By a News Reporter-Staff News Editor at Investment Weekly News -- KB Home (NYSE:KBH), one of the nation's largest and most recognized homebuilders, reported results for its fourth quarter and fiscal year ended November 30, 2013 . Highlights and developments include the following: Three Months Ended November 30, 2013 Total revenues rose 7% to $618.5 million from $578.2 million for the year-earlier quarter, as double-digit increases in each of the Company's Southwest, Central and Southeast homebuilding regions were partly offset by a decrease in its West Coast homebuilding region. Homes delivered decreased 4% from the fourth quarter of 2012 to 2,038 homes, reflecting a decline in deliveries from the Company's West Coast homebuilding region that was partially offset by increases in each of the Company's other three homebuilding regions. The overall average selling price grew to $301,100 , up 11% from the year-earlier quarter, extending the Company's trend of year-over-year increases. The increase in the average selling price reflected the Company's ongoing investment in higher-performing, choice locations in land constrained growth markets that feature higher household incomes and demand for larger home sizes, as well as incremental revenues generated through lot premiums, options and upgrades, and generally favorable housing market conditions. Each of the Company's homebuilding regions posted a higher average selling price compared to the year-earlier quarter. Average selling price increases ranged from 10% in the Company's Southeast homebuilding region to 29% in its West Coast homebuilding region. The Company's homebuilding operating income of $47.0 million increased from $15.6 million for the year-earlier quarter. As a percentage of homebuilding revenues, operating income improved by 490 basis points to 7.6%, compared to 2.7% for the 2012 fourth quarter. The housing gross profit margin expanded by 420 basis points to 17.9% from 13.7% for the year-earlier quarter. The current quarter housing gross profit margin included an $8.5 million charge associated with water intrusion-related repairs at certain of the Company's communities in central and southwest Florida , inventory impairment charges of $.4 million , and land option contract abandonment charges of $2.9 million . In the fourth quarter of 2012, the housing gross profit margin included charges of $5.2 million for inventory impairments, $.4 million for land option contract abandonments, and $2.6 million for water intrusion-related repairs in central and southwest Florida . Excluding the above-mentioned charges, the Company's adjusted housing gross profit margin expanded by 470 basis points to 19.8% for the current quarter from 15.1% for the year-earlier quarter. Selling, general and administrative expenses as a percentage of housing revenues were 10.3%, compared to 11.0% in the year-earlier quarter. The Company's current quarter selling, general and administrative expenses included the reversal of a previously established accrual of $8.2 million due to a favorable court decision. Interest expense increased to $21.6 million from $16.0 million in the year-earlier quarter due to the inclusion of a $10.4 million loss on the early extinguishment of debt in the current quarter, partly offset by an increase in the amount of interest capitalized associated with a larger amount of qualifying assets. The Company's financial services operations generated pretax income of $3.1 million , which was up slightly from the year-earlier quarter. Net income increased to $28.1 million , or $.31 per diluted share, compared to $7.7 million , or $.10 per diluted share, in the fourth quarter of 2012. Income tax expense totaled $.2 million , compared to an income tax benefit of $5.3 million in the year-earlier quarter. Twelve Months Ended November 30, 2013 Revenues rose to $2.10 billion , up 34% from $1.56 billion for the prior year. Homes delivered increased 14% to 7,145 homes, up from 6,282 homes in 2012. The overall average selling price of $291,700 rose $45,200 , or 18%, from $246,500 in 2012. Homebuilding operating income improved significantly to $92.1 million , increasing by $112.4 million from an operating loss of $20.3 million in 2012. As a percentage of homebuilding revenues, operating income improved by 570 basis points to 4.4%, compared to an operating loss of 1.3% for 2012. The increase in homebuilding operating income reflected both a higher housing gross profit margin and improvement in the Company's selling, general and administrative expense ratio. The Company's housing gross profit margin improved by 270 basis points to 16.7% from 14.0% for the prior year. The adjusted housing gross profit margin expanded to 18.4%, up 490 basis points from 13.5% for 2012. Selling, general and administrative expenses as a percentage of housing revenues improved by 300 basis points to 12.3% from 15.3% in 2012. The Company's financial services operations posted pretax income of $10.2 million for the twelve months ended November 30, 2013 , compared to $10.9 million for the year-earlier period. Net income of $40.0 million , or $.46 per diluted share, increased by $99.0 million from a net loss of $59.0 million , or $.76 per diluted share, for the year ended November 30, 2012 . The 2013 results included an income tax benefit of $1.6 million , compared to an income tax benefit of $20.1 million in 2012 that reflected the resolution of federal and state tax audits. This marked the first time the Company has generated full-year net income since 2006. Backlog and Net Orders Potential future housing revenues in backlog at November 30, 2013 increased to $682.5 million , up 10% from $618.6 million at November 30, 2012 . The number of homes in the Company's backlog was 2,557 at November 30, 2013 , essentially flat compared to 2,577 at November 30, 2012 , although projected housing gross profit margins in backlog were higher year over year. The overall value of net orders for the 2013 fourth quarter was $481.7 million , up 5% from $459.3 million in the year-earlier quarter. Three of the Company's four homebuilding regions reported year-over-year growth in net order value, with increases ranging from 27% in the Southeast region to 72% in the Southwest region. The Company generated 1,556 net orders in the fourth quarter of 2013, essentially even with the year-earlier quarter. Net orders were up in each of the Company's homebuilding regions, with the exception of its West Coast homebuilding region, which experienced a year-over-year decrease largely as a result of the Company's ongoing strategic operational shift within the region toward coastal submarkets, the sell-out of older communities and delays in new community openings. The fourth quarter cancellation rate as a percentage of gross orders was 36% in 2013, compared to 35% in 2012. As a percentage of beginning backlog, the fourth quarter cancellation rate was 29% in 2013 and 26% in 2012. Balance Sheet Cash, cash equivalents and restricted cash totaled $572.0 million at November 30, 2013 , compared to $424.9 million at August 31, 2013 and $567.1 million at November 30, 2012 . The Company's cash, cash equivalents and restricted cash at November 30, 2013 increased by $147.1 million from August 31, 2013 primarily due to the net proceeds received from the issuance of $450 million of 7.00% senior notes due 2021, which were partly offset by the retirement of $215 million in aggregate principal amount of certain of the Company's senior notes due in 2014 and 2015 through a combination of purchases made pursuant to applicable tender offers and redemptions, as well as investments in inventories. The Company had no borrowings outstanding under its $200 million unsecured revolving credit facility as of November 30, 2013 . Inventories increased to $2.30 billion at November 30, 2013 from $1.71 billion at November 30, 2012 . Land and land development investments rose to $1.14 billion for the twelve months ended November 30, 2013 from $564.9 million for the year-earlier period, reflecting the Company's ongoing investments in land positions across the country. As a result of the significant land acquisition activity in 2013, the number of lots owned or controlled increased to 61,095 at November 30, 2013 , up 37% from 44,752 at November 30, 2012 . The Company's debt balance totaled $2.15 billion at November 30, 2013 , compared to $1.94 billion at August 31, 2013 and $1.72 billion at November 30, 2012 . The debt balance at November 30, 2013 increased from August 31, 2013 as a result of the capital markets and senior note retirement transactions completed during the quarter. These transactions provided additional cash to enhance the Company's financial strength and liquidity and support future growth. The Company's next scheduled debt maturity is in 2015, when $199.9 million of its 6 1/4% senior notes become due. Management Comments "Our fourth quarter results provided a solid finish to 2013 with both revenues and profits up from the prior year," said Jeffrey Mezger , president and chief executive officer. "We also posted full-year net income for the first time in several years. These results reflect the positive momentum within our business throughout 2013 that delivered measurably improved financial performance, with higher revenues and better bottom-line results in each quarter of the year. The catalyst for this progress has been an ongoing strategic shifting of our operations to higher-performing markets across the country. The favorable impact of this approach was most evident in California , where our average selling price for the quarter increased 29% from a year ago to $524,200 . Our results for the fourth quarter and full year reinforce our belief that we have the right strategies in place to create long-term value for our stockholders as the housing recovery progresses." Keywords for this news article include: KB Home , Economics, Finance and Investment, Investment and Finance. Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2014, NewsRx LLC
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