KB Home is one of the largest and most recognized homebuilding companies in the U.S. and has been building homes for nearly 60 years.years, with more than 600,000 homes delivered since our founding. We constructsell and sellbuild a variety of new homes designed primarily for first-time, first move-up and active adult homebuyers, including attached and detached single-family residential homes, townhomes and condominiums. We offer homes in development communities, at urban in-fill locations and as part of mixed-use projects. Our homebuilding operations represent most of our business, accounting for 99.6%99.7% of our total revenues in 2015.2017. Our financial services operations, which accounted for .4%the remaining .3% of our total revenues in 2015,2017, offer certainvarious insurance products to our homebuyers in the markets where we build homes and provide title services in certain of those markets. Since July 2014, ourOur financial services operations have also providedprovide mortgage banking services, including residential consumer mortgage loan (“mortgage loan”) originations, to our homebuyers indirectly through KBHS Home Community Mortgage,Loans, LLC (“HCM”KBHS”). HCM is, an unconsolidated joint venture we formed with Nationstar MortgageStearns Lending, LLC (“Nationstar”Stearns”)., which became operational in 2017.

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. Also, as used in this report, “home” is a single-family residence, whether it is a single-family home or other type of residential property; “community” is a single development in which new homes are constructed as part of an integrated plan; and “community count” is the number of communities we have open for sales with at least five homes/lots left to sell.

The following charts present homes delivered and homebuilding revenues for the years ended November 30, 2013, 20142015, 2016 and 2015:2017:

Reflecting the geographic reach of our homebuilding business, we have ongoing operations in the nineseven states and 3935 major markets presented below. We also operate in various submarkets within these major markets. From time to time, we refer to these

Additional financial and operational information related to our homebuilding reporting segments, including revenues, pretax income (losses)(loss), inventories and assets, is provided below in the “Management’sItem 7 – Management’s Discussion and Analysis of Financial Condition

Since 1997,2016, we have followed the principles of an operationalimplemented a Returns-Focused Growth Plan that is designed to drive higher revenues and improvement in our homebuilding operating income margin, return on invested capital, return on equity and leverage ratio, and to achieve certain financial targets for these and related metrics in 2019. The plan’s main components are (1) executing our core business model thatstrategy, (2) improving our asset efficiency and (3) monetizing our significant deferred tax assets.

In each of our communities, we build, decorate and landscape model homes which play a key componentrole in providing customers with a hands-on experience. Our sales teams are trained by us and have extensive knowledge of management operating policies and our distinct homebuying experience and help increase the revenues we generate from home sales. These showrooms, which are generally centrally located within our served markets and utilize electronic displays and virtual design tools, allow ourproducts, assisting homebuyers to customize their home by selecting from a wide variety of design options and upgrades that are available at no cost or for purchase as part of the original constructionin all aspects of their home. The coordinated efforts of our sales representatives and design studio consultants are intended to generate higher customer satisfaction and lead to enhanced customer retention and referrals.purchase.

Our corporate management and support personnel develop and oversee the implementation of company-wide strategic initiatives, our overall operational policies and internal control standards, and perform various centralized functions, including architecture; purchasing and national contracts; treasury and cash management; land acquisition approval; risk and litigation management; accounting and financial reporting; internal audit and compliance activities; information technology systems; and investor and media relations. Corporate management is responsible for, among other things, evaluating and selecting the geographic markets in which we operate, consistent with our overall business strategy; allocating capital resources to markets for land acquisition and development activities; making major personnel decisions related to employee compensation and benefits; and monitoring the financial and operational performance of our divisions.

Developable land for the production of homes is a core resource for our business. Based on our current strategic plans, we seek to own or control land sufficient to meet our forecasted production goals for the next three to five years. In 2016,2018, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment return and marketing standards. However, we may decide to sell certain land interests as part of our capital allocation and marketing strategy, or to monetize land previously held for future development as part of our Returns-Focused Growth Plan, or for other reasons.

Our community development process generally consists of four phases: land acquisition, land development into finished lots for a community (if necessary), home construction and delivery of completed homes to buyers.homebuyers. Historically, our community development process has typically ranged from six to 24 months in our West Coast homebuilding reporting segment, with a somewhat shorter duration in our other homebuilding reporting segments. Our community development process varies based on, among other things, the extent and speed of required government approvals and utility service activations, the overall size of a particular community, the scope of necessary site preparation activities, the type of product(s) that will be offered, weather conditions, time of year, promotional marketing results, the availability of construction resources, consumer demand, local and general economic and housing market conditions, and other factors.

Although they vary significantly in size and complexity, our communities typically consist of 30 to 250 lots ranging in size from 1,9001,800 to 11,50011,000 square feet. In our communities, we typically offer three to 15 home design choices. We also generally build one to three model homes at each community so that prospective buyershomebuyers can preview the various products available. Depending on the community, we may offer premium lots containing more square footage, better views and/or location benefits. Some of our communities consist of multiple-story structures that encompass several attached condominium-style units.

As noted above, we target geographic areas for potential land acquisitions and community development based on the results of periodic surveys of both new and resale homebuyers in particular markets, prevailing local economic conditions and home sales activity, the supply and type of homes that are available for sale, and other market research activities. Local, in-house specialists analyze specific geographic areas to identify desirable land acquisition targets, or to evaluate whether to dispose of an existing land interest. We also use studies performed by third-party specialists.

We generally structure our land acquisition and land development activities to minimize, or to defer the timing of, expenditures in order to reduce both the market risks associated with holding land and our working capital and financial commitments, including interest and other carrying costs. We typically use contracts that, in exchange for a small initial option payment or earnest money deposit, payment give us an option or similar right to acquire land at a future date, usually at a pre-determined price and pending our satisfaction with the feasibility of developing and selling homes on the land and/or an underlying land seller’s completion of certain obligations, such as securing entitlements, developing infrastructure or finishing lots. We refer to land subject to such option or similar contractual rights as being “controlled.” Our decision to exercise a particular land option or similar right is based on the results of our due diligence and continued market viability analysis after entering into such a contract. Information related to our land option contracts and other similar contracts is provided in Note 7.7 – Inventory Impairments and Land Option Contract Abandonments in the Notes to Consolidated Financial Statements in this report.

The following table presents the number of inventory lots we owned, in various stages of development, or controlled under land option contracts or other similar contracts by homebuilding reporting segment as of November 30, 20152017 and 2014:2016:

The following charts present the percentage of inventory lots we owned or controlled under land option contracts or other similar contracts by homebuilding reporting segment and the percentage of total lots we owned and controlled under option as of November 30, 2015:2017:

We act as the general contractor for the majority of our communities, and engage outside general contractors in all other instances. We, or the outside general contractors we engage, contract with a variety of independent subcontractors, who are

Our “backlog” consists of homes that are under a purchase contract but have not yet been delivered to a buyer.homebuyer. Ending backlog represents the number of homes in backlog from the previous period plus the number of net orders (new orders for homes less cancellations) generated during the current period minus the number of homes delivered during the current period. Our backlog at any given time will be affected by cancellations, homes delivered and our community count. Our cancellation rates and the factors affecting our cancellationsuch rates are further discussed below in both the “Risk Factors”Item 1A – Risk Factors and “Management’sItem 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” sectionsOperations in this report. The number of homes we deliver has historically increased from the first to the fourth quarter in any year. Substantially all of our homes in backlog at November 30, 20152017 are expected to be delivered during the year ended November 30, 2016.2018.

Our backlog at November 30, 2015 increased 36% to 3,966 homes from 2,9092017 of 4,411 was essentially even with the 4,420 homes at November 30, 2014, largely due to a year-over-year increase2016. The average selling price of our homes in our net orders in 2015.backlog was $376,400 at November 30, 2017, up 10% from $343,700 at November 30, 2016. Our backlog at November 30, 20152017 represented potential future housing revenues of approximately $1.28$1.66 billion, a 40%9% increase from approximately $914.0 million$1.52 billion at November 30, 2014,2016, reflecting the larger number of homes in our backlog and a higher average selling price of those homes.the homes in our backlog.

At December 31, 20152017 and 2014,2016, we had approximately 1,6801,915 and 1,5901,790 full-time employees, respectively. None of our employees are represented by a collective bargaining agreement.

Our operations have historically been funded by internally generated cash flows, public equity and debt issuances, land option contracts and other similar contracts, and land seller financing, and performance bonds and letters of credit. We also have the ability to borrow funds under our unsecured revolving credit facility with various banks (“Credit Facility”). Depending on market conditions and available opportunities, we may obtain project financing, or secure external financing with community or other inventory assets that we own or control. By “project financing,” we mean loans that are specifically obtained for, or secured by, particular communities or other inventory assets. We may also arrange or engage in bank loan, project debt or other financial transactions and/or expand the capacity of the Credit Facility or our cash-collateralized letter of credit facilitiesfacility with variousa financial institutionsinstitution (the “LOC Facilities”Facility”) or enter into additional such facilities.

As part of our due diligence process for land acquisitions, we often use third-party environmental consultants to investigate potential environmental risks, and we require disclosures, representations and warranties from land sellers regarding environmental risks. Despite these efforts, there can be no assurance that we will avoid material liabilities relating to the existence or removal of toxic wastes, site restoration, monitoring or other environmental matters affecting properties currently or previously owned or controlled by us. No estimate of any potential liabilities can be made although weWe may, from time to time, acquire property that requires us to incur environmental clean-up costs after conducting appropriate due diligence, including, but not limited to, using detailed investigations performed by environmental consultants. In such instances, we take steps prior to our acquisition of the land to gain reasonable assurance as to the precise scope of work required and the costs associated with removal, site restoration and/or monitoring. To the extent contamination or other environmental issues have occurred in the past, we will attempt to recover restoration costs from third parties, such as the generators of hazardous waste, land sellers or others in the prior chain of title and/or their insurers. Based on these practices, we anticipate that it is unlikely that environmental clean-up costs will have a material effect on our consolidated financial statements. However, despite these efforts, there can be no assurance that we will avoid material liabilities relating to the existence or removal of toxic wastes, site restoration, monitoring or other environmental matters affecting properties currently or previously owned or controlled by us, and no estimate of any potential liabilities can be made. We have not been notified by any governmental agency of any claim that any of the properties owned or formerly owned by us are identified by the U.S. Environmental Protection Agency (or similar state or local agency) as being a “Superfund” (or similar state or local) clean-up site requiring remediation, which could have a material effect on our future consolidated financial statements. Costs associated with the use of environmental consultants are not material to our consolidated financial statements.

We have made a dedicated effort to further differentiate ourselves from other homebuilders and resale homes through our ongoing commitment to become a leading national company in environmental sustainability. We continually seek out and utilize innovative technologies and systems to further improve the energy and water efficiency of our homes, as well as engage in campaigns and other educational efforts, sometimes together with other companies, organizations and groups, to increase consumer awareness of the importance and impact of sustainability in selecting a home and the products within a home. Under our commitment to sustainability, we, among other things:

More information about our sustainability commitment can be found in our annual sustainability reports, which we have published on our website since 2008. We intend to continue to research, evaluate and utilize new or improved products and construction and business practices consistent with our commitment and believe our sustainability initiatives can help put us in a better position, compared to resale homes and homebuilders with less-developed programs, to comply with evolving local, state and federal rules and regulations intended to protect natural resources and to address climate change and similar environmental concerns.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, beneficial ownership reports on Forms 3, 4 and 5 and proxy statements, as well as all amendments to those reports are available free of charge through our investor relations website at http://investor.kbhome.com, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). We will also provide these reports in electronic or paper format free of charge upon request made to our investor relations department at investorrelations@kbhome.com or at our principal executive offices. We intend for our investor relations website to be the primary location where investors and the general public can obtain announcements regarding, and can learn more about, our financial and operational performance, business plans and prospects, our board of directors, our senior executive management team, and our corporate governance policies, including our

The following important economic and market, strategic, operational, and legal and regulatory risk factors could adversely impact our business. These factors could cause our actual results to differ materially from the forward-looking and other statements that (a) we make in registration statements, periodic reports (including this report) and other filings with the SEC and from time to time in our news releases, annual reports and other written reports or communications, (b) we post on or make available through our websites and/or through other electronic channels, and (c) our personnel and representatives make orally from time to time.

Since 2012, the housing market has continued to improve compared to the several difficult years of the housing downturn from mid-2006 through 2011. The improvement has been driven primarily by steady demand for homes, fairly low inventories of homes available for sale and generally healthy economic and demographic factors. However, the performance of individual housing markets varied throughout 2015, withAs in 2017, we expect future home sales activity and selling price appreciation robust(or depreciation) to vary in certainstrength between markets and tepid in others duewithin submarkets based to among other things, risinga substantial degree on their specific economic and housing pricesenvironments, which may also reflect national, state and/or inventory levels.

If on an overall basiseconomic or housing conditions become more challenging generally or in our served markets, due to the economicfactors listed above, whether individually or housing environment becomes more challenging;collectively, or otherwise, or home sales or selling prices do not continue to advance at the same pace as in recent years or decline; or any or all of the negative factors or events described above occur, persist and/or worsen,decline, there would likely be a corresponding adverse effect on our business and our consolidated financial statements, including, but not limited to, our net orders, the number of homes we deliver, our average selling prices, the amount of revenues we generate, our housing gross profit margins and our ability to operate profitably, and the effect may be material. In addition, adjustments to federal government economic, taxation and spending laws, policies or programs by the current administration and U.S. Congress may negatively impact the financial markets, consumer spending and/or the housing market, and, in turn, materially and adversely affect our operating results and consolidated financial statements.

We depend on suchthird-party lenders, (including HCM)including Stearns, our joint venture partner in KBHS, to provide mortgage loans thatto our buyers typically requirehomebuyers who need such financing to purchase our homes. Higherhomes, and our dependence on such lenders is greater than for other homebuilders that operate a captive mortgage lender. Homebuyers’ ability to obtain financing largely depends on prevailing mortgage loan interest rates, which may result from the Federal Reserve deciding to increasecredit standards that mortgage lenders use and the availability of mortgage loan programs provided by federal funds rate and/or investors’ expectationsgovernment agencies (such as to the Federal Reserve’s potential actions to influence interest rates, could also measurably reduce demand for our homes by increasing borrowers’ financing costs, and thereby have a material adverse effect on our consolidated financial statements.

Our buyershomebuyers may obtain mortgage financing for their home purchases from any lender or other provider of their choice, including HCM. If, due to credit or consumer lending market conditions, regulatory requirements, or other factors or business decisions, these lenders refuse or are unable to provide mortgage loans to our buyers, the number of homeschoice. However, we deliver, our business and our consolidated financial statements may be materially and adversely affected.

We face significant competition in several areas of our business from other homebuilders, some of which have recently grown larger through mergers and operational performance, and the continued implementationacquisitions, sellers of theseexisting homes, and other strategies may not be successful.

We can provide no guaranteeassurance that our strategies, and any related initiatives or actions, will be successful, that they will generate growth, or earnings or returns at any particular level or within any particular time frame, or that we will achieve in 20162018 or beyond positive operational or financial results or results in any particular metric or measure equal to or better than our 20152017 performance, or perform in any period as well as other homebuilders. In addition, we can provide no assurance that our community locations and products (or any refining of our products) will successfully attract consumers, command selling prices, or generate orders, revenues and/or housing gross profit margins at the levels we have experienced in the past or anticipate in future periods, at levels sufficient for us to be profitable or at levels higher than other homebuilders. We also cannot provide any assurance that we will be able to maintain theseour strategies, and any related initiatives or actions, in 20162018 and, due to unexpectedly favorable or unfavorable market conditions or other factors, we may determine that we need to adjust, refine or abandon all or portions of theseour strategies, initiatives or actions, althoughthough we cannot guarantee that any such changes will be successful. The failure of any one or more of our present strategies, or any related initiatives or actions, or the failure of any adjustments or alternative strategies, initiatives or actions that we may pursue or implement, to be successful would likely have an

The availability of developable land, particularly finished and partially finished lots, that meetsmeeting our investment return and marketing standards depends on a number ofseveral factors, outside of our control, including, among other things, land availability in general, geographical/topographicaltopographical/governmental constraints, land sellers’ business relationships and competition for desirable property, legal or government agency or utility service company processes, our abilityproperty. As discussed above in the “Competition, Seasonality, Delivery Mix and the costs to obtain building permitsOther Factors” section in this report, since 2013 we have experienced heightened competition with homebuilders and other developers and investors for land, which, in addition to geographic, topographic and regulatory approvalslimitations, has caused the availability of desirable land in high-demand submarkets to become more constrained and prevailing conditions in the marketplacecostly. In some instances, these other homebuilders, developers and investors (both domestic and international) have greater financial resources than us and/or use less stringent underwriting standards that enable them to bid more for land.

Should suitable land become less available to us, the number of homes that we may be able to build and selldeliver could be reduced. In addition, as noted above, the cost of attractive land could continue to increase and adversely impact our housing gross profit margins our consolidated financial statements and our ability to maintain ownership or control of a sufficient supply of land to meet our production goals. The availabilityA lack of available suitable land could also affect the success of our current strategies, and growth initiatives. Further, if we decide to reduce our land acquisition activity in 2016 below our current plans due to a lack of available assets that meet our standards,related initiatives, including our ability to increasegrow our scale and share in our served markets; to expand our community count, to maintain or grow our revenues and housing gross profits andcount; to maintain or increase our revenues; to reduce our debt; and to maintain or improve our profitability in 20162018 and beyond, would likely be constrained and could have a material adverse effect on our business and consolidated financial statements.

The value of the land and housing inventory we currently own or control depends on market conditions, including estimates of future demand for, and the revenues that can be generated from, this inventory. The value of our inventory can vary considerably because there is often a significant amount of time between our acquiring control or taking ownership of land and the delivery of homes on that land, particularly undeveloped and/or unentitled land. Based onIf, in 2018, the present economic or housing environment

Because of the uncertainties inherent to these matters, including our ability to maintainobtain recoveries for home warranty or increaseother construction defect claims from responsible independent contractors and/or their or our profitability.

We can provide no assurance that in 2018 we will not face additional home warranty and other things, cause businessesconstruction defect claims and/or incur additional related repair and residents to leave,other costs, or discourage businessesexperience negative publicity/reputational harm or households from coming to, affected served markets, thereby limiting economic growth and/or resulting in significant delays and/or higher costsbe successful in obtaining required inspections, permitsany recoveries of related repair and other costs, and that any of these items — if they occur, or approvals with respect to the developmentrecoveries of our communities located in such markets.  These negative impacts could adversely affect our ability to generate orders and revenues and/or to maintain or increase our housing gross profit margins in such markets, and the impact could be material and adverse to our consolidated financial statements.

At November 30, 2017, we had deferred tax assets of $633.6 million, net of a $23.6 million valuation allowance. Our ability to realize our deferred tax assets is based on the extent to which we generate future taxable income and on prevailing corporate income tax rates, and we cannot provide any assurance as to when and to what extent we will generate sufficient future taxable income to realize our deferred tax assets, whether in whole or in any part. On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted into law. While we are assessing the TCJA, and believe that weits impact on our business may not be ablefully known for some time, its reduction of the federal corporate income tax rate from 35% to recover, particularly21%, effective January 1, 2018, will result in our recording a one-time, non-cash charge of approximately $115 million to our provision for income taxes in the 2018 first quarter. The charge is solely due to the accounting re-measurement of our deferred tax assets based on the lower income tax rate. While we believe the TCJA will not impact the ability of our deferred tax assets, as re-measured, to reduce the amount of cash federal income taxes payable in 2018 and beyond, any future lowering of corporate income tax rates, and/or adjustment in the treatment of deferred tax assets, could impact the realization as well as the value of our deferred tax assets in our consolidated balance sheets, and these impacts could be material and adverse. Further, we have filed our tax returns based on certain filing positions we believe are appropriate. Should the applicable taxing authorities disagree with these positions, we may owe additional taxes.

The benefits of our deferred tax assets, including our net operating losses (“NOLs”), built-in losses and tax credits, would be reduced or potentially eliminated if we experienced an “ownership change” under Internal Revenue Code Section 382 (“Section 382”). 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 on the amount of NOLs we could use to reduce our home selling prices decrease,taxable income could result in a material amount of our NOLs expiring unused. This would significantly impair the value of our net deferred tax assets and, theas a result, have a material negative impact on our consolidated financial statements.

Our officers and employees are important resources, and we see attracting and retaining a dedicated and talented team as crucial to our success. If we are unable to continue to retain and attract qualified employees, or, alternatively, if we are required or believe it is appropriate to reduce our overhead expenses through significant personnel reductions or adjustments to compensation and benefits, our performance, our ability to achieve our strategic growth goals, our business and our consolidated financial statements could be material.materially and adversely affected.

A significant and extended disruption 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; and require us to incur significant expenses to address and remediate or otherwise resolve these kinds of issues. The release of confidential information may also lead to litigation or other proceedings against us by affected individuals, business partners and/or regulators, and the outcome of such proceedings, which could include losses, penalties, fines, injunctions, expenses and charges recorded against our earnings and cause us reputational harm, could have ana material and adverse impacteffect on our business and consolidated financial statements because increasing production costsstatements. Depending on its nature, a data security breach may result in the unauthorized use or loss of our assets or financial resources, and such unauthorized use(s) or loss(es), which could require us to increase our home selling prices in an effort to maintain satisfactory housing gross profit margins. However, webe significant, may not be able to increase our home selling prices to cover inflation in production costs due to market conditions, and we may need to hold or reduce our selling prices, or offer sales incentives or discounts, in order to competedetected for home sales. If determined necessary, our loweringsome period of home selling prices and/or using sales incentives or discounts, intime. In addition, to impacting our housing gross profit margins, may also reduce the value of our land inventory, including the assets we have purchased in recent years, and make it more difficult for us to fully recover the costs of our landmaintaining adequate protection against data security threats, based on considerations of their evolution, pervasiveness and any related community development through our home selling prices frequency and/or if we choose, through land sales. In addition, depressed land values may cause us to abandon and forfeit deposits on land option contracts and other similar contracts if we cannot satisfactorily renegotiate the purchase price of the subject land. We may record charges against our earnings for inventory impairments if the value of our owned inventory, including land we decide to sell, is reduced,government-mandated standards or for land option contract abandonments if we choose not to exercise land option contracts or other similar contracts, and these charges mayobligations regarding protective efforts, could be substantial. Inflation may also increase interest rates for mortgage loans and thereby reduce demand for our homes and lead to lower revenues, as well as increase the interest rates we may need to accept to obtain external financing for our business operations.

Under current tax law,Prior to the TCJA’s enactment, significant expenses of owning a home, including mortgage loan interest costs and real estate taxes, generally arewere deductible expenses for the purpose of calculating an individual’s or household’s federal, and in some cases state, taxable income, subject to various limitations. IfThe TCJA establishes new limits on the federal tax deductions individual taxpayers may take on mortgage loan interest payments and on state and local taxes, including real estate taxes. The TCJA also raises the standard deduction. These changes could reduce the perceived affordability of homeownership, and therefore the demand for homes, and/or have a moderating impact on home sales prices, in areas with relatively high housing prices and/or high state and local income taxes and real estate taxes, including in certain of our served markets in California. As a result, some communities in our California operations could experience lower net orders and/or a tempering of average sales prices in future periods depending on how homebuyers react to the tax law changes under the TCJA. In addition, if the federal government further changes, or a state government changes, its income tax laws by eliminating limiting or substantially reducing thesethe income tax benefits associated with homeownership, the after-tax cost of owning a home could increase substantially.measurably increase. Any increases in personal income tax rates and/or tax deduction limits or restrictions enacted at the federal or state levels, including those enacted under the TCJA, could adversely impact demand for and/or selling prices of new homes, including our homes, and the effect on our consolidated financial statements could be adverse and material.

Our homebuilding business is heavily regulated and subject to a significant amount of local, state and federal regulation concerningincluding, among other things, zoning, allowable housing density, natural and other resource protection, building designs, land/community developmentworksite health and safety and home construction methods, worksite safety and similar matters, as well as governmental taxes, fees and levies on the acquisition and development of land. These regulations often provide broad discretion to government authorities that oversee these matters, which can result in unanticipated delays, adjustments in the allowable scope, size or characteristics,restrictions, penalties for non-compliance and/or increases in the cost of a specified development project or a number of projects in particular markets. We may also experience delays due to a building permit moratorium or regulatory restrictions in any of the locations in which we operate, which can among other things, affect the balance of land held for future development in our inventory. Further, there isprovide no assurance that these governmental regulations or other laws, statutes, ordinances, rules and policies applicable to our business, will not be interpreted or revised in ways that will require us to change our present strategies or operations, incur significant compliance costs or

Independent subcontractors perform all land development and home construction work at our communities.  Although we do not have the ability to control what these independent subcontractors pay their own employees, or their own subcontractors, or the work rules they impose on such personnel, federal and state governmental agencies, including the U.S. National Labor Relations Board, have sought, and may in the future seek, to hold contracting parties like us responsible for subcontractors’ violations of wage and hour laws, or workers’ compensation, collective bargaining and/or other employment-related obligations related to subcontractors’ workforces.  Governmental agency determinations or attempts by others to make us responsible for subcontractors’ labor practices or obligations, whether under “joint employer” theories, specific state laws or regulations, such as under the California Labor Code, or otherwise, could create substantial adverse exposure for us in situations that are not within our control and could be material to our consolidated financial statements.

In addition, we are subject to a variety of local, state and federal laws, statutes, ordinances, rules and regulations concerning the environment, includingenvironment. These requirements to manage and/or mitigate storm water runoff, dust particles and other environmental impacts of our production activities at our communities. These laws, statutes, ordinances, rules and regulations, and/or evolving interpretations thereof, may cause production delays, may cause us to incur substantial compliance, litigation and other costs, and can prohibit or restrict homebuilding activity in certain regions or areas,areas; any of which could also reduce the fair value of the affected inventory and require us to record significant impairment charges against our earnings.charges. Environmental laws may also impose liability for the costs of removal or remediation of hazardous or toxic substances whether or not the developer or owner of the property knew of, or was responsible for, the presence of those substances. The actual or potential presence of those substances on or nearby our properties may prevent us from selling our homes and we may also be liable, under applicable laws and regulations or lawsuits brought by private parties, for hazardous or toxic substances on land that we have sold in the past. Further, a significant portion of

We are also involved in legal, arbitral or regulatory proceedings or investigations incidental to our business, is conductedthe outcome or settlement of which could result in California, one of the most highly regulated and litigious states in the country. Therefore, our potential exposure toclaims, losses, and expenses due to new laws, regulations or litigation may be greater than other homebuilders with a less significant California presence.

The homebuilding industrymortgage banking operations of KBHS are heavily regulated and housing market are very competitive,subject to rules and competitive conditions could adversely affect our business or our consolidated financial statements.

None.

We lease our corporate headquarters in Los Angeles, California. Our homebuilding division offices (except for our San Antonio, Texas office) and our design 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.

Our legal proceedings are discussed in Note 16.16 – Legal Matters in the Notes to Consolidated Financial Statements in this report.

EXECUTIVE OFFICERS OF THE REGISTRANT

As of December 31, 2015,2017, there were 635578 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.

Information regarding the shares of our common stock that may be issued under our equity compensation plans is provided below in the “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” section 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 common stock under this program in the year ended November 30, 2015. The shares purchased during the three months ended November 30, 2015 were previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of 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 shares purchased during the then-current balancethree months ended November 30, 2017, as reflected in the above table, were previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of 4,000,000 shares that remainedrestricted stock awards. These transactions are not considered repurchases under the prior board-approved share repurchase program.board of directors’ authorization.

The following graph compares the five-year cumulative total return of KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index for the periods ended November 30:

The data in this table should be read in conjunction with the “Management’sItem 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations and “FinancialItem 8 – Financial Statements and Supplementary Data” sectionsData in this report.

During 2017, we delivered steady improvement in our financial and operational performance, including enhancing our profitability, strengthening our balance sheet, improving our cash flow, generating better returns, and reducing our leverage ratio. Our return on equity for the year throughincreased 370 basis points to 10.0%, within the 2019 target range of 10% to 15% under our investmentsReturns-Focused Growth Plan. With the substantial cash flow we generated, we reduced our debt balance by more than $300 million and, by the end of 2017, improved our debt to capital ratio to 54.7% and our net debt to capital ratio to within our 2019 target range of 40% to 50%.

In 2017, we invested $1.52 billion in land and land development to support home delivery and revenue growth in 2018 and beyond, as we made additional progress in expanding our community count and positioning our communities in attractive locationscontinue to sustainwork on increasing the upward momentumscale of our business within our existing geographic footprint as part of our core business strategy. In 2016, such investments totaled $1.36 billion. Approximately 48% of our total investment in 2015 and beyond. Our average community count in 2015 rose 22% on a year-over-year basis, which helped drive measurable increases in our net orders, net order value and backlog levels. Our 2015 ending community count of 247 was 9% higher than our 2014 year-end number.

The following table provides a summary of the current-year and potential future productivity of our operating platform in terms ofpresents information concerning our net orders, net order value, cancellation rate, ending backlog, and community count for the years ended November 30, 20152017 and 20142016 (dollars in thousands):

The following table presents a summary of certain financial and operational data for our homebuilding operations (dollars in thousands, except average selling price):

The following tables present homes delivered, net orders, cancellation rates as a percentage of gross orders, net order value, average community count, and ending backlog (number of homes and value) by homebuilding reporting segment (dollars in thousands):

Housing revenues in 2015 grew 23%2017 rose 21% from the previous year, reflecting a 14%an 11% increase in the number of homes delivered and an 8%a 9% increase in the overall average selling price of those homes. In 2014,2016, housing revenues rose 14%grew 23% from 20132015 due to a 1%20% increase in the number of homes delivered and a 13%3% increase in the overall average selling price. We delivered a total of 8,19610,909 homes in 2015,2017, up from 7,215 homes delivered9,829 in 2014.2016. This year-over-year increase primarily reflected the 14%11% higher backlog of homes we had at the beginning of 20152017 as compared to the previous year and the 22%a 6% increase in our net orders during the current year. In 2014,2016, the number of homes delivered rose from 7,1458,196 in 20132015 mainly as a result of 6% growththe 36% higher backlog of homes we had at the beginning of 2016 and an 11% increase in our net orders during thethat year. The overall average selling price of homes delivered advanced to $354,800 in 2015 from $328,400 in 2014, which had increased from $291,700 in 2013.

The overall average selling price of our homes delivered rose to $397,400 in 2017 from $363,800 in 2016, which had increased on afrom $354,800 in 2015. The year-over-year basisincreases in both 2015our overall average selling price in 2017 and 2014 as a result of2016 reflected our continued strategic focus on positioning our new home communities in attractive, land-constrained locations featuringthat feature higher-income homebuyers who prefer larger homes and prefer to include more lot and product premiums and design options and upgrades with the construction of their homes;homebuyers; higher median home selling prices; our actions to balance homesales pace and selling prices and sales pacewithin our communities to optimize revenues and profits; and generally favorable market conditions. In 2017, the increase was also due to a shift in product and geographic mix.

Our landLand sale revenues totaled $21.1 million in 2017, $7.4 million in 2016 and $112.8 million in 2015, $20.0 million in 2014 and $.9 million in 2013. The substantial2015. In 2017, the year-over-year increase in land sale revenues was partly due to our focus on improving our asset efficiency as part of our Returns-Focused Growth Plan. The higher land sale revenues in 2015 as compared to 2017 and 2016 reflected activityour execution on opportunistic transactions in each of our four homebuilding reporting segments as part of an ongoing focus on improving our asset efficiency by executing on targeted opportunities to monetize certain land positions. The land sales in 2015 were mainly comprised of the sale of a large land parcel in northern California and sales of certain land previously held for future development.segments. Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our marketingbusiness strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at reasonableacceptable prices and prevailing market conditions.