Home builder KB Home (KBH) Friday reported a narrower loss for the first quarter of fiscal 2009, reflecting a significant year-over-year reduction in impairment charges. Quarterly revenues tumbled 61% on lower housing revenues due to reductions in home deliveries and average selling price. Moving forward, KB Home currently sees no meaningful improvement in market conditions for the remainder of the year.
Los Angeles, California-based KB Home builds various types of homes, including attached and detached single-family homes, town homes and condominiums, designed primarily for first-time, first move-up adult buyers. It also offers mortgage services in a joint venture with Countrywide KB Home Loans. The company has operations in nine states.
For the quarter, the company's net loss was $58.07 million, or $0.75 per share, compared with a net loss of $268.17 million, or $3.47 per share, last year. The company said the favorable impact of its execution on strategic initiatives, combined with lower impairment charges, contributed to the significant reduction in net loss from a year ago.
The 2009 first-quarter net loss included pretax, non-cash charges for inventory and joint venture impairments and land option contract abandonments of $32.3 million, down 86% from $223.9 million of similar pretax, non-cash charges included in the year-ago quarter results.
On average, analysts polled by Thomson Reuters expected the company to report a loss of $0.81 per share for the first quarter. Analysts' estimates typically exclude one-time items. For the sequentially preceding fourth quarter, KB Home's net loss was $307.3 million, or $3.96 per share.
The homebuilder's quarterly revenues plunged to $307.36 million from $794.22 million in the year-earlier quarter, primarily due to lower housing revenues. Analysts were looking for revenues of $347.51 million. For the fourth quarter of fiscal 2008, KB Home delivered revenues of $919 million.
First-quarter housing revenues reached $304.5 million, a 58% fall from $726.7 million in the first quarter of 2008, reflecting a 51% decrease in homes delivered and a 15% decrease in the average selling price.
KB Home said it delivered 1,445 homes at an average selling price of $210,700 in the first quarter, compared with 2,928 homes at an average selling price of $248,200 a year ago. The home deliveries were down 51%, while average selling price dropped 15%. Average selling price was down 21%, 19% and 24% in the company's West Coast, Southwest and Southeast regions, respectively. In the Central region, average selling price rose 3%.
During the first quarter, company-wide net orders for new homes increased 26% to 1,827 from 1,449 in the same quarter of 2008. The cancellation rate based on gross orders was 28%, compared with 53% in the first quarter of 2008.
KB Home also reported land sale revenues of $1.3 million, a sharp decline from $64.6 million in the year-earlier quarter.
Commenting on the results, Jeffrey Mezger, president and chief executive officer, said, KB Home continues to operate in a national housing market that is severely challenged by inventory oversupply, declining home prices, tightening lending standards, rising unemployment and weakening consumer confidence.
KB Home said it had 2,651 homes in backlog representing approximately $559.8 million in future revenues at February 28, 2009, lower than a backlog of 4,843 homes representing future revenues of approximately $1.23 billion at February 29, 2008.
The company's equity in loss of unconsolidated joint ventures totaled $9.7 million, including impairment charges of $7.6 million. This compares to year-ago quarter equity in loss of unconsolidated joint ventures of $39.9 million, including $36.4 million of impairment charges.
Further, KB Home's financial services operations, which include its unconsolidated mortgage banking joint venture, generated pre-tax income of $1.7 million in the first quarter, down from $7.9 million in the year-earlier quarter. The decrease was mainly due to a 56% decline in mortgages originated by the joint venture, reflecting the company's reduced home deliveries, and a 12% decline in average loan size due to the generally lower average selling prices of its homes.
Among others in the sector, Lennar Corp. (LEN) is scheduled to announce its first-quarter results on March 31. The Street analysts are of the view that the company will post a loss of $0.64 per share for the quarter on revenues of $530.38 million.
Another peer, DR Horton Inc. (DHI) has recently reported a narrower loss for the first quarter, driven by lower inventory impairments and land option cost write-offs, despite a decline in revenues. The Fort Worth, Texas-based company's net loss was $62.6 million, or $0.20 per share, compared with a net loss of $128.8 million, or $0.41 per share, last year. DR Horton's homebuilding revenue dipped to $900.3 million from $1.708 billion in the same quarter of fiscal 2008.
Going forward, Mezger said, Although we currently foresee no meaningful improvement in market conditions for the remainder of this year, we are confident that our intense customer focus and the many ongoing initiatives we have undertaken to adapt to today's difficult housing environment will continue to differentiate KB Home from its competitors and enhance our long-term performance.
KB Home had said earlier it expects the housing market difficulty and general economic uncertainty to continue in 2009.
KBH is trading at $15.54, up $1.38, on a volume of 7.81 million shares.
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