KB HOME

Previous wording

Our 2024 second quarter performance was solid. We generated total revenues of $1.71 billion and year-over-year improvement in net income, diluted earnings per share, net orders and net order value. Additionally, longer-term housing market drivers remained largely positive, including favorable demographic trends, rising household formations, solid employment, the undersupply of new and resale homes, and demand for homes at our price points. At the same time, mortgage interest rates were volatile and generally rose during the period, which created uncertainty for homebuyers and challenged housing affordability. Within this environment, we continued to employ targeted sales strategies during the quarter, as we have to varying degrees since the 2022 second half, including homebuyer concessions (particularly, mortgage-related concessions such as interest rate buydowns), to support homebuyers, helping to drive order activity and minimize cancellations. Net orders for the 2024 second quarter rose 2% from the year-earlier quarter, reflecting an increased monthly net order pace per community of 5.5, which was one of our highest second-quarter levels in many years and up from 5.2 a year ago, partly offset by a 4% year-over-year decrease in our average community count. We believe sequentially higher traffic levels to our communities over the course of the quarter, a meaningfully lower cancellation rate compared to the prior-year period, the degree of personalization we offer our homebuyers and our improved build times also contributed to this net order result. Net order value for the 2024 second quarter expanded 7% year over year to $2.03 billion due to the increase in net orders and a higher average selling price of those orders, which largely reflected shifts in product and geographic mix.

Current wording

In the 2024 third quarter, our operational execution contributed to year-over-year growth in total revenues, net income and diluted earnings per share. While longer-term housing market drivers remain largely positive, including favorable demographic trends, rising household formations, solid employment, wage growth and the undersupply of new and resale homes, net orders for the 2024 third quarter were essentially flat with the year-earlier quarter, reflecting variability in demand across the quarter. Homebuying demand softened from late June through July, primarily due to consumers evaluating elevated mortgage interest rates, as well as rising general economic concerns. Amid the uneven market conditions, and considering the price increases we had implemented in most of our communities in the 2024 first half, we selectively adjusted pricing at certain communities in the third quarter to help stimulate demand and optimize the sales price and pace balance for each such asset. We also employed targeted sales strategies during the 2024 third quarter, as we have to varying degrees since the 2022 second half, including homebuyer concessions (particularly, mortgage-related concessions such as interest rate buydowns), to support homebuyers, helping to drive order activity and minimize cancellations. With these actions and a general moderation in mortgage interest rates, our weekly net orders improved sequentially in each of the last three weeks of August. For the 2024 third quarter, we achieved a monthly net order pace per community of 4.1, compared to 4.3 a year ago. The net order value for the current quarter increased 2% year over year to $1.54 billion, driven by an increase in the average selling price of our net orders, mainly due to shifts in product and geographic mix. Our average community count for the quarter increased 5% year over year, and we ended the quarter with 254 communities, up 10%.

Previous wording

Homebuilding revenues for the three months ended May 31, 2024 were generated solely from housing revenues. Housing revenues of $1.70 billion were down 3% from the year-earlier quarter due to a 4% decrease in the number of homes delivered to 3,523, partly offset by a slight increase in their average selling price to $483,000. Approximately 50% of our homes delivered in the 2024 second quarter were to first-time homebuyers. Homebuilding operating income for the three months ended May 31, 2024 was $188.2 million, compared to $202.1 million for the year-earlier quarter, and as a percentage of revenues, was 11.1%, compared to 11.5%. Our homebuilding operating income margin for the 2024 second quarter mainly reflected an increase in selling, general and administrative expenses as a percentage of housing revenues due to higher costs associated with a planned increase in our community count during the year as we position our operations for growth. Our housing gross profit margin of 21.1% for the 2024 second quarter was even with the year-earlier quarter. Our total pretax income for the 2024 second quarter rose 3% compared to the prior year period to $221.1 million, and included a $12.5 million gain associated with the sale of a privately held technology company in which we held an ownership interest. Net income and diluted earnings per share for the three months ended May 31, 2024 increased 2% and 11%, respectively, year over year. Our improved diluted earnings per share for the 2024 second quarter reflected the higher net income and the favorable impact of our common stock repurchases over the past several quarters.

Current wording

Homebuilding revenues for the three months ended August 31, 2024 were generated solely from housing operations. In the year-earlier period, homebuilding revenues were generated from housing operations and land sales. Our 2024 third-quarter housing revenues grew 11% year over year to $1.75 billion due to an 8% increase in the number of homes delivered to 3,631 and a 3% increase in their average selling price to $480,900. Approximately 50% of our homes delivered in the 2024 third quarter were to first-time homebuyers. Homebuilding operating income for the three months ended August 31, 2024 rose 5% from the year-earlier period to $189.0 million. As a percentage of revenues, homebuilding operating income was 10.8% for the 2024 third quarter compared to 11.3% for the year-earlier quarter, primarily reflecting a lower housing gross profit margin, partly offset by a modest improvement in selling, general and administrative expenses as a percentage of housing revenues. Our housing gross profit margin for the 2024 third quarter was 20.6%, compared to 21.5% for the year-earlier quarter. Net income and diluted earnings per share for the three months ended August 31, 2024 increased 5% and 13%, respectively, year over year. The increase in diluted earnings per share for the 2024 third quarter was driven by higher net income and the favorable impact of our common stock repurchases over the past several quarters.

Previous wording

During the 2024 first half, we remained focused on balancing pace, price and construction starts at each community to optimize our return on each inventory asset within its market context. The significant supply chain disruptions we experienced in recent years have largely subsided, and together with our ongoing initiative to simplify our product offerings, we have continued to improve our construction cycle times compared to last year. Among other benefits, faster construction times make our Built to Order® homes more appealing to customers, increase our inventory turns and expand the population of homes available for delivery. Reflecting our improved build times and lower cancellation rate in the current period, our homes delivered as a percentage of backlog at the beginning of the quarter increased to 61% for the 2024 second quarter, from 52% for the year-earlier quarter.

Current wording

During the nine months ended August 31, 2024, we remained focused on balancing pace, price and construction starts at each community to optimize our return on each inventory asset within its market context. The significant supply chain disruptions we experienced in recent years have largely subsided, and together with our ongoing initiative to simplify our product offerings, we have continued to improve our construction cycle times compared to last year. Among other benefits, faster construction times make our Built to Order® personalized homes more appealing to customers, increase our inventory turns and expand the population of homes available for delivery. Reflecting our improved build times and lower cancellation rate in the current period, our homes delivered as a percentage of backlog at the beginning of the quarter increased to 58% for the 2024 third quarter, from 46% for the year-earlier quarter.

Previous wording

We believe our strong balance sheet and liquidity position provide us with the flexibility to operate effectively through evolving market conditions for the remainder of 2024 and pursue our priorities of investing in land and land development to support future growth and returning capital to our stockholders. In the 2024 first half, we increased our investments in land and land development to $1.26 billion, up 64% from the year-earlier period. We also repurchased 1,591,405 shares of our common stock during the six months ended May 31, 2024 at a total cost of $100.0 million, and raised our quarterly cash dividend on our common stock by $.05 per share, or 25%, to $.25 per share. With our strong operating cash flow, we ended the 2024 second quarter with total liquidity of $1.73 billion, including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility. We had no cash borrowings outstanding under the Credit Facility at May 31, 2024.

Current wording

We believe our strong balance sheet and liquidity position will provide us with the flexibility to operate effectively through evolving market conditions during the 2024 fourth quarter and pursue our priorities of investing in land and land development to support future growth and returning capital to our stockholders. We continue to take a balanced approach in allocating our capital aligned with these priorities. For the nine months ended August 31, 2024, we increased our investments in land and land development to $2.10 billion, representing a 59% increase from the prior-year period, and repurchased 3,460,697 shares of our common stock at a total cost of $250.0 million. Over the nine months ended August 31, 2024, we have repurchased about 5% of our shares that were outstanding at the start of the fiscal year. Additionally, in the 2024 second quarter, we raised the quarterly cash dividend on our common stock by $.05 per share, or 25%, to $.25 per share, and we paid a cash dividend at this rate in the 2024 second and third quarters. We ended the 2024 third quarter with total liquidity of $1.46 billion, including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility. We had no cash borrowings outstanding under the Credit Facility at August 31, 2024.

Previous wording

Although our ending backlog value at May 31, 2024 decreased 10% year over year to approximately $3.12 billion, we believe we are well-positioned to achieve solid results for the 2024 third quarter and full year, as described below under “Outlook.” On a sequential basis, our ending backlog value increased 12% from the 2024 first quarter.

Current wording

Although our ending backlog value at August 31, 2024 decreased 14% year over year to approximately $2.92 billion, we believe we are well-positioned to achieve solid results for the 2024 fourth quarter and full year, as described below under “Outlook.”

Previous wording

Revenues. Homebuilding revenues for the three months ended May 31, 2024 and 2023 were generated solely from housing operations. Housing revenues for the 2024 second quarter were down 3% from the year-earlier quarter, reflecting a 4% decrease in the number of homes delivered, partly offset by a slight increase in their overall average selling price. The year-over-year decline in the number of homes delivered reflected decreases of 8%, 21% and 6% in our Southwest, Central and Southeast homebuilding reporting segments, respectively, partly offset by a 30% increase in our West Coast segment. The higher overall average selling price primarily reflected the combined effect of product and geographic mix factors and a year-over-year decrease in homebuyer concessions we selectively extended to buyers within backlog prior to delivery in conjunction with our targeted sales strategies.

Current wording

Revenues. Homebuilding revenues for the three months ended August 31, 2024 were generated solely from housing operations. For the three months ended August 31, 2023, homebuilding revenues were generated from housing operations and land sales. Housing revenues for the 2024 third quarter grew 11% from the year-earlier quarter due to increases of 8% in the overall number of homes delivered and 3% in their overall average selling price. The year-over-year growth in our 2024 third quarter housing revenues reflected increases of 50%, 15% and 4% in our West Coast, Southeast and Southwest homebuilding reporting segments, respectively, partially offset by a 26% decrease in our Central segment. The growth in the number of homes delivered as compared to the year-earlier quarter reflected increases of 57% and 9% in our West Coast and Southeast homebuilding reporting segments, respectively, partly offset by decreases of 5% and 15% in our Southwest and Central segments, respectively. The higher overall average selling price primarily resulted from the combined effect of product and geographic mix factors, particularly a greater proportion of homes delivered from our higher-priced West Coast homebuilding reporting segment, and a year-over-year decrease in homebuyer concessions.

Previous wording

Land sale revenues for the six months ended May 31, 2024 totaled $3.6 million. There were no land sales in the three months ended May 31, 2024 or the three-month and six-month periods ended May 31, 2023. Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our business strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market conditions.

Current wording

There were no land sales for the three months ended August 31, 2024, compared to $6.0 million of land sale revenues for the three months ended August 31, 2023. For the nine months ended August 31, 2024 and 2023, land sale revenues totaled $3.6 million and $6.0 million, respectively. Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our business strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market conditions.

Previous wording

Operating Income. Our homebuilding operating income for the three months ended May 31, 2024 decreased 7% year over year, reflecting lower housing gross profits and higher selling, general and administrative expenses. Operating income for the 2024 second quarter included inventory-related charges of $1.2 million, compared to $4.3 million in the year-earlier quarter. As a percentage of revenues, our operating income for the three months ended May 31, 2024 was 11.1%, compared to 11.5% for the corresponding 2023 period due to higher selling, general and administrative expenses as a percentage of housing revenues. Excluding inventory-related charges, our operating income as a percentage of revenues was 11.1% for the 2024 second quarter, compared to 11.7% for the year-earlier quarter.

Current wording

Operating Income. Our homebuilding operating income for the three months ended August 31, 2024 increased 5% year over year, reflecting higher housing gross profits, partly offset by higher selling, general and administrative expenses. Operating income for the 2024 third quarter included inventory-related charges of $1.2 million, compared to $.6 million in the year-earlier quarter. As a percentage of revenues, our operating income for the three months ended August 31, 2024 was 10.8%, compared to 11.3% for the corresponding 2023 period due to a lower housing gross profit margin, partially offset by lower selling, general and administrative expenses as a percentage of housing revenues. Excluding inventory-related charges, our operating income as a percentage of revenues was 10.9% for the 2024 third quarter, compared to 11.4% for the year-earlier quarter.

Previous wording

For the six months ended May 31, 2024, our operating income decreased 4% from the year-earlier period due to higher selling, general and administrative expenses, partly offset by higher housing gross profits and land sale profits. Operating income for the six months ended May 31, 2024 included inventory-related charges of $2.5 million, compared to $9.6 million of such charges in the corresponding 2023 period. As a percentage of revenues, our operating income for the six months ended May 31, 2024 decreased 50 basis points year over year to 10.9%, reflecting higher selling, general and administrative expenses as a percentage of revenues. Excluding inventory-related charges, our operating income as a percentage of revenues declined 70 basis points to 11.0% for the six months ended May 31, 2024 from 11.7% for the corresponding year-earlier period.

Current wording

For the nine months ended August 31, 2024, our operating income decreased slightly from the year-earlier period, as higher selling, general and administrative expenses were mostly offset by higher housing gross profits. Operating income for the nine months ended August 31, 2024 included inventory-related charges of $3.7 million, compared to $10.2 million of such charges in the corresponding 2023 period. As a percentage of revenues, our operating income for the nine months ended August 31, 2024 decreased 50 basis points year over year to 10.9%, reflecting higher selling, general and administrative expenses as a percentage of housing revenues and a lower housing gross profit margin. Excluding inventory-related charges, our operating income as a percentage of revenues declined 60 basis points to 11.0% for the nine months ended August 31, 2024 from 11.6% for the corresponding year-earlier period.

Previous wording

•Housing Gross Profits – Housing gross profits of $359.4 million for the three months ended May 31, 2024 were down 3% from $371.3 million for the year-earlier period due to lower housing revenues, as our housing gross profit margin of 21.1% for the 2024 second quarter remained even with the 2023 second quarter. The housing gross profit margin primarily reflected higher relative construction and land costs, and product and geographic mix shifts of homes delivered, offset by decreases in inventory-related charges and homebuyer concessions. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations, which is included in construction and land costs, was 1.7% and 1.8% for the three months ended May 31, 2024 and 2023, respectively. Excluding the inventory-related charges associated with housing operations of $1.2 million in the current quarter and $4.3 million in the year-earlier quarter, our adjusted housing gross profit margin of 21.2% for the 2024 second quarter decreased 20 basis points year over year.

Current wording

•Housing Gross Profits – Housing gross profits of $360.4 million for the three months ended August 31, 2024 grew 7% year over year, reflecting an increase in housing revenues, partly offset by a 90 basis-point decrease in our housing gross profit margin to 20.6%. The decline in the housing gross profit margin was primarily due to product and geographic mix shifts of homes delivered along with higher relative construction and land costs, which included the impact of pricing adjustments to support demand, partially offset by reduced homebuyer concessions. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations, which is included in construction and land costs, was 1.6% and 1.8% for the three months ended August 31, 2024 and 2023, respectively. Excluding the inventory-related charges associated with housing operations of $1.2 million in the current quarter and $.6 million in the year-earlier quarter, our adjusted housing gross profit margin of 20.7% for the 2024 third quarter decreased 80 basis points year over year.

Previous wording

For the six months ended May 31, 2024, our housing gross profits of $673.1 million increased from $667.0 million for the year-earlier period due to higher housing revenues, as our housing gross profit margin for the six months ended May 31, 2024 remained flat at 21.3%. The housing gross profit margin primarily reflected the same factors described above for the three months ended May 31, 2024. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.8% for the six months ended May 31, 2024, compared to 1.9% for the corresponding 2023 period. Excluding the inventory-related charges associated with housing operations of $2.5 million in the current period and $9.6 million in the year-earlier period, our adjusted housing gross profit margin of 21.4% for the six months ended May 31, 2024 decreased 20 basis points year over year.

Current wording

For the nine months ended August 31, 2024, our housing gross profits of $1.03 billion increased 3% from the year-earlier period due to higher housing revenues, partially offset by a 20 basis-point decline in our housing gross profit margin to 21.1%. The housing gross profit margin mainly reflected product and geographic mix shifts of homes delivered and higher relative construction and land costs, largely offset by decreases in both inventory-related charges and homebuyer concessions. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for the nine months ended August 31, 2024, compared to 1.9% for the corresponding 2023 period. Excluding the inventory-related charges associated with housing operations of $3.7 million in the current period and $10.2 million in the year-earlier period, our adjusted housing gross profit margin of 21.1% for the nine months ended August 31, 2024 decreased 50 basis points year over year.

Previous wording

•Land Sale Profits – Land sale profits totaled $1.5 million for the six months ended May 31, 2024. There was no land sale activity in the three months ended May 31, 2024 or the three-month and six-month periods ended May 31, 2023.

Current wording

•Land Sale Profits – There was no land sale activity in the three months ended August 31, 2024, compared to land sale profits of $1.1 million in the three months ended August 31, 2023. For the nine months ended August 31, 2024 and 2023, land sale profits totaled $1.5 million and $1.1 million, respectively.

Previous wording

For the six months ended May 31, 2024, selling, general and administrative expenses increased 7% year over year. As a percentage of housing revenues, selling, general and administrative expenses for the six months ended May 31, 2024 increased 60 basis points, primarily due to the reasons described above with respect to the three months ended May 31, 2024.

Current wording

Selling, general and administrative expenses for the three months ended August 31, 2024 increased 7% from the year-earlier quarter. As a percentage of housing revenues, our selling, general and administrative expenses for the 2024 third quarter decreased 40 basis points, primarily reflecting increased operating leverage from higher housing revenues.

Previous wording

Selling, general and administrative expenses for the three months ended May 31, 2024 increased 1% from the year-earlier quarter. As a percentage of housing revenues, our selling, general and administrative expenses for the 2024 second quarter increased 50 basis points, mainly reflecting higher costs including marketing and other expenses associated with a planned increase in our community count during the year as we position our operations for growth. We also invested in personnel and other resources in alignment with the expected larger scale of our business.

Current wording

For the nine months ended August 31, 2024, selling, general and administrative expenses increased 7% year over year. As a percentage of housing revenues, selling, general and administrative expenses for the nine months ended August 31, 2024 increased 30 basis points mainly due to higher costs, including marketing and other expenses associated with the increase in our community count during the year to position our operations for growth, partially offset by increased operating leverage from higher housing revenues.

Previous wording

Interest Income/Expense and Other. Interest income and other for the three months and six months ended May 31, 2024 was comprised of interest income and a $12.5 million gain associated with the sale of a privately held technology company in which we held an ownership interest. Further information regarding this gain is provided in Note 10 – Other Assets in the Notes to Consolidated Financial Statements in this report. For the three months and six months ended May 31, 2023, interest income and other was comprised solely of interest income.

Current wording

Interest Income/Expense and Other. Interest income and other for the three months ended August 31, 2024 and the three months and nine months ended August 31, 2023, was comprised solely of interest income. For the nine months ended August 31, 2024, interest income and other was comprised of interest income and a $12.5 million gain associated with the sale of a privately held technology company in which we held an ownership interest. Further information regarding this gain is provided in Note 10 – Other Assets in the Notes to Consolidated Financial Statements in this report.

Previous wording

Interest income, which is generated from short-term investments, increased to $6.9 million for the three months ended May 31, 2024, compared to $1.7 million for the year-earlier quarter. For the six months ended May 31, 2024, interest income increased to $12.8 million, compared to $2.2 million for the corresponding period of 2023. The year-over-year increases for the three-month and six-month periods ended May 31, 2024 reflected our higher average balance of cash equivalents and a higher interest rate in the 2024 periods. Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates.

Current wording

Interest income, which is generated from short-term investments, was $4.1 million for the three months ended August 31, 2024, compared to $5.5 million for the year-earlier quarter, reflecting a decrease in the average balance of cash equivalents and a lower interest rate. For the nine months ended August 31, 2024, interest income increased to $16.9 million, compared to $7.7 million for the corresponding period of 2023, due to a higher average balance of cash equivalents and a higher interest rate in the 2024 period. Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates.

Previous wording

We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs. All interest incurred during the three-month and six-month periods ended May 31, 2024 and 2023 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period. Accordingly, we had no interest expense for these periods. Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report.

Current wording

We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs. All interest incurred during the three-month and nine-month periods ended August 31, 2024 and 2023 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period. Accordingly, we had no interest expense for these periods. Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report.

Previous wording

Equity in Income (Loss) of Unconsolidated Joint Ventures. Our equity in income (loss) of unconsolidated joint ventures was nominal for the three months ended May 31, 2024 and 2023. For the six months ended May 31, 2024, our equity in loss of unconsolidated joint ventures was nominal, compared to $1.1 million for the year-earlier period. Further information regarding our investments in homebuilding unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.

Current wording

Equity in Income (Loss) of Unconsolidated Joint Ventures. Our equity in income of unconsolidated joint ventures was $3.5 million and $3.2 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, our equity in loss of unconsolidated joint ventures was nominal and $1.2 million, respectively. The year-over-year improvement for the 2024 periods mainly reflected homes delivered by an unconsolidated joint venture in California. In the corresponding periods of 2023, our unconsolidated joint ventures did not deliver any homes. Further information regarding our investments in homebuilding unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.

Previous wording

Backlog. The number of homes in our backlog and our backlog value at May 31, 2024 decreased 14% and 10%, respectively, from May 31, 2023. The year-over-year decreases narrowed for the fourth consecutive quarter. The decline in our overall backlog value at May 31, 2024, compared to May 31, 2023, reflected decreases in three of our homebuilding reporting segments, ranging from 6% in our Southwest segment to 31% in our Central segment, partly offset by a 7% increase in our West Coast segment. On a sequential basis, the number of homes in our 2024 second quarter ending backlog and corresponding ending backlog value increased 8% and 12%, respectively, from the previous quarter. A portion of the homes in backlog will not result in homes delivered due to cancellations.

Current wording

Backlog. The number of homes in our backlog and our backlog value at August 31, 2024 decreased 18% and 14%, respectively, from August 31, 2023. The decline in our overall backlog value reflected decreases in each of our homebuilding reporting segments, ranging from 9% in our Southwest segment to 24% in our Southeast segment. Based on our historical experience, a portion of the homes in backlog will not result in homes delivered due to cancellations.

Previous wording

Community Count. We use the term “community count” to refer to the number of communities open for sale with at least five homes left to sell at the end of a reporting period. Our average community count for the three months ended May 31, 2024 decreased 4% from the year-earlier period. Our ending community count for the 2024 second quarter was essentially flat with the year-earlier quarter. On a sequential basis, our 2024 second quarter ending community count expanded 4%. To help drive future community count growth, we increased our investments in land and land development on a year-over-year basis in the 2024 first half, and expect to increase our investments on a year-over-year basis in the remaining 2024 quarters, as discussed below under “Liquidity and Capital Resources.”

Current wording

Community Count. We use the term “community count” to refer to the number of communities open for sale with at least five homes left to sell at the end of a reporting period. Our average community count for the three months ended August 31, 2024 increased 5% from the year-earlier period. Our ending community count for the 2024 third quarter grew 10% from the year-earlier quarter. On a sequential basis, our 2024 third quarter ending community count expanded 3%. To help drive future community count growth, we increased our investments in land and land development on a year-over-year basis for the nine months ended August 31, 2024, as discussed below under “Liquidity and Capital Resources.”

Previous wording

In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment. Corporate and other had operating losses of $38.6 million and $38.3 million in the three months ended May 31, 2024 and 2023, respectively. For the six months ended May 31, 2024, Corporate and other had an operating loss of $73.7 million, compared to an operating loss of $68.5 million for the corresponding year-earlier period.

Current wording

In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment. Corporate and other had operating losses of $37.9 million and $36.0 million in the three months ended August 31, 2024 and 2023, respectively. For the nine months ended August 31, 2024, Corporate and other had an operating loss of $111.6 million, compared to an operating loss of $104.5 million for the corresponding year-earlier period.

Previous wording

The financial results of our homebuilding reporting segments for the three-month and six-month periods ended May 31, 2024 and 2023 were negatively impacted to varying degrees by homebuyer concessions we selectively extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered.

Current wording

The financial results of our homebuilding reporting segments for the three-month and nine-month periods ended August 31, 2024 and 2023 were negatively impacted to varying degrees by homebuyer concessions we selectively extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered.

Previous wording

In the three months ended May 31, 2024 and the three-month and six-month periods ended of May 31, 2023, revenues were generated solely from housing operations. In the six months ended May 31, 2024, this segment’s revenues were comprised of housing revenues and nominal land sale revenues. Housing revenues for the three months ended May 31, 2024 grew 24% from the year-earlier period to $698.4 million due to an increase in the number of homes delivered, partially offset by a decrease in their average selling price. For the six months ended May 31, 2024, housing revenues increased 14% year over year to $1.26 billion due to an increase in the number of homes delivered, partly offset by a decrease in their average selling price. Operating income for the three months ended May 31, 2024 was up year over year, reflecting higher housing gross profits, partly offset by increased selling, general and administrative expenses. Operating income as a percentage of revenues for the 2024 second quarter increased from the year-earlier quarter, primarily due to a 160 basis-point increase in the housing gross profit margin to 19.2% and a 90 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.7%. For the six months ended May 31, 2024, operating income as a percentage of revenues increased from the corresponding 2023 period, reflecting a 160 basis-point expansion in the housing gross profit margin to 19.5% and a 10 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.3%.

Current wording

In the three months ended August 31, 2024 and the three-month and nine-month periods ended August 31, 2023, revenues were generated solely from housing operations. In the nine months ended August 31, 2024, this segment’s revenues were comprised of housing revenues and nominal land sale revenues. The year-over-year growth in housing revenues for the three-month and nine-month periods ended August 31, 2024 was driven by an increase in the number of homes delivered, partially offset by a decrease in their average selling price. Operating income for the three months and nine months ended August 31, 2024 was up year over year, reflecting higher housing gross profits, partly offset by increased selling, general and administrative expenses. Operating income as a percentage of revenues for the 2024 third quarter rose from the year-earlier quarter, primarily due to a 30 basis-point increase in the housing gross profit margin to 18.8% and a 140 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.2%. For the nine months ended August 31, 2024, operating income as a percentage of revenues increased from the corresponding 2023 period, reflecting a 110 basis-point expansion in the housing gross profit margin to 19.2% and a 60 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.9%.

Previous wording

The year-over-year expansion in the housing gross profit margin for the three-month and six-month periods ended May 31, 2024 mainly reflected lower relative construction and land costs, a decrease in inventory-related charges and increased operating leverage from higher housing revenues. For the three months ended May 31, 2024, inventory-related charges associated with housing operations were $.6 million, compared to $3.1 million for the year-earlier period. For the six months ended May 31, 2024, inventory-related charges associated with housing operations were $1.9 million, compared to $3.9 million for the year-earlier period. The year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues for the three-month and six-month periods ended May 31, 2024 reflected a decrease in sales commissions and improved operating leverage from higher housing revenues, partly offset by higher costs including marketing and other expenses associated with a planned increase in our community count in this segment during the year.

Current wording

The year-over-year expansion in the housing gross profit margins for the three-month and nine-month periods ended August 31, 2024 mainly reflected lower relative construction and land costs, which occurred despite the effects of selective pricing adjustments aimed at stimulating demand. Additionally, the year-over-year expansion reflected increased operating leverage from higher housing revenues. The higher housing gross profit margin for the nine-month period ended August 31, 2024 also benefited from a decrease in homebuyer concessions. For the three months ended August 31, 2024, inventory-related charges associated with housing operations were $.5 million, compared to $.4 million for the year-earlier period. For the nine months ended August 31, 2024, inventory-related charges associated with housing operations were $2.4 million, compared to $4.3 million for the year-earlier period. The year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues for the three-month and nine-month periods ended August 31, 2024 reflected lower relative sales commissions and improved operating leverage from higher housing revenues, partly offset by higher costs including marketing and other expenses associated with our increased community count in this segment.

Previous wording

The year-over-year decrease in this segment’s revenues for the three months ended May 31, 2024 reflected a decline in the number of homes delivered, partly offset by an increase in their average selling price. For the six months ended May 31, 2024, housing revenues grew as a result of increases in both the number of homes delivered and their average selling price. Operating income for the three months ended May 31, 2024 decreased from the corresponding year-earlier period, mainly due to lower housing gross profits. As a percentage of revenues, this segment’s operating income for the 2024 second quarter improved from the year-earlier quarter, reflecting a 60 basis-point increase in the housing gross profit margin to 24.4%, partly offset by a 40 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 7.2%. For the six months ended May 31, 2024, operating income grew from the corresponding year-earlier period due to higher housing gross profits, partly offset by higher selling, general and administrative expenses. Operating income as a percentage of revenues for the six months ended May 31, 2024 declined from the corresponding 2023 period, reflecting a 30 basis-point decrease in the housing gross profit margin to 24.4% and a 10 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 7.1%.

Current wording

In the three-month and nine-month periods ended August 31, 2024, revenues were generated solely from housing operations. Revenues for the three-month and nine-month periods ended August 31, 2023 were comprised of housing revenues and land sale revenues. This segment’s housing revenues for the three months ended August 31, 2024 improved from $300.2 million in the year-earlier quarter, reflecting an increase in the average selling price of homes delivered, partly offset by a decrease in the number of homes delivered. For the nine months ended August 31, 2024, housing revenues grew as a result of increases in both the number of homes delivered and their average selling price. Operating income for the three months and nine months ended August 31, 2024 increased from the corresponding year-earlier period, due to higher housing gross profits, partially offset by higher selling, general and administrative expenses and the absence of land sale profits in the current periods, compared to $1.1 million of land sale profits in the year-earlier periods. As a percentage of revenues, this segment’s operating income for the 2024 third quarter improved from the year-earlier quarter, reflecting a 290 basis-point increase in the housing gross profit margin to 25.3%, partly offset by a 40 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 7.8%. Operating income as a percentage of revenues for the nine months ended August 31, 2024 improved from the corresponding 2023 period, primarily reflecting an 80 basis-point increase in the housing gross profit margin to 24.7%, partly offset by a 10 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 7.3%.

Previous wording

The year-over-year increase in the housing gross profit margin for the three months ended May 31, 2024 was mainly due to lower construction and land costs. The year-over-year decrease in the housing gross profit margin for the six months ended May 31, 2024 was primarily due to higher construction and land costs and product and geographic mix shifts of homes delivered. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months ended May 31, 2024 was mainly due to reduced operating leverage from lower housing revenues.

Current wording

The year-over-year expansion in the housing gross profit margins for the three-month and nine-month periods ended August 31, 2024 primarily reflected lower relative construction and land costs, increased operating leverage from higher housing revenues, a decrease in homebuyer concessions and product and geographic mix shifts of homes delivered. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and nine months ended August 31, 2024 was mainly due to higher costs including marketing and other expenses, partly offset by improved operating leverage from higher housing revenues.

Previous wording

In the three months ended May 31, 2024 and the three-month and six-month periods ended May 31, 2023, this segment’s revenues were generated solely from housing operations. In the six months ended May 31, 2024, this segment’s revenues were comprised of housing revenues and land sale revenues. Housing revenues for the three months ended May 31, 2024 decreased 31% from the year-earlier period. For the six months ended May 31, 2024, housing revenues of $693.1 million were down 26% year over year. The lower housing revenues for the three-month and six-month periods ended May 31, 2024 reflected decreases in both the number of homes delivered and their average selling price. Operating income for the three months ended May 31, 2024 declined from the year-earlier period due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. This segment’s operating income as a percentage of revenues for the 2024 second quarter decreased from the year-earlier period primarily due to a 210 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.7%. The housing gross profit margin was even with the year-earlier quarter at 22.1%. For the six months ended May 31, 2024, operating income was down from the corresponding year-earlier period due to lower housing gross profits, partly offset by lower selling, general and administrative expenses and current-period land sale profits of $1.1 million. Operating income as a percentage of revenues for the six months ended May 31, 2024 decreased from the corresponding 2023 period, reflecting an 80 basis-point decrease in the housing gross profit margin to 22.0% and a 170 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.9%.

Current wording

In the three months ended August 31, 2024 and the three-month and nine-month periods ended August 31, 2023, this segment’s revenues were generated solely from housing operations. In the nine months ended August 31, 2024, this segment’s revenues were comprised of housing revenues and land sale revenues. Housing revenues for the three months ended August 31, 2024 decreased 26% from the year-earlier period. For the nine months ended August 31, 2024, housing revenues of $1.07 billion were also down 26% year over year. The lower housing revenues for the three-month and nine-month periods ended August 31, 2024 reflected decreases in both the number of homes delivered and their average selling price. Operating income for the three months and nine months ended August 31, 2024 declined from the year-earlier period due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the nine months ended August 31, 2024 also reflected land sale profits of $1.1 million. This segment’s operating income as a percentage of revenues for the 2024 third quarter decreased from the year-earlier period, primarily due to a 190 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.1%, and a 140 basis-point decline in the housing gross profit margin to 21.8%. Operating income as a percentage of revenues for the nine months ended August 31, 2024 decreased from the corresponding 2023 period, mainly reflecting a 100 basis-point decrease in the housing gross profit margin to 21.9% and a 180 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.0%.

Previous wording

The housing gross profit margin for the three months ended May 31, 2024 remained even with the year-earlier period, as decreases in inventory-related charges and amortization of previously capitalized interest were offset by reduced operating leverage from lower housing revenues. Inventory-related charges associated with housing operations were $.3 million for the 2024 second quarter, compared to $1.1 million for the year-earlier period. For the six months ended May 31, 2024, the year-over-year decrease in the housing gross profit margin primarily reflected higher relative construction and land costs, product and geographic mix shifts of homes delivered, and reduced operating leverage from lower housing revenues, partly offset by a decrease in inventory-related charges. For the six months ended May 31, 2024, inventory-related charges associated with housing operations were $.3 million, compared to $2.1 million for the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and six months ended May 31, 2024 was primarily due to higher costs including marketing and other expenses associated with a planned increase in our community count in this segment during the year, an increase in sales commissions and reduced operating leverage from lower housing revenues.

Current wording

The housing gross profit margin for the three months ended August 31, 2024 declined due to higher relative construction and land costs, which included the impact of selective pricing adjustments aimed at stimulating demand, and reduced operating leverage from lower housing revenues, partly offset by a decrease in amortization of previously capitalized interest and lower homebuyer concessions. For the nine months ended August 31, 2024, the year-over-year decrease in the housing gross profit margin primarily reflected higher relative construction and land costs, product and geographic mix shifts of homes delivered, and reduced operating leverage from lower housing revenues, partly offset by a decrease in amortization of previously capitalized interest. Inventory-related charges associated with housing operations for the nine months ended August 31, 2024 were $.7 million, compared to $2.3 million for the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and nine months ended August 31, 2024 was primarily due to reduced operating leverage from lower housing revenues as well as higher costs, including marketing and other expenses.

Previous wording

This segment’s revenues for the three months ended May 31, 2024 were down slightly year over year as a decrease in the number of homes delivered was largely offset by an increase in their average selling price. For the six months ended May 31, 2024, revenues improved from the year-earlier period due to increases in both the number of homes delivered and their average selling price. Operating income for the 2024 second quarter decreased from the year-earlier quarter, reflecting lower housing gross profits and higher selling, general and administrative expenses. As a percentage of revenues, operating income for the 2024 second quarter decreased from the year-earlier quarter due to a 240 basis-point decrease in the housing gross profit margin to 21.3% and a 70 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.8%. For the six months ended May 31, 2024, operating income was down from the corresponding year-earlier period due to higher selling, general and administrative expenses, partly offset by higher housing gross profits. Operating income as a percentage of revenues for the six months ended May 31, 2024 decreased from the year-earlier period, reflecting a 120 basis-point decline in the housing gross profit margin to 21.4% and a 20 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.0%.

Current wording

This segment’s revenues for the three-month and nine-month periods ended August 31, 2024 and 2023 were generated solely from housing operations. Housing revenues for the three-month and nine-month periods ended August 31, 2024 grew year over year due to increases in both the number of homes delivered and their average selling price. Operating income for the three-month and nine-month periods ended August 31, 2024 decreased from the corresponding year-earlier periods, primarily reflecting higher selling, general and administrative expenses, as housing gross profits were essentially flat year over year. As a percentage of revenues, operating income for the 2024 third quarter decreased from the year-earlier quarter due to a 390 basis-point decrease in the housing gross profit margin to 20.0%, slightly offset by a 10 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.0%. For the nine months ended August 31, 2024, operating income as a percentage of revenues for the nine months ended August 31, 2024 decreased from the year-earlier period, reflecting a 220 basis-point decline in the housing gross profit margin to 20.9%.

Previous wording

The year-over-year decrease in the housing gross profit margin for the three months ended May 31, 2024 primarily reflected higher construction and land costs and product and geographic mix shifts of homes delivered, partly offset by a decrease in homebuyer concessions. For the six months ended May 31, 2024, the housing gross profit margin decreased year over year mainly due to higher construction and land costs, partly offset by decreases in both homebuyer concessions and inventory-related charges. For the six months ended May 31, 2024, inventory-related charges associated with housing operations were nominal, compared to $3.5 million for the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and six months ended May 31, 2024 was primarily due to higher costs including marketing and other expenses associated with a planned increase in our community count in this segment during the year, and an increase in sales commissions.

Current wording

The year-over-year decrease in the housing gross profit margin for the three months ended August 31, 2024 primarily reflected higher relative construction and land costs and product and geographic mix shifts of homes delivered. For the nine months ended August 31, 2024, the housing gross profit margin decreased year over year mainly due to higher relative construction and land costs, partly offset by decreases in both homebuyer concessions and inventory-related charges. For the nine months ended August 31, 2024, inventory-related charges associated with housing operations were $.4 million, compared to $3.5 million for the year-earlier period.

Previous wording

Revenues. Financial services revenues for the three months and six months ended May 31, 2024 rose from the year-earlier period due to an increase in insurance commissions, partly offset by a decrease in title services revenues.

Current wording

Revenues. Financial services revenues for the three months ended August 31, 2024 declined 9% year over year, due to decreases in both insurance commissions and title services revenues. For the nine months ended August 31, 2024, financial services revenues rose slightly from the year-earlier period, as an increase in insurance commissions was largely offset by a decrease in title services revenues.

Previous wording

Pretax income. Financial services pretax income for the three months ended May 31, 2024 grew 16% from the year-earlier period, largely due to an increase in the equity in income of our unconsolidated joint venture, KBHS. In the 2024 second quarter, the equity in income of our unconsolidated joint venture increased to $6.4 million, from $5.4 million in the year-earlier quarter, due to an increase in KBHS’ income. The year-over-year increase in KBHS’ income reflected gains of $1.3 million in the fair value of IRLCs in the current quarter, compared to $2.7 million of losses in the fair value of IRLCs in the year-earlier quarter. Also contributing to the year-over-year increase in KBHS’ income was the higher principal amount of loans originated, as 86% of the buyers financing their home purchases used KBHS, up from 80% in the year-earlier quarter.

Current wording

Pretax income. Financial services pretax income for the three months ended August 31, 2024 grew 11% from the year-earlier period, largely due to an increase in the equity in income of our unconsolidated joint venture, KBHS. In the 2024 third quarter, the equity in income of our unconsolidated joint venture increased to $5.9 million, from $4.1 million in the year-earlier quarter, due to an increase in KBHS’ income. The year-over-year increase in KBHS’ income reflected the loss in the fair value of IRLCs decreasing to $.4 million in the current quarter, compared to $5.2 million in the year-earlier quarter. Also contributing to the year-over-year increase in KBHS’ income was the higher principal amount of loans originated, which reflected increases in both the number of homes we delivered and the percentage of homebuyers using KBHS. In the 2024 third quarter, 88% of the buyers financing their home purchases used KBHS, up from 84% in the year-earlier quarter.

Previous wording

For the six months ended May 31, 2024, our financial services pretax income increased 43% from the corresponding 2023 period, mostly due to an increase in the equity in income of our unconsolidated joint venture. In the 2024 first half, the equity in income of unconsolidated joint venture rose to $13.5 million, compared to $7.0 million in the year-earlier period, mainly as a result of an increase in KBHS’ income. The year-over-year increase in KBHS’ income was primarily due to gains of $4.2 million in the fair value of IRLCs in the current period, compared to losses of $4.2 million in the year-earlier period, as well as the factors described above for the three months ended May 31, 2024.

Current wording

For the nine months ended August 31, 2024, our financial services pretax income increased 31% from the corresponding 2023 period, mostly due to an increase in the equity in income of our unconsolidated joint venture. In the nine months ended August 31, 2024, the equity in income of unconsolidated joint venture rose to $19.4 million, compared to $11.2 million in the year-earlier period, mainly as a result of an increase in KBHS’ income. The year-over-year increase in KBHS’ income was primarily due to gains of $3.8 million in the fair value of IRLCs in the current period, compared to losses of $9.4 million in the year-earlier period, as well as the factors described above for the three months ended August 31, 2024.

Previous wording

Our effective tax rate for the three months ended May 31, 2024 increased slightly from the year-earlier period, mainly due to a $2.0 million decrease in the Section 45L tax credits we recognized primarily from building energy-efficient homes and a $.7 million decrease in excess tax benefits related to stock-based compensation, partly offset by a $.5 million decrease in nondeductible executive compensation expense. For the six months ended May 31, 2024, our effective tax rate decreased from the year-earlier period, mainly due to a $2.7 million increase in excess tax benefits related to stock-based compensation and a $1.1 million decrease in nondeductible executive compensation expense, partly offset by a $3.6 million decrease in the Section 45L tax credits we recognized primarily from building energy-efficient homes.

Current wording

Our effective tax rate for the three months ended August 31, 2024 increased from the year-earlier period, mainly due to a $3.0 million decline in the Section 45L tax credits we recognized primarily from building energy-efficient homes and a $1.9 million decrease in excess tax benefits related to stock-based compensation, partly offset by a $2.4 million decrease in state taxes. For the nine months ended August 31, 2024, our effective tax rate was essentially flat with the year-earlier period, primarily reflecting a $5.3 million decrease in state income taxes, a $1.3 million decline in nondeductible executive compensation expense and a $.8 million increase in excess tax benefits related to stock-based compensation, largely offset by a $6.6 million decrease in the Section 45L tax credits.

Previous wording

We ended the 2024 second quarter with total liquidity of $1.73 billion, including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility. Based on our financial position as of May 31, 2024, and our business forecast as discussed below under “Outlook,” we have no material concerns related to our liquidity. We believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months.

Current wording

We ended the 2024 third quarter with total liquidity of $1.46 billion, including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility. Based on our financial position as of August 31, 2024, and our business forecast as discussed below under “Outlook,” we have no material concerns related to our liquidity. We believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months.

Previous wording

Cash Requirements. In the six months ended May 31, 2024, there have been no significant changes in our cash requirements from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2023.

Current wording

Cash Requirements. In the nine months ended August 31, 2024, there have been no significant changes in our cash requirements from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2023.

Previous wording

Investments in Land and Land Development. Our investments in land and land development for the six months ended May 31, 2024 increased 64% to $1.26 billion, compared to $763.2 million for the year-earlier period. Land acquisition expenditures, which are included in our investments in land and land development, increased to $491.9 million in the six months ended May 31, 2024, from $130.6 million in the corresponding period of 2023. Approximately 39% of our total investments for the six months ended May 31, 2024 related to land acquisitions, compared to approximately 17% in the prior-year period. While we made strategic investments in land and land development in each of our homebuilding reporting segments during the six months ended May 31, 2024 and 2023, approximately 53% and 55%, respectively, of these investments for each period were made in our West Coast homebuilding reporting segment.

Current wording

Investments in Land and Land Development. Our investments in land and land development for the nine months ended August 31, 2024 increased 59% to $2.10 billion, compared to $1.32 billion for the year-earlier period. Land acquisition expenditures, which are included in our investments in land and land development, increased to $916.9 million in the nine months ended August 31, 2024, from $329.5 million in the corresponding period of 2023. Approximately 44% of our total investments for the nine months ended August 31, 2024 related to land acquisitions, compared to approximately 25% in the prior-year period. While we made investments in land and land development in each of our homebuilding reporting segments during the nine months ended August 31, 2024 and 2023, approximately 55% of these investments for each period were made in our West Coast homebuilding reporting segment.

Previous wording

For the remainder of 2024, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards. While we expect our land acquisition activity to increase on a year-over-year basis in the remaining 2024 quarters, our investments in land and land development in the future will depend significantly on market conditions and available opportunities that meet our investment return standards.

Current wording

For the 2024 fourth quarter, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards. While we expect our land acquisition activity to increase on a year-over-year basis in the 2024 fourth quarter, our investments in land and land development in the future will depend significantly on market conditions and available opportunities that meet our investment return standards.

Previous wording

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at May 31, 2024 increased 4% from November 30, 2023, reflecting land investments during the six months ended May 31, 2024, partly offset by homes delivered and our abandonment of 3,274 previously controlled lots. The number of lots we owned or controlled as of May 31, 2024 increased 17% from November 30, 2023. The number of lots in inventory as of May 31, 2024 included 14,962 lots under contract where the associated deposits were refundable at our discretion, compared to 6,260 of such lots at November 30, 2023. Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 39% at May 31, 2024, compared to 27% at November 30, 2023. Generally, this percentage fluctuates with our decisions to control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on available opportunities and our investment return standards.

Current wording

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at August 31, 2024 increased 10% from November 30, 2023, reflecting land investments during the nine months ended August 31, 2024, partly offset by homes delivered and our abandonment of 5,590 previously controlled lots. The number of lots we owned or controlled as of August 31, 2024 increased 24% from November 30, 2023. The number of lots in inventory as of August 31, 2024 included 16,069 lots under contract where the associated deposits were refundable at our discretion, compared to 6,260 of such lots at November 30, 2023. Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 42% at August 31, 2024, compared to 27% at November 30, 2023. Generally, this percentage fluctuates with our decisions to control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on available opportunities and our investment return standards.

Previous wording

Land Option Contracts and Other Similar Contracts. As discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, our land option contracts and other similar contracts generally do not contain provisions requiring our specific performance. Our decision to exercise a particular land option contract or other similar contract depends on the results of our due diligence reviews and ongoing market and project feasibility analysis that we conduct after entering into such a contract. In some cases, our decision to exercise a land option contract or other similar contract may be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development approvals, and/or physically developing the underlying land by a pre-determined date. We typically have the ability not to exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers. If we were to acquire all the land we had under land option contracts and other similar contracts at May 31, 2024, we estimate the remaining purchase price to be paid would be as follows: 2024 – $826.1 million; 2025 – $859.6 million; 2026 – $305.1 million; 2027 – $77.6 million; 2028 – $65.4 million; and thereafter – $.7 million.

Current wording

Land Option Contracts and Other Similar Contracts. As discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, our land option contracts and other similar contracts generally do not contain provisions requiring our specific performance. Our decision to exercise a particular land option contract or other similar contract depends on the results of our due diligence reviews and ongoing market and project feasibility analysis that we conduct after entering into such a contract. In some cases, our decision to exercise a land option contract or other similar contract may be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development approvals, and/or physically developing the underlying land by a pre-determined date. We typically have the ability not to exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers. If we were to acquire all the land we had under land option contracts and other similar contracts at August 31, 2024, we estimate the remaining purchase price to be paid would be as follows: 2024 – $436.1 million; 2025 – $1.06 billion; 2026 – $406.2 million; 2027 – $123.6 million; 2028 – $91.0 million; and thereafter – $.6 million.