KB Home shows loss, warns home market could worsen
Analysts polled by Thomson Financial expected a loss of 72 cents per share. Those estimates typically exclude one-time charges and gains. KB shares rose 30 cents to $24.39 Thursday, though shares had already fallen around 4 percent on Wednesday. Third-quarter revenue fell 32 percent to $1.54 billion from $2.28 billion last year. That surpassed Wall Street’s estimate of $1.5 billion. KB also said it was able to use the proceeds from the sale of its French operations to pay off $650 million in debt. However, unit deliveries fell 28 percent to 5,699 and the average selling price dropped 7 percent to $267,700. The third-quarter cancellation rate of 50 percent was lower than the 60 percent rate in the prior year third quarter, but well above the 34 percent rate in the second quarter of this year. KB’s financial results were released the same day the Commerce Department reported dismal figures for new home sales. New-homes in August fell to the lowest level in seven years, a stark sign that the sudden scarcity of credit is aggravating an already painful housing slump. Sales of new homes dropped by 8.3 percent in August from July, the Commerce Department reported, driving down sales to a seasonally adjusted annual rate of 795,000 units. That was the lowest level since June 2000, when sales clocked in at a pace of 793,000. The company said it expects the market to worsen through 2008 as rising foreclosure rates increase the supply of homes on the market, leading to lower prices. “At this time, we see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins,” said President and Chief Executive Jeffrey Mezger in a statement. “The oversupply of unsold new and resale homes and downward pressure on new home values has worsened in many of our markets.” The company’s backlog, or homes under contract yet to be delivered, fell during the quarter. As of Aug. 31, the figure stood at 11,880 units, down from 17,198 units in the year-ago quarter. Diminished backlog reflects a negative year-over-year net order comparison during the past several quarters and also lower average selling prices, the company said. Net orders for the third quarter fell 6 percent to 3,907, compared with last year’s orders during the same period. At the close of the quarter, KB had $646 million in cash and a ratio of debt to capital of 45 percent, the company said. KB was the latest builder to report sagging sales and earnings during the third quarter. On Tuesday, Miami-based Lennar Corp. reported a third-quarter loss of more than $510 million due to falling sale prices and home deliveries. The company also said it had cut its work force by 35 percent and warned it expected further job cuts.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! Los Angeles-based builder KB Home swung to a loss in the third quarter and warned Thursday that the beleaguered housing market is likely to worsen next year. The Los Angeles-based company, one of the nation’s biggest home sellers, reported a loss of $35.6 million, or 46 cents per share, for the period ended Aug. 31, compared with profits of $153.2 million, or $1.90 per share, in the year-ago period. KB took pretax charges of $690.1 million and $107.9 million to write down the value of unsold inventory and joint-venture holdings. Those were partially offset by a gain of $438.1 million from the sale of KB’s stake in its French subsidiary. Excluding the French operations, the company reported a loss of $478.6 million, or $6.19 per share, from continuing operations.