KB Home (KBH) 8-K KB Home Completes Sale of Its French Operations

Exhibit 99.2

Unaudited Pro Forma Condensed Consolidated Financial Statements

On July 10, 2007, KB Home (the “Company”) completed the sale of its entire 49% equity interest in its publicly-traded French subsidiary, Kaufman & Broad SA (“KBSA”), thereby disposing of all of its French homebuilding operations and assets, pursuant to a share purchase agreement (the “Share Purchase Agreement”) it entered into with Financière Gaillon 8 SAS (the “Purchaser”), an affiliate of PAI Partners, a European private equity firm, and three of the Company’s wholly-owned domestic subsidiaries: Kaufman and Broad Development Group, International Mortgage Acceptance Corporation, and Kaufman and Broad International, Inc. (collectively, the “Selling Subsidiaries”). Under the Share Purchase Agreement, the Purchaser acquired the entire 49% equity interest (representing 10,921,954 shares, which were held collectively by the Selling Subsidiaries) at a price of 55.00 euros per share. The purchase price consisted of 50.17 euros per share paid by the Purchaser in cash, and a cash dividend of 4.83 euros per share paid by KBSA upon the approval of KBSA’s board of directors. The Share Purchase Agreement was attached as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 25, 2007.

The results of operations of KBSA were classified as discontinued operations in the unaudited consolidated financial statements and notes thereto included in the Company’s statement of operations as of and for the six months ended May 31, 2007 in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” as presented in the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2007. Accordingly, there are no pro forma adjustments to continuing operations necessary to reflect the Company’s sale of its equity interest in KBSA for the six months ended May 31, 2007.

The following unaudited pro forma condensed consolidated balance sheet as of May 31, 2007 gives effect to the sale of the Company’s ownership interest in KBSA as if it had occurred as of May 31, 2007. The following unaudited pro forma condensed consolidated statement of operations for the six months ended May 31, 2007 gives effect to the sale of the Company’s ownership interest in KBSA as if it had occurred as of December 1, 2006 and its unaudited pro forma condensed consolidated statement of income for the year ended November 30, 2006 gives effect to the sale of the Company’s ownership interest in KBSA as if it had occurred as of December 1, 2005.

The unaudited pro forma condensed consolidated financial information herein contains estimates based on presently available information and certain assumptions that the Company believes are reasonable. The actual amounts could differ from these estimates. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position or operating results that would have been achieved by the Company had the sale of its ownership interest in KBSA been completed as of the dates indicated, or of the financial position or operating results that may be obtained by the Company in the future. In addition, the unaudited pro forma condensed consolidated financial information does not reflect changes that may occur as a result of activities subsequent to the disposition described above. These unaudited pro forma condensed consolidated financial statements and the accompanying notes have been derived from and should be read together with the financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2006 and the Quarterly Report on Form 10-Q for the quarter ended May 31, 2007.

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KB Home
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(in thousands)

	As of May 31, 2007
	As reported(a)			Adjustments			Pro forma
Assets
Construction:
Cash and cash equivalents	$	272,088		$	807,246	(b)	$	1,079,334
Receivables		235,274			—			235,274
Inventories		5,238,312			—			5,238,312
Investments in unconsolidated joint ventures		379,334			—			379,334
Deferred income taxes		548,440			—			548,440
Other assets		336,658			—			336,658
		7,010,106			807,246			7,817,352
Financial services		34,269			—			34,269
Assets of discontinued operations		1,570,084			(1,570,084	)(c)		—
Total assets	$	8,614,459		$	(762,838	)	$	7,851,621
Liabilities and Stockholders’ Equity
Construction:
Accounts payable	$	399,022		$	—		$	399,022
Accrued expenses and other liabilities		1,273,373			167,853	(d)		1,441,226
Mortgages and notes payable		2,811,932			—			2,811,932
		4,484,327			167,853			4,652,180
Financial services		28,500			—			28,500
Liabilities of discontinued operations		1,322,981			(1,322,981	)(c)		—
Stockholders’ equity:
Common stock		114,873			—			114,873
Paid-in capital		840,272			—			840,272
Retained earnings		2,815,783			460,443	(d)		3,276,226
Accumulated other comprehensive income		68,153			(68,153	)(d)		—
Grantor stock ownership trust, at cost		(133,821	)		—			(133,821	)
Treasury stock, at cost		(926,609	)		—			(926,609	)
Total stockholders’ equity		2,778,651			392,290			3,170,941
Total liabilities and stockholders’ equity	$	8,614,459		$	(762,838	)	$	7,851,621

See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.

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KB Home
Unaudited Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)

	Six Months Ended May 31, 2007
	As reported (a)			Adjustments		Pro forma
Total revenues	$	2,802,046		$	—	$	2,802,046
Construction:
Revenues	$	2,794,635		$	—	$	2,794,635
Costs and expenses		(3,054,491	)		—		(3,054,491	)
Operating loss		(259,856	)		—		(259,856	)
Interest income		10,268			—		10,268
Equity in pretax loss of unconsolidated joint ventures		(41,700	)		—		(41,700	)
Construction pretax loss		(291,288	)		—		(291,288	)
Financial services:
Revenues		7,411			—		7,411
Expenses		(2,411	)		—		(2,411	)
Equity in pretax income of unconsolidated joint venture		10,191			—		10,191
Financial services pretax income		15,191			—		15,191
Loss from continuing operations before income taxes		(276,097	)		—		(276,097	)
Income tax benefit		112,600			—		112,600
Loss from continuing operations	$	(163,497	)	$	—	$	(163,497	)
Basic loss per share — continuing operations	$	(2.12	)	$	—	$	(2.12	)
Diluted loss per share — continuing operations	$	(2.12	)	$	—	$	(2.12	)
Basic average shares outstanding		77,046			—		77,046
Diluted average shares outstanding		77,046			—		77,046

See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.

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KB Home
Unaudited Pro Forma Condensed Consolidated Statement of Income
(in thousands, except per share amounts)

	Year Ended November 30, 2006
	As reported (a)			Adjustments			Pro forma
Total revenues	$	11,003,792		$	(1,623,709	)(e)	$	9,380,083
Construction:
Revenues	$	10,983,552		$	(1,623,709	)(e)	$	9,359,843
Costs and expenses		(10,227,835	)		1,438,308	(e)		(8,789,527	)
Operating income		755,717			(185,401	)		570,316
Interest income		6,146			(643	)(e)		5,503
Interest expense, net of amounts capitalized		(18,723	)		1,910	(e)		(16,813	)
Minority interests		(68,300	)		68,300	(e)		—
Equity in pretax loss of unconsolidated joint ventures		(10,325	)		(10,505	)(e)		(20,830	)
Construction pretax income		664,515			(126,339	)		538,176
Financial services:
Revenues		20,240			—			20,240
Expenses		(5,923	)		—			(5,923	)
Equity in pretax income of unconsolidated joint venture		19,219			—			19,219
Financial services pretax income		33,536			—			33,536
Income from continuing operations before income taxes		698,051			(126,339	)		571,712
Income tax expense		(215,700	)		36,900	(e)		(178,800	)
Income from continuing operations	$	482,351		$	(89,439	)	$	392,912
Basic earnings per share — continuing operations	$	6.12					$	4.98
Diluted earnings per share — continuing operations	$	5.82					$	4.74
Basic average diluted shares outstanding		78,829						78,829
Diluted average shares outstanding		82,856						82,856

See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.

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Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.

(a)	Historical information as of and for the six months ended May 31, 2007 has been derived from the unaudited consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2007. Historical financial information for the year ended November 30, 2006 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2006.
(b)	Represents total consideration, comprised of cash proceeds from the sale and dividends, of $807.2 million received from the sale of the Company’s entire 49% equity interest in KBSA.
(c)	Adjustment to eliminate the carrying value of assets and liabilities of KBSA.
(d)	Adjustment to reflect the gain on the sale of the Company’s 49% equity interest in KBSA, net of the related income tax expense, and the recognition of $68.2 million of cumulative foreign currency translation adjustment. The estimated pro forma net gain is included in discontinued operations. The estimated pro forma net gain is calculated as follows (in thousands):

Total cash proceeds	$	807,246
Net book basis in investment sold		(247,103	)
Recognition of cumulative foreign currency translation adjustment		68,153
Estimated professional fees and closing costs		(16,038	)
Estimated pro forma gain on the sale of KBSA before income taxes		612,258
Income tax expense		(244,662	)
Estimated pro forma net gain		367,596
Deferred royalty income recognized on the sale of KBSA		92,847
Estimated total pro forma adjustment	$	460,443

(e) Adjustments to reflect the reclassification of KBSA operations for the year ended November 30, 2006 to discontinued operations. KBSA was presented as discontinued operations in the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2007.

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