-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AqaqcWb5dsZdi3dPvWk9rhb9oGfCuPjBbdryVnU+6rSF6B8GtjxTM5x48qyw8Gw7 GGKvPxeuDgA/bSm2X3dksQ== 0000950148-98-001580.txt : 19980625 0000950148-98-001580.hdr.sgml : 19980625 ACCESSION NUMBER: 0000950148-98-001580 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980623 ITEM INFORMATION: FILED AS OF DATE: 19980624 SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KAUFMAN & BROAD HOME CORP CENTRAL INDEX KEY: 0000795266 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 953666267 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-09195 FILM NUMBER: 98652827 BUSINESS ADDRESS: STREET 1: 10990 WILSHIRE BLVD CITY: LOS ANGELES STATE: CA ZIP: 90024 BUSINESS PHONE: 3102314000 8-K 1 FORM 8-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JUNE 23, 1998 KAUFMAN AND BROAD HOME CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) DELAWARE 1-9195 95-3666267 (STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER OF INCORPORATION) IDENTIFICATION NO.) 10990 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90024 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (310) 231-4000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) NOT APPLICABLE (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) ================================================================================ 2 ITEM 5. OTHER EVENTS. FOR RELEASE TUESDAY, JUNE 23, 1998 For further information: 6:00 AM - PDT Dennis Welsch - Investors (310) 231-4010 Jeff Charney - Media (310) 231-4252 KAUFMAN AND BROAD REPORTS 55.6% INCREASE IN SECOND QUARTER EARNINGS PER SHARE LOS ANGELES (June 23, 1998) --- Kaufman and Broad Home Corporation (NYSE:KBH) today reported for the second quarter ended May 31, 1998, diluted earnings per share of $.42, an increase of 55.6% compared to diluted earnings per share of $.27 in the 1997 second quarter. Net income for the second quarter of 1998 totaled $17.2 million, up 60.9% compared to the prior year quarter. The improved results were primarily driven by increases in unit deliveries and construction gross margin, as well as significantly improved mortgage banking pretax income. "We expected to record strongly improved deliveries in the second quarter based on our excellent recent net orders and backlog trends; however, we also recorded an eighty basis point year-over-year improvement in housing gross margin for the second quarter which was particularly significant," said Bruce Karatz, chairman and chief executive officer. "This is the first tangible evidence that the expected KB2000-driven gross margin gains are being realized. Assuming stable business conditions, we believe the prospects are good for very favorable gross margin comparisons in the remaining quarters of 1998." Construction revenues for the 1998 second quarter totaled $526.7 million, up 29.4% versus the prior year quarter, driven by a 38.3% increase in unit deliveries which was partially offset by a 5.2% decline in average sales price and lower land and commercial revenues. Unit deliveries were up in all three of the Company's geographic segments, led by increases of 60.0% in Other U.S. and 118.2% in Foreign operations. Included in the 1,938 Other U.S. deliveries during the quarter were a total of 427 incremental deliveries from the Company's three recent acquisitions in Houston, Denver and Phoenix/Tucson. The decline in average sales price was due to a higher proportion of lower priced Other U.S. deliveries and a 25.4% decline in the average sales price in the Company's Foreign operations as a result of the SMCI acquisition in France in the third quarter 2 3 of 1997. These declines were partially offset by a 4.0% increase in the average sales price for California. "As evidenced by deliveries and order rates thus far, we are very pleased with our recent acquisitions," Karatz said. "Integration of the acquired companies is proceeding smoothly and should be substantially complete by the end of our third quarter. We are increasingly confident that revenues and earnings per share contributions from these transactions will meet or exceed our original expectations, assuming stable business conditions." Net orders for the 1998 second quarter totaled 4,861 units, up 43.1% compared to the 1997 second quarter. California net orders were down 5.8%, as higher order rates per community were more than offset by a 17.1% decline in the average number of active communities, particularly in Northern California. Net orders from Other U.S. operations totaled 2,907 units, up 72.9% compared to the second quarter of 1997, including a total of 539 net orders attributable to the three newly acquired companies. Foreign net orders increased 135.6% in the quarter, driven primarily by the SMCI acquisition and improved market conditions in France. Backlog at the end of the 1998 second quarter totaled 7,581 units, or $1.1 billion, up 71.6% and 67.8%, respectively, compared to the prior year quarter. Included in 1998 backlog were 940 units, or $120.0 million, associated with the newly acquired companies. "Net orders have continued at very strong levels in all regions except California, where we expect to substantially close the gap in quarterly comparisons for community counts in the fourth quarter of 1998," Karatz said. "In addition, in selected markets, particularly in California, we have been aggressively increasing prices in certain hard-to-replace communities with high sales rates, with the effect of slowing sales rates in those communities to better match production. We are extremely pleased that our backlog ratio at the end of the 1998 second quarter reached 179.8%, showing steady progress toward our KB2000 goal of 200%." The backlog ratio is defined as the ratio of beginning backlog to deliveries in the succeeding quarter. Construction operating income for the 1998 second quarter totaled $27.9 million, or 5.3% of construction revenues, up 35.6% and .2 percentage points, respectively, compared to the 1997 second quarter. The increase in construction operating margin was driven by a .8 percentage point increase in housing gross margin to 18.8%, partially offset by a lower margin on land sales and an increase in the construction selling, general and administrative expense ("SG&A") ratio. Included in 1998 second quarter gross profits were land losses of $1.2 million, compared to an aggregate loss of $.1 million related to land and commercial activities in the prior year quarter. Excluding these losses, the 1998 second quarter construction operating income margin would have improved .4 percentage points versus the prior year quarter. The 1998 second quarter SG&A expense, measured as a percent of housing revenues, was 13.3%, down .5 percentage 3 4 points from the 1998 first quarter, but up .4 percentage points from the 1997 second quarter. The quarterly year-over-year increase in the SG&A ratio was primarily due to: higher sales commissions; expenditures incurred in connection with extensive information systems revisions in support of the KB2000 operational business model; and expenses related to the acquisitions, including temporary duplicate overhead, as well as sales incentives associated with the sell through of non-KB2000 product. Partially offsetting the foregoing were favorable variances related to total Company advertising and sales incentives. Nonetheless, the Company expects that the SG&A ratio for the entire 1998 fiscal year will be approximately even with 1997, as quarterly year-over-year comparisons improve in the remainder of 1998, assuming stable business conditions. "In addition to quarterly year-over-year improvements in both gross and operating margins which are anticipated in the remainder of 1998, we are pleased to note the breadth and consistency of operating income contributions across all major regions of the Company," Karatz said. Mortgage banking pretax income for the 1998 second quarter totaled $4.7 million, up 55.3% compared to the prior year quarter due to increased loan closings and secondary marketing income. In addition, the loan mix was favorable, with fixed rate loans representing 77% of closings in this year's quarter, compared to 56% in the year ago quarter. For the first six months of 1998, the Company reported net income of $25.3 million, or $.62 diluted earnings per share, an increase of 63.2% versus the $.38 diluted earnings per share in the first six months of 1997. For the first six months of 1997, net income totaled $15.1 million. Construction revenues for the first half of 1998 totaled $944.0 million, up 26.4% from construction revenues of $746.7 million for the same period a year ago, as a 32.0% rise in deliveries to 6,038 units for the first six months of 1998 from 4,573 units for the first six months of 1997 was partially offset by lower land sales and a 3.2% decline in average sales price. As of the end of the 1998 second quarter, construction debt totaled $688.3 million, up $189.8 million from the year earlier period due principally to increased inventory levels resulting from the Company's overall growth in new communities as well as the acquisitions closed in the 1998 second quarter. Total consideration for the acquisitions, including debt assumed, was approximately $162 million. The Company's ratio of debt to total capital as of the end of the 1998 second quarter was 62.7%, compared to 56.5% and 59.1% at the end of the 1997 fiscal year and the end of the 1997 second quarter, respectively. As previously announced, the Company filed a registration statement, dated May 5, 1998, for the sale of approximately $150.0 million of securities, the proceeds of which will be used for general corporate purposes, including support of the Company's growth strategies and potential future acquisitions. The Company expects to complete the offering in the third quarter. The 4 5 immediate use of proceeds will be to pay down existing bank debt. If the offering had been completed during the second quarter, the Company's pro forma ratio of debt to total capital at May 31, 1998, would have been below the Company's targeted range of 50% to 60%. Los Angeles-based Kaufman and Broad Home Corporation is the largest home builder in the United States west of the Mississippi River, delivering more single family homes than any other builder in the region. The Company operates nineteen homebuilding divisions located in California, Nevada, Arizona, New Mexico, Texas, Colorado, Utah, France and Mexico. --------------------------------- Except for the historical information contained herein, certain of the matters discussed in this press release are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, which involve certain risks and uncertainties, including but not limited to, changes in general economic conditions, materials prices, labor costs, interest rates, consumer confidence, competition, environmental factors, and government regulations affecting the Company's operations. See the Company's Annual Report on Form 10-K for the year ended November 30, 1997 for a further discussion of these and other risks and uncertainties applicable to the Company's business. # # # (Financials Follow) 5 6 KAUFMAN AND BROAD HOME CORPORATION CONSOLIDATED STATEMENTS OF INCOME For the Six Months and Three Months Ended May 31, 1998 and 1997 (In Thousands, Except Per Share Amounts - Unaudited)
Six Months Three Months -------------------------- -------------------------- 1998 1997 1998 1997 --------- --------- --------- --------- TOTAL REVENUES $ 963,704 $ 762,246 $ 537,459 $ 415,000 ========= ========= ========= ========= CONSTRUCTION: Revenues $ 944,026 $ 746,676 $ 526,717 $ 407,041 Costs and expenses (900,923) (714,340) (498,801) (386,451) --------- --------- --------- --------- Operating income 43,103 32,336 27,916 20,590 Interest income 2,849 2,251 1,327 1,164 Interest expense, net of amounts capitalized (14,799) (16,444) (7,662) (8,048) Minority interests in pretax income of consolidated joint ventures (422) (114) (163) (61) Equity in pretax income of unconsolidated joint ventures 332 61 83 21 --------- --------- --------- --------- Construction pretax income 31,063 18,090 21,501 13,666 --------- --------- --------- --------- MORTGAGE BANKING: Revenues: Interest income 7,302 6,637 3,640 3,028 Other 12,376 8,933 7,102 4,931 --------- --------- --------- --------- 19,678 15,570 10,742 7,959 Expenses: Interest (7,136) (6,222) (3,557) (2,976) General and administrative (4,685) (3,789) (2,464) (1,944) --------- --------- --------- --------- Mortgage banking pretax income 7,857 5,559 4,721 3,039 --------- --------- --------- --------- TOTAL PRETAX INCOME 38,920 23,649 26,222 16,705 Income taxes (13,600) (8,500) (9,000) (6,000) --------- --------- --------- --------- NET INCOME $ 25,320 $ 15,149 $ 17,222 $ 10,705 ========= ========= ========= ========= BASIC EARNINGS PER SHARE $ .65 $ .39 $ .44 $ .28 ========= ========= ========= ========= DILUTED EARNINGS PER SHARE $ .62 $ .38 $ .42 $ .27 ========= ========= ========= =========
6 7 KAUFMAN AND BROAD HOME CORPORATION CONSOLIDATED BALANCE SHEETS (In Thousands - Unaudited)
May 31, November 30, May 31, 1998 1997 1997 ---------- ---------- ---------- ASSETS CONSTRUCTION: Cash and cash equivalents $ 9,012 $ 66,343 $ 11,666 Receivables 169,760 169,988 121,593 Inventories 1,049,788 790,243 789,296 Investments in unconsolidated joint ventures 5,706 6,338 7,736 Goodwill 50,469 31,283 35,192 Other assets 91,873 69,666 64,989 ---------- ---------- ---------- 1,376,608 1,133,861 1,030,472 ---------- ---------- ---------- MORTGAGE BANKING: Cash and cash equivalents 8,674 1,899 6,121 Receivables 243,392 280,230 183,900 Other assets 2,781 3,001 3,000 ---------- ---------- ---------- 254,847 285,130 193,021 ---------- ---------- ---------- TOTAL ASSETS $1,631,455 $1,418,991 $1,223,493 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CONSTRUCTION: Accounts payable $ 179,816 $ 163,646 $ 127,882 Accrued expenses and other liabilities 114,098 105,376 76,673 Mortgages and notes payable 688,283 496,869 498,496 ---------- ---------- ---------- 982,197 765,891 703,051 ---------- ---------- ---------- MORTGAGE BANKING: Accounts payable and accrued expenses 9,308 7,300 6,323 Notes payable 172,530 200,828 103,418 Collateralized mortgage obligations secured by mortgage-backed securities 55,198 60,058 64,726 ---------- ---------- ---------- 237,036 268,186 174,467 ---------- ---------- ---------- Minority interests in consolidated joint ventures 1,985 1,858 657 Stockholders' equity 410,237 383,056 345,318 ---------- ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,631,455 $1,418,991 $1,223,493 ========== ========== ==========
7 8 KAUFMAN AND BROAD HOME CORPORATION SUPPLEMENTAL INFORMATION For the Six Months and Three Months Ended May 31, 1998 and 1997 (Unaudited)
Six Months Three Months ------------------------------ ----------------------------- CONSTRUCTION REVENUES: 1998 1997 1998 1997 -------------- ------------- ------------- ------------- Housing $ 939,112 $ 734,222 $ 524,912 $ 400,372 Commercial -- 2,185 -- 2,185 Land 4,914 10,269 1,805 4,484 ------------- ------------ ------------ ------------ Total $ 944,026 $ 746,676 $ 526,717 $ 407,041 ============= ============ ============ ============
Six Months Three Months ------------------------------ ----------------------------- COSTS AND EXPENSES: 1998 1997 1998 1997 -------------- ------------- ------------- ------------- Construction and land costs $ 773,872 $ 614,526 $ 428,993 $ 334,938 Selling, general and administrative Expenses 127,051 99,814 69,808 51,513 ------------- ------------ ------------ ------------ Total $ 900,923 $ 714,340 $ 498,801 $ 386,451 ============= ============ ============ ============
Six Months Three Months ------------------------------ ----------------------------- AVERAGE SALES PRICES: 1998 1997 1998 1997 -------------- ------------- ------------- ------------- California $ 214,900 $ 204,600 $ 215,800 $ 207,500 Other U.S. 120,100 117,900 120,000 117,800 Foreign 137,600 201,400 143,400 192,100 ------------- ------------ ------------ ------------ Total $ 155,500 $ 160,600 $ 154,000 $ 162,400 ============= ============ ============ ============
Six Months Three Months ------------------------------ ----------------------------- NET ORDERS: 1998 1997 1998 1997 -------------- ------------- ------------- ------------- California 2,660 2,553 1,391 1,476 Other U.S. 4,969 3,209 2,907 1,681 Foreign 948 389 563 239 ------------- ------------ ------------ ------------ Total 8,577 6,151 4,861 3,396 ============= ============ ============ ============
Six Months Three Months ------------------------------ ----------------------------- UNIT DELIVERIES: 1998 1997 1998 1997 -------------- ------------- ------------- ------------- California 2,146 2,009 1,124 1,095 Other U.S. 3,279 2,313 1,938 1,211 Foreign 613 251 347 159 ------------- ------------ ------------ ------------ Total 6,038 4,573 3,409 2,465 ============= ============ ============ ============
May 31, 1998 May 31, 1997 ------------------------------ ----------------------------- Backlog Backlog Backlog Backlog BACKLOG DATA: Units Value Units Value -------------- ------------- ------------- ------------- California 1,830 $ 394,144 1,398 $ 288,719 Other U.S. 4,808 588,820 2,652 307,977 Foreign 943 136,929 367 70,806 ------------- ------------ ------------ ------------ Total 7,581 $ 1,119,893 4,417 $ 667,502 ============= ============ ============ ============
8 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: June 23, 1998 KAUFMAN AND BROAD HOME CORPORATION Registrant By: /s/ Michael F. Henn --------------------------------------------- Michael F. Henn Senior Vice President and Chief Financial Officer 9 -----END PRIVACY-ENHANCED MESSAGE-----