Our obligations to pay principal, premium, if any, and interest on 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 August 31, 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 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 provided by (used in) 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 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

Nine Months Ended August 31, 2014 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues	$	—		$	1,557,252		$	47,656		$	—		$	1,604,908
Homebuilding:
Revenues	$	—		$	1,557,252		$	39,642		$	—		$	1,596,894
Construction and land costs	—			(1,268,984		)	(36,274		)	—			(1,305,258		)
Selling, general and administrative expenses	(47,489		)	(146,607		)	(11,619		)	—			(205,715		)
Operating income (loss)	(47,489		)	141,661			(8,251		)	—			85,921
Interest income	385			7			1			—			393
Interest expense	(122,634		)	(4,408		)	—			100,753			(26,289		)
Intercompany interest	206,943			(105,892		)	(298		)	(100,753		)	—
Equity in income of unconsolidated joint ventures	—			1,161			—			—			1,161
Homebuilding pretax income (loss)	37,205			32,529			(8,548		)	—			61,186
Financial services pretax income	—			—			5,162			—			5,162
Total pretax income (loss)	37,205			32,529			(3,386		)	—			66,348
Income tax expense	(400		)	(400		)	—			—			(800		)
Equity in net income of subsidiaries	28,743			—			—			(28,743		)	—
Net income (loss)	$	65,548		$	32,129		$	(3,386	)	$	(28,743	)	$	65,548

Condensed Consolidating Statement of Operations

Nine Months Ended August 31, 2013 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues	$	—		$	1,434,836		$	43,763		$	—		$	1,478,599
Homebuilding:
Revenues	$	—		$	1,434,836		$	35,568		$	—		$	1,470,404
Construction and land costs	—			(1,200,334		)	(32,310		)	—			(1,232,644		)
Selling, general and administrative expenses	(45,355		)	(136,703		)	(10,594		)	—			(192,652		)
Operating income (loss)	(45,355		)	97,799			(7,336		)	—			45,108
Interest income	607			18			4			—			629
Interest expense	(98,090		)	(4,167		)	—			61,184			(41,073		)
Intercompany interest	147,343			(86,909		)	750			(61,184		)	—
Equity in income (loss) of unconsolidated joint ventures	—			(1,659		)	1			—			(1,658		)
Homebuilding pretax income (loss)	4,505			5,082			(6,581		)	—			3,006
Financial services pretax income	—			—			7,041			—			7,041
Total pretax income	4,505			5,082			460			—			10,047
Income tax benefit	800			900			100			—			1,800
Equity in net income of subsidiaries	6,542			—			—			(6,542		)	—
Net income	$	11,847		$	5,982		$	560		$	(6,542	)	$	11,847

Condensed Consolidating Statement of Operations

Three Months Ended August 31, 2014 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues	$	—		$	568,996		$	20,218		$	—		$	589,214
Homebuilding:
Revenues	$	—		$	568,996		$	17,235		$	—		$	586,231
Construction and land costs	—			(464,162		)	(15,262		)	—			(479,424		)
Selling, general and administrative expenses	(15,995		)	(52,832		)	(4,070		)	—			(72,897		)
Operating income (loss)	(15,995		)	52,002			(2,097		)	—			33,910
Interest income	109			1			—			—			110
Interest expense	(42,955		)	(1,648		)	—			38,148			(6,455		)
Intercompany interest	76,512			(38,359		)	(5		)	(38,148		)	—
Equity in loss of unconsolidated joint ventures	—			(751		)	—			—			(751		)
Homebuilding pretax income (loss)	17,671			11,245			(2,102		)	—			26,814
Financial services pretax income	—			—			1,847			—			1,847
Total pretax income (loss)	17,671			11,245			(255		)	—			28,661
Income tax expense	(200		)	(100		)	—			—			(300		)
Equity in net income of subsidiaries	10,890			—			—			(10,890		)	—
Net income (loss)	$	28,361		$	11,145		$	(255	)	$	(10,890	)	$	28,361

Condensed Consolidating Statement of Operations

Three Months Ended August 31, 2013 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues	$	—		$	533,593		$	15,381		$	—		$	548,974
Homebuilding:
Revenues	$	—		$	533,593		$	12,207		$	—		$	545,800
Construction and land costs	—			(435,168		)	(11,213		)	—			(446,381		)
Selling, general and administrative expenses	(11,203		)	(48,706		)	(3,547		)	—			(63,456		)
Operating income (loss)	(11,203		)	49,719			(2,553		)	—			35,963
Interest income	178			15			—			—			193
Interest expense	(33,140		)	(1,204		)	—			23,018			(11,326		)
Intercompany interest	52,786			(29,486		)	(282		)	(23,018		)	—
Equity in income (loss) of unconsolidated joint ventures	—			(657		)	1			—			(656		)
Homebuilding pretax income (loss)	8,621			18,387			(2,834		)	—			24,174
Financial services pretax income	—			—			2,404			—			2,404
Total pretax income (loss)	8,621			18,387			(430		)	—			26,578
Income tax benefit	200			500			—			—			700
Equity in net income of subsidiaries	18,457			—			—			(18,457		)	—
Net income (loss)	$	27,278		$	18,887		$	(430	)	$	(18,457	)	$	27,278

Condensed Consolidating Balance Sheet

August 31, 2014 (in thousands)



	KB Home Corporate		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
Assets
Homebuilding:
Cash and cash equivalents	$	236,649	$	55,730	$	4,679	$	—		$	297,058
Restricted cash	32,456		—		—		—			32,456
Receivables	1,447		115,706		272		—			117,425
Inventories	—		3,197,073		43,247		—			3,240,320
Investments in unconsolidated joint ventures	—		73,607		—		—			73,607
Other assets	101,963		14,865		1,334		—			118,162
	372,515		3,456,981		49,532		—			3,879,028
Financial services	—		—		8,363		—			8,363
Intercompany receivables	2,996,939		—		113,404		(3,110,343		)	—
Investments in subsidiaries	47,608		—		—		(47,608		)	—
Total assets	$	3,417,062	$	3,456,981	$	171,299	$	(3,157,951	)	$	3,887,391
Liabilities and stockholders’ equity
Homebuilding:
Accounts payable, accrued expenses and other liabilities	$	139,019	$	327,359	$	93,844	$	—		$	560,222
Mortgages and notes payable	2,512,806		67,994		—		—			2,580,800
	2,651,825		395,353		93,844		—			3,141,022
Financial services	—		—		1,802		—			1,802
Intercompany payables	20,670		3,050,388		39,285		(3,110,343		)	—
Stockholders’ equity	744,567		11,240		36,368		(47,608		)	744,567
Total liabilities and stockholders’ equity	$	3,417,062	$	3,456,981	$	171,299	$	(3,157,951	)	$	3,887,391

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

Nine Months Ended August 31, 2014 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Net cash provided by (used in) operating activities	$	65,951		$	(768,929	)	$	(13,684	)	$	—		$	(716,662	)
Cash flows from investing activities:
Contributions to unconsolidated joint ventures	—			(34,034		)	—			—			(34,034		)
Proceeds from sale of investment in unconsolidated joint venture	—			10,110			—			—			10,110
Purchases of property and equipment, net	(131		)	(3,924		)	(103		)	—			(4,158		)
Intercompany	(840,539		)	—			—			840,539			—
Net cash used in investing activities	(840,670		)	(27,848		)	(103		)	840,539			(28,082		)
Cash flows from financing activities:
Change in restricted cash	9,450			—			—			—			9,450
Proceeds from issuance of debt	400,000			—			—			—			400,000
Payment of debt issuance costs	(5,448		)	—			—			—			(5,448		)
Payments on mortgages and land contracts due to land sellers and other loans	—			(23,292		)	—			—			(23,292		)
Proceeds from issuance of common stock, net	137,045			—			—			—			137,045
Issuance of common stock under employee stock plans	202			—			—			—			202
Payments of cash dividends	(6,682		)	—			—			—			(6,682		)
Stock repurchases	(46		)	—			—			—			(46		)
Intercompany	—			834,483			6,056			(840,539		)	—
Net cash provided by financing activities	534,521			811,191			6,056			(840,539		)	511,229
Net increase (decrease) in cash and cash equivalents	(240,198		)	14,414			(7,731		)	—			(233,515		)
Cash and cash equivalents at beginning of period	476,847			41,316			14,360			—			532,523
Cash and cash equivalents at end of period	$	236,649		$	55,730		$	6,629		$	—		$	299,008

Condensed Consolidating Statement of Cash Flows

Nine Months Ended August 31, 2013 (in thousands)



	KB Home Corporate			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Net cash provided by (used in) operating activities	$	25,657		$	(413,443	)	$	(13,673	)	$	—		$	(401,459	)
Cash flows from investing activities:
Contributions to unconsolidated joint ventures	—			(5,063		)	(4,993		)	—			(10,056		)
Purchases of property and equipment, net	(346		)	(783		)	(230		)	—			(1,359		)
Intercompany	(493,419		)	—			—			493,419			—
Net cash used in investing activities	(493,765		)	(5,846		)	(5,223		)	493,419			(11,415		)

Cash flows from financing activities:
Change in restricted cash	731			—			—			—			731
Proceeds from issuance of debt	230,000			—			—			—			230,000
Payment of debt issuance costs	(10,086		)	—			—			—			(10,086		)
Payments on mortgages and land contracts due to land sellers and other loans	—			(44,405		)	—			—			(44,405		)
Proceeds from issuance of common stock, net	109,503			—			—			—			109,503
Issuance of common stock under employee stock plans	2,147			—			—			—			2,147
Payments of cash dividends	(6,272		)	—			—			—			(6,272		)
Stock repurchases	(7,967		)	—			—			—			(7,967		)
Intercompany	—			475,592			17,827			(493,419		)	—
Net cash provided by financing activities	318,056			431,187			17,827			(493,419		)	273,651
Net increase (decrease) in cash and cash equivalents	(150,052		)	11,898			(1,069		)	—			(139,223		)
Cash and cash equivalents at beginning of period	457,007			54,205			14,476			—			525,688
Cash and cash equivalents at end of period	$	306,955		$	66,103		$	13,407		$	—		$	386,465