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KB Home Reports Operating Results (10-Q)

October 09, 2012 | About:
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10qk

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KB Home (KBH) filed Quarterly Report for the period ended 2012-08-31.

Kb Home has a market cap of $1.2 billion; its shares were traded at around $14.8 with and P/S ratio of 0.9. The dividend yield of Kb Home stocks is 0.6%.

Highlight of Business Operations:

Total revenues for the nine months ended August 31, 2012 were $981.9 million, up 17% from $836.0 million for the nine months ended August 31, 2011. Included in our total revenues were financial services revenues of $7.9 million for the first nine months of 2012 and $6.2 million for the year-earlier period. Our net loss for the nine months ended August 31, 2012 totaled $66.7 million, or $.86 per diluted share, including insurance recoveries of $26.5 million related to repair costs on and costs to handle claims with respect to previously delivered homes, including homes affected by allegedly defective drywall material, and favorable warranty adjustments of $11.2 million that reflected trends in our overall warranty claims experience. These items were partly offset by charges of $22.9 million for inventory impairments and $8.8 million recorded as a result of an unfavorable court decision that is being appealed, as discussed in Note 14. Legal Matters in the Notes to Consolidated Financial Statements in this report. The net loss for the nine months ended August 31, 2012 also included an income tax benefit of $14.8 million, reflecting the resolution of federal and state tax audits during the period. In the year-earlier period, our net loss of $192.7 million, or $2.50 per diluted share, included inventory impairment and land option contract abandonment charges of $23.5 million, and a joint venture impairment charge of $53.7 million and a loss on loan guaranty of $37.3 million, both related to South Edge. Partly offsetting these items in the 2011 period were $7.4 million of favorable warranty adjustments that resulted from trends in our overall warranty claims experience on homes previously delivered, and $8.3 million of legal expense recoveries.

Revenues. Homebuilding revenues totaled $421.6 million for the three months ended August 31, 2012, increasing 16% from $364.5 million for the corresponding period of 2011 primarily due to increased revenues from housing operations. Housing revenues of $421.6 million for the three months ended August 31, 2012 improved from $364.4 million in the year-earlier period, due to a 7% increase in homes delivered and an 8% increase in the average selling price. We delivered 1,720 homes in the third quarter of 2012, up from 1,603 homes delivered in the year-earlier quarter. The increase in homes delivered was largely due to the relatively higher backlog level at the beginning of the 2012 third quarter, which was up 22% on a year-over-year basis. Within our homebuilding reporting segments, the number of homes delivered in the current quarter increased by 3%, 15% and 24% in our West Coast, Central and Southeast homebuilding reporting segments, respectively, and decreased by 20% in our Southwest homebuilding reporting segment, in each case as compared to the year-earlier quarter.

Gross profits from our homebuilding operations increased to $73.6 million for the three months ended August 31, 2012, up $12.0 million from $61.6 million for the year-earlier period. Our housing gross profits for the three months ended August 31, 2012 reflected our recognition of a probable insurance recovery of $16.5 million related to costs we have incurred to make repairs on and to handle claims for previously delivered homes, including homes affected by allegedly defective drywall material, which was partly offset by inventory impairment charges of $6.4 million. We expect to receive the cash from this insurance recovery in the fourth quarter of 2012. In the three months ended August 31, 2011, our housing gross profits included $7.4 million of favorable warranty adjustments, which were partially offset by $1.2 million of inventory impairment and land option contract abandonment charges. Our housing gross profit margin for the third quarter of 2012 increased by .6 percentage points to 17.5%, up from 16.9% in the year-earlier quarter. Our housing gross profit margin, excluding inventory impairment charges improved to 19.0% in the third quarter of 2012, compared to a housing gross profit margin, excluding inventory impairment and land option contract abandonment charges, of 17.2% in the third quarter of 2011.

Our housing gross profits of $149.1 million for the nine months ended August 31, 2012 increased by $43.3 million from $105.8 million for the year-earlier period. Housing gross profits for the nine months ended August 31, 2012 included inventory impairment charges of $22.9 million and the favorable warranty adjustments and insurance recovery described above under “Overview.” For the nine months ended August 31, 2011, housing gross profits included $23.5 million of inventory impairment and land option contract abandonment charges, which were partly offset by $6.2 million of favorable net warranty adjustments, largely due to the $7.4 million of favorable warranty adjustments recorded in the 2011 third quarter. For the first nine months of 2012, our housing gross profit margin improved by 2.6 percentage points to 15.3% from 12.7% for the year-earlier period. Our housing gross profit margin, excluding inventory impairment charges, was 17.7% for the nine months ended August 31, 2012. For the nine months ended August 31, 2011, our housing gross profit margin, excluding inventory impairment and land option contract abandonment charges, was 15.6%.

This segment posted pretax losses of $10.6 million for the nine months ended August 31, 2012 and $113.6 million for the corresponding period of 2011. The pretax results improved significantly in the first nine months of 2012 compared to the year-earlier period, which included a $53.7 million joint venture impairment charge we incurred in writing off our investment in South Edge and a $37.3 million loss on loan guaranty also related to South Edge. The gross profit margin increased to 18.9% in the nine months ended August 31, 2012 from 3.0% in the nine months ended August 31, 2011, primarily due to a decrease in inventory-related charges. Inventory impairment charges totaled $2.1 million for the nine months ended August 31, 2012. For the year-earlier period, inventory impairment and land option contract abandonment charges totaled $19.0 million, which included an $18.1 million adjustment to the fair value of real estate collateral that we took back on a note receivable. Selling, general and administrative expenses decreased by $5.7 million to $14.1 million in the first nine months of 2012 from $19.8 million in the year-earlier period for the reasons described above with respect to the three-month period ended August 31, 2012.

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