Home builder KB Home (NYSE: KBH) on Thursday reported a net loss of $35.6 million in the third quarter ended Aug. 31, compared with net earnings of $153.2 million in the same quarter last year.
And those losses were minimized by KB’s sale of its French home-building subsidiary Kaufman & Broad SA, which generated total gross proceeds of $807.2 million and an after-tax gain of $438.1 million for the quarter.
Without that boost, the quarterly net loss would have been $478.6 million, or $6.19 per diluted share, the company reported.
The bulk of the loss was due to pretax noncash charges of $690.1 million relating to inventory and joint venture impairments and the company’s abandonment of land-option contracts, KB Home reported in its earnings announcement.
Revenues for the quarter totaled $1.54 billion, down 32 percent from $2.28 billion in third-quarter 2006, the company reported.
Unit deliveries in the third quarter dropped 28 percent, falling from 7,893 units in third-quarter 2006 to 5,699 in third-quarter 2007. And the average selling price of its homes fell 7 percent, from $288,000 to $267,700.
The housing downturn and credit crunch has taken its toll on other home builders, too. Lennar Corp. this week reported a net loss of $513.9 million in the third quarter, compared with net earnings of $206.7 million for the same quarter last year.
“At this time, we see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins. We expect housing industry conditions to continue to worsen through the end of the year and into 2008,” said Jeffrey Mezger, KB Home president and CEO, in a statement. “Rising foreclosure rates are intensifying the problem of surplus inventory and will likely drive further home-price reductions.”
Mezger said the company’s latest quarterly earnings “reflect the seriously challenging market conditions that prevail for home builders across most of the nation. The oversupply of unsold new and resale homes and downward pressure on new-home values has worsened in many of our markets as tighter lending standards, low affordability and greater buyer caution suppress demand, while higher foreclosure activity combined with heightened builder and investor efforts to monetize their real estate investments boost supply.”
Mezger took over as company CEO when longtime CEO Bruce Karatz resigned in November amidst a stock-options scandal. Karatz, who led the company for 34 years, agreed to pay $13 million to KB Home after an investigation found that the company had incorrectly reported stock-option grants.
The company’s backlog as of Aug. 31 totaled 11,880 units, representing potential future housing revenues of $3.07 billion, down from the 17,198 backlog units and $4.95 billion backlog value at the end of third-quarter 2006.
KB Home’s home-building operations generated 3,907 net orders in the third quarter, down 6 percent compared to third-quarter 2006. And the company’s 2007 third-quarter cancellation rate of 50 percent was lower than its 60 percent cancellation rate in third-quarter 2006 “but higher than the 34 percent rate in the 2007 second quarter, reflecting the challenged housing and credit environment.”
KB Home’s stock price rose 62 cents per share today to close at $24.71.