KB Home ends Q2 with cash and equivalents of $529 million, increased debt of $2.57 billion

By Lisa Kerner

Charlotte, N.C., June 27 – KB Home is “solidly” profitable and “gaining momentum,” according to president and chief executive officer Jeffrey Mezger.

The Los Angeles-based homebuilder held a conference call on Friday to discuss its results for the second quarter ended May 31.

KB Home had cash, cash equivalents and restricted cash totaling about $529 million at quarter-end. This compares to about $345 million at Feb. 28 and $572 million at Nov. 30.

The increase from February to May was attributed mainly to capital markets transactions completed in the second quarter, which generated total net proceeds of $531.6 million, partly offset by strategic investments in inventories to support future growth, according to the earnings news release.

As of May 31, the company's debt balance was $2.57 billion, up from $2.15 billion at Nov. 30. The increase was due primarily to the current-quarter public issuance of $400 million of 4¾% senior notes due 2019, which generated net cash proceeds of $394.6 million.

KB Home had total liquidity of $684.5 million at quarter-end, including its unrestricted cash balance and $200 million unsecured revolving credit facility, which had no borrowings outstanding.

Stockholders’ equity was up during the quarter to about $710 million from about $536 million at the end of the prior quarter.

Financial highlights

KB Home’s quarterly revenues were up 8% year over year at $565 million. Revenues were up 9% for the six-month period at $1.02 billion.

The average selling price of homes was up 10%, and the company delivered 1,751 homes in the quarter.

For the six months ended May 31, the average selling price of homes rose 11%, and KB Home delivered 3,193 homes during the period.

Interest expense decreased to $8.6 million from $14.5 million in the year-earlier quarter, reflecting an increase in the amount of interest capitalized, the release stated.

Net income was up at $26.6 million, or $0.27 per diluted share, compared to a net loss of $3 million, or $0.04 per diluted share, in the second quarter of 2013.

KB Home reported net income for the six-month period of $37.2 million, or $0.40 per diluted share, up from a net loss of $15.4 million, or $0.19 per diluted share, in the six months ended May 31, 2013.

“We have produced year-over-year revenue increases for 11 straight quarters and operating income improvement for 10 consecutive quarters,” said Mezger.

“With the momentum we have generated through the first half of the year and our robust backlog, we believe we are on track to meet our fiscal 2014 goals.”

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