Signs of improvement in gross margins; and Adequate liquidity, including good cash position. Sharper-than-expected drop in new orders following the tax credit expiration; Higher-than-average leverage; and Lingering exposure to contingent liabilities related to joint-ventures could be a drain on current liquidity. Our rating on KB Home reflects our expectation that this Los Angeles-based homebuilder's bottom line will remain under pressure through 2011, given the unsteady overall housing market recovery, KB Home's weaker new orders, and the company's substantial overhead costs. Our ratings also continue to reflect risks associated with the company's highly leveraged financial profile. However, we acknowledge that operating losses have narrowed significantly due to lower impairment charges. KB Home is one of the nation's largest homebuilders, having delivered
