KB Home reports $2.58 billion of debt in Q3, land investment continues

By Lisa Kerner

Charlotte, N.C., Sept. 24 – KB Home “continued to generate positive results in several key financial and operating metrics during the third quarter,” chief financial officer Jeff Kaminski said during the company’s earnings call on Wednesday.

Year over year, the company’s revenues were up 7% at $589 million, while net income increased 4% to $28 million.

Kaminski said the average selling price of homes improved 9% and net order value grew 19% to $629 million.

During the third quarter, KB Home invested $334 million in land acquisition and development. Year to date, the company has spent $1.2 billion, or 34% more than the same period a year ago, said Kaminski. KB Home expects to spend a total of $1.6 billion on land for the full year.

Cash down, debt up

KB reported cash, cash equivalents and restricted cash at Aug. 31 of about $330 million. This compares to about $529 million at May 31 and $572 million at Nov. 30, 2013, according to the earnings news release.

The Los Angeles-based homebuilder had no borrowings outstanding under its $200 million unsecured revolving credit facility at quarter-end.

Debt totaled $2.58 billion at Aug. 31, up from $2.15 billion at Nov. 30, 2013, due to the public issuance of $400 million of senior notes in the second quarter, the release stated.

Interest expense decreased to $6.5 million from $11.3 million year over year due to an increase in the amount of interest capitalized.

Financial highlights

KB Home delivered 1,793 homes in the third quarter, compared to 1,825 homes delivered in the prior-year period. The overall average selling price was $327,000, up from $299,100 for the same period of 2013.

Homebuilding operating income was up about $2 million year over year at $34 million, while the housing gross profit margin advanced to 18.8% from 18.2%, the company said.

KB Home’s overall average community count increased 5% to 197 from a year ago.

“In a slowly recovering economic and housing market environment, we are consistently producing profitable results, growing our community count and generating our highest backlog value since 2008,” said president and chief executive officer Jeffrey Mezger.

“We believe demand will continue to strengthen as consumer confidence, household incomes and mortgage availability improve, creating even greater opportunities to achieve continued success in our served markets.”

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