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.

For the quarterly period ended February ~~28, 2019~~29, 2020.


☐	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, California90024

~~(310)~~ (310) 231-4000

(Address 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 every Interactive Data File required to be submitted 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 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	☒	Accelerated filer	☐
Non-accelerated filer	☐	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~~ ~~February 28, 2019~~.

There were ~~87,134,108~~90,448,228 shares of the registrant’s common stock, par value $1.00 per share, outstanding on February ~~28, 2019~~29, 2020. The registrant’s grantor stock ownership trust held an additional ~~7,859,975~~7,317,336 shares of the registrant’s common stock on that date.

KB HOME

FORM 10-Q

INDEX



	Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations - Three Months Ended February 29, 2020 and February 28, 2019 ~~and 2018~~	3

Consolidated Balance Sheets - February ~~28, 2019~~29, 2020 and November 30, ~~2018~~2019	4

Consolidated Statements of Cash Flows - Three Months Ended February 29, 2020 and February 28, 2019 ~~and 2018~~	5

Notes to Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3431

Item 3. Quantitative and Qualitative Disclosures About Market Risk	5447

Item 4. Controls and Procedures	5447

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	5447

Item 1A. Risk Factors	5447

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	5548

Item 6. Exhibits	5549

SIGNATURES	5650

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

KB HOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts – Unaudited)


	Three Months Ended February 28,						Three Months Ended
	2019			2018			February 29, 2020			February 28, 2019
Total revenues	$	811,483		$	871,623		$	1,075,935		$	811,483
Homebuilding:
Revenues	$	808,788		$	869,205		$	1,072,382		$	808,788
Construction and land costs	(670,855		)	(729,478		)	(886,053		)	(670,855		)
Selling, general and administrative expenses	(106,594		)	(95,724		)	(126,134		)	(106,594		)
Operating income	31,339			44,003			60,195			31,339
Interest income	1,105			1,003			935			1,105
Equity in loss of unconsolidated joint ventures	(406		)	(845		)
Equity in income (loss) of unconsolidated joint ventures							1,905			(406		)
Homebuilding pretax income	32,038			44,161			63,035			32,038
Financial services:
Revenues	2,695			2,418			3,553			2,695
Expenses	(1,024		)	(953		)	(962		)	(1,024		)
Equity in income of unconsolidated joint ventures	802			419			3,222			802
Financial services pretax income	2,473			1,884			5,813			2,473
Total pretax income	34,511			46,045			68,848			34,511
Income tax expense	(4,500		)	(117,300		)	(9,100		)	(4,500		)
Net income (loss)	$	30,011		$	(71,255	)
Earnings (loss) per share:
Net income							$	59,748		$	30,011
Earnings per share:
Basic	$	.34		$	(.82	)	$	.66		$	.34
Diluted	$	.31		$	(.82	)	$	.63		$	.31
Weighted average shares outstanding:
Basic	86,972			87,155			89,842			86,972
Diluted	96,962			87,155			94,205			96,962
Cash dividends declared per common share	$	.025		$	.025		$	.090		$	.025

~~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.

•

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 2 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 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 insurance and other recoveries of ~~$57.2~~$50.8 million and ~~$56.9~~$50.6 million are included in receivables in our consolidated balance sheets at February ~~28, 2019~~29, 2020 and November 30, ~~2018,~~2019, 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,						Three Months Ended
	2019			2018			February 29, 2020			February 28, 2019
Balance at beginning of period	$	176,841		$	177,695		$	177,765		$	176,841
Self-insurance expense (a)	3,747			4,401			4,634			3,747
Payments (b)	(2,726		)	(1,401		)	(918		)	(2,726		)
Balance at end of period	$	177,862		$	180,695		$	181,481		$	177,862


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,
2019 2018 Variance
Revenues:
Homebuilding $ 808,788
$ 869,205
(7) %
Financial services 2,695
2,418
11
Total revenues $ 811,483
$ 871,623
(7) %
Pretax income:
Homebuilding $ 32,038
$ 44,161
(27) %
Financial services 2,473
1,884
31
Total pretax income 34,511
46,045
(25 )
Income tax expense (4,500 ) (117,300 ) (96) %
Net income (loss) $ 30,011
$ (71,255 ) (a)
Basic earnings (loss) per share $ .34
$ (.82 ) (a)
Diluted earnings (loss) per share $ .31
$ (.82 ) (a)


~~(a)~~	~~Percentage not meaningful.~~



	Three Months Ended
	February 29, 2020			February 28, 2019			Variance
Revenues:
Homebuilding	$	1,072,382		$	808,788		33	%
Financial services	3,553			2,695			32
Total revenues	$	1,075,935		$	811,483		33	%
Pretax income:
Homebuilding	$	63,035		$	32,038		97	%
Financial services	5,813			2,473			135
Total pretax income	68,848			34,511			99
Income tax expense	(9,100		)	(4,500		)	(102	)
Net income	$	59,748		$	30,011		99	%
Basic earnings per share	$	.66		$	.34		94	%
Diluted earnings per share	$	.63		$	.31		103	%

~~While fundamental housing~~

Housing market ~~factors~~conditions were generally ~~favorable~~healthy through the three months ended February 29, 2020, and we continued to execute on our long-standing, customer-centric operating strategy. Among other things, this strategy focuses on giving our customers the ability to personalize their homes at prices that are affordable relative to local median household income levels in order to appeal to a wide array of consumers, primarily first-time homebuyers, as well as to move-up and active adult homebuyers. In the ~~2019~~2020 first quarter, ~~with strong employment levels, relatively high consumer confidence and a limited supply~~approximately 57% of homes available for sale, affordability concerns, stemming from several years of home price appreciation and a rise in mortgage interest rates, that emerged in the latter part of 2018 continued to temper homebuyer demand. The year-over-year decline in our net order and backlog values for the second half of 2018, which primarily resulted from our lower overall average community count for the year, together with the related homebuyer demand dynamics, negatively impacted our results for the 2019 first quarter compared to the year-earlier quarter, including with respect to our homes delivered revenues, pretax income, net orders and backlog. In light of consumers’ heightened affordability concerns, we are implementing targeted product refinements in certain communities, including the addition of smaller square footage plans that offer comparable room count and livability, while retaining a wide range of choice for our customers. At the same time, we are encouraged that our net order activity improved over the course of the quarter as mortgage interest rates stabilized and moderated. We believe a continuation of these trends would enable uswere to ~~generate year over year revenue growth~~first-time homebuyers, compared to approximately 52% in the ~~2019 second half.~~year-earlier quarter.

Within our homebuilding operations, housing revenues for the ~~2019~~2020 first quarter ~~declined 8% year over year to $798.2 million, as~~grew from the year-earlier quarter, reflecting a 28% increase in the number of homes we delivered ~~decreased 3%~~ to ~~2,152~~2,752 and a 5% rise in the overall average selling price ~~of those homes declined 5%~~ to ~~$370,900.~~$389,500. Homebuilding operating income for the current quarter ~~decreased 29%~~increased 92% year over year to ~~$31.3~~$60.2 million, and, as a percentage of related revenues, ~~declined 120~~improved 170 basis points to ~~3.9%~~5.6%. Our housing gross profits for the quarter ~~decreased~~increased compared to the year-earlier period, mainly due to ~~the lower volume of homes delivered and corresponding lower~~higher housing revenues ~~partially offset by~~and a ~~100 basis~~30-basis point increase in our housing gross profit margin to ~~17.1%~~17.4%.

The ~~expansion of~~year-over-year increase in our housing gross profit margin primarily reflected ~~a reduction in the~~improved operating leverage due to higher housing revenues, and lower relative amortization of previously capitalized interest, ~~and accounting changes resulting from our adoption of ASC 606, effective December 1, 2018, partly~~partially offset by ~~other items.~~a shift in the mix of homes

delivered. Our selling, general and administrative expense ratio ~~increased 240~~improved 160 basis points to ~~13.4%~~11.8% of housing revenues, ~~also reflecting our adoption~~mainly as a result of ~~ASC 606, as well as~~ increased ~~marketing expenses~~operating leverage due to ~~support new community openings~~higher housing revenues in the ~~quarter and the impact of legal recoveries and favorable legal settlements in the prior-year~~ quarter. Further information regarding the accounting impacts resulting from our adoption of ASC 606 is provided in Note 1 – Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements in this report.

Reflecting the continued effective execution of our three-year Returns-Focused Growth Plan, which is centered around enhancing asset efficiency, reducing leverage and improving returns, we invested $384.2 million in land and land development during the

~~2019 first quarter and repaid the entire $230.0 million in aggregate principal amount of our 1.375% Convertible Senior Notes due 2019 at their February 1, 2019 maturity.~~

On February 20, 2019, we completed concurrent public offerings of $300.0 million in aggregate principal amount of 6.875% Senior Notes due 2027 and an additional $100.0 million in aggregate principal amount of our existing series of 7.625% Senior Notes due 2023. Net proceeds from these offerings totaled $400.0 million, after deducting the underwriting discount and our expenses relating to the offerings, and were applied towards the optional redemption of the entire $400.0 million in aggregate principal amount of our 4.75% Senior Notes due 2019 before their May 15, 2019 maturity date, which redemption we announced on February 5, 2019 and completed on March 8, 2019.

Our financial leverage, as measured by the ratio of debt to capital, was 50.9% at February 28, 2019, compared to 49.7% at November 30, 2018. Our ratio of net debt to capital (a calculation that is described below under “Non-GAAP Financial Measures”) at February 28, 2019 was 44.3%, compared to 41.6% at November 30, 2018, within the targeted range of 35% to 45% under our Returns-Focused Growth Plan.

The following table presents information concerning our net orders, cancellation rates, ending backlog and community count for the three-month periods ended February 29, 2020 and February 28, 2019 ~~and 2018~~ (dollars in thousands):


	Three Months Ended February 28,						Three Months Ended
	2019			2018			February 29, 2020			February 28, 2019
Net orders	2,675			2,784			3,495			2,675
Net order value (a)	$	1,022,087		$	1,173,092		$	1,382,654		$	1,022,087
Cancellation rates (b)	20		%	20		%	14		%	20		%
Ending backlog — homes	4,631			4,972			5,821			4,631
Ending backlog — value	$	1,658,284		$	1,966,683		$	2,124,551		$	1,658,284
Ending community count	248			219			250			248
Average community count	244			222			251			244

internally generated cash flows;

public issuances of debt securities;

borrowings under the Credit Facility;

~~public issuances of our common stock;~~

~~public issuances of debt securities;~~

land option contracts and other similar contracts and seller notes;

public issuances of our common stock; and

letters of credit and performance bonds.

land acquisition and land development;

principal and interest payments on notes payable; and

repayments of borrowings under the Credit Facility.

~~On February 1, 2019, we repaid the entire $230.0 million in aggregate principal amount of our 1.375% Convertible Senior Notes due 2019 at their maturity.~~

On February 20, 2019, pursuant to the 2017 Shelf Registration, we completed concurrent public offerings of $300.0 million in aggregate principal amount of 6.875% Senior Notes due 2027 and an additional $100.0 million in aggregate principal amount of our existing series of 7.625% Senior Notes due 2023. Net proceeds from these offerings totaled $400.0 million, after deducting the underwriting discount and our expenses relating to the offering, and were applied towards the optional redemption of the entire $400.0 million in aggregate principal amount of our 4.75% Senior Notes due 2019 before their May 15, 2019 maturity date, which redemption we announced on February 5, 2019 and completed on March 8, 2019.

~~We expect to generate housing revenues~~prevailing market conditions, which, given recent developments in the ~~range~~second quarter-to-date period, could rapidly and materially deteriorate or otherwise change. During this time, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of ~~$900.0 million~~debt or equity securities or potential new issuances of debt or equity securities to $950.0 million, compared to $1.09 billion in the year-earlier quarter, and anticipate our average selling price to be in the range of $375,000 to $380,000, representing a decrease in the range of 5% to 7% as compared to the year-earlier period.

~~We expect our housing gross profit margin to be in the range of 17.0% to 17.6%, assuming no inventory-related charges.~~

~~We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 12.3% to 12.9%.~~

~~We expect our homebuilding operating income margin, excluding inventory-related charges, to range from 4.2% to 5.2%.~~

~~We expect an effective tax rate, excluding potential impacts from stock-based compensation and/or tax credits, of approximately 26%.~~

~~We expect a diluted weighted average share count of approximately 92 million.~~

~~We expect our average community count will be up approximately 15% to 20% from the 2018 second quarter.~~

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 share repurchases pursuant to our board of directors’ authorization;

material and trade costs and availability;

changes in interest rates;

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 Credit Facility;

~~volatility in the market price of our common stock;~~


•	volatility in the market price of our common stock;

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, and financial markets’ and businesses’ reactions to that failure;

government actions, policies, programs and regulations directed at or affecting the housing market (including the ~~TCJA, 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, including those resulting from regulatory guidance and interpretations issued with respect to ~~the TCJA;~~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;

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 and our ability to timely develop acquired land parcels and open new home communities;

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;~~


•	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;

income tax expense volatility associated with stock-based compensation;

the ability of our homebuyers to obtain residential mortgage loans and mortgage banking services;

the performance of mortgage lenders to our homebuyers;

the performance of KBHS;

information technology failures and data security breaches;

an epidemic or pandemic (such as the outbreak and worldwide spread of COVID-19), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may (as with COVID-19) 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 year ended November 30, ~~2018~~2019 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,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 February 28, 2019 (dollars in thousands):

Fiscal Year of Expected Maturity Fixed Rate Debt
Weighted Average
Effective Interest Rate
2019 $ 400,000
5.0 %
2020 350,000
8.5
2021 —
—
2022 800,000
7.4
2023 350,000
7.6
Thereafter 300,000
7.1
Total $ 2,200,000
7.1
Fair value at February 28, 2019 $ 2,298,750

since November 30, 2019. 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, ~~2018.~~2019.


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 February ~~28, 2019~~29, 2020.

There were no changes in our internal control over financial reporting during the quarter ended February ~~28, 2019~~29, 2020 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

For a discussion of our legal proceedings, see Note 1718 – Legal Matters in the Notes to Consolidated Financial Statements in this report.


Item 1A.	Risk Factors

~~There~~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, ~~2018.~~2019.

Our business could be materially and adversely disrupted by an epidemic or pandemic (such as the present outbreak and worldwide spread of COVID-19), or similar public threat, or fear of such an event, and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it.

An epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a material adverse impact on our consolidated financial statements.

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. On March 13, 2020, the United States declared a national emergency

concerning the outbreak, and several states and municipalities have declared public health emergencies. Along with these declarations, there have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world, including quarantines, and “stay-at-home” orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

In response to these steps, in mid-March, we temporarily closed our sales centers, model homes and design studios to the general public. During this time, we have shifted to an appointment-only personalized home sales process where permitted, following recommended distancing and other health and safety protocols when meeting in person with a customer, and we are leveraging our virtual sales tools to give customers the ability to shop for a new KB home from their mobile device or personal computer. In addition, we shifted our corporate and division office functions to work remotely. Combined with our limiting construction operations largely to authorized activities and a reduction in the availability, capacity and efficiency of municipal and private services necessary to the progress of land development, homebuilding, completing mortgage loans and delivering homes, which in each case has varied by market depending on the scope of the restrictions local authorities have established, these appropriate measures have tempered our sales pace and delayed home deliveries in the latter part of March and through the date of this report. We also prioritized our warranty service activities to respond to emergency repair requests, and otherwise on a by-exception basis. We are uncertain of the potential full magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19, which include, among other things, significant volatility in financial markets and a sharp decrease in the value of equity securities, including our common stock. In addition, we can provide no assurance as to whether the COVID-19 public health effort will be intensified to such an extent that we will not be able to conduct any business operations in certain of our served markets or at all for an indefinite period.

Our business could also be negatively impacted over the medium-to-longer term if the disruptions related to COVID-19 decrease consumer confidence generally or with respect to purchasing a home; cause civil unrest; or precipitate a prolonged economic downturn and/or an extended rise in unemployment or tempering of wage growth, any of which could lower demand for our products; impair our ability to sell and build homes in a typical manner or at all, generate revenues and cash flows, and/or access the Credit Facility or the capital or lending markets (or significantly increase the costs of doing so), as may be necessary to sustain our business; increase the costs or decrease the supply of building materials or the availability of subcontractors and other talent, including as a result of infections or medically necessary or recommended self-quarantining, or governmental mandates to direct production activities to support public health efforts; and/or result in our recognizing charges in future periods, which may be material, for inventory impairments or land option contract abandonments, or both, related to our current inventory assets. The inherent uncertainty surrounding COVID-19, due in part to rapidly changing governmental directives, public health challenges and progress, and market reactions thereto, also makes it more challenging for our management to estimate the future performance of our business and develop strategies to generate growth or achieve our initial or any revised objectives for 2020.

Should the adverse impacts described above (or others that are currently unknown) occur, whether individually or collectively, we would expect to experience, among other things, decreases in our net orders, homes delivered, average selling prices, revenues and profitability, as we have in the first few weeks of our second quarter, and such impacts could be material to our consolidated financial statements in the second quarter and beyond. In addition, should the COVID-19 public health effort intensify to such an extent that we cannot operate in most or all of our served markets, we could generate few or no orders and deliver few, if any homes during the applicable period, which could be prolonged. Along with a potential increase in cancellations of home purchase contracts, if there are prolonged government restrictions on our business and our customers, and/or an extended economic recession, we could be unable to produce revenues and cash flows sufficient to conduct our business; meet the terms of our covenants and other requirements under the Credit Facility, our senior notes and the related indenture, and/or mortgages and land contracts due to land sellers and other loans; service our outstanding debt; or pay any dividends to our stockholders. Such a circumstance could, among other things, exhaust our available liquidity (and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all of our then-outstanding debt obligations, which we may be unable to do.

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

The following table summarizes our purchases of our own equity securities during the three months ended February ~~28, 2019:~~29, 2020:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
December 1-31	—	$	—	—	2,193,947	—	$	—	—	2,193,947
January 1-31	—	—		—	2,193,947	—	—		—	2,193,947
February 1-28	147,382	22.67		—	2,193,947
February 1-29						155,307	40.04		—	2,193,947
Total	147,382	$	22.67	—		155,307	$	40.04	—

In ~~January 2016,~~May 2018, our board of directors authorized us to repurchase a total of up to ~~10,000,000~~4,000,000 shares of our outstanding common stock. As of November 30, 2016, we had repurchased 8,373,000 shares of our common stock pursuant to this authorization, at a total cost of $85.9 million. On May 14, 2018 our board of directors reaffirmed the remainder of the 2016 authorization and approved and authorized the repurchase of 2,373,000 additional shares of our outstanding common stock, for a total of up to 4,000,000 shares authorized for repurchase. As of November 30,In 2018, we ~~had~~ repurchased 1,806,053 shares of our common stock pursuant to this authorization, at a total cost of $35.0 million. As of November 30, 2019, we had 2,193,947 shares authorized for repurchase. During the three months ended February ~~28, 2019,~~29, 2020, no shares were repurchased pursuant to this authorization.

The shares purchased during the three months ended February ~~28, 2019, as reflected in the above table,~~29, 2020 were previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of PSUs. These transactions are not considered repurchases under the board of directors’ authorization.

Item 6. Exhibits



Exhibits

~~4.22~~		Form of officers’ certificates and guarantors’ officers’ certificates establishing the form and terms of the 6.875% Senior Notes due 2027, filed as an exhibit to our Current Report on Form 8-K dated February 20, 2019 (File No. 001-09195), is incorporated by reference herein.

~~4.23~~		Form of officers’ certificates and guarantors’ officers’ certificates establishing the form and terms of the 7.625% Senior Notes due 2023, filed as an exhibit to our Current Report on Form 8-K dated February 20, 2019 (File No. 001-09195), is incorporated by reference herein.

~~4.24~~		~~Form of 6.875% Senior Notes due 2027, filed as an exhibit to our Current Report on Form 8-K dated February 20, 2019 (File No. 001-09195), is incorporated by reference herein.~~

~~4.25~~		~~Form of 7.625% Senior Notes due 2023, filed as an exhibit to our Current Report on Form 8-K dated February 20, 2019 (File No. 001-09195), is incorporated by reference herein.~~

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~~101.INS		~~The following materials from KB Home’s Quarterly Report on Form 10-Q for~~XBRL Instance Document - the ~~quarter ended February 28, 2019, formatted~~instance document does not appear in ~~eXtensible Business Reporting Language (XBRL): (a) Consolidated Statements of Operations for~~ the ~~three months ended February 28, 2019~~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 2018, (b) Consolidated Balance Sheets as of February 28, 2019 and November 30, 2018, (c) Consolidated Statements of Cash Flows for the three months ended February 28, 2019 and 2018, 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	April ~~5, 2019~~1, 2020	By:	/s/ JEFF J. KAMINSKI
			Jeff J. Kaminski Executive Vice President and Chief Financial Officer (Principal Financial Officer)



Dated	April ~~5, 2019~~1, 2020	By:	/s/ WILLIAM R. HOLLINGER
			William R. Hollinger Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)

5650


	February 28, 2019			November 30, 2018			February 29, 2020			November 30, 2019
Assets
Homebuilding:
Cash and cash equivalents	$	511,690		$	574,359		$	429,706		$	453,814
Receivables	313,609			292,830			297,215			249,055
Inventories	3,683,763			3,582,839			3,728,616			3,704,602
Investments in unconsolidated joint ventures	57,134			61,960			57,147			57,038
Property and equipment, net	55,330			24,283			64,453			65,043
Deferred tax assets, net	433,295			441,820			312,166			364,493
Other assets	89,560			83,100			129,719			83,041
	5,144,381			5,061,191			5,019,022			4,977,086
Financial services	29,275			12,380			33,812			38,396
Total assets	$	5,173,656		$	5,073,571		$	5,052,834		$	5,015,482

Liabilities and stockholders’ equity
Homebuilding:
Accounts payable	$	209,015		$	258,045		$	236,981		$	262,772
Accrued expenses and other liabilities	631,381			666,268			621,558			618,783
Notes payable	2,203,589			2,060,263			1,749,148			1,748,747
	3,043,985			2,984,576			2,607,687			2,630,302
Financial services	1,174			1,495			2,043			2,058
Stockholders’ equity:
Common stock	119,258			119,196			122,291			121,593
Paid-in capital	755,341			753,570			803,420			793,954
Retained earnings	1,936,523			1,897,168			2,211,851			2,157,183
Accumulated other comprehensive loss	(9,565		)	(9,565		)	(17,149		)	(15,506		)
Grantor stock ownership trust, at cost	(85,246		)	(88,472		)	(79,359		)	(82,758		)
Treasury stock, at cost	(587,814		)	(584,397		)	(597,950		)	(591,344		)
Total stockholders’ equity	2,128,497			2,087,500			2,443,104			2,383,122
Total liabilities and stockholders’ equity	$	5,173,656		$	5,073,571		$	5,052,834		$	5,015,482


	Three Months Ended February 28,						Three Months Ended
	2019			2018			February 29, 2020			February 28, 2019
Cash flows from operating activities:
Net income (loss)	$	30,011		$	(71,255	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Equity in (income) loss of unconsolidated joint ventures	(396		)	426
Net income							$	59,748		$	30,011
Adjustments to reconcile net income to net cash used in operating activities:
Equity in income of unconsolidated joint ventures							(5,127		)	(396		)
Distributions of earnings from unconsolidated joint ventures	2,400			1,300			8,150			2,400
Amortization of discounts, premiums and issuance costs	1,468			1,552			613			1,468
Depreciation and amortization	6,446			628			7,316			6,446
Deferred income taxes	4,501			117,068			8,500			4,501
Stock-based compensation	4,152			3,829			4,950			4,152
Inventory impairments and land option contract abandonments	3,555			4,985			5,672			3,555
Changes in assets and liabilities:
Receivables	(19,495		)	(6,024		)	(4,195		)	(19,495		)
Inventories	(154,083		)	(135,311		)	(17,941		)	(154,083		)
Accounts payable, accrued expenses and other liabilities	(70,057		)	(54,016		)	(60,996		)	(70,057		)
Other, net	(6,712		)	(4,862		)	(16,556		)	(6,712		)
Net cash used in operating activities	(198,210		)	(141,680		)	(9,866		)	(198,210		)
Cash flows from investing activities:
Contributions to unconsolidated joint ventures	(2,527		)	(8,025		)	(1,668		)	(2,527		)
Return of investments in unconsolidated joint ventures	5,001			1,099			500			5,001
Proceeds from sale of building	5,804			—			—			5,804
Purchases of property and equipment, net	(10,025		)	(1,924		)	(6,671		)	(10,025		)
Net cash used in investing activities	(1,747		)	(8,850		)	(7,839		)	(1,747		)
Cash flows from financing activities:
Proceeds from issuance of debt	405,250			—			—			405,250
Payment of debt issuance costs	(5,209		)	—			—			(5,209		)
Repayment of senior notes	(230,000		)	—			—			(230,000		)
Borrowings under revolving credit facility	140,000			—			—			140,000
Repayments under revolving credit facility	(140,000		)	—			—			(140,000		)
Payments on mortgages and land contracts due to land sellers and other loans	(28,020		)	(3,362		)	—			(28,020		)
Issuance of common stock under employee stock plans	832			2,946			8,226			832
Tax payments associated with stock-based compensation awards	(3,342		)	(6,787		)	(6,219		)	(3,342		)
Payments of cash dividends	(2,266		)	(2,322		)	(8,233		)	(2,266		)
Net cash provided by (used in) financing activities	137,245			(9,525		)	(6,226		)	137,245
Net decrease in cash and cash equivalents	(62,712		)	(160,055		)	(23,931		)	(62,712		)
Cash and cash equivalents at beginning of period	575,119			720,861			454,858			575,119
Cash and cash equivalents at end of period	$	512,407		$	560,806		$	430,927		$	512,407



Balance Sheet	Balance at November 30, 2018		Adjustments due to ASC 606			Balance at December 1, 2018
Assets
Homebuilding:
Inventories	$	3,582,839	$	(35,288	)	$	3,547,551
Deferred tax assets, net	441,820		(4,024		)	437,796
Property and equipment, net	24,283		31,194			55,477
Financial services	12,380		19,728			32,108
Stockholders’ equity:
Retained earnings	1,897,168		11,610			1,908,778



	As of February 28, 2019
Balance Sheet	As Reported		Amounts without the Adoption of ASC 606		Effect of Change Higher/(Lower)
Assets
Homebuilding:
Inventories	$	3,683,763	$	3,722,475	$	(38,712	)
Deferred tax assets, net	433,295		437,019		(3,724		)
Property and equipment, net	55,330		22,132		33,198
Financial services	29,275		9,442		19,833
Stockholders’ equity:
Retained earnings	1,936,523		1,925,928		10,595



	Three Months Ended
	February 29, 2020			February 28, 2019
Revenues:
West Coast	$	484,497		$	305,810
Southwest	191,318			157,656
Central	283,513			241,592
Southeast	113,054			103,730
Total	$	1,072,382		$	808,788

Pretax income (loss):
West Coast	$	34,029		$	17,916
Southwest	32,112			22,072
Central	22,678			18,583
Southeast	2,630			(545		)
Corporate and other	(28,414		)	(25,988		)
Total	$	63,035		$	32,038



	Three Months Ended February 28, 2019
Statement of Operations	As Reported			Amounts without the Adoption of ASC 606			Effect of Change Higher/(Lower)
Homebuilding:
Revenues	$	808,788		$	808,155		$	633
Construction and land costs	(670,855		)	(676,115		)	(5,260		)
Selling, general and administrative expenses	(106,594		)	(99,281		)	7,313
Operating income	31,339			32,759			(1,420		)
Financial services:
Revenues	2,695			2,590			105
Total pretax income	34,511			35,826			(1,315		)
Income tax expense	(4,500		)	(4,800		)	(300		)
Net income	30,011			31,026			(1,015		)
Diluted earnings per share	.31			.32			(.01		)



Inventory impairment and land option contract abandonment charges:
West Coast	$	4,392	$	3,251
Southwest	171		59
Central	984		245
Southeast	125		—
Total	$	5,672	$	3,555



Inventory impairment charges:
West Coast	$	3,196	$	4,699
Southwest	—		—
Central	—		—
Southeast	—		—
Total	$	3,196	$	4,699

Land option contract abandonment charges:
West Coast	$	55	$	208
Southwest	59		—
Central	245		78
Southeast	—		—
Total	$	359	$	286



	February 29, 2020		November 30, 2019
Assets:
West Coast	$	1,936,066	$	1,925,192
Southwest	732,656		674,310
Central	1,045,352		1,035,563
Southeast	438,274		441,451
Corporate and other	866,674		900,570
Total	$	5,019,022	$	4,977,086



	February 28, 2019		November 30, 2018
Inventories:
Homes under construction
West Coast	$	560,514	$	514,099
Southwest	170,760		173,036
Central	319,931		312,366
Southeast	138,705		125,651
Subtotal	1,189,910		1,125,152



	February 28, 2019		November 30, 2018
Land under development
West Coast	1,053,533		1,059,432
Southwest	426,106		404,201
Central	561,979		543,472
Southeast	209,351		212,831
Subtotal	2,250,969		2,219,936

Land held for future development or sale
West Coast	159,644		154,462
Southwest	30,761		21,137
Central	7,835		9,346
Southeast	44,644		52,806
Subtotal	242,884		237,751
Total	$	3,683,763	$	3,582,839



Assets:
West Coast	$	1,983,539	$	1,880,516
Southwest	672,264		631,509
Central	1,021,616		1,017,490
Southeast	442,982		463,224
Corporate and other	1,023,980		1,068,452
Total	$	5,144,381	$	5,061,191


(a)	Other assets at February ~~28,~~29, 2020 and November 30, 2019 included ~~$19.8~~$21.1 million and $20.6 million, respectively, of contract assets for estimated future renewal commissions ~~due~~related to ~~our adoption of ASC 606 effective December 1, 2018, as described in Note 1 – Basis of Presentation and Significant Accounting Policies.~~then-existing insurance policies.



	February 29, 2020			November 30, 2019
Due from utility companies, improvement districts and municipalities	$	129,234		$	128,047
Recoveries related to self-insurance and other legal claims	77,217			80,729
Income taxes receivable	44,304			—
Refundable deposits and bonds	11,494			10,925
Other	43,317			37,846
Subtotal	305,566			257,547
Allowance for doubtful accounts	(8,351		)	(8,492		)
Total	$	297,215		$	249,055



	February 29, 2020		November 30, 2019
Homes completed or under construction	$	1,306,344	$	1,340,412
Land under development	2,271,073		2,213,713
Land held for future development or sale (a)	151,199		150,477
Total	$	3,728,616	$	3,704,602


2.	Segment Information


3.	Financial Services


(a)	Interest amortized to construction and land costs for the three months ended February 28, 2019 ~~and 2018~~ included $.6 million ~~and $1.0 million, respectively,~~ related to land sales during the ~~periods.~~period. There was 0 such interest amortized for the three months ended February 29, 2020.


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



	Three Months Ended
Unobservable Input (a)	February 29, 2020	February 28, 2019
Average selling price	$302,700 - $915,500	$1,045,400
Deliveries per month	1 - 4	1
Discount rate	17% - 18%	17%



	Three Months Ended February 28,
Unobservable Input	2019	2018
Average selling price	$1,045,400	$774,100
Deliveries per month	1	3
Discount rate	17%	18%


(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.


	February 28, 2019				November 30, 2018				February 29, 2020				November 30, 2019
	Cash Deposits		Aggregate Purchase Price		Cash Deposits		Aggregate Purchase Price		Cash Deposits		Aggregate Purchase Price		Cash Deposits		Aggregate Purchase Price
Unconsolidated VIEs	$	22,733	$	758,458	$	26,542	$	784,334	$	34,070	$	793,439	$	34,595	$	823,427
Other land option contracts and other similar contracts	27,069		475,740		27,288		586,904		41,536		599,426		40,591		600,092
Total	$	49,802	$	1,234,198	$	53,830	$	1,371,238	$	75,606	$	1,392,865	$	75,186	$	1,423,519



	February 28, 2019		November 30, 2018
Number of investments in unconsolidated joint ventures	6		6
Investments in unconsolidated joint ventures	$	57,134	$	61,960
Number of unconsolidated joint venture lots controlled under land option contracts and other similar contracts	25		36



	February 29, 2020			November 30, 2019
Computer software and equipment	$	28,114		$	27,091
Model furnishings and sales office improvements	84,624			82,117
Leasehold improvements, office furniture and equipment	16,686			16,173
Subtotal	129,424			125,381
Less accumulated depreciation	(64,971		)	(60,338		)
Total	$	64,453		$	65,043


~~(a)~~	The balance at February 28, 2019 reflects a change in the classification of certain community sales office and marketing- and model home-related costs and related accumulated amortization from inventories to property and equipment, net due to our adoption of ASC 606 effective December 1, 2018, as described in Note 1 – Basis of Presentation and Significant Accounting Policies.


~~(b)~~	In January 2019, we completed the sale and leaseback of our office building in San Antonio, Texas. The sale generated net cash proceeds of $5.8 million and a gain of $2.2 million, which will be recognized on a straight-line basis over a 10-year lease term until our adoption of ASU 2016-02, when the remaining gain will be recognized as a transition adjustment to retained earnings.



	February 29, 2020		November 30, 2019
Cash surrender value and benefit receivable from corporate-owned life insurance contracts	$	74,010	$	73,849
Lease right-of-use assets	32,036		—
Prepaid expenses	20,637		5,944
Debt issuance costs associated with unsecured revolving credit facility, net	3,036		3,248
Total	$	129,719	$	83,041



	February 28, 2019		November 30, 2018
Cash surrender value of corporate-owned life insurance contracts	$	74,649	$	73,721
Prepaid expenses and other	14,911		9,379
Total	$	89,560	$	83,100



	February 29, 2020		November 30, 2019
Self-insurance and other legal liabilities	$	231,299	$	229,483
Employee compensation and related benefits	114,379		163,646
Warranty liability	90,213		88,839
Accrued interest payable	36,435		32,507
Inventory-related obligations (a)	34,130		26,264
Lease liabilities	33,538		—
Customer deposits	32,888		22,382
Real estate and business taxes	11,870		14,872
Other	36,806		40,790
Total	$	621,558	$	618,783



	February 28, 2019		November 30, 2018
Self-insurance and other litigation liabilities	$	297,361	$	283,651
Employee compensation and related benefits	101,444		148,549
Warranty liability	84,191		82,490
Accrued interest payable	46,498		31,180
Inventory-related obligations (a)	23,319		40,892
Customer deposits	20,122		19,491
Real estate and business taxes	9,529		16,639
Other	48,917		43,376
Total	$	631,381	$	666,268



Lease right-of-use assets (a)	$	32,388
Lease liabilities (b)	33,918
Lease right-of-use assets obtained in exchange for new lease liabilities	3,640
Non-cash operating lease expense	—
Cash payments on lease liabilities	2,743
Weighted-average remaining lease term	5.0 years
Weighted-average discount rate (incremental borrowing rate)	5.1		%


(a)	Represents lease right-of-use assets of $32.0 million within our homebuilding operations and $.4 million within our financial services operations.


(b)	Represents lease liabilities of $33.5 million within our homebuilding operations and $.4 million within our financial services operations.



Years Ending November 30,
2020	$	7,826
2021	8,342
2022	7,058
2023	5,234
2024	4,289
Thereafter	5,875
Total lease payments	38,624
Less: Interest	(4,706		)
Present value of lease liabilities	$	33,918



	February 29, 2020		November 30, 2019
Mortgages and land contracts due to land sellers and other loans	$	7,889	$	7,889
7.00% Senior notes due December 15, 2021	448,375		448,164
7.50% Senior notes due September 15, 2022	348,408		348,267
7.625% Senior notes due May 15, 2023	351,633		351,748
6.875% Senior notes due June 15, 2027	296,471		296,379
4.80% Senior notes due November 15, 2029	296,372		296,300
Total	$	1,749,148	$	1,748,747



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.