KB Home (NYSE:KBH) this morning reported a loss of $268.2 million ($3.47 pershare) for the fiscal first quarter of 2008 ended Feb. 29, triple Wall Street estimates of a loss of $1.17 per share.

The loss was due to a 43% drop in revenues to $794.2 million, primarily driven by a decline of 47% in home building revenues to $726.7 million, both compared to the same quarter last year. The loss also reflected $223.9 million in write-downs and inventory impairments and a $100 million deferred tax valuation charge.

KB delivered 43% fewer homes, a total of 2,928, than it did in the first fiscal quarter of 2007. It attributed much of the decline to a 38% drop in active selling communities. Its average selling price dropped 7% to $248,200.

Net orders plunged 75% to 1,449 in 2008 from 5,744 last year, which the company also attributed to the reduction in active selling communities. The cancellation rate improved to 53% from 58% in the fiscal fourth quarter of 2007, but it remained significantly above the 34% rate in the first quarter of 2007.

Backlog at February 29, 2008 totaled 4,843 homes, with a dollar value of approximately $1.23 billion, down 57% in units and 59% in dollars from11,183 homes and $3.04 billion in value on February 28, 2007.

KB ended the quarter with $1.32 billion in cash on hand. Its ratio of debt to total capital was 58.0%, compared to 53.9% at the end of the fourth quarter of 2007. Net of cash, the ratio of debt to total capital was 35.1% at February 29, 2008, compared to 31.1% at November 30, 2007 and 46.2% at February 28, 2007.

KB's home building business generated an operating loss of $249.0 million, and gross margin fell to a negative 6.2% in the 2008 first quarter from a positive 15.5% in the year-earlier quarter. Excluding inventory impairment and abandonment charges, the margin would have been 9.0%, the company said.

Land sales generated losses of $76.1 million, including pretax, non-cash impairment charges of $77.2 million related to planned future land sales.KB's equity in loss of unconsolidated joint ventures totaled $39.9 million in the first quarter of 2008, including impairment charges of $36.4 million.

During the quarter, KB obtained an amendment to its credit facility that lowered the minimum consolidated tangible net worth from $2 billion to $1 billion and reduced the aggregate commitment under the credit facility from$1.5 billion to $1.3 billion. At February 29, 2008, the Company had no borrowings outstanding under the credit facility.

"Until prices stabilize and consumer confidence returns, we believe inventory levels will remain significantly out of balance with demand," said KB CEO Jeffrey Mezger. "We do not anticipate meaningful improvement in these conditions in the near term, as it is likely to take some time for the market to absorb the current excess housing supply and for consumer confidence to improve."

Analysts took the KB financials as a harbinger of more pain to come.

J.P. Morgan home building analyst Michael Rehaut, who has a "neutral" rating on KB stock and maintains a negative home building sector stance, was not impressed with the results. "Orders fell a highly disappointing 75%...which we believe points to further pricing actions ahead to spur sales, resulting in a continued material level of impairment charges over the next 2-3 quarters," he wrote in a research note to investors.

Carl Reichardt at Wachovia Capital Markets, which has a "market perform" rating on the stock, was similarly taken back by the drop in orders. His analysis of why orders dropped, contained in a research note, was, "At 0.49 orders per community per week, orders were still well below last year's Q1 pace of 1.21, which we attribute partially to the elevated 53% cancellation rate this quarter. Likewise, we know KBH--relatively short land compared to peers--attempted to hold the line on profit per home more aggressively than others this quarter. In a hypercompetitive field environment, evaporating absorptions are the result."