KB Home generates $1 billion cash in third quarter, drops debt by 55% from previous-year period

By Jennifer Lanning Drey

Portland, Ore., Sept. 27 - KB Home generated approximately $1 billion in cash during the third quarter through inventory reductions and the sale of its stake in its French subsidiary, KB Home chief financial officer Dom Cecere said Thursday during the company's quarterly earnings conference call.

The company used a portion of the proceeds to pay off its $400 million term loan and to redeem $250 million of its 9½% senior subordinated notes due 2011.

KB Home ended the third quarter with no borrowings on its $1.5 billion revolver and $646 million in cash.

Debt, net of cash, was $1.5 billion at Aug. 31, demonstrating a 55% reduction from $3.3 billion on the same date in 2006.

"A strong balance sheet and ample liquidity positions us to take advantage of future opportunities," Jeffrey T. Mezger, KB Home's chief executive officer, said during the call.

But the CEO also said the market does not yet show any signs that sales are improving to a level that will help clear the current excess inventory of unsold homes.

"Market conditions continue to be challenged with an excess supply of unsold homes, lack of affordability and declining consumer confidence impacting pricing and demand," he said.

"The downturn in homebuilding will not stabilize until consumer confidence is restored and supply and demand are back in balance. Until then, we are confident that we are well positioned to deal with the challenges ahead of us."

KB Home reported a third-quarter loss from continuing operations, net of income tax benefit, of $478.6 million, compared with after-tax income of $129.3 million in the same period last year.

Revenues were $1.54 billion in this year's third quarter, down from $2.28 billion in 2006.

KB Home is a Los Angeles-based builder of single-family homes.

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