KB Home, Los Angeles (NYSE:KBH) on Tuesday before market open reported net income of $100.7 million ($1.31 per diluted share) for its fiscal fourth quarter ended Nov. 30, due to an income tax refund under the extended net-operating-loss carryback provision of Congess' latest housing stimulus program. Without the refund, KB would have lost $91 million in the quarter on a pretax basis on noncash charges of $77.2 million for inventory and joint venture impairments and the abandonment of land option contracts.
The results compare with a net loss of $307.3 million ($-3.96) in the fiscal fourth quarter of 2008.
For the 2009 fiscal year, KB had a net loss of $101.8 million (-$1.33 per diluted share), including impairments and write-downs of $206.7. The annual loss also included an income tax benefit of $209.4 million. The loss was a significant improvement from fiscal 2008, in which KB lost $976.1 million(-$12.59 per diluted share) on impairments and charges of $748.6 million, and $68.0 million for goodwill impairments and a $355.9 million after-tax valuation charge against the net deferred tax assets generated during the year.
Shares of KB fell more than 6% to $15.38 in the first half-hour of trading Tuesday but ended the session down 4.1% at $15.71.
For the fourth quarter, revenues dropped 27% to $674.6 million, with home building down 32% to $618.7 million. Home deliveries fell 22% to 3,042 and the average selling price dropped 12% to $203,400.
New orders, however, rose 12% in the quarter to 1,446 as the cancellation rate improved to 31% of gross orders, down from 46% for the comparable quarter in 2008. Homes in backlog were 2,126 on Nov. 30 with an aggregate value of $422.5 million, down from 2,269 and $521.4 million, respectively, in the 2008 quarter.
For the fiscal year, KB delivered 8,488 homes at an average price of $207,100, compared to 12,438 homes delivered at an average price of $236,400 in the prior fiscal year. Total revenues for the fiscal year dropped 40% to$1.82 billion from $3.03 billion in fiscal 2008.
KB generated operating cash flow of $236.7 million during the quarter and ended the year with $1.29 billion in cash, cash equivalents and restricted cash. Its debt balance at November 30, 2009 was $1.82 billion, down $121.2 million from $1.94 billion at fiscal year-end 2008, due largely to the redemption of public debt during 2009.
KB ended the fiscal year with no cash borrowings outstanding under its unsecured revolving credit facility. Its ratio of debt to total capital, however, rose to 72.0% from 70.0% at the end of fiscal 2008. Net debt-to-capital was 42.9% at fiscal yearend compared to 45.4% a year before, due to the cash balance at the end of fiscal 2009. KB also cut the ceiling on its revolver from $650 million to $200 million.
SG&A decreased 30% to $85.4 million in the quarter; as a percentage of housing revenues, SG&A rose to 13.8% from 13.3% in the prior year quarter.
KB lost only $1.8 million on its joint ventures during the quarter, including $500,000 in impairments, down from $61.2 million in the 2008 quarter. Financial services operations, which include KB's interest in an unconsolidated mortgage banking joint venture, reported pretax income of$7.5 million in the current quarter, compared to pretax income of $6.9 million in the prior year's fourth quarter.
The company lost $38 million on land sales for the quarter, compared to a$1.1 million profit in the fiscal fourth quarter of 2008.
KB president and CEO Jeffrey Mezger, in a statement, credited the company's "open series" homes with fueling the fourth-quarter order increase. "We view the growth in our fourth quarter net orders as evidence that we are continuing to attract and meet the demands of today's homebuyers, particularly those in our core first-time buyer segment," he said.
While referring to the fourth quarter performance as "solid," Mezger sounded a note of caution regarding 2010. "There are indications that housing market conditions may be stabilizing in some regions, reflecting, among other things, relatively high levels of affordability," he said. "This is tempered, however, and could ultimately be undermined, by persistent economic weakness and unemployment, changes in federal government monetary and fiscal policies and programs, and by the impact of rising foreclosures and mortgage loan delinquencies."