© 2002 KB Home American Society for Quality IBH Lanehart Electric Companies 2005 National Energy & Environmental, Design and Construction Division's Conference

© 2002 KB Home Today’s Forum Moderator – Cathy Teague –Introductions KB Home IBH Lanehart Electric Co. Structure Wrap Up Moderator – Cathy Teague –Introductions KB Home IBH Lanehart Electric Co. Structure Wrap Up KB Home San Antonio Division

© 2002 KB Home KB Home & San Antonio Division Overview The Builder Certification Process KB’s Business Partners Overview The Builder Certification Process KB’s Business Partners

© 2002 KB Home History KB Home –Founded 1957 –Listed on American Stock Exchange 1962 –Entered Texas Market 1996 –Delivered over 33,000 units last year –Ranked Top 3 by JD POWER & Associates KB Home –Founded 1957 –Listed on American Stock Exchange 1962 –Entered Texas Market 1996 –Delivered over 33,000 units last year –Ranked Top 3 by JD POWER & Associates

© 2002 KB Home Vision To redefine our industry by creating a premier, disciplined, process driven company as measured by customers, employees and shareholders

© 2002 KB Home Company Strategy Make detailed customer and market knowledge a competitive advantage Developed unmatched operating excellence Build a world-class organization Make decisions based on fact throughout the organization Deliver maximum volume with sustainable high returns Set the stand for a consistent and reliable business partner

© 2002 KB Home San Antonio Division Hallmarks Comprehensive business model – KBnxt Construction Quality Continuous Improvement Customer Involvement Comprehensive business model – KBnxt Construction Quality Continuous Improvement Customer Involvement

© 2002 KB Home KBnxt Post Close Follow-up Referral Sales Build to Order Pre-Qualify for Mortgage Choice of Design Option 90% Retention Rate $2,500 Profit per Home Design Studio >7,000 options Choice of Floor Plans Floor Plans Develop Land >20%Growth in Below Market Costs Acquire Land Open New Communities Sub-market Survey KBnxt Operating Model

© 2002 KB Home Construction Quality Third Party Inspection –100% independent soil samples –Certified Engineer slab certification –Master plumber video of 100% completed slabs –Universal Forest Products Texas Engineer stamps every frame & truss package –100% FHA Frame Inspections –Quality Management Systems Frame Inspections Third Party Inspection –100% independent soil samples –Certified Engineer slab certification –Master plumber video of 100% completed slabs –Universal Forest Products Texas Engineer stamps every frame & truss package –100% FHA Frame Inspections –Quality Management Systems Frame Inspections

© 2002 KB Home Quality Construction Continued –Sequenced production cycle –10 Point Quality Check Points –100% FHA Final Inspection –Quality Management Systems Final Inspection –Sequenced production cycle –10 Point Quality Check Points –100% FHA Final Inspection –Quality Management Systems Final Inspection

© 2002 KB Home Continuous Improvement Action Plan –Stoplight feature –GAP analysis –Track it –Improve it –Measure it Action Plan –Stoplight feature –GAP analysis –Track it –Improve it –Measure it

© 2002 KB Home Partner With the Customer 10 Commitments Point of sale survey Design Studio survey Preconstruction meeting Frame walk meeting Orientation Close of escrow survey 10-day Customer Service Multiple surveys, post close 10-year warranty 10 Commitments Point of sale survey Design Studio survey Preconstruction meeting Frame walk meeting Orientation Close of escrow survey 10-day Customer Service Multiple surveys, post close 10-year warranty

© 2002 KB Home Who Benefits Quality, value, choice, continuous improvement, involvement –Buyer –Trades –KB Home Quality, value, choice, continuous improvement, involvement –Buyer –Trades –KB Home

© 2002 KB Home Buyer Benefits Consistently deliver a quality home on time Communicate honestly and often Partner the whole way through Maintain a 95% or better Customer Service Index Consistently deliver a quality home on time Communicate honestly and often Partner the whole way through Maintain a 95% or better Customer Service Index

© 2002 KB Home Trade Benefits –Consistency of product & service –Fewer callbacks and back charges –Continuous improvement –More efficient operations –Accountability and annual certification –Consistency of product & service –Fewer callbacks and back charges –Continuous improvement –More efficient operations –Accountability and annual certification

© 2002 KB Home KB Home Benefits –Satisfied customer –Predictability –Return on equity –Satisfied customer –Predictability –Return on equity

© 2002 KB Home Builder Certification Program NHQ Certified Builder Program Description Verification Communication Certification

© 2002 KB Home Building Quality –“KB Home is implementing a first of its kind quality assurance initiative, partnering with the NAHB Research Center”. –“The NAHB Quality Center certified contractor program is a powerful tool in assuring and documenting best construction practices”. –KB Home, San Antonio Division is the first builder in Texas to become a Certified Builder by the NHQ! –“KB Home is implementing a first of its kind quality assurance initiative, partnering with the NAHB Research Center”. –“The NAHB Quality Center certified contractor program is a powerful tool in assuring and documenting best construction practices”. –KB Home, San Antonio Division is the first builder in Texas to become a Certified Builder by the NHQ!

© 2002 KB Home Redefining Quality Residential Construction NAHB Research Center’s Builder Certification Program San Antonio Division 1 st in Texas Annual third party audits Prevention rather than detection Quality is everyone’s job at KB Home Trade Contractor Certification Program NAHB Research Center’s Builder Certification Program San Antonio Division 1 st in Texas Annual third party audits Prevention rather than detection Quality is everyone’s job at KB Home Trade Contractor Certification Program

© 2002 KB Home KB’s Business Partners Program Highlights NHQ Certified Trade Contractor Program –Initial screening [ (1.0) General] –Implementation [ (2.0) QA Plan] –Verification [ (3.0) Job Site Inspection] –Continuous improvement [ (4.0) Quality Improvement] –Certification [ (5.0) QA Systems Management] –Audit NHQ Certified Trade Contractor Program –Initial screening [ (1.0) General] –Implementation [ (2.0) QA Plan] –Verification [ (3.0) Job Site Inspection] –Continuous improvement [ (4.0) Quality Improvement] –Certification [ (5.0) QA Systems Management] –Audit

© 2002 KB Home Trade Program Continued Trade and Vendor Relationships –Coordinator and Quality Management –Quality System Management –Automated scheduling Verification –Project Manager sign off –Annual Certification Communication –One-on-one –Appreciation day –Hot Spot Meetings Trade and Vendor Relationships –Coordinator and Quality Management –Quality System Management –Automated scheduling Verification –Project Manager sign off –Annual Certification Communication –One-on-one –Appreciation day –Hot Spot Meetings

© 2002 KB Home Trade Program Continued Integration –Registration, plan, execute, follow up, survey –KBTPO Post work orders Auto voucher process Upcoming Web Payables function will replace the Auto Voucher process. Integration –Registration, plan, execute, follow up, survey –KBTPO Post work orders Auto voucher process Upcoming Web Payables function will replace the Auto Voucher process.

© 2002 KB Home Trade Program Continued Measurement Closing GAPs Leveraging Expertise Measurement Closing GAPs Leveraging Expertise

© 2002 KB Home Trade Discussion – Small Company IBH –Q&A IBH –Q&A

© 2002 KB Home Trade Discussion – Large Company Lanehart Electric Company –Q&A Lanehart Electric Company –Q&A

© 2002 KB Home Open Forum Questions?

© 2002 KB Home American Society for Quality Craig Westmoreland President, San Antonio Division Geoff Bellchambers Director, Quality Management Systems Tel: Dave Howell Craig Westmoreland President, San Antonio Division Geoff Bellchambers Director, Quality Management Systems Tel: Dave Howell