What changed in this filing

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Item 1. Financial Statements

2024-10-10 compared with 2024-07-05 · 114 added, 111 removed, 684 unchanged (25% of the section changed)

2 unchanged sentences

(In Thousands, Except Per Share Amounts – Unaudited)

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

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

2024 2023 2024 2023

27 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In Thousands – Unaudited)

(In Thousands, Except Shares – Unaudited)

2024 November 30,

25 unchanged sentences

Stockholders’ equity:

Common stock — 101,891,905 and 101,275,979 shares issued at May 31, 2024 and November 30, 2023, respectively

Common stock — 101,891,905 and 101,275,979 shares issued at August 31, 2024 and November 30, 2023, respectively

101,892 101,276

5 unchanged sentences

Grantor stock ownership trust, at cost:

6,705,247 shares at May 31, 2024 and November 30, 2023

6,705,247 shares at August 31, 2024 and November 30, 2023

( 72,718 ) ( 72,718 )

Treasury stock, at cost:

19,982,889 and 18,703,704 at May 31, 2024 and November 30, 2023, respectively

21,852,181 and 18,703,704 at August 31, 2024 and November 30, 2023, respectively

( 982,812 ) ( 737,364 )

5 unchanged sentences

(In Thousands – Unaudited)

Three Months Ended May 31, 2024 and 2023

Three Months Ended August 31, 2024 and 2023

Number of Shares

3 unchanged sentences

Ownership Trust Treasury Stock Total Stockholders’ Equity

Balance at February 29, 2024

Balance at May 31, 2024

101,892 ( 6,705 ) ( 19,983 ) $ 101,892 $ 848,635 $ 3,948,878 $ ( 3,671 ) $ ( 72,718 ) $ ( 831,312 ) $ 3,991,704

1 unchanged sentence

Dividends on common stock — — — — — ( 18,407 ) — — — ( 18,407 )

Employee stock options/other 30 — — 30 438 — — — — 468

— — 23 — ( 938 ) — — — 938 —

Stock-based compensation — — — — 7,968 — — — — 7,968

1 unchanged sentence

— — ( 1,869 ) — — — — — ( 151,500 ) ( 151,500 )

Balance at May 31, 2024

Balance at August 31, 2024

101,892 ( 6,705 ) ( 21,852 ) $ 101,892 $ 856,603 $ 4,087,800 $ ( 3,671 ) $ ( 72,718 ) $ ( 982,812 ) $ 3,987,094

Balance at February 28, 2023

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

2 unchanged sentences

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

Stock awards — — 46 — ( 1,598 ) — — — 1,598 —

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

1 unchanged sentence

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

Balance at May 31, 2023

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

Six Months Ended May 31, 2024 and 2023

Nine Months Ended August 31, 2024 and 2023

Number of Shares

12 unchanged sentences

Tax payments associated with stock-based compensation awards — — ( 258 ) — — — — — ( 16,505 ) ( 16,505 )

Balance at May 31, 2024

Balance at August 31, 2024

101,892 ( 6,705 ) ( 21,852 ) $ 101,892 $ 856,603 $ 4,087,800 $ ( 3,671 ) $ ( 72,718 ) $ ( 982,812 ) $ 3,987,094

8 unchanged sentences

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

Balance at May 31, 2023

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

1 unchanged sentence

(In Thousands – Unaudited)

Six Months Ended May 31,

Nine Months Ended August 31,

Cash flows from operating activities:

3 unchanged sentences

Distributions of earnings from unconsolidated joint ventures

21,275 12,172

Amortization of debt issuance costs and premiums 2,602 2,525

13 unchanged sentences

Net cash provided by operating activities

89,994 608,730

Cash flows from investing activities:

34 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 six months ended May 31, 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.

The results of our consolidated operations for the three months and nine months ended August 31, 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.

4 unchanged sentences

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

Our cash equivalents totaled $ 528.7 million at May 31, 2024 and $ 508.2 million at November 30, 2023.

At May 31, 2024 and November 30, 2023, our cash equivalents were mainly invested in interest-bearing bank deposit accounts and money market funds.

Our cash equivalents totaled $ 218.9 million at August 31, 2024 and $ 508.2 million at November 30, 2023.

At August 31, 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 $ 168.4 million for the three months ended May 31, 2024 and $ 164.4 million for the three months ended May 31, 2023.

For the six months ended May 31, 2024 and 2023, our comprehensive income was $ 307.1 million and $ 289.9 million, respectively.

Our comprehensive income for each of the three-month and six-month periods ended May 31, 2024 and 2023 was equal to our net income for the respective periods.

Our comprehensive income was $ 157.3 million for the three months ended August 31, 2024 and $ 149.9 million for the three months ended August 31, 2023.

For the nine months ended August 31, 2024 and 2023, our comprehensive income was $ 464.4 million and $ 439.9 million, respectively.

Our comprehensive income for each of the three-month and nine-month periods ended August 31, 2024 and 2023 was equal to our net income for the respective periods.

Recent Accounting Pronouncements Not Yet Adopted.

17 unchanged sentences

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

As of May 31, 2024, our homebuilding reporting segments conducted ongoing operations in the following states:

As of August 31, 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 May 31, Six Months Ended May 31,

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

2024 2023 2024 2023

11 unchanged sentences

Total $ 196,476 $ 184,622 $ 567,420 $ 544,339

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

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

2024 2023 2024 2023

14 unchanged sentences

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

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

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

2024 2023 2024 2023

17 unchanged sentences

Total liabilities $ 2,030 $ 1,645

(a) Other assets at May 31, 2024 and November 30, 2023 included $ 37.8 million and $ 34.4 million, respectively, of contract assets for estimated future renewal commissions.

(a) Other assets at August 31, 2024 and November 30, 2023 included $ 38.5 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 May 31, Six Months Ended May 31,

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

2024 2023 2024 2023

19 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 during the three-month and six-month periods ended May 31, 2024 and 2023.

For the three-month and six-month periods ended May 31, 2024 and 2023, no outstanding stock options were excluded from the diluted earnings per share calculations.

We had no other participating securities during the three-month and nine-month periods ended August 31, 2024 and 2023.

For the three-month and nine-month periods ended August 31, 2024 and 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.

14 unchanged sentences

Total $ 5,648,930 $ 5,133,646

Land under development at May 31, 2024 and November 30, 2023 included land held for future development of $ 17.2 million and $ 17.0 million, respectively.

Land under development at August 31, 2024 and November 30, 2023 included land held for future development of $ 10.5 million and $ 17.0 million, respectively.

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

2 unchanged sentences

Our interest costs were as follows (in thousands):

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

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

2024 2023 2024 2023

4 unchanged sentences

Capitalized interest at end of period $ 130,168 $ 138,730 $ 130,168 $ 138,730

(a) Interest amortized to construction and land costs for the six-month period ended May 31, 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- month period ended May 31, 2024 and three-month and six-month periods ended May 31, 2023.

(a) Interest amortized to construction and land costs for the nine-month period ended August 31, 2024 and the three-month and nine-month periods ended August 31, 2023 included $.2 million related to land sales.

There was no interest amortized to construction and land costs related to land sales for the three-month period ended August 31, 2024.

Inventory Impairments and Land Option Contract Abandonments

6 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 seven active communities or land parcels for recoverability as of May 31, 2024 with a carrying value of $ 89.8 million.

We evaluated six active communities or land parcels for recoverability as of August 31, 2024 with a carrying value of $ 121.0 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 May 31, 2024 and November 30, 2023.

Based on the results of our evaluations, we recognized no inventory impairment charges for the three-month and six-month periods ended May 31, 2024 and 2023.

As of May 31, 2024, the aggregate carrying value of our inventory that had been impacted by previous inventory impairment charges was $ 51.6 million, representing five communities and various other land parcels.

In addition, we evaluated land held for future development for recoverability as of both August 31, 2024 and November 30, 2023.

Based on the results of our evaluations, we recognized no inventory impairment charges for the three-month and nine-month periods ended August 31, 2024 and 2023.

As of August 31, 2024, the aggregate carrying value of our inventory that had been impacted by previous inventory impairment charges was $ 48.4 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.

1 unchanged sentence

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

Based on the results of our assessments, we recognized land option contract abandonment charges of $ 1.2 million and $ 2.5 million for the three-month and six-month periods ended May 31, 2024, respectively.

For the three-month and six-month periods ended May 31, 2023, we recognized land option contract abandonment charges of $ 4.3 million and $ 9.6 million, respectively.

Based on the results of our assessments, we recognized land option contract abandonment charges of $ 1.2 million and $ 3.7 million for the three-month and nine-month periods ended August 31, 2024, respectively.

For the three-month and nine-month periods ended August 31, 2023, we recognized land option contract abandonment charges of $ .6 million and $ 10.2 million, respectively.

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

4 unchanged sentences

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

Based on our analyses, we determined that one of our joint ventures at May 31, 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 May 31, 2024 and November 30, 2023 were unconsolidated and accounted for under the equity method because we did not have a controlling financial interest.

Based on our analyses, we determined that one of our joint ventures at August 31, 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 August 31, 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 May 31, 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.

As a result of our analyses, we determined that as of August 31, 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):

May 31, 2024 November 30, 2023

August 31, 2024 November 30, 2023

Deposits Aggregate

6 unchanged sentences

$ 77,458 $ 2,122,073 $ 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 $ 23.2 million at May 31, 2024 and $ 18.5 million at November 30, 2023.

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 $ 26.0 million at August 31, 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 $ 19.9 million at May 31, 2024 and $ 21.5 million at November 30, 2023.

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 $ 26.1 million at August 31, 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.

We had investments in six homebuilding unconsolidated joint ventures as of May 31, 2024 and November 30, 2023.

We had investments in six homebuilding unconsolidated joint ventures as of August 31, 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 May 31, Six Months Ended May 31,

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

2024 2023 2024 2023

4 unchanged sentences

$ 6,967 $ ( 193 ) $ 6,594 $ ( 2,118 )

The combined revenues and construction and land costs for the three-month and nine-month periods ended August 31, 2024 primarily related to homes delivered by an unconsolidated joint venture in California.

In the three-month and nine-month periods ended August 31, 2023, our unconsolidated joint ventures did not deliver any homes.

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

8 unchanged sentences

Total liabilities and equity $ 182,320 $ 172,832

(a) As of both May 31, 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.

(a) As of both August 31, 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.

In April 2024, the revolving line of credit was amended, increasing the aggregate commitment to $ 70.0 million from $ 62.0 million, with the amount of all advances through October 2024 not to exceed $ 80.0 million.

Principal repayments are made as homes are delivered, which began in May 2024.

Pursuant to the amendment, the revolving line of credit will convert to a term loan and the aggregate commitment will be reduced to $ 55.0 million effective October 31, 2024, and then to $ 25.0 million by April 30, 2025.

Borrowings under the line of credit are secured by the underlying property and related project assets.

The line of credit is scheduled to mature on April 19, 2026 , unless extended or terminated pursuant to its applicable terms.

None of our other unconsolidated joint ventures had outstanding debt at May 31, 2024 or November 30, 2023 .

None of our other unconsolidated joint ventures had outstanding debt at August 31, 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;

8 unchanged sentences

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

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

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

2024 2023 2024 2023

22 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 $ 18.0 million at May 31, 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, were gains of $ 1.3 million and $ 4.2 million for the three-month and six-month periods ended May 31, 2024, respectively, and losses of $ 2.7 million and $ 4.2 million for the three-month and six-month periods ended May 31, 2023, respectively.

The fair value of IRLCs included in other assets in KBHS’ balance sheets was $ 17.6 million at August 31, 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, were a loss of $.4 million for the three months ended August 31, 2024, a gain of $ 3.8 million for the nine months ended August 31, 2024, and losses of $ 5.2 million and $ 9.4 million for the three-month and nine-month periods ended August 31, 2023, 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.

4 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 May 31, 2024.

KBHS was in compliance with these covenants as of August 31, 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.

10 unchanged sentences

From the sale, we received cash plus certain preferred and common equity interests in the buyer.

The estimated fair value of the private equity interests is included in other assets as of May 31, 2024.

In connection with the sale, we recognized a gain of $ 12.5 million within interest income and other in our consolidated statements of operations for the three months and six months ended May 31, 2024.

The estimated fair value of the private equity interests is included in other assets as of August 31, 2024.

In connection with the sale, we recognized a gain of $ 12.5 million, which is included in interest income and other in our consolidated statements of operations for the nine months ended August 31, 2024.

Certain of our executives are eligible to receive a portion of the proceeds from the sale transaction, including any later distributions, pursuant to nominal interests they acquired, including our chairman and chief executive officer who acquired a 3.3 % interest, in the relevant limited liability company in 2000 through an incentive program described in the Proxy Statement for our 2001 Annual Meeting of Stockholders.

7 unchanged sentences

Inventory-related obligations (a) 46,360 41,525

Accrued interest payable 29,183 29,391

Lease liabilities 21,718 26,531

Accrued interest payable 17,392 29,391

Real estate and business taxes 16,966 15,169

10 unchanged sentences

term leases with terms of 12 months or less.

Our total lease expense for the three months ended May 31, 2024 and 2023 was $ 5.2 million and $ 5.6 million, respectively , and included short-term lease costs of $ 1.9 million and $ 2.2 million, respectively.

For the six months ended May 31, 2024 and 2023, our total lease expense was $ 10.3 million and $ 10.8 million, respectively, and included short-term lease costs of $ 3.7 million and $ 3.9 million, respectively.

Variable lease costs and external sublease income for the three-month and six-month periods ended May 31, 2024 and 2023 were immaterial.

Our total lease expense for the three months ended August 31, 2024 and 2023 was $ 5.1 million and $ 5.7 million, respectively , and included short-term lease costs of $ 1.9 million and $ 2.4 million, respectively.

For the nine months ended August 31, 2024 and 2023, our total lease expense was $ 15.4 million and $ 16.5 million, respectively, and included short-term lease costs of $ 5.6 million and $ 6.3 million, respectively.

Variable lease costs and external sublease income for the three-month and nine-month periods ended August 31, 2024 and 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 May 31, Six Months Ended May 31,

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

2024 2023 2024 2023

2 unchanged sentences

24.2 % 22.9 % 23.0 % 23.1 %

Our income tax expense and effective tax rate for the three months ended May 31, 2024 included the favorable impact of $ 4.8 million of Internal Revenue Code Section 45L (“Section 45L”) tax credits we recognized primarily from building energy-efficient homes and $.4 million of excess tax benefits related to stock-based compensation, partly offset by $ 3.0 million of nondeductible executive compensation expense.

Our income tax expense and effective tax rate for the three months ended May 31, 2023 reflected the favorable impact of $ 6.8 million of Section 45L tax credits we recognized primarily from building energy-efficient homes and $ 1.1 million of excess tax benefits related to stock-based compensation, partly offset by $ 3.5 million of nondeductible executive compensation expense.

For the six months ended May 31, 2024, our income tax expense and effective tax rate included the favorable impacts of $ 8.9 million of Section 45L tax credits we recognized primarily from building energy-efficient homes and $ 6.5 million of excess tax benefits related to stock-based compensation, partly offset by $ 5.5 million of nondeductible executive compensation expense.

Our income tax expense and effective tax rate for the six months ended May 31, 2023 reflected the favorable impact of $ 12.5 million of Section 45L tax credits we recognized primarily from building energy-efficient homes and $ 3.8 million of excess tax benefits related to stock-based compensation, partly offset by $ 6.6 million of nondeductible executive compensation expense.

Our income tax expense and effective tax rate for the three months ended August 31, 2024 included the favorable impact of $ 3.9 million of Internal Revenue Code Section 45L (“Section 45L”) tax credits we recognized primarily from building energy-efficient homes, and a $ 2.4 million year-over-year decrease in state taxes, partly offset by $ 2.4 million of nondeductible executive compensation expense.

Our income tax expense and effective tax rate for the three months ended August 31, 2023 reflected the favorable impact of $ 6.9 million of Section 45L tax credits and $ 1.9 million of excess tax benefits related to stock-based compensation, partly offset by $ 2.6 million of nondeductible executive compensation expense.

For the nine months ended August 31, 2024, our income tax expense and effective tax rate included the favorable impacts of $ 12.8 million of Section 45L tax credits we recognized primarily from building energy-efficient homes, $ 6.5 million of excess tax benefits related to stock-based compensation, and a $ 5.3 million year-over-year decrease in state income taxes, partly offset by $ 7.9 million of nondeductible executive compensation expense.

Our income tax expense and effective tax rate for the nine months ended August 31, 2023 reflected the favorable impact of $ 19.4 million of Section 45L tax credits and $ 5.7 million of excess tax benefits related to stock-based compensation, partly offset by $ 9.2 million of nondeductible executive compensation expense.

Deferred Tax Asset Valuation Allowance.

3 unchanged sentences

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

Our deferred tax assets of $ 131.4 million as of May 31, 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 May 31, 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 May 31, 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 six months ended May 31, 2024.

Our deferred tax assets of $ 130.7 million as of August 31, 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 August 31, 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 August 31, 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 nine months ended August 31, 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.

17 unchanged sentences

$ 1,691,060 $ 1,689,898

The carrying amounts of our senior notes listed above are net of unamortized debt issuance costs, which totaled $ 12.7 million at May 31, 2024 and $ 13.9 million at November 30, 2023.

The carrying amounts of our senior notes listed above are net of unamortized debt issuance costs, which totaled $ 12.1 million at August 31, 2024 and $ 13.9 million at November 30, 2023.

Unsecured Revolving Credit Facility.

8 unchanged sentences

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 May 31, 2024, we had no cash borrowings and $ 8.3 million of letters of credit outstanding under the Credit Facility.

Therefore, as of May 31, 2024, we had $ 1.08 billion available for cash borrowings under the Credit Facility, with up to $ 241.7 million of that amount available for the issuance of letters of credit.

As of August 31, 2024, we had no cash borrowings and $ 8.3 million of letters of credit outstanding under the Credit Facility.

Therefore, as of August 31, 2024, we had $ 1.08 billion available for cash borrowings under the Credit Facility, with up to $ 241.7 million of that amount available for the issuance of letters of credit.

Senior Unsecured Term Loan.

5 unchanged sentences

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

As of May 31, 2024, the weighted average annual interest rate on our outstanding borrowings under the Term Loan was 6.8 %.

As of August 31, 2024, the weighted average annual interest rate on our outstanding borrowings under the Term Loan was 6.8 %.

Letter of Credit Facility.

1 unchanged sentence

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

As of May 31, 2024 and November 30, 2023, we had letters of credit outstanding under the LOC Facility of $ 45.9 million and $ 12.5 million, respectively.

As of August 31, 2024 and November 30, 2023, we had letters of credit outstanding under the LOC Facility of $ 70.6 million and $ 12.5 million, respectively.

Senior Notes.

All the senior notes outstanding at May 31, 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 the senior notes outstanding at August 31, 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.

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

As of May 31, 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.

As of August 31, 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 May 31, 2024, inventories having a carrying value of $ 30.3 million were pledged to collateralize mortgages and land contracts due to land sellers and other loans.

As of May 31, 2024, principal payments on our notes payable are due during each year ending November 30 as follows:

2024 – $ 4.3 million;

As of August 31, 2024, inventories having a carrying value of $ 11.7 million were pledged to collateralize mortgages and land contracts due to land sellers and other loans.

As of August 31, 2024, principal payments on our notes payable are due during each year ending November 30 as follows:

2025 – $.5 million;

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Our inventories are generally Level 3 assets.

We had no inventories with carrying values that were adjusted to fair value during the six months ended May 31, 2024 or the year ended November 30, 2023.

We had no inventories with carrying values that were adjusted to fair value during the nine months ended August 31, 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):

May 31, 2024 November 30, 2023

August 31, 2024 November 30, 2023

Description Fair Value

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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, 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 May 31, Six Months Ended May 31,

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

2024 2023 2024 2023

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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 $ 26.5 million and $ 31.1 million are included in receivables in our consolidated balance sheets at May 31, 2024 and November 30, 2023, respectively.

Estimated probable insurance and other recoveries of $ 23.1 million and $ 31.1 million are included in receivables in our consolidated balance sheets at August 31, 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 May 31, Six Months Ended May 31,

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

2024 2023 2024 2023

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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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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 May 31, 2024, we had approximately 434 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 August 31, 2024, we had approximately 452 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 May 31, 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.

At August 31, 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;

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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 May 31, 2024, we had $ 1.31 billion of performance bonds and $ 54.2 million of letters of credit outstanding.

At August 31, 2024, we had $ 1.31 billion of performance bonds and $ 78.9 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 May 31, 2024, we had total cash deposits of $ 98.4 million to purchase land having an aggregate purchase price of $ 2.13 billion.

At August 31, 2024, we had total cash deposits of $ 77.5 million to purchase land having an aggregate purchase price of $ 2.12 billion.

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

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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.

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

the timing or nature of the ultimate outcome in this matter;

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

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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 May 31, 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 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, 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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This authorization replaced the prior board of directors authorization, which had $ 113.6 million remaining.

In the 2024 second quarter, we repurchased 764,742 shares of our common stock at a total cost of $ 50.0 million, bringing our total repurchases for the six months ended May 31, 2024 to 1,591,405 shares of common stock at a total cost of $ 100.0 million.

In the 2024 second quarter, we repurchased 764,742 shares of our common stock at a total cost of $ 50.0 million.

In the 2024 third quarter, we repurchased 1,869,292 shares of our common stock at a total cost of $ 150.0 million, bringing our total repurchases for the nine months ended August 31, 2024 to 3,460,697 shares of common stock at a total cost of $ 250.0 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 May 31, 2024, there was $ 950.0 million of remaining availability under this share repurchase authorization.

As of August 31, 2024, there was $ 800.0 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 three-month and six-month periods ended May 31, 2024 and 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 three-month and nine-month

periods ended August 31, 2024 and 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 second quarter, our board of directors approved a $ .05 per share increase in the quarterly cash dividend on our common stock to $ .25 per share and declared, and we paid, a quarterly cash dividend at the new higher rate.

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

Quarterly dividends declared and paid during the six-month periods ended May 31, 2024 and 2023 totaled $ .45 per share and $ .30 per share, respectively.

In the 2024 second quarter, our board of directors approved a $ .05 per share increase in the quarterly cash dividend on our common stock to $ .25 per share.

In the 2024 third quarter, our board of directors declared, and we paid, a quarterly cash dividend of $ .25 per share.

In the 2023 third quarter, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $ .20 per share.

Quarterly dividends declared and paid during the nine-month periods ended August 31, 2024 and 2023 totaled $ .70 per share and $ .50 per share, respectively.

Stock-Based Compensation

Stock Options.

At May 31, 2024 and November 30, 2023, we had 493,641 and 1,109,567 stock options outstanding with a weighted average exercise price of $ 16.05 and $ 15.50 , respectively.

At August 31, 2024 and November 30, 2023, we had 493,641 and 1,109,567 stock options outstanding with a weighted average exercise price of $ 16.05 and $ 15.50 , respectively.

We have not granted any stock option awards since 2016.

During the six months ended May 31, 2024, a total of 615,926 stock options with a weighted average exercise price of $ 15.05 were exercised.

As of May 31, 2024, stock options outstanding and stock options exercisable each had a weighted average remaining contractual life of 2.2 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 six-month periods ended May 31, 2024 and 2023.

Stock options outstanding and stock options exercisable each had an aggregate intrinsic value of $ 26.9 million at May 31, 2024.

During the nine months ended August 31, 2024, a total of 615,926 stock options with a weighted average exercise price of $ 15.05 were exercised.

As of August 31, 2024, stock options outstanding and stock options exercisable each had a weighted average remaining contractual life of 2.0 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, 2024 and 2023.

Stock options outstanding and stock options exercisable each had an aggregate intrinsic value of $ 33.4 million at August 31, 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 $ 9.4 million and $ 8.8 million for the three months ended May 31, 2024 and 2023, respectively, related to restricted stock and PSUs.

For the six months ended May 31, 2024 and 2023, we recognized total compensation expense of $ 17.3 million and $ 14.7 million, respectively, related to restricted stock and PSUs.

We recognized total compensation expense of $ 8.0 million and $ 9.2 million for the three months ended August 31, 2024 and 2023, respectively, related to restricted stock and PSUs.

For the nine months ended August 31, 2024 and 2023, we recognized total compensation expense of $ 25.3 million and $ 23.9 million, 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):

Six Months Ended May 31,

Nine Months Ended August 31,

Summary of cash and cash equivalents at end of period:

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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-Q

Item 1. Financial Statements