KB HOME

KB HOME

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Operations. KB Home is a builder of attached and detached single-family residential homes, townhomes and

condominiums. As of November 30, 2025, we conducted ongoing operations in Arizona, California, Colorado, Florida, Idaho,

Nevada, North Carolina, Texas and Washington. We also offer property and casualty insurance and, in certain instances,

earthquake, flood and personal property insurance to our homebuyers in the same markets as our homebuilding reporting

segments, and provide title services in the majority of our markets located within our Southwest, Central and Southeast

homebuilding reporting segments. We offer mortgage banking services, including mortgage loan originations, to our

homebuyers indirectly through KBHS, which is an unconsolidated joint venture between us and a third party.

Basis of Presentation. Our consolidated financial statements have been prepared in accordance with GAAP and include

our accounts and those of the consolidated subsidiaries in which we have a controlling financial interest. All intercompany

balances and transactions have been eliminated in consolidation. Investments in unconsolidated joint ventures in which we

have less than a controlling financial interest are accounted for using the equity method.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make

estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes.

Actual results could differ from those estimates.

Cash and Cash Equivalents. 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$152.6 million at November 30, 2025 and$385.1

million at November 30, 2024. At November 30, 2025 and 2024, our cash equivalents were mainly invested in interest-bearing

bank deposit accounts and money market funds.

Receivables. We record receivables net of an allowance for doubtful accounts. This allowance for potential losses is

established or maintained for expected uncollectible receivables. The allowance is estimated based on our evaluation of the

receivables, taking into account historical collection experience, general economic conditions, specific credit risk of the

counterparties and other relevant information.

Property and Equipment and Depreciation. Property and equipment are recorded at cost and are depreciated using the

straight-line method over their estimated useful lives as follows: computer software and equipment –two to 15 years; model

furnishings and sales office improvements –two tothree years; office furniture and equipment –three to 10 years; and

leasehold improvements – life of the lease. Repair and maintenance costs are expensed as incurred. Depreciation expense

totaled$37.3 million in 2025,$37.3 million in 2024 and$36.4 million in 2023.

Investments in Equity Securities. We have elected to measure our investments in equity securities without readily

determinable fair values at cost less impairment, if any, including adjustments for observable price changes in orderly

transactions for an identical or similar investment of the same issuer. These investments, which totaled$15.2 million at both

November 30, 2025 and 2024, are included in other assets in our consolidated balance sheets.

Homebuilding Operations. We recognize homebuilding revenue by applying the following steps in determining the timing

and amount of revenue to recognize: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the

contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, if

applicable; and (5) recognize revenue when (or as) we satisfy a performance obligation.

Our home sale transactions are made pursuant to contracts under which we typically have a single performance obligation

to deliver a completed home to the homebuyer when closing conditions are met. Revenues from home sales are recognized

when we have satisfied the performance obligation within the sales contract, which is generally when title to and possession of

the home and the risks and rewards of ownership are transferred to the homebuyer on the closing date. Under our home sales

contracts, we typically receive an initial cash deposit from the homebuyer at the time the sales contract is executed and receive

the remaining consideration to which we are entitled, through a third-party escrow agent, at closing. Customer deposits related

to sold but undelivered homes are included in accrued expenses and other liabilities.

Concurrent with the recognition of revenues in our consolidated statements of operations, all sales incentives are recorded

as a reduction of revenues. Sales incentives vary by community and may be in the form of price concessions on the selling

price of a home, mortgage-related concessions, closing cost allowances and/or free products or services. When we provide

sales incentives in the form of free products or services to homebuyers, their costs are reflected as construction and land costs

because such incentives are identified in our home sales contracts with homebuyers as an intrinsic part of our single

performance obligation to deliver and transfer title to their home for the transaction price stated in the contracts. Cash proceeds

from home sale closings held by third-party escrow agents for our benefit, typically for less than five days, are considered

deposits in-transit and classified as cash.

We may periodically elect to sell parcels of land to third parties if such assets no longer fit into our strategic operating plans

or are zoned for non-residential development. Land sale transactions are made pursuant to contracts under which we typically

have a performance obligation(s) to deliver specified land parcels to the buyer when closing conditions are met. We evaluate

each land sales contract to determine our performance obligation(s) under the contract, including whether we have a distinct

promise to perform post-closing land development work that is material within the context of the contract, and use objective

criteria to determine our completion of the applicable performance obligation(s), whether at a point in time or over time.

Revenues from land sales are recognized when we have satisfied the performance obligation(s) within the sales contract, which

is generally when title to and possession of the land and the risks and rewards of ownership are transferred to the land buyer on

the closing date. Under our land sales contracts, we typically receive an initial cash deposit from the buyer at the time the

contract is executed and receive the remaining consideration to which we are entitled, through a third-party escrow agent, at

closing. In the limited circumstances where we provide financing to the land buyer, we determine that collectability of the

receivable is reasonably assured before we recognize revenue.

In instances where we have a distinct and material performance obligation(s) within the context of a land sales contract to

perform land development work after the closing date, a portion of the transaction price under the contract is allocated to such

performance obligation(s) and is recognized as revenue over time based upon our estimated progress toward the satisfaction of

the performance obligation(s). We generally measure our progress based on our costs incurred relative to the total costs

expected to satisfy the performance obligation(s). While the payment terms for such a performance obligation(s) vary, we

generally receive the final payment when we have completed our land development work to the specifications detailed in the

applicable land sales contract and it has been accepted by the land buyer.

Homebuilding revenues include forfeited deposits, which occur when home sales or land sales contracts, if any, that

involve a non-refundable deposit are cancelled. Revenues from forfeited deposits are immaterial.

Within our homebuilding operations, substantially all of our contracts with customers and the related performance

obligations have an original expected duration of one year or less.

Construction and land costs are comprised of direct and allocated costs, including estimated future costs for the limited

warranty we provide on our homes, and certain amenities within a community. Land acquisition, land development and other

common costs are generally allocated on a relative fair value basis to the homes or lots within the applicable community or land

parcel. Land acquisition and land development costs include related interest and real estate taxes.

Disaggregation of Revenues. Our homebuilding operations accounted for 99.6%,99.6% and 99.5% of our total revenues

for the years ended November 30, 2025,2024 and 2023, respectively, with most of those revenues generated from home sales

contracts with customers. Due to the nature of our revenue-generating activities, we believe the disaggregation of revenues as

reported in our consolidated statements of operations, and as disclosed by homebuilding reporting segment in Note 2 –Segment

Information and for our financial services reporting segment in Note 3 –Financial Services, fairly depicts how the nature,

amount, timing and uncertainty of cash flows are affected by economic factors.

Inventories. Housing and land inventories are stated at cost, unless the carrying value is determined not to be recoverable,

in which case the affected inventories are written down to fair value or fair value less associated costs to sell. Real estate assets,

such as our housing and land inventories, are tested for recoverability whenever events or changes in circumstances indicate

that their carrying value may not be recoverable. Recoverability is measured by comparing the carrying value of an asset to the

undiscounted future net cash flows expected to be generated by the asset. These impairment evaluations are significantly

impacted by estimates for the amounts and timing of future revenues, costs and expenses, and other factors. If the carrying

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

amount by which the carrying value of the affected asset exceeds its estimated fair value. For land held for sale, if the fair value

less associated costs to sell exceeds the asset’s carrying value, no impairment charge is recognized.

Capitalized Interest. 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. Capitalized interest is amortized to

construction and land costs as the related inventories are delivered to homebuyers or land buyers (as applicable). We do not

capitalize interest on land held for future development and land held for sale.

Fair Value Measurements. Fair value measurements are used for inventories on a nonrecurring basis when events and

circumstances indicate that their carrying value is not recoverable. For these real estate assets, fair value is determined based on

the estimated future net cash flows discounted for inherent risk associated with each such asset, or other valuation techniques.

Our financial instruments consist of cash and cash equivalents, corporate-owned life insurance, outstanding borrowings

under the Credit Facility, if any, and the Term Loan, senior notes, and mortgages and land contracts due to land sellers and

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

techniques as appropriate. When available, we use quoted market prices in active markets to determine fair value.

Financial Services Operations. Our financial services reporting segment, which includes the operations of KB HOME

Mortgage Company, generates revenues primarily from insurance commissions and title services. Revenues from title services

are recognized when policies are issued, which generally occurs at the time each applicable home sale is closed. We receive

commissions from various third-party insurance carriers for arranging for the carriers to provide homeowner and other

insurance policies for our homebuyers that elect to obtain such coverage. In addition, each time a homebuyer renews their

insurance policy with the insurance carrier, we receive a renewal commission. Revenues from insurance commissions are

recognized when the insurance carrier issues an initial insurance policy to our homebuyer, which generally occurs at the time

each applicable home sale is closed. As our performance obligations for policy renewal commissions are satisfied upon

issuance of the initial insurance policy, insurance commissions for renewals are considered variable consideration.

Accordingly, we estimate the probable future renewal commissions when an initial policy is issued and record a corresponding

contract asset and insurance commission revenues. We estimate the amount of variable consideration based on historical

renewal trends and constrain the estimate such that it is probable that a significant reversal of cumulative recognized revenue

will not occur. We also consider the likelihood and magnitude of a potential future reversal of revenue and update our

assessment at the end of each reporting period. The contract assets for estimated future renewal commissions are included in

other assets within our financial services reporting segment.

Warranty Costs. Weprovide a limited warranty on all of our homes. We estimate the costs that may be incurred under

each limited warranty and record a liability in the amount of such costs at the time the revenue associated with the sale of each

home is recognized. Our primary assumption in estimating the amounts we accrue for warranty costs is that historical claims

experience is a strong indicator of future claims experience. Factors that affect our warranty liability include the number of

homes delivered, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of

our accrued warranty liability and adjust the amount as necessary based on our assessment. Our warranty liability is presented

on a gross basis for all years without consideration of recoveries and amounts we have paid on behalf of and expect to recover

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

parties, if any, are recorded as receivables when such recoveries are considered probable.

Self-Insurance. We self-insure a portion of our overall risk through the use of a captive insurance subsidiary. We record

liabilities based on the estimated costs required to cover reported claims, claims incurred but not yet reported, and claim

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

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

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

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

receivables when such recoveries are considered probable.

Community Sales Office and Other Marketing- and Model Home-Related Costs. Community sales office and other

marketing- and model home-related costs are either recorded as inventories, capitalized as property and equipment, or expensed

to selling, general and administrative expenses as incurred. Costs related to the construction of a model home, inclusive of

design choices and options that will be sold as part of the home, are recorded as inventories and recognized as construction and

land costs when the model home is delivered to a homebuyer. Costs to furnish and ready a model home or on-site community

sales facility that will not be sold as part of the model home, such as costs for model furnishings, community sales office and

model complex grounds, sales office construction and sales office furniture and equipment, are capitalized as property and

equipment under “model furnishings and sales office improvements.” Model furnishings and sales office improvements are

depreciated to selling, general and administrative expenses over their estimated useful lives. Other costs related to the

marketing of a community, removing the on-site community sales facility and readying a completed (model) home for sale are

expensed to selling, general and administrative expenses as incurred.

Advertising Costs. We expense advertising costs as incurred. We incurred advertising costs of$42.0 million in 2025,

$39.9 million in 2024 and$34.2 million in 2023.

Legal Fees. Legal fees associated with litigation and similar proceedings that are not expected to provide a benefit in

future periods are generally expensed as incurred. Legal fees associated with land acquisition and development and other

activities that are expected to provide a benefit in future periods are capitalized to inventories in our consolidated balance sheets

as incurred. We expensed legal fees of$8.3 million in 2025,$8.7 million in 2024 and$10.4 million in 2023.

Stock-Based Compensation. We measure and recognize compensation expense associated with our grant of equity-based

awards at an amount equal to the fair value of share-based payments granted under compensation arrangements over the vesting

period. For certain equity-based awards granted in October 2025 containing new provisions that accelerate or continue vesting

upon retirement, we recognize compensation expense over the period from the grant date to the date that retirement eligibility is

achieved, if that is expected to occur during the standard vesting period. Additionally, for such awards granted to retirement-

eligible employees, the full compensation cost of the award is recognized immediately upon grant. We estimate the fair value

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

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

we recognize compensation expense ratably over the vesting period when it is probable that stated performance targets will be

achieved and record cumulative adjustments in the period in which estimates change. We account for forfeitures of equity-

based awards as they occur.

Income Taxes. The provision for, or benefit from, income taxes is calculated using the asset and liability method, under

which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of

assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax

assets are evaluated on a quarterly basis to determine if adjustments to the valuation allowance are required. This evaluation is

based on the consideration of all available positive and negative evidence using a “more likely than not” standard with respect

to whether deferred tax assets will be realized. The ultimate realization of our deferred tax assets depends primarily on our

ability to generate future taxable income during the periods in which the related deferred tax assets become deductible. The

value of deferred tax assets in our consolidated balance sheets depends on applicable income tax rates.

Accumulated Other Comprehensive Loss. The accumulated balances of other comprehensive loss in the consolidated

balance sheets as of November 30, 2025 and 2024 were comprised solely of adjustments recorded directly to accumulated other

comprehensive loss related to our benefit plan obligations. Such adjustments are made annually as of November 30, when our

benefit plan obligations are remeasured.

Earnings Per Share. We compute earnings per share using the two-class method, which is an allocation of earnings

between the holders of common stock and a company’s participating security holders. Our outstanding nonvested shares of

restricted stock contain non-forfeitable rights to dividends and, therefore, are considered participating securities for purposes of

computing earnings per share pursuant to the two-class method. We had no other participating securities at November 30,

2025,2024 or 2023.

Adoption of New Accounting Pronouncement. In November 2023, the FASB issued Accounting Standards Update No.

2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is

intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant

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

fiscal years beginning after December 15, 2024, with retrospective application required for all prior periods presented. We

adopted ASU 2023-07 for 2025 and included the related disclosures in Note 2 –Segment Information. The adoption of this

guidance, which is related to disclosures only, had no impact on our consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted. In December 2023, the FASB issued Accounting Standards Update

No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the

rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or

loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income

tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities

to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance

is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements

that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but

retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our

consolidated financial statements and related disclosures.

In November 2024, the FASB issued Accounting Standards Update No. 2024-03, “Income Statement — Reporting

Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement

Expenses” (“ASU 2024-03”), which requires disclosure of certain costs and expenses on an interim and annual basis in the

notes to the consolidated financial statements. The guidance is effective for annual reporting periods beginning after December

15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted.

The guidance is to be applied either (1) prospectively to financial statements issued for reporting periods after the effective date

or (2) retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the potential

impact of adopting this new guidance on our consolidated financial statements and related disclosures.

In September 2025, the FASB issued Accounting Standards Update No. 2025-06, “Intangibles-Goodwill and Other-

Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU

2025-06”), which modernizes the accounting for costs related to internal-use software by removing all references to project

stages and clarifying the threshold entities apply to begin capitalizing costs. The guidance is effective for annual reporting

periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, and may be

applied using a prospective, retrospective or modified transition approach. Early adoption is permitted as of the beginning of an

annual reporting period. We are currently evaluating the potential impact of adopting this new guidance on our consolidated

financial statements and related disclosures.

Note 2. Segment Information

We operate two principal businesses: homebuilding and financial services. An operating segment is defined as a

component of an enterprise for which separate financial information is available and for which segment results are evaluated

regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance.

Each of our homebuilding divisions has been identified as an operating segment. Our homebuilding operating segments

have been aggregated into four homebuilding reporting segments, based primarily on similarities in economic and geographic

characteristics, product types, regulatory environments, methods used to sell and construct homes and land acquisition

characteristics. Our CODM, identified as our chief executive officer and chief operating officer for purposes of our reportable

segment disclosures, regularly reviews operating results for the individual operating segments that comprise our reporting

segments.

The CODM evaluates the performance of our homebuilding operating segments primarily based on their respective

housing gross profit margin and pretax income (loss). These profitability measures are used by the CODM in making operating

and capital resource allocation decisions at the segment level, including their review and approval of land acquisition and land

sale transactions. The CODM also uses these measures in business planning and forecasting, and considers budget-to-actual

variances for these measures when assessing segment performance. In addition, segment pretax income (loss) is used by the

CODM in determining the compensation of certain employees.

As of November 30, 2025, our homebuilding reporting segments conducted ongoing operations in the following states:

Our homebuilding reporting segments are engaged in the acquisition and development of land primarily for residential

purposes and offer a wide variety of homes that are designed to appeal to first-time, first move-up and active adult homebuyers.

Our homebuilding operations generate most of their revenues from the delivery of completed homes to homebuyers. They also

earn revenues from the sale of land.

We also haveone financial services reporting segment. The CODM reviews pretax income for our financial services

segment to assess performance and to inform decisions about the allocation of resources to the segment and as to financial

services product offerings.

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

title services. We offer mortgage banking services, including mortgage loan originations, to our homebuyers indirectly through

KBHS, our unconsolidated joint venture with GR Alliance, a subsidiary of Guaranteed Rate, Inc. We and GR Alliance each

have a 50.0% ownership interest, with GR Alliance providing management oversight of KBHS’ operations. The financial

services reporting segment is separately reported in our consolidated financial statements and in Note 3 –Financial Services.

Corporate and other is a non-operating segment that develops and oversees the implementation of company-wide strategic

initiatives and provides support to our reporting segments by centralizing certain administrative functions. Corporate

management is responsible for, among other things, evaluating and selecting the geographic markets in which we operate,

consistent with our overall business strategy; allocating capital resources to markets for land acquisition and development

activities; making major personnel decisions related to employee compensation and benefits; and monitoring the financial and

operational performance of our divisions. Corporate and other includes general and administrative expenses related to

operating our corporate headquarters. A portion of the expenses incurred by Corporate and other is allocated to our

homebuilding reporting segments.

Our reporting segments follow the same accounting policies used for our consolidated financial statements as described in

Note 1 –Summary of Significant Accounting Policies. The results of each reporting segment are not necessarily indicative of

the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented, nor

are they indicative of the results to be expected in future periods.

The following tables present certain statements of operations information relating to our homebuilding reporting segments

(in thousands):

(a)Housing gross profits are calculated by subtracting housing construction and land costs and inventory-related charges from housing revenues.

(b)Other is primarily comprised of interest income, interest expense and equity in income (loss) of unconsolidated joint ventures. For the year ended

November 30, 2024, Corporate and Other also includes a gain associated with the sale of our ownership interest in a privately held technology company,

as described in Note 11 –Other Assets. The following table summarizes the equity in income (loss) of unconsolidated joint ventures by homebuilding

reporting segment (in thousands):

The following tables present certain balance sheet information relating to our homebuilding reporting segments (in

Note 3. Financial Services

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

(a)Other assets at November 30, 2025 and 2024 included$39.1 million and$38.2 million, respectively, of contract assets for

estimated future renewal commissions.

Note 4. Earnings Per Share

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

In 2025,2024 and 2023, no outstanding stock options were excluded from the diluted earnings per share calculation.

Contingently issuable shares associated with outstanding PSUs were not included in the basic earnings per share calculations

for the periods presented, as the applicable vesting conditions had not been satisfied.

Note 5. Receivables

Receivables consisted of the following (in thousands):

(a)These receivables typically relate to infrastructure improvements we make with respect to our communities. We are

generally reimbursed for the cost of such improvements when they are accepted by the utility company, improvement

district or municipality, or after certain events occur, depending on the terms of the applicable agreements. These events

may include, but are not limited to, the connection of utilities or the issuance of bonds by the respective improvement

districts or municipalities.

Note 6. Inventories

Inventories consisted of the following (in thousands):

Homes completed or under construction is comprised of costs associated with homes completed or in various stages of

construction and includes direct construction and related land acquisition and land development costs. Land under development

primarily consists of land acquisition and land development costs. Land development costs include capitalized interest and real

estate taxes. When home construction begins, the associated land acquisition and land development costs are included in homes

under construction.

Land under development at November 30, 2025 and 2024 included land held for future development of$27.3 million and

$21.2 million, respectively. Land held for future development principally relates to land where development activity has been

suspended or has not yet begun but is expected to occur in the future. These assets are generally located in submarkets where

conditions do not presently support further investment or development, or are subject to a building permit moratorium or

regulatory restrictions, or are portions of larger land parcels that we plan to build out over several years and/or that have not yet

been entitled.

Our interest costs were as follows (in thousands):

(a)Interest amortized to construction and land costs for the years ended November 30, 2025,2024 and 2023 included nominal

amounts related to land sales during the periods.

Note 7. Inventory Impairments and Land Option Contract Abandonments

Each community or land parcel in our owned inventory is assessed to determine if indicators of potential impairment exist.

Impairment indicators are assessed separately for each community or land parcel on a quarterly basis and include, but are not

limited to, the following: significant decreases in net orders, average selling prices, volume of homes delivered, gross profit

margins on homes delivered or projected gross profit margins on homes in backlog or future deliveries; significant increases in

budgeted land development and home construction costs or cancellation rates; or projected losses on expected future land sales.

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

We evaluated 11, eight andfive communities or land parcels for recoverability as of November 30, 2025,2024 and 2023,

respectively. The carrying values of those communities or land parcels evaluated as of November 30, 2025,2024 and 2023

were$154.1 million,$139.5 million and$89.3 million, respectively. In addition, we evaluated land held for future

development for recoverability as of November 30, 2025,2024 and 2023. Inventory impairment charges are included in

construction and land costs in our consolidated statements of operations.

When an indicator of potential impairment is identified for a community or land parcel, we test the asset for recoverability

by comparing the carrying value of the asset to the undiscounted future net cash flows expected to be generated by the asset.

The undiscounted future net cash flows are impacted by then-current conditions and trends in the market in which the asset is

located as well as factors known to us at the time the cash flows are calculated. These factors may include recent trends in our

orders, backlog, cancellation rates and volume of homes delivered, as well as our expectations related to the following: product

offerings; market supply and demand, including estimated average selling prices and related price appreciation; and land

development, home construction and overhead costs to be incurred and related cost inflation. Our inventory is assessed for

potential impairment on a quarterly basis, and the assumptions used are reviewed and adjusted, as necessary, to reflect the

market conditions and trends and our expectations at the time each assessment is performed.

Given the inherent challenges and uncertainties in forecasting future results, our inventory assessments at the time they are

made take into consideration whether a community or land parcel is active, meaning whether it is open for sales and/or

undergoing development, or whether it is being held for future development or held for sale. Due to the short-term nature of

active communities and land held for sale, as compared to land held for future development, our inventory assessments

generally assume the continuation of then-current market conditions, subject to identifying information suggesting significant

sustained changes in such conditions. Our assessments of active communities, at the time made, generally anticipate net orders,

average selling prices, volume of homes delivered and costs for land development and home construction to continue at or near

then-current levels through the particular asset’s estimated remaining life. Inventory assessments for our land held for future

development consider then-current market conditions as well as subjective forecasts regarding the timing and costs of land

development and home construction and related cost inflation; the product(s) to be offered; and the net orders, volume of homes

delivered, and selling prices and related price appreciation of the offered product(s) when an associated community is

anticipated to open for sales. We evaluate various factors to develop these forecasts, including the availability of and demand

for homes and finished lots within the relevant marketplace; historical, current and expected future sales trends for the

marketplace; and third-party data, if available. The estimates, expectations and assumptions used in each of our inventory

assessments are specific to each community or land parcel based on what we believe are reasonable forecasts for their particular

performance, and may vary among communities or land parcels and may vary over time.

We record an inventory impairment charge on a community or land parcel that is active or held for future development

when indicators of potential impairment exist and the carrying value of the real estate asset is greater than the undiscounted

future net cash flows the asset is expected to generate. These real estate assets are written down to fair value, which is primarily

determined based on the estimated future net cash flows discounted for inherent risk associated with each such asset, or other

valuation techniques. Inputs used in our calculation of estimated discounted future net cash flows are specific to each affected

real estate asset and are based on our expectations for each such asset as of the applicable measurement date, including, among

others, expectations related to average selling prices and volume of homes delivered. The discount rates we used were

impacted by one or more of the following at the time the calculation was made: the risk-free rate of return; expected risk

premium based on estimated land development, home construction and delivery timelines; market risk from potential future

price erosion; cost uncertainty due to land development or home construction cost increases; and other risks specific to the asset

or conditions in the market in which the asset is located.

We record an inventory impairment charge on land held for sale when the carrying value of a land parcel is greater than its

fair value. These real estate assets are written down to fair value, less associated costs to sell. 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.

The following table summarizes ranges for significant quantitative unobservable inputs we utilized in our fair value

measurements with respect to impaired communities, other than land held for sale, written down to fair value during the years

presented:

(a)Ranges of inputs presented primarily reflect differences between the housing markets where each impacted community is

located, rather than fluctuations in prevailing market conditions.

Based on the results of our evaluations, we recognized inventory impairment charges of$15.5 million in 2025 related to

four communities with a post-impairment fair value of$38.6 million. We recognizedno inventory impairment charges in 2024

or 2023. The impairment charges in 2025 were principally driven by increased land development costs imposed by a

municipality affecting certain communities, and our decisions to make changes in our operational strategies aimed at more

quickly monetizing our investment in certain communities, mainly by accelerating the overall pace for selling, building and

delivering homes therein. If we change our strategy or if there are changes in market conditions for any given asset, it is

possible that we may recognize additional inventory impairment charges.

As of November 30, 2025, the aggregate carrying value of our inventory that had been impacted by inventory impairment

charges was$38.0 million, representing seven communities and various other land parcels. As of November 30, 2024, the

aggregate carrying value of our inventory that had been impacted by inventory impairment charges was$32.1 million,

representing four communities and various other land parcels.

Our inventory controlled under land option contracts and other similar contracts is assessed to determine whether it

continues to meet our investment return standards. Assessments are made separately for each optioned land parcel on a

quarterly basis and are affected by the following factors relative to the market in which the asset is located, among others:

current and/or anticipated net orders, average selling prices and volume of homes delivered; estimated land development and

home construction costs; and projected profitability on expected future housing or land sales. 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$16.5 million in 2025,

$4.6 million in 2024 and$11.4 million in 2023. Land option contract abandonment charges are included in construction and

land costs in our consolidated statements of operations.

The estimated remaining life of each community or land parcel in our inventory depends on various factors, such as the

total number of lots remaining; the expected timeline to acquire and entitle land and develop lots to build homes; the anticipated

future net order and cancellation rates; and the expected timeline to build and deliver homes sold. While it is difficult to

determine a precise timeframe for any particular inventory asset, based on current market conditions and expected delivery

timelines, we estimate our inventory assets’ remaining operating lives to range generally from one year to 10 years, and expect

to realize, on an overall basis, the majority of our inventory balance as of November 30, 2025 within five years.

Due to the judgment and assumptions applied in our inventory impairment and land option contract abandonment

assessment processes, and in our estimations of the remaining operating lives of our inventory assets and the realization of our

inventory balances, particularly as to land held for future development, it is possible that actual results could differ substantially

from those estimated, especially in periods of volatile housing market or economic conditions.

Note 8. Variable Interest Entities

Unconsolidated Joint Ventures. We participate in joint ventures from time to time that conduct land acquisition, land

development and/or other homebuilding activities in various markets where our homebuilding operations are located. Our

investments in these joint ventures may create a variable interest in a variable interest entity (“VIE”), depending on the

contractual terms of the arrangement. We analyze our joint ventures under the variable interest model to determine whether

they are VIEs and, if so, whether we are the primary beneficiary. Based on our analyses, we determined thatone of our joint

ventures at November 30, 2025 and 2024 was a VIE, but we were not the primary beneficiary of the VIE. Therefore, all of our

joint ventures at November 30, 2025 and 2024 were unconsolidated and accounted for under the equity method because we did

not have a controlling financial interest.

Land Option Contracts and Other Similar Contracts. In the ordinary course of our business, we enter into land option

contracts and other similar contracts with third parties and unconsolidated entities to acquire rights to land for the construction

of homes. The use of these contracts generally allows us to reduce the market risks associated with direct land ownership and

development, and reduce our capital and financial commitments, including interest and other carrying costs. Under these

contracts, which generally do not contain provisions requiring our specific performance, we typically make a specified option

payment or earnest money deposit in consideration for the right to purchase land in the future, usually at a predetermined price.

We analyze each of our land option contracts and other similar contracts under the variable interest model to determine

whether the land seller is a VIE and, if so, whether we are the primary beneficiary. Although we do not have legal title to the

underlying land, we are required to consolidate a VIE if we are the primary beneficiary. In determining whether we are the

primary beneficiary, we consider, among other things, whether we have the power to direct the activities of the VIE that most

significantly impact the VIE’s economic performance. Such activities would include, among other things, determining or

limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing

for the VIE. As a result of our analyses, we determined that as of November 30, 2025 and 2024, 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):

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$62.8 million at

November 30, 2025 and$34.3 million at November 30, 2024. These pre-acquisition costs and cash deposits were included in

inventories in our consolidated balance sheets.

For land option contracts and other similar contracts where the land seller entity is not required to be consolidated under the

variable interest model, we consider whether such contracts should be accounted for as financing arrangements. Land option

contracts and other similar contracts that may be considered financing arrangements include those we enter into with third-party

land financiers or developers in conjunction with such third parties acquiring a specific land parcel(s) on our behalf, at our

direction, and those with other landowners where we or our designee make improvements to the optioned land parcel(s) during

the applicable option period. 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). In making this

determination with respect to a land option contract, we consider the non-refundable deposit(s) we have made and any non-

reimbursable expenditures we have incurred for land improvement activities or other items up to the assessment date; additional

costs associated with abandoning the contract; and our commitments, if any, to incur non-reimbursable costs associated with the

contract. 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$15.4 million at November 30, 2025 and$26.0 million at November 30, 2024.

Note 9. Investments in Unconsolidated Joint Ventures

Homebuilding. We have investments in unconsolidated joint ventures that conduct land acquisition, land development and/

or other homebuilding activities in various markets where our homebuilding operations are located. We and our unconsolidated

joint venture partners make initial and/or ongoing capital contributions to these unconsolidated joint ventures, typically on a pro

rata basis, according to our respective equity interests. The obligations to make capital contributions are governed by each such

unconsolidated joint venture’s respective operating agreement and related governing documents. Our partners in these

unconsolidated joint ventures are unrelated homebuilders, and/or land developers and other real estate entities, or commercial

enterprises. These investments are designed primarily to reduce market and development risks and to increase the number of

lots we own or control. In some instances, participating in unconsolidated joint ventures has enabled us to acquire and develop

land that we might not otherwise have had access to due to a project’s size, financing needs, duration of development or other

circumstances. While we consider our participation in unconsolidated joint ventures as potentially beneficial to our

homebuilding activities, we do not view such participation as essential.

For distributions we receive from these unconsolidated joint ventures, we have elected to use the cumulative earnings

approach for our consolidated statements of cash flows. Under the cumulative earnings approach, distributions up to the

amount of cumulative equity in earnings recognized are treated as returns on investment within operating cash flows and those

in excess of that amount are treated as returns of investment within investing cash flows.

We typically have obtained rights to acquire portions of the land held by the unconsolidated joint ventures in which we

currently participate. When an unconsolidated joint venture sells land to our homebuilding operations, we defer recognition of

our share of such unconsolidated joint venture’s earnings (losses) until we recognize revenues on the corresponding home sale,

which is generally when title to and possession of the home and the risks and rewards of ownership are transferred to the

homebuyer on the closing date. At that time, we account for the earnings (losses) as a reduction (increase) to the cost of

purchasing the land from the unconsolidated joint venture. We defer recognition of our share of such unconsolidated joint

venture losses only to the extent profits are to be generated from the sale of the home to a homebuyer.

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

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

differ from our equity interest in the unconsolidated joint venture. This typically arises from our deferral of the unconsolidated

joint venture’s earnings (losses) from land sales to us, or other items.

We had investments insix unconsolidated joint ventures as of November 30, 2025,2024 and 2023. The following table

presents combined condensed information from the statements of operations for our homebuilding unconsolidated joint

ventures (in thousands):

The combined revenues and construction and land costs for November 30, 2025 and 2024 primarily related to homes

delivered by an unconsolidated joint venture in California. In 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):

(a)As of both November 30, 2025 and 2024, the unconsolidated joint venture in California that delivered homes in 2025 and

2024 had borrowings outstanding under a term loan with a third-party lender to finance its land acquisition, development

and construction activities. In January 2025, the term loan was amended, increasing the aggregate commitment to

$60.0 million from$55.0 million, and providing aneight-month loan extension option, which replacedtwo previoussix-

month extension options. Pursuant to the amendment, the aggregate commitment was reduced to$55.2 million on August

31, 2025, and is to be reduced to$40.0 million on February 28, 2026. This term loan is scheduled to mature on April 19,

2026, unless extended or terminated pursuant to its applicable terms. If the term loan is extended, the aggregate

commitment would be reduced to$28.0 million effective April 19, 2026. Borrowings under the term loan are secured by

the underlying property and related project assets. None of our other unconsolidated joint ventures had outstanding debt at

November 30, 2025 or 2024.

We provide certain guarantees and indemnities to the lender in connection with the above-described revolving line of

credit, including a guaranty of interest and carry costs; a guaranty to complete the construction of phases of the improvements

for the project as such phases are commenced; a guaranty against losses suffered due to certain bad acts or failures to act by the

unconsolidated joint venture or its partners; and an indemnity from environmental issues. Except to the extent related to the

foregoing guarantees and indemnities, we do not have a guaranty or any other obligation to repay borrowings under the line of

credit or to support the value of the underlying collateral. However, various financial and non-financial covenants apply under

the line of credit and with respect to the related guaranty and indemnity obligations, and a failure to comply with such

covenants could result in a default and cause the lender to seek to enforce such guaranty and indemnity obligations. As of the

date of this report, we were in compliance with the relevant covenants. We do not believe that our existing exposure under our

guaranty and indemnity obligations related to outstanding borrowings under the line of credit is material to our consolidated

financial statements.

Financial Services. The following table presents combined condensed information from the statements of operations for

our financial services unconsolidated joint ventures, mostly comprised of KBHS’s activities (in thousands):

Revenues are primarily generated from fees earned on mortgage loan originations, interest earned for the period loans are

held by KBHS, and gains on the sales of mortgage loans held for sale. Gains on the sales of mortgage loans held for sale

include the realized and unrealized gains and losses associated with changes in the fair value of such loans and any related

derivative financial instruments.

The following table presents combined condensed balance sheet information for our financial services unconsolidated joint

venture (in thousands):

(a)Cash and cash equivalents includes restricted cash of$.9 million at November 30, 2025 and$1.3 million at November 30,

Mortgage loans held for sale. Originated mortgage loans expected to be sold into the secondary market in the foreseeable

future are reported as mortgage loans held for sale and carried in KBHS’ balance sheets at fair value, with changes in fair value

recognized within revenues in KBHS’ statements ofoperations.

Interest rate lock commitments. KBHS enters into IRLCs in connection with originating certain mortgage loans held for

sale, at specified interest rates and within a specified period of time, with customers who have applied for a mortgage loan and

meet certain credit and underwriting criteria. KBHS accounts for IRLCs as free-standing derivatives and does not designate

any for hedge accounting. As a result, IRLCs are recognized in KBHS’ balance sheets at fair value, and gains or losses

resulting from changes in fair value are recognized within revenues in KBHS’ statements of operations. The fair value of

IRLCs is based on market prices, which includes an estimate of the fair value of the associated mortgage servicing rights,

adjusted for estimated costs to originate the underlying mortgage loans, as well as the probability that the mortgage loans will

fund within the terms of the IRLCs. The fair value of IRLCs included in other assets in KBHS’ balance sheets was$4.6 million

at November 30, 2025 and$16.0 million at November 30, 2024. The changes in the fair value of IRLCs, which were reported

in revenues for the applicable periods, were losses of$11.4 million for 2025 and$16.0 million for 2023 and a gain of$2.1

million for 2024.

KBHS manages the interest rate and price risk associated with its outstanding IRLCs by entering into best efforts forward

sale commitments under which mortgage loans locked with a borrower are simultaneously committed to a secondary market

investor at a fixed price, subject to the underlying mortgage loans being funded. These best efforts forward sale commitments

do not meet the definition of derivative financial instruments and are therefore not recorded in KBHS’ balance sheets. If the

mortgage loans underlying the IRLCs do not fund, KBHS has no obligation to fulfill the secondary market investor

commitments.

Funding facilities. KBHS maintains warehouse lines of credit and master repurchase agreements with various financial

institutions to fund its originated mortgage loans, with its mortgage loans held for sale pledged as collateral under these

agreements. The agreements contain covenants which include certain financial requirements, including maintenance of

minimum tangible net worth, minimum liquid assets, maximum debt to net worth ratio and positive net income, as defined in

the agreements. KBHS was in compliance with these covenants as of November 30, 2025. In addition to its compliance with

these covenants, KBHS also depends on the ability and willingness of the applicable lenders and financial institutions,

including any substitute or additional lenders and financial institutions, to extend such credit facilities to KBHS to fund its

originated mortgage loans. KBHS intends to renew these facilities when they expire at various dates in 2026. The warehouse

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

Note 10. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Note 11. Other Assets

Other assets consisted of the following (in thousands):

(a)Other includes investments in equity securities without readily determinable fair values, totaling$15.2 million at

November 30, 2025 and 2024. We received these securities in connection with the March 1, 2024 sale of substantially all

the assets of an investee company, in which we had an aggregate ownership interest of approximately 13.5%, to a privately

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

buyer. In connection with the sale, we recognized a gain of$12.5 million, which was included in interest income and other

in our consolidated statements of operations for the year ended November 30, 2024.

Note 12. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

(a)Represents liabilities for financing arrangements discussed in Note 8 –Variable Interest Entities, as well as liabilities for

fixed or determinable amounts associated with TIFE assessments. As homes are delivered, our obligation to pay the

remaining TIFE assessments associated with each underlying lot is transferred to the homebuyer. As such, these

assessment obligations will be paid by us only to the extent we do not deliver homes on applicable lots before the related

TIFE obligations mature.

Note 13. Leases

We lease certain property and equipment for use in our operations. We recognize lease expense for these leases generally

on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Lease right-of-use assets

and lease liabilities are recorded in our consolidated balance sheets for leases with an expected term at the commencement date

of more than 12 months. Some of our leases includeone or more renewal options, the exercise of which is generally at our

discretion. Such options are excluded from the expected term of the lease unless we determine it is reasonably certain the

option will be exercised. Lease liabilities are equal to the present value of the remaining lease payments while the amount of

lease right-of-use assets is based on the lease liabilities, subject to adjustment, such as for lease incentives. Our leases do not

provide a readily determinable implicit interest rate; therefore, we estimate our incremental borrowing rate to calculate the

present value of remaining lease payments. In determining our incremental borrowing rate, we considered the lease term,

market interest rates, current interest rates on our senior notes and the effects of collateralization. Our lease population at

November 30, 2025 was comprised of operating leases where we are the lessee, primarily real estate leases for our corporate

offices, division offices and design studios, as well as certain equipment leases. Our lease agreements do not contain any

residual value guarantees or material restrictive covenants.

Lease expense is included in selling, general and administrative expenses in our consolidated statements of operations and

includes costs for leases with terms of more than 12 months as well as short-term leases with terms of 12 months or less. For

the years ended November 30, 2025,2024 and 2023, our total lease expense was$20.5 million,$20.2 million and

$22.1 million, respectively, and included short-term lease costs of$7.2 million,$7.0 million and$8.6 million, respectively.

Variable lease costs and external sublease income for the years ended November 30, 2025,2024 and 2023 were immaterial.

The following table presents our lease right-of-use assets, lease liabilities and the weighted-average remaining lease term

and weighted-average discount rate (incremental borrowing rate) used in calculating the lease liabilities (dollars in thousands):

(a)Lease right-of-use assets and lease liabilities are predominantly within our homebuilding operations, with only nominal

amounts in our financial services operations.

The following table presents additional information about our leases (in thousands):

As of November 30, 2025, the future minimum lease payments required under our leases are as follows (in thousands):

Note 14. Income Taxes

Income Tax Expense. The components of the income tax expense in our consolidated statements of operations are as

follows (in thousands):

Our effective tax rates were 22.6% for 2025,23.0% for 2024 and 23.5% for 2023.

In 2025, our income tax expense and effective tax rate included the favorable impacts of$13.1 million of Section 45L tax

credits we recognized primarily from building energy-efficient homes and$8.2 million of excess tax benefits related to stock-

based compensation, partly offset by$12.9 million of non-deductible executive compensation expense. In 2024, our income

tax expense and effective tax rate reflected the favorable impacts of$19.3 million of Section 45L tax credits and$7.9 million of

excess tax benefits related to stock-based compensation, partly offset by$10.7 million of non-deductible executive

compensation expense. In 2023, our income tax expense and effective tax rate reflected the favorable impacts of$25.2 million

of Section 45L tax credits and$5.5 million of excess tax benefits related to stock-based compensation, partly offset by

$12.2 million of non-deductible executive compensation expense.

In 2025, Section 45L tax credits decreased year over year, largely reflecting the impact of guidance the IRS issued in 2023

that heightened the Section 45L energy-efficiency qualification standard for homes built in California relative to other states

and our decision to build homes in many of our markets beginning in 2025 that are highly energy efficient and qualify for

ENERGY STAR certification but do not qualify for Section 45L tax credits. We believe the additional costs necessary to

satisfy the higher standards for some of our homes outweigh the possible benefits of meeting those higher standards for both

our business and our buyers.

On July 4, 2025, the OBBBA was signed into law. Among its provisions is the repeal of Section 45L tax credits for new

energy-efficient homes delivered after June 30, 2026. As a result, beginning in our 2026 third quarter, our income tax expense

and effective tax rate will no longer reflect a benefit from such tax credits as to homes delivered after the effective date. The

other tax-related provisions of the OBBBA are not expected to have a material impact on our consolidated financial statements.

Deferred Tax Assets, Net. Deferred income taxes result from temporary differences in the financial and tax basis of assets

and liabilities. Significant components of our deferred tax liabilities and assets are as follows (in thousands):

Reconciliation of Expected Income Tax Expense. The income tax expense computed at the statutory U.S. federal income

tax rate and the income tax expense provided in our consolidated statements of operations differ as follows (dollars in

Deferred Tax Asset Valuation Allowance. We evaluate our deferred tax assets quarterly to determine if adjustments to our

valuation allowance are required based on the consideration of all available positive and negative evidence using a “more likely

than not” standard with respect to whether deferred tax assets will be realized. Our evaluation considers, among other factors,

our historical operating results, our expectation of future profitability, the duration of the applicable statutory carryforward

periods, and conditions in the housing market and the broader economy. In our evaluation, we give more significant weight to

evidence that is objective in nature as compared to subjective evidence. Also, more significant weight is given to evidence that

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

realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periods in

which the related deferred tax assets become deductible. The value of our deferred tax assets depends on applicable income tax

rates.

Our deferred tax assets of$104.2 million at November 30, 2025 and$119.2 million at November 30, 2024 were partially

offset in each year by valuation allowances of$15.5 million and$16.8 million, respectively. The deferred tax asset valuation

allowances at November 30, 2025 and 2024 were primarily related to certain state NOLs that had not met the “more likely than

not” realization standard at those dates. As a result of changes in state income tax rates and our utilization of certain state

NOLs, we reduced the valuation allowance by$1.3 million in 2025. As of November 30, 2025, we would need to generate

approximately$356.0 million of pretax income within certain states in future periods before 2044 to realize our deferred tax

assets. Based on the evaluation of our deferred tax assets as of November 30, 2025 and 2024, we determined that most of our

deferred tax assets would be realized.

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a

valuation allowance with respect to our deferred tax assets. The accounting for deferred tax assets is based upon estimates of

future results. Changes in positive and negative evidence, including differences between estimated and actual results, could

result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated financial

statements. Changes in existing federal and state tax laws and corporate income tax rates could also affect actual tax results and

the realization of deferred tax assets over time.

The majority of the tax benefits associated with our NOLs can be carried forward for 20 years and applied to offset future

taxable income. Depending on their applicable statutory period, the state NOLs of$20.3 million, if not utilized, will begin to

expire between 2026 and 2044. In 2025,$.1 million of state NOLs expired. No state NOLs expired in 2024 or 2023.

Unrecognized Tax Benefits. Gross unrecognized tax benefits are the differences between a tax position taken or expected

to be taken in a tax return, and the benefit recognized for accounting purposes. A reconciliation of the beginning and ending

balances of gross unrecognized tax benefits, including interest and penalties, is as follows (in thousands):

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

recognize accrued interest and penalties related to unrecognized tax benefits in our consolidated financial statements as a

component of the provision for income taxes.

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

time. During the next 12 months, it is possible that the amount of unrecognized tax benefits will change, but we are not able to

provide a range of such change. The potential change, if any, will be related to increases due to new tax positions taken and the

accrual of interest and penalties. Our total accrued interest and penalties related to unrecognized income tax benefits was

approximately$.2 million at November 30, 2025 and 2024. Because of the impact of deferred tax accounting, other than

interest and penalties, the disallowance of the shorter deductibility period would not affect our annual effective tax rate but

would accelerate the payment of cash to a tax authority to an earlier period. As of November 30, 2025, the fiscal years ending

2022 and later remain open to federal examinations, while 2021 and later remain open to state examinations.

The benefits of our deferred tax assets, including our NOLs, built-in losses and tax credits would be reduced or potentially

eliminated if we experienced an “ownership change” under Internal Revenue Code Section 382 (“Section 382”). Based on our

analysis performed as of November 30, 2025, we do not believe that we have experienced an ownership change as defined by

Section 382, and, therefore, the NOLs, built-in losses and tax credits we have generated should not be subject to a Section 382

limitation as of this reporting date.

Note 15. Notes Payable

Notes payable consisted of the following (in thousands):

The carrying amounts of the Term Loan and senior notes listed above are net of debt issuance costs, which totaled$10.1

million at November 30, 2025 and$11.5 million at November 30, 2024.

Unsecured Revolving Credit Facility. On November 12, 2025, we obtained a$1.20 billion Credit Facility, which

refinanced and replaced our prior$1.09 billion unsecured revolving credit facility that was due to mature on February 18, 2027.

The Credit Facility will mature on November 12, 2030 and contains an uncommitted accordion feature under which its

aggregate principal amount of available loans can be increased to a maximum of$1.70 billion under certain conditions,

including obtaining additional bank commitments. The Credit Facility also contains a sublimit of$250.0 million for the

issuance of letters of credit. Interest on amounts borrowed under the Credit Facility accrues at a term SOFR, daily SOFR or a

base rate, plus a spread that depends on our Leverage Ratio, as defined under the Credit Facility. Interest is payable monthly

(base rate or daily SOFR borrowings) or each month or three months (term SOFR borrowings). The Credit Facility also

requires the payment of a commitment fee at a per annum rate ranging from.15% to.35% of the unused commitment, based on

our Leverage Ratio. Under the terms of the Credit Facility, we are required, among other things, to maintain compliance with

various covenants, including financial covenants relating to our consolidated tangible net worth, Leverage Ratio, and either an

Interest Coverage Ratio or a minimum level of liquidity, each as defined therein. Our obligations to pay borrowings under the

Credit Facility are guaranteed on a joint and several basis by our Guarantor Subsidiaries. The amount of the Credit Facility

available for cash borrowings and the issuance of letters of credit depends on the total cash borrowings and letters of credit

outstanding under the Credit Facility and the maximum available amount under the terms of the Credit Facility. As of

November 30, 2025, we hadno cash borrowings and$1.6 million of letters of credit outstanding under the Credit Facility.

Therefore, as of November 30, 2025, we had nearly$1.20 billion available for cash borrowings under the Credit Facility, with

up to$248.4 million of that amount available for the issuance of letters of credit.

Senior Unsecured Term Loan. On November 12, 2025, we also entered into an amendment to our Term Loan with the

lenders party thereto that extended its maturity from August 25, 2026 to November 12, 2029. Interest under the Term Loan

accrues at a term SOFR, daily SOFR or base rate, plus a spread that depends on our Leverage Ratio. Interest is payable

quarterly (base rate borrowing), monthly (daily SOFR loans), or each month or three months (term SOFR borrowing). The

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

under the Term Loan are guaranteed on a joint and several basis by our Guarantor Subsidiaries. As of November 30, 2025 and

2024, the weighted average annual interest rates on our outstanding borrowings under the Term Loan were 5.4% and 6.0%,

respectively.

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

our business. Under the LOC Facility, which expires on February 13, 2028, we may issue up to$100.0 million of letters of

credit. As of November 30, 2025 and 2024, we had letters of credit outstanding under the LOC Facility of$68.2 million and

$73.3 million, respectively.

Senior Notes. All the senior notes outstanding at November 30, 2025 and 2024 represent senior unsecured obligations that

are guaranteed by certain of our subsidiaries and rank equally in right of payment with all of our and our Guarantor

Subsidiaries’ existing unsecured and unsubordinated indebtedness. All of our senior notes were issued in underwritten public

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

The key terms of each of our senior notes outstanding as of November 30, 2025 were as follows (dollars in thousands):

(a)At our option, these notes may be redeemed, in whole at any time or from time to time in part, at a redemption price equal

to the greater of (i)100% of the principal amount of the notes being redeemed and (ii) the sum of the present values of the

remaining scheduled payments of principal and interest on the notes being redeemed (exclusive of interest accrued to the

applicable redemption date), discounted to the redemption date at a defined rate, plus, in each case, accrued and unpaid

interest on the notes being redeemed to, but excluding, the applicable redemption date, except that six months prior to the

stated maturity date for these notes, the redemption price will be equal to 100% of the principal amount of the notes being

redeemed, plus accrued and unpaid interest on the notes being redeemed to, but excluding, the applicable redemption date.

(b)At our option, these notes may be redeemed, in whole at any time or in part from time to time, on or after July 15, 2025, at

the applicable specified redemption price, including accrued and unpaid interest, if any, to, but excluding, the applicable

redemption date. Depending on the redemption date, the applicable redemption price ranges from 100% to 103.625% of

the principal amount of the notes to be redeemed.

If a change in control occurs as defined in the instruments governing our senior notes, we would be required to offer to

purchase all of our outstanding senior notes at 101% of their principal amount, together with all accrued and unpaid interest, if

any.

The indenture governing our senior notes does not contain any financial covenants. Subject to specified exceptions, the

indenture contains certain restrictive covenants that, among other things, limit our ability to incur secured indebtedness, or

engage in sale-leaseback transactions involving property above a certain specified value. In addition, the indenture contains

certain limitations related to mergers, consolidations, and sales of assets.

As of the date of this report, we were in compliance with the applicable terms of all our covenants and other requirements

under the Credit Facility, the Term Loan, the senior notes, the indenture, 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. Our ability to

access the Credit Facility’s full borrowing capacity, as well as the LOC Facility’s full issuance capacity, also depends on the

ability and willingness of the applicable lenders and financial institutions, including any substitute or additional lenders and

financial institutions, to meet their commitments to fund loans, extend credit or provide payment guarantees to or for us under

those instruments. There are no agreements that restrict our payment of dividends other than the Credit Facility and the Term

Loan, which would restrict our payment of certain dividends, such as cash dividends on our common stock, if a default under

the Credit Facility or the Term Loan exists at the time of any such payment, or if any such payment would result in such a

default (other than dividends paid within 60 days after declaration, if there was no default at the time of declaration).

Mortgages and Land Contracts Due to Land Sellers and Other Loans. As of November 30, 2025, inventories having a

carrying value of$16.8 million were pledged to collateralize mortgages and land contracts due to land sellers and other loans.

Shelf Registration. Our 2023 Shelf Registration is filed with the SEC. The 2023 Shelf Registration registers the offering

of securities that we may issue from time to time in amounts to be determined. Our ability to issue securities is subject to

market conditions and, with respect to debt securities, other factors impacting our borrowing capacity. We have not made any

offerings of securities under the 2023 Shelf Registration.

Principal payments on our notes payable are due during each year ending November 30 as follows:2026 —$.8 million;

2027 —$301.0 million;2028 —$.8 million;2029 —$660.4 million;2030 —$350.0 million; and thereafter —$390.0

million.

Note 16. Fair Value Disclosures

Fair value measurements of assets and liabilities are categorized based on the following hierarchy:

Level 1 Fair value determined based on quoted prices in active markets for identical assets or liabilities.

Level 2 Fair value determined using significant observable inputs, such as quoted prices for similar assets or liabilities

or quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than

quoted prices that are observable for the asset or liability, or inputs that are derived principally from or

corroborated by observable market data, by correlation or other means.

Level 3 Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or

similar techniques.

Fair value measurements are used for inventories on a nonrecurring basis when events and circumstances indicate that their

carrying value is not recoverable. These measurements are generally Level 3 within the fair value hierarchy. See Note 7 –

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

(a)Amounts represent the aggregate fair value for real estate assets impacted by inventory impairment charges during the

applicable period, as of the date that the fair value measurements were made. The carrying value for these real estate assets

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

measurement date.

The 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):

(a)The carrying value for the senior notes, as presented, includes unamortized debt issuance costs. Debt issuance costs are not

factored into the estimated fair values of these notes.

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

carrying values reported for cash and cash equivalents, outstanding borrowings under the Credit Facility, if any, and the Term

Loan, and mortgages and land contracts due to land sellers and other loans approximate fair values. The carrying value of

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

Note 17. Commitments and Contingencies

Commitments and contingencies include typical obligations of homebuilders for the completion of contracts and those

incurred in the ordinary course of business.

Warranty. Weprovide a limited warranty on all of our homes. The specific terms and conditions of our limited warranty

program vary depending upon the markets in which we do business. We generally provide a structural warranty of 10 years, a

warranty on electrical, heating, cooling, plumbing and certain other building systems each varying fromtwo tofive years based

on geographic market and state law, and a warranty ofone year for other components of the home. Our limited warranty

program is ordinarily how we respond to and account for homeowners’ requests to local division offices seeking repairs of

certain conditions or defects, including claims where we could have liability under applicable state statutes or tort law for a

defective condition in or damages to a home. Our warranty liability covers our costs of repairs associated with homeowner

claims made under our limited warranty program. These claims are generally made directly by a homeowner and involve their

individual home.

We periodically assess the adequacy of our accrued warranty liability, which is included in accrued expenses and other

liabilities in our consolidated balance sheets, and adjust the amount as necessary based on our assessment. Our assessment

includes the review of our actual warranty costs incurred to identify trends and changes in our warranty claims experience, and

considers our home construction quality and customer service initiatives and outside events. While we believe the warranty

liability currently reflected in our consolidated balance sheets to be adequate, unanticipated changes or developments in the

legal environment, local weather, land or environmental conditions, quality of materials or methods used in the construction of

homes or customer service practices and/or our warranty claims experience could have a significant impact on our actual

warranty costs in future periods and such amounts could differ significantly from our current estimates.

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

Guarantees. In the normal course of our business, we issue certain representations, warranties and guarantees related to

our home sales and land sales. Based on historical experience, we do not believe any potential liability with respect to these

representations, warranties or guarantees would be material to our consolidated financial statements.

Self-Insurance. We maintain, and require the majority of our independent contractors to maintain, general liability

insurance (including construction defect and bodily injury coverage) and workers’ compensation insurance. These insurance

policies protect us against a portion of our risk of loss from claims related to our homebuilding activities, subject to certain self-

insured retentions, deductibles and other coverage limits. We also maintain certain other insurance policies. Costs associated

with our self-insurance programs are included in selling, general and administrative expenses. In Arizona, California, Colorado

and Nevada, our contractors’ general liability insurance primarily takes the form of a wrap-up policy under a program where

eligible independent contractors are enrolled as insureds on each community. Enrolled contractors generally contribute toward

the cost of the insurance and agree to pay a contractual amount in the future if there is a claim related to their work. To the

extent provided under the wrap-up program, we absorb the enrolled contractors’ general liability associated with the work

performed on our homes within the applicable community as part of our overall general liability insurance and our self-

insurance.

We self-insure a portion of our overall risk through the use of a captive insurance subsidiary, which provides coverage for

our exposure to construction defect, bodily injury and property damage claims and related litigation or regulatory actions, up to

certain limits. Our self-insurance liability generally covers the costs of settlements and/or repairs, if any, as well as our costs to

defend and resolve the following types of claims:

•Construction defect: Construction defect claims, which represent the largest component of our self-insurance liability,

typically originate through a legal or regulatory process rather than directly by a homeowner and involve the alleged

occurrence of a condition affectingtwo or more homes within the same community, or they involve a common area or

homeowners’ association property within a community. These claims typically involve higher costs to resolve than

individual homeowner warranty claims, and the rate of claims is highly variable.

•Bodily injury: Bodily injury claims typically involve individuals (other than our employees) who claim they were

injured while on our property or as a result of our operations.

•Property damage: Property damage claims generally involve claims by third parties for alleged damage to real or

personal property as a result of our operations. Such claims may occasionally include those made against us by

owners of property located near our communities.

As of November 30, 2025 and 2024, our self-insurance liability was primarily related to construction defect claims. Our

self-insurance liability at each reporting date represents the estimated costs of reported claims, claims incurred but not yet

reported, and claim adjustment expenses. The amount of our self-insurance liability is based on an analysis performed by a

third-party actuary that uses our historical claim and expense data, as well as industry data to estimate these overall costs. Key

assumptions used in developing these estimates include claim frequencies, severities and resolution patterns, which can occur

over an extended period of time. These estimates are subject to variability due to the length of time between the delivery of a

home to a homebuyer and when a construction defect claim is made, and the ultimate resolution of such claim; uncertainties

regarding such claims relative to our markets and the types of product we build; and legal or regulatory actions and/or

interpretations, among other factors. Due to the degree of judgment involved and the potential for variability in these

underlying assumptions, our actual future costs could differ from those estimated. In addition, changes in the frequency and

severity of reported claims and the estimates to resolve claims can impact the trends and assumptions used in the actuarial

analysis, which could be material to our consolidated financial statements. Though state regulations vary, construction defect

claims are reported and resolved over a long period of time, which can extend for 10 years or more. As a result, the majority of

the estimated self-insurance liability based on the actuarial analysis relates to claims incurred but not yet reported. Therefore,

adjustments related to individual existing claims generally do not significantly impact the overall estimated liability.

Adjustments to our liabilities related to homes delivered in prior years are recorded in the period in which a change in our

estimate occurs.

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

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

recoveries of$22.3 million and$22.6 million are included in receivables in our consolidated balance sheets at November 30,

2025 and 2024, 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 year to year. Because of the

inherent uncertainty and variability in these assumptions, our actual insurance recoveries could differ significantly from

amounts currently estimated.

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

(a)Represents net changes in the portion of our self-insurance liability estimated to be recoverable from our insurers or other

parties, and/or actual recoveries funded directly by our insurers or other parties, if any, and an adjustment to increase our

previously recorded liabilityby$5.5 million in 2024 and$6.5 million in 2023.

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

matter is identified at its outset as either a warranty or self-insurance claim, it remains as such through its resolution. 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.

The payments we make in connection with claims and related repair work may be recovered from our insurers to the extent

such payments exceed the self-insured retentions or deductibles under, and are within the scope of coverage provided by, our

general liability insurance policies. Also, in certain instances, in the course of resolving a claim, we pay amounts in advance of

and/or on behalf of an independent contractor(s) or their insurer(s) and believe we will be reimbursed for such payments.

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

considered probable.

In addition to the risk that is effectively self-insured through our captive insurance subsidiary, we often obtain project-

specific insurance coverage for construction defect risk on attached projects (e.g., condominiums or townhomes) with self-

insured retentions generally ranging from$50,000 to$250,000. We record estimated liabilities and recoveries for projected

losses related to these projects on a gross basis, including for known claims as well as estimates for claims incurred but not yet

reported, to the extent such amounts are considered probable and estimable.

Performance Bonds and Letters of Credit. We are often required to provide to various municipalities and other

government agencies performance bonds and/or letters of credit to secure the completion of our projects and/or in support of

obligations to build community improvements such as roads, sewers, water systems and other utilities, and to support similar

development activities by certain of our unconsolidated joint ventures. At November 30, 2025, we had$1.37 billion of

performance bonds and$69.8 million of letters of credit outstanding. At November 30, 2024, we had$1.33 billion of

performance bonds and$81.6 million of letters of credit outstanding. If any such performance bonds or letters of credit are

called, we would be obligated to reimburse the issuer of the performance bond or letter of credit. We do not believe that a

material amount of any currently outstanding performance bonds or letters of credit will be called. Performance bonds do not

have stated expiration dates. Rather, we are released from the performance bonds as the underlying performance is completed.

The expiration dates of some letters of credit issued in connection with community improvements coincide with the expected

completion dates of the related projects or obligations. Most letters of credit, however, are issued with an initial term ofone

year and are typically extended on a year-to-year basis until the related performance obligations are completed.

Land Option Contracts and Other Similar Contracts. In the ordinary course of business, we enter into land option

contracts and other similar contracts to acquire rights to land for the construction of homes. At November 30, 2025, we had

total cash deposits of$80.9 million to purchase land having an aggregate purchase price of$2.06 billion. Our land option

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

Civil Subpoena. On October 2, 2023, we received a subpoena from the U.S. Department of Justice Civil Division, dated

September 27, 2023, to produce certain documents and testimony with respect to the inspection, rating, marketing and

advertising of our ENERGY STAR homes, including our contracts and/or communications with U.S. EPA 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 matter; or the impact, if any, such outcome

may have on our business or consolidated financial statements. As a result, while a loss or penalty, if any, is reasonably

possible in this matter, it is not considered to be probable or estimable.

Note 18. Legal Matters

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

We believe the accruals we have recorded for probable and reasonably estimable losses with respect to these proceedings are

adequate and that, as of November 30, 2025, 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; (b) the advice and analyses of counsel; and (c) the assumptions and judgment of

management. Similar factors and considerations are used in establishing new accruals for proceedings as to which losses have

become probable and reasonably estimable at the time an evaluation is made. Our accruals for litigation and regulatory

proceedings are presented on a gross basis without consideration of recoveries and amounts we have paid on behalf of and

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

recover from other parties, if any, are recorded as receivables when such recoveries are considered probable. Based on our

experience, we believe the amounts that may be claimed or alleged against us in these proceedings are not a meaningful

indicator of our potential liability. The outcome of any of these proceedings, including the defense and other litigation-related

costs and expenses we may incur, however, is inherently uncertain and could differ significantly from the estimate reflected in a

related accrual, if made. Therefore, it is possible that the ultimate outcome of any proceeding, if in excess of a related accrual

or if an accrual has not been made, could be material to our consolidated financial statements. Pursuant to SEC rules, we will

disclose any proceeding in which a governmental authority is a party and that arises under any federal, state or local provisions

enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the

environment only where we believe that such proceeding will result in monetary sanctions on us, exclusive of interest and costs,

above $1.0 million or is otherwise material to our consolidated financial statements.

Note 19. Stockholders’ Equity

Preferred Stock. Prior to its April 30, 2024 expiration, we had in place a stockholder-approved rights agreement, and each

share of our common stock included a related preferred share purchase right, to help protect the benefits of our NOLs and other

deferred tax assets from an ownership change under Section 382. With the expiration of the rights agreement, which was

initially established in 2009, we de-listed and de-registered the related rights in August 2024. Additionally, per its authority

thereunder, our board of directors fixed October 10, 2024 as the expiration date for Article Ninth of our Restated Certificate of

Incorporation, as amended, which was also put in place in 2009 as a supplemental mechanism to help protect such NOL-related

benefits.

Common Stock. In the 2023 first quarter, we repurchased 1,965,442 shares of our common stock on the open market

pursuant to a 2022 board of directors authorization at a total cost of$75.0 million. On March 21, 2023, our board of directors

authorized us to repurchase up to$500.0 million of our outstanding common stock. This authorization replaced the 2022

authorization. In the 2023 second, third and fourth quarters, we repurchased 7,278,995 shares of our common stock on the open

market pursuant to the 2023 authorization at a total cost of$336.4 million, bringing our total repurchases for the year ended

November 30, 2023 to 9,244,437 shares of common stock at a total cost of$411.4 million. As of November 30, 2023, there

was$163.6 million of remaining availability under this share repurchase authorization.

In the 2024 first quarter, we repurchased 826,663 shares of our common stock on the open market pursuant to the 2023

board of directors authorization at a total cost of$50.0 million. On April 18, 2024, our board of directors authorized us to

repurchase up to$1.00 billion of our outstanding common stock. This authorization replaced the 2023 authorization, which had

$113.6 million remaining. In the 2024 second, third and fourth quarters, we repurchased 3,898,518 shares of our common stock

on the open market pursuant to the 2024 authorization at a total cost of$300.0 million, bringing our total repurchases for the

year ended November 30, 2024 to 4,725,181 shares of common stock at a total cost of$350.0 million. As of November 30,

2024, there was$700.0 million of remaining availability under the 2024 share repurchase authorization.

In the 2025 first, second and third quarters, we repurchased 7,788,113 shares of our common stock on the open market

pursuant to the 2024 board of directors authorization at a total cost of$438.5 million. On October 9, 2025, our board of

directors authorized us to repurchase up to$1.00 billion of our outstanding common stock. This authorization replaced the

2024 authorization, which had$261.5 million remaining. In the 2025 fourth quarter, we repurchased 1,597,196 shares of our

common stock on the open market pursuant to the 2025 authorization at a total cost of$100.0 million, bringing our total

repurchases for the year ended November 30, 2025 to 9,385,309 shares of common stock at a total cost of$538.5 million.

Repurchases under the current authorization may occur periodically through open market purchases, privately negotiated

transactions or otherwise, with the timing and amount at management’s discretion and dependent on market, business and other

conditions. This share repurchase authorization will continue in effect until fully used or earlier terminated or suspended by our

board of directors, and does not obligate us to purchase any shares. As of November 30, 2025, there was$900.0 million of

remaining availability under the 2025 share repurchase authorization.

The IRA imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31,

2022. All dollar amounts presented in this report related to our share repurchases and our share repurchase authorizations

exclude such excise taxes, to the extent applicable, unless otherwise indicated.

In 2025, our board of directors declared four quarterly cash dividends of $.25 per share of common stock. In the 2024 first

quarter, our board of directors declared a quarterly cash dividend of$.20 per share of common stock. 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 second

quarter, and declared quarterly dividends at the new higher rate for the 2024 second, third and fourth quarters. In the 2023 first

and second quarters, our board of directors declared quarterly cash dividends of$.15 per share. Our board of directors

approved a$.05 per share increase in the quarterly cash dividend on our common stock to$.20 per share in the 2023 second

quarter, and declared quarterly dividends at this higher rate for the 2023 third and fourth quarters. All dividends declared

during 2025,2024 and 2023 were also paid during those years. Quarterly cash dividends declared and paid during 2025,2024

and 2023 totaled$1.00 per share,$.95 per share and$.70 per share, respectively.

Treasury Stock. In addition to the shares purchased pursuant to our share repurchase program, we acquired$23.9 million,

$25.0 million and$14.2 million of our common stock in 2025,2024 and 2023, respectively. A portion of the common stock

acquired in 2025,2024 and 2023 consisted of previously issued shares delivered to us by employees to satisfy their withholding

tax obligations on the vesting of PSUs and restricted stock awards or of forfeitures of previous restricted stock awards.

Treasury stock is recorded at cost. Differences between the cost of treasury stock and the reissuance proceeds are recorded to

paid-in capital. These transactions are not considered repurchases under the share repurchase program described above. In

October 2024, we retired 27,557,428 shares of our treasury stock. Upon the retirement of the treasury stock, we deducted the

par value from common stock and reflected the excess of cost over par value as a reduction to retained earnings.

Note 20. Accumulated Other Comprehensive Loss

The following table presents the changes in the balances of each component of accumulated other comprehensive loss (in

(a)Amount is comprised solely of the amortization of net actuarial gain. The accumulated other comprehensive loss

component is included in the computation of net periodic benefit costs as further discussed in Note 22 –Postretirement

Benefits.

There isno estimated prior service cost expected to be amortized from accumulated other comprehensive loss into net

periodic benefit cost during 2026.

Note 21. Employee Benefit and Stock Plans

Most of our employees are eligible to participate in the KB Home 401(k) Savings Plan (“401(k) Plan”) under which we

match employee contributions up to 6% of eligible compensation per payroll period. The aggregate cost of the 401(k) Plan to

us was$9.0 million in 2025,$8.8 million in 2024 and$8.3 million in 2023. The assets of the 401(k) Plan are held by a third-

party trustee, with an affiliate of the trustee managing some fund options offered by the 401(k) Plan. The 401(k) Plan

participants may direct the investment of their funds among one or more of the several fund options offered by the 401(k) Plan.

As of November 30, 2025,2024 and 2023, approximately 4%,6% and 5%, respectively, of the 401(k) Plan’s net assets at each

period were invested in our common stock.

Approval of the Amended and Restated KB Home 2014 Equity Incentive Plan. We maintain one active equity

compensation plan, the Amended and Restated KB Home 2014 Equity Incentive Plan (“Amended and Restated 2014 Plan”),

with an aggregate share grant capacity for stock-based awards to our employees, non-employee directors and consultants of

18,200,000 shares. In addition, if an award made under the Amended and Restated KB Home 2014 Equity Incentive Plan

subsequently expires or is canceled, forfeited or settled for cash, then any shares associated with such award may, to the extent

of such expiration, cancellation, forfeiture or cash settlement, be used again for new grants under the plan, and shares tendered

or withheld to satisfy tax withholding obligations with respect to a full value award may be used again for new grants under the

plan. Under the Amended and Restated 2014 Plan, grants of stock options and other similar awards reduce the share grant

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

on a 1.78-for-1 basis. Any shares that again become available for grant will be added back to the equity incentive plan’s

available grant capacity in the same manner in which they were initially deducted (i.e., 1-for-1 or 1.78-for-1). The Amended

and Restated 2014 Plan provides that stock options may be awarded for periods of up to 10 years, and enables us to grant other

stock-based awards and cash bonuses.

Stock-Based Compensation. With the approval of the management development and compensation committee, consisting

entirely of independent members of our board of directors, we have provided compensation benefits to certain of our employees

in the form of stock options, restricted stock and PSUs. Certain stock-based compensation benefits are also provided to our

non-employee directors pursuant to the Non-Employee Directors Compensation Plan (“Director Plan”). Compensation expense

related to equity-based awards is included in selling, general and administrative expenses in our consolidated statements of

operations. Stock-based compensation expense for 2025 included$16.0 million recognized on an accelerated basis for certain

equity awards granted in October 2025 that included new provisions for accelerated vesting of restricted stock and continued

vesting of PSUs for long-tenured employees upon retirement. The following table presents our stock-based compensation

expense (in thousands):

Stock Options. Stock option transactions are summarized as follows:

There wereno stock options granted in 2025,2024 or 2023. We have not granted any stock option awards since 2016.

The total intrinsic value of stock options exercised was$3.2 million in 2025,$32.7 million in 2024 and$17.4 million in 2023.

The aggregate intrinsic value of both stock options outstanding and stock options exercisable was$16.9 million at

November 30, 2025,$27.8 million at November 30,2024, and$40.6 million at November 30,2023. The intrinsic value of a

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

All of the stock options outstanding and stock options exercisable at November 30, 2025 had an exercise price of$16.21

and a remaining contractual life of.8 years. At November 30, 2025, there wasno unrecognized stock-based compensation

expense related to stock option awards as all these awards were fully vested.

Restricted Stock. From time to time, we grant restricted stock to various employees as a compensation benefit. During the

restriction periods, these employees are entitled to vote and to receive cash dividends on such shares. Except as to recipients of

the restricted stock awards granted in October 2025 who were retirement-eligible on the grant date or who become retirement-

eligible during the standard vesting period, the restrictions imposed with respect to the shares granted lapse in installments

within, or in full at the end of, three years after their grant date if certain conditions are met.

Restricted stock transactions are summarized as follows:

As of November 30, 2025, we had$15.2 million of total unrecognized compensation cost related to restricted stock awards

that will be recognized over a weighted average period of approximately three years.

Performance-Based Restricted Stock Units. On October 9, 2025, we granted PSUs to certain employees. Each PSU grant

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

between 0% and 200% of the recipient’s Award Shares, and will vest based on our achieving, over athree-year period

commencing on December 1, 2025 and ending on November 30, 2028, specified levels of (a) cumulative adjusted earnings per

share; (b) average adjusted return on invested capital; and (c) revenue growth performance relative to a peer group of high-

production public homebuilding companies. The grant date fair value of each such PSU was$57.59. Upon vesting, each PSU

recipient is entitled to receive a proportionate amount of credited cash dividends that are paid in respect of one share of our

common stock with a record date between the grant date and the date the compensation committee of our board of directors

determines the applicable performance achievements, if any. On October 10, 2024, we granted PSUs to certain employees with

generally similar terms as the 2025 PSU grants, except that the applicable performance period commenced on December 1,

2024 and ends on November 30, 2027. The grant date fair value of each such PSU was$79.81. On October 5, 2023, we

granted PSUs to certain employees with generally similar terms as the 2025 PSU grants, except that the applicable performance

period commenced on December 1, 2023 and ends on November 30, 2026. The grant date fair value of each such PSU was

$44.10.

PSU transactions are summarized as follows:

The number of shares of our common stock actually granted to a recipient, if any, upon the vesting of a PSU depends on

the degree of achievement of the applicable performance measures during the designated three-year performance period. The

shares of our common stock that were granted under the terms of PSUs that vested in 2025 included an aggregate of 235,562

shares above the target amount awarded to the eligible recipients based on performance from December 1, 2021 through

November 30, 2024. PSUs that vested in 2024 included an aggregate of 259,818 shares above the target amount based on

performance from December 1, 2020 through November 30, 2023, and PSUs that vested in 2023 included an aggregate of

267,674 shares above the target amount based on our performance from December 1, 2019 through November 30, 2022. PSUs

do not have dividend or voting rights during the performance period. Compensation cost for PSUs is initially estimated based

on target performance achievement and adjusted as appropriate throughout the performance period. Accordingly, future

compensation costs associated with outstanding PSUs may increase or decrease based on the probability and extent of

achievement with respect to the applicable performance measures. At November 30, 2025, total unrecognized compensation

cost related to unvested PSUs was$32.1 million, which is expected to be recognized over a weighted-average period of

approximately three years.

Director Awards. We have granted deferred common stock awards to our non-employee directors pursuant to the terms of

the Director Plan and elections made by each director. At November 30, 2025,2024 and 2023, the aggregate outstanding

deferred common stock awards granted under the Director Plan were 100,840,86,504 and 271,683, respectively. In addition,

we have granted common stock on an unrestricted basis to our non-employee directors on the grant date pursuant to the

Director Plan and elections made by each director.

Grantor Stock Ownership Trust. At November 30, 2023, we had a grantor stock ownership trust (“Trust”), which was

established in 1999 and administered by a third-party trustee, that held and distributed the shares of common stock acquired to

support certain employee compensation and employee benefit obligations under our existing stock option plan, the 401(k) Plan

and other employee benefit plans. For financial reporting purposes, the Trust was consolidated with us, and therefore any

dividend transactions between us and the Trust were eliminated. Acquired shares held by the Trust were valued at the market

price on the date of purchase and shown as a reduction to stockholders’ equity in the consolidated balance sheets. The

difference between the Trust share value and the market value on the date shares were released from the Trust was included in

paid-in capital. Common stock held in the Trust was not considered outstanding in the computations of earnings per share. The

Trust terminated on September 30, 2024. The 6,705,247 shares held by the Trust were transferred to treasury stock.

Note 22. Postretirement Benefits

We have a supplemental non-qualified, unfunded retirement plan, the KB Home Retirement Plan (“Retirement Plan”),

effective as of July 11, 2002, pursuant to which we have offered to pay supplemental pension benefits to certain designated

individuals (consisting of current and former employees) in connection with their retirement. The Retirement Plan was closed

to new participants in 2004. We also have an unfunded death benefit plan, the KB Home Death Benefit Only Plan (“DBO

Plan”), implemented on November 1, 2001, for certain designated individuals (consisting of current and former employees).

The DBO Plan was closed to new participants in 2006.

In connection with these plans andtwo other minor benefit programs, we have purchased cost recovery life insurance

contracts on the lives of the designated individuals. The insurance contracts associated with the Retirement Plan and DBO Plan

are held by a trust. The trust is the owner and beneficiary of such insurance contracts. The amount of the insurance coverage

under the contracts is designed to provide sufficient funds to cover all costs of the plans if assumptions made as to employment

term, mortality experience, policy earnings and other factors, as applicable, are realized. The cash surrender value of the

Retirement Plan life insurance contracts was$29.3 million at November 30, 2025 and$31.4 million at November 30, 2024. We

recognized investment gains on the cash surrender value of the Retirement Plan life insurance contracts of$.3 million in 2025,

$.8 million in 2024 and$.1 million in 2023. In 2025,2024 and 2023, we paid$2.5 million,$2.4 million and$2.3 million,

respectively, in benefits under the Retirement Plan to eligible former employees. The cash surrender value of the DBO Plan life

insurance contracts was$17.7 million at November 30, 2025 and$17.3 million at November 30, 2024. We recognized

investment gains on the cash surrender value of the DBO Plan life insurance contracts of$.4 million in 2025,$.5 million in

2024 and$.1 million in 2023. In 2024, we paid$.3 million in benefits under the DBO Plan. We paidno benefits under the

DBO Plan in 2025 and 2023.

The net periodic benefit cost of our Retirement Plan and DBO Plan is included in selling, general and administrative

expenses in ourconsolidated statements of operations and consisted of the following (in thousands):

The liabilities related to these plans were$61.6 million at November 30, 2025 and$60.8 million at November 30, 2024,

and are included in accrued expenses and other liabilities in the consolidated balance sheets. For the years ended November 30,

2025 and 2024, the discount rates we used for the plans were approximately 4.8% and 4.9%, respectively.

Benefit payments under our Retirement Plan and DBO Plan are expected to be paid during each year ending November 30

as follows:2026 —$3.7 million;2027 —$4.2 million;2028 —$4.8 million;2029 —$5.0 million;2030 —$5.1 million; and

for the five years ended November 30, 2035 —$23.0 million in the aggregate.

Note 23. Supplemental Disclosure to Consolidated Statements of Cash Flows

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