Tuesday, Sept. 21, 2004 | 10:54 a.m.
Labor shortages in Las Vegas and Phoenix affected KB Home earnings slightly for the third quarter, company executives said this morning following Monday's release of its third quarter earnings numbers.
The labor issues, specifically a shortage of framing contractors here and in Phoenix, created short-term problems for the Los Angeles-based company, Jeffrey Mezger, executive vice president and chief operating officer said during a conference call.
"It had a short term effect, but we've worked through it," he said.
Mezger said the Las Vegas and Phoenix markets are growing and selling at such high levels, subcontractors have had a hard time keeping up with the demand for labor.
Dom Cecere, chief financial officer, said the labor shortage caused the number of expected home closings (houses that have completed construction and closed escrow) to fall short by about 500 homes. Those home closings will most likely be included in fourth quarter numbers, company officials said.
Shortages in cement and wood also had slight effects on the builder, as did bad weather in the southeast and in Florida.
Despite those challenges, KB Home on Monday reported a profit of $117.9 million or $2.84 per share for the third quarter ended Aug. 31, up from $97.8 million or $2.33 in the year-ago quarter.
Revenue for the Los Angeles home building company grew 21 percent to $1.7 billion.
The number of new houses delivered during the third quarter was 6,912, not including KB Home's France division. The number of houses delivered in the Southwest, of which Las Vegas is included, was 1,884 in the third quarter, and 5,337 for the first nine months of the year, the company reported.
KB Home is one of the largest home builders in the nation and France, and is the Las Vegas Valley's largest builder, closing escrow on 3,381 homes in 2003 in Las Vegas, Home Builders Research Inc. reported.
From January to August of this year KB Home closed escrow on 2,513 houses in Las Vegas, research firm SalesTraq reported.
The average sales price of KB Home houses nationwide reached $214,400 during the third quarter, a 5 percent increase over the same time last year.
In the Southwest KB Home houses averaged $199,600 during the third quarter, an almost 11 percent increase over the year-ago quarter. On the West Coast, KB Home houses averaged $407,900, a 16 percent increase over the year-ago quarter.
The company attributed the improvement in its earnings to expanded margins and growth in the number of homes sold.
"The performance of our core home building business also benefited from our geographic diversity and growing wide-array of attached and detached product offerings, appealing to first-time and move-up homebuyers, as well as active adults and luxury buyers," Bruce Karatz, chairman and chief executive officer, said in a statement.
Company officials said during today's conference call that it will begin to broaden its product line, from more moderate priced homes, to include luxury home products.
The KB Home luxury series will be rolled out in California first, Derrick Hall, KB Home spokesman said after the conference call.
It has not yet been decided whether KB Home will introduce the product line in Las Vegas, he said.
KB Home already has expanded its range of homes in the Las Vegas market. This year it started construction and sales of its Tripoly product, triplex houses, around the valley. Prices for those homes start in the mid to high $100,000 range.
KB Home's Las Vegas division ranked third in the J.D. Power and Associates 2004 New Home Builder Customer Satisfaction Study, released last week.
The affect the survey might have on sales in Las Vegas and other markets where the builder ranked high is not clear, Karatz said.
He said the company continues to focus on improvement and said the entire industry is doing a better job.
"We're dealing with the most important consumer purchase people will make in their lifetime," he said, adding the survey's high marks are a positive benefit.
Also last week, the U.S. Environmental Protection Agency (EPA) ordered KB Home to cease work in waterways that flow to the Las Vegas Wash and Lake Mead.
The notice was for work KB Home conducted on the 160-acre Huntington subdivision, west of Fort Apache Road in the southwest Las Vegas Valley, without a federal permit, the EPA said.
Officials with KB Home said in a statement last week that it is "committed to complete permit compliance."
"We have had productive meetings with the EPA and are hopeful we can resolve this matter in a timely manner," Kate Mulhearn, KB spokeswoman, said in a statement.
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