KB Home
KB HOME (Form: DEF 14A, Received: 02/26/2016 17:40:02)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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KB HOME
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Dear Fellow Stockholder:
Together with the Board of Directors and management team of KB Home, I am pleased to invite you to our 2016 Annual Meeting of Stockholders. The meeting will be held on Thursday, April 7, 2016 at 9:00 a.m., Pacific Time, at The Fairmont Miramar Hotel, 101 Wilshire Boulevard in Santa Monica, California.
At the Annual Meeting, we will consider the items of business below. More information on these items is in the attached Notice of 2016 Annual Meeting of Stockholders and Proxy Statement. Your vote on these items is very important, and we encourage you to vote via the Internet, telephone or mail as soon as possible to ensure that your vote is counted .
Items of Business
 
Board Recommendation
 
 
 
 
 
Elect ten directors, each to serve for a one-year term
FOR
 
 
 
 
 
Advisory vote to approve named executive officer compensation
FOR
 
 
 
 
 
Approve the Amended KB Home 2014 Equity Incentive Plan
FOR
 
 
 
 
 
Ratify the appointment of our independent registered public accounting firm
FOR
Following the formal business at the Annual Meeting, we will discuss our 2015 fiscal year results and provide you with an opportunity to ask questions.
2015 in Review
Overall, we view 2015 as a year of important progress, as we accelerated our profitable growth while simultaneously laying the groundwork to sustain our momentum in 2016.
We set aggressive targets for 2015 related to our revenues, pretax income and community count, among other key metrics, to motivate strong year-over-year performance and drive growth. While we experienced generally favorable conditions in most of our served markets, with healthy supply and demand dynamics fueled by steady employment and economic gains over the course of the year, the housing market remained below historically normalized levels. Yet, in spite of the industry trend of relatively slow growth, we produced solid results against our goals.
In 2015, we delivered 8,196 homes, which, together with an increase in our average selling price to an all-time high, drove a 26% year-over-year increase in our total revenues. We crossed the $3 billion mark in revenues, achieving a significant milestone as we increased the scale of our business. We leveraged our revenue growth to produce a 34% year-over-year improvement in pretax income to $127 million, our best performance since 2006 and our third consecutive year of profitability. We utilized a portion of our substantial deferred tax asset last year to shelter our pretax income from income taxes, helping to improve our liquidity position.
We also continued to support the growth of our business by investing approximately $967 million of capital in land and land development in 2015. We remained disciplined in our investment approach, evaluating opportunities against our research-based and returns-focused standards. Reflecting this investment, we concluded 2015 with a 9% increase in our year-end community count and 247 communities open for sales. Over the past three years, we have expanded our community count by 44%, targeting attractive, land-constrained locations across our geographically-diverse served markets.


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Through this focused approach, we increased our year-over-year net order value by 26% to $3.3 billion in 2015, with our net orders increasing 22% to 9,253. We also ended the year with our highest fourth-quarter backlog value since 2007. At $1.3 billion, our 2015 year-end backlog value represented a 40% increase relative to 2014, which positions us well for solid growth entering our new fiscal year.

We refer you to our Annual Report on Form 10-K for the fiscal year ended November 30, 2015 for additional details on our 2015 performance, as well as our outlook for 2016.
A Sustainable Future
As many of you know, KB Home has a long-standing commitment to sustainability, and integrating sustainability principles into the homes we build. We are a leader in utilizing state-of-the-art, sustainable building practices to construct energy and water efficient homes to conserve natural resources while also lowering the total cost of homeownership for our customers. I am extremely proud of our accomplishments, and I believe our work in this area differentiates us in our industry. I am pleased to share with you several honors that we received in 2015 in recognition of our leadership in sustainability:
ENERGY STAR® Partner of the Year – Sustained Excellence Award – Honoring organizations that make outstanding contributions to protecting the environment through energy efficiency. This was our fifth consecutive year of receiving the award.


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ENERGY STAR Partner of the Year – Climate Communications Award – Honoring organizations that raise public awareness of the impact of climate change. We are the first and only homebuilder to earn this distinction, and we have received the honor two years in a row.
2015 WaterSense® Sustained Excellence Award Winner – We are the first and only national homebuilder to be recognized with this award for our work in water efficiency innovation.
In Closing
As we go to print with this letter, we continue to expect housing market conditions to remain generally favorable in 2016, with further improvement toward more normalized conditions. Against this backdrop, combined with our higher backlog levels and our ownership and control of all of the lots we need to achieve our 2016 delivery targets, we believe we are well positioned to accomplish our key strategic goals for 2016.
We remain committed to increasing stockholder value and thank you for your continued support of KB Home. We hope to see you on April 7.
Sincerely,
JEFFREY T. MEZGER
President and Chief Executive Officer
February 26, 2016


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N OTICE OF 2016 A NNUAL M EETING OF S TOCKHOLDERS
 
Time and Date:
 
9:00 a.m., Pacific Time, on Thursday, April 7, 2016.
 
 
 
 
 
 
 
 
Location:
 
The Fairmont Miramar Hotel, 101 Wilshire Boulevard, Santa Monica, CA 90401.
 
 
 
 
 
 
 
 
Items of Business:
 
(1) Elect ten directors, each to serve for a one-year term;
 
 
 
(2) Advisory vote to approve named executive officer compensation;
 
 
 
(3) Approve the Amended KB Home 2014 Equity Incentive Plan; and
 
 
 
(4) Ratify the appointment of our independent registered public accounting firm.
 
 
 
 
 
 
 
 
 
 
The accompanying Proxy Statement describes these items in more detail. We have not received notice of any other matters that may be properly presented at the meeting.
 
 
 
 
Record Date:
 
You can vote at the meeting and at any adjournment or postponement of the meeting if you were a stockholder of record on February 5, 2016.
 
 
 
 
 
 
 
 
 
 
 
Voting:
 
Please vote as soon as possible, even if you plan to attend the meeting, to ensure your shares will be represented. You do not need to attend the meeting to vote if you vote before the meeting. If you are a holder of record, you may vote your shares via the Internet, telephone or mail. If your shares are held by a broker or financial institution, you must vote your shares using a method the broker or financial institution provides.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual Report:
 
Copies of our Annual Report on Form 10-K for the fiscal year ended November 30, 2015 (“Annual Report”), including audited financial statements, are being made available to stockholders concurrently with the accompanying Proxy Statement. We anticipate these materials will first be made available on or about February 26, 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on April 7, 2016: Our Proxy Statement and Annual Report are available at www.kbhome.com/investor/proxy .
 

B Y O RDER OF T HE B OARD OF D IRECTORS ,
W ILLIAM A . (T ONY ) R ICHELIEU
Vice President and Corporate Secretary
Los Angeles, California
February 26, 2016


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KB HOME
10990 Wilshire Boulevard
Los Angeles, CA 90024
(NYSE:KBH)
 
PROXY STATEMENT
Your Board of Directors (“Board”) is furnishing this Proxy Statement and a proxy/voting instruction form or a Notice of Internet Availability, as applicable, to you to solicit your proxy for our 2016 Annual Meeting of Stockholders. We anticipate these proxy materials will first be made available on or about February 26, 2016. The Annual Meeting is scheduled for Thursday, April 7, 2016 at The Fairmont Miramar Hotel. The exact location and items of business for the meeting are described in the accompanying Notice of 2016 Annual Meeting of Stockholders. Stockholders can vote via the Internet, telephone or mail or in person at the Annual Meeting, as described below under the heading “Annual Meeting, Voting and Other Information.”
 
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CORPORATE GOVERNANCE AND BOARD MATTERS
 
 
 
• All directors are independent (except our President and Chief Executive Officer (“CEO”)), and elected annually under a majority voting standard.
 
• Non-employee directors meet in executive sessions at each in-person Board meeting, and any non-employee director can request additional executive sessions.
 
 
 
• Our standing Board Committees are entirely composed of independent directors.
 
• There is Board-level oversight of our political contributions, which are reported in our public Sustainability Reports.
 
 
 
• We have one class of voting securities and no supermajority voting requirements.
 
• All employees and non-employee directors are prohibited from pledging or hedging their holdings of our securities.
 
 
 
• Directors and senior executives are subject to stock ownership requirements.
 
• Seven of the eight directors serving at the time attended our 2015 Annual Meeting of Stockholders (held April 2, 2015).
Board of Directors
The Board is elected by our stockholders to oversee the management of our business and to assure that the long-term interests of our stockholders are being served. The Board carries out this role subject to Delaware law (our state of incorporation), and in accordance with our Certificate of Incorporation, By-Laws, Ethics Policy and Corporate Governance Principles. As of the date of this Proxy Statement, the Board has nine members. Jeffrey T. Mezger, our CEO, is the only director who is an employee.
The Board held four meetings during 2015. Each director attended at least 75% of the meetings of the Board and of the Board Committees on which he or she served during the year. We expect directors to attend our annual stockholder meetings.
Key Governance Documents
Corporate Governance Principles : provide the primary framework within which we conduct our business and pursue our strategic goals.
Ethics Policy : establishes the ethical standards we expect our non-employee directors, senior executives and employees to follow when representing KB Home. To this end, all employees, including our senior executives, and our non-employee directors must comply with our Ethics Policy.
Board Leadership
Since 2007, the Board has been led by an independent Chairman, Mr. Stephen F. Bollenbach. In addition to the responsibilities specified in our Corporate Governance Principles, Mr. Bollenbach, as Chairman, coordinates the Board’s activities, including the scheduling of meetings and non-employee director executive sessions, and the relevant agenda items in each case (in consultation with the CEO as appropriate). Mr. Bollenbach also presides over all Board meetings at which he is present, and chairs the non-employee director executive sessions. Per our Corporate Governance Principles, the Board may also designate such responsibilities to a lead independent director, if one is elected, or to another director or directors.
Upon his election as a director at the Annual Meeting, the Board plans again to elect Mr. Bollenbach as Chairman, continuing his capable service in that role. The Board believes that having an independent director serving as Chairman or as a lead independent director is the most appropriate Board leadership structure, enabling the Board to effectively carry out its role and responsibilities on behalf of KB Home and our stockholders. 
Director Independence
We believe that a substantial majority of our directors should be independent. To be independent, the Board must affirmatively determine that a director does not have any material relationship with us based on all relevant facts and circumstances. The Board makes independence determinations based on information supplied by directors, director nominees and other sources, the Board’s Nominating and Corporate Governance Committee’s prior review and recommendation, and certain categorical standards contained in our Corporate Governance Principles that are consistent with New York Stock Exchange (“NYSE”) listing standards. The Board has determined that, other than Mr. Mezger, all directors who served in 2015 and all director nominees are independent. In making its independence determinations, the Board found that:
Michael M. Wood’s independence was not impaired by, and he did not have a direct or indirect material interest in, our receipt of consulting services and research data in 2015 from a firm in which he owns a <1% passive equity interest.
Kenneth M. Jastrow, II’s independence was not impaired by, and he did not have a direct or indirect material interest in, our considering in 2015 the purchase of land and land development-related rights from Forestar Group, Inc., where he served as non-executive chairman until September 2015 and as a director until December 2015.

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Director nominee Dr. Stuart A. Gabriel’s independence is not impaired by his participation on our national advisory board from 2009 to 2015, where he and other outside experts periodically provided advice on our sustainability initiatives. Dr. Gabriel was not paid for his participation other than reimbursement of travel-related expenses to attend meetings. Like other national advisory board participants, Dr. Gabriel could designate qualified charitable organizations to receive donations from us. Based on Dr. Gabriel’s participation from 2013 to 2015, he could designate up to $2,500 in donations to charitable organizations in each such year. Of this amount, we donated $1,500 in each such year to an organization for which he serves as a director. Dr. Gabriel no longer participates on our national advisory board.
Board Committee Information
The Board has three standing committees — Audit and Compliance (“Audit Committee”); Management Development and Compensation (“Compensation Committee”); and Nominating and Corporate Governance (“Nominating Committee”). The Board appoints the members of and has adopted a charter for each Board Committee. At each regular Board meeting, the Board Committee Chairs report to the Board on their committee’s activities. The Board and each Board Committee conduct an annual evaluation of their respective performance. The Board has delegated certain responsibilities and authority to each Board Committee, as described below. Each Board Committee member served during all of 2015, other than Robert L. Patton, Jr., who joined both the Audit Committee and the Nominating Committee upon his election to the Board on July 15, 2015. In addition, Melissa Lora rotated from the Nominating Committee to the Compensation Committee on July 16, 2015.
Audit Committee
FY2015 Meetings: 6
Members
Primary Duties
Melissa Lora (Chair)
Dr. Thomas W. Gilligan
Robert L. Patton, Jr.
Michael M. Wood
Each member is financially literate. Ms. Lora is an “audit committee financial expert,” per NYSE listing standards and Securities and Exchange Commission (“SEC”) rules.
The Audit Committee is charged with the duties and responsibilities in its charter, which include general oversight of our accounting and reporting practices and audit process, including our independent registered public accounting firm’s qualifications, independence, retention, compensation and performance; and is authorized to act on the Board’s behalf with respect to our incurring, guaranteeing or redeeming debt and approving our entry into certain transactions. Per its charter, the Audit Committee reviewed and approved updates to our Ethics Policy that became effective as of October 31, 2015. The Audit Committee is a separately designated standing audit committee as defined in Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
Compensation Committee
FY2015 Meetings: 6
Members
Primary Duties
Kenneth M. Jastrow, II (Chair)
Stephen F. Bollenbach
Timothy W. Finchem
Robert L. Johnson
Melissa Lora
Each member is a “non-employee director” under SEC rules and is an “outside director” under Section 162(m) of the Internal Revenue Code (“Code”).
The Compensation Committee is charged with the duties and responsibilities in its charter, which include evaluating and compensating our CEO; determining our CEO’s direct reports’ compensation; and evaluating and recommending non-employee director compensation and benefits. The Compensation Committee receives assistance from our management and has retained an outside compensation consultant, Frederic W. Cook & Co., Inc. (“FWC”), as described below under the heading “Executive Compensation Decision-Making Process and Policies.” The Compensation Committee may delegate its duties and responsibilities to our management, excluding the authority to grant equity-based awards, or to a Board subcommittee.
Compensation Committee Interlocks and Insider Participation
None of our directors or executive officers had any relationship that would constitute a “compensation committee interlock” as described under SEC rules.
Nominating Committee
FY2015 Meetings: 4
Members
Primary Duties
Timothy W. Finchem (Chair)
Stephen F. Bollenbach
Dr. Thomas W. Gilligan
Robert L. Johnson
Robert L. Patton, Jr.
Michael M. Wood
The Nominating Committee is charged with the duties and responsibilities in its charter, which include overseeing our corporate governance policies and practices; reviewing “related party transactions,” as discussed below; overseeing annual Board and Board Committee performance evaluations; and identifying, evaluating and recommending qualified director candidates to the Board. The Nominating Committee also regularly evaluates the skills and characteristics of current and potential directors, and identified for each present director nominee certain specific skills and qualifications that supported the Board’s determination that each should serve as a director, as described below under the heading “Election of Directors.”

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Board Role in Risk Oversight
Our management is charged with assessing, monitoring and addressing risks in the operation of our business. As described below, the Board oversees our management’s development and implementation of policies, plans and processes for assessing, monitoring and addressing risks so that they are appropriate. The Board has delegated its risk oversight responsibilities to the Audit Committee, except for employee compensation-related risks that are the Compensation Committee’s purview.
Audit Committee Role . The Audit Committee oversees an annual enterprise risk management assessment performed by our management that identifies significant risk areas to our business and corresponding mitigating factors, and it requests or receives periodic updates as it or our management deem necessary or appropriate. The Audit Committee Chair reports to the Board regarding identified significant risks as deemed appropriate. In addition, at each of its regular meetings, the Audit Committee receives reports from each of our senior finance, accounting, legal and internal audit executives, and meets in separate executive sessions with each such executive and with representatives of our independent registered public accounting firm.
Compensation Committee Role . The Compensation Committee oversees an annual risk assessment of our employee compensation policies and programs that is performed by FWC in conjunction with our management and is focused on potential design and implementation risks. The Compensation Committee also carries out its risk oversight role on an ongoing basis through its review and, to the degree appropriate, specific approval of compensation arrangements as they are being developed by our senior human resources personnel. The Compensation Committee Chair reports to the Board regarding significant risks as deemed appropriate. Based on this oversight approach and the outcome of the most recent annual risk assessment, we do not believe that our present employee compensation policies and programs are likely to have a material adverse effect on us.
Certain Relationships and Related Party Transactions
Pursuant to its charter, the Nominating Committee must review and approve or ratify any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we participate and in which a director, a director nominee, an executive officer or a beneficial owner of five percent or more of our common stock (or, in each case, an immediate family member) had or will have a direct or indirect material interest (a “Covered Transaction”), except transactions within the categories described at right or as otherwise determined by the Board. Covered individuals and stockholders are expected to inform our Corporate Secretary of Covered Transactions, and we collect information from our directors, director nominees and executive officers about their affiliations and affiliations of their family members so that we can review our records for any such transactions.
The Nominating Committee will approve or ratify a Covered Transaction if, based on a review of all material facts of the transaction and feasible alternatives, the Nominating Committee deems the transaction to be in our and our stockholders’ best interests. The Nominating Committee determined that there were no Covered Transactions during 2015.
Pre-Approved Transaction Categories
• Any transaction in which the total amount involved is less than or equal to $120,000;
• The employment and compensation (a) of a director or executive officer if the individual’s compensation is reported in our annual proxy statement, or (b) of any other executive officer who is not an immediate family member of one of the foregoing individuals or a director nominee if such executive officer’s compensation was approved, or recommended for approval, by the Compensation Committee;
• Any transaction that would not (a) need to be reported under federal securities laws, (b) be deemed to impair a director’s independence under our Corporate Governance Principles or (c) be deemed to be a conflict of interest under our Ethics Policy; and
• Any transaction where an individual’s interest therein arises solely from ownership of our common stock and all holders of our common stock received the same benefit on a pro-rata basis.
Director Qualifications and Nominations
The Nominating Committee evaluates and recommends individuals for election to the Board at regular or special meetings and at any point during the year, taking into consideration the attributes listed in our Corporate Governance Principles and diversity of background and personal experience, among other factors. Diversity may encompass race, ethnicity, national origin and gender, geographic residency, educational and professional history, community or public service, expertise or knowledge base and/or other tangible and intangible aspects of an individual in relation to the personal characteristics of current directors and potential director nominees. There is no formal policy as to how diversity is applied, and an individual’s background and personal experience, while important, do not necessarily outweigh other any other factors.
Individuals may be nominated by current directors, and the Nominating Committee has retained professional search firms from time to time to assist with director recruitment. Current directors recommended Mr. Patton as a candidate prior to his election to the Board in July 2015 and Dr. Gabriel as a director nominee. Security holders may propose director nominees by following the procedures set forth in our By-Laws, which require, among other things, timely advance written notice to our Corporate Secretary of any potential nominee that contains specified information about the nominee and the nominating stockholder. Security holder director nominees are considered in the same manner as any other potential nominees.

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DIRECTOR COMPENSATION
Our directors (other than Mr. Mezger, who is not paid for his Board service) are primarily compensated under our Non-Employee Directors Compensation Plan (“Director Plan”). Director Plan compensation is provided on a “Director Year” basis, a period that begins on the date of an annual meeting and ends on the day before the following annual meeting. Director Plan compensation in 2015 reflected terms the Board set in October 2014, as described below. As a director nominee, Dr. Gabriel has not received any compensation under the Director Plan or otherwise for Board-related service.
Director Plan Compensation
Board Retainer
$100,000
Equity Grant (value)
$145,000
Committee Chair Retainers
$25,000 (Audit Committee)
$18,000 (Compensation Committee)
$15,000 (Nominating Committee)
Committee Member Retainers
$10,000 (Audit and Compliance)
$7,000 (Compensation Committee)
$5,000 (Nominating Committee)
Meeting Fees
$1,500 (for each additional meeting)
Director Plan Compensation Components
Board and Board Committee Retainers . These retainers are paid in quarterly cash installments over a Director Year. Each director may elect instead to receive the value of their respective retainers in shares of our common stock or an equal number of stock units, in either case granted on the same date as the below-described equity grant.
Equity Grant . Except as described below, each director may elect to receive the value of the equity grant in shares of our common stock or an equal number of stock units, in either case granted on the first date of a Director Year. Each stock unit represents the right to receive one share of our common stock on the earlier of a change in control or the date a director leaves the Board. Directors receive dividends on common stock grants, or cash payments on stock units at the same time and in an equivalent amount as any dividend paid on a share of our common stock.
If a director has not satisfied the stock ownership requirement by the applicable time (described below under the heading “Stock Ownership Requirements”), the director can only receive stock units for the equity grant, and cannot dispose of any shares of our common stock until the director satisfies the stock ownership requirement or leaves the Board.
Meeting Fees . These fees are payable for attending any Board or Board Committee meeting above its number of regularly-scheduled meetings, up to five additional meetings. Eligibility for fees for attending more than five additional meetings is subject to the approval of the Chairman/respective Committee Chair. No meeting fees were paid in 2015.
Directors elected to the Board other than at an annual meeting receive prorated Director Plan compensation, with equity grants made on the date of election. We also pay directors’ travel-related expenses for Board meetings and Board activities.
Director Compensation During Fiscal Year 2015
Name(a)
Fees Earned or 
Paid in Cash
($)(b)
Stock
Awards
($)(c)
Option
Awards
($)
All Other
Compensation
($)(d)
Total
($)
Mr. Bollenbach
$
375,000

$
145,000

$

$

$
520,000

Mr. Finchem
20,000

267,000



287,000

Dr. Gilligan
110,000

145,000



255,000

Mr. Jastrow
110,250

145,000


13,545

268,795

Mr. Johnson
95,000

157,000



252,000

Ms. Lora

275,000



275,000

Mr. Patton
28,750

72,500



101,250

Mr. Wood
110,000

145,000



255,000

(a)
Mr. Patton was elected to the Board on July 15, 2015 and therefore received prorated compensation during 2015.
(b)
Fees Earned or Paid in Cash . These amounts represent payments of Board and Board Committee retainers based on directors’ elections to receive the retainers in cash. The amount shown for Mr. Bollenbach also includes a $300,000

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Chairman of the Board retainer, which he may keep if removed from the Board without cause. As Chairman, Mr. Bollenbach is not eligible for any Board Committee retainers.
(c)
Stock Awards . These amounts represent the aggregate grant date fair value of the shares of our common stock or stock units granted to our directors in 2015 computed as described in Note 19. Employee Benefit and Stock Plans in the Notes to the Consolidated Financial Statements in our Annual Report, except that estimates of forfeitures related to service-based vesting conditions have been disregarded. All such grants were made on April 2, 2015, except that the grants to Mr. Patton were made on July 15, 2015, the date he was elected to the Board. Below are the number of shares of our common stock or stock units granted to each director in 2015 and each director’s total holdings of equity-based awards as of February 16, 2016.
Name
2015 Common Stock Grants (#)
2015 Stock Unit Grants (#)
Total Holdings (#)(i)
Mr. Bollenbach
9,136


207,503

Mr. Finchem

16,823

148,378

Dr. Gilligan

9,136

48,238

Mr. Jastrow

9,136

135,767

Mr. Johnson
9,892


138,004

Ms. Lora

17,327

188,804

Mr. Patton
4,420


4,420

Mr. Wood

9,136

25,279

(i)
Total Holdings . These amounts reflect the directors’ total respective outstanding holdings of equity-based awards, consisting of common stock, stock unit and stock option grants in the following respective amounts: Mr. Bollenbach 9,136 , 54,264 and 144,103 ; Mr. Finchem 0 , 93,028 and 55,350 ; Dr. Gilligan 0 , 21,349 and 26,889 ; Mr. Jastrow 0 , 80,417 and 55,350 ; Mr. Johnson 9,892 , 34,769 and 93,343 ; Ms. Lora 0 , 122,234 and 66,570 ; Mr. Patton 4,420 , 0 and 0 ; and Mr. Wood 0 , 13,901 and 11,378 . All such stock options were granted prior to October 2014, when the current Director Plan terms were made effective and stock option awards ceased being a component of director compensation. Some of these stock options held by Messrs. Bollenbach (88,753) and Johnson (37,993) and Ms. Lora (11,220) have 15-year terms and generally must be exercised by the earlier of their respective terms or the first anniversary of their leaving the Board. The remainder have ten-year terms and generally must be exercised by the earlier of their respective terms or the third anniversary of the grantee leaving the Board. Based on the directors’ respective elections, each such stock option represents a right to receive shares of our common stock equal in value to the positive difference between the option’s stated exercise price and the fair market value of a share of our common stock on an exercise date, and are therefore settled in a manner similar to stock appreciation rights (and are referred to in this Proxy Statement as “Director SARs”). In 2014, the Board authorized us to repurchase shares of our common stock or issue stock payment awards under our 2014 Equity Incentive Plan to effect settlements of these previously granted Director SARs, though none have been so settled.
(d)
All Other Compensation. This amount for Mr. Jastrow represents a premium we paid for a life insurance policy maintained to fund charitable donations under the Directors’ Legacy Program, which is described below. In 2015, we paid a total of $27,090 in premiums for program life insurance policies, including for the policy maintained with respect to Mr. Jastrow. Some of these life insurance policies did not require premium payments in 2015. Premium payments, where required, vary depending on participants’ respective ages and other factors. The total amount payable under the program at November 30, 2015 was $15.2 million.
Indemnification Agreements
We have agreements with our directors that provide them with indemnification and advancement of expenses to supplement what our Certificate of Incorporation and insurance policies provide, subject to certain limitations.
Directors’ Legacy Program
We established the Directors’ Legacy Program in 1995 to recognize our and our directors’ interests in supporting educational institutions and other charitable organizations. The Board closed the program to new participants in 2007. As a result, Messrs. Bollenbach, Johnson, Mezger, Patton and Wood and Dr. Gilligan do not, and Dr. Gabriel, if he is elected to the Board, will not, participate in the program. Under the program, we will make a charitable donation on each participating director’s behalf of up to $1 million to up to five participant-designated, qualifying institutions or organizations. Donations are paid in ten equal annual installments directly to the designated recipient institutions or organizations after a participating director’s death. All participating directors have fully vested in their donation amount; however, neither they nor their families receive any proceeds, compensation or tax savings associated with the program.

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ELECTION OF DIRECTORS
The Board will present as nominees at the Annual Meeting, and recommends our stockholders elect to the Board, each of the individuals named below for a one-year term ending with the election of directors at our 2017 Annual Meeting. Each nominee has consented to being nominated and has agreed to serve as a director if elected. Other than Dr. Gabriel and Mr. Patton, each nominee is standing for re-election. Dr. Gabriel is not currently a director. Mr. Patton was elected to the Board on July 15, 2015. Should any of the nominees become unable to serve as a director prior to the Annual Meeting, the individuals named as proxies for the meeting will, unless otherwise directed, vote for the election of another person as the Board may recommend. On the date of the Annual Meeting, if the individuals nominated by the Board are elected as directors, the Board will have ten members. There are no term limits for directors.
Voting Standard
To be elected, each director nominee must receive a majority of votes cast in favor ( i.e. , the votes cast for a nominee’s election must exceed the votes cast against the nominee’s election).
 
Director Resignation Policy
Our Corporate Governance Principles provide that a director nominee who fails to win election to the Board in an uncontested election is expected to tender his or her resignation from the Board (or to have previously submitted a conditional tender). An “uncontested election” is one in which there is no director nominee that has been nominated by a stockholder in accordance with our By-Laws. This election is an uncontested election. If an incumbent director fails to receive the required vote for election in an uncontested election, the Nominating Committee will act promptly to determine whether to accept the director’s resignation and will submit its recommendation for consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding that resignation. The Nominating Committee and the Board may consider any relevant factors in deciding whether to accept a director’s resignation.
BOARD RECOMMENDATION : FOR THE ELECTION OF EACH DIRECTOR NOMINEE
Director Nominees
A brief summary of each director nominee’s principal occupation, recent professional experience, the specific qualifications the Board identified in determining that each such individual should serve on the Board, and other public company directorships for at least the past five years, if any, is provided below.
 
 
 
  
Stephen F. Bollenbach , age 73, is our Non-Executive Chairman of the Board. He was the Co-Chairman and Chief Executive Officer of Hilton Hotels Corporation, a hotel developer and operator, positions he held from May 2004 and February 1996, respectively. He retired from Hilton in October of 2007. Prior to joining Hilton, Mr. Bollenbach was Senior Executive Vice President and Chief Financial Officer for The Walt Disney Company from 1995 to 1996. Before Disney, Mr. Bollenbach was President and Chief Executive Officer of Host Marriott Corporation from 1993 to 1995, and served as Chief Financial Officer of Marriott Corporation from 1992 to 1993. From 1990 to 1992, Mr. Bollenbach was Chief Financial Officer of the Trump Organization. Mr. Bollenbach serves as a director of Time Warner Inc., Macy’s, Inc., and Mondelēz International, Inc. He previously served as a director of American International Group Inc., Moelis & Company, and Harrah’s Entertainment, Inc. Mr. Bollenbach joined the Board in 2007 and has since served as its Non-Executive Chairman. Mr. Bollenbach has several years of experience and expertise as a senior corporate executive and public company board member, including as a lead independent director, and has demonstrated exemplary leadership as Non-Executive Chairman of the Board.
 
 
 
  
Timothy W. Finchem , age 68, has been Commissioner of the PGA TOUR, a membership organization for professional golfers, since 1994. He joined the TOUR staff as Vice President of Business Affairs in 1987, and was promoted to Deputy Commissioner and Chief Operating Officer in 1989. Mr. Finchem served in the White House as Deputy Advisor to the President in the Office of Economic Affairs in 1978 and 1979, and in the early 1980’s, co-founded the National Marketing and Strategies Group in Washington, D.C. He joined the Board in 2005. Mr. Finchem has demonstrated success in broadening the popularity of professional golf among the demographic groups that make up our core homebuyers, and has experience in residential community development. He also has a substantial presence in Florida, one of our key markets.
 
 
 

6


 
Dr. Stuart A. Gabriel , age 62, is the director of the Richard S. Ziman Center for Real Estate at the University of California, Los Angeles (UCLA), and Professor of Finance and Arden Realty Chair at the UCLA Anderson School of Management. Prior to joining UCLA in 2007, he was director and Lusk Chair in Real Estate at the USC Lusk Center for Real Estate, and was Professor of Finance and Business Economics at the Marshall School of Business at the University of Southern California (USC). Dr. Gabriel serves as a director of KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust II, Inc. and KBS Real Estate Investment Trust III, Inc., and is a consultant to corporate and governmental entities. He holds a Ph.D. in Economics from the University of California, Berkeley. Dr. Gabriel previously served on the economics staff of the Federal Reserve Board in Washington D.C., as a visiting scholar at the Federal Reserve Bank of San Francisco, and as President of the American Real Estate and Urban Economics Association. Dr. Gabriel’s significant professional experience in and distinguished study of macroeconomics and real estate, mortgage and finance markets provides considerable knowledge and insight with respect to the economic, regulatory and financial drivers that affect housing and homebuilding at local, regional and national levels. In addition, with his nearly two decades of service in leadership roles at two of the most preeminent academic institutions in the country—UCLA and USC—he has substantial management and administrative expertise, and is highly respected for his perspective on housing and land use matters in California, an important market for us, and nationally.
 
 
 
 
Dr. Thomas W. Gilligan , age 61, is the Tad and Dianne Taube Director of the Hoover Institution on War, Revolution and Peace at Stanford University, a position he was appointed to in September 2015. The Hoover Institution is a public policy research center devoted to the advanced study of economics, politics, history, and political economy, as well as international affairs. From 2008 until his appointment at the Hoover Institution, Dr. Gilligan served as the Dean of the McCombs School of Business at The University of Texas at Austin. Prior to his appointment at the McCombs School of Business, Dr. Gilligan held several key administrative roles at the Marshall School of Business at the University of Southern California (USC), including as interim Dean, as the Vice-Dean of Undergraduate Education, as director of the Ph.D. program, and as the Chair of the Finance and Business Economics Department. He is a director of Southwest Airlines Co., and has served as a consultant to businesses in the entertainment, agriculture, service and construction industries, dealing with antitrust and contract issues, as well as pricing strategies. He joined the Board in 2012. Dr. Gilligan has deep knowledge of and significant academic credentials in the fields of finance, economics and business administration, and brings extensive leadership skills and experience from his many years of service as a dean at two of the premier post-graduate business schools in the country. In addition, he is well-known and highly regarded, professionally and personally, in both Texas and California, which are key markets for us.
 
 
 
  
Kenneth M. Jastrow, II , age 68, has been since 2009 the lead director of MGIC Investment Corporation, a provider of private mortgage insurance, and also serves as a director of Genesis Energy, LLC, the general partner of Genesis Energy, L.P., a publicly traded master limited partnership. He joined the KB Home Board in 2001. Mr. Jastrow previously served as the Non-Executive Chairman of Forestar Group Inc., a real estate and natural resources company, from December 2007 to September 2015 and as a director until December 2015. Mr. Jastrow has several years of experience and leadership in the paper, building products, forestry, real estate and mortgage lending industries, providing critical perspective in businesses that impact the homebuilding industry, and on sustainability practices. He also brings a significant knowledge of corporate governance matters from his service on a number of public company boards, and has a substantial presence in Texas, a key market for us.
 
 
 
  
Robert L. Johnson , age 69, is founder and chairman of The RLJ Companies, an innovative business network that owns or holds interests in a diverse portfolio of companies in the consumer financial services, private equity, real estate, hospitality, professional sports, film production, gaming, and automobile dealership industries. Prior to forming The RLJ Companies in 2004, Mr. Johnson was founder and chief executive officer of Black Entertainment Television (BET), which was acquired by Viacom Inc. in 2001. He continued to serve as chief executive officer of BET until 2006. In July 2007, Mr. Johnson was named by USA Today as one of the 25 most influential business leaders of the past 25 years. Mr. Johnson currently serves on the board of directors or trustees of the Lowe’s Companies, Inc., RLJ Entertainment, Inc., RLJ Lodging Trust, and Strayer Education, Inc. He previously served as a director of RLJ Acquisition, Inc. He joined the Board in 2008. Mr. Johnson has significant experience in real estate, finance, mortgage banking and brand-building enterprises and a unique and diverse background in a number of industry sectors. He also has a substantial presence in Washington D.C. and the mid-Atlantic region, which is an important market for us.

7


 
 
 
  
Melissa Lora , age 53, has been since 2013 the President of Taco Bell International, a segment of Taco Bell Corp., which is a division of Yum! Brands, Inc., one of the world’s largest restaurant companies. Ms. Lora joined Taco Bell in 1987, serving as Taco Bell Corp.’s Chief Financial Officer from 2001 to 2012, and then as its Global Chief Financial and Development Officer from 2012 to 2014. Ms. Lora also was Regional Vice President and General Manager from 1998 to 2000 for Taco Bell Corp.’s operations throughout the Northeastern United States. She joined the Board in 2004. Ms. Lora is very knowledgeable of and has substantial experience and expertise in financial matters as well as in managing real estate assets. She has made significant contributions to the work of the Audit Committee since joining the Board and has provided strong leadership as its Chair since 2008
 
 
 
  
Jeffrey T. Mezger , age 60, has been our President and Chief Executive Officer since November 2006. Prior to becoming President and Chief Executive Officer, Mr. Mezger served as our Executive Vice President and Chief Operating Officer, a position he assumed in 1999. From 1995 until 1999, Mr. Mezger held a number of executive posts in our southwest region, including Division President, Arizona Division, and Senior Vice President and Regional General Manager over Arizona and Nevada. Mr. Mezger joined us in 1993 as president of the Antelope Valley Division in Southern California. He joined the Board in 2006. He is a member of the Executive Board of the USC Lusk Center for Real Estate, is a member of the Policy Advisory Board for the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley Haas School of Business, serves as Chairman of the Policy Advisory Board for the Harvard Joint Center for Housing Studies and was the founding Chairman of the Executive Committee for the Leading Builders of America. In 2012, Mr. Mezger was inducted into the California Homebuilding Foundation Hall of Fame. As our CEO, Mr. Mezger has demonstrated dedicated and effective leadership, and ownership of our business strategy and its results. He has also established himself as a leading voice in the industry through his nearly 40 years of experience in the public homebuilding sector.
 
 
 
 
Robert L. Patton, Jr. , age 53, has been a partner of Guggenheim Baseball Management since 2012. He became part owner of the Los Angeles Dodgers on May 1, 2012. Mr. Patton principally operates oil and gas properties in Texas and Kansas and has additional investments in many other sectors, including ranching and insurance. He serves on the board of Security Benefit Corporation and the Advisory Council of the University of Texas, College of Liberal Arts. Mr. Patton received a B.B.A. from the University of Texas as well as a J.D. from St. Mary’s University and LLM from Southern Methodist University. Mr. Patton has several years of experience in a wide range of industries as well as in real estate development, providing significant expertise and insight on investment management, financial planning, operational execution and regulatory compliance. He also has a substantial presence in Southern California and Texas, which are key markets for us.
 
 
 
 
Michael M. Wood , age 68, is Founder and Chairman of Redwood Investments LLC, a Washington, D.C. investment company established in 2005 and concentrating in media, real estate and alternative energy. From 2006-2009, Mr. Wood was the U.S. Ambassador to Sweden where he made cooperation between the U.S. and Sweden in alternative energy technology his top priority. In recognition for this work, in 2009, the King of Sweden bestowed on Mr. Wood the insignia of Commander Grand Cross, Order of the Polar Star, a medal given by Sweden’s Royal Family to people of foreign birth who make significant contributions to Sweden. Prior to becoming ambassador, Mr. Wood was co-founder and CEO of Hanley Wood LLC, the leading media company in the construction industry and one of the ten largest business-to-business media companies in the U.S. Mr. Wood is also Chairman of Winsight, LLC, a private business-to-business publishing company serving the convenience retailing, restaurant, and on-the-go food industries, and serves on the Board of Directors of Capital Partners for Education in Washington, D.C. Mr. Wood has extensive knowledge of the homebuilding industry and significant experience in real estate and alternative energy investing, providing substantial insight and expertise with respect to our business operations and longstanding commitment to sustainability. He is also a prominent and respected professional in Washington D.C., an important market for us, and has a distinguished policymaking background.


8


 
OWNERSHIP OF KB HOME SECURITIES
The following table shows, as of February 16, 2016, each stockholder known to us to beneficially own more than five percent of our common stock; and the beneficial ownership of our common stock by each of our directors and named executive officers, and all of our directors and executive officers as a group. Except as otherwise indicated, beneficial ownership is direct and each owner has sole voting and investment power with respect to the reported securities holdings.
Stockholder(a)
Total Beneficial Ownership(b)
Percent of Class
Stock Options(c)
Restricted Common Stock(d)
FMR LLC(e)
245 Summer Street, Boston, MA 02210
12,908,200

14.0%


BlackRock, Inc.(f)
  55 East 52 nd  Street, New York, NY 10055
10,308,470

11.2%


KB Home Grantor Stock Ownership Trust(g)
Wells Fargo Retirement and Trust Executive Benefits
One West Fourth Street, Winston-Salem, NC 27101
10,135,461

10.7%


The Vanguard Group, Inc.(h)
100 Vanguard Blvd., Malvern, PA 19355
5,916,507

6.4%


Donald Smith & Co., Inc.(i)
152 West 57th Street, New York, NY 10019
4,603,214

5.0%


Directors(j)
 
 
 
 
Stephen F. Bollenbach
207,503

*
144,103


Timothy W. Finchem
148,378

*
55,350


Dr. Thomas W. Gilligan
48,238

*
26,889


Kenneth M. Jastrow, II
135,767

*
55,350


Robert L. Johnson
138,004

*
93,343


Melissa Lora
190,847

*
66,570


Robert L Patton, Jr.
204,420

*


Michael M. Wood
13,901

*


Named Executive Officers
 
 
 
 
Jeffrey T. Mezger
5,527,932

5.5%
5,031,216


Jeff J. Kaminski
463,752

*
357,482

61,572

Brian J. Woram
477,085

*
351,986

46,403

Albert Z. Praw
298,174

*
201,457

46,403

Nicholas S. Franklin
29,000

*

24,000

Directors/executive officers as a group (15 people)
8,763,927

8.6%
7,079,341

226,307

*Denotes less than 1% ownership.
(a)
Except for FMR LLC and the Grantor Stock Ownership Trust (“GSOT”), the beneficial ownership and percent of class figures for the listed stockholders are taken from their respective Schedule 13G or Schedule 13G/A filings with the SEC and reflect their respective determinations of their ownership as of December 31, 2015. The beneficial ownership and percent of class figure for FMR LLC are taken from its Schedule 13G/A filing with the SEC, as described below, and reflect its determination of its ownership at January 29, 2016. The percent of class figure for the GSOT is relative to the total number of shares of our common stock entitled to vote at the Annual Meeting, as described below under the heading “Annual Meeting, Voting and Other Information.”
(b)
The amounts reported in this column for the directors include the following directly owned shares of our common stock: Ms. Lora 2,043; and Mr. Patton 200,000. The amounts reported in this column for the named executive officers include the following directly owned shares of our common stock: Mr. Mezger 496,716; Mr. Kaminski 44,698; Mr. Woram 78,696; Mr. Praw 50,314; and Mr. Franklin 5,000; and all executives officers as a group 812,826.
(c)
The amounts reported in this column are the shares of our common stock that can be acquired within 60 days of February 16, 2016 through the exercise of Director SARs (as described above under the heading “Director Compensation”), or common stock option awards (for the named executive officers). These amounts are included in the

9


amounts reported for each individual in the Total Beneficial Ownership column. Mr. Wood has not satisfied the applicable stock ownership requirement to exercise his Director SARs. No Director SARs have been granted to Mr. Patton.
(d)
The amounts reported in this column for the named executive officers are shares of restricted common stock. These amounts are included in the amounts reported for each named executive officer in the Total Beneficial Ownership column.
(e)
The stock holding information is based solely on a Schedule 13G/A dated February 9, 2016 that FMR LLC, a parent holding company, filed with the SEC to report the beneficial ownership of FMR LLC and its direct and indirect subsidiaries and affiliates, and Ms. Abigail P. Johnson, a director and the vice chairman, chief executive officer and president of FMR LLC. Of the reported amount, FMR LLC and its direct and indirect subsidiaries and affiliates and Ms. Johnson had sole voting power as to 204,200 shares and had sole dispositive power as to 12,908,200 shares. A wholly-owned FMR LLC subsidiary, Fidelity Management & Research Company, an investment adviser to various investment companies, votes the shares held by the investment companies under guidelines established by its Boards of Trustees.
(f)
The stock holding information is based solely on a Schedule 13G/A dated January 8, 2016 that BlackRock, Inc., a parent holding company, filed with the SEC to report its beneficial ownership. Of the reported amount, BlackRock, Inc. subsidiaries, collectively, had sole voting power as to 10,124,683 shares and had sole dispositive power as to 10,308,470 shares, and a subsidiary, BlackRock Fund Advisors, beneficially owned more than 5% of our outstanding shares.
(g)
The GSOT holds these shares pursuant to a trust agreement, with Wells Fargo Bank, N.A. as trustee. Both the GSOT and the trustee disclaim beneficial ownership of the shares. Under the trust agreement, our employees who hold unexercised common stock options under our employee equity compensation plans determine the voting of the GSOT shares. The number of GSOT shares that any one employee can direct the vote of depends on how many eligible employees submit voting instructions to the trustee. Employees who are also directors cannot vote GSOT shares; therefore, Mr. Mezger cannot direct the vote of any GSOT shares. If all eligible employees submit voting instructions, our other named executive officers can direct the vote of the following amounts of GSOT shares: Mr. Kaminski 986,275; Mr. Woram 871,182; Mr. Praw 606,736; and Mr. Franklin 202,029; and all current executive officers as a group (excluding Mr. Mezger) 4,164,383.
(h)
The stock holding information is based solely on a Schedule 13G/A dated February 10, 2016 that The Vanguard Group, Inc., an investment adviser to various investment companies (“VGI”), filed with the SEC to report its beneficial ownership. Of the reported amount, VGI had sole voting power as to 106,367 shares, had sole dispositive power as to 5,808,340 shares, had shared voting power as to 6,800 shares and had shared dispositive power as to 108,167 shares. Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., each VGI subsidiaries, beneficially own 101,367 and 11,800 shares, respectively.
(i)
The stock holding information is based solely on a Schedule 13G dated February 8, 2016 that Donald Smith & Co., Inc., an investment adviser to various institutional clients, filed with the SEC to report its beneficial ownership and beneficial ownership on behalf of the Donald Smith Long/Short Equities Fund, L.P., a partnership. Of the reported amount, Donald Smith & Co., Inc. had sole voting power as to 3,757,823 shares and had sole dispositive power as to 4,603,214 shares. The Donald Smith Long/Short Equities Fund, L.P. had sole voting power as to 14,974 shares and had sole dispositive power as to 4,603,214 shares.
(j)
Ms. Lora holds the amount reported for her in the Total Beneficial Ownership column in a trust in which she and her spouse are trustees and beneficiaries and over which they jointly exercise voting and investment power. Mr. Wood holds the amount reported for him in the Total Beneficial Ownership column in a trust in which he and his spouse are trustees and over which they jointly exercise voting and investment power, and he is the sole beneficiary as to the reported securities. Dr. Gabriel does not beneficially own any shares of our common stock.
Stock Ownership Requirements
Our directors and senior executives are subject to stock ownership requirements to better align their interests with those of our stockholders. Our Corporate Governance Principles require each of our directors to own at least five times the Board retainer (currently $500,000) in value of our common stock or common stock equivalents by the fifth anniversary of joining the Board (the directors serving on the Board on October 9, 2014 must meet the ownership threshold by the fifth anniversary of that date). Our executive stock ownership policy requires designated senior executives, including our named executive officers, to own a certain number of shares within five years of becoming subject to the policy. The policy is discussed below under the heading “Equity Stock Ownership Policy.” Each of our directors and named executive officers is in compliance with their respective requirements.


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COMPENSATION DISCUSSION AND ANALYSIS
 
Our Named Executive Officers (“NEOs”)
Jeffrey T. Mezger
President and Chief Executive Officer

Jeff J. Kaminski
Executive Vice President and Chief Financial Officer

Brian J. Woram
Executive Vice President and General Counsel
Albert Z. Praw
Executive Vice President, Real Estate and Business Development
Nicholas S. Franklin
Executive Vice President, Strategic Operations
2015 Performance Highlights
As a national homebuilder, we operate in a dynamic, complex and challenging business environment, and we produced robust results in 2015 against our aggressive performance goals. These results were achieved across several short-term and long-term financial, operating and strategic metrics, and demonstrate strong growth compared to a year ago as well as over the last three years.
 
 
Short-Term Operating Results
Total Revenues
Homebuilding Operating Income
Total Pretax Income
ñ
26.0%
20.0%
34.0%
 
Strategic Performance Indicators
 
 
 
 
Annual Net Orders
Year-End Backlog Value
ñ
22.0%
40.0%
 
Long-Term Performance Results
3-Yr. Revenue Growth
3-Yr. Cumulative Operating Income
3-Yr. Cumulative Net Income
Up
94.0%
$371M
$1.04B
 
 
 
 
 
 
 
2015 CEO Compensation Summary
• Our CEO’s base salary has remained the same since 2006.
• Our CEO’s performance-based and formula-driven 2015 annual cash incentive payout of ~$2.49M was higher than his 2014 payout, driven by our increased pretax profitability in 2015.
• Our CEO earned 149% of his target award, or ~$1.49M, under a 2012 three-year performance cash program, based on our generating over $507M of adjusted operating income during the performance period.
• Our CEO’s 2015 long-term incentives were solely performance-oriented equity awards — performance-based restricted stock units (“PSUs”) and common stock options. The PSUs comprised more than 50% of the total grant date fair value, and the total grant date fair value was 31% lower than in 2014.
Pay for Performance
 
Our CEO’s compensation decreased in 2015, primarily due to a reduction in his long-term incentives, demonstrating alignment with total stockholder return (“TSR”).
 
 
 
 
2015 Say On Pay Result — 87% Approval
Our stockholders were highly supportive of our executive pay program at our 2015 Annual Meeting. As a result, we have not materially changed our program, though we have taken several actions based on stockholder feedback.
Total Year-Over-Year CEO Compensation Down ~ 15%
Total 2015 Pay: $8,856,923 ~90% performance-based
Total 2014 Pay: $10,349,483 ~90% performance-based
Listening to our Stockholders
At our 2015 Annual Meeting, approximately 87% of the shares of our common stock present or represented at the meeting supported our advisory vote on named executive officer compensation. We believe this high level of support demonstrated a substantial degree of stockholder confidence in our performance and executive compensation programs. In 2015, we continued our longstanding practice of reaching out to our stockholders, including nearly all of our 25 largest stockholders, and directly engaged with stockholders representing over 50% of our outstanding shares. We value the input we received from stockholders and took their feedback into account during 2015 as described below.

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Topic
Stockholder Feedback
Action Taken
CEO Long-Term Incentive Grant
The CEO’s total grant value in 2014 was too large or increased too much from the prior-year grant.
Reduced our CEO’s 2015 total grant date fair value by 31% from 2014.
Long-Term Incentive Measures
Provide more information about performance goals.
Additional disclosure on performance goals is provided below under the heading “Long-Term Incentives.”
Short-Term Incentive Measures
Remove revenue as a stand-alone performance measure.
Minimize use of subjective components.
Revenue is not a measure in the 2015 or 2016 annual incentive plans.
Plan funding is formula-based and payout decisions are more transparent.
Stock Ownership Requirements
Remove 10%/year for 5 years reduction in required ownership for executives who reach age 60.
Eliminated the reduction feature from the stock ownership requirements.
Tax Restoration Payments
Maintain 2011 policy not to provide tax restoration payment benefits to newly hired executives.
Did not extend tax restoration payment benefits to Executive Vice President hired during 2015.
Compensation Governance
KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAMS
What We Do
What We Don’t Do
ü
Engage with and consider stockholder input in designing our executive pay programs.
×
Do not allow re-pricing of stock options without stockholder approval.
ü
Grant all of our CEO’s total long-term incentives in performance-oriented vehicles.
×
Do not provide new tax “gross-ups” to any officer or employee.
ü
Perform under Compensation Committee oversight, annual risk assessments to determine that our employee compensation policies and programs are not likely to have a material adverse effect on us.
×
Do not, without stockholder approval, enter into new severance arrangements with executive officers above the limits specified in a longstanding policy, as described below under the heading “Severance Arrangements.”
ü
Link annual NEO incentive pay to objective, pre-established financial performance goals.
×
Do not allow our NEOs (or any employees or non-employee directors) to hedge or pledge their holdings of our securities.
ü
Engage at the sole direction of the Compensation Committee an independent compensation consultant.
×
Do not provide perquisites to our NEOs beyond those offered to all employees, other than market-competitive medical, dental and vision benefits and the opportunity to participate in a deferred compensation plan.
ü
Maintain stock ownership requirements for all NEOs.
 
 
ü
Maintain a relevant peer group.
 
 
ü
Maintain clawback policies consistent with the Sarbanes-Oxley Act of 2002 and the 2010 Dodd-Frank Wall Street Reform Act (when effective).
 
 

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Pay Program Overview
The components of, and rationale for, each element of our executive compensation program are described in the table below.
REWARD TYPE
DESCRIPTION
RATIONALE
BASE SALARY
• Fixed compensation delivered in cash on a semi-monthly basis.
• A market-aligned component of the overall pay package to provide a baseline level of pay; key to attracting and retaining highly-qualified executives.
ANNUAL INCENTIVE PROGRAM
• The funding of our NEOs’ 2015 annual incentives was formula-driven, based on pretax income and asset efficiency measures.
• Motivates achievement of key short-term financial results.
LONG-TERM INCENTIVE PROGRAM
Performance-Based Restricted Stock Units
• 52% of total grant date fair value for our CEO, and nearly 20% for our other NEOs.
• 2015 grants have three, long-term performance measures: three-year cumulative earnings per share, three-year average return on invested capital, and three-year revenue growth versus our peer group.
• Focuses executives on achievement of long-term operating results.
• Establishes strong alignment with long-term stockholder interests through performance-based payouts in shares of our common stock.
Stock Options
• 48% of total grant date fair value for our CEO and approximately 50% for our other NEOs.
• Value realized only with share price appreciation, which is strongly influenced by performance.
Restricted Stock
• Approximately 30% of total grant date fair value for our NEOs other than our CEO.
• Encourages retention and provides additional alignment with stockholder interests in conjunction with stock ownership requirements.
RETIREMENT PROGRAMS AND PERQUISITES
• A 401(k) plan in which all eligible employees may participate.
• Legacy executive retirement and death benefit plans have been closed to new participants for over a decade.
• Market-competitive medical, dental and vision benefits and the opportunity to participate in a deferred compensation plan.
• Programs are aligned with market practices.
• Focuses executives on earning rewards through performance pay elements, not through entitlements.
As outlined above, we place a significant emphasis on at-risk, performance-based pay. As shown below, in 2015, our CEO received nearly 90% of his direct compensation ( i.e. , base salary and annual and long-term incentives) in performance-based and/or at-risk vehicles. For our other NEOs, such vehicles made up, on average, 80% of their direct compensation.

13


To further illustrate the significant at-risk nature of the long-term incentives granted to our CEO, the table below shows the intrinsic value at November 30, 2015 of our CEO’s long-term incentives granted in the last three years (comprised of PSUs and common stock options). For the PSUs, intrinsic value is based on the November 30, 2015 closing price of our common stock ($14.09) and the target number of common stock shares to be granted. The stock options have no intrinsic value, as their grant prices exceeded the closing price of our underlying common stock on November 30, 2015.
CEO Long-Term Incentives Intrinsic Value
Grant Year
 
Grant Price
 
Grant Date Fair Value
 
Intrinsic Value at November 30, 2015
 
Intrinsic Value Relative to Grant Date Fair Value
2015
 
$
14.92

 
$
3,812,763

 
$
1,873,970

 
49%
2014
 
14.62

 
5,500,000

 
2,756,314

 
50%
2013
 
16.63

 
2,707,660

 
1,409,000

 
52%
Three-Year Total
 
$
12,020,423

 
$
6,039,284

 
50%
NEO Compensation Components
Base Salaries .  The Compensation Committee annually reviews and approves the base salaries of our CEO and our other NEOs. The Compensation Committee approves NEO base salaries based on its consideration of several factors, including an NEO’s experience, specific responsibilities, capabilities, individual performance and expected future contributions; our current and expected financial and operational results; and market rates to ensure competitiveness. In July 2015, each of our NEOs, except for our CEO and Mr. Franklin (who was hired during 2015), received a base salary increase, ranging from 1.8% to 2.8%, based on our growth over the prior 12 months, an evaluation of the factors listed above and our CEO’s recommendations.
2015 Annual Incentives . Our annual incentive program is structured to drive performance in short-term operating results ( i.e. , over a fiscal year period). To provide alignment of the program with stockholders’ interests, the Compensation Committee established a requirement that we achieve total adjusted pretax income (“API”) of $100 million for our 2015 fiscal year (“Minimum Pretax Income”) for the participating executive officers to receive any annual incentive payouts.
Based in part on stockholder feedback, we adjusted our annual incentive program for 2015 by eliminating revenue as a stand-alone performance measure. In addition, the 2015 program’s funding was formula-driven and determined based on two components: (a) API performance relative to threshold and target goals; and (b) API performance relative to a minimum asset efficiency measure. For the first component, the applicable threshold performance goal was considered reasonably achievable, yet uncertain to be met under then-expected market and business conditions in 2015. The target performance goal was designed to require significant management effort to achieve.
API is our total pretax income excluding incentive and variable compensation expense and inventory impairment and land option contract abandonment charges. We view API as a comprehensive short-term measure of our executive officers’ performance, as it reflects their ability to generate revenue, manage expenses and control fixed costs. The asset efficiency measure was selected to motivate our executive officers to generate profitable growth while controlling inventory levels and increasing our return on inventory in 2015, in alignment with our strategy of investing in attractive, land-constrained locations across our served markets to expand our operating platform and community count.
For our NEOs, target annual incentive payouts relative to base salary remained consistent with the prior year, with our CEO at 150% and all other NEOs at 100%. Maximum annual incentive payouts are limited to a multiple of each NEO’s target level, with our CEO at four times, our CFO at three times and our other NEOs at two times. The potential target and maximum annual incentive opportunities were in line with peer group pay practices and designed to generate award levels that, if achieved, would appropriately reward strong performance for 2015.
2015 Annual Incentive Program Component Funding . Because we exceeded the Minimum Pretax Income, our NEOs became eligible to receive annual incentive payouts, with the funding for such payouts based on our performance under the two components of the 2015 program, as discussed below.
API Performance Relative to Goals Funding. For the first component of the 2015 annual incentive program, we set an aggressive API performance target of $183.0 million, and limited potential payouts to the participating executive officers to no more than their respective pre-established target payout levels under the program, even if our actual API exceeded the target performance level. We achieved API of $166.5 million for 2015, or approximately 91% of target, driven primarily by our 34% year-over-year increase in pretax income. As shown in the table below, this performance funded strictly formula-based payouts of 82% of target to our NEOs, or $3.1 million in total, pursuant to the performance-to-payout level ratio established for this component. The payouts under this component accounted for approximately 57% of the total 2015 annual incentive payouts the Compensation Committee approved for our NEOs.

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2015 API Performance Levels and Payout Summary
 
Threshold
Target
Actual Result
API Performance Levels
$137.3 million
$183.0 million
$166.5 million
API Performance Levels Relative to Target
75%
100%
91%
Payout Level Ratios
50%
100%
82%
The participating executive officers could earn annual incentive payouts above their respective target payout levels (but limited to each such officer’s respective maximum payout level) only if and to the extent our API performance exceeded a minimum asset efficiency objective. This second component of the 2015 annual incentive program is further described below.
API Performance Relative to Asset Efficiency Funding . This component was designed to create tighter alignment of our annual incentive program with our strategic focus in 2015, as discussed above. Under it, two percent of each dollar of API over our minimum asset efficiency objective funded an additional annual incentive pool to be allocated among the eligible participating executive officers. The minimum asset efficiency objective was set at a one percent return on inventory for 2015, which was approximately $32.7 million. With the difference between our API and the minimum asset efficiency objective equal to $133.9 million, the asset efficiency performance pool was funded at a total level of approximately $2.7 million.
The Compensation Committee determined the allocation of the asset efficiency performance pool based on pre-established potential payout ranges that took into consideration each eligible participant’s 2015 target and maximum annual incentive compensation payout opportunities; historical relative annual incentive payouts by functional role/seniority level; and competitive market pay information. The ranges for the 2015 program are shown in the table below.
2015 Asset Efficiency Performance Pool Potential Payout Ranges
Position
Potential Payout Range (Percent of Total Pool Funding)
CEO
43% — 50%
Other NEOs
12% — 15%
The Compensation Committee also took into account each eligible participant’s individual performance contributions, with the respective contributions for such participants other than our CEO informed by our CEO’s assessment of their performance. Based on all of these elements, each participant achieved an individual performance factor (“IPF”) within the participant’s potential payout range that determined the participant’s actual allocation of the asset efficiency performance pool. The respective IPF-based allocations to our NEOs are shown in the table below, all of which fell below the maximum limit of each such NEO’s potential payout range, as noted above.
NEO
2015 NEO Individual Performance Contributions
IPF
Mr. Mezger
Mr. Mezger provided outstanding leadership in setting and driving performance against our top strategic objectives. In 2015, our year-over-year pretax income grew by 34%, ending backlog value rose by 40%, and net orders grew by 22%. Mr. Mezger also played a critical role in promoting the continued enhancement of the KB Home brand as a leader in innovation in sustainable building practices.
47.0%
Mr. Kaminski
Mr. Kaminski oversaw the successful completion of a comprehensive three-year strategic plan that measurably enhanced our capital structure and liquidity. He continued his strong leadership in managing our balance sheet through refinancing senior notes and expanding our revolving credit facility. In addition, he drove further improvements in our operating divisions’ financial performance.
14.8%
Mr. Woram
In 2015, Mr. Woram’s major accomplishments included successes in transactional support, litigation management and significant litigation cost recoveries via mediations and settlements. He continued to provide strong oversight to our legal team, and he was successful in strategically addressing risk mitigation opportunities in our business.
12.3%
Mr. Praw
Mr. Praw led our efforts in driving land investment and community count growth through successful land acquisitions, allowing us to achieve nearly 14% year-over-year growth in deliveries in 2015 and positioning us to meet our 2016 delivery goals. He also drove asset optimization strategies to balance our portfolios in several markets, resulting in more than $110 million of land sale revenues in 2015.
13.0%
Mr. Franklin
Mr. Franklin joined our team during 2015. Since joining, he has driven greater coordination across key corporate functions, improving efficiency and support for our operating divisions. In addition, he assumed operational leadership responsibilities for a significant division within our Southern California homebuilding business and was paid a bonus of $106,400 for that contribution.
N/A
As a group, our NEOs received approximately $2.3 million under the second component of the 2015 annual incentive program, which accounted for approximately 43% of the total 2015 annual incentive payouts the Compensation Committee approved for our NEOs. Since he was hired during 2015, Mr. Franklin did not participate in this component of the 2015 annual incentive program.

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2015 Annual Incentive Payouts . The annual incentive payouts the Compensation Committee approved for our NEOs are identified in the following table, which shows each NEO’s (a) pre-established target and maximum payout levels under the 2015 program; (b) actual payout under each component of the program; and (c) actual total 2015 annual incentive payout.
2015 Annual Incentive Program Payout Levels and Actual Payouts
NEO
Target
Maximum
API Performance Component Payout(a)
Asset Efficiency Component Payout
Total Payout
Mr. Mezger
$
1,500,000
 
$
6,000,000
 
$
1,230,000
 
$
1,258,297
 
$
2,488,297
 
Mr. Kaminski
665,000
 
1,995,000
 
545,300
 
394,891
 
940,191
 
Mr. Woram
560,000
 
1,120,000
 
459,200
 
327,960
 
787,160
 
Mr. Praw
550,000
 
1,100,000
 
451,000
 
348,039
 
799,039
 
Mr. Franklin
480,000
 
960,000
 
393,600
 
 
393,600
 
(a) Annex 1 to this Proxy Statement contains a reconciliation of our pretax income calculated in accordance with generally accepted accounting principles (“GAAP”) to the non-GAAP financial measure of API.
2016 Annual Incentive Program . The 2016 annual incentive program will be nearly identical to our 2015 program, including (a) a formula-driven funding structure; (b) a minimum pretax income performance level for our executive officer participants to qualify for any annual incentive payouts; and (c) actual funding of annual incentive payouts determined by pretax income performance and an asset efficiency performance measure. The target performance level for the pretax income measure requires measurable improvement from our actual 2015 performance.
Long-Term Incentives . We provide long-term incentives to our NEOs and other senior executives that are designed to promote alignment of pay with our performance and stockholder value creation and encourage the retention of talented individuals. In October 2015, the Compensation Committee approved long-term incentive awards consisting of PSUs, common stock options and shares of restricted common stock. These particular vehicles were selected to further strengthen the alignment of the recipients’ interests with those of our stockholders. As noted above, our CEO’s total long-term incentive grant date fair value was reduced by 31% as compared to his prior-year grant, in part reflecting stockholder feedback we received in 2015.
The majority of the total long-term incentive grant date fair value approved for our CEO, and nearly 20% of the total grant date fair value approved for our other NEOs, was composed of PSUs with specific performance results required to achieve vesting. The balance of the total long-term incentive grant date fair value approved for our CEO and approximately 50% of the total grant date fair value approved for our other NEOs was in the form of stock options that only accrue value for the recipient with share price appreciation, which is strongly influenced by performance. Finally, approximately 30% of the total long-term incentive grant date fair value approved for the NEOs other than our CEO was in the form of time-vesting restricted stock. The long-term incentive grants approved for our NEOs and the corresponding grant date fair value are identified in the following table, as well as in the Grants of Plan-Based Awards During Fiscal Year 2015 table.
NEO Long-Term Incentives Granted in 2015
NEO
PSUs
Restricted Stock
Stock Options
Total ($)
#
$
#
$
#
$
Mr. Mezger
133,000

$
1,984,360


$

333,000
 
$
1,828,403
 
$
3,812,763
 
Mr. Kaminski
14,000

208,880

24,000

358,080

115,000
 
631,431
 
1,198,391
 
Mr. Woram
10,000

149,200

18,000

268,560

80,000
 
439,256
 
857,016
 
Mr. Praw
10,000

149,200

18,000

268,560

80,000
 
439,256
 
857,016
 
Mr. Franklin
14,000

208,880

24,000

358,080

115,000
 
631,431
 
1,198,391
 
Performance-Based Restricted Stock Units . We have granted PSUs to our executive officers each year since 2012. As with prior PSU grants, the PSUs granted in 2015 (“2015 PSUs”) are designed to focus our executive officers on achieving important long-term financial objectives over several years. The 2015 PSUs include the following measures consisting of a combination of absolute and relative metrics that, if achieved, will drive positive outcomes for our business and that we believe are strong drivers of stockholder value creation:
• Cumulative Earnings Per Share (“EPS”):
50% weight, measures our profitability trajectory over the three-year period
• Average Return on Invested Capital (“ROIC”):
20% weight, measures our profitability relative to the capital deployed
• Revenue Growth Rank Versus Peers:
30% weight, measures our ability to grow our top-line relative to our peers

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The 2015 PSU amounts shown in the table above reflect a target award of shares of our common stock (“Award Shares”). Each 2015 PSU entitles a recipient to a grant of 0% to 200% of his Award Shares. The 2015 PSUs will vest, based on our achieving, over the three-year period commencing on December 1, 2015 and ending on November 30, 2018, specified levels of performance against the three performance measures noted above. Vesting is generally subject to a recipient’s continued employment with us to and including a date that is no later than 90 days after the end of the performance period (“Determination Date”). The performance for both the cumulative EPS and the average ROIC measure will be determined on an adjusted, tax-affected basis that excludes certain compensation expense, inventory impairment and land option contract abandonment charges, and other extraordinary items subject to Compensation Committee approval.
Performance for each measure is to be determined by the Compensation Committee on the Determination Date. In addition, as with prior PSU grants, each recipient of a 2015 PSU will be credited with an amount equal to the cash dividends that are paid in respect of one share of our common stock with a record date between the grant date and the Determination Date (“Dividend Equivalent”). At vesting, each recipient will receive a cash payment equal to the credited Dividend Equivalent in proportion to the Award Shares approved for grant to the recipient, if any. If performance over the performance period for all three 2015 PSU measures is below specific thresholds, each recipient will be granted no shares of common stock and will receive no cash Dividend Equivalent payment. Except for death, disability or certain retirement circumstances, each recipient will forfeit any rights with respect to Award Shares and to any cash Dividend Equivalent payment if a recipient terminates service prior to the Determination Date.
PSU Measures and Goals . In response to stockholder feedback we received in 2015, below is additional disclosure regarding the measures and goals for our outstanding PSU awards.
As described in our 2014 Proxy Statement, we granted PSUs to our executive officers in 2013 (“2013 PSUs”) that entitle recipients to a grant of 0% to 200% of a target award of shares of our common stock based on our achieving, over the three-year period commencing on December 1, 2013 and ending on November 30, 2016, specified levels of (a) average return on equity (“ROE”) performance and (b) revenue growth performance relative to our peer group. As described in our 2015 Proxy Statement, we granted PSUs to our executive officers in 2014 (“2014 PSUs”) that entitle recipients to a grant of 0% to 200% of a target award of shares of our common stock based on our achieving, over the three-year period commencing on December 1, 2014 and ending on November 30, 2017, specified levels of performance against the same three performance measures noted above for the 2015 PSUs. The following tables present our goals with respect to the 2013, 2014 and 2015 PSU performance measures. As shown below, the goals for the measures other than relative revenue growth have increased year-over-year at each performance level.
Performance Measure
PSU Year
Threshold Goal
Target Goal
Maximum Goal
Average ROE
2013
10.0%
15.0%
20.0%
Cumulative EPS
2014
$2.52
$3.04
$4.00
2015
$2.73
$3.31
$4.36
Average ROIC
2014
2.8%
3.3%
4.0%
2015
3.0%
3.5%
4.3%
Performance Measure
Performance (Rank)
Target Award Multiplier
Relative Revenue Growth
Applies to 2013, 2014 and 2015 PSUs
(Adjustments to ranking levels and multipliers will be made if there are changes in the peer group composition over time, per the terms of the PSUs)
First or Second
200%
3
178%
4
156%
5
134%
6
113%
7
90%
8
67%
9
44%
10
21%
Bottom 2
0%
The threshold performance levels outlined above are designed to be reasonably achievable, yet uncertain to be met under expected market and business conditions at the time of grant. Target performance levels are designed to require significant management effort to achieve, and maximum performance levels are designed to be measurably more difficult to achieve than target performance levels. Each of these performance levels directly scale to threshold, target and maximum payout opportunities.

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As 2015 was the first year of the three-year performance period for the 2014 PSUs and the second year of the three-year performance period for the 2013 PSUs, and because we will not know our relative revenue growth rank as compared to the peer group until the end of each three-year performance period, no shares under the 2013 PSUs and 2014 PSUs have vested. For the applicable goals associated with the 2013 and 2014 PSUs, our performance through 2015 is tracking above maximum performance on the average ROE measure, approximately target performance on the cumulative EPS measure, and below threshold performance on the average ROIC measure. Ultimately, our achievement with respect to the applicable performance goals during the upcoming fiscal year(s) will determine the extent to which any shares under the 2013, 2014 and 2015 PSUs vest.
2012 PSU Awards . As described in our 2013 Proxy Statement, we granted PSUs to our executive officers in 2012 (“2012 PSUs”) that entitled recipients to a grant of 0% to 200% of a target award of shares of our common stock based on our achieving, over the three-year period commencing on December 1, 2012 and ending on November 30, 2015, specified levels of (a) average ROE performance and (b) revenue growth performance relative to our peer group. With the performance period for the 2012 PSUs completed, on February 12, 2016, the Compensation Committee approved share grants with respect to the 2012 PSUs as set forth in the tables below. Since he was not employed by us at the time of the award grant, Mr. Franklin did not participate in the 2012 PSU program.
2012 PSU Award Determinations
Performance Measure
Average Annual Performance
Aggregate Total Performance
Target Award Multiplier
ROE (60% weight)
33.4%
N/A
200%
Relative Revenue Growth (40% weight)
N/A
6 th  out of 12 peer companies
113%
Cumulative Multiplier
165%
The average ROE result for the 2012 PSUs, which was above the maximum goal level, reflected our generation of $1.04 billion in net income over the performance period, as noted above under the heading “2015 Performance Highlights.” This strong performance allowed us to achieve the reversal in 2014 of $825.2 million of our deferred tax asset valuation allowance, which, among other things, significantly strengthened our balance sheet, contributed to a $1.2 billion increase in our stockholders’ equity over the past two years and enables us to potentially shelter, on a cash basis, approximately $2 billion of future earnings from income taxes. The relative revenue growth result for the 2012 PSUs reflected our 94% revenue growth over the performance period. In addition, during 2015, two of the peer companies that were part of the original peer group for the relative revenue growth performance measure merged to form a single peer company. Our ranking in the table above reflects our position at the end of the three-year performance period among the post-merger peer group, consistent with the terms of the 2012 PSUs and based on the relative revenue growth performance rank-to-target award multiplier table above.
2012 PSU Awards
NEO
Target Award(#)
Actual Award(#)
Mr. Mezger
152,495
251,617
Mr. Kaminski
17,868
29,482
Mr. Woram
16,636
27,449
Mr. Praw
16,636
27,449
Stock Options and Restricted Stock . Each common stock option shown above in the NEO Long-Term Incentives Granted in 2015 table will vest ratably over a three-year period. Each share of restricted common stock shown in that same table will vest in three equal annual installments on October 25, 2016, 2017 and 2018, and entitles the recipient to receive all cash dividends that are paid in respect of one share of our common stock with a record date during the period between the grant date and an applicable vesting date. Except for death, disability or certain retirement circumstances, each NEO will forfeit any unvested restricted stock or stock options if his employment with us is terminated before an applicable vesting date.
2012 Performance Cash Awards . In 2012, the Compensation Committee approved performance cash awards to our NEOs and other senior executives consistent with the pay-for-performance purpose of our long-term incentives and to enhance retention. Each 2012 performance cash award was designed to deliver a cash payout of 0% to 200% of a participant’s target award value relative to threshold, target and maximum performance goals the Compensation Committee set for each year of the three-year performance period ending on November 30, 2015. The goals, which the Compensation Committee increased in each year of the program, are shown in the table below.

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2012 Performance Cash Awards – Measures, Goals and Results
Financial Performance Measure
Performance Goals
Actual Performance Result
Actual Payout Result to Target
Threshold
Target
Maximum
Adjusted Operating Income, FY13
$68.0 million
$100.0 million
$116.0 million
$128.8 million
200%
Adjusted Operating Income, FY14
$149.0 million
$170.0 million
$191.0 million
$189.0 million
182%
Adjusted Operating Income, FY15
$159.8 million
$213.0 million
$239.6 million
$189.7 million
69%
Total
150%
The threshold, target and maximum performance goal levels for each year of the 2012 program’s performance period were based on adjusted operating income, calculated as the sum of our homebuilding operating income, financial services operating income and equity in income of unconsolidated financial services joint ventures, excluding incentive and variable compensation expense, and inventory impairment and land option contract abandonment charges (“AOI”). Annex 1 to this Proxy Statement shows the calculation of our AOI in each year of the 2012 program’s performance period and a reconciliation of operating income calculated in accordance with GAAP to the non-GAAP financial measure of AOI. The Compensation Committee considered AOI to be an appropriate performance measure because it incentivizes revenue generation, margin expansion and cost control, all of which underpin profitability, our top strategic priority throughout the program’s performance period.
2012 Performance Cash Award Payouts . In approving the performance achievement for 2015 under the 2012 performance cash award program, the Compensation Committee determined it was appropriate not to exclude $3.2 million of inventory impairment charges relating to land assets we acquired during the 2012 program’s performance period, thereby reducing the payout level to 65% from 69%. With this performance achievement level adjustment, and a similar adjustment to the 2014 payout level to 181% from 182%, the Compensation Committee approved overall 2012 performance cash award payments to our NEOs that were approximately 149% of target, as shown in the table below. As he was not employed by us at the time of grant, Mr. Franklin did not participate in the 2012 performance cash award program, which is the last year that performance cash awards were issued to our NEOs.
2012 Performance Cash Award Payouts
NEO
Target
Overall Payment
Mr. Mezger
$
1,000,000

$
1,486,667

Mr. Kaminski
300,000

446,000

Mr. Woram
270,000

401,400

Mr. Praw
270,000

401,400

Executive Compensation Decision-Making Process and Policies
The Compensation Committee oversees our executive compensation decision-making process and executive compensation and benefits programs and policies. In making executive compensation decisions, the Compensation Committee considers a variety of factors and data, with our performance and individual executive performance generally viewed as the most important inputs, and takes into account the totality of compensation that may be paid through base salaries and annual and long-term incentives. Among the data the Compensation Committee considers are financial and operational performance information and metrics for us, including comparisons to prior years’ performance and our current business plans, and for our peer group (which is described below); surveys and forecasts of comparative general industry and peer group compensation and benefits practices; and at least annually, management-prepared tally sheets for each NEO and certain other senior executives with up to five years of compensation data. The Compensation Committee, in consultation with FWC, also considers one-year and three-year pay and performance data regarding the members of our peer group.
Role of Our Management . Our CEO and senior human resources and legal department executives provide information and recommendations to assist the Compensation Committee’s decision-making, and also advise on compliance and disclosure requirements.
Role of Compensation Consultants . The Compensation Committee is assisted in the executive compensation decision-making process, as well as on compliance and disclosure requirements, by FWC, which it retains directly. FWC attends Compensation Committee meetings as needed. To maintain its independence and avoid any conflicts of interest, FWC may not work directly for our management unless the Compensation Committee pre-approves the work, including fees. During 2015, FWC did not provide any services that would have required such pre-approval. Based on its consideration of factors under

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NYSE listing standards, the Compensation Committee determined that FWC’s work did not raise any conflicts of interest, and therefore considered FWC to be independent.
Peer Group . Our peer group is composed solely of public companies that, like us, are engaged in high production homebuilding as their primary business. We compete with these companies for both homebuyers and management talent. The competition with these companies for human resources reflects our, and their, need to attract and retain high caliber management and other personnel with strong high production homebuilding expertise and experience to execute business activities in distinct, local markets. Therefore, a principal focus in designing our compensation and benefits programs is to meet this critical, competitive need.
The Compensation Committee, in consultation with FWC and our management, periodically reviews and considers changes to the makeup of our peer group. The Compensation Committee principally considers the competitive factors described above, and it also considers our total revenues and market capitalization relative to those of the companies in the peer group. The companies in our peer group are shown in the table below. As of their most recently filed proxy statements before the date of this Proxy Statement, each member of our peer group included us in its own peer group. During 2015, former peers Ryland Group and Standard Pacific merged to form CalAtlantic Group, which we have retained in our peer group.
Our Peer Group
• Beazer Homes
 
• Hovnanian Enterprises
 
 • M/I Homes
 
 • PulteGroup
 • CalAtlantic Group
 
• Lennar Corporation
 
• Meritage Homes
 
• Toll Brothers
• DR Horton
 
• MDC Holdings
 
• NVR Incorporated
 

As of December 31, 2015, the reported total revenues (on a trailing 12-month basis) of the companies in our peer group were within a range of approximately one-half to 4.0 times our total revenues, and our total revenues approximated the median of the peer group. The market capitalization of our peer group (on a trailing three-year basis) was within a range of approximately one-third to 6.0 times ours.
Equity Stock Ownership Policy . We maintain a longstanding executive stock ownership policy. The policy is intended to encourage, and has encouraged, our executives to increase their ownership of our common stock over time and to align their interests with our stockholders’ interests. Under the policy, designated senior executives are expected to achieve specific levels of common stock ownership within five years of joining us and, once achieved, maintain such ownership throughout employment with us. The targeted common stock ownership levels for our NEOs are as follows:
Executive Position
Ownership Guideline
CEO
6.0 times base salary
Other NEOs
2.0 times base salary
Common stock ownership includes shares directly owned by the NEO, and shares are valued at the greater of the most recent closing price on a valuation date, or the closing price on the date shares are acquired. Designated executives are required to hold all vested net (after tax) shares of time-vesting and performance-vesting restricted stock and up to 100% of net shares acquired through stock option exercises until their applicable stock ownership requirement is met, absent a hardship or other qualified exception. Each of our NEOs is in compliance with the requirements of the policy.
Formerly, our executive stock ownership policy allowed for a reduction in the ownership requirement by 10% each year for five years once a designated executive reached the age of 60. We recently updated the policy to eliminate this reduction based on feedback from our stockholders during 2015.
Prohibition on Hedging/Pledging of Our Securities . To further align their interests with those of our stockholders, our employees and non-employee directors cannot engage in short sales of our securities and cannot buy or sell puts, calls or any other financial instruments that are designed to hedge or offset decreases or increases in the value of our securities (including derivatives, prepaid variable forward contracts, equity swaps, collars and exchange funds). They also cannot hold our securities in a margin account or otherwise pledge our securities as collateral for any loan.
Equity-Based Award Grant Policy . Our equity-based award grant policy governs the timing and establishes certain internal controls over the grant of equity-based awards. The policy requires that the Compensation Committee (or the Board) approve all grants of equity-based awards, and their terms. The policy does not permit any delegation of granting authority for equity-based awards to our management. Per the policy, the exercise price of any stock option award will not be less than the closing price of our common stock on the NYSE on the grant date.

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Clawback .  Under his Employment Agreement, our CEO must repay certain bonus and incentive- or equity-based compensation he receives if we are required to restate our financial statements as a result of his misconduct, consistent with Section 304 of the Sarbanes-Oxley Act of 2002. We will also recoup incentive-based compensation to the extent required under the Dodd-Frank Act and any rules, regulations and listing standards issued under that act, when effective.
Tax Implications of our Executive Compensation Program . Section 162(m) of the Code generally disallows a tax deduction for compensation over $1.0 million paid to “covered employees” (which, under current federal tax rules, are our NEOs other than the CFO) unless it is qualifying performance-based compensation. We generally design our compensation plans in order to maintain federal tax deductibility for executive compensation under Section 162(m) of the Code, and the Compensation Committee considers the potential Section 162(m) impact when approving the compensation paid to our NEOs. The Compensation Committee, however, will approve compensation that may not be deductible under Section 162(m) of the Code where it believes it is in our company’s and our stockholders’ best interests to do so.
Indemnification Agreements . We have entered into agreements with each of our NEOs and certain other senior executives that provide them with indemnification and advancement of expenses to supplement what our Certificate of Incorporation and insurance policies provide, subject to certain limitations.
Severance, Change in Control and Post-Termination Arrangements and Benefits
Severance Arrangements .  Mr. Mezger’s Employment Agreement provides him with certain severance benefits, and all of our current NEOs (except Mr. Franklin, who has not yet served for a full year) participate in our Executive Severance Plan, which provides them with certain severance benefits. These severance arrangements are discussed further below under the heading “Potential Payments Upon Termination of Employment or Change in Control.” In considering our stockholders’ approval of an advisory proposal, in 2008 we adopted a policy under which we will obtain stockholder approval before paying severance benefits to an executive officer under a future severance arrangement in excess of 2.99 times the sum of the executive officer’s then-current base salary and target bonus. Future severance arrangements do not include arrangements existing at the time we adopted the policy or that we assume or acquire unless, in each case, any such severance arrangement is changed in a manner that materially increases its severance benefits.
Change in Control Arrangements .  Since 2001, we have maintained a Change in Control Severance Plan (“CIC Plan”) that, upon a change in control, provides participants with certain benefits and accelerated vesting of equity awards. The CIC Plan is intended to enable and encourage our management to focus its attention on obtaining the best possible result for our stockholders in a change in control situation; to promote management continuity; and to provide income protection in the event of involuntary loss of employment. In addition, if we experience a change in control, the vesting is accelerated for any unvested benefits under our Deferred Compensation Plan (“DCP”), which is discussed below, and under certain of our employee benefit plans, including our equity compensation plans. Benefits to which each of our NEOs may be entitled upon a change in control are further discussed below under the heading “Potential Payments Upon Termination of Employment or Change in Control.”
Death Benefits .  Our Death Benefit Only Plan, in which Messrs. Mezger and Praw participate, provides a death benefit to the participant’s designated beneficiary of $1 million (plus an additional tax restoration amount sufficient to pay taxes on the benefit and the additional amount). We closed the Death Benefit Only Plan to new participants beginning in 2006, and only term life insurance, with a $750,000 benefit level payable to an executive’s designated beneficiaries, has been made available to incoming eligible executives. We maintain this term life insurance benefit for Messrs. Kaminski, Woram and Franklin. We also maintain a $400,000 life insurance death benefit for designated beneficiaries of Mr. Mezger. In addition, under the terms of our equity award agreements, award recipients or their estates are eligible for accelerated vesting of equity awards upon the recipient’s death or disability, as defined in the award agreements.
Other Benefits .  The majority of our health and welfare benefits are made available to all full-time employees, including our NEOs. During 2015, as in years past, our NEOs also received reimbursement for qualified out-of-pocket medical, dental and vision expenses that exceed amounts payable under our standard medical, dental and vision plans. In addition, in 2015, certain of our NEOs, and other employees, participated in our DCP, as described below under the heading “Retirement Programs.” These market-competitive benefits are offered to attract key executive talent and to promote retention. Other than those described in the foregoing sentences and the additional items described above under the heading “Death Benefits” and below under the heading “Retirement Programs,” we do not provide any additional benefits or perquisites to our NEOs or other senior executives.
Retirement Programs . The KB Home 401(k) Savings Plan (“401(k) Plan”), a qualified defined contribution plan, is the only program we offer to all full-time employees that provides post-employment benefits. Our NEOs and certain other employees can also participate in the unfunded nonqualified DCP to defer compensation they receive. The DCP allows participants to make pretax contributions of up to 75% of their base salary and 75% of their annual incentive compensation, and to select from one or more investment options in which their deferred compensation is deemed to be invested. We do not provide a guaranteed rate of return on these investment options. Thus, a participant’s credited earnings depends on their investment elections. We

21


provide a dollar-for-dollar match of 401(k) Plan and DCP contributions on up to an aggregate amount of 6% of a participant’s base salary. Matching contributions are generally fully vested after five years of service. Deferred amounts together with any credited investment returns under the DCP are paid out to participants in a lump sum or in installments in accordance with their advance written election, commencing either at a specified date during employment or upon termination of employment. NEO deferrals under the DCP are shown below in the Non-Qualified Deferred Compensation During Fiscal Year 2015 table. We also maintain a Retirement Plan for certain executives, including Mr. Mezger, whose participation is shown in the Pension Benefits During Fiscal Year 2015 table. The Retirement Plan, closed to new participants since 2004 with no additional benefit accruals to participants (other than cost-of-living adjustments), provides each participant with specific annual payments for 20 years that begin upon the later of reaching age 55, the tenth anniversary of a participation commencement date or the termination of employment with us. Mr. Mezger’s original annual benefit amount under the Retirement Plan was $450,000 . This amount is increased only by annual cost-of-living adjustments applied to federal social security benefits. 
 
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT
The Management Development and Compensation Committee of the Board of Directors has reviewed and discussed the above “Compensation Discussion and Analysis” with KB Home management. Based on this review and discussion, the Management Development and Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement.
Management Development and Compensation Committee
 
 
 
 
 
Kenneth M. Jastrow, II, Chair
Stephen F. Bollenbach
Timothy W. Finchem
Robert L. Johnson
Melissa Lora
 
 
Summary Compensation Table
Name and Principal Position
Fiscal
Year
Salary
($)(a)
Bonus
($)(b)
Stock
Awards
($)(c)
Option
Awards
($)(c)
Non-Equity
Incentive Plan
Compensation
($)(d)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(e)
All Other
Compensation
($)(f)
Total
($)
Jeffrey T. Mezger
President and
Chief Executive Officer
2015
$
1,000,000

$

$
1,984,360

$
1,828,403

$
3,974,964

$

$
69,196

$
8,856,923

2014
1,000,000

125,000

2,860,000

2,640,000

2,824,750

830,924

68,809

10,349,483

2013
1,000,000

500,000

1,663,000

1,044,660

2,725,500


67,884

7,001,044

Jeff J. Kaminski
Executive Vice President and Chief Financial Officer
2015
656,250


566,960

631,431

1,386,191


51,156

3,291,988

2014
620,833

62,500

550,000

550,000

1,280,316


47,459

3,111,108

2013
570,833

260,000

498,900

348,220

952,200


45,848

2,676,001

Brian J. Woram
Executive Vice President and
General Counsel
2015
554,166


417,760

439,256

1,188,560


44,731

2,644,473

2014
544,167

62,500

387,500

387,500

1,144,114


43,459

2,569,240

2013
531,250

242,000

415,750

271,612

800,820


42,356

2,303,788

Albert Z. Praw
Executive Vice President,   Real Estate and
Business Development
2015
541,250


417,760

439,256

1,200,439


43,803

2,642,508

2014
529,167

62,500

387,500

387,500

1,123,683


42,979

2,533,329

2013
510,417

100,000

415,750

271,612

780,675


12,376

2,090,830

Nicholas S. Franklin
Executive Vice President, Strategic Operations
2015
379,615

106,400

566,960

631,431

393,600


22,861

2,100,867

(a)
Salary. As discussed above under the heading “Base Salaries,” the annual base salaries of our NEOs other than our CEO and Mr. Franklin were increased in July 2015 to the following levels: Mr. Kaminski $665,000; Mr. Woram $560,000; and Mr. Praw $550,000. Mr. Franklin joined us on April 4, 2015, with an annual base salary of $600,000. The salary amount reported in the table reflects what he was paid in 2015 after his hire.
(b)
Bonus. In 2015, Mr. Franklin received a bonus in recognition of his assuming additional operational leadership responsibilities for a significant division within our Southern California homebuilding business. For 2014, these amounts reflect additional payments related to a 2011 performance cash award program. For 2013, these amounts reflect payments

22


of three-year restricted cash awards granted in 2010 to the NEOs other than Mr. Praw. Mr. Praw received a discretionary bonus for 2013 that was approved by the Compensation Committee.
(c)
Stock Awards and Option Awards. These amounts represent the aggregate grant date fair value of stock awards (consisting of both restricted stock and PSUs) and option awards (consisting of common stock options) computed as described in Note 19. Employee Benefit and Stock Plans in the Notes to the Consolidated Financial Statements in our Annual Report, except that estimates of forfeitures related to service-based vesting conditions have been disregarded. They do not represent realized compensation. The 2015 stock awards represent the grant date fair value of restricted stock and the probable award of shares of our common stock underlying the PSUs granted. The grant date fair value of the PSUs if maximum performance is achieved is as follows: Mr. Mezger $3,968,720; Mr. Kaminski $417,760; Mr. Woram $298,400; Mr. Praw $298,400; and Mr. Franklin $417,760.
(d)
Non-Equity Incentive Plan Compensation. The amounts for 2015 include the sum of 2015 annual incentive and 2012 performance cash award payouts, as applicable. The amounts for 2014 include the same two types of compensation elements. The 2013 amounts reflect only annual incentive payouts. The table below summarizes each component for 2014 and 2015.
NEO
Year
Annual Incentive Payout
Performance Cash Award Payout
Total Non-Equity Incentive Plan Compensation
Mr. Mezger
2015
$
2,488,297

$
1,486,667

$
3,974,964

2014
2,034,750

790,000

2,824,750

Mr. Kaminski
2015
940,191

446,000

1,386,191

2014
885,316

395,000

1,280,316

Mr. Woram
2015
787,160

401,400

1,188,560

2014
749,114

395,000

1,144,114

Mr. Praw
2015
799,039

401,400

1,200,439

2014
728,683

395,000

1,123,683

Mr. Franklin
2015
393,600


393,600

(e)
Change in Pension Value and Nonqualified Deferred Compensation Earnings. These amounts (as applicable) reflect the increase in the actuarial present value of accumulated benefits under our Retirement Plan. These changes are tied to interest rate fluctuations and do not reflect any cash or other compensation received by Mr. Mezger. The respective amounts attributed to the change in actuarial present value in 2015, 2014 and 2013 were $(84,667), $830,924 and $(709,566).
(f)
All Other Compensation. The amounts shown consist only of the following items — no other perquisites were provided to our NEOs:
401(k) Plan and DCP Matching Contributions . The respective aggregate 2015, 2014 and 2013 401(k) Plan and DCP matching contributions we made to our NEOs were as follows: Mr. Mezger $55,900 , $55,600 and $55,300 ; Mr. Kaminski $39,375 , $35,750 and $32,425 ; Mr. Woram  $32,950 , $31,750 and $28,613 ; Mr. Praw $32,475 , $29,125 and $0 ; and Mr. Franklin $15,900 , $0 and $0 .
Premium Payments . The respective aggregate premiums we paid for our NEOs in 2015, 2014 and 2013 on supplemental medical expense reimbursement plans and life insurance policies, as described above under the heading “Other Benefits,” were as follows: Mr. Mezger $13,296 , $13,209 and $12,582 ; Mr. Kaminski $11,781 , $11,709 and $11,099 ; Mr. Woram $11,781 , $11,709 and $11,099 ; Mr. Praw $11,328 , $11,241 and $10,614 ; and Mr. Franklin $6,961 , $0 and $0 .

23


Grants of Plan-Based Awards During Fiscal Year 2015
Name
Grant
Date(a)
Type of
Award
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards
Estimated Possible Payouts Under
Equity Incentive Plan Awards(b)
All Other 
Stock 
Awards: 
Number 
of Shares 
of Stock 
or Units 
(#) 
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
Exercise
or Base
Price of
Option
Awards
($/Sh)
Grant
Date
Fair
Value of
Stock and
Option
Awards
($)(c)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Mr. Mezger
2/11/2015
Annual Incentive
$
750,000

$
1,500,000

$
6,000,000

 
 
 
 
 
 
 
10/8/2015
PSUs
 

 

 

31,255

133,000

266,000



 
 
$
1,984,360

10/8/2015
Stock Options
 
 
 
 
 
 
 

333,000

$
14.92

1,828,403

Mr. Kaminski
2/11/2015
Annual Incentive
332,500

665,000

1,995,000

 
 
 
 

 

 

 

10/8/2015
PSUs
 
 
 
3,290

14,000

28,000



 
 
208,880

10/8/2015
Restricted Stock
 

 

 

 
 
 
24,000

 
 
358,080

10/8/2015
Stock Options
 
 
 
 
 
 
 

115,000

14.92

631,431

Mr. Woram
2/11/2015
Annual Incentive
280,000

560,000

1,120,000

 
 
 
 

 

 

 

10/8/2015
PSUs
 
 
 
2,350

10,000

20,000



 
 
149,200

10/8/2015
Restricted Stock
 

 

 

 
 
 
18,000

 
 
268,560

10/8/2015
Stock Options
 
 
 
 
 
 
 

80,000

14.92

439,256

Mr. Praw
2/11/2015
Annual Incentive
275,000

550,000

1,100,000

 
 
 
 

 

 

 

10/8/2015
PSUs
 
 
 
2,350

10,000

20,000



 
 
149,200

10/8/2015
Restricted Stock
 

 

 

 
 
 
18,000

 
 
268,560

10/8/2015
Stock Options
 
 
 
 
 
 
 

80,000

14.92

439,256

Mr. Franklin
4/14/2015
Annual Incentive
240,000

480,000

960,000

 
 
 
 

 

 

 

10/8/2015
PSUs
 
 
 
3,290

14,000

28,000



 
 
208,880

10/8/2015
Restricted Stock
 

 

 

 
 
 
24,000

 
 
358,080

10/8/2015
Stock Options
 
 
 
 
 
 
 

115,000

14.92

631,431

(a)
Grant Date. The date shown for each award is the date the Compensation Committee approved the award.
(b)
Estimated Possible Payouts Under Equity Incentive Plan Awards. If there is a payout of the PSUs, “Threshold” represents the lowest possible payout if threshold performance is achieved for each performance measure, and “Maximum” reflects the highest possible payout (200% of the target award of shares granted). The performance measures are described above under the heading “Performance-Based Restricted Stock Units.” If threshold performance is not achieved on all three measures, the NEOs will not receive any payout of the PSUs.
(c)
Grant Date Fair Value of Stock and Option Awards. The grant date fair value for each award is computed as described in footnote (c) to the Summary Compensation Table. The 2015 stock awards represent the grant date fair value of restricted stock and the probable award of shares of our common stock underlying the PSUs granted as of the grant date.

24


Outstanding Equity Awards at Fiscal Year-End 2015
Name
Grant Date
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(a)

Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#)(b)
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested
($)(c)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That 
Have Not
Vested
(#)(d)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(d)
Mr. Mezger
10/30/2001
431,122

 
 
$
13.95
 
10/30/2016
 
 
 
 
10/30/2001
68,878

 
 
13.95
 
10/30/2016
 
 
 
 
2/13/2002
102,090

 
 
20.07
 
2/13/2017
 
 
 
 
5/8/2002
44,516

 
 
25.63
 
5/8/2017
 
 
 
 
10/7/2002
400,000

 
 
21.51
 
10/7/2017
 
 
 
 
10/24/2003
74,667

 
 
33.24

(e) 
10/24/2018
 
 
 
 
10/24/2003
149,333

 
 
34.05

(e) 
10/24/2018
 
 
 
 
10/22/2004
80,750

 
 
40.90
 
10/22/2019
 
 
 
 
10/22/2004
119,250

 
 
40.90
 
10/22/2019
 
 
 
 
7/12/2007
325,050

 
 
36.19
 
11/30/2016
(f) 
 
 
 
 
7/12/2007
325,050

 
 
36.19
 
7/12/2017
 
 
 
 
10/4/2007
137,500

 
 
28.10
 
10/4/2017
 
 
 
 
10/1/2009
489,258

 
 
15.44
 
10/1/2019
 
 
 
 
8/13/2010
397,818

 
 
19.90
 
10/2/2018
(g) 
 
 
 
 
10/7/2010
240,000



 
11.06
 
10/7/2020
 
 
 
 
10/7/2010
260,000

 

11.06
 
10/7/2020
 
 
 
 
11/9/2010
412,500

 
 
28.10
 
10/4/2017
(g) 
 
 
 
 
10/6/2011
335,000


 
6.32
 
10/6/2021
 
 
 
 
10/6/2011
365,000


 
6.32
 
10/6/2021
 
 
 
 
11/8/2012
 
 
 
  
  
251,617

$
3,545,284



10/10/2013
100,000

50,000

 
16.63
 
10/10/2023
 
 
 
 
10/10/2013
 
 
 
  
 
 
 
100,000

$
1,409,000

10/9/2014
173,434

346,866

 
14.62
 
10/9/2024
 
 
 
 
10/9/2014
 
 
 
 
 
 
 
195,622

2,756,314

10/8/2015


333,000

 
14.92
 
10/8/2025
 
 
 
 
10/8/2015
 
 
 
 
 
 
 
133,000

1,873,970

Mr. Kaminski
7/15/2010
45,017



 
11.26
 
7/15/2020
 
 
 
 
10/7/2010
118,000



 
11.06
 
10/7/2020
 
 
 
 
10/6/2011
125,000



 
6.32
 
10/6/2021
 
 
 
 
11/8/2012
 
 
 
  
  
29,482

415,401





10/10/2013
33,333

16,667

 
16.63
 
10/10/2023
 
 
 
 
10/10/2013
 
 
 
 
 
15,000

211,350

15,000

211,350

10/9/2014
36,132

72,264

 
14.62
 
10/9/2024
 
 
 
 
10/9/2014
 
 
 
 
 
22,572

318,039

15,048

212,026

10/8/2015
 
115,000

 
14.92
 
10/8/2025
 
 
 
 
10/8/2015
 
 
 
 
 
24,000

338,160

14,000

197,260


25


Name
Grant Date
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(a)

Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#)(b)
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested
($)(c)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That 
Have Not
Vested
(#)(d)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(d)
Mr. Woram
7/15/2010
79,529



 
11.26
 
7/15/2020
 
 
 
 
10/7/2010
111,000



 
11.06
 
10/7/2020
 
 
 
 
10/6/2011
110,000



 
6.32
 
10/6/2021
 
 
 
 
11/8/2012
 
 
 
  
  
27,449

$
386,756





10/10/2013
26,000

13,000

 
16.63
 
10/10/2023
 
 
 
 
10/10/2013
 
 
 
 
 
12,500

176,125

12,500

$
176,125

10/9/2014
25,457

50,913

 
14.62
 
10/9/2024
 
 
 
 
10/9/2014
 
 
 
 
 
15,903

224,073

10,602

149,382

10/8/2015
 
80,000

 
14.92
 
10/8/2025
 
 
 
 
10/8/2015
 
 
 
 
 
18,000

253,620

10,000

140,900

Mr. Praw
10/6/2011
150,000



 
6.32
 
10/6/2021
 
 
 
 
11/8/2012
 
 
 
  
  
27,449

386,756





10/10/2013
26,000

13,000

 
16.63
 
10/10/2023
 
 
 
 
10/10/2013
 
 
 
 
 
12,500

176,125

12,500

176,125

10/9/2014
25,457

50,913

 
14.62
 
10/9/2024
 
 
 
 
10/9/2014
 
 
 
 
 
15,903

224,073

10,602

149,382

10/8/2015
 
80,000

 
14.92
 
10/8/2025
 
 
 
 
10/8/2015
 
 
 
 
 
18,000

253,620

10,000

140,900

Mr. Franklin
10/8/2015


115,000

 
14.92
 
10/8/2025
 
 
 
 
10/8/2015
 
 
 
 
 
24,000

338,160

14,000

197,260

(a)
Number of Securities Underlying Unexercised Options-Unexercisable. Stock option awards generally vest in equal installment amounts ( i.e. , ratably) over a three-year period.
(b)
Number of Shares or Units of Stock That Have Not Vested . Includes restricted stock grants and the shares of our common stock the Compensation Committee approved for grant on February 12, 2016 pursuant to the 2012 PSUs based on our performance through the end of the three-year performance period, as described above under the heading “2012 PSU Awards.” Upon their approval for grant to the recipients, the earned 2012 PSU-related shares became fully vested, with no restrictions on transferability or otherwise. The restricted stock awards granted in 2013 and 2014 will vest at the conclusion of the three-year vesting period from the grant date. The 2015 restricted stock awards will vest in three equal annual installments on October 25, 2016, 2017 and 2018.
(c)
Market Value of Shares That Have Not Vested. The market value shown is based on the price of our common stock on November 30, 2015, which was $14.09.
(d)
Equity Incentive Plan Awards: Number and Market Value of Unearned Units . The awards shown are the PSUs granted to our NEOs in 2013, 2014 and 2015, reflecting target award amounts as of November 30, 2015 and the market price of our common stock on November 30, 2015, which was $14.09. These PSUs will vest based on our achievement of certain performance measures over an applicable three-year performance period.
(e)
As a result of an internal review of our employee stock option grant practices in 2006, we adjusted the exercise prices of certain of our employee stock options in order to comply with Section 409A of the Code. The exercise price for a certain portion of the stock option grant made on October 24, 2003 was not adjusted.
(f)
The expiration date for these stock options is set under Mr. Mezger’s Employment Agreement.

26


(g)
Through participation in two exchange offers that we conducted in 2010, these common stock options replaced cash-settled stock appreciation right awards that had been previously granted to the NEO as long-term incentives. Each common stock option has an exercise price equal to the replaced award’s exercise price, and the same number of underlying shares, vesting schedule and expiration date as each replaced award. The exchange offers did not include a re-pricing or any other changes impacting the value of the awards to the NEO, no additional grants or awards were made to the NEO, and the issuance of the common stock options did not result in any incremental fair value to the NEO.
Option Exercises and Stock Vested During Fiscal Year 2015