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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 | |
---|---|---|---|---|---|---|---|---|
0.45 | 0.64% | 70.55 | 71.12 | 70.21 | 70.87 | 915,542 | 23:56:17 |
Revenues Total $1.02 Billion Net Income of $47.5 Million, or $.51 Per Diluted Share Average Community Count Increases 17% to 252; Net Orders Up 15%
KB Home (NYSE: KBH) today reported results for its second quarter ended May 31, 2019.
“We are pleased with our second quarter performance, as we made significant progress on our Returns-Focused Growth Plan. Two of the key objectives of this Plan are to grow our business and strengthen our balance sheet. This quarter’s results demonstrate further achievement in both areas, with average community count growth of 17% year over year — our most substantial increase in four years — and a 930-basis point reduction in our debt to capital ratio, to 45.8% over the same period,” said Jeffrey Mezger, chairman, president and chief executive officer.
“Demand for our products was strong at 5.4 net orders per community, per month, keeping pace with the exceptional absorption rate we generated in last year’s second quarter. We were well positioned throughout this Spring selling season, with the ongoing expansion of our community count driving a 15% year-over-year increase in net orders. With net order value up 13% year over year to $1.5 billion, driven by double digit order growth in each of our four regions, and continued year-over-year community count growth anticipated for our third and fourth quarters, we are confident we can produce further improvement in our results in the second half of this year.”
Three Months Ended May 31, 2019 (comparisons on a year-over-year basis)
Six Months Ended May 31, 2019 (comparisons on a year-over-year basis)
Backlog and Net Orders (comparisons on a year-over-year basis)
Balance Sheet as of May 31, 2019 (comparisons to November 30, 2018)
Earnings Conference Call
The conference call to discuss the Company’s 2019 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 www.kbhome.com.
About KB Home
KB Home (NYSE: KBH) is one of the largest homebuilders in the United States, with more than 600,000 homes delivered since our founding in 1957. We operate in 38 markets in eight states, primarily serving first-time and first move-up homebuyers, as well as second move-up and active adults. We are differentiated in offering customers the ability to personalize what they value most in their home, from choosing their lot, floor plan, and exterior, to selecting design and décor choices in our KB Home Studios. In addition, our industry leadership in sustainability helps to lower the cost of homeownership for our buyers compared to a typical resale home. We take a broad approach to sustainability, encompassing energy efficiency, water conservation, healthier indoor environments, smart home capabilities and waste reduction. KB Home is the first national builder to have earned awards under all of the U.S. EPA’s homebuilder programs — ENERGY STAR®, WaterSense® and Indoor airPLUS®. We invite you to learn more about KB Home by visiting www.kbhome.com, calling 888-KB-HOMES, or connecting with us 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; 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 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, and the guidance and/or interpretations with respect thereto; 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 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 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, 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 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, 2019 and 2018
(In Thousands, Except Per Share Amounts - Unaudited)
Three Months Ended May 31,
Six Months Ended May 31,
2019
2018
2019
2018
Total revenues
$
1,021,803
$
1,101,423
$
1,833,286
$
1,973,046
Homebuilding:
Revenues
$
1,018,671
$
1,098,673
$
1,827,459
$
1,967,878
Costs and expenses
(966,572
)
(1,024,475
)
(1,744,021
)
(1,849,677
)
Operating income
52,099
74,198
83,438
118,201
Interest income
439
1,278
1,544
2,281
Equity in loss of unconsolidated joint ventures
(369
)
(322
)
(775
)
(1,167
)
Homebuilding pretax income
52,169
75,154
84,207
119,315
Financial services:
Revenues
3,132
2,750
5,827
5,168
Expenses
(1,040
)
(957
)
(2,064
)
(1,910
)
Equity in income of unconsolidated joint ventures
2,500
1,361
3,302
1,780
Financial services pretax income
4,592
3,154
7,065
5,038
Total pretax income
56,761
78,308
91,272
124,353
Income tax expense
(9,300
)
(21,000
)
(13,800
)
(138,300
)
Net income (loss)
$
47,461
$
57,308
$
77,472
$
(13,947
)
Earnings (loss) per share:
Basic
$
.54
$
.65
$
.88
$
(.16
)
Diluted
$
.51
$
.57
$
.82
$
(.16
)
Weighted average shares outstanding:
Basic
87,641
87,581
87,310
87,370
Diluted
92,366
101,159
94,635
87,370
KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands - Unaudited)
May 31, 2019
November 30, 2018
Assets
Homebuilding:
Cash and cash equivalents
$
178,876
$
574,359
Receivables
299,708
292,830
Inventories
3,780,853
3,582,839
Investments in unconsolidated joint ventures
56,446
61,960
Property and equipment, net
61,221
24,283
Deferred tax assets, net
424,395
441,820
Other assets
87,734
83,100
4,889,233
5,061,191
Financial services
30,720
12,380
Total assets
$
4,919,953
$
5,073,571
Liabilities and stockholders’ equity
Homebuilding:
Accounts payable
$
262,920
$
258,045
Accrued expenses and other liabilities
605,816
666,268
Notes payable
1,854,556
2,060,263
2,723,292
2,984,576
Financial services
1,451
1,495
Stockholders’ equity
2,195,210
2,087,500
Total liabilities and stockholders’ equity
$
4,919,953
$
5,073,571
KB HOME
SUPPLEMENTAL INFORMATION
For the Three Months and Six Months Ended May 31, 2019 and 2018
(In Thousands, Except Average Selling Price - Unaudited)
Three Months Ended May 31,
Six Months Ended May 31,
2019
2018
2019
2018
Homebuilding revenues:
Housing
$
1,017,799
$
1,091,768
$
1,815,970
$
1,958,308
Land
872
6,905
11,489
9,570
Total
$
1,018,671
$
1,098,673
$
1,827,459
$
1,967,878
Homebuilding costs and expenses:
Construction and land costs
Housing
$
843,071
$
905,055
$
1,504,399
$
1,632,135
Land
673
6,189
10,200
8,587
Subtotal
843,744
911,244
1,514,599
1,640,722
Selling, general and administrative expenses
122,828
113,231
229,422
208,955
Total
$
966,572
$
1,024,475
$
1,744,021
$
1,849,677
Interest expense:
Interest incurred
$
36,544
$
39,924
$
71,332
$
79,868
Interest capitalized
(36,544
)
(39,924
)
(71,332
)
(79,868
)
Total
$
—
$
—
$
—
$
—
Other information:
Amortization of previously capitalized interest
$
37,754
$
52,433
$
68,301
$
94,783
Depreciation and amortization
7,463
2,196
15,377
4,376
Average selling price:
West Coast
$
574,800
$
673,100
$
588,600
$
664,100
Southwest
326,500
307,700
326,500
305,900
Central
287,400
304,500
286,300
300,100
Southeast
297,800
279,900
297,900
279,200
Total
$
367,700
$
401,800
$
369,100
$
396,400
KB HOME
SUPPLEMENTAL INFORMATION
For the Three Months and Six Months Ended May 31, 2019 and 2018
(Dollars in Thousands - Unaudited)
Three Months Ended May 31,
Six Months Ended May 31,
2019
2018
2019
2018
Homes delivered:
West Coast
680
738
1,177
1,330
Southwest
566
588
1,049
1,088
Central
1,067
1,008
1,891
1,829
Southeast
455
383
803
693
Total
2,768
2,717
4,920
4,940
Net orders:
West Coast
1,141
969
1,840
1,776
Southwest
768
642
1,301
1,210
Central
1,498
1,347
2,424
2,343
Southeast
657
574
1,174
987
Total
4,064
3,532
6,739
6,316
Net order value:
West Coast
$
664,431
$
614,863
$
1,084,892
$
1,195,285
Southwest
241,729
200,259
412,568
377,201
Central
438,302
380,672
722,568
680,600
Southeast
188,226
166,176
334,747
281,976
Total
$
1,532,688
$
1,361,970
$
2,554,775
$
2,535,062
May 31, 2019
May 31, 2018
Homes
Value
Homes
Value
Backlog data:
West Coast
1,378
$
806,651
1,328
$
918,188
Southwest
1,178
372,699
1,210
371,902
Central
2,247
669,037
2,296
673,461
Southeast
1,124
324,786
953
273,334
Total
5,927
$
2,173,173
5,787
$
2,236,885
KB HOME RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In Thousands, Except Percentages and Per Share Amounts - 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, adjusted income tax expense, adjusted net income, adjusted diluted earnings per share, adjusted effective tax rate and ratio of net debt to capital, none 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 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,
2019
2018
2019
2018
Housing revenues
$
1,017,799
$
1,091,768
$
1,815,970
$
1,958,308
Housing construction and land costs
(843,071
)
(905,055
)
(1,504,399
)
(1,632,135
)
Housing gross profits
174,728
186,713
311,571
326,173
Add: Inventory-related charges (a)
4,337
6,526
7,892
11,511
Housing gross profits excluding inventory-related charges
179,065
193,239
319,463
337,684
Add: Amortization of previously capitalized interest (b)
37,716
49,348
67,702
90,717
Adjusted housing gross profits
$
216,781
$
242,587
$
387,165
$
428,401
Housing gross profit margin
17.2
%
17.1
%
17.2
%
16.7
%
Housing gross profit margin excluding inventory-related charges
17.6
%
17.7
%
17.6
%
17.2
%
Adjusted housing gross profit margin
21.3
%
22.2
%
21.3
%
21.9
%
(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.
Adjusted Income Tax Expense, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted Effective Tax Rate
The following table reconciles the Company’s income tax expense, net income (loss), diluted earnings (loss) per share and effective tax rate calculated in accordance with GAAP to the non-GAAP financial measures of adjusted income tax expense, adjusted net income, adjusted diluted earnings per share and adjusted effective tax rate, respectively:
Six Months Ended May 31,
2019
2018
As Reported
As Reported
TCJA Adjustment
As Adjusted
Total pretax income
$
91,272
$
124,353
$
—
$
124,353
Income tax expense (a)
(13,800
)
(138,300
)
111,200
(27,100
)
Net income (loss)
$
77,472
$
(13,947
)
$
111,200
$
97,253
Diluted earnings (loss) per share
$
.82
$
(.16
)
$
.97
Weighted average shares outstanding — diluted
94,635
87,370
101,283
Effective tax rate (a)
15
%
111
%
22
%
(a)
For the six months ended May 31, 2019, income tax expense and the related effective tax rate primarily reflected the favorable impacts of $4.3 million of federal energy tax credits the Company earned from building energy-efficient homes, a $3.3 million reversal of a deferred tax asset valuation allowance and $2.9 million of excess tax benefits related to stock-based compensation. For the six months ended May 31, 2018, income tax expense and adjusted income tax expense, as well as the related effective tax rate and adjusted effective tax rate, included the favorable impacts of $4.2 million of federal energy tax credits the Company earned from building energy-efficient homes and $2.4 million of excess tax benefits related to stock-based compensation.
The Company’s adjusted income tax expense, adjusted net income, adjusted diluted earnings per share and adjusted effective tax rate are non-GAAP financial measures, which the Company calculates by excluding a non-cash charge of $111.2 million recorded in the 2018 first quarter from its reported income tax expense, net loss, diluted loss per share and effective tax rate, respectively. This charge was primarily due to the Company’s accounting re-measurement of its deferred tax assets based on the reduction in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018, under the TCJA. The most directly comparable GAAP financial measures are the Company’s income tax expense, net income (loss), diluted earnings (loss) per share and effective tax rate. The Company believes these non-GAAP measures are meaningful to investors as they allow for an evaluation of the Company’s operating results without the impact of the TCJA-related charge.
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, 2019
November 30, 2018
Notes payable
$
1,854,556
$
2,060,263
Stockholders’ equity
2,195,210
2,087,500
Total capital
$
4,049,766
$
4,147,763
Ratio of debt to capital
45.8
%
49.7
%
Notes payable
$
1,854,556
$
2,060,263
Less: Cash and cash equivalents
(178,876
)
(574,359
)
Net debt
1,675,680
1,485,904
Stockholders’ equity
2,195,210
2,087,500
Total capital
$
3,870,890
$
3,573,404
Ratio of net debt to capital
43.3
%
41.6
%
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/20190626005243/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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