KB Home (NYSE:KBH) Q4 2017 Earnings Conference Call - Final Transcript

Jan 10, 2018 • 05:00 pm ET


KB Home (NYSE:KBH) Q4 2017 Earnings Conference Call - Final Transcript


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Good afternoon. My name is Darren, and I will be your conference operator today. I would like to welcome everyone to the KB Home 2017 Fourth Quarter and Full-Year Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded and will be available for replay at the company's website, kbhome.com, through February 10th.

Now, I would like to turn the call over to Jill Peters, Senior Vice President, Investor Relations. Jill, you may begin.

Jill Peters

Thank you, Darren. Good afternoon, everyone, and thank you for joining us today to review our fourth quarter and full-year results. With me are Jeff Mezger, Chairman, President, and Chief Executive Officer; Jeff Kaminski, Executive Vice President and Chief Financial Officer; Bill Hollinger, Senior Vice President and Chief Accounting Officer; and Thad Johnson, Senior Vice President and Corporate Treasurer.

Before we begin, let me note that during this call, items will be discussed that are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future results, and the company does not undertake any obligation to update them. Due to factors outside of the company's control, including those detailed in today's press release and in our filings with the Securities and Exchange Commission, actual results could be materially different from those stated or implied in the forward-looking statement.

In addition, a reconciliation of the non-GAAP measures referenced during today's discussion to their most directly comparable GAAP measures can be found in today's press release and/or on the Investor Relations page of our website at kbhome.com.

And, with that, I will turn the call over to Jeff Mezger.

Jeffrey Mezger

Thank you, Jill. Good afternoon, and Happy New Year to all of you. We had an excellent finish to 2017, which was the first year of our three-year returns-focused growth plan. We increased our scale, growing revenues 22% to $4.4 billion.

We also significantly improved our profitability, with operating margin expansion of 140 basis points, excluding inventory-related charges, driving substantial growth in earnings and an increase in our stockholders' equity of over $200 million. At the heart of our returns-focused growth plan is the ability to generate substantial levels of cash flow and to redeploy this cash in a balanced way to fuel profitable growth and reduce our debt. In executing our plan, we enhanced our profitability, improved our asset efficiency, and accelerated the utilization of our deferred-tax assets. The cash produced by our operations in 2017 enabled investments of $1.5 billion in land acquisition and development and a reduction in our debt balance of $315 million.

Even with these sizable allocations of capital, we still ended the year with over $700 million in cash, decreased our net debt-to-capital ratio to 45%, and drove our return on equity higher by 370 basis points. Our strategy is producing solid results, and we feel very good about the progress we are making on our goals. Moving on to a review of the fourth quarter. Overall, our results were quite strong