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KB Home 3rd-quarter loss narrows as revenue rises

September 24, 2010

KB Home narrowed its fiscal third-quarter loss, helped by fewer charges and higher revenue.

Its stock rose 54 cents, or 4.6 percent, to $12.25 in premarket trading.

But the homebuilder's backlog, which represents future housing revenue, dropped, and net orders fell 39 percent. The economic downturn, high unemployment and tight credit continue to keep many from buying homes, even with some of the lowest mortgage rates in decades.

KB Home said Friday it lost $1.4 million, or 2 cents per share, in the three months ended Aug. 31. That compares with a loss of $66 million, or 87 cents a share, a year earlier.

The quarter's results included $3.3 million in inventory impairment and land option contract abandonment charges. This is considerably lower than the $47.7 million for similar charges in the prior-year period.

Revenue rose 9 percent to $501 million, the first year-over-year increase in almost four years, aided by higher average selling prices and a rise in the number of homes delivered.

The average selling price climbed 6 percent to $214,200, while the number of homes delivered increased 4 percent to 2,320.

The performance was much better than the loss of 15 cents per share and revenue of $477.8 million that analysts polled by Thomson Reuters expected. These estimates usually take out one-time items.

Nevertheless, KB Home's results also reflected a slowdown in the housing market. KB Home had a backlog of 2,169 homes as of Aug. 31, indicating potential future housing revenue of about $455.3 million. This is below the prior-year's total, which was 3,722 homes with potential revenue of approximately $734.1 million.

In addition, net orders dropped 39 percent to 1,314 compared with 2,158 a year ago. The company's cancellation rate was slightly higher at 21 percent. It was 20 percent a year earlier.

President and CEO Jeffrey Mezger said in a statement that the dropoff in net orders was because demand declined after the government's homebuyer tax credit expired in April. Difficult economic conditions and tough year-ago comparisons also weighed on the results, he added.

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