<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended February 28, 1995.
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from [ ] to [ ].
Commission File No. 1-9195
KAUFMAN AND BROAD HOME CORPORATION
(Exact name of registrant as specified in charter)
Delaware 95-3666267
(State of incorporation) (IRS employer identification number)
10990 Wilshire Boulevard
Los Angeles, California 90024
(310) 231-4000
(Address and telephone number of principal and executive offices)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
Yes / X / No / /
----- -----
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT.
Common stock, par value $1.00 per share, 32,382,317 shares outstanding
<PAGE> 2
KAUFMAN AND BROAD HOME CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER(S)
---------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income -
Three Months ended February 28, 1995 and 1994 3
Consolidated Balance Sheets -
February 28, 1995 and November 30, 1994 4
Consolidated Statements of Cash Flows -
Three Months ended February 28, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8-11
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX OF EXHIBITS 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KAUFMAN AND BROAD HOME CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended February 28,
--------------------------------------
1995 1994
--------------- ----------------
<S> <C> <C>
TOTAL REVENUES $ 229,832 $ 256,879
=============== ================
CONSTRUCTION:
Revenues $ 224,377 $ 249,405
Construction and land costs (187,201) (200,269)
Selling, general and administrative expenses (31,672) (32,539)
--------------- ----------------
Operating income 5,504 16,597
Interest income 551 642
Interest expense, net of amounts capitalized (5,641) (4,242)
Minority interests in pretax income of
consolidated joint ventures (23) (218)
Equity in pretax income (loss) of
unconsolidated joint ventures (124) 53
--------------- ----------------
Construction pretax income 267 12,832
--------------- ----------------
MORTGAGE BANKING:
Revenues:
Interest income 4,301 4,738
Other 1,154 2,736
--------------- ----------------
5,455 7,474
Expenses:
Interest (3,972) (4,954)
General and administrative (1,065) (1,298)
--------------- ----------------
Mortgage banking pretax income 418 1,222
--------------- ----------------
TOTAL PRETAX INCOME 685 14,054
Income taxes (250) (5,200)
--------------- ----------------
NET INCOME $ 435 $ 8,854
=============== ================
EARNINGS PER SHARE $ .01 $ .22
=============== ================
AVERAGE SHARES OUTSTANDING 39,743 40,373
=============== ================
CASH DIVIDENDS PER COMMON SHARE $ .075 $ .075
=============== ================
</TABLE>
See accompanying notes.
3
<PAGE> 4
KAUFMAN AND BROAD HOME CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands - Unaudited)
<TABLE>
<CAPTION>
February 28, November 30,
1995 1994
-------------- ---------------
<S> <C> <C>
ASSETS
CONSTRUCTION:
Cash and cash equivalents $ 25,480 $ 49,497
Trade and other receivables 104,808 114,921
Inventories 1,037,528 942,713
Investments in unconsolidated joint ventures 25,437 25,314
Other assets 55,902 34,691
-------------- ---------------
1,249,155 1,167,136
-------------- ---------------
MORTGAGE BANKING:
Cash and cash equivalents 9,773 5,311
Receivables:
First mortgages and mortgage-backed securities 107,975 110,223
First mortgages held under commitment of sale and
other receivables 99,360 164,365
Other assets 7,016 7,425
-------------- ---------------
224,124 287,324
-------------- ---------------
TOTAL ASSETS $ 1,473,279 $ 1,454,460
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CONSTRUCTION:
Accounts payable $ 112,912 $ 146,179
Accrued expenses and other liabilities 59,619 72,845
Mortgages and notes payable 695,246 565,020
-------------- ---------------
867,777 784,044
-------------- ---------------
MORTGAGE BANKING:
Accounts payable and accrued expenses 5,799 10,293
Notes payable 72,000 125,000
Collateralized mortgage obligations secured by
mortgage-backed securities 94,377 96,731
-------------- ---------------
172,176 232,024
-------------- ---------------
Deferred income taxes 31,097 31,373
-------------- ---------------
Minority interests in consolidated joint ventures 2,025 2,272
-------------- ---------------
Series B convertible preferred stock 1,300 1,300
Common stock 32,382 32,378
Paid-in capital 188,994 188,970
Retained earnings 176,819 181,282
Cumulative foreign currency translation adjustments 709 817
-------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 400,204 404,747
-------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,473,279 $ 1,454,460
============== ===============
</TABLE>
See accompanying notes.
4
<PAGE> 5
KAUFMAN AND BROAD HOME CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended February 28,
--------------------------------------
1995 1994
--------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 435 $ 8,854
Adjustments to reconcile net income to net cash used
for operating activities:
Equity in pretax (income) loss of
unconsolidated joint ventures 124 (53)
Minority interests in pretax income of
consolidated joint ventures 23 218
Amortization of discounts and issuance costs 431 579
Depreciation and amortization 1,372 705
Provision for deferred income taxes (276) (1,095)
Change in:
Receivables 74,978 44,955
Inventories (78,187) (28,460)
Accounts payable, accrued expenses
and other liabilities (50,987) (43,070)
Other, net (19,965) (3,835)
--------------- ----------------
Net cash used for operating activities (72,052) (21,202)
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in unconsolidated joint ventures (247) (7,816)
Net originations of mortgages held for long-term
investment (295) (1,773)
Payments received on first mortgages and
mortgage-backed securities 2,788 16,753
Other, net (2,476) (1,437)
--------------- ----------------
Net cash provided (used) by investing activities (230) 5,727
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from credit agreements and other short-
term borrowings 75,010 97,445
Payments on collateralized mortgage obligations (2,678) (15,614)
Payments on mortgages, land contracts and other loans (14,437) (2,539)
Distributions from (payments to) minority interests in
consolidated joint ventures (270) 189
Purchase of special common stock and warrants (73,677)
Payments of cash dividends (4,898) (4,907)
--------------- ----------------
Net cash provided by financing activities 52,727 897
--------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (19,555) (14,578)
Cash and cash equivalents at beginning of period 54,808 75,122
--------------- ----------------
Cash and cash equivalents at end of period $ 35,253 $ 60,544
=============== ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized $ 2,174 $ 2,938
=============== ================
Income taxes paid $ 781 $ 4,093
=============== ================
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Cost of inventories acquired through seller financing $ 16,628 $ 1,895
=============== ================
</TABLE>
See accompanying notes.
5
<PAGE> 6
KAUFMAN AND BROAD HOME CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in the annual financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial statements
for the year ended November 30, 1994 contained in the Company's 1994
Annual Report to Shareholders.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the Company's financial
position as of February 28, 1995, the results of its consolidated
operations for the three months ended February 28, 1995 and 1994, and its
consolidated cash flows for the three months ended February 28, 1995 and
1994. The results of operations for the three months ended February 28,
1995 are not necessarily indicative of the results to be expected for the
full year. The consolidated balance sheet at November 30, 1994 has been
taken from the audited financial statements as of that date.
2. Statement of Financial Accounting Standards No. 115
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" effective December 1, 1994. In accordance with this
pronouncement, the Company's mortgage-backed securities, which have been
classified as held-to-maturity, are stated at amortized cost, adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. There was no impact on the
Company's financial position or results of operations from the adoption of
this pronouncement. The total amortized cost, gross unrealized holding
gains, gross unrealized holding losses, and aggregate fair value of the
mortgage-backed securities are $100,746,000, $2,380,000, $144,000 and
$102,982,000, respectively at February 28, 1995.
3. Earnings Per Share
The computation of earnings per share is based on the weighted average
number of common shares, special common shares, equivalent Series B
convertible preferred shares and common share equivalents outstanding
during each period. The Series B convertible preferred shares are
considered common stock due to their mandatory conversion into common
stock, and the related dividends are not deducted from net income for
purposes of calculating earnings per share. Common share equivalents
include dilutive stock options and warrants using the treasury stock
method.
If, for purposes of calculating earnings per share, the Series B
convertible preferred shares were excluded from the weighted average
shares outstanding and the related dividends deducted from net income, the
computation would have resulted in a loss per share of $.06 and earnings
per share of $.19 for the three months ended February 28, 1995 and 1994,
respectively.
6
<PAGE> 7
KAUFMAN AND BROAD HOME CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
February 28, November 30,
1995 1994
--------------- ---------------
<S> <C> <C>
Homes, lots and improvements in production $ 729,979,000 $ 712,563,000
Land under development 307,549,000 230,150,000
--------------- ---------------
Total inventories $ 1,037,528,000 $ 942,713,000
=============== ===============
</TABLE>
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Total revenues for the three months ended February 28, 1995 decreased
10.5% to $229.8 million from $256.9 million for the quarter ended February
28, 1994 primarily due to lower housing revenues. Net income for the
first quarter of 1995 decreased to $.4 million or $.01 per share from $8.9
million or $.22 per share for the same period a year ago. Housing
revenues for the current period declined 11.9% from the year-earlier
period as severe rains in California (the location of 71.1% of the
Company's first quarter 1995 deliveries) and the cumulative effect of
seven interest rate increases implemented by the Federal Reserve Board
since February 1994 negatively impacted unit deliveries by 11.2%.
CONSTRUCTION
Revenues decreased by $25.0 million to $224.4 million in the first quarter
of 1995 from $249.4 million in the first quarter of 1994 due to lower
housing revenues, as revenues from French commercial development
activities were essentially flat and revenues from land sales were higher.
Residential revenues for the period decreased by $29.3 million to $216.6
million on 1,367 deliveries from $245.9 million on 1,539 deliveries in the
year-earlier period, primarily due to a decrease of 24.1% in California
unit volume partially offset by a 115.5% increase in deliveries from other
United States operations. Housing revenues in the United States totaled
$196.1 million on 1,265 unit deliveries in the first three months of 1995,
compared to $226.3 million on 1,417 units in the first three months of
1994. These decreases mainly reflected the effect of poor weather
conditions throughout California during the first quarter and the
lingering impact of higher mortgage interest rates over the preceding
twelve months. Revenues from French housing operations during the period
grew to $20.3 million on 102 units from $18.5 million on 110 units in the
prior year's quarter. During the first quarter of 1995, the Company's
overall average selling price decreased slightly to $158,300 from $159,700
in the prior year's period as a result of a 2.9% decrease in the average
selling price in the United States, partially offset by an increase in the
French average selling price. The Company's average price of selling a
home in the United States decreased in the first quarter of 1995 to
$155,100 from $159,700 in the first quarter of 1994, largely as a result
of a higher level of deliveries coming from the lower-priced markets
outside of California. Deliveries outside of California but within the
United States accounted for 23.2% of total United States deliveries in the
first quarter of 1995, compared to 9.6% in the first quarter of 1994.
Included in the total were the first deliveries from Oppel Jenkins, the
largest builder of single-family homes in Albuquerque, New Mexico,
acquired by the Company in January 1995. In France, the average selling
price in the first quarter of 1995 rose 18.4% to $198,700 from $167,800 in
the year-earlier quarter due to a change in the mix of deliveries and a
weakening of the U.S. dollar against the French franc.
Revenues from commercial development activities in France remained
essentially flat at $.9 million in the first quarter of 1995 compared to
$1.0 million for the same period a year ago. Revenues from land sales
totaled $6.8 million in the first quarter of 1995 compared to $2.5 million
in the first quarter of 1994. The increase in land sale revenues
reflected greater opportunities available to the Company to sell land as
more developers returned to an increasingly competitive market.
Operating income decreased by $11.1 million to $5.5 million in the first
quarter of 1995 from $16.6 million in the first quarter of 1994. This
decrease primarily reflected lower gross profits on housing sales,
partially offset by higher gross profits from land sales and an
improvement in selling, general and administrative expenses. The decline
in housing gross profits reflected both lower unit volume and a reduction
in margins. Gross profits (excluding profits from land sales) decreased
by $14.1 million to $34.3 million in the first quarter of 1995 from $48.4
million in the prior year's period. Gross profits (excluding profits from
land sales) as a percentage of related revenues decreased to 15.8% in the
current quarter from 19.6% in the year-earlier quarter. For the same
periods, the Company's housing gross margin was 15.7% in 1995, down from
19.4% in 1994. This decrease primarily reflected a lower housing gross
margin in California as substantially higher sales incentives were
required to stimulate buying activity in an inclement environment while
the volume decline caused the fixed component of gross margin to increase
as a percentage of housing revenues. Gross profits from land sales
increased to $2.9 million in the first quarter of 1995 from $.7 million in
the same quarter a year ago.
8
<PAGE> 9
Selling, general and administrative expenses decreased by $.8 million
to $31.7 million in the first quarter of 1995 from $32.5 million in the
corresponding 1994 period, principally due to the California unit
volume decline. Furthermore, throughout the first three months of
1995, the Company implemented a company-wide program to reduce its
overhead cost structure; however, the impact of these cost cutting
initiatives began to take effect too late in the first quarter to
substantially offset the decline in revenues. As a percentage of
housing revenues, selling, general and administrative expenses
increased to 14.6% in the current quarter compared to 13.2% for the
year-earlier period. Nevertheless, the Company believes the overhead
reductions, including staff reductions, reduced marketing and promotion
expenses, elimination of a supplemental incentive compensation plan and
other initiatives, should increasingly improve selling, general and
administrative expenses as a percentage of housing revenues as the year
progresses.
Interest income remained flat at $.6 million in the first quarter of
1995 as there was little change in the average balances of short-term
investments and mortgages receivable compared to the same period a year
ago.
Interest expense (net of amounts capitalized) increased to $5.6 million
in the first quarter of 1995 compared to $4.2 million in the first
quarter of 1994, reflecting an increase in average indebtedness and an
overall higher effective borrowing rate. Debt levels primarily
increased as a result of additional borrowings under the Company's
domestic unsecured revolving credit agreement in connection with higher
inventory levels as the Company continued its expansion in the western
United States. The Company's effective borrowing rate increased as a
result of the hikes in interest rates implemented by the Federal
Reserve Board throughout 1994 and into early 1995.
Minority interests in pretax income of consolidated joint ventures. The
Company conducts a portion of both its residential and commercial
development activities through majority-owned partnerships, primarily
in France, which are fully consolidated in the accompanying financial
statements. As a result, operating income in the first quarter of 1995
has been reduced by minority interests in the pretax income of these
partnerships of $.02 million compared to $.2 million in the prior
year's period.
Equity in pretax income (loss) of unconsolidated joint ventures
reflected a loss of $.1 million in first quarter 1995, a decline from
$.1 million in income in first quarter 1994. Joint ventures recorded
combined revenues of $13.3 million in the current quarter compared to
$.2 million for the corresponding period of 1994. Revenues from
residential properties amounted to $10.4 million in the first quarter
of 1995 and $.2 million for the same period of 1994. Revenues of $2.9
million were generated from unconsolidated joint venture commercial
projects during the first quarter of 1995 while no revenues were
generated from such projects during the prior year's quarter. The loss
in the first quarter of 1995 primarily reflected the operating results
of a single French multi-family residential project, where revenues
failed to offset the costs of the venture which included selling,
general, administrative and interest expenses.
MORTGAGE BANKING
Interest income and interest expense decreased by $.4 million and $1.0
million, respectively, in the first quarter of 1995 compared to the
same quarter a year ago. These amounts decreased primarily due to the
declining balances of outstanding mortgage-backed securities and
related collateralized mortgage obligations, stemming from both
regularly scheduled monthly principal amortization and prepayment
activity of mortgage collateral. Interest income and expense are
expected to continue to decline as the mortgage-backed securities and
related collateralized mortgage obligations pay off at approximately
the same rate. Interest expense also decreased as a result of the
lower amount of notes payable outstanding during the first quarter of
1995 compared to the prior year's quarter.
Other mortgage banking revenues decreased by $1.5 million to $1.2
million in the first three months of 1995 from $2.7 million in the
first three months of 1994. This decrease was principally the result
of lower gains on the sale of mortgages and servicing rights due to
lower mortgage origination volume in the United States.
General and administrative expenses for the current quarter decreased
to $1.1 million from $1.3 million for the same period a year ago,
reflecting lower mortgage production levels due to the decrease in
domestic unit deliveries and the benefit of aggressive cost reduction
programs.
9
<PAGE> 10
INCOME TAXES
Income tax expense totaled $.3 million in the first quarter of 1995 and
$5.2 million in the prior year's first quarter. These amounts represented
effective income tax rates of approximately 37% in both periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company assesses its liquidity in terms of its ability to generate
cash to fund its operating and investing activities. Historically, the
Company has funded its construction and mortgage banking concerns with
internally generated operating results and external sources of debt and
equity financing. In the first quarter of 1995, net cash used for
operating, investing and financing activities totaled $19.6 million,
compared to $14.6 million used in the prior year's first quarter.
The Company's operating activities for the first quarter of 1995 used
$72.1 million, while first quarter 1994 operating activities used $21.2
million. In the first quarter of 1995, the Company used cash to fund a
net investment of $78.2 million in inventories, excluding $16.6 million of
inventories acquired through seller financing, and to pay down $51.0
million in accounts payable, accrued expenses and other liabilities. The
use of cash was partially offset by a $75.0 million reduction in
receivables. Inventories increased primarily in the United States where
they rose to $904.8 million at February 28, 1995 from $807.5 million at
November 30, 1994, as the Company continued its domestic expansion and
sales rates continued to be sluggish in the first quarter of 1995. The
reduction in receivables mainly related to a decrease in mortgage
origination volume in the first quarter of 1995 as compared to the fourth
quarter of 1994, resulting in a lower balance of mortgages held under
commitment of sale.
Operating activities for the first quarter of 1994 used cash for a net
investment of $28.5 million in inventories, excluding $1.9 million of
inventories acquired through seller financing, and to pay down $43.1
million in accounts payable, accrued expenses and other liabilities. The
use of cash was partially offset by first quarter earnings and a $45.0
million reduction in receivables. Inventories increased mainly due to the
Company's continued domestic expansion. The reduction in receivables
related primarily to a decrease in mortgage origination volume in the
first quarter of 1994 when compared to the fourth quarter of 1993.
Cash used by investing activities totaled $.2 million in the first quarter
of 1995 compared to cash provided by investing activities of $5.7 million
in the year-earlier period. In the first quarter of 1995, cash was
provided from $2.8 million in proceeds received from mortgage-backed
securities which were principally used to pay down the collateralized
mortgage obligations for which the mortgage-backed securities have served
as collateral. Partially offsetting these proceeds was $2.5 million of
cash used for other investing activities. In the first quarter of 1994,
proceeds of $16.8 million received from mortgage-backed securities
provided the majority of the cash from investing activities. Partially
offsetting these proceeds was $7.8 million of cash used for investments in
unconsolidated joint ventures.
Financing activities in the first quarter of 1995 provided $52.7 million
of cash, as compared to $.9 million provided in the first quarter of 1994.
In the first quarter of 1995, cash was provided by $60.6 million in net
proceeds from borrowings. These cash inflows were partially offset by
payments on collateralized mortgage obligations of $2.7 million, the funds
for which were provided by receipts on mortgage-backed securities; and
$4.9 million of cash dividend payments. Financing activities in 1994's
first quarter resulted in net cash inflows due mainly to $94.9 million in
net proceeds from borrowings mostly offset by the purchase of special
common stock and warrants for $73.7 million; payments on collateralized
mortgage obligations of $15.6 million; and $4.9 million of cash dividend
payments.
Under the Company's $500 million domestic unsecured revolving credit
facility, which contains a $200 million sublimit for the Company's
mortgage banking operations, a total of $157.4 million was available for
future use as of February 28, 1995. The Company's French unsecured
financing agreements had in the aggregate $109.6 million available at
February 28, 1995. In addition to the $200 million sublimit, the
Company's mortgage banking operations had commitments of $120 million on
the asset-backed commercial paper facility. Of the total $120 million
potentially available under this facility, $53 million was available at
quarter-end for the mortgage banking operation's future use.
10
<PAGE> 11
The Company believes it has adequate resources and sufficient credit
line facilities to satisfy its current and reasonably anticipated
future requirements for funds to acquire capital assets and land, to
construct homes, to fund its mortgage banking operations and to meet
any other needs of its business, both on a short and long-term basis.
The Company's residential backlog as of February 28, 1995 consisted of
1,285 units, representing aggregate future revenues of approximately
$212.6 million compared to 1,204 units representing $181.6 million a
year earlier, marking the first time since the second quarter of 1993
that residential backlog was up on a year over year basis. The
Company's operations in the United States accounted for approximately
$164.8 million of backlog value on 1,037 units at February 28, 1995,
compared to $147.7 million on 994 units at February 28, 1994. Despite
severe weather conditions which resulted in net orders in California
for the current quarter declining 13.8% from the prior year's quarter,
backlog levels in California remained essentially flat when compared to
the prior year as the backlog value totaled approximately $125.9
million on 757 units at February 28, 1995 and $125.0 million on 766
units at February 28, 1994. Other United States operations
demonstrated year over year growth in backlog levels with the backlog
value at February 28, 1995 increasing to approximately $39.0 million on
280 units from $22.7 million on 228 units at February 28, 1994. This
growth reflected a 64.8% increase in net orders for the first three
months of 1995 compared to the first three months of 1994. The Company
expects the improved backlog, including the continuation of strong new
order activity in the other United States operations, to contribute to
an improved level of deliveries in the second quarter when compared to
the first quarter of 1995.
In France, the residential backlog value at February 28, 1995 was
approximately $44.8 million on 219 units, up from $32.9 million on 198
units a year earlier. In addition, the 1995 first quarter backlog
improved from $30.1 million on 169 units at November 30, 1994. However,
the Company's net orders in France decreased during the first quarter of
1995 by 11.1% to 152 units from 171 units for the same period a year
ago. The backlog associated with consolidated commercial development
activities was valued at approximately $32.7 million at February 28,
1995, compared to $37.9 million at February 28, 1994, reflecting the
reduced opportunities in the French commercial market.
Substantially all of the homes included in residential backlog are
expected to be delivered in 1995; however, cancellations could occur,
particularly if market conditions deteriorate or mortgage interest
rates increase, thereby decreasing backlog and related future revenues.
The Company's domestic expansion outside of California produced higher
deliveries in Arizona in the first quarter compared to the same period
a year ago. Furthermore, during the current quarter the Company
generated deliveries from New Mexico (the acquisition of Oppel Jenkins)
and Colorado where there were no corresponding deliveries in the prior
year's quarter. With the integration of Oppel Jenkins into the
Company's domestic operations complete, its New Mexico operations will
contribute three full months of results in the second quarter of 1995.
The Company took its first orders in Utah in the current quarter and is
expected to generate deliveries there in the second quarter of 1995.
Nevertheless, the Company continues to face challenges within its
domestic operations, including a relatively weak housing recovery in
California; higher mortgage interest rates when compared to early 1994,
which continue to make it more difficult to qualify entry-level buyers
for loans; and the negative effects of severe and prolonged rain storms
in California throughout the first three months of 1995, which reduced
sales volumes, delayed openings of new communities and slowed
production.
In Mexico, the Company's start-up operation continues to be re-assessed
as a result of the series of sharp devaluations of the peso in early
fiscal 1995. These uncertainties have slowed an already complex
regulatory process and heightened market concerns for new home sales.
The level and timing of sales or deliveries in Mexico, if any, in 1995
thus remains uncertain.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 23, 1995, at the Company's 1995 Annual Meeting of Stockholders,
two matters were submitted for stockholder vote, upon which matters 83% of
the outstanding capital stock of the Company was voted.
Election of Directors. Messrs. Ronald W. Burkle and Luis G. Nogales were
elected to the board of directors and Messrs. Ray R. Irani and Guy
Nafilyan were re-elected as directors. Messrs. Antoine
Jeancourt-Galignani, James A. Johnson, Bruce Karatz, Lester Pollack and
Sanford C. Sigoloff and Ms. Jane Evans were not up for re-election and
remain as directors. Over ninety two percent of the shares voted were
voted in favor of the director candidates. Mr. Burkle received 25,007,249
affirmative votes with 1,947,374 votes withheld; Mr. Nogales received
25,006,118 affirmative votes with 1,948,505 votes withheld; Mr. Irani
received 26,427,629 affirmative votes with 526,994 votes withheld; and Mr.
Nafilyan received 26,884,567 affirmative votes with 70,056 votes withheld.
Performance-Based Incentive Plan for Senior Management. At the Annual
Meeting stockholders were also asked to approve the Performance-Based
Incentive Plan for Senior Management. Ninety percent of the votes cast,
or 24,259,759 shares, were in favor of the plan, with 2,490,448 shares
voting against.
ITEM 5. OTHER INFORMATION
The following table presents residential information in terms of unit
deliveries to home buyers and net orders taken by geographical market for
the three-month periods ended February 28, 1995 and 1994, together with
backlog data in terms of units and value by geographical market as of
February 28, 1995 and 1994.
<TABLE>
<CAPTION> Backlog - Value
Deliveries Net Orders Backlog - Units In Thousands
-------------- --------------- ----------------- -------------------
Market 1995 1994 1995 1994 1995 1994 1995 1994
- ------ ----- ----- ----- ----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 972 1,281 1,101 1,277 757 766 $125,870 $125,045
Other United States 293 136 374 227 280 228 38,971 22,704
France 102 110 152 171 219 198 44,820 32,875
Canada - 12 9 9 29 12 2,958 948
----- ----- ----- ----- ----- ----- -------- --------
Total 1,367 1,539 1,636 1,684 1,285 1,204 $212,619 $181,572
===== ===== ===== ===== ===== ===== ======== ========
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
11 Statement of Computation of Per Share Earnings.
24 The consent of Ernst & Young LLP, independent auditors, filed as an
exhibit to the Company's 1994 Annual Report on Form 10- K, is incorporated
by reference herein.
27 Financial Data Schedule.
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended February 28, 1995.
12
<PAGE> 13
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 thereunto duly authorized.
KAUFMAN AND BROAD HOME CORPORATION
----------------------------------
Registrant
Dated April 14, 1995 /s/ BRUCE KARATZ
--------------------- ----------------------------------
Bruce Karatz
Chairman, President and
Chief Executive Officer
Dated April 14, 1995 /s/ MICHAEL F. HENN
--------------------- ----------------------------------
Michael F. Henn
Senior Vice President and
Chief Financial Officer
13
<PAGE> 14
<TABLE>
<CAPTION>
Page of
Sequentially
INDEX OF EXHIBITS Numbered Pages
--------------
<S> <C>
11 Statement of Computation of Per Share Earnings 15
27 Financial Data Schedule 16
</TABLE>
14
<PAGE> 1
EXHIBIT 11
KAUFMAN AND BROAD HOME CORPORATION
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(In Thousands Except Per Share Amounts - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended February 28,
--------------------------------------
1995 1994
--------------- ----------------
<S> <C> <C>
PRIMARY:
Net income $ 435 $ 8,854
=============== ================
Weighted average common shares outstanding 32,380 32,593
Weighted average Series B convertible preferred shares(1) 6,500 6,500
Common share equivalents:
Stock options 863 1,280
--------------- ----------------
39,743 40,373
=============== ================
PRIMARY EARNINGS PER SHARE(2) $ .01 $ .22
=============== ================
FULLY DILUTED:
Net income $ 435 $ 8,854
=============== ================
Weighted average common shares outstanding 32,380 32,593
Weighted average Series B convertible preferred shares(1) 6,500 6,500
Common share equivalents:
Stock options 927 1,280
--------------- ----------------
39,807 40,373
=============== ================
FULLY DILUTED EARNINGS PER SHARE(2,3) $ .01 $ .22
=============== ================
</TABLE>
__________________________________
(1) Each of the 1,300 Series B convertible preferred shares is convertible
into five shares of common stock.
(2) If, for purposes of calculating primary and fully diluted earnings per
share, the Series B convertible preferred shares were excluded from the
weighted average shares outstanding and the related dividends deducted from
net income, the computations would have resulted in both primary and fully
diluted loss per share of $.06 for the three months ended February 28, 1995
and earnings per share of $.19 for the three months ended February 28,
1994.
(3) Fully diluted earnings per share is not disclosed in the Company's
consolidated financial statements since the maximum dilutive effect is not
material.
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> FEB-28-1995
<EXCHANGE-RATE> 1
<CASH> 35,253
<SECURITIES> 107,975<F1>
<RECEIVABLES> 204,168
<ALLOWANCES> 0
<INVENTORY> 1,037,528
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,473,279
<CURRENT-LIABILITIES> 0
<BONDS> 368,148<F2>
<COMMON> 32,382
0
1,300
<OTHER-SE> 366,522
<TOTAL-LIABILITY-AND-EQUITY> 1,473,279
<SALES> 224,377
<TOTAL-REVENUES> 229,832
<CGS> 187,201
<TOTAL-COSTS> 191,173<F3>
<OTHER-EXPENSES> 32,737<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,641
<INCOME-PRETAX> 685
<INCOME-TAX> 250
<INCOME-CONTINUING> 435
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 435
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0<F5>
<FN>
<F1>Marketable securities are comprised of first mortgages and mortgage-backed
securities which are held for long-term investment. The mortgage-backed
securities serve as collateral for related collateralized mortgage
obligations.
<F2>Bonds are comprised of senior and senior subordinated notes and
collateralized mortgage obligations.
<F3>Total Costs include interest expense on the collateralized mortgage
obligations, as the associated interest income generated from the
mortgage-backed securities is included in Total Revenues.
<F4>Other Expenses are comprised of selling, general and administrative
expenses.
<F5>Fully diluted earnings per share is not disclosed in the Company's
consolidated financial statements since the maximum dilutive effect is not
material.
</FN>
</TABLE>
