KB Home is one of the largest and most recognized homebuilding companies in the U.S. and has been building homes for more than 50nearly 60 years. We construct and sell homes through our operating divisions under the name KB Home. Unless the context indicates otherwise, the terms “we,” “our” and “us” used in this report refer to KB Home, a Delaware corporation, and its predecessors and subsidiaries.

Unless the context indicates otherwise, the terms “we,” “our” and “us” used in this report we use the termrefer to KB Home, a Delaware corporation, and its predecessors and subsidiaries. Also as used in this report, “home” to refer tois a single-family residence, whether it is a single-family home or other type of residential property, and we use the termproperty; “community” to refer tois a single development in which new homes are constructed as part of an integrated plan.plan; and “community count” is the number of communities we have open for sales with at least five homes/lots left to sell.

Reflecting the geographic reach of our homebuilding business, as of the date of this report, ourwe have ongoing principal operations are in the 10nine states and 4039 major markets presented below. We also operate in various submarkets within these major markets. From time to time, we refer to these markets and submarkets collectively as our “served markets.” For reporting purposes, we organize our homebuilding operations into four segments — West Coast, Southwest, Central and Southeast.

Since 1997, we have followed the principles of an operational business model that we call KBnxt. KBnxt provides the core framework under which we have established the primary operational and strategic goals for our homebuilding business. We believe the principles of KBnxt set us apart from other large-productionhigh-production homebuilders and provide the foundation for our long-term growth.

While weWe consider KBnxt to be integral to our success in the homebuilding industry,industry. However, there canmay be market-driven circumstances where we believe it is necessary or appropriate to temporarily deviate from certain of itsKBnxt principles. For example, at times weThese deviations may be unable to maintain an even flow production of homes in a particular area because of slow net order activity. Also, in specific targeted communities with strong demand, we may startinclude starting construction on a small number of homes in a community before a corresponding purchase contract iscontracts are signed with buyers to more quickly meet thecustomer delivery expectations of homebuyers and generate revenues. In some land constrained submarkets,revenues; or in submarkets experiencing significant homebuilding activity, we may acquireacquiring undeveloped or unentitled land parcels that otherwise fit withfits within our marketing strategy and meetmeets our investment return standards. OtherIn addition, other circumstances maycould arise in the future that may lead us to make specific short-term shifts from the principles of KBnxt.our KBnxt principles.

We act as the general contractor for the majority of our communities, and hire experiencedengage outside general contractors in all other instances. We, or the outside general contractors we engage, contract with a variety of independent subcontractors, who are typically locally-based, to supply the skilled trade laborperform all land development and to procurehome construction work through their own employees or subcontractors. We do not self-perform any land development or home construction work. These independent subcontractors also supply some of the building materials required for allsuch production activities. Our contracts with ourthese independent subcontractors require that they comply with all laws applicable to their work, including laborwage and safety laws, meet performance standards, and follow local building codes and permits.

As discussed above under “Item 1. Business — Competition,in the “Competition, Seasonality, Delivery Mix and Other Factors,”Factors” section in this report, we have experiencedexperience seasonal fluctuations in our quarterly operating results that can have a material impact on our results and our consolidated financial statements. Historically, a significant percentage of our home purchase contracts are entered into in the spring and early summer months, and we deliver a corresponding significant percentage of our homes in the late summer and fall months. As a result, we historically have experienced uneven quarterly results, with generally fewer homes delivered and lower revenues and operating income generally during the first and second quarters of our fiscal year. We currentlyThough we expect to experience the traditional seasonality cycle and its impactimpacts on our results as the present housing recovery progresses, but we can makeprovide no assurancesassurance as to the degree to which oursuch historical seasonal patterns will occur in 20142016 and beyond, if at all.

Our homebuilding operations and our present strategies require significant amounts of cash and/or the availability of external financing. We have historically funded our homebuilding and financial services activitiesoperations with internally generated cash flows, public equity and external sources of debt issuances (including common stock, senior notes and equity financing. However, during the housing downturn, we relied primarily on the positive operating cash flow we generated, principally through the receipt of federal income tax refunds,convertible senior notes), land option contracts and from homeother similar contracts and land salesseller financing, and our efforts to reduce our overhead costs, to meet our working capital needsperformance bonds and to repay outstanding indebtedness.letters of credit. In recent years, the impact of the housing downturn in reducing our stockholders’ equity and increasing our debt-to-capital ratio and volatility in the financial and credit markets made external sources of liquidity less available and more costly to us. In 2013, relatively favorable housing and credit market conditions enabled us to refinance and extend the maturity of our outstanding senior notes due in 2014 and certain of our outstanding senior notes due in 2015 through the issuance of new senior notes, albeit at somewhat higher interest rates than the refinanced debt, and to raise unrestricted cash for general business purposes. We alsoaddition, we have entered into the Credit Facility.Facility and the LOC Facilities in order to support certain aspects of our operations in the ordinary course of our business, including land acquisitions, community development and other strategic growth initiatives. We anticipate that we will need to maintain the Credit Facility and the LOC Facilities in 2016, and, if necessary or desirable, we may seek to expand their capacities or enter into additional such facilities, or other similar facility arrangements with the same or other financial institutions. We may also issue additional senior notes, convertible senior notes or equity. However, we can provide no assurances, however,assurance that we will be able to generate cash flows from our operations or access external creditfinancing in 2016 or equity markets in 2014beyond at favorable terms or at all.all, or that our stockholders’ equity and ratio of debt to capital will remain at, or further improve from, their respective 2015 year-end levels.

Market conditions in 20142016 and beyond may significantly limit our ability to replace or refinance indebtedness, particularly givenin part due to provisions within our outstanding senior notes that may restrict the amount and nature of debt we may incur in the future and the ratings of our senior notes by the three principal nationally recognized registered credit rating agencies, as discussed further below.

While we believe we can meet our forecasted capital requirements from our cash resources, expected future cash flow, capital markets accessflows from our operations, and the external financing sources that we anticipate will be available to us, we can provide no assurance that we will be able to do so, or do so without incurring substantially higher costs or significantly diluting existing stockholders’ equity interests. If conditions in the financial and credit markets continue to be volatile or worsen, whether generally, or for homebuilders or us in particular, it could reduce our ability to implement our strategies, initiatives and actions and profitably grow our business. Current and future federal and state regulations limiting the investment activities of financial institutions could also impact our ability to access the capital markets, to obtain additional external financing and/or maintain or, if necessary or desirable, expand the capacities of the Credit Facility or the LOC Facilities or enter into additional such facilities, or other similar facilities, in each case on acceptable terms or at all. The adverse effects of these conditions on our business, liquidity and consolidated financial statements could be material to us.our consolidated financial statements.

Our ability to meet our debt service and other obligations necessary to operate our business in the ordinary course will depend on our future performance. Our businessAs of the date of this report, our next scheduled maturity of senior notes is substantially affected by changeson September 15, 2017 with respect to $265.0 million in economic cycles. Our revenues, earnings and cash flows vary with the levelaggregate principal amount of general economic activity and competition in the markets in which we operate. They could also be affected by financial, political, regulatory, environmental and other factors, many of which are beyond our control. A higher interest rate on our debt could materially and adversely affect our consolidated financial statements.9.10% senior notes due 2017 (“9.10% Senior Notes due 2017”).

Our business may not generate sufficient cash flowflows from our operations, and sufficient external financing at a reasonable cost may not be available to us, in an amount sufficient to meet our debt service obligations fulfilland other obligations necessary to operate our business in the ordinary course, comply with the Credit Facility’s financial covenants, or operational obligations we may have under certain unconsolidated joint venture transactions, support our letter of credit facilities (including the LOC Facilities), or. Further, as described in Note 13. Notes Payable in the Notes to fund our other liquidity or operational needs. Further,Consolidated Financial Statements in this report, if a change of control were to occur as defined in the instrumentinstruments governing our senior notes, we would be required to offer to purchase all of our outstanding senior notes (with the exception of the amounts outstanding related to our 6 1/4% senior notes due 2015 (the “6 1/4% Senior Notes due 2015”) and our 7 1/4% senior notes due 2018 (the “7 1/4% Senior Notes due 2018”)) at 101% of their principal amount, together with all accrued and unpaid interest,or if any. If a fundamental change under the terms of our 1.375% convertible senior notes due 2019 (the “1.375%(“1.375% Convertible Senior Notes due 2019”), which includes a change of control, occurs prior to their stated maturity date, the holderswe may require usbe required to offer to purchase for cashcertain of our senior notes and/or all or any portion of their notes at 100%

Under the terms of the Credit Facility, we are required, among other things, to maintain compliance with various covenants, including financial covenants relating to our consolidated tangible net worth, leverage, and interest coverage or liquidity. The Credit Facility is also governed by a borrowing base test and includes a limitation on investments in joint ventures and non-guarantor subsidiaries. In addition, the existence ofAmong other things, these restrictionscovenants and covenants mayother requirements can influence our operating decisions of whether to enter into, or the manner in which we can structure certain transactions, in order to maintain compliance. If we fail to comply with these covenants and other requirements, the participating financial institutions could terminate the Credit Facility, cause borrowings under the Credit Facility, if any, to become immediately due and payable and/or could demand that we compensate them for waiving instances of noncompliance. In addition, under certain circumstances, a default under the Credit Facility under certain circumstances or a default under any series of our senior notes or convertible senior notes could cause a default with respect to our senior or convertible seniorother series of such notes and result in the acceleration of the maturity of all of our senior and/or convertible senior notes and our inability to borrow under the Credit Facility, as well as incurring penalties and additional fees, all of which would have a material adverse impact on our liquidity and on our consolidated financial statements. Moreover, we may need to curtail our investment activities and other uses of cash to maintain compliance with the restrictionscovenants and covenantsother requirements under the Credit Facility.

Our abilityaccess to access the capital markets and external financing sources on favorable terms is a key factor in our ability to fund our operations and to grow our business. As of the date of this report, our credit rating by Fitch Ratings is B+, with a stable outlook, our credit rating by Moody’s Investor Services is B2, with a stablepositive outlook, and our credit rating by Standard and Poor’s Financial Services is B, with a stable outlook. Downgrades of our credit rating by any of these principal nationally recognized registered credit rating agencies may make it more difficult and costly for us to access the capital markets and external financing sources, and could have a material adverse effect on our consolidated financial statements.

The majorityChanges in tax laws could also affect our actual tax results, the valuation of our net deferred tax asset is federal relatedassets and is valued atour ability to realize our net deferred tax assets. Specifically, a 35%decrease in enacted corporate income tax rate. If, as some lawmakers have proposed,rates in our major jurisdictions, especially in the U.S.federal corporate income tax rate, is lowered, we would be required to write down a roughly proportionate amount ofdecrease the value of our federal net deferred tax asset to account for this lower rate. We would also need to recordassets and result in a corresponding write down of our valuation allowance. The lowercharge to income tax rate wouldexpense, which could be material, as well as reduce our future federal taxes, which may putability to use our net deferred tax assets.

In addition, notwithstanding the reversal of a substantial portion of our deferred tax creditsasset valuation allowance at risk of expiring before we could use them.

While the complexity of Section 382’s provisions and the limited knowledge any public company has about the ownership of its publicly-tradedpublicly traded stock make it difficult to determine whether an ownership change has occurred, we currently believe that an ownership change has not occurred. However, if an ownership change were to occur, the annual limit Section 382 may impose could result in a material amount of our NOLNOLs expiring unused. This would significantly impair the value of our NOLnet deferred tax assets and, as a result, have a material negative impact on our consolidated financial statements.

In 2009, our stockholders approved an amendment to our restated certificate of incorporation that is designed to block transfers of our common stock that could result in an ownership change, and a rights agreement pursuant to which we have issued certain stock purchase rights with terms designed to deter transfers of our common stock that could result in an ownership change. However, these measures cannot guarantee complete protection against an ownership change and it remains possible that one may occur.

Our officers and employees are an important resource, and we see attracting and retaining a dedicated and talented team to execute our KBnxt operational business model as crucial to our ability to achieve and maintain an advantage over other homebuilders. We face intense competition for qualified personnel, particularly at senior management levels, from other homebuilders, from other companies in the housing and real estate industries, particularly with the increased residential construction activity in 2012 and 2013, and from companies in various other industries with respect to certain roles or functions. Moreover, the prolonged housing downturn and the decline in the market value of our common stock during the housing downturn havehas made it difficult for us to attract and retain talent, even as we are making a targeted effort to strengthen and expand certain of our local field management teams and talent as part of our strategic growth initiatives.talent. If we are unable to continue to retain and attract qualified employees, or if we need to significantly increase compensation and benefits to do so (including as a result of complying with pending health care coverage requirements ofunder the federal Patient Protection and Affordable Care Act and the Health Care

We use information technology, digital telecommunications and other computer resources to carry out important operational and promotional marketing activities and to maintain our business records. Many of these resources are provided to us and/or maintained on our behalf by third-party service providers pursuant to agreements that specify to varying degrees certain security and service level standards. Although we and our service providers employ what we believe are adequate security, disaster recovery and other preventative and corrective measures, our ability to conduct our business may be impaired if these resources, including our primary website,websites or e-mail system, are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third party, natural disaster, hardware or software corruption or failure or error or poor product or vendor/developer selection (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost connectivity to our networked resources. A significant and extended disruption in the functioning of these resources, including our primary website,websites or e-mail system, could damage our reputation and cause us to lose customers, orders, deliveries of homes and revenues, result in the unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information (including information about our homebuyersbuyers and business partners), impair the effectiveness of our internal control over financial reporting, and require us to incur significant expenseexpenses to address and remediate or otherwise resolve these kinds of issues. We may not be able to recover these expenses in whole or in any part from our service providers or responsible parties, and/or their or our insurers. The release of confidential information may also lead to litigation or other proceedings against us by affected individuals, and/or business partners and/or by regulators, and the outcome of such proceedings, which could include losses, penalties, or fines, injunctions, expenses and charges recorded against our earnings and cause us reputational harm, could have a material and adverse effect on our business and consolidated financial statements. Depending on its nature, a particular data security breach, penetration or compromise, or a series of breaches, penetrations or compromises, may result in the unauthorized use or loss of our assets or financial resources on a one-time or continuing basis, and such unauthorized use(s) or loss(es), which could be significant, may not be detected for some period of time. In addition, the costs of maintaining adequate protection against suchdata security threats, dependingbased on considerations of their evolution, pervasiveness and frequency and/or government-mandated standards or obligations regarding protective efforts, could be material to our consolidated financial statements in a particular period or over various periods.

None.

We lease our corporate headquarters in Los Angeles, California. Our homebuilding division offices (except for our San Antonio, Texas office) and our KB Home Studiosdesign studios are located in leased space in the markets where we conduct business. We own the premises for our San Antonio office.

We believe that such properties, including the equipment located therein, are suitable and adequate to meet the needs of our businesses.

There is no family relationship between any of our executive officers or between any of our executive officers and any of our directors.

As of December 31, 2013,2015, there were 704635 holders of record of our common stock. Our common stock is traded on the New York Stock Exchange under the ticker symbol “KBH.” The following table presents, for the periods indicated, the price ranges of our common stock, and cash dividends declared and paid per share:

The declaration and payment of cash dividends on shares of our common stock, whether at current levels or at all, are at the discretion of our board of directors, and depend upon, among other things, our expected future earnings, cash flows from our operations, capital requirements, access to external financing, debt structure and adjustments thereto, covenants and other requirements under the Credit Facility or other of our debt obligations, operational and financial investment strategy and general financial condition, as well as general business conditions.

The descriptionInformation regarding the shares of our common stock that may be issued under our equity compensation plans required by Item 201(d) of Regulation S-K is incorporated herein by reference to “Part III — Item 12. Securityprovided below in the “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” ofsection in this report.

As of November 30, 2015, we were authorized to repurchase 4,000,000 shares of our common stock under a share repurchase program approved by our board of directors in December 2005. We did not repurchase any shares of our equity securitiescommon stock under this program in the year ended November 30, 2015. The shares purchased during the fourth quarterthree months ended November 30, 2015 were previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of 2013.restricted stock awards as well as shares forfeited by individuals upon their termination of employment. These transactions are not considered repurchases under the share repurchase program.

The following graph below compares the five-year cumulative total return of KB Home common stock, the S&P 500 Index the S&P Homebuilding Index and the Dow Jones US Home Construction Index for the periods ended November 30.30:

The data in this table should be read in conjunction with “Item 7. Management’sthe “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the Notes thereto, which are included in “Item 8. Financial“Financial Statements and Supplementary Data.” Both are includedData” sections in this report.