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Share Name | Share Symbol | Market | Type |
---|---|---|---|
KB Home | NYSE:KBH | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.06 | -0.09% | 69.97 | 70.58 | 69.86 | 70.33 | 282,546 | 17:53:53 |
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)
Six Months Ended May 31, 2017 (comparisons on a year-over-year basis)
Backlog and Net Orders (comparisons on a year-over-year basis)
Balance Sheet as of May 31, 2017 (comparisons to November 30, 2016)
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 97,060KB 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 $ 5,131,624KB 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 HOMESUPPLEMENTAL 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 $ 1,829,102KB 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
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