KB Home 1Q Earnings Drop

Los Angeles, March 22, 2007--Homebuilder KB Home, reported fiscal first-quarter earnings that fell to $27.5 million, or 34 cents per share, from $173.3 million, or $2.01 per share, a year ago.

Even with the sharp decline, the result topped Wall Street's expectations. Analysts surveyed by Thomson Financial were looking for profit of 25 cents per share.

Revenue fell 19 percent to $1.77 billion from $2.19 billion, as unit deliveries fell 16 percent and the average selling price dropped 5 percent, but surpassed analysts' forecast of $1.61 billion. The company delivered 6,655 homes at an average price of $261,400.

Orders were off 12 percent to 7,677 in the quarter. The cancellation rate was 31 percent, a sharp improvement from the 48 percent in the fourth quarter of fiscal 2006.

The housing sector has been plagued by an excess of supply, built up during the five-year boom that ended 18 months ago. That oversupply has forced builders to cut production and lower prices to sell through the inventory.

"We believe these conditions will likely continue for at least the remainder of 2007, reducing our quarterly and full-year revenues and earnings compared to 2006 results," said Jeffrey Mezger, president and chief executive officer, in a statement.

KB said it is using "extreme caution" when making land purchases and development plans. The company also warned that problems in the sector of the mortgage market that lends to people with poor credit could cause problems for builders if the rate of foreclosure increases and more homes hit the market.