What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-01-20 compared with 2022-01-21 · 250 added, 262 removed, 1182 unchanged (30% of the section changed)

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Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (Ernst & Young LLP , Los Angeles, CA , PCAOB ID:

Separate combined financial statements of our unconsolidated joint venture activities have been omitted because, if considered in the aggregate, they would not constitute a significant subsidiary as defined by Rule 3-09 of Regulation S-X.

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Amortization of prior service cost

Settlement loss — — 356

Other comprehensive income (loss) before tax 18,553 4,325 ( 7,024 )

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290,000,000 shares authorized at November 30, 2022 and 2021;

100,711,153 and 99,868,625 shares issued at November 30, 2021 and 2020, respectively

100,711,153 shares issued at November 30, 2022 and 2021

100,711 100,711

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Grantor stock ownership trust, at cost:

6,705,247 and 7,124,317 shares at November 30, 2021 and 2020, respectively

6,705,247 shares at November 30, 2022 and 2021

( 72,718 ) ( 72,718 )

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Cumulative effect of adoption of ASC 842 — — — — — 1,510 — — — 1,510

Reclassification of stranded tax effects — — — — — 1,643 ( 1,643 ) — — —

Net income — — — — — 296,243 — — — 296,243

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— — ( 241 ) — — — — — ( 9,503 ) ( 9,503 )

Retirement of treasury stock ( 23,488 ) — 23,488 ( 23,488 ) — ( 549,618 ) — — 573,106 —

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 ASC 842 — — — — — 1,510 — — — 1,510

Reclassification of stranded tax effects — — — — — 1,643 ( 1,643 ) — — —

Cumulative effect of adoption of ASU 2016-13 — — — — — ( 226 ) — — — ( 226 )

Net income — — — — — 564,746 — — — 564,746

Other comprehensive loss, net of tax — — — — — — ( 5,127 ) — — ( 5,127 )

Other comprehensive income, net of tax — — — — — — 3,157 — — 3,157

Dividends on common stock — — — — — ( 54,052 ) — — — ( 54,052 )

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Stock-based compensation — — — — 28,904 — — — — 28,904

Stock repurchases — — ( 4,669 ) — — — — — ( 188,175 ) ( 188,175 )

Tax payments associated with stock-based compensation awards

— — ( 208 ) — — — — — ( 12,337 ) ( 12,337 )

Retirement of treasury stock ( 23,488 ) — 23,488 ( 23,488 ) — ( 549,618 ) — — 573,106 —

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

Cumulative effect of adoption of ASU 2016-13 — — — — — ( 226 ) — — — ( 226 )

Net income — — — — — 816,666 — — — 816,666

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Dividends on common stock — — — — — ( 52,452 ) — — — ( 52,452 )

Employee stock options/other

798 — — 798 10,891 — — — — 11,689

Stock awards — — 1,088 — ( 41,824 ) — — — 41,824 —

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11,038 18,511 35,649

Amortization of discounts, premiums and issuance costs

2,852 2,498 4,426

Amortization of debt issuance costs and premiums 2,322 2,852 2,498

Depreciation and amortization

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1,900 12,838 12,651

Proceeds from sale of building

Purchases of property and equipment, net

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( 1,535,000 ) ( 340,000 ) —

Borrowings under senior unsecured term loan 360,000 — —

Payments on mortgages and land contracts due to land sellers and other loans

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Impact of COVID-19 Pandemic on Consolidated Financial Statements.

The COVID-19 pandemic and related governmental control measures considerably disrupted global and national economies, the U.S.

housing market, and our business during the 2020 second quarter.

Amid extraordinary economic impacts;

a sudden rise in unemployment;

significant stock market and secondary market volatility;

uncertainty about how to effectively contain COVID-19’s spread;

weakened consumer confidence;

and our swift closing of our sales centers, model homes and design studios to the public, we saw a drastic decrease in demand for new homes (including homes ordered in the 2020 first quarter) and our order pace slowed significantly.

Along with a considerable increase in home purchase cancellations, we experienced a sizable reduction in our 2020 second quarter net orders.

Further, our construction activities were restricted in many jurisdictions, and completely shut down in some of them, and together with the reduced availability or capacity of some municipal and private services necessary to build and deliver homes, and supply chain disruptions, our cycle times became extended.

This caused home delivery delays during most of the 2020 second quarter, which tempered our revenues for the period.

With the uncertainty surrounding the COVID-19 pandemic, and in prioritizing cash preservation and liquidity, we limited our land investments and curtailed our overhead expenditures, partly through workforce realignment and reductions.

As a result, our selling, general and administrative expenses for the 2020 second quarter included severance charges of $ 6.7 million.

With the easing to varying degrees of restrictive public health orders in our served markets beginning in May 2020, our net orders began to rebound significantly following a low point in April 2020, as steadily increasing demand drove our 2020 third- and fourth-quarter net orders to then-15-year highs.

Though this sharp rise in net orders over these periods substantially expanded the number of homes in our backlog as well as our backlog value, our deliveries and revenues for the 2020 third and fourth quarters were moderated primarily by the negative effects of the COVID-19 pandemic in our 2020 second quarter.

In 2021, while the pandemic persisted, demand for our homes remained strong, and our ending backlog value at November 30, 2021 expanded to its highest fourth-quarter level since 2005.

With the ongoing strong demand, we continued to increase our land acquisition and development investments in 2021, as we did in the latter part of 2020, to measurably expand our lot pipeline and support future community count growth.

While we continue to experience construction services availability constraints, supply chain disruptions and rising and volatile raw material prices and availability, particularly with respect to building materials and appliances, as well as delays related to state and municipal construction permitting, inspections and utilities, that could negatively impact our growth, margins and financial results in future periods, and there remains a risk that significant COVID-19 pandemic-related disruptions could emerge, we believe we are well-positioned to operate effectively through the present environment.

Since mid-March 2020, the COVID-19 pandemic and related 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 in 2020, 2021 and 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.

In addition, we encountered delays related to state and municipal construction permitting, inspection and utility processes, which have been disrupted by key equipment shortages.

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

These factors could also negatively affect our growth, margins and financial results in future periods and result in our recognizing charges for inventory impairments or land option contract abandonments, or both, related to our inventory assets.

The impact of any or all of these, among other factors, could be material to our consolidated financial statements.

In the 2020 second quarter, with the uncertainty surrounding the COVID-19 pandemic, and in prioritizing cash preservation and liquidity, we limited our land investments and curtailed our overhead expenditures, partly through workforce realignment and reductions.

As a result, our selling, general and administrative expenses for 2020 included severance charges of $ 6.7 million.

Use of Estimates.

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Our cash equivalents totaled $ 15.8 million at November 30, 2022 and $ 15.4 million at November 30, 2021.

At November 30, 2021 and 2020, the majority of our cash and cash equivalents was invested in interest-bearing bank deposit accounts.

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

We record receivables net of an allowance for doubtful accounts.

This allowance for potential losses is established or maintained for expected uncollectible receivables.

The allowance is estimated based on our evaluation of the

receivables, taking into account historical collection experience, general economic conditions, specific credit risk of the counterparties and other relevant information.

The allowance is estimated based on our evaluation of the receivables, taking into account historical collection experience, general economic conditions, specific credit risk of the counterparties and other relevant information.

Property and Equipment and Depreciation.

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Our home sale transactions are made pursuant to contracts under which we typically have a single performance obligation to deliver a completed home to the homebuyer when closing conditions are met.

Revenues from home sales are recognized when we have satisfied the performance obligation within the sales contract, which is generally when title to and possession of the home and the risks and rewards of ownership are transferred to the homebuyer on the closing date.

Revenues from home sales are recognized

when we have satisfied the performance obligation within the sales contract, which is generally when title to and possession of the home and the risks and rewards of ownership are transferred to the homebuyer on the closing date.

Under our home sale contracts, we typically receive an initial cash deposit from the homebuyer at the time the sales contract is executed and receive the remaining consideration to which we are entitled, through a third-party escrow agent, at closing.

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Disaggregation of Revenues.

Our homebuilding operations accounted for 99.7 % and 99.6 % of our total revenues for the years ended November 30, 2021 and 2020, with most of those revenues generated from home sale contracts with customers.

Due to the nature of our revenue-generating activities, we believe the disaggregation of revenues as reported in our consolidated statement of operations, and as disclosed by homebuilding reporting segment in Note 2 – Segment Information and for our financial services reporting segment in Note 3 – Financial Services, fairly depicts how the nature, amount, timing and uncertainty of cash flows are affected by economic factors.

Our homebuilding operations accounted for 99.7 % of our total revenues for each of the years ended November 30, 2022 and 2021, with most of those revenues generated from home sale contracts with customers.

Due to the nature of our revenue-generating activities, we believe the disaggregation of revenues as reported in our consolidated statements of operations, and as disclosed by homebuilding reporting segment in Note 2 – Segment Information and for our financial services reporting segment in Note 3 – Financial Services, fairly depicts how the nature, amount, timing and uncertainty of cash flows are affected by economic factors.

Inventories .

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These impairment evaluations are significantly impacted by estimates for the amounts and timing of future revenues, costs and expenses, and other factors.

If the carrying value of a real estate asset is determined not to be recoverable, the impairment charge to be recognized is measured by the amount by which the carrying value of the affected asset exceeds its estimated fair value.

If the carrying value of a real estate asset is determined not to be recoverable, the impairment charge to be recognized is measured by the

amount by which the carrying value of the affected asset exceeds its estimated fair value.

For land held for sale, if the fair value less associated costs to sell exceeds the asset’s carrying value, no impairment charge is recognized.

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For these real estate assets, fair value is determined based on the estimated future net cash flows discounted for inherent risk associated with each such asset, or other valuation techniques.

Our financial instruments consist of cash and cash equivalents, senior notes, and mortgages and land contracts due to land sellers and other loans.

Our financial instruments consist of cash and cash equivalents, corporate-owned life insurance, outstanding borrowings under the Credit Facility and the Term Loan, senior notes, and mortgages and land contracts due to land sellers and other loans.

Fair value measurements of financial instruments are determined by various market data and other valuation techniques as appropriate.

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These estimated costs are based on an actuarial analysis of our historical claims and expense data, as well as industry data.

Our self-insurance liability is presented on a gross basis for all years without consideration of

insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.

Our self-insurance liability is presented on a gross basis for all years without consideration of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.

Estimates of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as receivables when such recoveries are considered probable.

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Costs to furnish and ready a model home or on-site community sales facility that will not be sold as part of the model home, such as costs for model furnishings, community sales office and model complex grounds, sales office construction and sales office furniture and equipment, are capitalized as property and equipment under “model furnishings and sales office improvements.” Model furnishings and sales office improvements are depreciated to selling, general and administrative expenses over their estimated useful lives.

Other costs related to the marketing of a community, removing the on-site community sales facility and readying a completed (model) home for sale are expensed to selling, general and administrative expenses as incurred.

Other costs related to the marketing of a

community, removing the on-site community sales facility and readying a completed (model) home for sale are expensed to selling, general and administrative expenses as incurred.

Advertising Costs.

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We measure and recognize compensation expense associated with our grant of equity-based awards at an amount equal to the fair value of share-based payments granted under compensation arrangements over the vesting period.

We estimate the fair value of stock options and Director Plan SARs granted using the Black-Scholes option-pricing model with assumptions based primarily on historical data.

We estimate the fair value of stock options granted using the Black-Scholes option-pricing model with assumptions based primarily on historical data.

We estimate the fair value of other equity-based awards using the closing price of our common stock on the grant date.

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Adoption of New Accounting Pronouncements .

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedes the revenue guidance in Accounting Standards Codification Topic 605, “Revenue Recognition,” and most industry-specific revenue and cost guidance in the accounting standards codification, including some cost guidance related to construction-type and production-type contracts.

ASU 2014-09 and its related amendments collectively resulted in ASC 606.

The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

On December 1, 2018, we adopted ASC 606, using the modified retrospective method applied to contracts that were

not completed as of the adoption date.

Upon the adoption of ASC 606, we recorded a cumulative effect adjustment to increase beginning retained earnings by $ 11.6 million, net of tax, as of December 1, 2018.

Within our homebuilding operations, ASC 606 impacted the classification and timing of recognition in our consolidated financial statements of certain community sales office and other marketing- and model home-related costs, which we previously capitalized to inventories and amortized through construction and land costs with each home delivered in a community.

With our adoption of ASC 606, these costs are capitalized to property and equipment and depreciated to selling, general and administrative expenses, or expensed to selling, general and administrative expenses as incurred.

Upon adopting ASC 606, we reclassified these community sales office and other marketing- and model home-related costs and related accumulated amortization from inventories to either property and equipment, net or retained earnings in our consolidated balance sheet.

As a result of the change in the classification of certain community sales office and other marketing- and model home-related costs from inventories to property and equipment, net, these costs are presented as a cash outflow from investing activities in our consolidated statements of cash flows under ASC 606.

Previously, such costs were classified as a cash outflow from operating activities.

Forfeited deposits related to cancelled home sale and land sale contracts, which were previously reflected as other income within selling, general and administrative expenses, are included in homebuilding revenues under ASC 606.

Within our financial services operations, ASC 606 impacted the timing of recognition in our consolidated financial statements of insurance commissions for insurance policy renewals.

We previously recognized such insurance commissions as revenue when policies were renewed.

With our adoption of ASC 606, insurance commissions for future policy renewals are estimated and recognized as revenue when the insurance carrier issues an initial insurance policy to our homebuyer, which generally occurs at the time each applicable home sale is closed.

Upon adopting ASC 606, we recognized contract assets for the estimated future renewal commissions related to existing insurance policies as of December 1, 2018.

In February 2016, the FASB issued Accounting Standards Update No.

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On December 1, 2019, we adopted ASU 2016-02 and its related amendments (collectively, “ASC 842”) using the modified retrospective method.

Results for reporting periods beginning December 1, 2019 and after are presented under ASC 842, while results for prior reporting periods have not been adjusted and continue to be presented under the accounting guidance in effect for those periods.

We elected the package of practical expedients permitted under the transition guidance, which allowed us to carry forward our original assessment of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.

We also elected the practical expedient that allows lessees the option to account for lease and non-lease components together as a single component for all classes of underlying assets.

The adoption of ASC 842 resulted in our recording lease right-of-use assets and lease liabilities of $ 31.2 million on our consolidated balance sheet as of December 1, 2019.

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We adopted ASU 2018-02 effective December 1, 2019 and elected to reclassify the income tax effects of the TCJA from accumulated other comprehensive loss to retained earnings, which resulted in an increase of $ 1.6 million to both retained earnings and accumulated other comprehensive loss, with no impact on total stockholders’ equity.

Amounts for prior reporting periods have not been adjusted and continue to be presented under the accounting guidance in effect for those periods.

In June 2016, the FASB issued Accounting Standards Update No.

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Recent Accounting Pronouncements Not Yet Adopted.

In December 2019, the FASB issued Accounting Standards Update No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification Topic 740, “Income

Taxes” (“ASC 740”), and clarifies certain aspects of ASC 740 to promote consistency among reporting entities.

ASU 2019-12 is effective for us beginning December 1, 2021.

Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

We do not expect the adoption of ASU 2019-12 to have a material impact on our consolidated financial statements.

In March 2020, the FASB issued Accounting Standards Update No.

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Scope” (“ASU 2021-01”), which clarified the scope and application of the original guidance.

We plan to adopt ASU 2020-04 and ASU 2021-01 when LIBOR is discontinued.

We are currently evaluating the potential impact of adopting this guidance, but do not expect it to have a material impact on our consolidated financial statements.

We are currently evaluating the potential impact of adopting ASU 2020-04 and ASU 2021-01, but do not expect it to have a material impact on our consolidated financial statements.

Reclassifications.

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Our financial services segment earns revenues primarily from insurance commissions and from the provision of title services.

We offer mortgage banking services, including mortgage loan originations, to our homebuyers indirectly through KBHS, an unconsolidated joint venture we initially formed with Stearns, with each party having a 50.0 % ownership interest and Stearns providing management oversight of KBHS’ operations.

On March 1, 2021, Guaranteed Rate acquired the parent company of Stearns.

In October 2021, Stearns was renamed as GR Alliance.

We are not aware of any significant changes with respect to GR Alliance or its operations as a result of the transaction being completed.

We offer mortgage banking services, including mortgage loan originations, to our homebuyers indirectly through KBHS, our unconsolidated joint venture with GR Alliance.

We and GR Alliance each have a 50.0 % ownership interest, with GR Alliance providing management oversight of KBHS’ operations.

The financial services reporting segment is separately reported in our consolidated financial statements.

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and monitoring the financial and operational performance of our divisions.

Corporate and other includes general and administrative expenses related to

operating our corporate headquarters.

Corporate and other includes general and administrative expenses related to operating our corporate headquarters.

A portion of the expenses incurred by Corporate and other is allocated to our homebuilding reporting segments.

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Title services 10,572 9,415 6,883

Interest income — — 6

Total 23,414 19,901 15,472

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Effect of dilutive securities:

Interest expense and amortization of debt issuance costs associated with convertible senior notes, net of taxes

Undistributed earnings allocated to nonvested restricted stock

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2,487 3,186 3,622

Convertible senior notes

Weighted average shares outstanding — diluted

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In 2022, 2021 and 2020, no outstanding stock options were excluded from the diluted earnings per share calculation.

In 2019, outstanding stock options to purchase a nominal amount of common stock were excluded from the diluted earnings per share calculation because the effect of their inclusion would be antidilutive.

The diluted earnings per share calculation for the year ended November 30, 2019 included the dilutive effect of our 1.375 % convertible senior notes due 2019 based on the number of days they were outstanding during the period.

We repaid those notes at their February 1, 2019 maturity.

Contingently issuable shares associated with outstanding PSUs were not included in the basic earnings per share calculations for the periods presented, as the applicable vesting conditions had not been satisfied.

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Refundable deposits and bonds 17,610 13,681

Income taxes receivable — 41,323

Other 52,201 49,359

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Capitalized interest at end of year $ 145,494 $ 161,119 $ 190,113

(a) Interest amortized to construction and land costs for the years ended November 30, 2021, 2020 and 2019 included $.2 million, $.4 million and $.7 million, respectively, related to land sales during the periods.

(a) Interest amortized to construction and land costs for the years ended November 30, 2021 and 2020 included nominal amounts related to land sales during the periods.

Inventory Impairments and Land Option Contract Abandonments

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If indicators of potential impairment exist for a community or land parcel, the identified asset is evaluated for recoverability.

We evaluated one , 11 and 21 communities or land parcels for recoverability as of November 30, 2021, 2020 and 2019, respectively.

We evaluated five , one and 11 communities or land parcels for recoverability as of November 30, 2022, 2021 and 2020, respectively.

The carrying values of those communities or land parcels evaluated as of November 30, 2022, 2021 and 2020 were $ 118.7 million, $ 29.9 million and $ 123.4 million, respectively.

The higher number and corresponding carrying value of communities or land parcels evaluated as of November 30, 2020 and 2019 reflected the then-current conditions and trends in the markets where the communities are located, as well as certain communities or land parcels previously held for future development that were reactivated as part of our efforts to improve our asset efficiency.

In addition, we evaluated land held for future development for recoverability as of November 30, 2022, 2021 and 2020.

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and land development, home construction and overhead costs to be incurred and related cost inflation.

With respect to the year ended November 30, 2021, these expectations considered the year-over-year increases in our overall average net orders per community, backlog levels, homes delivered and housing gross profit margin during the period as well as our experience that conditions in the markets where assessed assets were located were relatively stable or improved, with no significant deterioration identified or projected, as to revenue or cost drivers that would prevent or otherwise impact recoverability.

With respect to the year ended

November 30, 2022, these expectations considered the weakening in U.S.

housing demand in the year’s second half, rising interest rates, elevated inflation levels, and significant year-over-year decreases in our net orders per community in the 2022 third and fourth quarters, driven in part by a substantial increase in cancellations.

We also considered our lower year-end backlog, both in number of homes and value;

estimated average selling prices and housing gross profit margins based on the current and anticipated conditions in the markets where assessed assets are located;

and ongoing supply-chain disruptions and delays with respect to state and municipal permitting, inspection and utility processes on our construction cycle times.

Based on these recoverability considerations, we recognized inventory impairment charges for certain inventory assets in the 2022 fourth quarter, as described below.

With respect to the year ended November 30, 2021, our expectations considered the year-over-year increases in our overall average net orders per community, backlog levels, homes delivered and housing gross profit margin during the period as well as our experience that conditions in the markets where assessed assets were located were relatively stable or improved, with no significant deterioration identified or projected, as to revenue or cost drivers that would prevent or otherwise impact recoverability.

Our inventory is assessed for potential impairment on a quarterly basis, and the assumptions used are reviewed and adjusted, as necessary, to reflect the market conditions and trends and our expectations at the time each assessment is performed.

With respect to the year ended November 30, 2020, our expectations considered that our net orders, ending backlog and cancellation rates for the 2020 third and fourth quarters improved from both the corresponding year-earlier quarters as well as the 2020 second quarter, when the early stages of the COVID-19 pandemic and related COVID-19 control responses in our served markets caused a significant contraction in economic activity and adversely affected our ability to conduct normal operations, as described in Note 1 – Summary of Significant Accounting Policies.

Our impairment assessments also considered that while the number of homes delivered in the 2020 third and fourth quarters decreased from the corresponding year-earlier quarters, reflecting the negative COVID-19-related impacts earlier in the year, the average selling price of those homes increased and our housing gross profit margins improved significantly over the same periods.

Moreover, the average selling price of our net orders generated during the 2020 third and fourth quarters increased from the corresponding year-earlier periods.

Taken together, and notwithstanding the significant disruptions associated with the COVID-19 pandemic during the 2020 second quarter, our inventory assessments as of November 30, 2020 determined that market conditions for each of our assets in inventory where impairment indicators were identified were expected to be sufficiently stable, with a solid net order pace and a steady average selling price, to support such assets’ recoverability.

Given the inherent challenges and uncertainties in forecasting future results, our inventory assessments at the time they are made take into consideration whether a community or land parcel is active, meaning whether it is open for sales and/or undergoing development, or whether it is being held for future development or held for sale.

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Discount rate 17 % - 21 %

(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 .

Based on the results of our evaluations, we recognized inventory impairment charges of $ 9.9 million in 2021 related to two communities with a post-impairment fair value of $ 18.0 million.

(a) Ranges of inputs presented primarily reflect differences between the housing markets where each impacted community is located, rather than fluctuations in prevailing market conditions .

Based on the results of our evaluations, we recognized inventory impairment charges of $ 24.1 million in 2022 related to four communities with a post-impairment fair value of $ 41.3 million.

In 2021, we recognized inventory impairment charges of $ 9.9 million related to two communities with a post-impairment fair value of $ 18.0 million.

In 2020, we recognized inventory impairment charges of $ 22.7 million related to 10 communities with a post-impairment fair value of $ 46.5 million.

In 2019, we recognized inventory impairment charges of $ 14.0 million related to eight communities with a post-impairment fair value of $ 27.1 million.

The impairment charges in 2021, 2020 and 2019 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 impairment charges in 2022, 2021 and 2020 reflected our decisions to make changes in our operational strategies aimed at more quickly monetizing our investment in certain communities, mainly by accelerating the overall pace for selling, building and delivering homes therein, including communities on land previously held for future development.

If we change our strategy or if there are changes in market conditions for any given asset, it is possible that we may recognize additional inventory impairment charges.

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.

As of November 30, 2022, the aggregate carrying value of our inventory that had been impacted by inventory impairment charges was $ 102.9 million, representing eight communities and various other land parcels.

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While it is difficult to determine a precise timeframe for any particular inventory asset, based on current market conditions and expected delivery timelines, we estimate our inventory assets’ remaining operating lives to range generally from one year to in excess of 10 years, and expect to realize, on an overall basis, the majority of our inventory balance as of November 30, 2022 within five years .

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.

Variable Interest Entities

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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.

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We share in the earnings (losses) of these unconsolidated joint ventures generally in accordance with our respective equity interests.

In some instances, we recognize earnings (losses) related to our investment in an unconsolidated joint venture that

differ from our equity interest in the unconsolidated joint venture.

In some instances, we recognize earnings (losses) related to our investment in an unconsolidated joint venture that differ from our equity interest in the unconsolidated joint venture.

This typically arises from our deferral of the unconsolidated joint venture’s earnings (losses) from land sales to us, or other items.

We had investments in six unconsolidated joint ventures as of November 30, 2021 and five unconsolidated joint ventures as of November 30, 2020 and 2019.

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

We had investments in six unconsolidated joint ventures as of November 30, 2022 and 2021 and five unconsolidated joint ventures as of November 30, 2020.

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

Years Ended November 30,

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Income (loss) $ ( 1,559 ) $ ( 220 ) $ 25,258

For the years ended November 30, 2021 and 2020, combined revenues and construction and land costs primarily related to homes delivered from an unconsolidated joint venture in California.

The lower combined revenues and construction and land costs for 2021 as compared to 2020 mainly reflected a decrease in the number of homes delivered from this unconsolidated joint venture to 10 in 2021 from 99 in 2020.

The joint venture delivered its last home in the 2021 second quarter.

For the year ended November 30, 2019, combined revenues and construction and land costs were generated primarily from land sales.

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

The combined revenues and construction and land costs for 2021 and 2020 included the results of an unconsolidated joint venture in California, which delivered its last home in the 2021 second quarter.

For the year ended November 30, 2022, combined revenues and construction and land costs were generated from land sales.

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

Cash $ 14,066 $ 15,731

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Accounts payable and other liabilities $ 8,369 $ 12,285

Notes payable (a) 34,396 —

Equity 89,793 68,325

Total liabilities and equity $ 132,558 $ 80,610

(a) As of November 30, 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 November 30, 2022 or 2021.

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

a guaranty to complete the construction of phases of the improvements

for the 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):

Years Ended November 30,

2022 2021 2020

Revenues $ 115,173 $ 126,398 $ 108,417

Expenses ( 73,573 ) ( 79,221 ) ( 66,109 )

Income $ 41,600 $ 47,177 $ 42,308

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):

Cash and cash equivalents $ 28,120 $ 23,916

Mortgage loans held for sale 250,572 234,669

Other assets 33,176 14,060

Total assets $ 311,868 $ 272,645

Liabilities and equity

Accounts payable and other liabilities $ 15,590 $ 18,375

Funding facilities 242,944 221,633

Equity 53,334 32,637

Total liabilities and equity $ 311,868 $ 272,645

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 .

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 $ 29.8 million at November 30, 2022 and $ 9.5 million at November 30, 2021.

The changes in the fair value of IRLCs, which

were reported in revenues for the applicable periods, were gains of $ 20.3 million, $ 2.8 million and $ 4.0 million for 2022, 2021 and 2020, 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 November 30, 2022.

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

The warehouse line of credit and master repurchase agreements are not guaranteed by us or any of our Guarantor Subsidiaries.

Property and Equipment, Net

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Other assets consisted of the following (in thousands):

Cash surrender value and benefit receivable from corporate-owned life insurance contracts $ 68,748 $ 73,227

Cash surrender value of corporate-owned life insurance contracts $ 55,591 $ 68,748

Lease right-of-use assets 25,469 27,508

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Customer deposits 76,738 71,032

Inventory-related obligations (a) 36,146 31,094

Lease liabilities 29,279 37,668

Accrued interest payable 29,989 24,554

Lease liabilities 27,494 29,279

Inventory-related obligations (a) 19,136 36,146

Real estate and business taxes 17,557 17,563

Federal and state taxes payable 3,671 8,290

Other 43,925 42,210

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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.

Some of our leases include one or more renewal options, the exercise of which is generally at our discretion.

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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.

For the years ended November 30, 2021 and 2020, our total lease expense was $ 17.3 million and $ 17.7 million, respectively, and

included short-term lease costs of $ 4.7 million and $ 6.0 million, respectively.

For the years ended November 30, 2022, 2021 and 2020, our total lease expense was $ 20.7 million, $ 17.3 million and $ 17.7 million, respectively, and included short-term lease costs of $ 7.7 million, $ 4.7 million and $ 6.0 million, respectively.

Variable lease costs and external sublease income for the years ended November 30, 2022, 2021 and 2020 were immaterial.

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Income tax expense $ ( 197,300 ) $ ( 58,100 ) $ ( 255,400 )

Federal State Total

Current $ ( 44,300 ) $ ( 33,700 ) $ ( 78,000 )

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Our effective tax rates were 23.8 % for 2022, 18.8 % for 2021 and 18.6 % for 2020.

In 2021, our income tax expense and effective tax rate reflected the favorable impacts of $ 49.5 million of federal tax credits we earned primarily from building energy-efficient homes and $ 7.1 million of excess tax benefits related to stock-based compensation, partly offset by $ 11.3 million of non-deductible executive compensation expense under Internal Revenue Code Section 162(m).

In 2020, our income tax expense and effective tax rate reflected the favorable impacts of $ 18.7 million of federal tax credits we earned from building energy-efficient homes and $ 12.0 million of excess tax benefits related to stock-based compensation, partly offset by $ 5.7 million of non-deductible executive compensation expense.

In 2019, our income tax expense and effective tax rate reflected the favorable impacts of $ 5.3 million of excess tax benefits related to stock-based compensation, a $ 4.4 million deferred tax asset valuation allowance reversal related to refundable alternative minimum tax (“AMT”) and $ 4.3 million of federal tax credits we earned from building energy-efficient homes, partly offset by $ 5.3 million of non-deductible executive compensation expense and a $ 1.9 million non-cash charge due to the re-measurement of deferred tax assets based on a reduction in certain state income tax rates.

The federal energy tax credits for the year ended November 30, 2021 resulted from legislation enacted in December 2020 and earlier periods.

The legislation enacted in December 2020, among other things, extended the availability of a business tax credit for building new energy-efficient homes through December 31, 2021.

The federal energy tax credits for the year ended November 30, 2020 resulted from legislation enacted in December 2019 that, among other things, extended the availability of the tax credit through December 31, 2020.

The federal energy tax credits for the year ended November 30, 2019 resulted from legislation enacted on February 9, 2018 that, among other things, extended the availability of the tax credit through December 31, 2017.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted to provide economic and other relief as a result of the COVID-19 pandemic.

Among other things, the CARES Act accelerated the timetable for AMT credit refunds.

In 2022, our income tax expense and effective tax rate reflected the favorable impacts of $ 22.6 million of federal tax credits we recognized primarily from building energy-efficient homes and $ 1.8 million of excess tax benefits related to stock-based compensation, partly offset by $ 9.7 million of non-deductible executive compensation expense under Internal Revenue Code

Section 162(m).

In 2021, our income tax expense and effective tax rate reflected the favorable impacts of $ 49.5 million of federal tax credits we recognized primarily from building energy-efficient homes and $ 7.1 million of excess tax benefits related to stock-based compensation, partly offset by $ 11.3 million of non-deductible executive compensation expense.

In 2020, our income tax expense and effective tax rate reflected the favorable impacts of $ 18.7 million of federal tax credits we recognized primarily from building energy-efficient homes and $ 12.0 million of excess tax benefits related to stock-based compensation, partly offset by $ 5.7 million of non-deductible executive compensation expense.

On August 16, 2022, the IRA was enacted into law.

The IRA contains significant tax law changes, including a CAMT of 15% on adjusted financial statement income for applicable corporations, and a 1% excise tax on stock repurchases after December 31, 2022.

If applicable, the CAMT will not be effective for us until our fiscal year ending November 30, 2024.

The IRA also extends the federal tax credit for building new energy-efficient homes for homes delivered from January 1, 2022 (retroactively) through December 31, 2032, as well as modifies and increases it starting in 2023.

Previously, the federal tax credit expired for homes delivered after December 31, 2021.

The federal tax credits we recognized in 2022 reflected the impact of the extension under the IRA.

We are currently evaluating the other potential effects of the IRA on our consolidated financial statements.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted on March 27, 2020, provided economic and other relief as a result of the COVID-19 pandemic.

Among other things, the CARES Act accelerated the timetable for alternative minimum tax (“AMT”) credit refunds.

As a result, in the 2020 second quarter, we filed a superseding 2019 federal income tax return claiming an additional refund of $ 39.3 million of AMT credits and reclassified this amount from deferred tax assets to receivables.

We received this AMT credit refund in the 2021 first quarter.

In the 2020 fourth quarter, an amended 2019 federal income tax return was filed to expedite our additional refund and to recognize federal energy tax credits we earned from building energy-efficient homes in 2019.

In the 2020 fourth quarter, an amended 2019 federal income tax return was filed to expedite our additional refund and to recognize federal tax credits we earned from building energy-efficient homes in 2019.

These credits were in addition to the $ 43.3 million of AMT tax credits that we reclassified from deferred tax assets to receivables in the 2020 first quarter when we filed a preliminary 2019 federal income tax return.

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In June 2020, California enacted tax legislation that approved the suspension of California NOL deductions for tax years 2020, 2021 and 2022.

Although the suspension of California NOL deductions did not have an impact on our income tax expense for the year ended November 30, 2021 or 2020, it contributed to the year-over-year increase in the amount of taxes we paid in 2021.

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 years ended November 30, 2022, 2021 or 2020, it contributed to the year-over-year increase in the amount of taxes we paid in 2022 and 2021.

Deferred Tax Assets, Net.

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Deferred tax assets:

Warranty, legal and other accruals $ 63,424 $ 54,826

NOLs from 2006 through 2022 60,680 73,662

Employee benefits 55,382 56,384

Warranty, legal and other accruals 54,826 41,319

Inventory impairment and land option contract abandonment charges 24,871 30,767

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State taxes, net of federal income tax benefit ( 46,139 ) ( 4.3 ) ( 31,378 ) ( 4.5 ) ( 16,395 ) ( 4.4 )

NOL reconciliation — — — — 3,111 .9

Other, net ( 544 ) ( .1 ) 48 — 12 —

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In our evaluation, we give more significant weight to evidence that is objective in nature as compared to subjective evidence.

Also, more significant weight is given to evidence that

directly relates to our then-current financial performance as compared to indirect or less current evidence.

Also, more significant weight is given to evidence that directly relates to our then-current financial performance as compared to indirect or less current evidence.

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.

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As of November 30, 2022, we would need to generate approximately $ 670 million of pretax income in future periods before 2042 to realize our deferred tax assets.

Based on the evaluation of our deferred tax assets as of November 30, 2021, we determined that most of our deferred tax assets would be realized.

In 2020, as a result of an expiration and the remeasurement of certain state NOLs, we decreased both our deferred tax assets and the related deferred tax asset valuation allowance for these NOLs by $ 1.2 million.

In 2019, the decrease in the valuation allowance primarily reflected our reversal of a $ 4.4 million deferred tax asset valuation allowance, partly due to the Internal Revenue Service’s announcement in January 2019 that refundable AMT credits will not be subject to sequestration for taxable years beginning after December 31, 2017.

Based on the evaluation of our deferred tax assets as of November 30, 2022 and 2021, we determined that most of our deferred tax assets would be realized.

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.

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Depending on their applicable statutory period, the state NOL carryforwards of $ 60.7 million, if not utilized, will begin to expire between 2023 and 2042.

State NOL carryforwards of $.2 million and $.4 million expired in 2021 and 2020, respectively.

In addition, $ 4.6 million of our tax credits, if not utilized, will expire in 2041.

State NOL carryforwards of $.1 million, $.2 million and $.4 million expired in 2022, 2021 and 2020, respectively.

Unrecognized Tax Benefits.

Gross unrecognized tax benefits are the differences between a tax position taken or expected to be taken in a tax return, and the benefit recognized for accounting purposes.

A reconciliation of the beginning and ending balances of gross unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):

A reconciliation of the beginning and ending balances of gross unrecognized tax benefits, including interest and penalties, is as follows (in thousands):

Years Ended November 30,

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Balance at end of year $ 975 $ 930 $ —

We had unrecognized tax benefits of $.9 million as of November 30, 2021.

Our unrecognized tax benefits are included in accrued expenses and other liabilities in our consolidated financial statements.

We had unrecognized tax benefits of $ 1.0 million as of November 30, 2022 and $.9 million as of November 30, 2021.

Our unrecognized tax benefits are included in accrued expenses and other liabilities in our consolidated balance sheets.

We recognize accrued interest and penalties related to unrecognized tax benefits in our consolidated financial statements as a component of the provision for income taxes.

As of November 30, 2020 and 2019, we had no gross unrecognized tax benefits.

As of November 30, 2020, we had no gross unrecognized tax benefits.

If these unrecognized tax benefits reverse in the future, they would have a beneficial impact on our effective tax rate at that time.

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The potential change will be related to increases due to new tax positions taken and the accrual of interest and penalties.

As of November 30, 2021 and 2020, there were no tax positions for which the ultimate deductibility is highly certain but the timing of such deductibility is uncertain.

Our total accrued interest and penalties related to unrecognized income tax benefits was zero at both November 30, 2021 and 2020.

Our total accrued interest and penalties related to unrecognized income tax benefits was less than $.1 million at November 30, 2022 and zero at 2021.

Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect our annual effective tax rate but would accelerate the payment of cash to a tax authority to an earlier period.

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Notes payable consisted of the following (in thousands):

Mortgages and land contracts due to land sellers and other loans (at interest rates of 4.5 % at November 30, 2021 and 4.5 % to 6.0 % at November 30, 2020)

$ 5,327 $ 4,667

7.00 % Senior notes due December 15, 2021

Unsecured revolving credit facility $ 150,000 $ —

Senior unsecured term loan 357,485 —

Mortgages and land contracts due to land sellers and other loans (at an interest rate of 4.5 % at November 30, 2022 and 2021)

7.50 % Senior notes due September 15, 2022

349,471 348,846

7.625 % Senior notes due May 15, 2023

350,788 351,281

6.875 % Senior notes due June 15, 2027

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297,230 296,905

7.25 % Senior notes due July 15, 2030

4.00 % Senior notes due June 15, 2031

385,778 385,375

Total $ 1,838,511 $ 1,685,027

The carrying amounts of our senior notes listed above are net of debt issuance costs and premiums, which totaled $ 10.3 million at November 30, 2021 and $ 7.5 million at November 30, 2020.

The carrying amounts of the Term Loan and senior notes listed above are net of debt issuance costs and premiums, if applicable, which totaled $ 16.2 million at November 30, 2022 and $ 10.3 million at November 30, 2021.

Unsecured Revolving Credit Facility.

We have an $ 800.0 million Credit Facility that will mature on October 7, 2023.

On February 18, 2022, we entered into an amendment to our Credit Facility that increased its borrowing capacity from $ 800.0 million to $ 1.09 billion and extended its maturity from October 7, 2023 to February 18, 2027 .

The Credit Facility contains an uncommitted accordion feature under which its aggregate principal amount of available loans can be increased to a maximum of $ 1.29 billion under certain conditions, including obtaining additional bank commitments.

The Credit Facility also contains a sublimit of $ 250.0 million for the issuance of letters of credit.

Interest on amounts borrowed under the Credit Facility is payable at least quarterly in arrears at a rate based on either a Eurodollar or a base rate, plus a spread that depends on our Leverage Ratio, as defined under the Credit Facility.

Interest on amounts borrowed under the Credit Facility accrues at an adjusted term SOFR rate or a base rate, plus a spread that depends on our Leverage Ratio, as defined under the Credit Facility.

Interest is payable quarterly (base rate) or each month or three months (adjusted term SOFR).

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.

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 an Interest Coverage Ratio or a 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 November 30, 2021, we had no cash borrowings and $ 8.6 million of letters of credit outstanding under the Credit Facility.

As of November 30, 2022, we had $ 150.0 million cash borrowings and $ 6.7 million of letters of credit outstanding under the Credit Facility.

Therefore, as of November 30, 2022, we had $ 933.3 million available for cash borrowings under the Credit Facility, with up to $ 243.3 million of that amount available for the issuance of letters of credit.

As of November 30, 2022, the weighted average annual interest rate on our outstanding borrowings under the Credit Facility was 5.1 %.

Senior Unsecured Term Loan.

On August 25, 2022, we entered into the Term Loan with the lenders party thereto, and on October 3, 2022 obtained an additional lender commitment thereunder, pursuant to which the lenders committed up to $ 360.0 million.

The Term Loan will mature on August 25, 2026 , or earlier if we secure borrowings under the Credit Facility without similarly securing the Term Loan (subject to certain exceptions).

Interest under the Term Loan generally will be based on either an adjusted term SOFR or a base rate, plus a spread that depends on our Leverage Ratio.

The Term Loan contains various covenants that are substantially the same as those under the Credit Facility.

Proceeds drawn under the Term Loan are guaranteed on a joint and several basis by our Guarantor Subsidiaries.

As of November 30, 2022, the weighted average annual interest rate on our outstanding borrowings under the Term Loan was 5.6 %.

On November 14, 2022, we borrowed $ 360.0 million under the Term Loan and, on November 15, 2022, we used the proceeds toward the redemption of our $ 350.0 million in aggregate principal amount of 7.625 % Senior Notes due 2023 at par.

LOC Facility.

On August 12, 2021, we entered into an amendment to our LOC Facility that increased the limit of letters of credit we may issue under it from $ 50.0 million to $ 75.0 million, and extended the expiration date from February 13, 2022 to February 13, 2025.

Under the LOC Facility, we obtain letters of credit from time to time in the ordinary course of operating our business.

We maintain an LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business.

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

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

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Shelf Registration.

On July 9, 2020, we filed the 2020 Shelf Registration with the SEC.

Our 2020 Shelf Registration is filed with the SEC.

The 2020 Shelf Registration registers the offering of securities that we may issue from time to time in amounts to be determined.

Our ability to issue securities is subject to market conditions.

The 2020 Shelf Registration replaced our previously effective universal shelf registration statement filed with the SEC on July 14, 2017.

Senior Notes.

All of the senior notes outstanding at November 30, 2021 and 2020 represent senior unsecured obligations that are guaranteed by certain of our subsidiaries and rank equally in right of payment with all of our existing and future indebtedness.

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

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

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6.875 % Senior notes

$ 350,000 July 31, 2012 September 15, 2022 Yes (a) 7.7 %

7.625 % Senior notes

350,000 February 17, 2015/February 20, 2019 May 15, 2023 Yes (b) 7.5

$ 300,000 February 20, 2019 June 15, 2027 Yes (a) 7.1 %

4.80 % Senior notes

300,000 February 20, 2019 June 15, 2027 Yes (b) 7.1

300,000 November 4, 2019 November 15, 2029 Yes (a) 5.0

7.25 % Senior notes

300,000 November 4, 2019 November 15, 2029 Yes (b) 5.0

350,000 June 22, 2022 July 15, 2030 Yes (b) 7.5

4.00 % Senior notes

390,000 June 9, 2021 June 15, 2031 Yes (b) 4.2

(b) At our option, these notes may be redeemed, in whole at any time or from time to time in part, at a redemption price equal to the greater of (i) 100 % of the principal amount of the notes being redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed (exclusive of interest accrued to the applicable redemption date), discounted to the redemption date at a defined rate, plus, in each case, accrued and unpaid interest on the notes being redeemed to, but excluding, the applicable redemption date, except that six months prior to the stated maturity date for these notes and until their maturity, the redemption price will be equal to 100 % of the principal amount of the notes being redeemed, plus, in each case, accrued and unpaid interest on the notes being redeemed to, but excluding, the applicable redemption date.

390,000 June 9, 2021 June 15, 2031 Yes (a) 4.2

(a) At our option, these notes may be redeemed, in whole at any time or from time to time in part, at a redemption price equal to the greater of (i) 100 % of the principal amount of the notes being redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed (exclusive of interest accrued to the applicable redemption date), discounted to the redemption date at a defined rate, plus, in each case, accrued and unpaid interest on the notes being redeemed to, but excluding, the applicable redemption date, except that six months prior to the stated maturity date for these notes, the redemption price will be equal to 100 % of the principal amount of the notes being redeemed, plus accrued and unpaid interest on the notes being redeemed to, but excluding, the applicable redemption date.

(b) At our option, these notes may be redeemed, in whole at any time or in part from time to time prior to July 15, 2025, at a redemption price equal to 100 % of the principal amount of the notes being redeemed plus a “make whole” premium, plus accrued and unpaid interest, if any, to the redemption date.

In addition, at any time or from time to time prior to July 15, 2025, an amount not to exceed the net proceeds of qualified equity offerings may be used at our option to redeem up to 40 % of the aggregate principal amount of these notes, at a redemption price equal to 107.250 % of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding the redemption date.

We may also elect to redeem the notes in whole at any time or in part from time to time, on or after July 15, 2025, at the applicable specified redemption price, including accrued and unpaid interest, if any, to the redemption date.

If a change in control occurs as defined in the instruments governing our senior notes, we would be required to offer to purchase all of our outstanding senior notes at 101 % of their principal amount, together with all accrued and unpaid interest, if any.

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Net proceeds from this offering totaled $ 345.5 million, after deducting the underwriting discount and our expenses relating to the offering.

The 4.00 % Senior Notes due 2031 represent senior unsecured obligations of ours and rank equally in right of payment with all of our existing unsecured and unsubordinated indebtedness.

Interest on the 7.25 % Senior Notes due 2030 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.

On July 7, 2022, we used the net proceeds from the issuance of the 7.25 % Senior Notes due 2030, together with cash on hand, to retire our then-outstanding $ 350.0 million in aggregate principal amount of 7.50 % Senior Notes due 2022 before their September 15, 2022 maturity date, by redemption pursuant to the optional redemption terms specified for such notes.

We paid $ 353.6 million to redeem the notes and recorded a charge of $ 3.6 million for the early extinguishment of debt in the 2022 third quarter, primarily due to a make-whole premium paid to redeem these senior notes.

On June 9, 2021, we completed the underwritten public offering of $ 390.0 million in aggregate principal amount of 4.00 % Senior Notes due 2031 at 100 % of their aggregate principal amount.

Net proceeds from this offering totaled $ 385.2 million, after deducting the underwriting discount and our expenses relating to the offering.

Interest on the 4.00 % Senior Notes due 2031 is payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 2021.

These notes will mature on June 15, 2031.

On June 9, 2021, we used a portion of the net proceeds from the issuance of the 4.00 % Senior Notes due 2031 to purchase, pursuant to a tender offer that expired the previous day, $ 269.8 million in aggregate principal amount of our outstanding $ 450.0 million of 7.00 % Senior Notes due 2021.

We paid $ 274.9 million to purchase the notes and recorded a charge of $ 5.1 million for the early extinguishment of debt in the 2021 third quarter due to a premium paid under the tender offer and the unamortized original issue discount associated with these senior notes.

On September 15, 2021, we redeemed the remaining $ 180.2 million in aggregate principal amount of the 7.00 % Senior Notes due 2021 at par value pursuant to the terms of the notes.

On June 9, 2021, we used a portion of the net proceeds from the issuance of the 4.00 % Senior Notes due 2031 to purchase, pursuant to a tender offer that expired the previous day, $ 269.8 million in aggregate principal amount of our then-outstanding $ 450.0 million of 7.00 % Senior Notes due 2021.

On September 15, 2021, we redeemed the then-remaining $ 180.2 million in aggregate principal amount of the 7.00 % Senior Notes due 2021 at par value pursuant to their terms.

The indenture governing our senior notes does not contain any financial covenants.

Subject to specified exceptions, the indenture contains certain restrictive covenants that, among other things, limit our ability to incur secured indebtedness, or engage in sale-leaseback transactions involving property above a certain specified value.

In addition, our senior notes contain certain limitations related to mergers, consolidations, and sales of assets.

As of the date of this report, we were in compliance with the applicable terms of all 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.

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

As of the date of this report, we were in compliance with the applicable terms of all our covenants and other requirements under the Credit Facility, the Term Loan, the senior notes, the indenture, and the mortgages and land contracts due to land sellers and other loans.

Our ability to access the Credit Facility for cash borrowings and letters of credit and our ability to secure future debt financing depend, in part, on our ability to remain in such compliance.

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

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:

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

Principal payments on our notes payable are due during each year ending November 30 as follows:

2023 — $ 3.2 million;

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2025 — $.5 million;

and thereafter — $ 990.0 million.

2026 — $ 360.0 million;

2027 — $ 450.0 million;

and thereafter — $ 1.04 billion.

Borrowings under the Credit Facility are reflected as principal payments due in 2027, corresponding to the Credit Facility’s maturity date.

Fair Value Disclosures

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

Inventories (a) Level 3 $ 27,923 $ ( 9,903 ) $ 18,020 $ 69,211 $ ( 22,723 ) $ 46,488

Inventories Level 3 $ 65,372 $ ( 24,077 ) $ 41,295 $ 27,923 $ ( 9,903 ) $ 18,020

(a) Amounts represent the aggregate fair value for real estate assets impacted by inventory impairment charges during the applicable period, as of the date that the fair value measurements were made.

The carrying value for these real estate assets may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the measurement date.

The fair values for inventories that were determined using Level 3 inputs were based on the estimated future net cash flows discounted for inherent risk associated with each underlying asset.

The carrying value for these real estate assets

may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the measurement date.

The fair values for inventories that were determined using Level 3 inputs were primarily based on the estimated future net cash flows discounted for inherent risk associated with each underlying asset.

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

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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, outstanding borrowings under the Credit Facility and the Term Loan, and mortgages and land contracts due to land sellers and other loans approximate fair values.

The carrying value of corporate-owned life insurance is based on the cash surrender value of the policies and, accordingly, approximates fair value.

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The specific terms and conditions of our limited warranty program vary depending upon the markets in which we do business.

We generally provide a structural warranty of 10 years, a

warranty on electrical, heating, cooling, plumbing and certain other building systems each varying from two to five years based on geographic market and state law, and a warranty of one year for other components of the home.

We generally provide a structural warranty of 10 years, a warranty on electrical, heating, cooling, plumbing and certain other building systems each varying from two to five years based on geographic market and state law, and a warranty of one year for other components of the home.

Our limited warranty program is ordinarily how we respond to and account for homeowners’ requests to local division offices seeking repairs of certain conditions or defects, including claims where we could have liability under applicable state statutes or tort law for a defective condition in or damages to a home.

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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.

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Balance at end of year $ 175,977 $ 189,131 $ 194,180

(a) Includes 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;

an adjustment to increase our previously recorded liability by $ 6.8 million in 2021;

and adjustments to reduce our previously recorded liability by $ 4.0 million in 2020 and $ 2.5 million in 2019.

(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;

an adjustment to increase our previously recorded liability by $ 7.0 million in 2022 and $ 6.8 million in 2021;

and an adjustment to reduce our previously recorded liability by $ 4.0 million in 2020.

The 2022 amount 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.

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In these instances, the claims and related repair work generally are initially covered by our warranty liability, and the costs associated with resolving the legal matter (including any additional repair work) are covered by our self-insurance liability.

The payments we make in connection with claims and related repair work, whether covered within our warranty liability and/or our self-insurance liability, may be recovered from our insurers to the extent such payments exceed the self-insured

retentions or deductibles under our general liability insurance policies.

Also, in certain instances, in the course of resolving a claim, we pay amounts in advance of and/or on behalf of an independent contractor(s) or their insurer(s) and believe we will be reimbursed for such payments.

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Florida Chapter 558 Actions .

We and certain of our trade partners have received a growing number of claims from attorneys on behalf of individual owners of our homes and/or homeowners’ associations that allege, pursuant to Chapter 558 of the Florida Statutes, various construction defects, with most relating to stucco and water-intrusion issues.

We and certain of our trade partners continue to receive claims from attorneys on behalf of individual owners of our homes and/or homeowners’ associations that allege, pursuant to Chapter 558 of the Florida Statutes, various construction defects, with most relating to stucco and water-intrusion issues.

The claims primarily involve homes in our Jacksonville, Orlando, and Tampa operations.

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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.

In addition, although we believe it is probable we will receive additional claims in future periods, we are unable to reasonably estimate the number of such claims or the amount or range of any potential losses associated with such claims as each of these is dependent on several factors, including the actions of third parties over which we have no control;

is dependent on several factors, including the actions of third parties over which we have no control;

the nature of any specific claims;

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.

We, along with our outside consultants, have continued to investigate these allegations, and 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.

At this stage of our investigation into these allegations, it is reasonably possible that our loss could exceed the amount accrued by an estimated range of $ 0 to $ 3.0 million.

Our investigation will also involve identifying potentially responsible parties, including insurers, to pay for or perform any necessary repairs.

We are in discussions with the homeowners association regarding the claims and their resolution.

Performance Bonds and Letters of Credit.

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At November 30, 2022, we had $ 1.27 billion of performance bonds and $ 43.0 million of letters of credit outstanding.

At November 30, 2020, we had $ 897.6 million of performance bonds and $ 42.1 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.

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

Potential Contingent Gain.

In pursuing e-commerce opportunities in the late-1990s, we sought strategic alliances to provide new products and services to our homebuyers and invested in certain technology businesses aimed at enhancing the homebuying experience.

We accounted for these investments under the cost method.

We wrote these investments off in 2001-2002, when we believed they were not recoverable based on the extended technology industry downturn and related severe stock market correction.

One of these companies, in which we had invested approximately $ 1.8 million, has since developed a viable business and experienced significant revenue growth.

We have a minority ownership interest in this investee company.

In addition, in 2000 we granted nominal ownership interests in this and other investee companies to 16 then-current executives under an incentive compensation program.

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.

Subsequent to the end of our 2021 fiscal year, this investee company entered into a letter of intent with a prospective buyer and, 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.

Legal Matters

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Preferred Stock.

To help protect the benefits of our NOLs and other deferred tax assets from an ownership change under Section 382, on January 22, 2009, we adopted a Rights Agreement (“Prior Rights Agreement”), and we declared a dividend distribution of one preferred share purchase right for each outstanding share of common stock that was payable to stockholders of record as of the close of business on March 5, 2009.

On April 12, 2018, we entered into an Amended and Restated Rights Agreement with Computershare Inc., as rights agent (“2018 Rights Agreement”), which amended and restated the Prior Rights Agreement.

The 2018 Rights Agreement extended the latest possible expiration date of the rights issued pursuant to the 2018 Rights Agreement to the close of business on April 30, 2021 and made certain other related changes.

On April 8, 2021, we entered into an Amended Rights Agreement with Computershare Inc., as rights agent, (“2021 Rights Agreement”) following its approval by our stockholders at our 2021 Annual Meeting held on April 8, 2021.

The 2021 Rights Agreement amends the 2018 Rights Agreement.

As with the 2018 Rights Agreement, the 2021 Rights Agreement is intended to continue to help protect our NOLs and other deferred tax assets from an ownership change under Internal Revenue Code Section 382.

The 2021 Rights Agreement extended the latest possible expiration date of the rights issued pursuant to the 2018 Rights Agreement to the close of business on April 30, 2024 and made certain other related changes.

Otherwise, the 2021 Rights Agreement’s terms are substantively the same as those of the 2018 Rights Agreement.

Subject to the terms, provisions and conditions of the 2021 Rights Agreement, if these rights become exercisable, each right would initially represent the right to purchase from us 1/100th of a share of our Series A Participating Cumulative Preferred Stock for a purchase price of $ 85.00 (“Purchase Price”).

To help protect the benefits of our NOLs and other deferred tax assets from an ownership change under Section 382, on January 22, 2009, we adopted a rights agreement and declared a dividend distribution of one preferred share purchase right for each outstanding share of common stock.

Subject to the terms, provisions and conditions of the rights agreement, if the rights become exercisable, each right would initially represent the right to purchase from us 1/100th of a share of our Series A Participating Cumulative Preferred Stock for a purchase price of $ 85.00 (“Purchase Price”).

If issued, each fractional share of preferred stock would generally give a stockholder approximately the same dividend, voting and liquidation rights as does one share of our common stock.

However, prior to exercise, a right does not give its holder any rights as a stockholder, including without limitation any dividend, voting or liquidation rights.

The rights will not be exercisable until the earlier of (a) 10 calendar days after a public announcement by us that a person or group has become an Acquiring Person (as defined under the Prior Rights Agreement) and (b) 10 business days after the commencement of a tender or exchange offer by a person or group if upon consummation of the offer the person or group would beneficially own 4.9 % or more of our outstanding common stock.

The rights will not be exercisable until the earlier of (a) 10 calendar days after a public announcement by us that a person or group has become an Acquiring Person (as defined under the rights agreement) and (b) 10 business days after the commencement of a tender or exchange offer by a person or group if upon consummation of the offer the person or group would beneficially own 4.9 % or more of our outstanding common stock.

Until these rights become exercisable (“Distribution Date”), common stock certificates and/or book-entry shares will evidence the rights and may contain a notation to that effect.

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After the Distribution Date, the rights may be transferred other than in connection with the transfer of the underlying shares of our common stock.

If there is an Acquiring Person on the

Distribution Date or a person or group becomes an Acquiring Person after the Distribution Date, each holder of a right, other than rights that are or were beneficially owned by an Acquiring Person, which will be void, will thereafter have the right to receive upon exercise of a right and payment of the Purchase Price, that number of shares of our common stock having a market value of two times the Purchase Price.

If there is an Acquiring Person on the Distribution Date or a person or group becomes an Acquiring Person after the Distribution Date, each holder of a right, other than rights that are or were beneficially owned by an Acquiring Person, which will be void, will thereafter have the right to receive upon exercise of a right and payment of the Purchase Price, that number of shares of our common stock having a market value of two times the Purchase Price.

After the later of the Distribution Date and the time we publicly announce that an Acquiring Person has become such, our board of directors may exchange the rights, other than rights that are or were beneficially owned by an Acquiring Person, which will be void, in whole or in part, at an exchange ratio of one share of common stock per right, subject to adjustment.

At any time prior to the later of the Distribution Date and the time we publicly announce that an Acquiring Person becomes such, our board of directors may redeem all of the then-outstanding rights in whole, but not in part, at a price of $ .001 per right, subject to adjustment (“Redemption Price”).

At any time prior to the later of the Distribution Date and the time we publicly announce that an Acquiring Person becomes such, our board of directors may redeem all the then-outstanding rights in whole, but not in part, at a price of $ .001 per right, subject to adjustment (“Redemption Price”).

The redemption will be effective immediately upon the board of directors’ action, unless the action provides that such redemption will be effective at a subsequent time or upon the occurrence or nonoccurrence of one or more specified events, in which case the redemption will be effective in accordance with the provisions of the action.

Immediately upon the effectiveness of the redemption of the rights, the right to exercise the rights will terminate and the only right of the holders of rights will be to receive the Redemption Price, with interest thereon.

The rights issued pursuant to the 2021 Rights Agreement will expire on the earliest of (a) the close of business on April 30, 2024 (b) the time at which the rights are redeemed, (c) the time at which the rights are exchanged, (d) the time at which our board of directors determines that a related provision in our Restated Certificate of Incorporation is no longer necessary, and (e) the close of business on the first day of a taxable year of ours to which our board of directors determines that no tax benefits may be carried forward.

Per the rights agreement, as amended, the rights issued thereunder will expire on the earliest of (a) the close of business on April 30, 2024, (b) the time at which the rights are redeemed, (c) the time at which the rights are exchanged, (d) the time at which our board of directors determines that a related provision in our Restated Certificate of Incorporation is no longer necessary, and (e) the close of business on the first day of a taxable year of ours to which our board of directors determines that no tax benefits may be carried forward.

Common Stock.

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In 2021, we repurchased 4,668,600 shares of our common stock on the open market pursuant to this authorization at a total cost of $ 188.2 million.

Repurchases under the remaining authorization of 331,400 shares 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 and business conditions and other factors.

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 additional shares.

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 Director Plan SARs.

The 2014 Plan, which was amended in April 2016, is discussed in Note 21 – Employee Benefit and Stock Plans.

As of November 30, 2021, 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.

Our board of directors declared four quarterly cash dividends of $ .15 per share of common stock in 2021.

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 the prior board of directors authorization, which had 331,400 shares remaining for repurchase.

In 2022, we repurchased 4,927,499 shares of our common stock on the open market pursuant to this authorization at a total cost of $ 150.0 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 November 30, 2022, we were authorized to repurchase up to $ 150.0 million of our outstanding common stock.

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 Director Plan SARs.

As the remaining outstanding Director Plan SARs expired in April 2022, this stock repurchase authorization was no longer needed.

Our board of directors declared four quarterly cash dividends of $ .15 per share of common stock in 2022 and 2021.

In 2020, our board of directors declared quarterly cash dividends of $ .09 per share of common stock in the first, second and third quarters.

In the 2020 fourth quarter, our board of directors approved an increase in the quarterly cash dividend on our common stock to $ .15 per share and declared a quarterly cash dividend at the new higher rate.

Our board of directors declared quarterly cash dividends of $ .025 per share of common stock in the 2019 first and second quarters.

In the 2019 third quarter, our board of directors approved an increase in the quarterly cash dividend on our common stock to $ .09 per share, and declared quarterly cash dividends at the new higher rate in the 2019 third and fourth quarters.

All dividends declared during 2022, 2021 and 2020 were also paid during those years.

Treasury Stock.

In addition to the shares purchased in 2021 pursuant to our share repurchase program, we acquired $ 12.3 million, $ 9.5 million and $ 7.3 million of our common stock in 2021, 2020 and 2019, respectively.

All of the common stock acquired in 2020 and 2019 and a portion of the common stock acquired in 2021 consisted of previously issued shares delivered to us by employees to satisfy their withholding tax obligations on the vesting of PSUs and restricted stock awards or of forfeitures of previous restricted stock awards.

In addition to the shares purchased in 2022 and 2021 pursuant to our share repurchase program, we acquired $ 15.9 million, $ 12.3 million and $ 9.5 million of our common stock in 2022, 2021 and 2020, respectively.

A portion of the common stock acquired in 2022 and 2021 and all the common stock acquired in 2020 consisted of previously issued shares delivered to us by employees to satisfy their withholding tax obligations on the vesting of PSUs and restricted stock awards or of forfeitures of previous restricted stock awards.

Treasury stock is recorded at cost.

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Balance at November 30, 2020 $ ( 22,276 )

Other comprehensive loss before reclassifications ( 8,412 )

Other comprehensive income before reclassifications 2,664

Amounts reclassified from accumulated other comprehensive loss 1,661

Income tax benefit related to items of other comprehensive loss 1,897

Other comprehensive loss, net of tax ( 5,127 )

Reclassification of stranded tax effects to retained earnings ( 1,643 )

Income tax expense related to items of other comprehensive income ( 1,168 )

Other comprehensive income, net of tax 3,157

Balance at November 30, 2021 ( 19,119 )

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Details About Accumulated Other Comprehensive Loss Components 2022 2021 2020

2021 2020 2019

Postretirement benefit plan adjustments

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Amortization of prior service cost — 86 425

Settlement loss — — 356

Total reclassifications (a) $ 1,090 $ 1,661 $ 1,388

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As of November 30, 2022, 2021 and 2020, approximately 3 %, 4 % and 4 %, respectively, of the 401(k) Plan’s net assets at each period were invested in our common stock.

Amended KB Home 2014 Plan.

At our Annual Meeting of Stockholders held on April 7, 2016, our stockholders approved the Amended KB Home 2014 Equity Incentive Plan (“Amended 2014 Plan”), authorizing, among other things, the issuance for grants of stock-based awards to our employees, non-employee directors and consultants of up to 7,500,000 additional shares above the original 4,800,000 shares our stockholders approved under the plan (or an aggregate issuance of 12,300,000 shares), plus any shares that were available for grant as of April 7, 2014 under our 2010 Equity Incentive Plan (“2010 Plan”), and any

shares subject to then-outstanding awards under the 2010 Plan that subsequently expire or are cancelled, forfeited, tendered or withheld to satisfy tax withholding obligations with respect to full value awards, or settled for cash.

No new awards may be made under the 2010 Plan.

Therefore, the Amended 2014 Plan is our only active equity compensation plan.

Under the Amended 2014 Plan, grants of stock options and other similar awards reduce the Amended 2014 Plan’s share capacity on a 1 -for-1 basis, and grants of restricted stock and other similar “full value” awards reduce the Amended 2014 Plan’s share capacity on a 1.78 -for-1 basis.

In addition, subject to the Amended 2014 Plan’s terms and conditions, a stock-based award may also be granted under the Amended 2014 Plan to replace an outstanding award granted under another plan of ours (subject to the terms of such other plan) with terms substantially identical to those of the award being replaced.

The Amended 2014 Plan provides that stock options and SARs may be awarded for periods of up to 10 years.

The Amended 2014 Plan also enables us to grant cash bonuses and other stock-based awards.

Equity Incentive Plan.

We maintain one active equity incentive plan with an authorized aggregate issuance of 12,300,000 shares, plus shares available for grant under a prior equity incentive plan, and shares subject to outstanding awards under the prior equity incentive plan that subsequently expire or are canceled, forfeited, tendered or withheld to satisfy tax withholding obligations with respect to full value awards, or settled for cash.

In addition, if an award made under our active equity incentive plan subsequently expires or is canceled, forfeited or settled for cash, then any shares associated with such award may, to the extent of such expiration, cancellation, forfeiture or cash settlement, be used again for new grants under the plan, and shares tendered or withheld to satisfy tax withholding obligations with respect to a full value award may be used again for new grants under the plan.

Under our active equity incentive plan, grants of stock options and other similar awards reduce the plan’s share

capacity on a 1 -for-1 basis, and grants of restricted stock and other similar “full value” awards reduce the share capacity on a 1.78 -for-1 basis.

Any shares that again become available for grant will be added back to the equity incentive plan’s available grant capacity in the same manner in which they were initially deducted ( i.e ., 1-for-1 or 1.78-for-1).

The plan provides that stock options and stock appreciation rights may be awarded for periods of up to 10 years.

It also enables us to grant cash bonuses and other stock-based awards.

Stock-Based Compensation.

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2022 2021 2020

Stock options $ — $ — $ 189

Restricted stock $ 8,743 $ 7,139 $ 6,993

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We have not granted any stock option awards since 2016.

The total intrinsic value of stock options exercised was $ 22.1 million for the year ended November 30, 2021, $ 48.2 million for the year ended November 30, 2020 and $ 37.1 million for the year ended November 30, 2019.

There were no stock options exercised in 2022.

The total intrinsic value of stock options exercised was $ 22.1 million in 2021 and $ 48.2 million in 2020.

The aggregate intrinsic value of stock options outstanding was $ 26.5 million, $ 40.9 million and $ 48.9 million at November 30, 2022, 2021 and 2020, respectively.

The intrinsic value of stock options exercisable was $ 40.9 million at November 30, 2021, $ 48.9 million at November 30, 2020, and $ 89.9 million at November 30, 2019.

The aggregate intrinsic value of stock options exercisable was $ 26.5 million at November 30, 2022, $ 40.9 million at November 30, 2021, and $ 48.9 million at November 30, 2020.

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the price of the option.

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1,674,393 $ 15.56 2.9 1,674,393 $ 15.56 2.9

At November 30, 2021, there was no unrecognized stock-based compensation expense related to stock option awards as all of these awards were fully vested.

At November 30, 2022, there was no unrecognized stock-based compensation expense related to stock option awards as all these awards were fully vested.

Restricted Stock.

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Performance-Based Restricted Stock Units.

On October 7, 2021, we granted PSUs to certain employees.

On November 14, 2022, we granted PSUs to certain employees.

Each PSU grant corresponds to a target amount of our common stock (“Award Shares”).

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We have granted Director Plan SARs and deferred common stock awards to our non-employee directors pursuant to the terms of the Director Plan and elections made by each director.

All of these awards were fully vested as of November 30, 2016.

Director Plan SARs, which have not been granted since April 2014 as they ceased being a component of non-employee director compensation after that date, are stock settled, have terms of up to 15 years and may be exercised when a respective director leaves the board or earlier if applicable stock ownership requirements have been met.

Deferred common stock awards will be paid out at the earlier of a change in control or the date a respective director leaves the board.

All Director Plan SARs were granted at an exercise price equal to the closing price of our common stock on the date of grant.

At November 30, 2021, 2020 and 2019, the aggregate outstanding Director Plan SARs were 70,849 , 155,569 and 224,674 , respectively, and the aggregate outstanding deferred common stock awards granted under the Director Plan were 469,171 , 548,952 and 519,160 , respectively.

All these awards were fully vested as of November 30, 2016.

Director Plan SARs, which have not been granted since April 2014 as they ceased being a component of non-employee director compensation after that date, were stock settled, had terms of up to 15 years and were granted at an exercise price equal to the closing price of our common stock on the date of grant.

There were no remaining Director Plan SARs outstanding at November 30, 2022.

At November 30, 2021 and 2020, the aggregate outstanding Director Plan SARs were 70,849 and 155,569 , respectively.

At November 30, 2022, 2021 and 2020, the aggregate outstanding deferred common stock awards granted under the Director Plan were 409,648 , 469,171 and 548,952 , respectively.

In addition, we have granted common stock on an unrestricted basis to our non-employee directors on the grant date pursuant to the Director Plan and elections made by each director.

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Common stock held in the Trust is not considered outstanding in the computations of earnings per share.

The Trust held 6,705,247 and 7,124,317 shares of common stock at November 30, 2021 and 2020, respectively.

The Trust held 6,705,247 shares of common stock at both November 30, 2022 and 2021.

The trustee votes shares held by the Trust in accordance with voting directions from eligible employees, as specified in a trust agreement with the trustee.

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The cash surrender value of the Retirement Plan life insurance contracts was $ 35.3 million at November 30, 2022 and $ 40.5 million at November 30, 2021.

We recognized an investment loss on the cash surrender value of the Retirement Plan life insurance contracts of $ 1.1 million in 2021, and investment gains of $.7 million in 2020 and $ 2.1 million in 2019.

We recognized investment losses on the cash surrender value of the Retirement Plan life insurance contracts of $ 3.1 million and $ 1.1 million in 2022 and 2021, and an investment gain of $.7 million in 2020.

In 2022, 2021 and 2020, we paid $ 2.0 million, $ 1.9 million and $ 1.9 million, respectively, in benefits under the Retirement Plan to eligible former employees.

The cash surrender value of the DBO Plan life insurance contracts was $ 16.8 million at November 30, 2022 and $ 18.5 million at November 30, 2021.

We recognized an investment loss on the cash surrender value of the DBO Plan life insurance contracts of $.3 million in 2021, and investment gains of $.3 million in 2020 and $.9 million in 2019.

We recognized investment losses on the cash surrender value of the DBO Plan life insurance contracts of $ 1.5 million in 2022 and $.3 million in 2021, and an investment gain of $.3 million in 2020.

In 2022, we paid $.7 million in benefits under the DBO Plan.

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Amortization of net actuarial loss 998 1,443 912

Settlement loss — — 356

Total $ 3,983 $ 4,273 $ 4,364

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Increase in operating lease right-of-use assets and lease liabilities due to adoption of ASC 842 — — 31,199

Decrease in inventories due to adoption of ASC 606 — — ( 35,288 )

Increase in property and equipment, net due to adoption of ASC 606 — — 31,194

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of KB Home:

To the Stockholders and the Board of Directors of KB Home:

Opinion on the Financial Statements

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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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-K

Item 8. Financial Statements and Supplementary Data