Our obligations to pay principal, premium, if any, and interest under our senior notes and the 1.375% Convertible Senior Notes due 2019 and borrowings, if any, under the Credit Facility are guaranteed on a joint and several basis by certain of our subsidiaries (the “Guarantor Subsidiaries”). The guarantees are full and unconditional and the Guarantor Subsidiaries are 100% owned by us. Pursuant to the terms of the indenture governing our senior notes and the 1.375% Convertible Senior Notes due 2019, and the terms of the Credit Facility, if any of the Guarantor Subsidiaries ceases to be a “significant subsidiary” as defined by Rule 1-02 of Regulation S-X (as in effect on June 1, 1996) using a 5% rather than a 10% threshold (provided that the assets of our non-guarantor subsidiaries do not in the aggregate exceed 10% of an adjusted measure of our consolidated total assets), it will be automatically and unconditionally released and discharged from its guaranty of our senior notes, the 1.375% Convertible Senior Notes due 2019 and the Credit Facility so long as all guarantees by such Guarantor Subsidiary of any other of our or our subsidiaries’ indebtedness are terminated at or prior to the time of such release. We have determined that separate, full financial statements of the Guarantor Subsidiaries would not be material to investors and, accordingly, supplemental financial information for the Guarantor Subsidiaries is presented.

The supplemental financial information for all periods presented below reflects the relevant subsidiaries that were Guarantor Subsidiaries as of February 28, 2014. The format of the condensed consolidating financial statements has been revised for the periods previously reported in our quarterly reports to retrospectively reflect (a) the transfer of certain of our subsidiaries from non-guarantor subsidiaries to guarantor subsidiaries as a result of such subsidiaries becoming guarantor subsidiaries during 2013 and (b) the following elective reclassifications which relate solely to transactions between KB Home corporate and its subsidiaries: (i) the reclassification of KB Home corporate, guarantor and non-guarantor intercompany interest, which had previously been included in interest expense, to a separate line item with corresponding offsets in the consolidating adjustments column; (ii) the reclassification of the net intercompany funding activity of KB Home corporate, which was previously included in cash flows provided by (used in) financing activities, to cash flows from investing activities with corresponding offsets in the consolidating adjustments column; and (iii) the reclassification of dividends received by KB Home corporate from its subsidiaries to cash provided by (used in) operating activities. Such dividends were previously included in net cash provided by (used in) financing activities. This revised presentation of the condensed consolidating financial statements had no impact or effect on our consolidated financial statements for any periods presented, including our consolidated statements of operations, consolidated balance sheets and consolidated statements of cash flows.

Condensed Consolidating Statement of Operations

Three Months Ended February 28, 2014 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues	$	—		$	435,849		$	14,838		$	—		$	450,687
Homebuilding:
Revenues	$	—		$	435,849		$	12,418		$	—		$	448,267
Construction and land costs	—			(358,092		)	(11,182		)	—			(369,274		)
Selling, general and administrative expenses	(15,744		)	(41,972		)	(3,558		)	—			(61,274		)
Operating income (loss)	(15,744		)	35,785			(2,322		)	—			17,719
Interest income	167			1			—			—			168
Interest expense	(38,008		)	(1,272		)	—			28,004			(11,276		)
Intercompany interest	59,722			(32,096		)	378			(28,004		)	—
Equity in income of unconsolidated joint ventures	—			2,590			—			—			2,590
Homebuilding pretax income (loss)	6,137			5,008			(1,944		)	—			9,201
Financial services pretax income	—			—			1,562			—			1,562
Total pretax income (loss)	6,137			5,008			(382		)	—			10,763
Income tax expense	(100		)	(100		)	—			—			(200		)
Equity in net income of subsidiaries	4,526			—			—			(4,526		)	—
Net income (loss)	$	10,563		$	4,908		$	(382	)	$	(4,526	)	$	10,563

Condensed Consolidating Statement of Operations

Three Months Ended February 28, 2013 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues	$	—		$	393,228		$	11,991		$	—		$	405,219
Homebuilding:
Revenues	$	—		$	393,228		$	9,588		$	—		$	402,816
Construction and land costs	—			(334,498		)	(8,767		)	—			(343,265		)
Selling, general and administrative expenses	(14,823		)	(40,809		)	(3,465		)	—			(59,097		)
Operating income (loss)	(14,823		)	17,921			(2,644		)	—			454
Interest income	201			1			2			—			204
Interest expense	(31,847		)	(1,575		)	—			18,182			(15,240		)
Intercompany interest	45,356			(28,134		)	960			(18,182		)	—
Equity in loss of unconsolidated joint ventures	—			(435		)	—			—			(435		)
Homebuilding pretax loss	(1,113		)	(12,222		)	(1,682		)	—			(15,017		)
Financial services pretax income	—			—			2,659			—			2,659
Total pretax income (loss)	(1,113		)	(12,222		)	977			—			(12,358		)
Income tax expense	—			(100		)	—			—			(100		)
Equity in net loss of subsidiaries	(11,345		)	—			—			11,345			—
Net income (loss)	$	(12,458	)	$	(12,322	)	$	977		$	11,345		$	(12,458	)

Condensed Consolidating Balance Sheet

February 28, 2014 (in thousands)



	KB Home Corporate		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
Assets
Homebuilding:
Cash and cash equivalents	$	234,234	$	61,043	$	7,992	$	—		$	303,269
Restricted cash	42,083		—		—		—			42,083
Receivables	1,446		85,659		250		—			87,355
Inventories	—		2,600,119		34,825		—			2,634,944
Investments in unconsolidated joint ventures	—		60,648		—		—			60,648
Other assets	97,477		11,574		1,436		—			110,487
	375,240		2,819,043		44,503		—			3,238,786
Financial services	—		—		9,386		—			9,386
Intercompany receivables	2,397,174		—		113,059		(2,510,233		)	—
Investments in subsidiaries	42,004		—		—		(42,004		)	—
Total assets	$	2,814,418	$	2,819,043	$	166,948	$	(2,552,237	)	$	3,248,172
Liabilities and stockholders’ equity
Homebuilding:
Accounts payable, accrued expenses and other liabilities	$	134,679	$	295,212	$	94,407	$	—		$	524,298
Mortgages and notes payable	2,112,110		63,080		—		—			2,175,190
	2,246,789		358,292		94,407		—			2,699,488
Financial services	—		—		2,350		—			2,350
Intercompany payables	21,295		2,455,743		33,195		(2,510,233		)	—
Stockholders’ equity	546,334		5,008		36,996		(42,004		)	546,334
Total liabilities and stockholders’ equity	$	2,814,418	$	2,819,043	$	166,948	$	(2,552,237	)	$	3,248,172

Condensed Consolidating Balance Sheet

November 30, 2013 (in thousands)



	KB Home Corporate		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
Assets
Homebuilding:
Cash and cash equivalents	$	476,847	$	41,316	$	11,932	$	—		$	530,095
Restricted cash	41,906		—		—		—			41,906
Receivables	1,472		74,186		91		—			75,749
Inventories	—		2,263,034		35,543		—			2,298,577
Investments in unconsolidated joint ventures	—		130,192		—		—			130,192
Other assets	97,647		9,072		357		—			107,076
	617,872		2,517,800		47,923		—			3,183,595
Financial services	—		—		10,040		—			10,040
Intercompany receivables	2,129,729		—		117,829		(2,247,558		)	—
Investments in subsidiaries	39,955		—		—		(39,955		)	—
Total assets	$	2,787,556	$	2,517,800	$	175,792	$	(2,287,513	)	$	3,193,635
Liabilities and stockholders’ equity
Homebuilding:
Accounts payable, accrued expenses and other liabilities	$	117,875	$	292,220	$	94,363	$	—		$	504,458
Mortgages and notes payable	2,111,773		38,725		—		—			2,150,498
	2,229,648		330,945		94,363		—			2,654,956
Financial services	—		—		2,593		—			2,593
Intercompany payables	21,822		2,186,855		38,881		(2,247,558		)	—
Stockholders’ equity	536,086		—		39,955		(39,955		)	536,086
Total liabilities and stockholders’ equity	$	2,787,556	$	2,517,800	$	175,792	$	(2,287,513	)	$	3,193,635

Condensed Consolidating Statement of Cash Flows

Three Months Ended February 28, 2014 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Net cash provided by (used in) operating activities	$	25,225		$	(238,483	)	$	(7,805	)	$	—		$	(221,063	)
Cash flows from investing activities:
Contributions to unconsolidated joint ventures	—			(8,618		)	—			—			(8,618		)
Proceeds from sale of investment in unconsolidated joint venture	—			10,110			—			—			10,110
Purchases of property and equipment, net	(70		)	(1,455		)	(51		)	—			(1,576		)
Intercompany	(265,497		)	—			—			265,497			—
Net cash provided by (used in) investing activities	(265,567		)	37			(51		)	265,497			(84		)
Cash flows from financing activities:
Change in restricted cash	(177		)	—			—			—			(177		)
Payments on mortgages and land contracts due to land sellers and other loans	—			(2,655		)	—			—			(2,655		)
Payments of cash dividends	(2,094		)	—			—			—			(2,094		)
Intercompany	—			260,828			4,669			(265,497		)	—
Net cash provided by (used in) financing activities	(2,271		)	258,173			4,669			(265,497		)	(4,926		)
Net increase (decrease) in cash and cash equivalents	(242,613		)	19,727			(3,187		)	—			(226,073		)
Cash and cash equivalents at beginning of period	476,847			41,316			14,360			—			532,523
Cash and cash equivalents at end of period	$	234,234		$	61,043		$	11,173		$	—		$	306,450

Condensed Consolidating Statement of Cash Flows

Three Months Ended February 28, 2013 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Net cash provided by (used in) operating activities	$	8,208		$	(206,425	)	$	(12,815	)	$	—		$	(211,032	)
Cash flows from investing activities:
Contributions to unconsolidated joint ventures	—			(94		)	(210		)	—			(304		)
Purchases of property and equipment, net	(96		)	(318		)	(16		)	—			(430		)
Intercompany	(239,211		)	—			—			239,211			—
Net cash used in investing activities	(239,307		)	(412		)	(226		)	239,211			(734		)

Cash flows from financing activities:
Change in restricted cash	(2,257		)	—			—			—			(2,257		)
Proceeds from issuance of debt	230,000			—			—			—			230,000
Payment of debt issuance costs	(6,878		)	—			—			—			(6,878		)
Payments on mortgages and land contracts due to land sellers and other loans	—			(17,003		)	—			—			(17,003		)
Proceeds from issuance of common stock, net	109,811			—			—			—			109,811
Issuance of common stock under employee stock plans	52			—			—			—			52
Payments of cash dividends	(2,089		)	—			—			—			(2,089		)
Intercompany	—			230,182			9,029			(239,211		)	—
Net cash provided by financing activities	328,639			213,179			9,029			(239,211		)	311,636
Net increase (decrease) in cash and cash equivalents	97,540			6,342			(4,012		)	—			99,870
Cash and cash equivalents at beginning of period	457,007			54,205			14,476			—			525,688
Cash and cash equivalents at end of period	$	554,547		$	60,547		$	10,464		$	—		$	625,558