What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-07-08 compared with 2022-04-08 · 234 added, 141 removed, 542 unchanged (41% of the section changed)

2 unchanged sentences

(In Thousands, Except Per Share Amounts – Unaudited)

Three Months Ended February 28,

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Total revenues $ 1,720,062 $ 1,440,892 $ 3,118,851 $ 2,582,630

5 unchanged sentences

Interest income 39 241 75 894

Equity in income of unconsolidated joint ventures 23 304

Equity in income (loss) of unconsolidated joint ventures ( 310 ) ( 127 ) ( 287 ) 177

Homebuilding pretax income 264,189 163,016 433,810 278,067

60 unchanged sentences

(In Thousands – Unaudited)

Three Months Ended February 28,

Six Months Ended May 31,

Cash flows from operating activities:

4 unchanged sentences

Distributions of earnings from unconsolidated joint ventures

Amortization of premiums and issuance costs 549 644

Amortization of debt issuance costs and premiums 1,137 1,296

Depreciation and amortization

15,534 14,496

Deferred income taxes

11,500 31,700

Stock-based compensation

15,888 13,654

Inventory impairments and land option contract abandonments

4 unchanged sentences

84,259 44,847

( 3,254 ) 10,455

Net cash used in operating activities ( 314,812 ) ( 18,067 )

14 unchanged sentences

Issuance of common stock under employee stock plans

Stock repurchases ( 50,000 ) —

Tax payments associated with stock-based compensation awards

16 unchanged sentences

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for the fair presentation of our results for the interim periods presented.

The results of our consolidated operations for the three months ended February 28, 2022 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 results of our consolidated operations for the three months and six months ended May 31, 2022 are not necessarily indicative of the results to be expected for the full year due to seasonal variations in operating results and other factors.

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.

1 unchanged sentence

The 2019 coronavirus disease (“COVID-19”) pandemic and related responses by public health and governmental authorities to contain and combat the outbreak and spread (“COVID-19 control responses”) have adversely affected many economic sectors, significantly disrupted the global supply chain and fueled producer price and consumer inflation.

Our business was impacted by these issues during the three months ended February 28, 2022.

We experienced, among other things, ongoing construction services availability constraints, supply chain bottlenecks and rising and volatile raw and other building material prices amid uneven availability, particularly for lumber.

Our business continued to be impacted by these issues during the three months and six months ended May 31, 2022.

In addition, we encountered delays related to state and municipal construction permitting, inspection and utility processes.

All these factors, to varying degrees, extended our construction cycle times, delayed home deliveries and community openings and raised our costs in the 2022 first quarter.

They could also negatively impact our growth, margins and financial results in future periods, as could additional significant COVID-19-related disruptions, if they emerge.

At the same time, we continue to experience strong demand for our products and believe we are well-positioned to operate effectively through the present environment.

All these factors, to varying degrees, extended our construction cycle times, delayed home deliveries and community openings and raised our costs in the 2022 first half.

These factors could also negatively impact our growth, margins and financial results in future periods, as could additional significant COVID-19-related disruptions, if they emerge.

Use of Estimates.

3 unchanged sentences

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 $ 15.3 million at February 28, 2022 and $ 15.4 million at November 30, 2021.

At February 28, 2022 and November 30, 2021, the majority of our cash and cash equivalents was invested in interest-bearing bank deposit accounts.

Our cash equivalents totaled $ 15.5 million at May 31, 2022 and $ 15.4 million at November 30, 2021.

At May 31, 2022 and November 30, 2021, the majority of our cash and cash equivalents was invested in interest-bearing bank deposit accounts.

Comprehensive Income.

Our comprehensive income was $ 134.3 million for the three months ended February 28, 2022 and $ 97.1 million for the three months ended February 28, 2021.

Our comprehensive income for each of the three-month periods ended February 28, 2022 and 2021 was equal to our net income for the respective periods.

Our comprehensive income was $ 210.7 million for the three months ended May 31, 2022 and $ 143.4 million for the three months ended May 31, 2021.

For the six months ended May 31, 2022 and 2021, our comprehensive income was $ 344.9 million and $ 240.4 million, respectively.

Our comprehensive income for each of the three-month and six-month periods ended May 31, 2022 and 2021 was equal to our net income for the respective periods.

Adoption of New Accounting Pronouncement .

16 unchanged sentences

We have identified five operating reporting segments, comprised of four homebuilding reporting segments and one financial services reporting segment.

As of February 28, 2022, our homebuilding reporting segments conducted ongoing operations in the following states:

As of May 31, 2022, our homebuilding reporting segments conducted ongoing operations in the following states:

California, Idaho and Washington

12 unchanged sentences

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

Three Months Ended February 28,

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

West Coast $ 761,217 $ 625,690 $ 1,420,091 $ 1,140,206

Southwest 290,924 258,061 500,691 445,746

2 unchanged sentences

$ 1,714,826 $ 1,436,035 $ 3,108,980 $ 2,574,043

Three Months Ended February 28,

Pretax income (loss):

5 unchanged sentences

Total $ 264,189 $ 163,016 $ 433,810 $ 278,067

Inventory impairment and land option contract abandonment charges:

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Inventory impairment and land option contract abandonment charges:

West Coast $ 157 $ 117 $ 157 $ 3,918

Southwest 55 165 164 293

Central 520 70 586 70

Southeast — 105 — 240

Total $ 732 $ 457 $ 907 $ 4,521

2022 November 30,

7 unchanged sentences

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

Three Months Ended February 28,

Insurance commissions

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Insurance commissions $ 2,596 $ 2,432 $ 5,114 $ 4,280

Title services 2,637 2,425 4,738 4,307

Other 3 — 19 —

Total 5,236 4,857 9,871 8,587

General and administrative ( 1,362 ) ( 1,253 ) ( 2,709 ) ( 2,453 )

( 1,347 ) ( 1,200 )

Operating income 3,874 3,604 7,162 6,134

Equity in income of unconsolidated joint ventures

14,807 7,044 19,955 13,014

Pretax income $ 18,681 $ 10,648 $ 27,117 $ 19,148

1 unchanged sentence

Cash and cash equivalents $ 2,395 $ 1,372

$ 2,049 $ 1,372

Receivables 2,452 2,166

Investments in unconsolidated joint ventures 27,222 16,317

12,415 16,317

Other assets (a) 25,697 24,347

25,100 24,347

Total assets $ 57,766 $ 44,202

Accounts payable and accrued expenses $ 3,275 $ 2,685

$ 2,808 $ 2,685

Total liabilities $ 3,275 $ 2,685

(a) Other assets at February 28, 2022 and November 30, 2021 included $ 24.9 million and $ 24.1 million, respectively, of contract assets for estimated future renewal commissions.

(a) Other assets at May 31, 2022 and November 30, 2021 included $ 25.5 million and $ 24.1 million, respectively, of contract assets for estimated future renewal commissions.

Earnings Per Share

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

Three Months Ended February 28,

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Net income $ 210,670 $ 143,364 $ 344,927 $ 240,415

14 unchanged sentences

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 February 28, 2022 or 2021.

For the three-month periods ended February 28, 2022 and 2021, no outstanding stock options were excluded from the diluted earnings per share 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.

We had no other participating securities at May 31, 2022 or 2021.

For the three-month and six-month periods ended May 31, 2022 and 2021, no outstanding stock options were excluded from the diluted earnings per share 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.

Receivables consisted of the following (in thousands):

12 unchanged sentences

Total $ 5,557,649 $ 4,802,829

Land under development at February 28, 2022 and November 30, 2021 included land held for future development or sale of $ 52.9 million and $ 45.2 million, respectively .

Land under development at May 31, 2022 and November 30, 2021 included land held for future development or sale of $ 54.8 million and $ 45.2 million, 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.

2 unchanged sentences

Our interest costs were as follows (in thousands):

Three Months Ended February 28,

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Capitalized interest at beginning of period $ 159,649 $ 188,555 $ 161,119 $ 190,113

3 unchanged sentences

Capitalized interest at end of period $ 154,665 $ 180,065 $ 154,665 $ 180,065

(a) For the three months ended February 28, 2021, interest amortized to construction and land costs included a nominal amount related to land sales during the period.

(a) For the six months ended May 31, 2021, interest amortized to construction and land costs included a nominal amount related to land sales during the period.

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.

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.

1 unchanged sentence

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 one active community for recoverability as of February 28, 2022 with a carrying value of $ 6.6 million.

As of November 30, 2021, no active communities or land parcels were evaluated for recoverability.

In addition, we evaluated land held for future development for recoverability as of both February 28, 2022 and November 30, 2021.

Based on the results of our evaluations, we recognized no inventory impairment charges for the three months ended February 28, 2022 and $ 3.6 million of such charges for the three months ended February 28, 2021.

The inventory impairment charges for the 2021 first quarter reflected our decisions to make changes in our operational strategies aimed at more quickly monetizing our investment in certain communities by accelerating the overall pace for selling, building and delivering homes therein, including communities on land previously held for future development.

As of May 31, 2022 and November 30, 2021, no active communities or land parcels with indicators of potential impairment were identified.

As a result, no active communities or land parcels were evaluated for recoverability as of these dates.

We evaluated land held for future development for recoverability as of both May 31, 2022 and November 30, 2021.

Based on the results of our evaluations, we recognized no inventory impairment charges for the three months or six months ended May 31, 2022 or the three months ended May 31, 2021.

For the six months ended May 31, 2021, we recognized inventory impairment charges of $ 3.6 million that reflected our decisions to make changes in our operational strategies aimed at more quickly monetizing our investment in certain communities by accelerating the overall pace for selling, building and delivering homes therein, including communities on land previously held for future development.

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

Three Months Ended

Unobservable Input February 28, 2021

Three Months Ended May 31, Six Months Ended May 31,

Unobservable Input 2022 2021 2022 2021

Average selling price $ —

1 unchanged sentence

Discount rate — %

As of February 28, 2022, the aggregate carrying value of our inventory that had been impacted by inventory impairment charges was $ 90.6 million, representing seven communities and various other land parcels.

As of May 31, 2022, the aggregate carrying value of our inventory that had been impacted by inventory impairment charges was $ 81.7 million, representing seven communities and various other land parcels.

As of November 30, 2021, the aggregate carrying value of our inventory that had been impacted by inventory impairment charges was $ 87.7 million, representing 11 communities and various other land parcels.

1 unchanged sentence

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 $.2 million for the three months ended February 28, 2022 and $.4 million for the three months ended February 28, 2021.

Based on the results of our assessments, we recognized land option contract abandonment charges of $.7 million for the three months ended May 31, 2022 and $.9 million for the six months ended May 31, 2022.

For the three months and six months ended May 31, 2021, we recognized land option contract abandonment charges of $.5 million and $.9 million, respectively.

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, it is possible that actual results could differ substantially from those estimated.

4 unchanged sentences

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 February 28, 2022 and November 30, 2021 was a VIE, but we were not the primary beneficiary of the VIE.

Therefore, all of our joint ventures at February 28, 2022 and November 30, 2021 were unconsolidated and accounted for under the equity method because we did not have a controlling financial interest.

Based on our analyses, we determined that one of our joint ventures at May 31, 2022 and November 30, 2021 was a VIE, but we were not the primary beneficiary of the VIE.

Therefore, all of our joint ventures at May 31, 2022 and November 30, 2021 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.

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

February 28, 2022 and November 30, 2021, 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.

As a result of our analyses, we determined that as of May 31, 2022 and November 30, 2021, 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, 2022 November 30, 2021

May 31, 2022 November 30, 2021

Deposits Aggregate

6 unchanged sentences

$ 73,841 $ 1,863,846 $ 74,509 $ 1,859,851

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 $ 37.9 million at February 28, 2022 and $ 38.1 million at November 30, 2021.

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 $ 44.0 million at May 31, 2022 and $ 38.1 million at November 30, 2021.

These pre-acquisition costs and cash deposits were included in inventories in our consolidated balance sheets.

2 unchanged sentences

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).

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 $ 11.9 million at February 28, 2022 and $ 26.5 million at November 30, 2021.

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 $ 13.0 million at May 31, 2022 and $ 26.5 million at November 30, 2021.

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.

1 unchanged sentence

The obligations to make capital contributions are governed by each such unconsolidated joint venture’s respective operating agreement and related governing documents.

As of both February 28, 2022 and November 30, 2021, we had investments in six unconsolidated joint ventures.

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

Three Months Ended February 28,

As of both May 31, 2022 and November 30, 2021, we had investments in six homebuilding unconsolidated joint ventures.

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

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Revenues $ 1,108 $ 3,148 $ 3,958 $ 12,839

1 unchanged sentence

Other expense, net ( 918 ) ( 530 ) ( 1,348 ) ( 1,409 )

Income $ 121 $ 687

The lower combined revenues and construction and land costs for the three months ended February 28, 2022, as compared to the year-earlier period, mainly reflected a decrease in the number of homes delivered from an unconsolidated joint venture in California that delivered its last home in the 2021 second quarter.

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

Income (loss) $ ( 582 ) $ ( 201 ) $ ( 461 ) $ 486

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

2022 November 30,

Cash and cash equivalents $ 18,884 $ 15,731

105,734 64,034

Total assets $ 126,238 $ 80,610

Liabilities and equity

Accounts payable and other liabilities $ 11,871 $ 12,285

Notes payable (a)

Equity 85,253 68,325

Total liabilities and equity $ 126,238 $ 80,610

(a) As of May 31, 2022, one of our unconsolidated joint ventures had borrowings outstanding under a revolving line of credit it entered into with a third-party lender in April 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 other unconsolidated joint ventures had outstanding debt at May 31, 2022 or November 30, 2021 .

We provide certain guarantees and indemnities to the lender in connection with the above-described revolving line of credit for one of our unconsolidated joint ventures, including a guaranty of interest and carry costs;

a guaranty to complete the construction of phases of the improvements for the project as such phases are commenced;

a guaranty against losses suffered due to certain bad acts or failures to act by the unconsolidated joint venture or its partners;

and an indemnity from environmental issues.

Except to the extent related to the foregoing guarantees and 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 underlying collateral.

However, various financial and non-financial covenants apply under the line of credit and with respect to the related guaranty and indemnity obligations, and a failure to comply with such covenants could result in a default and cause the lender to seek to enforce such guaranty and indemnity obligations.

As of the date of this report, we were in compliance with the relevant covenants.

We do not believe that our existing exposure under our guaranty and indemnity obligations related to outstanding borrowings under the line of credit is material to our consolidated financial statements.

Financial Services.

The following table presents combined condensed information from the statements of operations for our financial services unconsolidated joint ventures, primarily comprised of KBHS (in thousands):

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Revenues $ 50,224 $ 34,298 $ 80,200 $ 65,370

Expenses ( 20,607 ) ( 20,240 ) ( 40,287 ) ( 39,373 )

Income $ 29,617 $ 14,058 $ 39,913 $ 25,997

Revenues are primarily generated from fees earned on mortgage loan originations, interest earned for the period loans are held by KBHS, and 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 financial services unconsolidated joint ventures, primarily comprised of KBHS (in thousands):

2022 November 30,

Cash and cash equivalents $ 18,867 $ 23,916

Mortgage loans held for sale 189,255 234,669

Other assets 68,493 46,218

Total assets $ 276,615 $ 304,803

1 unchanged sentence

Accounts payable and other liabilities $ 18,680 $ 18,375

Funding facilities 203,486 253,791

Equity 54,449 32,637

Total liabilities and equity $ 276,615 $ 304,803

Mortgage loans held for sale .

Originated mortgage loans expected to be sold into the secondary market in 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 $ 42.9 million at May 31, 2022 and $ 9.5 million at November 30, 2021.

The change in fair value of IRLCs, which was reported in revenues, totaled $ 25.8 million and $ 33.4 million for the three months and six months ended May 31, 2022, respectively, and $ 1.9 million and $ 2.6 million for the three months and six months ended May 31, 2021, respectively.

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 May 31, 2022.

KBHS intends to renew these agreements when they expire at various dates in 2022 and 2023.

The warehouse line of credit and master repurchase agreements are not guaranteed by us or any of the subsidiaries that guarantee our homebuilding notes payable (“Guarantor Subsidiaries”) .

Other assets consisted of the following (in thousands):

4 unchanged sentences

Debt issuance costs associated with unsecured revolving credit facility, net 4,869 1,553

$ 104,716 $ 104,153

Total $ 111,222 $ 104,153

Accrued Expenses and Other Liabilities

5 unchanged sentences

Customer deposits 91,903 71,032

Federal and state taxes payable 47,388 8,290

Accrued interest payable 32,160 24,554

Lease liabilities 26,908 29,279

Accrued interest payable 24,791 24,554

Inventory-related obligations (a) 21,142 36,146

Federal and state taxes payable 15,224 8,290

Real estate and business taxes 12,929 17,563

Other 38,215 42,210

$ 734,252 $ 756,905

Total $ 719,491 $ 756,905

(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 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.

1 unchanged sentence

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 on our consolidated balance sheets for leases with an expected term at the commencement date of more than 12 months.

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 each of the three-month periods ended February 28, 2022 and 2021 was $ 4.3 million , and included short-term lease costs of $ 1.2 million and $ 1.3 million, respectively.

Variable lease costs and external sublease income for the three-month periods ended February 28, 2022 and 2021 were immaterial.

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

Our total lease expense for the three-month periods ended May 31, 2022 and 2021 was $ 4.9 million and $ 4.3 million, respectively , and included short-term lease costs of $ 1.8 million and $ 1.2 million, respectively.

For the six months ended May 31, 2022 and 2021, our total lease expense was $ 9.2 million and $ 8.6 million, respectively, and included short-term lease costs of $ 3.0 million and $ 2.5 million, respectively.

Variable lease costs and external sublease income for the three-month and six-month periods ended May 31, 2022 and 2021 were immaterial.

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

2022 November 30,

1 unchanged sentence

Lease liabilities (b) 27,060 29,481

(a) Represents lease right-of-use assets within our homebuilding operations and financial services operations of $ 26.3 million and $.2 million, respectively, at February 28, 2022, and $ 27.5 million and $.2 million, respectively, at November 30, 2021 .

(b) Represents lease liabilities within our homebuilding operations and financial services operations of $ 28.1 million and $.2 million, respectively, at February 28, 2022, and $ 29.3 million and $.2 million, respectively, at November 30, 2021.

(a) Represents lease right-of-use assets within our homebuilding operations and financial services operations of $ 25.0 million and $.1 million, respectively, at May 31, 2022, and $ 27.5 million and $.2 million, respectively, at November 30, 2021 .

(b) Represents lease liabilities within our homebuilding operations and financial services operations of $ 26.9 million and $.2 million, respectively, at May 31, 2022, and $ 29.3 million and $.2 million, respectively, at November 30, 2021.

Income Tax Expense.

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

Three Months Ended February 28,

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Income tax expense $ 72,200 $ 30,300 $ 116,000 $ 56,800

1 unchanged sentence

25.5 % 17.4 % 25.2 % 19.1 %

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 earned primarily from building energy-efficient homes, partially offset by $ 1.7 million of non-deductible executive compensation expense under Internal Revenue Code Section 162(m).

Our income tax expense and effective tax rate for the three months ended February 28, 2021 reflected the favorable impacts of $ 3.5 million of excess tax benefits related to stock-based compensation and $ 2.7 million of federal tax credits we earned primarily from building energy-efficient homes, partly offset by $ 1.4 million of non-deductible executive compensation expense.

The federal energy tax credits for the three months ended February 28, 2022 and 2021 resulted from legislation enacted in December 2020 and earlier periods.

Our income tax expense and effective tax rate for the three months ended May 31, 2022 included the favorable impact of $.6 million of federal tax credits we earned primarily from building energy-efficient homes, which was more than offset by $ 2.2 million of non-deductible executive compensation expense under Internal Revenue Code Section 162(m).

Our income tax expense and effective tax rate for the three months ended May 31, 2021 reflected the favorable impacts of $ 14.8 million of federal tax credits we earned from building energy-efficient homes and $.4 million of excess tax benefits related to stock-based compensation, partly offset by $ 1.9 million of non-deductible executive compensation expense.

For the six months ended May 31, 2022, our income tax expense and effective tax rate included the favorable impacts of $ 2.2 million of excess tax benefits related to stock-based compensation and $.8 million of federal tax credits we earned primarily from building energy-efficient homes, which were more than offset by $ 3.9 million of non-deductible executive compensation expense under Internal Revenue Code Section 162(m).

Our income tax expense and effective tax rate for the six months ended May 31, 2021 reflected the favorable impacts of $ 17.5 million of federal tax credits we earned primarily from building energy-efficient homes and $ 3.9 million of excess tax benefits related to stock-based compensation, partly offset by $ 3.3 million of non-deductible executive compensation expense.

The federal energy tax credits for the three-month and six-month periods ended May 31, 2022 and 2021 resulted from legislation enacted in December 2020 and earlier periods.

The federal tax credit for building new energy-efficient homes expired for homes delivered after December 31, 2021.

5 unchanged sentences

On February 9, 2022, California enacted legislation restoring the NOL deduction for tax years beginning on or after January 1, 2022, which would be effective for our 2023 fiscal year.

Although the suspension of California NOL deductions did not have an impact on our income tax expense for the three months ended February 28, 2022, it contributed to the year-over-year increase in the amount of taxes we paid in this period.

Although the suspension of California NOL deductions did not have an impact on our income tax expense for the three months or six months ended May 31, 2022, it contributed to the year-over-year increase in the amount of taxes we paid in these periods.

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.

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 deferred tax assets become deductible.

The value of our deferred tax assets depends on applicable income tax rates.

Our deferred tax assets of $ 190.4 million as of February 28, 2022 and $ 194.8 million as of November 30, 2021 were each partly offset by a valuation allowance of $ 17.4 million.

The deferred tax asset valuation allowances as of February 28, 2022 and November 30, 2021 were primarily related to certain state NOLs that had not met the “more likely than not” realization standard at those dates.

Based on the evaluation of our deferred tax assets as of February 28, 2022, we determined that most of our deferred tax assets would be realized.

Therefore, no adjustments to our deferred tax valuation allowance were needed for the three months ended February 28, 2022.

Our deferred tax assets of $ 183.3 million as of May 31, 2022 and $ 194.8 million as of November 30, 2021 were each partly offset by a valuation allowance of $ 17.4 million.

The deferred tax asset valuation allowances as of May 31, 2022 and November 30, 2021 were primarily related to certain state NOLs that had not met the “more likely than not” realization standard at those dates.

Based on the evaluation of our deferred tax assets as of May 31, 2022, we determined that most of our deferred tax assets would be realized.

Therefore, no adjustments to our deferred tax valuation allowance were needed for the six months ended May 31, 2022.

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.

18 unchanged sentences

$ 2,085,275 $ 1,685,027

The carrying amounts of our senior notes listed above are net of unamortized debt issuance costs and premiums, which totaled $ 10.0 million at February 28, 2022 and $ 10.3 million at November 30, 2021.

The carrying amounts of our senior notes listed above are net of unamortized debt issuance costs and premiums, which totaled $ 9.7 million at May 31, 2022 and $ 10.3 million at November 30, 2021.

Unsecured Revolving Credit Facility.

5 unchanged sentences

The Credit Facility also requires the payment of a commitment fee at a per annum rate ranging from .15 % to .35 % of the unused commitment, based on our Leverage Ratio.

consolidated interest coverage ratio (“Interest Coverage Ratio”) or minimum level of liquidity, each as defined therein.

Under the terms of the 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 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, 2022, we had $ 250.0 million of cash borrowings and $ 8.6 million of letters of credit outstanding under the Credit Facility.

Therefore, as of February 28, 2022, we had $ 831.4 million available for cash borrowings under the Credit Facility, with up to $ 241.4 million of that amount available for the issuance of letters of credit.

As of May 31, 2022, we had $ 400.0 million of cash borrowings and $ 8.6 million of letters of credit outstanding under the Credit Facility.

Therefore, as of May 31, 2022, we had $ 681.4 million available for cash borrowings under the Credit Facility, with up to $ 241.4 million of that amount available for the issuance of letters of credit.

Letter of Credit Facility.

1 unchanged sentence

Under the LOC Facility, which expires on February 13, 2025 , we may issue up to $ 75.0 million of letters of credit.

As of February 28, 2022 and November 30, 2021, we had letters of credit outstanding under the LOC Facility of $ 36.7 million and $ 34.6 million, respectively.

As of May 31, 2022 and November 30, 2021, we had letters of credit outstanding under the LOC Facility of $ 36.4 million and $ 34.6 million, respectively.

Mortgages and Land Contracts Due to Land Sellers and Other Loans.

As of February 28, 2022, inventories having a carrying value of $ 18.5 million were pledged to collateralize mortgages and land contracts due to land sellers and other loans.

As of May 31, 2022, inventories having a carrying value of $ 22.2 million were pledged to collateralize mortgages and land contracts due to land sellers and other loans.

Senior Notes.

All the senior notes outstanding at February 28, 2022 and November 30, 2021 represent senior unsecured obligations that are guaranteed by certain of our subsidiaries and rank equally in right of payment with all of our and our guarantor subsidiaries’ existing unsecured and unsubordinated indebtedness.

All the senior notes outstanding at May 31, 2022 and November 30, 2021 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 unsubordinated indebtedness.

All of our senior notes were issued in underwritten public offerings.

3 unchanged sentences

In addition, the indenture contains certain limitations related to mergers, consolidations, and sales of assets.

As of February 28, 2022, we were in compliance with the applicable terms of all of our covenants and other requirements under the Credit Facility, the senior notes, the indenture, and the mortgages and land contracts due to land sellers and other loans.

As of May 31, 2022, we were in compliance with our covenants and other requirements under the 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 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.

As of February 28, 2022, principal payments on senior notes, mortgages and land contracts due to land sellers and other loans are due during each year ending November 30 as follows:

As of May 31, 2022, principal payments on senior notes, mortgages and land contracts due to land sellers and other loans are due during each year ending November 30 as follows:

2022 – $ 353.2 million;

7 unchanged sentences

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 three months ended February 28, 2022 and the year ended November 30, 2021 (in thousands):

February 28, 2022 November 30, 2021

The following table presents the fair value hierarchy and our assets measured at fair value on a nonrecurring basis for the six months ended May 31, 2022 and the year ended November 30, 2021 (in thousands):

May 31, 2022 November 30, 2021

Description Fair Value Hierarchy Pre-Impairment Value Inventory Impairment Charges Fair Value (a) Pre-Impairment Value Inventory Impairment Charges Fair Value (a)

4 unchanged sentences

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

February 28, 2022 November 30, 2021

May 31, 2022 November 30, 2021

Description Fair Value

8 unchanged sentences

The fair values of our senior notes are generally estimated based on quoted market prices for these instruments.

The carrying values reported for cash and cash equivalents, and mortgages and land contracts due to land sellers and other loans approximate fair values.

The carrying values reported for cash and cash equivalents, mortgages and land contracts due to land sellers and other loans, and outstanding borrowings under the Credit Facility 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.

14 unchanged sentences

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

Three Months Ended February 28,

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Balance at beginning of period $ 97,466 $ 92,687 $ 96,153 $ 91,646

10 unchanged sentences

In Arizona, California, Colorado and Nevada, our contractors’ general liability insurance primarily takes the form of a wrap-up policy under a program where eligible independent contractors are enrolled as insureds on each community.

Enrolled contractors 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.

Enrolled 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 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.

22 unchanged sentences

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 $ 57.0 million and $ 57.8 million are included in receivables in our consolidated balance sheets at February 28, 2022 and November 30, 2021, respectively.

Estimated probable insurance and other recoveries of $ 41.0 million and $ 57.8 million are included in receivables in our consolidated balance sheets at May 31, 2022 and November 30, 2021, 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.

1 unchanged sentence

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

Three Months Ended February 28,

Three Months Ended May 31, Six Months Ended May 31,

2022 2021 2022 2021

Balance at beginning of period $ 190,594 $ 193,445 $ 189,131 $ 194,180

4 unchanged sentences

(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.

Amounts for the three-month and six-month periods ended May 31, 2022 primarily reflected a change in the actuarially determined estimate of probable recoveries largely associated with higher self-insured retention levels in our more recent coverage years, and an insurance carrier’s payment of a portion of a townhome claim settlement reached in the 2022 first quarter.

For most of our claims, there is no interaction between our warranty liability and self-insurance liability.

9 unchanged sentences

Under Chapter 558, homeowners must serve written notice of a construction defect(s) and 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 claims without litigation, and a number of others have been resolved with applicable trade partners or their insurers covering the related costs, as of February 28, 2022, we had approximately 554 outstanding noticed claims, and some are scheduled for trial over the next few quarters and beyond.

Although we have resolved many of these claims without litigation, and a number of others have been resolved with applicable trade partners or their insurers covering the related costs, as of May 31, 2022, we had approximately 490 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 some of these cases have informed us of their inability to continue to pay claims-related costs.

At February 28, 2022, we had an accrual for our estimated probable loss for these matters and a receivable for estimated probable insurance recoveries.

At May 31, 2022, we had an accrual for our estimated probable loss 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 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.

2 unchanged sentences

and our evaluation of the particular facts surrounding each such claim.

Townhome Community Construction Defect Claims.

In the 2016 fourth quarter, we received claims from a homeowners association alleging there were construction defects, primarily involving roofing and stucco issues, at a completed townhome community in Northern California totaling approximately $ 25.0 million.

At November 30, 2021, we had an accrual for our estimated probable loss in this matter and a receivable for estimated probable insurance recoveries that reflected the status of our investigation to such date.

In February 2022, we reached a settlement with the homeowners association, agreeing to pay approximately $ 12.0 million, with a portion thereof to be covered by our direct insurer, plus an assignment of claims against a window manufacturer.

The total amount of the settlement was covered within our previously established self-insurance accrual and had no material impact on our consolidated financial statements for the 2022 first quarter.

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 February 28, 2022, we had $ 1.15 billion of performance bonds and $ 45.3 million of letters of credit outstanding.

At May 31, 2022, we had $ 1.24 billion of performance bonds and $ 45.0 million of letters of credit outstanding.

At November 30, 2021, we had $ 1.11 billion of performance bonds and $ 43.2 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.

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.

4 unchanged sentences

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 February 28, 2022, we had total cash deposits of $ 64.6 million to purchase land having an aggregate purchase price of $ 1.73 billion.

At May 31, 2022, we had total cash deposits of $ 73.8 million to purchase land having an aggregate purchase price of $ 1.86 billion.

Our land option contracts and other similar contracts generally do not contain provisions requiring our specific performance.

7 unchanged sentences

Prior to his appointment, our chairman, president and chief executive officer, who presently serves on this investee company’s board of directors, received such grants, including for this investee company, as a participant in the program.

In January 2022, this investee company entered into a letter of intent with a prospective buyer and the parties are continuing discussions.

If a sales transaction is completed, we expect we could realize a gain that would be recognized in a future period when the sale closes.

In January 2022, this investee company entered into a letter of intent with a prospective buyer.

During the 2022 second quarter, the parties ceased negotiations on the potential transaction.

Legal Matters

We are involved in litigation and regulatory proceedings incidental to our business that are in various procedural stages.

We believe the accruals we have recorded for probable and reasonably estimable losses with respect to these proceedings are adequate and that, as of February 28, 2022, 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 believe the accruals we have recorded for probable and reasonably estimable losses with respect to these proceedings are adequate and that, as of May 31, 2022, 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;

5 unchanged sentences

Based on our experience, we believe 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.

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.

2 unchanged sentences

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

Three Months Ended February 28, 2022 and 2021

Three Months Ended May 31, 2022 and 2021

Number of Shares

3 unchanged sentences

Ownership Trust Treasury Stock Total Stockholders’ Equity

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

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

Net income — — — — — 210,670 — — — 210,670

2 unchanged sentences

Stock-based compensation — — — — 9,021 — — — — 9,021

Tax payments associated with stock-based compensation awards

— — ( 320 ) — — — — — ( 12,153 ) ( 12,153 )

Stock repurchases — — ( 1,520 ) — — — — — ( 50,000 ) ( 50,000 )

Balance at May 31, 2022 100,711 ( 6,705 ) ( 6,840 ) $ 100,711 $ 834,883 $ 2,697,149 $ ( 19,119 ) $ ( 72,718 ) $ ( 249,911 ) $ 3,290,995

Balance at February 28, 2021 100,042 ( 6,705 ) ( 1,305 ) $ 100,042 $ 827,456 $ 1,951,657 $ ( 22,276 ) $ ( 72,718 ) $ ( 35,977 ) $ 2,748,184

Net income — — — — — 143,364 — — — 143,364

Dividends on common stock — — — — — ( 13,733 ) — — — ( 13,733 )

Employee stock options/other 65 — — 65 903 — — — — 968

Stock awards 44 — 2 44 ( 88 ) — — — 44 —

Stock-based compensation — — — — 8,082 — — — — 8,082

Balance at May 31, 2021 100,151 ( 6,705 ) ( 1,303 ) $ 100,151 $ 836,353 $ 2,081,288 $ ( 22,276 ) $ ( 72,718 ) $ ( 35,933 ) $ 2,886,865

Six Months Ended May 31, 2022 and 2021

Number of Shares

Stock Grantor

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, 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 — — — — — 344,927 — — — 344,927

Dividends on common stock — — — — — ( 27,142 ) — — — ( 27,142 )

Stock awards — — 785 — ( 29,625 ) — — — 29,625 —

Stock-based compensation — — — — 15,888 — — — — 15,888

Stock repurchases — — ( 1,520 ) — — — — — ( 50,000 ) ( 50,000 )

Tax payments associated with stock-based compensation awards — — ( 320 ) — — — — — ( 12,153 ) ( 12,153 )

Balance at May 31, 2022 100,711 ( 6,705 ) ( 6,840 ) $ 100,711 $ 834,883 $ 2,697,149 $ ( 19,119 ) $ ( 72,718 ) $ ( 249,911 ) $ 3,290,995

Balance at November 30, 2020 99,869 ( 7,124 ) ( 1,107 ) $ 99,869 $ 824,306 $ 1,868,896 $ ( 22,276 ) $ ( 77,265 ) $ ( 27,761 ) $ 2,665,769

Cumulative effect of adoption of new accounting standard for credit losses — — — — — ( 226 ) — — — ( 226 )

5 unchanged sentences

Tax payments associated with stock-based compensation awards — — ( 208 ) — — — — — ( 8,456 ) ( 8,456 )

Balance at February 28, 2021 100,042 ( 6,705 ) ( 1,305 ) $ 100,042 $ 827,456 $ 1,951,657 $ ( 22,276 ) $ ( 72,718 ) $ ( 35,977 ) $ 2,748,184

Balance at May 31, 2021 100,151 ( 6,705 ) ( 1,303 ) $ 100,151 $ 836,353 $ 2,081,288 $ ( 22,276 ) $ ( 72,718 ) $ ( 35,933 ) $ 2,886,865

On February 17, 2022, the management development and compensation committee of our board of directors approved the payout of 674,677 shares of our common stock in connection with the vesting of PSUs that were granted to certain employees on October 4, 2018.

The shares paid out under the PSUs reflected our achievement of certain performance measures that were based on cumulative earnings per share, average return on invested capital, and revenue growth relative to a peer group of high-production public homebuilding companies over the three-year period from December 1, 2018 through November 30, 2021.

to a peer group of high-production public homebuilding companies over the three-year period from December 1, 2018 through November 30, 2021.

Of the shares of common stock paid out, 319,815 shares, or $ 12.2 million, were purchased by us in the 2022 first quarter to satisfy the recipients’ withholding taxes on the vesting of the PSUs.

The shares purchased were not considered repurchases under the authorizations described below.

As of February 28, 2022, we were authorized to repurchase 331,400 shares of our common stock under a board of directors approved share repurchase program.

We did not repurchase any of our common stock under this program in the three months ended February 28, 2022.

Unrelated to the share repurchase program, our board of directors authorized in 2014 the repurchase of not more than 680,000 shares of our outstanding common stock, and also authorized potential future grants of up to 680,000 stock payment awards under the KB Home 2014 Equity Incentive Plan (“2014 Plan”), in each case solely as necessary for director elections in respect of outstanding stock appreciation rights awards granted under our Non-Employee Directors Compensation Plan.

The 2014 Plan was amended in April 2016.

As of February 28, 2022, we have not repurchased any shares and no stock payment awards have been granted under the 2014 Plan, as amended, pursuant to the respective board of directors’ authorizations.

In the three-month periods ended February 28, 2022 and 2021, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $ .15 per share.

On April 7, 2022, our board of directors authorized us to repurchase up to $ 300.0 million of our outstanding common stock.

This authorization replaced a prior board of directors authorization, which had 331,400 shares remaining for repurchase.

In the 2022 second quarter, we repurchased 1,519,646 shares of our common stock on the open market pursuant to this new authorization at a total cost of $ 50.0 million.

Repurchases under the 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 market, business and other conditions.

This share repurchase authorization will continue in effect until fully used or earlier terminated or suspended by our board of directors, and does not obligate us to purchase any shares.

As of May 31, 2022, we had $ 250.0 million of common stock authorized for repurchase.

On April 7, 2022, our board of directors also terminated a separate stock repurchase authorization it made in 2014 for the repurchase of not more than 680,000 shares of our outstanding common stock, solely as necessary for director elections in respect of outstanding stock appreciation rights awards granted under our Non-Employee Directors Compensation Plan.

As the remaining outstanding stock appreciation rights awards expired in April 2022, this stock repurchase authorization was no longer needed.

In the three-month periods ended May 31, 2022 and 2021, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $ .15 per share.

Quarterly dividends declared and paid during the six-month periods ended May 31, 2022 and 2021 totaled $ .30 per share.

Stock-Based Compensation

Stock Options.

At both February 28, 2022 and November 30, 2021, we had 1,674,393 stock options outstanding and exercisable with a weighted average exercise price of $ 15.56 .

At both May 31, 2022 and November 30, 2021, we had 1,674,393 stock options outstanding and exercisable with a weighted average exercise price of $ 15.56 .

We have not granted any stock option awards since 2016.

As of February 28, 2022, stock options outstanding and stock options exercisable each had a weighted average remaining contractual life of 3.6 years.

As all outstanding stock options have been fully vested since 2019, there was no unrecognized compensation expense related to stock option awards at February 28, 2022 and no stock-based compensation expense associated with stock options for the three-month periods ended February 28, 2022 and 2021.

Stock options outstanding and stock options exercisable each had an aggregate intrinsic value of $ 38.6 million at February 28, 2022.

As of May 31, 2022, stock options outstanding and stock options exercisable each had a weighted average remaining contractual life of 3.4 years.

As all outstanding stock options have been fully vested since 2019, there was no unrecognized compensation expense related to stock option awards at May 31, 2022 and no stock-based compensation expense associated with stock options for the three-month and six-month periods ended May 31, 2022 and 2021.

Stock options outstanding and stock options exercisable each had an aggregate intrinsic value of $ 31.7 million at May 31, 2022.

(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.)

1 unchanged sentence

From time to time, we grant restricted stock and PSUs to various employees as a compensation benefit.

We recognized total compensation expense of $ 6.9 million and $ 5.6 million for the three months ended February 28, 2022 and 2021, respectively, related to restricted stock and PSUs.

We recognized total compensation expense of $ 9.0 million and $ 8.1 million for the three months ended May 31, 2022 and 2021, respectively, related to restricted stock and PSUs.

For the six months ended May 31, 2022 and 2021, we recognized total compensation expense of $ 15.9 million and $ 13.7 million, respectively.

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,

Six Months Ended May 31,

Summary of cash and cash equivalents at end of period:

$ 240,688 $ 569,793

Homebuilding $ 244,186 $ 608,069

Financial services 2,395 978

$ 242,737 $ 570,959

Total $ 246,581 $ 609,047

Supplemental disclosures of cash flow information:

Interest paid, net of amounts capitalized $ ( 237 ) $ ( 164 )

$ ( 7,606 ) $ ( 3,860 )

Income taxes paid 97,654 26,295

Six Months Ended May 31,

Supplemental disclosures of non-cash activities:

2 unchanged sentences

Subsequent Event

On April 7, 2022, our board of directors authorized us to repurchase up to $ 300.0 million of our outstanding common stock.

This authorization replaced a prior board of directors authorization, as discussed in Note 18 – Stockholders’ Equity, which had 331,400 shares remaining for repurchase.

This share repurchase authorization will continue in effect until fully used or earlier terminated or suspended by our board of directors, and does not obligate us to purchase any shares.

As of the date of this report, we have not repurchased any shares under this authorization.

On June 22, 2022, we completed the underwritten public offering of $ 350.0 million in aggregate principal amount of 7.25 % senior notes due 2030 (“7.25% Senior Notes due 2030”) at 100 % of their aggregate principal amount.

Interest on the 7.25% Senior Notes due 2030, which represent senior unsecured obligations of ours and rank equally in right of payment with all of our existing unsecured and unsubordinated indebtedness, is payable semi-annually in arrears on January 15 and July 15, commencing on January 15, 2023.

These notes will mature on July 15, 2030.

We used the net proceeds from the issuance of the 7.25 % Senior Notes due 2030, together with cash on hand, to retire our outstanding $ 350.0 million in aggregate principal amount of 7.50 % senior notes due 2022 (“7.50% Senior Notes due 2022”) on July 7, 2022, by redemption pursuant to the optional redemption terms specified for such notes.

In connection with this early extinguishment of debt, we expect to recognize a charge of approximately $ 4.0 million in the 2022 third quarter.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements