KB Home (NYSE:KBH), Los Angeles, on Friday reported a net loss of $30.7 million (-$.40 per diluted share) for its fiscal second quarter ended May 31 on , including an after-tax charge of $12.8 million to deferred tax assets. The results compare with the second quarter of 2009, when the net loss was$78.4 million (-$1.03 per diluted share), on impairments and other write-downs of $49.5 million and a $31.7 million charge to deferred tax assets.
Analysts were expecting a loss of 30 cents a share minus the tax charge, without which the loss would have been 23 cents per share. Still, KB shares were down nearly 8% at $11.26 in morning trading Friday.
Revenues were down 3% to $374.1 million, reflecting a 4% year-over-year decrease in the average selling price to $207,900, partially offset by a 1% year-over-year increase in homes delivered to 1,782. It was the first time in 14 quarters that deliveries rose on an annual comparison.
Second quarter land sale revenues totaled $2.1 million in both 2010 and 2009.
Net new orders in the quarter were down 23% to 2,244. As a percentage of beginning backlog, the cancellation rate was 26% in the current quarter, compared to 27% in the 2009 second quarter.
"While our net orders were down for the quarter compared to a year ago due to fewer active communities, general economic weakness, and the expiration of the federal homebuyer tax credit, our net orders were up sequentially from this year's first quarter and were solid on a per community basis,"said Jeffrey Mezger, president and CEO. "We believe this bodes well for our ability to generate future revenue growth as we expand our community count."
The Company's backlog at the end of the 2010 second quarter was 3,175 homes, a 17% decrease from 3,804 homes at the end of the second quarter of 2009. At quarter's end, backlog value totaled $648.2 million, a 19% decrease from the prior year quarter.
While the company did not provide a breakdown of its lot count, it said it added approximately 4,300 owned or controlled lots in the second quarter spread among each of the company's geographic regions on both a year-over-year and sequential basis,. Most of the activity, KB said, was concentrated in the West Coast and Central regions. At quarter's end, KB said, it owned or controlled nearly 40,000 lots and "remained focused on strategically expanding its land pipeline."
Housing gross margin was 17.7%, an improvement of 15.8 percentage points from 1.9% in the 2009 quarter. Selling, general and administrative expenses were $83.0 million in the quarter of 2010 compared to $72.6 million in the year-earlier period. As a percentage of housing revenues, SG&A was 22.4% in the quarter compared to 19.1% in the 2009 quarter.
Losses from unconsolidated homebuilding joint ventures fell to $1.5 million from a loss of $11.8 million in the second quarter of 2009, which included$7.2 million of impairment charges.
Financial services operations, which include the Company's equity interest in an unconsolidated mortgage banking joint venture, generated pretax income of $4.2 million in the current quarter compared with $4.4 million in the year-earlier quarter.
KB ended the quarter with $1.09 billion of cash, cash equivalents and restricted cash. Its debt balance at May 31, 2010 was $1.76 billion, down $65.0 million from $1.82 billion at November 30, 2009. Total debt-to-capital was 74%, up from 72% at the end of the 2009 quarter; net debt-to-cap was 51.8%, up from 42.9%.
David Goldberg, home building analyst at UBS, was surprised by the decline in orders, which he had forecast to be up 10%. However, he wrote in a research note, "Despite these results, we believe the discipline inherent in its build-to-order model will drive long-term benefits as conditions normalize. That said, the company's return to profitability will likely lage peers in the near term."