KB Home widens loss in second quarter, misses estimates
KB Home (NYSE:KBH) announced Wednesday it widened its second quarter losses as revenues dropped, causing the homebuilder's share to sink on the New York Stock Exchange.
For the three months ending May 31, the Los Angeles, California-based company posted a net loss of $68.5 million, or $0.89 per share, compared to a net loss of $30.7 million, or $0.40 loss per share, in the year-ago period.
The loss, which came in far higher than the negative 31 cents per share estimate, prompted the company's stock to fall 16.44%, to trade at $9.96 as of 2:35 pm EDT on Wednesday.
KB Home said its loss included noncash charges related to inventory impairments, a $20.6 million abandonment charge on a land option contract, and a loan guaranty loss of $14.6 million. No such items were incurred in the second quarter of 2010.
The $14.6 million charge was related to a joint venture in Las Vegas called Inspirada, where the company was to build thousands of homes. When land prices fell, however, KB defaulted on its loans from a banking syndicate, and recently agreed, along with other builders, to pay lenders to resolve legal bankruptcy court claims.
Excluding these charges, the company's second quarter homebuilding operating loss was $22.3 million, it said.
Revenues dropped 27% year-over-year to $271.7 million, but still above the $257.1 million expected by analysts. A 29% decrease in homes delivered, partially offset by a 3% increase in average selling price, contributed to the revenue slide.
Net orders also fell 11% to 1,998 from 2,244 during the second quarter of 2010. Excluding quarterly one-time charges, gross margins for the quarter were 14.9%, still below 17.7% a year earlier, due to pricing pressure and a shift in product mix.
By the end of the quarter, KB Home had over 2,400 homes in backlog, falling 24%, and representing $501.5 million in revenues.
"We also expect the sequential increases in our deliveries and revenues for the remaining quarters of this year to . . . drive stronger bottom line results," said president and CEO Jeffrey Mezger.
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