KB Home Swings to a Loss
Amid Weak Housing Demand

KB Home Inc. Tuesday said it swung to a fiscal fourth-quarter net loss, amid land-related write-downs and other costs associated with the deteriorating housing market.

For the latest quarter ended Nov. 30, the Los Angeles-based home builder reported a net loss of $49.6 million, or 64 cents a share, compared with net income of $304.4 million, or $3.44 a share, a year earlier.

Results for the year-ago quarter were restated to reflect adjustments made following the company's review of its stock option grant practices.

Analysts polled by Thomson Financial were looking for a fourth-quarter loss of $1.14 a share.

Revenue in the latest quarter rose 13% to $3.54 billion, reflecting a 9% increase in housing revenue.

Earnings were affected by a pretax charge of $343.3 million for inventory and joint-venture impairments and the abandonment of land option contracts.

KB Homes President and Chief Executive Jeffrey Mezger said he expects unit deliveries to decrease "through the first half of 2007 and potentially longer."

"We remain confident in the long-term prospects for the homebuilding industry and our company," Mr. Mezger said. "But it will take time for individual markets to work through the current oversupply of housing and for buyers to regain their confidence in price stability."

Deliveries for the quarter rose 5.1% to 12,553 homes. The average selling price rose 3.7%, to $272,400. New orders fell 38% to 6,059 from 9,747%. KB Homes said it has a backlog of 17,384 homes valued at $4.43 billion.

In premarket trading, KB Home shares were at $50.70, versus Monday's close of $51.94.

With its latest results, KB Home joins the growing list of home builders reporting large impairments to their land holdings, as revenue and profit continue to erode amid the downturn in the housing market.

KB Home said in a Securities and Exchange Commission filing last month that it expected to take fourth-quarter charges of between $235 million and $285 million to write down the value of its land holdings amid a deteriorating housing market. It also said it would record a $90 million charge from the abandonment of certain land-option contracts.

The filing cited a challenging environment, which included an oversupply of inventory, a decline in new home orders and sales prices and an increase in sales incentives to generate new orders.

The company also said last month it would record $41 million in expenses related to the backdating of stock options that led to the resignation in November of its chief executive, Bruce Karatz. As a result of this expense, KB said it would have to restate financial statements for 2003, 2004 and 2005.

In its earnings release, the company said it would file later today with the Securities and Exchange Commission its quarterly and full-year results, with restated figures.

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