Before we take a look at insider sales, let’s take a look at KB Homes orders and cancellations.

Dow Jones is reporting KB Home Says Cancellations Up, Orders Down

KB Home (KBH) has noticed a surge in cancellations and a drop-off in orders in the first two months of fiscal 2006, and if this trend continues, the company said it likely will have to ratchet down its revenue guidance for the year, according to a 10K filing.

The comments appear to be a sign that the sharp drop-off in orders recently reported by luxury builder Toll Brothers Inc. (TOL) may not be limited to the luxury segment as many market experts presumed.
“There are signs that consumer demand in the United States for residential housing at current prices is softening,” KB Home said in its 10K, which was filed with the Securities and Exchange Commission on Friday.
The Los Angeles builder noted that the U.S. Census Bureau reported that single-family housing starts in December fell 12% from November, and about 8% from December 2004. Also, the bureau reported that the median sales price for new homes declined approximately 3% in December from a year earlier.

“Our results to date in fiscal year 2006 reflect these broader market trends,” the company said, whose fiscal year ends Nov. 30. “In the first two months of the (fiscal) year, we have experienced an increase in home order cancellations and a decline in net orders for new homes when compared to the same period last year.”
If this trend continues, “we may be required to moderate our revenue guidance for fiscal year 2006,” KB Home said.

However, the company said it doesn’t expect to change its earnings-per-share guidance for fiscal 2006 as the company has accelerated its share buyback program. In December, KB Home’s board authorized the repurchase of 10 million shares. Since then, the company has repurchased 2 million shares in addition to the 2 million shares it bought back during its fiscal fourth quarter under the previous authorization program.

Well fancy that.
Let’s now take a look at KBH Insider sales:
(Click on chart for a better view)

Those transactions were as of February 14, 2006.
That is an incomplete list of the most recent transactions only.
Click here for a complete list of insider sales.

It’s Mish telepathic question and answer time.
The thought lines are now open.
Hmmmm. It seems everyone has the same three questions:

  1. How much of those share buybacks will insiders be selling into?
  2. How much of those share buybacks are needed for insider options granted?
  3. Is Albert Z. Praw (president) and Albert Praw (Private Shareholder) the same person?

It just so happens I spoke with KB Homes Investor Relations just today.

From KB Homes Investor Relations:
“KB issues between 500,000 and 750,000 options this past year”.

“Albert Praw and Albert Z. Praw are the same person. Albert is a long-time employee of the company — appears to be an option exercise.”

I have no answer for the first question unfortunately.
Here is my own question:
Does anyone find it interesting that the president “planned” to dump 32,666 options the moment he could?

As interesting as that idea might be, please ponder following chart.
Congratulations appear to be in order for Chairman Bruce Karatz.

Cancellations up, orders down, massive bailout at the top.
How do they do they manage this every time?
Enquiring minds want to know.

Mike Shedlock / Mish/