KB Home (NYSE:KBH) Friday morning reported a net loss of $255.9 million for its fiscal second quarter ended May 31, as the company took write-downs of $201.1 million plus a $98.9 million charge to deferred income tax assets.The loss, which equates to $3.30 per diluted share, was more than triple the mean estimate of a loss of $0.94 per share among analysts surveyed by Thomson Reuters.

Revenues fell 55% from the same quarter in 2007 to $639.1 million as in the quarter ended May 31, 2008 on a 41% decrease in homes delivered to 2,810 and a 17% decline in the average selling price to $226,600. Orders fell 42% to 4,200, largely due to a 37% year-over-year decrease in KB's number of active communities. The cancellation rate improved to 27% from 53% in the first quarter of 2008 and 34% in the second quarter of 2007.

Homes in backlog decreased 54% on a year-over-year basis to 6,233, with decreases in the company's operating regions ranging from 46% to 65%.Backlog value fell 61% to approximately $1.47 billion.

The write-downs included non-cash charges of $176.5 million for inventory and joint venture impairments and the abandonment of land option contracts, and $24.6 million for goodwill impairment. The company said it hoped that it would be able to recapture the $98.9 million charge to deferred tax assets as it returns to profitability in the future.

KB said it maintained positive cash flow for the second quarter and the first half of 2008 and said it expected to continue to do so through the rest of the fiscal year. It ended the quarter with $1.31 billion in cash and another $1.1 billion available on its credit facility. The ratio of debt to total capital rose to 62.9% compared to 50.3% at the end of last year's second fiscal quarter. The company on June 12 announced a redemption of $300 million in 7 3/4% senior subordinated notes due 2010 on July 14, 2008 at a price of 101.938% .

Housing gross margin fell to -17.5% in the quarter from a -3.9% in the second quarter of 2007. Excluding inventory-related non-cash charges, the housing gross margin would have been 8.7%. The company cut its sales, general and administrative costs by 38%, or $74.5 million, compared to last year's second quarter.

"Housing market conditions remain difficult for the homebuilding industry, with inventories of unsold homes expanding as foreclosures rise to record highs, and consumer confidence continuing to deteriorate amid signs of weakness in the general economy," said Jeffrey Mezger, KB president and CEO."Despite substantially lower home prices, relatively low interest rates and an abundance of choices, potential new home buyers remain reluctant to purchase a home."

Shares of KB opened down 4% at $17.40.