Basis of Presentation and Significant Accounting Policies

6 Months Ended

May 31, 2011

Basis of Presentation and Significant Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

1. Basis of Presentation and Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted.

In the opinion of KB Home (the “Company”), the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company’s consolidated financial position as of May 31, 2011, the results of its consolidated operations for the six months and three months ended May 31, 2011 and 2010, and its consolidated cash flows for the six months ended May 31, 2011 and 2010. The results of consolidated operations for the six months and three months ended May 31, 2011 are not necessarily indicative of the results to be expected for the full year, due to seasonal variations in operating results and other factors. The consolidated balance sheet at November 30, 2010 has been taken from the audited consolidated financial statements as of that date. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended November 30, 2010, which are contained in the Company’s Annual Report on Form 10-K for that period.

Use of Estimates

The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP and, therefore, include amounts based on informed estimates and judgments of management. Actual results could differ from these estimates.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid short-term debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company’s cash equivalents totaled $502.3 million at May 31, 2011 and $797.2 million at November 30, 2010. The majority of the Company’s cash and cash equivalents were invested in money market accounts and U.S. government securities.

Restricted cash of $114.0 million at May 31, 2011 consisted of $87.2 million of cash deposited with various financial institutions that is required as collateral for the Company’s cash-collateralized letter of credit facilities (the “LOC Facilities”), and $26.8 million of cash in an escrow account required as collateral for a surety bond. Restricted cash of $115.5 million at November 30, 2010 consisted of $88.7 million of cash collateral for the LOC Facilities and $26.8 million of cash collateral for the surety bond.

Loss per share

Basic and diluted loss per share were calculated as follows (in thousands, except per share amounts):

	Six Months Ended May 31,						Three Months Ended May 31,
	2011			2010			2011			2010
Numerator:
Net loss	$	(183,030	)	$	(85,413	)	$	(68,504	)	$	(30,709	)
Denominator:
Basic and diluted average shares outstanding		76,983			76,844			76,991			76,854
Basic and diluted loss per share	$	(2.38	)	$	(1.11	)	$	(.89	)	$	(.40	)

All outstanding stock options were excluded from the diluted loss per share calculations for the six months and three months ended May 31, 2011 and 2010 because the effect of their inclusion would be antidilutive, or would decrease the reported loss per share.

Comprehensive loss

The Company’s comprehensive loss was $68.5 million for the three months ended May 31, 2011 and $30.7 million for the three months ended May 31, 2010. The Company’s comprehensive loss was $183.0 million for the six months ended May 31, 2011 and $85.4 million for the six months ended May 31, 2010. The accumulated balances of other comprehensive loss in the consolidated balance sheets as of May 31, 2011 and November 30, 2010 were comprised solely of adjustments recorded directly to accumulated other comprehensive loss in accordance with Accounting Standards Codification Topic No. 715, “Compensation — Retirement Benefits” (“ASC 715”). ASC 715 requires an employer to recognize the funded status of defined postretirement benefit plans as an asset or liability on the balance sheet and requires any unrecognized prior service costs and actuarial gains/losses to be recognized in accumulated other comprehensive income (loss).