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KB Home Reports Record Fourth Quarter and Full Year 2005 Results
Fourth Quarter EPS Up 59% to $3.51; Backlog Increases 40% to $6.76 Billion Company Repurchases Two Million Shares During the Quarter 2005 Revenues Increase 34% to $9.44 Billion; EPS of $9.53, Up 67% Company Reaffirms 2006 Earnings Guidance of $11.25 Per Diluted Share Board Authorizes New 10-Million-Share Repurchase Plan; Increases Dividend 33%

LOS ANGELES, Dec 15, 2005 /PRNewswire-FirstCall via COMTEX News Network/ -- KB Home (NYSE: KBH), one of the largest homebuilders in the United States and France, today reported financial results for its fourth quarter and fiscal year ended November 30, 2005. Highlights include:

* Total revenues rose 32% in the fourth quarter of 2005 to $3.15 billion, reflecting a 33% year-over-year increase in housing revenues fueled by a 16% increase in unit delivery volume and a 15% increase in the average unit selling price. Fourth quarter net income rose 66% from the year-earlier period to $310.6 million, driven by revenue growth and an improved operating margin. Diluted earnings per share for the fourth quarter increased 59% to $3.51. * For the full year, KB Home delivered 37,140 homes and generated total revenues of $9.44 billion, exceeding 2004's record levels by 17% and 34%, respectively. Net income for 2005 increased 75% year-over-year to $842.4 million, and diluted earnings per share rose 67% to $9.53. The Company's revenues have grown at a compound annual rate of 19% over the past five years, and diluted earnings per share have increased at a compound rate of 29% over the same period. * Unit and dollar backlog at November 30, 2005 increased 27% and 40%, respectively, from year-end 2004 levels. Year-end backlog exceeded 25,000 units for the first time in the Company's history, representing potential future revenues of $6.76 billion. Based on the growing backlog and strong overall financial results, the Company reaffirms earnings expectations of $11.25 per diluted share for 2006, an 18% increase from 2005 results. * KB Home repurchased two million shares of its common stock during the fourth quarter of 2005 at an aggregate price of $129.4 million, exhausting its existing board-authorized repurchase plan. On December 8, 2005, the Company's directors authorized the repurchase of an additional 10 million shares of the Company's common stock. The board also increased the annual cash dividend on the Company's common stock by 33% to $1.00 per share. * On September 1, 2005, the Company completed the sale of substantially all the assets of its mortgage banking operations to the nation's leading home loan lender, Countrywide Financial Corporation. In a separate transaction, the two companies established Countrywide KB Home Loans, a 50-50 joint venture that represents the first large-scale collaboration between a national builder and lender. Countrywide KB Home Loans began providing mortgage banking services to the Company's homebuyers on September 1, 2005. * KB Home entered into a new five-year $1.50 billion revolving credit facility on November 22, 2005. The new facility, which may be increased under certain circumstances up to $2.00 billion, increases the Company's revolving-credit borrowing capacity by 50% at more attractive interest rates. The Company's liquidity measures at November 30, 2005 continued to improve, with just $84 million in borrowings outstanding under its new credit facility and a debt-to-capital ratio of 46.4%, representing the lower end of the Company's targeted range. Net of cash, the Company's leverage ratio was 44.8% at November 30, 2005.

"We extended our trend of strong, consistent financial performance in the fourth quarter of 2005 and completed another successful year, delivering 37,140 homes and posting revenues approaching $10 billion," said Bruce Karatz, chairman and chief executive officer. "Our revenues and earnings have grown at double-digit compound annual rates over the past five years as a direct result of our consistent execution of a disciplined operational business model that has steered our homebuilding operations through geographic expansion, product diversification and greater customer satisfaction. Entering 2006, we plan to continue to operate under our proven operational and financial disciplines to drive shareholder value. In addition to the strengths within our business, economic factors, including positive job growth and demographic trends in the markets we serve, support our favorable outlook and earnings projection of $11.25 per share for 2006."

Company-wide revenues reached $3.15 billion for the quarter ended November 30, 2005, increasing $770 million or 32% from $2.38 billion in the year-earlier quarter, largely as a result of revenue growth within the Company's homebuilding operations. Fourth quarter housing revenues grew 33% to $3.14 billion, up from $2.36 billion in the year-earlier period, on a 16% increase in unit deliveries to 11,946 from 10,285 in the fourth quarter of 2004 and a 15% increase in the overall average unit selling price to $262,700 from $229,200 in the 2004 fourth quarter. The average selling price rose in each of the Company's geographic regions with increases ranging from 4% in the Central region to 35% in the Southwest.

Higher housing revenues and a significantly improved operating margin boosted fourth quarter construction operating income by 66% to $492.8 million, up from $297.6 million in the year-earlier quarter. The Company's construction operating income margin expanded 310 basis points in the period, to 15.7% from 12.6% in the fourth quarter of 2004. The increased margin reflected improvement in both the Company's housing gross margin, which rose to 27.1% in the 2005 fourth quarter from 25.1% in the year-earlier period and in selling, general and administrative expenses as a percentage of housing revenues, which decreased to 11.4% in the 2005 fourth quarter from 12.6% in the fourth quarter of 2004. The substantial improvement in margins and overhead propelled the Company's pretax margin to 15.3% in the fourth quarter of 2005, up 360 basis points from 11.7% for the fourth quarter of 2004. The Company's net income climbed to $310.6 million in the fourth quarter of 2005, up from $186.7 million in the year-earlier period, mainly due to higher revenues and a higher operating margin. Earnings per diluted share in the 2005 fourth quarter rose 59% to $3.51, up from $2.21 in the prior year period, as the impact of higher pretax earnings was partially offset by an increase in the Company's effective income tax rate, which rose to 35% in 2005 from 33% in 2004, and a greater average number of diluted shares outstanding.

"The recent actions by our board in authorizing a new share repurchase program and increasing the dividend on our common stock demonstrate KB Home's on-going commitment to translating operational success into enhanced value for our shareholders," said Karatz. "The Company's growth and sustained profitability have allowed us to opportunistically repurchase 45 million shares since 1999 and raise our dividend for the third consecutive year while maintaining a healthy financial position."

The Company generated 9,747 net orders in the 2005 fourth quarter, up 15% from 8,516 net orders in the year-earlier period. Unit backlog rose 27% to 25,722 units at November 30, 2005 from 20,280 units at November 30, 2004, while backlog value grew by $1.95 billion or 40%, to approximately $6.76 billion at November 30, 2005 from approximately $4.82 billion at November 30, 2004. Year-end backlog values increased by more than 25% over 2004 levels in each of the Company's geographic regions in the United States and France.

"KB Home generated more than 42,000 net orders for new homes in 2005," said Karatz, "driving our year-end backlog to a new record high. This backlog provides great support for our 2006 financial projections. While year-over- year net order comparisons posted double-digit increases in each quarter of the year, our net order growth moderated in the fourth quarter. Nevertheless, visible ongoing demand for the Company's diverse array of first-time, move-up, luxury and active-adult products suggests that we can expect a healthy growth rate in our markets across the country in 2006, trending toward lower, long- term normalized levels."

For the year ended November 30, 2005, the Company delivered 37,140 homes, a 17% increase from 31,646 homes delivered in 2004. Total revenues reached $9.44 billion in 2005, up 34% from $7.05 billion in the corresponding period of 2004. Net income for the full 2005 year rose 75% to $842.4 million, up from $480.9 million a year ago. Diluted earnings per share for the period rose 67% to $9.53, up from $5.70 per diluted share in 2004.

"With another successful year behind us, several new initiatives are energizing our prospects for 2006," added Karatz. "Our recently-launched KB Urban division will offer medium-to-high-density housing opportunities in city centers. Our first collaboration with Martha Stewart Living Omnimedia, Inc. will launch a 650 unit community in North Carolina. Our entry into Louisiana will help rebuild vital housing stock in an area recently devastated by hurricanes. And our Countrywide KB Home Loans joint venture will continue to provide a wide array of financing options to our homebuyers. Each of these initiatives is an extension of our efforts to provide high quality services and add to the exciting range of choices KB Home customers across the country have come to expect."

The Conference Call on the Fourth Quarter 2005 earnings will be broadcast live TOMORROW at 8:00 a.m. Pacific Standard Time, 11:00 a.m. Eastern Standard Time. To listen, please go to the Investor Relations section of the Company's Web site at http://www.kbhome.com.

Building homes for nearly half a century, KB Home is one of America's premier homebuilders with domestic operating divisions in some of the fastest-growing regions and states: West Coast-California; Southwest-Arizona, Nevada and New Mexico; Central-Colorado, Illinois, Indiana and Texas; and Southeast-Florida, Georgia, Maryland, North Carolina, South Carolina and Virginia. Kaufman & Broad S.A., the Company's publicly-traded French subsidiary, is one of the largest homebuilders in France. In fiscal 2005, the Company delivered homes to 37,140 families in the United States and France. KB Home also offers complete mortgage services through Countrywide KB Home Loans, a joint venture with Countrywide Financial Corporation. Founded in 1957, and winner of the 2004 American Business Award for Best Overall Company, KB Home is a Fortune 500 company listed on the New York Stock Exchange under the ticker symbol "KBH." For more information about any of KB Home's new home communities, call 888-KB-HOMES or visit http://www.kbhome.com.

Except for the historical information contained herein, certain matters discussed in this press release are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, including any statements concerning future financial performance, business and prospects, and future Company actions and their expected results. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions including, but not limited to, changes in national, regional, local or general economic conditions, conditions in the capital, credit and homebuilding markets, material prices and availability, labor costs and availability, interest rates and the Company's debt levels, the secondary market for loans, consumer confidence, competition, currency exchange rates (insofar as they affect the Company's operations in France), environmental factors (including weather, natural disasters or similar environmental events), government regulations affecting the Company's operations, the availability and cost of land in desirable areas, and the continued impact of terrorist activities and U.S. response, unanticipated violations of Company policy, unanticipated legal or regulatory proceedings or claims or other events outside of the Company's control. See the Company's Annual Report on Form 10-K and its Annual Report to Shareholders for the year ended November 30, 2004 and its other public filings with the Securities and Exchange Commission for a further discussion of these and other risks and uncertainties applicable to the Company's business. The Company does not have a specific policy or intent of updating or revising forward-looking statements.

For Further Information Contact:
Kelly Masuda, Investor Contact
(310) 893-7434 or kmasuda@kbhome.com
Caroline Shaw, Media Contact
(310) 231-4142 or cshaw@kbhome.com


                                   KB HOME
                      CONSOLIDATED STATEMENTS OF INCOME
   For the Twelve Months and Three Months Ended November 30, 2005 and 2004
                   (In Thousands, Except Per Share Amounts)

                                   Twelve Months            Three Months
                                  2005        2004        2005        2004

    Total revenues             $9,441,650  $7,052,684  $3,150,140  $2,380,597


    Construction:
      Revenues                 $9,410,282  $7,008,267  $3,145,673  $2,368,758
      Costs and expenses       (8,053,286) (6,233,568) (2,652,859) (2,071,136)

      Operating income          1,356,996     774,699     492,814     297,622

      Interest income               4,210       3,918       1,178         940
      Interest expense, net of
       amounts capitalized        (18,872)    (18,154)     (8,145)     (3,521)
      Minority interests          (77,827)    (69,049)    (22,280)    (27,875)
      Equity in pretax of
       unconsolidated joint
       ventures                    20,316      17,600       9,863       8,336

      Construction pretax
       income                   1,284,823     709,014     473,430     275,502

    Financial services:
      Revenues                     31,368      44,417       4,467      11,839
      Expenses                    (27,241)    (35,729)     (2,725)     (8,807)
      Other                         6,841          --       6,841          --
      Equity in pretax of
       unconsolidated joint
       venture                        230          --         230          --

      Financial services
       pretax income               11,198       8,688       8,813       3,032

    Total pretax income         1,296,021     717,702     482,243     278,534

    Income taxes                 (453,600)   (236,800)   (171,600)    (91,800)

    Net income                   $842,421    $480,902    $310,643    $186,734


    Basic earnings per share       $10.29       $6.14       $3.75       $2.39


    Diluted earnings per share      $9.53       $5.70       $3.51       $2.21

    Basic average shares
     outstanding                   81,888      78,316      82,930      78,144


    Diluted average shares
     outstanding                   88,425      84,356      88,414      84,450



                                   KB HOME
                         CONSOLIDATED BALANCE SHEETS
                                (In Thousands)

                                         November 30,  August 31, November 30,
                                            2005         2005         2004

    ASSETS

    Construction:
      Cash and cash equivalents           $144,783      $60,153     $190,660
      Receivables                          580,931      492,870      513,974
      Inventories                        6,128,342    5,743,820    4,143,254
      Investments in unconsolidated
       joint ventures                      275,378      240,666      168,425
      Deferred income taxes                220,814      207,439      217,618
      Goodwill                             242,589      245,030      249,313
      Other assets                         124,150      147,368      142,252
                                         7,716,987    7,137,346    5,625,496

    Financial services                      29,933      100,854      210,460

    Total assets                        $7,746,920   $7,238,200   $5,835,956


    LIABILITIES AND STOCKHOLDERS' EQUITY

    Construction:
      Accounts payable                    $892,727     $788,480     $749,050
      Accrued expenses and other
       liabilities                       1,338,626      946,977      810,913
      Mortgages and notes payable        2,463,814    2,701,430    1,975,600
                                         4,695,167    4,436,887    3,535,563

    Minority interests in
     consolidated subsidiaries and
     joint ventures                        144,951      136,951      127,040

    Financial services                      55,131       60,403      117,672

    Stockholders' equity                 2,851,671    2,603,959    2,055,681

    Total liabilities and
     stockholders' equity               $7,746,920   $7,238,200   $5,835,956



                                   KB HOME
                           SUPPLEMENTAL INFORMATION
   For the Twelve Months and Three Months Ended November 30, 2005 and 2004
                                (In Thousands)

                                     Twelve Months           Three Months
    Construction revenues:         2005        2004        2005        2004

      Housing                  $9,364,803  $6,957,548  $3,138,714  $2,357,403
      Commercial                    5,202      22,834          --       6,108
      Land                         40,277      27,885       6,959       5,247

         Total                 $9,410,282  $7,008,267  $3,145,673  $2,368,758


                                     Twelve Months           Three Months
    Costs and expenses:            2005        2004        2005        2004

      Construction and land
       costs
         Housing               $6,852,541  $5,285,619  $2,288,882  $1,764,936
         Commercial                 3,077      17,697          --       4,721
         Land                      32,521      22,540       6,107       3,440
           Subtotal             6,888,139   5,325,856   2,294,989   1,773,097
      Selling, general and
       administrative expenses  1,165,147     907,712     357,870     298,039

           Total               $8,053,286  $6,233,568  $2,652,859  $2,071,136


                                     Twelve Months           Three Months
    Interest expense:              2005        2004        2005        2004

      Interest incurred          $183,842    $141,470    $51,286      $39,865
      Interest capitalized       (164,970)   (123,316)   (43,141)     (36,344)

         Interest expense         $18,872     $18,154     $8,145       $3,521




                                     Twelve Months           Three Months
    Other information:             2005        2004        2005        2004

      Depreciation and
       amortization               $20,382     $21,848     $4,739      $6,379
      Amortization of
       previously capitalized
       interest                   104,056      78,808     36,349      24,624



                                   KB HOME
                           SUPPLEMENTAL INFORMATION
   For the Twelve Months and Three Months Ended November 30, 2005 and 2004


                                     Twelve Months           Three Months
    Average sales price:           2005        2004        2005        2004

      West Coast                 $460,500    $411,500   $473,400     $436,700
      Southwest                   265,600     202,600    289,100      213,800
      Central                     157,600     151,300    163,100      156,700
      Southeast                   215,100     171,700    233,900      176,600
      France                      206,300     211,500    196,500      220,700
         Total                   $252,100    $219,900   $262,700     $229,200


                                     Twelve Months           Three Months
    Unit deliveries:               2005        2004        2005        2004

      West Coast                   6,624       5,383       2,331       1,740
      Southwest                    7,357       7,478       1,809       2,141
      Central                      9,866       9,101       3,238       3,127
      Southeast                    7,162       4,975       2,312       1,667
      France                       6,131       4,709       2,256       1,610
         Total                    37,140      31,646      11,946      10,285

      Unconsolidated joint
       ventures:                     509         931          81         330


                                     Twelve Months           Three Months
    Net orders:                    2005        2004        2005        2004

      West Coast                   7,411       6,209       1,693       1,489
      Southwest                    8,233       8,167       1,706       1,737
      Central                     10,753       9,434       2,151       1,828
      Southeast                    8,495       7,023       1,960       1,746
      France                       7,513       5,445       2,237       1,716
         Total                    42,405      36,278       9,747       8,516

      Unconsolidated joint
       ventures:                     401         856         245         108


                                  November 30, 2005       November 30, 2004
                                  Backlog   Backlog       Backlog   Backlog
    Backlog data:                  Units     Value         Units     Value
     (Dollars in thousands)
      West Coast                   4,254  $2,045,476       3,467  $1,523,380
      Southwest                    5,428   1,562,698       4,552   1,005,990
      Central                      4,945     751,589       4,058     598,198
      Southeast                    5,613   1,324,410       4,280     824,370
      France                       5,482   1,079,954       3,923     866,983
         Total                    25,722  $6,764,127      20,280  $4,818,921

      Unconsolidated joint
       ventures:                     387     $80,883         495     $87,765

SOURCE: KB Home

Kelly Masuda, Investor Contact, +1-310-893-7434, kmasuda@kbhome.com, or Caroline Shaw, Media Contact, +1-310-231-4142, cshaw@kbhome.com, both of KB Home

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