EXHIBIT 99.1
[KB HOME PRESS RELEASE LOGO]
FOR RELEASE, MONDAY, SEPTEMBER 20, 2004 FOR FURTHER INFORMATION CONTACT:
2:00 P.M. PACIFIC DAYLIGHT TIME Kelly Masuda, Investor Relations
(310) 231-4184 or kmasuda@kbhome.com
Derrick Hall, Media Contact
(310) 231-4142 or dmhall@kbhome.com
KB HOME REPORTS RECORD THIRD QUARTER RESULTS; RAISES 2004 EARNINGS ESTIMATE
REVENUES OF $1.75 BILLION, UP 21%; EPS INCREASES 22% TO $2.84
NET ORDERS UP 23%; BACKLOG INCREASES 42% TO $4.82 BILLION
COMPANY FORECASTS EPS GROWTH OF 27% FOR 2005
Los Angeles, CA, September 20, 2004 - KB Home (NYSE: KBH), one of the largest
homebuilders in the United States and France, today announced record financial
results for its third quarter ended August 31, 2004. Highlights include:
- The Company achieved strong top-line growth in the third quarter of
2004 with total revenues of $1.75 billion, up 21% from $1.44 billion
posted in 2003. Housing revenues increased 24% to $1.72 billion in the
quarter, driven by higher unit deliveries which rose 17% to 8,041 units
and a 5% increase in the average selling price to $214,400.
- Substantial earnings growth in the quarter was driven by higher unit
volume and the expansion of the Company's construction operating margin.
Net income for the third quarter of 2004 totaled $117.9 million,
increasing 20% from $97.8 million in the third quarter of 2003. The
Company's diluted earnings per share increased to $2.84 for the three
months ended August 31, 2004, up 22% from $2.33 for the three months ended
August 31, 2003.
- Company-wide net orders for the third quarter increased 23% to 8,982,
up from 7,319 net orders reported for the same quarter of 2003.
Year-over-year net order growth was driven by higher net orders from each
of the Company's geographic regions. Recent acquisitions and de novo
growth have significantly expanded the Company's territory in the Central
and Southeast regions and set the stage for continued net order momentum.
- Backlog at August 31, 2004, in terms of both units and dollars, was the
highest of any quarter-end in the Company's history. The dollar value of
backlog at August 31, 2004 totaled approximately $4.82 billion, up 42%
from August 31, 2003, and represents a strong pipeline of future revenues
for the remainder of 2004 and into 2005. The Company's unit backlog at
August 31, 2004 stood at 21,928, an increase of 5,356 units or 32% from
16,572 units at August 31, 2003.
- The Company's favorable financial performance through the first nine
months of 2004 and positive outlook
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for the remainder of the year and 2005 have prompted an increase in
expected earnings to $11.00 per diluted share for 2004 from the Company's
previous estimate. This represents an increase of 25% from the $8.80
earnings per diluted share generated in 2003. The Company also issued
initial earnings guidance for 2005 of $14.00 per diluted share, a 27%
increase over the forecasted 2004 diluted earnings per share.
"The strength of KB Home's third quarter net income and earnings per
share is the direct result of our excellent top-line growth in unit deliveries
and revenues combined with the expansion of our margins," said Bruce Karatz,
chairman and chief executive officer. "The performance of our core homebuilding
business also benefited from our geographic diversity and growing wide-array of
attached and detached product offerings, appealing to first-time and move-up
homebuyers, as well as active adults and luxury buyers. As current market
conditions remained solid and supported the underlying fundamental demand for
housing, unit deliveries in nearly all of our geographic regions exceeded prior
year results in the third quarter. We anticipate this performance to continue in
the fourth quarter, delivering outstanding results for the full year."
Total revenues for the third quarter of 2004 rose to $1.75 billion,
up 21% from $1.44 billion in the third quarter of 2003. Housing revenues
increased 24% in the period to $1.72 billion, up from $1.39 billion in the
year-earlier period as a result of increases in both unit volume and average
selling prices. Unit deliveries rose 17% to 8,041 in the third quarter of 2004
from 6,850 in the same quarter of 2003. The Company's overall average selling
price rose 5% to $214,400 in 2004 from $203,600 in 2003. Year-over-year growth
in the Company's average selling price reflected increases in all of its
domestic geographic regions.
"Our strategic investments in markets across the country over the
past several quarters have laid the necessary groundwork for achieving our
long-term growth goals," Karatz said. "We fully expect these investments to
translate into higher community counts, revenues and earnings in the future.
Demand for new homes should remain healthy as we expect the nation's economy to
improve, consumer confidence to increase, household incomes to rise, and
favorable demographic trends to continue to drive new household formations.
Based on both our ability to deliver a rising number of new homes and our
assessment of likely market conditions for the remainder of this year and into
2005, we have increased our earnings estimate for 2004 to $11.00 per diluted
share and are forecasting a 27% increase in earnings to $14.00 per diluted share
for 2005."
Construction operating income rose to $190.8 million in the third
quarter of 2004, a 39% increase from $137.3 million in the year-earlier quarter.
The improvement was largely due to higher unit volume and an expanded operating
margin. The Company's housing gross margin increased 130 basis points to 24.1%
for the three months ended August 31, 2004, up from 22.8% for the same period of
2003 primarily due to the favorable pricing environment as well as operating
efficiencies achieved. The Company's construction operating margin increased to
11.0% in the third quarter of 2004 from 9.7% in the third quarter of 2003. Net
income rose to an all-time third quarter high of $117.9 million in 2004, up 20%
from $97.8 million in the third quarter of 2003.
"KB Home's operating margin exhibited substantial growth in the
third quarter primarily as a result of a higher housing gross margin," Karatz
said. "We have leveraged the increase in our revenues by managing our costs in
accordance with our operational business model to drive margin growth. Our
success in quickly and effectively integrating recently acquired businesses also
contributed to the improved profit margin."
The Company's backlog value totaled approximately $4.82 billion at
August 31, 2004, a 42% increase compared to $3.40 billion at August 31, 2003.
Total backlog units at August 31, 2004 rose 32% year-over-year to
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21,928 units reflecting increases in all geographic regions in which the Company
operates. This backlog growth resulted from a 23% increase in net orders for the
quarter ended August 31, 2004 to 8,982, up from the 7,319 net orders posted for
the same quarter of 2003. All geographic regions generated favorable
year-over-year comparisons.
"Net order activity during the third quarter increased significantly
from the prior year quarter and drove the tremendous increase in our backlog
which represents future revenues," Karatz said. "With a record third quarter
backlog supporting our projections for the remainder of 2004, we operate from a
great vantage point as we move forward. Furthermore, as of quarter end we owned
or controlled a diverse inventory pipeline comprised of more than 160,000 lots
in attractive markets across the United States, which further enhances our
optimism for the longer-term in this land-constrained environment."
During the first nine months of 2004, the Company delivered 21,361
homes, up 16% from the 18,457 delivered in the first nine months of 2003. Total
revenues for the first three quarters of 2004 reached $4.67 billion, up 17% from
$3.98 billion in the first three quarters of 2003. The Company's construction
operating margin improved 150 basis points to 10.3% for the nine months ended
August 31, 2004 and fueled a 27% increase in net income to $294.2 million from
$232.0 million for the nine months ended August 31, 2003. Diluted earnings per
share for the first three quarters of 2004 set a new Company record of $6.98,
advancing 27% from the prior record of $5.51 per share in the same period of
2003.
THE CONFERENCE CALL ON THE THIRD QUARTER 2004 EARNINGS WILL BE BROADCAST LIVE
TOMORROW AT 8:00 A.M. PACIFIC DAYLIGHT TIME, 11:00 A.M. EASTERN DAYLIGHT TIME.
TO LISTEN, PLEASE GO TO THE INVESTOR RELATIONS SECTION OF THE COMPANY'S WEB SITE
AT 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, North Carolina and South Carolina. Kaufman & Broad S.A., the Company's
majority-owned subsidiary, is one of the largest homebuilders in France. In
fiscal 2003, the Company delivered homes to 27,331 families in the United States
and France. It also operates a full-service mortgage company for the convenience
of its buyers. 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 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
subject to risks, uncertainties and assumptions including, but not limited to,
the continued impact of terrorist activities and U.S. response, accelerating
recessionary trends and other adverse changes in general economic conditions,
material prices, labor costs, interest rates, the secondary market for loans,
consumer confidence, competition, currency exchange rates (insofar as they
affect the Company's operations in France), environmental factors, government
regulations affecting the Company's operations, the availability and cost of
land in desirable areas, unanticipated violations of Company policy,
unanticipated legal proceedings, and conditions in the capital, credit and
homebuilding markets. See the Company's Annual Report on Form 10-K and its
Annual Report to Shareholders for the year ended November 30, 2003 and its other
filings for a further discussion of these and other risks and uncertainties
applicable to the Company's business.
# # #
(TABLES FOLLOW)
# # #
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KB HOME
CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months and Three Months Ended August 31, 2004 and 2003
(In Thousands, Except Per Share Amounts - Unaudited)
Nine Months Three Months
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
TOTAL REVENUES $ 4,672,087 $ 3,977,313 $ 1,748,292 $ 1,442,259
=========== =========== =========== ===========
CONSTRUCTION:
Revenues $ 4,639,509 $ 3,920,387 $ 1,739,538 $ 1,418,075
Costs and expenses (4,162,432) (3,574,058) (1,548,757) (1,280,729)
----------- ----------- ----------- -----------
Operating income 477,077 346,329 190,781 137,346
Interest income 2,978 2,041 782 568
Interest expenses, net of amounts capitalized (14,633) (18,398) (3,827) (2,400)
Minority interests (41,174) (12,690) (18,535) (3,995)
Equity in pretax of unconsolidated joint ventures 9,264 1,453 5,600 764
----------- ----------- ----------- -----------
Construction pretax income 433,512 318,735 174,801 132,283
----------- ----------- ----------- -----------
MORTGAGE BANKING:
Revenues:
Interest income 7,930 11,089 2,935 3,026
Other 24,648 45,837 5,819 21,158
----------- ----------- ----------- -----------
32,578 56,926 8,754 24,184
Expenses:
Interest (3,069) (5,132) (1,104) (1,294)
General and administrative (23,853) (24,201) (6,497) (9,158)
----------- ----------- ----------- -----------
Mortgage banking pretax income 5,656 27,593 1,153 13,732
----------- ----------- ----------- -----------
TOTAL PRETAX INCOME 439,168 346,328 175,954 146,015
Income taxes (145,000) (114,300) (58,100) (48,200)
----------- ----------- ----------- -----------
NET INCOME $ 294,168 $ 232,028 $ 117,854 $ 97,815
=========== =========== =========== ===========
BASIC EARNINGS PER SHARE $ 7.51 $ 5.87 $ 3.03 $ 2.51
=========== =========== =========== ===========
DILUTED EARNINGS PER SHARE $ 6.98 $ 5.51 $ 2.84 $ 2.33
=========== =========== =========== ===========
BASIC AVERAGE SHARES OUTSTANDING 39,186 39,560 38,916 38,895
=========== =========== =========== ===========
DILUTED AVERAGE SHARES OUTSTANDING 42,150 42,135 41,494 41,946
=========== =========== =========== ===========
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KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands - Unaudited)
August 31, November 30, August 31,
2004 2003 2003
---------- ----------- ----------
ASSETS
CONSTRUCTION:
Cash and cash equivalents $ 1,947 $ 116,555 $ 50,387
Receivables 400,593 430,266 369,088
Inventories 4,059,936 2,883,482 2,867,152
Investments in unconsolidated joint ventures 122,440 32,797 29,142
Deferred income taxes 155,912 165,896 158,329
Goodwill 244,315 228,999 215,520
Other assets 149,661 124,751 129,395
---------- ---------- ----------
5,134,804 3,982,746 3,819,013
---------- ---------- ----------
MORTGAGE BANKING:
Cash and cash equivalents 36,821 21,564 20,124
Receivables 190,256 219,532 264,185
Other assets 13,893 12,017 13,428
---------- ---------- ----------
240,970 253,113 297,737
---------- ---------- ----------
TOTAL ASSETS $5,375,774 $4,235,859 $4,116,750
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CONSTRUCTION:
Accounts payable $ 598,359 $ 554,387 $ 523,089
Accrued expenses and other liabilities 621,091 574,527 441,925
Mortgages and notes payable 2,030,606 1,253,932 1,442,171
---------- ---------- ----------
3,250,056 2,382,846 2,407,185
---------- ---------- ----------
MORTGAGE BANKING:
Accounts payable and accrued expenses 82,056 31,858 34,537
Notes payable 97,328 132,225 162,670
Collateralized mortgage obligations secured by
mortgage-backed securities 5,140 6,848 8,603
---------- ---------- ----------
184,524 170,931 205,810
---------- ---------- ----------
Minority interests 116,068 89,231 77,458
Stockholders' equity 1,825,126 1,592,851 1,426,297
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,375,774 $4,235,859 $4,116,750
========== ========== ==========
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KB HOME
SUPPLEMENTAL INFORMATION
For the Nine Months and Three Months Ended August 31, 2004 and 2003
(In Thousands - Unaudited)
Nine Months Three Months
----------------------------- -----------------------------
CONSTRUCTION REVENUES: 2004 2003 2004 2003
---------- ---------- ---------- ----------
Housing $4,600,145 $3,802,426 $1,723,861 $1,394,434
Commercial 16,726 105,638 7,602 15,246
Land 22,638 12,323 8,075 8,395
---------- ---------- ---------- ----------
Total $4,639,509 $3,920,387 $1,739,538 $1,418,075
========== ========== ========== ==========
Nine Months Three Months
----------------------------- -----------------------------
COSTS AND EXPENSES: 2004 2003 2004 2003
---------- ---------- ---------- ----------
Construction and land costs
Housing $3,520,683 $2,961,413 $1,308,487 $1,075,924
Commercial 12,976 83,645 5,764 13,244
Land 19,100 11,247 5,136 8,221
---------- ---------- ---------- ----------
Subtotal 3,552,759 3,056,305 1,319,387 1,097,389
Selling, general and administrative expenses 609,673 517,753 229,370 183,340
---------- ---------- ---------- ----------
Total $4,162,432 $3,574,058 $1,548,757 $1,280,729
========== ========== ========== ==========
Nine Months Three Months
----------------------------- -----------------------------
INTEREST EXPENSES: 2004 2003 2004 2003
---------- ---------- ---------- ----------
Interest incurred $ 101,605 $ 89,674 $ 37,325 $ 28,540
Interest capitalized (86,972) (71,276) (33,498) (26,140)
---------- ---------- ---------- ----------
Interest expense $ 14,633 $ 18,398 $ 3,827 $ 2,400
========== ========== ========== ==========
Nine Months Three Months
----------------------------- -----------------------------
OTHER INFORMATION: 2004 2003 2004 2003
---------- ---------- ---------- ----------
Depreciation and amortization $ 15,469 $ 15,942 $ 5,021 $ 5,503
Amortization of previously capitalized interest 54,184 46,863 19,684 16,649
========== ========== ========== ==========
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KB HOME
SUPPLEMENTAL INFORMATION
For the Nine Months and Three Months Ended August 31, 2004 and 2003
(Unaudited)
Nine Months Three Months
--------------------------- --------------------------
AVERAGE SALES PRICE: 2004 2003 2004 2003
-------- -------- -------- --------
West Coast $399,500 $352,200 $407,900 $351,400
Southwest 198,100 177,300 199,600 180,000
Central 148,400 149,100 148,800 146,300
Southeast 169,200 157,000 172,000 155,100
France 206,800 200,900 199,200 201,400
-------- -------- -------- --------
Total $215,400 $206,000 $214,400 $203,600
======== ======== ======== ========
Nine Months Three Months
--------------------------- --------------------------
UNIT DELIVERIES: 2004 2003 2004 2003
-------- -------- -------- --------
West Coast 3,643 3,763 1,333 1,339
Southwest 5,337 4,685 1,884 1,731
Central 5,974 5,075 2,432 1,851
Southeast 3,308 2,312 1,263 1,017
France 3,099 2,622 1,129 912
------ ------ ----- ------
Total 21,361 18,457 8,041 6,850
====== ====== ===== ======
Unconsolidated Joint Ventures: 601 144 277 59
====== ====== ===== ======
Nine Months Three Months
--------------------------- --------------------------
NET ORDERS: 2004 2003 2004 2003
-------- -------- -------- --------
West Coast 4,720 4,663 1,526 1,410
Southwest 6,430 5,881 2,025 1,912
Central 7,606 5,889 2,204 1,913
Southeast 5,277 2,900 1,892 1,130
France 3,729 2,932 1,335 954
------ ------ ----- -----
Total 27,762 22,265 8,982 7,319
====== ====== ===== =====
Unconsolidated Joint Ventures: 748 394 148 136
====== ====== ===== =====
August 31, 2004 August 31, 2003
--------------------------- --------------------------
BACKLOG DATA: Backlog Units Backlog value Backlog Units Backlog value
------------- ------------- ------------- -------------
(Dollars in thousands)
West Coast 3,718 $1,522,970 3,280 $1,142,247
Southwest 4,956 987,632 3,991 729,195
Central 5,357 806,894 4,473 643,354
Southeast 4,201 765,654 2,353 389,373
France 3,696 735,504 2,475 497,475
------ ---------- ------ ----------
Total 21,928 $4,818,654 16,572 $3,401,644
====== ========== ====== ==========
Unconsolidated Joint Ventures: 838 $ 147,233 295 $ 47,726
====== ========== ====== ==========
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