KB Home Earnings Call Insights: Inspirada and Gross Margins
KB Home (NYSE:KBH) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.
Robert Wetenhall – RBC Capital Markets: Just wanted to see how much upside is there to ASP’s lot, given the fact you’re up 22% year-over-year and I was hoping, Jeff if you could give us little bit more color on your outlook for Inspirada as we go into ’14?
Jeffrey T. Mezger – President, CEO and Director: Well, as Jeff shared in his comments Bob, we do expect our sales price to go up a little bit more in the fourth quarter, 299 in the third quarter and a little bit above 300 is what he guided for the fourth quarter. Moving forward, a lot of it will depend on mix of what’s opening and closing and we think we’ll continue to be able to push our overall pricing up through the mix of the communities that we’re bringing to market. We don’t bank on prices going up as we project our business and my hunch is that the little uptick in interest rates probably slowed down the inflation side of things for a while in housing, which I actually think is healthy for the recovery in the long run. As to Inspirada, there’s a few moving parts to it, as you know, the development agreement applies to the villages and primarily 3, 4, 5 and beyond. We do have assets in village 2 that are in the entitlement process that we intend to open up in 2014, hopefully in the spring and we’ll come right behind that as the development agreement turns into actual development on site and all the builders are hopeful of getting communities open later in the year in the ensuing villages beyond. So, it’s a pretty exciting development in a very land constrained market and we think it’s an incredible opportunity for us now.
Robert Wetenhall – RBC Capital Markets: Just as a follow-up, Jeff, you’ve done a great job on managing costs. Are we kind of at the end of the rope in terms of getting the SG&A ratio to where it’s at or is there room for improvement as sales continue to grow?