KB Home (NYSE:KBH) Q3 2019 Earnings Conference Call - Final Transcript

Sep 25, 2019 • 05:00 pm ET


KB Home (NYSE:KBH) Q3 2019 Earnings Conference Call - Final Transcript


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Good afternoon. My name is Devon, and I will be your conference operator today. I would like to welcome everyone to KB Home 2019 Third Quarter Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded and it will be available for replay at the Company's website kbhome.com through October 25.

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

Jill Peters

Thank you, Devon. Good afternoon, everyone and thank you for joining us today to review our results for the third quarter of fiscal 2019. 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 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 filings with the Securities and Exchange Commission, actual results could be materially different from those stated or implied in the forward-looking statements.

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 T. Mezger

Thank you, Jill, and good afternoon to everyone. We are pleased with our results for the third quarter, which reflect the underlying strength of our business, and consistent execution of our Returns-Focused Growth Plan. Our performance this quarter is important not only for how we are positioned to close our fiscal 2019, but also in the foundation it provides for continued success into 2020 which we believe is shaping up to be quite solid.

As we approach the three-year mark of our plan with meaningful results generated during this period, our focus remains the same, to profitably grow our business through consistent implementation of our core business strategy, while strengthening our balance sheet by driving greater productivity and efficiency of our assets. As a result of our solid execution on this plan, we expect to increase our diluted earnings per share in 2019 by the more than 150% relative to 2016. Our higher profitability contributes to significantly improved returns with our return on equity expected to accelerate from 6.3% in 2016 to over 12% in 2019. Over the past year, our business has generated significant operating cash flow including the incremental cash for monetizing our deferred tax asset, which has enabled us to grow our inventory by $230 million while reducing our debt by over $200 million. These accomplishments contributed two important outcomes. First, in addition to our planned double-digit