KB Home, Los Angeles (NYSE:KBH) on Friday morning reported a net loss of$1.4 million (-$.02 per share) for its fiscal third quarter ended August 31, handily beating the Wall Street consensus expectation for a loss of 15 cents a share. The loss included $3.3 million in impairments and other land charges.

The company attributed the better-than-expected performance to strong revenue growth, higher gross margins and lower costs of sales. Shares of KB were up 4.6% at $12.25 in pre-market trading Friday but had settled back to $12.08, up 3.1%, at the open.

The loss compares with a net loss of $66.0 million (-$.87 per share), for the year-earlier quarter, during which KB took $47.7 million in impairment and other land charges,

Revenues increased 9% to $501 million, the first time KB has reported year-over-year quarterly revenue growth in nearly four years. Home building generated operating income of $8.4 million for the quarter, compared to an operating loss of $42.1 million for the year-earlier quarter.

Deliveries rose 4% from last year's quarter to 2,320 this year, and the average selling price increased 6% to $214,200.

New orders, however, fell 39% to 1,314. The cancellation rate rose to 21% from 20% in the prior-year-quarter.

Backlog at quarter's end was down 42% from the same time last year to 2,169 homes with an aggregate value of $455.3 million, down 38% from the end of last August.

Gross margin was 17.5% (18.2% minus charges), up 6.4 percentage points from the comparable period in 2009. Selling, general and administrative expenses(SG&A) decreased by $5.3 million, or 6%, to $78.6 million in the quarter, attributed primarily to cost-cutting and a gain tied to compensation associated with the company's stock price. As a percentage of housing revenues, SG&A improved by 2.7 percentage points to 15.8% from 18.5% in the year-earlier quarter, 27.5% in this year's first quarter and 22.4% in second quarter, 2010.

KB added approximately 3,700 owned or controlled lots to its inventory in the third quarter of 2010, mostly on the west coast and in the central regions. At quarter's end, the company owned and controlled over 41,000 lots. It did not provide a breakout of owned vs. controlled lots or their geographic distribution.

KB ended the quarter with $1.04 billion in cash, equivalents and restricted cash. It was carrying $1.8 billion in debt on its balance sheet, down $19.5 million from $1.82 billion as of November 30, 2009.

"The housing market continues to face significant headwinds from high unemployment and foreclosures, which are impeding a broader recovery, and recent net order trends in the homebuilding industry have injected additional caution into our near-term outlook," Jeffrey Mezger, president and CEO, said. "Nonetheless, building on our improved operating results for the third quarter, we intend to maintain our strategic initiatives to open new communities in select locations that are expected to offer attractive potential sales growth, and to carefully evaluate land investment opportunities that meet our standards so that we are well-positioned, financially and operationally, for the long term."

Carl Reichardt at Wells Fargo Securities was muted in his assessment of the earnings report: "KBH's orders were particularly weak in our opinion, although the company did have a tough comparison, with Q3 '09 orders up 62% yr/yr. Margins and costs seem to have stabilized for KBH, but with a build-to-order business model, KBH cannot rely on spec homes in order to drive volume, so KBH's weak backlog (down 32% sequentially and 42% yr/yr) indicates Q4 revenues and margins should be weaker than Q3 in our opinion, which is not consistent with historical, seasonal trends."