Segment Information

6 Months Ended

May 31, 2011

As of May 31, 2011, the Company had identified five reporting segments, comprised of four homebuilding reporting segments and one financial services reporting segment, within its consolidated operations in accordance with Accounting Standards Codification Topic No. 280, “Segment Reporting.” As of May 31, 2011, the Company’s homebuilding reporting segments conducted ongoing operations in the following states:

West Coast: California
Southwest: Arizona and Nevada
Central: Colorado and Texas
Southeast: Florida, Maryland, North Carolina and Virginia

The Company’s homebuilding reporting segments are engaged in the acquisition and development of land primarily for residential purposes and offer a wide variety of homes that are designed to appeal to first-time, move-up and active adult homebuyers.

The Company’s homebuilding reporting segments were identified based primarily on similarities in economic and geographic characteristics, product types, regulatory environments, methods used to sell and construct homes and land acquisition characteristics. The Company evaluates segment performance primarily based on segment pretax results.

The Company’s financial services reporting segment provides title and insurance services to the Company’s homebuyers. This segment also provided mortgage banking services to the Company’s homebuyers indirectly through KBA Mortgage, LLC (“KBA Mortgage”), a joint venture of a subsidiary of the Company and a subsidiary of Bank of America, N.A., with each partner having a 50% ownership interest in the venture. The Bank of America, N.A. subsidiary partner operated KBA Mortgage. The Company has accounted for KBA Mortgage as an unconsolidated joint venture in the financial services reporting segment of the Company’s consolidated financial statements. The Company’s financial services reporting segment conducts operations in the same markets as the Company’s homebuilding reporting segments. From its formation in 2005 until June 30, 2011, KBA Mortgage provided mortgage banking services to a significant proportion of the Company’s homebuyers. During the first quarter of 2011, the Bank of America, N.A. subsidiary partner in KBA Mortgage approached the Company about exiting the joint venture due to the desire of Bank of America, N.A. to cease participating in joint venture structures in its business. As a result, effective June 27, 2011, KBA Mortgage ceased accepting loan applications, and it ceased offering mortgage banking services to the Company’s homebuyers after June 30, 2011. After June 30, 2011, Bank of America, N.A. is processing and closing the residential consumer mortgage loans that KBA Mortgage originated for the Company’s homebuyers on or before June 26, 2011. The Company entered into a marketing services agreement with MetLife Home Loans, a division of MetLife Bank, N.A., effective June 27, 2011. Under the agreement, MetLife Home Loans’ personnel located onsite at each of the Company’s new home communities can offer (i) financing options and mortgage loan products to the Company’s homebuyers, (ii) to prequalify homebuyers for residential consumer mortgage loans, and (iii) to commence the loan origination process for homebuyers who elect to use MetLife Home Loans. The Company will make marketing materials and other information regarding MetLife Home Loans’ financing options and mortgage loan products available to its homebuyers and will be compensated solely for the fair market value of these services. MetLife Home Loans and MetLife Bank, N.A. are not affiliates of the Company or any of its subsidiaries. The Company’s homebuyers are under no obligation to use MetLife Home Loans and may select any lender of their choice to obtain mortgage financing for the purchase of a home. The Company does not have any ownership, joint venture or other interests in or with MetLife Home Loans or MetLife Bank, N.A. or with respect to the revenues or income that may be generated from MetLife Home Loans’ providing mortgage banking services to, or originating residential consumer mortgage loans for, the Company’s homebuyers. The Company expects that its agreement with MetLife Home Loans will help its homebuyers to obtain reliable mortgage banking services to purchase a home.

The Company’s reporting segments follow the same accounting policies used for the Company’s consolidated financial statements. Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented, nor are they indicative of the results to be expected in future periods.

The following tables present financial information relating to the Company’s reporting segments (in thousands):


	Six Months Ended May 31,				Three Months Ended May 31,
	2011		2010		2011		2010

Revenues:
West Coast	$	178,914	$	272,089	$	107,143	$	163,655
Southwest		51,932		93,450		28,632		59,602
Central		144,790		174,751		84,201		91,826
Southeast		89,648		94,735		50,007		57,431

Total homebuilding revenues		465,284		635,025		269,983		372,514
Financial services		3,394		3,005		1,755		1,538


Total	$	468,678	$	638,030	$	271,738	$	374,052


	Six Months Ended May 31,						Three Months Ended May 31,
	2011			2010			2011			2010

Pretax income (loss):
West Coast	$	6,591		$	16,056		$	(2,274	)	$	12,699
Southwest		(116,821	)		(9,997	)		(36,492	)		(5,534	)
Central		(10,202	)		(9,107	)		(3,493	)		(1,803	)
Southeast		(23,021	)		(31,261	)		(8,993	)		(11,075	)
Corporate and other (a)		(41,731	)		(56,874	)		(19,181	)		(29,071	)

Total homebuilding pretax loss		(185,184	)		(91,183	)		(70,433	)		(34,784	)
Financial services		2,254			6,070			1,629			4,175


Total	$	(182,930	)	$	(85,113	)	$	(68,804	)	$	(30,609	)


(a)		Corporate and other includes corporate general and administrative expenses.


Equity in income (loss) of unconsolidated joint ventures:
West Coast	$	(17	)	$	647		$	(80	)	$	547
Southwest		(55,902	)		(4,280	)		(2	)		(2,105	)
Central		—			—			—			—
Southeast		(10	)		901			(10	)		10


Total	$	(55,929	)	$	(2,732	)	$	(92	)	$	(1,548	)


Inventory impairments:
West Coast	$	1,351		$	1,196		$	1,351		$	—
Southwest		18,715			962			18,324			—
Central		51			—			—			—
Southeast		969			4,677			419			—


Total	$	21,086		$	6,835		$	20,094		$	—


Land option contract abandonments:
West Coast	$	112		$	—		$	—		$	—
Southwest		296			—			296			—
Central		240			6,340			—			—
Southeast		611			187			201			—


Total	$	1,259		$	6,527		$	497		$	—


Joint venture impairments:
West Coast	$	—		$	—		$	—		$	—
Southwest		53,727			—			—			—
Central		—			—			—			—
Southeast		—			—			—			—


Total	$	53,727		$	—		$	—		$	—


	May 31,		November 30,
	2011		2010
Assets:
West Coast	$	1,077,311	$	965,323
Southwest		297,639		376,234
Central		341,922		328,938
Southeast		355,266		372,611
Corporate and other		763,150		1,037,200

Total homebuilding assets		2,835,288		3,080,306
Financial services		25,060		29,443


Total assets	$	2,860,348	$	3,109,749


Investments in unconsolidated joint ventures:
West Coast	$	38,203	$	37,830
Southwest		4,078		59,191
Central		—		—
Southeast		8,855		8,562


Total	$	51,136	$	105,583