KB Home (NYSE: KBH), one of the largest homebuilders in the United States and France, today reported financial results for its fourth quarter and fiscal year ended November 30, 2005. Highlights include:
* Total revenues rose 32% in the fourth quarter of 2005 to $3.15 billion,
reflecting a 33% year-over-year increase in housing revenues fueled by a
16% increase in unit delivery volume and a 15% increase in the average
unit selling price. Fourth quarter net income rose 66% from the
year-earlier period to $310.6 million, driven by revenue growth and an
improved operating margin. Diluted earnings per share for the fourth
quarter increased 59% to $3.51.
* For the full year, KB Home delivered 37,140 homes and generated total
revenues of $9.44 billion, exceeding 2004's record levels by 17% and
34%, respectively. Net income for 2005 increased 75% year-over-year to
$842.4 million, and diluted earnings per share rose 67% to $9.53. The
Company's revenues have grown at a compound annual rate of 19% over the
past five years, and diluted earnings per share have increased at a
compound rate of 29% over the same period.
* Unit and dollar backlog at November 30, 2005 increased 27% and 40%,
respectively, from year-end 2004 levels. Year-end backlog exceeded
25,000 units for the first time in the Company's history, representing
potential future revenues of $6.76 billion. Based on the growing
backlog and strong overall financial results, the Company reaffirms
earnings expectations of $11.25 per diluted share for 2006, an 18%
increase from 2005 results.
* KB Home repurchased two million shares of its common stock during the
fourth quarter of 2005 at an aggregate price of $129.4 million,
exhausting its existing board-authorized repurchase plan. On
December 8, 2005, the Company's directors authorized the repurchase of
an additional 10 million shares of the Company's common stock. The
board also increased the annual cash dividend on the Company's common
stock by 33% to $1.00 per share.
* On September 1, 2005, the Company completed the sale of substantially
all the assets of its mortgage banking operations to the nation's
leading home loan lender, Countrywide Financial Corporation. In a
separate transaction, the two companies established Countrywide KB Home
Loans, a 50-50 joint venture that represents the first large-scale
collaboration between a national builder and lender. Countrywide
KB Home Loans began providing mortgage banking services to the Company's
homebuyers on September 1, 2005.
* KB Home entered into a new five-year $1.50 billion revolving credit
facility on November 22, 2005. The new facility, which may be increased
under certain circumstances up to $2.00 billion, increases the Company's
revolving-credit borrowing capacity by 50% at more attractive interest
rates. The Company's liquidity measures at November 30, 2005 continued
to improve, with just $84 million in borrowings outstanding under its
new credit facility and a debt-to-capital ratio of 46.4%, representing
the lower end of the Company's targeted range. Net of cash, the
Company's leverage ratio was 44.8% at November 30, 2005.
"We extended our trend of strong, consistent financial performance in the fourth quarter of 2005 and completed another successful year, delivering 37,140 homes and posting revenues approaching $10 billion," said Bruce Karatz, chairman and chief executive officer. "Our revenues and earnings have grown at double-digit compound annual rates over the past five years as a direct result of our consistent execution of a disciplined operational business model that has steered our homebuilding operations through geographic expansion, product diversification and greater customer satisfaction. Entering 2006, we plan to continue to operate under our proven operational and financial disciplines to drive shareholder value. In addition to the strengths within our business, economic factors, including positive job growth and demographic trends in the markets we serve, support our favorable outlook and earnings projection of $11.25 per share for 2006."
Company-wide revenues reached $3.15 billion for the quarter ended November 30, 2005, increasing $770 million or 32% from $2.38 billion in the year-earlier quarter, largely as a result of revenue growth within the Company's homebuilding operations. Fourth quarter housing revenues grew 33% to $3.14 billion, up from $2.36 billion in the year-earlier period, on a 16% increase in unit deliveries to 11,946 from 10,285 in the fourth quarter of 2004 and a 15% increase in the overall average unit selling price to $262,700 from $229,200 in the 2004 fourth quarter. The average selling price rose in each of the Company's geographic regions with increases ranging from 4% in the Central region to 35% in the Southwest.
Higher housing revenues and a significantly improved operating margin boosted fourth quarter construction operating income by 66% to $492.8 million, up from $297.6 million in the year-earlier quarter. The Company's construction operating income margin expanded 310 basis points in the period, to 15.7% from 12.6% in the fourth quarter of 2004. The increased margin reflected improvement in both the Company's housing gross margin, which rose to 27.1% in the 2005 fourth quarter from 25.1% in the year-earlier period and in selling, general and administrative expenses as a percentage of housing revenues, which decreased to 11.4% in the 2005 fourth quarter from 12.6% in the fourth quarter of 2004. The substantial improvement in margins and overhead propelled the Company's pretax margin to 15.3% in the fourth quarter of 2005, up 360 basis points from 11.7% for the fourth quarter of 2004. The Company's net income climbed to $310.6 million in the fourth quarter of 2005, up from $186.7 million in the year-earlier period, mainly due to higher revenues and a higher operating margin. Earnings per diluted share in the 2005 fourth quarter rose 59% to $3.51, up from $2.21 in the prior year period, as the impact of higher pretax earnings was partially offset by an increase in the Company's effective income tax rate, which rose to 35% in 2005 from 33% in 2004, and a greater average number of diluted shares outstanding.
"The recent actions by our board in authorizing a new share repurchase program and increasing the dividend on our common stock demonstrate KB Home's on-going commitment to translating operational success into enhanced value for our shareholders," said Karatz. "The Company's growth and sustained profitability have allowed us to opportunistically repurchase 45 million shares since 1999 and raise our dividend for the third consecutive year while maintaining a healthy financial position."
The Company generated 9,747 net orders in the 2005 fourth quarter, up 15% from 8,516 net orders in the year-earlier period. Unit backlog rose 27% to 25,722 units at November 30, 2005 from 20,280 units at November 30, 2004, while backlog value grew by $1.95 billion or 40%, to approximately $6.76 billion at November 30, 2005 from approximately $4.82 billion at November 30, 2004. Year-end backlog values increased by more than 25% over 2004 levels in each of the Company's geographic regions in the United States and France.
"KB Home generated more than 42,000 net orders for new homes in 2005," said Karatz, "driving our year-end backlog to a new record high. This backlog provides great support for our 2006 financial projections. While year-over- year net order comparisons posted double-digit increases in each quarter of the year, our net order growth moderated in the fourth quarter. Nevertheless, visible ongoing demand for the Company's diverse array of first-time, move-up, luxury and active-adult products suggests that we can expect a healthy growth rate in our markets across the country in 2006, trending toward lower, long- term normalized levels."
For the year ended November 30, 2005, the Company delivered 37,140 homes, a 17% increase from 31,646 homes delivered in 2004. Total revenues reached $9.44 billion in 2005, up 34% from $7.05 billion in the corresponding period of 2004. Net income for the full 2005 year rose 75% to $842.4 million, up from $480.9 million a year ago. Diluted earnings per share for the period rose 67% to $9.53, up from $5.70 per diluted share in 2004.
"With another successful year behind us, several new initiatives are energizing our prospects for 2006," added Karatz. "Our recently-launched KB Urban division will offer medium-to-high-density housing opportunities in city centers. Our first collaboration with Martha Stewart Living Omnimedia, Inc. will launch a 650 unit community in North Carolina. Our entry into Louisiana will help rebuild vital housing stock in an area recently devastated by hurricanes. And our Countrywide KB Home Loans joint venture will continue to provide a wide array of financing options to our homebuyers. Each of these initiatives is an extension of our efforts to provide high quality services and add to the exciting range of choices KB Home customers across the country have come to expect."
The Conference Call on the Fourth Quarter 2005 earnings will be broadcast live TOMORROW at 8:00 a.m. Pacific Standard Time, 11:00 a.m. Eastern Standard Time. To listen, please go to the Investor Relations section of the Company's Web site at http://www.kbhome.com.
Building homes for nearly half a century, KB Home is one of America's premier homebuilders with domestic operating divisions in some of the fastest-growing regions and states: West Coast-California; Southwest-Arizona, Nevada and New Mexico; Central-Colorado, Illinois, Indiana and Texas; and Southeast-Florida, Georgia, Maryland, North Carolina, South Carolina and Virginia. Kaufman & Broad S.A., the Company's publicly-traded French subsidiary, is one of the largest homebuilders in France. In fiscal 2005, the Company delivered homes to 37,140 families in the United States and France. KB Home also offers complete mortgage services through Countrywide KB Home Loans, a joint venture with Countrywide Financial Corporation. Founded in 1957, and winner of the 2004 American Business Award for Best Overall Company, KB Home is a Fortune 500 company listed on the New York Stock Exchange under the ticker symbol "KBH." For more information about any of KB Home's new home communities, call 888-KB-HOMES or visit http://www.kbhome.com.
Except for the historical information contained herein, certain matters discussed in this press release are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, including any statements concerning future financial performance, business and prospects, and future Company actions and their expected results. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions including, but not limited to, changes in national, regional, local or general economic conditions, conditions in the capital, credit and homebuilding markets, material prices and availability, labor costs and availability, interest rates and the Company's debt levels, the secondary market for loans, consumer confidence, competition, currency exchange rates (insofar as they affect the Company's operations in France), environmental factors (including weather, natural disasters or similar environmental events), government regulations affecting the Company's operations, the availability and cost of land in desirable areas, and the continued impact of terrorist activities and U.S. response, unanticipated violations of Company policy, unanticipated legal or regulatory proceedings or claims or other events outside of the Company's control. See the Company's Annual Report on Form 10-K and its Annual Report to Shareholders for the year ended November 30, 2004 and its other public filings with the Securities and Exchange Commission for a further discussion of these and other risks and uncertainties applicable to the Company's business. The Company does not have a specific policy or intent of updating or revising forward-looking statements.
For Further Information Contact:
Kelly Masuda, Investor Contact
(310) 893-7434 or kmasuda@kbhome.com
Caroline Shaw, Media Contact
(310) 231-4142 or cshaw@kbhome.com
KB HOM ONSOLIDATED STATEMENTS OF INCOME
For the Twelve Months and Three Months Ended November 30, 2005 and 2004
(In Thousands, Except Per Share Amounts)
Twelve Months Three Months
2005 2004 2005 2004
Total revenues $9,441,650 $7,052,684 $3,150,140 $2,380,597
Construction:
Revenues $9,410,282 $7,008,267 $3,145,673 $2,368,758
Costs and expenses (8,053,286) (6,233,568) (2,652,859) (2,071,136)
Operating income1,356,996774,699492,814297,622
Interest income4,210 3,918 1,178 940
Interest expense, net o mounts capitalized (18,872) (18,154)(8,145)(3,521)
Minority interests(77,827) (69,049) (22,280) (27,875)
Equity in pretax o nconsolidated join entures20,316 17,600 9,863 8,336
Construction preta ncome 1,284,823709,014473,430275,502
Financial services:
Revenues 31,368 44,417 4,467 11,839
Expenses(27,241) (35,729)(2,725)(8,807)
Other6,841-- 6,841-- Equity in pretax o nconsolidated join enture 230-- 230--
Financial service retax income11,198 8,688 8,813 3,032
Total pretax income 1,296,021717,702482,243278,534
Income taxes (453,600) (236,800) (171,600) (91,800)
Net income $842,421 $480,902 $310,643 $186,734
Basic earnings per share $10.29 $6.14 $3.75 $2.39
Diluted earnings per share $9.53 $5.70 $3.51 $2.21
Basic average shares
outstanding 81,888 78,316 82,930 78,144
Diluted average shares
outstanding 88,425 84,356 88,414 84,450
KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands)
November 30, August 31, November 30,
2005 2005 2004
ASSETS
Construction:
Cash and cash equivalents $144,783 $60,153$190,660
Receivables 580,931 492,870 513,974
Inventories 6,128,342 5,743,820 4,143,254
Investments in unconsolidate oint ventures 275,378 240,666 168,425
Deferred income taxes 220,814 207,439 217,618
Goodwill 242,589 245,030 249,313
Other assets124,150 147,368 142,252
7,716,987 7,137,346 5,625,496
Financial services 29,933 100,854 210,460
Total assets $7,746,920 $7,238,200 $5,835,956
LIABILITIES AND STOCKHOLDERS' EQUITY
Construction:
Accounts payable$892,727$788,480$749,050
Accrued expenses and othe iabilities 1,338,626 946,977 810,913
Mortgages and notes payable 2,463,814 2,701,430 1,975,600
4,695,167 4,436,887 3,535,563
Minority interests in
consolidated subsidiaries and
joint ventures 144,951 136,951 127,040
Financial services 55,131 60,403 117,672
Stockholders' equity 2,851,671 2,603,959 2,055,681
Total liabilities and
stockholders' equity$7,746,920 $7,238,200 $5,835,956
KB HOM UPPLEMENTAL INFORMATION
For the Twelve Months and Three Months Ended November 30, 2005 and 2004
(In Thousands)
Twelve Months Three Months
Construction revenues: 2005 2004 2005 2004
Housing $9,364,803 $6,957,548 $3,138,714 $2,357,403
Commercial5,202 22,834-- 6,108
Land40,277 27,885 6,959 5,247
Total $9,410,282 $7,008,267 $3,145,673 $2,368,758
Twelve Months Three Months
Costs and expenses: 2005 2004 2005 2004
Construction and lan osts
Housing$6,852,541 $5,285,619 $2,288,882 $1,764,936
Commercial 3,077 17,697-- 4,721
Land 32,521 22,540 6,107 3,440
Subtotal 6,888,139 5,325,856 2,294,989 1,773,097
Selling, general an dministrative expenses 1,165,147907,712357,870298,039
Total$8,053,286 $6,233,568 $2,652,859 $2,071,136
Twelve Months Three Months
Interest expense: 2005 2004 2005 2004
Interest incurred$183,842 $141,470 $51,286 $39,865
Interest capitalized (164,970) (123,316) (43,141)(36,344)
Interest expense $18,872$18,154$8,145 $3,521
Twelve Months Three Months
Other information: 2005 2004 2005 2004
Depreciation an mortization$20,382$21,848$4,739 $6,379
Amortization o reviously capitalize nterest 104,056 78,80836,349 24,624
KB HOM UPPLEMENTAL INFORMATION
For the Twelve Months and Three Months Ended November 30, 2005 and 2004
Twelve Months Three Months
Average sales price: 2005 2004 2005 2004
West Coast $460,500 $411,500 $473,400$436,700
Southwest 265,600202,600 289,100 213,800
Central 157,600151,300 163,100 156,700
Southeast 215,100171,700 233,900 176,600
France 206,300211,500 196,500 220,700
Total $252,100 $219,900 $262,700$229,200
Twelve Months Three Months
Unit deliveries:2005 2004 2005 2004
West Coast 6,624 5,383 2,331 1,740
Southwest7,357 7,478 1,809 2,141
Central 9,866 9,101 3,238 3,127
Southeast7,162 4,975 2,312 1,667
France 6,131 4,709 2,256 1,610
Total37,140 31,646 11,946 10,285
Unconsolidated join entures: 509 93181 330
Twelve Months Three Months
Net orders:2005 2004 2005 2004
West Coast 7,411 6,209 1,693 1,489
Southwest8,233 8,167 1,706 1,737
Central 10,753 9,434 2,151 1,828
Southeast8,495 7,023 1,960 1,746
France 7,513 5,445 2,237 1,716
Total42,405 36,278 9,747 8,516
Unconsolidated join entures: 401 856 245 108
November 30, 2005 November 30, 2004
Backlog Backlog Backlog Backlog
Backlog data: UnitsValue UnitsValue
(Dollars in thousands)
West Coast 4,254 $2,045,476 3,467 $1,523,380
Southwest5,428 1,562,698 4,552 1,005,990
Central 4,945751,589 4,058598,198
Southeast5,613 1,324,410 4,280824,370
France 5,482 1,079,954 3,923866,983
Total25,722 $6,764,127 20,280 $4,818,921
Unconsolidated join entures: 387$80,883 495$87,765