##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the quarterly period ended May 31, 2010.
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
 For the transition period from [] to [].
 Commission File No. 001-09195
 KB HOME
  Delaware
    
    95-3666267(State of incorporation)
    
    (IRS employer identification number)
 
  þ o
  o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o (Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ




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##### 



KB HOME
FORM 10-Q
INDEX
 PageNumberPART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Operations 
Six Months and Three Months Ended May 31, 2010 and 2009
    
    
    3Consolidated Balance Sheets 
May 31, 2010 and November 30, 2009
    
    
    4Consolidated Statements of Cash Flows 
Six Months Ended May 31, 2010 and 2009
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    31Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    52Item 4. Controls and Procedures
    
    
    52PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    53Item 1A. Risk Factors
    
    
    53Item 6. Exhibits
    
    
    54SIGNATURES
    
    
    55INDEX OF EXHIBITS
    
    
    56Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 KB HOME
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Total revenues
    
    $
    638,030
    
    
    $
    691,831
    
    
    $
    374,052
    
    
    $
    384,470Homebuilding:Revenues
    
    $
    635,025
    
    
    $
    688,666
    
    
    $
    372,514
    
    
    $
    382,925Construction and land costs
    
    
    (533,383
    )
    
    
    (667,768
    )
    
    
    (306,843
    )
    
    
    (376,810
    )Selling, general and administrative expenses
    
    
    (155,193
    )
    
    
    (133,769
    )
    
    
    (82,990
    )
    
    
    (72,594
    )Operating loss
    
    
    (53,551
    )
    
    
    (112,871
    )
    
    
    (17,319
    )
    
    
    (66,479
    )Interest income
    
    
    1,025
    
    
    
    5,279
    
    
    
    601
    
    
    
    1,766Interest expense, net of amounts capitalized
    
    
    (35,925
    )
    
    
    (20,123
    )
    
    
    (16,518
    )
    
    
    (11,471
    )Equity in loss of unconsolidated joint ventures
    
    
    (2,732
    )
    
    
    (21,496
    )
    
    
    (1,548
    )
    
    
    (11,754
    )Homebuilding pretax loss
    
    
    (91,183
    )
    
    
    (149,211
    )
    
    
    (34,784
    )
    
    
    (87,938
    )Financial services:Revenues
    
    
    3,005
    
    
    
    3,165
    
    
    
    1,538
    
    
    
    1,545Expenses
    
    
    (1,885
    )
    
    
    (1,654
    )
    
    
    (992
    )
    
    
    (794
    )Equity in income of unconsolidated joint
venture
    
    
    4,950
    
    
    
    4,545
    
    
    
    3,629
    
    
    
    3,604Financial services pretax income
    
    
    6,070
    
    
    
    6,056
    
    
    
    4,175
    
    
    
    4,355Total pretax loss
    
    
    (85,113
    )
    
    
    (143,155
    )
    
    
    (30,609
    )
    
    
    (83,583
    )Income tax benefit (expense)
    
    
    (300
    )
    
    
    6,700
    
    
    
    (100
    )
    
    
    5,200Net loss
    
    $
    (85,413
    )
    
    $
    (136,455
    )
    
    $
    (30,709
    )
    
    $
    (78,383
    )Basic and diluted loss per share
    
    $
    (1.11
    )
    
    $
    (1.78
    )
    
    $
    (.40
    )
    
    $
    (1.03
    )Basic and diluted average shares outstanding
    
    
    76,844
    
    
    
    76,822
    
    
    
    76,854
    
    
    
    76,281Cash dividends declared per common share
    
    $
    .1250
    
    
    $
    .1250
    
    
    $
    .0625
    
    
    $
    .0625
   3




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##### Table of Contents



KB HOME
 
 CONSOLIDATED BALANCE SHEETS
  May 31,
    
    
    November 30,2010
    
    
    2009AssetsHomebuilding:Cash and cash equivalents
    
    $
    985,756
    
    
    $
    1,174,715Restricted cash
    
    
    107,757
    
    
    
    114,292Receivables
    
    
    137,033
    
    
    
    337,930Inventories
    
    
    1,686,289
    
    
    
    1,501,394Investments in unconsolidated joint ventures
    
    
    103,605
    
    
    
    119,668Other assets
    
    
    151,433
    
    
    
    154,5663,171,873
    
    
    
    3,402,565Financial services
    
    
    30,364
    
    
    
    33,424Total assets
    
    $
    3,202,237
    
    
    $
    3,435,989Liabilities and stockholders equityHomebuilding:Accounts payable
    
    $
    321,585
    
    
    $
    340,977Accrued expenses and other liabilities
    
    
    503,231
    
    
    
    560,368Mortgages and notes payable
    
    
    1,755,366
    
    
    
    1,820,3702,580,182
    
    
    
    2,721,715Financial services
    
    
    6,874
    
    
    
    7,050Common stock
    
    
    115,143
    
    
    
    115,120Paid-in capital
    
    
    863,829
    
    
    
    860,772Retained earnings
    
    
    711,423
    
    
    
    806,443Accumulated other comprehensive loss
    
    
    (22,244
    )
    
    
    (22,244
    )Grantor stock ownership trust, at cost
    
    
    (121,427
    )
    
    
    (122,017
    )Treasury stock, at cost
    
    
    (931,543
    )
    
    
    (930,850
    )Total stockholders equity
    
    
    615,181
    
    
    
    707,224Total liabilities and stockholders equity
    
    $
    3,202,237
    
    
    $
    3,435,989
   4




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KB HOME
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six Months Ended May 31,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (85,413
    )
    
    $
    (136,455
    )Adjustments to reconcile net loss to net cash provided (used) by
operating activities:Equity in (income) loss of unconsolidated joint ventures
    
    
    (2,218
    )
    
    
    16,951Distributions of earnings from unconsolidated joint ventures
    
    
    7,500
    
    
    
    7,662Amortization of discounts and issuance costs
    
    
    1,065
    
    
    
    682Depreciation and amortization
    
    
    1,780
    
    
    
    2,920Loss on voluntary termination of revolving credit facility
    
    
    1,802
    
    
    
    Tax benefits from stock-based compensation
    
    
    1,599
    
    
    
    4,093Stock-based compensation expense
    
    
    4,029
    
    
    
    1,489Inventory impairments and land option contract abandonments
    
    
    13,362
    
    
    
    66,980Change in assets and liabilities:Receivables
    
    
    183,417
    
    
    
    213,978Inventories
    
    
    (155,214
    )
    
    
    120,738Accounts payable, accrued expenses and other liabilities
    
    
    (81,609
    )
    
    
    (209,651
    )Other, net
    
    
    (2,704
    )
    
    
    (5,865
    )Net cash provided (used) by operating activities
    
    
    (112,604
    )
    
    
    83,522Cash flows from investing activities:Investments in unconsolidated joint ventures, net
    
    
    (1,756
    )
    
    
    7,310Purchases of property and equipment, net
    
    
    (454
    )
    
    
    (914
    )Net cash provided (used) by investing activities
    
    
    (2,210
    )
    
    
    6,396Cash flows from financing activities:Change in restricted cash
    
    
    6,535
    
    
    
    13,244Repayment of senior subordinated notes
    
    
    
    
    
    
    (200,000
    )Payments on mortgages, land contracts and other loans
    
    
    (71,828
    )
    
    
    (36,718
    )Issuance of common stock under employee stock plans
    
    
    897
    
    
    
    1,691Excess tax benefit associated with exercise of stock options
    
    
    583
    
    
    
    Payments of cash dividends
    
    
    (9,607
    )
    
    
    (9,524
    )Repurchases of common stock
    
    
    (350
    )
    
    
    (616
    )Net cash used by financing activities
    
    
    (73,770
    )
    
    
    (231,923
    )Net decrease in cash and cash equivalents
    
    
    (188,584
    )
    
    
    (142,005
    )Cash and cash equivalents at beginning of period
    
    
    1,177,961
    
    
    
    1,141,518Cash and cash equivalents at end of period
    
    $
    989,377
    
    
    $
    999,513
   5




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##### Table of Contents



KB HOME
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    
    Basis of Presentation and Significant Accounting Policies
   Use of Estimates
  Cash and Cash Equivalents and Restricted Cash
   Loss per share
  Comprehensive loss
   6




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##### Table of Contents



KB HOME
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    
    Basis of Presentation and Significant Accounting Policies (continued)
  Reclassifications
  2.
    
    Stock-Based Compensation
  Stock Options
  WeightedAverage ExerciseOptions
    
    
    PriceOptions outstanding at beginning of period
    
    
    5,711,701
    
    
    $
    27.39Granted
    
    
    122,956
    
    
    
    14.96Exercised
    
    
    (23,000
    )
    
    
    13.95Cancelled
    
    
    (156,733
    )
    
    
    18.72Options outstanding at end of period
    
    
    5,654,924
    
    
    
    27.41Options exercisable at end of period
    
    
    4,107,445
    
    
    
    31.25
   7




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##### Table of Contents



KB HOME
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2.
    
    Stock-Based Compensation (continued)
 Other Stock-Based Awards
  Approval of the KB Home 2010 Equity Incentive Plan
  3.
    
    Segment Information
  
     8




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##### Table of Contents



KB HOME
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3.
    
    Segment Information (continued)
   Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:West Coast
    
    $
    272,089
    
    
    $
    290,178
    
    
    $
    163,655
    
    
    $
    181,658Southwest
    
    
    93,450
    
    
    
    96,446
    
    
    
    59,602
    
    
    
    44,173Central
    
    
    174,751
    
    
    
    160,755
    
    
    
    91,826
    
    
    
    83,110Southeast
    
    
    94,735
    
    
    
    141,287
    
    
    
    57,431
    
    
    
    73,984Total homebuilding revenues
    
    
    635,025
    
    
    
    688,666
    
    
    
    372,514
    
    
    
    382,925Financial services
    
    
    3,005
    
    
    
    3,165
    
    
    
    1,538
    
    
    
    1,545Total revenues
    
    $
    638,030
    
    
    $
    691,831
    
    
    $
    374,052
    
    
    $
    384,470Pretax income (loss):West Coast
    
    $
    16,056
    
    
    $
    (52,421
    )
    
    $
    12,699
    
    
    $
    (40,100
    )Southwest
    
    
    (9,997
    )
    
    
    (25,946
    )
    
    
    (5,534
    )
    
    
    (5,208
    )Central
    
    
    (9,107
    )
    
    
    (10,513
    )
    
    
    (1,803
    )
    
    
    (4,356
    )Southeast
    
    
    (31,261
    )
    
    
    (29,641
    )
    
    
    (11,075
    )
    
    
    (15,816
    )Corporate and other (a)
    
    
    (56,874
    )
    
    
    (30,690
    )
    
    
    (29,071
    )
    
    
    (22,458
    )Total homebuilding pretax loss
    
    
    (91,183
    )
    
    
    (149,211
    )
    
    
    (34,784
    )
    
    
    (87,938
    )Financial services
    
    
    6,070
    
    
    
    6,056
    
    
    
    4,175
    
    
    
    4,355Total pretax loss
    
    $
    (85,113
    )
    
    $
    (143,155
    )
    
    $
    (30,609
    )
    
    $
    (83,583
    )Equity in income (loss) of
unconsolidated joint ventures:West Coast
    
    $
    647
    
    
    $
    (8,040
    )
    
    $
    547
    
    
    $
    (8,235
    )Southwest
    
    
    (4,280
    )
    
    
    (9,942
    )
    
    
    (2,105
    )
    
    
    (2,255
    )Central
    
    
    
    
    
    
    506
    
    
    
    
    
    
    
    485Southeast
    
    
    901
    
    
    
    (4,020
    )
    
    
    10
    
    
    
    (1,749
    )Total
    
    $
    (2,732
    )
    
    $
    (21,496
    )
    
    $
    (1,548
    )
    
    $
    (11,754
    )Inventory impairments:West Coast
    
    $
    1,196
    
    
    $
    8,403
    
    
    $
    
    
    
    $
    1,412Southwest
    
    
    962
    
    
    
    13,267
    
    
    
    
    
    
    
    1,340Central
    
    
    
    
    
    
    1,617
    
    
    
    
    
    
    
    1,617Southeast
    
    
    4,677
    
    
    
    6,860
    
    
    
    
    
    
    
    1,391Total
    
    $
    6,835
    
    
    $
    30,147
    
    
    $
    
    
    
    $
    5,760
 (a)
    
    Corporate and other includes corporate general and administrative expenses.  9




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KB HOME
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3.
    
    Segment Information (continued)
 Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Land option contract abandonments:West Coast
    
    $
    
    
    
    $
    27,679
    
    
    $
    
    
    
    $
    27,396Southwest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Central
    
    
    6,340
    
    
    
    
    
    
    
    
    
    
    
    Southeast
    
    
    187
    
    
    
    9,154
    
    
    
    
    
    
    
    9,154Total
    
    $
    6,527
    
    
    $
    36,833
    
    
    $
    
    
    
    $
    36,550Joint venture impairments:West Coast
    
    $
    
    
    
    $
    7,190
    
    
    $
    
    
    
    $
    7,190Southwest
    
    
    
    
    
    
    5,426
    
    
    
    
    
    
    
    Central
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Southeast
    
    
    
    
    
    
    2,186
    
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    14,802
    
    
    $
    
    
    
    $
    7,190
 May 31,
    
    
    November 30,2010
    
    
    2009Assets:West Coast
    
    $
    914,314
    
    
    $
    838,510Southwest
    
    
    376,333
    
    
    
    346,035Central
    
    
    358,099
    
    
    
    357,688Southeast
    
    
    425,395
    
    
    
    361,551Corporate and other
    
    
    1,097,732
    
    
    
    1,498,781Total homebuilding assets
    
    
    3,171,873
    
    
    
    3,402,565Financial services
    
    
    30,364
    
    
    
    33,424Total assets
    
    $
    3,202,237
    
    
    $
    3,435,989Investments in unconsolidated joint ventures:West Coast
    
    $
    40,559
    
    
    $
    54,795Southwest
    
    
    54,880
    
    
    
    56,779Central
    
    
    
    
    
    
    Southeast
    
    
    8,166
    
    
    
    8,094Total
    
    $
    103,605
    
    
    $
    119,668
  10




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##### Table of Contents



KB HOME
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  4.
    
    Financial Services
  Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009RevenuesInterest income
    
    $
    2
    
    
    $
    28
    
    
    $
    1
    
    
    $
    11Title services
    
    
    386
    
    
    
    448
    
    
    
    230
    
    
    
    261Insurance commissions
    
    
    2,617
    
    
    
    2,689
    
    
    
    1,307
    
    
    
    1,273Total
    
    
    3,005
    
    
    
    3,165
    
    
    
    1,538
    
    
    
    1,545ExpensesGeneral and administrative
    
    
    (1,885
    )
    
    
    (1,654
    )
    
    
    (992
    )
    
    
    (794
    )Operating income
    
    
    1,120
    
    
    
    1,511
    
    
    
    546
    
    
    
    751Equity in income of unconsolidated
joint venture
    
    
    4,950
    
    
    
    4,545
    
    
    
    3,629
    
    
    
    3,604Pretax income
    
    $
    6,070
    
    
    $
    6,056
    
    
    $
    4,175
    
    
    $
    4,355
 May 31,
    
    
    November 30,2010
    
    
    2009AssetsCash and cash equivalents
    
    $
    3,621
    
    
    $
    3,246Receivables
    
    
    523
    
    
    
    1,395Investment in unconsolidated joint venture
    
    
    26,198
    
    
    
    28,748Other assets
    
    
    22
    
    
    
    35Total assets
    
    $
    30,364
    
    
    $
    33,424LiabilitiesAccounts payable and accrued expenses
    
    $
    6,874
    
    
    $
    7,050Total liabilities
    
    $
    6,874
    
    
    $
    7,050
 5.
    
    Inventories
  May 31,
    
    
    November 30,2010
    
    
    2009Homes, lots and improvements in production
    
    $
    1,259,614
    
    
    $
    1,091,851Land under development
    
    
    426,675
    
    
    
    409,543Total
    
    $
    1,686,289
    
    
    $
    1,501,394
  11




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##### Table of Contents



KB HOME
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  5.
    
    Inventories (continued)
  Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Capitalized interest at beginning of
period
    
    $
    291,279
    
    
    $
    361,619
    
    
    $
    290,451
    
    
    $
    365,333Capitalized interest related to
consolidation of previously
unconsolidated joint ventures
    
    
    9,914
    
    
    
    
    
    
    
    
    
    
    
    Interest incurred (a)
    
    
    61,906
    
    
    
    57,277
    
    
    
    29,855
    
    
    
    28,019Interest expensed (a)
    
    
    (35,925
    )
    
    
    (20,123
    )
    
    
    (16,518
    )
    
    
    (11,471
    )Interest amortized
    
    
    (51,769
    )
    
    
    (43,372
    )
    
    
    (28,383
    )
    
    
    (26,480
    )Capitalized interest at end of period (b)
    
    $
    275,405
    
    
    $
    355,401
    
    
    $
    275,405
    
    
    $
    355,401
 (a)
    
    Amounts for the three months and six months ended May 31, 2010 include $.4 million of
debt issuance costs written off in connection with the Companys voluntary termination of
the Credit Facility during the second quarter of 2010. Amounts for the six months ended
May 31, 2010 also include $1.4 million of debt issuance costs written off in connection
with the Companys voluntary reduction of the aggregate commitment under the Credit
Facility from $650.0 million to $200.0 million during the first quarter of 2010.(b)
    
    Inventory impairment charges are recognized against all inventory costs of a community,
such as land, land improvements, costs of home construction and capitalized interest.
Capitalized interest amounts presented in the table reflect the gross amount of capitalized
interest as impairment charges recognized are not generally allocated to specific
components of inventory. 6.
    
    Inventory Impairments and Land Option Contract Abandonments
    12




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##### Table of Contents



KB HOME
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  6.
    
    Inventory Impairments and Land Option Contract Abandonments (continued)
      7.
    
    Fair Value Disclosures
  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.
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KB HOME
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  7.
    
    Fair Value Disclosures (continued)
  Fair Value Measurements UsingQuoted
    
    
    SignificantPrices in
    
    
    Other
    
    
    SignificantSix Months
    
    
    Active
    
    
    Observable
    
    
    UnobservableEnded
    
    
    Markets
    
    
    Inputs
    
    
    InputsDescription
    
    May 31, 2010 (a)
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Total LossesLong-lived assets
held and used
    
    $
    3,907
    
    
    $
    
    
    
    $
    
    
    
    $
    3,907
    
    
    $
    (6,835
    )
 (a)
    
    Amount represents the aggregate fair values for communities where the Company recognized
noncash inventory impairment charges during the period, as of the date that the fair value
measurements were made. The carrying value for these communities may have subsequently
increased or decreased from the fair value reflected due to activity that has occurred since
the measurement date.    May 31, 2010
    
    
    November 30, 2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair ValueFinancial Liabilities:Senior notes due 2011 at 6 3/8%
    
    $
    99,857
    
    
    $
    102,000
    
    
    $
    99,800
    
    
    $
    100,250Senior notes due 2014 at 5 3/4%
    
    
    249,428
    
    
    
    235,000
    
    
    
    249,358
    
    
    
    234,375Senior notes due 2015 at 5 7/8%
    
    
    298,970
    
    
    
    274,500
    
    
    
    298,875
    
    
    
    276,000Senior notes due 2015 at 6 1/4%
    
    
    449,721
    
    
    
    412,875
    
    
    
    449,698
    
    
    
    419,063Senior notes due 2017 at 9.1%
    
    
    260,112
    
    
    
    267,650
    
    
    
    259,884
    
    
    
    276,263Senior notes due 2018 at 7 1/4%
    
    
    298,839
    
    
    
    270,000
    
    
    
    298,787
    
    
    
    281,250
    14




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KB HOME
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  8.
    
    Variable Interest Entities
       15




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KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8.
    
    Variable Interest Entities (continued)
 the purchase price of land not yet purchased and the Companys cash deposits. The Companys cash
deposits related to these land option and other contracts totaled $4.1 million at November 30,
2009. Creditors, if any, of these VIEs had no recourse against the Company.
 As of May 31, 2010, the Company had cash deposits totaling $1.5 million associated with land
option and other contracts that the Company determined to be unconsolidated VIEs, having an
aggregate purchase price of $32.9 million, and had cash deposits totaling $18.2 million
associated with land option and other contracts that the Company determined were not VIEs, having
an aggregate purchase price of $324.9 million.
 The Companys exposure to loss related to its land option and other contracts with third parties
and unconsolidated entities consisted of its non-refundable deposits, which totaled $19.7 million
at May 31, 2010 and $9.6 million at November 30, 2009. In addition, the Company had outstanding
letters of credit of $5.7 million at May 31, 2010 and $8.7 million at November 30, 2009 in lieu
of cash deposits under certain land option contracts.
 The Company also evaluates its land option contracts in accordance with Accounting Standards
Codification Topic No. 470, Debt (ASC 470), and, as a result of its evaluations, increased
inventories, with a corresponding increase to accrued expenses and other liabilities, on its
consolidated balance sheets by $21.6 million at May 31, 2010 and $36.1 million at November 30,
2009.
 9.
    
    Investments in Unconsolidated Joint Ventures
 The Company participates in unconsolidated joint ventures that conduct land acquisition,
development and/or other homebuilding activities in various markets, typically where the
Companys homebuilding operations are located. The Companys partners in these unconsolidated
joint ventures are unrelated homebuilders, land developers and other real estate entities, or
commercial enterprises. Through these unconsolidated joint ventures, the Company seeks to reduce
and share market and development risks and to reduce its investment in land inventory, while
potentially increasing the number of homesites it controls or will own. In some instances,
participating in unconsolidated joint ventures enables the Company to acquire and develop land
that it might not otherwise have access to due to a projects size, financing needs, duration of
development or other circumstances. While the Company views its participation in unconsolidated
joint ventures as beneficial to its homebuilding activities, it does not view such participation
as essential.
 The Company and/or its unconsolidated joint venture partners typically obtain options or enter
into other arrangements to have the right to purchase portions of the land held by the
unconsolidated joint ventures. The prices for these land options or other arrangements are
generally negotiated prices that approximate fair value. When an unconsolidated joint venture
sells land to the Companys homebuilding operations, the Company defers recognition of its share
of such unconsolidated joint venture earnings until a home sale is closed and title passes to a
homebuyer, at which time the Company accounts for those earnings as a reduction of the cost of
purchasing the land from the unconsolidated joint venture.
 The Company and its unconsolidated joint venture partners make initial or ongoing capital
contributions to these unconsolidated joint ventures, typically on a pro rata basis. The
obligations to make capital contributions are governed by each unconsolidated joint ventures
respective operating agreement and related documents.
 Each unconsolidated joint venture is obligated to maintain financial statements in accordance
with GAAP. The Company shares in profits and losses of these unconsolidated joint ventures
generally in accordance with its respective equity interests. In some instances, the
Company recognizes profits and losses that differ from its pro rata share of profits and losses
recognized by an unconsolidated joint venture. Such differences may arise from impairments
recognized by the Company related to its investment in an unconsolidated joint venture which
differ from the recognition of impairments by the unconsolidated joint venture, differences
between the Companys basis in assets transferred to an unconsolidated joint venture and the
unconsolidated joint ventures basis in those assets, the deferral of unconsolidated joint
venture profits from land sales to the Company, or other items.
  16




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KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    Investments in Unconsolidated Joint Ventures (continued)
 The following table presents information from the combined condensed statements of operations of
the Companys unconsolidated joint ventures (in thousands):
 Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    100,079
    
    
    $
    34,207
    
    
    $
    14,277
    
    
    $
    22,731Construction and land costs
    
    
    (100,735
    )
    
    
    (50,371
    )
    
    
    (12,215
    )
    
    
    (31,870
    )Other expenses, net
    
    
    (8,837
    )
    
    
    (23,259
    )
    
    
    (8,515
    )
    
    
    (17,124
    )Loss
    
    $
    (9,493
    )
    
    $
    (39,423
    )
    
    $
    (6,453
    )
    
    $
    (26,263
    )
 With respect to the Companys investment in unconsolidated joint ventures, its equity in loss of
unconsolidated joint ventures for the three months and six months ended May 31, 2009 included
pretax, noncash impairment charges of $7.2 million and $14.8 million, respectively. There were
no such charges for the three months or six months ended May 31, 2010.
 The following table presents combined condensed information from the balance sheets of the
Companys unconsolidated joint ventures (in thousands):
 May 31,
    
    
    November 30,2010
    
    
    2009AssetsCash
    
    $
    17,499
    
    
    $
    12,816Receivables
    
    
    147,077
    
    
    
    142,639Inventories
    
    
    580,035
    
    
    
    709,130Other assets
    
    
    52,213
    
    
    
    56,939Total assets
    
    $
    796,824
    
    
    $
    921,524Liabilities and equityAccounts payable and other liabilities
    
    $
    61,486
    
    
    $
    94,533Mortgages and notes payable
    
    
    380,290
    
    
    
    514,172Equity
    
    
    355,048
    
    
    
    312,819Total liabilities and equity
    
    $
    796,824
    
    
    $
    921,524
 The following table presents information relating to the Companys investments in unconsolidated
joint ventures and the aggregate outstanding debt of its unconsolidated joint ventures as of the
dates specified, categorized by the nature of the Companys potential responsibility under a
guaranty, if any, for such debt (dollars in thousands):
 May 31,
    
    
    November 30,2010
    
    
    2009Number of investments in unconsolidated joint
ventures:With limited recourse debt (a)
    
    
    2
    
    
    
    2With non-recourse debt (b)
    
    
    
    
    
    
    2Other (c)
    
    
    8
    
    
    
    9Total
    
    
    10
    
    
    
    13
  17




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KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    Investments in Unconsolidated Joint Ventures (continued)
 May 31,
    
    
    November 30,2010
    
    
    2009Investments in unconsolidated joint ventures:With limited recourse debt
    
    $
    2,524
    
    
    $
    1,277With non-recourse debt
    
    
    
    
    
    
    9,983Other
    
    
    101,081
    
    
    
    108,408Total
    
    $
    103,605
    
    
    $
    119,668Outstanding debt of unconsolidated
joint ventures:With limited recourse debt
    
    $
    7,908
    
    
    $
    11,198With non-recourse debt
    
    
    
    
    
    
    130,025Other
    
    
    372,382
    
    
    
    372,949Total (d)
    
    $
    380,290
    
    
    $
    514,172
 (a)
    
    This category consists of unconsolidated joint ventures as to which the Company has
entered into a loan-to-value maintenance guaranty with respect to a portion of each such
unconsolidated joint ventures outstanding secured debt.(b)
    
    This category consists of unconsolidated joint ventures as to which the Company does not
have a guaranty or any other obligation to repay or to support the value of the collateral
(which collateral includes any letters of credit) underlying such unconsolidated joint
ventures respective outstanding secured debt.(c)
    
    This category consists of unconsolidated joint ventures with no outstanding debt and an
unconsolidated joint venture as to which the Company has entered into a several guaranty.
This guaranty, by its terms, purports to require the Company to guarantee the repayment of a
portion of the unconsolidated joint ventures outstanding debt in the event an involuntary
bankruptcy proceeding is filed against the unconsolidated joint venture that is not
dismissed within 60 days or for which an order approving relief under bankruptcy law is
entered, even if the unconsolidated joint venture or its partners do not collude in the
filing and the unconsolidated joint venture contests the filing, as further described below.In most cases, the Company may have also entered into a completion guaranty and/or a
carve-out guaranty with the lenders for the unconsolidated joint ventures identified in
categories (a) through (c) as further described below.(d)
    
    The Total amounts represent the aggregate outstanding debt of the unconsolidated
joint ventures in which the Company participates. These amounts do not represent the
Companys potential responsibility for such debt, if any. In most cases, the Companys
maximum potential responsibility for any portion of such debt, if any, is limited to either
a specified maximum amount or an amount equal to its pro rata interest in the relevant
unconsolidated joint venture, as further described below. The unconsolidated joint ventures finance land and inventory investments through a variety of
arrangements. To finance their respective land acquisition and development activities, certain of
the Companys unconsolidated joint ventures have obtained loans from third-party lenders that are
secured by the underlying property and related project assets. The Companys unconsolidated joint
ventures had aggregate outstanding debt, substantially all of which was secured, of approximately
$380.3 million at May 31, 2010 and $514.2 million at November 30, 2009. Various financial and
non-financial covenants apply to the outstanding debt of the unconsolidated joint ventures, and a
failure to comply with any applicable debt covenants could result in a default and cause lenders
to seek to enforce guarantees, if applicable, as described below.
 In certain instances, the Company and/or its partner(s) in an unconsolidated joint venture
provide guarantees and indemnities to the unconsolidated joint ventures lenders that may
include one or more of the following: (a) a completion guaranty; (b) a loan-to-value
maintenance guaranty; and/or (c) a carve-out guaranty. A completion
  18




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KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    Investments in Unconsolidated Joint Ventures (continued)
 guaranty refers to the actual physical completion of improvements for a project and/or the
obligation to contribute equity to an unconsolidated joint venture to enable it to fund its
completion obligations. A loan-to-value maintenance guaranty refers to the payment of funds to
maintain the applicable loan balance at or below a specific percentage of the value of an
unconsolidated joint ventures secured collateral (generally land and improvements). A carve-out
guaranty refers to the payment of (i) losses a lender suffers due to certain bad acts or
omissions by an unconsolidated joint venture or its partners, such as fraud or misappropriation,
or due to environmental liabilities arising with respect to the relevant project, or
(ii) outstanding principal and interest and certain other amounts owed to lenders upon the filing
by an unconsolidated joint venture of a voluntary bankruptcy petition or the filing of an
involuntary bankruptcy petition by creditors of the unconsolidated joint venture in which an
unconsolidated joint venture or its partners collude or which the unconsolidated joint venture
fails to contest.
 The Companys maximum potential responsibility under these guarantees and indemnities is limited
to either a specified maximum dollar amount or an amount equal to its pro rata interest in the
relevant unconsolidated joint venture.
 The Companys potential responsibility under its completion guarantees, if triggered, is highly
dependent on the facts of a particular case. In any event, the Company believes its actual
responsibility under these guarantees is limited to the amount, if any, by which an
unconsolidated joint ventures outstanding borrowings exceed the value of its assets, but may be
substantially less than this amount.
 At May 31, 2010, the Companys potential responsibility under its loan-to-value maintenance
guarantees relating to approximately $7.9 million of outstanding debt held by two unconsolidated
joint ventures totaled approximately $3.8 million, if any liability were determined to be due
thereunder. This amount represents the Companys maximum responsibility under such loan-to-value
maintenance guarantees assuming the underlying collateral has no value and without regard to
defenses that could be available to the Company against any attempted enforcement of such
guarantees.
 Notwithstanding the Companys potential unconsolidated joint venture guaranty and indemnity
responsibilities and the resolutions it has reached in certain instances with unconsolidated
joint venture lenders with respect to those potential responsibilities, at this time the Company
does not believe, except as described below, that its existing exposure under its outstanding
completion, loan-to-value and carve-out guarantees and indemnities related to unconsolidated
joint venture debt is material to the Companys consolidated financial position or results of
operations.
 In addition to the above-described guarantees and indemnities, the Company has also provided a
several guaranty to the lenders of one of the Companys unconsolidated joint ventures. By its
terms, the guaranty purports to guarantee the repayment of principal and interest and certain
other amounts owed to the unconsolidated joint ventures lenders when an involuntary bankruptcy
proceeding is filed against the unconsolidated joint venture that is not dismissed within 60 days
or for which an order approving relief under bankruptcy law is entered, even if the
unconsolidated joint venture or its partners do not collude in the filing and the unconsolidated
joint venture contests the filing. The Companys potential responsibility under this several
guaranty fluctuates with the unconsolidated joint ventures debt and with the Companys and its
partners respective land purchases from the unconsolidated joint venture. At May 31, 2010, this
unconsolidated joint venture had total outstanding indebtedness of approximately $372.4 million
and, if this guaranty were then enforced, the Companys maximum potential responsibility under
the guaranty would have been approximately $182.7 million in principal amount, which amount does
not account for any offsets or defenses that could be available to the Company.
 The lenders for two of the Companys unconsolidated joint ventures have filed lawsuits against
some of the unconsolidated joint ventures members, and certain of those members parent
companies, seeking to recover damages under completion guarantees, among other claims. The
Company and the other parent companies, together with the members, are defending the lawsuits
in which they have been named and are currently exploring resolutions with the lenders. In a
separate proceeding, the members (including the Company) of one of these unconsolidated joint
ventures participated in an arbitration regarding their respective performance
  19




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KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    Investments in Unconsolidated Joint Ventures (continued)
 obligations in order to address one members claims for specific performance and, in the
alternative, damages. On July 6, 2010, a decision was issued in this arbitration proceeding. In
its decision, the arbitration panel denied the specific performance claims and awarded damages in
an amount well below the amount claimed. The Companys potential proportional responsibility for
the damages awarded is not considered to be material to the Companys consolidated financial
position or results of operations. The litigation commenced by the lenders remains ongoing, and
there is no assurance that the parties involved will reach satisfactory resolutions. Further, if
satisfactory resolutions are not reached, there is no assurance as to whether the ultimate
outcome of any of the litigation would not be material to the Companys consolidated financial
position or results of operations.
 10.
    
    Mortgages and Notes Payable
 Mortgages and notes payable consisted of the following (in thousands):
 May 31,
    
    
    November 30,2010
    
    
    2009Mortgages and land contracts due to land sellers and other loans
    
    $
    98,439
    
    
    $
    163,968Senior notes due 2011 at 6 3/8%
    
    
    99,857
    
    
    
    99,800Senior notes due 2014 at 5 3/4%
    
    
    249,428
    
    
    
    249,358Senior notes due 2015 at 5 7/8%
    
    
    298,970
    
    
    
    298,875Senior notes due 2015 at 6 1/4%
    
    
    449,721
    
    
    
    449,698Senior notes due 2017 at 9.1%
    
    
    260,112
    
    
    
    259,884Senior notes due 2018 at 7 1/4%
    
    
    298,839
    
    
    
    298,787Total
    
    $
    1,755,366
    
    
    $
    1,820,370
 At November 30, 2009, the Company had a Credit Facility with a syndicate of lenders that was
scheduled to mature in November 2010. To reduce costs associated with maintaining the Credit
Facility, effective December 28, 2009, the Company voluntarily reduced the aggregate commitment
under the Credit Facility from $650.0 million to $200.0 million and effective March 31, 2010, the
Company voluntarily terminated the Credit Facility.
 With the Credit Facilitys termination, the Company proceeded to enter into the LOC Facilities
with various banks to obtain letters of credit in the ordinary course of its business. As of May
31, 2010, $81.9 million of letters of credit were outstanding under the LOC Facilities. The LOC
Facilities require the Company to deposit and maintain cash with the banks as collateral for its
letters of credit outstanding. As of May 31, 2010, the amount of cash maintained for the LOC
Facilities totaled $82.7 million, and was included in restricted cash on the Companys
consolidated balance sheet as of that date. The Company may in the future enter into similar
facilities with other financial institutions.
 The termination of the Credit Facility also released and discharged six of the Companys
subsidiaries from guaranteeing any obligations with respect to the Companys senior notes (the
Released Subsidiaries). Each of the Released Subsidiaries is not a significant subsidiary,
as defined under Rule 1-02(w) of Regulation S-X, and does not guarantee any other indebtedness of
the Company. Each Released Subsidiary may be required to again provide a guarantee with respect
to the Companys senior notes if it becomes a significant subsidiary. Three of the Companys
subsidiaries (the Guarantor Subsidiaries) continue to provide a guarantee with respect to the
Companys senior notes.
 In the second quarter of 2010, the Company voluntarily replaced letters of credit it previously
posted as collateral for certain mortgages and notes payable with cash collateral deposited in an
account. As of May 31, 2010, this required cash collateral, which relates to a multi-level
residential building the Company is operating as a rental property, totaled $25.1 million and was
included in restricted cash on the Companys consolidated balance sheet as of that date.
  20




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KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    Mortgages and Notes Payable (continued)
 The indenture governing the Companys senior notes does not contain any financial maintenance
covenants. Subject to specified exceptions, the senior notes indenture contains certain
restrictive covenants that, among other things, limit the Companys ability to incur secured
indebtedness; or engage in sale-leaseback transactions involving property or assets above a
certain specified value. The terms governing the Companys senior notes due 2017 contain certain
limitations related to mergers, consolidations, and sales of assets.
 As of May 31, 2010, the Company was in compliance with the applicable terms of all of its
covenants under the Companys senior notes, senior notes indenture, and mortgages and land
contracts due to land sellers and other loans. The Companys ability to secure future debt
financing may depend in part on its ability to remain in such compliance.
 11.
    
    Commitments and Contingencies
 The Company provides a limited warranty on all of its homes. The specific terms and conditions
of warranties vary depending upon the market in which the Company does business. The Company
generally provides a structural warranty of 10 years, a warranty on electrical, heating, cooling,
plumbing and other building systems each varying from two to five years based on geographic
market and state law, and a warranty of one year for other components of a home. The Company
estimates the costs that may be incurred under each limited warranty and records a liability in
the amount of such costs at the time the revenue associated with the sale of each home is
recognized. Factors that affect the Companys warranty liability include the number of homes
delivered, historical and anticipated rates of warranty claims, and cost per claim. The
Companys primary assumption in estimating the amounts it accrues for warranty costs is that
historical claims experience is a strong indicator of future claims experience. The Company
periodically assesses the adequacy of its recorded warranty liabilities, which are included in
accrued expenses and other liabilities in the consolidated balance sheets, and adjusts the
amounts as necessary based on its assessment.
 The changes in the Companys warranty liability are as follows (in thousands):
  Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Balance at beginning of period
    
    $
    135,749
    
    
    $
    145,369
    
    
    $
    130,549
    
    
    $
    142,224Warranties issued
    
    
    2,650
    
    
    
    4,226
    
    
    
    1,458
    
    
    
    2,233Payments and adjustments
    
    
    (20,646
    )
    
    
    (11,905
    )
    
    
    (14,254
    )
    
    
    (6,767
    )Balance at end of period
    
    $
    117,753
    
    
    $
    137,690
    
    
    $
    117,753
    
    
    $
    137,690
 The Companys warranty liability of $117.8 million at May 31, 2010 includes $17.7 million
associated with the remaining repair of approximately 317 homes primarily delivered in 2006 and
2007 and located in Florida and Louisiana that were identified as containing or suspected of
containing allegedly defective drywall manufactured in China. The Company believes that its
overall warranty liability at May 31, 2010 is sufficient with respect to its general limited
warranty obligations and the estimated costs remaining to repair the identified homes impacted by
the allegedly defective drywall. The Company is continuing to review whether there are any
additional homes delivered in Florida, Louisiana or other locations that contain or may contain
this drywall material and depending on the outcome of its review and its actual claims
experience, the Company may need to increase its warranty liability in future periods. The
amount accrued to repair these homes is based largely on the Companys estimates of future costs.
If the actual costs to repair these homes differ from the estimated costs, the Company may revise
its warranty estimate for this issue.
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KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    Commitments and Contingencies (continued)
 The Company has been named as a defendant in seven lawsuits relating to this drywall material,
and it may in the future be subject to other similar litigation or claims that could cause the
Company to incur significant costs. Given the preliminary stages of the proceedings, the Company
has not concluded whether the outcome of any of these lawsuits, if unfavorable, is likely to be
material to its consolidated financial position or results of operations.
 The Company will seek reimbursement from various sources for the costs it expects to incur to
investigate and complete repairs and to defend itself in litigation associated with this drywall
material. At this early stage of its efforts to investigate and complete repairs and to respond
to litigation, however, the Company has not recorded any amounts for potential recoveries as of
May 31, 2010.
 In the normal course of its business, the Company issues certain representations, warranties and
guarantees related to its home sales and land sales that may be affected by Accounting Standards
Codification Topic No. 460, Guarantees. Based on historical evidence, the Company does not
believe any of these representations, warranties or guarantees would result in a material effect
on its consolidated financial position or results of operations.
 The Company has, and requires the majority of its subcontractors to have, general liability
insurance (including construction defect coverage) and workers compensation insurance. These
insurance policies protect the Company against a portion of its risk of loss from claims related
to its homebuilding activities, subject to certain self-insured retentions, deductibles and other
coverage limits. In Arizona, California, Colorado and Nevada, the Companys general liability
insurance takes the form of a wrap-up policy, where eligible subcontractors are enrolled as
insureds on each project. The Company self-insures a portion of its overall risk through the use
of a captive insurance subsidiary. The Company records expenses and liabilities based on the
costs required to cover its self-insured retention and deductible amounts under its insurance
policies, and on the estimated costs of potential claims and claim adjustment expenses above its
coverage limits or that are not covered by its policies. These estimated costs are based on an
analysis of the Companys historical claims and include an estimate of construction defect claims
incurred but not yet reported. The Companys estimated liabilities for such items were $98.3
million at May 31, 2010 and $107.0 million at November 30, 2009. These amounts are included in
accrued expenses and other liabilities in the Companys consolidated balance sheets. The
Companys expenses associated with self-insurance totaled $1.8 million for the three months ended
May 31, 2010 and $1.4 million for the three months ended May 31, 2009. The Companys expenses
associated with self-insurance totaled $3.6 million for the six months ended May 31, 2010 and
$3.5 million for the six months ended May 31, 2009.
 The Company is often required to obtain performance bonds and letters of credit in support of its
obligations to various municipalities and other government agencies in connection with community
improvements such as roads, sewers and water, and to certain unconsolidated joint ventures. At
May 31, 2010, the Company had $479.9 million of performance bonds and $81.9 million of letters of
credit outstanding. In the event any such performance bonds or letters of credit were called, the
Company would be obligated to reimburse the issuer of the performance bond or letter of credit.
The Company does 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, the Company is released from the performance bonds as the underlying performance is
completed. The expiration dates of letters of credit issued in connection with community
improvements and certain unconsolidated joint ventures coincide with the expected completion
dates of the related projects or obligations. If the obligations related to a project are
ongoing, the relevant letters of credit are typically extended on a year-to-year basis.
 In the ordinary course of its business, the Company enters into land option contracts (or similar
agreements) to procure land for the construction of homes. At May 31, 2010, the Company had total
deposits of $25.4 million, comprised of cash deposits of $19.7 million and letters of credit of
$5.7 million, to purchase land having an aggregate purchase price of $357.8 million. The
Companys land option contracts generally do not contain provisions requiring the Companys
specific performance.
  22




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KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12.
    
    Legal Matters
 ERISA Litigation
 On March 16, 2007, plaintiffs Reba Bagley and Scott Silver filed an action brought under Section
502 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132, Bagley et al., v.
KB Home, et al., in the United States District Court for the Central District of California. The
action was brought against the Company, its directors, certain of its current and former
officers, and the board of directors committee that oversees the KB Home 401(k) Savings Plan
(401(k) Plan). After the court allowed leave to file an amended complaint, plaintiffs filed an
amended complaint adding Tolan Beck and Rod Hughes as additional plaintiffs and dismissing
certain individuals as defendants. All four plaintiffs claim to be former employees of KB Home
who participated in the 401(k) Plan. Plaintiffs allege on behalf of themselves and on behalf of
all others similarly situated that all defendants breached fiduciary duties owed to plaintiffs
and purported class members under ERISA by failing to disclose information to and providing
misleading information to participants in the 401(k) Plan about the Companys alleged prior stock
option backdating practices and by failing to remove the Companys stock as an investment option
under the 401(k) Plan. Plaintiffs allege that this breach of fiduciary duties caused plaintiffs
to earn less on their 401(k) Plan accounts than they would have earned but for defendants
alleged breach of duties.
 The parties to the litigation executed a settlement agreement on February 26, 2010 and an amended
settlement agreement on April 5, 2010. On April 12, 2010, the court preliminarily approved the
amended settlement and the conditional certification of the settlement class described in the
amended settlement. The preliminarily approved settlement is not material to the consolidated
financial position or results of operations of the Company. The court set the fairness hearing
on the proposed settlement for July 26, 2010.Other Matters
 On October 2, 2009, the staff of the SEC notified the Company that a formal order of
investigation had been issued regarding possible accounting and disclosure issues. Although the
SEC has not indicated, and the Company cannot be certain as to, the scope of the SECs
investigation, the information requests from the SEC received to date relate to the Companys
impairments, including both inventory and joint ventures. The Company is cooperating with the
staff of the SEC in connection with the investigation. The Company cannot predict the outcome of,
or the timeframe for, the conclusion of this matter.
 In addition to those described in this report, the Company is involved in litigation and
government proceedings incidental to its business. These proceedings are in various procedural
stages and, based on reports of counsel, the Company believes as of the date of this report that
provisions or accruals made for any potential losses (to the extent estimable) are adequate and
that any liabilities or costs arising out of these proceedings are not likely to have a
materially adverse effect on its consolidated financial position or results of operations. The
outcome of any of these proceedings, however, is inherently uncertain, and if unfavorable
outcomes were to occur, there is a possibility that they would, individually or in the aggregate,
have a materially adverse effect on the Companys consolidated financial position or results of
operations.
 13.
    
    Stockholders Equity
 As of May 31, 2010, the Company was authorized to repurchase four million shares of its common
stock under a board-approved share repurchase program. The Company did not repurchase any shares
of its common stock under this program in the six months ended May 31, 2010. The Company has not
repurchased common shares pursuant to a common stock repurchase plan for the past several years
and any resumption of such stock repurchases will be at the discretion of the Companys board of
directors. The Company acquired $.4 million of common stock in the six months ended May 31,
2010, which were previously issued shares delivered to the Company by employees to satisfy
withholding taxes on the vesting of restricted stock awards. These transactions are not
considered repurchases under the share repurchase program.
 During the quarter ended February 28, 2010, the Companys board of directors declared a cash
dividend of
  23




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##### Table of Contents



KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13.
    
    Stockholders Equity (continued)
 $.0625 per share of common stock, which was paid on February 18, 2010 to stockholders of record
on February 4, 2010. During the quarter ended May 31, 2010, the Companys board of directors
declared a cash dividend of $.0625 per share of common stock, which was paid on May 20, 2010 to
stockholders of record on May 6, 2010.
 14.
    
    Recent Accounting Pronouncements
 In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures
About Fair Value Measurements (ASU 2010-06), which provides amendments to Accounting Standards
Codification Subtopic No. 820-10, Fair Value Measurements and Disclosures  Overall. ASU
2010-06 requires additional disclosures and clarifications of existing disclosures for recurring
and nonrecurring fair value measurements. The revised guidance is effective for interim and
annual reporting periods beginning after December 15, 2009. ASU 2010-06 concerns disclosure only
and did not have an impact on the Companys financial position or results of operations.
 15.
    
    Income Taxes
 The Companys income tax expense totaled $.1 million for the three months ended May 31, 2010,
compared to an income tax benefit of $5.2 million for the three months ended May 31, 2009. The
Companys effective income tax expense rate was .3% in the second quarter of 2010, compared to an
effective income tax benefit rate of 6.2% for the second quarter of 2009. For the six months
ended May 31, 2010, the Companys income tax expense totaled $.3 million compared to an income
tax benefit of $6.7 million for the six months ended May 31, 2009. The Companys effective
income tax expense rate was .4% in the six months ended May 31, 2010, compared to an effective
income tax benefit rate of 4.7% for the year-earlier period. The year-over-year difference in the
Companys 2010 second quarter effective tax rate was primarily due to the recognition of a
$4.6 million federal and state income tax receivable in the second quarter of 2009 based on the
status of federal audits and amended state filings. For the six months ended May 31, 2010, the
difference in the effective tax rate compared to the year-earlier period resulted primarily from
the recognition of the $4.6 million receivable and the reversal of a $1.8 million liability for
unrecognized federal and state tax benefits during the 2009 period.
 In accordance with Accounting Standards Codification Topic No. 740, Income Taxes (ASC 740),
the Company evaluates its deferred tax assets quarterly to determine if valuation allowances are
required. ASC 740 requires that companies assess whether valuation allowances should be
established based on the consideration of all available evidence using a more likely than not
standard. During the three months ended May 31, 2010, the Company recorded a valuation allowance
of $12.8 million against the net deferred tax assets generated from the loss for the period.
During the three months ended May 31, 2009, the Company recorded a similar valuation allowance of
$31.7 million against net deferred tax assets. For the six months ended May 31, 2010 and 2009,
the Company recorded valuation allowances of $34.0 million and $54.4 million, respectively,
against the net deferred tax assets generated from the losses for those periods.
 The Companys net deferred tax assets totaled $1.1 million at both May 31, 2010 and November 30,
2009. The deferred tax asset valuation allowance increased to $784.0 million at May 31, 2010 from
$750.0 million at November 30, 2009. This increase reflected the net impact of the $34.0 million
valuation allowance recorded during the first six months of 2010.
 During the three months ended May 31, 2010, the Company had $.1 million of additions and $.4
million of reductions to its total gross unrecognized tax benefits as a result of the current
status of federal and state audits. During the six months ended May 31, 2010, additions and
reductions to the Companys total gross unrecognized tax benefits were $.3 million and $.7
million, respectively. The total amount of gross unrecognized tax benefits, including interest
and penalties, was $9.0 million as of May 31, 2010. The Company anticipates that total
unrecognized tax benefits will decrease by an amount ranging from $3.0 million to $4.0 million
during the twelve months from this reporting date due to various state filings associated with
the resolution of the federal audit.
  24




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##### Table of Contents



KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15.
    
    Income Taxes (continued)
 The benefits of the Companys net operating losses, built-in losses and tax credits would be
reduced or potentially eliminated if the Company experienced an ownership change under Internal
Revenue Code Section 382 (Section 382). Based on the Companys analysis performed as of May 31,
2010, the Company does not believe it has experienced an ownership change as defined by
Section 382, and, therefore, the net operating losses, built-in losses and tax credits the
Company has generated should not be subject to a Section 382 limitation as of this reporting
date.
 16.
    
    Supplemental Disclosure to Consolidated Statements of Cash Flows
 The following are supplemental disclosures to the consolidated statements of cash flows (in
thousands):
 Six Months Ended May 31,2010
    
    
    2009Summary of cash and cash equivalents at the end of the period:Homebuilding
    
    $
    985,756
    
    
    $
    997,357Financial services
    
    
    3,621
    
    
    
    2,156Total
    
    $
    989,377
    
    
    $
    999,513Supplemental disclosures of cash flow information:Interest paid, net of amounts capitalized
    
    $
    40,493
    
    
    $
    27,653Income taxes paid
    
    
    292
    
    
    
    5,171Income taxes refunded
    
    
    191,342
    
    
    
    235,620Supplemental disclosures of noncash activities:Increase in inventories in connection with consolidation
of joint ventures
    
    $
    72,300
    
    
    $
    Increase in accounts payable, accrued expenses and other
liabilities in connection with consolidation of joint
ventures
    
    
    38,861
    
    
    
    Cost of inventories acquired through seller financing
    
    
    6,299
    
    
    
    6,494Decrease in consolidated inventories not owned
    
    
    (35,556
    )
    
    
    (31,529
    )
 17.
    
    Supplemental Guarantor Information The Companys obligation to pay principal, premium, if any, and interest under its senior notes
are guaranteed on a joint and several basis by the Guarantor Subsidiaries. The guarantees are
full and unconditional and the Guarantor Subsidiaries are 100% owned by the Company. The Company
has determined that separate, full financial statements of the Guarantor Subsidiaries would not
be material to investors and, accordingly, supplemental financial information for the Guarantor
Subsidiaries is presented.
 In connection with the Companys voluntary termination of the Credit Facility effective
March 31, 2010, the Released Subsidiaries were released and discharged from guaranteeing any
obligations with respect to the Companys senior notes. Accordingly, the supplemental financial
information presented below reflects the relevant subsidiaries that were Guarantor Subsidiaries
as of the respective periods then ended.
  25




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##### Table of Contents



KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17.
    
    Supplemental Guarantor Information (continued)
 
 KB Home
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingCorporate
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    182,893
    
    
    $
    455,137
    
    
    $
    
    
    
    $
    638,030Homebuilding:Revenues
    
    $
    
    
    
    $
    182,893
    
    
    $
    452,132
    
    
    $
    
    
    
    $
    635,025Construction and land costs
    
    
    
    
    
    
    (156,652
    )
    
    
    (376,731
    )
    
    
    
    
    
    
    (533,383
    )Selling, general and administrative expenses
    
    
    (47,029
    )
    
    
    (28,209
    )
    
    
    (79,955
    )
    
    
    
    
    
    
    (155,193
    )Operating loss
    
    
    (47,029
    )
    
    
    (1,968
    )
    
    
    (4,554
    )
    
    
    
    
    
    
    (53,551
    )Interest income
    
    
    865
    
    
    
    6
    
    
    
    154
    
    
    
    
    
    
    
    1,025Interest expense, net of amounts capitalized
    
    
    4,183
    
    
    
    (17,957
    )
    
    
    (22,151
    )
    
    
    
    
    
    
    (35,925
    )Equity in loss of unconsolidated joint
ventures
    
    
    
    
    
    
    (79
    )
    
    
    (2,653
    )
    
    
    
    
    
    
    (2,732
    )Homebuilding pretax loss
    
    
    (41,981
    )
    
    
    (19,998
    )
    
    
    (29,204
    )
    
    
    
    
    
    
    (91,183
    )Financial services pretax income
    
    
    
    
    
    
    
    
    
    
    6,070
    
    
    
    
    
    
    
    6,070Total pretax loss
    
    
    (41,981
    )
    
    
    (19,998
    )
    
    
    (23,134
    )
    
    
    
    
    
    
    (85,113
    )Income tax expense
    
    
    (100
    )
    
    
    (100
    )
    
    
    (100
    )
    
    
    
    
    
    
    (300
    )Equity in net loss of subsidiaries
    
    
    (43,332
    )
    
    
    
    
    
    
    
    
    
    
    43,332
    
    
    
    Net loss
    
    $
    (85,413
    )
    
    $
    (20,098
    )
    
    $
    (23,234
    )
    
    $
    43,332
    
    
    $
    (85,413
    )
  KB Home
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingCorporate
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    601,682
    
    
    $
    90,149
    
    
    $
    
    
    
    $
    691,831Homebuilding:Revenues
    
    $
    
    
    
    $
    601,682
    
    
    $
    86,984
    
    
    $
    
    
    
    $
    688,666Construction and land costs
    
    
    
    
    
    
    (583,815
    )
    
    
    (83,953
    )
    
    
    
    
    
    
    (667,768
    )Selling, general and administrative expenses
    
    
    (27,049
    )
    
    
    (84,857
    )
    
    
    (21,863
    )
    
    
    
    
    
    
    (133,769
    )Operating loss
    
    
    (27,049
    )
    
    
    (66,990
    )
    
    
    (18,832
    )
    
    
    
    
    
    
    (112,871
    )Interest income
    
    
    4,346
    
    
    
    417
    
    
    
    516
    
    
    
    
    
    
    
    5,279Interest expense, net of amounts capitalized
    
    
    20,699
    
    
    
    (39,195
    )
    
    
    (1,627
    )
    
    
    
    
    
    
    (20,123
    )Equity in loss of unconsolidated joint ventures
    
    
    
    
    
    
    (17,481
    )
    
    
    (4,015
    )
    
    
    
    
    
    
    (21,496
    )Homebuilding pretax loss
    
    
    (2,004
    )
    
    
    (123,249
    )
    
    
    (23,958
    )
    
    
    
    
    
    
    (149,211
    )Financial services pretax income
    
    
    
    
    
    
    
    
    
    
    6,056
    
    
    
    
    
    
    
    6,056Total pretax loss
    
    
    (2,004
    )
    
    
    (123,249
    )
    
    
    (17,902
    )
    
    
    
    
    
    
    (143,155
    )Income tax benefit
    
    
    100
    
    
    
    5,800
    
    
    
    800
    
    
    
    
    
    
    
    6,700Equity in net loss of subsidiaries
    
    
    (134,551
    )
    
    
    
    
    
    
    
    
    
    
    134,551
    
    
    
    Net loss
    
    $
    (136,455
    )
    
    $
    (117,449
    )
    
    $
    (17,102
    )
    
    $
    134,551
    
    
    $
    (136,455
    )
  26




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##### Table of Contents



KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17.
    
    Supplemental Guarantor Information (continued)
   KB Home
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingCorporate
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    113,497
    
    
    $
    260,555
    
    
    $
    
    
    
    $
    374,052Homebuilding:Revenues
    
    $
    
    
    
    $
    113,497
    
    
    $
    259,017
    
    
    $
    
    
    
    $
    372,514Construction and land costs
    
    
    
    
    
    
    (95,690
    )
    
    
    (211,153
    )
    
    
    
    
    
    
    (306,843
    )Selling, general and administrative expenses
    
    
    (23,891
    )
    
    
    (14,425
    )
    
    
    (44,674
    )
    
    
    
    
    
    
    (82,990
    )Operating income (loss)
    
    
    (23,891
    )
    
    
    3,382
    
    
    
    3,190
    
    
    
    
    
    
    
    (17,319
    )Interest income
    
    
    506
    
    
    
    6
    
    
    
    89
    
    
    
    
    
    
    
    601Interest expense, net of amounts capitalized
    
    
    6,022
    
    
    
    (10,224
    )
    
    
    (12,316
    )
    
    
    
    
    
    
    (16,518
    )Equity in loss of unconsolidated joint
ventures
    
    
    
    
    
    
    (35
    )
    
    
    (1,513
    )
    
    
    
    
    
    
    (1,548
    )Homebuilding pretax loss
    
    
    (17,363
    )
    
    
    (6,871
    )
    
    
    (10,550
    )
    
    
    
    
    
    
    (34,784
    )Financial services pretax income
    
    
    
    
    
    
    
    
    
    
    4,175
    
    
    
    
    
    
    
    4,175Total pretax loss
    
    
    (17,363
    )
    
    
    (6,871
    )
    
    
    (6,375
    )
    
    
    
    
    
    
    (30,609
    )Income tax expense
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100
    )Equity in net loss of subsidiaries
    
    
    (13,246
    )
    
    
    
    
    
    
    
    
    
    
    13,246
    
    
    
    Net loss
    
    $
    (30,709
    )
    
    $
    (6,871
    )
    
    $
    (6,375
    )
    
    $
    13,246
    
    
    $
    (30,709
    )
  KB Home
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingCorporate
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    341,461
    
    
    $
    43,009
    
    
    $
    
    
    
    $
    384,470Homebuilding:Revenues
    
    $
    
    
    
    $
    341,461
    
    
    $
    41,464
    
    
    $
    
    
    
    $
    382,925Construction and land costs
    
    
    
    
    
    
    (338,102
    )
    
    
    (38,708
    )
    
    
    
    
    
    
    (376,810
    )Selling, general and administrative expenses
    
    
    (17,725
    )
    
    
    (43,746
    )
    
    
    (11,123
    )
    
    
    
    
    
    
    (72,594
    )Operating loss
    
    
    (17,725
    )
    
    
    (40,387
    )
    
    
    (8,367
    )
    
    
    
    
    
    
    (66,479
    )Interest income
    
    
    1,353
    
    
    
    240
    
    
    
    173
    
    
    
    
    
    
    
    1,766Interest expense, net of amounts capitalized
    
    
    11,572
    
    
    
    (20,323
    )
    
    
    (2,720
    )
    
    
    
    
    
    
    (11,471
    )Equity in loss of unconsolidated joint
ventures
    
    
    
    
    
    
    (10,011
    )
    
    
    (1,743
    )
    
    
    
    
    
    
    (11,754
    )Homebuilding pretax loss
    
    
    (4,800
    )
    
    
    (70,481
    )
    
    
    (12,657
    )
    
    
    
    
    
    
    (87,938
    )Financial services pretax income
    
    
    
    
    
    
    
    
    
    
    4,355
    
    
    
    
    
    
    
    4,355Total pretax loss
    
    
    (4,800
    )
    
    
    (70,481
    )
    
    
    (8,302
    )
    
    
    
    
    
    
    (83,583
    )Income tax benefit
    
    
    300
    
    
    
    4,400
    
    
    
    500
    
    
    
    
    
    
    
    5,200Equity in net loss of subsidiaries
    
    
    (73,883
    )
    
    
    
    
    
    
    
    
    
    
    73,883
    
    
    
    Net loss
    
    $
    (78,383
    )
    
    $
    (66,081
    )
    
    $
    (7,802
    )
    
    $
    73,883
    
    
    $
    (78,383
    )
  27




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##### Table of Contents



KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17.
    
    Supplemental Guarantor Information (continued)
 
 KB Home
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingCorporate
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalAssetsHomebuilding:Cash and cash equivalents
    
    $
    835,535
    
    
    $
    11,024
    
    
    $
    139,197
    
    
    $
    
    
    
    $
    985,756Restricted cash
    
    
    82,678
    
    
    
    25,079
    
    
    
    
    
    
    
    
    
    
    
    107,757Receivables
    
    
    3,829
    
    
    
    16,363
    
    
    
    116,841
    
    
    
    
    
    
    
    137,033Inventories
    
    
    
    
    
    
    654,188
    
    
    
    1,032,101
    
    
    
    
    
    
    
    1,686,289Investments in unconsolidated joint ventures
    
    
    
    
    
    
    36,654
    
    
    
    66,951
    
    
    
    
    
    
    
    103,605Other assets
    
    
    65,868
    
    
    
    74,454
    
    
    
    11,111
    
    
    
    
    
    
    
    151,433987,910
    
    
    
    817,762
    
    
    
    1,366,201
    
    
    
    
    
    
    
    3,171,873Financial services
    
    
    
    
    
    
    
    
    
    
    30,364
    
    
    
    
    
    
    
    30,364Investments in subsidiaries
    
    
    27,464
    
    
    
    
    
    
    
    
    
    
    
    (27,464
    )
    
    
    Total assets
    
    $
    1,015,374
    
    
    $
    817,762
    
    
    $
    1,396,565
    
    
    $
    (27,464
    )
    
    $
    3,202,237Liabilities and stockholders equityHomebuilding:Accounts payable, accrued expenses and other liabilities
    
    $
    146,471
    
    
    $
    205,212
    
    
    $
    473,133
    
    
    $
    
    
    
    $
    824,816Mortgages and notes payable
    
    
    1,656,927
    
    
    
    94,902
    
    
    
    3,537
    
    
    
    
    
    
    
    1,755,3661,803,398
    
    
    
    300,114
    
    
    
    476,670
    
    
    
    
    
    
    
    2,580,182Financial services
    
    
    
    
    
    
    
    
    
    
    6,874
    
    
    
    
    
    
    
    6,874Intercompany
    
    
    (1,403,205
    )
    
    
    517,648
    
    
    
    885,557
    
    
    
    
    
    
    
    Stockholders equity
    
    
    615,181
    
    
    
    
    
    
    
    27,464
    
    
    
    (27,464
    )
    
    
    615,181Total liabilities and stockholders equity
    
    $
    1,015,374
    
    
    $
    817,762
    
    
    $
    1,396,565
    
    
    $
    (27,464
    )
    
    $
    3,202,237
  KB Home
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingCorporate
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalAssetsHomebuilding:Cash and cash equivalents
    
    $
    995,122
    
    
    $
    56,969
    
    
    $
    122,624
    
    
    $
    
    
    
    $
    1,174,715Restricted cash
    
    
    114,292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,292Receivables
    
    
    191,747
    
    
    
    109,536
    
    
    
    36,647
    
    
    
    
    
    
    
    337,930Inventories
    
    
    
    
    
    
    1,374,617
    
    
    
    126,777
    
    
    
    
    
    
    
    1,501,394Investments in unconsolidated joint ventures
    
    
    
    
    
    
    115,402
    
    
    
    4,266
    
    
    
    
    
    
    
    119,668Other assets
    
    
    68,895
    
    
    
    85,856
    
    
    
    (185
    )
    
    
    
    
    
    
    154,5661,370,056
    
    
    
    1,742,380
    
    
    
    290,129
    
    
    
    
    
    
    
    3,402,565Financial services
    
    
    
    
    
    
    
    
    
    
    33,424
    
    
    
    
    
    
    
    33,424Investments in subsidiaries
    
    
    35,955
    
    
    
    
    
    
    
    
    
    
    
    (35,955
    )
    
    
    Total assets
    
    $
    1,406,011
    
    
    $
    1,742,380
    
    
    $
    323,553
    
    
    $
    (35,955
    )
    
    $
    3,435,989Liabilities and stockholders equityHomebuilding:Accounts payable, accrued expenses
and other liabilities
    
    $
    147,264
    
    
    $
    588,203
    
    
    $
    165,878
    
    
    $
    
    
    
    $
    901,345Mortgages and notes payable
    
    
    1,656,402
    
    
    
    163,967
    
    
    
    1
    
    
    
    
    
    
    
    1,820,3701,803,666
    
    
    
    752,170
    
    
    
    165,879
    
    
    
    
    
    
    
    2,721,715Financial services
    
    
    
    
    
    
    
    
    
    
    7,050
    
    
    
    
    
    
    
    7,050Intercompany
    
    
    (1,104,879
    )
    
    
    990,210
    
    
    
    114,669
    
    
    
    
    
    
    
    Stockholders equity
    
    
    707,224
    
    
    
    
    
    
    
    35,955
    
    
    
    (35,955
    )
    
    
    707,224Total liabilities and stockholders equity
    
    $
    1,406,011
    
    
    $
    1,742,380
    
    
    $
    323,553
    
    
    $
    (35,955
    )
    
    $
    3,435,989
  28




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##### Table of Contents



KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17.
    
    Supplemental Guarantor Information (continued)
 
 KB Home
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingCorporate
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCash flows from operating activities:Net loss
    
    $
    (85,413
    )
    
    $
    (20,098
    )
    
    $
    (23,234
    )
    
    $
    43,332
    
    
    $
    (85,413
    )Adjustments to reconcile net loss to net cash provided
(used) by operating activities:Inventory impairments and land option contract
abandonments
    
    
    
    
    
    
    1,196
    
    
    
    12,166
    
    
    
    
    
    
    
    13,362Changes in assets and liabilities:Receivables
    
    
    187,918
    
    
    
    (6,535
    )
    
    
    2,034
    
    
    
    
    
    
    
    183,417Inventories
    
    
    
    
    
    
    (17,601
    )
    
    
    (137,613
    )
    
    
    
    
    
    
    (155,214
    )Accounts payable, accrued expenses and other liabilities
    
    
    (787
    )
    
    
    (16,996
    )
    
    
    (63,826
    )
    
    
    
    
    
    
    (81,609
    )Other, net
    
    
    478
    
    
    
    23
    
    
    
    12,352
    
    
    
    
    
    
    
    12,853Net cash provided (used) by operating activities
    
    
    102,196
    
    
    
    (60,011
    )
    
    
    (198,121
    )
    
    
    43,332
    
    
    
    (112,604
    )Cash flows from investing activities:Investments in unconsolidated joint ventures
    
    
    
    
    
    
    (56
    )
    
    
    (1,700
    )
    
    
    
    
    
    
    (1,756
    )Purchases of property and equipment, net
    
    
    (21
    )
    
    
    (58
    )
    
    
    (375
    )
    
    
    
    
    
    
    (454
    )Net cash used by investing activities
    
    
    (21
    )
    
    
    (114
    )
    
    
    (2,075
    )
    
    
    
    
    
    
    (2,210
    )Cash flows from financing activities:Change in restricted cash
    
    
    31,614
    
    
    
    (25,079
    )
    
    
    
    
    
    
    
    
    
    
    6,535Payments on mortgages, land contracts and other loans
    
    
    
    
    
    
    (53,354
    )
    
    
    (18,474
    )
    
    
    
    
    
    
    (71,828
    )Issuance of common stock under employee stock plans
    
    
    897
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    897Excess tax benefit associated with exercise of stock options
    
    
    583
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    583Payments of cash dividends
    
    
    (9,607
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,607
    )Repurchases of common stock
    
    
    (350
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (350
    )Intercompany
    
    
    (284,899
    )
    
    
    105,104
    
    
    
    223,127
    
    
    
    (43,332
    )
    
    
    Net cash provided (used) by financing activities
    
    
    (261,762
    )
    
    
    26,671
    
    
    
    204,653
    
    
    
    (43,332
    )
    
    
    (73,770
    )Net increase (decrease) in cash and cash equivalents
    
    
    (159,587
    )
    
    
    (33,454
    )
    
    
    4,457
    
    
    
    
    
    
    
    (188,584
    )Cash and cash equivalents at beginning of period
    
    
    995,122
    
    
    
    44,478
    
    
    
    138,361
    
    
    
    
    
    
    
    1,177,961Cash and cash equivalents at end of period
    
    $
    835,535
    
    
    $
    11,024
    
    
    $
    142,818
    
    
    $
    
    
    
    $
    989,377
  29




---



##### Table of Contents



KB HOME
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17.
    
    Supplemental Guarantor Information (continued)
 
 KB Home
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    ConsolidatingCorporate
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCash flows from operating activities:Net loss
    
    $
    (136,455
    )
    
    $
    (117,449
    )
    
    $
    (17,102
    )
    
    $
    134,551
    
    
    $
    (136,455
    )Adjustments to reconcile net loss to net cash provided
(used) by operating activities:Inventory impairments and land option contract
abandonments
    
    
    
    
    
    
    62,052
    
    
    
    4,928
    
    
    
    
    
    
    
    66,980Changes in assets and liabilities:Receivables
    
    
    206,725
    
    
    
    8,569
    
    
    
    (1,316
    )
    
    
    
    
    
    
    213,978Inventories
    
    
    
    
    
    
    (75,478
    )
    
    
    196,216
    
    
    
    
    
    
    
    120,738Accounts payable, accrued expenses and other liabilities
    
    
    (58,500
    )
    
    
    (41,162
    )
    
    
    (109,989
    )
    
    
    
    
    
    
    (209,651
    )Other, net
    
    
    1,628
    
    
    
    19,510
    
    
    
    6,794
    
    
    
    
    
    
    
    27,932Net cash provided (used) by operating activities
    
    
    13,398
    
    
    
    (143,958
    )
    
    
    79,531
    
    
    
    134,551
    
    
    
    83,522Cash flows from investing activities:Investments in unconsolidated joint ventures
    
    
    
    
    
    
    (12,535
    )
    
    
    19,845
    
    
    
    
    
    
    
    7,310Sales (purchases) of property and equipment, net
    
    
    (20
    )
    
    
    (1,189
    )
    
    
    295
    
    
    
    
    
    
    
    (914
    )Net cash provided (used) by investing activities
    
    
    (20
    )
    
    
    (13,724
    )
    
    
    20,140
    
    
    
    
    
    
    
    6,396Cash flows from financing activities:Change in restricted cash
    
    
    13,244
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,244Repayment of senior subordinated notes
    
    
    (200,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200,000
    )Payments on mortgages, land contracts and other loans
    
    
    
    
    
    
    (36,718
    )
    
    
    
    
    
    
    
    
    
    
    (36,718
    )Issuance of common stock under employee stock plans
    
    
    1,691
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,691Payments of cash dividends
    
    
    (9,524
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,524
    )Repurchases of common stock
    
    
    (616
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (616
    )Intercompany
    
    
    59,210
    
    
    
    186,807
    
    
    
    (111,466
    )
    
    
    (134,551
    )
    
    
    Net cash provided (used) by financing activities
    
    
    (135,995
    )
    
    
    150,089
    
    
    
    (111,466
    )
    
    
    (134,551
    )
    
    
    (231,923
    )Net decrease in cash and cash equivalents
    
    
    (122,617
    )
    
    
    (7,593
    )
    
    
    (11,795
    )
    
    
    
    
    
    
    (142,005
    )Cash and cash equivalents at beginning of period
    
    
    987,057
    
    
    
    25,067
    
    
    
    129,394
    
    
    
    
    
    
    
    1,141,518Cash and cash equivalents at end of period
    
    $
    864,440
    
    
    $
    17,474
    
    
    $
    117,599
    
    
    $
    
    
    
    $
    999,513
  30




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations
 OVERVIEW
  Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Homebuilding
    
    $
    635,025
    
    
    $
    688,666
    
    
    $
    372,514
    
    
    $
    382,925Financial services
    
    
    3,005
    
    
    
    3,165
    
    
    
    1,538
    
    
    
    1,545Total
    
    $
    638,030
    
    
    $
    691,831
    
    
    $
    374,052
    
    
    $
    384,470Pretax loss:Homebuilding
    
    $
    (91,183
    )
    
    $
    (149,211
    )
    
    $
    (34,784
    )
    
    $
    (87,938
    )Financial services
    
    
    6,070
    
    
    
    6,056
    
    
    
    4,175
    
    
    
    4,355Total pretax loss
    
    
    (85,113
    )
    
    
    (143,155
    )
    
    
    (30,609
    )
    
    
    (83,583
    )Income tax benefit (expense)
    
    
    (300
    )
    
    
    6,700
    
    
    
    (100
    )
    
    
    5,200Net loss
    
    $
    (85,413
    )
    
    $
    (136,455
    )
    
    $
    (30,709
    )
    
    $
    (78,383
    )Basic and diluted loss per share
    
    $
    (1.11
    )
    
    $
    (1.78
    )
    
    $
    (.40
    )
    
    $
    (1.03
    )
  The Open Series The
Open Series
  31




---



##### Table of Contents



The Open Series,
     32




---



##### Table of Contents



HOMEBUILDING
  Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Housing
    
    $
    632,579
    
    
    $
    685,260
    
    
    $
    370,421
    
    
    $
    380,806Land
    
    
    2,446
    
    
    
    3,406
    
    
    
    2,093
    
    
    
    2,119Total
    
    
    635,025
    
    
    
    688,666
    
    
    
    372,514
    
    
    
    382,925Costs and expenses:Construction and land costsHousing
    
    
    530,950
    
    
    
    662,876
    
    
    
    304,756
    
    
    
    373,453Land
    
    
    2,433
    
    
    
    4,892
    
    
    
    2,087
    
    
    
    3,357Total
    
    
    533,383
    
    
    
    667,768
    
    
    
    306,843
    
    
    
    376,810Selling, general and
administrative expenses
    
    
    155,193
    
    
    
    133,769
    
    
    
    82,990
    
    
    
    72,594Total
    
    
    688,576
    
    
    
    801,537
    
    
    
    389,833
    
    
    
    449,404Operating loss
    
    $
    (53,551
    )
    
    $
    (112,871
    )
    
    $
    (17,319
    )
    
    $
    (66,479
    )Homes delivered
    
    
    3,108
    
    
    
    3,206
    
    
    
    1,782
    
    
    
    1,761Average selling price
    
    $
    203,500
    
    
    $
    213,700
    
    
    $
    207,900
    
    
    $
    216,200Housing gross margin
    
    
    16.1
    %
    
    
    3.3
    %
    
    
    17.7
    %
    
    
    1.9
    %Selling, general and
administrative expenses as a
percentage of housing revenues
    
    
    24.5
    %
    
    
    19.5
    %
    
    
    22.4
    %
    
    
    19.1
    %Operating loss as a
percentage of
homebuilding revenues
    
    
    -8.4
    %
    
    
    -16.4
    %
    
    
    -4.6
    %
    
    
    -17.4
    %
  33




---



##### Table of Contents



Three Months Ended May 31,Homes Delivered
    
    
    Net Orders
    
    
    Cancellation RatesSegment
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009West Coast
    
    
    500
    
    
    
    569
    
    
    
    608
    
    
    
    928
    
    
    
    15
    %
    
    
    16
    %Southwest
    
    
    359
    
    
    
    241
    
    
    
    351
    
    
    
    359
    
    
    
    16
    
    
    
    18Central
    
    
    550
    
    
    
    525
    
    
    
    796
    
    
    
    1,048
    
    
    
    31
    
    
    
    20Southeast
    
    
    373
    
    
    
    426
    
    
    
    489
    
    
    
    575
    
    
    
    26
    
    
    
    26
    

Total
    
    
    1,782
    
    
    
    1,761
    
    
    
    2,244
    
    
    
    2,910
    
    
    
    24
    %
    
    
    20
    %Unconsolidated joint ventures
    
    
    34
    
    
    
    55
    
    
    
    27
    
    
    
    45
    
    
    
    
    %
    
    
    31
    %
 Six Months Ended May 31,Homes Delivered
    
    
    Net Orders
    
    
    Cancellation RatesSegment
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009West Coast
    
    
    840
    
    
    
    920
    
    
    
    1,037
    
    
    
    1,387
    
    
    
    16
    %
    
    
    20
    %Southwest
    
    
    575
    
    
    
    508
    
    
    
    664
    
    
    
    581
    
    
    
    15
    
    
    
    22Central
    
    
    1,079
    
    
    
    972
    
    
    
    1,511
    
    
    
    1,670
    
    
    
    30
    
    
    
    23Southeast
    
    
    614
    
    
    
    806
    
    
    
    945
    
    
    
    1,099
    
    
    
    24
    
    
    
    27Total
    
    
    3,108
    
    
    
    3,206
    
    
    
    4,157
    
    
    
    4,737
    
    
    
    23
    %
    
    
    23
    %Unconsolidated joint ventures
    
    
    55
    
    
    
    78
    
    
    
    46
    
    
    
    73
    
    
    
    10
    %
    
    
    39
    %
 May 31,Backlog - ValueBacklog - Homes
    
    
    (In Thousands)Segment
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009West Coast
    
    
    720
    
    
    
    1,048
    
    
    $
    241,383
    
    
    $
    334,600Southwest
    
    
    371
    
    
    
    421
    
    
    
    60,278
    
    
    
    72,429Central (a)
    
    
    1,351
    
    
    
    1,419
    
    
    
    224,212
    
    
    
    228,723Southeast
    
    
    733
    
    
    
    916
    
    
    
    122,365
    
    
    
    161,104Total
    
    
    3,175
    
    
    
    3,804
    
    
    $
    648,238
    
    
    $
    796,856Unconsolidated joint ventures
    
    
    28
    
    
    
    62
    
    
    $
    11,760
    
    
    $
    24,118
 (a)
    
    The ending backlog amounts have been adjusted to reflect the consolidation of a
previously unconsolidated joint venture in the second quarter of 2009. Revenues.
  34




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##### Table of Contents



Operating Loss.
 The Open Series
    35




---



##### Table of Contents



Interest Income.
 Interest Expense, Net of Amounts Capitalized.
  36




---



##### Table of Contents



Equity in Loss of Unconsolidated Joint Ventures.
  NON-GAAP FINANCIAL MEASURES
  Housing Gross Margin, Excluding Inventory Impairment and Land Option Contract Abandonment
Charges.
  37




---



##### Table of Contents



Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Housing revenues
    
    $
    632,579
    
    
    $
    685,260
    
    
    $
    370,421
    
    
    $
    380,806Housing construction and land costs
    
    
    (530,950
    )
    
    
    (662,876
    )
    
    
    (304,756
    )
    
    
    (373,453
    )Housing gross margin
    
    
    101,629
    
    
    
    22,384
    
    
    
    65,665
    
    
    
    7,353Add: Inventory impairment and land
option contract abandonment
charges
    
    
    13,362
    
    
    
    65,640
    
    
    
    
    
    
    
    40,970Housing gross margin, excluding
inventory impairment and land
option contract abandonment
charges
    
    $
    114,991
    
    
    $
    88,024
    
    
    $
    65,665
    
    
    $
    48,323Housing gross margin as a
percentage of housing revenues
    
    
    16.1
    %
    
    
    3.3
    %
    
    
    17.7
    %
    
    
    1.9
    %Housing gross margin, excluding
inventory impairment and land
option contract abandonment
charges, as a percentage of
housing revenues
    
    
    18.2
    %
    
    
    12.8
    %
    
    
    17.7
    %
    
    
    12.7
    %
  Ratio of Net Debt to Total Capital.
 May 31,
    
    
    November 30,2010
    
    
    2009Mortgages and notes payable
    
    $
    1,755,366
    
    
    $
    1,820,370Stockholders equity
    
    
    615,181
    
    
    
    707,224Total capital
    
    $
    2,370,547
    
    
    $
    2,527,594Ratio of debt to total capital
    
    
    74.0
    %
    
    
    72.0
    %Mortgages and notes payable
    
    $
    1,755,366
    
    
    $
    1,820,370Less: Cash and cash equivalents and restricted cash
    
    
    (1,093,513
    )
    
    
    (1,289,007
    )Net debt
    
    
    661,853
    
    
    
    531,363Stockholders equity
    
    
    615,181
    
    
    
    707,224Total capital
    
    $
    1,277,034
    
    
    $
    1,238,587Ratio of net debt to total capital
    
    
    51.8
    %
    
    
    42.9
    %
  38




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##### Table of Contents



HOMEBUILDING SEGMENTS
  Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009West Coast:Revenues
    
    $
    272,089
    
    
    $
    290,178
    
    
    $
    163,655
    
    
    $
    181,658Construction and land costs
    
    
    (207,707
    )
    
    
    (289,710
    )
    
    
    (127,678
    )
    
    
    (190,085
    )Selling, general and
administrative expenses
    
    
    (32,732
    )
    
    
    (34,929
    )
    
    
    (16,394
    )
    
    
    (18,767
    )Operating income (loss)
    
    
    31,650
    
    
    
    (34,461
    )
    
    
    19,583
    
    
    
    (27,194
    )Other, net
    
    
    (15,594
    )
    
    
    (17,960
    )
    
    
    (6,884
    )
    
    
    (12,906
    )Pretax income (loss)
    
    $
    16,056
    
    
    $
    (52,421
    )
    
    $
    12,699
    
    
    $
    (40,100
    )Southwest:Revenues
    
    $
    93,450
    
    
    $
    96,446
    
    
    $
    59,602
    
    
    $
    44,173Construction and land costs
    
    
    (72,159
    )
    
    
    (95,373
    )
    
    
    (45,136
    )
    
    
    (38,347
    )Selling, general and
administrative expenses
    
    
    (22,732
    )
    
    
    (15,255
    )
    
    
    (16,143
    )
    
    
    (8,109
    )Operating loss
    
    
    (1,441
    )
    
    
    (14,182
    )
    
    
    (1,677
    )
    
    
    (2,283
    )Other, net
    
    
    (8,556
    )
    
    
    (11,764
    )
    
    
    (3,857
    )
    
    
    (2,925
    )Pretax loss
    
    $
    (9,997
    )
    
    $
    (25,946
    )
    
    $
    (5,534
    )
    
    $
    (5,208
    )Central:Revenues
    
    $
    174,751
    
    
    $
    160,755
    
    
    $
    91,826
    
    
    $
    83,110Construction and land costs
    
    
    (149,691
    )
    
    
    (140,028
    )
    
    
    (76,023
    )
    
    
    (72,356
    )Selling, general and
administrative expenses
    
    
    (28,030
    )
    
    
    (26,704
    )
    
    
    (14,850
    )
    
    
    (13,849
    )Operating income (loss)
    
    
    (2,970
    )
    
    
    (5,977
    )
    
    
    953
    
    
    
    (3,095
    )Other, net
    
    
    (6,137
    )
    
    
    (4,536
    )
    
    
    (2,756
    )
    
    
    (1,261
    )Pretax loss
    
    $
    (9,107
    )
    
    $
    (10,513
    )
    
    $
    (1,803
    )
    
    $
    (4,356
    )Southeast:Revenues
    
    $
    94,735
    
    
    $
    141,287
    
    
    $
    57,431
    
    
    $
    73,984Construction and land costs
    
    
    (98,918
    )
    
    
    (138,314
    )
    
    
    (55,306
    )
    
    
    (73,946
    )Selling, general and
administrative expenses
    
    
    (17,755
    )
    
    
    (22,329
    )
    
    
    (8,301
    )
    
    
    (10,380
    )Operating loss
    
    
    (21,938
    )
    
    
    (19,356
    )
    
    
    (6,176
    )
    
    
    (10,342
    )Other, net
    
    
    (9,323
    )
    
    
    (10,285
    )
    
    
    (4,899
    )
    
    
    (5,474
    )Pretax loss
    
    $
    (31,261
    )
    
    $
    (29,641
    )
    
    $
    (11,075
    )
    
    $
    (15,816
    )
 West Coast
  39




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Southwest
   40




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Central
     41




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Southeast
    FINANCIAL SERVICES
   42




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Six Months Ended May 31,
    
    
    Three Months Ended May 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    3,005
    
    
    $
    3,165
    
    
    $
    1,538
    
    
    $
    1,545Expenses
    
    
    (1,885
    )
    
    
    (1,654
    )
    
    
    (992
    )
    
    
    (794
    )Equity in income of unconsolidated
joint venture
    
    
    4,950
    
    
    
    4,545
    
    
    
    3,629
    
    
    
    3,604Pretax income
    
    $
    6,070
    
    
    $
    6,056
    
    
    $
    4,175
    
    
    $
    4,355Total originations (a):Loans
    
    
    2,526
    
    
    
    2,620
    
    
    
    1,484
    
    
    
    1,521Principal
    
    $
    463,237
    
    
    $
    498,449
    
    
    $
    276,919
    
    
    $
    293,438Percentage of homebuyers using
KBA Mortgage
    
    
    84
    %
    
    
    81
    %
    
    
    86
    %
    
    
    83
    %Loans sold to third parties (a):Loans
    
    
    2,456
    
    
    
    2,404
    
    
    
    1,348
    
    
    
    1,292Principal
    
    $
    440,137
    
    
    $
    457,045
    
    
    $
    241,377
    
    
    $
    263,394
 (a)
    
    Loan originations and sales occur within KBA Mortgage. Revenues
 Expenses
 Equity in Income of Unconsolidated Joint Venture
  INCOME TAXES
   43




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Liquidity and Capital Resources
 Overview.
  Capital Resources.
      44




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Consolidated Cash Flows
 Operating Activities
   Investing Activities
  45




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Financing Activities
  Shelf Registration Statement
 Share Repurchase Program
  Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments
    46




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47




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48




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Critical Accounting Policies
  Recent Accounting Pronouncements
  Outlook
   49




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50




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Forward-Looking Statements
  The Open Series
  51




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   Weighted AverageFiscal Year of Expected Maturity
    
    Fixed Rate Debt
    
    
    Interest Rate2010
    
    $
    
    
    
    
    
    %2011
    
    
    99,857
    
    
    
    6.42012
    
    
    
    
    
    
    2013
    
    
    
    
    
    
    2014
    
    
    249,428
    
    
    
    5.8Thereafter
    
    
    1,307,642
    
    
    
    7.0Total
    
    $
    1,656,927
    
    
    
    6.7
    %Fair value at May 31, 2010
    
    $
    1,562,025
  
 Item 4. Controls and Procedures
   52




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 ERISA Litigation
 Bagley et al., v. KB Home, et al.
  Other Matters
   
 Item 1A. Risk Factors
   53




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Item 6. Exhibits
 Exhibits10.56
    *
    
    KB Home 2010 Equity Incentive Plan, filed as an exhibit to the Companys Quarterly Report
on Form 10-Q for the quarter ended February 28, 2010, is incorporated by reference herein.10.57
    *
    
    Form of Indemnification Agreement, filed as an exhibit to the Companys Current Report
on Form 8-K dated April 2, 2010, is incorporated by reference herein.31.1
    
    
    Certification of Jeffrey T. Mezger, President and Chief Executive Officer of KB Home
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Jeff J. Kaminski, Executive Vice President and Chief Financial Officer
of KB Home Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Jeffrey T. Mezger, President and Chief Executive Officer of KB Home
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    
    Certification of Jeff J. Kaminski, Executive Vice President and Chief Financial Officer
of KB Home Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 *
    
    Management contract or compensatory plan or arrangement in which
executive officers are eligible to participate.  54




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##### Table of Contents



SIGNATURES
  KB HOME
RegistrantDated July 9, 2010
    By:
    /s/ JEFF J. KAMINSKIJeff J. KaminskiExecutive Vice President and Chief Financial Officer
(Principal Financial Officer) Dated July 9, 2010
    By:
    /s/ WILLIAM R. HOLLINGERWilliam R. HollingerSenior Vice President and Chief Accounting Officer
(Principal Accounting Officer)  55




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##### Table of Contents



INDEX OF EXHIBITS
 10.56
    *
    
    KB Home 2010 Equity Incentive Plan, filed as an exhibit to the Companys Quarterly Report on
Form 10-Q for the quarter ended February 28, 2010, is incorporated by reference herein.10.57
    *
    
    Form of Indemnification Agreement, filed as an exhibit to the Companys Current Report on
Form 8-K dated April 2, 2010, is incorporated by reference herein.31.1
    
    
    Certification of Jeffrey T. Mezger, President and Chief Executive Officer of KB Home Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Jeff J. Kaminski, Executive Vice President and Chief Financial Officer of KB
Home Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Jeffrey T. Mezger, President and Chief Executive Officer of KB Home
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    
    Certification of Jeff J. Kaminski, Executive Vice President and Chief Financial Officer of KB
Home Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 *
    
    Management contract or compensatory plan or arrangement in which executive
officers are eligible to participate.  56