KB Home (NYSE: KBH), one of the nation's largest and most recognized homebuilders, today reported results for its third quarter ended August 31, 2012. Highlights and developments include the following:
Three Months Ended August 31, 2012
Revenues increased 16% to $424.5 million, compared to $367.3 million
for the third quarter of 2011, reflecting growth in the number of
homes delivered and a higher average selling price.
- The Company delivered 1,720 homes, up 7% from the year-earlier quarter, with three of the Company's four homebuilding regions posting year-over-year increases.
- The overall average selling price of $245,100 rose by $17,700, or 8%, from $227,400 for the year-earlier quarter, marking the ninth consecutive quarter of year-over-year increases, and was up by $12,100, or 5% from $233,000 in the second quarter of 2012.
- Compared to the year-earlier quarter, average selling prices increased 14% in the Company's West Coast region, 13% in its Southwest region and 6% in its Southeast region. The average selling price in the Company's Central region was essentially even with the prior year.
The housing gross profit margin improved to 17.5%, up 60 basis points
compared to 16.9% in both the third quarter of 2011 and the second
quarter of 2012.
- The housing gross profit margin for the current quarter reflected an insurance recovery of $16.5 million for previously incurred expenses, including costs associated with drywall material manufactured in China. The Company expects to receive the cash from this insurance recovery in the fourth quarter. In the 2011 third quarter, the housing gross profit margin included $7.4 million of favorable warranty adjustments.
- Excluding inventory impairment charges of $6.4 million in the current quarter and inventory impairment and land option contract abandonment charges of $1.2 million in the year-earlier quarter, the third quarter housing gross profit margin improved by 180 basis points to 19.0% in 2012 from 17.2% in 2011.
While the Company delivered more homes, generating higher related
revenues and associated selling expenses, its selling, general and
administrative expenses of $62.8 million in the current quarter were
up only slightly from $60.2 million in the same quarter a year ago.
Additionally, the year-earlier quarter included the favorable impact
of legal expense recoveries of $8.3 million.
- Reflecting the higher revenues, selling, general and administrative expenses as a percentage of housing revenues improved by 160 basis points to 14.9% from 16.5% a year ago, and by 720 basis points from 22.1% in the 2012 second quarter.
- The Company's selling, general and administrative expense ratio reached its lowest third-quarter level since 2007.
The Company's homebuilding operating income increased significantly to
$10.9 million in the current quarter, up from $1.4 million in the
- This marked the Company's first posting of quarterly operating income in 2012.
- As a percentage of homebuilding revenues, homebuilding operating income was 2.6%, up 220 basis points from .4% in the third quarter of 2011.
- Compared to the second quarter of 2012, the Company's homebuilding operating results as a percentage of homebuilding revenues improved by 780 basis points.
Interest expense totaled $23.1 million, up from $12.3 million in the
- Interest expense in the current quarter reflected an $8.3 million loss on the early extinguishment of debt associated with the Company's purchase of certain of its outstanding senior notes pursuant to previously announced cash tender offers.
Net income totaled $3.3 million, up $12.9 million from the net loss of
$9.6 million in the year-earlier quarter. The Company's earnings per
diluted share of $.04 represented a considerable improvement from the
loss per diluted share of $.13 in the year-earlier quarter.
- The current quarter results included an income tax benefit of $10.7 million primarily due to the resolution of a federal income tax audit. The Company received the related income tax refund in the fourth quarter.
Nine Months Ended August 31, 2012
- Homes delivered increased 9% to 4,160, up from 3,817 in the year-earlier period.
- The overall average selling price of $234,100 was up 8% from $217,400 for the corresponding period of 2011.
- Revenues totaled $981.9 million, up 17% from $836.0 million for the year-earlier period.
- The Company's net loss of $66.7 million, or $.86 per diluted share, improved substantially from the net loss of $192.7 million, or $2.50 per diluted share, for the nine months ended August 31, 2011.
Potential future housing revenues in backlog at August 31, 2012 rose
substantially to $744.7 million, up 33% from $559.3 million at August
31, 2011, with three of the Company's four homebuilding regions
posting year-over-year increases.
- The potential future housing revenues in backlog reached the highest third quarter-end level since 2008.
- The number of homes in the Company's backlog increased 18% to 3,142 at August 31, 2012 from 2,657 at August 31, 2011.
The overall value of net orders generated in the third quarter of 2012
grew to $493.3 million, up 16% from $426.7 million in the year-earlier
- Three of the Company's four homebuilding regions reported sizable year-over-year increases in net order value, with its West Coast region up 25% to $252.6 million, its Central region up 20% to $135.9 million, and its Southeast region up 10% to $70.2 million.
Net orders increased to 1,900 in the third quarter of 2012, up 3% from
the strong net orders of 1,838 in the year-earlier quarter, which had
increased 40% from the third quarter of 2010. The year-over-year net
order comparison was also tempered by the Company's lower community
count, which decreased 13% to 203 at the end of the current quarter
from 233 at the end of the third quarter of 2011.
- The Company's overall net order growth reflected increases of 13% in each of the Company's West Coast and Central regions, and an increase of 1% in its Southeast region. These increases were partly offset by a decrease of 41% in the Company's Southwest region, which was largely due to the Company's ongoing strategic repositioning of its operations in the region.
- The cancellation rate as a percentage of gross orders was 29%, unchanged from the year-earlier quarter and slightly higher than the 26% rate in the 2012 second quarter. As a percentage of beginning backlog, the cancellation rate improved to 26% from 32% in both the third quarter of 2011 and the second quarter of 2012.
Cash and cash equivalents and restricted cash totaled $466.5 million
at August 31, 2012, including unrestricted cash and cash equivalents
of $420.4 million. At May 31, 2012, cash and cash equivalents and
restricted cash totaled $377.4 million, including unrestricted cash
and cash equivalents of $314.3 million.
- Even though the Company invested more in land and land development than in the year-earlier quarter, it generated $14.1 million of positive net cash flow from operating activities, compared to $38.6 million of net cash used in operating activities in the third quarter of 2011. The Company also generated approximately $92 million in cash, net of expenses, from the issuance of new senior notes in the 2012 third quarter.
Inventories at August 31, 2012 were $1.77 billion, up from $1.73
billion at November 30, 2011.
- Land and land development spending totaled $337.0 million in the first nine months of 2012. While the Company invested in land and land development in each of its homebuilding regions, the majority of its land-related spending during the period was in California and Texas.
- The Company owned or controlled 44,582 lots as of August 31, 2012, an increase of 11% from 40,170 lots owned or controlled at November 30, 2011, and an increase of 21% from 36,771 lots owned or controlled at August 31, 2011.
The Company's debt balance of $1.73 billion at August 31, 2012
increased from $1.58 billion at November 30, 2011.
- During the current quarter, the Company issued $350.0 million in aggregate principal amount of 7.5% senior notes due 2022. Net proceeds from the issuance were used to purchase an aggregate principal amount of $244.9 million of the Company's 5 3/4% senior notes due 2014 and 5 7/8% and 6 1/4% senior notes due 2015 that were validly tendered and accepted for purchase pursuant to the Company's previously announced cash tender offers for those series, each of which expired on August 7, 2012. The Company plans to use the remaining net proceeds from the issuance for general corporate purposes.
- The Company's next scheduled debt maturity is not until 2014, when the remaining $76.0 million of its 5 3/4% senior notes become due.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV