KB Home Up 6% Despite Cancellations

Los Angeles, CA, September 22, 2006--Homebuilder KB Home reported Thursday that revenue increased 6 percent during its fiscal third quarter but noted that net home orders fell 43 percent during the period, in part due to cancellations. The company, one of the largest homebuilders and land developers in the nation, did not report earnings results for the quarter ended Aug. 31, citing an internal review of its stock option grants. No conclusions have been reached in the review, the Los Angeles-based company said. KB Home said total revenue during the quarter was $2.67 billion, compared to $2.53 billion in the year-ago period. Analysts surveyed by Thomson Financial had expected earnings per share of $1.95 for the quarter on revenue of $2.61 billion. Chairman and chief executive Bruce Karatz said in a statement he doesn't anticipate market conditions will improve significantly in the foreseeable future. He expects that to have an unfavorable impact on the company's net income comparisons. "Greater competition among homebuilders and imbalances in supply, demand and affordability in a number of markets have adversely affected our unit deliveries, revenues, pricing and net orders for the quarter," Karatz said. The total average selling price of a KB Home rose 10 percent during the quarter to $279,000, but unit volume dropped 3 percent. Net orders totaled 5,989 homes, down 43 percent from 10,467 in the same quarter last year. Domestically, KB Home's net new orders fell 53 percent. Housing unit deliveries in the third quarter totaled 9,523, compared to 9,812 in the same quarter last year, the company said. The company reported its backlog at the end of the quarter stood at 23,878 units, down from 27,744 units at the close of the year-ago quarter. KB Home has been renegotiating or canceling land purchase option contracts, trimming the size of planned developments and selling land holdings. The company expects to lower its outstanding debt into 2007 and repurchase shares. The builder said it would disclose full third-quarter results once the stock option grants review is complete.