8-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 23, 2002

KB HOME

(Exact Name of Registrant as Specified in Charter)

Delaware	1-9195	95-3666267
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

10990 Wilshire Boulevard, Los Angeles, California 90024
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code:
(310) 231-4000

N/A
(Former Name or Former Address, if Changed since Last Report)

TABLE OF CONTENTS

EXHIBIT 99.1

EXHIBIT 99.2

Item 5. Other Events.

         Two exhibits are filed herewith in connection with Pre-Effective Amendment No. 2 (filed January 23, 2002) to the $750 million Registration Statement on Form S-3 of KB HOME (Registration Statement No. 333-71630) initially filed on October 15, 2001.

Exhibits

Exhibit
99.1	Risk Factors.
99.2	KB Home press release dated January 10, 2002

         Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	KB HOME
Date: January 23, 2002	By:	/s/ Kimberly N. King
		Kimberly N. King Corporate Secretary and Director, Corporate Legal Affairs

2 EX-99.1 3 v78561ex99-1.htm EXHIBIT 99.1

EXHIBIT 99.1

RISK FACTORS

         We want you to be aware that the following important factors could adversely impact our homebuilding and mortgage lending operations. These factors could cause our actual results to differ materially from the forward-looking and other statements that we make in registration statements, periodic reports and other filings with the Securities and Exchange Commission, and that we make from time to time in our news releases, annual reports and other written communications, as well as oral forward-looking and other statements made from time to time by our representatives.

Our business is cyclical and is significantly impacted by changes in general and local economic conditions.

Our business is substantially affected by changes in national and general economic factors outside of our control, such as:

• short and long term interest rates;

• the availability of financing for homebuyers;

• consumer confidence;

• federal mortgage financing programs; and

• federal income tax provisions.

The cyclicality of our business is also highly sensitive to changes in economic conditions that can occur on a local or regional basis, such as changes in:

• housing demand;

• population growth;

• employment levels and job growth; and

• property taxes.

Weather conditions and natural disasters such as earthquakes, hurricanes, tornadoes, floods, droughts, fires and other casualties can harm our homebuilding business on a local or regional basis.

Fluctuating lumber prices and shortages, as well as shortages or price fluctuations in other important building materials, can have an adverse effect on our homebuilding business.

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Similarly, labor shortages or unrest among key trades, such as carpenters, roofers, electricians and plumbers, can delay the delivery of our homes and increase our costs.

The difficulties described above can cause demand and prices for our homes to diminish or cause us to take longer and incur more costs to build our homes. We may not be able to recover these increased costs by raising prices because the price of each home is usually set several months before the home is delivered, as our customers typically sign their home purchase contracts before construction has even begun on their homes. In addition, some of the difficulties described above could cause some homebuyers to cancel their home purchase contracts altogether.

Our success depends on the availability of improved lots and undeveloped land that meet our land investment criteria.

The availability of finished and partially developed lots and undeveloped land for purchase that meet our internal criteria depends on a number of factors outside our control, including land availability in general, competition with other homebuilders and land buyers for desirable property, inflation in land prices and zoning, allowable housing density and other regulatory requirements. Should suitable lots or land become less available, the number of homes we may be able to build and sell could be reduced, and the cost of land could be increased, perhaps substantially, which could adversely impact our results of operations.

Home prices and sales activity in particular regions of the Western, Southwestern and Central United States impact our results of operations because our business is concentrated in these markets.

Home prices and sales activity in some of our key markets have declined from time to time for market-specific reasons, including adverse weather or economic contraction due to, among other things, the failure or decline of key industries and employers. If home prices or sales activity decline in one or more of the key markets in which we operate, our costs may not decline at all or at the same rate and, as a result, our overall results of operations may be adversely impacted.

Interest rate increases or changes in federal lending programs could lower demand for our homes and adversely impact our mortgage lending operations.

Nearly all of our customers finance the purchase of their homes, and a significant majority of these customers arrange their financing through our mortgage lending subsidiary. Increases in interest rates or decreases in availability of mortgage financing would increase monthly mortgage costs for our potential homebuyers and could therefore reduce demand for our homes and mortgages. Increased interest rates can also hinder our ability to realize our backlog because our sales contracts provide our customers with a financing contingency. Financing contingencies allow customers to cancel their home purchase contracts in the event they cannot arrange for financing at interest rates that were prevailing when they signed their contracts.

Because the availability of FNMA, FHLMC, FHA and VA mortgage financing is an important factor in marketing many of our homes, any limitations or restrictions on the availability of those

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types of financing could reduce our home sales and the lending volume at our mortgage subsidiary.

We are subject to substantial legal and regulatory requirements regarding the development of land, the homebuilding process and protection of the environment, which can cause us to suffer delays and incur costs associated with compliance and prohibit or restrict homebuilding activity in some regions or areas.

Our homebuilding business is heavily regulated and subject to increasing local, state and federal statutes, ordinances, rules and regulations concerning zoning, resource protection, building design, construction and similar matters. These regulations often provide broad discretion to governmental authorities that regulate these matters, which can result in unanticipated delays or increases in the cost of a specified project or a number of projects in particular markets. We may also experience periodic delays in homebuilding projects due to building moratoria in any of the areas in which we operate.

We are also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the environment. These laws and regulations may cause delays in construction and delivering new homes, may cause us to incur substantial compliance and other costs, and can prohibit or severely restrict homebuilding activity in certain environmentally sensitive regions or areas. In addition, environmental laws may 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 presence of these substances on 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 properties and lots that we have sold in the past.

Further, a significant portion of our business is conducted in California, which is one of the most highly regulated and litigious states in the country. Therefore, our potential exposure to losses and expenses due to new laws, regulations or litigation may be greater than other homebuilders with a less significant California presence.

Because of our French business, we are also subject to regulations and restrictions imposed by the government of France concerning investments by non-French companies, such as us, in businesses in France, as well as to French laws and regulations similar to those discussed above.

Our mortgage operations are heavily regulated and subject to the rules and regulations promulgated by a number of governmental and quasi-governmental agencies. We are also subject to federal and state statutes and regulations which, among other things, prohibit discrimination, establish underwriting guidelines which include obtaining inspections and appraisals, require credit reports on prospective borrowers and fix maximum loan amounts. A finding that we had materially violated any of the foregoing laws could have an adverse effect on our results of mortgage operations.

We are subject to a Consent Order that we entered into with the Federal Trade Commission in 1979. Pursuant to the Consent Order, we provide explicit warranties on the quality of our

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homes, follow certain guidelines in advertising and provide certain disclosures to prospective purchasers of our homes. A finding that we have significantly violated the Consent Order could result in substantial liability and could limit our ability to sell homes in certain markets.

We build homes in highly competitive markets, which could hurt our future operating results.

We compete in each of our markets with a number of homebuilding companies for homebuyers, land, financing, raw materials and skilled management and labor resources. Our competitors include other large national homebuilders, as well as smaller regional and local builders that can have an advantage in local markets because of long-standing relationships they may have with local labor or land sellers. We also compete with other housing alternatives, such as existing homes and rental housing.

These competitive conditions can:

— make it difficult for us to acquire desirable land which meets our land buying criteria;

— cause us to offer or to increase our sales incentives or price discounts; and

— result in reduced sales.

Any of these competitive conditions can adversely impact our revenues, increase our costs and/or impede the growth of our local or regional homebuilding businesses.

Our mortgage lending operation competes with other mortgage lenders, including national, regional and local mortgage bankers, savings and loan associations and other financial institutions. Mortgage lenders with greater access to capital markets or those with less rigorous lending criteria can sometimes offer lower interest rates than we can, which can diminish our ability to compete and adversely impact the results of operations from our mortgage lending business.

Because of the seasonal nature of our business, our quarterly operating results fluctuate.

We have experienced seasonal fluctuations in quarterly operating results. We typically do not commence significant construction on a home before a sales contract has been signed with a homebuyer. A significant percentage of our sales contracts are made during the spring and summer months. Construction of our homes typically requires approximately three months and weather delays that often occur during late winter and early spring may extend this period. As a result of these combined factors, we historically have experienced uneven quarterly results, with lower revenues and operating income generally during the first and second quarters of our fiscal year.

Our leverage may place burdens on our ability to comply with the terms of our indebtedness, may restrict our ability to operate and may prevent us from fulfilling our obligations.

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The amount of our debt could have important consequences to you. For example, it could:

— limit our ability to obtain future financing for working capital, capital expenditures, acquisitions, debt service requirements or other requirements;

— require us to dedicate a substantial portion of our cash flow from operations to the payment of our debt and reduce our ability to use our cash flow for other purposes;

— impact our flexibility in planning for, or reacting to, changes in our business;

— place us at a competitive disadvantage because we have more debt than some of our competitors; and

— make us more vulnerable in the event of a downturn in our business or in general economic conditions.

Our ability to meet our debt service and other obligations will depend upon our future performance. We are engaged in businesses that are substantially affected by changes in economic cycles. Our revenues and earnings vary with the level of general economic activity in the markets we serve. Our businesses could also be affected by financial, political, business and other factors, many of which are beyond our control. The factors that affect our ability to generate cash can also affect our ability to raise additional funds through the sale of debt and/or equity securities, the refinancing of debt or the sale of assets. Changes in prevailing interest rates may also affect our ability to meet our debt service obligations, because borrowings under our bank credit facilities bear interest at floating rates. A higher interest rate on our debt could adversely affect our operating results.

Our business may not generate sufficient cash flow from operations and borrowings may not be available to us under our bank credit facilities in an amount sufficient to enable us to pay our debt service obligations or to fund our other liquidity needs. We may need to refinance all or a portion of our debt on or before maturity, which we may not be able to do on favorable terms or at all.

Under the terms of our bank credit facilities, our debt service payment obligations are defined as Consolidated Interest Expense. As defined, Consolidated Interest Expense for the year ended November 30, 2000 and the nine-months ended August 31, 2001 were $109.6 million and $89.3 million, respectively. On a pro forma basis, after giving effect to the issuance on December 14, 2001 of our $200,000,000 8-5/8% Senior Subordinated Notes due 2008 and the redemption on December 31, 2001 of our $175,000,000 9-3/8% Senior Subordinated Notes due 2003, our debt service payment obligations for the year ended November 30, 2000 and the nine-months ended August 31, 2001 would have been $110.4 million and $90.0 million, respectively.

We may have difficulty in continuing to obtain the additional financing required to operate and develop our business.

Our homebuilding operations require significant amounts of cash and/or available credit. It is not possible to predict the future terms or availability of additional capital. Moreover, our outstanding domestic public debt, as well as our domestic credit facilities and the credit facilities of our French subsidiary, contain provisions that may restrict the amount and nature of debt we may incur in the future. Our bank credit facilities limit our ability to borrow additional funds by placing a maximum cap on our leverage ratio. Under the most restrictive of these provisions, as of August 31, 2001, we would have been permitted to incur up to $1,888.8 million of Total Consolidated Indebtedness, as defined in the bank credit facilities. This maximum amount exceeded our actual Total Consolidated Indebtedness at August 31, 2001 by $735.0 million. There can be no assurance that we can actually borrow up to this maximum amount at any time, as our ability to borrow additional funds, and to raise additional capital through other means, is also dependent on conditions in the capital markets and our credit-worthiness. If conditions in the capital markets change significantly, it could reduce our sales and may hinder our future growth and results of operations.

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Our future growth may be limited by contracting economies in the markets in which we currently operate, our inability to find appropriate acquisition candidates, or our consummation of acquisitions that may not be successfully integrated or may not achieve expected benefits.

Our future growth and results of operations could be adversely affected if the markets in which we currently operate do not continue to support the expansion of our existing business or if we are unable to identify suitable acquisition opportunities in new markets. Over the last several years, there has been some significant consolidation in the homebuilding industry, which has made it somewhat more difficult for us to identify appropriate acquisition candidates in new markets and has increased competition for acquisition candidates. If we do consummate acquisitions in the future, we may not be successful in integrating the operations of the acquired businesses, including their product lines, dispersed operations and distinct corporate cultures. Our inability to grow in existing markets or find appropriate acquisition opportunities in new markets, or our failure to successfully manage future acquisitions, would limit our ability to grow and would adversely impact our future operating results.

Because we build homes in France, some of our revenues and earnings are subject to foreign currency and economic risks.

A portion of our construction operations are located in France. As a result, our financial results are affected by fluctuations in the value of the U.S. dollar as compared to the Euro and changes in the French economy to the extent those changes affect the homebuilding market there. We do not currently use any currency hedging instruments or other strategies to manage currency risks related to fluctuations in the value of the U.S. dollar or the Euro.

International instability, and future terrorist acts against or similar adverse developments involving the United States or France, could have a material adverse effect on our operations.

The September 11, 2001 terrorist acts against the United States and the subsequent U.S. military response have resulted in generalized economic uncertainty. In the weeks immediately following the September 11th attacks, net orders for our homes fell sharply and cancellations increased, although they have subsequently returned to levels that compare favorably on a year-over-year basis. We do not expect the adverse developments immediately following September 11th to have a material effect on our overall future results of operations. Despite this apparent rebound, considerable instability continues and consumer confidence continues to diminish. These generalized conditions or future adverse developments in the war against terrorism, future terrorist acts against the U.S. or France or increased international instability in general, could result in a material long-term decrease in our net orders and an increase in cancellations, which could materially adversely affect our operating results or result in a decline in the market value of our securities.

6 EX-99.2 4 v78561ex99-2.htm EXHIBIT 99.2

EXHIBIT 99.2

[KB HOME LOGO]

PRESS RELEASE

FOR RELEASE THURSDAY, JANUARY 10, 2002	For Further Information Contact:
5:30 AM Pacific Standard Time	Clem Teng, Investor Relations (310) 231-4033 or cteng@kbhome.com Kate Mulhearn, Media Contact (310) 231-4147 or kmulhearn@kbhome.com

KB HOME REPORTS RECORD FOURTH QUARTER EARNINGS
Net Income Advances 20.6%; EPS Beats Consensus Estimates;
Year-end Backlog Reaches an All-time High of 11,225 Units

     Los Angeles, California, January 10, 2002— KB Home (NYSE: KBH), one of the largest homebuilders in the United States and France, today announced record results for its fourth quarter and fiscal year ended November 30, 2001. Highlights include:

• Unit deliveries reached an all-time fourth quarter high of 7,883 units, driving total revenues to $1.45 billion, the highest fourth quarter level in the Company’s history. Net income for the quarter advanced 20.6% to a record $88.5 million, or $2.03 per diluted share.

• Full year 2001 net income advanced to $214.2 million, or $5.50 per diluted share, the highest level in the Company’s history. Full year unit deliveries of 24,868 and total revenues of $4.57 billion surpassed the Company’s previous records of 22,847 deliveries and $3.93 billion in revenues established in 2000. The Company’s deliveries have grown at a five-year compound annual rate of 19%.

• The Company ended the year with substantial liquidity, including $281.3 million in cash and $564.1 million of available borrowing capacity under its revolving credit facility.

• The Company’s ratio of debt to total capital improved 4 percentage points to 49.9% at November 30, 2001 from 53.9% at November 30, 2000. Stockholders’ equity rose 66.9% to $1.09 billion at November 30, 2001 from $654.8 million at November 30, 2000. The Company’s average return on equity for the last five years has exceeded 20%.

• Year-end backlog exceeded 11,000 units for the first time in the Company’s history and represented future revenues of $1.91 billion at November 30, 2001, providing excellent visibility for 2002 results.

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     “In the fourth quarter, with EPS of $2.03, KB Home continued the trend of consistent financial performance and beat Wall Street consensus estimates by more than 10%. The homebuilding industry in general and KB Home in particular have exhibited remarkable resilience during the recent economic slowdown and the aftermath of the tragic events of September 11th,” commented Bruce Karatz, Chairman and Chief Executive Officer. “We believe the industry’s performance during this economic downturn demonstrates the strength of our industry and reflects the positive evolution of large public homebuilders. Our capital structure and operational disciplines allow us to deliver more consistent results even during challenging times.”

     Net income rose 20.6% to $88.5 million, or $2.03 per diluted share, in the fourth quarter from $73.4 million, or $2.00 per diluted share for the same quarter of 2000. The increase in net income for the quarter ended November 30, 2001 stemmed from higher unit delivery volume and increased income from the Company’s mortgage banking operations. The Company’s year-over-year earnings per share growth for the fourth quarter was adversely impacted by an 18.3% increase in the average number of shares outstanding resulting from the Company’s conversion of its Feline Prides in August 2001.

     Unit deliveries (including deliveries from joint ventures) rose 10.0% to 7,883 units in the fourth quarter of 2001 from 7,168 units in the same quarter of 2000. Total construction revenues for the quarter ended November 30, 2001 were $1.43 billion, the highest for any fourth quarter in the Company’s history, up from $1.23 billion for the same quarter a year ago. Housing revenues reached $1.40 billion, increasing 16.2% from $1.20 billion in the year-earlier quarter due to the combined effects of higher unit volume and a higher average selling price, which rose 5.2% to $178,800 for the fourth quarter of 2001 from $169,900 for the same quarter of 2000. Construction revenues for the fourth quarter of 2001 included French commercial revenues of $16.3 million and land sales of $13.1 million.

     “We had an excellent fourth quarter and full year in 2001 with solid increases in unit volume, revenues and earnings,” stated Karatz. “The strategies we have employed to reduce the financial risk in our business and deliver predictable, sustainable performance are working as planned. Our unit deliveries and earnings have grown at five-year compound annual rates of 19% and 37%, respectively, and our average return on equity for the last five years has exceeded 20%. It is my hope that the multiples and valuations in the homebuilding industry will increase as KB Home and other homebuilders continue to demonstrate that our industry has become less sensitive to economic swings.”

     Construction operating income for the fourth quarter totaled $135.1 million compared with $121.5 million in the year-earlier quarter, an increase of 11.2%, generated mainly from the combined effects of higher unit volume and housing gross margins. The Company’s housing gross margin rose to 20.8% in the three months ended November 30, 2001 from 20.6% in the same period of 2000. Commercial activities and land sales produced total profits of $3.6 million in the fourth quarter of 2001 compared to profits of $2.7 million generated in the fourth quarter of 2000.

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     Pretax income from the Company’s mortgage banking operations rose 80.7% to $14.5 million in the fourth quarter of 2001 from $8.0 million in the same quarter a year ago, benefiting from higher domestic unit volume, increased retention and a favorable ratio of fixed rate to variable rate loans.

     “We ended the year in a solid financial position with over $280 million in cash, plenty of available borrowing capacity and our leverage ratio below 50%,” commented Karatz. “The financial flexibility we have achieved as a result of strong earnings growth and the strategic management of our business should enable us to navigate through the current economic climate and seize opportunities presented.”

     Total stockholders’ equity advanced 66.9% from the prior year to $1.09 billion at November 30, 2001. On a per share basis, stockholders’ equity was $25.87 at November 30, 2001 compared to $19.16 at November 30, 2000. The Company’s ratio of debt to total capital at the end of the fourth quarter improved 4 percentage points to 49.9% in 2001 from 53.9% in 2000. Net of the construction cash balance at November 30, 2001, the ratio of net debt to total capital was 42.9%. At the end of the fourth quarter of 2001, the Company had $564.1 million of available borrowing capacity as no amounts were outstanding under its revolving credit facility.

     The Company’s backlog value reached $1.91 billion on 11,225 units at November 30, 2001, the highest level for any year-end in its history. At November 30, 2001, the Company had approximately two quarters of deliveries in backlog, providing excellent visibility for 2002 earnings. Net orders of 5,353 for the fourth quarter were down slightly from 5,418 net orders in the year-earlier quarter on mixed results as year-over-year increases in net orders posted by the Central and France regions were offset by decreases in the West Coast and Southwest regions. Net orders remained volatile following the September 11th attack but regained strength late in the quarter. Year-over-year net order comparisons for the final two months of the quarter showed sequential improvement with the month of November turning positive results. Subsequent to the end of the quarter, the overall net order comparison for the month of December also remained slightly positive.

     For the year ended November 30, 2001, unit deliveries (including joint ventures) totaled 24,868, increasing 8.8% from 22,847 in the year-earlier period and establishing a new company record. Total revenues for the year rose 16.4% to $4.57 billion from $3.93 billion in the year ago period. Net income for the year ended November 30, 2001 was $214.2 million, or $5.50 per diluted share compared to $170.3 million, or $4.25 per diluted share in the year ago period (excluding a one-time gain of $39.6 million or $.99 per diluted share on the issuance of stock by the Company’s French subsidiary in an initial public offering). Including this gain, net income and diluted earnings per share for the year ended November 30, 2000 were $210.0 million and $5.24, respectively.

The Conference Call on Fourth Quarter 2001 Earnings will be broadcast live TODAY at 8:00 AM Pacific Standard Time, 11:00 AM Eastern Standard Time. To listen, please go to the Investor Relations section of the Company’s Web site at www.kbhome.com.

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     KB Home is one of America’s premier homebuilders with domestic operating divisions in the following regions and states: West Coast— California; Southwest— Arizona, Nevada and New Mexico; and Central—Colorado, Texas and Florida. Kaufman & Broad S.A., the Company’s majority-owned subsidiary, is one of the largest homebuilders in France. In fiscal 2001, the Company delivered homes to 24,868 families in the United States and France. It also operates a full-service mortgage company for the convenience of its buyers. Founded in 1957, KB Home is a Fortune 500 company listed on the New York Stock Exchange under the ticker symbol “KBH.” For more information about any of KB Home’s new home communities, call 1-800-34-HOMES or visit the Company’s Web site at www.kbhome.com.

     Except for the historical information contained herein, certain matters discussed in this press release are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, including any statements concerning future financial performance, business and prospects, and future Company actions and their expected results. These forward-looking statements are subject to risks, uncertainties and assumptions including, but not limited to, the continued impact of the recent terrorist activities and U.S. response, accelerating recessionary trends and other adverse changes in general economic conditions, material prices, labor costs, interest rates, uncertainties associated with California’s electricity supply problems, the secondary market for loans, consumer confidence, competition, currency exchange rates (insofar as they affect the Company’s operations in France), environmental factors, government regulations affecting the Company’s operations, the availability and cost of land in desirable areas, unanticipated violations of Company policy, unanticipated legal proceedings, and conditions in the capital, credit and homebuilding markets. See the Company’s Annual Report on Form 10-K and its Annual Report to Shareholders for the year ended November 30, 2000 and its other filings for a further discussion of these and other risks and uncertainties applicable to the Company’s business.

# # #
(Tables Follow)
# # #

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KB HOME
CONSOLIDATED STATEMENTS OF INCOME
For the Twelve Months and Three Months Ended November 30, 2001 and 2000
(In Thousands, Except Per Share Amounts)

			Twelve Months						Three Months
			2001			2000			2001			2000
Total revenues			$	4,574,184		$	3,930,858		$	1,450,861		$	1,244,067
Construction:
	Revenues			4,501,715			3,870,488			1,426,419			1,225,152
	Costs and expenses			(4,149,399	)		(3,581,879	)		(1,291,341	)		(1,103,667	)
	Operating income			352,316			288,609			135,078			121,485
	Interest income			3,559			5,782			913			761
	Interest expense, net of amounts capitalized			(41,072	)		(31,479	)		(10,349	)		(9,152	)
	Minority interests			(27,932	)		(31,640	)		(7,658	)		(10,699	)
	Equity in pretax of unconsolidated joint ventures			3,875			2,926			1,494			673
	Gain on issuance of French subsidiary stock			—			39,630			—			—
	Construction pretax income			290,746			273,828			119,478			103,068
Mortgage banking:
	Revenues:
		Interest income		21,935			21,130			6,073			5,229
		Other		50,534			39,240			18,369			13,686
				72,469			60,370			24,442			18,915
	Expenses:
		Interest		(18,436	)		(19,374	)		(3,984	)		(5,118	)
		General and administrative		(20,262	)		(17,164	)		(5,928	)		(5,758	)
	Mortgage banking pretax income			33,771			23,832			14,530			8,039
Total pretax income				324,517			297,660			134,008			111,107
Income taxes				(110,300	)		(87,700	)		(45,500	)		(37,700	)
Net income			$	214,217		$	209,960		$	88,508		$	73,407
Basic earnings per share			$	5.72		$	5.39		$	2.10		$	2.10
Diluted earnings per share			$	5.50		$	5.24		$	2.03		$	2.00
Basic average shares outstanding				37,465			38,931			42,188			34,977
Diluted average shares outstanding				38,919			40,069			43,500			36,756

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KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands)

		November 30,		August 31,		November 30,
		2001		2001		2000
ASSETS
Construction:
	Cash and cash equivalents	$	266,195	$	33,725	$	21,385
	Receivables		437,043		371,581		306,581
	Inventories		1,884,761		1,969,675		1,657,401
	Investments in unconsolidated joint ventures		8,844		8,696		10,407
	Deferred income taxes		118,584		66,633		73,842
	Goodwill		190,785		192,399		202,177
	Other assets		77,310		96,137		89,975
			2,983,522		2,738,846		2,361,768
Mortgage banking:
	Cash and cash equivalents		15,138		11,456		11,696
	Receivables		686,403		540,322		446,302
	Other assets		7,803		8,574		9,155
			709,344		560,352		467,153
Total assets		$	3,692,866	$	3,299,198	$	2,828,921
LIABILITIES AND STOCKHOLDERS’ EQUITY
Construction:
	Accounts payable	$	446,279	$	343,861	$	311,537
	Accrued expenses and other liabilities		351,144		246,495		201,672
	Mortgages and notes payable		1,088,615		1,135,293		987,980
			1,886,038		1,725,649		1,501,189
Mortgage banking:
	Accounts payable and accrued expenses		33,289		15,032		11,135
	Notes payable		595,035		485,631		385,294
	Collateralized mortgage obligations secured by mortgage-backed securities		22,359		23,934		29,928
			650,683		524,597		426,357
Minority interests			63,664		59,407		246,616
Stockholders’ equity			1,092,481		989,545		654,759
Total liabilities and stockholders’ equity		$	3,692,866	$	3,299,198	$	2,828,921

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KB HOME
SUPPLEMENTAL INFORMATION
For the Twelve Months and Three Months Ended November 30, 2001 and 2000

			Twelve Months				Three Months
			2001		2000		2001		2000
Construction Revenues:
	Housing		$	4,367,001	$	3,769,154	$	1,397,061	$	1,202,023
	Commercial			69,888		802		16,298		802
	Land			64,826		100,532		13,060		22,327
		Total	$	4,501,715	$	3,870,488	$	1,426,419	$	1,225,152

			Twelve Months				Three Months
			2001		2000		2001		2000
Costs and Expenses:
	Construction and land costs		$	3,612,936	$	3,123,869	$	1,132,447	$	974,527
	Selling, general and administrative expenses			536,463		458,010		158,894		129,140
		Total	$	4,149,399	$	3,581,879	$	1,291,341	$	1,103,667

			Twelve Months				Three Months
			2001		2000		2001		2000
Average Sales Prices:
	West Coast		$	283,100	$	257,000	$	286,300	$	262,700
	Southwest			157,600		145,200		161,000		148,200
	Central			140,700		128,600		146,100		130,400
	Foreign			146,300		158,700		146,500		153,500
		Total	$	178,000	$	168,300	$	178,800	$	169,900

			Twelve Months				Three Months
			2001		2000		2001		2000
Net Orders:
	West Coast			4,772		6,018		973		1,198
	Southwest			6,478		6,036		1,156		1,337
	Central			10,029		8,923		2,051		1,941
	Foreign			3,436		2,854		1,156		836
		Total		24,715		23,831		5,336		5,312
	Unconsolidated Joint Ventures:			220		444		17		106

			Twelve Months				Three Months
			2001		2000		2001		2000
Unit Deliveries:
	West Coast			5,550		5,476		1,628		1,697
	Southwest			6,238		5,832		1,797		1,623
	Central			9,368		8,112		3,069		2,631
	Foreign			3,382		2,972		1,320		1,124
		Total		24,538		22,392		7,814		7,075
	Unconsolidated Joint Ventures:			330		455		69		93

			November 30, 2001				November 30, 2000
			Backlog Units		Backlog Value		Backlog Units		Backlog Value
Backlog Data:
	West Coast			1,643	$	474,645		2,421	$	643,620
	Southwest			2,551		420,282		2,311		345,609
	Central			4,921		700,251		4,010		541,258
	Foreign			2,012		294,870		1,817		272,901
		Total		11,127	$	1,890,048		10,559	$	1,803,388
	Unconsolidated Joint Ventures:			98	$	20,384		208	$	42,224

7 -----END PRIVACY-ENHANCED MESSAGE-----

EX-99.1

KB HOME EXHIBIT 99.1

EX-99.2

KB HOME EXHIBIT 99.2