KB Home (NYSE:KBH) Q4 2019 Earnings Conference Call - Final Transcript

Jan 09, 2020 • 05:00 pm ET


KB Home (NYSE:KBH) Q4 2019 Earnings Conference Call - Final Transcript


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Good afternoon. My name is Devon, and I'll be your conference operator today. I would like to welcome everyone to the KB Home 2019 Fourth Quarter Earnings Conference Call. [Operator Instructions] Following the company's opening remarks, we will open the lines for questions. Today's conference call is being recorded and will be available for replay at the company's website, kbhome.com, through February 9th.

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, Devon. Good afternoon, everyone, and thank you for joining us today to review our results for the fourth quarter of fiscal 2019. With me are Jeff Mezger, Chairman, President, and Chief Executive Officer; Matt Mandino, Executive Vice President and Chief Operating 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. Good afternoon, everyone, and Happy New Year. We finished 2019 strong with fourth quarter results that reflected solid demand for our product as homebuyers continued to prioritize choice and personalization in their home buying decisions. In addition, our performance under our Returns-Focused Growth Plan produced measurable results, most notably in the year-over-year expansion of our housing gross profit margin.

With the conclusion of the third year of this plan, there are several achievements to highlight. First, at roughly $270 million, our net income in 2019 is up by over 150% relative to 2016 when we launched the plan. This helped drive our return on equity to 12.2%, nearly doubling its 2016 level to a point that was solidly within the plan's target range.

Next, the significant cash from operations that we generated in the past three years enabled us to invest over $5 billion in land acquisition and development, as well as return $73 million in capital to shareholders through dividends and share repurchases, while also repaying about $850 million in debt. As a result, we worked our debt-to-capital ratio down considerably to 42.3% from 60.5%, also achieving our tightened target goal and reduced our interest incurred meaningfully, benefiting our gross margin. With the success of