UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended August 31, 2004.

or

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from [         ] to [         ].

Commission File No. 1-9195

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10990 Wilshire Boulevard
Los Angeles, California 90024
(310) 231-4000

(Address and telephone number of principal executive offices)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE 12b-2 OF THE EXCHANGE ACT).

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT’S CLASSES OF COMMON STOCK AS OF AUGUST 31, 2004.

Common stock, par value $1.00 per share, 46,319,110 shares outstanding, including 7,391,920 shares held by the Registrant’s Grantor Stock Ownership Trust and excluding 8,448,100 shares held in treasury.

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FORM 10-Q
INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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See accompanying notes.

3

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See accompanying notes.

4

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See accompanying notes.

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1.		Basis of Presentation and Significant Accounting Policies
		The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted.
		In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of August 31, 2004, the results of its consolidated operations for the nine months and three months ended August 31, 2004 and 2003, and its consolidated cash flows for the nine months ended August 31, 2004 and 2003. The results of operations for the nine months and three months ended August 31, 2004 are not necessarily indicative of the results to be expected for the full year. The consolidated balance sheet at November 30, 2003 has been taken from the audited financial statements as of that date. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended November 30, 2003 contained in the Company’s 2003 Annual Report to Stockholders.
		Segment information
		The Company has identified two reportable segments: construction and mortgage banking. Information for the Company’s reportable segments is presented in its consolidated statements of income and consolidated balance sheets included herein. The Company’s reporting segments follow the same accounting policies used for the Company’s consolidated financial statements. Management evaluates a segment’s performance based upon a number of factors including pretax results.
		Stock-based compensation
		The Company has elected to account for stock-based compensation using the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations and, therefore, recorded no compensation expense in the determination of net income during the nine-month and three-month periods ended August 31, 2004 and 2003. The following table illustrates the effect on net income and earnings per share if the fair value method had been applied to all outstanding and unvested awards in the nine-month and three-month periods ended August 31, 2004 and 2003 (in thousands, except per share amounts):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.		Basis of Presentation and Significant Accounting Policies (continued)
		Earnings per share
		Basic earnings per share is calculated by dividing net income by the average number of common shares outstanding for the period. Diluted earnings per share is calculated by dividing net income by the average number of common shares outstanding including all dilutive potentially issuable shares under various stock option plans and stock purchase contracts.
		The following table presents a reconciliation of average shares outstanding (in thousands):

Comprehensive Income

The following table presents the components of comprehensive income (in thousands):

The accumulated balances of other comprehensive income in the balance sheets as of August 31, 2004 and November 30, 2003 are comprised solely of cumulative foreign currency translation adjustments of $40.6 million and $38.5 million, respectively.

2.		Inventories
		Inventories consist of the following (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2.		Inventories (continued)
		The Company’s interest costs are as follows (in thousands):

3.		Consolidation of Variable Interest Entities
		In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FASB Interpretation No. 46”). FASB Interpretation No. 46 is intended to clarify the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements” (“ARB No. 51”), to certain entities (referred to as “variable interest entities” or “VIEs”) in which equity investors do not have the characteristics of a controlling interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Pursuant to FASB Interpretation No. 46, an enterprise that absorbs a majority of the VIE’s expected losses, receives a majority of the VIE’s expected residual returns, or both, is determined to be the primary beneficiary of the VIE and must consolidate the entity. FASB Interpretation No. 46 applied immediately to VIEs created after January 31, 2003 and was effective no later than the first interim or annual period ending after March 15, 2004 for VIEs created on or before January 31, 2003.
		In the ordinary course of its business, the Company enters into land option contracts in order to procure land for the construction of homes. Under such land option contracts, the Company will fund a specified option deposit or earnest money deposit in consideration for the right to purchase land in the future, usually at a predetermined price. Under the requirements of FASB Interpretation No. 46, certain of the Company’s land option contracts may create a variable interest for the Company, with the land seller being identified as a VIE.
		In compliance with FASB Interpretation No. 46, the Company analyzed its land option contracts and other contractual arrangements and has consolidated the fair value of certain VIEs from which the Company is purchasing land under option contracts. The consolidation of these VIEs, where the Company was determined to be the primary beneficiary, added $70.6 million to inventory and other liabilities in the Company’s consolidated balance sheet at August 31, 2004. The Company’s cash deposits related to these land option contracts totaled $15.4 million at August 31, 2004. Creditors, if any, of these VIEs have no recourse against the Company. As of August 31, 2004, excluding consolidated VIEs, the Company had cash deposits and/or letters of credit totaling $120.0 million which were associated with land option contracts having an aggregate purchase price of $2.32 billion.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4.		Goodwill
		The changes in the carrying amount of goodwill for the nine months ended August 31, 2004, by segment, are as follows (in thousands):

5.		Accounting for Derivative Instruments and Hedging Activities
		To meet the financing needs of its customers, the Company’s mortgage banking subsidiary is party to interest rate lock commitments (“IRLCs”), which are extended to borrowers who have applied for funding and meet certain defined credit and underwriting criteria. In accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), the Company’s mortgage banking subsidiary classifies and accounts for IRLCs as non-designated derivative instruments at fair value with changes in fair value recorded to earnings.
		In the normal course of business and pursuant to its risk management strategies, the Company’s mortgage banking subsidiary uses derivative financial instruments to reduce its exposure to fluctuations in interest rates. When interest rates rise, IRLCs and mortgage loans held for sale decline in value. To preserve the value of its mortgage inventory and minimize the impact of movements in market interest rates on the IRLCs and mortgage loans held for sale, the mortgage banking operations enter into mandatory and non-mandatory forward contracts to sell mortgage loans.
		Effective June 1, 2004, the Company elected to designate its forward contracts as fair value hedges to the extent that hedge effectiveness criteria are met. Under fair value hedge accounting, changes in the fair value of these derivative instruments that are determined to be effective and offsetting changes in the fair value of the underlying hedged items are recognized in current earnings. Prior to this election, from June 1, 2003 through May 31, 2004, the Company elected not to engage in hedge accounting in order to determine the appropriate accounting treatment for its derivative instruments. Accordingly, all derivative instruments during this period were carried in the balance sheet at fair value, with changes in the value recorded directly to earnings. Prior to the no-hedge election, mortgage forward contracts were designated as cash flow hedges and changes in the fair value of these instruments were recognized in other comprehensive income until such time that earnings were affected by the underlying hedged item. This election to use fair value hedge accounting did not materially impact the Company’s financial position or results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

5.		Accounting for Derivative Instruments and Hedging Activities (continued)
		The following table summarizes the interest rate sensitive instruments of the mortgage banking operations (in thousands):

6.		Mortgages and Notes Payable
		On January 2