KB Home Posts Quarterly Loss,
Home-Building Revenue Slides
KB Home, one of the nation's largest home builders, said it swung to a loss in the fiscal second quarter as it booked charges for land and inventory write-downs amid continuing woes in the housing industry.
"We can't predict when market conditions will improve," President and Chief Executive Jeffrey Mezger said.
Besides aggressive competition and continued weak demand, "tighter credit conditions in the subprime and near-prime mortgage market have also exacerbated current market dynamics, keeping prospective buyers out of the market, slowing the absorption of excess supply and further delaying a housing market recovery," Mr. Mezger said.
The net loss for the quarter ended May 31 came to $148.7 million, or $1.93 a share, compared with profit of $205.4 million, or $2.45 a share, a year ago, KB Home said.
The company reported a loss from continuing operations of $174.2 million, or $2.26 a share in the latest quarter, largely due to a pretax, non-cash charge of $308.2 million related to inventory and joint venture impairments and the abandonment of land options contracts.
A year ago, earnings from continuing operations came to $184.4 million, or $2.20 a share.
In a move to concentrate on its core U.S. home-building operations, KB Home in May agreed to sell its 49% stake in French home builder Kaufman & Broad S.A. to Paris private-equity firm PAI Partners. Income from the French discontinued operations, net of taxes, totaled $25.5 million or 33 cents a share in the second quarter, compared with $21 million or 25 cents a share a year before.
Analysts polled by Thomson Financial had expected the Los Angeles company to post latest-quarter earnings, excluding items, of seven cents a share.
Revenue in the latest quarter plunged 36% to $1.41 billion. Home-building revenue slid 41% to $1.3 billion.
For its latest quarter, KB Home delivered 4,776 homes, down 36% from a year before. The average sale price of a delivered home fell to $271,600 from $295,300 a year ago. Net orders dropped 3% to 7,265. The backlog as of May 31 was 13,672 units, valued at $3.74 billion, compared with 20,924 units, valued at $6.12 billion, a year earlier.
In premarket trading, KB Home shares were at $39.60, versus Wednesday's close of $40.43.
The outlook has been getting increasingly dark for home builders as the fallout continues in the subprime mortgage crisis. With builders slashing prices on existing inventory and abandoning land options, skyrocketing foreclosures and tighter lending requirements have further stressed an industry not likely to improve until next year.
On Monday, KB Home rival Lennar Corp. posted a deep second-quarter loss, citing a rising inventory of unsold homes, and warned that crumbling conditions in the housing market could worsen through the third quarter and the rest of the year. Those results came on the heels of a report by the National Association of Realtors that showed that existing-home sales for May fell to their lowest level in nearly four years. That figure is important because many buyers of new homes upgrade from previously owned homes.
The realtor group's gloomy picture followed data from the government last week stating that May housing starts fell 2.1% amid production cuts as home builders struggled to pare bloated inventories. Analysts said further price cuts are inevitable as inventories of unsold homes keep growing, amid rising foreclosures.
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