<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 August 31, 2000.
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 its 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 SEPTEMBER 30, 2000.
Common stock, par value $1.00 per share, 42,869,154 shares outstanding,
including 8,786,192 shares held by the Registrant's Grantor Stock Ownership
Trust and excluding 1,448,100 shares held in treasury.
<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 -
Nine Months and Three Months ended August 31, 2000 and 1999 3
Consolidated Balance Sheets -
August 31, 2000 and November 30, 1999 4
Consolidated Statements of Cash Flows -
Nine Months ended August 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10-17
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
SIGNATURES 20
INDEX OF EXHIBITS 21
</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>
Nine Months Ended August 31, Three Months Ended August 31,
----------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
TOTAL REVENUES $ 2,686,791 $ 2,613,526 $ 981,024 $ 1,057,113
=========== =========== =========== ===========
CONSTRUCTION:
Revenues $ 2,645,336 $ 2,570,145 $ 965,374 $ 1,040,413
Construction and land costs (2,149,342) (2,085,016) (775,106) (836,497)
Selling, general and administrative expenses (328,870) (326,636) (114,387) (122,713)
----------- ----------- ----------- -----------
Operating income 167,124 158,493 75,881 81,203
Interest income 5,021 5,613 1,274 1,831
Interest expense, net of amounts capitalized (22,327) (20,167) (9,145) (7,141)
Minority interests (20,941) (21,075) (8,417) (8,605)
Equity in pretax income of unconsolidated
joint ventures 2,253 585 763 638
Gain on issuance of French subsidiary stock 39,630 -- -- --
----------- ----------- ----------- -----------
Construction pretax income 170,760 123,449 60,356 67,926
----------- ----------- ----------- -----------
MORTGAGE BANKING:
Revenues:
Interest income 15,901 13,369 5,062 5,079
Other 25,554 30,012 10,588 11,621
----------- ----------- ----------- -----------
41,455 43,381 15,650 16,700
Expenses:
Interest (14,256) (12,109) (4,645) (4,543)
General and administrative (11,406) (8,924) (4,922) (3,147)
Secondary marketing trading loss -- (18,155) -- (18,155)
----------- ----------- ----------- -----------
Mortgage banking pretax income 15,793 4,193 6,083 (9,145)
----------- ----------- ----------- -----------
TOTAL PRETAX INCOME 186,553 127,642 66,439 58,781
Income taxes (50,000) (44,700) (21,800) (20,600)
----------- ----------- ----------- -----------
NET INCOME $ 136,553 $ 82,942 $ 44,639 $ 38,181
=========== =========== =========== ===========
BASIC EARNINGS PER SHARE $ 3.39 $ 1.77 $ 1.17 $ .80
=========== =========== =========== ===========
DILUTED EARNINGS PER SHARE $ 3.32 $ 1.73 $ 1.14 $ .78
=========== =========== =========== ===========
BASIC AVERAGE SHARES OUTSTANDING 40,240 46,838 38,267 47,911
=========== =========== =========== ===========
DILUTED AVERAGE SHARES OUTSTANDING 41,189 47,996 39,218 48,891
=========== =========== =========== ===========
CASH DIVIDENDS PER COMMON SHARE $ .225 $ .225 $ .075 $ .075
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
KAUFMAN AND BROAD HOME CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands - Unaudited)
<TABLE>
<CAPTION>
August 31, November 30,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
CONSTRUCTION:
Cash and cash equivalents $ 31,379 $ 15,576
Trade and other receivables 243,579 205,847
Mortgages and notes receivable 20,080 58,702
Inventories 1,758,298 1,521,265
Investments in unconsolidated joint ventures 23,392 21,290
Deferred income taxes 89,171 99,519
Goodwill 194,219 205,618
Other assets 98,935 86,259
----------- -----------
2,459,053 2,214,076
----------- -----------
MORTGAGE BANKING:
Cash and cash equivalents 13,813 12,791
Receivables:
First mortgages and mortgage-backed securities 41,178 47,080
First mortgages held under commitments of sale and other receivables 312,661 386,076
Other assets 9,405 4,212
----------- -----------
377,057 450,159
----------- -----------
TOTAL ASSETS $ 2,836,110 $ 2,664,235
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CONSTRUCTION:
Accounts payable $ 371,756 $ 328,528
Accrued expenses and other liabilities 200,336 222,855
Mortgages and notes payable 993,244 813,424
----------- -----------
1,565,336 1,364,807
----------- -----------
MORTGAGE BANKING:
Accounts payable and accrued expenses 7,760 9,711
Notes payable 305,895 377,666
Collateralized mortgage obligations secured by mortgage-backed
securities 31,246 36,219
----------- -----------
344,901 423,596
----------- -----------
Minority interests:
Consolidated subsidiaries and joint ventures 49,963 9,499
Company obligated mandatorily redeemable preferred securities
of subsidiary trust holding solely debentures of the Company 189,750 189,750
----------- -----------
239,713 199,249
----------- -----------
Common stock 48,312 48,091
Paid-in capital 338,652 335,324
Retained earnings 527,518 376,626
Accumulated other comprehensive income (8,984) (1,584)
Grantor stock ownership trust (191,001) (81,874)
Treasury stock, at cost (28,337) --
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 686,160 676,583
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,836,110 $ 2,664,235
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
KAUFMAN AND BROAD HOME CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands - Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
August 31,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 136,553 $ 82,942
Adjustments to reconcile net income to net cash used
by operating activities:
Equity in pretax income of unconsolidated joint ventures (2,253) (585)
Minority interests 20,941 21,075
Gain on issuance of French subsidiary stock (39,630) --
Amortization of discounts and issuance costs 755 1,279
Depreciation and amortization 30,497 27,682
Provision for deferred income taxes 10,348 5,851
Change in:
Receivables 74,301 (145,898)
Inventories (224,597) (258,826)
Accounts payable, accrued expenses and other liabilities 16,906 127,028
Other, net (29,786) (5,209)
--------- ---------
Net cash used by operating activities (5,965) (144,661)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired -- (11,646)
Investments in unconsolidated joint ventures 151 (13,682)
Net sales (originations) of mortgages held for long-term investment 668 (1,860)
Payments received on first mortgages and mortgage-backed securities 5,262 12,367
Purchases of property and equipment, net (11,632) (15,355)
--------- ---------
Net cash used by investing activities (5,551) (30,176)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from credit agreements and other short-term borrowings 98,314 260,831
Issuance of French subsidiary stock 113,118 --
Payments on collateralized mortgage obligations (4,994) (11,780)
Payments on mortgages, land contracts and other loans (15,682) (57,620)
Payments to minority interests (16,037) (21,376)
Payments of cash dividends (8,914) (10,790)
Repurchases of common stock (137,464) (8,004)
--------- ---------
Net cash provided by financing activities 28,341 151,261
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,825 (23,576)
Cash and cash equivalents at beginning of period 28,367 63,353
--------- ---------
Cash and cash equivalents at end of period $ 45,192 $ 39,777
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized $ 28,101 $ 19,577
========= =========
Income taxes paid $ 30,673 $ 49,089
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Cost of inventories acquired through seller financing $ 12,436 $ 18,362
========= =========
Issuance of common stock related to an acquisition $ -- $ 146,005
========= =========
Debt assumed related to an acquisition $ -- $ 303,239
========= =========
</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, 1999 contained in the Company's 1999 Annual Report to
Stockholders.
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 August 31, 2000, the results of its consolidated operations
for the nine months and three months ended August 31, 2000 and 1999, and its
consolidated cash flows for the nine months ended August 31, 2000 and 1999.
The results of operations for the nine months and three months ended August
31, 2000 are not necessarily indicative of the results to be expected for
the full year. The consolidated balance sheet at November 30, 1999 has been
taken from the audited financial statements as of that date.
2. Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
August 31, November 30,
2000 1999
---------- -----------
<S> <C> <C>
Homes, lots and improvements in production $1,231,605 $1,063,505
Land under development 526,693 457,760
---------- ----------
Total inventories $1,758,298 $1,521,265
========== ==========
</TABLE>
The impact of capitalizing interest costs on consolidated pretax income is
as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
August 31, August 31,
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest incurred $ 68,224 $ 55,606 $ 23,834 $ 20,887
Interest expensed (22,327) (20,167) (9,145) (7,141)
-------- -------- -------- --------
Interest capitalized 45,897 35,439 14,689 13,746
Interest amortized (28,362) (27,924) (10,965) (9,124)
-------- -------- -------- --------
Net impact on consolidated pretax income $ 17,535 $ 7,515 $ 3,724 $ 4,622
======== ======== ======== ========
</TABLE>
3. Earnings Per Share
Basic earnings per share is calculated by dividing net income by the average
number of common shares outstanding for the period. Diluted earnings per
share is calculated by dividing net income by the average number of common
shares outstanding including all dilutive potentially issuable shares under
various stock option plans and stock purchase contracts.
6
<PAGE> 7
KAUFMAN AND BROAD HOME CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Earnings Per Share (continued)
The following table presents a reconciliation of average shares outstanding
(in thousands):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
August 31, August 31,
------------------ ------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic average shares outstanding 40,240 46,838 38,267 47,911
Net effect of stock options assumed to
be exercised 949 1,158 951 980
------ ------ ------ ------
Diluted average shares outstanding 41,189 47,996 39,218 48,891
====== ====== ====== ======
</TABLE>
4. Comprehensive Income
Comprehensive income consists of net income and foreign currency translation
adjustments and totaled $40.0 million and $41.3 million for the three months
ended August 31, 2000 and 1999, respectively, and $129.2 million and $81.4
million for the nine months ended August 31, 2000 and 1999, respectively.
5. Segment Information
The Company has identified two reportable segments: construction and
mortgage banking. Information for the Company's reportable segments is
presented in its consolidated statements of income and consolidated balance
sheets included herein. The Company's reporting segments follow the same
accounting policies used for the Company's consolidated financial
statements. Management evaluates a segment's performance based upon a number
of factors including pretax results.
6. Issuance of French Subsidiary Stock
On February 7, 2000, Kaufman & Broad S.A. (KBSA), the Company's wholly owned
French subsidiary issued 5,314,327 common shares (including the over
allotment option) in an initial public offering. The offering was made in
France and elsewhere in Europe and was priced at 23 euros per share. KBSA is
now listed on the Premier Marche of the ParisBourse. The offering generated
total net proceeds of $113.1 million of which $82.9 million was used by the
Company to reduce its domestic debt and repurchase additional shares of its
common stock. The remainder of the proceeds was used to fund internal and
external growth of KBSA. The Company recognized a gain of $39.6 million, or
$.97 per diluted share as a result of the offering. The Company continues to
own a majority interest in KBSA and will continue to consolidate these
operations in its financial statements.
7. Stock Repurchase Plan
During the nine months ended August 31, 2000, the Company repurchased 6.7
million shares of its common stock at a total cost of $137.5 million under
its common stock repurchase program. On September 21, 2000, the Company
repurchased 4.0 million shares of common stock which it had issued in the
January 1999 acquisition of Lewis Homes, thereby completing the purchase of
all the 14.5 million shares of common stock previously authorized for
repurchase by the Company's Board of Directors. The Lewis shareholders
continue to own approximately 3.9 million shares of the Company's common
stock.
7
<PAGE> 8
KAUFMAN AND BROAD HOME CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. Mortgages and Notes Payable
On February 18, 2000, the Company's mortgage banking subsidiary renewed its
revolving mortgage warehouse agreement (the "Mortgage Warehouse Facility")
and increased the facility from $250 million to $300 million. The Mortgage
Warehouse Facility, which expires on February 18, 2003, provides for an
annual fee based on the committed balance of the facility and provides for
interest at either the London Interbank Offered Rate or the Federal Funds
Rate plus an applicable spread on amounts borrowed. The Master Loan and
Security Agreement was renewed on May 19, 2000 with an investment bank and
was increased from $150 million to $250 million. The agreement, which
expires on May 18, 2001, provides for a facility fee based on the $250
million maximum amount available and provides for interest to be paid
monthly at the Eurodollar Rate plus an applicable spread on amounts
borrowed. The amounts outstanding under the Mortgage Warehouse Facility and
the Master Loan and Security Agreement are secured by a borrowing base,
which includes certain mortgage loans held under commitments of sale and are
repayable from sales proceeds. There are no compensating balance
requirements under either facility. Both facilities include financial
covenants and restrictions which, among other things, require the
maintenance of certain financial statement ratios, a minimum tangible net
worth and a minimum net income.
On October 6, 2000, the Company entered into $725 million in new unsecured
credit facilities, consisting of a $564.0 million four-year committed
revolving credit facility, and a $161.0 million five-year term loan, which
replaced its Bridge Revolving Credit Facility, Domestic Unsecured Revolving
Credit Facility and Term Loan Agreement. These new facilities can be
expanded up to an aggregate total of $900 million through additional bank
lending commitments. Interest on each of the new unsecured credit facilities
will be paid monthly at the London Interbank Offered Rate plus an applicable
spread on amounts borrowed. The financial covenants and restrictions on the
new unsecured credit facilities are substantially the same as those under
the facilities that were replaced.
9. Acquisition
Effective January 7, 1999, the Company acquired substantially all of the
homebuilding assets of the Lewis Homes group of companies ("Lewis Homes").
The purchase price for Lewis Homes was approximately $449 million, comprised
of the assumption of approximately $303 million in debt and the issuance of
7,886,686 shares of the Company's common stock valued at approximately $146
million. The purchase price was based on the December 31, 1998 net book
values of the entities purchased. The excess of the purchase price over the
estimated fair value of net assets acquired was $177.6 million and was
allocated to goodwill. The Company is amortizing the goodwill on a
straight-line basis over a period of ten years. Under the terms of the
purchase agreement, a Lewis family member has also been appointed to the
Company's Board of Directors.
The 7,886,686 shares of Company common stock issued in the Lewis Homes
acquisition were "restricted" shares and could not be resold without a
registration statement or compliance with Securities and Exchange Commission
regulations that limit the number of shares that may be resold in a given
period. The Company originally agreed to file a registration statement for
6.0 million of those shares in three increments at the Lewis holders'
request from July 1, 2000 to July 1, 2002. On September 21, 2000, the
Company repurchased 4.0 million of the shares issued in the Lewis Homes
acquisition from the Lewis holders at a price of $26.00 per share. In
connection with the repurchase, the Lewis holders' registration rights for
the first two increments was extinguished; however, they have a continuing
right to request the registration of 2.0 million shares between January 1,
2002 and July 1, 2002. The Lewis holders currently continue to own 3,886,686
shares of the Company's common stock.
The following unaudited pro forma information presents a summary of the
consolidated results of operations of the Company as if the acquisition of
Lewis Homes had occurred as of December 1, 1998 with pro forma adjustments
to give effect to amortization of goodwill, interest expense on acquisition
debt and certain other adjustments, together with related income tax effects
(in thousands, except per share amounts):
8
<PAGE> 9
KAUFMAN AND BROAD HOME CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. Acquisition (continued)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
August 31,
1999
-----------------
<S> <C>
Total revenues $2,696,478
Total pretax income 132,157
Net income 85,857
Basic earnings per share 1.79
Diluted earnings per share 1.75
</TABLE>
10. Reclassifications
Certain amounts in the consolidated financial statements of prior years have
been reclassified to conform to the 2000 presentation.
9
<PAGE> 10
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 August 31, 2000 decreased $76.1
million, or 7.2%, to $981.0 million from $1.06 billion for the three months
ended August 31, 1999. For the nine months ended August 31, 2000, total
revenues increased $73.3 million, or 2.8%, to $2.69 billion from $2.61
billion in the year-earlier period. The decrease in total revenues for the
three month period of 2000 compared to 1999 was primarily due to lower
housing and land sale revenues. For the nine months ended August 31, 2000,
total revenues increased due to higher year to date housing and land sale
revenues. Net income for the third quarter of 2000 totaled $44.6 million, or
$1.14 per diluted share. This compared favorably with third quarter 1999 net
income of $38.2 million or $.78 per diluted share, which included a pretax
secondary marketing trading loss of $18.2 million in August 1999 related to
the Company's mortgage banking subsidiary. Excluding the impact of the
trading loss, net income for the third quarter of 1999 was $50.0 million and
diluted earnings per share were $1.02. For the nine months ended August 31,
2000, net income increased to $136.6 million or $3.32 per diluted share from
$82.9 million or $1.73 per diluted share for the nine months ended August 31,
1999. Results for the first nine months of 2000 included a one-time gain of
$39.6 million, or $.97 per diluted share, on the issuance of stock by the
Company's French subsidiary (the French IPO gain) in an initial public
offering in February 2000. Excluding the French IPO gain, diluted earnings
per share for the nine months ended August 31, 2000 totaled $2.35 per share,
up 35.8% compared with the nine month period of 1999. The increase in diluted
earnings per share in the three month period was principally driven by an
improvement in selling, general and administrative expenses as a percentage
of revenues, a lower effective income tax rate and a 19.8% reduction in the
average number of diluted shares outstanding due to the Company's share
repurchase program. Earnings per share rose in the first nine months of 2000
due to an improved housing gross margin, a lower effective income tax rate
and a 14.2% reduction in the average number of diluted shares outstanding.
Mortgage banking pretax income for the three months and nine months ended
August 31, 2000 (excluding the trading loss) decreased 32.5% and 29.3%,
respectively, from the year ago periods. These decreases were primarily due
to lower housing unit volume, the impact of recent market interest rate
increases, including a shift in product mix toward more variable rate loans,
as well as lower retention and the intensely competitive mortgage banking
environment, and transition costs related to the consolidation of the
Company's mortgage banking operations.
CONSTRUCTION
Revenues decreased by $75.0 million, or 7.2%, to $965.4 million in the third
quarter of 2000 from $1.04 billion in the third quarter of 1999 due to a
decrease in housing and land sale revenues. Housing revenues for the period
decreased by 5.9%, or $60.3 million, to $959.7 million from $1.02 billion in
the year-earlier period as a result of a 6.4% decrease in unit deliveries.
Housing revenues in the United States decreased 2.5% to $845.2 million on
4,984 unit deliveries in the third quarter of 2000 from $866.8 million on
5,155 units in the corresponding quarter of 1999 as lower housing revenues
from California operations were only partially offset by increases in Other
U.S operations.
Housing revenues of $369.2 million from California operations for the third
quarter of 2000 were down 9.0% from $405.6 million in the year-earlier period
mainly due to unit deliveries decreasing 11.4% to 1,444 units from 1,629
units in the third quarter of 1999. The decrease in California deliveries
resulted from three primary factors. First, the prior year's quarter included
the Company's sell-through of certain acquired Lewis communities which were
located in areas that did not fit into the Company's overall KB2000 operating
strategy and were not replaced. Also, there was a temporary lag in deliveries
associated with the reduction of overlapping communities in the Company's
core California markets. Second, there have been fewer new community openings
in Northern California in 2000, with only 13 new communities opening in the
first nine months compared to 33 openings in the same period of 1999. Third,
the strength of the Company's Other U.S. operations, which generally offer
lower risk for less investment in land, has resulted in more stringent
criteria guiding the Company's land investment decisions and has caused the
Company to be more selective in its land investments in California. While
these factors are expected to continue to negatively impact deliveries in the
fourth quarter of 2000, the Company anticipates this trend to reverse with
favorable year-over-year comparisons in 2001.
Housing revenues from Other U.S. operations totaled $476.0 million for the
three months ended August 31, 2000 compared to $461.2 million in the same
period a year ago, an increase of 3.2%. Other U.S. deliveries of
10
<PAGE> 11
3,540 units in the third quarter of 2000 were nearly unchanged from the 3,526
units in the third quarter of 1999 as the average number of active
communities in the Company's Other U.S. operations also remained essentially
flat at 179 compared to 178. Revenues from French housing operations during
the three months ended August 31, 2000 decreased to $114.6 million on 726
units from $151.9 million on 944 units in the year-earlier period primarily
due to increased demand in the prior year as potential homebuyers were
seeking to benefit from a favorable French tax law that expired in August
1999.
During the third quarter of 2000, the Company's overall average selling price
was $168,100, nearly flat when compared to $167,100 in the same quarter a
year ago. The Company's domestic average selling price rose to $169,600 in
the third quarter of 2000 from $168,100 in the same period of 1999. For the
three months ended August 31, 2000, the average selling price in the
Company's California operations increased 2.7% to $255,700 from $249,000 for
the same period a year ago and the average selling price in Other U.S.
operations rose 2.8% to $134,500 from $130,800. The California average
selling price increased only moderately due to the lower proportion of
higher-priced Northern California deliveries in the third quarter of 2000, as
a greater proportion of deliveries were generated from Southern California
operations. In France, the average selling price in the third quarter of 2000
decreased 1.9% to $157,800 from $160,900 in the year-earlier quarter
primarily due to a weakening in the French franc and an increase in the
proportion of deliveries generated from condominiums, which are typically
priced below single-family homes.
Revenues from land sales totaled $5.6 million in the third quarter of 2000
compared to $19.9 million in the third quarter of 1999. As of the end of the
third quarter of 2000, the Company had completed the majority of land sales
planned in connection with its asset repositioning program; however, it is
expected that further land sales in connection with the asset repositioning
program will occur in the fourth quarter.
For the first nine months of 2000, construction revenues increased by $75.2
million, or 2.9%, to $2.65 billion, from $2.57 billion for the same period a
year ago as a result of higher housing and land sale revenues. Housing
revenues totaled $2.57 billion on 15,317 units in the first nine months of
2000 compared to $2.54 billion on 15,521 units for the same period a year
ago. Housing operations in the United States produced revenues of $2.27
billion on 13,469 units in the first nine months of 2000 and $2.26 billion on
13,762 units in the comparable period of 1999. During the first nine months
of 2000, California housing revenues decreased 7.0% to $961.4 million from
$1.03 billion in the first nine months of 1999, reflecting an 11.3% decrease
in unit deliveries during the period. Housing revenues from Other U.S.
operations increased 6.8% to $1.31 billion in the first nine months of 2000
from $1.22 billion in the prior year's period as unit deliveries in the
region rose 2.0%. Deliveries in California decreased to 3,779 units for the
first nine months of 2000 from 4,258 for the first nine months of 1999, while
deliveries from Other U.S. operations increased to 9,690 units from 9,504
units during the same period. French housing revenues totaled $298.0 million
on 1,844 units in the first nine months of 2000 compared to $283.3 million on
1,745 units in the corresponding period of 1999.
The Company-wide average new home price increased 2.3% to $167,600 in the
first nine months of 2000 from $163,900 in the year-earlier period. For the
first nine months of 2000, the average selling price in California increased
4.8% to $254,400 from $242,700 for the first nine months of 1999 and the
average selling price in Other U.S. operations rose 4.7% to $134,800 from
$128,800. These increases occurred as a result of selected increases in sales
prices in certain markets. In France, the average selling price for the nine
month period decreased slightly to $161,600 in 2000 compared to $162,400 in
1999.
Company-wide revenues from land sales increased to $78.2 million in the first
nine months of 2000 from $24.9 million in the first nine months of 1999. The
significant increase in land sales for the nine months ended August 31, 2000
resulted from the Company's asset repositioning strategy, adopted in late
1999, which includes the identification and sale of non-core assets.
Operating income decreased by $5.3 million to $75.9 million in the third
quarter of 2000 from $81.2 million in the third quarter of 1999 as lower
gross profits were partially offset by improvement in selling, general and
administrative expenses. However, the construction operating income margin in
the third quarter of 2000 was 7.9%, up .1 percentage point from 7.8% in the
year-earlier quarter. Gross profits decreased by $13.6 million, or 6.7%, to
$190.3 million in the third quarter of 2000 from $203.9 million in the prior
year's period. During this same period, housing gross profits decreased by
$14.4 million to $190.0 million from $204.4 million. The housing gross margin
decreased to 19.8% in the third quarter of 2000 from 20.0% in the
year-earlier quarter but continued an upward trend from 18.9% and 19.1% in
the first and second quarters of 2000, respectively. Land sales generated
essentially break-even results in the third quarters of both 2000 and 1999.
11
<PAGE> 12
Selling, general and administrative expenses decreased 6.8% to $114.4 million
in the three month period ended August 31, 2000 from $122.7 million in the
same period a year ago. As a percentage of housing revenues, selling, general
and administrative expenses were 11.9% in the third quarter of 2000 compared
to 12.0% in the same period a year ago. The slightly improved ratio in 2000
resulted from the cost savings generated from the Company's cost containment
initiatives, which more than offset transitional costs associated with the
consolidation of the Company's homebuilding accounting functions into two
regional office locations. This consolidation effort is expected to be
completed in the fourth quarter of 2000.
For the first nine months of 2000, operating income increased by $8.6 million
to $167.1 million from $158.5 million in the corresponding period of 1999 as
higher gross profits were partially offset by a slight increase in selling,
general and administrative expenses. Construction operating income margin for
the nine months ended August 31, 2000 was 6.3%, up from 6.2% in the same
period of 1999. Gross profits increased by $10.9 million, or 2.2%, to $496.0
million in the first nine months of 2000 from $485.1 million in the first
nine months of 1999. During this same period, housing gross margin increased
to 19.3% from 19.1%. The increase in the Company's housing gross margin for
the nine months ended August 31, 2000 resulted primarily from the improved
pricing environment in the latter part of 1999 as well as the reduced impact
related to purchase accounting associated with the 1999 acquisition of Lewis
Homes. Company-wide land sales generated essentially break-even results for
the first nine months of both 2000 and 1999.
Selling, general and administrative expenses rose by $2.3 million to $328.9
million for the first nine months of 2000 from $326.6 million for the same
period of 1999. As a percentage of housing revenues, selling, general and
administrative expenses remained steady at 12.8% for the nine months ended
August 31, 2000 and 1999.
Interest income totaled $1.3 million in the third quarter of 2000 compared to
$1.8 million in the third quarter of 1999. For the first nine months,
interest income totaled $5.0 million in 2000 and $5.6 million in 1999. The
slight decline in interest income in the third quarter and first nine months
of 2000 reflected a decrease in the interest bearing average balances of
short-term investments and mortgages receivable compared to the same periods
a year ago.
Interest expense (net of amounts capitalized) increased by $2.0 million to
$9.1 million in the third quarter of 2000 from $7.1 million in the third
quarter of 1999. For the nine months ended August 31, 2000, interest expense
increased by $2.1 million to $22.3 million from $20.2 million for the nine
months ended August 31, 1999. Gross interest incurred in the three months and
nine months ended August 31, 2000 was higher than that incurred in the
corresponding year-ago periods by $2.9 million and $12.6 million,
respectively, reflecting an increase in average indebtedness. The percentage
of interest capitalized during the three months ended August 31, 2000 and
1999 was 61.6% and 65.8%, respectively. For the nine month periods ended
August 31, this percentage was 67.3% in 2000 and 63.7% in 1999. The amount of
interest capitalized as a percentage of gross interest incurred and
distributions associated with the Company's outstanding Feline Prides was
53.2% and 57.7% for the three months and nine months ended August 31, 2000,
respectively and 55.7% and 52.9% for the three months and nine months ended
August 31, 1999, respectively.
Minority interests totaled $8.4 million in the third quarter of 2000 and $8.6
million in the third quarter of 1999. For the first nine months of 2000,
minority interests totaled $20.9 million compared to $21.1 million for the
first nine months of 1999. Minority interests for the three months and nine
months ended August 31, 2000 are comprised of two major components: pretax
income of consolidated subsidiaries and joint ventures related to residential
and commercial activities and distributions associated with the Company's
Feline Prides. Minority interests for the third quarter and first nine months
of 2000 include the impact of the French IPO.
Equity in pretax income of unconsolidated joint ventures in the third quarter
of 2000 totaled $.8 million compared to $.6 million recorded in the third
quarter of 1999. The Company's joint ventures generated combined revenues of
$24.2 million during the three months ended August 31, 2000 compared with no
revenues recorded in the corresponding period of 1999. For the first nine
months of 2000, the Company's equity in pretax income of unconsolidated joint
ventures totaled $2.3 million compared to $.6 million for the same period of
1999. Combined revenues from these joint ventures totaled $87.8 million in
the first nine months of 2000 and $.7 million in the first nine months of
1999. Revenues from unconsolidated joint ventures increased in the three
months and nine months ended August 31, 2000 primarily due to the inclusion
of a new domestic joint venture in 2000. All of the joint venture revenues in
the 2000 and 1999 periods were generated from residential properties.
12
<PAGE> 13
Gain on issuance of French subsidiary stock totaled $39.6 million in the
first nine months of 2000. This one-time gain resulted from the issuance of
5,314,327 common shares (including the over allotment option) by KBSA, the
Company's wholly owned French subsidiary, in an initial public offering in
the first quarter of 2000. The offering was made in France and elsewhere in
Europe and was priced at 23 euros per share. KBSA is now listed on the
Premiere Marche of the ParisBourse. The offering generated total net proceeds
of $113.1 million of which $82.9 million was used by the Company to reduce
its domestic debt and repurchase additional shares of its common stock. The
remainder of the proceeds was used to fund internal and external growth of
KBSA. The Company continues to own a majority interest in KBSA and will
continue to consolidate these operations in its financial statements.
MORTGAGE BANKING
Interest income and interest expense in the third quarter of 2000 were
essentially flat compared to the same quarter a year ago. For the first nine
months of 2000, interest income from mortgage banking activities rose by $2.5
million and related interest expense increased by $2.1 million from the same
period of 1999. Interest income for the first nine months of 2000 increased
due to the higher balance of first mortgages held under commitments of sale
and other receivables outstanding during the period. The increase in interest
expense resulted from the higher balance of notes payable outstanding during
the first nine months of 2000 compared to the same period of 1999.
Other mortgage banking revenues decreased by $1.0 million to $10.6 million in
the third quarter of 2000 from $11.6 million in the prior year's third
quarter. For the first nine months of 2000, other mortgage banking revenues
totaled $25.6 million, a decrease of $4.4 million from $30.0 million in the
first nine months of 1999. These decreases were primarily the result of lower
gains on the sale of mortgages and servicing rights due to lower unit
delivery volume as well as factors resulting from the impact of interest rate
increases, including a shift in product mix toward more variable rate loans,
lower retention and the intensely competitive mortgage banking environment.
General and administrative expenses associated with mortgage banking
activities increased by $1.8 million to $4.9 million in the third quarter of
2000 from $3.1 million for the same period a year ago. For the nine month
period, these expenses totaled $11.4 million in 2000 and $8.9 million in
1999. General and administrative expenses for the Company's mortgage banking
subsidiary increased in 2000 due to expansion of the operations.
INCOME TAXES
Income tax expense totaled $21.8 million and $20.6 million in the third
quarter of 2000 and 1999, respectively. For the first nine months of 2000,
income tax expense totaled $50.0 million compared to $44.7 million in the
same period of 1999. The income tax amounts represented effective income tax
rates of approximately 34% in both the three months and nine months ended
August 31 (excluding the gain on issuance of French subsidiary stock) and 35%
in both periods of 1999. The Company's effective tax rate declined by 1.0
percentage point in 2000 as a result of greater utilization of tax credits.
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. For the nine months ended August 31, 2000, net cash provided by
operating, investing and financing activities totaled $16.8 million compared
to $23.6 million used in the nine months ended August 31, 1999.
Operating activities used $6.0 million of cash during the first nine months
of 2000 compared to $144.7 million used during the same period of 1999. The
Company's uses of operating cash in the first nine months of 2000 included
investments in inventories of $224.6 million (excluding $12.4 million of
inventories acquired through seller financing), a gain on the issuance of
French subsidiary stock of $39.6 million and other operating uses of $29.8
million. Partially offsetting these uses was cash provided from nine months'
earnings of $136.6 million, a decrease in receivables of $74.3 million, an
increase in accounts payable, accrued expenses and other liabilities of $16.9
million and various noncash items deducted from net income.
13
<PAGE> 14
Operating activities for the first nine months of 1999 used cash to fund an
investment of $258.8 million in inventories (excluding the effect of
acquisitions and $18.4 million of inventories acquired through seller
financing) and an increase of $145.9 million in receivables. Sources of
operating cash in the first nine months of 1999 included nine months'
earnings of $82.9 million, an increase in accounts payable, accrued expenses
and other liabilities of $127.0 million and various noncash items deducted
from net income.
Investing activities used $5.5 million of cash in the first nine months of
2000 compared to $30.2 million used in the year-earlier period. In the first
nine months of 2000, cash was used for net purchases of property and
equipment of $11.6 million. Partially offsetting this use were proceeds of
$5.2 million 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, sales of mortgages held
for long-term investment of $.7 million and investments in unconsolidated
joint ventures of $.2 million. In the first nine months of 1999, cash of
$11.6 million, net of cash acquired, was used for acquisitions, $15.4 million
was used for net purchases of property and equipment, $13.7 million was used
for distributions related to investments in unconsolidated joint ventures and
$1.9 million was used for originations of mortgages held for long-term
investment. Partially offsetting these uses was $12.4 million of proceeds
received from mortgage-backed securities.
Financing activities in the first nine months of 2000 provided $28.3 million
of cash compared to $151.3 million provided in the first nine months of 1999.
In the first nine months of 2000, cash was provided from proceeds from the
issuance of French subsidiary stock of $113.1 million and net proceeds from
borrowings of $82.6 million. Partially offsetting these sources were payments
for repurchases of common stock of $137.5 million, payments to minority
interests of $16.0 million, cash dividend payments of $8.9 million and
payments on collateralized mortgage obligations of $5.0 million. Financing
activities in the first nine months of 1999 resulted in net cash inflows due
to net proceeds from borrowings of $203.2 million, partially offset by
payments to minority interests of $21.3 million, payments on collateralized
mortgage obligations of $11.8 million, cash dividend payments of $10.8
million and repurchases of common stock of $8.0 million.
On February 18, 2000, the Company's mortgage banking subsidiary renewed its
revolving mortgage warehouse agreement (the "Mortgage Warehouse Facility")
and increased the facility from $250 million to $300 million. The Mortgage
Warehouse Facility, which expires on February 18, 2003, provides for an
annual fee based on the committed balance of the facility and provides for
interest at either the London Interbank Offered Rate or the Federal Funds
Rate plus an applicable spread on amounts borrowed. The Master Loan and
Security Agreement was renewed on May 19, 2000 with an investment bank and
was increased from $150 million to $250 million. The agreement, which expires
on May 18, 2001, provides for a facility fee based on the $250 million
maximum amount available and provides for interest to be paid monthly at the
Eurodollar Rate plus an applicable spread on amounts borrowed. The amounts
outstanding under the Mortgage Warehouse Facility and the Master Loan and
Security Agreement are secured by a borrowing base, which includes certain
mortgage loans held under commitments of sale and are repayable from sales
proceeds. There are no compensating balance requirements under either
facility. Both facilities include financial covenants and restrictions which,
among other things, require the maintenance of certain financial statement
ratios, a minimum tangible net worth and a minimum net income.
On October 6, 2000, the Company entered into $725 million in new unsecured
credit facilities, consisting of a $564.0 million four-year committed
revolving credit facility and a $161.0 million five-year term loan, which
replaced its Bridge Revolving Credit Facility, Domestic Unsecured Revolving
Credit Facility and Term Loan Agreement. These new facilities can be expanded
up to an aggregate total of $900 million through additional bank lending
commitments. Interest on each of the new unsecured credit facilities will be
paid monthly at the London Interbank Offered Rate plus an applicable spread
on amounts borrowed. The financial covenants and restrictions on the new
unsecured credit facilities are substantially the same as those under the
facilities that were replaced.
In June 2000, the Company finalized the sale of Kaufman and Broad
Multi-Housing Group, Inc., a transaction which generated net proceeds to the
Company of approximately $85 million. The sale of this operation did not have
a material impact on the Company's operating results.
During the nine months ended August 31, 2000, the Company repurchased 6.7
million shares of its common stock at a total cost of $137.5 million under
its common stock repurchase program. On September 21, 2000,
14
<PAGE> 15
the Company repurchased 4.0 million shares of common stock which it had
issued in the January 1999 acquisition of Lewis Homes, thereby completing the
purchase of all the 14.5 million shares of common stock previously authorized
for repurchase by the Company's Board of Directors. The Lewis shareholders
continue to own approximately 3.9 million shares of the Company's common
stock.
As of August 31, 2000 the Company had a total of $324.4 million available
under its existing committed revolving credit facilities. On October 6, 2000,
these facilities were replaced by $725 million in new unsecured credit
facilities. The Company's French unsecured financing agreements, totaling
$184.5 million, had in the aggregate $89.7 million available at August 31,
2000. In addition, the Company's mortgage banking operations had $57.1
million available under its $300 million Mortgage Warehouse Facility and
$187.0 million available under its $250 million Master Loan and Security
Agreement at quarter-end. Despite executing stock repurchases of
approximately $219 million since August 1999, the Company has kept its
leverage ratio within its target range of 45% to 55%. The Company's financial
leverage, as measured by the ratio of net debt to total capital, was 53.1% at
August 31, 2000 compared to 53.4% at August 31, 1999.
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.
OUTLOOK
The Company's residential backlog as of August 31, 2000 consisted of 12,115
units, representing aggregate future revenues of approximately $2.03 billion,
up 12.1% and 16.2%, respectively, from 10,809 units, representing aggregate
future revenues of approximately $1.75 billion, a year earlier. Company-wide
net orders for the third quarter of 2000 totaled 5,357 compared to 5,347 net
orders in the third quarter of 1999. The Company's backlog ratio (defined as
the ratio of beginning backlog to deliveries in the succeeding quarter) at
the end of the third quarter of 2000 was approximately 214.9% compared with
189.5% a year earlier. The quarter-end backlog ratio exceeded management's
target of 200.0% for the first time in the Company's history.
The Company's domestic operations accounted for approximately $1.72 billion
of backlog value on 10,217 units at August 31, 2000, up from $1.51 billion on
9,353 units at August 31, 1999, reflecting higher backlogs from both
California and Other U.S. operations. Backlog in California increased to
approximately $737.9 million on 2,920 units at August 31, 2000 from $631.8
million on 2,630 units at August 31, 1999 despite net orders decreasing 21.6%
to 1,301 in the third quarter of 2000 from 1,660 for the same quarter a year
ago. Other U.S. operations also demonstrated significant year-over-year
growth in backlog levels with the backlog value at August 31, 2000 increasing
to approximately $985.1 million on 7,297 units from $882.5 million on 6,723
units at August 31, 1999. Other U.S. net orders rose 9.9% to 3,492 in the
third quarter of 2000 from 3,177 in the year-earlier quarter. The average
number of active communities in the Company's domestic operations for the
third quarter of 2000 was 270, essentially flat when compared to 267 for the
same quarter a year ago.
In France, the value of residential backlog at August 31, 2000 was
approximately $310.0 million on 1,897 units, up from $231.0 million on 1,442
units a year earlier. The Company's net orders in France increased by 10.2%
to 563 units in the third quarter of 2000 from 511 units in the third quarter
of 1999. The value of backlog associated with the Company's French commercial
development activities rose to approximately $7.0 million at August 31, 2000
from approximately $1.4 million at August 31, 1999.
Substantially all of the homes included in residential backlog are expected
to be delivered; however, cancellations could occur, particularly if market
conditions deteriorate or mortgage interest rates increase, thereby
decreasing backlog and related future revenues.
Company-wide net orders for the month of September 2000, including net orders
from unconsolidated joint ventures, totaled 1,535, up 10.0% from the 1,395
net orders received in the comparable period of 1999. During this same
period, domestic net orders were up 10.9%, reflecting a 3.0% increase in
California and a 15.0% increase in Other U.S. net orders. In France, net
orders for the month of September 2000 increased 1.5% compared to the same
period a year ago.
The Company expects its KB2000 operational business model to continue to
drive strong performance in the remainder of 2000 and into 2001. The strength
of the Company's backlog at the end of the third quarter of
15
<PAGE> 16
2000, which was approximately $283.3 million higher than the backlog at the
end of the third quarter of 1999, should enable it to achieve its year 2000
delivery goals. Since the first quarter of 2000, the Company has experienced
improvement in its housing gross margin in each succeeding quarter, a trend
it largely attributes to its KB2000 operational business model. For the
fourth quarter of 2000, the Company expects its housing gross margin to
continue to improve when compared to the third quarter of 2000 and the fourth
quarter of 1999. The combined effects of anticipated improvement in housing
gross margin and the selling, general and administrative expense ratio
together with a lower tax rate and fewer shares outstanding are expected to
result in record earnings per share for the Company in the fourth quarter of
2000.
While continuing to operate under the disciplines of the KB2000 operational
business model, the Company has leveraged the business model with additional
complementary initiatives, including strategies to establish leading market
positions and identify acquisition opportunities. The Company hopes to
continue to increase overall unit delivery growth in future years. The
Company's growth strategies include expanding existing operations to optimal
market volume levels, and considering entry into new geographic markets
through acquisitions. Growth in the Company's existing markets will be driven
by the Company's ability to increase the average number of active communities
through the continued successful implementation of its KB2000 operational
business model.
As part of its strategy, the Company has made a commitment to pursue
opportunities in the area of e-commerce under its recently formed subsidiary,
e.KB, Inc. These efforts include continually improving its web site,
kbhomes.com, to provide more information for consumers, utilizing its
houseCALL center to support web site efforts and making strategic investments
in related e-commerce businesses. The Company intends to continue to focus on
e-commerce initiatives with the hope of reducing supply chain costs, building
longer-term relationships with its customers and bringing new technology to
its customers.
In August 2000, the Company announced that it had formed American CityVista,
a joint venture with Henry Cisneros, former president of Univision
Communications and former Secretary of the U.S. Department of Housing and
Urban Development, who now is also a director of the Company. American
CityVista will develop distinctive communities in urban areas where new
residential development has not occurred in recent years. American CityVista,
working with the Company, will identify sites, plan neighborhoods, acquire
and develop land, build homes and market them as competitively-priced
"villages within cities" that are wired for technology and designed to honor
local tastes and traditions.
The Company continues to focus on the asset repositioning strategy that it
announced in late 1999. As part of this strategy, the Company continues to
review its assets and businesses for the purpose of monetizing non-strategic
or marginal positions, and has instituted even more stringent criteria for
land acquisitions. The Company's asset repositioning activities during 2000
have included the partial IPO of its French subsidiary, the sale of Kaufman
and Broad Multi-Housing Group, Inc., and various land sales. As of the end of
the third quarter of 2000, a majority of the land assets originally
identified through the asset repositioning strategy as non-core have been
sold; however, it is expected that further land sales in connection with the
asset repositioning program will occur in the fourth quarter. The asset
repositioning initiatives are intended to increase cash flows available to
reduce debt and/or repurchase additional stock, or possibly to fund future
acquisitions.
Based on its current projections, which includes the impact of the Company's
share repurchase program, the Company expects to establish record earnings
per share in fiscal 2000, although this goal could be materially affected by
various risk factors, such as changes in general economic conditions either
nationally or in the regions in which the Company operates, job growth and
employment levels, a downturn in the economy's pace, home mortgage interest
rates and consumer confidence, among other things. Future increases in
short-term interest rates instituted by the Federal Reserve Board may give
rise to further increases in mortgage interest rates, which could affect the
Company's performance.
16
<PAGE> 17
SAFE HARBOR STATEMENT
Investors are cautioned that certain statements contained in this document,
as well as some statements by the Company in periodic press releases and some
oral statements by Company officials to securities analysts and stockholders
during presentations about the Company are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995
(the "Act"). Statements which are predictive in nature, which depend upon or
refer to future events or conditions, or which include words such as
"expects", "anticipates", "intends", "plans", "believes", "estimates",
"hopes", and similar expressions constitute forward-looking statements. In
addition, any statements concerning future financial performance (including
future revenues, earnings or growth rates), ongoing business strategies or
prospects, and possible future Company actions, which may be provided by
management are also forward-looking statements as defined by the Act.
Forward-looking statements are based on current expectations and projections
about future events and are subject to risks, uncertainties, and assumptions
about the Company, economic and market factors and the homebuilding industry,
among other things. These statements are not guaranties of future
performance, and the Company has no specific intention to update these
statements.
Actual events and results may differ materially from those expressed or
forecasted in the forward-looking statements made by the Company or Company
officials due to a number of factors. The principal important risk factors
that could cause the Company's actual performance and future events and
actions to differ materially from such forward-looking statements include,
but are not limited to, national or regional changes in general economic
conditions, employment levels, costs of homebuilding material and labor, home
mortgage and other interest rates, the secondary market for mortgage loans,
competition, currency exchange rates as they affect the Company's operations
in France, consumer confidence, government regulation or restrictions on real
estate development, capital or credit market conditions affecting the
Company's cost of capital; the availability and cost of land in desirable
areas; environmental factors, governmental regulations, unanticipated
violations of Company policy, property taxes and unanticipated delays in the
Company's operations. See the Company's Annual Report on Form 10-K for the
year ended November 30, 1999 and other Company filings with the Securities
and Exchange Commission for a further discussion of risks and uncertainties
applicable to the Company's business.
The Company undertakes no obligation to update any forward-looking statements
in this Report on Form 10-Q or elsewhere.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Geographical 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 months and nine months ended August 31, 2000 and 1999, together with
backlog data in terms of units and value by geographical market as of August
31, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended August 31,
------------------------------------------
Deliveries Net Orders
------------------ ------------------
Market 2000 1999 2000 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
California 1,444 1,629 1,301 1,660
Other U.S. 3,540 3,526 3,492 3,177
Foreign 726 948 564 510
------ ------ ------ ------
Total 5,710 6,103 5,357 5,347
====== ====== ====== ======
Unconsolidated
Joint Ventures 102 -- 102 --
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended August 31, August 31,
------------------------------------------------- ----------------------------------------------------
Backlog - Value
Deliveries Net Orders Backlog - Units In Thousands
----------------------- ----------------------- ------------------------ ------------------------
Market 2000 1999 2000 1999 2000 1999 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 3,779 4,258 4,820 5,336 2,920 2,630* $ 737,912 $ 631,823*
Other U.S. 9,690 9,504 11,681 10,889 7,297 6,723* 985,091 882,538*
Foreign 1,848 1,759 2,018 1,962 1,898* 1,456* 310,240* 235,544*
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 15,317 15,521 18,519 18,187 12,115* 10,809* $2,033,243* $1,749,905*
========== ========== ========== ========== ========== ========== ========== ==========
Unconsolidated
Joint Ventures 362 -- 338 -- 195 -- $ 35,880 $ --
========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
* Backlog amounts for 2000 have been adjusted to reflect the acquisition
of two France-based builders. Therefore, backlog amounts at November 30,
1999 combined with net order and delivery activity for the first nine
months of 2000 will not equal ending backlog at August 31, 2000.
Similarly, backlog amounts for 1999 were adjusted to reflect the
acquisition of Lewis Homes and a France-based builder.
18
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Exhibits
--------
<S> <C>
24 The consent of Ernst & Young LLP, independent auditors, filed as an
exhibit to the Company's 1999 Annual Report on Form 10-K, is
incorporated by reference herein.
27 Financial Data Schedule.
</TABLE>
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended August 31, 2000.
19
<PAGE> 20
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 October 13, 2000 /s/ BRUCE KARATZ
----------------------- --------------------------------------
Bruce Karatz
Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
Dated October 13, 2000 /s/ WILLIAM R. HOLLINGER
----------------------- --------------------------------------
William R. Hollinger
Vice President and Controller
(Chief Accounting Officer)
20
<PAGE> 21
<TABLE>
<CAPTION>
Page of
Sequentially
INDEX OF EXHIBITS Numbered Pages
----------------
<S> <C> <C>
27 Financial Data Schedule.
</TABLE>
21
