KB Home remains optimistic despite challenges of the housing market

By Lisa Kerner

Charlotte, N.C., Sept. 25 - KB Home is "increasingly well-positioned to compete in today's housing market," Jeffrey Mezger, president and chief executive officer, said during the company's quarterly earnings conference call on Friday.

Mezger said KB strengthened its balance sheet prior to the turn in the housing market and is steadily reducing housing inventory, lowering debt and protecting its cash in an effort to return to profitability.

According to Mezger, KB's orders were up and cancellations are improving.

The average selling price of a KB home was down $37,000 to $203,0000, and the company has shortened its time to build.

While Mezger expects the housing market to remain challenged, he said KB is responding to what he called the "new normal."

Positive cash flow expected

KB generated $35 million in positive cash flow in operations in the fiscal third quarter ended Aug. 31 and expects to produce overall positive cash flows for the fourth quarter and full-year 2009, according to William Hollinger, KB's chief accounting officer.

The company ended the fiscal third quarter with cash and cash equivalents of $1.1 billion and total liquidity of $1.5 billion.

Total debt at quarter-end was $1.8 billion, roughly flat with the debt balance at the end of the fiscal second quarter. The company had no borrowings outstanding under its revolving credit facility as of Aug. 31.

For the fiscal third quarter, KB posted revenues of $458.5 million, down 33% from $681.6 million in the year-earlier quarter. The company reported a net loss of $66.0 million, compared with a net loss of $144.7 million for the comparable period in 2008.

"We are encouraged by the positive net order results we achieved in the quarter but remain cautious given the current economic climate," Mezger said.

"While we have more work to do to return to profitability, we believe we are making progress on many fronts toward this goal," Mezger said.

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

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