating
leverage due to lower housing revenues.
- Adjusted housing gross profit margin, a metric that excludes
inventory-related charges and the amortization of previously
capitalized interest, increased to 21.9% from 21.3%.
- Selling, general and administrative expenses as a percentage of
housing revenues were 12.6%, compared to 12.1%, primarily due to
the above-noted severance charges and decreased operating leverage
from lower housing revenues, partly offset by reduced expenses for
certain employee compensation plans.
- Excluding the current quarter severance charges, the Company’s
selling, general and administrative expense ratio was 11.8%.
- The Company's financial services operations generated pretax
income of $7.6 million, up from $4.6 million, mainly reflecting
higher income from its mortgage banking joint venture, KBHS Home
Loans, LLC (“KBHS”).
- KBHS originated 76% of the residential mortgage loans the
Company’s homebuyers obtained to finance their home purchase,
compared to 69%.
- Total pretax income grew 19% to $67.8 million.
- The Company‘s income tax expense and effective tax rate were
$15.8 million and approximately 23%, respectively. In the
year-earlier quarter, income tax expense was $9.3 million and the
effective tax rate was approximately 16%. The higher effective tax
rate in the current quarter primarily reflected a decrease in
federal energy tax credits and the absence of excess tax benefits
from stock-based compensation.
- Net income and diluted earnings per share increased to $52.0
million and $.55, respectively, compared to net income of $47.5
million and diluted earnings per share of $.51.
Six Months Ended May 31, 2020
(comparisons on a year-over-year basis)
- Total revenues of $1.99 billion increased 9%.
- Homes delivered grew 7% to 5,251.
- Average selling price rose 2% to $377,400.
- Pretax income increased 50% to $136.6 million.
- Net income grew 44% to $111.7 million and diluted earnings per
share increased 45% to $1.19.
Backlog and Net Orders (comparisons on
a year-over-year basis)
- The COVID-19 pandemic and associated public health responses
that began in mid-March and became increasingly strict through most
of the quarter negatively affected the Company’s gross orders and
net orders, and elevated its cancellation rate. As a result, gross
orders and net orders for the 2020 second quarter decreased 36% and
57%, respectively.
- The Company’s monthly gross orders for March and April
decreased 4% and 59%, respectively. For May, the decrease in gross
orders moderated to 42% as government restrictions began to ease in
the latter part of the month and the Company started to gradually
resume more normalized operations. The Company’s net orders were
down 10% in March, 107% in April and 55% in May.
- The Company’s cancellation rate as a percentage of gross orders
increased to 43% for the quarter from 15%, largely reflecting the
Company’s proactive efforts to assure a backlog of qualified
homebuyers amid the unprecedented nationwide economic and
employment disruptions resulting from the pandemic. The
cancellation rates for March, April and May were 20%, 114% and 34%,
respectively.
- The Company’s ending backlog was composed of 5,080 homes,
compared to 5,927 homes. Ending backlog value totaled $1.90
billion, compared to $2.17 billion.
- Average community count for the quarter decreased 2% to 247.
Ending community count of 244 was down 4%.
- Company-wide, net orders per community averaged 2.4 per month,
compared to 5.4. In the year-earlier quarter, the Company achieved
one of its highest second-quarter net order paces of the past
several years.
Balance Sheet as of May 31, 2020
(comparisons to November 30, 2019)
- Cash and cash equivalents totaled $575.0 million, compared to
$453.8 million.
- The Company had total liquidity of $1.36 billion, including
cash and cash equivalents and $787.6 million of available capacity
under its unsecured revolving credit facility. There were no cash
borrowings outstanding under the facility. The Company has not
borrowed under the facility in 2020.
- Inventories decreased slightly to $3.61 billion.
- Lots owned or under contract totaled 60,480, down 7%,
reflecting fewer optioned lots. Approximately 62% of the total lots
were owned and 38% were under contract.
- The Company’s 37,589 owned lots represented a supply of
approximately 3.1 years, based on homes delivered in the trailing
12 months.
- Notes payable of $1.77 billion were essentially unchanged.
- The Company’s debt to capital ratio of 41.5% improved 80 basis
points. The Company’s net debt to capital ratio improved 280 basis
points to 32.4%.
- The Company’s next scheduled debt maturity is on December 15,
2021, when $450.0 million in aggregate principal amount of its
7.00% senior notes become due.
Company Outlook — COVID-19
Impact
The negative effects of the COVID-19 pandemic and the related
extended public health and governmental measures of varying
restrictiveness to contain and combat the outbreak significantly
impacted the Company’s business during the 2020 second quarter. In
response to the pandemic and with the health and well-being of its
employees, customers and business partners, and their families,
being a high priority, the Company took decisive actions in
mid-March, temporarily closing its sales centers, model homes and
design studios to the public and shifting to virtual sales tools
and an appointment-only personalized home sales process, where
permitted. The Company also shifted its corporate and division
office functions to work remotely. With the Company’s construction
operations being restricted in many jurisdictions, and completely
shut down in some of them, together with the reduced availability
or capacity of some municipal and private services necessary to
build and deliver homes, the Company experienced home delivery
delays during most of the quarter. In addition, the Company’s order
pace moderated significantly, and home purchase cancellations
increased considerably largely reflecting the Company’s proactive
efforts to assure a backlog of qualified homebuyers amid a
pandemic-induced economic downturn that affected homebuyers’
employment status or created uncertainty for them about that status
and their ability to purchase their home, as well as disruptions in
the availability of mortgage loans or in the performance of
lenders, among other factors. Among the markets with the largest
impact to the Company’s second quarter net orders were the Inland
Empire and Bay Area in California; Las Vegas, Nevada; Houston,
Texas; and Orlando, Florida.
Over the past several weeks, conditions have started to improve
in conjunction with state and local governments relaxing
“stay-at-home” and similar public health mandates that were
implemented in response to the pandemic. With restrictions easing
in many of its served markets, the Company, in the latter part of
May, began the process of more broadly opening its sales centers,
model homes and design studios to the public, while also expanding
construction and warranty service activities to the extent
permitted by local authorities. The Company also launched
significant enhancements to its website, including upgraded home
search tools. In June, certain of the Company’s division offices
began to reopen to employees. During the reopening process, the
Company has instituted several safety protocols, such as distancing
and personal protective equipment requirements, enhanced premises
cleaning and personal hygiene measures and wellness checks, in
accordance with applicable public health orders. The increased
ongoing investment in these appropriate steps is intended to help
protect the health of customers, employees and business partners.
Due to the variation in laws and restrictions, the timing and
manner of the Company’s reopening process has varied from market to
market.
The Company is encouraged by its ability to effectively resume
nearly all of its core operations and the recent improvement in its
gross orders, net orders and cancellation rate, which it believes
is an indicator of underlying strength in the overall housing
market and the resilience of the attractive markets in which it
operates. Subsequent to the end of the quarter, the Company’s
business continued to rebound measurably, with gross orders and net
orders increasing on both a year-over-year and sequential basis.
Gross orders for the first three weeks of June 2020 increased 4%
year over year while net orders rose 2%, each reflecting the more
favorable operating environment. On a sequential basis, gross
orders for the first three weeks of June were up 22% and net orders
were up 48%, compared to the immediately preceding three weeks. The
Company’s cancellation rate for this period also returned closer to
a more normalized level of 21%, nearly even with the year-earlier
period. As the economy continues to recover from the severe impacts
of the pandemic and related public health measures, the Company
expects employment, consumer confidence and other fundamental
housing factors to also improve. However, the speed, trajectory and
strength of any such recovery remains highly uncertain, and it
could be slowed or reversed by a number of factors, including a
possible widespread resurgence in COVID-19 infections in the second
half of 2020 without the availability of generally effective
therapeutics or a vaccine for the disease. Given this uncertainty,
the Company will continue to proceed in a carefully targeted manner
with land acquisition and land development, and to focus on
generating cash inflows from its business and preserving cash and
liquidity by curtailing overhead expenditures. Company management
is reinstating guidance and will provide its outlook for the 2020
third quarter and full year on the Company’s earnings conference
call.
Earnings Conference Call
The conference call to discuss the Company’s 2020 second quarter
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 kbhome.com.
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 42 markets
across eight states, serving a wide array of buyer groups. What
sets us apart is how we give our customers the ability to
personalize their homes from homesites and floor plans to cabinets
and countertops, at a price that fits their budget. We are the
first builder to make every home we build ENERGY STAR® certified.
In fact, we go beyond the EPA requirements by ensuring every ENERGY
STAR certified KB home has been tested and verified by a
third-party inspector to meet the EPA’s strict certification
standards, which helps lower the cost of ownership and to make our
new homes healthier and more comfortable than new ones without
certification. 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 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,
generally and during the current recession; 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 Coronavirus Aid, Relief, and Economic
Security Act relief provisions for outstanding mortgage loans, 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 thereto; 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 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 in 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 business strategies and achieve any
associated financial and operational targets and objectives; income
tax expense volatility associated with 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, our mortgage banking
joint venture with Stearns Ventures, LLC; information technology
failures and data security breaches; an epidemic or pandemic (such
as the outbreak and worldwide spread of COVID-19), and the control
response measures that international, federal, state and local
governments, agencies, law enforcement and/or health authorities
implement to address it, which may (as with COVID-19) precipitate
or exacerbate one or more of the above-mentioned and/or other
risks, and significantly disrupt or prevent us from operating our
business in the ordinary course for an extended period; a
continuation of widespread protests and civil unrest related to
efforts to institute law enforcement and other social and political
reforms, and the impacts of implementing or failing to implement
any such reforms; 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, 2020 and 2019
(In Thousands, Except Per Share
Amounts - Unaudited)
Three Months Ended May 31,
Six Months Ended May 31,
2020
2019
2020
2019
Total revenues
$
913,970
$
1,021,803
$
1,989,905
$
1,833,286
Homebuilding:
Revenues
$
910,280
$
1,018,671
$
1,982,662
$
1,827,459
Costs and expenses
(858,691
)
(966,572
)
(1,870,878
)
(1,744,021
)
Operating income
51,589
52,099
111,784
83,438
Interest income
442
439
1,377
1,544
Equity in income (loss) of unconsolidated
joint ventures
8,154
(369
)
10,059
(775
)
Homebuilding pretax income
60,185
52,169
123,220
84,207
Financial services:
Revenues
3,690
3,132
7,243
5,827
Expenses
(883
)
(1,040
)
(1,845
)
(2,064
)
Equity in income of unconsolidated joint
ventures
4,797
2,500
8,019
3,302
Financial services pretax income
7,604
4,592
13,417
7,065
Total pretax income
67,789
56,761
136,637
91,272
Income tax expense
(15,800
)
(9,300
)
(24,900
)
(13,800
)
Net income
$
51,989
$
47,461
$
111,737
$
77,472
Earnings per share:
Basic
$
.57
$
.54
$
1.23
$
.88
Diluted
$
.55
$
.51
$
1.19
$
.82
Weighted average shares
outstanding:
Basic
90,493
87,641
90,169
87,310
Diluted
93,472
92,366
93,628
94,635
KB HOME
CONSOLIDATED BALANCE
SHEETS
(In Thousands - Unaudited)
May 31, 2020
November 30, 2019
Assets
Homebuilding:
Cash and cash equivalents
$
575,006
$
453,814
Receivables
312,928
249,055
Inventories
3,607,465
3,704,602
Investments in unconsolidated joint
ventures
57,823
57,038
Property and equipment, net
65,764
65,043
Deferred tax assets, net
257,571
364,493
Other assets
126,588
83,041
5,003,145
4,977,086
Financial services
38,857
38,396
Total assets
$
5,042,002
$
5,015,482
Liabilities and stockholders’
equity
Homebuilding:
Accounts payable
$
180,868
$
262,772
Accrued expenses and other liabilities
602,393
618,783
Notes payable
1,766,539
1,748,747
2,549,800
2,630,302
Financial services
1,848
2,058
Stockholders’ equity
2,490,354
2,383,122
Total liabilities and stockholders’
equity
$
5,042,002
$
5,015,482
KB HOME
SUPPLEMENTAL
INFORMATION
For the Three Months and Six
Months Ended May 31, 2020 and 2019
(In Thousands, Except Average
Selling Price - Unaudited)
Three Months Ended May 31,
Six Months Ended May 31,
2020
2019
2020
2019
Homebuilding revenues:
Housing
$
909,978
$
1,017,799
$
1,981,788
$
1,815,970
Land
302
872
874
11,489
Total
$
910,280
$
1,018,671
$
1,982,662
$
1,827,459
Homebuilding costs and
expenses:
Construction and land costs
Housing
$
744,151
$
843,071
$
1,629,632
$
1,504,399
Land
302
673
874
10,200
Subtotal
744,453
843,744
1,630,506
1,514,599
Selling, general and administrative
expenses
114,238
122,828
240,372
229,422
Total
$
858,691
$
966,572
$
1,870,878
$
1,744,021
Interest expense:
Interest incurred
$
31,055
$
36,544
$
62,017
$
71,332
Interest capitalized
(31,055
)
(36,544
)
(62,017
)
(71,332
)
Total
$
—
$
—
$
—
$
—
Other information:
Amortization of previously capitalized
interest
$
28,746
$
37,754
$
63,321
$
68,301
Depreciation and amortization
7,815
7,463
15,744
15,377
Average selling price:
West Coast
$
567,200
$
574,800
$
591,900
$
588,600
Southwest
317,100
326,500
316,700
326,500
Central
297,600
287,400
295,200
286,300
Southeast
292,300
297,800
292,100
297,900
Total
$
364,100
$
367,700
$
377,400
$
369,100
KB HOME
SUPPLEMENTAL
INFORMATION
For the Three Months and Six
Months Ended May 31, 2020 and 2019
(Dollars in Thousands -
Unaudited)
Three Months Ended May 31,
Six Months Ended May 31,
2020
2019
2020
2019
Homes delivered:
West Coast
585
680
1,379
1,177
Southwest
552
566
1,155
1,049
Central
955
1,067
1,923
1,891
Southeast
407
455
794
803
Total
2,499
2,768
5,251
4,920
Net orders:
West Coast
555
1,141
1,534
1,840
Southwest
305
768
1,070
1,301
Central
719
1,498
1,936
2,424
Southeast
179
657
713
1,174
Total
1,758
4,064
5,253
6,739
Net order value:
West Coast
$
324,936
$
664,431
$
923,352
$
1,084,892
Southwest
99,464
241,729
356,684
412,568
Central
212,445
438,302
585,926
722,568
Southeast
51,599
188,226
205,136
334,747
Total
$
688,444
$
1,532,688
$
2,071,098
$
2,554,775
May 31, 2020
May 31, 2019
Homes
Value
Homes
Value
Backlog data:
West Coast
1,198
$
705,357
1,378
$
806,651
Southwest
1,153
380,454
1,178
372,699
Central
2,001
609,156
2,247
669,037
Southeast
728
208,050
1,124
324,786
Total
5,080
$
1,903,017
5,927
$
2,173,173
KB HOME RECONCILIATION 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 is
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 they are not calculated in accordance
with GAAP, these non-GAAP 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,
2020
2019
2020
2019
Housing revenues
$
909,978
$
1,017,799
$
1,981,788
$
1,815,970
Housing construction and land costs
(744,151
)
(843,071
)
(1,629,632
)
(1,504,399
)
Housing gross profits
165,827
174,728
352,156
311,571
Add: Inventory-related charges (a)
4,379
4,337
10,051
7,892
Housing gross profits excluding
inventory-related charges
170,206
179,065
362,207
319,463
Add: Amortization of previously
capitalized interest (b)
28,746
37,716
63,321
67,702
Adjusted housing gross profits
$
198,952
$
216,781
$
425,528
$
387,165
Housing gross profit margin
18.2
%
17.2
%
17.8
%
17.2
%
Housing gross profit margin excluding
inventory-related charges
18.7
%
17.6
%
18.3
%
17.6
%
Adjusted housing gross profit margin
21.9
%
21.3
%
21.5
%
21.3
%
(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, 2020
November 30, 2019
Notes payable
$
1,766,539
$
1,748,747
Stockholders’ equity
2,490,354
2,383,122
Total capital
$
4,256,893
$
4,131,869
Ratio of debt to capital
41.5
%
42.3
%
Notes payable
$
1,766,539
$
1,748,747
Less: Cash and cash equivalents
(575,006
)
(453,814
)
Net debt
1,191,533
1,294,933
Stockholders’ equity
2,490,354
2,383,122
Total capital
$
3,681,887
$
3,678,055
Ratio of net debt to capital
32.4
%
35.2
%
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: https://www.businesswire.com/news/home/20200624005265/en/
Jill Peters, Investor Relations Contact (310) 893-7456 or
jpeters@kbhome.com Cara Kane, Media Contact (321) 299-6844 or
ckane@kbhome.com
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