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    KB Home Reports 2020 Fourth Quarter and Full Year Results

    1/12/21 4:10:00 PM ET
    $KBH
    Homebuilding
    Consumer Discretionary
    Get the next $KBH alert in real time by email

    LOS ANGELES--(BUSINESS WIRE)--KB Home (NYSE: KBH) today reported results for its fourth quarter and year ended November 30, 2020.

    “We had a strong finish to this extraordinary year, particularly with the 42% year-over-year increase in our fourth quarter net orders,” said Jeffrey Mezger, Chairman, President and Chief Executive Officer. “Housing market conditions continue to be robust, as the pandemic has helped propel demand for homeownership, accentuating all the financial, health, safety and emotional benefits it offers. This fundamental shift has long been anticipated — with pent-up demographic forces, a housing supply shortage, and favorable mortgage interest rates — and COVID-19 has accelerated these dynamics. In addition to generating strong net order growth, we also expanded our gross margin in the fourth quarter to 21%, excluding inventory-related charges, a level that we believe we can sustain for our 2021 fiscal year.”

    “With the substantial increase in our backlog, we enter the new year well positioned to both expand our scale and deliver that growth at superior margins. Our favorable outlook is supported by the composition of our backlog, a strong line-up of planned community openings, and a leaner, more efficient operation. Most notably, we expect meaningfully higher revenue and earnings in 2021 to drive significant expansion of our return on equity.”

    Three Months Ended November 30, 2020 (comparisons on a year-over-year basis)

    • Revenues totaled $1.19 billion, down 23% from $1.56 billion, reflecting the negative impact the COVID-19 pandemic had on the Company’s operations, particularly its net orders and housing starts, in the second quarter.
    • Homes delivered were 2,876, compared to 3,929.
    • Average selling price increased 5% to $413,700.
    • Homebuilding operating income totaled $115.7 million, compared to $162.5 million. The homebuilding operating income margin decreased 80 basis points to 9.7%. Excluding inventory-related charges of $11.7 million in the current quarter and $4.1 million in the year-earlier quarter, this metric was flat at 10.7%.
      • The housing gross profit margin expanded 40 basis points to 20.0%. Excluding inventory-related charges, the housing gross profit margin increased 110 basis points to 21.0%.
        • The housing gross profit margin improvement primarily reflected a favorable pricing environment due to the strength of housing market demand, shifts in the geographic and product mix of homes delivered and lower amortization of previously capitalized interest.
        • Adjusted housing gross profit margin, a metric that excludes inventory-related charges and the amortization of previously capitalized interest, increased to 24.0% from 23.1%.
      • Selling, general and administrative expenses as a percentage of housing revenues increased to 10.3% from 9.1%, primarily due to decreased operating leverage from lower housing revenues, partly offset by the Company’s targeted actions to reduce overhead costs.
    • The Company’s financial services operations generated pretax income of $9.5 million, up from $9.3 million, mainly reflecting higher income from its mortgage banking joint venture, KBHS Home Loans, LLC.
      • KBHS Home Loans, LLC originated 81% of the residential mortgage loans the Company’s homebuyers obtained to finance their home purchase, compared to 74%.
    • Total pretax income decreased to $126.1 million from $165.0 million, reflecting the effects from pandemic-related disruptions on the Company’s operations earlier in the year. As a percentage of revenues, pretax income was even with the year-earlier quarter at 10.6%.
      • Excluding the above-mentioned inventory-related charges in both periods and a $6.8 million charge for the early extinguishment of debt in the 2019 fourth quarter, pretax income as a percentage of revenues increased 20 basis points to 11.5% from 11.3%.
    • The Company‘s income tax expense and effective tax rate were $20.0 million and approximately 16%, respectively. In the year-earlier quarter, income tax expense was $41.8 million and the effective tax rate was approximately 25%. The lower effective tax rate in the current quarter primarily reflected the favorable impacts of federal energy tax credits and excess tax benefits from stock-based compensation.
    • Net income and diluted earnings per share were $106.1 million and $1.12, respectively, compared to net income of $123.2 million and diluted earnings per share of $1.31.

    Twelve Months Ended November 30, 2020 (comparisons on a year-over-year basis)

    • Total revenues of $4.18 billion were down 8%.
    • Homes delivered decreased 10% to 10,672.
    • Average selling price increased slightly to $388,900.
    • Pretax income grew 5% to $364.0 million.
    • Net income increased 10% to $296.2 million.
    • Diluted earnings per share rose 10% to $3.13.

    Backlog and Net Orders (comparisons on a year-over-year basis)

    • Net orders for the quarter grew 42% to 3,937, the Company’s highest fourth-quarter level since 2005, with net order value increasing by $525.5 million, or 50%, to $1.58 billion. Both net orders and net order value increased in all of the Company’s four regions, with net order value growth ranging from 30% in the Southwest region to 69% in the Southeast region.
      • The Company’s cancellation rate as a percentage of gross orders for the quarter improved to 14% from 22%.
      • Company-wide, net orders per community averaged 5.6 per month, up 51% compared to 3.7.
    • The Company’s ending backlog increased 54% to 7,810 homes. Ending backlog value grew 63% to $2.96 billion, the Company’s highest fourth-quarter backlog value since 2005. Each of the Company’s four regions generated substantial year-over-year growth in backlog value, with increases ranging from 34% in the Southwest region to 93% in the West Coast region.
    • Average community count for the quarter decreased 8% to 234. Ending community count of 236 was down 6%.

    Balance Sheet as of November 30, 2020 (comparisons to November 30, 2019)

    • Cash and cash equivalents increased to $681.2 million, compared to $453.8 million.
      • The Company had total liquidity of $1.47 billion, including cash and cash equivalents and $787.6 million of available capacity under its unsecured revolving credit facility. The Company did not borrow under the facility in 2020.
    • Inventories increased 5% to $3.90 billion.
      • In 2020, the Company’s investments in land acquisition and development totaled $1.69 billion, compared to $1.62 billion.
      • The Company’s lots owned or under contract rose to 67,038, of which approximately 60% were owned and 40% were under contract.
      • The Company’s 40,047 owned lots represented a supply of approximately 3.8 years, based on homes delivered in the trailing 12 months.
    • Notes payable of $1.75 billion were essentially unchanged.
      • The Company’s debt to capital ratio of 39.6% improved 270 basis points. The Company’s net debt to capital ratio improved 660 basis points to 28.6%.
      • The Company’s next scheduled debt maturity is on December 15, 2021, when $450.0 million in aggregate principal amount of its 7.00% senior notes become due.

    COVID-19 Impact on 2020 Fourth Quarter Results and 2021 Outlook

    The COVID-19 pandemic and related governmental control measures severely disrupted global and national economies, the U.S. housing market and the Company’s business during its 2020 second quarter. During this period, the Company experienced a sizable reduction in its net orders and backlog, protracted supply chain delays and construction cycle time extensions in most of its served markets. With the easing to varying degrees of restrictive public health orders in its served markets beginning in May, the Company’s net orders began to rebound significantly following a low point in April as housing demand fueled by the combination of historically low mortgage interest rates, a limited supply of resale inventory and consumers’ increasing desire to own a single-family home drove the Company’s third- and fourth-quarter net orders to 15-year highs. Though this sharp rise in net orders in the second half generated a substantial expansion in backlog, and positioned the Company for considerable top-line and bottom-line growth next year, the Company’s deliveries, revenues and profits for the 2020 fourth quarter reflected the negative effects from the early stages of the pandemic.

    During the 2020 second quarter and most of the third quarter, in prioritizing cash preservation and liquidity in light of lingering uncertainty surrounding the COVID-19 pandemic, the Company limited its investments in land and land development, resulting in a 24% year-over-year decrease in those quarters combined. Together with the Company’s close-out of communities earlier than planned due to an accelerated, demand-driven net order pace, and delays in community openings due in part to pandemic-related issues, the Company’s ending community count for the fourth quarter decreased year over year.

    With the sustained strong housing demand over the 2020 second half, the Company has intensified its land acquisition and development investments to measurably expand its lot pipeline and support future community count growth. In the fourth quarter, the Company increased its investments by 63% from the year-earlier quarter and, as a result, anticipates positive year-over-year community count comparisons beginning in the 2021 second half to drive an increase in community count for the year. In addition, with its ending backlog value up a robust 63% from a year ago, representing potential future revenues of approximately $2.96 billion, its highest level since 2005, the Company expects to achieve significant growth in its scale and profits in 2021. However, this favorable outlook could be affected materially by developments related to the COVID-19 pandemic, including new or more restrictive “stay-at-home” orders and other new or revised public health requirements recommended or imposed by federal, state and local authorities. Until the COVID-19 pandemic has been resolved as a public health crisis, it retains the potential to cause further and more severe disruption of global and national economies, the U.S. housing market and the Company’s business, including the Company’s net orders, backlog and revenues.

    Conference Call

    The conference call to discuss the Company’s 2020 fourth 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 kbhome.com.

    About KB Home

    KB Home (NYSE: KBH) is one of the largest and most recognized homebuilders in the United States and has been building quality homes for over 60 years. Today, KB Home operates in 45 markets across eight states, serving a wide array of buyer groups. What sets us apart is how we give our customers the ability to personalize their homes from homesites and floor plans to cabinets and countertops, at a price that fits their budget. We are the first builder to make every home we build ENERGY STAR® certified. In fact, we go beyond the EPA requirements by ensuring every ENERGY STAR certified KB home has been tested and verified by a third-party inspector to meet the EPA’s strict certification standards, which helps lower the cost of ownership and to make our new homes healthier and more comfortable than new ones without certification. We also work with our customers every step of the way, building strong personal relationships so they have a real partner in the homebuying process, and the experience is as simple and easy as possible. Learn more about how we build homes built on relationships by visiting 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; 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, particularly lumber; 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; home selling prices, including our homes’ selling prices, increasing at a faster rate than consumer incomes; 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, or to approve additional COVID-19-related relief or stimulus measures, and financial markets’ and businesses’ reactions to any such failure; government actions, policies, programs and regulations directed at or affecting the housing market (including the Coronavirus Aid, Relief, and Economic Security Act relief provisions for outstanding mortgage loans and any extensions or broadening thereof, 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 thereto; 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 and the guidance and/or interpretations with respect thereto; the availability and cost of land in desirable areas and our ability to timely develop acquired land parcels and open new home communities; 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 business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this release or in other public filings, presentations or disclosures; income tax expense volatility associated with 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, our mortgage banking joint venture with Stearns Ventures, LLC; information technology failures and data security breaches; an epidemic or pandemic (such as the outbreak and worldwide spread of COVID-19), and the control response measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may (as with COVID-19) precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; a continuation of widespread protests and civil unrest related to efforts to institute law enforcement and other social and political reforms, and the impacts of implementing or failing to implement any such reforms; 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 Twelve Months Ended November 30, 2020 and 2019

    (In Thousands, Except Per Share Amounts)

     

     

    Three Months Ended November 30,

     

    Twelve Months Ended November 30,

     

    2020

     

     

    2019

     

     

    2020

     

     

    2019

     

    Total revenues

    $

    1,194,256

     

     

     

    $

    1,558,675

     

     

     

    $

    4,183,174

     

     

     

    $

    4,552,747

     

     

    Homebuilding:

     

     

     

     

     

     

     

    Revenues

    $

    1,189,892

     

     

     

    $

    1,553,344

     

     

     

    $

    4,167,702

     

     

     

    $

    4,537,658

     

     

    Costs and expenses

    (1,074,147

    )

     

     

    (1,390,877

    )

     

     

    (3,851,230

    )

     

     

    (4,206,278

    )

     

    Operating income

    115,745

     

     

     

    162,467

     

     

     

    316,472

     

     

     

    331,380

     

     

    Interest income

    391

     

     

     

    413

     

     

     

    2,554

     

     

     

    2,158

     

     

    Equity in income (loss) of unconsolidated joint ventures

    493

     

     

     

    (390

    )

     

     

    12,474

     

     

     

    (1,549

    )

     

    Loss on early extinguishment of debt

    —

     

     

     

    (6,800

    )

     

     

    —

     

     

     

    (6,800

    )

     

    Homebuilding pretax income

    116,629

     

     

     

    155,690

     

     

     

    331,500

     

     

     

    325,189

     

     

    Financial services:

     

     

     

     

     

     

     

    Revenues

    4,364

     

     

     

    5,331

     

     

     

    15,472

     

     

     

    15,089

     

     

    Expenses

    (1,182

    )

     

     

    (1,266

    )

     

     

    (4,083

    )

     

     

    (4,333

    )

     

    Equity in income of unconsolidated joint ventures

    6,280

     

     

     

    5,212

     

     

     

    21,154

     

     

     

    12,230

     

     

    Financial services pretax income

    9,462

     

     

     

    9,277

     

     

     

    32,543

     

     

     

    22,986

     

     

    Total pretax income

    126,091

     

     

     

    164,967

     

     

     

    364,043

     

     

     

    348,175

     

     

    Income tax expense

    (20,000

    )

     

     

    (41,800

    )

     

     

    (67,800

    )

     

     

    (79,400

    )

     

    Net income

    $

    106,091

     

     

     

    $

    123,167

     

     

     

    $

    296,243

     

     

     

    $

    268,775

     

     

    Earnings per share:

     

     

     

     

     

     

     

    Basic

    $

    1.16

     

     

     

    $

    1.37

     

     

     

    $

    3.26

     

     

     

    $

    3.04

     

     

    Diluted

    $

    1.12

     

     

     

    $

    1.31

     

     

     

    $

    3.13

     

     

     

    $

    2.85

     

     

    Weighted average shares outstanding:

     

     

     

     

     

     

     

    Basic

    90,983

     

     

     

    89,100

     

     

     

    90,464

     

     

     

    87,996

     

     

    Diluted

    94,557

     

     

     

    93,682

     

     

     

    94,086

     

     

     

    93,838

     

     

    KB HOME

    CONSOLIDATED BALANCE SHEETS

    (In Thousands)

     

     

    November 30,
    2020

     

    November 30,
    2019

    Assets

     

     

     

    Homebuilding:

     

     

     

    Cash and cash equivalents

    $

    681,190

     

     

    $

    453,814

     

    Receivables

    272,659

     

     

    249,055

     

    Inventories

    3,897,482

     

     

    3,704,602

     

    Investments in unconsolidated joint ventures

    46,785

     

     

    57,038

     

    Property and equipment, net

    65,547

     

     

    65,043

     

    Deferred tax assets, net

    231,067

     

     

    364,493

     

    Other assets

    125,510

     

     

    83,041

     

     

    5,320,240

     

     

    4,977,086

     

    Financial services

    36,202

     

     

    38,396

     

    Total assets

    $

    5,356,442

     

     

    $

    5,015,482

     

     

     

     

     

    Liabilities and stockholders’ equity

     

     

     

    Homebuilding:

     

     

     

    Accounts payable

    $

    273,368

     

     

    $

    262,772

     

    Accrued expenses and other liabilities

    667,501

     

     

    618,783

     

    Notes payable

    1,747,175

     

     

    1,748,747

     

     

    2,688,044

     

     

    2,630,302

     

    Financial services

    2,629

     

     

    2,058

     

    Stockholders’ equity

    2,665,769

     

     

    2,383,122

     

    Total liabilities and stockholders’ equity

    $

    5,356,442

     

     

    $

    5,015,482

     

    KB HOME

    SUPPLEMENTAL INFORMATION

    For the Three Months and Twelve Months Ended November 30, 2020 and 2019

    (In Thousands, Except Average Selling Price)

     

     

    Three Months Ended November 30,

     

    Twelve Months Ended November 30,

     

    2020

     

     

    2019

     

     

    2020

     

     

    2019

     

    Homebuilding revenues:

     

     

     

     

     

     

     

    Housing

    $

    1,189,892

     

     

     

    $

    1,542,226

     

     

     

    $

    4,150,793

     

     

     

    $

    4,510,814

     

     

    Land

    —

     

     

     

    11,118

     

     

     

    16,909

     

     

     

    26,844

     

     

    Total

    $

    1,189,892

     

     

     

    $

    1,553,344

     

     

     

    $

    4,167,702

     

     

     

    $

    4,537,658

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Homebuilding costs and expenses:

     

     

     

     

     

     

     

    Construction and land costs

     

     

     

     

     

     

     

    Housing

    $

    951,450

     

     

     

    $

    1,239,237

     

     

     

    $

    3,365,509

     

     

     

    $

    3,683,174

     

     

    Land

    —

     

     

     

    11,338

     

     

     

    14,942

     

     

     

    25,754

     

     

    Subtotal

    951,450

     

     

     

    1,250,575

     

     

     

    3,380,451

     

     

     

    3,708,928

     

     

    Selling, general and administrative expenses

    122,697

     

     

     

    140,302

     

     

     

    470,779

     

     

     

    497,350

     

     

    Total

    $

    1,074,147

     

     

     

    $

    1,390,877

     

     

     

    $

    3,851,230

     

     

     

    $

    4,206,278

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Interest expense:

     

     

     

     

     

     

     

    Interest incurred

    $

    31,076

     

     

     

    $

    36,056

     

     

     

    $

    124,147

     

     

     

    $

    143,412

     

     

    Interest capitalized

    (31,076

    )

     

     

    (36,056

    )

     

     

    (124,147

    )

     

     

    (143,412

    )

     

    Total

    $

    —

     

     

     

    $

    —

     

     

     

    $

    —

     

     

     

    $

    —

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Other information:

     

     

     

     

     

     

     

    Amortization of previously capitalized interest

    $

    35,823

     

     

     

    $

    49,944

     

     

     

    $

    129,772

     

     

     

    $

    156,803

     

     

    Depreciation and amortization

    7,449

     

     

     

    8,259

     

     

     

    30,894

     

     

     

    31,584

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Average selling price:

     

     

     

     

     

     

     

    West Coast

    $

    640,300

     

     

     

    $

    598,300

     

     

     

    $

    609,400

     

     

     

    $

    592,300

     

     

    Southwest

    344,100

     

     

     

    318,200

     

     

     

    327,300

     

     

     

    322,000

     

     

    Central

    312,200

     

     

     

    301,100

     

     

     

    303,400

     

     

     

    293,500

     

     

    Southeast

    282,500

     

     

     

    287,200

     

     

     

    288,600

     

     

     

    293,200

     

     

    Total

    $

    413,700

     

     

     

    $

    392,500

     

     

     

    $

    388,900

     

     

     

    $

    380,000

     

     

    KB HOME

    SUPPLEMENTAL INFORMATION

    For the Three Months and Twelve Months Ended November 30, 2020 and 2019

    (Dollars in Thousands)

     

     

    Three Months Ended November 30,

     

    Twelve Months Ended November 30,

     

    2020

     

    2019

     

    2020

     

    2019

    Homes delivered:

     

     

     

     

     

     

     

    West Coast

    864

     

     

    1,199

     

     

    2,869

     

     

    3,214

     

    Southwest

    602

     

     

    731

     

     

    2,385

     

     

    2,346

     

    Central

    1,051

     

     

    1,302

     

     

    3,932

     

     

    4,291

     

    Southeast

    359

     

     

    697

     

     

    1,486

     

     

    2,020

     

    Total

    2,876

     

     

    3,929

     

     

    10,672

     

     

    11,871

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Net orders:

     

     

     

     

     

     

     

    West Coast

    987

     

     

    745

     

     

    3,850

     

     

    3,542

     

    Southwest

    741

     

     

    651

     

     

    2,668

     

     

    2,658

     

    Central

    1,576

     

     

    1,009

     

     

    4,981

     

     

    4,565

     

    Southeast

    633

     

     

    372

     

     

    1,905

     

     

    2,076

     

    Total

    3,937

     

     

    2,777

     

     

    13,404

     

     

    12,841

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Net order value:

     

     

     

     

     

     

     

    West Coast

    $

    617,691

     

     

    $

    431,870

     

     

    $

    2,302,785

     

     

    $

    2,087,293

     

    Southwest

    272,169

     

     

    209,837

     

     

    914,770

     

     

    842,335

     

    Central

    510,124

     

     

    308,377

     

     

    1,534,747

     

     

    1,362,580

     

    Southeast

    184,647

     

     

    109,052

     

     

    547,187

     

     

    597,945

     

    Total

    $

    1,584,631

     

     

    $

    1,059,136

     

     

    $

    5,299,489

     

     

    $

    4,890,153

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    November 30, 2020

     

    November 30, 2019

     

    Homes

     

    Value

     

    Homes

     

    Value

    Backlog data:

     

     

     

     

     

     

     

    West Coast

    2,024

     

     

    $

    1,152,609

     

     

    1,043

     

     

    $

    598,299

     

    Southwest

    1,521

     

     

    523,705

     

     

    1,238

     

     

    389,597

     

    Central

    3,037

     

     

    932,814

     

     

    1,988

     

     

    590,936

     

    Southeast

    1,228

     

     

    353,275

     

     

    809

     

     

    234,875

     

    Total

    7,810

     

     

    $

    2,962,403

     

     

    5,078

     

     

    $

    1,813,707

     

    KB HOME
    RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
    (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 adjusted housing gross profit margin and ratio of net debt to capital, neither of which is 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 November 30,

     

    Twelve Months Ended November 30,

     

    2020

     

     

    2019

     

     

    2020

     

     

    2019

     

    Housing revenues

    $

    1,189,892

     

     

     

    $

    1,542,226

     

     

     

    $

    4,150,793

     

     

     

    $

    4,510,814

     

     

    Housing construction and land costs

    (951,450

    )

     

     

    (1,239,237

    )

     

     

    (3,365,509

    )

     

     

    (3,683,174

    )

     

    Housing gross profits

    238,442

     

     

     

    302,989

     

     

     

    785,284

     

     

     

    827,640

     

     

    Add: Inventory-related charges (a)

    11,730

     

     

     

    4,148

     

     

     

    28,669

     

     

     

    17,291

     

     

    Housing gross profits excluding inventory-related charges

    250,172

     

     

     

    307,137

     

     

     

    813,953

     

     

     

    844,931

     

     

    Add: Amortization of previously capitalized interest (b)

    35,823

     

     

     

    49,854

     

     

     

    129,330

     

     

     

    156,114

     

     

    Adjusted housing gross profits

    $

    285,995

     

     

     

    $

    356,991

     

     

     

    $

    943,283

     

     

     

    $

    1,001,045

     

     

    Housing gross profit margin

    20.0

     

    %

     

    19.6

     

    %

     

    18.9

     

    %

     

    18.3

     

    %

    Housing gross profit margin excluding inventory-related charges

    21.0

     

    %

     

    19.9

     

    %

     

    19.6

     

    %

     

    18.7

     

    %

    Adjusted housing gross profit margin

    24.0

     

    %

     

    23.1

     

    %

     

    22.7

     

    %

     

    22.2

     

    %

     

    (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.

    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:

     

    November 30,
    2020

     

    November 30,
    2019

    Notes payable

    $

    1,747,175

     

     

     

    $

    1,748,747

     

     

    Stockholders’ equity

    2,665,769

     

     

     

    2,383,122

     

     

    Total capital

    $

    4,412,944

     

     

     

    $

    4,131,869

     

     

    Ratio of debt to capital

    39.6

     

    %

     

    42.3

     

    %

     

     

     

     

     

     

     

     

    Notes payable

    $

    1,747,175

     

     

     

    $

    1,748,747

     

     

    Less: Cash and cash equivalents

    (681,190

    )

     

     

    (453,814

    )

     

    Net debt

    1,065,985

     

     

     

    1,294,933

     

     

    Stockholders’ equity

    2,665,769

     

     

     

    2,383,122

     

     

    Total capital

    $

    3,731,754

     

     

     

    $

    3,678,055

     

     

    Ratio of net debt to capital

    28.6

     

    %

     

    35.2

     

    %

    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.

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