KB Home, one of the nation’s premier homebuilders, today reported results for its third quarter ended August 31, 2011. Highlights and developments include the following:

Revenues in the third quarter of 2011 totaled $367.3 million, down 27% from $501.0 million in the third quarter of 2010. The decrease was mainly due to a decline in housing revenues, reflecting a 31% year-over-year decrease in the number of homes delivered to 1,603, which was partly offset by a 6% year-over-year increase in the average selling price to $227,400.

The Company reported a net loss of $9.6 million, or $.13 per diluted share, for the quarter ended August 31, 2011, compared to a net loss of $1.4 million, or $.02 per diluted share, for the corresponding period of 2010. The 2011 third quarter net loss included $1.2 million of noncash charges for inventory impairments and land option contract abandonments, compared to $3.4 million of similar charges in the year-earlier quarter.

The Company ended the 2011 third quarter with a total of $590.6 million of cash, cash equivalents and restricted cash, of which $113.2 million was restricted. The Company's debt balance at August 31, 2011 was $1.59 billion, down $188.8 million from $1.78 billion at November 30, 2010, largely due to the repayment of $100.0 million in aggregate principal amount of 6 3/8% senior notes upon their August 15, 2011 maturity.

Company-wide net orders increased 40% to 1,838 in the third quarter of 2011 from 1,314 in the corresponding period of 2010. At August 31, 2011, the Company had 2,657 homes in backlog, representing projected future housing revenues of approximately $559.3 million, compared to a backlog of 2,169 homes at August 31, 2010, representing projected future housing revenues of approximately $455.3 million.

“We achieved encouraging operational and financial results in the third quarter despite the ongoing difficult housing environment,” said Jeffrey Mezger, president and chief executive officer. “We generated year-over-year growth in both net orders and backlog in all four of our operating regions. We also improved our bottom line results by narrowing our net loss substantially from the second quarter, and continued our sequential improvement in key financial metrics in 2011, including our housing gross margin and selling, general and administrative expense ratio. During the quarter, we repaid $100 million of senior notes at their scheduled maturity, while remaining focused on maintaining an ample cash balance. Our next scheduled debt maturity is in 2014.”

“Our strategic actions over the past several quarters of investing in attractive land positions, opening new communities, and reducing construction and overhead costs are yielding measurable results,” continued Mezger. “We remain carefully focused on extending and sustaining the positive sequential trends we have established, and ending the year with a strong fourth quarter, giving us momentum as we enter 2012.”

Total revenues of $367.3 million in the quarter ended August 31, 2011 decreased 27% from the year-earlier quarter, reflecting a 31% decline in the number of homes delivered, partly offset by a 6% increase in the average selling price. The Company delivered 1,603 homes in the 2011 third quarter, compared to 2,320 homes delivered in the year-earlier quarter. The year-over-year declines in homes delivered and revenues were largely due to the impact of the April 30, 2010 expiration of the federal homebuyer tax credit, which elevated deliveries and revenues in the 2010 third quarter. The Company's average selling price increased to $227,400 in the third quarter of 2011 from $214,200 in the year-earlier quarter. Land sale revenues totaled $.1 million in the third quarter of 2011 and $1.9 million in the third quarter of 2010.

The Company’s homebuilding business posted operating income of $1.4 million for the quarter ended August 31, 2011, following operating losses in the prior two quarters of 2011. For the year-earlier quarter, homebuilding operating income totaled $8.4 million. The year-over-year decline in homebuilding operating income reflected lower gross profits, which were partly offset by reduced selling, general and administrative expenses.

The decrease in gross profits in the third quarter of 2011 from the corresponding quarter of 2010 resulted from fewer homes delivered and a lower housing gross margin. The Company's third quarter housing gross margin decreased to 16.9% in 2011 from 17.5% in 2010. The current quarter included $7.4 million of favorable warranty adjustments resulting from trends in the Company's overall warranty claims experience on homes previously delivered, which were partly offset by $1.2 million of inventory impairment and land option contract abandonment charges. In the year-earlier quarter, the Company had $3.4 million of inventory impairment and land option contract abandonment charges. Excluding the effect of the inventory-related charges, the current quarter's housing gross margin would have been 17.2%, down from 18.2% in the year-earlier quarter. The decline was largely the result of reduced leverage from a lower volume of homes delivered and a shift in product mix, partly offset by the warranty adjustments. However, the current quarter's housing gross margin continued to trend favorably on a sequential basis, improving from 13.4% and 14.9% in the first and second quarters of 2011, respectively.

Selling, general and administrative expenses decreased by $18.4 million, or 23%, to $60.2 million in the third quarter of 2011 from $78.6 million in the year-earlier quarter, reflecting the Company's ongoing actions to streamline its organizational structure and reduce overhead, the recovery of legal expenses from insurance carriers and a lower volume of homes delivered. As a percentage of housing revenues, the Company's selling, general and administrative expenses were 16.5% in the third quarter of 2011, improving on a sequential basis from 25.4% in the first quarter and 23.2% in the second quarter of 2011. In the third quarter of 2010, this ratio was 15.8%.

Interest expense, net of amounts capitalized, decreased to $12.3 million in the third quarter of 2011 from $16.2 million in the year-earlier quarter, mainly due to a reduction in the amount of debt outstanding and an increase in the amount of interest capitalized as a result of a higher balance of inventory qualifying for interest capitalization.

The Company's financial services operations, which included the Company's equity interest in an unconsolidated mortgage banking joint venture, generated pretax income of $1.1 million for the current quarter and $2.4 million for the year-earlier quarter. The equity in loss of the unconsolidated mortgage banking joint venture was $.9 million in the third quarter of 2011, compared to equity in income of $1.0 million in the year-earlier quarter. The Company's unconsolidated mortgage banking joint venture stopped accepting loan applications and offering mortgage banking services in late June 2011. Also in late June, the Company entered into a marketing services agreement with MetLife Home Loans, a division of MetLife Bank, N.A., under which MetLife Home Loans offers a wide array of financing options and mortgage loan products to the Company's homebuyers at all of its communities nationwide.

The Company posted total pretax losses of $9.6 million and $6.7 million for the third quarters of 2011 and 2010, respectively. The Company recorded a net loss of $9.6 million, or $.13 per diluted share, for the third quarter of 2011, including an after-tax charge of $2.5 million to record a valuation allowance against the net deferred tax assets generated from the quarter's loss. In the third quarter of 2010, the Company generated a net loss of $1.4 million, or $.02 per diluted share, including a similar after-tax charge of $3.0 million.

The Company’s net orders in the third quarter of 2011 increased 40% on a year-over-year basis, driving the quarter-end number of homes in backlog above the year-earlier level. Third quarter 2011 net orders increased to 1,838, up from 1,314 in the year-earlier period. Net orders rose in each of the Company's four geographic regions, with increases ranging from 22% in the Central region to 73% in the West Coast region. The favorable year-over-year comparisons partly reflected activity from recently opened communities as well as depressed net orders in the year-earlier period due to the impact of the expiration of the federal homebuyer tax credit last year. The cancellation rate as a percentage of gross orders was 29% in the third quarter of 2011 and 33% in the year-earlier quarter. The Company's backlog at the end of the current quarter totaled 2,657 homes, a 22% increase from the 2,169 homes in backlog at the end of the third quarter of 2010. Projected future housing revenues from homes in backlog at August 31, 2011 totaled approximately $559.3 million, a 23% increase from projected future housing revenues of approximately $455.3 million at August 31, 2010, reflecting a higher number of homes in backlog across all of the Company's regions.

For the nine months ended August 31, 2011, Company-wide revenues totaled $836.0 million, down 27% from $1.14 billion for the year-earlier period. The decrease was mainly due to lower housing revenues. The number of homes delivered in the first nine months of fiscal 2011 decreased 30% year over year to 3,817, while the average selling price increased 4% to $217,400. The Company posted a net loss of $192.7 million, or $2.50 per diluted share, for the nine months ended August 31, 2011, including noncash charges of $77.2 million for inventory and joint venture impairments and land option contract abandonments, a $37.3 million loss on loan guaranty, and an after-tax charge of $73.3 million to record a valuation allowance against net deferred tax assets. In the nine months ended August 31, 2010, the Company generated a net loss of $86.8 million, or $1.13 per diluted share, including noncash charges of $16.7 million for inventory impairments and land option contract abandonments, and a $37.0 million after-tax charge to record a valuation allowance against net deferred tax assets.