Homebuilder KB Home this week announced record financial results for the third quarter, with total revenues reaching $1.75 billion, up 21 percent from third-quarter 2003 results. Housing revenues increased 24 percent from third quarter 2003 to third quarter 2004, to $1.72 billion, the company also announced.
The average selling price rose 5 percent in that time, to $214,400, and housing unit deliveries were up 17 percent to 8,041 units.
Some other KB Home third-quarter statistics:
- Net income for the third quarter of 2004 totaled $117.9 million, a 20 percent increase from $97.8 million in third quarter 2003. The company’s diluted earnings per share increased to $2.84 for the three months ended Aug. 31, 2004, up 22 percent from $2.33 for the three months ended Aug. 31, 2003.
- Companywide net orders for the third quarter increased 23 percent 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 expanded the company’s territory in the Central and Southeast regions and set the stage for continued net order strength.
- The company’s backlog at Aug. 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 Aug. 31, 2004, totaled approximately $4.82 billion, up 42 percent from Aug. 31, 2003, and represents a pipeline of future revenue for the remainder of 2004 and into 2005. The company’s unit backlog at Aug. 31, 2004, stood at 21,928, an increase of 5,356 units or 32 percent from 16,572 units at Aug. 31, 2003.
- The company’s favorable financial performance through the first nine months of 2004 and positive outlook for the remainder of the year and 2005 have prompted an increase in expected earnings to $11 per diluted share for 2004 from the company’s previous estimate. This represents an increase of 25 percent from the $8.80 earnings per diluted share generated in 2003. The company also issued initial earnings guidance for 2005 of $14 per diluted share, a 27 percent 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, KB Home 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 home buyers, 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 percent from $1.44 billion in the third quarter of 2003. Housing revenues increased 24 percent 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 percent 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 percent 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 per diluted share and are forecasting a 27 percent increase in earnings to $14 per diluted share for 2005.”
Construction operating income rose to $190.8 million in the third quarter of 2004, a 39 percent 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 percent for the three months ended Aug. 31, 2004, up from 22.8 percent 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 percent in the third quarter of 2004 from 9.7 percent in the third quarter of 2003. Net income rose to an all-time third-quarter high of $117.9 million in 2004, up 20 percent 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.
The company’s backlog value totaled approximately $4.82 billion at Aug. 31, 2004, a 42 percent increase compared to $3.4 billion at Aug. 31, 2003. Total backlog units at Aug. 31, 2004, rose 32 percent year-over-year to 21,928 units reflecting increases in all geographic regions in which the company operates. This backlog growth resulted from a 23 percent increase in net orders for the quarter ended Aug. 31, 2004, to 8,982, up from the 7,319 net orders posted for the same quarter of 2003.
“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 percent 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 percent from $3.98 billion in the first three quarters of 2003. The company’s construction operating margin improved 150 basis points to 10.3 percent for the nine months ended Aug. 31, 2004, and fueled a 27 percent increase in net income to $294.2 million from $232 million for the nine months ended Aug. 31, 2003. Diluted earnings per share for the first three quarters of 2004 set a new Company record of $6.98, advancing 27 percent from the prior record of $5.51 per share in the same period of 2003.
KB Home has domestic operating divisions in 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 home buyers. Founded in 1957, KB Home is a Fortune 500 company listed on the New York Stock Exchange under the ticker symbol “KBH.”
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