| Employee Benefit and Stock Plans | Employee Benefit and Stock Plans Most of our employees are eligible to participate in the KB Home 401(k) Savings Plan (“401(k) Plan”) under which we match employee contributions up to 6% of eligible compensation per payroll period. The aggregate cost of the 401(k) Plan to us was $8.3 million in 2023, $8.2 million in 2022 and $7.2 million in 2021. The assets of the 401(k) Plan are held by a third-party trustee, with an affiliate of the trustee managing some fund options offered by the 401(k) Plan. The 401(k) Plan participants may direct the investment of their funds among one or more of the several fund options offered by the 401(k) Plan. As of November 30, 2023, 2022 and 2021, approximately 5%, 3% and 4%, respectively, of the 401(k) Plan’s net assets at each period were invested in our common stock. Approval of the Amended and Restated KB Home 2014 Equity Incentive Plan. At our Annual Meeting of Stockholders held on April 20, 2023, our stockholders approved the Amended and Restated KB Home 2014 Equity Incentive Plan (“Amended and Restated 2014 Plan”), confirming, among other things, an aggregate share grant capacity for stock-based awards to our employees, non-employee directors and consultants of 18,200,000 shares through approving and incorporating the base amount of 12,300,000 shares under the predecessor Amended KB Home 2014 Equity Incentive Plan and adding 5,900,000 shares. In addition, if an award made under the Amended and Restated KB Home 2014 Equity Incentive Plan subsequently expires or is canceled, forfeited or settled for cash, then any shares associated with such award may, to the extent of such expiration, cancellation, forfeiture or cash settlement, be used again for new grants under the plan, and shares tendered or withheld to satisfy tax withholding obligations with respect to a full value award may be used again for new grants under the plan. The Amended and Restated 2014 Plan is our only active equity compensation plan. As with the Amended KB Home 2014 Equity Incentive Plan, under the Amended and Restated 2014 Plan, grants of stock options and other similar awards reduce the share grant capacity on a 1-for-1 basis, and grants of restricted stock and other similar “full value” awards reduce the share grant capacity on a 1.78-for-1 basis. Any shares that again become available for grant will be added back to the equity incentive plan’s available grant capacity in the same manner in which they were initially deducted ( i.e ., 1-for-1 or 1.78-for-1). The Amended and Restated 2014 Plan provides stock options and SARs may be awarded for periods of up to 10 years, and enables us to grant other stock-based awards and cash bonuses. Stock-Based Compensation. With the approval of the management development and compensation committee, consisting entirely of independent members of our board of directors, we have provided compensation benefits to certain of our employees in the form of stock options, restricted stock and PSUs. Certain stock-based compensation benefits are also provided to our non-employee directors pursuant to the Non-Employee Directors Compensation Plan (“Director Plan”). Compensation expense related to equity-based awards is included in selling, general and administrative expenses in our consolidated statements of operations. The following table presents our stock-based compensation expense (in thousands): Years Ended November 30, 2023 2022 2021 Restricted stock $ 9,659 $ 8,743 $ 7,139 PSUs 23,065 18,757 19,512 Director awards 1,888 1,964 2,253 Total $ 34,612 $ 29,464 $ 28,904 Stock Options. Stock option transactions are summarized as follows: Years Ended November 30, 2023 2022 2021 Options Weighted Options Weighted Options Weighted Options outstanding at beginning of year 1,674,393 $ 15.56 1,674,393 $ 15.56 2,462,714 $ 15.32 Granted — — — — — — Exercised (564,826) 15.68 — — (788,321) 14.83 Cancelled — — — — — — Options outstanding at end of year 1,109,567 $ 15.50 1,674,393 $ 15.56 1,674,393 $ 15.56 Options exercisable at end of year 1,109,567 $ 15.50 1,674,393 $ 15.56 1,674,393 $ 15.56 Options available for grant at end of year 8,245,553 3,260,585 4,096,427 There were no stock options granted in 2023, 2022 or 2021. We have not granted any stock option awards since 2016. The total intrinsic value of stock options exercised was $17.4 million in 2023 and $22.1 million in 2021. There were no stock options exercised in 2022. The aggregate intrinsic value of both stock options outstanding and stock options exercisable was $40.6 million at November 30, 2023, $26.5 million at November 30, 2022, and $40.9 million at November 30, 2021. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the price of the option. Stock options outstanding and stock options exercisable at November 30, 2023 are summarized as follows: Options Outstanding Options Exercisable Exercise Price Options Weighted Weighted Options Weighted Weighted $14.62 44,343 $ 14.62 0.9 44,343 $ 14.62 $14.92 560,000 14.92 1.9 560,000 14.92 $16.21 505,224 16.21 2.9 505,224 16.21 $14.62 to $16.21 1,109,567 $ 15.50 2.3 1,109,567 $ 15.50 2.3 At November 30, 2023, there was no unrecognized stock-based compensation expense related to stock option awards as all these awards were fully vested. Restricted Stock. From time to time, we grant restricted stock to various employees as a compensation benefit. During the restriction periods, these employees are entitled to vote and to receive cash dividends on such shares. The restrictions imposed with respect to the shares granted lapse in installments within, or in full at the end of, three years after their grant date if certain conditions are met. Restricted stock transactions are summarized as follows: Years Ended November 30, 2023 2022 2021 Shares Weighted Shares Weighted Shares Weighted Outstanding at beginning of year 543,886 $ 19.50 431,191 $ 19.22 423,215 $ 19.56 Granted 329,209 41.78 347,131 27.49 286,709 40.55 Vested (268,696) 42.12 (192,840) 29.09 (265,131) 42.04 Cancelled (16,232) 32.24 (41,596) 38.58 (13,602) 34.43 Outstanding at end of year 588,167 $ 21.29 543,886 $ 19.50 431,191 $ 19.22 As of November 30, 2023, we had $18.6 million of total unrecognized compensation cost related to restricted stock awards that will be recognized over a weighted average period of approximately three years. Performance-Based Restricted Stock Units. On October 5, 2023, we granted PSUs to certain employees. Each PSU grant corresponds to a target amount of our common stock (“Award Shares”). Each PSU entitles the recipient to receive a grant of between 0% and 200% of the recipient’s Award Shares, and will vest based on our achieving, over a three-year period commencing on December 1, 2023 and ending on November 30, 2026, specified levels of (a) cumulative adjusted earnings per share; (b) average adjusted return on invested capital; and (c) revenue growth performance relative to a peer group of high-production public homebuilding companies. The grant date fair value of each such PSU was $44.10. Upon vesting, each PSU recipient is entitled to receive a proportionate amount of credited cash dividends that are paid in respect of one share of our common stock with a record date between the grant date and the date the compensation committee of our board of directors determines the applicable performance achievements, if any. On November 14, 2022, we granted PSUs to certain employees with similar terms as the 2023 PSU grants, except that the applicable performance period commenced on December 1, 2022 and ends on November 30, 2025. The grant date fair value of each such PSU was $30.12. On October 7, 2021, we granted PSUs to certain employees with similar terms as the 2022 PSU grants, except that the applicable performance period commenced on December 1, 2021 and ends on November 30, 2024. The grant date fair value of each such PSU was $39.31. PSU transactions are summarized as follows: Years Ended November 30, 2023 2022 2021 Shares Weighted Shares Weighted Shares Weighted Outstanding at beginning of year 1,273,157 $ 19.70 1,392,864 $ 23.48 1,346,870 $ 23.25 Granted 554,523 39.80 650,077 33.34 465,064 39.67 Vested (602,265) 35.20 (674,677) 38.00 (419,070) 40.70 Cancelled — — (95,107) 38.55 — — Outstanding at end of year 1,225,415 $ 21.18 1,273,157 $ 19.70 1,392,864 $ 23.48 The number of shares of our common stock actually granted to a recipient, if any, when a PSU vests will depend on the degree of achievement of the applicable performance measures during the applicable three-year period. The shares of our common stock that were granted under the terms of PSUs that vested in 2023 included an aggregate of 267,674 additional shares above the target amount awarded to the eligible recipients based on our achievement of certain levels of the three above-described metrics over the three-year period from December 1, 2019 through November 30, 2022. The shares of our common stock that were granted under the terms of PSUs that vested in 2022 included an aggregate of 265,782 additional shares above the target amount awarded to the eligible recipients based on our achievement of certain levels of the three above-described metrics over the three-year period from December 1, 2018 through November 30, 2021. The shares of our common stock that were granted under the terms of PSUs that vested in 2021 included an aggregate of 119,733 additional shares above the target amount awarded to the eligible recipients based on our achievement of certain levels of the three above-described metrics over the three-year period from December 1, 2019 through November 30, 2020. The PSUs do not have dividend or voting rights during the performance period. Compensation cost for PSUs is initially estimated based on target performance achievement and adjusted as appropriate throughout the performance period. Accordingly, future compensation costs associated with outstanding PSUs may increase or decrease based on the probability and extent of achievement with respect to the applicable performance measures. At November 30, 2023, we had $42.0 million of total unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted-average period of approximately three years. Director Awards. We have granted stock appreciation rights (“SARs”) and deferred common stock awards to our non-employee directors pursuant to the terms of the Director Plan and elections made by each director. All these awards were fully vested as of November 30, 2016. SARs, which have not been granted since April 2014 as they ceased being a component of non-employee director compensation after that date, were stock settled, had terms of up to 15 years and were granted at an exercise price equal to the closing price of our common stock on the date of grant. There were no SARs outstanding at November 30, 2023 or 2022. At November 30, 2021, the aggregate outstanding SARs were 70,849. At November 30, 2023, 2022 and 2021, the aggregate outstanding deferred common stock awards granted under the Director Plan were 271,683, 409,648 and 469,171, respectively. In addition, we have granted common stock on an unrestricted basis to our non-employee directors on the grant date pursuant to the Director Plan and elections made by each director. Grantor Stock Ownership Trust. We have a grantor stock ownership trust (“Trust”), administered by a third-party trustee, that holds and distributes the shares of common stock acquired to support certain employee compensation and employee benefit obligations under our existing stock option plan, the 401(k) Plan and other employee benefit plans. The existence of the Trust does not impact the amount of benefits or compensation that is paid under these plans. For financial reporting purposes, the Trust is consolidated with us, and therefore any dividend transactions between us and the Trust are eliminated. Acquired shares held by the Trust remain valued at the market price on the date of purchase and are shown as a reduction to stockholders’ equity in the consolidated balance sheets. The difference between the Trust share value and the market value on the date shares are released from the Trust is included in paid-in capital. Common stock held in the Trust is not considered outstanding in the computations of earnings per share. The Trust held 6,705,247 shares of common stock at both November 30, 2023 and 2022. The trustee votes shares held by the Trust in accordance with voting directions from eligible employees, as specified in a trust agreement with the trustee. |
