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KB Home Reports 2013 Second Quarter Results

Stocks in this article: KBH

“We believe there are considerable opportunities for profitable growth in the markets where we operate, particularly in the largest consumer segments represented by first-time and first move-up homebuyers, that currently comprise the majority of our business,” continued Mezger. “Our strategic approach, accompanied by solid housing market conditions that are steadily strengthening, continues to drive positive momentum in our operations. Looking forward, we will continue to leverage our successful business strategies and pursue additional investment opportunities to accelerate top line growth and enhance profitability. Our outlook for 2013 remains favorable even with the second quarter charge associated with water intrusion repairs, which we believe puts the financial impact of the matter behind us. We remain confident that we are on course to achieve a solidly profitable 2013, with meaningful profits expected in each of the final two quarters of the year, and will continue to build positive momentum entering 2014.”

Earnings Conference Call

The conference call on the second quarter 2013 earnings will be broadcast live TODAY at 8:30 a.m. Pacific Daylight Time, 11:30 a.m. Eastern Daylight 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 the following: general economic, employment and business conditions; adverse market conditions, including an increased supply of unsold homes, declining home prices and greater foreclosure and short sale activity, among other things, that could negatively affect our consolidated financial statements, including due to additional impairment or land option contract abandonment charges, lower revenues and operating and other losses; conditions in the capital, credit and financial 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, maturity schedule 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 project financing, on favorable terms; our compliance with the terms and covenants of our revolving credit facility; weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; competition for home sales from other sellers of new and resale homes, including lenders and other 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 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, including our warranty claims and costs experience at certain of our communities in Florida; 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 strategies and initiatives with respect to product, geographic and market positioning (including our efforts to expand our inventory base/pipeline with desirable land positions or interests at reasonable cost and to expand our community count, open additional new home communities for sales and sell higher-priced homes and more design options, and our operational and investment concentration in markets in California), revenue growth, asset optimization, asset activation, local field management and talent investment, and overhead reduction and cost management; consumer traffic to our new home communities and consumer interest in our product designs and offerings, particularly from higher-income consumers; cancellations and our ability to realize our backlog by converting net orders to home deliveries; our home sales and delivery performance, particularly in key markets in California; the manner in which our homebuyers are offered and whether they 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; the ability of Home Community Mortgage to become operational in all of our served markets as and by the time currently anticipated; 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 Six Months and Three Months Ended May 31, 2013 and 2012

(In Thousands, Except Per Share Amounts — Unaudited)

 
Six Months Three Months
2013       2012 2013       2012
Total revenues $ 929,625   $ 557,410   $ 524,406   $ 302,852  
Homebuilding:
Revenues $ 924,604 $ 552,500 $ 521,788 $ 300,605
Costs and expenses (915,459 ) (599,185 ) (513,097 ) (316,141 )
Operating income (loss) 9,145 (46,685 ) 8,691 (15,536 )
Interest income 436 246 232 111
Interest expense (29,747 ) (30,755 ) (14,507 ) (14,469 )
Equity in loss of unconsolidated joint ventures (1,002 ) (315 ) (567 ) (243 )
Homebuilding pretax loss (21,168 ) (77,509 ) (6,151 ) (30,137 )
Financial services:
Revenues 5,021 4,910 2,618 2,247
Expenses (1,471 ) (1,528 ) (636 ) (693 )
Equity in income (loss) of unconsolidated joint venture 1,087   89   (4 ) (53 )
Financial services pretax income 4,637   3,471   1,978   1,501  
Total pretax loss (16,531 ) (74,038 ) (4,173 ) (28,636 )
Income tax benefit 1,100   4,100   1,200   4,500  
Net loss $ (15,431 ) $ (69,938 ) $ (2,973 ) $ (24,136 )
Basic and diluted loss per share $ (.19 ) $ (.91 ) $ (.04 ) $ (.31 )
Basic and diluted average shares outstanding 81,526   77,097   83,605   77,105  
 
 
                     

KB HOME

CONSOLIDATED BALANCE SHEETS

(In Thousands — Unaudited)

 

May 31,

2013

November 30,

2012

Assets
Homebuilding:
Cash and cash equivalents $ 538,571 $ 524,765
Restricted cash 42,322 42,362
Receivables 66,121 64,821
Inventories 2,029,390 1,706,571
Investments in unconsolidated joint ventures 122,800 123,674
Other assets 103,797   95,050
2,903,001 2,557,243
Financial services 9,120   4,455
Total assets $ 2,912,121   $ 2,561,698
 
Liabilities and stockholders’ equity
Homebuilding:
Accounts payable $ 117,804 $ 118,544
Accrued expenses and other liabilities 378,149 340,345
Mortgages and notes payable 1,943,275   1,722,815
2,439,228 2,181,704
Financial services 2,077 3,188
Stockholders’ equity 470,816   376,806
Total liabilities and stockholders’ equity $ 2,912,121   $ 2,561,698
 
 
               

KB HOME

SUPPLEMENTAL INFORMATION

For the Six Months and Three Months Ended May 31, 2013 and 2012

(In Thousands — Unaudited)

 
Six Months Three Months
2013       2012 2013       2012
Homebuilding revenues:
Housing $ 924,604 $ 552,500 $ 521,788 $ 300,605
Land        
Total $ 924,604   $ 552,500   $ 521,788   $ 300,605  
 
 
Six Months Three Months
2013 2012 2013 2012
Costs and expenses:
Construction and land costs
Housing $ 786,263 $ 484,873 $ 442,998 $ 253,041
Land        
Subtotal 786,263 484,873 442,998 253,041
Selling, general and administrative expenses 129,196   114,312   70,099   63,100  
Total $ 915,459   $ 599,185   $ 513,097   $ 316,141  
 
 
Six Months Three Months
2013 2012 2013 2012
Interest expense:
Interest incurred $ 67,911 $ 58,017 $ 34,489 $ 29,609
Loss on early extinguishment of debt 2,003
Interest capitalized (38,164 ) (29,265 ) (19,982 ) (15,140 )
Total $ 29,747   $ 30,755   $ 14,507   $ 14,469  
 
 
Six Months Three Months
2013 2012 2013 2012
Other information:
Depreciation and amortization $ 3,327 $ 2,128 $ 1,891 $ 1,157
Amortization of previously capitalized interest 40,271   27,694   21,566   15,025  
 
 
               

KB HOME

SUPPLEMENTAL INFORMATION

For the Six Months and Three Months Ended May 31, 2013 and 2012

(Unaudited)

 
Six Months Three Months
2013       2012 2013       2012
Average sales price:
West Coast $ 434,800 $ 372,300 $ 460,400 $ 402,000
Southwest 225,300 181,900 223,900 177,800
Central 187,700 164,300 188,900 163,700
Southeast 224,400   193,100   227,500   195,800
Total $ 281,700   $ 226,400   $ 290,400   $ 233,000
 
 
Six Months Three Months
2013 2012 2013 2012
Homes delivered:
West Coast 1,103 639 594 330
Southwest 351 327 211 157
Central 1,208 1,023 637 536
Southeast 620   451   355   267
Total 3,282   2,440   1,797   1,290
 
 
Six Months Three Months
2013 2012 2013 2012
Net orders:
West Coast 1,117 889 587 600
Southwest 388 369 189 229
Central 1,621 1,447 968 900
Southeast 707   541   418   320
Total 3,833   3,246   2,162   2,049
 
 
May 31, 2013 May 31, 2012
Backlog Homes Backlog Value Backlog Homes Backlog Value
Backlog data (dollars in thousands):
West Coast 698 $ 337,878 713 $ 301,652
Southwest 220 48,524 245 43,518
Central 1,562 296,949 1,442 237,558
Southeast 648   143,262   562   110,680
Total 3,128   $ 826,613   2,962   $ 693,408
 
 

KB HOME

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

For the Six Months and Three Months Ended May 31, 2013 and 2012

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