UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.~~

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended ~~August 31, 2017~~.February 28, 2023.


☐	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.~~

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from [ ] to [ ].

Commission File No. 001-09195

KB HOME

(Exact name of registrant as specified in its charter)



Delaware			95-3666267
(State of incorporation)			(IRS employer identification number)

10990 Wilshire Boulevard

Los Angeles, California 90024

(310) 231-4000

(Address, including zip code, and telephone number of principal executive offices)

Securities registered pursuant to section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange
on which registered

Common Stock (par value $1.00 per share)

KBH

New York Stock Exchange

Rights to Purchase Series A Participating Cumulative Preferred Stock

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of~~ ~~August 31, 2017~~.

There were ~~86,500,307~~82,491,192 shares of the registrant’s common stock, par value $1.00 per share, outstanding on ~~August 31, 2017~~.February 28, 2023. The registrant’s grantor stock ownership trust held an additional ~~9,153,296~~6,705,247 shares of the registrant’s common stock on that date.

KB HOME

FORM 10-Q

INDEX


			Page Number
PART I. FINANCIAL INFORMATION

			~~Page~~ ~~Number~~
~~PART I. FINANCIAL INFORMATION~~

Item 1. Financial Statements

Consolidated Statements of Operations - Three Months Ended February 28, 2023 and ~~Nine Months Ended August 31, 2017 and 2016~~2022			3

Consolidated Balance Sheets - ~~August 31, 2017~~ February 28, 2023 and November 30, ~~2016~~2022			4

Consolidated Statements of Cash Flows - ~~Nine~~ Three Months Ended ~~August 31, 2017~~February 28, 2023 and ~~2016~~2022			5

Notes to Consolidated Financial Statements			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3323

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5441

Item 4. Controls and Procedures			5541

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			5542

Item 1A. Risk Factors			5542

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5542

Item 6. Exhibits			5543

SIGNATURES			5644

~~INDEX OF EXHIBITS~~			57

PART I. FINANCIAL INFORMATION


~~Item 1.~~	~~Financial Statements~~

Item 1.Financial Statements

KB HOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts – Unaudited)


	Three Months Ended August 31,						Nine Months Ended August 31,							Three Months Ended February 28,
	2017			2016			2017			2016				2023		2022
Total revenues	$	1,144,001		$	913,283		$	2,965,391		$	2,402,704		Total revenues	$	1,384,314	$	1,398,789
Homebuilding:													Homebuilding:
Revenues	$	1,140,787		$	910,111		$	2,957,105		$	2,394,315		Revenues	$	1,378,537	$	1,394,154
Construction and land costs	(955,001		)	(760,490		)	(2,499,677		)	(2,018,022		)	Construction and land costs	(1,082,821)		(1,082,112)
Selling, general and administrative expenses	(109,095		)	(98,144		)	(305,901		)	(279,886		)	Selling, general and administrative expenses	(139,227)		(142,480)
Operating income	76,691			51,477			151,527			96,407			Operating income	156,489		169,562
Interest income	347			109			747			395			Interest income	467		36
Interest expense	—			—			(6,307		)	(5,667		)
Equity in loss of unconsolidated joint ventures	(814		)	(536		)	(679		)	(1,964		)

Equity in income (loss) of unconsolidated joint ventures													Equity in income (loss) of unconsolidated joint ventures	(757)		23

Homebuilding pretax income	76,224			51,050			145,288			89,171			Homebuilding pretax income	156,199		169,621
Financial services:													Financial services:
Revenues	3,214			3,172			8,286			8,389			Revenues	5,777		4,635
Expenses	(890		)	(891		)	(2,525		)	(2,621		)	Expenses	(1,358)		(1,347)
Equity in income (loss) of unconsolidated joint ventures	660			132			1,600			(652		)
Equity in income of unconsolidated joint venture													Equity in income of unconsolidated joint venture	1,582		5,148
Financial services pretax income	2,984			2,413			7,361			5,116			Financial services pretax income	6,001		8,436
Total pretax income	79,208			53,463			152,649			94,287			Total pretax income	162,200		178,057
Income tax expense	(29,000		)	(14,100		)	(56,400		)	(26,200		)	Income tax expense	(36,700)		(43,800)
Net income	$	50,208		$	39,363		$	96,249		$	68,087		Net income	$	125,500	$	134,257
Earnings per share:													Earnings per share:
Basic	$	.58		$	.46		$	1.12		$	.79		Basic	$	1.49	$	1.51
Diluted	$	.51		$	.42		$	1.00		$	.72		Diluted	$	1.45	$	1.47
Weighted average shares outstanding:													Weighted average shares outstanding:
Basic	85,974			84,457			85,517			85,952			Basic	83,468		88,285
Diluted	98,912			95,203			97,624			96,437			Diluted	85,995		91,067
Cash dividends declared per common share	$	.025		$	.025		$	.075		$	.075

See accompanying notes.

KB HOME

CONSOLIDATED BALANCE SHEETS

(In Thousands – Unaudited)


	August 31, 2017			November 30, 2016				February 28, 2023		November 30, 2022
Assets							Assets
Homebuilding:							Homebuilding:
Cash and cash equivalents	$	494,053		$	592,086		Cash and cash equivalents	$	260,127	$	328,517

Receivables	229,033			231,665			Receivables	348,567		322,767
Inventories	3,513,794			3,403,228			Inventories	5,445,153		5,543,176
Investments in unconsolidated joint ventures	64,513			64,016			Investments in unconsolidated joint ventures	51,188		46,785
Property and equipment, net							Property and equipment, net	89,359		89,234
Deferred tax assets, net	683,085			738,985			Deferred tax assets, net	155,868		160,868
Other assets	102,394			91,145			Other assets	102,902		101,051
	5,086,872			5,121,125				6,453,164		6,592,398
Financial services	12,687			10,499			Financial services	60,937		59,532
Total assets	$	5,099,559		$	5,131,624		Total assets	$	6,514,101	$	6,651,930

Liabilities and stockholders’ equity							Liabilities and stockholders’ equity
Homebuilding:							Homebuilding:
Accounts payable	$	189,535		$	215,331		Accounts payable	$	349,800	$	412,525
Accrued expenses and other liabilities	565,168			550,996			Accrued expenses and other liabilities	678,611		736,971
Notes payable	2,502,379			2,640,149			Notes payable	1,788,850		1,838,511
	3,257,082			3,406,476				2,817,261		2,988,007
Financial services	1,535			2,003			Financial services	1,377		3,128
Stockholders’ equity:							Stockholders’ equity:
Common stock	117,498			116,224
Common stock — 100,783,133 and 100,711,153 shares issued at February 28, 2023 and November 30, 2022, respectively							Common stock — 100,783,133 and 100,711,153 shares issued at February 28, 2023 and November 30, 2022, respectively	100,783		100,711
Paid-in capital	722,536			696,938			Paid-in capital	819,904		836,260
Retained earnings	1,653,512			1,563,742			Retained earnings	3,256,602		3,143,578
Accumulated other comprehensive loss	(16,057		)	(16,057		)	Accumulated other comprehensive loss	(5,575)		(5,575)
Grantor stock ownership trust, at cost	(99,279		)	(102,300		)
Treasury stock, at cost	(537,268		)	(535,402		)
Grantor stock ownership trust, at cost: 6,705,247 shares at February 28, 2023 and November 30, 2022							Grantor stock ownership trust, at cost: 6,705,247 shares at February 28, 2023 and November 30, 2022	(72,718)		(72,718)
Treasury stock, at cost: 11,586,694 and 10,015,507 at February 28, 2023 and November 30, 2022, respectively							Treasury stock, at cost: 11,586,694 and 10,015,507 at February 28, 2023 and November 30, 2022, respectively	(403,533)		(341,461)
Total stockholders’ equity	1,840,942			1,723,145			Total stockholders’ equity	3,695,463		3,660,795
Total liabilities and stockholders’ equity	$	5,099,559		$	5,131,624		Total liabilities and stockholders’ equity	$	6,514,101	$	6,651,930

See accompanying notes.

KB HOME

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands – Unaudited)


	Nine Months Ended August 31,							Three Months Ended February 28,
	2017			2016				2023		2022
Cash flows from operating activities:							Cash flows from operating activities:
Net income	$	96,249		$	68,087		Net income	$	125,500	$	134,257
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in (income) loss of unconsolidated joint ventures	(921		)	2,616
Amortization of discounts and issuance costs	5,006			5,668
Adjustments to reconcile net income to net cash used in operating activities:							Adjustments to reconcile net income to net cash used in operating activities:
Equity in income of unconsolidated joint ventures							Equity in income of unconsolidated joint ventures	(825)		(5,171)
Distributions of earnings from unconsolidated joint ventures							Distributions of earnings from unconsolidated joint ventures	11		9,295
Amortization of debt issuance costs and premiums							Amortization of debt issuance costs and premiums	835		549
Depreciation and amortization	2,151			2,763			Depreciation and amortization	8,712		7,627

Deferred income taxes	55,900			25,600			Deferred income taxes	5,000		4,400
Loss on early extinguishment of debt	5,685			—

Stock-based compensation	9,893			10,180			Stock-based compensation	5,867		6,867
Inventory impairments and land option contract abandonments	18,122			16,758			Inventory impairments and land option contract abandonments	5,289		175
Changes in assets and liabilities:							Changes in assets and liabilities:
Receivables	2,172			10,384			Receivables	(25,303)		(8,569)
Inventories	(95,850		)	(265,529		)	Inventories	101,293		(405,851)
Accounts payable, accrued expenses and other liabilities	9,926			24,761			Accounts payable, accrued expenses and other liabilities	(131,671)		2,069
Other, net	(5,063		)	(3,900		)	Other, net	(791)		3,317
Net cash provided by (used in) operating activities	103,270			(102,612		)	Net cash provided by (used in) operating activities	93,917		(251,035)
Cash flows from investing activities:							Cash flows from investing activities:
Contributions to unconsolidated joint ventures	(15,154		)	(1,000		)	Contributions to unconsolidated joint ventures	(13,223)		(8,568)
Return of investments in unconsolidated joint ventures	8,159			3,495			Return of investments in unconsolidated joint ventures	5,100		1,255

Purchases of property and equipment, net	(6,643		)	(2,680		)	Purchases of property and equipment, net	(8,838)		(10,563)
Net cash used in investing activities	(13,638		)	(185		)	Net cash used in investing activities	(16,961)		(17,876)
Cash flows from financing activities:							Cash flows from financing activities:
Change in restricted cash	—			8,742
Repayment of senior notes	(105,326		)	—

Borrowings under revolving credit facility							Borrowings under revolving credit facility	170,000		675,000
Repayments under revolving credit facility							Repayments under revolving credit facility	(220,000)		(425,000)

Issuance costs for unsecured revolving credit facility	(1,711		)	—			Issuance costs for unsecured revolving credit facility	—		(3,805)
Payments on mortgages and land contracts due to land sellers and other loans	(92,443		)	(41,913		)	Payments on mortgages and land contracts due to land sellers and other loans	(237)		(400)

Issuance of common stock under employee stock plans	20,677			7,351			Issuance of common stock under employee stock plans	1,134		—
Stock repurchases							Stock repurchases	(75,000)		—
Tax payments associated with stock-based compensation awards							Tax payments associated with stock-based compensation awards	(9,748)		(12,153)
Payments of cash dividends	(6,479		)	(6,471		)	Payments of cash dividends	(12,476)		(14,130)
Stock repurchases	(2,543		)	(87,531		)
Net cash used in financing activities	(187,825		)	(119,822		)
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	(146,327)		219,512
Net decrease in cash and cash equivalents	(98,193		)	(222,619		)	Net decrease in cash and cash equivalents	(69,371)		(49,399)
Cash and cash equivalents at beginning of period	593,000			560,341			Cash and cash equivalents at beginning of period	330,198		292,136
Cash and cash equivalents at end of period	$	494,807		$	337,722		Cash and cash equivalents at end of period	$	260,827	$	242,737

See accompanying notes.

KB HOME

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies


1.	~~Basis of Presentation and Significant Accounting Policies~~

Basis of Presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, ~~certain~~they do not include all the information and ~~footnote disclosures normally included in the annual~~footnotes required by GAAP for complete financial statements. These unaudited consolidated financial statements ~~prepared~~should be read in ~~accordance~~conjunction with ~~GAAP have~~the audited consolidated financial statements for the year ended November 30, 2022, which are contained in our Annual Report on Form 10-K for that period. The consolidated balance sheet at November 30, 2022 has been ~~condensed or omitted.~~

taken from the audited consolidated financial statements as of that date. In ~~our~~the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting ~~only~~ of normal recurring ~~accruals)~~adjustments) considered necessary ~~to present fairly our consolidated financial position as of~~ ~~August 31, 2017~~,for the ~~results~~fair presentation of our ~~consolidated operations~~results for the ~~three months and nine months ended~~ ~~August 31, 2017~~ ~~and 2016, and our consolidated cash flows for the nine months ended~~ ~~August 31, 2017~~ ~~and 2016.~~interim periods presented. The results of our consolidated operations for the three months ~~and nine months~~ ended ~~August 31, 2017~~February 28, 2023 are not necessarily indicative of the results to be expected for the full year due to seasonal variations in operating results and other factors. The consolidated balance sheet at November 30, 2016 has been taken from the audited consolidated financial statements as of that date. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended ~~November 30, 2016, which are contained in our Annual Report on Form 10-K for that period.~~

Unless the context indicates otherwise, the terms “we,” “our,” and “us” used in this report refer to KB Home, a Delaware corporation, and its subsidiaries.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents. We consider all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. Our cash equivalents totaled ~~$306.1~~$51.3 million at ~~August 31, 2017~~February 28, 2023 and ~~$396.1~~$15.8 million at November 30, ~~2016. The~~2022. At February 28, 2023 and November 30, 2022, the majority of our ~~cash and~~ cash equivalents was invested in interest-bearing bank deposit accounts.

Comprehensive Income. Our comprehensive income was ~~$50.2~~$125.5 million for the three months ended ~~August 31, 2017~~February 28, 2023 and ~~$39.4~~$134.3 million for the three months ended ~~August 31, 2016. For the nine months ended August 31, 2017 and 2016, our comprehensive income was $96.2 million and $68.1 million, respectively.~~February 28, 2022. Our comprehensive income for each of the three-month ~~and nine-month~~ periods ended ~~August 31, 2017~~February 28, 2023 and ~~2016~~2022 was equal to our net income for the respective periods.

~~Recent Accounting Pronouncements Not Yet Adopted~~. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued Accounting Standards Update No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which delayed the effective date of ASU 2014-09 by one year. In 2016 and 2017, the FASB issued accounting standards updates that amended several aspects of ASU 2014-09. ASU 2014-09, as amended, is effective for us for annual and interim periods beginning December 1, 2018 (with early adoption permitted beginning in our 2018 fiscal year) and allows for full retrospective or modified retrospective methods of adoption. We expect to adopt ASU 2014-09 under the modified retrospective method in our 2019 first quarter. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements and disclosures, and have been involved in industry specific discussions with the FASB on the treatment of certain items. We do not believe the adoption of ASU 2014-09 will have a material impact on the amount or timing of our homebuilding revenues. We are also continuing to evaluate the impact adopting this guidance may have on other aspects of our business.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under ASU 2016-02, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Lessor accounting remains substantially similar to current GAAP. In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information. ASU 2016-02 will be effective for us beginning December 1, 2019 (with early adoption permitted) and mandates a modified retrospective2.Segment Information

~~transition method. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.~~

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, “Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 will be effective for us beginning December 1, 2017 (with early adoption permitted). We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 provides guidance on how certain cash receipts and cash payments are to be presented and classified in the statement of cash flows. ASU 2016-15 will be effective for us beginning after December 1, 2018 (with early adoption permitted). We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective for us beginning December 1, 2018 (with early adoption permitted) and will be applied using a retrospective transition method to each period presented. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

~~Reclassifications.~~ ~~Certain amounts in our consolidated financial statements for prior years have been reclassified to conform to the current period presentation.~~


2.	~~Segment Information~~

We have identified five operating reporting segments, comprised of four homebuilding reporting segments and one financial services reporting segment. As of ~~August 31, 2017~~,February 28, 2023, our homebuilding reporting segments conducted ongoing operations in the following states:

~~West Coast: California~~

~~Southwest: Arizona and Nevada~~

~~Central: Colorado and Texas~~

~~Southeast:~~


West Coast:			California, Idaho and Washington
Southwest:			Arizona and Nevada
Central:			Colorado and Texas
Southeast:			Florida and North Carolina

Our homebuilding reporting segments are engaged in the acquisition and development of land primarily for residential purposes and offer a wide variety of homes that are designed to appeal to first-time, first move-up and active adult homebuyers. Our homebuilding operations generate most of their revenues from the delivery of completed homes to homebuyers. They also earn revenues from the sale of land.

Our homebuilding reporting segments were identified based primarily on similarities in economic and geographic characteristics, product types, regulatory environments, methods used to sell and construct homes and land acquisition characteristics. Management evaluates segment performance primarily based on segment pretax results.

Our financial services reporting segment offers property and casualty insurance and, in certain instances, earthquake, flood and personal property insurance to our homebuyers in the same markets as our homebuilding reporting segments, and provides title services in the majority of our markets located within our Southwest, Central and Southeast homebuilding reporting segments. ~~This~~Our financial services reporting segment earns revenues primarily from insurance commissions and from the provision of title services. ~~Until October 2016, we provided~~

We offer mortgage banking services, including residential consumer mortgage loan (“mortgage loan”) originations, to our homebuyers indirectly through ~~Home Community Mortgage, LLC (“HCM”), a joint venture of a subsidiary of ours and a subsidiary of Nationstar Mortgage LLC (“Nationstar”). Through these respective subsidiaries, we have a~~ ~~49.9%~~ ~~ownership interest and Nationstar has a~~ ~~50.1%~~ ownership interest in HCM, with Nationstar providing management oversight of HCM’s operations. In the 2016 fourth quarter, we and Nationstar began the process to wind down HCM and transfer HCM’s operations and certain assets to Stearns Lending, LLC (“Stearns Lending”). Our homebuyers may select any lender of their choice to obtain mortgage financing for the purchase of their home.

~~In the 2016 fourth quarter, a subsidiary of ours and a subsidiary of Stearns Lending entered into an agreement to form~~ KBHS Home Loans, LLC (“KBHS”), anour unconsolidated ~~mortgage banking~~ joint venture ~~to offer mortgage banking services, including mortgage loan originations, to our homebuyers.~~with GR Alliance

Ventures, LLC (“GR Alliance”). We and ~~Stearns Lending~~GR Alliance each have a 50.0% ownership interest, ~~in KBHS,~~ with ~~Stearns Lending~~GR Alliance providing management oversight of KBHS’ operations. ~~KBHS was operational in all of our served markets as of June 2017. Our financial services reporting segment is separately reported in our consolidated financial statements.~~

Corporate and other is a non-operating segment that develops and oversees the implementation of company-wide strategic initiatives and provides support to our reporting segments by centralizing certain administrative functions. Corporate management is responsible for, among other things, evaluating and selecting the geographic markets in which we operate, consistent with our overall business strategy; allocating capital resources to markets for land acquisition and development activities; making major personnel decisions related to employee compensation and benefits; and monitoring the financial and operational performance of our divisions. Corporate and other includes general and administrative expenses related to operating our corporate headquarters. A portion of the expenses incurred by Corporate and other is allocated to our homebuilding reporting segments.

Our reporting segments follow the same accounting policies used for our consolidated financial statements. The results of each reporting segment are not necessarily indicative of the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented, nor are they indicative of the results to be expected in future periods.

The following tables present financial information relating to our homebuilding reporting segments (in thousands):


	Three Months Ended February 28,
	2023		2022
Revenues:
West Coast	$	540,019	$	658,874
Southwest	239,587		209,767
Central	389,951		355,322
Southeast	208,980		170,191
Total	$	1,378,537	$	1,394,154

Pretax income (loss):
West Coast	$	59,550	$	110,034
Southwest	44,031		35,905
Central	58,833		38,116
Southeast	23,525		20,266
Corporate and other	(29,740)		(34,700)
Total	$	156,199	$	169,621




Inventory impairment and land option contract abandonment charges:
West Coast	$	869	$	—
Southwest	—		109
Central	951		66
Southeast	3,469		—
Total	$	5,289	$	175


	February 28, 2023		November 30, 2022
Assets:
West Coast	$	2,548,876	$	2,631,598
Southwest	1,063,712		1,074,912
Central	1,476,402		1,493,486
Southeast	927,498		929,208
Corporate and other	436,676		463,194
Total	$	6,453,164	$	6,592,398

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Revenues:
West Coast $ 609,598
$ 414,150
$ 1,426,030
$ 1,029,269
Southwest 132,307
106,187
376,132
318,190
Central 291,006
265,524
826,008
707,917
Southeast 107,876
124,250
328,935
338,939
Total $ 1,140,787
$ 910,111
$ 2,957,105
$ 2,394,315

Pretax income (loss):
West Coast $ 58,922
$ 36,912
$ 118,271
$ 78,647
Southwest 11,648
8,592
30,269
31,229
Central 28,921
27,601
75,584
61,515
Southeast 1,129
2,329
(605 ) (11,825 )
Corporate and other (24,396 ) (24,384 ) (78,231 ) (70,395 )
Total $ 76,224
$ 51,050
$ 145,288
$ 89,171

Inventory impairment charges:
West Coast $ 4,992
$ 2,579
$ 8,136
$ 7,153
Southwest 2,102
—
3,445
—
Central —
—
—
787
Southeast —
—
3,032
5,915
Total $ 7,094
$ 2,579
$ 14,613
$ 13,855

3. Financial Services

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Land option contract abandonments:
West Coast $ 903
$ 270
$ 2,738
$ 691
Southwest —
142
—
253
Central —
—
518
460
Southeast 116
61
253
1,499
Total $ 1,019
$ 473
$ 3,509
$ 2,903

August 31,
2017 November 30,
2016
Inventories:
Homes under construction
West Coast $ 852,965
$ 695,742
Southwest 170,805
130,886
Central 368,112
297,290
Southeast 109,595
122,020
Subtotal 1,501,477
1,245,938

Land under development
West Coast 698,736
820,088
Southwest 280,754
268,507
Central 432,448
456,508
Southeast 172,540
182,554
Subtotal 1,584,478
1,727,657

Land held for future development or sale
West Coast 222,327
210,910
Southwest 111,220
122,927
Central 14,496
15,439
Southeast 79,796
80,357
Subtotal 427,839
429,633
Total $ 3,513,794
$ 3,403,228

Assets:
West Coast $ 1,920,337
$ 1,847,279
Southwest 598,085
564,636
Central 934,610
909,497
Southeast 369,484
414,730
Corporate and other 1,264,356
1,384,983
Total $ 5,086,872
$ 5,121,125


3.	~~Financial Services~~

The following tables present financial information relating to our financial services reporting segment (in thousands):


	Three Months Ended February 28,
	2023		2022
Revenues
Insurance commissions	$	3,374	$	2,518
Title services	2,403		2,101
Other	—		16
Total	5,777		4,635

Expenses
General and administrative	(1,358)		(1,347)
Operating income	4,419		3,288
Equity in income of unconsolidated joint venture	1,582		5,148
Pretax income	$	6,001	$	8,436


	February 28, 2023		November 30, 2022
Assets
Cash and cash equivalents	$	700	$	1,681
Receivables	2,978		3,475
Investments in unconsolidated joint venture	28,249		26,678
Other assets (a)	29,010		27,698
Total assets	$	60,937	$	59,532

Liabilities
Accounts payable and accrued expenses	$	1,377	$	3,128
Total liabilities	$	1,377	$	3,128

(a)Other assets at February 28, 2023 and November 30, 2022 included $28.9 million and $27.6 million, respectively, of contract assets for estimated future renewal commissions.

4. Earnings Per Share

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Revenues
Insurance commissions $ 1,897
$ 1,897
$ 4,515
$ 4,844
Title services 1,317
1,275
3,766
3,545
Interest income —
—
5
—
Total 3,214
3,172
8,286
8,389

Expenses
General and administrative (890 ) (891 ) (2,525 ) (2,621 )
Operating income 2,324
2,281
5,761
5,768
Equity in income (loss) of unconsolidated joint ventures 660
132
1,600
(652 )
Pretax income $ 2,984
$ 2,413
$ 7,361
$ 5,116

August 31,
2017 November 30,
2016
Assets
Cash and cash equivalents $ 754
$ 914
Receivables 2,224
1,764
Investments in unconsolidated joint ventures (a) 9,631
7,771
Other assets 78
50
Total assets $ 12,687
$ 10,499
Liabilities
Accounts payable and accrued expenses $ 1,535
$ 2,003
Total liabilities $ 1,535
$ 2,003


~~(a)~~	Our investments in unconsolidated joint ventures as of August 31, 2017 included a $5.3 million capital contribution we made to KBHS in the 2017 first quarter, and a $5.0 million distribution we received from HCM in the 2017 second quarter.


4.	~~Earnings Per Share~~

Basic and diluted earnings per share were calculated as follows (in thousands, except per share amounts):


	Three Months Ended February 28,
	2023		2022
Numerator:
Net income	$	125,500	$	134,257
Less: Distributed earnings allocated to nonvested restricted stock	(87)		(65)
Less: Undistributed earnings allocated to nonvested restricted stock	(777)		(584)
Numerator for basic earnings per share	124,636		133,608
Effect of dilutive securities:

Add: Undistributed earnings allocated to nonvested restricted stock	777		584
Less: Undistributed earnings reallocated to nonvested restricted stock	(754)		(566)
Numerator for diluted earnings per share	$	124,659	$	133,626

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Numerator:
Net income $ 50,208
$ 39,363
$ 96,249
$ 68,087
Less: Distributed earnings allocated to nonvested restricted stock (14 ) (10 ) (43 ) (31 )
Less: Undistributed earnings allocated to nonvested restricted stock (307 ) (180 ) (602 ) (296 )
Numerator for basic earnings per share 49,887
39,173
95,604
67,760


	Three Months Ended February 28,
	2023		2022
Denominator:
Weighted average shares outstanding — basic	83,468		88,285
Effect of dilutive securities:
Share-based payments	2,527		2,782
Weighted average shares outstanding — diluted	85,995		91,067
Basic earnings per share	$	1.49	$	1.51
Diluted earnings per share	$	1.45	$	1.47

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Effect of dilutive securities:
Interest expense and amortization of debt issuance costs associated with convertible senior notes, net of taxes 664
667
1,990
2,000
Add: Undistributed earnings allocated to nonvested restricted stock 307
180
602
296
Less: Undistributed earnings reallocated to nonvested restricted stock (267 ) (161 ) (528 ) (264 )
Numerator for diluted earnings per share $ 50,591
$ 39,859
$ 97,668
$ 69,792

Denominator:
Weighted average shares outstanding — basic 85,974
84,457
85,517
85,952
Effect of dilutive securities:
Share-based payments 4,536
2,344
3,705
2,083
Convertible senior notes 8,402
8,402
8,402
8,402
Weighted average shares outstanding — diluted 98,912
95,203
97,624
96,437
Basic earnings per share $ .58
$ .46
$ 1.12
$ .79
Diluted earnings per share $ .51
$ .42
$ 1.00
$ .72

We compute earnings per share using the two-class method, which is an allocation of earnings between the holders of common stock and a company’s participating security holders. Our outstanding nonvested shares of restricted stock contain non-forfeitable rights to dividends and, therefore, are considered participating securities for purposes of computing earnings per share pursuant to the two-class method. We had no other participating securities at ~~August 31, 2017~~February 28, 2023 or ~~August 31, 2016.~~2022.

~~Outstanding~~For the three-month periods ended February 28, 2023 and 2022, no outstanding stock options ~~to purchase 2.5 million shares of our common stock~~ were excluded from the diluted earnings per share calculations for the three-month and nine-month periods ended August 31, 2017, and outstanding options to purchase 6.6 million shares of our common stock were excluded from the diluted earnings per share calculations for the three-month and nine-month periods ended August 31, 2016 because the effect of their inclusion in each case would be antidilutive.calculations. Contingently issuable shares associated with outstanding performance-based restricted stock units (each, a “PSU”) were not included in the basic earnings per share calculations for the periods presented, as the applicable vesting conditions had not been satisfied.


5.	~~Receivables~~

5. Receivables

Receivables consisted of the following (in thousands):


	February 28, 2023		November 30, 2022
Due from utility companies, improvement districts and municipalities	$	196,692	$	181,443
Recoveries related to self-insurance and other legal claims	84,800		76,581
Refundable deposits and bonds	17,308		17,610


Other	54,911		52,201
Subtotal	353,711		327,835
Allowance for doubtful accounts	(5,144)		(5,068)
Total	$	348,567	$	322,767

6. Inventories

August 31,
2017 November 30,
2016
Due from utility companies, improvement districts and municipalities $ 111,267
$ 102,780
Recoveries related to self-insurance claims 75,018
84,476
Refundable deposits and bonds 14,211
13,665
Recoveries related to warranty and other claims 5,202
14,609
Other 36,102
28,745
Subtotal 241,800
244,275
Allowance for doubtful accounts (12,767 ) (12,610 )
Total $ 229,033
$ 231,665


6.	~~Inventories~~

Inventories consisted of the following (in thousands):


	February 28, 2023		November 30, 2022
Homes completed or under construction	$	2,186,226	$	2,414,675
Land under development	3,258,927		3,128,501
Total	$	5,445,153	$	5,543,176

August 31,
2017 November 30,
2016
Homes under construction $ 1,501,477
$ 1,245,938
Land under development 1,584,478
1,727,657
Land held for future development or sale (a) 427,839
429,633
Total $ 3,513,794
$ 3,403,228

~~(a)~~ Land under development at February 28, 2023 and November 30, 2022 included land held for future development or sale ~~totaled $56.1~~of $25.3 million ~~at August 31, 2017~~ and ~~$63.4~~$21.6 million, ~~at November 30, 2016.~~respectively.

Interest is capitalized to inventories while the related communities or land parcels are being actively developed and until homes are completed or the land is available for immediate sale. Capitalized interest is amortized to construction and land

costs as the related inventories are delivered to homebuyers or land buyers (as applicable). ~~Interest and real estate taxes are not capitalized on~~In the case of land held for future development ~~or sale.~~and land held for sale, applicable interest is expensed as incurred.

Our interest costs were as follows (in thousands):


	Three Months Ended February 28,
	2023		2022
Capitalized interest at beginning of period	$	145,494	$	161,119
Interest incurred	27,804		28,303

Interest amortized to construction and land costs	(26,136)		(29,773)
Capitalized interest at end of period	$	147,162	$	159,649

7. Inventory Impairments and Land Option Contract Abandonments

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Capitalized interest at beginning of period $ 303,984
$ 309,045
$ 306,723
$ 288,442
Interest incurred (a) 43,434
46,485
136,857
138,994
Interest expensed (a) —
—
(6,307 ) (5,667 )
Interest amortized to construction and land costs (b) (55,204 ) (40,424 ) (145,059 ) (106,663 )
Capitalized interest at end of period (c) $ 292,214
$ 315,106
$ 292,214
$ 315,106


~~(a)~~	~~Interest incurred and interest expensed for the nine months ended August 31, 2017 included a charge of $5.7 million for the early extinguishment of debt.~~

~~(b)~~

Interest amortized to construction and land costs for the three months ended August 31, 2017 included $.2 million related to land sales during the period. We had no land sale activity for the three months ended August 31, 2016. Interest amortized to construction and land costs for the nine months ended August 31, 2017 and 2016 included $1.8 million and $.5 million, respectively, related to land sales during those periods.


~~(c)~~	Capitalized interest amounts presented in the table reflect the gross amount of capitalized interest, as inventory impairment charges recognized, if any, are not generally allocated to specific components of inventory.


7.	~~Inventory Impairments and Land Option Contract Abandonments~~

Each community or land parcel in our owned inventory is assessed on a quarterly basis to determine if indicators of potential impairment exist. We record an inventory impairment charge on a community or land parcel that is active or held for future development when indicators of potential impairment exist and the carrying value of the real estate asset is greater than the undiscounted future net cash flows the asset is expected to generate. These real estate assets are written down to fair value, which is primarily determined based on the estimated future net cash flows discounted for inherent risk associated with each such asset, or other valuation techniques. We record an inventory impairment charge on land held for sale when the carrying value of a land parcel is greater than its fair value. These real estate assets are written down to fair value, less associated costs to sell. The estimated fair values of such assets are generally based on bona fide letters of intent from outside parties, executed sales contracts, broker quotes or similar information.

We evaluated ~~49 and 43~~four active communities or land parcels for recoverability ~~during the nine months ended August 31, 2017 and 2016, respectively. The~~as of February 28, 2023 with a carrying value of ~~the~~$72.0 million. As of November 30, 2022, we evaluated five active communities or land parcels evaluated during the nine months ended August 31, 2017 and 2016 was $436.7 million and $350.0 million, respectively. Some of the communities or land parcels evaluated during the nine months ended August 31, 2017 and 2016 were evaluated in more than one quarterly period. Communities or land parcels evaluated for recoverability ~~in more than one quarterly period were counted only once for each nine-month period.~~

~~The communities or~~with a carrying value of $118.7 million. In addition, we evaluated land ~~parcels evaluated during the nine months ended August 31, 2017 included certain communities or land parcels previously~~ held for future development ~~that were reactivated during 2016 or 2017~~for recoverability as ~~part~~ of ~~our efforts to improve our asset efficiency under our returns-focused growth plan.~~

both February 28, 2023 and November 30, 2022. Based on the results of our evaluations, we recognized inventory impairment charges of $7.1 million for the three months ended August 31, 2017 and $14.6 million for the nine months ended August 31, 2017. For the three months and nine months ended August 31, 2016, we recognized inventory impairment charges of $2.6 million and $13.9 million, respectively. Theno inventory impairment charges for the three months ended February 28, 2023 and nine months ended August 31, 2017 and 2016 reflected our decisions to make changes in our operational strategies aimed at more quickly monetizing our investment in those communities or land parcels. The inventory impairment charges for the three months and nine months ended August 31, 2017 included one community in California where we decided to accelerate the overall pace for selling and delivering homes, primarily through lowering selling prices. In addition, the inventory impairment charges for these three-month and nine-month periods included two communities and six communities, respectively, where we decided to accelerate the overall pace for selling, building and delivering homes on land previously held for future development. The inventory impairment charges for the three months and nine months ended August 31, 2016 included two communities in California where we decided to accelerate the overall pace for selling, building and delivering homes, primarily through lowering selling prices. The inventory impairment charges for the nine months ended August 31, 2016 also included $5.4 million associated with the sales of two land parcels in the Metro Washington, D.C. market as part of the wind down of our operations in that market, and $5.2 million associated with one community in California and one in Florida where we decided to accelerate the overall timing for selling, building and delivering homes on land that was previously held for future development. The charges for the nine months ended August 31, 2016 also reflected the sales of our last remaining land parcels in the Rio Grande Valley area of Texas, which closed in the 2016 second quarter.2022.

The following table summarizes ranges for significant quantitative unobservable inputs we utilized in our fair value measurements with respect to the impaired communities written down to fair value during the periods presented:

Three Months Ended August 31, Nine Months Ended August 31,
Unobservable Input (a) 2017 2016 2017 2016
Average selling price $207,100 - $1,576,500 $351,600 - $486,000 $207,100 - $1,576,500 $280,100 - $486,000
Deliveries per month 2 - 4 2 - 3 2 - 4 1 - 4
Discount rate 17% - 18% 17% 17% - 18% 17% - 20%


~~(a)~~	~~The ranges of inputs used in each period primarily reflect differences between the housing markets where each impacted community is located, rather than fluctuations in prevailing market conditions.~~

As of ~~August 31, 2017,~~February 28, 2023, the aggregate carrying value of our inventory that had been impacted by inventory impairment charges was ~~$209.1~~$91.9 million, representing 26seven communities and various other land parcels. As of November 30, ~~2016,~~2022, the aggregate carrying value of our inventory that had been impacted by inventory impairment charges was ~~$215.3~~$102.9 million, representing 28eight communities and various other land parcels.

Our inventory controlled under land option contracts and other similar contracts is assessed on a quarterly basis to determine whether it continues to meet our investment return standards. When a decision is made not to exercise certain land option contracts and other similar contracts due to market conditions and/or changes in our marketing strategy, we write off the related inventory costs, including non-refundable deposits and unrecoverable pre-acquisition costs. Based on the results of our assessments, we recognized land option contract abandonment charges of ~~$1.0~~$5.3 million ~~corresponding to 119 lots~~ for the three months ended ~~August 31, 2017,~~February 28, 2023 and ~~$3.5~~$.2 million ~~of such charges corresponding to 639 lots for the nine months ended August 31, 2017. We recognized land option contract abandonment charges of $.5 million corresponding to 50 lots~~ for the three months ended August 31, 2016, and $2.9 million of such charges corresponding to 542 lots for the nine months ended August 31, 2016. Of the land option contract abandonment charges recognized for the three months and nine months ended August 31, 2016, $1.4 million related to the wind down of our Metro Washington, D.C. operations.February 28, 2022.

Due to the judgment and assumptions applied in our inventory impairment and land option contract abandonment assessment processes, and in our estimations of the remaining operating lives of our inventory assets and the realization of our inventory balances, particularly as to land held for future development, ~~or sale,~~ it is possible that actual results could differ substantially from those estimated.


8.	~~Variable Interest Entities~~

8. Variable Interest Entities

Unconsolidated Joint Ventures. We participate in joint ventures from time to time that conduct land acquisition, land development and/or other homebuilding activities in various markets where our homebuilding operations are located. Our investments in these joint ventures may create a variable interest in a variable interest entity (“VIE”), depending on the contractual terms of the arrangement. We analyze our joint ventures under the variable interest model to determine whether they are VIEs and, if so, whether we are the primary beneficiary. Based on our analyses, we determined that one of our joint ventures at ~~August 31, 2017~~February 28, 2023 and November 30, ~~2016~~2022 was a VIE, but we were not the primary beneficiary of the VIE. ~~All~~Therefore, all of our joint ventures at ~~August 31, 2017~~February 28, 2023 and November 30, ~~2016~~2022 were unconsolidated and accounted for under the equity method because we did not have a controlling financial interest.

Land Option Contracts and Other Similar Contracts. In the ordinary course of our business, we enter into land option contracts and other similar contracts with third parties and unconsolidated entities to acquire rights to land for the construction of homes. Under these contracts, we typically make a specified option payment or earnest money deposit in consideration for the right to purchase land in the future, usually at a predetermined price. We analyze each of our land option contracts and other similar contracts under the variable interest model to determine whether the land seller is a VIE and, if so, whether we are the primary beneficiary. Although we do not have legal title to the underlying land, we are required to consolidate a VIE if we are the primary beneficiary. As a result of our analyses, we determined that as of ~~August 31, 2017~~February 28, 2023 and November 30, ~~2016~~2022, we were not the primary beneficiary of any VIEs from which we have acquired rights to land under land option contracts and other similar contracts. We perform ongoing reassessments of whether we are the primary beneficiary of a VIE.

The following table presents a summary of our interests in land option contracts and other similar contracts (in thousands):


	February 28, 2023				November 30, 2022
	Cash Deposits		Aggregate Purchase Price		Cash Deposits		Aggregate Purchase Price
Unconsolidated VIEs	$	18,711	$	618,939	$	22,399	$	635,502
Other land option contracts and other similar contracts	22,754		426,496		29,451		529,430
Total	$	41,465	$	1,045,435	$	51,850	$	1,164,932

August 31, 2017 November 30, 2016

Cash
Deposits

Aggregate
Purchase Price

Cash
Deposits

Aggregate
Purchase Price
Unconsolidated VIEs $ 18,318
$ 607,813
$ 24,910
$ 641,642
Other land option contracts and other similar contracts 20,815
372,371
17,919
431,954
Total $ 39,133
$ 980,184
$ 42,829
$ 1,073,596

In addition to the cash deposits presented in the table above, our exposure to loss related to our land option contracts and other similar contracts with third parties and unconsolidated entities consisted of pre-acquisition costs of ~~$28.0~~$30.4 million at ~~August 31, 2017~~February 28, 2023 and ~~$56.0~~$33.1 million at November 30, ~~2016~~.2022. These pre-acquisition costs and cash deposits were included in inventories in our consolidated balance sheets.

For land option contracts and other similar contracts where the land seller entity is not required to be consolidated under the variable interest model, we consider whether such contracts should be accounted for as financing arrangements. Land option contracts and other similar contracts that may be considered financing arrangements include those we enter into with third-party land financiers or developers in conjunction with such third parties acquiring a specific land parcel(s) on our behalf, at our direction, and those with other landowners where we or our designee make improvements to the optioned land parcel(s) during the applicable option period. For these land option contracts and other similar contracts, we record the remaining purchase price of the associated land parcel(s) in inventories in our consolidated balance sheets with a corresponding financing obligation if we determine that we are effectively compelled to exercise the option to purchase the land parcel(s). In making this determination with respect to a land option contract or other similar contract, we consider the non-refundable deposit(s) we have made and any non-reimbursable expenditures we have incurred for land improvement activities or other items up to the assessment date; additional costs associated with abandoning the contract; and our commitments, if any, to incur non-reimbursable costs associated with the contract. As a result of our evaluations of land option contracts and other similar contracts for financing arrangements, we recorded inventories in our consolidated balance sheets, with a corresponding increase to accrued expenses and other liabilities, of ~~$28.5 million~~ at ~~August 31, 2017~~ ~~and $50.5~~$10.7 million at February 28, 2023 and $5.1 million at November 30, ~~2016~~.2022.


9.	~~Investments in Unconsolidated Joint Ventures~~

9. Investments in Unconsolidated Joint Ventures

Homebuilding. We have investments in unconsolidated joint ventures that conduct land acquisition, land development and/or other homebuilding activities in various markets where our homebuilding operations are located. We and our unconsolidated joint venture partners make initial and/or ongoing capital contributions to these unconsolidated joint ventures, typically on a pro rata basis, according to our respective equity interests. The obligations to make capital contributions are governed by each such unconsolidated joint venture’s respective operating agreement and related governing documents.

~~We typically have obtained rights to acquire portions~~As of ~~the land held by the~~both February 28, 2023 and November 30, 2022, we had investments in six homebuilding unconsolidated joint ventures in which we currently participate. When an unconsolidated joint venture sells land to our homebuilding operations, we defer recognition of our share of such unconsolidated joint venture’s earnings (losses) until a home sale is closed and title passes to a homebuyer, at which time we account for those earnings (losses) as a reduction (increase) to the cost of purchasing the land from the unconsolidated joint venture. We defer recognition of our share of such unconsolidated joint venture losses only to the extent profits are to be generated from the sale of the home to a homebuyer.

We share in the earnings (losses) of these unconsolidated joint ventures generally in accordance with our respective equity interests. In some instances, we recognize earnings (losses) related to our investment in an unconsolidated joint venture that differ from our equity interest in the unconsolidated joint venture. This typically arises from our deferral of the unconsolidated joint venture’s earnings (losses) from land sales to us, or other items.

ventures. The following table presents combined condensed information from the statements of operations offor our homebuilding unconsolidated joint ventures (in thousands):

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Revenues $ 12,802
$ 19,338
$ 39,604
$ 41,190
Construction and land costs (12,832 ) (19,383 ) (37,625 ) (45,379 )
Other expense, net (1,294 ) (1,008 ) (3,547 ) (3,599 )
Loss $ (1,324 ) $ (1,053 ) $ (1,568 ) $ (7,788 )

The year-over-year decreases in combined revenues and construction and land costs for three months and nine months ended August 31, 2017 primarily reflected decreased land sale activity from unconsolidated joint ventures in California.


	Three Months Ended February 28,
	2023		2022
Revenues	$	—	$	2,850
Construction and land costs	—		(2,299)
Other expense, net	(1,453)		(430)
Income (loss)	$	(1,453)	$	121

The following table presents combined condensed balance sheet information for our homebuilding unconsolidated joint ventures (in thousands):


	February 28, 2023		November 30, 2022
Assets
Cash	$	13,206	$	14,066
Receivables	3,389		3,394
Inventories	134,204		114,465
Other assets	587		633
Total assets	$	151,386	$	132,558

Liabilities and equity
Accounts payable and other liabilities	$	8,357	$	8,369

Notes payable (a)	46,098		34,396
Equity	96,931		89,793
Total liabilities and equity	$	151,386	$	132,558

August 31,
2017 November 30,
2016
Assets
Cash $ 21,372
$ 31,928
Receivables 797
882
Inventories 145,299
165,385
Other assets 2,270
629
Total assets $ 169,738
$ 198,824

Liabilities and equity
Accounts payable and other liabilities $ 19,174
$ 19,880
Notes payable (a) 25,618
44,381
Equity 124,946
134,563
Total liabilities and equity $ 169,738
$ 198,824

~~(a)~~

~~Two~~(a) As of both February 28, 2023 and November 30, 2022, one of our unconsolidated joint ventures have separate construction loan agreements with different third-party lenders to finance their respective land development activities. The outstanding debt under these agreements is secured by the corresponding underlying property and related project assets and is non-recourse to us. Of this outstanding secured debt at August 31, 2017, $24.8 million is scheduled to mature in August 2018 and the remainder is scheduled to mature in February 2020. At November 30, 2016, only one of these unconsolidated joint ventures had outstanding secured debt. None of our other unconsolidated joint ventures had any outstanding debt at August 31, 2017 or November 30, 2016.

~~The following table presents additional information relating to our investments in~~ unconsolidated joint ventures ~~(dollars~~had borrowings outstanding under a revolving line of credit it entered into with a third-party lender in ~~thousands):~~

August 31,
2017 November 30,
2016
Number of investments in unconsolidated joint ventures 7
7
Investments in unconsolidated joint ventures $ 64,513
$ 64,016
Number of unconsolidated joint venture lots controlled under land option contracts and other similar contracts 388
471

WeApril 2022 to finance its land acquisition, development and construction activities. Borrowings under this line of credit, which has a maximum commitment of $62.0 million, are secured by the underlying property and related project assets. The line of credit is scheduled to mature on April 19, 2026, unless extended or terminated pursuant to its applicable terms. None of our ~~partners in the~~other unconsolidated joint ventures ~~that have the above-noted construction loan agreements~~had outstanding debt at February 28, 2023 or November 30, 2022.

We provide certain guarantees and indemnities to the ~~applicable~~ lender in connection with the above-described revolving line of credit, including a guaranty of interest and carry costs; a guaranty to complete the construction of phases of the improvements for the ~~applicable project;~~project as such phases are commenced; a guaranty against losses ~~the lender suffers~~suffered due to certain bad acts or failures to act by the unconsolidated joint venture or its partners; and an indemnity ~~of the lender~~ from environmental ~~issues; and in one case, a guaranty of interest payments on~~issues. Except to the ~~outstanding balance of the secured debt under the construction loan agreement. In each instance, our actual responsibility under~~extent related to the foregoing ~~guaranty~~guarantees and ~~indemnity obligations is limited to our pro rata interest in the unconsolidated joint venture. We~~indemnities, we do not have a guaranty or any other obligation to repay borrowings under the line of credit or to support the value of the ~~collateral~~ underlying ~~the outstanding secured debt of these unconsolidated joint ventures.~~collateral. However, various financial and non-financial covenants apply under the line of credit and with respect to ~~the outstanding secured debt and~~ the related guaranty and indemnity obligations, and a failure to comply with such covenants could result in a default and cause ~~an applicable~~the lender to seek to enforce such guaranty and indemnity ~~obligations, if and as may be applicable.~~obligations. As of ~~August 31, 2017,~~the date of this report, we were in compliance with the ~~applicable terms of our~~ relevant ~~covenants with respect to the construction loan agreements.~~covenants. We do not believe that our existing exposure under our guaranty and indemnity obligations related to outstanding borrowings under the ~~outstanding secured debt~~line of ~~these unconsolidated joint ventures~~credit is material to our consolidated financial statements.

OfFinancial Services. The following table presents combined condensed information from the statements of operations for our financial services unconsolidated joint venture ~~lots controlled under land option~~(in thousands):


	Three Months Ended February 28,
	2023		2022
Revenues	$	20,190	$	28,401
Expenses	(17,025)		(18,104)
Income	$	3,165	$	10,297

Revenues are primarily generated from fees earned on mortgage loan originations, interest earned for the period loans are held by KBHS, and ~~other similar contracts at August 31, 2017, we are committed to purchase 90 lots from one~~gains on the sales of mortgage loans held for sale. Gains on the sales of mortgage loans held for sale include the realized and unrealized gains and losses associated with changes in the fair value of such loans and any related derivative financial instruments.

The following table presents combined condensed balance sheet information for our ~~unconsolidated joint ventures in quarterly takedowns over the next three years for an aggregate purchase price of approximately $39.9 million under agreements that we entered into with the~~financial services unconsolidated joint venture (in thousands):


	February 28, 2023		November 30, 2022
Assets
Cash and cash equivalents	$	31,890	$	28,120
Mortgage loans held for sale	198,364		250,572
Other assets	30,547		33,176
Total assets	$	260,801	$	311,868

Liabilities and equity
Accounts payable and other liabilities	$	12,770	$	15,590
Funding facilities	191,533		242,944

Equity	56,498		53,334
Total liabilities and equity	$	260,801	$	311,868

Mortgage loans held for sale. Originated mortgage loans expected to be sold into the secondary market in ~~2016.~~the foreseeable future are reported as mortgage loans held for sale and carried in KBHS’ balance sheets at fair value, with changes in fair value recognized within revenues in KBHS’ statements of operations.

Interest Rate Lock Commitments (“IRLCs”). KBHS enters into IRLCs in connection with originating certain mortgage loans held for sale, at specified interest rates and within a specified period of time, with customers who have applied for a mortgage loan and meet certain credit and underwriting criteria. KBHS accounts for IRLCs as free-standing derivatives and does not designate any for hedge accounting. As a result, IRLCs are recognized in KBHS’ balance sheets at fair value, and gains or losses resulting from changes in fair value are recognized within revenues in KBHS’ statements of operations. The fair value of IRLCs is based on market prices, which includes an estimate of the fair value of the associated mortgage servicing rights, adjusted for estimated costs to originate the underlying mortgage loans as well as the probability that the mortgage loans will fund within the terms of the IRLCs. The fair value of IRLCs included in other assets in KBHS’ balance sheets was $28.3 million at February 28, 2023 and $29.8 million at November 30, 2022. The changes in the fair value of IRLCs, which were reported in revenues for the applicable periods, were losses of $1.5 million for the three months ended February 28, 2023 and gains of $7.6 million for the three months ended February 28, 2022.


~~10.~~	~~Other Assets~~

KBHS manages the interest rate and price risk associated with its outstanding IRLCs by entering into best efforts forward sale commitments under which mortgage loans locked with a borrower are simultaneously committed to a secondary market investor at a fixed price, subject to the underlying mortgage loans being funded. These best efforts forward sale commitments do not meet the definition of derivative financial instruments and are therefore not recorded in KBHS’ balance sheets. If the mortgage loans underlying the IRLCs do not fund, KBHS has no obligation to fulfill the secondary market investor commitments.

Funding facilities. KBHS maintains warehouse line of credit and master repurchase agreements with various financial institutions to fund its originated mortgage loans, with its mortgage loans held for sale pledged as collateral under these agreements. The agreements contain covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquid assets, maximum debt to net worth ratio and positive net income, as defined in the agreements. KBHS was in compliance with these covenants as of February 28, 2023. In addition to its compliance with these covenants, KBHS also depends on the ability and willingness of the applicable lenders and financial institutions to extend such credit facilities to KBHS to fund its originated mortgage loans. KBHS intends to renew these facilities when they expire at various dates in 2023. The warehouse line of credit and master repurchase agreements are not guaranteed by us or any of the subsidiaries that guarantee our senior notes, unsecured revolving credit facility with various banks (“Credit Facility”) and senior unsecured term loan agreement (“Term Loan”), (collectively, “Guarantor Subsidiaries”).

10.Other Assets

Other assets consisted of the following (in thousands):


	February 28, 2023		November 30, 2022
Cash surrender value of corporate-owned life insurance contracts	$	55,087	$	55,591

Lease right-of-use assets	26,255		25,469
Prepaid expenses	17,473		15,645
Debt issuance costs associated with unsecured revolving credit facility, net	4,087		4,346
Total	$	102,902	$	101,051

11.Accrued Expenses and Other Liabilities

August 31,
2017 November 30,
2016
Cash surrender value of corporate-owned life insurance contracts $ 73,983
$ 70,829
Property and equipment, net 18,718
14,240
Prepaid expenses 7,150
4,894
Debt issuance costs associated with unsecured revolving credit facility 2,543
1,182
Total $ 102,394
$ 91,145


~~11.~~	~~Accrued Expenses and Other Liabilities~~

Accrued expenses and other liabilities consisted of the following (in thousands):


	February 28, 2023		November 30, 2022
Self-insurance and other legal liabilities	$	242,511	$	234,128
Employee compensation and related benefits	106,330		182,443
Warranty liability	101,238		101,890
Customer deposits	69,235		76,738
Federal and state taxes payable	34,963		3,671
Lease liabilities	28,444		27,494
Inventory-related obligations (a)	24,502		19,136
Accrued interest payable	17,391		29,989
Real estate and business taxes	13,754		17,557
Other	40,243		43,925
Total	$	678,611	$	736,971

(a)Represents liabilities for financing arrangements discussed in Note 8 – Variable Interest Entities, as well as liabilities for fixed or determinable amounts associated with tax increment financing entity (“TIFE”) assessments. As homes are delivered, our obligation to pay the remaining TIFE assessments associated with each underlying lot is transferred to the homebuyer. As such, these assessment obligations will be paid by us only to the extent we do not deliver homes on applicable lots before the related TIFE obligations mature.

12.Leases

We lease certain property and equipment for use in our operations. We recognize lease expense for these leases generally on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Lease right-of-use assets and lease liabilities are recorded in our consolidated balance sheets for leases with an expected term at the commencement date of more than 12 months. Lease expense is included in selling, general and administrative expenses in our consolidated statements of operations and includes costs for leases with terms of more than 12 months as well as short-term leases with terms of 12 months or less. Our total lease expense for the three months ended February 28, 2023 and 2022 was $5.2 million and $4.3 million, respectively, and included short-term lease costs of $1.7 million and $1.2 million, respectively. Variable lease costs and external sublease income for the three-month periods ended February 28, 2023 and 2022 were immaterial.

The following table presents our lease right-of-use assets and lease liabilities (in thousands):


	February 28, 2023		November 30, 2022
Lease right-of-use assets (a)	$	26,299	$	25,545
Lease liabilities (a)	28,490		27,580

August 31,
2017 November 30,
2016
Self-insurance and other litigation liabilities $ 202,690
$ 170,988
Employee compensation and related benefits 128,838
130,352
Accrued interest payable 79,459
67,411
Warranty liability 63,811
56,682
Inventory-related obligations (a) 54,681
82,682
Customer deposits 19,511
18,175
Real estate and business taxes 14,622
14,370
Other 1,556
10,336
Total $ 565,168
$ 550,996
(a)Consists of amounts within both our homebuilding and financial services operations. The financial services amounts were nominal as of each date.

~~(a)~~

Represents liabilities for financing arrangements discussed in Note 8 – Variable Interest Entities, as well as liabilities for fixed or determinable amounts associated with tax increment financing entity (“TIFE”) assessments. As homes are delivered, our obligation to pay the remaining TIFE assessments associated with each underlying lot is transferred to the homebuyer. As such, these assessment obligations will be paid by us only to the extent we do not deliver homes on applicable lots before the related TIFE obligations mature.


~~12.~~	~~Income Taxes~~

13.Income Taxes

Income Tax Expense. Our income tax expense and effective ~~income~~ tax rates were as follows (dollars in thousands):


	Three Months Ended February 28,
	2023			2022
Income tax expense	$	36,700		$	43,800
Effective tax rate	22.6		%	24.6		%

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Income tax expense (a) $ 29,000
$ 14,100
$ 56,400
$ 26,200
Effective income tax rate (a) 36.6 % 26.4 % 36.9 % 27.8 %
Our income tax expense and effective tax rate for the three months ended February 28, 2023 included the favorable impact of $5.7 million of federal tax credits we recognized primarily from building energy-efficient homes and $2.7 million of excess tax benefits related to stock-based compensation, partly offset by $3.1 million of nondeductible executive compensation expense. Our income tax expense and effective tax rate for the three months ended February 28, 2022 reflected the favorable impacts of $2.2 million of excess tax benefits related to stock-based compensation and $.2 million of federal tax credits we recognized primarily from building energy-efficient homes, partly offset by $1.7 million of nondeductible executive compensation expense.

~~(a)~~

Amounts reflect the favorable net impact of federal energy tax credits we earned from building energy-efficient homes through December 31, 2016. The net impact of these tax credits was $2.6 million and $6.7 million for the three months ended August 31, 2017 and 2016, respectively, and $3.8 million and $10.4 million for the nine months ended August 31, 2017 and 2016, respectively. There has not been any new legislation enacted extending the business tax credit for building energy-efficient homes beyond December 31, 2016.

Deferred Tax Asset Valuation Allowance. We evaluate our deferred tax assets quarterly to determine if adjustments to our valuation allowance are required based on the consideration of all available positive and negative evidence using a “more likely than not” standard with respect to whether deferred tax assets will be realized. Our evaluation considers, among other factors, our historical operating results, our expectation of future profitability, the duration of the applicable statutory carryforward periods, and conditions in the housing market and the broader economy. The ultimate realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periods in which the related ~~temporary differences in the financial basis and the~~deferred tax ~~basis of the~~ assets become deductible. The value of our deferred tax assets depends on applicable income tax rates.

Our deferred tax assets of ~~$707.7~~$173.0 million as of ~~August 31, 2017~~February 28, 2023 and ~~$763.8~~$178.0 million as of November 30, ~~2016~~2022 were each partly offset by a valuation ~~allowances~~allowance of ~~$24.6 million and $24.8 million, respectively.~~$17.1 million. The deferred tax asset valuation allowances as of ~~August 31, 2017~~February 28, 2023 and November 30, ~~2016~~2022 were primarily related to certain state net operating losses ~~(“NOLs”)~~ that had not met the “more likely than not” realization standard at those dates. In the three months ended August 31, 2017, we reversed $.2 million of our deferred tax asset valuation allowance due to the utilization of additional state NOLs recognized with the filing of our 2016 state tax returns. Based on ~~our~~the evaluation of our deferred tax assets as of ~~August 31, 2017,~~February 28, 2023, we determined that most of our deferred tax assets would be realized. Therefore, no ~~other~~ adjustments to our deferred tax valuation allowance were needed for the ~~nine~~three months ended ~~August 31, 2017.~~

February 28, 2023.

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets. The accounting for deferred tax assets is based upon estimates of future results. Changes in positive and negative evidence, including differences between estimated and actual results, could result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated financial statements. Changes in existing federal and state tax laws and corporate income tax rates could also affect ~~our~~ actual tax ~~expense,~~results and the realization of ~~our~~ deferred tax assets over ~~time and/or the value of our deferred tax assets on our consolidated balance sheets.~~time.

~~Unrecognized Tax Benefits.~~ ~~At both~~ ~~August 31, 2017~~ and November 30, 2016, our gross unrecognized tax benefits (including interest and penalties) totaled $.1 million, all of which, if recognized, would affect our effective income tax rate. We anticipate that these gross unrecognized tax benefits will decrease by an amount ranging from ~~zero~~ to ~~$.1 million~~ ~~during the 12 months from this reporting date. Our fiscal years ending 2014 and later remain open to federal examinations, while fiscal years 2012 and later remain open to state examinations.~~

14.Notes Payable


~~13.~~	~~Notes Payable~~

Notes payable consisted of the following (in thousands):


	February 28, 2023		November 30, 2022
Unsecured revolving credit facility	$	100,000	$	150,000
Senior unsecured term loan due August 25, 2026	357,653		357,485
6.875% Senior notes due June 15, 2027	297,709		297,595
4.80% Senior notes due November 15, 2029	297,314		297,230
7.25% Senior notes due July 15, 2030	345,769		345,663
4.00% Senior notes due June 15, 2031	385,882		385,778
Mortgages and land contracts due to land sellers and other loans	4,523		4,760
Total	$	1,788,850	$	1,838,511

August 31,
2017 November 30,
2016
Mortgages and land contracts due to land sellers and other loans $ 24,142
$ 66,927
9.10% Senior notes due September 15, 2017 164,963
263,932
7 1/4% Senior notes due June 15, 2018 299,811
299,647
4.75% Senior notes due May 15, 2019 398,134
397,364
8.00% Senior notes due March 15, 2020 345,869
344,811
7.00% Senior notes due December 15, 2021 446,429
445,911
7.50% Senior notes due September 15, 2022 347,116
346,774
7.625% Senior notes due May 15, 2023 247,643
247,404
1.375% Convertible senior notes due February 1, 2019 228,272
227,379
Total $ 2,502,379
$ 2,640,149

The carrying amounts of our senior notes listed above are net of unamortized debt issuance costs, ~~and discounts,~~ which totaled ~~$16.8~~$15.7 million at ~~August 31, 2017~~February 28, 2023 and ~~$21.8~~$16.2 million at November 30, ~~2016.~~2022.

Unsecured Revolving Credit Facility. ~~On July 27, 2017, we entered into~~We have a ~~second amended and restated revolving loan agreement with a syndicate of financial institutions~~$1.09 billion Credit Facility that increased the commitment under our unsecured revolving credit facility from $275.0 million to $500.0 million and extended its maturity from August 7, 2019 to July 27, 2021 (“Amended Credit Facility”).will mature on February 18, 2027. The ~~Amended~~ Credit Facility contains an uncommitted accordion feature under which ~~the~~its aggregate principal amount of available loans ~~may~~can be increased to a maximum of ~~$600.0 million~~$1.29 billion under certain conditions, including obtaining additional bank commitments. The ~~Amended~~ Credit Facility also contains a sublimit of $250.0 million for the issuance of letters of ~~credit, which may be utilized in combination with, or to replace, our cash-collateralized letter of credit facility with a financial institution (“LOC Facility”).~~credit. Interest on amounts borrowed under the ~~Amended~~ Credit Facility ~~is payable quarterly in arrears~~accrues at ~~a rate based on either a Eurodollar~~an adjusted term Secured Overnight Financing Rate (“SOFR”) or a base rate, plus a spread that depends on our consolidated leverage ratio (“Leverage Ratio”), as defined under the ~~Amended~~ Credit Facility. Interest is payable quarterly (base rate) or each month or three months (adjusted term SOFR). The ~~Amended~~ Credit Facility also requires the payment of a commitment fee at a per annum rate ranging from ~~.30%~~.15% to ~~.45%~~.35% of the unused commitment, based on our Leverage Ratio. Under the terms of the ~~Amended~~ Credit Facility, we are required, among other things, to maintain compliance with various covenants, including financial covenants relating to our consolidated tangible net worth, Leverage Ratio, and either a consolidated interest coverage ratio (“Interest Coverage Ratio”) or minimum level of liquidity, each as defined therein. Our obligations to pay borrowings under the Credit Facility are guaranteed on a joint and several basis by our Guarantor Subsidiaries. The amount of the ~~Amended~~ Credit Facility available for cash borrowings orand the issuance of letters of credit depends on the total cash borrowings and letters of credit outstanding under the ~~Amended~~ Credit Facility and the maximum available amount under the terms of the ~~Amended~~ Credit Facility. As of ~~August 31, 2017,~~February 28, 2023, we had no$100.0 million of cash borrowings and ~~$33.0~~$6.6 million of letters of credit outstanding under the ~~Amended~~ Credit Facility. Therefore, as of ~~August 31, 2017,~~February 28, 2023, we had ~~$467.0~~$983.4 million available for cash borrowings under the ~~Amended~~ Credit Facility, with up to ~~$217.0~~$243.4 million of that amount available for the issuance of letters of credit. As of February 28, 2023, the weighted average annual interest rate on our outstanding borrowings under the Credit Facility was 5.9%.

~~LOC~~Senior Unsecured Term Loan. We have a $360.0 million Term Loan with the lenders party thereto. The Term Loan will mature on August 25, 2026, or earlier if we secure borrowings under the Credit Facility without similarly securing the Term Loan (subject to certain exceptions). Interest under the Term Loan accrues at an adjusted term SOFR or a base rate, plus a spread that depends on our Leverage Ratio. Interest is payable quarterly (base rate) or each month or three months (adjusted term SOFR). The Term Loan contains various covenants that are substantially the same as those under the Credit Facility. Proceeds drawn under the Term Loan are guaranteed on a joint and several basis by our Guarantor Subsidiaries. As of February 28, 2023, the weighted average annual interest rate on our outstanding borrowings under the Term Loan was 6.1%.

Letter of Credit Facility. We maintain ~~the~~ an unsecured letter of credit agreement with a financial institution (“LOC ~~Facility~~Facility”) to obtain letters of credit from time to time in the ordinary course of operating our business. Under the LOC Facility, which expires on February 13, 2025, we may issue up to $75.0 million of letters of credit. As of ~~August 31, 2017~~February 28, 2023 and November 30, ~~2016,~~2022, we had no letters of credit outstanding under the LOC ~~Facility.~~Facility of $23.1 million and $36.4 million, respectively.

~~Mortgages and Land Contracts Due to Land Sellers and Other Loans.~~ ~~As of~~ ~~August 31, 2017, inventories having a carrying value of $73.5 million were pledged to collateralize mortgages and land contracts due to land sellers and other loans.~~

~~Shelf Registration.~~ On July 14, 2017, we filed an automatically effective universal shelf registration statement (“2017 Shelf Registration”) with the SEC. The 2017 Shelf Registration registers the offering of securities that we may issue from time to time in amounts to be determined. Issuances of securities under our 2017 Shelf Registration require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued. Our ability to issue securities is subject to market conditions and other factors impacting our borrowing capacity. The 2017 Shelf Registration replaced our previously effective universal shelf registration statement filed with the SEC on July 18, 2014. We have not made any offerings of securities under the 2017 Shelf Registration.

Senior Notes. All of the senior notes outstanding at ~~August 31, 2017~~February 28, 2023 and November 30, ~~2016~~2022 represent senior unsecured obligations that are guaranteed by our Guarantor Subsidiaries and rank equally in right of payment with all of our and our Guarantor Subsidiaries’ existing unsecured and ~~future~~unsubordinated indebtedness. All of our senior notes were issued in underwritten public offerings. Interest on each of these senior notes is payable semi-annually. At any time prior to the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of the 1.375% convertible senior notes due 2019 (“1.375% Convertible Senior Notes due 2019”). These notes are initially convertible into shares of our common stock at a conversion rate of ~~36.5297~~ ~~shares for each $1,000 principal amount of the notes, which represents an initial conversion price of approximately~~ ~~$27.37~~ ~~per share. This initial conversion rate equates to~~ ~~8,401,831~~ ~~shares of our common stock and is subject to adjustment upon the occurrence of certain events, as described in the instruments governing these notes.~~

On December 14, 2016, we elected to exercise our optional redemption rights under the terms of the 9.100% senior notes due 2017 (“9.10% Senior Notes due 2017”). On January 13, 2017, we redeemed $100.0 million in aggregate principal amount of the notes outstanding at the redemption price calculated in accordance with the “make-whole” provisions of the notes. We used internally generated cash to fund this redemption. We paid a total of $105.3 million to redeem the notes and recorded a charge of $5.7 million for the early extinguishment of debt. Upon this redemption, $165.0 million in aggregate principal amount of the notes remained outstanding.

The indenture governing ~~the~~our senior notes does not contain any financial covenants. Subject to specified exceptions, the indenture contains certain restrictive covenants that, among other things, limit our ability to incur secured indebtedness, or engage in ~~sale-leaseback~~sale and leaseback transactions involving property ~~or assets~~ above a certain specified value. In addition, the ~~senior notes (with the exception of the 7 1/4% senior notes due 2018) contain~~indenture contains certain limitations related to mergers, consolidations, and sales of assets.

As of ~~August 31, 2017~~,February 28, 2023, we were in compliance with ~~the applicable terms of all~~ our covenants and other requirements under the ~~Amended~~ Credit Facility, the Term Loan, the senior notes, the indenture, and the mortgages and land contracts due to land sellers and other loans. Our ability to access the ~~Amended~~ Credit Facility for cash borrowings and letters of credit and our ability to secure future debt financing depend, in part, on our ability to remain in such compliance. Our ability to access the Credit Facility’s full borrowing capacity, as well as the LOC Facility’s full issuance capacity, also depends on the ability and willingness of the applicable lenders and financial institutions, including any substitute or additional lenders and financial institutions, tomeet their commitments to fund loans, extend credit or provide payment guarantees to or for us under those instruments.

~~Principal payments on senior notes,~~Mortgages and Land Contracts Due to Land Sellers and Other Loans. As of February 28, 2023, inventories having a carrying value of $28.4 million were pledged to collateralize mortgages and land contracts due to land sellers and other ~~loans~~loans.

As of February 28, 2023, principal payments on our notes payable are due during each year ending November 30 as follows: ~~2017~~2023 – ~~$179.0~~$3.1 million; ~~2018~~2024 – ~~$310.1~~$1.0 million; ~~2019~~2025 – ~~$630.0~~$.4 million; ~~2020~~2026 – ~~$350.0~~$360.0 million; ~~2021~~2027 – ~~$0;~~$400.0 million and thereafter – ~~$1.05~~$1.04 billion. Borrowings under the Credit Facility are reflected as principal payments due in 2027, corresponding to the Credit Facility’s maturity date.


~~14.~~	~~Fair Value Disclosures~~

15.Fair Value Disclosures

Fair value measurements of assets and liabilities are categorized based on the following hierarchy:



Level 1						Fair value determined based on quoted prices in active markets for identical assets or liabilities.

Level 2						Fair value determined using significant observable inputs, such as quoted prices for similar assets or liabilities or quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data, by correlation or other means.

Level 3						Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or similar techniques.

Fair value measurements are used for inventories on a nonrecurring basis when events and circumstances indicate that their carrying value is not recoverable. The following table presents the fair value hierarchy and our assets measured at fair value on a nonrecurring basis ~~for the nine months ended August 31, 2017 and the year ended November 30, 2016~~ (in thousands):


		February 28, 2023						November 30, 2022
Description	Fair Value Hierarchy	Pre-Impairment Value		Inventory Impairment Charges		Fair Value (a)		Pre-Impairment Value		Inventory Impairment Charges		Fair Value (a)

Inventories	Level 3	$	—	$	—	$	—	$	65,372	$	(24,077)	$	41,295

Description Fair Value Hierarchy August 31,
2017 November 30,
2016
Inventories (a) Level 2 $ —
$ 3,657
Inventories (a) Level 3 32,262
37,329


~~(a)~~	(a)Amounts represent the aggregate fair value for real estate assets impacted by inventory impairment charges during the applicable period as of the date the fair value measurements were made. The carrying value for these real estate assets may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the measurement date.

~~Inventories with a carrying value of $46.9 million were written down to their fair value of $32.3 million during the nine months ended August 31, 2017, resulting in~~ inventory impairment charges during the applicable period, as of ~~$14.6 million. Inventories with a~~the date that the fair value measurements were made. The carrying value ~~of $89.1 million were written down to their~~for these real estate assets may have subsequently increased or decreased from the fair value ~~less associated costs~~reflected due to ~~sell (where applicable), of $39.5 million during~~activity that has occurred since the ~~year ended November 30, 2016, resulting in inventory impairment charges of $49.6 million.~~measurement date.

~~The fair values for inventories that were determined using Level 2 inputs were based on bona fide letters of intent from outside parties or executed sales contracts.~~ The fair values for inventories that were determined using Level 3 inputs were primarily based on the estimated future net cash flows discounted for inherent risk associated with each underlying ~~asset, or, with respect to planned future land sales, were based on broker quotes.~~asset.

The following table presents the fair value hierarchy, carrying values and estimated fair values of our financial instruments, except those for which the carrying values approximate fair values (in thousands):


		February 28, 2023				November 30, 2022
Description	Fair Value Hierarchy	Carrying Value (a)		Estimated Fair Value		Carrying Value (a)		Estimated Fair Value
Financial Liabilities:
Senior notes	Level 2	$	1,326,674	$	1,221,538	$	1,326,266	$	1,205,875

August 31, 2017 November 30, 2016

Fair Value
Hierarchy

Carrying
Value (a)

Estimated
Fair Value

Carrying
Value (a)

Estimated
Fair Value
Financial Liabilities:
Senior notes Level 2 $ 2,249,965
$ 2,460,581
$ 2,345,843
$ 2,494,844
Convertible senior notes Level 2 228,272
237,475
227,379
223,675
(a)The carrying values for the senior notes, as presented, include unamortized debt issuance costs. Debt issuance costs are not factored into the estimated fair values of these notes.


~~(a)~~	The carrying values for the senior notes and convertible senior notes, as presented, include unamortized debt issuance costs. Debt issuance costs are not factored into the estimated fair values of these notes.

The fair values of our ~~senior notes and convertible~~ senior notes are generally estimated based on quoted market prices for these instruments. The carrying values reported for cash and cash equivalents, outstanding borrowings under the Credit Facility and the Term Loan, and mortgages and land contracts due to land sellers and other loans approximate fair values. The carrying value of corporate-owned life insurance is based on the cash surrender value of the policies and, accordingly, approximates fair value.


~~15.~~	~~Commitments and Contingencies~~

16.Commitments and Contingencies

Commitments and contingencies include typical obligations of homebuilders for the completion of contracts and those incurred in the ordinary course of business.

Warranty. We provide a limited warranty on all of our homes. The specific terms and conditions of our limited warranty program vary depending upon the markets in which we do business. We generally provide a structural warranty of 10 years,, a warranty on electrical, heating, cooling, plumbing and certain other building systems each varying from two to five years based on geographic market and state law, and a warranty of one year for other components of the home. Our limited warranty program is ordinarily how we respond to and account for homeowners’ requests to local division offices seeking repairs of certain conditions or defects, including claims where we could have liability under applicable state statutes or tort law for a defective condition in or damages to a home. Our warranty liability covers our costs of repairs associated with homeowner claims made under our limited warranty program. These claims are generally made directly by a homeowner and involve their individual home.

We estimate the costs that may be incurred under each limited warranty and record a liability in the amount of such costs at the time the revenue associated with the sale of each home is recognized. Our primary assumption in estimating the amounts we accrue for warranty costs is that historical claims experience is a strong indicator of future claims experience. Factors that affect our warranty liability include the number of homes delivered, historical and anticipated rates of warranty claims,

and cost per claim. We periodically assess the adequacy of our accrued warranty liability, which is included in accrued expenses and other liabilities in our consolidated balance sheets, and adjust the amount as necessary based on our assessment. Our assessment includes the review of our actual warranty costs incurred to identify trends and changes in our warranty claims experience, and considers our home construction quality and customer service initiatives and outside events. While we believe the warranty liability currently reflected in our consolidated balance sheets to be adequate, unanticipated changes or developments in the legal environment, local weather, land or environmental conditions, quality of materials or methods used in the construction of homes or customer service practices and/or our warranty claims experience could have a significant impact on our actual warranty costs in future periods and such amounts could differ significantly from our current estimates.

The changes in our warranty liability were as follows (in thousands):


	Three Months Ended February 28,
	2023		2022
Balance at beginning of period	$	101,890	$	96,153
Warranties issued	7,990		7,890
Payments	(8,642)		(6,577)

Balance at end of period	$	101,238	$	97,466

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Balance at beginning of period $ 60,037
$ 48,837
$ 56,682
$ 49,085
Warranties issued 10,041
8,006
25,965
19,573
Payments (6,267 ) (4,719 ) (18,836 ) (17,186 )
Adjustments —
—
—
652
Balance at end of period $ 63,811
$ 52,124
$ 63,811
$ 52,124

Guarantees. In the normal course of our business, we issue certain representations, warranties and guarantees related to our home sales and land sales. Based on historical experience, we do not believe any potential liability with respect to these representations, warranties or guarantees would be material to our consolidated financial statements.

Self-Insurance. We maintain, and require the majority of our independent ~~subcontractors~~contractors to maintain, general liability insurance (including construction defect and bodily injury coverage) and workers’ compensation insurance. These insurance policies protect us against a portion of our risk of loss from claims related to our homebuilding activities, subject to certain self-insured retentions, deductibles and other coverage limits. We also maintain certain other insurance policies. Costs associated with our self-insurance programs are included in selling, general and administrative expenses. In Arizona, California, Colorado and Nevada, our ~~subcontractors’~~contractors’ general liability insurance primarily takes the form of a wrap-up policy under a program where eligible independent ~~subcontractors~~contractors are enrolled as insureds on each community. Enrolled ~~subcontractors~~contractors generally contribute toward the cost of the insurance and agree to pay a contractual amount in the future if there is a claim related to their work. To the extent provided under the wrap-up program, we absorb the enrolled ~~subcontractors’~~contractors’ general liability associated with the work performed on our homes within the applicable community as part of our overall general liability insurance and our self-insurance.

We self-insure a portion of our overall risk through the use of a captive insurance subsidiary, which provides coverage for our exposure to construction defect, bodily injury and property damage claims and related litigation or regulatory actions, up to certain limits. Our self-insurance liability generally covers ~~our~~the costs of settlements and/or repairs, if any, as well as our costs to defend and resolve the following types of claims:

•Construction defect: Construction defect claims, which represent the largest component of our self-insurance liability, typically originate through a legal or regulatory process rather than directly by a homeowner and involve the alleged occurrence of a condition affecting two or more homes within the same community, or they involve a common area or homeowners’ association property within a community. These claims typically involve higher costs to resolve than individual homeowner warranty claims, and the rate of claims is highly variable.

•Bodily injury: Bodily injury claims typically involve individuals (other than our employees) who claim they were injured while on our property or as a result of our operations.

•Property damage: Property damage claims generally involve claims by third parties for alleged damage to real or personal property as a result of our operations. Such claims may occasionally include those made against us by owners of property located near our communities.

Our self-insurance liability at each reporting date represents the estimated costs of reported claims, claims incurred but not yet reported, and claim adjustment expenses. The amount of our self-insurance liability is based on an analysis performed by a third-party actuary that uses our historical claim and expense data, as well as industry data to estimate these overall costs. Key assumptions used in developing these estimates include claim frequencies, severities and resolution patterns, which can occur over an extended period of time. These estimates are subject to variability due to the length of time between the delivery of a home to a homebuyer and when a construction defect claim is made, and the ultimate resolution of such claim; uncertainties regarding such claims relative to our markets and the types of ~~product~~products we build; and legal or regulatory actions and/or

interpretations, among other factors. Due to the degree of judgment involved and the potential for variability in these underlying assumptions, our actual future costs could differ from those estimated. In addition, changes in the frequency and severity of reported claims and the estimates to resolve claims can impact the trends and assumptions used in the actuarial analysis, which could be material to our consolidated financial statements. Though state regulations vary, construction defect claims are reported and resolved over a long period of time, which can extend for 10 years or more. As a result, the majority of the estimated self-insurance liability based on the actuarial analysis relates to claims incurred but not yet reported. Therefore, adjustments related to individual existing claims generally do not significantly impact the overall estimated liability. Adjustments to our liabilities related to homes delivered in prior years are recorded in the period in which a change in our estimate occurs.

Our self-insurance liability is presented on a gross basis for all periods without consideration of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any. Estimated probable ~~self-insurance~~insurance and other recoveries of ~~$75.0~~$31.5 million and ~~$84.5~~$32.7 million are included in receivables in our consolidated balance sheets at ~~August 31, 2017~~February 28, 2023 and November 30, ~~2016,~~2022, respectively. These self-insurance recoveries are principally based on actuarially determined amounts and depend on various factors, including, among other things, the above-described claim cost estimates, our insurance policy coverage limits for the applicable policy year(s), historical third-party recovery rates, insurance industry practices, the regulatory environment and legal precedent, and are subject to a high degree of variability from period to period. Because of the inherent uncertainty and variability in these assumptions, our actual insurance recoveries could differ significantly from amounts currently estimated.

The changes in our self-insurance liability were as follows (in thousands):


	Three Months Ended February 28,
	2023		2022
Balance at beginning of period	$	175,977	$	189,131
Self-insurance provided	3,841		4,739
Payments	(7,296)		(2,466)
Adjustments (a)	(1,253)		(810)
Balance at end of period	$	171,269	$	190,594

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Balance at beginning of period $ 156,505
$ 156,733
$ 158,584
$ 173,011
Self-insurance expense (a) 5,573
7,110
13,811
15,532
Payments (2,291 ) (4,517 ) (7,051 ) (19,952 )
Adjustments (b) 21,673
—
21,673
—
Reclassification of estimated probable recoveries (c)
(3,901 ) 5,518
(9,458 ) (3,747 )
Balance at end of period $ 177,559
$ 164,844
$ 177,559
$ 164,844
(a)Represents net changes in estimated probable recoveries related to self-insurance, which are recorded in receivables, to present our self-insurance liability on a gross basis.


~~(a)~~	~~These expenses are included in selling, general and administrative expenses and are largely offset by contributions from subcontractors participating in the wrap-up policy.~~

~~(b)~~

Amounts for the three months and nine months ended August 31, 2017 reflect a change in estimate to increase our self-insurance liability based on a review of actual claim resolution experience, which indicated a higher frequency of claims and, to a lesser extent, a higher claim severity than previously anticipated. Based on these higher historical claim frequency and severity trends, we determined in the 2017 third quarter that future payments for claims relating to homes delivered in certain prior years were likely to exceed the then-estimated liabilities remaining for those claims. Therefore, we recorded an adjustment to increase our self-insurance liability based on an actuarially determined estimate that we believe has a higher probability of being adequate to cover future payments associated with unresolved claims, including claims incurred but not yet reported. This adjustment is included in selling, general and administrative expenses.


~~(c)~~	~~Amount for each period represents the changes in the estimated probable insurance and other recoveries that were reclassified to receivables to present our self-insurance liability on a gross basis.~~

For most of our claims, there is no interaction between our warranty liability and self-insurance liability. Typically, if a matter is identified at its outset as either a warranty or self-insurance claim, it remains as such through its resolution. However, there can be instances of interaction between the liabilities, such as where individual homeowners in a community separately request warranty repairs to their homes to address a similar condition or issue and subsequently join together to initiate, or potentially initiate, a legal process with respect to that condition or issue and/or the repair work we have undertaken. In these instances, the claims and related repair work generally are initially covered by our warranty

liability, and the costs associated with resolving the legal matter (including any additional repair work) are covered by our self-insurance liability.

The payments we make in connection with claims and related repair work, whether covered within our warranty liability and/or our self-insurance liability, may be recovered from our insurers to the extent such payments exceed the self-insured retentions or deductibles under our general liability insurance policies. Also, in certain instances, in the course of resolving a claim, we pay amounts in advance of and/or on behalf of ~~a subcontractor(s)~~an independent contractor(s) or their insurer(s) and believe we will be reimbursed for

such payments. Estimates of all such amounts, if any, are recorded as receivables in our consolidated balance sheets when any such recovery is considered probable. ~~Such receivables associated~~

Florida Chapter 558 Actions. We and certain of our trade partners continue to receive claims from attorneys on behalf of individual owners of our homes and/or homeowners’ associations that allege, pursuant to Chapter 558 of the Florida Statutes, various construction defects, with most relating to stucco and water-intrusion issues. The claims primarily involve homes in our ~~warranty~~Jacksonville, Orlando, and ~~other claims totaled $5.2 million at August 31, 2017~~Tampa operations. Under Chapter 558, homeowners must serve written notice of a construction defect(s) and ~~$14.6 million at November 30, 2016. We believe collection~~provide the served construction and/or design contractor(s) with an opportunity to respond to the noticed issue(s) before they can file a lawsuit. Although we have resolved many of these ~~receivables is probable based on our history~~claims without litigation, and a number of ~~collections for similar claims. In~~others have been resolved with applicable trade partners or their insurers covering the ~~2017 third quarter, we received insurance recoveries~~related costs, as of ~~$23.5 million, which exceeded the $11.6 million of estimated probable receivables~~February 28, 2023, we had ~~previously recorded. The excess recoveries were included~~approximately 480 outstanding noticed claims, and some are scheduled for trial over the next few quarters and beyond. In addition, some of our trade partners’ insurers in ~~selling, general and administrative expenses.~~

~~Northern California Claims.~~ ~~In the 2017 third quarter, we received claims from a homeowners association alleging approximately $100.0 million~~some of ~~damages from purported construction defects at a completed townhome community in Northern California. We are investigating~~ these ~~allegations, and we currently expect it may take up~~cases have informed us of their inability to ~~several quarters~~continue to ~~fully evaluate them.~~pay claims-related costs. At ~~August 31, 2017,~~February 28, 2023, we had an accrual for our estimated probable loss ~~in this matter.~~for these matters and a receivable for estimated probable insurance recoveries. While it is reasonably possible that our loss could exceed the amount accrued and our recoveries could be less than the amount recorded, at this ~~preliminary stage of our investigation into these allegations,~~time, we are unable to estimate the total amount of the loss in excess of the accrued amount and/or associated with a shortfall in the recoveries that is reasonably possible. ~~Our investigation~~In addition, although we believe it is probable we will ~~also involve identifying potentially responsible~~receive additional claims in future periods, we are unable to reasonably estimate the number of such claims or the amount or range of any potential losses associated with such claims as each of these is dependent on several factors, including the actions of third parties ~~including insurers, to pay for or perform~~over which we have no control; the nature of any ~~necessary repairs.~~specific claims; and our evaluation of the particular facts surrounding each such claim.

Performance Bonds and Letters of Credit. We are often required to provide to various municipalities and other government agencies performance bonds and/or letters of credit to secure the completion of our projects and/or in support of obligations to build community improvements such as roads, sewers, water systems and other utilities, and to support similar development activities by certain of our unconsolidated joint ventures. At ~~August 31, 2017~~,February 28, 2023, we had ~~$557.5 million~~$1.30 billion of performance bonds and ~~$33.0~~$29.8 million of letters of credit outstanding. At November 30, ~~2016,~~2022, we had ~~$535.7 million~~$1.27 billion of performance bonds and ~~$31.0~~$43.0 million of letters of credit outstanding. If any such performance bonds or letters of credit are called, we would be obligated to reimburse the issuer of the performance bond or letter of credit. We do not believe that a material amount of any currently outstanding performance bonds or letters of credit will be called. Performance bonds do not have stated expiration dates. Rather, we are released from the performance bonds as the underlying performance ~~obligations are~~is completed. The expiration dates of some letters of credit issued in connection with community improvements coincide with the expected completion dates of the related projects or obligations. Most letters of credit, however, are issued with an initial term of one year and are typically extended on a year-to-year basis until the related performance obligations are completed.

Land Option Contracts and Other Similar Contracts. In the ordinary course of our business, we enter into land option contracts and other similar contracts to acquire rights to land for the construction of homes. At ~~August 31, 2017~~,February 28, 2023, we had total cash deposits of ~~$39.1~~$41.5 million to purchase land having an aggregate purchase price of ~~$980.2 million.~~$1.05 billion. Our land option contracts and other similar contracts generally do not contain provisions requiring our specific performance.


~~16.~~	~~Legal Matters~~

~~Nevada Development Contract Litigation.~~ In 2007, Las Vegas Development Associates, LLC (“LVDA”) agreed to purchase approximately 83 acres of land located near Las Vegas, Nevada from KB HOME Nevada Inc., a wholly owned subsidiary of ours (“KB Nevada”). LVDA subsequently assigned its rights to Essex Real Estate Partners, LLC (“Essex”). KB Nevada and Essex entered into a development agreement relating to certain major infrastructure improvements. In 2008, LVDA and Essex filed a complaint in the Eighth Judicial District Court in Clark County, Nevada alleging that KB Nevada breached the development agreement, and that KB Nevada fraudulently induced them to enter into the purchase and development agreements. LVDA’s and Essex’s lenders subsequently filed related actions that were consolidated into the LVDA/Essex matter. The consolidated plaintiffs sought rescission of the agreements or, in the alternative, damages and interest. KB Nevada denied the allegations, and believed it had meritorious defenses to the consolidated plaintiffs’ claims. Following various Nevada state court decisions from 2013 to 2016 that significantly narrowed the consolidated plaintiffs’ claims and the scope of potential damages, effective March 3, 2017, KB Nevada, LVDA, Essex, the administrative agent for the LVDA/Essex lenders and a guarantor for the underlying LVDA/Essex loan reached a settlement. Under the settlement, the above-described litigation was dismissed with prejudice, with mutual releases by the parties of all claims related to the matter. As part of the settlement, KB Nevada agreed to purchase the land, if certain conditions are satisfied, on or before February 15, 2020 (subject to a potential extension of up to six months). If the conditions are not satisfied and KB Nevada does not purchase the land, it will make a specified cash payment pursuant to the settlement agreement that is not material to our consolidated financial statements. This settlement did not have an impact on our consolidated financial statements for the three-month or nine-month periods ended August 31, 2017.

~~San Diego Water Board Notice of Violation~~. In August 2015, the California Regional Water Quality Control Board, San Diego Region (“RWQCB”) issued to us and another homebuilder a Notice of Violation (“NOV”) alleging violations of the California Water Code and waste discharge prohibitions of the water quality control plan for the San Diego Region (Basin Plan). According to the NOV, the alleged violations involved the unpermitted discharge of fill material into the waters of the United States and California during the grading of a required secondary access road for a community located in San Diego County, California.17.Legal Matters

The work was performed pursuant to a County-issued grading permit and in reliance on third-party experts. In its NOV, the RWQCB requested to meet with us to discuss the alleged violations as part of its process to determine whether to bring any enforcement action, and we have met with the RWQCB staff in an effort to resolve the matters alleged in the NOV. An administrative hearing before the RWQCB was originally scheduled for August 10, 2016, but was continued pending ongoing discussions with the RWQCB staff. On May 26, 2017, we and the RWQCB staff reached a settlement regarding the matters alleged in the NOV, and agreed to a stipulated administrative order in lieu of formal administrative proceedings. On August 30, 2017, the RWQCB, through its authorized delegate, approved the stipulated administrative order. Under the stipulated administrative order, we agreed to pay a total of $.3 million and to enhance certain of our land development procedures. We are also seeking recovery of the costs associated with this matter from responsible parties. The stipulated administrative order did not have an impact on our consolidated financial statements for the three-month or nine-month periods ended August 31, 2017.

~~Other Matters.~~ ~~In addition to the specific proceedings described above, we~~ are involved in ~~other~~ litigation and regulatory proceedings incidental to our business that are in various procedural stages. We believe ~~that~~ the accruals we have recorded for probable and reasonably estimable losses with respect to these proceedings are adequate and that, as of ~~August 31, 2017,~~February 28, 2023, it was not reasonably possible that an additional material loss had been incurred in an amount in excess of the estimated amounts already recognized or disclosed in our consolidated financial statements. We evaluate our accruals for litigation and regulatory proceedings at least quarterly and, as appropriate, adjust them to reflect (a) the facts and circumstances known to us at the time, including information regarding negotiations, settlements, rulings and other relevant events and developments; (b) the advice and analyses of counsel; and (c) the assumptions and judgment of management. Similar factors and considerations are used in establishing new accruals for proceedings as to which losses have become probable and reasonably estimable at the time an evaluation is made. Our accruals for litigation and regulatory proceedings are presented on a gross basis without consideration of recoveries and

amounts we have paid on behalf of and expect to recover from other parties, if any. Estimates of recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as receivables when such recoveries are considered probable. Based on our experience, we believe ~~that~~ the amounts that may be claimed or alleged against us in these proceedings are not a meaningful indicator of our potential liability. The outcome of any of these proceedings, including the defense and other litigation-related costs and expenses we may incur, however, is inherently uncertain and could differ significantly from the estimate reflected in a related accrual, if made. Therefore, it is possible that the ultimate outcome of any proceeding, if in excess of a related accrual or if an accrual had not been made, could be material to our consolidated financial statements. Pursuant to SEC rules, we will disclose any proceeding in which a governmental authority is a party and that arises under any federal, state or local provisions enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment only where we believe that such proceeding will result in monetary sanctions on us, exclusive of interest and costs, above $1.0 million or is otherwise material to our consolidated financial statements.


~~17.~~	~~Stockholders’ Equity~~

18.Stockholders’ Equity

A summary of changes in stockholders’ equity is presented below (in thousands):

Nine Months Ended August 31, 2017
Number of Shares

Common
Stock

Grantor
Stock
Ownership
Trust

Treasury
Stock
Common Stock Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss
Grantor Stock
Ownership Trust
Treasury Stock Total Stockholders’ Equity
Balance at November 30, 2016 116,224
(9,432 ) (21,720 ) $ 116,224
$ 696,938
$ 1,563,742
$ (16,057 ) $ (102,300 ) $ (535,402 ) $ 1,723,145
Net income —
—
—
—
—
96,249
—
—
—
96,249
Dividends on common stock —
—
—
—
—
(6,479 ) —
—
—
(6,479 )
Employee stock options/other 1,205
—
—
1,205
19,472
—
—
—
—
20,677
Stock awards 69
279
27
69
(3,767 ) —
—
3,021
677
—
Stock-based compensation —
—
—
—
9,893
—
—
—
—
9,893
Stock repurchases —
—
(152 ) —
—
—
—
—
(2,543 ) (2,543 )
Balance at August 31, 2017 117,498
(9,153 ) (21,845 ) $ 117,498
$ 722,536
$ 1,653,512
$ (16,057 ) $ (99,279 ) $ (537,268 ) $ 1,840,942

We maintain an account with our transfer agent to reserve the maximum number of shares of our common stock potentially deliverable upon conversion to holders of the 1.375% Convertible Senior Notes due 2019 based on the terms of their governing instruments. Accordingly, the common stock reserve account had a balance of ~~12,602,735~~ ~~shares at~~ ~~August 31, 2017. The maximum number of shares would potentially be deliverable to holders only in certain limited circumstances as set forth in the governing instruments.~~


	Three Months Ended February 28, 2023 and 2022
	Number of Shares
	Common Stock	Grantor Stock Ownership Trust	Treasury Stock	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Grantor Stock Ownership Trust		Treasury Stock		Total Stockholders’ Equity
Balance at November 30, 2022	100,711	(6,705)	(10,016)	$	100,711	$	836,260	$	3,143,578	$	(5,575)	$	(72,718)	$	(341,461)	$	3,660,795


Net income	—	—	—	—		—		125,500		—		—		—		125,500
Dividends on common stock	—	—	—	—		—		(12,476)		—		—		—		(12,476)
Employee stock options/other	72	—	—	72		1,062		—		—		—		—		1,134

Stock awards	—	—	671	—		(23,285)		—		—		—		23,285		—
Stock-based compensation	—	—	—	—		5,867		—		—		—		—		5,867
Stock repurchases	—	—	(1,965)	—		—		—		—		—		(75,609)		(75,609)
Tax payments associated with stock-based compensation awards	—	—	(277)	—		—		—		—		—		(9,748)		(9,748)
Balance at February 28, 2023	100,783	(6,705)	(11,587)	$	100,783	$	819,904	$	3,256,602	$	(5,575)	$	(72,718)	$	(403,533)	$	3,695,463

Balance at November 30, 2021	100,711	(6,705)	(5,785)	$	100,711	$	848,620	$	2,379,364	$	(19,119)	$	(72,718)	$	(217,383)	$	3,019,475


Net income	—	—	—	—		—		134,257		—		—		—		134,257
Dividends on common stock	—	—	—	—		—		(14,130)		—		—		—		(14,130)

Stock awards	—	—	721	—		(27,249)		—		—		—		27,249		—
Stock-based compensation	—	—	—	—		6,867		—		—		—		—		6,867

Tax payments associated with stock-based compensation awards	—	—	(320)	—		—		—		—		—		(12,153)		(12,153)
Balance at February 28, 2022	100,711	(6,705)	(5,384)	$	100,711	$	828,238	$	2,499,491	$	(19,119)	$	(72,718)	$	(202,287)	$	3,134,316

On February ~~15, 2017,~~24, 2023, the management development and compensation committee of our board of directors approved the payout of 602,265 shares of our common stock in connection with the vesting of PSUs that were granted to certain employees on October ~~10, 2013.~~3, 2019. The ~~278,460~~ shares paid out under the PSUs reflected our achievement of ~~our common stock~~certain performance measures that were ~~granted under the terms of PSUs that vested in 2017 included an aggregate of 125,460 additional shares above the target amount awarded to the eligible recipients~~ based on ~~our achieving certain levels of~~cumulative earnings per share, average return on ~~equity performance~~invested capital, and

revenue growth ~~performance~~ relative to a peer group of high-production public homebuilding companies over the three-year period from December 1, ~~2013~~2019 through November 30, ~~2016.~~

~~As of August 31, 2017, we were authorized to repurchase 1,627,000~~2022. Of the shares of ~~our~~ common stock ~~under a board approved share repurchase program. We did not repurchase any of our common stock under this program~~paid out, 276,853 shares, or $9.7 million, were purchased by us in the ~~nine months ended August 31, 2017.~~

~~During~~2023 first quarter to satisfy the ~~nine months ended August 31, 2017, we repurchased 152,569, or $2.5 million, of previously issued shares delivered to us by employees to satisfy~~recipients’ withholding taxes on the vesting of ~~restricted stock and PSU awards as well as~~the PSUs. The shares ~~forfeited by individuals upon their termination of employment. These transactions~~purchased were not considered repurchases under the ~~above-described~~authorizations described below.

On April 7, 2022, our board of directors ~~authorization.~~authorized us to repurchase up to $300.0 million of our outstanding common stock, excluding excise tax. As of November 30, 2022, there was $150.0 million of remaining availability under this share repurchase authorization, excluding excise tax. In the 2023 first quarter, we repurchased 1,965,442 shares of our common stock on the open market pursuant to this authorization at a total cost of approximately $75.0 million, excluding excise tax. Repurchases under the authorization may occur periodically through open market purchases, privately negotiated transactions or otherwise, with the timing and amount at management’s discretion and dependent on market, business and other conditions. This share repurchase authorization will continue in effect until fully used or earlier terminated or

~~During each~~

suspended by our board of directors, and does not obligate us to purchase any shares. As of February 28, 2023, we were authorized to repurchase up to $75.0 million of our outstanding common stock in additional transactions, excluding excise tax.

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. In the 2023 first quarter, we reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in accrued expenses and other liabilities on our consolidated balance sheet.

In the three-month periods ended ~~August 31, 2017~~February 28, 2023 and ~~2016,~~2022, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of ~~$.025~~$.15 per ~~share of common stock. Quarterly cash dividends declared and paid during the nine months ended August 31, 2017 and 2016 totaled $.075 per share of common stock.~~share.


~~18.~~	~~Stock-Based Compensation~~

19.Stock-Based Compensation

Stock Options. ~~We estimate the grant-date fair value of~~At February 28, 2023 and November 30, 2022, we had 1,602,413 and 1,674,393 stock options ~~using the Black-Scholes option-pricing model. The following table summarizes~~outstanding with a weighted average exercise price of $15.55 and $15.56, respectively. We have not granted any stock option ~~transactions for~~awards since 2016. In the ~~nine months ended August 31, 2017:~~

Options
Weighted
Average Exercise
Price
Options outstanding at beginning of period 12,731,545
$ 18.95
Granted —
—
Exercised (1,204,676 ) 17.17
Cancelled (945,742 ) 28.51
Options outstanding at end of period 10,581,127
$ 18.30
Options exercisable at end of period 8,556,885
$ 18.98

2023 first quarter, 71,980 stock options with a weighted average exercise price of $15.75 were exercised. As of ~~August 31, 2017, the weighted average remaining contractual life of~~February 28, 2023, stock options outstanding and stock options exercisable ~~was~~ ~~4.1 years~~ ~~and~~ ~~3.1 years, respectively. There was~~ ~~$1.4 million~~ ~~of total unrecognized compensation expense related to unvested stock option awards as of~~ ~~August 31, 2017~~ ~~that is expected to be recognized over~~each had a weighted average ~~period~~remaining contractual life of ~~1.3~~2.6 years. ~~For the three months ended~~ ~~August 31, 2017~~ ~~and 2016,~~As all outstanding stock options have been fully vested since 2019, there was no stock-based compensation expense associated with stock options ~~totaled $.6 million and $.9 million, respectively. For~~for the ~~nine-month~~three-month periods ended ~~August 31, 2017~~February 28, 2023 and ~~2016, stock-based compensation expense associated with stock options totaled $1.7 million and $2.9 million, respectively. The aggregate intrinsic values of stock~~2022. Stock options outstanding and stock options exercisable ~~were $63.5~~each had an aggregate intrinsic value of $31.6 million ~~and $51.4 million, respectively,~~ at ~~August 31, 2017.~~February 28, 2023. (The intrinsic value of a stock option is the amount by which the market value of a share of the underlying common stock exceeds the exercise price of the stock option.)

Other Stock-Based Awards. From time to time, we grant restricted stock and PSUs to various employees as a compensation benefit. We recognized total compensation expense of ~~$2.3~~$5.9 million and ~~$1.8~~$6.9 million for the three months ended ~~August 31, 2017~~February 28, 2023 and ~~2016,~~2022, respectively, related to restricted stock and PSUs. ~~We recognized total compensation expense~~

20.Supplemental Disclosure to Consolidated Statements of ~~$8.1 million and $7.3 million for the nine-month periods ended August 31, 2017 and 2016, respectively, related to restricted stock and PSUs.~~Cash Flows

~~Director Awards.~~ On April 13, 2017, we granted equity awards to our non-employee directors under our Non-Employee Directors Compensation Plan and pursuant to the respective elections each director made thereunder. The equity awards consisted of 22,994 shares of our common stock that were issued on an unrestricted basis to the respective directors on the grant date, and 43,499 shares that will be paid out on the earlier of a change in control or the date the respective directors leave our board.


~~19.~~	~~Supplemental Disclosure to Consolidated Statements of Cash Flows~~

The following are supplemental disclosures to the consolidated statements of cash flows (in thousands):


	Three Months Ended February 28,
	2023		2022
Summary of cash and cash equivalents at end of period:
Homebuilding	$	260,127	$	240,688
Financial services	700		2,049
Total	$	260,827	$	242,737

Supplemental disclosures of cash flow information:
Interest paid, net of amounts capitalized	$	12,598	$	(7,606)
Income taxes paid	408		340
Supplemental disclosures of non-cash activities:

Increase (decrease) in consolidated inventories not owned	5,596		(14,623)
Increase in inventories due to distributions of land and land development from an unconsolidated joint venture	2,963		3,951

21.Subsequent Event

Nine Months Ended August 31,
2017 2016
Summary of cash and cash equivalents at end of period:
Homebuilding $ 494,053
$ 334,669
Financial services 754
3,053
Total $ 494,807
$ 337,722

Supplemental disclosures of cash flow information:
Interest paid, net of amounts capitalized $ (17,111 ) $ (13,512 )
Income taxes paid 3,464
3,208

Supplemental disclosures of noncash activities:
Reclassification of warranty recoveries to receivables $ —
$ 2,151
Decrease in consolidated inventories not owned (22,018 ) (59,144 )
Increase in inventories due to distributions of land and land development from an unconsolidated joint venture 5,198
4,331
Inventories acquired through seller financing 49,658
89,968


~~20.~~	~~Supplemental Guarantor Information~~

~~Our obligations~~On March 21, 2023, our board of directors authorized us to ~~pay principal, premium, if any, and interest on the senior notes and borrowings, if any,~~repurchase up to $500.0 million of our outstanding common stock, excluding excise tax. This authorization replaced a prior board of directors authorization, as discussed in Note 18 – Stockholders’ Equity, which had $75.0 million remaining, excluding excise tax. Repurchases under the ~~Amended Credit Facility are guaranteed~~new authorization may occur periodically through open market purchases, privately negotiated transactions or otherwise, with the timing and amount at management’s discretion and dependent on ~~a joint~~market, business and ~~several basis~~other conditions. This share repurchase authorization will continue in effect until fully used or earlier terminated or suspended by ~~certain~~our board of ~~our subsidiaries (“Guarantor Subsidiaries”). The guarantees are full~~directors, and ~~unconditional and the Guarantor Subsidiaries are~~ ~~100%~~ ~~owned by us. Pursuant~~does not obligate us to ~~the terms~~purchase any shares. As of the ~~indenture governing the senior notes and the terms~~date of ~~the Amended Credit Facility, if~~this report, we have not repurchased any ~~of the Guarantor Subsidiaries ceases to be a “significant subsidiary” as defined by Rule 1-02 of Regulation S-X (as in effect on June 1, 1996) using a~~ 5% ~~rather than a 10% threshold (provided that the assets of our non-guarantor subsidiaries do not in the aggregate exceed~~ ~~10%~~ of an adjusted measure of our consolidated total assets), it will be automatically and unconditionally released and discharged from its guaranty of the senior notes and the Amended Credit Facility so long as all guarantees by such Guarantor Subsidiary of any other of our or our subsidiaries’ indebtedness are terminated at or prior to the time of such release. We have determined that separate, full financial statements of the Guarantor Subsidiaries would not be material to investors and, accordingly, supplemental financial information for the Guarantor Subsidiaries is presented.

~~The supplemental financial information for all periods presented below reflects the relevant subsidiaries that were Guarantor Subsidiaries as of~~ ~~August 31, 2017~~.

~~Condensed Consolidating Statements of Operations (in thousands)~~shares under this authorization.

Three Months Ended August 31, 2017

KB Home
Corporate

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments
Total
Total revenues $ —
$ 1,048,045
$ 95,956
$ —
$ 1,144,001
Homebuilding:
Revenues $ —
$ 1,048,045
$ 92,742
$ —
$ 1,140,787
Construction and land costs —
(871,350 ) (83,651 ) —
(955,001 )
Selling, general and administrative expenses (23,220 ) (72,686 ) (13,189 ) —
(109,095 )
Operating income (loss) (23,220 ) 104,009
(4,098 ) —
76,691
Interest income 345
2
—
—
347
Interest expense (41,746 ) (434 ) (1,254 ) 43,434
—
Intercompany interest 77,367
(31,059 ) (2,874 ) (43,434 ) —
Equity in loss of unconsolidated joint ventures —
(814 ) —
—
(814 )
Homebuilding pretax income (loss) 12,746
71,704
(8,226 ) —
76,224
Financial services pretax income —
—
2,984
—
2,984
Total pretax income (loss) 12,746
71,704
(5,242 ) —
79,208
Income tax benefit (expense) (3,700 ) (26,200 ) 900
—
(29,000 )
Equity in net income of subsidiaries 41,162
—
—
(41,162 ) —
Net income (loss) $ 50,208
$ 45,504
$ (4,342 ) $ (41,162 ) $ 50,208

Three Months Ended August 31, 2016

KB Home
Corporate

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments
Total
Total revenues $ —
$ 801,832
$ 111,451
$ —
$ 913,283
Homebuilding:
Revenues $ —
$ 801,832
$ 108,279
$ —
$ 910,111
Construction and land costs —
(664,224 ) (96,266 ) —
(760,490 )
Selling, general and administrative expenses (23,436 ) (64,541 ) (10,167 ) —
(98,144 )
Operating income (loss) (23,436 ) 73,067
1,846
—
51,477
Interest income 96
11
2
—
109
Interest expense (46,485 ) —
—
46,485
—
Intercompany interest 78,834
(27,997 ) (4,352 ) (46,485 ) —
Equity in loss of unconsolidated joint ventures —
(536 ) —
—
(536 )
Homebuilding pretax income (loss) 9,009
44,545
(2,504 ) —
51,050
Financial services pretax income —
—
2,413
—
2,413
Total pretax income (loss) 9,009
44,545
(91 ) —
53,463
Income tax expense (1,600 ) (12,300 ) (200 ) —
(14,100 )
Equity in net income of subsidiaries 31,954
—
—
(31,954 ) —
Net income (loss) $ 39,363
$ 32,245
$ (291 ) $ (31,954 ) $ 39,363

Nine Months Ended August 31, 2017

KB Home
Corporate

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments
Total
Total revenues $ —
$ 2,671,533
$ 293,858
$ —
$ 2,965,391
Homebuilding:
Revenues $ —
$ 2,671,533
$ 285,572
$ —
$ 2,957,105
Construction and land costs —
(2,240,974 ) (258,703 ) —
(2,499,677 )
Selling, general and administrative expenses (68,809 ) (206,513 ) (30,579 ) —
(305,901 )
Operating income (loss) (68,809 ) 224,046
(3,710 ) —
151,527
Interest income 740
5
2
—
747
Interest expense (131,788 ) (1,428 ) (3,641 ) 130,550
(6,307 )
Intercompany interest 226,470
(87,524 ) (8,396 ) (130,550 ) —
Equity in loss of unconsolidated joint ventures —
(678 ) (1 ) —
(679 )
Homebuilding pretax income (loss) 26,613
134,421
(15,746 ) —
145,288
Financial services pretax income —
—
7,361
—
7,361
Total pretax income (loss) 26,613
134,421
(8,385 ) —
152,649
Income tax benefit (expense) (4,900 ) (52,300 ) 800
—
(56,400 )
Equity in net income of subsidiaries 74,536
—
—
(74,536 ) —
Net income (loss) $ 96,249
$ 82,121
$ (7,585 ) $ (74,536 ) $ 96,249

Nine Months Ended August 31, 2016

KB Home
Corporate

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments
Total
Total revenues $ —
$ 2,103,943
$ 298,761
$ —
$ 2,402,704
Homebuilding:
Revenues $ —
$ 2,103,943
$ 290,372
$ —
$ 2,394,315
Construction and land costs —
(1,751,995 ) (266,027 ) —
(2,018,022 )
Selling, general and administrative expenses (66,752 ) (182,015 ) (31,119 ) —
(279,886 )
Operating income (loss) (66,752 ) 169,933
(6,774 ) —
96,407
Interest income 336
53
6
—
395
Interest expense (135,192 ) (1,641 ) (2,161 ) 133,327
(5,667 )
Intercompany interest 228,596
(82,984 ) (12,285 ) (133,327 ) —
Equity in loss of unconsolidated joint ventures —
(1,961 ) (3 ) —
(1,964 )
Homebuilding pretax income (loss) 26,988
83,400
(21,217 ) —
89,171
Financial services pretax income —
—
5,116
—
5,116
Total pretax income (loss) 26,988
83,400
(16,101 ) —
94,287
Income tax benefit (expense) (3,700 ) (24,600 ) 2,100
—
(26,200 )
Equity in net income of subsidiaries 44,799
—
—
(44,799 ) —
Net income (loss) $ 68,087
$ 58,800
$ (14,001 ) $ (44,799 ) $ 68,087

~~Condensed Consolidating Balance Sheets (in thousands)~~

August 31, 2017

KB Home
Corporate

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments
Total
Assets
Homebuilding:
Cash and cash equivalents $ 400,956
$ 82,622
$ 10,475
$ —
$ 494,053
Receivables 4,939
144,447
79,647
—
229,033
Inventories —
3,167,657
346,137
—
3,513,794
Investments in unconsolidated joint ventures —
62,011
2,502
—
64,513
Deferred tax assets, net 271,967
265,640
145,478
—
683,085
Other assets 91,420
8,384
2,590
—
102,394
769,282
3,730,761
586,829
—
5,086,872
Financial services —
—
12,687
—
12,687
Intercompany receivables 3,606,529
—
102,335
(3,708,864 ) —
Investments in subsidiaries 108,984
—
—
(108,984 ) —
Total assets $ 4,484,795
$ 3,730,761
$ 701,851
$ (3,817,848 ) $ 5,099,559
Liabilities and stockholders’ equity
Homebuilding:
Accounts payable, accrued expenses and other liabilities $ 169,661
$ 365,102
$ 219,940
$ —
$ 754,703
Notes payable 2,453,127
23,222
26,030
—
2,502,379
2,622,788
388,324
245,970
—
3,257,082
Financial services —
—
1,535
—
1,535
Intercompany payables 21,065
3,270,731
417,068
(3,708,864 ) —
Stockholders’ equity 1,840,942
71,706
37,278
(108,984 ) 1,840,942
Total liabilities and stockholders’ equity $ 4,484,795
$ 3,730,761
$ 701,851
$ (3,817,848 ) $ 5,099,559

November 30, 2016

KB Home
Corporate

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments
Total
Assets
Homebuilding:
Cash and cash equivalents $ 463,100
$ 100,439
$ 28,547
$ —
$ 592,086
Receivables 4,807
135,915
90,943
—
231,665
Inventories —
3,048,132
355,096
—
3,403,228
Investments in unconsolidated joint ventures —
61,517
2,499
—
64,016
Deferred tax assets, net 276,737
318,077
144,171
—
738,985
Other assets 79,526
9,177
2,442
—
91,145
824,170
3,673,257
623,698
—
5,121,125
Financial services —
—
10,499
—
10,499
Intercompany receivables 3,559,012
—
97,062
(3,656,074 ) —
Investments in subsidiaries 35,965
—
—
(35,965 ) —
Total assets $ 4,419,147
$ 3,673,257
$ 731,259
$ (3,692,039 ) $ 5,131,624
Liabilities and stockholders’ equity
Homebuilding:
Accounts payable, accrued expenses and other liabilities $ 131,530
$ 397,605
$ 237,192
$ —
$ 766,327
Notes payable 2,548,112
66,927
25,110
—
2,640,149
2,679,642
464,532
262,302
—
3,406,476
Financial services —
—
2,003
—
2,003
Intercompany payables 16,360
3,208,725
430,989
(3,656,074 ) —
Stockholders’ equity 1,723,145
—
35,965
(35,965 ) 1,723,145
Total liabilities and stockholders’ equity $ 4,419,147
$ 3,673,257
$ 731,259
$ (3,692,039 ) $ 5,131,624

~~Condensed Consolidating Statements of Cash Flows (in thousands)~~

Nine Months Ended August 31, 2017

KB Home
Corporate

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments
Total
Net cash provided by (used in) operating activities $ 82,480
$ 30,480
$ (9,690 ) $ —
$ 103,270
Cash flows from investing activities:
Contributions to unconsolidated joint ventures —
(9,899 ) (5,255 ) —
(15,154 )
Return of investments in unconsolidated joint ventures —
3,169
4,990
—
8,159
Purchases of property and equipment, net (5,875 ) (719 ) (49 ) —
(6,643 )
Intercompany (43,367 ) —
—
43,367
—
Net cash used in investing activities (49,242 ) (7,449 ) (314 ) 43,367
(13,638 )
Cash flows from financing activities:
Repayment of senior notes (105,326 ) —
—
—
(105,326 )
Issuance costs for unsecured revolving credit facility (1,711 ) —
—
—
(1,711 )
Payments on mortgages and land contracts due to land sellers and other loans —
(92,443 ) —
—
(92,443 )
Issuance of common stock under employee stock plans 20,677
—
—
—
20,677
Payments of cash dividends (6,479 ) —
—
—
(6,479 )
Stock repurchases (2,543 ) —
—
—
(2,543 )
Intercompany —
51,595
(8,228 ) (43,367 ) —
Net cash used in financing activities (95,382 ) (40,848 ) (8,228 ) (43,367 ) (187,825 )
Net decrease in cash and cash equivalents (62,144 ) (17,817 ) (18,232 ) —
(98,193 )
Cash and cash equivalents at beginning of period 463,100
100,439
29,461
—
593,000
Cash and cash equivalents at end of period $ 400,956
$ 82,622
$ 11,229
$ —
$ 494,807

Nine Months Ended August 31, 2016

KB Home
Corporate

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments
Total
Net cash provided by (used in) operating activities $ 49,705
$ (205,084 ) $ 52,767
$ —
$ (102,612 )
Cash flows from investing activities:
Contributions to unconsolidated joint ventures —
(1,000 ) —
—
(1,000 )
Return of investments in unconsolidated joint ventures —
3,495
—
—
3,495
Purchases of property and equipment, net (2,066 ) (452 ) (162 ) —
(2,680 )
Intercompany (141,886 ) —
—
141,886
—
Net cash provided by (used in) investing activities (143,952 ) 2,043
(162 ) 141,886
(185 )
Cash flows from financing activities:
Change in restricted cash 8,742
—
—
—
8,742
Payments on mortgages and land contracts due to land sellers and other loans —
(41,913 ) —
—
(41,913 )
Issuance of common stock under employee stock plans 7,351
—
—
—
7,351
Payments of cash dividends (6,471 ) —
—
—
(6,471 )
Stock repurchases (87,531 ) —
—
—
(87,531 )
Intercompany —
206,168
(64,282 ) (141,886 ) —
Net cash provided by (used in) financing activities (77,909 ) 164,255
(64,282 ) (141,886 ) (119,822 )
Net decrease in cash and cash equivalents (172,156 ) (38,786 ) (11,677 ) —
(222,619 )
Cash and cash equivalents at beginning of period 444,850
96,741
18,750
—
560,341
Cash and cash equivalents at end of period $ 272,694
$ 57,955
$ 7,073
$ —
$ 337,722


~~21.~~	~~Subsequent Event~~

On September 15, 2017, we repaid the remaining $165.0 million in aggregate principal amount of the 9.10% Senior Notes due 2017 at their maturity. We used internally generated cash to retire the notes.


~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

OVERVIEW

Revenues are generated from our homebuilding and financial services operations. The following table presents a summary of our consolidated results of operations (dollars in thousands, except per share amounts):


	Three Months Ended February 28,
	2023		2022		Variance
Revenues:
Homebuilding	$	1,378,537	$	1,394,154	(1)	%
Financial services	5,777		4,635		25
Total revenues	$	1,384,314	$	1,398,789	(1)	%
Pretax income:
Homebuilding	$	156,199	$	169,621	(8)	%
Financial services	6,001		8,436		(29)
Total pretax income	162,200		178,057		(9)
Income tax expense	(36,700)		(43,800)		16
Net income	$	125,500	$	134,257	(7)	%
Diluted earnings per share	$	1.45	$	1.47	(1)	%

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 Variance 2017 2016 Variance
Revenues:
Homebuilding $ 1,140,787
$ 910,111
25 % $ 2,957,105
$ 2,394,315
24 %
Financial services 3,214
3,172
1
8,286
8,389
(1 )
Total revenues $ 1,144,001
$ 913,283
25 % $ 2,965,391
$ 2,402,704
23 %
Pretax income:
Homebuilding $ 76,224
$ 51,050
49 % $ 145,288
$ 89,171
63 %
Financial services 2,984
2,413
24
7,361
5,116
44
Total pretax income 79,208
53,463
48
152,649
94,287
62
Income tax expense (29,000 ) (14,100 ) (106 ) (56,400 ) (26,200 ) (115 )
Net income $ 50,208
$ 39,363
28 % $ 96,249
$ 68,087
41 %
Basic earnings per share $ .58
$ .46
26 % $ 1.12
$ .79
42 %
Diluted earnings per share $ .51
$ .42
21 % $ 1.00
$ .72
39 %

The housing market maintained positive momentum during the first three quarters of 2017, supported by healthy industry fundamentals, steady demand and tight supply. This environment in most of our served markets and our continued execution on our returns-focused growth plan enabled us to generate higher deliveries, revenues and pretax incomeWe generated solid financial results in the ~~2017 third~~2023 first quarter despite significantly more challenging conditions compared to the ~~prior-year~~year-earlier quarter, as the combination of relatively high mortgage interest rates, elevated inflation and ~~achieve~~various other macroeconomic and geopolitical concerns that weighed on consumer budgets and confidence throughout the 2022 second half continued to negatively impact housing market demand.

During the quarter, we remained focused on balancing pace, price and construction starts at each community to optimize our return on each inventory asset within its market context. Positioning for the Spring selling season, we also implemented targeted sales strategies, including selective price adjustments and other homebuyer concessions (particularly, mortgage-related concessions such as interest rate buydown or lock programs), which, together with a ~~record-low third quarter~~stabilizing mortgage interest rate environment, helped drive order activity and decrease cancellations. While our net orders and net order value decreased 49% and 53%, respectively, compared to the year-earlier period, we generated sequential improvement in our net orders in both January and February, and net orders remained strong in March. Although we are encouraged by this progress, we expect consumer caution from interest rate and economic uncertainties as well as affordability pressures to continue to negatively impact homebuyer demand for the remainder of the year. We also anticipate the price adjustments and other homebuyer concessions we have implemented, along with other factors discussed below under “Outlook,” will contribute to a year-over-year decrease in the average selling ~~general and administrative expense ratio. Within our homebuilding operations, housing~~price of homes delivered in each of the remaining quarters of 2023.

Homebuilding revenues for the three months ended February 28, 2023 and 2022 were generated entirely from housing revenues. Housing revenues for the 2023 first quarter ~~grew 25%~~were essentially the same as the year-earlier quarter, as a 3% decrease in the number of homes delivered to 2,788 was mostly offset by a 2% increase in their average selling price to $494,500. Approximately 50% of our homes delivered in the 2023 first quarter were to first-time homebuyers. Homebuilding operating income for the three months ended February 28, 2023 decreased 8% year over year to ~~$1.14 billion,~~$156.5 million and, as ~~the number~~a percentage of ~~homes we delivered increased 11%~~revenues, was down 80 basis points to ~~2,765 and the overall average selling price of those homes rose 12% to $411,400.~~11.4%. Our ~~housing gross profits~~homebuilding operating income margin for the 2023 first quarter ~~increased 23% from the year-earlier quarter due to the higher volume of homes delivered, partly offset by~~reflected a ~~20 basis point~~ decrease in our housing gross profit margin to ~~16.2%. Inventory-related charges totaled $8.1 million~~21.5%, compared to 22.4% for the ~~three months ended August 31, 2017, compared to $3.1 million~~year-ago quarter, partly offset by a slight improvement in ~~the year-earlier period. Our~~ selling, general and administrative expense ratio improved 120 basis points to 9.6% of housing revenues, primarily reflecting enhanced operating leverage from delivering more homes and generating corresponding higher housing revenues in the current period, and our ongoing efforts to contain our overhead costs to the extent possible. Homebuilding operating income for the 2017 third quarter increased 49% to $76.7 million, andexpenses as a percentage of ~~homebuilding revenues, increased 100 basis points to 6.7%.~~

~~For the three months ended August 31, 2017, we generated~~housing revenues. Although net income ~~of $50.2 million, up 28% from the corresponding period of 2016, and~~decreased 7%, diluted earnings per share was nearly even with the year-earlier period due to the favorable impact of ~~$.51, up 21% year~~our common stock repurchases over ~~year.~~the past several quarters, which are discussed in Note 18 – Stockholders’ Equity in the Notes to Consolidated Financial Statements in this report.

~~During~~In the ~~nine months ended August 31, 2017,~~2023 first quarter, we, ~~invested $1.12 billion~~like many other homebuilders, continued to experience production challenges due to supply chain disruptions, as well as ongoing construction services availability constraints and delays with respect to state and municipal construction permitting, inspection and utility processes, which have been impacted by key equipment shortages. These issues, which have persisted to varying degrees since the 2020 second quarter, have resulted in ~~land~~cycle times that remain extended

relative to our historical average, and ~~land development~~delays in deliveries and community openings. We have adapted to ~~drive community openings~~the extent possible to these changing conditions, re-sequencing construction when necessary, and, in ~~2017~~some cases, ordering items in advance of starting homes to mitigate delays. In addition, we are committed to reducing construction cycle times and ~~beyond as we~~ continue to work ~~on increasing~~with our suppliers and trade partners to improve their performance and pricing, which may help offset some of the ~~scale~~impact of the above-described price adjustments and other homebuyer concessions we have implemented. While these challenging circumstances are diminishing as to certain construction stages, we expect them to continue to negatively affect our ~~business within our existing geographic footprint under our core business strategy. In~~land development and home construction activities through the ~~corresponding period~~remainder of ~~2016, such investments totaled $1.06 billion. Approximately 49% of our total investments~~2023, and it is possible they will worsen in that and in later periods.

Reflecting the slowdown in housing market demand that began in the ~~nine-month period ended August 31, 2017 related to land acquisition, compared to approximately 50% in~~2022 second half and continued throughout the ~~year-earlier period.~~

~~The following table presents information concerning~~2023 first quarter, our ~~net orders, cancellation rates,~~ ending backlog ~~and community count for the three-month and nine-month periods ended August 31, 2017 and 2016 (dollars in thousands):~~

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Net orders 2,608
2,508
8,604
8,029
Net order value (a) $ 1,071,932
$ 929,589
$ 3,540,866
$ 2,957,265
Cancellation rates (b) 25 % 29 % 23 % 25 %
Ending backlog — homes 5,455
5,226
5,455
5,226
Ending backlog — value $ 2,115,942
$ 1,848,580
$ 2,115,942
$ 1,848,580
Ending community count 231
227
231
227
Average community count 234
235
236
239


~~(a)~~	Net order value represents the potential future housing revenues associated with net orders generated during a period, as well as homebuyer selections of lot and product premiums and design studio options and upgrades for homes in backlog during the same period.


~~(b)~~	~~Cancellation rates represent the total number of contracts for new homes canceled during a period divided by the total (gross) orders for new homes generated during the same period.~~

~~Net Orders.~~ For the three months ended August 31, 2017, net orders from our homebuilding operations grew 4% from the year-earlier period, resulting in an increase in absorptions to 3.7 homes per community, per month. The combination of higher net orders and a higher overall average selling price resulted in the value of our 2017 third quarter net orders increasing 15% from the year-earlier quarter. We had particularly strong growth in our West Coast and Southwest homebuilding reporting segments. In our West Coast homebuilding reporting segment, net order value increased 26% from the year-earlier quarter, reflecting 10% growth in net orders and a 14% increase in the average selling price of those orders. In our Southwest homebuilding reporting segment, net order value rose 37%at February 28, 2023 decreased 42% year over year ~~as a result of 26% growth in net orders and a 9% rise in the average selling price of those orders. Our cancellation rate as a percentage of gross orders~~to approximately $3.31 billion. Yet, we believe we are well-positioned to achieve solid results for the ~~three months ended August 31, 2017 improved from the year-earlier quarter. For the nine months ended August 31, 2017, net orders increased 7%~~2023 second quarter and ~~net order value grew 20% from the corresponding period of 2016, while the cancellation rate~~full year, as ~~a percentage of gross orders also improved.~~described below under “Outlook.”

~~Backlog~~. The number of homes in our backlog at August 31, 2017 rose 4% from August 31, 2016. The potential future housing revenues in our backlog at August 31, 2017 grew 14% from August 31, 2016, reflecting the larger number of homes in our backlog and the higher average selling price of those homes. The average selling price of our homes in backlog increased 10%. The growth in our backlog value reflected year-over-year increases in three of our four homebuilding reporting segments, ranging from 1% in our Central homebuilding reporting segment to 43% in our Southwest homebuilding reporting segment.

~~Community Count.~~ We use the term “community count” to refer to the number of communities with at least five homes/lots left to sell at the end of a reporting period. Our average community count for the 2017 third quarter was essentially flat on a year-over-year basis, as increases in our West Coast, Southwest and Central homebuilding reporting segments were offset by a 21% decline in our Southeast homebuilding reporting segment stemming from fewer community openings over the past year, and the wind down of our Metro Washington, D.C. operations in 2016. For the nine months ended August 31, 2017, our ending community count increased 2%, while our average community count decreased 1%, both as compared to the year-earlier period.

HOMEBUILDING

Financial Results. The following table presents a summary of certain financial and operational data for our homebuilding operations (dollars in thousands, except average selling price):


	Three Months Ended February 28,
	2023			2022
Revenues:
Housing	$	1,378,537		$	1,394,154
Land	—			—
Total	1,378,537			1,394,154
Costs and expenses:
Construction and land costs
Housing	(1,082,821)			(1,082,112)
Land	—			—
Total	(1,082,821)			(1,082,112)
Selling, general and administrative expenses	(139,227)			(142,480)
Total	(1,222,048)			(1,224,592)
Operating income	156,489			169,562
Interest income	467			36
Equity in income (loss) of unconsolidated joint ventures	(757)			23

Homebuilding pretax income	$	156,199		$	169,621
				\
Homes delivered	2,788			2,868
Average selling price	$	494,500		$	486,100
Housing gross profit margin as a percentage of housing revenues	21.5		%	22.4		%
Adjusted housing gross profit margin as a percentage of housing revenues	21.8		%	22.4		%

Selling, general and administrative expenses as a percentage of housing revenues	10.1		%	10.2		%
Operating income as a percentage of revenues	11.4		%	12.2		%

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Revenues:
Housing $ 1,137,406
$ 910,111
$ 2,944,013
$ 2,390,165
Land 3,381
—
13,092
4,150
Total 1,140,787
910,111
2,957,105
2,394,315
Costs and expenses:
Construction and land costs
Housing (953,413 ) (760,490 ) (2,488,577 ) (2,007,621 )
Land (1,588 ) —
(11,100 ) (10,401 )
Total (955,001 ) (760,490 ) (2,499,677 ) (2,018,022 )
Selling, general and administrative expenses (109,095 ) (98,144 ) (305,901 ) (279,886 )
Total (1,064,096 ) (858,634 ) (2,805,578 ) (2,297,908 )
Operating income $ 76,691
$ 51,477
$ 151,527
$ 96,407
Homes delivered 2,765
2,487
7,569
6,769
Average selling price $ 411,400
$ 365,900
$ 389,000
$ 353,100
Housing gross profit margin as a percentage of housing revenues 16.2 % 16.4 % 15.5 % 16.0 %
Housing gross profit margin excluding inventory-related charges as a percentage of housing revenues 16.9 % 16.8 % 16.1 % 16.4 %
Adjusted housing gross profit margin as a percentage of housing revenues 21.7 % 21.2 % 21.0 % 20.9 %
Selling, general and administrative expenses as a percentage of housing revenues 9.6 % 10.8 % 10.4 % 11.7 %
Operating income as a percentage of homebuilding revenues 6.7 % 5.7 % 5.1 % 4.0 %

~~For reporting purposes, we organize~~Revenues. Homebuilding revenues for the three months ended February 28, 2023 and 2022 were comprised solely of housing revenues. In the 2023 first quarter, housing revenues were nearly even with the year-earlier quarter, as a 3% decrease in the number of homes delivered was mostly offset by a 2% increase in their overall average selling price. The year-over-year decrease in the number of homes delivered primarily reflected a 14% decline in our ~~homebuilding operations into four segments —~~ West Coast homebuilding reporting segment, partly offset by increases of 4% and 9% in our Southwest ~~Central~~ and ~~Southeast.~~Southeast homebuilding reporting segments, respectively. The decline in our West Coast homebuilding reporting segment mainly resulted from a 47% year-over-year

decrease in this segment’s backlog of homes at the beginning of the quarter. The higher overall average selling price primarily reflected product and geographic mix factors, partly offset by increased homebuyer concessions we selectively extended to buyers within backlog prior to delivery in conjunction with our targeted sales strategies described above under “Overview.”

Operating Income. Our homebuilding operating income for the three months ended February 28, 2023 decreased 8% from the year-earlier period, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the 2023 first quarter included inventory-related charges of $5.3 million, compared to $.2 million in the year-earlier quarter. As a percentage of ~~August 31, 2017~~revenues, our operating income for the three months ended February 28, 2023 was 11.4%, compared to 12.2% for the corresponding 2022 period. Excluding inventory-related charges, our operating income as a percentage of revenues decreased 50 basis points to 11.7% for the 2023 first quarter from 12.2% for the year-earlier quarter.

•Housing Gross Profits – Housing gross profits of $295.7 million for the three months ended February 28, 2023 declined 5% from $312.0 million for the year-earlier period, largely due to a decrease in our housing gross profit margin. Our housing gross profit margin for the 2023 first quarter decreased 90 basis points year over year to 21.5%, mainly as a result of: higher relative construction costs, partly due to shifts in product and geographic mix; increased homebuyer concessions in light of affordability pressures; and greater inventory-related charges. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations, which is included in construction and land costs, was 1.9% and 2.1% for the three months ended February 28, 2023 and 2022, respectively. Excluding the inventory-related charges associated with housing operations of $5.3 million in the current quarter and $.2 million in the year-earlier quarter, our adjusted housing gross profit margin for the 2023 first quarter decreased 60 basis points year over year. The calculation of adjusted housing gross profit margin, which we believe provides a clearer measure of the performance of our business, is described below under “Non-GAAP Financial Measures.”

•Selling, General and Administrative Expenses –The following table presents the components of our selling, general and administrative expenses (dollars in thousands):


	Three Months Ended February 28,
	2023		% of Housing Revenues		2022		% of Housing Revenues
Marketing expenses	$	33,138	2.4	%	$	28,848	2.1	%
Commission expenses (a)	46,487		3.4		48,629		3.5
General and administrative expenses	59,602		4.3		65,003		4.6
Total	$	139,227	10.1	%	$	142,480	10.2	%

(a)Commission expenses include sales commissions on homes delivered paid to internal sales counselors and external real estate brokers.

Selling, general and administrative expenses for the three months ended February 28, 2023 decreased 2% from the year-earlier quarter. As a percentage of housing revenues, our selling, general and administrative expenses for the 2023 first quarter improved 10 basis points, reflecting lower general and administrative expenses and commission expenses, partly offset by higher marketing expenses to support our higher average community count.

Interest Income/Expense. Interest income, which is generated from short-term investments, totaled $.5 million for the three months ended February 28, 2023 and was nominal for the year-earlier period. Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates.

We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs. All interest incurred during the three-month periods ended February 28, 2023 and 2022 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period. Accordingly, we had no interest expense for these periods. Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report.

Equity in Income (Loss) of Unconsolidated Joint Ventures. Our equity in loss of unconsolidated joint ventures was $.8 million for the three months ended February 28, 2023, compared to nominal equity in income of unconsolidated joint ventures for the year-earlier period. Further information regarding our investments in homebuilding unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.

Net Orders, Cancellation Rates, Backlog and Community Count. The following table presents information about our net orders, cancellation rate, ending backlog and community count (dollars in thousands):


	Three Months Ended February 28,
	2023			2022
Net orders	2,142			4,210
Net order value (a)	$	1,001,868		$	2,153,734
Cancellation rate (b)	36		%	11		%
Ending backlog — homes	7,016			11,886
Ending backlog — value	$	3,314,890		$	5,711,305
Ending community count	256			208
Average community count	251			213

(a) Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design studio options and upgrades for homes in backlog during the same period.

(b) Cancellation rates represent the total number of contracts for new homes cancelled during a period divided by the total (gross) orders for new homes generated during the same period.

Net Orders. Reflecting the softening housing market demand that began in the 2022 second half from the factors described above under “Overview,” net orders for the 2023 first quarter decreased 49% from the year-earlier quarter, with the pace of monthly net orders per community slowing to 2.8, compared to 6.6. The decrease in net orders and the slower monthly pace reflected lower gross orders combined with higher cancellations. The value of our net orders declined 53% year over year due to the overall decrease in our net orders, as well as the lower average selling price for those homes. The year-over-year net order and net order value comparisons for the 2023 first quarter improved from the declines of 80% and 79%, respectively, in the 2022 fourth quarter, as mortgage interest rates stabilized and we implemented selective price adjustments and other homebuyer concessions (particularly, mortgage-related concessions such as interest rate buydown or lock programs) ahead of the Spring selling season to help generate orders and decrease cancellations. In the 2023 first quarter, both net orders and net order values were down on a year-over-year basis in each of our four homebuilding reporting segments. Reflecting price adjustments and other homebuyer concessions as well as a shift in product and geographic mix, the average selling price of our net orders for the 2023 first quarter was $467,700, down 9% from the year-earlier period.

Our cancellation rate as a percentage of gross orders for the three months ended February 28, 2023 increased compared to the year-earlier period and was higher than our typical historical levels, reflecting the soft housing market demand. The cancellation rate for the three months ended February 28, 2022 was exceptionally low due to the strong demand levels we experienced in that period. On a sequential basis, the cancellation rate improved from 68% in the 2022 fourth quarter.

Backlog. The number of homes in our backlog at February 28, 2023 decreased 41% from February 28, 2022, reflecting our substantially lower backlog at the beginning of the quarter and a year-over-year decrease in our net orders for the three months ended February 28, 2023. The potential future housing revenues in our backlog at February 28, 2023 declined 42% from February 28, 2022 as a result of both the lower number of homes in backlog and a 2% decrease in their average selling price. The year-over-year decrease in our overall backlog value at February 28, 2023 reflected decreases in all of our homebuilding reporting segments, ~~consisted of ongoing operations located~~ranging from 30% in the ~~following states:~~Southeast to 53% in the West ~~Coast — California; Southwest — Arizona~~Coast. A portion of the orders in backlog will not result in homes delivered due to cancellations.

Community Count. We use the term “community count” to refer to the number of communities open for sale with at least five homes left to sell at the end of a reporting period. We continued to expand our community count in the 2023 first quarter, with ending community count up 23% and ~~Nevada; Central — Colorado~~the average community count up 18%, each as compared to the year-earlier period, primarily reflecting new community openings and ~~Texas;~~fewer communities selling out during the three months ended February 28, 2023. While maintaining a healthy supply of land owned or controlled under land option contracts and ~~Southeast — Florida~~other similar contracts to fuel future community openings, we continued to moderate our land investments in the 2023 first quarter in response to soft housing market conditions, as discussed below under “Liquidity and ~~North Carolina.~~Capital Resources.”

HOMEBUILDING REPORTING SEGMENTS

Operational Data. The following tables present information about our homes delivered, net orders, cancellation rates as a percentage of gross orders, net order value, average community count and ending backlog (number of homes and value) by homebuilding reporting segment (dollars in thousands):


	Three Months Ended February 28,
	Homes Delivered				Net Orders				Cancellation Rates
Segment	2023		2022		2023		2022		2023			2022
West Coast	786		914		857		1,094		20		%	11	%
Southwest	536		516		470		748		26			7
Central	935		953		411		1,444		58			14
Southeast	531		485		404		924		39			9
Total	2,788		2,868		2,142		4,210		36		%	11	%




	Net Order Value						Average Community Count
Segment	2023		2022		Variance		2023		2022			Variance
West Coast	$	535,539	$	845,517	(37)	%	80		57			40	%
Southwest	177,392		327,569		(46)		45		34			32
Central	139,468		618,009		(77)		80		75			7
Southeast	149,469		362,639		(59)		46		47			(2)
Total	$	1,001,868	$	2,153,734	(53)	%	251		213			18	%




















	February 28,
	Backlog – Homes						Backlog – Value
Segment	2023		2022		Variance		2023		2022			Variance
West Coast	1,358		2,621		(48)	%	$	918,535	$	1,951,554		(53)	%
Southwest	1,626		2,426		(33)		686,101		1,028,385			(33)
Central	2,465		4,402		(44)		1,069,380		1,811,261			(41)
Southeast	1,567		2,437		(36)		640,874		920,105			(30)
Total	7,016		11,886		(41)	%	$	3,314,890	$	5,711,305		(42)	%

The composition of our homes delivered, net orders and backlog shifts with the product and geographic mix of our active communities and the corresponding average selling prices of the homes ordered and/or delivered at these communities in any particular period, changing as new communities open and existing communities wind down or sell out in the ordinary course. In addition, with our Built to Order model, the selling prices of individual homes within a community may vary due to differing lot sizes and locations, home square footage, product premiums and the design studio options and upgrades buyers select in the community. These intrinsic variations in our business limit the comparability of our homes delivered, net orders and backlog, as well as their corresponding values, between sequential and year-over-year periods, in addition to the effect of prevailing economic or housing market conditions in or across any particular periods. As described above under “Overview,” housing market conditions in the 2023 first quarter are significantly more challenging than in the year-ago quarter.

Financial Results. Below is a discussion of the financial results for each of our homebuilding reporting segments. Further information regarding these segments, including their pretax income (loss), is included in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report. The difference between each homebuilding reporting segment’s operating income (loss) and pretax income (loss) is generally due to the equity in income (loss) of unconsolidated joint ventures and/or interest income and expense.

In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment. Corporate and other had operating losses of $30.2 million and $34.7 million in the three months ended February 28, 2023 and 2022, respectively.

Three Months Ended August 31,
Homes Delivered Net Orders Cancellation Rates
Segment 2017 2016 2017 2016 2017 2016
West Coast 890
710
853
775
16 % 19 %
Southwest 454
369
549
437
24
22
Central 1,032
976
859
931
33
35
Southeast 389
432
347
365
24
36
Total 2,765
2,487
2,608
2,508
25 % 29 %

The financial results of our homebuilding reporting segments for the three months ended February 28, 2023 were negatively impacted to varying degrees by homebuyer concessions we selectively extended to buyers within backlog prior to delivery in conjunction with our targeted sales strategies described above under “Overview,” as well as shifts in the product and geographic mix of homes delivered. Segment financial results for three months ended February 28, 2023 were also affected by construction services availability constraints and building material cost pressures, as well as ongoing supply chain disruptions and other production-related challenges, also as described above under “Overview.”

West Coast. The following table presents financial information related to our West Coast segment (dollars in thousands, except average selling price):


	Three Months Ended February 28,
	2023			2022			Variance
Revenues	$	540,019		$	658,874		(18)	%
Construction and land costs	(441,186)			(507,465)			13
Selling, general and administrative expenses	(38,613)			(41,508)			7
Operating income	$	60,220		$	109,901		(45)	%

Homes delivered	786			914			(14)	%
Average selling price	$	687,000		$	720,900		(5)	%
Operating income as a percentage of revenues	11.2		%	16.7		%	(550)	bps

Three Months Ended August 31,
Net Order Value Average Community Count
Segment 2017 2016 Variance 2017 2016 Variance
West Coast $ 547,049
$ 435,598
26 % 63
60
5 %
Southwest 168,300
122,876
37
40
36
11
Central 256,502
263,707
(3 ) 93
91
2
Southeast 100,081
107,408
(7 ) 38
48
(21 )
Total $ 1,071,932
$ 929,589
15 % 234
235
— %

Nine Months Ended August 31,
Homes Delivered Net Orders Cancellation Rates
Segment 2017 2016 2017 2016 2017 2016
West Coast 2,226
1,799
2,744
2,325
14 % 19 %
Southwest 1,297
1,111
1,634
1,337
21
20
Central 2,898
2,647
3,094
3,042
30
30
Southeast 1,148
1,212
1,132
1,325
25
29
Total 7,569
6,769
8,604
8,029
23 % 25 %

Net Order Value Average Community Count
Segment �� 2017 2016 Variance 2017 2016 Variance
West Coast $ 1,835,910
$ 1,346,091
36 % 64
58
10 %
Southwest 484,833
385,501
26
40
37
8
Central 899,392
845,164
6
92
90
2
Southeast 320,731
380,509
(16 ) 40
54
(26 )
Total $ 3,540,866
$ 2,957,265
20 % 236
239
(1 )%

August 31,
Backlog – Homes Backlog – Value
Segment 2017 2016 Variance 2017 2016 Variance
West Coast 1,431
1,264
13 % $ 938,902
$ 724,795
30 %
Southwest 1,141
831
37
336,523
234,736
43
Central 2,175
2,237
(3 ) 641,101
636,234
1
Southeast 708
894
(21 ) 199,416
252,815
(21 )
Total 5,455
5,226
4 % $ 2,115,942
$ 1,848,580
14 %

~~Revenues. Homebuilding~~This segment’s revenues for the three months ended ~~August 31, 2017 rose 25%~~February 28, 2023 declined from the year-earlier ~~period to $1.14 billion, primarily~~quarter due to ~~an increase in housing revenues.~~

Housing revenues for the quarter ended August 31, 2017 increased 25% to $1.14 billion due to increases in both the number of homes we delivered and the overall average selling price of those homes. We delivered 2,765 homes in the 2017 third quarter, up 11%, largely due to the 8% higher backlog level we had at the beginning of the quarter. The overall average selling price of homes delivered for the three months ended August 31, 2017 rose 12% to $411,400, reflecting a ~~shift in product and geographic mix and generally rising home prices.~~

Land sale revenues totaled $3.4 million for the three months ended August 31, 2017. We had no land sales in the three months ended August 31, 2016. The land sale revenues in the 2017 third quarter reflected the execution of our plans to monetize certain non-strategic land parcels through land sales as part of our returns-focused growth plan. These land sales are expected to generate

cash that we can redeploy for investments in land that are expected to generate a higher return and grow our business, or reduce our debt. Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our marketing strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market conditions.

For the nine months ended August 31, 2017, our homebuilding revenues increased 24% from the year-earlier period to $2.96 billion. Housing revenues for the nine months ended August 31, 2017 rose $553.8 million, or 23%, from the corresponding period of 2016, reflecting growth in the number of homes delivered and ~~an increase in the overall~~their lower average selling ~~price of those homes. For the first nine months of 2017, we delivered 7,569 homes, an increase of 12%, and the overall average selling price of homes delivered rose 10% to $389,000.~~

Land sale revenues increased to $13.1 million for the nine months ended August 31, 2017 from $4.2 million for the nine months ended August 31, 2016, reflecting the factors discussed above with respect to our 2017 third quarter land sale revenues.

price. Operating ~~Income~~. Our homebuilding operating income increased 49% to $76.7 million for the three months ended August 31, 2017. Homebuilding operating income for the 2017 third quarter included $8.1 million of inventory impairment and land option contract abandonment charges, compared to $3.1 million of such charges in the corresponding 2016 quarter. As a percentage of homebuilding revenues, our homebuilding operating income for the three months ended ~~August 31, 2017 increased 100 basis points~~February 28, 2023 was down year over year, ~~to 6.7%.~~

~~For the nine months ended August 31, 2017, our homebuilding operating~~reflecting lower housing gross profits, partly offset by reduced selling, general and administrative expenses. Operating income of $151.5 million rose 57% from the corresponding period of 2016. The nine-month period ended August 31, 2017 included total inventory impairment and land option contract abandonment charges of $18.1 million, compared to $16.8 million in the nine-month period ended August 31, 2016. The charges in the nine-month period ended August 31, 2016 were in part the result of our decision to wind down our Metro Washington, D.C. operations. Asas a percentage of ~~homebuilding~~ revenues ~~our homebuilding operating income for~~decreased from the ~~nine months ended August 31, 2017 improved 110 basis points year over year~~year-earlier quarter, primarily due to ~~5.1%.~~

~~The year-over-year improvements~~a 470 basis-point decline in ~~our homebuilding operating income for~~ the ~~three-month and nine-month periods ended August 31, 2017 primarily reflected increases in~~ housing gross ~~profits that were partly offset by increases~~profit margin to 18.3% and an 80 basis-point increase in selling, general and administrative ~~expenses.~~expenses as a percentage of housing revenues to 7.1%. The year-over-year decrease in the housing gross profit margin primarily reflected higher relative construction costs, shifts in the product and geographic mix of homes delivered, and reduced operating leverage from lower housing revenues. In addition, the year-over-year comparisons for the three months and nine months ended August 31, 2017 reflected profits from land sales in the current period, compared to no land sales in the three-month period ended August 31, 2016, and land sale losses in the nine-month period ended August 31, 2016, as further discussed below.

Housing gross profits increased to $184.0 million for the three months ended August 31, 2017 from $149.6 million for the year-earlier period. Our housing gross profits for the 2017 and 2016 third quarters included the above-noted inventory-related charges.

~~Our~~ housing gross profit margin for the ~~2017 third quarter decreased 20 basis points year over year to 16.2%, primarily due to an increase~~three months ended February 28, 2023 included $.9 million of inventory-related charges, while there were no such charges in the amortization of previously capitalized interest (approximately 40 basis points) and higher inventory-related charges (approximately 30 basis points), partly offset by improved operating leverage on fixed costs as a result of the increased volume of homes delivered and corresponding higher housing revenues (approximately 30 basis points), lower construction and land costs (approximately 10 basis points) and a decrease in sales incentives (approximately 10 basis points).year-earlier quarter. The increase in ~~the amortization of previously capitalized interest~~selling, general and administrative expenses as a percentage of housing revenues ~~was~~ mainly ~~due to longer-term development and/or extended construction time frames for certain communities in our West Coast homebuilding reporting segment.~~reflected reduced operating leverage from lower housing revenues.

Excluding the amortization of previously capitalized interest associated with housing operations of $55.0 million and $40.4 million in the three-month periods ended August 31, 2017 and 2016, respectively, and the above-mentioned inventory-related charges in the applicable periods, our adjusted housing gross profit margin improved 50 basis points from the year-earlier quarter to 21.7%Southwest. The ~~calculation of adjusted housing gross profit margin, which we believe provides a clearer measure of the performance of~~following table presents financial information related to our ~~business, is described below under “Non-GAAP Financial Measures.”~~Southwest segment (dollars in thousands, except average selling price):

Selling, general and administrative expenses for the 2017 third quarter rose to $109.1 million from $98.1 million for the year-earlier quarter, mainly due to higher variable expenses associated with the


	Three Months Ended February 28,
	2023			2022			Variance
Revenues	$	239,587		$	209,767		14	%
Construction and land costs	(177,003)			(156,428)			(13)
Selling, general and administrative expenses	(18,466)			(17,324)			(7)
Operating income	$	44,118		$	36,015		22	%


Homes delivered	536			516			4	%
Average selling price	$	447,000		$	406,500		10	%
Operating income as a percentage of revenues	18.4		%	17.2		%	120	bps

The year-over-year ~~increases~~growth in ~~homes delivered and corresponding revenues. As a percentage of housing~~this segment’s revenues ~~selling, general and administrative expenses improved 120 basis points from the prior-year period to 9.6%~~ for the three months ended August 31, 2017, largely due to improved operating leverage on fixed costs from the increased volume of homes delivered and corresponding higher housing revenues, and our ongoing efforts to contain our overhead costs to the extent possible. The ratio was also favorably impacted by a settlement we received in a lengthy lawsuit related to a property in Nevada, which was largely offset by a net charge related to self-insurance.

~~Land sale profits totaled $1.8 million for the three months ended August 31, 2017. We had no land sales in the prior-year quarter.~~

Our housing gross profits of $455.4 million for the nine months ended August 31, 2017 increased $72.9 million, or 19%, from $382.5 million for the year-earlier period. Housing gross profits for the nine months ended August 31, 2017 included $18.1 million of inventory impairment and land option contract abandonment charges. For the nine months ended August 31, 2016, housing gross profits included $10.6 million of such charges. Our housing gross profit margin of 15.5% for the first nine months of 2017 decreased 50 basis points year over year, primarily reflecting the impact of higher construction and land costs, an increase in the amortization of previously capitalized interest and higher inventory impairment and land option contract abandonment charges, partly offset by improved operating leverage on fixed costs as a result of the increased volume of homes delivered and corresponding higher housing revenues. Sales incentives as a percentage of housing revenues for the nine months ended August 31, 2017 were approximately the same as the year-earlier period. In the nine months ended August 31, 2017, our adjusted housing gross profit margin improved 10 basis points year over year to 21.0%.

Selling, general and administrative expenses increased $26.0 million, or 9%, year over year to $305.9 million for the nine months ended August 31, 2017 from $279.9 million for the corresponding period of 2016 for the reasons described above with respect to the three months ended August 31, 2017. As a percentage of housing revenues, selling, general and administrative expenses improved 130 basis points year over year to 10.4% for the nine months ended August 31, 2017.

For the nine months ended August 31, 2017, land sales generated profits of $2.0 million. For the nine months ended August 31, 2016, land sale losses of $6.3 million reflected the inventory impairment charges associated with the wind down of our operations in the Metro Washington, D.C. market, and inventory impairment charges recorded in the 2016 first quarter related to the sales of our last remaining land parcels in the Rio Grande Valley area of Texas, which closed in the 2016 second quarter.

The estimated remaining life of each community or land parcel in our inventory depends on various factors, such as the total number of lots remaining; the expected timeline to acquire and entitle land and develop lots to build homes; the anticipated future net order and cancellation rates; and the expected timeline to build and deliver homes sold. While it is difficult to determine a precise timeframe for any particular inventory asset, based on current market conditions and expected delivery timelines, we estimate our inventory assets’ remaining operating lives to range generally from one year to in excess of 10 years and expect to realize, on an overall basis, the majority of our inventories as of August 31, 2017 within five years. The following table presents our inventories as of August 31, 2017 based on our current estimated timeframe for delivery of the last home within an applicable community or land parcel (in millions):

0-2 years 3-5 years 6-10 years
Greater than
10 years
Total
Inventories $ 1,965.2
$ 1,224.7
$ 227.0
$ 96.9
$ 3,513.8

The inventories in the 0-2 years and 3-5 years categories were located in all of our homebuilding reporting segments, though mostly in our West Coast and Central segments, and collectively represented 91% of our total inventories at August 31, 2017 and November 30, 2016. Inventories in the 6-10 years category were also located in all of our homebuilding reporting segments but largely in our West Coast and Central segments, while inventories in the greater than 10 years category were primarily located in our West Coast and Southwest homebuilding reporting segments. The inventories in the 6-10 years and greater than 10 years categories were generally comprised of land held for future development.

Due to the judgment and assumptions applied in our inventory impairment and land option contract abandonment assessment processes, and in our estimations of the remaining operating lives of our inventory assets and the realization of our inventories, particularly as to land held for future development, it is possible that actual results could differ substantially from those estimated.

Deterioration in the supply and demand factors in the overall housing market or in an individual market or submarket, or changes to our operational or selling strategy at certain communities, may lead to additional inventory impairment charges, future charges associated with land sales or the abandonment of land option contracts or other similar contracts related to certain assets. Due to the nature or location of the projects, land held for future development that we activate as part of our strategic growth initiatives or to accelerate sales and/or our return on investment, or that we otherwise monetize to help increase our asset efficiency, may have a somewhat greater likelihood of being impaired than other of our active inventory.

We believe that the carrying value of our inventories as of August 31, 2017 is recoverable. Our considerations in making this determination include the factors and trends incorporated into our inventory impairment analyses, and as applicable, the prevailing regulatory environment, competition from other homebuilders, inventory levels and sales activity of resale homes, and the local economic conditions where an asset is located. In addition, we consider the financial and operational status and expectations of our inventories as well as specific attributes or circumstances of each community or land parcel in our inventory that could be indicators of potential impairments. However, if conditions in the overall housing market or in a specific market or submarket worsen in the future beyond our current expectations, if future changes in our marketing strategy significantly affect any key

assumptions used in our projections of future cash flows, or if there are material changes in any of the other items we consider in assessing recoverability, we may recognize charges in future periods for inventory impairments or land option contract abandonments, or both, related to our current inventory assets. Any such charges could be material to our consolidated financial statements.

~~Interest Income~~. Interest income, which is generated from short-term investments, totaled $.3 million for the three months ended August 31, 2017 and $.1 million for the three months ended August 31, 2016. For the nine months ended August 31, 2017 and 2016, our interest income totaled $.7 million and $.4 million, respectively. Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates.

~~Interest Expense.~~ Interest expense results principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs. All interest incurred during the three-month periods ended August 31, 2017 and 2016 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for those periods. As a result, we had no interest expense for the three-month periods ended August 31, 2017 and 2016. For the nine months ended August 31, 2017, our interest expense, net of amounts capitalized, totaled $6.3 million, compared to $5.7 million for the year-earlier period. Our interest expense for the nine-month period ended August 31, 2017 included a charge of $5.7 million for the early extinguishment of debt associated with our optional redemption of $100.0 million in aggregate principal amount of the 9.10% Senior Notes due 2017. The redemption, which was completed on January 13, 2017 using internally generated cash, represented a step toward reducing our debt in line with our returns-focused growth plan.

During the nine months ended August 31, 2017 and 2016, the average amount of our inventory qualifying for interest capitalization was lower than our average debt level and, therefore, a portion of the interest we incurred was reflected as interest expense.

Interest incurred decreased to $43.4 million for the three months ended August 31, 2017 from $46.5 million for the year-earlier period, due to the lower average debt level in the current period as a result of the above-mentioned optional redemption of the 9.10% Senior Notes due 2017. We capitalized all of the interest incurred in the three months ended August 31, 2017 and 2016. For the nine months ended August 31, 2017, interest incurred decreased to $136.9 million from $139.0 million for the year-earlier period due to a lower average debt level in the current period, partly offset by the above-mentioned charge for the early extinguishment of debt. We capitalized $130.6 million and $133.3 million of the interest incurred in the nine months ended August 31, 2017 and 2016, respectively. The percentage of interest capitalized, excluding the charge for the early extinguishment of debt in the current period, was 99.5% and 95.9% for the nine months ended August 31, 2017 and 2016, respectively. The percentage of interest capitalized generally fluctuates based on the amount of our inventory qualifying for interest capitalization and the amount of debt outstanding.

Interest amortized to construction and land costs associated with housing operations increased to $55.0 million for the three months ended August 31, 2017 from $40.4 million for the year-earlier period. For the nine months ended August 31, 2017, interest amortized to construction and land costs associated with housing operations rose to $143.3 million from $106.2 million for the year-earlier period. The year-over-year increases in interest amortized for the three-month and nine-month periods ended August 31, 2017February 28, 2023 reflected increases in both the number of homes delivered and their average selling price. Operating income increased from the ~~overall construction~~year-earlier period due to higher housing gross profits, partially offset by higher selling, general and ~~land costs attributable to those homes.~~administrative expenses. As a percentage of ~~housing~~ revenues, this segment’s operating income improved from the amortization of previously capitalized interest associated with housing operations was 4.8% and 4.4% for the three months ended August 31, 2017 and 2016, respectively, and 4.9% and 4.4% for the nine months ended August 31, 2017 and 2016, respectively. The year-over-year increaseyear-earlier quarter, reflecting a 70 basis-point expansion in the ~~amortization of previously capitalized interest~~housing gross profit margin to 26.1% and a 50 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues ~~for both the three-month and nine-month periods ended August 31, 2017 was mainly due~~ to longer-term development and/or extended construction time frames for certain communities in our West Coast homebuilding reporting segment. Additionally, interest amortized to construction and land costs in the 2017 third quarter included $.2 million related to land sales that occurred during the period. For the nine months ended August 31, 2017 and 2016, interest amortized to construction and land costs included $1.8 million and $.5 million, respectively, of7.7%. The housing gross profit margin expansion primarily reflected lower relative amortization of previously capitalized interest and improved operating leverage from higher housing revenues. The

improvement in selling, general and administrative expenses as a percentage of housing revenues mainly reflected lower external sales commissions and increased operating leverage from higher housing revenues.

Central. The following table presents financial information related to ~~land sales that occurred during those periods.~~our Central segment (dollars in thousands, except average selling price):

~~Equity in Loss of Unconsolidated Joint Ventures. Our equity in loss of unconsolidated joint ventures totaled $.8 million~~


	Three Months Ended February 28,
	2023			2022			Variance
Revenues	$	389,951		$	355,322		10	%
Construction and land costs	(297,286)			(284,860)			(4)
Selling, general and administrative expenses	(33,839)			(32,346)			(5)
Operating income	$	58,826		$	38,116		54	%

Homes delivered	935			953			(2)	%
Average selling price	$	417,100		$	372,800		12	%
Operating income as a percentage of revenues	15.1		%	10.7		%	440	bps

This segment’s revenues for the three months ended ~~August 31, 2017~~February 28, 2023 increased from the corresponding year-earlier period, primarily reflecting a higher average selling price of homes delivered. Operating income increased from the corresponding year-earlier period due to higher housing gross profits, partly offset by higher selling, general and ~~$.5 million~~administrative expenses. This segment’s operating income as a percentage of revenues improved from the year-earlier period primarily due to a 400 basis-point increase in the housing gross profit margin to 23.8% and a 40 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 8.7%. The year-over-year increase in the housing gross profit margin primarily reflected lower relative construction and land costs due to a shift in the product and geographic mix of homes delivered and lower relative amortization of previously capitalized interest, partly offset by increased homebuyer concessions.

Southeast. The following table presents financial information related to our Southeast segment (dollars in thousands, except average selling price):


	Three Months Ended February 28,
	2023			2022			Variance
Revenues	$	208,980		$	170,191		23	%
Construction and land costs	(165,056)			(132,230)			(25)
Selling, general and administrative expenses	(20,399)			(17,695)			(15)
Operating income	$	23,525		$	20,266		16	%


Homes delivered	531			485			9	%
Average selling price	$	393,600		$	350,900		12	%
Operating income as a percentage of revenues	11.3		%	11.9		%	(60)	bps

This segment’s revenues for the three months ended ~~August 31, 2016. For~~February 28, 2023 grew year over year as a result of an increase in the ~~nine months ended August 31, 2017, our equity~~number of homes delivered and the higher average selling price of those homes. Operating income increased from the corresponding year-earlier period, reflecting higher housing gross profits, partly offset by higher selling, general and administrative expenses. As a percentage of revenues, operating income declined from the year-earlier period mainly due to a 130 basis-point decrease in ~~loss of unconsolidated joint ventures was $.7~~the housing gross profit margin to 21.0% that primarily reflected an increase in inventory-related charges to $3.5 million, compared to ~~$2.0 million~~no such charges in the year-earlier period, and an increase in homebuyer concessions, partly offset by a shift in product and geographic mix of homes delivered and improved operating leverage from higher housing revenues. Selling, general and administrative expenses as a percentage of housing revenues improved 70 basis points from the year-earlier period to 9.7%, mainly reflecting increased operating leverage from higher housing revenues.

FINANCIAL SERVICES REPORTING SEGMENT

The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands):


	Three Months Ended February 28,
	2023			2022
Revenues	$	5,777		$	4,635
Expenses	(1,358)			(1,347)
Equity in income of unconsolidated joint ventures	1,582			5,148
Pretax income	$	6,001		$	8,436

Total originations (a):
Loans	1,816			1,783
Principal	$	726,665		$	691,933
Percentage of homebuyers using KBHS	79		%	71		%
Average FICO score	733			732

Loans sold (a):
Loans sold to GR Alliance	1,828			1,527
Principal	$	741,468		$	595,959
Loans sold to third parties	91			352
Principal	$	32,242		$	112,192

(a)Loan originations and sales occurred within KBHS.

Revenues. Financial services revenues for the ~~same~~three months ended February 28, 2023 grew from the corresponding 2022 period due to increases in both title services revenues and insurance commissions.

Pretax income. Financial services pretax income for the three months ended February 28, 2023 decreased 29% from the year-earlier period, as a decrease in the equity in income of ~~2016.~~our unconsolidated joint venture was partly offset by improved results from our insurance and title services businesses. In the 2023 first quarter, the equity in income of our unconsolidated joint venture, KBHS, decreased to $1.6 million, compared to $5.1 million in the year-earlier quarter, as a result of a decline in KBHS’ income. The year-over-year decline in KBHS’ income was primarily due to losses of $1.5 million in the fair value of IRLCs in the current quarter, compared to gains of $7.6 million in the year-earlier quarter, mainly reflecting a lower volume of new IRLCs in the 2023 first quarter. Partly offsetting this impact were the higher principal amount of loan originations, which reflected the 2% increase in the average selling price of homes delivered, and an increase in the percentage of homebuyers using KBHS. Further information regarding our investments in unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.

INCOME TAXES

Income Tax Expense. Our income tax expense and effective tax rates were as follows (dollars in thousands):


	Three Months Ended February 28,
	2023			2022
Income tax expense	$	36,700		$	43,800
Effective tax rate	22.6		%	24.6		%

Our effective tax rate for the three months ended February 28, 2023 decreased from the year-earlier period, mainly due to a $5.5 million increase in the federal tax credits we recognized primarily from building energy-efficient homes and a $.5 million increase in excess tax benefits related to stock-based compensation, partly offset by a $1.4 million increase in nondeductible executive compensation expense.

Further information regarding our income taxes is provided in Note 13 – Income Taxes in the Notes to Consolidated Financial Statements in this report.

NON-GAAP FINANCIAL MEASURES

This report contains information about our adjusted housing gross profit margin, ~~and our ratio of net debt to capital, neither of~~ which ~~are~~is not calculated in accordance with GAAP. We believe ~~these~~this non-GAAP financial ~~measures are~~measure is relevant and useful to investors in understanding our operations and the leverage employed in our operations, and may be helpful in comparing us with other companies in the homebuilding industry to the extent they provide similar information. However, because ~~the adjusted housing gross profit margin and the ratio of net debt to capital are~~it is not calculated in accordance with GAAP, ~~these~~this non-GAAP financial ~~measures~~measure may not be completely comparable to other companies in the homebuilding industry and, thus, should not be considered in isolation or as an alternative to operating performance and/or financial measures prescribed by GAAP. Rather, ~~these~~this non-GAAP financial ~~measures~~measure should be used to supplement ~~their respective~~the most directly comparable GAAP financial ~~measures~~measure in order to provide a greater understanding of the factors and trends affecting our operations.

Adjusted Housing Gross Profit Margin. The following table reconciles our housing gross profit margin calculated in accordance with GAAP to the non-GAAP financial measure of our adjusted housing gross profit margin (dollars in thousands):


	Three Months Ended February 28,
	2023			2022
Housing revenues	$	1,378,537		$	1,394,154
Housing construction and land costs	(1,082,821)			(1,082,112)
Housing gross profits	295,716			312,042
Add: Inventory-related charges (a)	5,289			175
Adjusted housing gross profits	$	301,005		$	312,217

Housing gross profit margin as a percentage of housing revenues	21.5		%	22.4		%
Adjusted housing gross profit margin as a percentage of housing revenues	21.8		%	22.4		%

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Housing revenues $ 1,137,406
$ 910,111
$ 2,944,013
$ 2,390,165
Housing construction and land costs (953,413 ) (760,490 ) (2,488,577 ) (2,007,621 )
Housing gross profits 183,993
149,621
455,436
382,544
Add:    Inventory-related charges (a) 8,113
3,052
18,122
10,615
Housing gross profits excluding inventory-related charges 192,106
152,673
473,558
393,159
Add:    Amortization of previously capitalized interest (b) 55,036
40,424
143,254
106,181
Adjusted housing gross profits $ 247,142
$ 193,097
$ 616,812
$ 499,340
Housing gross profit margin as a percentage of housing revenues 16.2 % 16.4 % 15.5 % 16.0 %
Housing gross profit margin excluding inventory-related charges as a percentage of housing revenues 16.9 % 16.8 % 16.1 % 16.4 %
Adjusted housing gross profit margin as a percentage of housing revenues 21.7 % 21.2 % 21.0 % 20.9 %
(a)    Represents inventory impairment and land option contract abandonment charges associated with housing operations.


~~(a)~~	~~Represents inventory impairment and land option contract abandonment charges associated with housing operations.~~


~~(b)~~	~~Represents the amortization of previously capitalized interest associated with housing operations.~~

Adjusted housing gross profit margin is a non-GAAP financial measure, which we calculate by dividing housing revenues less housing construction and land costs excluding ~~(1)~~ housing inventory impairment and land option contract abandonment charges (as applicable) recorded during a given period, ~~and (2) amortization of previously capitalized interest associated with housing operations,~~ by housing revenues. The most directly comparable GAAP financial measure is housing gross profit margin. We believe adjusted housing gross profit margin is a relevant and useful financial measure to investors in evaluating our performance as it measures the gross profits we generated specifically on the homes delivered during a given period. This non-GAAP financial measure isolates the impact that the housing inventory impairment and land option contract abandonment charges ~~and the amortization of previously capitalized interest associated with housing operations,~~ have on housing gross profit margins, and allows investors to make comparisons with our competitors that adjust housing gross profit margins in a similar manner. We also believe investors will find adjusted housing gross profit margin relevant and useful because it represents a profitability measure that may be compared to a prior period without regard to variability of housing inventory impairment and land option contract abandonment ~~charges, and amortization of previously capitalized interest associated with housing operations.~~charges. This financial measure assists us in making strategic decisions regarding community location and product mix, product pricing and construction pace.

~~Ratio of Net Debt to Capital.~~ ~~The following table reconciles our ratio of debt to capital calculated in accordance with GAAP to the non-GAAP financial measure of our ratio of net debt to capital (dollars in thousands):~~

August 31,
2017 November 30,
2016
Notes payable $ 2,502,379
$ 2,640,149
Stockholders’ equity 1,840,942
1,723,145
Total capital $ 4,343,321
$ 4,363,294
Ratio of debt to capital 57.6 % 60.5 %

Notes payable $ 2,502,379
$ 2,640,149
Less: Cash and cash equivalents (494,053 ) (592,086 )
Net debt 2,008,326
2,048,063
Stockholders’ equity 1,840,942
1,723,145
Total capital $ 3,849,268
$ 3,771,208
Ratio of net debt to capital 52.2 % 54.3 %

The ratio of net debt to capital is a non-GAAP financial measure, which we calculate by dividing notes payable, net of homebuilding cash and cash equivalents, by capital (notes payable, net of homebuilding cash and cash equivalents, plus stockholders’ equity). The most directly comparable GAAP financial measure is the ratio of debt to capital. We believe the ratio of net debt to capital is a relevant and useful financial measure to investors in understanding the degree of leverage employed in our operations.

~~HOMEBUILDING REPORTING SEGMENTS~~

Below is a discussion of the financial results of each of our homebuilding reporting segments. Further information regarding these segments, including their pretax income (loss), is included in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report. The difference between each homebuilding reporting segment’s operating income (loss) and pretax income (loss) is generally due to the equity in income (loss) of unconsolidated joint ventures and/or interest income and expense.

~~West Coast. The following table presents financial information related to our West Coast homebuilding reporting segment for the periods indicated (dollars in thousands, except average selling price):~~

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 Variance 2017 2016 Variance
Revenues $ 609,598
$ 414,150
47 % $ 1,426,030
$ 1,029,269
39 %
Construction and land costs (512,921 ) (350,636 ) (46 ) (1,215,056 ) (877,363 ) (38 )
Selling, general and administrative expenses (37,402 ) (26,188 ) (43 ) (90,991 ) (70,321 ) (29 )
Operating income $ 59,275
$ 37,326
59 % $ 119,983
$ 81,585
47 %

Homes delivered 890
710
25 % 2,226
1,799
24 %
Average selling price $ 682,500
$ 583,300
17 % $ 639,600
$ 572,100
12 %
Housing gross profit margin 15.6 % 15.3 % 30 bps 14.7 % 14.8 % (10 )bps

This segment’s revenues for the three months and nine months ended August 31, 2017 were generated from both housing operations and land sales, while its revenues for the three months and nine months ended August 31, 2016 were generated solely from housing operations. Housing revenues for the 2017 third quarter grew 47% to $607.4 million. For the nine months ended August 31, 2017, housing revenues rose 38% from the corresponding year-earlier period to $1.42 billion. The housing revenue growth in each period of 2017 reflected increases in both the number of homes delivered and the average selling price of those homes. The increases in the number of homes delivered in the three-month and nine-month periods ended August 31, 2017 primarily reflected the substantially higher backlog level at the beginning of each period as compared to the corresponding year-earlier period, and were largely attributable to our Northern California operations. The average selling price of homes delivered during the three

months and nine months ended August 31, 2017 rose from the corresponding periods of 2016 due to a shift in product and geographic mix, and generally rising home prices. Land sale revenues consisted of contingent consideration (profit participation revenues) that we realized in the current period and totaled $2.2 million for both the three-month and nine-month periods ended August 31, 2017.

Operating income for the three months ended August 31, 2017 increased significantly from the year-earlier period, primarily reflecting higher housing gross profits, partly offset by higher selling, general and administrative expenses. Housing gross profits increased as a result of the higher volume of homes delivered and an increase in the housing gross profit margin. The year-over-year growth in the housing gross profit margin was mainly due to improved operating leverage from the increased volume of homes delivered and corresponding higher housing revenues and a shift in product and geographic mix, partly offset by higher construction and land costs, and an increase in the amortization of previously capitalized interest that was mainly due to longer-term development and/or extended construction time frames for certain communities. Inventory-related charges impacting the 2017 third quarter housing gross profit margin totaled $5.9 million, compared to $2.8 million in the year-earlier quarter. Land sales generated profits of $2.2 million for the three months ended August 31, 2017, reflecting the above-mentioned contingent consideration realized during the period. Selling, general and administrative expenses for the three months ended August 31, 2017 increased from the year-earlier period, primarily due to higher variable expenses associated with the increased volume of homes delivered and corresponding higher housing revenues.

For the nine months ended August 31, 2017, operating income rose 47% from the year-earlier period, mainly reflecting growth in housing gross profits that was partly offset by an increase in selling, general and administrative expenses. The increase in housing gross profits reflected the higher volume of homes delivered, partly offset by a slight decrease in the housing gross profit margin. The year-over-year decline in the housing gross profit margin was mainly due to higher construction and land costs, an increase in inventory-related charges, a shift in product and geographic mix of homes delivered, and an increase in the amortization of previously capitalized interest as discussed above with respect to the three months ended August 31, 2017. These impacts were partly offset by improved operating leverage from the increased volume of homes delivered and corresponding higher housing revenues. Inventory-related charges impacting the housing gross profit margin totaled $10.9 million for the nine-month period ended August 31, 2017 and $7.8 million for the corresponding period of 2016. Land sales generated profits of $2.2 million for the nine months ended August 31, 2017. Selling, general and administrative expenses for the nine months ended August 31, 2017 increased from the year-earlier period, primarily for the reasons described above with respect to the three months ended August 31, 2017.

~~Southwest. The following table presents financial information related to our Southwest homebuilding reporting segment for the periods indicated (dollars in thousands, except average selling price):~~

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 Variance 2017 2016 Variance
Revenues $ 132,307
$ 106,187
25 % $ 376,132
$ 318,190
18 %
Construction and land costs (111,959 ) (87,790 ) (28 ) (317,238 ) (260,541 ) (22 )
Selling, general and administrative expenses (8,239 ) (9,695 ) 15
(29,259 ) (24,986 ) (17 )
Operating income $ 12,109
$ 8,702
39 % $ 29,635
$ 32,663
(9 ) %

Homes delivered 454
369
23 % 1,297
1,111
17 %
Average selling price $ 291,400
$ 287,800
1 % $ 290,000
$ 286,400
1 %
Housing gross profit margin 15.4 % 17.3 % (190 )bps 15.7 % 18.1 % (240 )bps

This segment’s revenues for the three months and nine months ended August 31, 2017 and 2016 were generated solely from housing operations. Housing revenues for the three months and nine months ended August 31, 2017 increased 25% and 18%, respectively, from the corresponding year-earlier periods, reflecting increases in both the number of homes delivered and the average selling price of those homes. The year-over-year growth in the number of homes delivered primarily reflected the higher number of homes in backlog at the beginning of each of the 2017 periods as compared to the corresponding 2016 periods. The year-over-year increase in the number of homes delivered for the three months ended August 31, 2017 was attributable to both our Arizona and Nevada operations, while the increase for the nine months ended August 31, 2017 primarily occurred in our Nevada operations.

Operating income for the three months ended August 31, 2017 increased substantially from the corresponding period of 2016 due to higher housing gross profits and lower selling, general and administrative expenses. The year-over-year increase in the housing

gross profits reflected an increase in the number of homes delivered, partly offset by a decline in the housing gross profit margin. The decrease in the housing gross profit margin reflected higher construction and land costs and a shift in product mix of homes delivered. Inventory-related charges impacting the 2017 third quarter housing gross profit margin totaled $2.1 million, compared to $.1 million in the year-earlier quarter. Selling, general and administrative expenses for the 2017 third quarter decreased from the corresponding 2016 quarter, mainly due to a settlement received in a lawsuit in the current quarter, partly offset by higher variable expenses associated with the increased volume of homes delivered and corresponding higher housing revenues, and an increase to legal accruals. Sales incentives as a percentage of housing revenues in the three months ended August 31, 2017 decreased slightly from the year-earlier period.

For the nine months ended August 31, 2017, operating income decreased from the year-earlier period, reflecting lower housing gross profits and higher selling, general and administrative expenses. The decrease in housing gross profits reflected a year-over-year decline in the housing gross profit margin, partly offset by an increase in the number of homes delivered. The housing gross profit margin declined for the reasons described above with respect to the three-month period ended August 31, 2017, and higher inventory-related charges. Inventory-related charges impacting the housing gross profit margin totaled $3.4 million for the nine months ended August 31, 2017, compared to $.3 million for the year-earlier period. Selling, general and administrative expenses for the nine months ended August 31, 2017 rose from the year-earlier period, mainly due to higher variable expenses associated with the increased volume of homes delivered and corresponding higher housing revenues.

~~Central. The following table presents financial information related to our Central homebuilding reporting segment for the periods indicated (dollars in thousands, except average selling price):~~

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 Variance 2017 2016 Variance
Revenues $ 291,006
$ 265,524
10 % $ 826,008
$ 707,917
17 %
Construction and land costs (235,086 ) (212,629 ) (11 ) (671,509 ) (572,262 ) (17 )
Selling, general and administrative expenses (26,999 ) (25,294 ) (7 ) (78,761 ) (74,253 ) (6 )
Operating income $ 28,921
$ 27,601
5 % $ 75,738
$ 61,402
23 %

Homes delivered 1,032
976
6 % 2,898
2,647
9 %
Average selling price $ 280,800
$ 272,100
3 % $ 282,100
$ 265,900
6 %
Housing gross profit margin 19.4 % 19.9 % (50 )bps 18.9 % 19.4 % (50 )bps

This segment’s revenues for the three months and nine months ended August 31, 2017 and the nine months ended August 31, 2016 were generated from both housing operations and land sales. For the three months ended August 31, 2016, this segment’s revenues were generated solely from housing operations. Housing revenues for the 2017 third quarter increased 9% to $289.8 million from $265.5 million for the year-earlier quarter. For nine months ended August 31, 2017, housing revenues rose 16% to $817.5 million from $703.8 million. The housing revenue growth in each period of 2017 reflected increases in both the number of homes delivered and the average selling price of those homes. The year-over-year growth in the number of homes delivered in the three-month and nine-month periods ended August 31, 2017 reflected increases from both our Colorado and Texas operations, despite having missed approximately 50 deliveries due to Hurricane Harvey in Texas. The average selling price for the three months and nine months ended August 31, 2017 rose from the corresponding periods of 2016, primarily due to a greater proportion of homes delivered from higher-priced communities, a shift in product mix, and generally rising home prices. Land sale revenues for the three months ended August 31, 2017 totaled $1.2 million, while such revenues for the nine months ended August 31, 2017 and 2016 totaled $8.5 million and $4.2 million, respectively.

Operating income for the three months ended August 31, 2017 increased $1.3 million from the year-earlier period, mainly due to growth in housing gross profits, partly offset by an increase in selling, general and administrative expenses. Housing gross profits expanded due to the increased volume of homes delivered, partially offset by a decrease in the housing gross profit margin. The housing gross profit margin declined from the year-earlier quarter, largely due to higher construction and land costs and a shift in product mix of homes delivered. Land sales generated losses of $.2 million in the three months ended August 31, 2017. Selling, general and administrative expenses for the 2017 third quarter increased from the year-earlier quarter due to higher variable expenses associated with the increased volume of homes delivered and corresponding higher housing revenues, partly offset by lower overhead costs as a result of our cost containment efforts.

For the nine months ended August 31, 2017, operating income increased $14.3 million from the year-earlier period, mainly due to growth in housing gross profits. The increase in housing gross profits reflected an increase in the number of homes delivered,

partly offset by a lower housing gross profit margin. The housing gross profit margin decreased from the year-earlier period due to the reasons described above with respect to the three months ended August 31, 2017, partly offset by unfavorable warranty adjustments in the year-earlier period. Inventory-related charges impacting the housing gross profit margin totaled $.5 million for the nine-months ended August 31, 2017 and $1.2 million for corresponding period of 2016. Land sales generated losses of $.2 million and $.9 million for the nine months ended August 31, 2017 and 2016, respectively. The land sale loss for the nine months ended August 31, 2016 included an inventory impairment charge of approximately $.8 million related to the sales of our last remaining land parcels in the Rio Grande Valley area of Texas. Selling, general and administrative expenses for the nine months ended August 31, 2017 increased compared to the corresponding period of 2016, mainly due to the reasons described above with respect to the three months ended August 31, 2017. In addition, the nine-month period ended August 31, 2016 included an increase to a legal accrual.

~~Southeast. The following table presents financial information related to our Southeast homebuilding reporting segment for the periods indicated (dollars in thousands, except average selling price):~~

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 Variance 2017 2016 Variance
Revenues $ 107,876
$ 124,250
(13 ) % $ 328,935
$ 338,939
(3 ) %
Construction and land costs (93,517 ) (108,002 ) 13
(291,456 ) (303,308 ) 4
Selling, general and administrative expenses (13,230 ) (13,919 ) 5
(38,017 ) (44,140 ) 14
Operating income (loss) $ 1,129
$ 2,329
(52 ) % $ (538 ) $ (8,509 ) 94 %

Homes delivered 389
432
(10 ) % 1,148
1,212
(5 ) %
Average selling price $ 277,300
$ 287,600
(4 ) % $ 284,500
$ 279,700
2 %
Housing gross profit margin 13.5 % 13.1 % 40 bps 11.5 % 12.1 % (60 )bps

This segment’s revenues for the three months ended August 31, 2017 and the three months and nine months ended August 31, 2016 were generated solely from housing operations. Revenues for the nine months ended August 31, 2017 were generated from both housing operations and land sales. Housing revenues for the three months ended August 31, 2017 declined 13% from the year-earlier period, reflecting decreases in both the number of homes delivered and the average selling price of those homes. For the nine months ended August 31, 2017, housing revenues decreased 4% to $326.6 million due to a decrease in the number of homes delivered, partly offset by an increase in the average selling price. The year-over-year decreases in the number of homes delivered for the three months and nine months ended August 31, 2017 mainly reflected the wind down of our Metro Washington, D.C. operations. The year-over-year decrease in the average selling price for the three months ended August 31, 2017 was mainly due to a shift in mix, including the absence of deliveries from Metro Washington D.C. in the current period. The average selling price for the nine months ended August 31, 2017 rose from the corresponding 2016 period, primarily due to a greater proportion of homes delivered from higher-priced communities, a shift in product mix and generally rising home prices. Land sale revenues for the nine months ended August 31, 2017 totaled $2.4 million.

For the three months ended August 31, 2017, operating income declined from the prior year period due to a decrease in housing gross profits, partly offset by a decrease in selling, general and administrative expenses. The year-over-year decline in housing gross profits reflected a decrease in the number of homes delivered, partly offset by an improved housing gross profit margin. This segment’s housing gross profit margin increased on a year-over-year basis, primarily due to lower overall construction and land costs. Inventory-related charges impacting the housing gross profit margin for both of the three-month periods ended August 31, 2017 and 2016 totaled $.1 million. Sales incentives as a percentage of housing revenues in the 2017 third quarter increased slightly from the year-earlier quarter. Land sales generated nominal losses of $.2 million for the quarter ended August 31, 2017. Selling, general and administrative expenses decreased in the 2017 third quarter from the year-earlier period, primarily due to lower overhead costs and a lower volume of homes delivered.

For the nine months ended August 31, 2017, this segment’s operating loss improved significantly from the year-earlier period mainly due to a decrease in selling, general and administrative expenses and improved land sale results, partly offset by a decline in housing gross profits. Housing gross profits decreased compared to the year-earlier period, for the reasons described above with respect to the three months ended August 31, 2017. The housing gross profit margin decreased on a year-over-year basis, primarily due to higher overall construction and land costs and an increase in inventory-related charges, partly offset by unfavorable warranty adjustments in the year-earlier period. In the nine months ended August 31, 2017, inventory-related charges impacting the housing gross profit margin totaled $3.3 million, compared to $2.1 million for the prior-year period. Land sales generated break-even results for the nine months ended August 31, 2017. Land sale losses of $5.4 million for the nine months ended August

31, 2016 reflected inventory impairment charges associated with the wind down of our operations in the Metro Washington, D.C. area. Selling, general and administrative expenses for the nine-month period ended August 31, 2017 decreased from the year-earlier period, primarily due to lower overhead costs as a result of our cost containment efforts, the wind down of our Metro Washington, D.C. operations in 2016, and the lower volume of homes delivered. In addition, the 2016 period included a legal settlement of $2.5 million.

~~FINANCIAL SERVICES REPORTING SEGMENT~~

~~The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands):~~

Three Months Ended August 31, Nine Months Ended August 31,
2017 2016 2017 2016
Revenues $ 3,214
$ 3,172
$ 8,286
$ 8,389
Expenses (890 ) (891 ) (2,525 ) (2,621 )
Equity in income (loss) of unconsolidated joint ventures 660
132
1,600
(652 )
Pretax income $ 2,984
$ 2,413
$ 7,361
$ 5,116

~~Revenues~~. Financial services revenues for the three months ended August 31, 2017 totaled $3.2 million, essentially even with the year-earlier period. For the nine months ended August 31, 2017, financial services revenues decreased slightly to $8.3 million from $8.4 million for the corresponding period of 2016.

~~Expenses~~. General and administrative expenses totaled $.9 million for each of the three-month periods ended August 31, 2017 and August 31, 2016. For the nine months ended August 31, 2017 and 2016, general and administrative expenses totaled $2.5 million and $2.6 million, respectively.

~~Equity in Income (Loss) of Unconsolidated Joint Ventures~~. The equity in income of unconsolidated joint ventures was $.7 million for the three months ended August 31, 2017, compared to $.1 million for the three months ended August 31, 2016. For the nine months ended August 31, 2017, the equity in income of unconsolidated joint ventures was $1.6 million, compared to the equity in loss of unconsolidated joint ventures of $.7 million for corresponding period of 2016. The year-over-year changes for the three-month and nine-month periods ended August 31, 2017 primarily reflected the commencement of KBHS’ operations in 2017, as described below, and the wind down of HCM in the latter part of 2016. The equity in loss of unconsolidated joint ventures for the nine months ended August 31, 2016 was solely related to HCM’s operations. As part of the wind down of HCM’s operations, which is discussed in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report, HCM stopped originating loans in October 2016 and had no significant impact on our consolidated statements of operations for the three months or nine months ended August 31, 2017.

In connection with the wind-down process, our equity in loss of unconsolidated joint ventures in the 2016 fourth quarter reflected an increase in HCM’s reserves for potential future losses on certain loans it originated. While we believe we will not need to record any additional charges in connection with the wind down of HCM, it is reasonably possible that we may incur further losses with respect to our equity interest in future periods as the wind down of HCM is completed. Although we are currently unable to estimate the amount or range of such losses, if any, we believe they would not have a material impact on our consolidated financial statements.

In the 2016 fourth quarter, a subsidiary of ours and a subsidiary of Stearns Lending entered into an agreement to form KBHS, an unconsolidated mortgage banking joint venture to offer mortgage banking services, including mortgage loan originations, to our homebuyers. We and Stearns Lending each have a 50.0% ownership interest in KBHS, with Stearns Lending providing management oversight of KBHS’ operations. KBHS was operational in all of our served markets as of June 2017. Our financial services reporting segment is separately reported in our consolidated financial statements.

~~INCOME TAXES~~

Our income tax expense totaled $29.0 million and $14.1 million for the three months ended August 31, 2017 and 2016, respectively. For the nine months ended August 31, 2017 and 2016, our income tax expense totaled $56.4 million and $26.2 million, respectively. Our income tax expense for the three months ended August 31, 2017 reflected the favorable impact of $2.6 million of federal energy tax credits we earned from building energy-efficient homes through December 31, 2016, resulting in an effective income tax rate of 36.6%. For the three months ended August 31, 2016, our effective income tax rate of 26.4% reflected the favorable impact of $6.7 million of federal energy tax credits. Income tax expense for the nine months ended August 31, 2017 and 2016

reflected the favorable impact of federal energy tax credits of $3.8 million and $10.4 million, respectively. Our effective income tax rate was 36.9% for the nine months ended August 31, 2017, and 27.8% for the nine months ended August 31, 2016. There has not been any new legislation enacted extending the business tax credit for building energy-efficient homes beyond December 31, 2016.

At August 31, 2017 and November 30, 2016, we had deferred tax assets of $707.7 million and $763.8 million, respectively, that were partly offset by valuation allowances of $24.6 million and $24.8 million, respectively. The deferred tax asset valuation allowances as of August 31, 2017 and November 30, 2016 were primarily related to certain state NOLs that had not met the “more likely than not” realization standard at those dates. In the three months ended August 31, 2017, we reversed $.2 million of our deferred tax asset valuation allowance due to the utilization of additional state NOLs recognized with the filing of our 2016 state tax returns.

~~Further information regarding our income taxes is provided in Note 12 – Income Taxes in the Notes to Consolidated Financial Statements in this report.~~

Liquidity and Capital Resources

Overview. We have funded our homebuilding and financial services activities over the last several years with:

•internally generated cash flows;

~~public issuances of our common stock;~~

•public issuances of debt securities;

•borrowings under the Credit Facility;

•the Term Loan;

•land option contracts and other similar contracts and seller notes;

•public issuances of our common stock; and

•letters of credit and performance bonds.

~~We also have the ability to borrow funds under the Amended Credit Facility.~~ We manage our use of cash in the operation of our business to support the execution of our primary strategic goals. Over the past several years, we have primarily used cash for:

•land acquisition and land development;

•home construction;

•operating expenses;

•principal and interest payments on notes payable;

•repayments of borrowings under the Credit Facility;

•dividends paid to stockholders; and

•repurchases of our common stock.

We ended the 2023 first quarter with total liquidity of $1.24 billion, including cash ~~collateral.~~and cash equivalents and $983.4 million of available capacity under the Credit Facility. Based on our financial position as of February 28, 2023, and our business forecast for the remainder of 2023 as discussed below under “Outlook,” we have no material concerns related to our liquidity. While the softening in homebuyer demand that began in the 2022 second half indicates potential liquidity risks, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months. Though the financial industry and capital markets turmoil that began with regulatory authorities closing two U.S. banks in early March 2023 could also create a potential liquidity risk if it spreads, as discussed below under Part II, Item 1A – Risk Factors, as of the date of this report, we believe it will not impair our ability to access any cash and cash equivalents we have invested in interest-bearing bank deposit accounts, or the full borrowing, credit extension and payment guarantee capacities available under our Credit Facility and the LOC Facility.

Cash Requirements. There have been no significant changes in our cash requirements from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2022.

Investments in Land and Land Development.Our investments in land and land development ~~totaled $1.12 billion~~ for the ~~nine~~three months ended~~August 31, 2017~~, February 28, 2023 decreased 48% to $367.0 million, compared to ~~$1.06 billion~~$704.7 million for the ~~corresponding~~year-earlier period, primarily due to a strategic reduction in land acquisitions. In the three months ended February 28, 2023, our land acquisitions decreased 86% to $50.0 million from $365.8 million, reflecting a pivot in our land investment strategy beginning in the 2022 third quarter in response to softening housing market conditions, to emphasize developing land positions we already own or control under land option contracts and other similar contracts. We have also evaluated our transaction pipeline and renegotiated pricing and terms for many deals while abandoning others that no longer met our investment return standards. In addition, we have modified our land development strategy, electing where appropriate to build in smaller phases, and in some cases, defer the start of ~~2016. Approximately 49%~~the next phase of lots in a community to align with expected demand. Reflecting these shifts in our land strategy, approximately 14% of our total investments infor the ~~nine~~three months ended ~~August 31, 2017~~ February 28, 2023 related to land ~~acquisition,~~acquisitions, compared to approximately ~~50%~~52% in the ~~year-earlier~~prior-year period. While we made strategic investments in land and land development in each of our homebuilding reporting segments during the ~~first nine~~three months ~~of 2017~~ended February 28, 2023 and ~~2016,~~2022, approximately ~~61%~~53% and ~~65%~~57%, respectively, of these investments for each period were made in our West Coast homebuilding reporting segment.

For the remainder of 2023, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards, though we anticipate at a lower level than in the past two years. Our investments in land and land development in the future will depend significantly on market conditions and available opportunities that meet our investment return ~~standards to support home delivery and revenue growth in 2018 and beyond.~~standards.

The following table presents the number of lots ~~and the carrying value of inventory~~ we owned or controlled under land option contracts and other similar contracts and the carrying value of inventory by homebuilding reporting segment (dollars in thousands):


	August 31, 2017			November 30, 2016			Variance						February 28, 2023			November 30, 2022			Variance
Segment	Lots	$		Lots	$		Lots		$			Segment	Lots	Carrying Value		Lots	Carrying Value		Lots	Carrying Value
West Coast	11,157	$	1,774,028	10,904	$	1,726,740	253		$	47,288		West Coast	17,512	$	2,337,899	19,302	$	2,425,141	(1,790)	$	(87,242)
Southwest	9,253	562,779		8,338	522,320		915		40,459			Southwest	8,304	983,478		8,841	993,059		(537)	(9,581)
Central	18,211	815,056		18,272	769,237		(61	)	45,819			Central	21,918	1,255,966		24,001	1,278,420		(2,083)	(22,454)
Southeast	7,003	361,931		7,311	384,931		(308	)	(23,000		)	Southeast	14,670	867,810		16,651	846,556		(1,981)	21,254
Total	45,624	$	3,513,794	44,825	$	3,403,228	799		$	110,566		Total	62,404	$	5,445,153	68,795	$	5,543,176	(6,391)	$	(98,023)

The number and carrying value of ~~the~~ lots we owned or controlled under land option contracts and other similar contracts at ~~August 31, 2017 increased~~February 28, 2023 decreased from November 30, ~~2016 primarily due to the investments in land and land development we made during the nine months ended August 31, 2017, and an increase~~2022, reflecting homes delivered in the ~~number~~2023 first quarter as well as the above-mentioned pivot in our land investment strategy, which included our abandonment of ~~homes under construction, reflecting our higher backlog level. Overall,~~3,799 previously controlled lots in the current quarter. The number of lots we in inventory as of February 28, 2023 included 4,027 lots under contract where the associated deposits were refundable at our discretion, compared to 5,543 of such lots at November 30, 2022. Our lots

controlled under land option contracts and other similar contracts as a percentage of total lots was ~~22%~~26% at

~~August 31, 2017~~, February 28, 2023, compared to ~~21%~~30% at November 30, ~~2016.~~2022. Generally, this percentage fluctuates with our decisions to control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on available opportunities and our investment return standards.

~~We ended our 2017 third quarter with~~ ~~$494.1 million~~ ~~of cash~~Land Option Contracts and ~~cash equivalents, compared to~~ ~~$592.1 million~~ ~~at November 30, 2016. The majority of our cash and cash equivalents at~~ ~~August 31, 2017~~ ~~and November 30, 2016 was invested in interest-bearing bank deposit accounts.~~

~~Capital Resources.~~ ~~Our notes payable consisted of the following (in thousands):~~

August 31,
2017 November 30,
2016 Variance
Mortgages and land contracts due to land sellers and other loans $ 24,142
$ 66,927
$ (42,785 )
Senior notes 2,249,965
2,345,843
(95,878 )
Convertible senior notes 228,272
227,379
893
Total $ 2,502,379
$ 2,640,149
$ (137,770 )

On December 14, 2016, as a step toward reducing our debt in line with our returns-focused growth plan, we elected to exercise our optional redemption rights under the terms of the 9.10% Senior Notes due 2017. On January 13, 2017, we redeemed $100.0 million in aggregate principal amount of the notes outstanding at the redemption price calculated in accordance with the “make-whole” provisions of the notes. We used internally generated cash to fund this redemption. We paid a total of $105.3 million to redeem the notes and recorded a charge of $5.7 million for the early extinguishment of debt. Upon this redemption, $165.0 million in aggregate principal amount of the notes remained outstanding. As disclosed in Note 21 – Subsequent Event in the Notes to Consolidated Financial Statements in this report, on September 15, 2017, we repaid the remaining $165.0 million in aggregate principal amount of the 9.10% Senior Notes due 2017 at their maturity. We used internally generated cash to retire the notes.

~~Our financial leverage, as measured by the ratio of debt to capital, was~~ ~~57.6%~~ at ~~August 31, 2017, compared to~~ ~~60.5%~~ at November 30, 2016. Our ratio of net debt to capital (a calculation that is described above under “Non-GAAP Financial Measures”) at August 31, 2017 was 52.2%, compared to 54.3% at November 30, 2016.

~~LOC Facility. We had no letters of credit outstanding under the LOC Facility at August 31, 2017 or November 30, 2016.~~

~~Unsecured Revolving Credit Facility~~. On July 27, 2017, we entered into the Amended Credit Facility, which, among other things, increased the commitment under our unsecured revolving credit facility from $275.0 million to $500.0 million and extended its maturity from August 7, 2019 to July 27, 2021. The Amended Credit Facility also contains a sublimit of $250.0 million for the issuance of letters of credit, which may be utilized in combination with, or to replace, our LOC Facility. The amount of the Amended Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash borrowings and letters of credit outstanding under the Amended Credit Facility and the maximum available amount under the terms of the Amended Credit Facility. As of August 31, 2017, we had no cash borrowings and $33.0 million of letters of credit outstanding under the Amended Credit Facility. Therefore, as of August 31, 2017, we had $467.0 million available for cash borrowings under the Amended Credit Facility, with up to $217.0 million of that amount available for the issuance of additional letters of credit. The Amended Credit Facility is further described in Note 13 – Notes Payable in the Notes to Consolidated Financial Statements in this report.

Under the terms of the Amended Credit Facility, we are required, among other things, to maintain compliance with various covenants, including financial covenants relating to our consolidated tangible net worth, Leverage Ratio, and either an Interest Coverage Ratio or minimum level of liquidity, each as defined therein. Our compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Amended Credit Facility and can differ in certain respects from comparable GAAP or other commonly used terms. The financial covenant requirements are set forth below:

~~Consolidated Tangible Net Worth.~~ We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $1.24 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after May 31, 2017 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after May 31, 2017.

~~Leverage Ratio.~~ ~~We must also maintain a Leverage Ratio of less than or equal to .65 at the end of each fiscal quarter.~~

~~Interest Coverage Ratio or Liquidity.~~ We are also required to maintain either (a) an Interest Coverage Ratio of greater than or equal to 1.50 at the end of each fiscal quarter; or (b) a minimum level of liquidity, but not both. Our minimum liquidity is required to be greater than or equal to consolidated interest incurred, as defined under the Amended Credit Facility, for the four most recently ended fiscal quarters in the aggregate.

In addition, under the Amended Credit Facility, our investments in joint ventures and non-guarantor subsidiaries (which are shown, respectively, in Note 9 – Investments in Unconsolidated Joint Ventures and in Note 20 – Supplemental Guarantor Information in the Notes to Consolidated Financial Statements in this report) as of the end of each fiscal quarter cannot exceed the sum of (a) $104.8 million and (b) 20% of consolidated tangible net worth. Further, the Amended Credit Facility does not permit our borrowing base indebtedness, which is the aggregate principal amount of the outstanding indebtedness for borrowed money and non-collateralized financial letters of credit of us and certain of our subsidiaries, to be greater than the borrowing base (a measure of our inventory and unrestricted cash assets).

The covenants and other requirements under the Amended Credit Facility represent the most restrictive covenants that we are subject to with respect to our notes payable. The following table summarizes the financial covenants and other requirements under the Amended Credit Facility, and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of ~~August 31, 2017~~:

Financial Covenants and Other Requirements Covenant Requirement Actual
Consolidated tangible net worth > $1.27 billion $1.84 billion
Leverage Ratio < .650 .576
Interest Coverage Ratio (a) > 1.500 2.703
Minimum liquidity (a) > $175.1 million $494.1 million
Investments in joint ventures and non-guarantor subsidiaries < $473.0 million $101.8 million
Borrowing base in excess of borrowing base indebtedness (as defined) n/a $482.1 million


~~(a)~~	Under the terms of the Amended Credit Facility, we are required to maintain either a minimum Interest Coverage Ratio or a minimum level of liquidity, but not both. As of August 31, 2017, we met both the Interest Coverage Ratio and the minimum liquidity requirements.

The indenture governing the senior notes does not contain any financial covenants. Subject to specified exceptions, the indenture contains certain restrictive covenants that, among other things, limit our ability to incur secured indebtedness, or engage in sale-leaseback transactions involving property or assets above a certain specified value. In addition, the senior notes (with the exception of the 7 1/4% senior notes due 2018) contain certain limitations related to mergers, consolidations, and sales of assets.

Our obligations to pay principal, premium, if any, and interest under the senior notes and borrowings, if any, under the Amended Credit Facility are guaranteed on a joint and several basis by the Guarantor Subsidiaries. The guarantees are full and unconditional and the Guarantor Subsidiaries are 100% owned by us. We may also cause other subsidiaries of ours to become Guarantor Subsidiaries if we believe it to be in our or the relevant subsidiary’s best interests. Condensed consolidating financial information for our subsidiaries considered to be Guarantor Subsidiaries is provided in Note 20 – Supplemental Guarantor Information in the Notes to Consolidated Financial Statements in this report.

As of August 31, 2017, we were in compliance with the applicable terms of all our covenants under the Amended Credit Facility, the senior notes, the indenture, and the mortgages and land contracts due to land sellers and other loans. Our ability to access the Amended Credit Facility for cash borrowings and letters of credit and our ability to secure future debt financing depend, in part, on our ability to remain in such compliance. There are no agreements that restrict our payment of dividends other than to maintain compliance with the financial covenant requirements under the Amended Credit Facility, which would restrict our payment of dividends if a default under the Amended Credit Facility exists at the time of any such payment, or if any such payment would result in such a default.

Depending on available terms, we finance certain land acquisitions with purchase-money financing from land sellers or with other forms of financing from third parties. At August 31, 2017, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $24.1 million, secured primarily by the underlying property, which had an aggregate carrying value of $73.5 million.

~~Credit Ratings.~~ Our credit ratings are periodically reviewed by rating agencies. In April 2017, Moody’s Investor Services upgraded our corporate credit rating to B1, with a stable outlook, from B2, with a positive outlook. In August 2017, Standard and Poor’s Financial Services upgraded our rating to B+ from B, with a positive outlook. As of August 31, 2017, our credit rating by Fitch

~~Ratings was B+, with a stable outlook. On September 14, 2017, Fitch Ratings affirmed our credit rating at B+ and revised the rating outlook to positive from stable.~~

~~Consolidated Cash Flows. The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands):~~

Nine Months Ended August 31,
2017 2016
Net cash provided by (used in):
Operating activities $ 103,270
$ (102,612 )
Investing activities (13,638 ) (185 )
Financing activities (187,825 ) (119,822 )
Net decrease in cash and cash equivalents $ (98,193 ) $ (222,619 )

~~Operating Activities. Operating activities provided net cash of~~ ~~$103.3 million~~ ~~in the~~ ~~nine months endedAugust 31, 2017, and used~~ ~~$102.6 million~~ ~~in the~~ ~~nine months ended~~ ~~August 31, 2016. Generally, our net operating cash flows fluctuate primarily based on changes in our inventories and our profitability.~~

Our net cash provided by operating activities for the nine months ended August 31, 2017 largely reflected net income of $96.2 million, a net increase in accounts payable, accrued expenses and other liabilities of $9.9 million, and a net decrease in receivables of $2.2 million, partly offset by net cash of $95.9 million used for investments in inventories. In the nine months ended August 31, 2016, our net cash used in operating activities mainly reflected investments in inventories of $265.5 million, partly offset by net income of $68.1 million, a net increase in accounts payable, accrued expenses and other liabilities of $24.8 million, and a net decrease in receivables of $10.4 million.

~~Investing Activities~~. Investing activities used net cash of $13.6 million in the nine months ended August 31, 2017 and $.2 million in the year-earlier period. In the nine months ended August 31, 2017, our uses of cash included $15.2 million for contributions to unconsolidated joint ventures and $6.6 million for net purchases of property and equipment. These uses of cash were partially offset by an $8.2 million return of investments in unconsolidated joint ventures. In the nine months ended August 31, 2016, cash of $2.7 million was used for net purchases of property and equipment and $1.0 million was used for contributions to unconsolidated joint ventures. These uses were largely offset by a $3.5 million return of investments in unconsolidated joint ventures.

~~Financing Activities~~. Financing activities used net cash of $187.8 million in the nine months ended August 31, 2017 and $119.8 million in the nine months ended August 31, 2016. In the nine months ended August 31, 2017, cash was used for our optional early redemption of $100.0 million in aggregate principal amount of the 9.10% Senior Notes due 2017, payments on mortgages and land contracts due to land sellers and other loans of $92.4 million, dividend payments on our common stock of $6.5 million, repurchases of previously issued shares of our common stock delivered to us by employees to satisfy withholding taxes on the vesting of restricted stock and PSU awards, as well as shares forfeited by individuals upon their termination of employment at a total cost of $2.5 million, and $1.7 million of issuance costs for the Amended Credit Facility. The cash used in financing activities for the nine months ended August 31, 2017 was partly offset by $20.7 million of issuances of common stock under employee stock plans. In the nine months ended August 31, 2016, cash was used for repurchases of shares of our common stock at a total cost of $87.5 million, payments on mortgages and land contracts due to land sellers and other loans of $41.9 million, and dividend payments on our common stock of $6.5 million. The cash used was partly offset by a decrease of $8.7 million in our restricted cash balance and $7.4 million of issuances of common stock under employee stock plans.

During the three months ended August 31, 2017 and August 31, 2016, our board of directors declared, and we paid, a quarterly cash dividend of $.025 per share of common stock. Quarterly cash dividends declared and paid during the nine months ended August 31, 2017 and 2016 totaled $.075 per share of common stock. The declaration and payment of future cash dividends on our common stock are at the discretion of our board of directors and depend upon, among other things, our expected future earnings, cash flows, capital requirements, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions.

~~Shelf Registration.~~ On July 14, 2017, we filed the 2017 Shelf Registration with the SEC. The 2017 Shelf Registration registers the offering of securities that we may issue from time to time in amounts to be determined. Issuances of securities under our 2017 Shelf Registration require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued. Our ability to issue securities is subject to market conditions and other factors impacting our borrowing capacity. The 2017 Shelf Registration replaced our previously effective universal shelf registration statement filed with the SEC on July 18, 2014. We have not made any offerings of securities under the 2017 Shelf Registration.

We believe we have adequate capital resources and sufficient access to the credit and capital markets and external financing sources to satisfy our current and reasonably anticipated long-term requirements for funds to acquire assets and land, to use and/or develop acquired assets and land, to construct homes, to finance our financial services operations and to meet other needs in the ordinary course of our business. In addition to acquiring and/or developing land that meets our investment return standards, in the remainder of 2017, we may use or redeploy our cash resources or cash borrowings under the Amended Credit Facility to support other business purposes that are aligned with our primary strategic growth goals. We may also arrange or engage in capital markets, bank loan, project debt or other financial transactions. These transactions may include repurchases from time to time of our outstanding common stock. They may also include repurchases from time to time of our outstanding senior notes or other debt through redemptions, tender offers, exchange offers, private exchanges, open market or private purchases or other means, as well as potential new issuances of equity or senior or convertible senior notes or other debt through public offerings, private placements or other arrangements to raise or access additional capital to support our current land and land development investment targets, to complete strategic transactions and for other business purposes and/or to effect repurchases or additional redemptions of our outstanding senior notes or other debt. The amounts involved in these transactions, if any, may be material. As necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Amended Credit Facility or the LOC Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities to mature or expire. Our ability to engage in such transactions, however, may be constrained by economic, capital, credit and/or financial market conditions, investor interest and/or our current leverage ratios, and we can provide no assurance of the success or costs of any such transactions.

~~Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments~~

~~Unconsolidated Joint Ventures.~~ As discussed in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report, we have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located. Our unconsolidated joint ventures had total combined assets of ~~$169.7 million~~ at ~~August 31, 2017~~ ~~and~~ ~~$198.8 million~~ ~~at November 30, 2016. Our investments in unconsolidated joint ventures totaled~~ ~~$64.5 million~~ at ~~August 31, 2017~~ and $64.0 million at November 30, 2016. As of August 31, 2017, two of our unconsolidated joint ventures had outstanding secured debt totaling $25.6 million under separate construction loan agreements with different third-party lenders to finance their respective land development activities. The outstanding secured debt under these agreements is non-recourse to us, with $24.8 million scheduled to mature in August 2018 and the remainder scheduled to mature in February 2020. At November 30, 2016, only one of these unconsolidated joint ventures had outstanding secured debt of $44.4 million. None of our other unconsolidated joint ventures had any outstanding debt at August 31, 2017 or November 30, 2016. While we and our partners in the unconsolidated joint ventures that have the construction loan agreements provide certain guarantees and indemnities to the applicable lender, we do not have a guaranty or any other obligation to repay or to support the value of the collateral underlying the outstanding secured debt of these unconsolidated joint ventures. We do not believe that our existing exposure under our guaranty and indemnity obligations related to the outstanding secured debt of these unconsolidated joint ventures is material to our consolidated financial statements. None of our other unconsolidated joint ventures had outstanding debt at August 31, 2017 or November 30, 2016. Other Similar Contracts. As discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, ~~we determined that one of~~ our joint ventures at August 31, 2017 and November 30, 2016 was a VIE, but we were not the primary beneficiary of this VIE. All of our joint ventures were unconsolidated and accounted for under the equity method because we did not have a controlling financial interest.

Of the 388 unconsolidated joint venture lots controlled under land option and other similar contracts at August 31, 2017, we are committed to purchase 90 lots from one of our unconsolidated joint ventures in quarterly takedowns over the next three years for an aggregate purchase price of approximately $39.9 million under agreements that we entered into with the joint venture in 2016.

~~Land Option Contracts and Other Similar Contracts.~~ As discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, in the ordinary course of our business, we enter into land option contracts and other similar contracts with third parties and unconsolidated entities to acquire rights to land for the construction of homes. At ~~August 31, 2017, we had total cash deposits of~~ ~~$39.1 million~~ ~~to purchase land having an aggregate purchase price of~~ ~~$980.2 million. At November 30, 2016, we had total deposits of $42.8 million to purchase land having an aggregate purchase price of $1.07 billion. Our~~ land option contracts and other similar contracts generally do not contain provisions requiring our specific performance. Our decision to exercise a particular land option contract or other similar contract depends on the results of our due diligence reviews and ongoing market and project feasibility analysis that we conduct after entering into such a contract. In some cases, our decision to exercise a land option contract or other similar contract may be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development approvals, and/or physically developing the underlying land by a pre-determined date. We typically have the ability not to exercise our rights to the underlying land for any reason and forfeit our deposits without further penalty or obligation to the sellers. If we were to acquire all of the land we ~~controlled~~had under ~~our~~ land option contracts and other similar contracts at ~~August 31, 2017~~,February 28, 2023, we estimate the remaining purchase price to be paid would be as follows: ~~2017~~2023 –

~~$347.7~~ $428.2 million; ~~2018~~2024 – ~~$312.8~~$320.6 million; ~~2019~~2025 – ~~$113.0~~$121.1 million; ~~2020~~2026 – ~~$50.2~~$124.8 million; ~~2021~~2027 – ~~$35.8~~$6.0 million; and thereafter – ~~$81.6~~$3.3 million.

~~In addition to the~~Liquidity. The table below summarizes our cash ~~deposits,~~and cash equivalents, and total liquidity (in thousands):


	February 28, 2023		November 30, 2022
Cash and cash equivalents	$	260,127	$	328,517
Credit Facility commitment	1,090,000		1,090,000
Borrowings outstanding under the Credit Facility	(100,000)		(150,000)
Letters of credit outstanding under the Credit Facility	(6,650)		(6,650)
Credit Facility availability	983,350		933,350
Total liquidity	$	1,243,477	$	1,261,867

The majority of our ~~exposure to loss related to our land option contracts~~cash equivalents at February 28, 2023 and ~~other similar contracts~~November 30, 2022 were invested in interest-bearing bank deposit accounts.

Capital Resources. Our notes payable consisted of ~~pre-acquisition costs~~the following (in thousands):


	February 28, 2023		November 30, 2022		Variance
Credit Facility	$	100,000	$	150,000	$	(50,000)
Term Loan	357,653		357,485		168
Senior notes	1,326,674		1,326,266		408
Mortgages and land contracts due to land sellers and other loans	4,523		4,760		(237)
Total	$	1,788,850	$	1,838,511	$	(49,661)

Our financial leverage, as measured by the ratio of ~~$28.0 million~~debt to capital, was 32.6% at ~~August 31, 2017~~ ~~and~~ ~~$56.0 million~~February 28, 2023, compared to 33.4% at November 30, ~~2016. These pre-acquisition costs and cash deposits were included~~2022. The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity).

LOC Facility. We maintain the LOC Facility to obtain letters of credit from time to time in ~~inventories in~~the ordinary course of operating our ~~consolidated balance sheets.~~

~~We determined that as~~business. Under the LOC Facility, which expires on February 13, 2025, we may issue up to $75.0 million of ~~August 31, 2017~~letters of credit. As of February 28, 2023 and November 30, ~~2016~~2022, we ~~were not~~had letters of credit outstanding under the ~~primary beneficiary~~LOC Facility of ~~any VIEs from which we have acquired rights to land under land option contracts~~$23.1 million and other similar contracts. We also evaluated our land option contracts and other similar contracts for financing arrangements and, as a result of our evaluations, increased inventories, with a corresponding increase to accrued expenses and other liabilities, in our consolidated balance sheets by ~~$28.5~~$36.4 million, at ~~August 31, 2017~~ ~~and $50.5 million at November 30, 2016, as further~~ respectively.

Performance Bonds. As discussed in Note 816 – ~~Variable Interest Entities~~Commitments and Contingencies in the Notes to Consolidated Financial Statements in this ~~report.~~report, we had $1.30 billion and $1.27 billion of performance bonds outstanding at February 28, 2023 and November 30, 2022, respectively.

~~Contractual Obligations.~~ ~~Due~~Unsecured Revolving Credit Facility. We have a $1.09 billion Credit Facility that will mature on February 18, 2027. The Credit Facility contains an uncommitted accordion feature under which its aggregate principal amount of available loans can be

increased to a maximum of $1.29 billion under certain conditions, including obtaining additional bank commitments. The amount of the Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash borrowings and letters of credit outstanding under the Credit Facility and the maximum available amount under the terms of the Credit Facility. As of February 28, 2023, we had $100.0 million of cash borrowings and $6.6 million of letters of credit outstanding under the Credit Facility. The Credit Facility is further described in Note 14 – Notes Payable in the Notes to Consolidated Financial Statements in this report.

Under the terms of the Credit Facility and the Term Loan, as discussed below, we are required, among other things, to maintain compliance with various covenants, including financial covenants regarding our consolidated tangible net worth, Leverage Ratio, and either an Interest Coverage Ratio or minimum liquidity level, each as defined therein. Our compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Credit Facility and the Term Loan and can differ in certain respects from comparable GAAP or other commonly used terms. The financial covenant requirements under the Credit Facility and the Term Loan are set forth below:

•Consolidated tangible net worth – We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $2.09 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after November 30, 2021 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after November 30, 2021.

•Leverage Ratio – We must also maintain a Leverage Ratio of less than or equal to .60 at the end of each fiscal quarter. The Leverage Ratio is calculated as the ratio of our consolidated total indebtedness to the sum of consolidated total indebtedness and consolidated tangible net worth, all as defined under the Credit Facility.

•Interest Coverage Ratio or liquidity – We are also required to maintain either (a) an Interest Coverage Ratio of greater than or equal to 1.50 at the end of each fiscal quarter; or (b) a minimum level of liquidity, but not both. The Interest Coverage Ratio is the ratio of our consolidated adjusted EBITDA to consolidated interest incurred, each as defined under the Credit Facility and the Term Loan, in each case for the previous 12 months. Our minimum liquidity is required to be greater than or equal to consolidated interest incurred, as defined under the Credit Facility and the Term Loan, for the four most recently ended fiscal quarters in the aggregate.

In addition, under the Credit Facility and the Term Loan, our equity investments in joint ventures and non-guarantor subsidiaries and other unconsolidated entities as of the end of each fiscal quarter cannot exceed the sum of (a) $104.8 million and (b) 20% of consolidated tangible net worth. Further, for so long as we do not hold an investment grade rating, as defined under the Credit Facility and the Term Loan, the Credit Facility and the Term Loan do not permit our borrowing base indebtedness, which, subject to certain exceptions, is the aggregate principal amount of our and certain of our subsidiaries’ outstanding indebtedness for borrowed money and non-collateralized financial letters of credit, to be greater than our borrowing base (a measure relating to our ~~optional~~inventory and unrestricted cash assets).

The covenants and other requirements under the Credit Facility and the Term Loan represent the most restrictive covenants that we are subject to with respect to our notes payable. The following table summarizes the financial covenants and other requirements under the Credit Facility and the Term Loan, and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of February 28, 2023:

Financial Covenants and Other Requirements

Covenant Requirement

Actual

Consolidated tangible net worth

$2.56 billion

$3.66 billion

Leverage Ratio

.600

.329

Interest Coverage Ratio (a)

1.500

10.498

Minimum liquidity (a)

$119.2 million

$160.1 million

Investments in joint ventures and non-guarantor subsidiaries

$835.8 million

$290.2 million

Borrowing base in excess of borrowing base indebtedness (as defined)

n/a

$2.47 billion

(a) Under the terms of the Credit Facility and the Term Loan, we are required to maintain either a minimum Interest Coverage Ratio or a minimum level of liquidity.

The indenture governing our senior notes does not contain any financial covenants. Subject to specified exceptions, the indenture contains certain restrictive covenants that, among other things, limit our ability to incur secured indebtedness, or

engage in sale-leaseback transactions involving property above a certain specified value. In addition, the indenture contains certain limitations related to mergers, consolidations, and sales of assets.

As of February 28, 2023, we were in compliance with the applicable terms of all of our covenants and other requirements under the Credit Facility, the Term Loan, the senior notes, the indenture, and the mortgages and land contracts due to land sellers and other loans. Our ability to access the Credit Facility for cash borrowings and letters of credit and our ability to secure future debt financing depend, in part, on our ability to remain in such compliance. Our ability to access the Credit Facility’s full borrowing capacity, as well as the LOC Facility’s full issuance capacity, also depends on the ability and willingness of the applicable lenders and financial institutions, including any substitute or additional lenders and financial institutions, tomeet their commitments to fund loans, extend credit or provide payment guarantees to or for us under those instruments.

There are no agreements that restrict our payment of dividends other than the Credit Facility and the Term Loan, which would restrict our payment of certain dividends, such as cash dividends on our common stock, if a default under the Credit Facility or the Term Loan exists at the time of any such payment, or if any such payment would result in such a default (other than dividends paid within 60 days after declaration, if there was no default at the time of declaration).

Depending on available terms, we finance certain land acquisitions with purchase-money financing from land sellers or with other forms of financing from third parties. At February 28, 2023, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $4.5 million, secured primarily by the underlying property, which had an aggregate carrying value of $28.4 million.

Senior Unsecured Term Loan.We have a $360.0 million Term Loan with the lenders party thereto that will mature on August 25, 2026, or earlier if we secure borrowings under the Credit Facility without similarly securing the Term Loan (subject to certain exceptions). The Term Loan is further described in Note 14 – Notes Payable in the Notes to Consolidated Financial Statements in this report.

Consolidated Cash Flows. The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands):


	Three Months Ended February 28,
	2023		2022
Net cash provided by (used in):
Operating activities	$	93,917	$	(251,035)
Investing activities	(16,961)		(17,876)
Financing activities	(146,327)		219,512
Net decrease in cash and cash equivalents	$	(69,371)	$	(49,399)

Operating Activities. Generally, our net operating cash flows fluctuate mainly based on changes in our inventories and our profitability. Our net cash provided by operating activities for the three months ended February 28, 2023 primarily reflected net income of $125.5 million and a net decrease in inventories of $101.3 million, partly offset by a net decrease in accounts payable, accrued expenses and other liabilities of $131.7 million and a net increase in receivables of $25.3 million. In the three months ended February 28, 2022, our net cash used in operating activities mainly reflected a net increase in inventories of $405.9 million and a net increase in receivables of $8.6 million, partly offset by net income of $134.3 million and a net increase in accounts payable, accrued expenses and other liabilities of $2.1 million.

Investing Activities. In the three months ended February 28, 2023, our uses of cash included $13.2 million for contributions to unconsolidated joint ventures and $8.8 million for net purchases of property and equipment. These uses of cash were partially offset by a $5.1 million return of investments in unconsolidated joint ventures. In the three months ended February 28, 2022, the net cash used for investing activities reflected $10.6 million for net purchases of property and equipment and $8.6 million for contributions to unconsolidated joint ventures. These uses of cash were partially offset by a $1.3 million return of investments in unconsolidated joint ventures.

Financing Activities. In the three months ended February 28, 2023, our uses of cash included stock repurchases of $75.0 million, net repayments under the Credit Facility of $50.0 million, dividend payments on our common stock of $12.5 million, tax payments associated with stock-based compensation awards of $9.7 million and payments on mortgages and land contracts due to land sellers and other loans of $.2 million. The cash used was partly offset by $1.1 million of issuances of common stock under employee stock plans. In the three months ended February 28, 2022, cash was provided by net borrowings under the Credit Facility of $250.0 million. Partially offsetting the cash provided were $14.1 million of dividend payments on our

common stock, $12.2 million of tax payments associated with stock-based compensation awards, $3.8 million of costs incurred for an amendment of the Credit Facility and $.4 million of payments on mortgages and land contracts due to land sellers and other loans.

Dividends. In the three-month periods ended February 28, 2023 and 2022, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $.15 per share. The declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our board of directors and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions.

As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business. For the remainder of 2023, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility to support our business within the context of prevailing market conditions. During this time, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or equity securities or potential new issuances of debt or equity securities to support our business needs. The amounts involved in these transactions, if any, may be material. In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Credit Facility or the LOC Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities or loans to mature or expire. Our ability to engage in such transactions may be constrained by volatile or tight economic, capital, credit and/or financial market conditions or moderated investor and/or lender interest or capacity stemming from the unfavorable industry trends described above under “Overview” or other factors, and/or our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from any one or series of such transactions. The potential liquidity risks from the financial industry and capital markets turmoil that began in early ~~redemption~~March 2023 with the closing of two U.S. banks is discussed below under Part II, Item 1A – Risk Factors.

Supplemental Guarantor Financial Information

As of February 28, 2023, we had $1.34 billion in aggregate principal amount of outstanding senior notes, $100.0 million of borrowings outstanding under the Credit Facility and $360.0 million in aggregate principal amount of borrowings outstanding under the ~~9.10% Senior Notes due 2017, which is further described~~Term Loan. Our obligations to pay principal and interest on the senior notes and borrowings, if any, under the Credit Facility and the Term Loan are guaranteed on a joint and several basis by our Guarantor Subsidiaries. Our other subsidiaries, including all of our subsidiaries associated with our financial services operations, do not guarantee any such indebtedness (collectively, “Non-Guarantor Subsidiaries”), although we may cause a Non-Guarantor Subsidiary to become a Guarantor Subsidiary if we believe it to be in our or the relevant subsidiary’s best interest. See Note 1314 – Notes Payable in the Notes to Consolidated Financial Statements in this report for additional information regarding the terms of our ~~contractual~~senior notes, the Credit Facility and the Term Loan.

The guarantees are full and unconditional, and the Guarantor Subsidiaries are 100% owned by us. The guarantees are senior unsecured obligations of each of the Guarantor Subsidiaries and rank equally in right of payment with all unsecured and unsubordinated indebtedness and guarantees of such Guarantor Subsidiaries. The guarantees are effectively subordinated to any secured indebtedness of such Guarantor Subsidiaries to the extent of the value of the assets securing such indebtedness, and structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries.

Pursuant to the terms of the indenture governing the senior notes and the terms of the Credit Facility and the Term Loan, if any of the Guarantor Subsidiaries ceases to be a “significant subsidiary” as defined by Rule 1-02 of ~~August 31, 2017 have changed materially from those reported~~Regulation S-X using a 5% rather than a 10% threshold (provided that the assets of our Non-Guarantor Subsidiaries do not in the ~~“Management’s Discussion~~aggregate exceed 10% of an adjusted measure of our consolidated total assets), it will be automatically and ~~Analysis~~unconditionally released and discharged from its guaranty of ~~Financial Condition~~the senior notes, the Credit Facility and ~~Results~~the Term Loan so long as all guarantees by such Guarantor Subsidiary of ~~Operations” section in~~any other of our ~~Annual Report on Form 10-K for~~or our subsidiaries’ indebtedness are terminated at or prior to the ~~year ended November 30, 2016.~~ time of such release.

The following ~~table sets forth our future cash requirements related to~~tables present summarized financial information for KB Home and the ~~contractual obligations~~Guarantor Subsidiaries on a combined basis, excluding unconsolidated joint ventures and after the elimination of ~~our long-term debt~~(a) intercompany transactions and ~~interest as of August 31, 2017 (in millions):~~

Total 2017 2018-2019 2020-2021 Thereafter
Contractual obligations:
Long-term debt $ 2,519.1
$ 179.0
$ 940.1
$ 350.0
$ 1,050.0
Interest 554.2
54.2
258.4
171.0
70.6
Total $ 3,073.3
$ 233.2
$ 1,198.5
$ 521.0
$ 1,120.6

~~There have been no other significant changes~~balances between KB Home and the Guarantor Subsidiaries and (b) equity in ~~our contractual obligations~~earnings from ~~those reported~~and investments in the ~~“Management’s Discussion and Analysis of~~Non-Guarantor Subsidiaries. See Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial ~~Condition and Results of Operations” section~~Statements in this report for additional information regarding our ~~Annual Report on Form 10-K for the year ended November 30, 2016.~~unconsolidated joint ventures.


	February 28, 2023		November 30, 2022
Summarized Balance Sheet Data (in thousands)
Assets
Cash	$	218,810	$	265,916
Inventories	5,009,654		5,118,252
Amounts due from Non-Guarantor Subsidiaries	414,707		403,249
Total assets	6,283,930		6,404,755

Liabilities and Stockholders’ Equity
Notes payable	$	1,786,340	$	1,836,001
Amounts due to Non-Guarantor Subsidiaries	286,422		283,280
Total liabilities	2,827,446		2,977,348
Stockholders’ equity	3,456,484		3,427,407


	Three Months Ended February 28, 2023
Summarized Statement of Operations Data (in thousands)
Revenues	$	1,305,717
Construction and land costs	(1,017,038)
Selling, general and administrative expenses	(135,957)
Interest income from Non-Guarantor Subsidiaries	6,613
Pretax income	159,657
Net income	124,057

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires the use of judgment in the application of accounting policies and estimates of uncertain matters. There have been no significant changes to our critical accounting policies and estimates during the ~~nine~~three months ended ~~August 31, 2017~~February 28, 2023 from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section inof our Annual Report on Form 10-K for the year ended November 30, ~~2016.~~2022.

Recent Accounting Pronouncements

~~Recent~~There are no recent accounting pronouncements that are ~~discussed in Note 1 – Basis of Presentation and Significant Accounting Policies in the Notes~~expected to ~~Consolidated Financial Statements in this report.~~have a material impact on our consolidated financial statements.

Outlook

We believe ~~the~~several long-term housing market ~~will~~fundamental factors remain onpositive, including favorable demographics, a ~~positive trajectory~~decade-plus underproduction of new homes in relation to population growth and low resale home inventory. However, sharply higher mortgage interest rates beginning in early 2022, several years of rising housing prices, elevated inflation and various other macroeconomic and geopolitical concerns combined to significantly weaken housing market demand in the 2022 second half, and the soft market conditions continued in the 2023 first quarter. We expect consumer caution from interest rate and economic uncertainties as well as affordability pressures to continue to negatively impact homebuyer demand for the remainder of ~~2017 based on favorable industry fundamentals, including rising household formations, healthy economic conditions, high consumer confidence,~~2023, with lower net orders and ~~steady job and income growth, that are fueling demand with relatively low inventories of homes available~~higher cancellation rates anticipated for ~~sale in many markets.~~the 2023 second quarter, each as compared to the corresponding prior-year period.

Given these conditions, and depending on the market dynamics and the size and construction stage of the backlog within each community, we plan to continue to implement or maintain selective price adjustments and other homebuyer concessions to help generate new orders as we did in ~~most~~the 2023 first quarter. We anticipate the pricing adjustments and other homebuyer concessions we have selectively implemented since the 2022 third quarter and may continue to implement, as well as a community mix shift within our West Coast homebuilding reporting segment with a lower proportion of deliveries expected from higher-priced communities, will contribute to a year-over-year decrease in the overall average selling price of homes

delivered in each of the remaining quarters of 2023. At the same time, with the deceleration in housing starts compared to a year ago, we are continuing to pursue reductions in our ~~served markets,~~direct construction costs and cycle times to help offset any such pricing adjustments and other homebuyer concessions. We are committed to reducing our cycle times to achieve deliveries within a more traditional timeframe of between six and seven months from home sale to delivery.

We believe we are in a strong position to operate effectively through changing market conditions, with a solid balance sheet and liquidity, and anticipated healthy operating cash flow for the 2023 fiscal year. We plan to continue to moderate and be highly selective in our land investments until market conditions improve, as well as maintain a balanced approach to capital allocation to maximize long-term stockholder value. In this regard, on March 21, 2023, our board of directors approved a $500.0 million share repurchase authorization, providing us flexibility to continue to repurchase our common stock on an opportunistic basis.

We plan to continue to manage our product offerings, pricing, net order pace and inventory levels to optimize each asset based on ~~the year-over-year increase in~~local housing market conditions, leveraging our differentiating, highly customer-centric Built to Order business model and operational capabilities to help effectively meet evolving consumer preferences and budgets. With our backlog value of $3.31 billion at ~~August 31, 2017,~~February 28, 2023, we believe we ~~are well positioned to~~can achieve our ~~primary objectives~~projected results for ~~2017 as we continue~~2023, subject to ~~execute~~the factors and risks described in this report. Based on the foregoing, our ~~returns-focused growth plan. Our~~ present outlook for the 2023 second quarter and full year is as follows:

~~2017 Fourth~~2023 Second Quarter:

•We expect to generate housing revenues in the range of ~~$1.3~~$1.35 billion to ~~$1.4~~$1.50 billion, ~~compared to $1.2~~a decrease from $1.71 billion in the ~~year-earlier quarter, reflecting both the conversion of~~corresponding 2022 period, and anticipate our ~~higher backlog at August 31, 2017 into homes delivered and an anticipated overall~~ average selling price ~~of those homes~~to be approximately $480,000, compared to $494,300 in the year-earlier period, a 3% decrease year over year.

•We expect our homebuilding operating income margin will be in the range of ~~$425,000~~9.5% to ~~$430,000.~~10.5%, assuming no inventory-related charges, down from 15.5% for the year-earlier quarter.

•We expect our housing gross profit margin will be in the range of 20.0% to 21.0%, assuming no inventory-related charges, compared to 25.3% for the corresponding 2022 quarter.

•We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 10.3% to 10.8%, compared to 9.8% in the 2022 second quarter.

•We expect our effective tax rate will be approximately 24%. The effective tax rate for the year-earlier quarter was approximately 26%.

•We expect our average community count will be up in the range of 15% to 20%, compared to the prior-year quarter.

•We expect our net orders will range between 3,000 and 3,700, representing a year-over-year decline of 14% at the mid-point.

2023 Full Year

•We expect our housing revenues to be in the range of $5.20 billion to $5.90 billion, a decrease of 19% at the mid-point of the range, from $6.88 billion in 2022, and anticipate our average selling price will be in the range of $480,000 to $490,000, a decrease from $500,800 for 2022.

•We expect our homebuilding operating income margin to be in the range of 10.0% to 11.0%, assuming no inventory-related charges, compared to 15.6% for 2022.

•We expect our housing gross profit margin to be in the range of ~~18.0%~~20.5% to ~~18.3%~~21.5%, assuming no inventory-related ~~charges.~~charges, compared to 24.8% for 2022.

•We ~~believe~~expect our selling, general and administrative expenses as a percentage of housing revenues ~~will~~to be in the range of 10.0% to 11.0%, compared to 9.2% ~~to 9.4%.~~in the prior year.

•We expect ~~our operating income margin, excluding inventory-related charges, to~~the effective tax rate will be approximately ~~8.9%.~~24%, flat with 2022.

~~We are projecting an effective income tax rate of approximately 39%.~~

•We expect our average community count ~~for the fourth quarter~~ will be ~~approximately flat as compared to~~up year over year in the ~~2016 fourth quarter.~~low double-digit percentage range.

~~2017 Full-Year~~:

•We expect ~~our full-year housing revenues to be approximately $4.3 billion, an increase from $3.6 billion in 2016.~~

~~We expect our homebuilding operating income margin to be approximately 6.7%, assuming no inventory-related charges, as compared to 5.7% in 2016.~~

~~We expect our average community count to be approximately flat relative to 2016.~~

~~2018 Full-Year~~:

~~We expect our housing revenues to be~~a return on equity in the ~~range of $4.5 billion to $4.9 billion.~~

~~We expect our average community count to be flat to slightly down relative to 2017.~~

We have operations in Houston, Texas and in the state of Florida, areas that were severely impacted by recent hurricanes that caused heavy flooding in some locations and widespread damage to existing homes, commercial buildings and infrastructure. These operations constituted 15% of our housing revenues over the last twelve months. While these events did not significantly affect our results for the three-month or nine-month periods ended August 31, 2017, and our communities in the affected areas had minimal damage, we believe our Houston and Florida operations, and our consolidated financial statements, could be affected in the fourth quarter and future quarters by, among other things, a decline in 2017 fourth quarter net orders in the mid-single digit range; land development and home construction delays and/or elevated costs stemming from general hurricane-related recovery efforts that heighten the demand for, and constrain the supply of, building materials and available trade labor; warranty repair claims from our affected homeowners; and tempered homebuyer traffic and home sales activity.low double-digit percentage range.

Our future performance and the strategies we implement (and adjust or refine as necessary or appropriate) ~~in the 2017 fourth quarter and beyond~~ will ~~also~~ depend significantly on prevailing economic, employment, homebuilding industry and capital, credit and financial market conditions

and on a fairly stable and constructive political and regulatory environment (particularly in ~~regards~~regard to housing and mortgage loan financing policies),. The Federal Reserve’s aggressive raising of the federal funds interest rate and other measures during 2022 and into 2023 to moderate persistent U.S. inflation, and the further actions it may take, are expected to be an ongoing headwind for the housing market for the remainder of 2023, as they have elevated mortgage loan interest rates and created macroeconomic uncertainty and financial market turbulence that, among other ~~factors.~~things, has tempered consumer demand for homes and disrupted credit and lending markets. In addition, we believe the supply chain disruptions, other production challenges and construction cost pressures described in this Management’s Discussion and Analysis of Financial Condition and Results of Operations will generally persist for the remainder of 2023. The potential extent and effect of these factors on our business is highly uncertain, unpredictable and outside our control, and our past performance, including in the 2023 first quarter, should not be considered indicative of our future results on any metric or set of metrics, including, but not limited to, our net orders, backlog, revenues and returns.

Forward-Looking Statements

Investors are cautioned that certain statements contained in this report, as well as some statements by us in periodic press releases and other public disclosures and some oral statements by us to securities analysts, stockholders and others during presentations, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “hope,” and similar expressions constitute forward-looking statements. In addition, any statements that we may make or provide concerning future financial or operating performance (including without limitation future revenues, community count, homes delivered, net orders, selling prices, sales pace per new community, expenses, expense ratios, housing gross profits, housing gross profit margins, earnings or earnings per share, or growth or growth rates), future market conditions, future interest rates, and other economic conditions, ongoing business strategies or prospects, future dividends and changes in dividend levels, the value of our backlog (including amounts that we expect to realize upon delivery of homes included in our backlog and the timing of those deliveries), the value of our net orders, potential future asset acquisitions and the impact of completed acquisitions, future share issuances or repurchases, future debt issuances, repurchases or redemptions and other possible future actions are also forward-looking statements as defined by the Act. Forward-looking statements are based on our current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our operations, economic and market factors, and the homebuilding industry, among other things. These statements are not guarantees of future performance, and we have no specific policy or intention to update these statements. If we update or revise any such statement(s), no assumption should be made that we will further update or revise that statement(s) or update or revise any other such statement(s). In addition, forward-looking and other statements in this report and in other public or oral disclosures that express or contain opinions, views or assumptions about market or economic conditions; the success, performance, effectiveness and/or relative positioning

of our strategies, initiatives or operational activities; and other matters, may be based in whole or in part on general observations of our management, limited or anecdotal evidence and/or business or industry experience without in-depth or any particular empirical investigation, inquiry or analysis.

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The most important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, the following:

•general economic, employment and business conditions;

•population growth, household formations and demographic trends;

•conditions in the capital, credit and financial markets;

•our ability to access external financing sources and raise capital through the issuance of common stock, debt or other securities, and/or project financing, on favorable terms;

•the execution of any securities repurchases pursuant to our board of directors’ authorization;

•material and trade costs and ~~availability;~~availability, including building materials and appliances, and delays related to state and municipal construction, permitting, inspection and utility processes, which have been disrupted by key equipment shortages;

•consumer and producer price inflation;

•changes in interest ~~rates;~~rates, including those set by the Federal Reserve, which the Federal Reserve has increased sharply in the past few quarters and signaled an intention to aggressively further to moderate inflation, available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans;

•our debt level, including our ratio of debt to capital, and our ability to adjust our debt level and maturity schedule;

•our compliance with the terms of the ~~Amended~~ Credit ~~Facility;~~Facility and the Term Loan;

•the ability and willingness of the applicable lenders, including any substitute or additional lenders, to meet their commitments to fund loans, extend credit or provide payment guarantees to or for us under the Credit Facility or LOC Facility;

•volatility in the market price of our common stock;

•home selling prices, including our homes’ selling prices, increasing at a faster rate than consumer incomes;

•weak or declining consumer confidence, either generally or specifically with respect to purchasing homes;

•competition from other sellers of new and resale homes;

•weather events, significant natural disasters and other climate and environmental factors;

•any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations or raise the amount the federal government is authorized to borrow to meet its existing legal obligations, and financial markets’ and businesses’ reactions to any such failure;

•government actions, policies, programs and regulations directed at or affecting the housing market (including the ~~Dodd-Frank Act,~~ tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies), the homebuilding industry, or construction activities;

•changes in existing tax laws or enacted corporate income tax ~~rates;~~rates, including those resulting from regulatory guidance and interpretations issued with respect to thereto;

•changes in U.S. trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries;

•disruptions in world and regional trade flows, economic activity and supply chains due to the military conflict in Ukraine, including those stemming from wide-ranging sanctions the U.S. and other countries have imposed or may further impose on Russian business sectors, financial organizations, individuals and raw materials, the impact of which may, among other things, increase our operational costs, exacerbate building materials and appliance shortages and/or reduce our revenues and earnings;

•the adoption of new or amended financial accounting standards and the guidance and/or interpretations with respect thereto;

•the availability and cost of land in desirable ~~areas;~~areas and our ability to timely develop acquired land parcels and open new home communities;

•impairment, land option contract abandonment or other inventory-related charges, including any stemming from decreases in the value of our land assets;

•our warranty claims experience with respect to homes previously delivered and actual warranty costs incurred;

•costs and/or charges arising from regulatory compliance requirements or from legal, arbitral or regulatory proceedings, investigations, claims or settlements, including unfavorable outcomes in any such matters resulting in actual or potential monetary damage awards, penalties, fines or other direct or indirect payments, or injunctions, consent decrees or other voluntary or involuntary restrictions or adjustments to our business operations or practices that are beyond our current expectations and/or accruals;

•our ability to use/realize the net deferred tax assets we have generated;

•our ability to successfully implement our current and planned strategies and initiatives related to our product, geographic and market positioning, gaining share and scale in our served markets and in entering into new markets;

•our operational and investment concentration in markets in California;

•consumer interest in our new home communities and products, particularly from first-time homebuyers andhigher-income consumers;

•our ability to generate orders andconvert our backlog of orders to home deliveries and revenues, particularly in key markets in California;

•our ability to successfully implement our ~~returns-focused growth plan~~business strategies and achieve ~~the~~any associated ~~revenue, margin, profitability, cash flow, community reactivation, land sales, business growth, asset efficiency, return on invested capital, return on equity, net debt-to-capital ratio and other~~ financial and operational targets and ~~objectives;~~objectives, including those discussed in this report or in any of our other public filings, presentations or disclosures;

•income tax expense volatility associated with stock-based compensation;

•the ability of our homebuyers to obtain residential mortgage loans and mortgage banking ~~services;~~services, which may depend on the ability and willingness of lenders and financial institutions to offer such loans and services to our homebuyers;

•the performance of mortgage lenders to our homebuyers;

~~completing the wind down of HCM as planned;~~

•the performance of KBHS;

•the ability and willingness of the applicable lenders and financial institutions to extend credit facilities to KBHS to fund its originated mortgage loans;

•information technology failures and data security breaches;

•an epidemic or pandemic, and the control response measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; and

•other events outside of our control.

Please see our Annual Report on Form 10-K for the ~~fiscal~~ year ended November 30, ~~2016~~2022 and other filings with the SEC for a further discussion of these and other risks and uncertainties applicable to our business.


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~

We enter into debt obligations primarily to support general corporate purposes, including the operations of our subsidiaries. We are subject to interest rate risk on our senior notes. For fixed rate debt,Item 3.Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in ~~interest rates generally affect the fair value of the debt instrument, but not~~ our ~~earnings or cash flows. We generally have no obligation to prepay our debt before maturity, and, as a result, interest rate~~market risk and changes in fair market value should not have a significant impact on our fixed rate debt until we are required or elect to refinance or repurchase such debt. Under our current policies, we do not use interest rate derivative instruments to manage our exposure to changes in interest rates.

The following table presents principal cash flows by scheduled maturity, weighted average effective interest rates and the estimated fair value of our long-term fixed rate debt obligations as of August 31, 2017 (dollars in thousands):

Fiscal Year of Expected Maturity Fixed Rate Debt
Weighted Average
Effective Interest Rate
2017 $ 165,000
9.6 %
2018 300,000
7.3
2019 630,000
3.9
2020 350,000
8.5
2021 —
—
Thereafter 1,050,000
7.5
Total $ 2,495,000
6.9 %
Fair value at August 31, 2017 $ 2,698,056

since November 30, 2022. For additional information regarding our market risk, refer to the “Quantitative and Qualitative Disclosures About Market Risk” section of our Annual Report on Form 10-K for the year ended November 30, ~~2016.~~2022.


~~Item 4.~~	~~Controls and Procedures~~

Item 4.Controls and Procedures

We have established disclosure controls and procedures to ensure that information we are required to disclose in the reports we file or submit under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and accumulated and communicated to management, including our Chief Executive Officer (“Principal Executive Officer”) and Chief Financial Officer (“Principal Financial Officer”), as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of senior management, including our Principal Executive Officer and our Principal Financial Officer, we evaluated our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of ~~August 31, 2017~~.February 28, 2023.

~~There were~~We have invested significant resources over the past few years to develop and implement a new custom enterprise resource planning (“ERP”) system designed to improve the efficiency of our internal operational and administrative activities. While the new ERP system has become an increasing component of our business as more of our operating divisions transition to it, the related internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. Accordingly, we continue to rely upon a combination of our existing and new ERP systems for financial statement reporting purposes. Other than the new ERP system implementation, there have been no changes in our internal control over financial reporting during the quarter ended ~~August 31, 2017~~February 28, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.OTHER INFORMATION


~~Item 1.~~	~~Legal Proceedings~~

Item 1.Legal Proceedings

For a discussion of our legal proceedings, see Note 1617 – Legal Matters in the Notes to Consolidated Financial Statements in this report.


~~Item 1A.~~	~~Risk Factors~~

~~There~~Item 1A.Risk Factors

Except as set forth below, as of the date of this report, there have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended November 30, ~~2016.~~2022. However, we cannot provide any assurance that any such risk factor will not materialize.

Financial industry and capital markets turmoil may materially and adversely affect our liquidity and consolidated financial statements.

In early March 2023, federal and state banking regulators closed two U.S. banks, with which neither we nor KBHS had any banking, financing or other business relationships or dependencies, precipitating financial industry and capital markets turmoil centered on concerns about the stability and solvency of other banks and financial institutions and the attendant risk they may be closed and/or forced by governmental agencies into receivership or sale. The failure of other banks and financial institutions, if it occurs, could have a material adverse effect on our liquidity or consolidated financial statements if we have placed cash and cash equivalent deposits at such banks or financial institutions, or if such banks or financial institutions, or any substitute or additional banks or financial institutions, participate in our Credit Facility or LOC Facility. Under our Credit Facility, non-defaulting lenders are not obligated to cover or acquire a defaulting lender’s respective commitment to fund loans or to issue letters of credit, and may not issue additional letters of credit if we do not enter into arrangements to address the risk with respect to the defaulting lender (which may include cash collateral). If the non-defaulting lenders are unable or unwilling to cover or acquire a defaulting lender’s respective commitment, potentially due to other demands they face under other credit instruments to which they are party, or because of regulatory restrictions, among other factors, we may not be able to access the Credit Facility’s full borrowing or letter of credit capacity to support our business needs. Similarly, if the applicable lender fails to meet its commitment to provide payment guarantees for us under the LOC Facility, we may not be able to access its full issuance capacity to carry out important operational processes. In addition, if a party to the warehouse line of credit and master repurchase agreements KBHS uses to fund mortgage originations fails, or is unable or unwilling to fulfill their obligations, KBHS may be limited in its ability, or unable, to provide mortgage loans to our homebuyers, which may prevent them from closing on their home at the time expected or at all. Also, if there is a failure of the lender of the revolving line of credit to one of our unconsolidated joint ventures for it to finance its land acquisition, development and construction activities, the unconsolidated joint venture may be delayed or unable to complete the project.

Based on our outreach to our, KBHS’ and the unconsolidated joint venture’s banking and financial institution partners, and steps we have taken to place deposits only with certain of those partners, as of the date of this report, we believe the above-described financial industry and capital markets turmoil will not impair our, KBHS’ or the unconsolidated joint venture’s ability to access any cash and cash equivalents on deposit or the full amounts available for borrowings or other credit extensions under the applicable financial instruments, in each case if and as needed in the ordinary course.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

~~In January 2016,~~The following table summarizes purchases of our own equity securities during the three months ended February 28, 2023 (dollars in thousands, except per share amounts):


Period	Total Number of Shares Purchased	Average Price Paid per Share		Dollar Value of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (a)
December 1-31	—	$	—	$	—	$	150,000
January 1-31 (b)	1,159,816	38.80		44,998		105,002
February 1-28 (b)	1,082,594	36.72		30,002		75,000
Total	2,242,410	$	37.79	$	75,000

(a) On April 7, 2022, our board of directors authorized us to repurchase ~~a total of~~ up to ~~10,000,000 shares~~$300.0 million of our outstanding common stock. As of ~~August 31, 2017,~~November 30, 2022, there was $150.0 million of remaining availability under this share repurchase authorization. In the 2023 first quarter, we ~~had~~ repurchased ~~8,373,000~~1,965,442 shares of our common stock on the open market pursuant to this authorization at a total cost of ~~$85.9~~$75.0 million. ~~During~~As of February 28, 2023, we were authorized to repurchase up to $75.0 million of common stock in additional transactions, excluding excise tax. This authorization was replaced on March 21, 2023 by a subsequent authorization by our board of directors authorizing us to repurchase up to $500.0 million of our common stock, excluding excise tax.

(b) The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the ~~three months ended August~~net value of certain stock repurchases made after December 31, ~~2017, no~~2022. All dollar amounts presented exclude such excise taxes, as applicable.

The total number of shares ~~were repurchased pursuant~~purchased and average price paid per share in the above table includes previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of PSUs in February 2023, as described in Note 18 – Stockholders’ Equity in the Notes to Consolidated Financial Statements in this report. These transactions are not considered repurchases under the board of directors’ authorization.

Item 6.Exhibits


Exhibits

~~Exhibits~~22		List of Guarantor Subsidiaries, filed as an exhibit to our Annual Report on Form 10-K for the year ended November 30, 2022 (File No. 001-09195), is incorporated by reference herein.

~~10.53~~31.1		~~Second Amended and Restated Revolving Loan Agreement, dated as of July 27, 2017, among us, the banks party thereto, and Citibank, N.A., as Administrative Agent.~~

~~31.1~~	Certification of Jeffrey T. Mezger, Chairman, President and Chief Executive Officer of KB Home Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.

31.2		Certification of Jeff J. Kaminski, Executive Vice President and Chief Financial Officer of KB Home Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.

32.1		Certification of Jeffrey T. Mezger, Chairman, President and Chief Executive Officer of KB Home Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.

32.2		Certification of Jeff J. Kaminski, Executive Vice President and Chief Financial Officer of KB Home Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.

~~101~~101.INS		~~The following materials from KB Home’s Quarterly Report on Form 10-Q for~~XBRL Instance Document - the ~~quarter ended August 31, 2017, formatted~~instance document does not appear in ~~eXtensible Business Reporting Language (XBRL): (a) Consolidated Statements of Operations for~~ the ~~three months~~Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document and nine months ended August 31, 2017 and 2016, (b) Consolidated Balance Sheets as of August 31, 2017 and November 30, 2016, (c) Consolidated Statements of Cash Flows for the nine months ended August 31, 2017 and 2016, and (d) Notes to Consolidated Financial Statements.included in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	~~KB HOME~~ ~~Registrant~~



~~Dated~~			~~October 5, 2017~~KB HOME Registrant

~~By:~~

Dated

April 7, 2023

By:

/s/ JEFF J. KAMINSKI

Jeff J. Kaminski

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Dated

~~October 5, 2017~~April 7, 2023

By:

/s/ WILLIAM R. HOLLINGER

William R. Hollinger

Senior Vice President and Chief Accounting Officer

(Principal Accounting Officer)

~~INDEX OF EXHIBITS~~




~~10.53~~		~~Second Amended and Restated Revolving Loan Agreement, dated as of July 27, 2017, among us, the banks party thereto, and Citibank, N.A., as Administrative Agent.~~

~~31.1~~		~~Certification of Jeffrey T. Mezger, Chairman, President and Chief Executive Officer of KB Home Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~		~~Certification of Jeff J. Kaminski, Executive Vice President and Chief Financial Officer of KB Home Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~		Certification of Jeffrey T. Mezger, Chairman, President and Chief Executive Officer of KB Home Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2~~		Certification of Jeff J. Kaminski, Executive Vice President and Chief Financial Officer of KB Home Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101~~		The following materials from KB Home’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2017, formatted in eXtensible Business Reporting Language (XBRL): (a) Consolidated Statements of Operations for the three months and nine months ended August 31, 2017 and 2016, (b) Consolidated Balance Sheets as of August 31, 2017 and November 30, 2016, (c) Consolidated Statements of Cash Flows for the nine months ended August 31, 2017 and 2016, and (d) Notes to Consolidated Financial Statements.



Inventory impairment charges:
West Coast	$	4,992	$	2,579	$	8,136	$	7,153
Southwest	2,102		—		3,445		—
Central	—		—		—		787
Southeast	—		—		3,032		5,915
Total	$	7,094	$	2,579	$	14,613	$	13,855



	August 31, 2017		November 30, 2016
Inventories:
Homes under construction
West Coast	$	852,965	$	695,742
Southwest	170,805		130,886
Central	368,112		297,290
Southeast	109,595		122,020
Subtotal	1,501,477		1,245,938

Land under development
West Coast	698,736		820,088
Southwest	280,754		268,507
Central	432,448		456,508
Southeast	172,540		182,554
Subtotal	1,584,478		1,727,657

Land held for future development or sale
West Coast	222,327		210,910
Southwest	111,220		122,927
Central	14,496		15,439
Southeast	79,796		80,357
Subtotal	427,839		429,633
Total	$	3,513,794	$	3,403,228



Assets:
West Coast	$	1,920,337	$	1,847,279
Southwest	598,085		564,636
Central	934,610		909,497
Southeast	369,484		414,730
Corporate and other	1,264,356		1,384,983
Total	$	5,086,872	$	5,121,125



	Three Months Ended August 31,		Nine Months Ended August 31,
Unobservable Input (a)	2017	2016	2017	2016
Average selling price	$207,100 - $1,576,500	$351,600 - $486,000	$207,100 - $1,576,500	$280,100 - $486,000
Deliveries per month	2 - 4	2 - 3	2 - 4	1 - 4
Discount rate	17% - 18%	17%	17% - 18%	17% - 20%



	August 31, 2017		November 30, 2016
Number of investments in unconsolidated joint ventures	7		7
Investments in unconsolidated joint ventures	$	64,513	$	64,016
Number of unconsolidated joint venture lots controlled under land option contracts and other similar contracts	388		471



	August 31, 2017		November 30, 2016
Self-insurance and other litigation liabilities	$	202,690	$	170,988
Employee compensation and related benefits	128,838		130,352
Accrued interest payable	79,459		67,411
Warranty liability	63,811		56,682
Inventory-related obligations (a)	54,681		82,682
Customer deposits	19,511		18,175
Real estate and business taxes	14,622		14,370
Other	1,556		10,336
Total	$	565,168	$	550,996



	Nine Months Ended August 31, 2017
	Number of Shares
	Common Stock	Grantor Stock Ownership Trust		Treasury Stock		Common Stock		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Grantor Stock Ownership Trust			Treasury Stock			Total Stockholders’ Equity
Balance at November 30, 2016	116,224	(9,432	)	(21,720	)	$	116,224	$	696,938		$	1,563,742		$	(16,057	)	$	(102,300	)	$	(535,402	)	$	1,723,145
Net income	—	—		—		—		—			96,249			—			—			—			96,249
Dividends on common stock	—	—		—		—		—			(6,479		)	—			—			—			(6,479		)
Employee stock options/other	1,205	—		—		1,205		19,472			—			—			—			—			20,677
Stock awards	69	279		27		69		(3,767		)	—			—			3,021			677			—
Stock-based compensation	—	—		—		—		9,893			—			—			—			—			9,893
Stock repurchases	—	—		(152	)	—		—			—			—			—			(2,543		)	(2,543		)
Balance at August 31, 2017	117,498	(9,153	)	(21,845	)	$	117,498	$	722,536		$	1,653,512		$	(16,057	)	$	(99,279	)	$	(537,268	)	$	1,840,942



	Options		Weighted Average Exercise Price
Options outstanding at beginning of period	12,731,545		$	18.95
Granted	—		—
Exercised	(1,204,676	)	17.17
Cancelled	(945,742	)	28.51
Options outstanding at end of period	10,581,127		$	18.30
Options exercisable at end of period	8,556,885		$	18.98



	Three Months Ended August 31, 2017
	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Total revenues	$	—		$	1,048,045		$	95,956		$	—		$	1,144,001
Homebuilding:
Revenues	$	—		$	1,048,045		$	92,742		$	—		$	1,140,787
Construction and land costs	—			(871,350		)	(83,651		)	—			(955,001		)
Selling, general and administrative expenses	(23,220		)	(72,686		)	(13,189		)	—			(109,095		)
Operating income (loss)	(23,220		)	104,009			(4,098		)	—			76,691
Interest income	345			2			—			—			347
Interest expense	(41,746		)	(434		)	(1,254		)	43,434			—
Intercompany interest	77,367			(31,059		)	(2,874		)	(43,434		)	—
Equity in loss of unconsolidated joint ventures	—			(814		)	—			—			(814		)
Homebuilding pretax income (loss)	12,746			71,704			(8,226		)	—			76,224
Financial services pretax income	—			—			2,984			—			2,984
Total pretax income (loss)	12,746			71,704			(5,242		)	—			79,208
Income tax benefit (expense)	(3,700		)	(26,200		)	900			—			(29,000		)
Equity in net income of subsidiaries	41,162			—			—			(41,162		)	—
Net income (loss)	$	50,208		$	45,504		$	(4,342	)	$	(41,162	)	$	50,208



	Three Months Ended August 31, 2016
	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Total revenues	$	—		$	801,832		$	111,451		$	—		$	913,283
Homebuilding:
Revenues	$	—		$	801,832		$	108,279		$	—		$	910,111
Construction and land costs	—			(664,224		)	(96,266		)	—			(760,490		)
Selling, general and administrative expenses	(23,436		)	(64,541		)	(10,167		)	—			(98,144		)
Operating income (loss)	(23,436		)	73,067			1,846			—			51,477
Interest income	96			11			2			—			109
Interest expense	(46,485		)	—			—			46,485			—
Intercompany interest	78,834			(27,997		)	(4,352		)	(46,485		)	—
Equity in loss of unconsolidated joint ventures	—			(536		)	—			—			(536		)
Homebuilding pretax income (loss)	9,009			44,545			(2,504		)	—			51,050
Financial services pretax income	—			—			2,413			—			2,413
Total pretax income (loss)	9,009			44,545			(91		)	—			53,463
Income tax expense	(1,600		)	(12,300		)	(200		)	—			(14,100		)
Equity in net income of subsidiaries	31,954			—			—			(31,954		)	—
Net income (loss)	$	39,363		$	32,245		$	(291	)	$	(31,954	)	$	39,363



	Nine Months Ended August 31, 2016
	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Total revenues	$	—		$	2,103,943		$	298,761		$	—		$	2,402,704
Homebuilding:
Revenues	$	—		$	2,103,943		$	290,372		$	—		$	2,394,315
Construction and land costs	—			(1,751,995		)	(266,027		)	—			(2,018,022		)
Selling, general and administrative expenses	(66,752		)	(182,015		)	(31,119		)	—			(279,886		)
Operating income (loss)	(66,752		)	169,933			(6,774		)	—			96,407
Interest income	336			53			6			—			395
Interest expense	(135,192		)	(1,641		)	(2,161		)	133,327			(5,667		)
Intercompany interest	228,596			(82,984		)	(12,285		)	(133,327		)	—
Equity in loss of unconsolidated joint ventures	—			(1,961		)	(3		)	—			(1,964		)
Homebuilding pretax income (loss)	26,988			83,400			(21,217		)	—			89,171
Financial services pretax income	—			—			5,116			—			5,116
Total pretax income (loss)	26,988			83,400			(16,101		)	—			94,287
Income tax benefit (expense)	(3,700		)	(24,600		)	2,100			—			(26,200		)
Equity in net income of subsidiaries	44,799			—			—			(44,799		)	—
Net income (loss)	$	68,087		$	58,800		$	(14,001	)	$	(44,799	)	$	68,087



	0-2 years		3-5 years		6-10 years		Greater than 10 years		Total
Inventories	$	1,965.2	$	1,224.7	$	227.0	$	96.9	$	3,513.8



	Total		2017		2018-2019		2020-2021		Thereafter
Contractual obligations:
Long-term debt	$	2,519.1	$	179.0	$	940.1	$	350.0	$	1,050.0
Interest	554.2		54.2		258.4		171.0		70.6
Total	$	3,073.3	$	233.2	$	1,198.5	$	521.0	$	1,120.6



Fiscal Year of Expected Maturity	Fixed Rate Debt		Weighted Average Effective Interest Rate
2017	$	165,000	9.6	%
2018	300,000		7.3
2019	630,000		3.9
2020	350,000		8.5
2021	—		—
Thereafter	1,050,000		7.5
Total	$	2,495,000	6.9	%
Fair value at August 31, 2017	$	2,698,056