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KB Home Reports 2012 Fourth Quarter And Full Year Results

Housing Gross Profit Margin, Excluding Inventory Impairment and Land Option Contract Abandonment Charges

The following table reconciles the Company’s housing gross profit margin calculated in accordance with GAAP to the non-GAAP financial measure of the Company’s housing gross profit margin, excluding inventory impairment and land option contract abandonment charges:

    Twelve Months     Three Months
2012     2011 2012     2011
Housing revenues $ 1,548,432 $ 1,305,299 $ 574,377 $ 475,636
Housing construction and land costs (1,317,529 ) (1,129,785 ) (492,594 ) (405,899 )
Housing gross profits 230,903 175,514 81,783 69,737
Add: Inventory impairment and land option contract abandonment charges 28,533   25,740   5,621   2,284  
Housing gross profits, excluding inventory impairment and land option contract abandonment charges $ 259,436   $ 201,254   $ 87,404   $ 72,021  
Housing gross profit margin as a percentage of housing revenues 14.9 % 13.4 % 14.2 % 14.7 %
Housing gross profit margin, excluding inventory impairment and land option contract abandonment charges, as a percentage of housing revenues 16.8 % 15.4 % 15.2 % 15.1 %
 

Housing gross profit margin, excluding inventory impairment and land option contract abandonment charges, is a non-GAAP financial measure, which the Company calculates by dividing housing revenues less housing construction and land costs before inventory impairment and land option contract abandonment charges associated with housing operations recorded during a given period, by housing revenues. The most directly comparable GAAP financial measure is housing gross profit margin. The Company believes housing gross profit margin, excluding inventory impairment and land option contract abandonment charges, is a relevant and useful financial measure to investors in evaluating the Company's performance as it measures the gross profits the Company generated specifically on the homes delivered during a given period and enhances the comparability of housing gross profit margin between periods. This financial measure assists management in making strategic decisions regarding product mix, product pricing and construction pace. The Company also believes investors will find housing gross profit margin, excluding inventory impairment and land option contract abandonment charges, relevant and useful because it represents a profitability measure that may be compared to a prior period without regard to variability of charges for inventory impairments or land option contract abandonments.

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