KB Home Reports 2012 Fourth Quarter and Full Year Results
KB Home Reports 2012 Fourth Quarter and Full Year Results
Fourth Quarter Revenues Increase 20%; Earnings Per Share of $.10
Backlog Value Up 35% to $618.6 Million, Reflecting Growth in All Homebuilding
Regions
Business Wire
LOS ANGELES -- December 20, 2012
KB Home (NYSE: KBH), one of the nation’s largest and most recognized
homebuilders, today reported results for its fourth quarter and fiscal year
ended November 30, 2012. Highlights and developments include the following:
Three Months Ended November 30, 2012
* Revenues rose 20% to $578.2 million, compared to $479.9 million for the
fourth quarter of 2011, driven by an increase in the number of homes
delivered and a higher average selling price.
* The Company delivered 2,122 homes, up 6% from the year-earlier
quarter, primarily reflecting growth in the Company’s West Coast and
Central homebuilding regions.
* The overall average selling price increased to $270,700, up $32,300
or 14% from $238,400 in the year-earlier quarter, extending the
Company’s trend of generating year-over-year improvement to 10
consecutive quarters. Sequentially, the Company’s overall average
selling price increased 10% from $245,100 in the third quarter of
2012, reflecting increases in all of the Company’s homebuilding
regions.
* Compared to the year-earlier quarter, average selling prices were
higher across all of the Company’s homebuilding regions with
increases of up to 23%.
* The Company’s homebuilding operating income improved to $15.6 million in
the current quarter, up significantly from $.8 million posted in the
year-earlier quarter which included a $6.6 million gain on loan guaranty.
On a sequential basis, the Company’s homebuilding operating income
increased by $4.7 million from $10.9 million in the third quarter of 2012.
Homebuilding operating income for the current quarter increased by $21.2
million on a sequential basis, excluding a $16.5 million insurance
recovery that favorably impacted the 2012 third quarter.
* As a percentage of homebuilding revenues, homebuilding operating
income was 2.7%, up 250 basis points from .2% in the fourth quarter
of 2011. The current quarter percentage also improved slightly from
2.6% in the 2012 third quarter.
* The housing gross profit margin was 14.2%, compared to 14.7% in
the year-earlier quarter. Included in the current quarter were
$5.6 million of inventory impairment and land option contract
abandonment charges and a $2.6 million charge related to water
intrusion repairs at certain of the Company’s communities in
Florida. In 2011, the fourth quarter housing gross profit margin
included $2.3 million of inventory-related charges.
* The fourth quarter housing gross profit margin, excluding
inventory impairment and land option contract abandonment
charges, improved slightly to 15.2% in 2012 from 15.1% in
2011.
* The current quarter housing gross profit margin decreased
from the third quarter of 2012 largely due to the insurance
recovery included in that quarter. Excluding this recovery,
the 2012 fourth quarter housing gross profit margin
improved from the 2012 third quarter.
* While delivering more homes and generating higher homebuilding
revenues, the Company reduced its selling, general and
administrative expenses by $9.4 million, or 12%, to $66.2
million in the current quarter from $75.6 million in the same
quarter a year ago.
* Reflecting these results, the Company’s selling, general
and administrative expenses as a percentage of housing
revenues were 11.5% in the current quarter, improving by
440 basis points from a year ago and by 340 basis points
from the 2012 third quarter. The current quarter percentage
was the lowest it has been since the fourth quarter of
2007.
* Interest expense was $16.0 million, compared to $12.3 million in the
year-earlier quarter due to the Company’s higher average debt level and
slightly higher average interest rate, which reflected the issuance of two
series of senior notes in 2012, the proceeds of which were primarily used
to repurchase other series of senior notes pursuant to two applicable
tender offers.
* The Company’s financial services operations generated pretax income of
$3.1 million, compared to $22.8 million in the year-earlier quarter. The
2011 fourth quarter results included a gain of $19.8 million related to
the wind down of a former unconsolidated mortgage banking joint venture.
* Net income totaled $7.7 million, or $.10 per diluted share, compared to
$13.9 million, or $.18 per diluted share, in the year-earlier quarter. The
year-earlier quarter included the financial services gain and the gain on
loan guaranty. Excluding the impact of these 2011 fourth quarter gains,
which totaled $26.4 million, the Company’s 2012 fourth quarter net income
improved by $20.2 million from the year-earlier quarter.
* The Company’s fourth quarter net income included income tax benefits
of $5.3 million in 2012 and $2.5 million in 2011.
Twelve Months Ended November 30, 2012
* Revenues totaled $1.56 billion, up 19% from $1.32 billion for the prior
year.
* Homes delivered increased 8% to 6,282, up from 5,812 homes delivered in
the previous year.
* The overall average selling price of $246,500 was up 10% from $224,600 in
2011.
* The Company’s operating loss of $20.3 million in 2012 improved
substantially compared to an operating loss of $103.1 million in 2011.
* The Company’s net loss of $59.0 million, or $.76 per diluted share,
narrowed by $119.8 million from the net loss of $178.8 million, or $2.32
per diluted share, for the year ended November 30, 2011.
Backlog and Net Orders
* Potential future housing revenues in backlog at November 30, 2012 rose to
$618.6 million, up 35% from $459.0 million at November 30, 2011, with each
of the Company’s four homebuilding regions posting a year-over-year
increase.
* The potential future housing revenues in backlog reached the highest
fourth quarter-end level since 2007.
* The number of homes in the Company’s backlog increased 20% to 2,577
at November 30, 2012 from 2,156 at November 30, 2011.
* The overall value of net orders generated in the fourth quarter of 2012
grew to $459.3 million, up 25% from $368.6 million in the year-earlier
quarter, which had experienced a sizable increase of 65% from the previous
year.
* Three of the Company’s four homebuilding regions reported
year-over-year increases in net order value with the West Coast
region up 38% to $259.2 million, the Central region up 13% to $98.7
million and the Southeast region up 13% to $70.4 million.
* Net orders totaled 1,557 in the fourth quarter of 2012, up 4% compared to
1,494 in the year-earlier quarter which had increased 38% from the fourth
quarter of 2010. The year-over-year net order comparison for 2012 was
impacted by the Company’s lower community count. The Company had 191 new
home communities open for sales at the end of the 2012 fourth quarter,
down 18% from 234 at the end of the 2011 fourth quarter.
* The year-over-year increase in the Company’s 2012 fourth quarter net
orders reflected a 26% increase in the Company’s West Coast
homebuilding region that was mostly offset by decreases in the
Company’s other regions.
* Although the Company posted only a modest improvement in overall net
orders in the 2012 fourth quarter, its average net orders per
community, which has generally been one of the highest in the
industry, was 7.9 in the current quarter, up 23% from 6.4 in the
year-earlier quarter.
* The fourth quarter cancellation rate as a percentage of gross orders
was 35% in 2012 and 34% in 2011. As a percentage of beginning
backlog, the fourth quarter cancellation rate was 26% in 2012 and 29%
in 2011.
Balance Sheet
* Cash, cash equivalents and restricted cash totaled $567.1 million at
November 30, 2012, up $87.6 million from $479.5 million at November 30,
2011.
* The Company’s unrestricted cash and cash equivalents increased by
$109.7 million to $524.8 million from $415.1 million at November 30,
2011.
* The Company generated $110.4 million of positive net cash flow from
operating activities in the fourth quarter of 2012, compared to $37.6
million of net cash used in operating activities in the fourth
quarter of 2011.
* For the full year of 2012, the Company generated positive net cash
flow from operating activities for the first time since 2009.
* Inventories totaled $1.71 billion at November 30, 2012 and $1.73 billion
at November 30, 2011.
* Land and land development investments totaled $564.9 million for the
year ended November 30, 2012. The Company invested in land and land
development in each of its homebuilding regions, with the majority
occurring in California and Texas.
* The Company owned or controlled 44,752 lots at November 30, 2012, an
increase of 11% from 40,170 lots owned or controlled at November 30,
2011.
* The Company’s debt balance of $1.72 billion at November 30, 2012 increased
from $1.58 billion at November 30, 2011, reflecting the capital markets
transactions completed during the year.
* The Company’s next scheduled debt maturity is in 2014, when the
remaining $76.0 million of its 5 3/4% senior notes become due.
Management Comments
“Our results for the fourth quarter reflect year-over-year and sequential
improvement in most of our key operational and financial metrics,” said
Jeffrey Mezger, president and chief executive officer. “We increased our
deliveries and generated solid top-line growth, a higher housing gross profit
margin and continued improvement in our selling, general and administrative
expense ratio, all of which translated to higher homebuilding operating
income. In addition to improved execution on our business strategies, we
benefited from better housing market conditions and increased demand for
larger homes with more design options, which drove our average selling prices
higher in all of our regions. Although our fourth quarter community count
decreased from the prior year and impacted our overall net order growth, our
net orders on a per-community basis strengthened. By leveraging the
investments in land and land development we have made and plan to make next
year, we expect to significantly increase the number of new home communities
we have open for sales in 2013.
“Furthermore, we are encouraged by the success of our ‘going on offense’
initiatives and the improvements we are seeing in housing markets across the
country, most notably in California,” continued Mezger. “The tightening supply
of homes available for sale, high housing affordability and favorable mortgage
interest rate environment are driving increased demand and providing us with
more opportunities to generate greater revenues. We anticipate housing demand
will continue to strengthen, particularly as more households facing rising
rental costs consider the benefits of homeownership and emerge from the
sidelines. Although the strength of the economy and pending federal budget
decisions are important considerations that could potentially disrupt the
housing recovery and cause us to shift our current plans, we believe that,
with our higher backlog, more community openings on the horizon, and the
continued improvement we are expecting in our performance as we move ahead, we
are well positioned to be profitable for 2013.”
Earnings Conference Call
The conference call on the fourth quarter 2012 earnings will be broadcast live
TODAY at 8:30 a.m. Pacific Standard Time, 11:30 a.m. Eastern Standard Time. To
listen, please go to the Investor Relations section of the Company’s website
at www.kbhome.com.
About KB Home
KB Home is one of the largest and most recognized homebuilding companies in
the United States. Since its founding in 1957, the Company has built more than
half a million quality homes. KB Home's signature Built to Order™ approach
lets each buyer customize their new home from lot location to floor plan and
design features. In addition to meeting strict ENERGY STAR® guidelines, all KB
homes are highly energy efficient to help lower monthly utility costs for
homeowners, which the Company demonstrates with its proprietary KB Home Energy
Performance Guide® (EPG®). A leader in utilizing state-of-the-art sustainable
building practices, KB Home was named the #1 Green Homebuilder in the most
recent study by Calvert Investments and the #1 Homebuilder on FORTUNE
magazine's 2011 World’s Most Admired Companies list. Los Angeles-based KB Home
was the first homebuilder listed on the New York Stock Exchange, and trades
under the ticker symbol “KBH.” For more information about KB Home's new home
communities, call 888-KB-HOMES or visit www.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: general economic,
employment and business conditions; adverse market conditions that could
result in additional impairments or abandonment charges and operating losses,
including an oversupply of unsold homes, declining home prices and increased
foreclosure and short sale activity, among other things; conditions in the
capital and credit markets (including residential consumer mortgage lending
standards, the availability of residential consumer mortgage financing and
mortgage foreclosure rates); material prices and availability; labor costs and
availability; changes in interest rates; inflation; our debt level, including
our ratio of debt to total capital, and our ability to adjust our debt level
and structure and to access the equity, credit, capital or other financial
markets or other external financing sources, including raising capital through
the public or private issuance of common stock, debt or other securities,
and/or obtaining a credit facility or project financing, on favorable terms;
weak or declining consumer confidence, either generally or specifically with
respect to purchasing homes; competition for home sales from other sellers of
new and existing homes, including sellers of homes obtained through
foreclosures or short sales; weather conditions, significant natural disasters
and other environmental factors; government actions, policies, programs and
regulations directed at or affecting the housing market (including, but not
limited to, the Dodd-Frank Act, tax credits, tax incentives and/or subsidies
for home purchases, tax deductions for residential consumer mortgage interest
payments and property taxes, tax exemptions for profits on home sales, and
programs intended to modify existing mortgage loans and to prevent mortgage
foreclosures), the homebuilding industry, or construction activities;
decisions by lawmakers on federal fiscal policies, including those relating to
taxation and government spending; the availability and cost of land in
desirable areas; our warranty claims experience with respect to homes
previously delivered and actual warranty costs incurred; legal or regulatory
proceedings or claims; our ability to use/realize the net deferred tax assets
we have generated; our ability to successfully implement our current and
planned product, geographic and market positioning (including, but not limited
to, our efforts to expand our inventory base/pipeline with desirable land
positions or interests at reasonable cost and to open new communities for
sales and sell higher-priced homes and design options, and our operational and
investment concentration in markets in California and Texas), revenue growth,
asset optimization, and overhead and other cost reduction strategies; consumer
traffic to our new home communities and consumer interest in our product
designs; home purchase contract cancellations and our ability to realize our
backlog; our home sales and delivery performance in key markets in California
and Texas; the manner in which our homebuyers are offered and are able to
obtain residential consumer mortgage loans and mortgage banking services,
including from our preferred mortgage lender, Nationstar Mortgage; the
performance of Nationstar Mortgage as our preferred mortgage lender;
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 Twelve Months and Three Months Ended November 30, 2012 and 2011
(In Thousands, Except Per Share Amounts)
Twelve Months Three Months
2012 2011 2012 2011
Total revenues $ 1,560,115 $ 1,315,866 $ 578,201 $ 479,872
Homebuilding:
Revenues $ 1,548,432 $ 1,305,562 $ 574,377 $ 475,746
Costs and (1,568,688 ) (1,408,636 ) (558,815 ) (474,911 )
expenses
Operating (20,256 ) (103,074 ) 15,562 835
income (loss)
Interest 518 871 155 95
income
Interest (69,804 ) (49,204 ) (15,989 ) (12,302 )
expense
Equity in
income (loss)
of (394 ) (55,839 ) (357 ) 26
unconsolidated
joint ventures
Homebuilding (89,936 ) (207,246 ) (629 ) (11,346 )
pretax loss
Financial
services:
Revenues 11,683 10,304 3,824 4,126
Expenses (2,991 ) (3,512 ) (754 ) (1,031 )
Equity in
income (loss)
of 2,191 19,286 (17 ) 19,662
unconsolidated
joint venture
Financial
services 10,883 26,078 3,053 22,757
pretax income
Total pretax (79,053 ) (181,168 ) 2,424 11,411
income (loss)
Income tax 20,100 2,400 5,300 2,500
benefit
Net income $ (58,953 ) $ (178,768 ) $ 7,724 $ 13,911
(loss)
Basic earnings
(loss) per $ (.76 ) $ (2.32 ) $ .10 $ .18
share
Diluted
earnings $ (.76 ) $ (2.32 ) $ .10 $ .18
(loss) per
share
Basic average
shares 77,106 77,043 77,103 77,159
outstanding
Diluted
average shares 77,106 77,043 78,282 77,197
outstanding
KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands)
November 30, November 30,
2012 2011
Assets
Homebuilding:
Cash and cash equivalents $ 524,765 $ 415,050
Restricted cash 42,362 64,481
Receivables 64,821 66,179
Inventories 1,706,571 1,731,629
Investments in unconsolidated joint 123,674 127,926
ventures
Other assets 95,050 75,104
2,557,243 2,480,369
Financial services 4,455 32,173
Total assets $ 2,561,698 $ 2,512,542
Liabilities and stockholders' equity
Homebuilding:
Accounts payable $ 118,544 $ 104,414
Accrued expenses and other liabilities 340,345 374,406
Mortgages and notes payable 1,722,815 1,583,571
2,181,704 2,062,391
Financial services 3,188 7,494
Stockholders' equity 376,806 442,657
Total liabilities and stockholders' equity $ 2,561,698 $ 2,512,542
KB HOME
SUPPLEMENTAL INFORMATION
For the Twelve Months and Three Months Ended November 30, 2012 and 2011
(In Thousands)
Twelve Months Three Months
2012 2011 2012 2011
Homebuilding
revenues:
Housing $ 1,548,432 $ 1,305,299 $ 574,377 $ 475,636
Land — 263 — 110
Total $ 1,548,432 $ 1,305,562 $ 574,377 $ 475,746
Twelve Months Three Months
2012 2011 2012 2011
Costs and
expenses:
Construction
and land costs
Housing $ 1,317,529 $ 1,129,785 $ 492,594 $ 405,899
Land — 200 — 1
Subtotal 1,317,529 1,129,985 492,594 405,900
Selling,
general and 251,159 247,886 66,221 75,576
administrative
expenses
Loss (gain) on — 30,765 — (6,565 )
loan guaranty
Total $ 1,568,688 $ 1,408,636 $ 558,815 $ 474,911
Twelve Months Three Months
2012 2011 2012 2011
Interest
expense:
Interest $ 122,379 $ 115,649 $ 33,105 $ 27,548
incurred
Loss (gain) on
early 10,278 (3,612 ) — —
extinguishment
of debt
Interest (62,853 ) (62,833 ) (17,116 ) (15,246 )
capitalized
Total $ 69,804 $ 49,204 $ 15,989 $ 12,302
Twelve Months Three Months
2012 2011 2012 2011
Other
information:
Depreciation
and $ 4,638 $ 4,181 $ 1,341 $ 885
amortization
Amortization
of previously 78,630 79,338 29,721 26,592
capitalized
interest
KB HOME
SUPPLEMENTAL INFORMATION
For the Twelve Months and Three Months Ended November 30, 2012 and 2011
Twelve Months Three Months
2012 2011 2012 2011
Average
sales price:
West Coast $ 388,300 $ 335,500 $ 405,400 $ 358,300
Southwest 193,900 165,800 219,500 179,100
Central 170,100 171,500 179,500 173,100
Southeast 206,200 195,500 219,900 192,900
Total $ 246,500 $ 224,600 $ 270,700 $ 238,400
Twelve Months Three Months
2012 2011 2012 2011
Homes
delivered:
West Coast 1,945 1,757 765 656
Southwest 683 843 170 270
Central 2,566 2,155 843 706
Southeast 1,088 1,057 344 363
Total 6,282 5,812 2,122 1,995
Twelve Months Three Months
2012 2011 2012 2011
Net orders:
West Coast 2,166 2,017 619 490
Southwest 663 907 140 172
Central 2,697 2,480 485 517
Southeast 1,177 1,228 313 315
Total 6,703 6,632 1,557 1,494
November 30, 2012 November 30, 2011
Backlog Homes Backlog Value Backlog Backlog
Homes Value
Backlog data
(dollars in
thousands):
West Coast 684 $ 248,790 463 $ 161,987
Southwest 183 40,206 203 37,071
Central 1,149 204,473 1,018 168,512
Southeast 561 125,157 472 91,380
Total 2,577 $ 618,626 2,156 $ 458,950
KB HOME
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
For the Twelve Months and Three Months Ended November 30, 2012 and 2011
(In Thousands, Except Percentages)
This press release contains, and Company management’s discussion of the
results presented in this press release may include, information about the
Company’s housing gross profit margin, excluding inventory impairment and land
option contract abandonment charges, which is not calculated in accordance
with generally accepted accounting principles (“GAAP”). The Company believes
this non-GAAP financial measure is relevant and useful to investors in
understanding 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 housing gross profit margin,
excluding inventory impairment and land option contract abandonment charges is
not calculated in accordance with GAAP, this measure 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 the operating and
financial performance measures prescribed by GAAP. Rather, this non-GAAP
financial measure should be used to supplement its respective most directly
comparable GAAP financial measure in order to provide a greater understanding
of the factors and trends affecting the Company's operations.
Housing Gross Profit Margin, Excluding Inventory Impairment and Land Option
Contract Abandonment Charges
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 housing gross profit margin, excluding inventory impairment and land
option contract abandonment charges:
Twelve Months Three Months
2012 2011 2012 2011
Housing $ 1,548,432 $ 1,305,299 $ 574,377 $ 475,636
revenues
Housing
construction (1,317,529 ) (1,129,785 ) (492,594 ) (405,899 )
and land
costs
Housing
gross 230,903 175,514 81,783 69,737
profits
Add:
Inventory
impairment
and land 28,533 25,740 5,621 2,284
option
contract
abandonment
charges
Housing
gross
profits,
excluding
inventory
impairment $ 259,436 $ 201,254 $ 87,404 $ 72,021
and land
option
contract
abandonment
charges
Housing
gross profit
margin as a 14.9 % 13.4 % 14.2 % 14.7 %
percentage
of housing
revenues
Housing
gross profit
margin,
excluding
inventory
impairment
and land 16.8 % 15.4 % 15.2 % 15.1 %
option
contract
abandonment
charges, as
a percentage
of housing
revenues
Housing gross profit margin, excluding inventory impairment and land option
contract abandonment charges, is a non-GAAP financial measure, which the
Company calculates by dividing housing revenues less housing construction and
land costs before inventory impairment and land option contract abandonment
charges associated with housing operations recorded during a given period, by
housing revenues. The most directly comparable GAAP financial measure is
housing gross profit margin. The Company believes housing gross profit margin,
excluding inventory impairment and land option contract abandonment charges,
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 and enhances the
comparability of housing gross profit margin between periods. This financial
measure assists management in making strategic decisions regarding product
mix, product pricing and construction pace. The Company also believes
investors will find housing gross profit margin, excluding inventory
impairment and land option contract abandonment charges, relevant and useful
because it represents a profitability measure that may be compared to a prior
period without regard to variability of charges for inventory impairments or
land option contract abandonments.
Contact:
KB Home
Katoiya Marshall, Investor Relations Contact
(310) 893-7446
kmarshall@kbhome.com
or
Susan Martin, Media Contact
(310) 231-4142
smartin@kbhome.com
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