What changed in this filing

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Item 1. Financial Statements

2024-04-05 compared with 2023-10-06 · 219 added, 218 removed, 540 unchanged (45% of the section changed)

2 unchanged sentences

(In Thousands, Except Per Share Amounts – Unaudited)

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

Three Months Ended

February 29, 2024 February 28, 2023

Total revenues $ 1,467,766 $ 1,384,314

6 unchanged sentences

Equity in loss of unconsolidated joint ventures ( 445 ) ( 757 )

Loss on early extinguishment of debt — ( 3,598 ) — ( 3,598 )

Homebuilding pretax income 163,088 156,199

2 unchanged sentences

Expenses ( 1,546 ) ( 1,358 )

Equity in income of unconsolidated joint ventures 4,149 128 11,157 20,083

Equity in income of unconsolidated joint venture

Financial services pretax income 11,577 6,001

38 unchanged sentences

Stockholders’ equity:

Common stock — 101,259,329 and 100,711,153 shares issued at August 31, 2023 and November 30, 2022, respectively

Common stock — 101,861,682 and 101,275,979 shares issued at February 29, 2024 and November 30, 2023, respectively

101,862 101,276

5 unchanged sentences

Grantor stock ownership trust, at cost:

6,705,247 shares at August 31, 2023 and November 30, 2022

6,705,247 shares at February 29, 2024 and November 30, 2023

( 72,718 ) ( 72,718 )

Treasury stock, at cost:

15,235,409 and 10,015,507 at August 31, 2023 and November 30, 2022, respectively

19,241,230 and 18,703,704 at February 29, 2024 and November 30, 2023, respectively

( 781,809 ) ( 737,364 )

3 unchanged sentences

See accompanying notes.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands – Unaudited)

Three Months Ended February 29, 2024 and February 28, 2023

Number of Shares

Stock Grantor

Trust Treasury

Stock Common Stock Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Grantor Stock

Ownership Trust Treasury Stock Total Stockholders’ Equity

Balance at November 30, 2023

101,276 ( 6,705 ) ( 18,704 ) $ 101,276 $ 845,693 $ 3,676,924 $ ( 3,671 ) $ ( 72,718 ) $ ( 737,364 ) $ 3,810,140

Net income — — — — — 138,665 — — — 138,665

Dividends on common stock — — — — — ( 16,355 ) — — — ( 16,355 )

Employee stock options/other 586 — — 586 8,218 — — — — 8,804

— — 548 — ( 22,060 ) — — — 22,060 —

Stock-based compensation — — — — 7,921 — — — — 7,921

Stock repurchases, including excise tax

— — ( 827 ) — — — — — ( 50,000 ) ( 50,000 )

Tax payments associated with stock-based compensation awards

— — ( 258 ) — — — — — ( 16,505 ) ( 16,505 )

Balance at February 29, 2024

101,862 ( 6,705 ) ( 19,241 ) $ 101,862 $ 839,772 $ 3,799,234 $ ( 3,671 ) $ ( 72,718 ) $ ( 781,809 ) $ 3,882,670

Balance at November 30, 2022

100,711 ( 6,705 ) ( 10,016 ) $ 100,711 $ 836,260 $ 3,143,578 $ ( 5,575 ) $ ( 72,718 ) $ ( 341,461 ) $ 3,660,795

Net income — — — — — 125,500 — — — 125,500

Dividends on common stock — — — — — ( 12,476 ) — — — ( 12,476 )

Employee stock options/other 72 — — 72 1,062 — — — — 1,134

Stock awards — — 671 — ( 23,285 ) — — — 23,285 —

Stock-based compensation — — — — 5,867 — — — — 5,867

Stock repurchases, including excise tax

— — ( 1,965 ) — — — — — ( 75,609 ) ( 75,609 )

Tax payments associated with stock-based compensation awards — — ( 277 ) — — — — — ( 9,748 ) ( 9,748 )

Balance at February 28, 2023

100,783 ( 6,705 ) ( 11,587 ) $ 100,783 $ 819,904 $ 3,256,602 $ ( 5,575 ) $ ( 72,718 ) $ ( 403,533 ) $ 3,695,463

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands – Unaudited)

Nine Months Ended August 31,

Three Months Ended

February 29, 2024 February 28, 2023

Cash flows from operating activities:

$ 138,665 $ 125,500

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Equity in income of unconsolidated joint ventures ( 6,610 ) ( 825 )

Distributions of earnings from unconsolidated joint ventures

12,172 10,679

Amortization of debt issuance costs and premiums 860 835

Depreciation and amortization

26,986 23,861

Deferred income taxes

14,900 21,100

Loss on early extinguishment of debt

Stock-based compensation

23,934 22,944

Inventory impairments and land option contract abandonments

5 unchanged sentences

4,151 ( 791 )

Net cash provided by (used in) operating activities 772,523 ( 223,999 )

Net cash provided by operating activities

28,518 93,917

Cash flows from investing activities:

6 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of debt

Repayment of senior notes

— ( 353,598 )

Payment of issuance costs — ( 10,695 )

Borrowings under revolving credit facility

170,000 1,485,000

Repayments under revolving credit facility

8 unchanged sentences

( 16,355 ) ( 12,476 )

Net cash provided by (used in) financing activities ( 445,551 ) 183,240

Net increase (decrease) in cash and cash equivalents 282,199 ( 94,879 )

Net cash used in financing activities

( 74,973 ) ( 146,327 )

Net decrease in cash and cash equivalents

( 59,047 ) ( 69,371 )

Cash and cash equivalents at beginning of period 727,342 330,198

10 unchanged sentences

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

The results of our consolidated operations for the three months and nine months ended August 31, 2023 are not necessarily indicative of the results to be expected for the full year due to seasonal variations in operating results and other factors.

The results of our consolidated operations for the three months ended February 29, 2024 are not necessarily indicative of the results to be expected for the full year due to seasonal variations in operating results and other factors.

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

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We consider all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents.

Our cash equivalents totaled $ 460.9 million at August 31, 2023 and $ 15.8 million at November 30, 2022.

At August 31, 2023 and November 30, 2022, the majority of our cash equivalents was invested in interest-bearing bank deposit accounts.

Our cash equivalents totaled $ 488.4 million at February 29, 2024 and $ 508.2 million at November 30, 2023.

At February 29, 2024 and November 30, 2023, our cash equivalents were mainly invested in interest-bearing bank deposit accounts and money market funds.

Comprehensive Income.

Our comprehensive income was $ 149.9 million for the three months ended August 31, 2023 and $ 255.3 million for the three months ended August 31, 2022.

For the nine months ended August 31, 2023 and 2022, our comprehensive income was $ 439.9 million and $ 600.3 million, respectively.

Our comprehensive income for each of the three-month and nine-month periods ended August 31, 2023 and 2022 was equal to our net income for the respective periods.

Our comprehensive income was $ 138.7 million for the three months ended February 29, 2024 and $ 125.5 million for the three months ended February 28, 2023.

Our comprehensive income for each of the three-month periods ended February 29, 2024 and February 28, 2023 was equal to our net income for the respective periods.

Recent Accounting Pronouncements Not Yet Adopted.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

ASU 2023-07 is to be applied retrospectively to all prior periods presented in the financial statements.

Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued Accounting Standards Update No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign).

ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes.

The guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Segment Information

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

As of August 31, 2023, our homebuilding reporting segments conducted ongoing operations in the following states:

As of February 29, 2024, our homebuilding reporting segments conducted ongoing operations in the following states:

California, Idaho and Washington

12 unchanged sentences

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

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

Three Months Ended

February 29, 2024 February 28, 2023

West Coast $ 558,302 $ 540,019

25 unchanged sentences

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

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

Three Months Ended

February 29, 2024 February 28, 2023

Insurance commissions $ 3,592 $ 3,374

Title services 2,476 2,403

Other — — — 19

Total 6,068 5,777

1 unchanged sentence

Operating income 4,522 4,419

Equity in income of unconsolidated joint ventures 4,149 128 11,157 20,083

Equity in income of unconsolidated joint venture

Pretax income $ 11,577 $ 6,001

2 unchanged sentences

Receivables 2,545 2,783

Investments in unconsolidated joint venture 25,814 26,678

Investment in unconsolidated joint venture

19,909 19,354

Other assets (a) 35,741 34,476

2 unchanged sentences

Total liabilities $ 859 $ 1,645

(a) Other assets at August 31, 2023 and November 30, 2022 included $ 31.4 million and $ 27.6 million, respectively, of contract assets for estimated future renewal commissions.

(a) Other assets at February 29, 2024 and November 30, 2023 included $ 35.7 million and $ 34.4 million, respectively, of contract assets for estimated future renewal commissions.

Earnings Per Share

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

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

Three Months Ended

February 29, 2024 February 28, 2023

Net income $ 138,665 $ 125,500

Distributed earnings allocated to nonvested restricted stock ( 120 ) ( 62 ) ( 295 ) ( 190 )

Undistributed earnings allocated to nonvested restricted stock ( 998 ) ( 1,150 ) ( 2,851 ) ( 2,685 )

Distributed earnings allocated to participating securities

( 117 ) ( 87 )

Undistributed earnings allocated to participating securities

( 937 ) ( 777 )

Numerator for basic earnings per share 137,611 124,636

Effect of dilutive securities:

Undistributed earnings allocated to nonvested restricted stock 998 1,150 2,851 2,685

Undistributed earnings reallocated to nonvested restricted stock ( 967 ) ( 1,119 ) ( 2,766 ) ( 2,610 )

Numerator for diluted earnings per share $ 148,846 $ 254,148 $ 436,814 $ 597,456

Three Months Ended August 31, Nine Months Ended August 31,

Undistributed earnings allocated to participating securities

Undistributed earnings reallocated to participating securities

( 909 ) ( 754 )

Numerator for diluted earnings per share $ 137,639 $ 124,659

Weighted average shares outstanding — basic 75,894 83,468

6 unchanged sentences

Our outstanding nonvested shares of restricted stock contain non-forfeitable rights to dividends and, therefore, are considered participating securities for purposes of computing earnings per share pursuant to the two-class method.

We had no other participating securities at August 31, 2023 or 2022.

For the three-month and nine-month periods ended August 31, 2023 and 2022, no outstanding stock options were excluded from the diluted earnings per share calculations.

We had no other participating securities at February 29, 2024 or February 28, 2023.

For the three-month periods ended February 29, 2024 and February 28, 2023, no outstanding stock options were excluded from the diluted earnings per share calculations.

Contingently issuable shares associated with outstanding performance-based restricted stock units (each, a “PSU”) were not included in the basic earnings per share calculations for the periods presented, as the applicable vesting conditions had not been satisfied.

13 unchanged sentences

Total $ 5,243,581 $ 5,133,646

Land under development at August 31, 2023 and November 30, 2022 included land held for future development or sale of $ 27.4 million and $ 21.6 million, respectively.

Land under development at February 29, 2024 and November 30, 2023 included land held for future development of $ 17.0 million in both periods.

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

2 unchanged sentences

Our interest costs were as follows (in thousands):

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

Three Months Ended

February 29, 2024 February 28, 2023

Capitalized interest at beginning of period $ 134,375 $ 145,494

3 unchanged sentences

Capitalized interest at end of period $ 134,377 $ 147,162

(a) Interest amortized to construction and land costs for the three months and nine months ended August 31, 2023 included nominal amounts related to land sales during the periods.

(a) Interest amortized to construction and land costs for the three months ended February 29, 2024 included $.2 million related to land sales.

There was no interest amortized to construction and land costs related to land sales for the three months ended February 28, 2023.

Inventory Impairments and Land Option Contract Abandonments

5 unchanged sentences

The estimated fair values of such assets are generally based on bona fide letters of intent from outside parties, executed sales contracts, broker quotes or similar information.

We evaluated four active communities or land parcels for recoverability as of August 31, 2023 with a carrying value of $ 66.2 million.

We evaluated 10 active communities or land parcels for recoverability as of February 29, 2024 with a carrying value of $ 168.3 million.

As of November 30, 2023, we evaluated five active communities or land parcels for recoverability with a carrying value of $ 89.3 million.

In addition, we evaluated land held for future development for recoverability as of both August 31, 2023 and November 30, 2022.

Based on the results of our evaluations, we recognized no inventory impairment charges for the three-month and nine-month periods ended August 31, 2023.

For both the three-month and nine-month periods ended August 31, 2022, we recognized inventory impairment charges of $ 2.6 million related to a parcel of land held for sale.

As of August 31, 2023, the aggregate carrying value of our inventory that had been impacted by inventory impairment charges was $ 80.9 million, representing six 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.

In addition, we evaluated land held for future development for recoverability as of both February 29, 2024 and November 30, 2023.

Based on the results of our evaluations, we recognized no inventory impairment charges for the three-month periods ended February 29, 2024 and February 28, 2023.

As of February 29, 2024, the aggregate carrying value of our inventory that had been impacted by previous inventory impairment charges was $ 60.2 million, representing five communities and various other land parcels.

As of November 30, 2023, the aggregate carrying value of our inventory that had been impacted by previous inventory impairment charges was $ 73.9 million, representing five communities and various other land parcels.

Our inventory controlled under land option contracts and other similar contracts is assessed on a quarterly basis to determine whether it continues to meet our investment return standards.

When a decision is made not to exercise certain land option contracts and other similar contracts due to market conditions and/or changes in our marketing strategy, we write off the related inventory costs, including non-refundable deposits and unrecoverable pre-acquisition costs.

Based on the results of our assessments, we recognized land option contract abandonment charges of $.6 million for the three months ended August 31, 2023 and $ 10.2 million for the nine months ended August 31, 2023.

For the three-month and nine-month periods ended August 31, 2022, we recognized land option contract abandonment charges of $ 5.9 million and $ 6.8 million, respectively.

When a decision is made not to exercise certain

land option contracts and other similar contracts due to market conditions and/or changes in our marketing strategy, we write off the related inventory costs, including non-refundable deposits and unrecoverable pre-acquisition costs.

Based on the results of our assessments, we recognized land option contract abandonment charges of $ 1.3 million for the three months ended February 29, 2024 and $ 5.3 million for the three months ended February 28, 2023.

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.

3 unchanged sentences

Our investments in these joint ventures may create a variable interest in a variable interest entity (“VIE”), depending on the contractual terms of the arrangement.

We analyze our joint ventures under the variable interest model to determine

whether they are VIEs and, if so, whether we are the primary beneficiary.

Based on our analyses, we determined that one of our joint ventures at August 31, 2023 and November 30, 2022 was a VIE, but we were not the primary beneficiary of the VIE.

Therefore, all of our joint ventures at August 31, 2023 and November 30, 2022 were unconsolidated and accounted for under the equity method because we did not have a controlling financial interest.

We analyze our joint ventures under the variable interest model to determine whether they are VIEs and, if so, whether we are the primary beneficiary.

Based on our analyses, we determined that one of our joint ventures at February 29, 2024 and November 30, 2023 was a VIE, but we were not the primary beneficiary of the VIE.

Therefore, all of our joint ventures at February 29, 2024 and November 30, 2023 were unconsolidated and accounted for under the equity method because we did not have a controlling financial interest.

Land Option Contracts and Other Similar Contracts.

3 unchanged sentences

Although we do not have legal title to the underlying land, we are required to consolidate a VIE if we are the primary beneficiary.

As a result of our analyses, we determined that as of August 31, 2023 and November 30, 2022, we were not the primary beneficiary of any VIEs from which we have acquired rights to land under land option contracts and other similar contracts.

We perform ongoing reassessments of whether we are the primary beneficiary of a VIE.

As a result of our analyses, we determined that as of February 29, 2024 and November 30, 2023, we were not the primary beneficiary of any VIEs from which we have acquired rights to land under land option contracts and other similar contracts.

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

August 31, 2023 November 30, 2022

February 29, 2024 November 30, 2023

Deposits Aggregate

6 unchanged sentences

$ 42,681 $ 1,281,374 $ 45,018 $ 1,268,532

In addition to the cash deposits presented in the table above, our exposure to loss related to our land option contracts and other similar contracts with third parties and unconsolidated entities consisted of pre-acquisition costs of $ 19.4 million at August 31, 2023 and $ 33.1 million at November 30, 2022.

In addition to the cash deposits presented in the table above, our exposure to loss related to our land option contracts and other similar contracts with third parties and unconsolidated entities consisted of pre-acquisition costs of $ 18.6 million at February 29, 2024 and $ 18.5 million at November 30, 2023.

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

2 unchanged sentences

For these land option contracts and other similar contracts, we record the remaining purchase price of the associated land parcel(s) in inventories in our consolidated balance sheets with a corresponding financing obligation if we determine that we are effectively compelled to exercise the option to purchase the land parcel(s).

As a result of our evaluations of land option contracts and other similar contracts for financing arrangements, we recorded inventories in our consolidated balance sheets, with a corresponding increase to accrued expenses and other liabilities, of $ 2.9 million at August 31, 2023 and $ 5.1 million at November 30, 2022.

As a result of our evaluations of land option contracts and other similar contracts for financing arrangements, we recorded inventories in our consolidated balance sheets, with a corresponding increase to accrued expenses and other liabilities, of $ 19.9 million at February 29, 2024 and $ 21.5 million at November 30, 2023.

Investments in Unconsolidated Joint Ventures

3 unchanged sentences

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

As of both August 31, 2023 and November 30, 2022, we had investments in six homebuilding unconsolidated joint ventures.

We had investments in six homebuilding unconsolidated joint ventures as of February 29, 2024 and November 30, 2023.

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

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

Three Months Ended

February 29, 2024 February 28, 2023

Revenues $ — $ —

12 unchanged sentences

Total liabilities and equity $ 178,629 $ 172,832

(a) As of both August 31, 2023 and 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.

(a) As of both February 29, 2024 and November 30, 2023, 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 August 31, 2023 or November 30, 2022 .

None of our other unconsolidated joint ventures had outstanding debt at February 29, 2024 or November 30, 2023 .

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;

5 unchanged sentences

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.

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, mostly comprised of KBHS’ activities (in thousands):

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

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

Three Months Ended

February 29, 2024 February 28, 2023

Revenues $ 30,412 $ 20,190

21 unchanged sentences

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 $ 20.4 million at August 31, 2023 and $ 29.8 million at November 30, 2022.

The changes in the fair value of IRLCs, which were reported in revenues for the applicable periods, were losses of $ 5.2 million and $ 9.4 million for the three-month and nine-month periods ended August 31, 2023, respectively, and a loss of $ 6.3 million and a gain of $ 27.1 million for the three-month and nine-month periods ended August 31, 2022, respectively.

The fair value of IRLCs included in other assets in KBHS’ balance sheets was $ 16.7 million at February 29, 2024 and $ 13.9 million at November 30, 2023.

The changes in the fair value of IRLCs, which were reported in revenues for the applicable periods, was a gain of $ 2.9 million for the three months ended February 29, 2024 and a loss of $ 1.5 million for the three months ended February 28, 2023.

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.

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.

2 unchanged sentences

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 August 31, 2023.

KBHS was in compliance with these covenants as of February 29, 2024.

In addition to its compliance with these covenants, KBHS also depends on the ability and willingness of the applicable lenders and financial institutions to extend such credit facilities to KBHS to fund its originated mortgage loans.

KBHS intends to renew these facilities when they expire at various dates in 2023 and 2024.

KBHS intends to renew these facilities when they expire at various dates in 2024.

The warehouse lines of credit and master repurchase agreements are not guaranteed by us or any of the subsidiaries that guarantee our senior notes, unsecured revolving credit facility with various banks (“Credit Facility”) and senior unsecured term loan agreement (“Term Loan”), (collectively, “Guarantor Subsidiaries”).

13 unchanged sentences

Customer deposits 60,069 58,910

Lease liabilities 24,977 27,494

Inventory-related obligations (a) 41,315 41,525

Federal and state taxes payable 35,358 1,851

Lease liabilities 26,056 26,531

Accrued interest payable 17,207 29,391

Real estate and business taxes 11,486 15,169

Federal and state taxes payable 15,774 3,671

Other 45,903 45,707

5 unchanged sentences

We recognize lease expense for these leases generally on a straight-line basis over the lease term and combine lease and non-lease components for all leases.

Lease right-of-use assets and lease liabilities are recorded in our consolidated balance sheets for leases with an expected term at the commencement date of more than 12 months.

Lease right-of-use

assets and lease liabilities are recorded in our consolidated balance sheets for leases with an expected term at the commencement date of more than 12 months.

Lease expense is included in selling, general and administrative expenses in our consolidated statements of operations and includes costs for leases with terms of more than 12 months as well as short-term leases with terms of 12 months or less.

Our total lease expense for the three months ended August 31, 2023 and 2022 was $ 5.7 million and $ 5.4 million, respectively , and included short-term lease costs of $ 2.4 million and $ 2.2 million, respectively.

For the nine months ended August 31, 2023 and 2022, our total lease expense was $ 16.5 million and $ 14.6 million, respectively, and included short-term lease costs of $ 6.3 million and $ 5.2 million, respectively.

Variable lease costs and external sublease income for the three-month and nine-month periods ended August 31, 2023 and 2022 were immaterial.

Our total lease expense for the three months ended February 29, 2024 and February 28, 2023 was $ 5.1 million and $ 5.2 million, respectively , and included short-term lease costs of $ 1.8 million and $ 1.7 million, respectively.

Variable lease costs and external sublease income for the three-month periods ended February 29, 2024 and February 28, 2023 were immaterial.

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

6 unchanged sentences

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

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

Three Months Ended

February 29, 2024 February 28, 2023

Income tax expense $ 36,000 $ 36,700

1 unchanged sentence

20.6 % 22.6 %

Our income tax expense and effective tax rate for the three months ended August 31, 2023 included the favorable impact of $ 6.9 million of federal tax credits we recognized primarily from building energy-efficient homes and $ 1.9 million of excess tax benefits related to stock-based compensation, partly offset by $ 2.6 million of nondeductible executive compensation expense.

Our income tax expense and effective tax rate for the three months ended August 31, 2022 reflected the favorable impact of $ 15.3 million of federal tax credits we recognized primarily from building energy-efficient homes, partly offset by $ 2.9 million of nondeductible executive compensation expense.

For the nine months ended August 31, 2023, our income tax expense and effective tax rate included the favorable impacts of $ 19.4 million of federal tax credits we recognized primarily from building energy-efficient homes and $ 5.7 million of excess tax benefits related to stock-based compensation, partly offset by $ 9.2 million of nondeductible executive compensation expense.

Our income tax expense and effective tax rate for the nine months ended August 31, 2022 reflected the favorable impacts of $ 16.1 million of federal tax credits we recognized primarily from building energy-efficient homes and $ 2.2 million of excess tax benefits related to stock-based compensation, partly offset by $ 6.8 million of nondeductible executive compensation expense.

Our income tax expense and effective tax rate for the three months ended February 29, 2024 included the favorable impact of $ 6.1 million of excess tax benefits related to stock-based compensation and $ 4.1 million of Internal Revenue Code Section 45L (“Section 45L”) tax credits we recognized primarily from building energy-efficient homes, partly offset by $ 2.5 million of nondeductible executive compensation expense.

Our income tax expense and effective tax rate for the three months ended February 28, 2023 reflected the favorable impact of $ 5.7 million of Section 45L tax credits we recognized primarily from building energy-efficient homes and $ 2.7 million of excess tax benefits related to stock-based compensation, partly offset by $ 3.1 million of nondeductible executive compensation expense.

Deferred Tax Asset Valuation Allowance.

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

Our deferred tax assets of $ 163.1 million as of August 31, 2023 and $ 178.0 million as of November 30, 2022 were each partly offset by a valuation allowance of $ 17.1 million.

The deferred tax asset valuation allowances as of August 31, 2023 and November 30, 2022 were primarily related to certain state net operating losses that had not met the “more likely than not” realization standard at those dates.

Based on the evaluation of our deferred tax assets as of August 31, 2023, we determined that most of our deferred tax assets would be realized.

Therefore, no adjustments to our deferred tax asset valuation allowance were needed for the nine months ended August 31, 2023.

Our deferred tax assets of $ 134.1 million as of February 29, 2024 and $ 136.4 million at November 30, 2023 were both partly offset by valuation allowances of $ 16.9 million.

The deferred tax asset valuation allowances at February 29, 2024 and November 30, 2023 were primarily related to certain state net operating losses that had not met the “more likely than not” realization standard at those dates.

Based on the evaluation of our deferred tax assets as of February 29, 2024, we determined that most of our deferred tax assets would be realized.

Therefore, no adjustments to our deferred tax asset valuation allowance were needed for the three months ended February 29, 2024.

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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2024 November 30,

Unsecured revolving credit facility $ — $ 150,000

Senior unsecured term loan due August 25, 2026 $ 358,323 $ 358,156

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$ 1,692,729 $ 1,689,898

The carrying amounts of our senior notes listed above are net of unamortized debt issuance costs, which totaled $ 14.5 million at August 31, 2023 and $ 16.2 million at November 30, 2022.

The carrying amounts of our senior notes listed above are net of unamortized debt issuance costs, which totaled $ 13.3 million at February 29, 2024 and $ 13.9 million at November 30, 2023.

Unsecured Revolving Credit Facility.

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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 August 31, 2023, we had no cash borrowings and $ 6.6 million of letters of credit outstanding under the Credit Facility.

Therefore, as of August 31, 2023, we had $ 1.08 billion available for cash borrowings under the Credit Facility, with up to $ 243.4 million of that amount available for the issuance of letters of credit.

As of February 29, 2024, we had no cash borrowings and $ 6.7 million of letters of credit outstanding under the Credit Facility.

Therefore, as of February 29, 2024, we had $ 1.08 billion 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.

Senior Unsecured Term Loan.

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

As of August 31, 2023, the weighted average annual interest rate on our outstanding borrowings under the Term Loan was 6.8 %.

As of February 29, 2024, the weighted average annual interest rate on our outstanding borrowings under the Term Loan was 6.8 %.

Letter of Credit Facility.

We maintain an unsecured letter of credit agreement with a financial institution (“LOC Facility”) to obtain letters of credit from time to time in the ordinary course of operating our business.

Under the LOC Facility, we may issue up to $ 75.0 million of letters of credit.

On August 10, 2023, we entered into an amendment to our LOC Facility that extended the expiration date from February 13, 2025 to February 18, 2027 .

As of August 31, 2023 and November 30, 2022, we had letters of credit outstanding under the LOC Facility of $ 13.0 million and $ 36.4 million, respectively.

Under the LOC Facility, which expires on February 18, 2027 , we may issue up to $ 75.0 million of letters of credit.

As of February 29, 2024 and November 30, 2023, we had letters of credit outstanding under the LOC Facility of $ 25.5 million and $ 12.5 million, respectively.

Senior Notes.

All the senior notes outstanding at August 31, 2023 and November 30, 2022 represent senior unsecured obligations that are guaranteed by our Guarantor Subsidiaries and rank equally in right of payment with all of our and our Guarantor Subsidiaries’ existing unsecured and unsubordinated indebtedness.

All the senior notes outstanding at February 29, 2024 and November 30, 2023 represent senior unsecured obligations that are guaranteed by our Guarantor Subsidiaries and rank equally in right of payment with all of our and our Guarantor Subsidiaries’ existing unsecured and unsubordinated indebtedness.

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

Interest on each of these senior notes is payable semi-annually.

In the three months ended August 31, 2022, we completed the underwritten public offering of $ 350.0 million in aggregate principal amount of 7.25 % senior notes due 2030 (“ 7.25 % Senior Notes due 2030”) and used the net proceeds, together with cash on hand, to retire $ 350.0 million in aggregate principal amount of certain outstanding senior notes before their maturity date, pursuant to the optional redemption terms specified for such notes.

We paid $ 353.6 million to redeem these notes and recorded a charge of $ 3.6 million for the early extinguishment of debt in the 2022 third quarter.

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 and leaseback transactions involving property above a certain specified value.

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 and leaseback transactions involving property above a certain specified value.

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

As of August 31, 2023, we were in compliance with 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.

As of February 29, 2024, we were in compliance with all of our covenants and other requirements under the Credit Facility, the Term Loan, the senior notes, the indenture, the LOC Facility, 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.

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

As of August 31, 2023, inventories having a carrying value of $ 33.2 million were pledged to collateralize mortgages and land contracts due to land sellers and other loans.

Shelf Registration.

On July 10, 2023, we filed an automatically effective universal shelf registration statement (“2023 Shelf Registration”) with the SEC.

The 2023 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 and, with respect to debt securities, other factors impacting our borrowing capacity.

The 2023 Shelf Registration replaced our previously effective universal shelf registration statement filed with the SEC on July 9, 2020.

We have not made any offerings of securities under the 2023 Shelf Registration.

As of August 31, 2023, principal payments on our notes payable are due during each year ending November 30 as follows:

As of February 29, 2024, inventories having a carrying value of $ 19.6 million were pledged to collateralize mortgages and land contracts due to land sellers and other loans.

As of February 29, 2024, principal payments on our notes payable are due during each year ending November 30 as follows:

2024 – $ 2.9 million;

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Fair value measurements are used for inventories on a nonrecurring basis when events and circumstances indicate that their carrying value is not recoverable.

The following table presents the fair value hierarchy and our assets measured at fair value on a nonrecurring basis for the nine months ended August 31, 2023 and the year ended November 30, 2022 (in thousands):

August 31, 2023 November 30, 2022

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

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

(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 primarily based on the estimated future net cash flows discounted for inherent risk associated with each underlying asset.

Our inventories are generally Level 3 assets.

We had no inventories with carrying values that were adjusted to fair value during the three months ended February 29, 2024 or the year ended November 30, 2023.

See Note 7 – Inventory Impairments and Land Option Contract Abandonments for information regarding the valuation of these assets.

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):

August 31, 2023 November 30, 2022

February 29, 2024 November 30, 2023

Description Fair Value

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Level 2 $ 1,328,366 $ 1,284,325 $ 1,327,934 $ 1,260,725

(a) The carrying values for the senior notes, as presented, include unamortized debt issuance costs.

(a) The carrying value for the senior notes, as presented, includes unamortized debt issuance costs.

Debt issuance costs are not factored into the estimated fair values of these notes.

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

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

The carrying values reported for cash and cash equivalents, 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 changes in our warranty liability were as follows (in thousands):

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

Three Months Ended

February 29, 2024 February 28, 2023

Balance at beginning of period $ 98,000 $ 101,890

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

Estimated probable insurance and other recoveries of $ 31.6 million and $ 32.7 million are included in receivables in our consolidated balance sheets at August 31, 2023 and November 30, 2022, respectively.

Estimated probable insurance and other recoveries of $ 30.2 million and $ 31.1 million are included in receivables in our consolidated balance sheets at February 29, 2024 and November 30, 2023, respectively.

These self-insurance recoveries are principally based on actuarially determined amounts and depend on various factors, including, among other things, the above-described claim cost estimates, our insurance policy coverage limits for the applicable policy year(s), historical third-party recovery rates, insurance industry practices, the regulatory environment and legal precedent, and are subject to a high degree of variability from period to period.

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

Three Months Ended August 31, Nine Months Ended August 31,

2023 2022 2023 2022

Three Months Ended

February 29, 2024 February 28, 2023

Balance at beginning of period $ 179,832 $ 175,977

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However, there can be instances of interaction between the liabilities, such as where individual homeowners in a community separately request warranty repairs to their homes to address a similar condition or issue and subsequently join together to initiate, or potentially initiate, a legal process with respect to that condition or issue and/or the repair work we have undertaken.

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

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.

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

In addition to the risk that is effectively self-insured through our captive insurance subsidiary, we often obtain project-specific insurance coverage for construction defect risk on attached projects (e.g., condominiums or townhomes) with policy deductibles generally ranging from $ 50,000 to $ 250,000 .

We record estimated liabilities and recoveries for projected losses related to these projects on a gross basis, including for known claims as well as estimates for claims incurred but not yet reported, to the extent such amounts are considered probable and estimable.

Florida Chapter 558 Actions .

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Under Chapter 558, homeowners must serve written notice of a construction defect(s) and provide the served construction and/or design contractor(s) with an opportunity to respond to the noticed issue(s) before they can file a lawsuit.

Although we have resolved many of these claims without litigation, and a number of others have been resolved with applicable trade partners or their insurers covering the related costs, as of August 31, 2023, we had approximately 485 outstanding noticed claims, and some are scheduled for trial over the next few quarters and beyond.

Although we have resolved many of these claims without litigation, and a number of others have been resolved with applicable trade partners or their insurers covering the related costs, as of February 29, 2024, we had approximately 483 outstanding noticed claims, and some are scheduled for trial over the next few quarters and beyond.

In addition, some of our trade partners’ insurers in some of these cases have informed us of their inability to continue to pay claims-related costs.

At August 31, 2023, we had an accrual for our estimated probable loss for these matters and a receivable for estimated probable insurance recoveries.

While it is reasonably possible that our loss could exceed the amount accrued and our recoveries could be less than the amount recorded, at this time, we are unable to estimate the total amount of the loss in excess of the accrued amount and/or associated with a shortfall in the recoveries that is reasonably possible.

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;

At February 29, 2024, we had an accrual for our estimated probable loss for these matters and a receivable for estimated probable insurance recoveries, including an estimate for claims incurred but not reported.

While it is reasonably possible that our losses could exceed the amounts accrued and our recoveries could be less than the amounts 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 as each of these is dependent on several factors, including the extent of additional claims to be reported in future periods;

the nature of any specific claims;

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

our evaluation of the particular facts surrounding each such claim;

and actions of third parties over which we have no control.

Performance Bonds and Letters of Credit .

We are often required to provide to various municipalities and other government agencies performance bonds and/or letters of credit to secure the completion of our projects and/or in support of obligations to build community improvements such as roads, sewers, water systems and other utilities, and to support similar development activities by certain of our unconsolidated joint ventures.

At August 31, 2023, we had $ 1.32 billion of performance bonds and $ 19.7 million of letters of credit outstanding.

At February 29, 2024, we had $ 1.30 billion of performance bonds and $ 32.2 million of letters of credit outstanding.

At November 30, 2023, we had $ 1.32 billion of performance bonds and $ 19.1 million of letters of credit outstanding.

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In the ordinary course of our business, we enter into land option contracts and other similar contracts to acquire rights to land for the construction of homes.

At August 31, 2023, we had total cash deposits of $ 39.2 million to purchase land having an aggregate purchase price of $ 1.20 billion.

At February 29, 2024, we had total cash deposits of $ 42.7 million to purchase land having an aggregate purchase price of $ 1.28 billion.

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

Civil Subpoena .

On October 2, 2023, we received a subpoena from the U.S.

Department of Justice Civil Division, dated September 27, 2023, to produce certain documents and testimony with respect to the inspection, rating, marketing and advertising of our ENERGY STAR homes, including our contracts and/or communications with U.S.

Environmental Protection Agency and third-party ENERGY STAR rating companies, real estate brokers, real estate appraisers, financial institutions and other parties, as well as inspection-related guidelines, instructions, methods, policies, processes and procedures.

We are cooperating with the government, producing documents and information.

As of the date of this report, we are unable to predict what actions the government will take, if any;

the timing or nature of the ultimate outcome in this

or the impact, if any, such outcome may have on our business or consolidated financial statements.

As a result, while a loss or penalty, if any, is reasonably possible in this matter, it is not considered to be probable or estimable .

Legal Matters

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

We believe the accruals we have recorded for probable and reasonably estimable losses with respect to these proceedings are adequate and that, as of August 31, 2023, it was not reasonably possible that an additional material loss had been incurred in an amount in excess of the estimated amounts already recognized or disclosed in our consolidated financial statements.

We believe the accruals we have recorded for probable and reasonably estimable losses with respect to these proceedings are adequate and that, as of February 29, 2024, it was not reasonably possible that an additional material loss had been incurred in an amount in excess of the estimated amounts already recognized or disclosed in our consolidated financial statements.

We evaluate our accruals for litigation and regulatory proceedings at least quarterly and, as appropriate, adjust them to reflect (a) the facts and circumstances known to us at the time, including information regarding negotiations, settlements, rulings and other relevant events and developments;

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Stockholders’ Equity

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

Three Months Ended August 31, 2023 and 2022

Number of Shares

Stock Grantor

Trust Treasury

Stock Common Stock Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Grantor Stock

Ownership Trust Treasury Stock Total Stockholders’ Equity

Balance at May 31, 2023 101,019 ( 6,705 ) ( 13,704 ) $ 101,019 $ 830,765 $ 3,407,813 $ ( 5,575 ) $ ( 72,718 ) $ ( 494,822 ) $ 3,766,482

Net income — — — — — 149,933 — — — 149,933

Dividends on common stock — — — — — ( 15,928 ) — — — ( 15,928 )

Employee stock options/other 240 — — 240 3,358 — — — — 3,598

Stock-based compensation — — — — 9,248 — — — — 9,248

Stock repurchases — — ( 1,531 ) — — — — — ( 83,205 ) ( 83,205 )

Balance at August 31, 2023 101,259 ( 6,705 ) ( 15,235 ) $ 101,259 $ 843,371 $ 3,541,818 $ ( 5,575 ) $ ( 72,718 ) $ ( 578,027 ) $ 3,830,128

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

Net income — — — — — 255,329 — — — 255,329

Dividends on common stock — — — — — ( 12,772 ) — — — ( 12,772 )

Stock-based compensation — — — — 7,056 — — — — 7,056

Stock repurchases — — ( 1,582 ) — — — — — ( 50,000 ) ( 50,000 )

Balance at August 31, 2022 100,711 ( 6,705 ) ( 8,422 ) $ 100,711 $ 841,939 $ 2,939,706 $ ( 19,119 ) $ ( 72,718 ) $ ( 299,911 ) $ 3,490,608

Nine Months Ended August 31, 2023 and 2022

Number of Shares

Stock Grantor

Trust Treasury

Stock Common Stock Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Grantor Stock

Ownership Trust Treasury Stock Total Stockholders’ Equity

Balance at November 30, 2022 100,711 ( 6,705 ) ( 10,016 ) $ 100,711 $ 836,260 $ 3,143,578 $ ( 5,575 ) $ ( 72,718 ) $ ( 341,461 ) $ 3,660,795

Net income — — — — — 439,875 — — — 439,875

Dividends on common stock — — — — — ( 41,635 ) — — — ( 41,635 )

Employee stock options/other 548 — — 548 8,060 — — — — 8,608

Stock awards — — 717 — ( 24,883 ) — — — 24,883 —

Stock-based compensation — — — — 23,934 — — — — 23,934

Stock repurchases — — ( 5,659 ) — — — — — ( 251,701 ) ( 251,701 )

Tax payments associated with stock-based compensation awards — — ( 277 ) — — — — — ( 9,748 ) ( 9,748 )

Balance at August 31, 2023 101,259 ( 6,705 ) ( 15,235 ) $ 101,259 $ 843,371 $ 3,541,818 $ ( 5,575 ) $ ( 72,718 ) $ ( 578,027 ) $ 3,830,128

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

Net income — — — — — 600,256 — — — 600,256

Dividends on common stock — — — — — ( 39,914 ) — — — ( 39,914 )

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

Stock-based compensation — — — — 22,944 — — — — 22,944

Stock repurchases — — ( 3,102 ) — — — — — ( 100,000 ) ( 100,000 )

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

Balance at August 31, 2022 100,711 ( 6,705 ) ( 8,422 ) $ 100,711 $ 841,939 $ 2,939,706 $ ( 19,119 ) $ ( 72,718 ) $ ( 299,911 ) $ 3,490,608

On February 28, 2024, the management development and compensation committee of our board of directors approved the payout of 519,636 shares of our common stock in connection with the vesting of PSUs that were granted to certain employees on October 8, 2020.

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Of the shares of common stock paid out, 248,157 shares, or $ 15.9 million, were purchased by us in the 2024 first quarter to satisfy the recipients’ withholding taxes on the vesting of the PSUs.

The shares purchased

were not considered repurchases under the authorizations described below.

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

As of November 30, 2022, there was $ 150.0 million of remaining availability under this share repurchase authorization, excluding excise tax.

In the 2023 first quarter, we repurchased 1,965,442 shares of our common stock on the open market pursuant to this authorization at a total cost of approximately $ 75.0 million, excluding excise tax.

On March 21, 2023, our board of directors authorized us to repurchase up to $ 500.0 million of our outstanding common stock, excluding excise tax.

This authorization replaced the prior board of directors authorization, which had $ 75.0 million remaining, excluding excise tax.

In the 2023 third quarter, we repurchased 1,531,318 shares of our common stock at a total cost of approximately $ 82.5 million, excluding excise tax, bringing our total repurchases for the nine months ended August 31, 2023 to 5,659,642 shares of common stock at a total cost of approximately $ 249.6 million, excluding excise tax.

Repurchases under the current 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.

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

On March 21, 2023, our board of directors authorized us to repurchase up to $ 500.0 million of our outstanding common stock.

As of November 30, 2023, there was $ 163.6 million of remaining availability under this share repurchase authorization.

In the 2024 first quarter, we repurchased 826,663 shares of our common stock at a total cost of $ 50.0 million.

Repurchases under the authorization may occur periodically through open market purchases, privately negotiated transactions or otherwise, with the timing and amount at management’s discretion and dependent on market, business and other conditions.

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

As of August 31, 2023, we were authorized to repurchase up to approximately $ 325.4 million of our outstanding common stock in additional transactions, excluding excise tax.

As of February 29, 2024, there was $ 113.6 million of remaining availability under this share repurchase authorization.

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.

In the nine months ended August 31, 2023, we reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in accrued expenses and other liabilities on our consolidated balance sheet.

In the 2023 third quarter, our board of directors approved a $ .05 per share increase in the quarterly cash dividend on our common stock to $ .20 per share and declared, and we paid, a quarterly cash dividend at the new higher rate.

In the 2022 third quarter, our board of directors declared, and we paid a quarterly cash dividend on our common stock of $ .15 per share.

Quarterly cash dividends declared and paid during the nine-month periods ended August 31, 2023 and 2022 totaled $ .50 per share and $ .45 per share, respectively.

In the three months ended February 29, 2024 and February 28, 2023, we reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in accrued expenses and other liabilities on our consolidated balance sheet.

All amounts presented in this report related to our share repurchases and our share repurchase authorization exclude such excise taxes, to the extent applicable, unless otherwise indicated.

In the 2024 first quarter, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $ .20 per share.

In the 2023 first quarter, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $ .15 per share.

Stock-Based Compensation

Stock Options.

At August 31, 2023 and November 30, 2022, we had 1,126,217 and 1,674,393 stock options outstanding with a weighted average exercise price of $ 15.49 and $ 15.56 , respectively.

At February 29, 2024 and November 30, 2023, we had 521,864 and 1,109,567 stock options outstanding with a weighted average exercise price of $ 16.01 and $ 15.50 , respectively.

We have not granted any stock option awards since 2016.

During the nine months ended August 31, 2023, a total of 548,176 stock options with a weighted average exercise price of $ 15.70 were exercised.

As of August 31, 2023, stock options outstanding and stock options exercisable each had a weighted average remaining contractual life of 2.5 years.

As all outstanding stock options have been fully vested since 2019, there was no stock-based compensation expense associated with stock options for the three-month and nine-month periods ended August 31, 2023 and 2022.

Stock options outstanding and stock options exercisable each had an aggregate intrinsic value of $ 39.8 million at August 31, 2023.

During the three months ended February 29, 2024, a total of 587,703 stock options with a weighted average exercise price of $ 15.03 were exercised.

As of February 29, 2024, stock options outstanding and stock options exercisable each had a weighted average remaining contractual life of 2.4 years.

As all outstanding stock options have been fully vested since 2019, there was no stock-based compensation expense associated with stock options for the three-month periods ended February 29, 2024 and February 28, 2023.

Stock options outstanding and stock options exercisable each had an aggregate intrinsic value of $ 26.3 million at February 29, 2024.

(The intrinsic value of a stock option is the amount by which the market value of a share of the underlying common stock exceeds the exercise price of the stock option.)

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

We recognized total compensation expense of $ 9.2 million and $ 7.0 million for the three months ended August 31, 2023 and 2022, respectively, related to restricted stock and PSUs.

For the nine months ended August 31, 2023 and 2022, we recognized total compensation expense of $ 23.9 million and $ 22.9 million, respectively.

Approval of the Amended and Restated KB Home 2014 Equity Incentive Plan.

At our Annual Meeting of Stockholders held on April 20, 2023, our stockholders approved the Amended and Restated KB Home 2014 Equity Incentive Plan (“Amended and Restated 2014 Plan”), confirming, among other things, an aggregate share grant capacity for stock-based awards to our employees, non-employee directors and consultants of 18,200,000 shares through approving and incorporating the base amount of 12,300,000 shares under the predecessor Amended KB Home 2014 Equity Incentive Plan and adding 5,900,000 shares, plus any shares subject to outstanding awards under our 2010 Equity Incentive Plan (“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.

With no other shares available for grant under the 2010 Plan, the Amended and Restated 2014 Plan is our only active equity compensation plan.

As with the Amended KB Home 2014 Equity Incentive Plan, under the Amended and Restated 2014 Plan, grants of stock options and other similar awards reduce the share grant capacity on a 1 -for-1 basis, and grants of restricted stock and other similar “full value” awards reduce the share grant capacity on a 1.78 -for-1 basis.

The Amended and Restated 2014 Plan provides stock options and SARs may be awarded for periods of up to 10 years, and enables us to grant other stock-based awards and cash bonuses.

As of the date

of this report, no grants have been made under the Amended and Restated 2014 Plan following the date of its approval by our stockholders.

We recognized total compensation expense of $ 7.9 million and $ 5.9 million for the three months ended February 29, 2024 and February 28, 2023, respectively, related to restricted stock and PSUs.

Supplemental Disclosure to Consolidated Statements of Cash Flows

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

Nine Months Ended August 31,

Three Months Ended

February 29, 2024 February 28, 2023

Summary of cash and cash equivalents at end of period:

7 unchanged sentences

Inventories acquired through seller financing 3,149 —

Decrease in consolidated inventories not owned

Increase (decrease) in consolidated inventories not owned

( 1,599 ) 5,596

Increase in inventories due to distributions of land and land development from an unconsolidated joint venture 2,147 2,963

Subsequent Event

In pursuing strategic e-commerce opportunities in the late-1990s, we made investments in certain technology businesses through separate limited liability companies (“LLCs”) established to hold each such investment.

Among these businesses, we invested through the relevant LLC approximately $ 1.8 million in a privately held technology company, accounted for under the cost method.

The investment was subsequently written off in 2001-2002, along with the other e-commerce business investments, as it was determined not to be recoverable due to the then-extended technology industry downturn and related severe stock market correction.

The investee company subsequently developed a viable business providing online listing and, over time, other marketing services designed specifically for promoting new home communities that we and other homebuilders, which comprised the company’s shareholders, found to be useful.

On March 1, 2024, substantially all the assets of this investee company, in which we had an approximately 13.5 % aggregate indirect ownership interest, were sold to a privately held buyer.

From the sale and certain related transactions, we received approximately $ 1.7 million in cash along with equity interests in the privately held buyer.

We may receive additional nominal cash proceeds in later periods upon the expiration, and subject to the terms, of certain sale transaction-related escrows.

We are in the process of evaluating the fair value of the equity interests, as there are no quoted prices for identical or similar assets, and determining the resulting gain from this transaction, which we expect to record in our 2024 second quarter.

In addition, we received a proportionate indirect equity interest in a privately held entity to which the investee company distributed certain assets prior to completing the sales transaction.

Certain of our current and former executives are eligible to receive a portion of the cash proceeds from the sale transaction, including any later distributions from the sale transaction-related escrows, pursuant to nominal interests they acquired in the relevant LLC in 2000 under an incentive program.

This includes our chairman and chief executive officer, who represented our ownership interest as a member of the privately held technology company’s board of directors (without compensation from us or the company) from 2006 through to the time of the sale transaction, and our executive vice president, real estate and business development.

The program is described in the Proxy Statement for our 2001 Annual Meeting of Stockholders and provides for certain distributions to the eligible executives in accordance with their proportionate share in the LLC.

The timing and manner of such distributions are also subject to certain terms and conditions.

In addition, per their LLC interests, the eligible executives are entitled to their proportionate share of future proceeds, if any, associated with the equity interests we received.

For the years ended November 30, 2023, 2022 and 2021, we paid the investee company $ 2.3 million, $ 1.1 million and $.8 million, respectively, for marketing services related to our new home communities.

As part of the sale transaction, we agreed to continue to use such services for a five-year period.

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

What changed 10-Q

Item 1. Financial Statements