FORM 10-K
LENNAR CORPORATION
FORM 10-K
For the fiscal year ended November 30, 2014
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13.
Item 14.
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Part IV
Item 15.
Signatures
Exhibits, Financial Statement Schedules
Financial Statement Schedule
Certifications
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9
17
18
18
18
19
21
22
70
72
138
138
140
140
140
140
140
140
141
144
146
147
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2014
Commission file number 1-11749
________________________________________________________
Lennar Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
95-4337490
(I.R.S. Employer
Identification No.)
700 Northwest 107th Avenue, Miami, Florida 33172
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (305) 559-4000
________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock, par value 10¢
Class B Common Stock, par value 10¢
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES
NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES
NO
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. YES
NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). YES
NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES
NO
The aggregate market value of the registrant’s Class A and Class B common stock held by non-affiliates of the registrant
(168,333,343 shares of Class A common stock and 9,705,207 shares of Class B common stock) as of May 31, 2014, based on the
closing sale price per share as reported by the New York Stock Exchange on such date, was $7,219,372,214.
As of November 30, 2014, the registrant had outstanding 173,736,150 shares of Class A common stock and 31,303,195 shares
of Class B common stock.
________________________________________________________
DOCUMENTS INCORPORATED BY REFERENCE:
Related Section
III
Documents
Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before March 30, 2015.
Item 1.
Business
Overview of Lennar Corporation
PART I
We are one of the nation’s largest homebuilders, a provider of real estate related financial services, a
commercial real estate investment, investment management and finance company through our Rialto segment and a
developer of multifamily rental properties in select U.S. markets primarily through unconsolidated entities.
Our homebuilding operations are the most substantial part of our business, comprising $7.0 billion in revenues,
or approximately 90% of consolidated revenues in fiscal 2014. We have grouped our homebuilding activities into five
reportable segments, which we refer to as Homebuilding East, Homebuilding Central, Homebuilding West,
Homebuilding Southeast Florida and Homebuilding Houston. Information about homebuilding activities in states in
which our homebuilding activities are not economically similar to those in other states in the same geographic area is
grouped under “Homebuilding Other.” Our reportable homebuilding segments and Homebuilding Other have operations
located in:
East: Florida(1), Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia
Central: Arizona, Colorado and Texas(2)
West: California and Nevada
Southeast Florida: Southeast Florida
Houston: Houston, Texas
Other: Illinois, Minnesota, Tennessee, Oregon and Washington
(1)
(2)
Florida in the East reportable segment excludes Southeast Florida, which is its own reportable segment.
Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.
Our other reportable segments are Lennar Financial Services, Rialto and Lennar Multifamily. For financial
information about our Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily operations, you should
review Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is Item 7 of this
Report, and our consolidated financial statements and the notes to our consolidated financial statements, which are
included in Item 8 of this Report.
A Brief History of Our Company
We are a national homebuilder that operates in various states with deliveries of 21,003 new homes in 2014. Our
company was founded as a local Miami homebuilder in 1954. We completed our initial public offering in 1971 and listed
our common stock on the New York Stock Exchange in 1972. During the 1980s and 1990s, we entered and expanded
operations in a number of homebuilding markets, including California, Florida and Texas, through both organic growth
and acquisitions, such as Pacific Greystone Corporation in 1997. In 1997, we completed the spin-off of our then
commercial real estate business, LNR Property Corporation. In 2000, we acquired U.S. Home Corporation, which
expanded our operations into New Jersey, Maryland, Virginia, Minnesota and Colorado and strengthened our position in
other states. From 2002 through 2005, we acquired several regional homebuilders, which brought us into new markets
and strengthened our position in several existing markets. From 2010 through 2013, we started and expanded our
homebuilding operations in the Atlanta, Oregon, Seattle and Nashville markets. More recently, we have been
strengthening and expanding our competitive position through the development of land that was strategically purchased
at favorable prices during the real estate market downturn, and through a focus on our ancillary and complementary
platforms, including Rialto, Lennar Multifamily and FivePoint, a consolidated joint venture that was formed to manage
master planned mixed use developments.
Homebuilding Operations
Overview
Our homebuilding operations include the construction and sale of single-family attached and detached homes,
as well as the purchase, development and sale of residential land directly and through unconsolidated entities in which
we have investments. We primarily sell single-family attached and detached homes in communities targeted to first-time,
move-up and active adult homebuyers. We operate primarily under the Lennar brand name. Our homebuilding mission is
focused on the profitable development of these residential communities. Key elements of our strategy include:
•
Strong Operating Margins - We believe our operating leverage combined with our attractive land purchases
position us for strong operating margins.
• Everything’s Included® Approach - We are focused on distinguishing our products, including through our
Everything’s Included® approach, which maximizes our purchasing power to include luxury features as
standard items in our homes.
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•
Innovative Homebuilding - We are constantly innovating the homes we build to create products that meet
our customers' needs. Our latest innovation, NextGen homes, or a home within a home, provides a unique
new home solution for multi-generational households as homebuyers often need to accommodate children
and parents to share the cost of their mortgage and other living expenses.
• Flexible Operating Structure - Our local operating structure gives us the flexibility to make operating
decisions based on local homebuilding conditions and customer preferences, while our centralized
management structure provides oversight for our homebuilding operations.
Diversified Program of Property Acquisition
We generally acquire land for development and for the construction of homes that we sell to homebuyers. Land
purchases are subject to specified underwriting criteria and are made through our diversified program of property
acquisition, which may consist of the following:
• Acquiring land directly from individual land owners/developers or homebuilders;
• Acquiring local or regional homebuilders that own, or have options to purchase, land in strategic markets;
• Acquiring land through option contracts, which generally enables us to control portions of properties
owned by third parties (including land funds) and unconsolidated entities in which we have investments
until we have determined whether to exercise the options;
• Acquiring parcels of land through joint ventures, which among other factors, limits the amount of our
capital invested in land while increasing our access to potential future homesites and allowing us to
participate in strategic ventures;
• Acquiring land in conjunction with Lennar Multifamily and Lennar Commercial; and
• Acquiring distressed assets from banks and opportunity funds, often through relationships established by
our Rialto segment.
At November 30, 2014, we owned 132,679 homesites and had access through option contracts to an additional
31,890 homesites, of which 24,855 homesites were through option contracts with third parties and 7,035 homesites were
through option contracts with unconsolidated entities in which we have investments. At November 30, 2013, we owned
125,643 homesites and had access through option contracts to an additional 28,133 homesites, of which 20,966
homesites were through option contracts with third parties and 7,167 homesites were through option contracts with
unconsolidated entities in which we have investments.
Construction and Development
Through our own efforts and those of unconsolidated entities in which Lennar Homebuilding has investments,
we are involved in all phases of planning and building in our residential communities, including land acquisition, site
planning, preparation and improvement of land and design, construction and marketing of homes. We use independent
subcontractors for most aspects of home construction. At November 30, 2014, we were actively building and marketing
homes in 625 communities, including 3 communities being developed by unconsolidated entities.
We generally supervise and control the development of land and the design and building of our residential
communities with a relatively small labor force. We hire subcontractors for site improvements and virtually all of the
work involved in the construction of homes. Arrangements with our subcontractors generally provide that our
subcontractors will complete specified work in accordance with price schedules and in compliance with applicable
building codes and laws. The price schedules may be subject to change to meet changes in labor and material costs or for
other reasons. We believe that the sources and availability of raw materials to our subcontractors are adequate for our
current and planned levels of operation. We generally do not own heavy construction equipment. We finance
construction and land development activities primarily with cash generated from operations and debt issuances.
For additional information about our investments in and relationships with unconsolidated entities, see
Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.
Marketing
We offer a diversified line of homes for first-time, move-up and active adult homebuyers in a variety of
environments ranging from urban infill communities to golf course communities. Our Everything’s Included® marketing
program simplifies the home buying experience by including the most desirable features as standard items. This
marketing program enables us to differentiate our homes from those of our competitors by creating value through
standard upgrades and competitive pricing, while reducing construction and overhead costs through a simplified
manufacturing process, product standardization and volume purchasing. In addition, our innovative NextGen homes and
our advances in including solar powered technology in certain of the homes we sell, enhance our image and improve our
marketing and sales efforts. We sell our homes primarily from models that we have designed and constructed.
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We employ sales associates who are paid salaries, commissions or both to conduct on-site sales of homes. We
also sell homes through independent brokers. Our marketing strategy is focused on advertising through digital and social
media, including through our Internet website, www.lennar.com, which has allowed us to attract more knowledgeable
homebuyers. However, we also continue to advertise through more traditional media, including newspapers, radio
advertisements and other local and regional publications and on billboards. We tailor our marketing strategy based on the
community being advertised, such as advertising our active adult communities in areas where prospective active adult
homebuyers live.
Quality Service
We strive to continually improve homeowner customer satisfaction throughout the pre-sale, sale, construction,
closing and post-closing periods. We strive to create a quality home buying experience for our customers through the
participation of sales associates, on-site construction supervisors and customer care associates, all working in a team
effort, which we believe leads to enhanced customer retention and referrals. The quality of our homes is substantially
affected by the efforts of on-site management and others engaged in the construction process, by the materials we use in
particular homes and by other similar factors.
We warrant our new homes against defective materials and workmanship for a minimum period of one year
after the date of closing. Although we subcontract virtually all segments of construction to others and our contracts call
for the subcontractors to repair or replace any deficient items related to their trades, we are primarily responsible to the
homebuyers for the correction of any deficiencies.
Local Operating Structure and Centralized Management
We balance a local operating structure with centralized corporate level management. Our local operating
structure consists of homebuilding divisions across the country, which are generally managed by a division president, a
controller, management personnel focused on land entitlement, acquisition and development, sales, construction,
customer service and purchasing. We decentralize our homebuilding operations to give our division presidents and their
teams, who generally have significant experience in the homebuilding industry, and in most instances, in their particular
markets, the flexibility to make local operating decisions, including land identification, entitlement and development, the
management of inventory levels for our current sales volume, community development, home design, construction and
marketing of our homes.
We centralize at the corporate level decisions related to our overall strategy, acquisitions of land and businesses,
risk management, financing, cash management and information systems.
Deliveries
We primarily sell single-family attached and detached homes in communities targeted to first-time, move-up
and active adult homebuyers. The average sales price of a Lennar home was $326,000 in fiscal 2014, compared to
$290,000 in fiscal 2013 and $255,000 in fiscal 2012.
The table below indicates the number of deliveries for each of our current reportable homebuilding segments
and Homebuilding Other during our last three fiscal years:
Years Ended November 30,
2014
2013
2012
East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,824
3,156
4,141
2,086
2,482
1,314
21,003
6,941
2,814
3,323
1,741
2,266
1,205
18,290
5,440
2,154
2,301
1,314
1,917
676
13,802
Of the total home deliveries listed above, 32, 56 and 95 represent deliveries from unconsolidated entities for the
years ended November 30, 2014, 2013 and 2012, respectively.
Backlog
Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are
generally accompanied by deposits. In some instances, purchasers are permitted to cancel sales contracts if they fail to
qualify for financing or under certain other circumstances. We experienced a cancellation rate of 17% in 2014, compared
to 16% and 17% in 2013 and 2012, respectively. The cancellation rate for the year ended November 30, 2014 was within
a range that is consistent with historical cancellation rates and below those we experienced from 2006 through 2009. We
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expect that substantially all homes currently in backlog will be delivered in fiscal year 2015. We do not recognize
revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.
The table below indicates the backlog dollar value for each of our current reportable homebuilding segments
and Homebuilding Other as of the end of each of our last three fiscal years:
(In thousands)
East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
113,563
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,974,328
2014
672,204
310,726
437,492
214,606
225,737
November 30,
2013
2012
600,257
195,762
257,498
215,988
180,665
169,431
368,361
168,912
202,959
141,146
135,282
143,725
1,619,601
1,160,385
Of the total dollar value of homes in backlog listed above, $39.8 million, $2.5 million and $3.5 million
represent the dollar value of homes in backlog from unconsolidated entities at November 30, 2014, 2013 and 2012,
respectively.
Lennar Homebuilding Investments in Unconsolidated Entities
We create and participate in joint ventures that acquire and develop land for our homebuilding operations, for
sale to third parties or for use in their own homebuilding operations. Through these joint ventures, we reduce the amount
we invest in order to assure access to potential future homesites, thereby mitigating certain risks associated with land
acquisitions, and, in some instances, we obtain access to land to which we could not otherwise have obtained access or
could not have obtained access on as favorable terms. As of November 30, 2014 and 2013, we had 35 and 36 Lennar
Homebuilding unconsolidated joint ventures, respectively, in which we were participating, and our maximum recourse
debt exposure related to Lennar Homebuilding unconsolidated joint ventures was $24.5 million and $41.0 million,
respectively.
Ancillary Businesses
We have ancillary business activities that are related to our homebuilding business, but are not components of
our core homebuilding operations.
FivePoint Communities - In 2011, we transferred the management of several large properties in California to
FivePoint Communities Management, Inc., a consolidated joint venture. FivePoint Communities is currently undertaking
six master planned mixed use developments, three in Southern California and three in or near San Francisco. These
developments are planned for a total of 50,000 homesites and 20 million square feet of commercial space, as well as
parks and sports and entertainment venues.
Lennar Commercial - Lennar Commercial is focused on the development, investment and management of retail,
office and mixed-use projects generally in the same states as our homebuilding operations.
Sunstreet - Lennar’s solar business is currently focused on providing homeowners in California and Colorado
through its solar power purchase program, a high-efficiency solar system that generates most of a home's annual
expected energy needs at a cost below current utility rates for the average homeowner.
Lennar Financial Services Operations
Mortgage Financing
We primarily offer conforming conventional, FHA-insured and VA-guaranteed residential mortgage loan
products and other products to buyers of our homes and others through our financial services subsidiary, Universal
American Mortgage Company, LLC, which includes Universal American Mortgage Company, LLC, d/b/a Eagle Home
Mortgage, from locations in most of the states in which we have homebuilding operations, as well as some other states.
In 2014, our financial services subsidiaries provided loans to 78% of our homebuyers who obtained mortgage financing
in areas where we offered services. Because of the availability of mortgage loans from our financial services
subsidiaries, as well as from independent mortgage lenders, we believe almost all creditworthy purchasers of our homes
have access to financing.
During 2014, we originated approximately 23,300 residential mortgage loans totaling $6.0 billion, compared to
22,300 residential mortgage loans totaling $5.3 billion during 2013. Substantially all of the residential mortgage loans we
originate are sold within a short period in the secondary mortgage market, the majority of which are sold on a servicing
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released, non-recourse basis. After the loans are sold, we retain potential liability for possible claims by purchasers that
we breached certain limited industry-standard representations and warranties in the loan sale agreements. Therefore, we
have limited direct exposure related to the residential mortgages we originate.
We finance our mortgage loan activities with borrowings under our financial services warehouse facilities or
from our operating funds. At November 30, 2014, our financial services warehouse facilities had a maximum aggregate
commitment of $925 million including $150 million of accordion features. The facilities have various maturity dates and
we expect the facilities to be renewed or replaced with other facilities when they mature. We have a corporate risk
management policy under which we hedge our interest rate risk on rate-locked loan commitments and loans held-for-sale
to mitigate exposure to interest rate fluctuations.
Title Insurance and Closing Services
We provide title insurance and closing services to our homebuyers and others. During 2014, we provided title
and closing services for approximately 90,700 real estate transactions, and issued approximately 220,400 title insurance
policies through our underwriter, North American Title Insurance Company, compared to 101,200 real estate transactions
and 192,400 title insurance policies during 2013. Title and closing services are provided by agency subsidiaries in
Arizona, California, Colorado, Delaware, District of Columbia, Florida, Illinois, Indiana, Maryland, Minnesota, Nevada,
New Jersey, New York, Pennsylvania, Texas, Utah, Virginia and Wisconsin. Title insurance services are provided in 40
states.
Rialto Operations
The Rialto segment is a commercial real estate investment, investment management, and finance company.
Rialto’s primary focus is to manage third-party capital and to originate commercial mortgage loans which it sells into
securitizations. It also has invested its own capital in mortgage loans, properties and real estate related securities.
Rialto is the sponsor of and an investor in private equity vehicles that invest in and manage real estate related
assets. This includes:
• Rialto Real Estate Fund, LP ("Fund I") that was formed in 2010 to invest in distressed real estate assets and
other related investments to which investors have committed and contributed a total of $700 million of
equity (including $75 million by us);
• Rialto Real Estate Fund II, LP ("Fund II") that was formed in 2012 to invest in distressed real estate assets
and other related investments to which investors have committed $1.3 billion (including $100 million by us);
and
• Rialto Mezzanine Partners Fund (the "Mezzanine Fund") that was formed in 2013 with a target of raising
$300 million in capital (including $27 million committed by us) to invest in performing mezzanine
commercial loans that have expected durations of one to two years and are secured by equity interests in the
borrowing entity owning the real estate assets.
Rialto also earns fees for its role as a manager of these vehicles and for providing asset management and other
services to those vehicles and other third parties. In addition, Rialto owns general partner interests in each of the funds,
which entitle it to a share of the sums distributed by the funds after investors have recovered their investments and
received specified internal rates of return on those investments. For both Fund I and Fund II, in order to protect investors
in the Funds, we agreed that while the Funds were seeking investments (which no longer is the case with regard to Fund
I) we would not make investments that are suitable for the applicable Fund, except to the extent an Advisory Committee
of the Fund decides that the Fund should not make particular investments, with an exception enabling us to purchase
properties for use in connection with our homebuilding operations.
During 2013, Rialto Mortgage Finance ("RMF") was formed and began originating and selling into
securitizations five, seven and ten year commercial first mortgage loans, generally with principal amounts between $2
million and $75 million, which are secured by income producing properties. RMF has secured two warehouse repurchase
financing agreements that mature in fiscal year 2015 with commitments totaling $650 million to help finance the loans it
makes. This business has become a significant contributor to the Rialto segment's revenues.
In 2010, our Rialto segment also acquired distressed residential and commercial real estate loans and real estate
owned ("REO") properties from three financial institutions (“Bank Portfolios”). We paid $310 million for the Bank
Portfolios, of which $124 million was financed through a 5-year senior unsecured note provided by one of the selling
institutions.
In 2010, our Rialto segment also acquired indirectly 40% managing member equity interests in two limited
liability companies (“LLCs”), in partnership with the Federal Deposit Insurance Corporation (“FDIC”), which retained
60% equity interest in the LLCs, for approximately $243 million (net of transaction costs and a $22 million working
capital reserve). The LLCs held performing and non-performing distressed residential and commercial real estate loans
(“FDIC Portfolios”). If the LLCs exceed expectations and meet certain internal rate of return and distribution threshold,
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our equity interest in the LLCs could be reduced from 40% down to 30%, with a corresponding increase to the FDIC’s
equity interest from 60% up to 70%. As these thresholds have not been met, distributions continue being shared 60% /
40% with the FDIC.
Lennar Multifamily Operations
We are actively involved, primarily through unconsolidated entities, in the development of multifamily rental
properties. Our Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional
quality multifamily rental properties in select U.S. markets. We currently use third-party management companies to rent
the apartments though we anticipate renting the apartments through our own entities in the future.
Our net investment in the Lennar Multifamily segment as of November 30, 2014 and 2013 was $203.7 million
and $105.6 million, respectively. Our Lennar Multifamily segment was participating in 26 and 13 unconsolidated entities
as of November 30, 2014 and 2013, respectively. During 2014, our Lennar Multifamily segment sold two operating
properties through unconsolidated entities. As of November 30, 2014, it had interests in 24 communities with
development costs of approximately $1.5 billion, of which one community was completed and operating, three
communities were partially completed and leasing, 19 communities were under construction and one was under
development. Our Lennar Multifamily segment had a pipeline of future projects totaling $4.3 billion in assets across a
number of states that will be developed by unconsolidated entities. We are exploring opportunities to create a fund,
which we would manage and in which we would make an investment, to provide funding for the rental communities we
develop.
For additional information about our investments in and relationships with unconsolidated entities, see
Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.
Seasonality
We historically have experienced, and expect to continue to experience, variability in quarterly results. Our
homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second
fiscal quarter and increased deliveries in the second half of our fiscal year. However, periods of economic downturn in
the industry, such as we experienced in recent years, can alter seasonal patterns.
Competition
The residential homebuilding industry is highly competitive. We compete for homebuyers in each of the market
regions where we operate with numerous national, regional and local homebuilders, as well as with resales of existing
homes and with the rental housing market. In recent years, lenders’ efforts to sell foreclosed homes have been a
significant competitive factor within the home sales industry. We compete for homebuyers on the basis of a number of
interrelated factors including location, price, reputation, amenities, design, quality and financing. In addition to
competition for homebuyers, we also compete with other homebuilders for desirable properties, raw materials and access
to reliable, skilled labor. We compete for land buyers with third parties in our efforts to sell land to homebuilders and
others. We believe we are competitive in the market regions where we operate primarily due to our:
•
Financial position, where we continue to focus on inventory management and liquidity;
• Access to land, particularly in land-constrained markets;
• Access to distressed assets, primarily through relationships established by our Rialto segment;
•
Pricing to current market conditions through sales incentives offered to homebuyers;
• Cost efficiencies realized through our national purchasing programs and production of value-engineered
homes;
• Quality construction and home warranty programs, which are supported by a responsive customer care
team; and
• Everything’s Included® marketing program, which simplifies the home buying experience by including
most desirable features as standard items.
Our financial services operations compete with other mortgage lenders, including national, regional and local
mortgage bankers and brokers, banks, savings and loan associations and other financial institutions, in the origination
and sale of residential mortgage loans. Principal competitive factors include interest rates and other features of mortgage
loan products available to the consumer. We compete with other title insurance agencies and underwriters for closing
services and title insurance. Principal competitive factors include service and price.
The business of Rialto, and the funds it manages, of purchasing distressed real estate related assets is highly
competitive and fragmented. A number of entities and funds have been formed in recent years for the purpose of
acquiring real estate related assets at discounted prices and it is likely that additional entities and funds will be formed for
this purpose during the next several years. We compete with these and other purchasers of distressed assets. We compete
in the marketplace for distressed real estate related asset portfolios based on many factors, including purchase price,
6
representations, warranties and indemnities, timeliness of purchase decisions and reputation. We believe that the major
factor distinguishing us from the competition is that our team is made up of already in place managers who are already
working out loans and dealing with similar borrowers. Additionally, because of the high number of loans made to
developers, we believe having our homebuilding team participating in the underwriting process provides us with a
distinct advantage in our evaluation of these assets. We believe that these factors, together with our ownership of a
mortgage services firm, puts us ahead of many of our competitors and has us well positioned to take advantage of the
large pipeline of opportunity that has been building. In marketing the real estate investment funds it sponsors, Rialto
competes with a large variety of asset managers, including investment banks and other financial institutions and real
estate investment firms.
Rialto’s RMF business competes with other commercial mortgage lenders in a competitive market and its
profitability depends on our ability to originate and sell into securitizations commercial real estate loans at attractive
prices. Some of our competitors may have a lower cost of funds than we do and access to funding sources that may not
be available to us. In addition, some of our competitors may have higher risk tolerances or make different risk
assessments, than we do, which could allow them to consider a wider variety of investments and establish more
relationships than us. We believe that our major distinction from many of our competitors is that our team is made up of
highly seasoned managers who have been originating and securitizing loans for over 25 years with long-standing
relationships and can leverage Rialto’s/Lennar’s infrastructure facilities for a rapid market entrance as well as Rialto’s
current underwriting platform.
Our multifamily operations compete with other multifamily apartment developers and operators, including
REITs, across the United States. In addition, our multifamily operations compete in securing capital, partners and equity,
and in securing tenants within the large supply of already existing rental apartments. Principal competitive factors
include location, rental price and quality, and management of the apartment buildings.
Regulation
The residential communities and multifamily apartment developments that we build are subject to a large
variety of local, state and federal statutes, ordinances, rules and regulations relating to, among other things, zoning,
construction permits or entitlements, construction materials, density, building design and property elevation, building
codes and handling of waste. These include laws requiring the use of construction materials that reduce the need for
energy-consuming heating and cooling systems. These laws and regulations are subject to frequent change and often
increase construction costs. In some instances, we must comply with laws that require commitments from us to provide
roads and other offsite infrastructure, and may require them to be in place prior to the commencement of new
construction. These laws and regulations are usually administered by counties and municipalities and may result in fees
and assessments or building moratoriums. In addition, certain new development projects are subject to assessments for
schools, parks, streets and highways and other public improvements, the costs of which can be substantial. Also, some
states are attempting to make homebuilders responsible for violations of wage and other labor laws by their
subcontractors.
Residential homebuilding and apartment development are also subject to a variety of local, state and federal
statutes, ordinances, rules and regulations concerning the protection of health and the environment. These environmental
laws include such areas as storm water and surface water management, soil, groundwater and wetlands protection,
subsurface conditions and air quality protection and enhancement. Environmental laws and existing conditions may
result in delays, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict
homebuilding activity in environmentally sensitive regions or areas.
In recent years, several cities and counties in which we have developments have submitted to voters “slow
growth” initiatives and other ballot measures that could impact the affordability and availability of land suitable for
residential development within those localities. Although many of these initiatives have been defeated, we believe that if
similar initiatives were approved, residential construction by us and others within certain cities or counties could be
seriously impacted.
In order to make it possible for some of our homebuyers to obtain FHA-insured or VA-guaranteed mortgages,
we must construct the homes they buy in compliance with regulations promulgated by those agencies. Various states
have statutory disclosure requirements relating to the marketing and sale of new homes. These disclosure requirements
vary widely from state-to-state. In addition, some states require that each new home be registered with the state at or
before the time title is transferred to a buyer (e.g., the Texas Residential Construction Commission Act). In some states,
we are required to be registered as a licensed contractor and comply with applicable rules and regulations. In various
states, our new home consultants are required to be registered as licensed real estate agents and to adhere to the laws
governing the practices of real estate agents.
Our mortgage and title subsidiaries must comply with applicable real estate laws and regulations. The
subsidiaries are licensed in the states in which they do business and must comply with laws and regulations in those
states. These laws and regulations include provisions regarding capitalization, operating procedures, investments, lending
7
and privacy disclosures, forms of policies and premiums. The Dodd-Frank Wall Street Reform and Consumer Protection
Act contains a number of new requirements relating to mortgage lending and securitizations. These include, among
others, minimum standards for lender practices, limitations on certain fees and a requirement that the originator of loans
that are securitized retain a portion of the risk, either directly or by holding interests in the securitizations.
Several federal, state and local laws, rules, regulations and ordinances, including, but not limited to, the Federal
Fair Debt Collection Practices Act (“FDCPA”) and the Federal Trade Commission Act and comparable state statutes,
regulate consumer debt collection activity. Although, for a variety of reasons, we may not be specifically subject to the
FDCPA or certain state statutes that govern debt collectors, it is our policy to comply with applicable laws in our
collection activities. To the extent that some or all of these laws apply to our collection activities our failure to comply
with such laws could have a material adverse effect on us. We are also subject to regulations promulgated by the Federal
Consumer Financial Protection Bureau regarding residential mortgage loans.
Because Rialto manages two real estate asset investment funds, one mezzanine loan fund and two entities partly
owned by the FDIC, a Rialto segment entity is registered as an investment adviser under the Investment Advisers Act of
1940. This Act has requirements related to dealings between investment advisers and the entities they advise and imposes
record keeping and disclosure obligations on investment advisers. Our RMF subsidiary must comply with laws and
regulations applicable to commercial mortgage lending. It or its subsidiaries must be licensed in states in which they
make loans and must comply with laws and regulations in those states.
Associates
At November 30, 2014, we employed 6,825 individuals of whom 3,578 were involved in the Lennar
Homebuilding operations, 2,707 were involved in the Lennar Financial Services operations, 383 were involved in the
Rialto operations and 157 were involved in the Lennar Multifamily operations, compared to November 30, 2013, when
we employed 5,708 individuals of whom 2,944 were involved in the Lennar Homebuilding operations, 2,377 were
involved in the Lennar Financial Services operations, 300 were involved in the Rialto operations and 87 were involved in
the Lennar Multifamily operations. We do not have collective bargaining agreements relating to any of our associates.
However, we subcontract many phases of our homebuilding operations and some of the subcontractors we use have
employees who are represented by labor unions.
NYSE Certification
On April 9, 2014, we submitted our Annual CEO Certification to the New York Stock Exchange ("NYSE") in
accordance with NYSE's listing standards. The certification was not qualified in any respect.
Available Information
Our corporate website is www.lennar.com. We make available on our website, free of charge, our Annual Report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports filed
or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as
reasonably practicable after we electronically file these documents with, or furnish them to, the Securities and Exchange
Commission. Information on our website is not part of this document.
Our website also includes printable versions of our Corporate Governance Guidelines, our Code of Business
Conduct and Ethics and the charters for each of the Audit, Compensation and Nominating and Corporate Governance
Committees of our Board of Directors. Each of these documents is also available in print to any stockholder who
requests a copy by addressing a request to:
Lennar Corporation
Attention: Office of the General Counsel
700 Northwest 107th Avenue
Miami, Florida 33172
8
Item 1A. Risk Factors.
The following are what we believe to be the principal risks that might materially affect us and our businesses.
Market and Economic Risks
The homebuilding recovery has continued its progression at a slow and steady pace, however a downturn in the
recovery or decline in economic conditions could adversely affect our operations.
In fiscal 2014, we experienced a steadily improving housing market, and in our business saw a strong recovery
in the number of new sales contracts signed and improved gross margins compared with the prior year. However,
demand for new homes is sensitive to changes in economic conditions such as the level of employment, consumer
confidence, consumer income, the availability of financing and interest rate levels. The economic downturn that began in
2007 was one of the most severe in U.S. history, and severely affected both the numbers of homes we could sell and the
prices for which we could sell them. We cannot predict whether the recovery in the housing market will continue. If the
recovery were to slow or stop, or economic conditions were to worsen, the demand for new homes would likely decline,
negatively impacting our business, results of operations, cash flows and financial condition.
For several years we had to take significant write-downs on the carrying values of land we owned and of option
expenses. A future decline in land values could result in similar write-downs.
Inventory risks are substantial for our homebuilding business. There are risks inherent in controlling, owning
and developing land and if housing demand declines, we may own land or lots at a cost we will not be able to recover
fully, or on which we cannot build and sell homes profitably. Also, there can be significant fluctuations in the value of
our owned undeveloped land, building lots and housing inventories related to changes in market conditions. As a result,
our deposits for building lots controlled under option or similar contracts may be put at risk, we may have to sell homes
or land for a lower than anticipated profit margin or we may have to record inventory impairment charges with regard to
our developed and undeveloped land and lots. When demand for homes fell during the recent recession, we were
required to take significant write-downs of the carrying value of our land inventory and we elected not to exercise many
options to purchase land, even though that required us to forfeit deposits and write-off pre-acquisition costs. If market
conditions were to deteriorate significantly in the future, we could again be required to make significant write downs
with regard to our land inventory, which would decrease the asset values reflected on our balance sheet and adversely
affect our earnings and our stockholders' equity.
Inflation may adversely affect us by increasing costs that we may not be able to recover.
Inflation can adversely affect us by increasing costs of land, materials and labor. In addition, significant
inflation is often accompanied by higher interest rates, which have a negative impact on demand for our homes. In a
highly inflationary environment, depending on industry and other economic conditions, we may be precluded from
raising home prices enough to keep up with the rate of inflation, which would reduce our profit margins. Although the
rate of inflation has been low for the last several years, we have been experiencing increases in the prices of labor and
materials and there could be a significant increase in inflation in the future.
Homebuilding, mortgage lending, distressed asset investing and multifamily rentals are very competitive industries,
and competitive conditions could adversely affect our business or financial results.
Homebuilding. The homebuilding industry is highly competitive. Homebuilders compete not only for
homebuyers, but also for desirable land, financing, raw materials, skilled management and labor resources. We compete
in each of our markets with numerous national, regional and local homebuilders. We also compete with sellers of
existing homes, including foreclosed homes, and with rental housing. These competitive conditions can reduce the
number of homes we deliver, negatively impact our selling prices, reduce our profit margins, and cause impairments in
the value of our inventory or other assets. Competition can also affect our ability to acquire suitable land, raw materials
and skilled labor at acceptable costs or terms.
Lennar Financial Services. Our Lennar Financial Services business competes with other mortgage lenders,
including national, regional and local banks and other financial institutions, many of which are far larger, and some of
which are subject to fewer government regulations, than our financial services subsidiaries. Mortgage lenders who are
subject to fewer regulations than we are or have greater access to low cost funds or different lending criteria than we do
may be able to offer more attractive financing to potential customers than we can.
Lennar Multifamily. Our multifamily rental business competes with other multifamily apartment developers and
operators across the United States. We also compete in securing capital, partners and equity, and in securing tenants with
the large supply of already existing rental apartments. These competitive conditions could negatively impact the ability
of the ventures in which we are participating to find renters for the apartments they are building or the prices for which
those apartments can be rented.
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Rialto. There are many firms and investment funds that compete with Rialto in trying to acquire distressed
mortgage debt, foreclosed properties and other real estate related assets that have been adversely affected by the recent
recession. At least some of the firms with which Rialto competes, or will compete, for investment opportunities have, or
will have, a cost of funds that is lower than that of Rialto or the funds it manages, and therefore those firms may be able
to pay more for investment opportunities than would be prudent for Rialto or the funds it manages. Our RMF business
competes with national and regional banks as well as smaller community banks within the various markets in which we
operate and non-bank lenders, many of which are far larger than RMF or have access to lower cost funds than we do.
Operational Risks
We may be subject to significant potential liabilities as a result of warranty and liability claims made against us.
As a homebuilder, we are subject in the ordinary course of our business to warranty and construction defect
claims. We are also subject to claims for injuries that occur in the course of construction activities. We record warranty
and other reserves for the homes we sell based on historical experience in our markets and our judgment of the
qualitative risks associated with the types of homes we build. We have, and many of our subcontractors have, general
liability, property, workers compensation and other business insurance. These insurance policies are intended to protect
us against a portion of our risk of loss from claims, subject to certain self-insured retentions, deductibles and other
coverage limits. However, it is possible that this insurance will not be adequate to address all warranty, construction
defect and liability claims to which we are subject. Additionally, the coverage offered and the availability of general
liability insurance for construction defects are currently limited and policies that can be obtained are costly and often
include exclusions based upon past losses those insurers suffered as a result of use of defective Chinese drywall and
other products in homes we and many other homebuilders built. As a result, an increasing number of our subcontractors
are unable to obtain insurance, and we have in many cases had to waive our customary insurance requirements, which
increases our and our insurers’ exposure to claims and increases the possibility that our insurance will not be adequate to
protect us for all the costs we incur.
Products supplied to us and work done by subcontractors can expose us to risks that could adversely affect our
business.
We rely on subcontractors to perform the actual construction of our homes, and in many cases, to select and
obtain building materials. Despite our detailed specifications and quality control procedures, in some cases,
subcontractors may use improper construction processes or defective materials, such as defective Chinese drywall that at
one time was installed by subcontractors in homes built for us and for many other homebuilders in Florida and
elsewhere. Although our subcontractors have principal responsibility for defects in the work they do, we have ultimate
responsibility to the homebuyers. Defective products widely used by the homebuilding industry can result in the need to
perform extensive repairs to large numbers of homes. The cost of complying with our warranty obligations may be
significant if we are unable to recover the cost of repairs from subcontractors, materials suppliers and insurers.
We also can suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to
comply with applicable laws, including laws involving things that are not within our control. When we learn about
possibly improper practices by subcontractors, we try to cause the subcontractors to discontinue them. However, we are
not always able to do that, and even when we can, it may not avoid claims against us relating to what the subcontractors
already did.
Supply shortages and risks related to the demand for skilled labor and building materials could increase costs and
delay deliveries.
Increased costs or shortages of skilled labor and/or lumber, framing, concrete, steel and other building materials
could cause increases in construction costs and construction delays. During 2014, we experienced increases in the prices
of some building materials and shortages of skilled labor in some areas. We generally are unable to pass on increases in
construction costs to customers who have already entered into purchase contracts, as those contracts generally fix the
price of the homes at the time the contracts are signed, which may be well in advance of the construction of the homes.
Sustained increases in construction costs may, over time, erode our margins, particularly if pricing competition restricts
our ability to pass additional costs of materials and labor on to homebuyers.
Reduced numbers of home sales extend the time it takes us to recover land purchase and property development costs.
We incur many costs even before we begin to build homes in a community. Depending on the stage of
development a land parcel is in when we acquire it, these may include costs of preparing land, finishing and entitling
lots, installing roads, sewers, water systems and other utilities, taxes and other costs related to ownership of the land on
which we plan to build homes. If the rate at which we sell and deliver homes slows, or if we delay the opening of new
home communities, we may incur additional pre-construction costs and it may take longer for us to recover our costs.
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Increased demand for homes could require us to increase our corporate credit line, and our inability to do that could
limit our ability to take full advantage of market opportunities.
Our business requires that we be able to finance the development of our residential communities. One of the
ways we do this is with bank borrowings. At November 30, 2014, we had a $1.5 billion Credit Facility, subject in part to
additional commitments. If market conditions strengthen to the point that we need additional funding but we are not able
to increase our Credit Facility or obtain funds from other types of financings, that could prevent us from taking full
advantage of the enhanced market opportunities.
Failure to comply with the covenants and conditions imposed by our credit facilities could restrict future borrowing or
cause our debt to become immediately due and payable.
We have a Credit Facility that is available for us to use to help finance our homebuilding, acquisitions and other
activities. The agreement governing our Credit Facility (the “Credit Agreement”) makes it a default for us if we fail to
pay principal or interest when it is due (subject in some instances to grace periods) or to comply with covenants,
including covenants regarding various financial ratios. In addition, our Lennar Financial Services segment has warehouse
facilities to finance its lending activities and our Rialto segment has warehouse facilities to finance its mortgage
origination activities. If we default under the Credit Agreement or our warehouse facilities, the lenders will have the right
to terminate their commitments to lend and to require immediate repayment of all outstanding borrowings. This could
reduce our available funds at a time when we are having difficulty generating all the funds we need from our operations,
in capital markets or otherwise, and restrict our ability to obtain financing in the future. Further, Rialto's 7.00% Senior
Notes due 2018 contain restrictive covenants imposing operational and financial restrictions on our Rialto segment,
including restrictions that may limit Rialto’s ability to sell assets, pay dividends or make other distributions, enter into
transactions with affiliates or incur additional indebtedness. In addition, if we default under the Credit Agreement or our
warehouse facilities, it could result in the amounts outstanding under our senior notes and convertible senior notes to
become immediately due and payable, which would have a material adverse impact on our consolidated financial
condition.
We have a substantial level of indebtedness which may have an adverse effect on our business or limit our ability to
take advantage of business, strategic or financing opportunities.
As of November 30, 2014, our consolidated debt, excluding amounts outstanding under our credit facilities, was
$5.2 billion. The indentures governing our senior notes and convertible senior notes do not restrict the incurrence of
future secured or unsecured debt by us, and the agreement governing our Credit Facility allows us to incur a substantial
amount of future unsecured debt. Our substantial level of indebtedness increases the possibility that we may be unable to
generate cash sufficient to pay the principal, interest or other amounts due on our indebtedness. Our reliance on debt to
help support our operations exposes us to a number of risks, including:
• we may be more vulnerable to general adverse economic and industry conditions;
• we may have to pay higher interest rates upon refinancing or on our variable rate indebtedness if interest
rates rise, thereby reducing our cash flows;
• we may find it difficult to, or may be unable to, obtain additional financing to fund future working capital,
capital expenditures and other general corporate requirements that would be in our best long-term interests;
• we may be required to dedicate a substantial portion of our cash flow from operations to the payment of
principal and interest on our debt, reducing the cash flow available to fund operations and investments;
• we may have reduced flexibility in planning for, or reacting to, changes in our businesses or the industries
in which they are conducted;
• we may have a competitive disadvantage relative to other companies in our industry that are less leveraged;
and
• we may be required to sell debt or equity securities or sell some of our core assets, possibly on unfavorable
terms, in order to meet payment obligations.
Our Lennar Financial Services segment and RMF have warehouse facilities that mature in 2015, and if we cannot
renew or replace these facilities, we may have to reduce our mortgage lending activities.
Our Lennar Financial Services segment has an aggregate committed and uncommitted amount under four
warehouse repurchase credit facilities that totaled $925 million as of November 30, 2014, all of which will mature during
2015. Our Lennar Financial Services segment uses these facilities to finance its mortgage lending activities until the
mortgage loans it originates are sold to investors. In addition, RMF, the commercial mortgage lender in our Rialto
segment, has an aggregate committed amount under two warehouse repurchase credit facilities that totaled $650 million
as of November 30, 2014 both of which will mature during 2015. RMF uses these facilities to finance its mortgage
origination activities. We expect these facilities to be renewed or replaced with other facilities when they mature. If we
were unable to renew or replace these facilities on favorable terms or at all when they mature, that could seriously
11
impede the activities of our Lennar Financial Services segment and RMF, as applicable, which would have a material
adverse impact on our financial results.
We conduct some of our operations through joint ventures with independent third parties and we can be adversely
impacted by our joint venture partners' failures to fulfill their obligations or decisions to act contrary to our wishes.
In our Homebuilding and Lennar Multifamily segments, we participate in joint ventures in order to acquire
attractive land positions, to manage our risk profile and to leverage our capital base. In certain circumstances, the joint
venture participants, including ourselves, are required to provide guarantees of obligations relating to the joint ventures,
such as completion and environmental guarantees. If a joint venture partner does not perform its obligations, we may be
required to bear more than our proportional share of the cost of fulfilling them. For example, as part of our Lennar
Multifamily business, and its joint ventures, we and the other venturers have assumed certain obligations to complete
construction of multifamily residential buildings at agreed upon costs, which could make us and the other venture
participants responsible for cost overruns. Although all the participants in a venture are normally responsible for sharing
the costs of fulfilling obligations of that type, if some of the venture participants are unable or unwilling to meet their
share of the obligations, we may be held responsible for some or all of the defaulted payments. In addition, because we
do not have a controlling interest in most of the joint ventures in which we participate, we may not be able to sell assets,
return invested capital or take other actions without the consent of at least one of our joint venture partners when such
action may be in our best interest.
Several of the joint ventures in which we participate will in the relatively near future be required to repay,
refinance, renegotiate or extend their loans. If any of those joint ventures are unable to do this, we could be required to
provide at least a portion of the funds the joint ventures need to be able to repay the loans and to conduct the activities
for which they were formed, which could adversely affect our financial position.
Our new businesses may not be as successful as we anticipate, and could disrupt our ongoing businesses and
adversely affect our operations.
We have invested and expect to continue to invest in new business opportunities. In July 2013, we began
commercial mortgage loan origination activities through RMF. In addition, during 2012 and 2013, we began our Lennar
Multifamily business in which we have invested substantial resources to participate in the development of multifamily
rental properties. Further, under our Homebuilding umbrella, we are investing in a solar business and a business focused
on the development, investment and management of commercial properties. As with any new businesses, these
endeavors, and others we may undertake in the future, are likely to involve significant risks and uncertainties, including
significant start-up costs and the possibility that the new businesses will not be profitable or will not generate the
expected returns on our investments, and the new businesses may require attention from our senior management that
reduces their ability to focus on our core activities.
The loss of the services of members of our senior management or a significant number of our employees could
negatively affect our business.
Our success depends to a significant extent upon the performance and active participation of our senior
management, many of whom have been with the Company for a significant number of years. If we were to lose members
of our senior management, we might not be able to find appropriate replacements on a timely basis and our operations
could be negatively affected. Also, the loss of a significant number of operating employees and our inability to hire
qualified replacements could have a material adverse effect on our business.
Our access to capital and our ability to obtain additional financing could be affected by any downgrade of our credit
ratings.
Our corporate credit rating and ratings of our senior notes and convertible senior notes affect, among other
things, our ability to access new capital, especially debt. A substantial portion of our access to capital is through the
issuance of senior notes and convertible senior notes, of which we have $4.3 billion outstanding as of November 30,
2014. Among other things, we rely on proceeds of debt issuances to pay the principal of existing senior notes when they
mature. Negative changes in the ratings of our senior notes could make it difficult for us to sell senior notes in the future
and could result in more stringent covenants and higher interest rates with regard to new senior notes we issue.
Natural disasters and severe weather conditions could delay deliveries and increase costs of new homes in affected
areas, which could harm our sales and results of operations.
Many of our homebuilding operations are conducted in areas that are subject to natural disasters, including
hurricanes, earthquakes, droughts, floods, wildfires and severe weather. The occurrence of natural disasters or severe
weather conditions can delay new home deliveries, increase costs by damaging inventories and lead to shortages of labor
and materials in areas affected by the disasters, and can negatively impact the demand for new homes in affected areas. If
our insurance does not fully cover business interruptions or losses resulting from these events, our results of operations
could be adversely affected.
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If our homebuyers are not able to obtain suitable financing, that would reduce demand for our homes and our home
sales revenues.
Many purchasers of our homes obtain mortgage loans to finance a substantial portion of the purchase price of
the homes they purchase. The uncertainties in the mortgage markets, including the tightening of credit standards and
increased government regulation, could adversely affect the ability of potential homebuyers to obtain financing for a
home purchase, thus preventing them from purchasing our homes. Changes made by Fannie Mae, Freddie Mac and
FHA/VA to sponsored mortgage programs, as well as changes made by private mortgage insurance companies, have
reduced the ability of many potential homebuyers to qualify for mortgages. Principal among these have been tighter
lending standards such as higher income requirements, larger required down payments, increased reserves and higher
required credit scores. In addition, there continues to be substantial uncertainty regarding the future of Fannie Mae and
Freddie Mac, including proposals that they reduce or terminate their role as the principal sources of liquidity in the
secondary market for mortgage loans. It is not clear how, if Fannie Mae and Freddie Mac curtail their secondary market
mortgage loan purchases, the liquidity they provide would be replaced. There is a substantial possibility that substituting
an alternate source of liquidity would increase mortgage interest rates, which would increase the buyer's effective cost of
the homes we sell, and therefore could reduce demand for our homes and adversely affect our results of operations.
Changes in tax laws can increase the after tax cost of owning a home, and further tax law changes could adversely
affect demand for the homes we build.
Under current tax law certain significant expenses of owning a home, including mortgage loan interest costs and
real estate taxes, generally are deductible expenses for the purpose of calculating an individual’s federal, and in some
cases state, tax liability. However, the American Taxpayer Relief Act of 2012, which was signed into law in January
2013, resulted in higher income tax rates and limits the amount of mortgage interest individuals can deduct in computing
their income tax liability. The limit on deductibility of mortgage interest can increase the after-tax cost of owning a home
for some individuals. Any additional increases in personal income tax rates and/or additional tax deduction limits could
adversely impact demand for new homes, including homes we build, which could adversely affect our results of
operations.
Our Lennar Financial Services segment can be adversely affected by reduced demand for our homes or by a
slowdown in mortgage refinancings.
Approximately 57% of the mortgage loans made by our Lennar Financial Services segment in 2014 were made
to buyers of homes we built. Therefore, a decrease in the demand for our homes would adversely affect the revenues of
this segment of our business. In addition, the revenues of our Lennar Financial Services segment would be adversely
affected by a decrease in refinance transactions, such as the decrease that we experienced during the first half of fiscal
2014.
If our ability to sell mortgages into the secondary market is impaired, that could significantly reduce our ability to sell
homes unless we are willing to become a long-term investor in loans we originate.
Substantially all of the residential mortgage loans we originate are sold within a short period in the secondary
mortgage market on a servicing released, non-recourse basis. If we became unable to sell loans into the secondary
mortgage market or directly to Fannie Mae and Freddie Mac, we would have to either curtail our origination of mortgage
loans, which among other things, could significantly reduce our ability to sell homes, or commit our own funds to long
term investments in mortgage loans, which, in addition to requiring us to deploy substantial amounts of our own funds,
could delay the time when we recognize revenues from home sales on our statements of operations.
If real estate Rialto acquired through foreclosures is not properly valued when it is acquired, we could be required to
take valuation charge-offs, which would reduce our earnings.
When a loan is foreclosed upon and we take title to the property, we obtain a valuation of the property and base
its book value on that valuation. The book value of the foreclosed property is periodically compared to its updated
market value (or its updated market value less estimated selling costs if the foreclosed property is classified as held-for-
sale), and a charge-off is recorded for any excess of the property's book value over its fair value. If the revised valuation
we establish for a property proves to be too high, we may have to record additional charge-offs in subsequent periods.
Material charge-offs could have an adverse effect on our results of operations, and possibly even on our financial
condition.
The ability of our Rialto segment to profit from the investments it makes may depend to a significant extent on its
ability to manage resolutions of distressed mortgages and other real estate related assets.
A principal factor in a prospective purchaser's decision regarding the price it will pay for a portfolio of mortgage
loans or other real estate related assets is the cash flow the prospective purchaser expects the portfolio to generate. The
cash flow a portfolio of distressed mortgage loans and related assets will generate can be affected by the way the assets
in the portfolio are managed. We believe the backgrounds and experience of the personnel in our Rialto segment enable
13
the Rialto segment to generate better cash flows from the distressed assets it manages than what is generally expected
with regard to similar assets. When Rialto decides whether it or a fund it manages should purchase particular distressed
assets and what it or the fund should be willing to pay for them, one consideration is whether, and to what extent, Rialto
thinks it will be able to obtain above average returns in resolving the assets. If Rialto is not able to achieve its anticipated
returns, it or the fund it manages will not realize the expected return on its investment.
Regulatory Risks
We may be adversely impacted by legal and regulatory changes.
We are subject with regard to almost all of our activities to a variety of federal, state and local laws and
regulations. Laws and regulations, and policies under or interpretations of existing laws and regulations, change
frequently. Our businesses could be adversely affected by changes in laws, regulations, policies or interpretations or by
our inability to comply with them without making significant changes in our businesses.
We may be adversely impacted by laws and regulations directed at the financial industry.
New or modified regulations and related regulatory guidance focused on the financial industry may have
adverse effects on aspects of our businesses. For example, in October 2014, final rules were promulgated under the
Dodd-Frank Wall Street Reform Act that requires mortgage lenders or third-party B-piece buyers to retain a portion of
the credit risk related to securitized loans. We have determined that these rules do not affect our residential mortgage
lending operations at this time; however, the new rules may adversely impact our commercial mortgage lending
operations in our RMF business. While we are still assessing the impact of the new rules on the market, we believe that
the rules may reduce the price of commercial mortgage-backed securities ("CMBS") and limit the overall volume of
CMBS related loan purchases, which could impact the financial results of our RMF business. In addition, if our
residential mortgage lending operations became subject to these rules in the future, that would substantially increase the
amount we would have to invest in our mortgage lending operations and increase our risks with regard to loans we
originate and sell in the secondary mortgage market.
Governmental regulations regarding land use and environmental matters could increase the cost and limit the
availability of our development and homebuilding projects and adversely affect our business or financial results.
We are subject to extensive and complex laws and regulations that affect the land development, homebuilding
and apartment development process, including laws and regulations related to zoning, permitted land uses, levels of
density, building design, elevation of properties, water and waste disposal and use of open spaces. These regulations
often provide broad discretion to the administering governmental authorities as to the conditions we must meet prior to
development or construction being approved, if they are approved at all. We are also subject to determinations by
governmental authorities as to the adequacy of water or sewage facilities, roads and other local services with regard to
particular residential communities. New housing developments may also be subject to various assessments for schools,
parks, streets and other public improvements. In addition, in many markets government authorities have implemented no
growth or growth control initiatives. Any of these can limit, delay, or increase the costs of land development or home
construction.
We are also subject to a variety of local, state and federal laws and regulations concerning protection of the
environment. In some of the markets where we operate, we are required by law to pay environmental impact fees, use
energy-saving construction materials and give commitments to municipalities to provide infrastructure such as roads and
sewage systems. We generally are required to obtain permits, entitlements and approvals from local authorities to
commence and carry out residential development or home construction. These permits, entitlements and approvals may,
from time-to-time, be opposed or challenged by local governments, environmental advocacy groups, neighboring
property owners or other possibly interested parties, adding delays, costs and risks of non-approval to the process.
Violations of environmental laws and regulations can result in injunctions, civil penalties, remediation expenses, and
other costs. In addition, some environmental laws impose strict liability, which means that we may be held liable for
unlawful environmental conditions on property we own which we did not create.
We are also subject to laws and regulations related to workers' health and safety, and there are efforts to subject
us to other labor related laws or rules, some of which may make us responsible for things done by our subcontractors
over which we have little or no control. In addition, our residential mortgage subsidiary is subject to various state and
federal statutes, rules and regulations, including those that relate to lending operations and other areas of mortgage
origination and loan servicing. The impact of those statutes, rules and regulations can increase our homebuyers’ costs of
financing, and our cost of doing business, as well as restricting our homebuyers’ access to some types of loans.
Our obligation to comply with the laws and regulations under which we operate, and our need to ensure that our
associates, subcontractors and other agents comply with these laws and regulations, could result in delays in construction
and land development, cause us to incur substantial costs and prohibit or restrict land development and homebuilding
activity in certain areas in which we operate. Budget reductions by state and local governmental agencies may increase
14
the time it takes to obtain required approvals and therefore may aggravate the delays we could encounter. Government
agencies also routinely initiate audits, reviews or investigations of our business practices to ensure compliance with
applicable laws and regulations, which can cause us to incur costs or create other disruptions in our businesses that can
be significant.
We can be injured by improper acts of persons over whom we do not have control.
Although we expect all of our associates (i.e., employees), officers and directors to comply at all times with all
applicable laws, rules and regulations, there may be instances in which subcontractors or others through whom we do
business engage in practices that do not comply with applicable laws, regulations or governmental guidelines. When we
learn of practices that do not comply with applicable laws or regulations, including practices relating to homes, buildings
or multifamily rental properties we build or finance, we move actively to stop the non-complying practices as soon as
possible and we have taken disciplinary action with regard to associates of ours who were aware of non-complying
practices and did not take steps to address them, including in some instances terminating their employment. However,
regardless of the steps we take after we learn of practices that do not comply with applicable laws or regulations, we can
in some instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the
practices' having taken place.
Our ability to collect upon mortgage loans may be limited by the application of state laws.
Our mortgage loans typically permit us to accelerate the debt upon default by the borrower. The courts of all
states will enforce acceleration clauses in the event of a material payment default, subject in some cases to a right of the
court to revoke the acceleration and reinstate the mortgage loan if a payment default is cured. The equity courts of a
state, however, may refuse to allow the foreclosure of a mortgage or to permit the acceleration of the indebtedness in
instances in which they decide that the exercise of those remedies would be inequitable or unjust or the circumstances
would render an acceleration unconscionable.
Further, the ability to collect upon mortgage loans may be limited by the application of state and federal laws.
For example, Nevada has enacted a law providing that if the amount an assignee of a mortgage note paid to acquire the
note is less than the face amount of the note, the creditor cannot recover more through a deficiency action than the
amount it paid for the note. If the Nevada law is upheld, or similar laws are enacted in other jurisdictions, it could
materially and adversely affect our ability and the ability of funds we manage to profit from purchases of distressed debt.
Other Risks
Our results of operations could be adversely affected if legal claims are brought against us and are not resolved in our
favor.
In the ordinary course of our business, we are subject to legal claims by homebuyers, borrowers against whom
we have instituted foreclosure proceedings, persons with whom we have land purchase contracts and a variety of other
persons. We establish reserves against legal claims and we believe that, in general, they will not have a material adverse
effect on our business or financial condition. However, if the amounts we are required to pay as a result of claims against
us substantially exceed the sums anticipated by our reserves, the need to pay those amounts could have a material
adverse effect on our results of operations for the periods when we are required to make the payments.
Information technology failures and data security breaches could harm our business.
We rely extensively on information technology (IT) systems, including Internet sites, data hosting facilities and
other hardware and platforms, some of which are hosted by third parties, to assist in conducting our businesses. Our IT
systems, like those of most companies, may be vulnerable to a variety of interruptions, including, but not limited to,
natural disasters, telecommunications failures, hackers, and other security issues. Moreover, our computer systems, like
those of most companies, are subjected to computer viruses or other malicious codes, and to cyber or phishing-attacks.
Although we have implemented administrative and technical controls and taken other actions to minimize the risk of
cyber incidents and protect our information technology, computer intrusion efforts are becoming increasingly
sophisticated, and even the enhanced controls we have installed might be breached. If our IT systems cease to function
properly, we could suffer interruptions in our operations. If our cyber-security is breached, unauthorized persons may
gain access to proprietary or confidential information, including information about purchasers of our homes or borrowers
from our mortgage lending subsidiaries. This could damage our reputation and require us to incur significant costs to
repair or restore the security of our computer systems.
Increases in the rate of cancellations of home sale agreements could have an adverse effect on our business.
Our backlog reflects agreements of sale with our homebuyers for homes that have not yet been delivered. We
have received a deposit from our home buyer for each home reflected in our backlog, and generally we have the right to
retain the deposit if the home buyer does not complete the purchase. In some cases, however, a home buyer may cancel
the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local laws, the
15
home buyer’s inability to obtain mortgage financing, his or her inability to sell his or her current home or our inability to
complete and deliver the home within the specified time. If there is a downturn in the housing market, or if mortgage
financing becomes even less available than it currently is, more homebuyers may cancel their agreements of sale with us,
which would have an adverse effect on our business and results of operations.
Our success depends on our ability to acquire land suitable for residential homebuilding at reasonable prices, in
accordance with our land investment criteria.
There is strong competition among homebuilders for land that is suitable for residential development. The
future availability of finished and partially finished developed lots and undeveloped land that meet our internal criteria
depends on a number of factors outside our control, including land availability in general, competition with other
homebuilders and land buyers for desirable property, inflation in land prices, zoning, allowable housing density, and
other regulatory requirements. Should suitable lots or land become less available, the number of homes we could build
and sell could be reduced, and the cost of land could be increased, perhaps substantially, which could adversely impact
our results of operations.
Expansion of our services and investments into international markets through our Rialto segment subjects us to risks
inherent in international operations.
In December 2014, Fund II, of which our Rialto segment owns an interest and for which it performs asset
management services, acquired an interest in a joint venture which holds real estate assets in Spain. Expansion of our
services and investments into Spain and any expansion into other international markets in the future, could result in
operational problems not typically experienced in the United States. Our activities outside the United States will be
subject to risks associated with doing business internationally, including fluctuations in currency exchange rates, changes
in a specific country’s or region’s political or economic conditions, and competitive disadvantages due to our need to
comply with U.S. anti-bribery laws. There also are tax consequences of doing business outside the U.S., both under U.S.
tax laws and under the tax laws of the countries in which we do business.
We could suffer adverse tax and other financial consequences if we are unable to utilize our net operating loss
("NOL") carryforwards.
At November 30, 2014, we had state tax NOL carryforwards totaling $113.8 million that will expire between
2015 and 2034. As of November 30, 2014, state tax NOL carryforwards totaling $2.0 million will expire over the next
twelve months, if sufficient taxable income is not generated in the applicable states to utilize the net operating losses. At
November 30, 2014, we had a valuation allowance of $8.0 million against our state NOL carryforwards because we
believe it is more likely than not that a portion of our state NOL carryforwards will not be realized due to the limited
carryforward periods in certain states. If we are unable to use our NOLs, we may have to record charges or reduce our
deferred tax assets, which could have an adverse effect on our results of operations.
We experience variability in our operating results on a quarterly basis and, as a result, our historical performance
may not be a meaningful indicator of future results.
We historically have experienced, and expect to continue to experience, variability in quarterly results. As a
result of such variability, our short-term performance may not be a meaningful indicator of future results. Our
homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second
fiscal quarter and increased deliveries in the second half of our fiscal year. Our quarterly results of operations may
continue to fluctuate in the future as a result of a variety of factors, including, among others, seasonal home buying
patterns, the timing of home closings and land sales and weather-related problems.
We have a stockholder who can exercise significant influence over matters that are brought to a vote of our
stockholders.
Stuart A. Miller, our Chief Executive Officer and a Director, has voting control, through personal holdings and
holdings by family-owned entities, of Class B, and to a lesser extent Class A, common stock that enables Mr. Miller to
cast approximately 44% of the votes that can be cast by the holders of all our outstanding Class A and Class B common
stock combined. That effectively gives Mr. Miller the power to control the election of our directors and the approval of
matters that are presented to our stockholders. Mr. Miller's voting power might discourage someone from seeking to
acquire us or from making a significant equity investment in us, even if we needed the investment to meet our
obligations or to operate our business. Also, because of his voting power, Mr. Miller could be able to authorize actions
that are contrary to our other stockholders' desires.
The trading price of our Class B common stock normally is lower than that of our Class A common stock.
The only difference between our Class A common stock and our Class B common stock is that the Class B
common stock entitles the holders to 10 votes per share, while the Class A common stock entitles holders to only one
vote per share. However, the trading price of the Class B common stock on the New York Stock Exchange ("NYSE")
16
normally is lower than the NYSE trading price of our Class A common stock. We believe this is because only a relatively
small number of shares of Class B common stock are available for trading, which reduces the liquidity of the market for
our Class B common stock to a point where many investors are reluctant to invest in it. The limited liquidity could make
it difficult for a holder of a significant number of shares of our Class B common stock to dispose of the stock without
materially reducing the trading price of the Class B common stock.
Changes in global or regional environmental conditions and governmental actions in response to such changes may
adversely affect us by increasing the costs of or restricting our planned or future growth activities.
There is growing concern from many members of the scientific community and the general public that an
increase in global average temperatures due to emissions of greenhouse gases and other human activities have caused, or
will cause, significant changes in weather patterns and increase the frequency and severity of natural disasters.
Government mandates, standards or regulations intended to reduce greenhouse gas emissions or projected climate
change impacts could result in restrictions on land development in certain areas and increased energy, transportation and
raw material costs, or cause us to incur compliance expenses that we will be unable fully to recover, which could reduce
our housing gross profit margins and adversely affect our results of operations.
Item 1B.
Unresolved Staff Comments.
Not applicable.
Executive Officers of Lennar Corporation
The following individuals are our executive officers as of January 23, 2015:
Position
Name
Stuart A. Miller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chief Executive Officer . . . . . . . . . . . . . . . . . . . . .
Richard Beckwitt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jonathan M. Jaffe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President and Chief Operating Officer. . . . . .
Bruce E. Gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President and Chief Financial Officer . . . . . .
Diane J. Bessette. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President and Treasurer . . . . . . . . . . . . . . . . .
Mark Sustana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secretary and General Counsel. . . . . . . . . . . . . . . .
David M. Collins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Age
57
55
55
56
54
53
45
Mr. Miller is one of our Directors and has served as our Chief Executive Officer since 1997. Mr. Miller served
as our President from 1997 to April 2011. Before 1997, Mr. Miller held various executive positions with us.
Mr. Beckwitt served as our Executive Vice President from March 2006 to 2011. Since April 2011, Mr. Beckwitt
has served as our President. As our Executive Vice President and then our President, Mr. Beckwitt has been involved in
all operational aspects of our company. Mr. Beckwitt served on the Board of Directors of D.R. Horton, Inc. from 1993 to
November 2003. From 1993 to March 2000, he held various executive officer positions at D.R. Horton, including
President of the company.
Mr. Jaffe has served as Vice President since 1994 and has served as our Chief Operating Officer since
December 2004. Before that time, Mr. Jaffe served as a Regional President in our Homebuilding operations.
Additionally, prior to his appointment as Chief Operating Officer, Mr. Jaffe was one of our Directors from 1997 through
June 2004.
Mr. Gross has served as Vice President and our Chief Financial Officer since 1997. Before that, Mr. Gross was
Senior Vice President, Controller and Treasurer of Pacific Greystone Corporation, which we acquired in 1997.
Ms. Bessette joined us in 1995 and served as our Controller from 1997 to 2008. Since February 2008, she has
served as our Treasurer. She was appointed a Vice President in 2000.
Mr. Sustana has served as our Secretary and General Counsel since 2005.
Mr. Collins joined us in 1998 and has served as our Controller since February 2008. Before becoming
Controller, Mr. Collins served as our Executive Director of Financial Reporting.
17
Item 2.
Properties.
We lease and maintain our executive offices in an office complex in Miami, Florida. Our homebuilding,
financial services, Rialto and multifamily offices are located in the markets where we conduct business, primarily in
leased space. We believe that our existing facilities are adequate for our current and planned levels of operation.
Because of the nature of our homebuilding operations, significant amounts of property are held as inventory in
the ordinary course of our homebuilding business. We discuss these properties in the discussion of our homebuilding
operations in Item 1 of this Report.
Item 3.
Legal Proceedings.
We are party to various claims and lawsuits which arise in the ordinary course of business, but we do not
consider the volume of our claims and lawsuits unusual given the number of homes we deliver and the fact that the
lawsuits often relate to homes delivered several years before the lawsuits are commenced. Although the specific
allegations in the lawsuits differ, they most commonly involve claims that we failed to construct homes in particular
communities in accordance with plans and specifications or applicable construction codes and seek reimbursement for
sums allegedly needed to remedy the alleged deficiencies, assert contract issues or relate to personal injuries. Lawsuits of
these types are common within the homebuilding industry. We are a plaintiff in many cases in which we seek
contribution from our subcontractors for home repair costs. The costs incurred by us in construction defect lawsuits may
be offset by warranty reserves, our third-party insurers, subcontractor insurers and indemnity contributions from
subcontractors. We are also a party to various lawsuits involving purchases and sales of real property. These lawsuits
include claims regarding representations and warranties made in connection with the transfer of the property and disputes
regarding the obligation to purchase or sell the property. We do not believe that the ultimate resolution of these claims or
lawsuits will have a material adverse effect on our business or financial position. However, the financial effect of
litigation concerning purchases and sales of property may depend upon the value of the subject property, which may
have changed from the time the agreement for purchase or sale was entered into. From time-to-time, we also receive
notices from environmental agencies or other regulators regarding alleged violations of environmental or other laws. We
typically settle these matters before they reach litigation for amounts that are not material to us.
We have been engaged in litigation since 2008 in the United States District Court for the District of Maryland
(U.S. Home Corporation v. Settlers Crossing, LLC, et al., Civil Action No. DKC 08-1863) regarding whether we are
required by a contract we entered into in 2005 to purchase a property in Maryland. After entering into the contract, we
later renegotiated the purchase price, reducing it from $200 million to $134 million, $20 million of which has been paid
and subsequently written off, leaving a balance of $114 million. In July 2014, the Court ruled that we may be obligated
to purchase the property. As a result of changes in zoning for the property during the litigation, the Court ordered further
proceedings to determine whether the sellers are entitled to specific performance and, if so, whether a further reduction
in the purchase price is required. In January 2015, the Court rendered a decision ordering us to purchase the property for
the $114 million balance of the contract price, to pay interest at the rate of 12% per annum from May 27, 2008, and to
reimburse the seller for real estate taxes and attorneys’ fees. We believe the decision is contrary to applicable law and
will appeal the decision.
In December 2013, we were awarded by a civil jury $802 million in compensatory damages and $200 million in
punitive damages against Nicolas Marsch III and his company, Briarwood Capital LLC, on court findings of defamation
and conspiracy to extort money from us in 2008 and 2009 (Lennar Corp. v. Briarwood Capital LLC, 2008-055741-
CA-01, Florida Circuit Court, Miami-Dade County). We do not expect to be able to collect the amount awarded to us.
Item 4.
Mine Safety Disclosures.
Not applicable.
18
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Our Class A and Class B common stock are listed on the New York Stock Exchange under the symbols “LEN”
and “LEN.B,” respectively. The following table shows the high and low sales prices for our Class A and Class B
common stock for the periods indicated, as reported by the NYSE, and cash dividends declared per share:
Class A Common Stock
High/Low Prices
Cash Dividends
Per Class A Share
Fiscal Quarter
First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
$44.40 - 34.09
2013
$43.22 - 35.51
$44.30 - 37.32
$44.40 - 36.76
$42.67 - 35.74
$39.97 - 31.35
$48.00 - 37.50
$37.84 - 31.09
2014
4¢
4¢
4¢
4¢
2013
4¢
4¢
4¢
4¢
Class B Common Stock
High/Low Prices
Cash Dividends
Per Class B Share
Fiscal Quarter
First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
$36.56 - 28.65
2013
$34.87 - 28.28
$36.31 - 31.63
$34.73 - 28.55
$35.98 - 30.06
$31.25 - 25.18
$38.58 - 30.96
$30.94 - 25.38
2014
4¢
4¢
4¢
4¢
2013
4¢
4¢
4¢
4¢
As of December 31, 2014, the last reported sale price of our Class A common stock was $44.81 and the last
reported sale price of our Class B common stock was $36.11. As of December 31, 2014, there were approximately 803
and 575 holders of record of our Class A and Class B common stock, respectively.
On January 14, 2015, our Board of Directors declared a quarterly cash dividend of $0.04 per share for both our
Class A and Class B common stock, which is payable on February 12, 2015, to holders of record at the close of business
on January 29, 2015. Our Board of Directors evaluates each quarter the decision whether to declare a dividend and the
amount of the dividend.
The following table provides information about the Company's repurchases of common stock during the three
months ended November 30, 2014:
Period:
Total Number of
Shares Purchased (1)
Average Price Paid
Per Share
September 1 to September 30, 2014 . . . . . .
October 1 to October 31, 2014 . . . . . . . . . .
— $
— $
November 1 to November 30, 2014 . . . . . .
173,858
$
—
—
47.24
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (2)
Maximum Number of
Shares that may yet be
Purchased under the
Plans or Programs (2)
—
—
—
6,218,968
6,218,968
6,218,968
(1) Represents shares of Class A common stock withheld by us to cover withholding taxes due, at the election of certain holders of
nonvested shares, with market value approximating the amount of withholding taxes due.
(2) In June 2001, our Board of Directors authorized a stock repurchase program under which we were authorized to purchase up to
20 million shares of our outstanding Class A common stock or Class B common stock. This repurchase authorization has no
expiration date.
The information required by Item 201(d) of Regulation S-K is provided in Item 12 of this Report.
19
Performance Graph
The following graph compares the five-year cumulative total return of our Class A common stock with the Dow
Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index. The graph assumes $100 invested on
November 30, 2009 in our Class A common stock, the Dow Jones U.S. Home Construction Index and the Dow Jones
U.S. Total Market Index, and the reinvestment of all dividends.
Lennar Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100
Dow Jones U.S. Home Construction Index . . . . . . . . . . . . . . . . . . . . . $ 100
Dow Jones U.S. Total Market Index . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100
121
90
112
149
97
120
310
177
139
293
184
183
388
220
212
2009
2010
2011
2012
2013
2014
20
Item 6.
Selected Financial Data.
The following table sets forth our selected consolidated financial and operating information as of or for each of
the years ended November 30, 2010 through 2014. The information presented below is based upon our historical
financial statements.
(Dollars in thousands, except per share amounts)
2014
2013
2012
2011
2010
At or for the Years Ended November 30,
Results of Operations:
Revenues:
Lennar Homebuilding . . . . . . . . . . . $
7,025,130
5,354,947
3,581,232
2,675,124
2,705,639
Lennar Financial Services. . . . . . . . $
Rialto. . . . . . . . . . . . . . . . . . . . . . . . $
Lennar Multifamily. . . . . . . . . . . . . $
454,381
230,521
69,780
427,342
138,060
14,746
384,618
138,856
426
255,518
164,743
—
275,786
92,597
—
Total revenues . . . . . . . . . . . $
7,779,812
5,935,095
4,105,132
3,095,385
3,074,022
Operating earnings (loss):
Lennar Homebuilding (1) . . . . . . . . $
1,033,721
Lennar Financial Services. . . . . . . . $
Rialto. . . . . . . . . . . . . . . . . . . . . . . . $
80,138
44,079
Lennar Multifamily. . . . . . . . . . . . . $
(10,993)
Corporate general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . $
Earnings before income taxes . . . . . . . . . $
Net earnings attributable to Lennar (2). . $
Diluted earnings per share . . . . . . . . . . . $
Cash dividends declared per each -
Class A and Class B common stock . . $
177,161
969,784
638,916
2.80
0.16
Financial Position:
733,075
85,786
26,128
(16,988)
146,060
681,941
479,674
2.15
0.16
258,985
84,782
11,569
(5,884)
127,338
222,114
679,124
3.11
0.16
109,505
20,729
63,457
(461)
95,256
97,974
92,199
0.48
0.16
100,060
31,284
57,307
—
93,926
94,725
95,261
0.51
0.16
Total assets . . . . . . . . . . . . . . . . . . . . . . . $
12,958,267
11,273,247
10,362,206
9,154,671
8,787,851
Debt:
Lennar Homebuilding . . . . . . . . . . . $
4,690,213
4,194,432
4,005,051
3,362,759
3,128,154
Rialto. . . . . . . . . . . . . . . . . . . . . . . . $
Lennar Financial Services. . . . . . . . $
Lennar Multifamily. . . . . . . . . . . . . $
623,246
704,143
—
Stockholders’ equity . . . . . . . . . . . . . . . . $
4,827,020
Total equity . . . . . . . . . . . . . . . . . . . . . . . $
5,251,302
Shares outstanding (000s). . . . . . . . . . . .
Stockholders’ equity per share . . . . . . . . $
205,039
23.54
Lennar Homebuilding Data (including
unconsolidated entities):
Number of homes delivered . . . . . . . . . .
New orders . . . . . . . . . . . . . . . . . . . . . . .
Backlog of home sales contracts. . . . . . .
21,003
22,029
5,832
441,883
374,166
13,858
4,168,901
4,627,470
204,412
20.39
18,290
19,043
4,806
574,480
457,994
—
3,414,764
4,001,208
191,548
17.83
13,802
15,684
4,053
765,541
410,134
—
2,696,468
3,303,525
188,403
14.31
10,845
11,412
2,171
752,302
271,678
—
2,608,949
3,194,383
186,636
13.98
10,955
10,928
1,604
Backlog dollar value . . . . . . . . . . . . . . . . $
1,974,328
1,619,601
1,160,385
560,659
407,292
(1) Lennar Homebuilding operating earnings include $9.9 million, $7.5 million, $15.6 million, $38.0 million and $51.3 million of inventory
valuation adjustments for the years ended November 30, 2014, 2013, 2012, 2011 and 2010, respectively. In addition, operating earnings
include $4.6 million, $12.1 million, $8.9 million and $10.5 million of our share of valuation adjustments related to assets of
unconsolidated entities in which we have investments for the years ended November 30, 2014, 2012, 2011 and 2010, respectively, and
$10.5 million and $1.7 million of valuation adjustments to our investments in unconsolidated entities for the years ended November 30,
2011 and 2010, respectively.
(2) Net earnings attributable to Lennar for the year ended November 30, 2014 includes $341.1 million tax provision for income taxes related
to pre-tax earnings of the period, compared to a $177.0 million net tax provision in the year ended November 30, 2013, which included a
tax benefit of $67.1 million for a valuation allowance reversal. Net earnings attributable to Lennar for the year ended November 30, 2012
includes $435.2 million of benefit for income taxes, which includes a reversal of the majority of our deferred tax asset valuation
allowance of $491.5 million, partially offset by a tax provision for fiscal year 2012 pre-tax earnings. Net earnings attributable to Lennar
for the years ended November 30, 2011 and 2010 include $14.6 million and $25.7 million, respectively, of benefit for income taxes,
primarily due to settlements with various taxing authorities.
21
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with “Selected Financial Data” and our audited consolidated financial statements and accompanying notes
included elsewhere in this Report.
Special Note Regarding Forward-Looking Statements
This annual report on Form 10-K contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements concern expectations, beliefs, projections, plans and
strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The
forward-looking statements in this annual report include statements regarding: our belief that we are still in the early
stages of a protracted slow growth housing recovery, our belief regarding the drivers of such recovery, and our belief that
we are well positioned to benefit from the recovery; our belief that the recovery will continue to benefit the rental
market; our expectation that will see some margin contraction in 2015; our belief regarding the impact of the decline in
oil prices on our Homebuilding operations; our expectation that we will continue to invest in carefully underwritten
strategic land acquisitions; our expectation that we will start generating positive cash flows in fiscal 2016; our
expectation that our Financial Services segment's earnings will increase in fiscal 2015; our expectation that Rialto's RMF
business will begin to generate a more predictable and recurring component of earnings for Rialto; our expectation that
the Multifamily segment will complete the construction of its development pipeline over the next four years, that we will
sell our rental properties once rents and occupancies have stabilized, and that we will sell another five communities
towards the end of fiscal 2015; our expectation that FivePoint Communities will continue to mature as a long-term
strategy; our belief that our main driver of earnings will continue to be our homebuilding and Financial Services
operations; our belief that we are well positioned to deliver between 23,500 and 24,000 homes with gross margins
expected to average about 24% during fiscal 2015; our belief that we are on track to achieve another year of substantial
profitability in fiscal 2015; our intent to settle the face value of the 2.75% convertible senior notes due 2020 in cash; our
expectation regarding our variability in our quarterly results; our expectations regarding the renewal or replacement of
our warehouse facilities; our belief regarding draws upon our bonds or letters of credit, and our belief regarding the
impact to the Company if there were such a draw; our expectation that substantially all homes currently in backlog will
be delivered in fiscal year 2015; our belief that our operations and borrowing resources will provide for our current and
long-term capital requirements at our anticipated levels of activity; our belief regarding legal proceedings in which we
are involved; and our estimates regarding certain tax matters and accounting valuations, including our expectations
regarding the result of anticipated settlements with various taxing authorities.
These forward-looking statements reflect our current views about future events and are subject to risks,
uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in
the future affect our actual results and could cause actual results to differ significantly from those expressed in any
forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the
assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or
implied by those forward-looking statements include, but are not limited to, the following: a slowdown in the recovery of
real estate markets across the nation, or any downturn in such markets; changes in general economic and financial
conditions, and demographic trends, in the U.S. leading to decreased demand for our services and homes, lower profit
margins and reduced access to credit; unfavorable or unanticipated outcomes in legal proceedings that substantially
exceed our expectations; the possibility that we will incur nonrecurring costs that may not have a material adverse effect
on our business or financial condition, but may have a material adverse effect on our consolidated financial statements
for a particular reporting period; decreased demand for our Multifamily rental properties, and our ability to successfully
sell our rental properties once rents and occupancies have stabilized; our ability to acquire land and pursue real estate
opportunities at anticipated prices; increased competition for home sales from other sellers of new and resale homes;
conditions in the capital, credit and financial markets, including mortgage lending standards, the availability of mortgage
financing and mortgage foreclosure rates; changes in interest and unemployment rates, and inflation; a decline in the
value of the land and home inventories we maintain or possible future write-downs of the carrying value of our real
estate assets; increases in operating costs, including costs related to real estate taxes, construction materials, labor and
insurance, and our ability to manage our cost structure, both in our Homebuilding and Multifamily businesses; our
inability to maintain anticipated pricing levels and our inability to predict the effect of interest rates on demand; the
ability and willingness of the participants in various joint ventures to honor their commitments; our ability to
successfully and timely obtain land-use entitlements and construction financing, and address issues that arise in
connection with the use and development of our land; natural disasters and other unforeseen damage for which our
insurance may not provide adequate coverage; our inability to successfully grow our ancillary businesses; potential
liability under environmental or construction laws, or other laws or regulations affecting our business; regulatory
changes that adversely affect the profitability of our businesses; our ability to comply with the terms of our debt
instruments; and our ability to successfully estimate the impact of certain regulatory, accounting and tax matters.
22
Please see “Item 1A-Risk Factors” of this Annual Report for a further discussion of these and other risks and
uncertainties which could affect our future results. We undertake no obligation to publicly revise any forward-looking
statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated
or unanticipated events, except to the extent we are legally required to disclose certain matters in SEC filings or
otherwise.
Outlook
We continue to believe that we are still in the early stages of a protracted slow growth housing recovery. The
housing market's recovery has continued its progression at a slow and steady pace, moving upward in a fairly narrow
channel as we enter fiscal 2015. The recovery has been supported on the downside by the significant production deficit
that has resulted from the extremely low volumes of dwellings, both single family and multifamily, that has been built
over the past seven years. At the same time, the recovery has been constrained by a limited supply of available homes on
the market, limited supply of land available to add to the supply of homes and constrained demand from purchasers who
would like to buy but are unable to access the mortgage market. We believe the recovery will also continue to benefit the
rental market as first time home purchasers find limited access to the for sale market as a result of high down payments
and strict underwriting standards.
Looking back, fiscal 2014 was an excellent year for Lennar, with revenues and pretax earnings attributable to
Lennar increasing 31% and 49%, respectively, from 2013. In fiscal 2014, our gross margin increased 50 basis points to
25.4%. This gross margin, combined with our selling, general and administrative expenses of 10.5%, increased our
operating margin 60 basis points to 14.9% during fiscal 2014. During fiscal 2014, labor and material costs increased by
7%, which represents a slowing pace of costs increases from the past two years. In addition, we ended the year with a
strong sales backlog, up 21% in homes and 22% in dollar value, which gives us a great start for fiscal 2015.
During fiscal 2014, we also had strong performances from our other business segments. Our Financial Services
segment produced $80.1 million of pretax earnings. Rialto generated $66.6 million of operating earnings net of earnings
attributable to noncontrolling interests, benefiting from the Rialto Mortgage Finance ("RMF") business and earnings
from its real estate funds. Our Multifamily rental business continued to grow during fiscal 2014, as it sold two completed
rental properties and ended the year with 19 communities under construction, one completed and fully leased, three
partially completed and leasing and one under development. Finally, our FivePoint Communities is well positioned,
managing the entitlement and development of some of the most desirable real estate assets in Southern and Northern
California.
In fiscal 2015, our principal focus in our homebuilding operations will continue to be on generating strong
operating margins on the homes we sell by delivering homes from our excellent land positions, although we expect to see
some margin contraction due to competitive pressures and the inclusion of some additional previously mothballed land
assets being developed. In addition, the significant decline in oil prices may negatively impact our Houston segment in
fiscal 2015, however this decline could potentially have offsetting benefits. Thus we cannot project the impact of
declining oil prices at this time. We will continue to carefully balance pricing power, sales incentives, brokerage
commissions and advertising expenses to maximize our results. In addition, we plan to continue to invest in carefully
underwritten strategic land acquisitions in well-positioned markets that we expect will continue to support our
homebuilding operations going forward and help us increase operating leverage as our deliveries increase. In fiscal 2014,
land purchases were $1.4 billion compared to $1.8 billion in fiscal 2013. For fiscal 2015, we are continuing our pivot
towards a land lighter model in homebuilding with the focus of becoming cash flow positive and deleveraging our
balance sheet. We expect to start generating positive cash flows in fiscal 2016.
During fiscal 2015, we expect our Financial Services segment's earnings to increase as the segment will
continue to benefit as our homebuilding business expands and the number of non-Lennar purchasers using our mortgage
company continues to grow in various markets. We are also focused on our multiple platforms including Rialto,
Multifamily, and FivePoint. As Rialto continues to grow as a blue chip capital investment management company and
commercial real estate capital provider, we expect contributions from Rialto's RMF business will begin to generate a
more predictable and recurring component of earnings for Rialto. In fiscal 2015, Rialto will continue its transition into an
asset light, fund model. Our Multifamily segment anticipates that the construction of its development pipeline will be
completed over the next four years, and as a merchant builder of apartments, we plan to sell our apartments once rents
and occupancies have stabilized. We are well positioned and expect to sell another five communities towards the end of
fiscal 2015. In addition, we expect FivePoint Communities to continue to mature as a long-term strategy as it develops
land in premium California locations to fill the growing demand for well-located approved and developed homesites.
In conclusion, we believe that our Company remains well positioned to benefit from the housing market's
recovery. We expect that our Company's main driver of earnings will continue to be our homebuilding and Financial
Services operations, as we are currently well positioned to deliver between 23,500 and 24,000 homes with gross margins
expected to average about 24% during fiscal 2015. We are also focused on our multiple platforms including Rialto,
Multifamily, and FivePoint, as such ancillary business continue to mature and expand their franchises providing longer-
23
term opportunities that we expect will enhance shareholder value. Overall, we are on track to achieve another year of
substantial profitability in fiscal 2015, as the housing market recovery continues and we will continue to benefit from our
strategic land acquisitions and new community openings.
Results of Operations
Overview
Our net earnings attributable to Lennar in 2014 were $638.9 million, or $2.80 per diluted share ($3.12 per basic
share), compared to $479.7 million, or $2.15 per diluted share ($2.48 per basic share), in 2013. Our 2014 earnings before
taxes were $969.8 million, compared to $681.9 million in 2013.
The following table sets forth financial and operational information for the years indicated related to our
operations.
Years Ended November 30,
2013
2012
(Dollars in thousands)
Lennar Homebuilding revenues:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,839,642
185,488
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Lennar Homebuilding revenues . . . . . . . . . . . . . . . . . . . . . .
7,025,130
2014
(355)
143,797
714,823
5,962,029
1,063,101
5,103,409
Lennar Homebuilding costs and expenses:
Cost of homes sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of land sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Lennar Homebuilding costs and expenses . . . . . . . . . . . . . .
Lennar Homebuilding operating margins . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding equity in earnings (loss) from unconsolidated
entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding other income, net . . . . . . . . . . . . . . . . . . . . . . .
(36,551)
Other interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding operating earnings . . . . . . . . . . . . . . . . . . . . $ 1,033,721
Lennar Financial Services revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $
454,381
Lennar Financial Services costs and expenses . . . . . . . . . . . . . . . . . . .
Lennar Financial Services operating earnings. . . . . . . . . . . . . . . . . $
Rialto revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . .
Rialto other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto operating earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Lennar Multifamily revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily costs and expenses . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily equity in earnings (loss) from unconsolidated
44,079
69,780
95,227
249,114
374,243
230,521
80,138
59,277
7,526
3,395
14,454
entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . $
(10,993)
Total operating earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,146,945
177,161
Corporate general administrative expenses . . . . . . . . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net earnings attributable to Lennar . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross margin as a % of revenue from home sales . . . . . . . . . . . . . . . .
S,G&A expenses as a % of revenues from home sales. . . . . . . . . . . . .
Operating margin as a % of revenues from home sales . . . . . . . . . . . .
Average sales price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
326,000
638,916
969,784
25.4%
10.5%
14.9%
24
5,292,072
3,492,177
62,875
89,055
5,354,947
3,581,232
3,973,812
2,698,831
45,834
559,462
4,579,108
775,839
78,808
438,727
3,216,366
364,866
23,803
27,346
(93,913)
733,075
427,342
341,556
85,786
138,060
151,072
22,353
16,787
26,128
14,746
31,463
(271)
(16,988)
828,001
146,060
681,941
479,674
(26,672)
15,144
(94,353)
258,985
384,618
299,836
84,782
138,856
138,990
41,483
(29,780)
11,569
426
6,306
(4)
(5,884)
349,452
127,338
222,114
679,124
24.9%
10.6%
14.3%
22.7%
12.6%
10.2%
290,000
255,000
2014 versus 2013
Revenues from home sales increased 29% in the year ended November 30, 2014 to $6.8 billion from $5.3
billion in 2013. Revenues were higher primarily due to a 15% increase in the number of home deliveries, excluding
unconsolidated entities, and a 12% increase in the average sales price of homes delivered. New home deliveries,
excluding unconsolidated entities, increased to 20,971 homes in the year ended November 30, 2014 from 18,234 homes
last year. There was an increase in home deliveries in all of our Homebuilding segments and Homebuilding Other, which
was primarily driven by an increase in active communities over the last year. The average sales price of homes delivered
increased to $326,000 in the year ended November 30, 2014 from $290,000 in the year ended November 30, 2013,
primarily due to increased pricing in many of our markets as the market recovery continues. Sales incentives offered to
homebuyers were $21,400 per home delivered in the year ended November 30, 2014, or 6.2% as a percentage of home
sales revenue, compared to $20,500 per home delivered in the year ended November 30, 2013, or 6.6% as a percentage
of home sales revenue. Currently, our biggest competition is from the sales of existing and foreclosed homes. We
differentiate our new homes from those homes by issuing new home warranties, updated floor plans, our Everything's
Included marketing program, community amenities and in certain markets by emphasizing energy efficiency and new
technologies.
Gross margins on home sales were $1.7 billion, or 25.4%, in the year ended November 30, 2014, compared to
gross margins on home sales of $1.3 billion, or 24.9%, in the year ended November 30, 2013. Gross margin percentage
on home sales improved compared to the year ended November 30, 2013, primarily due to an increase in the average
sales price of homes delivered, a decrease in sales incentives offered to homebuyers as a percentage of revenue from
home sales and $20.9 million of insurance recoveries and other nonrecurring items, partially offset by an increase in
materials, labor and land costs.
Gross profits on land sales totaled $41.7 million in the year ended November 30, 2014, compared to $17.0
million in the year ended November 30, 2013. Gross profits on land sales in the year ended November 30, 2013 included
a $4.8 million recovery of an option deposit previously written-off.
Selling, general and administrative expenses were $714.8 million in the year ended November 30, 2014,
compared to $559.5 million in the year ended November 30, 2013. As a percentage of revenues from home sales, selling,
general and administrative expenses improved to 10.5% in the year ended November 30, 2014, from 10.6% in the year
ended November 30, 2013.
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was ($0.4) million in the year
ended November 30, 2014, compared to $23.8 million in the year ended November 30, 2013. In the year ended
November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities related to our share of operating
losses of Lennar Homebuilding unconsolidated entities, which included $4.6 million of our share of valuation
adjustments related to assets of Lennar Homebuilding unconsolidated entities, partially offset by our share of operating
earnings of $4.7 million related to a third-party land sale by one unconsolidated entity. In the year ended November 30,
2013, Lennar Homebuilding equity in earnings from unconsolidated entities included our share of operating earnings of
$19.8 million primarily related to sales of homesites to third parties by one unconsolidated entity for approximately $204
million resulting in a gross profit of approximately $67 million.
Lennar Homebuilding other income, net, totaled $7.5 million in the year ended November 30, 2014, compared
to $27.3 million in the year ended November 30, 2013. In the year ended November 30, 2013, Lennar Homebuilding
other income, net was primarily due to management fees and the sale of a rental operating property by one of our
consolidated joint ventures that resulted in a gain of $14.4 million (the transaction resulted in a net loss of $3.2 million
after considering the impact of noncontrolling interests totaling $17.6 million), partially offset by other expenses.
Lennar Homebuilding interest expense was $201.5 million in the year ended November 30, 2014 ($161.4
million was included in cost of homes sold, $3.6 million in cost of land sold and $36.6 million in other interest expense),
compared to $214.3 million in the year ended November 30, 2013 ($117.8 million was included in cost of homes sold,
$2.6 million in cost of land sold and $93.9 million in other interest expense). Interest expense decreased due to an
increase in qualifying assets eligible for interest capitalization, partially offset by an increase in our outstanding debt and
home deliveries.
Operating earnings for our Lennar Financial Services segment were $80.1 million in the year ended
November 30, 2014, compared to operating earnings of $85.8 million in the year ended November 30, 2013. The
decrease in profitability was primarily due to a more competitive environment as a result of a significant decrease in
refinance transactions, which resulted in lower profit per transaction in the segment's mortgage operations.
Operating earnings for our Rialto segment were $66.6 million in the year ended November 30, 2014 (which
included $44.1 million of operating earnings and an add back of $22.5 million of net loss attributable to noncontrolling
interests), compared to operating earnings of $19.9 million (which included $26.1 million of operating earnings, partially
offset by $6.2 million of net earnings attributable to noncontrolling interests) in the year ended November 30, 2013.
25
Rialto revenues were $230.5 million in the year ended November 30, 2014, compared to revenues of $138.1
million in the year ended November 30, 2013. Revenues increased primarily due to the receipt of a $34.7 million
advanced distribution with regard to Rialto's carried interest in Rialto Real Estate Fund, LP (“Fund I”) in order to cover
the income tax obligation which resulted from allocations of taxable income due to Rialto’s general partner interest in
Fund I. In addition, revenues increased due to an increase in securitization revenue and interest income from Rialto
Mortgage Finance (“RMF”), partially offset by a decrease in interest income associated with Rialto’s portfolio of real
estate loans.
Rialto expenses were $249.1 million in the year ended November 30, 2014, compared to expenses of $151.1
million in the year ended November 30, 2013. Expenses increased primarily due to an increase in loan impairments of
$41.0 million due to changes in estimated cash flows expected to be collected on the segment’s loan portfolios and the
change from the accretable yield income method to a cost recovery basis method in the fourth quarter of 2014. We made
this determination in order to better reflect the performance of the loan portfolios due to the uncertainty in estimating the
timing and amount of future cash flows. In addition, expenses increased due to an increase in interest expense and other
general administrative expenses.
Rialto equity in earnings from unconsolidated entities was $59.3 million and $22.4 million in the years ended
November 30, 2014 and 2013, respectively, primarily related to our share of earnings from the Rialto real estate funds.
The higher equity in earnings related to increases in fair value and recognition of gains related to certain assets in the
Rialto real estate funds.
In the year ended November 30, 2014, Rialto other income, net was $3.4 million, which consisted primarily of
net realized gains on the sale of real estate owned ("REO") of $43.7 million and rental and other income, partially offset
by expenses related to owning and maintaining REO, $19.3 million of impairments on REO and other expenses. In the
year ended November 30, 2013, Rialto other income, net, was $16.8 million, which consisted primarily of net realized
gains on the sale of REO of $48.8 million, a gain of $8.5 million related to a bargain purchase acquisition, which
included cash and a loan receivable as consideration, and rental income, partially offset by expenses related to owning
and maintaining REO and $16.1 million of impairments on REO.
Operating loss for our Lennar Multifamily segment was $11.0 million in the year ended November 30, 2014,
compared to $17.0 million in the year ended November 30, 2013. In the year ended November 30, 2014, the operating
loss in Lennar Multifamily primarily related to general and administrative expenses, partially offset by the segment's
share of gains of $14.7 million as a result of the sale of two operating properties by Lennar Multifamily unconsolidated
entities and management fee income. In the year ended November 30, 2013, the operating loss in Lennar Multifamily
primarily related to general and administrative expenses, partially offset by gross profit on a land sale and management
fee income.
Corporate general and administrative expenses were $177.2 million, or 2.3% as a percentage of total revenues,
in the year ended November 30, 2014, compared to $146.1 million, or 2.5% as a percentage of total revenues, in the year
ended November 30, 2013. As a percentage of total revenues, corporate general and administrative expenses improved
due to increased operating leverage.
Net earnings (loss) attributable to noncontrolling interests were ($10.2) million and $25.3 million in the years
ended November 30, 2014 and 2013, respectively. Net loss attributable to noncontrolling interests in the year ended
November 30, 2014 was primarily due to a net loss related to the FDIC's interest in the portfolio of real estate loans that
we acquired in partnership with the FDIC, partially offset by a strategic transaction by one of our Lennar Homebuilding's
consolidated joint ventures that impacted noncontrolling interests by $5.6 million. In the year ended November 30, 2013,
net earnings attributable to noncontrolling interests were primarily attributable to a transaction by one of our
consolidated joint ventures that decreased noncontrolling interests by $17.6 million.
During the year ended November 30, 2014, we had a $341.1 million tax provision related to pre-tax earnings of
the period, compared to a $177.0 million net tax provision in the year ended November 30, 2013, which included a tax
benefit of $67.1 million for a valuation allowance reversal. Our overall effective tax rates were 34.80% and 26.96% for
the years ended November 30, 2014 and 2013, respectively. The difference in effective tax rates was primarily related to
the reversal of our valuation allowance in the year ended November 30, 2013.
2013 versus 2012
Revenues from home sales increased 52% in the year ended November 30, 2013 to $5.3 billion from $3.5
billion in 2012. Revenues were higher primarily due to a 33% increase in the number of home deliveries, excluding
unconsolidated entities, and a 14% increase in the average sales price of homes delivered. New home deliveries,
excluding unconsolidated entities, increased to 18,234 homes in the year ended November 30, 2013 from 13,707 homes
in the year ended November 30, 2012. There was an increase in home deliveries in all of our Homebuilding segments
and Homebuilding Other. The average sales price of homes delivered increased to $290,000 in the year ended
November 30, 2013 from $255,000 in the year ended November 30, 2012, driven primarily by an increase in the average
sales price of home deliveries in all of our Homebuilding segments, primarily due to increased pricing in many of our
26
markets as the market recovery continued. Sales incentives offered to homebuyers were $20,500 per home delivered in
the year ended November 30, 2013, or 6.6% as a percentage of home sales revenue, compared to $28,300 per home
delivered in the year ended November 30, 2012, or 10.0% as a percentage of home sales revenue.
Gross margins on home sales were $1,318.3 million, or 24.9%, in the year ended November 30, 2013, compared
to gross margins on home sales of $793.3 million, or 22.7%, in the year ended November 30, 2012. Gross margin
percentage on home sales improved in the year ended November 30, 2013 compared to the year ended November 30,
2012, primarily due to a decrease in sales incentives offered to homebuyers as a percentage of revenue from home sales,
an increase in the average sales price of homes delivered and a greater percentage of deliveries from our new higher
margin communities (communities where land was acquired subsequent to November 30, 2008) which made up 61% of
our 2013 deliveries, partially offset by an increase in materials, labor and land costs.
Gross profits on land sales totaled $17.0 million in the year ended November 30, 2013, compared to gross
profits on land sales of $10.2 million in the year ended November 30, 2012.
Selling, general and administrative expenses were $559.5 million in the year ended November 30, 2013,
compared to selling, general and administrative expenses of $438.7 million in the year ended November 30, 2012.
Selling, general and administrative expenses as a percentage of revenues from home sales improved to 10.6% in the year
ended November 30, 2013, from 12.6% in 2012, due to improved operating leverage as a result of increased absorption
per community and more active communities.
Lennar Homebuilding equity in earnings from unconsolidated entities was $23.8 million in the year ended
November 30, 2013, related to our share of operating earnings of Lennar Homebuilding unconsolidated entities,
primarily as a result of sales of approximately 500 homesites to third parties by one unconsolidated entity for
approximately $204 million, resulting in a gross profit of approximately $67 million. Our share of equity in earnings for
the year ended November 30, 2013 related to the sales of those homesites was $19.8 million. This compared to Lennar
Homebuilding equity in loss of $26.7 million in the year ended November 30, 2012, primarily related to our share of
operating losses of Lennar Homebuilding unconsolidated entities, which included $12.1 million of valuation adjustments
primarily related to strategic asset sales at Lennar Homebuilding's unconsolidated entities.
Lennar Homebuilding other income, net, totaled $27.3 million in the year ended November 30, 2013, primarily
due to management fees and the sale of an operating property by one of our consolidating homebuilding joint ventures
that resulted in a $14.4 million of other income (the transaction resulted in a net loss of $3.2 million after considering the
impact of noncontrolling interests totaling $17.6 million), partially offset by other expenses. This compared to Lennar
Homebuilding other income, net, of $15.1 million in the year ended November 30, 2012, which included a $15.0 million
gain on the sale of an operating property, partially offset by a pre-tax loss of $6.5 million related to the repurchase of
$204.7 million aggregate principal amount of our 5.95% senior notes due 2013 through a tender offer.
Homebuilding interest expense was $214.3 million in the year ended November 30, 2013 ($117.8 million was
included in cost of homes sold, $2.6 million in cost of land sold and $93.9 million in other interest expense), compared to
$181.4 million in the year ended November 30, 2012 ($85.1 million was included in cost of homes sold, $1.9 million in
cost of land sold and $94.4 million in other interest expense). Interest expense increased due to an increase in our
weighted average outstanding debt and an increase in deliveries, partially offset by a lower weighted average interest rate
compared to the year ended November 30, 2012.
Operating earnings for our Lennar Financial Services segment were $85.8 million in the year ended
November 30, 2013, compared to operating earnings of $84.8 million in the year ended November 30, 2012. The
operating earnings were consistent year over year, which was driven by an increase in profit in the title operations as a
result of a higher profit per transaction, offset by a slight decrease in profitability in the mortgage operations.
In the year ended November 30, 2013, operating earnings attributable to Lennar for the Rialto segment were
$19.9 million (which included $26.1 million of operating earnings, offset by $6.2 million of net earnings attributable to
noncontrolling interests), compared to operating earnings attributable to Lennar of $26.0 million (which was comprised
of $11.6 million of operating earnings and an add back of $14.4 million of net loss attributable to noncontrolling
interests) in the year ended November 30, 2012.
In the year ended November 30, 2013, revenues in the Rialto segment were $138.1 million, which consisted
primarily of accretable interest income associated with the segment’s portfolio of real estate loans, gains from
securitization transactions and interest income from the new RMF business and fees for managing and servicing assets,
compared to revenues of $138.9 million in the year ended November 30, 2012. Revenues decreased primarily due to
lower interest income as a result of a decrease in the segment's portfolio of loans, offset by gains from securitization
transactions and interest income from Rialto's new RMF business.
In the year ended November 30, 2013, expenses in the Rialto segment were $151.1 million, which consisted
primarily of costs related to its portfolio operations, the new RMF business, loan impairments of $16.1 million primarily
associated with the segment's FDIC loan portfolio (before noncontrolling interests) and other general and administrative
27
expenses, compared to expenses of $139.0 million in the year ended November 30, 2012, which consisted primarily of
costs related to its portfolio operations, loan impairments of $28.0 million primarily associated with the segment's FDIC
loan portfolio (before noncontrolling interests), and other general and administrative expenses.
In the year ended November 30, 2013, the Rialto segment also had equity in earnings from unconsolidated
entities of $22.4 million, which primarily included $21.9 million of equity in earnings related to our share of earnings
from the Rialto real estate funds. This compared to equity in earnings from unconsolidated entities of $41.5 million in
the year ended November 30, 2012, which primarily included $17.0 million of net gains primarily related to realized
gains from the sale of investments in the portfolio underlying the the AllianceBernstein L.P. (“AB”) fund formed under
the Federal government’s Public-Private Investment Program (“PPIP”), $6.1 million of interest income earned by the AB
PPIP fund and $21.0 million of equity in earnings related to our share of earnings from Rialto Real Estate Fund, LP, a
real estate investments fund managed by the Rialto segment.
In the year ended November 30, 2013, Rialto other income, net was $16.8 million, which consisted primarily of
net realized gains on the sale of REO of $48.8 million, an $8.5 million gain related to a bargain purchase acquisition
which included cash and a loan receivable as consideration, and rental income, partially offset by expenses related to
owning and maintaining REO and impairments on REO of $16.1 million. In the year ended November 30, 2012, Rialto
other expense, net, was $29.8 million, which consisted primarily of expenses related to owning and maintaining REO
and impairments on REO, partially offset by net realized gains from sales of REO of $21.6 million and rental income.
Our Lennar Multifamily segment had a start-up operating loss of $17.0 million in the year ended November 30,
2013, compared to an operating loss of $5.9 million in the year ended November 30, 2012. The operating loss in Lennar
Multifamily primarily relates to general and administrative expenses of the segment, partially offset by gross profit on a
land sale and management fee income.
In the year ended November 30, 2013, corporate general and administrative expenses were $146.1 million, or
2.5% as a percentage of total revenues, compared to $127.3 million, or 3.1% as a percentage of total revenues, in the
year ended November 30, 2012. As a percentage of total revenues, corporate general and administrative expenses
improved due to increased operating leverage.
Net earnings (loss) attributable to noncontrolling interests were $25.3 million and ($21.8) million in the years
ended November 30, 2013 and 2012, respectively. Net earnings attributable to noncontrolling interests for the year ended
November 30, 2013 was primarily attributable to a transaction by one of our homebuilding consolidated joint ventures
that decreased noncontrolling interests by $17.6 million. Net loss attributable to noncontrolling interests for the year
ended November 30, 2012 was primarily related to our homebuilding operations and the FDIC's interest in the portfolio
of real estate loans.
During the years ended November 30, 2013 and 2012, we concluded that it was more likely than not that the
majority of our deferred tax assets would be utilized. In 2013, additional positive evidence included actual and forecasted
profitability, as well as generating cumulative pre-tax earnings over a rolling four year period including the pre-tax
earnings achieved during 2013. Accordingly, for the year ended November 30, 2013, we reversed $67.1 million of our
valuation allowance primarily against our state deferred tax assets. This reversal was offset by a tax provision of $244.1
million, primarily related to pre-tax earnings during the year ended November 30, 2013, resulting in a $177.0 million
provision for income taxes for the year ended November 30, 2013. As of November 30, 2013, our remaining valuation
allowance against our deferred tax assets was $12.7 million, which is primarily related to state net operating loss
carryforwards that are expected to expire due to short carryforward periods. For the year ended November 30, 2012, we
reversed $491.5 million of our valuation allowance against our deferred tax assets. This reversal was partially offset by a
tax provision of $25.9 million, primarily related to pre-tax earnings during the year ended November 30, 2012, resulting
in a $435.2 million benefit for income taxes for the year ended November 30, 2012. Our overall effective tax rates were
26.96% and (178.43%) for the years ended November 30, 2013 and 2012, respectively. The low effective tax rate and the
negative effective tax rate were primarily related to the reversal of our valuation allowance and special tax credits taken
in the years ended November 30, 2013 and 2012, respectively.
During the year ended November 30, 2013, we had significant transactions involving three of our consolidated
joint ventures. In the first joint venture transaction, we bought out our 50% partners for $82.3 million, paying $18.8
million in cash and financing the remainder with a short-term note. Our consolidated joint venture then contributed
certain assets to a new unconsolidated joint venture and brought in a new, long-term partner for $125 million, or a
31.25% interest. Additionally, if the new unconsolidated entity meets certain cash flow thresholds, the partner's equity
interest in the unconsolidated entity could be decreased to 16.25% or increased to 46.25% with a corresponding increase
or decrease in our equity interest percentage. During the year ended November 30, 2013, the new unconsolidated joint
venture subsequently distributed $125 million of cash to us as a return of capital.
In the second joint venture transaction, we purchased our partner's interest for $153.2 million and the
inventories are now wholly-owned assets, which we plan to develop and build homes. During the year ended
28
November 30, 2013, there was a third joint venture transaction where we paid off the bank debt of the consolidated joint
venture and assumed the partner's interest, resulting in the entity becoming wholly-owned.
These transactions did not impact our net earnings for the year ended November 30, 2013 but our consolidated
balance sheet as of November 30, 2013 was affected as follows: cash was reduced by approximately $47 million,
inventory decreased by approximately $225 million, investments in unconsolidated entities increased by $98 million,
deferred tax assets were increased by $40 million, additional paid-in capital (equity) was reduced by $62 million, net of
tax, and non-controlling interests were reduced by $134 million.
Homebuilding Segments
Our Homebuilding operations construct and sell homes primarily for first-time, move-up and active adult
homebuyers primarily under the Lennar brand name. In addition, our homebuilding operations purchase, develop and sell
land to third parties. In certain circumstances, we diversify our operations through strategic alliances and attempt to
minimize our risks by investing with third parties in joint ventures.
As of and for the year ended November 30, 2014, we have grouped our homebuilding activities into five
reportable segments, which we refer to as Homebuilding East, Homebuilding Central, Homebuilding West,
Homebuilding Southeast Florida and Homebuilding Houston. Information about homebuilding activities in states in
which our homebuilding activities are not economically similar to other states in the same geographic area is grouped
under “Homebuilding Other,” which is not considered a reportable segment. Reference in this Management’s Discussion
and Analysis of Financial Condition and Results of Operations to homebuilding segments are to those reportable
segments.
At November 30, 2014, our reportable homebuilding segments and Homebuilding Other consisted of
homebuilding divisions located in:
East: Florida(1), Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia
Central: Arizona, Colorado and Texas(2)
West: California and Nevada
Southeast Florida: Southeast Florida
Houston: Houston, Texas
Other: Illinois, Minnesota, Oregon, Tennessee and Washington
(1) Florida in the East reportable segment excludes Southeast Florida, which is its own reportable segment.
(2) Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.
29
The following tables set forth selected financial and operational information related to our homebuilding
operations for the years indicated:
Selected Financial and Operational Data
(In thousands)
Revenues:
East:
Years Ended November 30,
2014
2013
2012
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,228,469
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,212
Total East. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,247,681
Central:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
908,195
28,745
936,940
1,828,543
13,619
1,842,162
736,557
6,918
743,475
West:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,761,762
1,160,842
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,613
490
Total West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,796,375
1,161,332
Southeast Florida:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Southeast Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
686,994
5,904
692,898
675,927
37,186
713,113
578,295
59,828
638,123
502,175
—
502,175
604,212
36,949
641,161
459,743
4,899
464,642
1,283,441
16,539
1,299,980
487,317
19,071
506,388
683,267
14,022
697,289
353,841
13,800
367,641
449,580
22,043
471,623
234,731
3,580
238,311
Total homebuilding revenues. . . . . . . . . . . . . . . . . . . . . . . . $
7,025,130
5,354,947
3,581,232
30
(In thousands)
Operating earnings (loss):
East:
Years Ended November 30,
2014
2013
2012
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
341,461
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings from unconsolidated entities. . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total East. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central:
Sales of homes (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in loss from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings (loss) from unconsolidated entities (3) . . . . . . . . . . . .
Other income, net (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida:
5,193
2,254
2,867
(11,667)
340,108
81,182
6,911
(131)
(6,971)
(5,406)
75,585
286,393
11,851
(1,647)
7,652
(11,530)
292,719
279,561
1,255
678
(5,354)
(25,023)
251,117
68,743
773
(87)
(1,809)
(12,417)
55,203
190,582
3,442
22,039
27,832
(32,740)
211,155
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
158,951
107,733
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in loss from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . .
Other income, net (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Southeast Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston:
Sales of homes (6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings (loss) from unconsolidated entities. . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of land (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in loss from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,967
(576)
2,318
(2,697)
161,963
99,066
10,202
121
(201)
(1,566)
107,622
54,357
3,567
(376)
1,861
(3,685)
55,724
Total homebuilding operating earnings . . . . . . . . . . . . . . . $
1,033,721
(188)
(152)
7,778
(8,282)
106,889
73,024
10,749
2,079
(503)
(4,530)
80,819
39,155
1,010
(754)
(598)
(10,921)
27,892
733,075
137,231
2,472
542
(166)
(26,082)
113,997
39,388
909
(514)
(1,529)
(13,427)
24,827
39,941
388
(25,415)
2,393
(31,334)
(14,027)
65,745
(354)
(961)
15,653
(9,026)
71,057
43,423
6,182
(35)
1,328
(4,623)
46,275
28,891
650
(289)
(2,535)
(9,861)
16,856
258,985
(1) Sales of homes for the year ended November 30, 2014 included $6.4 million of insurance recoveries and other nonrecurring
items.
(2) Other expense, net for the year ended November 30, 2014 included $2.0 million in write-offs of other receivables.
(3) Lennar Homebuilding equity in loss for the year ended November 30, 2014 included our share of operating losses of Lennar
Homebuilding unconsolidated entities, which included $4.6 million of our share of valuation adjustments related to assets of
Lennar Homebuilding's unconsolidated entities, partially offset by our share of operating earnings of $4.7 million related to third-
party land sales by one unconsolidated entity. For the year ended November 30, 2013, Lennar Homebuilding equity in earnings
from unconsolidated entities included our share of operating earnings of $19.8 million primarily related to the sales of
31
approximately 500 homesites to third parties by one unconsolidated entity for approximately $204 million, resulting in a gross
profit of approximately $67 million. Equity in earnings recognized by us related to the sale of land by our unconsolidated entities
may vary significantly from period to period depending on the timing of those land sales and other transactions entered into by
our unconsolidated entities in which we have investments. For the year ended November 30, 2012, equity in loss from
unconsolidated entities included $12.1 million of our share of valuation adjustments primarily related to strategic asset sales at
Lennar Homebuilding unconsolidated entities.
(4) Other income, net for the year ended November 30, 2013, included a $14.4 million gain on the sale of an operating property.
(5) Other income, net for the year ended November 30, 2014 included $1.0 million of valuation adjustments to other assets. Other
income, net for the year ended November 30, 2012, included a $15.0 million gain on the sale of an operating property.
(6) Sales of homes for the year ended November 30, 2014 included a $5.5 million insurance recovery.
(7) Sales of land for the year ended November 30, 2014 included $1.5 million in write-offs of option deposits and pre-acquisition
costs.
Summary of Homebuilding Data
Deliveries:
Years Ended November 30,
2014
Homes
2013
2012
East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,824
3,156
4,141
2,086
2,482
1,314
6,941
2,814
3,323
1,741
2,266
1,205
5,440
2,154
2,301
1,314
1,917
676
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,003
18,290
13,802
Of the total home deliveries above, 32, 56 and 95 represent deliveries from unconsolidated entities for the years ended
November 30, 2014, 2013 and 2012, respectively.
Dollar Value (In thousands)
Average Sales Price
Years Ended November 30,
East . . . . . . . . . . . . $
2,234,086
2014
Central. . . . . . . . . .
West. . . . . . . . . . . .
Southeast Florida. .
Houston . . . . . . . . .
Other . . . . . . . . . . .
908,195
1,775,587
686,994
675,927
578,295
2013
1,834,794
736,558
1,190,385
502,175
604,212
459,743
2012
2014
2013
2012
1,290,549
$
487,317
728,092
353,841
449,580
234,731
286,000
288,000
429,000
329,000
272,000
440,000
327,000
264,000
262,000
358,000
288,000
267,000
382,000
291,000
237,000
226,000
316,000
269,000
235,000
347,000
257,000
Total . . . . . . . $
6,859,084
5,327,867
3,544,110
$
Of the total dollar value of home deliveries above, $19.4 million, $35.8 million and $51.9 million represent the dollar value
of home deliveries from unconsolidated entities for the years ended November 30, 2014, 2013 and 2012, respectively. The home
deliveries from unconsolidated entities had an average sales price of $608,000, $639,000 and $547,000 for the years ended
November 30, 2014, 2013 and 2012, respectively.
32
Sales Incentives (1):
Years Ended November 30,
(In thousands)
2014
2013
2012
East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
176,726
163,039
169,779
Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71,533
59,148
54,529
62,935
24,286
51,557
29,542
47,504
64,216
17,230
49,028
48,341
41,529
62,497
17,050
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
449,157
373,088
388,224
Years Ended November 30,
Average Sales Incentives Per
Home Delivered
Sales Incentives as a
% of Revenue
2014
2013
2012
2014
2013
2012
East . . . . . . . . . . . . $
Central. . . . . . . . . .
West. . . . . . . . . . . .
Southeast Florida. .
Houston . . . . . . . . .
Other . . . . . . . . . . .
Total . . . . . . . $
22,600
22,700
14,300
26,100
25,400
18,500
21,400
23,600
18,300
9,000
27,300
28,300
14,300
20,500
31,300
22,800
21,700
31,600
32,600
25,200
28,300
7.4%
7.3%
3.2%
7.4%
8.5%
4.0%
6.2%
8.2%
6.5%
2.5%
8.6%
9.6%
3.6%
6.6%
(1) Sales incentives relate to home deliveries during the period, excluding deliveries by unconsolidated entities.
New Orders (2):
Years Ended November 30,
2014
Homes
2013
2012
East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,068
3,473
4,516
2,055
2,643
1,274
7,533
2,805
3,231
1,879
2,419
1,176
11.7%
9.1%
6.6%
10.5%
12.2%
6.8%
10.0%
5,868
2,498
2,711
1,617
2,078
912
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,029
19,043
15,684
Of the new orders above, 95, 55 and 98 represent new orders from unconsolidated entities for the years ended November 30,
2014, 2013 and 2012, respectively.
Dollar Value (In thousands)
Average Sales Price
Years Ended November 30,
East . . . . . . . . . . . . $
Central. . . . . . . . . .
West. . . . . . . . . . . .
Southeast Florida. .
Houston . . . . . . . . .
Other . . . . . . . . . . .
2014
2,303,916
1,021,839
1,956,157
685,536
720,453
522,411
2013
2,066,065
763,895
1,243,831
576,781
649,472
485,699
2012
2014
2013
2012
1,438,268
$
591,677
834,426
441,311
505,579
333,232
286,000
294,000
433,000
334,000
273,000
410,000
327,000
274,000
272,000
385,000
307,000
268,000
413,000
304,000
245,000
237,000
308,000
273,000
243,000
365,000
264,000
Total . . . . . . . $
7,210,312
5,785,743
4,144,493
$
Of the total dollar value of new orders above, $56.8 million, $34.8 million and $54.4 million represent the dollar value of
new orders from unconsolidated entities for the years ended November 30, 2014, 2013 and 2012, respectively. The new orders from
unconsolidated entities had an average sales price of $598,000, $632,000 and $556,000 for the years ended November 30, 2014, 2013
and 2012, respectively.
(2) New orders represent the number of new sales contracts executed by homebuyers, net of cancellations, during the years ended
November 30, 2014, 2013 and 2012.
33
Backlog:
November 30,
Homes
2013
2012
2014
East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,212
1,968
1,376
Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
961
991
576
830
262
644
616
607
669
302
653
708
469
516
331
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,832
4,806
4,053
Of the total homes in backlog above, 67, 4 and 5 represent homes in backlog from unconsolidated entities at November 30,
2014, 2013 and 2012, respectively.
Dollar Value (In thousands)
Average Sales Price
2014
2013
2012
2014
2013
2012
November 30,
East . . . . . . . . . . . . $
Central. . . . . . . . . .
West. . . . . . . . . . . .
Southeast Florida. .
Houston . . . . . . . . .
Other . . . . . . . . . . .
672,204
310,726
437,492
214,606
225,737
113,563
600,257
195,762
257,498
215,988
180,665
169,431
368,361
$
168,912
202,959
141,146
135,282
143,725
Total . . . . . . . $
1,974,328
1,619,601
1,160,385
$
304,000
323,000
441,000
373,000
272,000
433,000
339,000
305,000
304,000
418,000
356,000
270,000
561,000
337,000
268,000
259,000
287,000
301,000
262,000
434,000
286,000
Of the total dollar value of homes in backlog above, $39.8 million, $2.5 million and $3.5 million represent the dollar value
of homes in backlog from unconsolidated entities at November 30, 2014, 2013 and 2012, respectively. The homes in backlog from
unconsolidated entities had an average sales price of $595,000, $624,000 and $704,000 at November 30, 2014, 2013 and 2012,
respectively.
Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are
generally accompanied by sales deposits. In some instances, purchasers are permitted to cancel sales if they fail to
qualify for financing or under certain other circumstances. We do not recognize revenue on homes under sales contracts
until the sales are closed and title passes to the new homeowners.
We experienced cancellation rates in our homebuilding segments and Homebuilding Other as follows:
Years Ended November 30,
2014
2013
2012
East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17%
20%
14%
13%
24%
13%
17%
16%
18%
15%
12%
21%
13%
16%
18%
18%
17%
12%
23%
8%
17%
34
Active Communities:
November 30,
2014
2013
2012
East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
233
117
111
32
78
54
625
197
101
80
30
79
50
537
Of the total active communities listed above, 3 communities represent active communities being developed by
unconsolidated entities as of November 30, 2014. Of the total active communities listed above, 2 communities represent active
communities being developed by unconsolidated entities as of both November 30, 2013 and 2012.
Deliveries from New Higher Margin Communities (3):
Years Ended November 30,
2014
Homes
2013
2012
East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,533
2,313
2,871
1,666
1,177
1,076
4,781
1,356
2,090
1,137
756
962
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,636
11,082
167
74
61
31
70
56
459
3,014
884
1,375
933
330
343
6,879
Dollar Value (In thousands)
Average Sales Price
2014
2013
2012
2014
2013
2012
Years Ended November 30,
East . . . . . . . . . . . . $
1,591,060
1,265,141
687,361
$
Central. . . . . . . . . .
West. . . . . . . . . . . .
Southeast Florida. .
Houston . . . . . . . . .
Other . . . . . . . . . . .
654,860
1,101,430
593,798
356,971
431,537
346,917
649,675
374,420
222,641
353,496
201,334
411,833
271,978
75,884
134,127
Total . . . . . . . $
4,729,656
3,212,290
1,782,517
$
288,000
283,000
384,000
356,000
303,000
401,000
323,000
265,000
256,000
311,000
329,000
294,000
367,000
290,000
228,000
228,000
300,000
292,000
230,000
391,000
259,000
(3) Deliveries from new higher margin communities represent deliveries from communities where land was acquired subsequent to
November 30, 2008, and is a subset of the deliveries included in the preceding deliveries table.
35
The following table details our gross margins on home sales for the years ended November 30, 2014, 2013 and
2012 for each of our reportable homebuilding segments and Homebuilding Other:
(In thousands)
East:
Years Ended November 30,
2014
2013
2012
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,228,469
Cost of homes sold . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,639,328
1,828,543
1,353,048
1,283,441
979,219
Gross margins on home sales . . . . . . . . . . . . . . . .
589,141 26.4%
475,495 26.0%
304,222 23.7%
Central:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of homes sold . . . . . . . . . . . . . . . . . . . . . . . . . . . .
908,195
721,494
736,557
591,611
487,317
390,823
Gross margins on home sales . . . . . . . . . . . . . . . .
186,701 20.6%
144,946 19.7%
96,494 19.8%
West:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of homes sold . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,761,762
1,305,208
1,160,842
840,619
683,267
540,982
Gross margins on home sales . . . . . . . . . . . . . . . .
456,554 25.9%
320,223 27.6%
142,285 20.8%
Southeast Florida:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of homes sold . . . . . . . . . . . . . . . . . . . . . . . . . . . .
686,994
473,146
502,175
352,684
353,841
256,672
Gross margins on home sales . . . . . . . . . . . . . . . .
213,848 31.1%
149,491 29.8%
97,169 27.5%
Houston:
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of homes sold . . . . . . . . . . . . . . . . . . . . . . . . . . . .
675,927
504,144
604,212
464,612
449,580
354,981
Gross margins on home sales . . . . . . . . . . . . . . . .
171,783 25.4%
139,600 23.1%
94,599 21.0%
Other
Sales of homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of homes sold . . . . . . . . . . . . . . . . . . . . . . . . . . . .
578,295
460,089
459,743
371,238
234,731
176,154
Gross margins on home sales . . . . . . . . . . . . . . . .
118,206 20.4%
88,505 19.3%
58,577 25.0%
Total gross margins on home sales . . . . . . . . . . . . . . . . . . $
1,736,233 25.4%
1,318,260 24.9%
793,346 22.7%
2014 versus 2013
East: Homebuilding revenues increased in 2014, compared to 2013, primarily due to an increase in the number
of home deliveries in all the states of the segment, except New Jersey and an increase in the average sales price of homes
delivered in all the states of the segment, except Georgia. The increase in the number of deliveries was primarily driven
by an increase in active communities over the last year. The decrease in home deliveries in New Jersey was primarily
due to the timing of deliveries in certain communities. The increase in the average sales price of homes delivered was
primarily because we have been able to increase the sales price of homes delivered and/or reduce sales incentives in
certain of our communities as the market recovery continues. The decrease in the average sales price of homes delivered
in Georgia was primarily driven by a change in product mix due to the timing of deliveries in certain of our communities.
Gross margin percentage on homes increased, compared to last year, primarily due to an increase in the average sales
price of homes delivered and a decrease in sales incentives offered to homebuyers as a percentage of revenues from
home sales, partially offset by an 8% increase in direct construction and land costs per home due to an increase in labor,
materials and land costs.
Central: Homebuilding revenues increased in 2014, compared to 2013, primarily due to an increase in the
number of home deliveries and in the average sales price of homes delivered in all the states of the segment. The increase
in the number of deliveries was primarily driven by an increase in active communities over the last year. The increase in
the average sales price of homes delivered was primarily because we have been able to increase the sales price of homes
delivered as the market recovery continues. Gross margin percentage on homes increased, compared to last year,
primarily due to an increase in the average sales price of homes delivered and $6.4 million of insurance recoveries and
other nonrecurring items, partially offset by an increase in sales incentives offered to homebuyers as a percentage of
revenues from home sales and a 12% increase in direct construction and land costs per home due to increases in labor,
material and land costs.
West: Homebuilding revenues increased in 2014, compared to 2013, primarily due to an increase in the number
of home deliveries and in the average sales price of homes delivered in all the states of the segment. The increase in the
number of deliveries was primarily driven by an increase in active communities over the last year. The increase in the
36
average sales price of homes delivered was primarily a result of a change in product mix due to the timing of deliveries
and because we have been able to increase the sales price of homes delivered as the market recovery continues. Gross
margin percentage on homes decreased, compared to last year, primarily due to a 20% increase in direct construction
costs per home as a result of a change in product mix due to the timing of deliveries and increases in labor, material and
land costs, and an increase in sales incentives offered to homebuyers as a percentage of revenues from home sales. This
was partially offset by an increase in the average sales price of homes delivered.
Southeast Florida: Homebuilding revenues increased in 2014, compared to 2013, primarily due to an increase
in the number of home deliveries and in the average sales price of homes delivered in this segment. The increase in the
number of deliveries was primarily driven by a lower mix of start-up communities, which are earlier in the life cycle of
delivering homes than non start-up communities. The increase in the average sales price of homes delivered was
primarily because we have been able to increase the sales price of homes delivered and/or reduce sales incentives in
certain of our communities as the market recovery continues. Gross margin percentage on homes sales increased,
compared to last year, primarily due to an increase in the average sales price of homes delivered and a decrease in sales
incentives offered to homebuyers as a percentage of revenues from home sales, partially offset by a 6% increase in direct
construction and land costs per home due to increases in labor, material and land costs.
Houston: Homebuilding revenues increased in 2014, compared to 2013, primarily due to an increase in the
number of home deliveries in this segment. The increase in the number of deliveries was primarily driven by higher
demand as the number of deliveries per active community increased. Gross margin percentage on homes sales increased,
compared to last year, primarily due to a decrease in sales incentives offered to homebuyers as a percentage of revenues
from home sales and a $5.5 million insurance recovery, partially offset by a 2% increase in direct construction and land
costs per home due to increases in labor, material and land costs.
Other: Homebuilding revenues increased in 2014, compared to 2013, primarily due to an increase in the
number of home deliveries in Oregon and Tennessee, which the latter is a new operation, partially offset by a decrease in
the number of home deliveries in Washington. Homebuilding revenues also increased due to an increase in the average
sales price of homes delivered in all the states of Homebuilding Other. The increase in the number of home deliveries in
Oregon was primarily driven by higher demand as the number of home deliveries per active community increased. The
decrease in the number of home deliveries in Washington was primarily due to a higher mix of start-up communities,
which are earlier in the life cycle of delivering homes than non start-up communities. The increase in the average sales
price of homes delivered was primarily because we have been able to increase the sales price of homes delivered in
certain of our communities as the market recovery continues. Gross margin percentage on homes sales increased,
compared to last year, primarily due to an increase in the average sales price of homes delivered, partially offset by an
increase in sales incentives offered to homebuyers as a percentage of revenues from home sales and a 14% increase in
direct construction and land costs per home due to increases in labor, material and land costs.
2013 versus 2012
East: Homebuilding revenues increased in 2013, compared to 2012, primarily due to an increase in the number
of home deliveries and in the average sales price of homes delivered in all the states of the segment. The increase in the
number of deliveries was primarily driven by an increase in our backlog demand as demand continued to outpace supply,
which is constrained by limited land availability and fewer competing homebuilders. The increase in the average sales
price of homes delivered was primarily because we have been able to increase the sales price of homes delivered and/or
reduce sales incentives in certain of our communities as the market recovery continued. Gross margin percentage on
homes increased, compared to 2012, primarily due to a greater percentage of deliveries from our new higher margin
communities, a decrease in sales incentives offered to homebuyers as a percentage of revenues from home sales and
lower valuation adjustments, partially offset by a 9% increase in direct construction and land costs per home due to an
increase in labor, materials and land costs.
Central: Homebuilding revenues increased in 2013, compared to 2012, primarily due to an increase in the
number of home deliveries and in the average sales price of homes delivered in all the states of the segment. The increase
in the number of deliveries was primarily driven by an increase in our backlog demand as demand continued to outpace
supply, which is constrained by limited land availability and fewer competing homebuilders. The increase in the average
sales price of homes delivered was primarily because we have been able to increase the sales price of homes delivered
and/or reduce sales incentives in certain of our communities as the market recovery continued. Gross margin percentage
on homes decreased slightly, compared to 2012, primarily due to a 15% increase in direct construction and land costs per
home due to increases in labor, material and land costs, partially offset by a greater percentage of deliveries from our
new higher margin communities and a decrease in sales incentives offered to homebuyers as a percentage of revenues
from home sales.
West: Homebuilding revenues increased in 2013, compared to 2012, primarily due to an increase in the number
of home deliveries and in the average sales price of homes delivered in all the states of the segment. The increase in the
number of deliveries was primarily driven by an increase in our backlog demand as demand continued to outpace supply,
which is constrained by limited land availability and fewer competing homebuilders. The increase in the average sales
37
price of homes delivered was primarily because we have been able to increase the sales price of homes delivered and/or
reduce sales incentives in certain of our communities as the market recovery continued. Gross margin percentage on
homes increased, compared to 2012, primarily due to a greater percentage of deliveries from our new higher margin
communities and a decrease in sales incentives offered to homebuyers as a percentage of revenues from home sales and
lower valuation adjustments, partially offset by a 7% increase in direct construction costs per home due to increases in
labor and material costs.
Southeast Florida: Homebuilding revenues increased in 2013, compared to 2012, primarily due to an increase
in the number of home deliveries and in the average sales price of homes delivered in this segment. The increase in the
number of home deliveries was primarily driven by an increase in our backlog demand as demand continued to outpace
supply, which is constrained by limited land availability and fewer competing homebuilders. The increase in the average
sales price of homes delivered was primarily because we have been able to increase the sales price of homes delivered
and/or reduce sales incentives in certain of our communities as the market recovery continued. Gross margin percentage
on homes sales increased, compared to 2012, primarily due to greater gross margin percentage in our new higher margin
communities and a decrease in sales incentives offered to homebuyers as a percentage of revenues from home sales,
partially offset by a 4% net increase in direct construction and land costs per home due to increases in labor and material
costs.
Houston: Homebuilding revenues increased in 2013, compared to 2012, primarily due to an increase in the
number of home deliveries and in the average sales price in this segment. The increase in the number of deliveries was
primarily driven by an increase in our backlog demand as demand continued to outpace supply, which is constrained by
limited land availability and fewer competing homebuilders. The increase in the average sales price of homes delivered
was primarily because we have been able to increase the sales price of homes delivered and/or reduce sales incentives in
certain of our communities as the market recovery continued. Gross margin percentage on homes sales increased,
compared to 2012, primarily due to a greater percentage of deliveries from our new higher margin communities and a
decrease in sales incentives offered to homebuyers as a percentage of revenues from home sales, partially offset by a
12% increase in direct construction and land costs per home due to increases in labor, material and land costs.
Other: Homebuilding revenues increased in 2013, compared to 2012, primarily due to an increase in the
number of home deliveries and in the average sales price in all the states of Homebuilding Other, except for Illinois,
which had insignificant activity and Oregon where the average sales price was flat year over year. The increase in the
number of deliveries was primarily driven by an increase in our backlog demand as demand continued to outpace supply,
which is constrained by limited land availability and fewer competing homebuilders. The increase in the average sales
price of homes delivered was primarily because we have been able to increase the sales price of homes delivered and/or
reduce sales incentives in certain of our communities as the market recovery continued. Gross margin percentage on
home sales decreased, compared to 2012, due to a 15% increase in direct construction and land costs per home due to
increases in labor, material and land costs, partially offset by a decrease in sales incentives offered to homebuyers as a
percentage of revenues from home sales and lower valuation adjustments.
Lennar Financial Services Segment
Our Lennar Financial Services reportable segment provides mortgage financing, title insurance and closing
services for both buyers of our homes and others. Our Lennar Financial Services segment sells substantially all of the
loans it originates within a short period in the secondary mortgage market, the majority of which are sold on a servicing
released, non-recourse basis. After the loans are sold, we retain potential liability for possible claims by purchasers that
we breached certain limited industry-standard representations and warranties in the loan sale agreements.
The following table sets forth selected financial and operational information relating to our Lennar Financial
Services segment:
Years Ended November 30,
2014
454,381
(Dollars in thousands)
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80,138
Operating earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dollar value of mortgages originated . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,950,000
23,300
Number of mortgages originated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage capture rate of Lennar homebuyers . . . . . . . . . . . . . . . . . . .
Number of title and closing service transactions . . . . . . . . . . . . . . . . .
Number of title policies issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
220,400
374,243
90,700
78%
2013
427,342
341,556
85,786
5,282,000
22,300
2012
384,618
299,836
84,782
4,431,000
19,700
77%
77%
101,200
192,400
108,200
149,300
38
Rialto Segment
Our Rialto reportable segment is a commercial real estate investment, investment management, and finance
company focused on raising, investing and managing third-party capital, originating and selling into securitizations
commercial mortgage loans as well as investing our own capital in real estate related mortgage loans, properties and
related securities. Rialto utilizes its vertically-integrated investment and operating platform to underwrite, diligence,
acquire, manage, workout and add value to diverse portfolios of real estate loans, properties and securities as well as
providing strategic real estate capital. Rialto's primary focus is to manage third-party capital and to originate and sell into
securitizations commercial mortgage loans. Rialto has commenced the workout and/or oversight of billions of dollars of
real estate assets across the United States, including commercial and residential real estate loans and properties as well as
mortgage backed securities with the objective of generating superior, risk-adjusted returns. To date, many of the
investment and management opportunities have arisen from the dislocation in the United States real estate markets and
the restructuring and recapitalization of those markets.
Rialto's operating earnings were as follows:
Years Ended November 30,
(In thousands)
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . .
Rialto other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating earnings (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
230,521
249,114
59,277
3,395
44,079
2013
2012
138,060
151,072
22,353
16,787
26,128
138,856
138,990
41,483
(29,780)
11,569
(1) Costs and expenses for the years ended November 30, 2014, 2013 and 2012 included loan impairments of $57.1 million, $16.1
million and $28.0 million, respectively, primarily associated with the segment's FDIC loans portfolio (before noncontrolling
interests).
(2) Operating earnings for the years ended November 30, 2014, 2013 and 2012 included ($22.5) million, $6.2 million and ($14.4)
million, respectively, of net earnings (loss) attributable to noncontrolling interests.
The following is a detail of Rialto other income (expense), net:
(In thousands)
Realized gains on REO sales, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unrealized losses on transfer of loans receivable to REO and
impairments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REO and other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on bargain purchase acquisition. . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended November 30,
2014
2013
2012
43,671
48,785
21,649
(26,107)
(58,067)
43,898
—
3,395
(16,517)
(44,282)
20,269
8,532
16,787
(11,160)
(56,745)
16,476
—
(29,780)
Loans Receivable
In February 2010, our Rialto segment acquired indirectly 40% managing member equity interests in two limited
liability companies (“LLCs”), in partnership with the FDIC, which retained 60% equity interest in the LLCs, for
approximately $243 million (net of transaction costs and a $22 million working capital reserve). The LLCs hold
performing and non-performing loans formerly owned by 22 failed financial institutions and when our Rialto segment
acquired its interests in the LLCs, the two portfolios consisted of approximately 5,500 distressed residential and
commercial real estate loans (“FDIC Portfolios”). If the LLCs exceed expectations and meet certain internal rate of
return and distribution thresholds, our equity interest in the LLCs could be reduced from 40% down to 30%, with a
corresponding increase to the FDIC’s equity interest from 60% up to 70%. As these thresholds have not been met,
distributions continue being shared 60% / 40% with the FDIC. During the years ended November 30, 2014 and 2013, the
LLCs distributed $184.9 million and $46.7 million, respectively, of which $110.9 million and $28.4 million, respectively,
was distributed to the FDIC and $74.0 million and $18.3 million, respectively, was distributed to Rialto, the parent
company.
The LLCs meet the accounting definition of VIEs and since we were determined to be the primary beneficiary,
we consolidated the LLCs. We were determined to be the primary beneficiary because we have the power to direct the
activities of the LLCs that most significantly impact the LLCs’ performance through Rialto's management and servicer
contracts. At November 30, 2014, these consolidated LLCs had total combined assets and liabilities of $508.4 million
and $21.5 million, respectively. At November 30, 2013, these consolidated LLCs had total combined assets and liabilities
of $727.1 million and $20.2 million, respectively.
39
In September 2010, our Rialto segment acquired approximately 400 distressed residential and commercial real
estate loans (“Bank Portfolios”) and over 300 REO properties from three financial institutions. We paid $310.0 million
for the distressed real estate and real estate related assets of which $124 million was financed through a 5-year senior
unsecured note provided by one of the selling institutions. As of November 30, 2014 and 2013, there was $60.6 million
and $90.9 million outstanding, respectively.
Rialto Mortgage Finance
In 2013, RMF was formed and began originating and selling into securitizations five, seven and ten year
commercial first mortgage loans, generally with principal amounts between $2 million and $75 million, which are
secured by income producing properties. This business has become a significant contributor to the Rialto segment's
revenues.
During the year ended November 30, 2014, RMF had originated loans with a total principal balance of $1.6
billion and sold $1.3 billion of loans into eight separate securitizations. During the year ended November 30, 2013, RMF
had originated loans with a principal balance of $690.3 million and sold $537.0 million of loans into three separate
securitizations. As of November 30, 2014 and 2013, $147.2 million and $109.3 million, respectively, of these originated
loans were sold into a securitization trust but not settled and thus were included as receivables, net on the Rialto
segment's consolidated balance sheet.
Investments
Rialto is the sponsor of and an investor in private equity vehicles that invest in and manage real estate related
assets. This includes:
• Rialto Real Estate Fund, LP ("Fund I") that was formed in 2010 to invest in distressed real estate assets and
other related investments to which investors have committed and contributed a total of $700 million of
equity (including $75 million by us);
• Rialto Real Estate Fund II, LP ("Fund II") that was formed in 2012 to invest in distressed real estate assets
and other related investments to which investors have committed $1.3 billion (including $100 million by
us); and
• Rialto Mezzanine Partners Fund (the "Mezzanine Fund") that was formed in 2013 with a target of raising
$300 million in capital (including $27 million committed by us) to invest in performing mezzanine
commercial loans that have expected durations of one to two years and are secured by equity interests in
the borrowing entity owning the real estate assets.
Rialto also earns fees for its role as a manager of these vehicles and for providing asset management and other
services to those vehicles and other third parties.
Rialto's share of earnings from unconsolidated entities was as follows:
(In thousands)
Rialto Real Estate Fund, LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto Real Estate Fund II, LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto Mezzanine Partners Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . $
Years Ended November 30,
2014
2013
2012
30,612
15,929
1,913
10,823
59,277
19,391
2,523
354
85
22,353
21,026
—
—
20,457
41,483
In 2010, our Rialto segment invested in non-investment grade commercial mortgage-backed securities
(“CMBS”) at a 55% discount to par value. The carrying value of the investment securities at November 30, 2014 and
2013 was $17.3 million and $16.1 million, respectively. Our Rialto segment classified these securities as held-to-
maturity based on its intent and ability to hold the securities until maturity.
40
Lennar Multifamily Segment
We have been actively involved, primarily through unconsolidated entities, in the development of multifamily
rental properties. Our Lennar Multifamily segment focuses on developing a geographically diversified portfolio of
institutional quality multifamily rental properties in select U.S. markets.
As of November 30, 2014 and 2013, our balance sheet had $268.0 million and $147.1 million, respectively, of
assets related to our Lennar Multifamily segment, which includes investments in unconsolidated entities of $105.7
million and $46.3 million, respectively. Our net investment in the Lennar Multifamily segment as of November 30, 2014
and 2013 was $203.7 million and $105.6 million, respectively. During 2014, our Lennar Multifamily segment sold two
operating properties through unconsolidated entities resulting in $14.7 million Lennar Multifamily's share of gains
included in Lennar Multifamily equity in earnings (loss) from unconsolidated entities. Our Lennar Multifamily segment
had 26 and 13, unconsolidated entities as of November 30, 2014 and 2013, respectively. As of November 30, 2014, our
Lennar Multifamily segment had interests in 24 communities with development costs of approximately $1.5 billion, of
which one community was completed and operating, three communities were partially completed and leasing, 19
communities were under construction and one was under development. Our Lennar Multifamily segment had a pipeline
of future projects totaling $4.3 billion in assets across a number of states that will be developed by unconsolidated
entities.
Financial Condition and Capital Resources
At November 30, 2014, we had cash and cash equivalents related to our homebuilding, financial services, Rialto
and multifamily operations of $1.3 billion, compared to $970.5 million and $1.3 billion at November 30, 2013 and 2012,
respectively.
We finance all of our activities including Homebuilding, financial services, Rialto, multifamily and general
operating needs primarily with cash generated from our operations, debt issuances and equity offerings as well as cash
borrowed under our warehouse lines of credit and our credit facility.
Operating Cash Flow Activities
During 2014, 2013 and 2012, cash used in operating activities totaled $788.5 million, $807.7 million and $424.6
million, respectively. During 2014, cash used in operating activities was impacted by an increase in inventories due to
strategic land purchases and land development costs, an increase in Lennar Financial Services loans held-for-sale due to
increased home deliveries towards the end of 2014 compared to 2013 and an increase in receivables, partially offset by
our net earnings and an increase in accounts payable and other liabilities.
During 2013, cash used in operating activities was impacted by an increase in inventories due to strategic land
purchases and an increase in Rialto loans held-for-sale related to RMF, partially offset by our increased revenues, an
increase in accounts payable and other liabilities and a decrease in Lennar Financial Services loans held-for-sale.
During 2012, cash used in operating activities was impacted by an increase in Lennar Financial Services loans
held-for-sale due to increased home deliveries towards the end of 2012 and an increase in inventories due to strategic
land purchases, partially offset by our net earnings (net of our deferred income tax benefit).
Investing Cash Flow Activities
During 2014, 2013 and 2012, cash provided by investing activities totaled $438.4 million, $689.2 million and
$245.3 million, respectively. During 2014, we received $269.7 million of proceeds from the sales of REO, $143.5
million of distributions of capital from Lennar Homebuilding unconsolidated entities, $66.9 million of distributions of
capital from Lennar Multifamily unconsolidated entities, $68.9 million of distributions of capital from Rialto
unconsolidated entities comprised of $32.5 million distributed by Fund I, $9.0 million distributed by Fund II, $16.5
million distributed by Mezzanine Fund and $10.9 million distributed by other investments, $43.9 million of proceeds
from the sale of a Lennar Homebuilding operating property and $51.9 million of proceeds from the sales of Lennar
Homebuilding investments available-for-sale. This was partially offset by $87.5 million of cash contributions to Lennar
Homebuilding unconsolidated entities primarily for working capital, $41.5 million of cash contributions to Rialto
unconsolidated entities comprised of $7.6 million contributed to Fund II, $18.1 million contributed to the Mezzanine
Fund and $15.8 million contributed to other investments, $30.8 million of cash contributions to Lennar Multifamily
unconsolidated entities primarily for working capital and $21.3 million for purchases of Lennar Homebuilding
investment available-for-sale.
During 2013, our cash provided by investing activities was primarily related to the receipt of $239.2 million of
proceeds from the sale of REO and $66.8 million of principal payments on Rialto loans receivable. In addition, cash
provided by investing activities increased due to $158.1 million of distributions of capital from Lennar Homebuilding
unconsolidated entities, primarily related to a distribution from a new unconsolidated joint venture, $42.6 million of
distributions of capital from Rialto unconsolidated entities, primarily related to Fund I, a $223.8 million decrease in
41
Rialto's defeasance cash by two consolidated minority-owned LLCs to repay a loan from the FDIC, and $140.6 million
of proceeds from the sale of a Lennar Homebuilding operating property. This was partially offset by $57.1 million of
cash contributions to Lennar Homebuilding unconsolidated entities primarily for working capital and $67.0 million of
cash contributions to Rialto unconsolidated entities comprised of $50.6 million contributed to Fund II and $16.4 million
contributed to the Mezzanine Fund.
During 2012, our cash provided by investing activities was primarily related to the receipt of $183.9 million of
proceeds from the sale of REO, $81.6 million of principal payments on Rialto loans receivable and $34.0 million of
distributions of capital from Lennar Homebuilding unconsolidated entities. This was offset by $72.6 million of cash
contributions to Lennar Homebuilding unconsolidated entities primarily for working capital and debt reduction, $43.6
million of cash contributions to Rialto unconsolidated entities and $51.1 million for Lennar Financial Services purchases
of held-to-maturity investment securities that mature at various dates within one year.
We are continually exploring various types of transactions to manage our leverage and liquidity positions, take
advantage of market opportunities and increase our revenues. These transactions may include the issuance of additional
indebtedness, the repurchase of our outstanding indebtedness for cash or equity, the acquisition of homebuilders and
other companies, the sale of our assets or lines of business, the issuance of common stock or securities convertible into
shares of common stock, and/or pursuing other financing alternatives. In connection with some of our more recently
formed businesses, such as Rialto and Multifamily, and our consolidated joint venture FivePoint Communities, we may
also consider other types of transactions such as restructurings, joint ventures, spin-offs or initial public offerings. We are
exploring opportunities to create a fund, which we would manage and in which we would make an investment, to
provide funding for the rental communities we develop. If any of these transactions are implemented, they could
materially impact the amount and composition of our indebtedness outstanding, increase our interest expense, dilute our
existing stockholders and/or affect the book value of our assets. At November 30, 2014, we had no agreements or
understandings regarding any significant transactions.
Financing Cash Flow Activities
During 2014, 2013 and 2012, our cash provided by (used in) financing activities totaled $661.4 million,
($221.8) million and $326.5 million, respectively. During 2014, our cash provided by financing activities was primarily
attributed to the receipt of proceeds related to the sale of $500 million aggregate principal amount of 4.500% senior notes
due June 2019, proceeds related to the sale of $350 million aggregate principal amount of 4.50% senior notes due
November 2019, proceeds related to the sale of $100 million aggregate principal amount of Rialto's 7.00% senior notes
due 2018 (the "7.00% Senior Notes"), $94.4 million of proceeds related to the issuance of Rialto's structured note
offering (the "Structured Notes") and net borrowings under our Lennar Financial Services' 364-day warehouse
repurchase facilities and our Rialto's warehouse repurchase facilities. The cash provided by financing activities was
partially offset by the $250.0 million redemption of our 5.50% senior notes due 2014, $299.7 million of principal
payments on other borrowings and $155.6 million of payments related to noncontrolling interests.
During 2013, our cash used in financing activities was attributed to $471.3 million of principal payments of our
Rialto notes payable, $83.8 million of net repayments under our Lennar Financial Services' 364-day warehouse
repurchase facilities, $287.4 million of principal payments on other borrowings, the $63.8 million redemption of our
5.95% senior notes due 2013 and $201.7 million of payments related to buyouts of our partners' noncontrolling interests,
primarily related to two of our consolidated joint ventures. This was partially offset by the receipt of proceeds related to
the sale of $275 million aggregate principal amount of our 4.125% senior notes due 2018, the sale of an additional $225
million aggregate principal amount of our 4.750% senior notes due 2022 and the sale of $250 million aggregate principal
amount of Rialto's 7.00% senior notes, $76.0 million of net borrowings under Rialto's warehouse repurchase facilities
related to RMF and $92.6 million of proceeds from other borrowings.
During 2012, our cash provided by financing activities was primarily attributed to the receipt of proceeds
related to the sale of $400 million of 4.75% senior notes due 2017, $350 million of 4.750% senior notes due 2022 and
the sale of an additional $50 million aggregate principal amount of our 3.25% convertible senior notes due 2021 that the
initial purchasers acquired to cover over-allotments. This was partially offset by the partial redemption of our 5.95%
senior notes due 2013, principal repayments on Rialto's notes payable and principal payments on other borrowings.
During 2013, we exercised certain land option contracts from a land investment venture to which we had sold
land in 2007, reducing the liabilities reflected on our consolidated balance sheet related to consolidated inventory not
owned by $28.9 million. Due to our continuing involvement, the 2007 transaction did not qualify as a sale under GAAP;
thus, the inventory remained on our balance sheet in consolidated inventory not owned. In 2014, we entered into a new
agreement with the joint venture, which required $155.0 million of inventory assets to remain consolidated due to the
existence of option contracts on substantially all of the homesites and were reclassified into land and land under
development. The remaining $70.3 million of inventory assets no longer under option by us were deconsolidated.
42
Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are
presented to assist in understanding the leverage of our Lennar Homebuilding operations. Lennar Homebuilding debt to
total capital and net Lennar Homebuilding debt to total capital were calculated as follows:
(Dollars in thousands)
Lennar Homebuilding debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
4,690,213
4,827,020
Total capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9,517,233
2013
4,194,432
4,168,901
8,363,333
November 30,
Lennar Homebuilding debt to total capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: Lennar Homebuilding cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . .
4,690,213
885,729
Net Lennar Homebuilding debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,804,484
Net Lennar Homebuilding debt to total capital (1) . . . . . . . . . . . . . . . . . . . . . . . . .
44.1%
49.3%
50.2%
4,194,432
695,424
3,499,008
45.6%
(1) Net Lennar Homebuilding debt to total capital is a non-GAAP financial measure defined as net Lennar Homebuilding debt
(Lennar Homebuilding debt less Lennar Homebuilding cash and cash equivalents) divided by total capital (net Lennar
Homebuilding debt plus stockholders' equity). We believe the ratio of net Lennar Homebuilding debt to total capital is relevant
and a useful financial measure to investors in understanding the leverage employed in our Lennar Homebuilding operations.
However, because net Lennar Homebuilding debt to total capital is not calculated in accordance with GAAP, this financial
measure should not be considered in isolation or as an alternative to financial measures prescribed by GAAP. Rather, this non-
GAAP financial measure should be used to supplement the our GAAP results.
At November 30, 2014, Lennar Homebuilding debt to total capital was lower compared to the prior year period,
primarily as a result of an increase in stockholder’s equity primarily related to our net earnings, partially offset by an
increase in Lennar Homebuilding debt due to the issuance of senior notes.
In addition to the use of capital in our homebuilding, financial services, Rialto and multifamily operations, we
actively evaluate various other uses of capital. This may include acquisitions of, or investments in, other entities, the
payment of dividends or repurchases of our outstanding common stock or debt. These activities may be funded through
any combination of our credit facility, warehouse lines of credit, cash generated from operations, sales of assets or the
issuance into capital markets of debt, common stock or preferred stock.
The following table summarizes our Lennar Homebuilding senior notes and other debts payable:
(Dollars in thousands)
5.60% senior notes due 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6.50% senior notes due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.25% senior notes due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.75% senior notes due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.95% senior notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.125% senior notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.500% senior notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.50% senior notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.75% convertible senior notes due 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.25% convertible senior notes due 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.750% senior notes due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.50% senior notes due 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgages notes on land and other debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2014
2013
500,272
249,923
396,278
399,250
248,485
274,995
500,477
350,000
431,042
400,000
571,439
—
368,052
500,527
249,886
395,312
399,250
248,167
274,995
—
—
416,041
400,000
571,012
249,640
489,602
$
4,690,213
4,194,432
Our Lennar Homebuilding average debt outstanding was $4.7 billion with an average rate for interest incurred
of 5.2% for the year ended November 30, 2014, compared to $4.4 billion with an average rate for interest incurred of
5.1% for the year ended November 30, 2013. Interest incurred related to Lennar Homebuilding debt for the year ended
November 30, 2014 was $273.4 million, compared to $261.5 million in 2013. The majority of our short-term financing
needs, including financings for land acquisition and development activities and general operating needs, are met with
cash generated from operations, proceeds from debt, as well as borrowings under our unsecured revolving credit facility
(the "Credit Facility").
43
The terms of each of our senior and convertible senior notes outstanding at November 30, 2014 were as follows:
Senior and Convertible Senior Notes Outstanding (1)
(Dollars in thousands)
Principal
Amount
Net Proceeds (2)
Price
Dates Issued
5.60% senior notes due 2015 . . . . . . . . . . . . . . . .
$
500,000
$
6.50% senior notes due 2016 . . . . . . . . . . . . . . . .
12.25% senior notes due 2017 . . . . . . . . . . . . . . .
4.75% senior notes due 2017 . . . . . . . . . . . . . . . .
6.95% senior notes due 2018 . . . . . . . . . . . . . . . .
4.125% senior notes due 2018 (4). . . . . . . . . . . . .
4.500% senior notes due 2019 . . . . . . . . . . . . . . .
4.50% senior notes due 2019 . . . . . . . . . . . . . . . .
2.75% convertible senior notes due 2020 . . . . . . .
3.25% convertible senior notes due 2021 . . . . . . .
250,000
400,000
400,000
250,000
275,000
500,000
350,000
446,000
400,000
501,400
248,900
386,700
395,900
243,900
271,718
495,725
347,016
436,400
391,600
(3)
April 2005, July 2005
99.873%
98.098%
April 2006
April 2009
100% July 2012, August 2012
98.929%
99.998%
(5)
100%
100%
100%
May 2010
February 2013
February 2014
November 2014
November 2010
November 2011,
December 2011
4.750% senior notes due 2022 (4). . . . . . . . . . . . .
575,000
567,585
(6)
October 2012, February
2013, April 2013
(1) Interest is payable semi-annually for each of the series of senior and convertible senior notes. The senior and convertible senior
notes are unsecured and unsubordinated, but are guaranteed by substantially all of our 100% owned homebuilding subsidiaries.
(2) We generally use the net proceeds of the sales for working capital and general corporate purposes, which can include the
repayment or repurchase of other outstanding senior notes.
(3) We issued $300 million aggregate principal amount at a price of 99.771% and $200 million aggregate principal amount at a price
of 101.407%.
(4) During 2013, we incurred additional interest with respect to the 4.125% senior notes due 2018 and to the 4.750% senior notes due
2022 because the registration statements relating to the notes did not became effective by, and the exchange offers were not
consummated by, the dates specified in the Registration Rights Agreement related to such notes.
(5) We issued $400 million aggregate principal amount at a price of 100% and $100 million aggregate principal amount at a price of
100.5%.
(6) We issued $350 million aggregate principal amount at a price of 100%, $175 million aggregate principal amount at a price of
98.073% and $50 million aggregate principal amount at a price of 98.250%.
In September 2014, we retired our $250 million 5.50% senior notes due September 2014 for 100% of the
outstanding principal amount, plus accrued and unpaid interest as of the maturity date.
The 3.25% convertible senior notes due 2021 (the "3.25% Convertible Senior Notes") are convertible into
shares of Class A common stock at any time prior to maturity or redemption at the initial conversion rate of 42.5555
shares of Class A common stock per $1,000 principal amount of the 3.25% Convertible Senior Notes or 17,022,200
shares of Class A common stock if all the 3.25% Convertible Senior Notes are converted, which is equivalent to an initial
conversion price of approximately $23.50 per share of Class A common stock, subject to anti-dilution adjustments. The
shares are included in the calculation of diluted earnings per share. Holders of the 3.25% Convertible Senior Notes have
the right to require us to repurchase them for cash equal to 100% of their principal amount, plus accrued but unpaid
interest on November 15, 2016. We have the right to redeem the 3.25% Convertible Senior Notes at any time on or after
November 20, 2016 for 100% of their principal amount, plus accrued but unpaid interest.
The 2.75% convertible senior notes due 2020 (the "2.75% Convertible Senior Notes") are convertible into cash,
shares of Class A common stock or a combination of both, at our election. However, it is our intent to settle the face
value of the 2.75% Convertible Senior Notes in cash. Holders may convert the 2.75% Convertible Senior Notes at the
initial conversion rate of 45.1794 shares of Class A common stock per $1,000 principal amount or 20,150,012 shares of
Class A common stock if all the 2.75% Convertible Senior Notes are converted, which is equivalent to an initial
conversion price of approximately $22.13 per share of Class A common stock, subject to anti-dilution adjustments. For
the years ended November 30, 2014 and 2013, our volume weighted average stock price was $39.96 and $37.06,
respectively, which exceeded the conversion price, thus 9.0 million shares and 8.2 million shares, respectively, were
included in the calculation of diluted earnings per share.
Holders of the 2.75% Convertible Senior Notes have the right to convert them, during any fiscal quarter (and
only during such fiscal quarter), if the last reported sale price of our Class A common stock for at least 20 trading days
(whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the
immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading
day. Holders of the 2.75% Convertible Senior Notes have the right to require us to repurchase them for cash equal to
100% of their principal amount, plus accrued but unpaid interest, on December 15, 2015. We have the right to redeem
44
the 2.75% Convertible Senior Notes at any time on or after December 20, 2015 for 100% of their principal amount, plus
accrued but unpaid interest.
For our 2.75% Convertible Senior Notes, we will be required to pay contingent interest with regard to any
interest period beginning with the interest period commencing December 20, 2015 and ending June 14, 2016, and for
each subsequent six-month period commencing on an interest payment date to, but excluding, the next interest payment
date, if the average trading price of the 2.75% Convertible Senior Notes during the five consecutive trading days ending
on the second trading day immediately preceding the first day of the applicable interest period exceeds 120% of the
principal amount of the 2.75% Convertible Senior Notes. The amount of contingent interest payable per $1,000 principal
amount of notes during the applicable interest period will equal 0.75% per year of the average trading price of such
$1,000 principal amount of 2.75% Convertible Senior Notes during the five trading day reference period.
Certain provisions under Accounting Standards Codification (“ASC”) 470, Debt, require the issuer of certain
convertible debt instruments that may be settled in cash on conversion to separately account for the liability and equity
components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. We have applied
these provisions to our 2.75% Convertible Senior Notes. At issuance, we estimated the fair value of the 2.75%
Convertible Senior Notes using similar debt instruments that did not have a conversion feature and allocated the residual
value to an equity component that represented the estimated fair value of the conversion feature at issuance. The debt
discount of the 2.75% Convertible Senior Notes is being amortized over five years and the annual effective interest rate
is 7.1% after giving effect to the amortization of the discount and deferred financing costs. At both November 30, 2014
and 2013, the principal amount of the 2.75% Convertible Senior Notes was $446.0 million. At November 30, 2014 and
2013, the carrying amount of the equity component included in stockholders’ equity was $15.0 million and $30.0
million, respectively, and the net carrying amount of the 2.75% Convertible Senior Notes included in Lennar
Homebuilding senior notes and other debts payable was $431.0 million and $416.0 million, respectively. During the
years ended November 30, 2014 and 2013, the amount of interest recognized relating to both the contractual interest and
amortization of the discount was $27.3 million and $26.5 million, respectively.
Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our Senior Notes
(the “Guaranteed Notes”). The guarantees are full and unconditional. The principal reason our 100% owned
homebuilding subsidiaries are guaranteeing the Guaranteed Notes is so holders of the Guaranteed Notes will have rights
at least as great with regard to our subsidiaries as any other holders of a material amount of our unsecured debt.
Therefore, the guarantees of the Guaranteed Notes will remain in effect only while the guarantor subsidiaries guarantee a
material amount of the debt of Lennar Corporation, as a separate entity, to others. At any time when a guarantor
subsidiary is no longer guaranteeing at least $75 million of Lennar Corporation’s debt other than the Guaranteed Notes,
either directly or by guaranteeing other subsidiaries’ obligations as guarantors of Lennar Corporation’s debt, the
guarantor subsidiary’s guarantee of the Guaranteed Notes will be suspended. Therefore, if the guarantor subsidiaries
cease guaranteeing Lennar Corporation’s obligations under our Credit Facility and our letter of credit facilities and are
not guarantors of any new debt, the guarantor subsidiaries’ guarantees of the Guaranteed Notes will be suspended until
such time, if any, as they again are guaranteeing at least $75 million of Lennar Corporation’s debt other than the
Guaranteed Notes.
If our guarantor subsidiaries are guaranteeing revolving credit lines totaling at least $75 million, we will treat
the guarantees of the Guaranteed Notes as remaining in effect even during periods when Lennar Corporation’s
borrowings under the revolving credit lines are less than $75 million. In addition, a subsidiary will be released from its
guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its
capital stock, are sold or otherwise disposed of.
At November 30, 2014, we had a $1.5 billion Credit Facility, which includes a $248 million accordion feature,
subject to additional commitments, with certain financial institutions that matures in June 2018. The proceeds available
under the Credit Facility, which are subject to specified conditions for borrowing, may be used for working capital and
general corporate purposes. The Credit Facility agreement also provides that up to $500 million in commitments may be
used for letters of credit. As of both November 30, 2014 and 2013, we had no outstanding borrowings under the Credit
Facility. We may from time to time, borrow from and repay the Credit Facility. Consequently, the amount outstanding
under the Credit Facility at the end of the period may not be reflective of the total amounts outstanding during the period.
We believe that we were in compliance with our debt covenants at November 30, 2014. In addition, we had $125 million
letter of credit facilities with a financial institution and a $140 million letter of credit facility with a different financial
institution.
Our performance letters of credit outstanding were $234.1 million and $160.6 million at November 30, 2014
and 2013, respectively. Our financial letters of credit outstanding were $190.4 million and $212.8 million at
November 30, 2014 and 2013, respectively. Performance letters of credit are generally posted with regulatory bodies to
guarantee the performance of certain development and construction activities. Financial letters of credit are generally
posted in lieu of cash deposits on option contracts, for insurance risks, credit enhancements and as other collateral.
45
Under the amended Credit Facility agreement executed in June 2014 (the "Credit Agreement"), as of the end of
each fiscal quarter, we are required to maintain minimum consolidated tangible net worth of approximately $1.5 billion
plus the sum of 50% of the cumulative consolidated net income from February 29, 2012, if positive, and 50% of the net
cash proceeds from any equity offerings from and after February 29, 2012. We are required to maintain a leverage ratio
that shall not exceed 65% and may be reduced by 2.5% per quarter if our interest coverage ratio is less than 2.25:1.00 for
two consecutive fiscal calendar quarters. The leverage ratio will have a floor of 60%. If our interest coverage ratio
subsequently exceeds 2.25:1.00 for two consecutive fiscal calendar quarters, the leverage ratio we will be required to
maintain will be increased by 2.5% per quarter to a maximum of 65%. As of the end of each fiscal quarter, we are also
required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the
last twelve months then ended or (2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last twelve
months then ended.
The following are computations of our compliance with the minimum net worth test, maximum leverage ratio,
and liquidity test, as calculated per the Credit Agreement as of November 30, 2014:
(Dollars in thousands)
Covenant Level
Level Achieved as of
November 30, 2014
Minimum net worth test (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,248,047
4,099,856
Maximum leverage ratio (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity test (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65.0%
1.00
44.2%
3.31
The terms of the minimum net worth test, maximum leverage ratio and liquidity test used in the Credit
Agreement are specifically calculated per the Credit Agreement and differ in specified ways from comparable GAAP or
common usage terms. Our minimum net worth test, maximum leverage ratio and liquidity test were calculated for
purposes of the Credit Agreement as of November 30, 2014 as follows:
(1) The minimum consolidated tangible net worth and the consolidated tangible net worth as calculated per the
Credit Agreement were as follows:
Minimum consolidated tangible net worth
(In thousands)
As of November 30, 2014
Stated minimum consolidated tangible net worth per the Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Plus: 50% of cumulative consolidated net income as calculated per the Credit Agreement, if positive. . . . . . . .
Required minimum consolidated tangible net worth per the Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . $
1,459,657
788,390
2,248,047
Consolidated tangible net worth
(In thousands)
As of November 30, 2014
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: Intangible assets (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible net worth as calculated per the Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Consolidated equity of mortgage banking, Rialto and other designated subsidiaries (b) . . . . . . . . . . . . . .
Less: Lennar Homebuilding and Lennar Multifamily noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated tangible net worth as calculated per the Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,251,302
(51,246)
5,200,056
(972,494)
(127,706)
4,099,856
(a) Intangible assets represent the Financial Services segment's title operations goodwill and title plant assets.
(b) Consolidated equity of mortgage banking subsidiaries represents the equity of the Lennar Financial Services segment's
mortgage banking operations. Consolidated equity of other designated subsidiaries represents the equity of certain
subsidiaries included within the Lennar Financial Services segment's title operations that are prohibited from being
guarantors under the Credit Agreement. The consolidated equity of Rialto, as calculated per the Credit Agreement,
represents Rialto's total assets minus Rialto's total liabilities as disclosed in Note 8 of the notes to our consolidated financial
statements as of November 30, 2014. The consolidated equity of mortgage banking subsidiaries, Rialto and other designated
subsidiaries are included in equity in our consolidated balance sheet as of November 30, 2014.
46
(2) The leverage ratio as calculated per the Credit Agreement was as follows:
Leverage ratio
(Dollars in thousands)
As of November 30, 2014
Lennar Homebuilding senior notes and other debts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,690,213
Less: Debt of Lennar Homebuilding consolidated entities (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funded debt as calculated per the Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: Financial letters of credit (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: Lennar's recourse exposure related to Lennar Homebuilding unconsolidated/consolidated entities, net (c)
Consolidated indebtedness as calculated per the Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Unrestricted cash and cash equivalents in excess of required liquidity per the Credit Agreement (d). . . . .
Numerator as calculated per the Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Denominator as calculated per the Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(80,351)
4,609,862
190,491
43,281
4,843,634
(892,291)
3,951,343
8,943,490
Leverage ratio (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44.2%
(a) Debt of our Lennar Homebuilding consolidated joint ventures is included in Lennar Homebuilding senior notes and other
debts payable in our consolidated balance sheet as of November 30, 2014.
(b) As of November 30, 2014, our financial letters of credit outstanding include $190.4 million disclosed in Note 6 of the notes
to our consolidated financial statements and $0.1 million of financial letters of credit related to the Financial Services
segment's title operations.
(c) Lennar's recourse exposure related to the Lennar Homebuilding unconsolidated and consolidated entities, net includes $24.5
million of net recourse exposure related to Lennar Homebuilding unconsolidated entities and $18.8 million of recourse
exposure related to Lennar Homebuilding consolidated entities, which is included in Lennar Homebuilding senior notes and
other debts payable in our consolidated balance sheet as of November 30, 2014.
(d) As of November 30, 2014, unrestricted cash and cash equivalents include $885.7 million of Lennar Homebuilding cash and
cash equivalents, $2.2 million of Lennar Multifamily cash and cash equivalents and $14.4 million of Lennar Financial
Services cash and cash equivalents, excluding cash and cash equivalents from mortgage banking subsidiaries and other
designated subsidiaries within the Lennar Financial Services segment.
(e) Leverage ratio consists of the numerator as calculated per the Credit Agreement divided by the denominator as calculated
per the Credit Agreement (consolidated indebtedness as calculated per the Credit Agreement, plus consolidated tangible net
worth as calculated per the Credit Agreement).
(3) Liquidity as calculated per the Credit Agreement was as follows:
Liquidity test
(Dollars in thousands)
As of November 30, 2014
Unrestricted cash and cash equivalents as calculated per the Credit Agreement (a). . . . . . . . . . . . . . . . . . . . . . . $
Consolidated interest incurred as calculated per the Credit Agreement (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liquidity (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
890,545
269,131
3.31
(a) Unrestricted cash and cash and cash equivalents at November 30, 2014 for the liquidity test calculation includes $885.7
million of Lennar Homebuilding cash and cash equivalents, plus $2.2 million of Lennar Multifamily cash and cash
equivalents, plus $14.4 million of Lennar Financial Services cash and cash equivalents, excluding cash and cash equivalents
from mortgage banking subsidiaries and other designated subsidiaries within the Lennar Financial Services segment, minus
$11.7 million of cash and cash equivalents of Lennar Homebuilding and Multifamily consolidated joint ventures.
(b) Consolidated interest incurred as calculated per the Credit Agreement for the twelve months ended November 30, 2014
includes Lennar Homebuilding interest incurred of $273.4 million, plus Lennar Financial Services interest incurred,
excluding interest incurred from mortgage banking subsidiaries and other designated subsidiaries within the Lennar
Financial Services operations, minus (1) interest incurred related to our partner's share of Lennar Homebuilding consolidated
joint ventures included within Lennar Homebuilding interest incurred, (2) Lennar Homebuilding interest income included
within Lennar Homebuilding other income, net, and (3) Lennar Financial Services interest income, excluding interest
income from mortgage banking subsidiaries and other designated subsidiaries within the Lennar Financial Services
operations.
(c) We are only required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest
incurred for the last twelve months then ended or (2) an interest coverage ratio of equal to or greater than 1.50:1.00 for the
last twelve months then ended. Although we are in compliance with our debt covenants for both calculations, we have only
disclosed the detailed calculation of our liquidity test.
47
Our Financial Services segment's warehouse facilities at November 30, 2014, were as follows:
(In thousands)
364-day warehouse repurchase facility that matures December 2014 (1). . . . . . . . . . . . . . . . . . . . . . $
364-day warehouse repurchase facility that matures January 2015 (2). . . . . . . . . . . . . . . . . . . . . . . .
364-day warehouse repurchase facility that matures February 2015. . . . . . . . . . . . . . . . . . . . . . . . . .
364-day warehouse repurchase facility that matures June 2015 (3) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Maximum Aggregate
Commitment
325,000
300,000
150,000
150,000
925,000
(1) In December 2014, our Lennar Financial Services segment amended its 364-day warehouse repurchase facility that matured in
December 2014 increasing the maximum aggregate commitment from $325 million to $350 million through the second quarter of
fiscal 2015 and to $450 million for the third and fourth quarter of fiscal 2015. The maturity date was extended to December 2015.
(2) Maximum aggregate commitment includes a $100 million accordion feature that is usable 10 days prior to fiscal quarter-end
through 20 days after fiscal quarter-end.
(3) Maximum aggregate commitment includes a $50 million accordion feature that is available beginning on the tenth (10th)
calendar day immediately preceding the first day of a fiscal quarter through 20 days after fiscal quarter-end.
Our Lennar Financial Services segment uses these facilities to finance its lending activities until the mortgage
loans are sold to investors and the proceeds are collected. The facilities are expected to be renewed or replaced with other
facilities when they mature. Borrowings under the facilities and their prior year predecessors were $698.4 million and
$374.2 million, at November 30, 2014 and 2013, respectively, and were collateralized by mortgage loans and receivables
on loans sold to investors but not yet paid for with outstanding principal balances of $732.1 million and $452.5 million,
at November 30, 2014 and 2013, respectively. The combined effective interest rate on the facilities at November 30,
2014 was 2.5%. Without the facilities, our Lennar Financial Services segment would have to use cash from operations
and other funding sources to finance its lending activities. Since our Lennar Financial Services segment’s borrowings
under the warehouse repurchase facilities are generally repaid with the proceeds from the sale of mortgage loans and
receivables on loans that secure those borrowings, the facilities are not likely to be a call on our current cash or future
cash resources. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by
selling mortgage loans held-for-sale to investors and by collecting on receivables on loans sold but not yet paid.
As of November 30, 2014 and 2013, RMF had two warehouse repurchase financing agreements that mature in
fiscal year 2015 with commitments totaling $650 million and $500 million, respectively, to help finance the loans it
makes. Rialto uses these warehouse repurchase financing agreements to finance five, seven and ten year commercial first
mortgage loans that are originated by RMF, generally with principal amounts between $2 million and $75 million, which
are secured by income producing properties. Borrowings under these facilities were $141.3 million and $76.0 million as
of November 30, 2014 and 2013, respectively.
In November 2013, our Rialto segment issued $250 million aggregate principal amount of the 7.00% Senior
Notes, at a price of 100% in a private placement. Proceeds from the offering, after payment of expenses, were
approximately $245 million. Rialto used a majority of the net proceeds of the sale of the 7.00% Senior Notes as working
capital for RMF and used $100 million to repay sums that had been advanced to RMF from Lennar to enable it to begin
originating and securitizing commercial mortgage loans. In March 2014, the Rialto segment issued an additional $100
million of the 7.00% Senior Notes at a price of 102.25% of their face value in a private placement. Proceeds from the
offering, after payment of expenses, were approximately $102 million. Rialto used the net proceeds of the offering to
provide additional working capital for RMF, and to make investments in the funds that Rialto manages, as well as for
general corporate purposes. Interest on the 7.00% Senior Notes is due semi-annually. At November 30, 2014 and 2013,
the carrying amount of the 7.00% Senior Notes was $351.9 million and $250.0 million, respectively. Under the
indenture, Rialto is subject to certain covenants limiting, among other things, Rialto’s ability to incur indebtedness, to
make investments, to make distributions to, or enter into transactions with, Lennar or to create liens, subject to certain
exceptions and qualifications. Rialto also has quarterly and annual reporting requirements, similar to an SEC registrant,
to holders of the 7.00% Senior Notes. We believe Rialto was in compliance with its debt covenants at November 30,
2014.
In May 2014, Rialto issued $73.8 million principal amount of the Structured Notes collateralized by certain
assets originally acquired in the Bank Portfolios transaction at a price of 100%, with an annual coupon rate of 2.85%.
Proceeds from the offering, after payment of expenses and hold backs for a cash reserve, were $69.1 million. In
November 2014, Rialto issued an additional $20.8 million of the Structured Notes at a price of 99.5%, with an annual
coupon rate of 5.0%. Proceeds from the offering, after payment of expenses, were $20.7 million. The estimated final
payment date of the Structured Notes is December 15, 2015. As of November 30, 2014, there was $58.0 million
outstanding related to the Structured Notes.
48
Changes in Capital Structure
We have a stock repurchase program adopted in 2006, which originally authorized us to purchase up to 20
million shares of our outstanding common stock. During the years ended November 30, 2014, 2013 and 2012, there were
no share repurchases of common stock under the stock repurchase program. As of November 30, 2014, the remaining
authorized shares that can be purchased under the stock repurchase program were 6.2 million shares of common stock.
During the year ended November 30, 2014, treasury stock decreased by 11.6 million shares of Class A common
stock primarily due to the retirement of 11.7 million shares of Class A common stock authorized by our Board of
Directors, partially offset by activity related to our equity compensation plan. During the year ended November 30, 2013,
treasury stock decreased by 0.4 million shares of Class A common stock due to activity related to our equity
compensation plan.
During the years ended November 30, 2014, 2013 and 2012, our Class A and Class B common stockholders
received a per share annual dividend of $0.16.
Based on our current financial condition and credit relationships, we believe that our operations and borrowing
resources will provide for our current and long-term capital requirements at our anticipated levels of activity.
Off-Balance Sheet Arrangements
Lennar Homebuilding - Investments in Unconsolidated Entities
At November 30, 2014, we had equity investments in 35 homebuilding and land unconsolidated entities (of
which 5 had recourse debt, 6 had non-recourse debt and 24 had no debt), compared to 36 homebuilding and land
unconsolidated entities at November 30, 2013. Historically, we invested in unconsolidated entities that acquired and
developed land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for
sale to third-party homebuyers. Through these entities, we primarily sought to reduce and share our risk by limiting the
amount of our capital invested in land, while obtaining access to potential future homesites and allowing us to participate
in strategic ventures. The use of these entities also, in some instances, enabled us to acquire land to which we could not
otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner.
Participants in these joint ventures have been land owners/developers, other homebuilders and financial or strategic
partners. Joint ventures with land owners/developers have given us access to homesites owned or controlled by our
partners. Joint ventures with other homebuilders have provided us with the ability to bid jointly with our partners for
large land parcels. Joint ventures with financial partners have allowed us to combine our homebuilding expertise with
access to our partners’ capital. Joint ventures with strategic partners have allowed us to combine our homebuilding
expertise with the specific expertise (e.g. commercial or infill experience) of our partner. Each joint venture is governed
by an executive committee consisting of members from the partners.
Although the strategic purposes of our joint ventures and the nature of our joint ventures partners vary, the joint
ventures are generally designed to acquire, develop and/or sell specific assets during a limited life-time. The joint
ventures are typically structured through non-corporate entities in which control is shared with our venture partners.
Each joint venture is unique in terms of its funding requirements and liquidity needs. We and the other joint venture
participants typically make pro-rata cash contributions to the joint venture. In many cases, our risk is limited to our
equity contribution and potential future capital contributions. Additionally, most joint ventures obtain third-party debt to
fund a portion of the acquisition, development and construction costs of their communities. The joint venture agreements
usually permit, but do not require, the joint ventures to make additional capital calls in the future. However, capital calls
relating to the repayment of joint venture debt under payment or maintenance guarantees generally is required.
Under the terms of our joint venture agreements, we generally have the right to share in earnings and
distributions of the entities on a pro-rata basis based on our ownership percentage. Some joint venture agreements
provide for a different allocation of profit and cash distributions if and when the cumulative results of the joint venture
exceed specified targets (such as a specified internal rate of return). Lennar Homebuilding equity in earnings (loss) from
unconsolidated entities excludes our pro-rata share of joint ventures’ earnings resulting from land sales to our
homebuilding divisions. Instead, we account for those earnings as a reduction of our costs of purchasing the land from
the joint ventures. This in effect defers recognition of our share of the joint ventures’ earnings related to these sales until
we deliver a home and title passes to a third-party homebuyer.
In many instances, we are designated as the manager of a venture under the direction of a management
committee that has shared power amongst the partners of the unconsolidated entity and we receive fees for such services.
In addition, we often enter into option and purchase contracts to acquire properties from our joint ventures, generally for
market prices at specified dates in the future. Option contracts generally require us to make deposits using cash or
irrevocable letters of credit toward the exercise price. These option deposits are generally negotiated on a case by case
basis.
49
We regularly monitor the results of our unconsolidated joint ventures and any trends that may affect their future
liquidity or results of operations. Joint ventures in which we have investments may be subject to a variety of financial
and non-financial debt covenants related primarily to equity maintenance, fair value of collateral and minimum homesite
takedown or sale requirements. We monitor the performance of joint ventures in which we have investments on a regular
basis to assess compliance with debt covenants. For those joint ventures not in compliance with the debt covenants, we
evaluate and assess possible impairment of our investment.
Our arrangements with joint ventures generally do not restrict our activities or those of the other participants.
However, in certain instances, we agree not to engage in some types of activities that may be viewed as competitive with
the activities of these ventures in the localities where the joint ventures do business.
As discussed above, the joint ventures in which we invest generally supplement equity contributions with third-
party debt to finance their activities. In some instances, the debt financing is non-recourse, thus neither we nor the other
equity partners are a party to the debt instruments. In other cases, we and the other partners agree to provide credit
support in the form of repayment or maintenance guarantees.
Material contractual obligations of our unconsolidated joint ventures primarily relate to the debt obligations
described above. The joint ventures generally do not enter into lease commitments because the entities are managed
either by us, or another of the joint venture participants, who supply the necessary facilities and employee services in
exchange for market-based management fees. However, they do enter into management contracts with the participants
who manage them. Some joint ventures also enter into agreements with developers, which may be us or other joint
venture participants, to develop raw land into finished homesites or to build homes.
The joint ventures often enter into option or purchase agreements with buyers, which may include us or other
joint venture participants, to deliver homesites or parcels in the future at market prices. Option deposits are recorded by
the joint ventures as liabilities until the exercise dates at which time the deposit and remaining exercise proceeds are
recorded as revenue. Any forfeited deposit is recognized as revenue at the time of forfeiture. Our unconsolidated joint
ventures generally do not enter into off-balance sheet arrangements.
As described above, the liquidity needs of joint ventures in which we have investments vary on an entity-by-
entity basis depending on each entity’s purpose and the stage in its life cycle. During formation and development
activities, the entities generally require cash, which is provided through a combination of equity contributions and debt
financing, to fund acquisition and development of properties. As the properties are completed and sold, cash generated is
available to repay debt and for distribution to the joint venture’s members. Thus, the amount of cash available for a joint
venture to distribute at any given time is primarily a function of the scope of the joint venture’s activities and the stage in
the joint venture’s life cycle.
We track our share of cumulative earnings and cumulative distributions of our joint ventures. For purposes of
classifying distributions received from joint ventures in our statements of cash flows, cumulative distributions are treated
as returns on capital to the extent of cumulative earnings and included in our consolidated statements of cash flows as
cash flow from operating activities. Cumulative distributions in excess of our share of cumulative earnings are treated as
returns of capital and included in our consolidated statements of cash flows as cash flows from investing activities.
50
Summarized financial information on a combined 100% basis related to Lennar Homebuilding’s unconsolidated
entities that are accounted for by the equity method was as follows:
Statement of Operations and Selected Information
Years Ended November 30,
(Dollars in thousands)
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) of unconsolidated entities . . . . . . . . . . . . . . . . . . . $
Our share of net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Lennar Homebuilding equity in earnings (loss) from unconsolidated
2014
263,395
291,993
—
(28,598)
(1,323)
entities (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Our cumulative share of net earnings - deferred at November 30 . . . . $
Our investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . $
656,837
Equity of the unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,278,941
Our investment % in the unconsolidated entities . . . . . . . . . . . . . . . . .
6,593
(355)
29%
2013
570,910
425,282
14,602
160,230
32,815
23,803
13,191
716,949
2,513,329
2012
353,902
418,905
10,515
(54,488)
(27,206)
(26,672)
1,621
562,234
2,111,173
29%
27%
(1) For the year ended November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities related primarily to our
share of operating losses of our Lennar Homebuilding unconsolidated entities, which included $4.6 million of valuation
adjustments related to assets of Lennar Homebuilding's unconsolidated entities, partially offset by $4.7 million of equity in
earnings as a result of third-party land sales by one unconsolidated entity. For the year ended November 30, 2013, Lennar
Homebuilding equity in earnings from unconsolidated entities included $19.8 million of equity in earnings primarily as a result of
sales of homesites to third parties by one unconsolidated entity. For the year ended November 30, 2012, Lennar Homebuilding
equity in loss included $12.1 million of valuation adjustments primarily related to strategic asset sales at Lennar Homebuilding's
unconsolidated entities.
November 30,
2014
2013
Balance Sheets
(In thousands)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
243,597
2,889,267
155,470
Liabilities and equity:
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
271,638
737,755
2,278,941
$
3,288,334
$
3,288,334
184,521
2,904,795
147,410
3,236,726
272,940
450,457
2,513,329
3,236,726
As of November 30, 2014 and 2013, our recorded investments in Lennar Homebuilding unconsolidated entities
were $656.8 million and $716.9 million, respectively, while the underlying equity in Lennar Homebuilding
unconsolidated entities partners’ net assets as of November 30, 2014 and 2013 was $722.6 million and $829.5 million,
respectively. The basis difference is primarily as a result of us buying an interest in a partner's equity in a Lennar
Homebuilding unconsolidated entity at a discount to book value and contributing non-monetary assets to an
unconsolidated entity with a higher fair value than book value.
In fiscal 2007, we sold a portfolio of land to a strategic land investment venture with Morgan Stanley Real
Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc., in which we have a 20% ownership interest and 50%
voting rights. Due to the nature of our continuing involvement, the transaction did not qualify as a sale under GAAP;
thus, the inventory remained on our consolidated balance sheet in consolidated inventory not owned. As of
November 30, 2013, the portfolio of land (including land development costs) of $241.8 million was also reflected as
inventory in the summarized condensed financial information related to Lennar Homebuilding’s unconsolidated entities
above. In 2014, we entered into a new agreement with the joint venture, which required $155.0 million of inventory
assets to remain consolidated due to the existence of option contracts on substantially all of the homesites and were
reclassified into land and land under development. The remaining $70.3 million of inventory assets no longer under
option by us were deconsolidated.
51
The Lennar Homebuilding unconsolidated entities in which we have investments usually finance their activities
with a combination of partner equity and debt financing. In some instances, we and our partners have guaranteed debt of
certain unconsolidated entities.
Debt to total capital of the Lennar Homebuilding unconsolidated entities in which we have investments was
calculated as follows:
November 30,
(Dollars in thousands)
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,278,941
Total capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,016,696
2014
737,755
2013
450,457
2,513,329
2,963,786
Debt to total capital of our unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24.5%
15.2%
Our investments in Lennar Homebuilding unconsolidated entities by type of venture were as follows:
(In thousands)
Land development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Homebuilding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
535,960
120,877
656,837
2013
537,548
179,401
716,949
Indebtedness of an unconsolidated entity is secured by its own assets. Some unconsolidated entities own
multiple properties and other assets. There is no cross collateralization of debt of different unconsolidated entities. We
also do not use our investment in one unconsolidated entity as collateral for the debt in another unconsolidated entity or
commingle funds among Lennar Homebuilding unconsolidated entities.
In connection with loans to a Lennar Homebuilding unconsolidated entity, we and our partners often guarantee
to a lender, either jointly and severally or on a several basis, any or all of the following: (i) the completion of the
development, in whole or in part, (ii) indemnification of the lender from environmental issues, (iii) indemnification of
the lender from “bad boy acts” of the unconsolidated entity (or full recourse liability in the event of an unauthorized
transfer or bankruptcy) and (iv) that the loan to value and/or loan to cost will not exceed a certain percentage
(maintenance or remargining guarantee) or that a percentage of the outstanding loan will be repaid (repayment
guarantee).
In connection with loans to an unconsolidated entity where there is a joint and several guarantee, we sometimes
have a reimbursement agreement with our partner. The reimbursement agreement provides that neither party is
responsible for more than its proportionate share of the guarantee. However, if our joint venture partner does not have
adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than
our proportionate share, up to our maximum exposure, which is the full amount covered by the joint and several
guarantee.
The total debt of Lennar Homebuilding unconsolidated entities in which we have investments, including
Lennar's maximum recourse exposure, were as follows:
November 30,
(In thousands)
Lennar’s net recourse exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Reimbursement agreements from partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar’s maximum recourse exposure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-recourse bank debt and other debt (partner’s share of several recourse) . . . . . . . . . $
Non-recourse land seller debt or other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-recourse debt with completion guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-recourse debt without completion guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-recourse debt to Lennar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
24,481
—
24,481
56,573
4,022
442,854
209,825
713,274
737,755
2013
27,496
13,500
40,996
61,008
20,454
245,821
82,178
409,461
450,457
Lennar’s maximum recourse exposure as a % of total JV debt . . . . . . . . . . . . . . . . . . . .
3%
9%
During the year ended November 30, 2014, our maximum recourse exposure related to indebtedness of Lennar
Homebuilding unconsolidated entities decreased by $16.5 million, as a result of $1.5 million paid by us primarily
52
through capital contributions to unconsolidated entities and $15.0 million primarily related to the joint ventures selling
assets.
The recourse debt exposure in the previous table represents our maximum exposure to loss from guarantees and
does not take into account the underlying value of the collateral or the other assets of the borrowers that are available to
repay debt or to reimburse us for any payments on our guarantees. The Lennar Homebuilding unconsolidated entities that
have recourse debt have a significant amount of assets and equity. The summarized balance sheets of the Lennar
Homebuilding unconsolidated entities with recourse debt were as follows:
(In thousands)
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
1,669,285
557,261
1,112,024
2013
1,656,065
470,975
1,185,090
November 30,
In addition, in most instances in which we have guaranteed debt of a Lennar Homebuilding unconsolidated
entity, our partners have also guaranteed that debt and are required to contribute their share of the guarantee payment.
Historically, we have had repayment guarantees and maintenance guarantees. In a repayment guarantee, we and our
venture partners guarantee repayment of a portion or all of the debt in the event of a default before the lender would have
to exercise its rights against the collateral. In the event of default, if our venture partner does not have adequate financial
resources to meet its obligation under our reimbursement agreement, we may be liable for more than our proportionate
share, up to our maximum recourse exposure, which is the full amount covered by the joint and several guarantee. As of
both November 30, 2014 and 2013, we did not have any maintenance guarantees related to our Lennar Homebuilding
unconsolidated entities. The maintenance guarantees only apply if the value of the collateral (generally land and
improvements) is less than a specified percentage of the loan balance.
In connection with many of the loans to Lennar Homebuilding unconsolidated entities, we and our joint venture
partners (or entities related to them) have been required to give guarantees of completion to the lenders. Those
completion guarantees may require that the guarantors complete the construction of the improvements for which the
financing was obtained. If the construction is to be done in phases, the guarantee generally is limited to completing only
the phases as to which construction has already commenced and for which loan proceeds were used.
If we are required to make a payment under any guarantee, the payment would generally constitute a capital
contribution or loan to the Lennar Homebuilding unconsolidated entity and increase our share of any funds the
unconsolidated entity distributes.
As of November 30, 2014, the fair values of the repayment guarantees and completion guarantees were not
material. We believe that as of November 30, 2014, in the event we become legally obligated to perform under a
guarantee of an obligation of a Lennar Homebuilding unconsolidated entity due to a triggering event under a guarantee,
most of the time the collateral should be sufficient to repay at least a significant portion of the obligation or we and our
partners would contribute additional capital into the venture. In certain instances, we placed performance letters of credit
and surety bonds with municipalities for our joint ventures (see Note 6 of the notes to our consolidated financial
statements).
In view of recent credit market conditions, it is not uncommon for lenders to real estate developers, including
joint ventures in which we have interests, to assert non-monetary defaults (such as failure to meet construction
completion deadlines or declines in the market value of collateral below required amounts) or technical monetary
defaults against the real estate developers. In most instances, those asserted defaults are resolved by modifications of the
loan terms, additional equity investments or other concessions by the borrowers. In addition, in some instances, real
estate developers, including joint ventures in which we have interests, are forced to request temporary waivers of
covenants in loan documents or modifications of loan terms, which are often, but not always obtained. However, in some
instances developers, including joint ventures in which we have interests, are not able to meet their monetary obligations
to lenders, and are thus declared in default. Because we sometimes guarantee all or portions of the obligations to lenders
of joint ventures in which we have interests, when these joint ventures default on their obligations, lenders may or may
not have claims against us. Normally, we do not make payments with regard to guarantees of joint venture obligations
while the joint ventures are contesting assertions regarding sums due to their lenders. When it is determined that a joint
venture is obligated to make a payment that we have guaranteed and the joint venture will not be able to make that
payment, we accrue the amounts probable to be paid by us as a liability. Although we generally fulfill our guarantee
obligations within a reasonable time after we determine that we are obligated with regard to them, at any point in time it
is likely that we will have some balance of unpaid guarantee liability. At both November 30, 2014 and 2013, we had no
liabilities accrued for unpaid guarantees of joint venture indebtedness on our consolidated balance sheets.
53
The following table summarizes the principal maturities of our Lennar Homebuilding unconsolidated entities
(“JVs”) debt as per current debt arrangements as of November 30, 2014 and does not necessarily reflect estimates of
future cash payments that will be made to reduce debt balances. Many JV loans have extension options in the loan
agreements that would allow the loans to be extended into future years.
(In thousands)
Maximum recourse debt exposure to
Lennar . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt without recourse to Lennar. . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total JV
Debt
$
$
24,481
713,274
737,755
(1) Represents land seller debt and other debt
Principal Maturities of Unconsolidated JVs by Period
2015
2016
2017
Thereafter
1,320
11,853
13,173
1,629
112,585
114,214
10,276
41,655
51,931
11,256
542,890
554,146
Other
Debt (1)
—
4,291
4,291
The table below indicates the assets, debt and equity of our 10 largest Lennar Homebuilding unconsolidated
joint venture investments as of November 30, 2014:
Lennar’s
Investment
Total JV
Assets
Maximum
Recourse
Debt
Exposure
to Lennar
Total
Debt
Without
Recourse
to Lennar
Total JV
Debt
Total JV
Equity
JV Debt
to Total
Capital
Ratio
(Dollars in thousands)
Top Ten JVs (1):
Heritage Fields El Toro. . . . . . . . $
182,252
1,503,865
11,256
386,608
397,864
1,004,910
Central Park West Holdings . . . .
Newhall Land Development . . . .
Runkle Canyon . . . . . . . . . . . . . .
Shipyard Communities (Hunters
Point). . . . . . . . . . . . . . . . . . . . . .
Ballpark Village . . . . . . . . . . . . .
Treasure Island Community
Development . . . . . . . . . . . . . . . .
MS Rialto Residential Holdings .
Krome Grove Land Trust . . . . . .
Willow Springs Properties . . . . .
10 largest JV investments . . . . . .
Other JVs . . . . . . . . . . . . . . . . . .
60,683
60,657
56,152
48,618
42,381
28,690
23,208
21,326
18,960
57,649
467,417
113,653
399,528
140,983
63,174
88,157
90,622
34,098
542,927
113,910
2,959,146
329,188
Total . . . . . . . . . . . . . . . . . . . . . . $
656,837
3,288,334
Land seller debt and other debt. .
Total JV debt. . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
9,276
—
20,532
3,949
24,481
—
24,481
—
340
—
221,071
47,000
—
—
19,761
—
674,780
34,203
708,983
4,291
713,274
52,969
353,187
112,304
150,242
92,972
57,411
82,581
58,759
32,187
1,997,522
281,419
2,278,941
—
340
—
221,071
47,000
—
—
29,037
—
695,312
38,152
733,464
4,291
737,755
28%
—
—
—
60%
34%
—
—
33%
—
26%
12%
24%
(1) All of the joint ventures presented in the table above operate in our Homebuilding West segment except for Krome Groves Land
Trust, which operates in our Homebuilding Southeast Florida segment and Willow Springs Properties, which operates in our
Homebuilding Central segment.
The table below indicates the percentage of assets, debt and equity of our 10 largest Lennar Homebuilding
unconsolidated joint venture investments as of November 30, 2014:
% of
Total JV
Assets
% of Maximum
Recourse Debt
Exposure to
to Lennar
% of Total
Debt Without
Recourse to
Lennar
% of
Total JV
Equity
10 largest JVs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other JVs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90%
10%
100%
84%
16%
100%
95%
5%
100%
88%
12%
100%
54
Rialto - Investments in Unconsolidated Entities
The following table reflects Rialto's investments in funds that invest in and manage real estate related assets and
other investments:
November 30,
2014
November 30,
2014
November 30,
2013
(Dollars in thousands)
Rialto Real Estate Fund, LP . .
Rialto Real Estate Fund II, LP
Rialto Mezzanine Partners
Fund . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . .
Inception
Year
Equity
Commitments
Equity
Commitments
Called
Commitment
to fund by the
Company
Funds
contributed
by the
Company
Investment
2010
2012
$ 700,006
$ 700,006
$
75,000
$
75,000
$
71,831
1,305,000
760,058
100,000
58,242
67,652
2013
251,100
188,600
27,299
20,504
20,226
15,991
75,729
53,103
16,724
9,017
$ 175,700
154,573
Rialto's share of earnings from unconsolidated entities was as follows:
(In thousands)
Rialto Real Estate Fund, LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto Real Estate Fund II, LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto Mezzanine Partners Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . $
Years Ended November 30,
2014
2013
2012
30,612
15,929
1,913
10,823
59,277
19,391
2,523
354
85
22,353
21,026
—
—
20,457
41,483
As manager of Fund I, we are entitled to receive additional revenue through a carried interest if Fund I meets
certain performance thresholds. If Fund I had ceased operations and liquidated all its investments at their estimated fair
values on November 30, 2014, we would have received $110.0 million with regard to our carried interest. However,
Fund I did not cease operations and liquidate its investments on November 30, 2014, and therefore the ultimate sum we
will receive with regard to our carried interest in Fund I may be substantially higher or lower than $110.0 million. During
the year ended November 30, 2014, Rialto received a $34.7 million advanced tax distribution with regard to its carried
interest in order to cover the income tax obligation, which resulted from allocations of taxable income to Rialto's general
partner interest.
In addition to the acquisition and management of the FDIC and Bank portfolios, an affiliate in the Rialto
segment was a sub-advisor to the AllianceBernstein L.P. (“AB”) fund formed under the Federal government’s Public-
Private Investment Program (“PPIP”) to purchase real estate related securities from banks and other financial institutions.
The sub-advisor received management fees for sub-advisory services. At the end of 2012, the AB PPIP fund finalized the
last sales of the underlying securities in the fund and made substantially all of the final liquidating distributions to the
partners, including us. As our role as sub-advisor to the AB PPIP fund has been completed, no further management fees
will be received for these services. During the year ended November 30, 2012, we contributed $1.9 million and received
distributions of $87.6 million. Of the distributions received during the year ended November 30, 2012, $83.5 million
related to the unwinding of the AB PPIP fund's operations. During the year ended November 30, 2013, we also earned
$9.1 million in fees from the segment's role as a sub-advisor to the AB PPIP fund, which were included in Rialto
revenues.
55
Summarized condensed financial information on a combined 100% basis related to Rialto’s investments in
unconsolidated entities that are accounted for by the equity method was as follows:
Balance Sheet
(In thousands)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loans receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2014
2013
141,609
512,034
378,702
795,306
311,037
45,451
332,968
523,249
285,565
381,555
149,350
191,624
$
2,184,139
1,864,311
Liabilities and equity:
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partner loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,573
395,654
—
1,767,912
Statements of Operations
$
2,184,139
Years Ended November 30,
108,514
398,445
163,940
1,193,412
1,864,311
(In thousands)
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings of unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . . . . $
2014
150,452
95,629
479,929
534,752
59,277
2013
2012
251,533
252,563
187,446
186,416
22,353
414,027
243,483
713,710
884,254
41,483
(1) Other income, net for the year ended November 30, 2014 included Fund I, Fund II, Mezzanine Fund and other investments
realized and unrealized gains on investments as well as other income from REO. Other income, net for the year ended November
30, 2013 included Fund I, Fund II and other investments realized and unrealized gains on investments as well as other income
from REO. Other income, net for the year ended November 30, 2012 included the AB PPIP Fund’s mark-to-market unrealized
gains and losses, and realized gains from the sale of investments in the portfolio underlying the AB PPIP fund, all of which the
Company's portion was a small percentage.
In 2010, the Rialto segment invested in non-investment grade CMBS at a 55% discount to par value. The
carrying value of the investment securities at November 30, 2014 and 2013 was $17.3 million and $16.1 million,
respectively. These securities bear interest at a coupon rate of 4% and have a stated and assumed final distribution date of
November 2020 and a stated maturity date of October 2057. The Rialto segment classified these securities as held-to-
maturity based on its intent and ability to hold the securities until maturity.
In January 2014, the Rialto segment acquired 100% of the loan servicing business segment of a financial
services company (the “Servicer Provider”) in which a subsidiary of Rialto had an approximately 5% investment, in
exchange for its investment interest. The Servicer Provider has a business segment that provides service and
infrastructure to the residential home loan market, which provides loan servicing support for all of Rialto's owned and
managed portfolios and asset management services for Rialto's small balance loan program. At acquisition date, the fair
value of the assets acquired was $20.8 million, the goodwill recorded was $5.1 million and the fair value of the liabilities
assumed was $17.6 million. As of November 30, 2013, the carrying value of the investment in the Servicer Provider was
$8.3 million.
Lennar Multifamily - Investments in Unconsolidated Entities
At November 30, 2014 and 2013, we had equity investments in 26 and 13 unconsolidated entities, respectively,
(all of which had non-recourse debt). We invest in unconsolidated entities that acquire and develop land to construct
multifamily rental properties. Through these entities, we are focusing on developing a geographically diversified
portfolio of institutional quality multifamily rental properties in select U.S. markets. Participants in these joint ventures
56
have been financial partners. Joint ventures with financial partners have allowed us to combine our development and
construction expertise with access to our partners’ capital. Each joint venture is governed by an operating agreement that
provides significant substantive participating voting rights on major decisions to our partners.
The joint ventures are typically structured through non-corporate entities in which control is shared with our
venture partners. Each joint venture is unique in terms of its funding requirements and liquidity needs. We and the other
joint venture participants typically make pro-rata cash contributions to the joint venture except for cost overruns relating
to the construction of the project. In all cases, we have been required to provide guarantees of completion and cost over-
runs to the lenders and partners. These completion guarantees may require us to complete the improvements for which
the financing was obtained. Therefore, our risk is limited to our equity contribution, draws on letters of credit and
potential future payments under the guarantees of completion and cost over-runs. In certain instances, payments made
under the cost over-run guarantee is considered a capital contribution.
Additionally, the joint ventures obtain third-party debt to fund a portion of the acquisition, development and
construction costs of the rental projects. The joint venture agreements usually permit, but do not require, the joint
ventures to make additional capital calls in the future. However, the joint venture debt does not have payment or
maintenance guarantees. Neither we nor the other equity partners are a party to the debt instruments. In some cases, we
agree to provide credit support in the form of a letter of credit provided to the bank.
We regularly monitor the results of our unconsolidated joint ventures and any trends that may affect their future
liquidity or results of operations. We also monitor the performance of joint ventures in which we have investments on a
regular basis to assess compliance with debt covenants. For those joint ventures not in compliance with the debt
covenants, we evaluate and assess possible impairment of our investment. All of the joint ventures were in compliance
with their debt covenants at November 30, 2014.
Under the terms of our joint venture agreements, we generally have the right to share in earnings and
distributions of the entities on a pro-rata basis based on our ownership percentages. Most joint venture agreements
provide for a different allocation of profit and cash distributions if and when the cumulative results of the joint venture
exceed specified targets (such as a specified internal rate of return).
In many instances, we are designated as the development manager and/or the general contractor of the
unconsolidated entity and receive fees for such services. In addition, we do not plan to enter into option and purchase
contracts to acquire properties from our joint ventures.
Our arrangements with joint ventures generally do not restrict our activities or those of the other participants.
However, in certain instances, we agree not to engage in some types of activities that may be viewed as competitive with
the activities of these ventures in the localities where the joint ventures do business.
Material contractual obligations of our unconsolidated joint ventures primarily relate to the debt obligations
described above. The joint ventures generally do not enter into lease commitments because the entities are managed
either by us or the other partners, who supply the necessary facilities and employee services in exchange for market-
based management fees. However, they do enter into management contracts with the participants who manage them.
As described above, the liquidity needs of joint ventures in which we have investments vary on an entity-by-
entity basis depending on each entity’s purpose and the stage in its life cycle. During formation and development
activities, the entities generally require cash, which is provided through a combination of equity contributions and debt
financing, to fund acquisition, development and construction of multifamily rental properties. As the properties are
completed and sold, cash generated will be available to repay debt and for distribution to the joint venture’s members.
Thus, the amount of cash available for a joint venture to distribute at any given time is primarily a function of the scope
of the joint venture’s activities and the stage in the joint venture’s life cycle.
We track our share of cumulative earnings and cumulative distributions of our joint ventures. For purposes of
classifying distributions received from joint ventures in our statements of cash flows, cumulative distributions are treated
as returns on capital to the extent of cumulative earnings and included in our consolidated statements of cash flows as
cash flows from operating activities. Cumulative distributions in excess of our share of cumulative earnings are treated as
returns of capital and included in our consolidated statements of cash flows as cash flows from investing activities.
57
Summarized financial information on a combined 100% basis related to Lennar Multifamily’s unconsolidated
entities that are accounted for by the equity method was as follows:
Balance Sheet
(In thousands)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating properties and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and equity:
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Statements of Operations and Selected Information
November 30,
2014
2013
25,319
637,259
14,742
677,320
87,151
163,376
426,793
677,320
5,800
236,528
3,460
245,788
11,147
51,604
183,037
245,788
Years Ended November 30,
(In thousands)
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) of unconsolidated entities . . . . . . . . . . . . . . . . . . . . $
Lennar Multifamily equity in earnings (loss) from unconsolidated
entities (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Our investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . $
Equity of the unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
4,855
7,435
35,068
32,488
14,454
105,674
426,793
2013
2012
—
1,493
—
(1,493)
(271)
46,301
183,037
—
29
—
(29)
(4)
3,126
18,872
Our investment % in the unconsolidated entities . . . . . . . . . . . . . . . . . .
25%
25%
17%
(1) Other income, net, included the gains related to the sale of two operating properties during the year ended November 30, 2014.
(2) For the year ended November 30, 2014, Lennar Multifamily equity in earnings from unconsolidated entities included Lennar
Multifamily's share of gains totaling $14.7 million related to the sale of two operating properties by unconsolidated entities. Our
share of profits and cash distributions from the sales of the two operating properties was higher compared to our ownership
interests in the two unconsolidated entities due to the achievement of specified internal rate of return milestones.
Option Contracts
We have access to land through option contracts, which generally enables us to control portions of properties
owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise
the option.
A majority of our option contracts require a non-refundable cash deposit or irrevocable letter of credit based on
a percentage of the purchase price of the land. Until recently, these option deposits generally have approximated 10% of
the exercise price. Sometimes, we are required to undertake property development during the option period, which
increases the amounts we lose if we do no exercise particular options. Our option contracts sometimes include price
adjustment provisions, which adjust the purchase price of the land to its approximate fair value at the time of acquisition
or are based on fair value at the time of takedown. The exercise periods of our option contracts generally range from one
to ten years.
Our investments in option contracts are recorded at cost unless those investments are determined to be impaired,
in which case our investments are written down to fair value. We review option contracts for indicators of impairment
during each reporting period. The most significant indicator of impairment is a decline in the fair value of the optioned
property such that the purchase and development of the optioned property would no longer meet our targeted return on
investment. Such declines could be caused by a variety of factors including increased competition, decreases in demand
or changes in local regulations that adversely impact the cost of development. Changes in any of these factors would
cause us to re-evaluate the likelihood of exercising our land options.
58
Some option contracts contain a predetermined take-down schedule for the optioned land parcels. However, in
almost all instances, we are not required to purchase land in accordance with those take-down schedules. In substantially
all instances, we have the right and ability to not exercise our option and forfeit our deposit without further penalty, other
than termination of the option and loss of any unapplied portion of our deposit and pre-acquisition costs. Therefore, in
substantially all instances, we do not consider the take-down price to be a firm contractual obligation.
When we intend not to exercise an option, we write-off any deposit and pre-acquisition costs associated with the
option contract. For the years ended November 30, 2014, 2013 and 2012, we wrote-off $4.6 million, $1.9 million and
$2.4 million, respectively, of option deposits and pre-acquisition costs related to homesites under option that we do not
intend to purchase.
The table below indicates the number of homesites owned and homesites to which we had access through
option contracts with third parties (“optioned”) or unconsolidated JVs (i.e., controlled homesites) at November 30, 2014
and 2013:
November 30, 2014
East . . . . . . . . . . . . . . . . . . . . . . . .
Central . . . . . . . . . . . . . . . . . . . . . .
West. . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
Total homesites. . . . . . . . . . . .
Controlled Homesites
Optioned
JVs
Total
Owned
Homesites
Total
Homesites
9,649
5,582
2,867
2,860
1,746
2,151
24,855
93
1,135
5,358
446
3
—
7,035
9,742
6,717
8,225
3,306
1,749
2,151
31,890
45,489
20,704
38,222
9,507
11,788
6,969
132,679
55,231
27,421
46,447
12,813
13,537
9,120
164,569
November 30, 2013
East . . . . . . . . . . . . . . . . . . . . . . . .
Central . . . . . . . . . . . . . . . . . . . . . .
West. . . . . . . . . . . . . . . . . . . . . . . .
Southeast Florida . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
Total homesites. . . . . . . . . . . .
Controlled Homesites
Optioned
JVs
Total
Owned
Homesites
Total
Homesites
6,364
6,837
2,794
1,270
2,035
1,666
172
1,135
5,471
326
63
—
6,536
7,972
8,265
1,596
2,098
1,666
41,660
20,297
35,609
8,757
12,075
7,245
48,196
28,269
43,874
10,353
14,173
8,911
20,966
7,167
28,133
125,643
153,776
We evaluate all option contracts for land to determine whether they are VIEs and, if so, whether we are the
primary beneficiary of certain of these option contracts. Although we do not have legal title to the optioned land, if we
are deemed to be the primary beneficiary or make a significant deposit for optioned land, we may need to consolidate the
land under option at the purchase price of the optioned land. Due to the new agreement with Morgan Stanley & Co., Inc.,
$155.0 million of consolidated inventory not owned was reclassified to land and land under development and $70.3
million of consolidated inventory not owned was deconsolidated during the year ended November 30, 2014.
In addition to this transaction, during the year ended November 30, 2014, consolidated inventory not owned
decreased by $182.4 million with a corresponding decrease to liabilities related to consolidated inventory not owned in
the accompanying consolidated balance sheet as of November 30, 2014. The decrease was primarily due to the purchase
of land that was the subject of a previously consolidated option contract. To reflect the purchase price of the inventory
consolidated, we had a net reclass related to option deposits from consolidated inventory not owned to land under
development in the accompanying consolidated balance sheet as of November 30, 2014. The liabilities related to
consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned
land and our cash deposits.
Our exposure to loss related to our option contracts with third parties and unconsolidated entities consisted of
our non-refundable option deposits and pre-acquisition costs totaling $85.6 million and $129.2 million at November 30,
2014 and 2013, respectively. Additionally, we had posted $34.5 million and $29.9 million of letters of credit in lieu of
cash deposits under certain option contracts as of November 30, 2014 and 2013, respectively.
59
Contractual Obligations and Commercial Commitments
The following table summarizes certain of our contractual obligations at November 30, 2014:
(In thousands)
Lennar Homebuilding - Senior notes and other
Total
Less than
1 year
1 to 3
years
3 to 5
years
More than
5 years
Payments Due by Period
debts payable (1) . . . . . . . . . . . . . . . . . . . . . . $ 4,690,213
659,378
829,906
1,776,470
1,424,459
Lennar Financial Services - Notes and other
debts payable . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto - Notes and other debts payable (2) . . . .
Interest commitments under interest bearing
704,143
623,246
debt (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases. . . . . . . . . . . . . . . . . . . . . . . . .
Other contractual obligations (4). . . . . . . . . . . .
162,553
Total contractual obligations (5) . . . . . . . . . . . . $ 7,333,829
1,016,560
137,114
698,446
144,665
259,522
34,358
162,553
5,697
125,467
412,249
52,219
—
—
353,114
217,886
33,879
—
—
—
126,903
16,658
—
1,958,922
1,425,538
2,381,349
1,568,020
(1) Some of the senior notes and other debts payable are convertible senior notes, which have been included in this table based on
maturity dates, but they are putable to, or callable by, us at earlier dates than the maturity dates disclosed in this table. The puts
are described in the detail description of each of the convertible senior notes in the financial condition and capital resources
section of this M,D&A.
(2) Amount includes notes payable and other debts payable of $351.9 million related to Rialto's 7.00% Senior Notes, $60.6 million
related to Rialto's 5-year senior unsecured note, $141.3 million related to the RMF warehouse repurchase financing agreements
and $58.0 million related to Rialto's Structured Notes with an estimated final payment date of December 15, 2015.
(3) Interest commitments on variable interest-bearing debt are determined based on the interest rate as of November 30, 2014.
(4) Amount includes $41.8 million of commitments to fund Rialto's Fund II, $6.8 million of commitments to fund Rialto's
Mezzanine Fund, $44.0 million of commitments to fund loans to RMF and $70.0 million of remaining commitments to fund a
homebuilding unconsolidated entity that was formed in 2013 for further expenses up until the unconsolidated entity obtains
permanent financing.
(5) Total contractual obligations excludes our gross unrecognized tax benefits and accrued interest and penalties totaling $38.7
million as of November 30, 2014, because we are unable to make reasonable estimates as to the period of cash settlement with
the respective taxing authorities.
We are subject to the usual obligations associated with entering into contracts (including option contracts) for
the purchase, development and sale of real estate in the routine conduct of our business. Option contracts for the
purchase of land generally enable us to defer acquiring portions of properties owned by third parties and unconsolidated
entities until we have determined whether to exercise our options. This reduces our financial risk associated with land
holdings. At November 30, 2014, we had access to 31,890 homesites through option contracts with third parties and
unconsolidated entities in which we have investments. At November 30, 2014, we had $85.6 million of non-refundable
option deposits and pre-acquisition costs related to certain of these homesites and had posted $34.5 million of letters of
credit in lieu of cash deposits under certain option contracts.
At November 30, 2014, we had letters of credit outstanding in the amount of $424.6 million (which included the
$34.5 million of letters of credit discussed above). These letters of credit are generally posted either with regulatory
bodies to guarantee our performance of certain development and construction activities, or in lieu of cash deposits on
option contracts, for insurance risks, credit enhancements and as other collateral. Additionally, at November 30, 2014, we
had outstanding performance and surety bonds related to site improvements at various projects (including certain
projects of our joint ventures) of $923.3 million. Although significant development and construction activities have been
completed related to these site improvements, these bonds are generally not released until all of the development and
construction activities are completed. As of November 30, 2014, there were approximately $363.7 million, or 39%, of
costs to complete related to these site improvements. We do not presently anticipate any draws upon these bonds, but if
any such draws occur, we do not believe they would have a material effect on our financial position, results of operations
or cash flows.
Our Lennar Financial Services segment had a pipeline of loan applications in process of $1.5 billion at
November 30, 2014. Loans in process for which interest rates were committed to the borrowers totaled approximately
$395.2 million as of November 30, 2014. Substantially all of these commitments were for periods of 60 days or less.
Since a portion of these commitments is expected to expire without being exercised by the borrowers or borrowers may
not meet certain criteria at the time of closing, the total commitments do not necessarily represent future cash
requirements.
Our Lennar Financial Services segment uses mandatory mortgage-backed securities (“MBS”) forward
commitments, option contracts and investor commitments to hedge our mortgage-related interest rate exposure. These
instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk associated with MBS
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forward commitments, option contracts and loan sales transactions is managed by limiting our counterparties to
investment banks, federally regulated bank affiliates and other investors meeting our credit standards. Our risk, in the
event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward
commitments and option contracts. At November 30, 2014, we had open commitments amounting to $771.0 million to
sell MBS with varying settlement dates through February 2015.
The following sections discuss market and financing risk, seasonality and interest rates and changing prices that
may have an impact on our business:
Market and Financing Risk
We finance our contributions to JVs, land acquisition and development activities, construction activities,
financial services activities, Rialto activities, Lennar Multifamily activities and general operating needs primarily with
cash generated from operations, debt and equity issuances, as well as borrowings under our Credit Facility and
warehouse repurchase facilities. We also purchase land under option agreements, which enables us to control homesites
until we have determined whether to exercise the option. We tried to manage the financial risks of adverse market
conditions associated with land holdings by what we believed to be prudent underwriting of land purchases in areas we
viewed as desirable growth markets, careful management of the land development process and, until recent years,
limitation of risks by using partners to share the costs of purchasing and developing land as well as obtaining access to
land through option contracts. Although we believed our land underwriting standards were conservative, we did not
anticipate the severe decline in land values and the sharply reduced demand for new homes encountered from 2007 to
2010.
Seasonality
We historically have experienced, and expect to continue to experience, variability in quarterly results. Our
homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second
fiscal quarter and increased deliveries in the second half of our fiscal year. However, periods of economic downturn in
the industry, such as we have experienced in previous years, will typically alter seasonal patterns.
Interest Rates and Changing Prices
Inflation can have a long-term impact on us because increasing costs of land, materials and labor result in a
need to increase the sales prices of homes. In addition, inflation is often accompanied by higher interest rates, which can
have a negative impact on housing demand and the costs of financing land development activities and housing
construction. Rising interest rates as well as increased materials and labor costs, may reduce gross margins. An increase
in material and labor costs is particularly a problem during a period of declining home prices. Conversely, deflation can
impact the value of real estate and make it difficult for us to recover our land costs. Therefore, either inflation or
deflation could adversely impact our future results of operations.
New Accounting Pronouncements
See Note 1 of the notes to our consolidated financial statements for a comprehensive list of new accounting
pronouncements.
Critical Accounting Policies and Estimates
Our accounting policies are more fully described in Note 1 of the notes to our consolidated financial statements
included in Item 8 of this document. As discussed in Note 1, the preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions about future events that affect the amounts reported in our consolidated financial statements and
accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the
determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such
differences may be material to our consolidated financial statements. Listed below are those policies and estimates that
we believe are critical and require the use of significant judgment in their application.
Valuation of Deferred Tax Assets
We record income taxes under the asset and liability method, whereby deferred tax assets and liabilities are
recognized based on the future tax consequences attributable to temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and attributable to operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the
years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted. Interest related to
unrecognized tax benefits is recognized in the financial statements as a component of income tax expense.
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A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the
available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish
valuation allowances for deferred tax assets is assessed each reporting period by us based on the consolidation of all
available positive and negative evidence using a "more-likely-than-not" standard with respect to whether deferred tax
assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and
cumulative losses, actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, our
experience with loss carryforwards not expiring unused and tax planning alternatives.
We believe that the accounting estimate for the valuation of deferred tax assets is a critical accounting estimate
because of the judgment required in assessing the likely future tax consequences of events that have been recognized in
our financial statements or tax returns. We base our estimate of deferred tax assets and liabilities on current tax laws and
rates and, in certain cases, business plans and other expectations about future outcomes. Changes in existing tax laws or
rates could affect actual tax results and future business results, which may affect the amount of deferred tax liabilities or
the valuation of deferred tax assets over time. Our accounting for deferred tax consequences represents our best estimate
of future events.
Goodwill
At November 30, 2014 and 2013, our goodwill was $44.3 million and $34.0 million. Goodwill represents the
excess of the purchase price paid over the fair value of the net assets acquired in business combinations. Evaluating
goodwill for impairment involves the determination of the fair value of our reporting units in which we have recorded
goodwill. A reporting unit is a component of an operating segment for which discrete financial information is available
and reviewed by management on a regular basis. Inherent in the determination of fair value of our reporting units are
certain estimates and judgments, including the interpretation of current economic indicators and market valuations as
well as our strategic plans with regard to our operations. To the extent additional information arises or our strategies
change, it is possible that our conclusion regarding goodwill impairment could change, which could have a material
effect on our financial position and results of operations. For these reasons, we believe that the accounting estimate
related to goodwill impairment is a critical accounting estimate.
We review goodwill annually (or whenever indicators of impairment exist) for impairment. We evaluated the
carrying value of our Lennar Financial Services and Rialto segments' goodwill in the fourth quarter of 2014. We
estimated the fair value of our Lennar Financial Services title and and mortgage operations and Rialto operations based
on the income approach and concluded that a goodwill impairment was not required for 2014. During the years ended
November 30, 2014, 2013 and 2012, we did not record goodwill impairment charges.
The income approach establishes fair value by methods which discount or capitalize earnings and/or cash flow
by a discount or capitalization rate that reflects market rate of return expectations, market conditions and the risk of the
relative investment. We used a discounted cash flow method when applying the income approach. This analysis includes
operating income, interest expense, taxes and incremental working capital as well as other factors. The projections used
in the analysis are for a five-year period and represent what we consider to be normalized earnings.
In determining the fair value of our Lennar Financial Services title and mortgage operations and Rialto
operations under the income approach, our expected cash flows are affected by various assumptions. The most
significant assumptions affecting our expected cash flows are the discount rate, projected revenue growth rate and
operating profit margin. The impact of a change in any of our significant underlying assumptions +/- 1% would not result
in a materially different fair value.
As of both November 30, 2014 and 2013, there were no significant identifiable intangible assets, other than
goodwill.
Lennar Homebuilding and Lennar Multifamily Operations
Lennar Homebuilding Revenue Recognition
Revenues from sales of homes are recognized when the sales are closed and title passes to the new homeowner,
the new homeowner’s initial and continuing investment is adequate to demonstrate a commitment to pay for the home,
the new homeowner’s receivable is not subject to future subordination and we do not have a substantial continuing
involvement with the new home. Revenues from sales of land are recognized when a significant down payment is
received, the earnings process is complete, title passes and collectability of the receivable is reasonably assured. We
believe that the accounting policy related to revenue recognition is a critical accounting policy because of the
significance of revenue.
Lennar Multifamily Revenue Recognition
Our Lennar Multifamily segment provides management services with respect to the development, construction
and management of rental projects in joint ventures in which we have investments. As a result, our Lennar Multifamily
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segment earns and receives fees, which are based upon a stated percentage of development and construction costs. These
fees are included in Lennar Multifamily revenue and are recorded over the period in which the services are performed,
fees are determinable and collectability is reasonably assured. In addition, our Lennar Multifamily segment provides
general contractor services for the construction of some of its rental projects and recognizes the revenue over the period
in which the services are performed under the percentage of completion method. We believe that the accounting policy
related to Lennar Multifamily revenue recognition is a critical accounting policy because it represents a significant
portion of our Lennar Multifamily's revenues and is expected to continue to grow in the future as the segment construct
more rental properties.
Inventories
Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which
case the impaired inventory is written down to fair value. Inventory costs include land, land development and home
construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and
construction. We review our inventory for indicators of impairment by evaluating each community during each reporting
period. The inventory within each community is categorized as finished homes and construction in progress or land
under development based on the development state of the community. There were 622 and 535 active communities,
excluding unconsolidated entities, as of November 30, 2014 and 2013, respectively. If the undiscounted cash flows
expected to be generated by a community are less than its carrying amount, an impairment charge is recorded to write
down the carrying amount of such community to its estimated fair value.
In conducting our review for indicators of impairment on a community level, we evaluate, among other things,
the margins on homes that have been delivered, margins on homes under sales contracts in backlog, projected margins
with regard to future home sales over the life of the community, projected margins with regard to future land sales, and
the estimated fair value of the land itself. We pay particular attention to communities in which inventory is moving at a
slower than anticipated absorption pace and communities whose average sales price and/or margins are trending
downward and are anticipated to continue to trend downward. From this review, we identify communities whose
carrying values exceed their undiscounted cash flows. For the year ended November 30, 2014, revenues and gross
margins have increased for all of our homebuilding segments and Homebuilding Other, except for the gross margins of
our Lennar Homebuilding West segment, compared to the year ended November 30, 2013, primarily due to an increase
in home deliveries and an increase in the average sales price of homes delivered .
We estimate the fair value of our communities using a discounted cash flow model. The projected cash flows for
each community are significantly impacted by estimates related to market supply and demand, product type by
community, homesite sizes, sales pace, sales prices, sales incentives, construction costs, sales and marketing expenses,
the local economy, competitive conditions, labor costs, costs of materials and other factors for that particular community.
Every division evaluates the historical performance of each of its communities as well as current trends in the market and
economy impacting the community and its surrounding areas. These trends are analyzed for each of the estimates listed
above. For example, during the downturn in the housing market, we found ways to reduce our construction costs in many
communities, and this reduction in construction costs in addition to changes in product type in many communities
impacted future estimated cash flows.
Each of the homebuilding markets in which we operate is unique, as homebuilding has historically been a local
business driven by local market conditions and demographics. Each of our homebuilding markets has specific supply and
demand relationships reflective of local economic conditions. Our projected cash flows are impacted by many
assumptions. Some of the most critical assumptions in our cash flow models are our projected absorption pace for home
sales, sales prices and costs to build and deliver our homes on a community by community basis.
In order to arrive at the assumed absorption pace for home sales included in our cash flow models, we analyze
our historical absorption pace in the community as well as other comparable communities in the geographical area. In
addition, we consider internal and external market studies and trends, which generally include, but are not limited to,
statistics on population demographics, unemployment rates and availability of competing product in the geographic area
where the community is located. When analyzing our historical absorption pace for home sales and corresponding
internal and external market studies, we place greater emphasis on more current metrics and trends such as the
absorption pace realized in our most recent quarters as well as forecasted population demographics, unemployment rates
and availability of competing product. Generally, if we notice a variation from historical results over a span of two fiscal
quarters, we consider such variation to be the establishment of a trend and adjust our historical information accordingly
in order to develop assumptions on the projected absorption pace in the cash flow model for a community.
In order to determine the assumed sales prices included in our cash flow models, we analyze the historical sales
prices realized on homes we delivered in the community and other comparable communities in the geographical area as
well as the sales prices included in our current backlog for such communities. In addition, we consider internal and
external market studies and trends, which generally include, but are not limited to, statistics on sales prices in
neighboring communities and sales prices on similar products in non-neighboring communities in the geographic area
where the community is located. When analyzing our historical sales prices and corresponding market studies, we also
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place greater emphasis on more current metrics and trends such as future forecasted sales prices in neighboring
communities as well as future forecasted sales prices for similar product in non-neighboring communities. Generally, if
we notice a variation from historical results over a span of two fiscal quarters, we consider such variation to be the
establishment of a trend and adjust our historical information accordingly in order to develop assumptions on the
projected sales prices in the cash flow model for a community.
In order to arrive at our assumed costs to build and deliver our homes, we generally assume a cost structure
reflecting contracts currently in place with our vendors adjusted for any anticipated cost reduction initiatives or increases
in cost structure. Those costs assumed are used in our cash flow models for our communities.
Since the estimates and assumptions included in our cash flow models are based upon historical results and
projected trends, they do not anticipate unexpected changes in market conditions or strategies that may lead to us
incurring additional impairment charges in the future.
Using all the available information, we calculate our best estimate of projected cash flows for each community.
While many of the estimates are calculated based on historical and projected trends, all estimates are subjective and
change from market to market and community to community as market and economic conditions change. The
determination of fair value also requires discounting the estimated cash flows at a rate we believe a market participant
would determine to be commensurate with the inherent risks associated with the assets and related estimated cash flow
streams. The discount rate used in determining each asset’s fair value depends on the community’s projected life and
development stage. We generally use a discount rate of approximately 20%, subject to the perceived risks associated with
the community’s cash flow streams relative to its inventory.
We estimate the fair value of inventory evaluated for impairment based on market conditions and assumptions
made by management at the time the inventory is evaluated, which may differ materially from actual results if market
conditions or our assumptions change. For example, market deterioration or changes in our assumptions may lead us to
incur additional impairment charges on previously impaired inventory, as well as on inventory not currently impaired,
but for which indicators of impairment may arise if market deterioration occurs.
We also have access to land inventory through option contracts, which generally enables us to defer acquiring
portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise
our option. A majority of our option contracts require a non-refundable cash deposit or irrevocable letter of credit based
on a percentage of the purchase price of the land. Our option contracts are recorded at cost. In determining whether to
walk-away from an option contract, we evaluate the option primarily based upon the expected cash flows from the
property under option. If we intend to walk-away from an option contract, we record a charge to earnings in the period
such decision is made for the deposit amount and any related pre-acquisition costs associated with the option contract.
We believe that the accounting related to inventory valuation and impairment is a critical accounting policy
because: (1) assumptions inherent in the valuation of our inventory are highly subjective and susceptible to change and
(2) the impact of recognizing impairments on our inventory has been and could continue to be material to our
consolidated financial statements. Our evaluation of inventory impairment, as discussed above, includes many
assumptions. The critical assumptions include the timing of the home sales within a community, management’s
projections of selling prices and costs and the discount rate applied to estimate the fair value of the homesites within a
community on the balance sheet date. Our assumptions on the timing of home sales are critical because the homebuilding
industry has historically been cyclical and sensitive to changes in economic conditions such as interest rates, credit
availability, unemployment levels and consumer sentiment. Changes in these economic conditions could materially affect
the projected sales price, costs to develop the homesites and/or absorption rate in a community. Our assumptions on
discount rates are critical because the selection of a discount rate affects the estimated fair value of the homesites within
a community. A higher discount rate reduces the estimated fair value of the homesites within the community, while a
lower discount rate increases the estimated fair value of the homesites within a community. Because of changes in
economic and market conditions and assumptions and estimates required of management in valuing inventory during
changing market conditions, actual results could differ materially from management’s assumptions and may require
material inventory impairment charges to be recorded in the future.
Product Warranty
Although we subcontract virtually all aspects of construction to others and our contracts call for the
subcontractors to repair or replace any deficient items related to their trades, we are primarily responsible to homebuyers
to correct any deficiencies. Additionally, in some instances, we may be held responsible for the actions of or losses
incurred by subcontractors. Warranty and similar reserves for homes are established at an amount estimated to be
adequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred
subsequent to the delivery of a home. Reserves are determined based upon historical data and trends with respect to
similar product types and geographical areas. We believe the accounting estimate related to the reserve for warranty costs
is a critical accounting estimate because the estimate requires a large degree of judgment.
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At November 30, 2014, the reserve for warranty costs was $115.9 million, which included $12.7 million of
adjustments to pre-existing warranties from changes in estimates during the current year primarily related to specific
claims related to certain of our homebuilding communities and other adjustments. While we believe that the reserve for
warranty costs is adequate, there can be no assurances that historical data and trends will accurately predict our actual
warranty costs. Additionally, there can be no assurances that future economic or financial developments might not lead to
a significant change in the reserve.
Lennar Homebuilding and Lennar Multifamily Investments in Unconsolidated Entities
We strategically invest in unconsolidated entities that acquire and develop land (1) for our homebuilding
operations or for sale to third parties, (2) for construction of homes for sale to third-party homebuyers or (3) for the
construction of multifamily rental properties. Our Lennar Homebuilding partners generally are unrelated homebuilders,
land owners/developers and financial or other strategic partners. Our Lennar Multifamily partners are all financial
partners.
Most of the unconsolidated entities through which we acquire and develop land are accounted for by the equity
method of accounting because we are not the primary beneficiary, and we have a significant, but less than controlling,
interest in the entities. We record our investments in these entities in our consolidated balance sheets as “Lennar
Homebuilding or Lennar Multifamily Investments in Unconsolidated Entities” and our pro-rata share of the entities’
earnings or losses in our consolidated statements of operations as “Lennar Homebuilding or Lennar Multifamily Equity
in Earnings (Loss) from Unconsolidated Entities,” as described in Note 4 and Note 9 of the notes to our consolidated
financial statements. For most unconsolidated entities, we generally have the right to share in earnings and distributions
on a pro-rata basis based upon ownership percentages. However, certain Lennar Homebuilding unconsolidated entities
and all of our Lennar Multifamily unconsolidated entities provide for a different allocation of profit and cash
distributions if and when cumulative results of the joint venture exceed specified targets (such as a specified internal rate
of return). Advances to these entities are included in the investment balance.
Management looks at specific criteria and uses its judgment when determining if we are the primary beneficiary
of, or have a controlling interest in, an unconsolidated entity. Factors considered in determining whether we have
significant influence or we have control include risk and reward sharing, experience and financial condition of the other
partners, voting rights, involvement in day-to-day capital and operating decisions and continuing involvement. The
accounting policy relating to the use of the equity method of accounting is a critical accounting policy due to the
judgment required in determining whether we are the primary beneficiary or have control or significant influence.
As of November 30, 2014, we believe that the equity method of accounting is appropriate for our investments in
unconsolidated entities where we are not the primary beneficiary and we do not have a controlling interest, but rather
share control with our partners. At November 30, 2014, the Lennar Homebuilding unconsolidated entities in which we
had investments had total assets of $3.3 billion and total liabilities of $1.0 billion. At November 30, 2014, the Lennar
Multifamily unconsolidated entities in which we had investments had total assets of $677.3 million and total liabilities of
$250.5 million.
We evaluate our investments in unconsolidated entities for indicators of impairment during each reporting
period. A series of operating losses of an investee or other factors may indicate that a decrease in the fair value of our
investment in the unconsolidated entity below its carrying amount has occurred which is other-than-temporary. The
amount of impairment recognized is the excess of the investment’s carrying amount over its estimated fair value.
The evaluation of our investment in unconsolidated entities includes certain critical assumptions: (1) projected
future distributions from the unconsolidated entities, (2) discount rates applied to the future distributions and (3) various
other factors.
Our assumptions on the projected future distributions from the Lennar Homebuilding unconsolidated entities
are dependent on market conditions. Specifically, distributions are dependent on cash to be generated from the sale of
inventory by the Lennar Homebuilding unconsolidated entities or assets by Lennar Multifamily unconsolidated entities.
Such inventory is also reviewed for potential impairment by the unconsolidated entities. The review for inventory
impairment performed by the unconsolidated entities is materially consistent with our process, as discussed above, for
evaluating our own inventory as of the end of a reporting period. The unconsolidated entities generally also use a
discount rate of approximately 20% in their reviews for impairment, subject to the perceived risks associated with the
community’s cash flow streams relative to its inventory. If a valuation adjustment is recorded by an unconsolidated entity
related to its assets, our proportionate share is reflected in our Lennar Homebuilding or Lennar Multifamily equity in
earnings (loss) from unconsolidated entities with a corresponding decrease to our Lennar Homebuilding or Lennar
Multifamily investment in unconsolidated entities. In certain instances, we may be required to record additional losses
relating to our investment in unconsolidated entities; if our investment in the unconsolidated entity, or a portion thereof,
is deemed to be other than temporarily impaired. These losses are included in Lennar Homebuilding other income
(expense), net or Lennar Multifamily costs and expenses. We believe our assumptions on the projected future
distributions from the unconsolidated entities are critical because the operating results of the unconsolidated entities from
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which the projected distributions are derived are dependent on the status of the homebuilding industry, which has
historically been cyclical and sensitive to changes in economic conditions such as interest rates, credit availability,
unemployment levels and consumer sentiment. Changes in these economic conditions could materially affect the
projected operational results of the unconsolidated entities from which the distributions are derived.
Additionally, we consider various qualitative factors to determine if a decrease in the value of our investment is
other-than-temporary. These factors include age of the venture, intent and ability for us to recover our investment in the
entity, financial condition and long-term prospects of the unconsolidated entity, short-term liquidity needs of the
unconsolidated entity, trends in the general economic environment of the land, entitlement status of the land held by the
unconsolidated entity, overall projected returns on investments, defaults under contracts with third parties (including
bank debt), recoverability of the investment through future cash flows and relationships with the other partners and
banks. If we believe that the decline in the fair value of the investment is temporary, then no impairment is recorded.
In addition, we believe our assumptions on discount rates are critical accounting policies because the selection
of the discount rates affects the estimated fair value of our investments in unconsolidated entities. A higher discount rate
reduces the estimated fair value of our investments in unconsolidated entities, while a lower discount rate increases the
estimated fair value of our investments in unconsolidated entities. Because of changes in economic conditions, actual
results could differ materially from management’s assumptions and may require material valuation adjustments to our
investments in unconsolidated entities to be recorded in the future.
Consolidation of Variable Interest Entities
GAAP requires the consolidation of VIEs in which an enterprise has a controlling financial interest. A
controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE
that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that
could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be
significant to the VIE.
Our variable interest in VIEs may be in the form of (1) equity ownership, (2) contracts to purchase assets,
(3) management services and development agreements between us and a VIE, (4) loans provided by us to a VIE or other
partner and/or (5) guarantees provided by members to banks and other third parties. We examine specific criteria and use
our judgment when determining if we are the primary beneficiary of a VIE. Factors considered in determining whether
we are the primary beneficiary include risk and reward sharing, experience and financial condition of other partner(s),
voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s executive committee,
existence of unilateral kick-out rights or voting rights, level of economic disproportionality between us and the other
partner(s) and contracts to purchase assets from VIEs.
Generally, all major decision making in our joint ventures is shared among all partners. In particular, business
plans and budgets are generally required to be unanimously approved by all partners. Usually, management and other
fees earned by us are nominal and believed to be at market and there is no significant economic disproportionality
between us and other partners. Generally, we purchase less than a majority of the JV’s assets and the purchase prices
under our option contracts are believed to be at market.
Generally, our Lennar Homebuilding unconsolidated entities become VIEs and consolidate when the other
partner(s) lack the intent and financial wherewithal to remain in the entity. As a result, we continue to fund operations
and debt paydowns through partner loans or substituted capital contributions. The accounting policy relating to variable
interest entities is a critical accounting policy because the determination whether an entity is a VIE and, if so, whether we
are primary beneficiary may require us to exercise significant judgment.
Lennar Financial Services Operations
Revenue Recognition
Title premiums on policies issued directly by us are recognized as revenue on the effective date of the title
policies and escrow fees and loan origination revenues are recognized at the time the related real estate transactions are
completed, usually upon the close of escrow. Revenues from title policies issued by independent agents are recognized as
revenue when notice of issuance is received from the agent, which is generally when cash payment is received by us.
Expected gains and losses from the sale of loans and their related servicing rights are included in the measurement of all
written loan commitments that are accounted for at fair value through earnings at the time of commitment. Interest
income on loans held-for-sale and loans held-for-investment is recognized as earned over the terms of the mortgage loans
based on the contractual interest rates. We believe that the accounting policy related to revenue recognition is a critical
accounting policy because of the significance of revenue.
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Loan Origination Liabilities
Substantially all of the loans our Lennar Financial Services segment originates are sold within a short period in
the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, we retain potential
liability for possible claims by purchasers that we breached certain limited industry-standard representations and
warranties related to loan sales. During recent years there has been an increased industry-wide effort by purchasers to
defray their losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular
loan sale agreements.
Our mortgage operations have established reserves for possible losses associated with mortgage loans
previously originated and sold to investors. We establish reserves for such possible losses based upon, among other
things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual
past repurchases and losses through the disposition of affected loans, as well as previous settlements. While we believe
that we have adequately reserved for known losses and projected repurchase requests, given the volatility in the
mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the
losses incurred resolving those repurchases exceed our expectations, additional recourse expense may be incurred. This
allowance requires management’s judgment and estimate. For these reasons, we believe that the accounting estimate
related to the loan origination losses is a critical accounting estimate.
Rialto Operations
Management Fees Revenue
Our Rialto segment provides services to a variety of legal entities and investment vehicles such as funds, joint
ventures, co-invests, and other private equity structures to manage their respective investments. As a result, Rialto earns
and receives management fees, underwriting fees and due diligence fees. These fees related to our Rialto segment are
included in Rialto revenues and are recorded over the period in which the services are performed, fees are determinable
and collectability is reasonably assured. Rialto receives investment management fees from investment vehicles based on
1) a percentage of committed capital during the commitment period and after the commitment period ends and 2) a
percentage of of invested capital less the portion of such invested capital utilized to acquire investments that have been
sold (in whole or in part) or liquidated. Fees earned for underwriting and due diligence services are based on actual costs
incurred. In certain situations, Rialto may earn additional fees when the return on assets managed exceeds contractually
established thresholds. Such revenue is only booked when the contract terms are met, the contract is at, or near,
completion and the amounts are known and collectability is reasonably assured. Since such revenue is recognized at the
end of the life of the investment vehicle, after substantially all of the assets have been sold and investment gains and
losses realized, the possibility of claw backs is limited. We believe the way we record Rialto management fees revenue is
a significant accounting policy because it represents a significant portion of our Rialto segment's revenues and is
expected to continue to grow in the future as the segment manages more assets.
Loans Receivable - Revenue Recognition
All of the acquired loans for which (1) there was evidence of credit quality deterioration since origination and
(2) for which it was deemed probable that we would be unable to collect all contractually required principal and interest
payments were accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality,
(“ASC 310-30”). For loans accounted for under ASC 310-30, management determined upon acquisition the loan’s value
based on due diligence regarding each of the loans, the underlying properties and the borrowers. We determined fair
value by discounting the cash flows expected to be collected adjusted for factors that a market participant would consider
when determining fair value. Factors considered in the valuation were projected cash flows for the loans, type of loan
and related collateral, classification status and current discount rates. Since the estimates are based on projections, all
estimates are subjective and can change due to unexpected changes in economic conditions or loan performance.
Under ASC 310-30, loans were pooled together according to common risk characteristics. A pool is then
accounted for as a single asset with a single component interest rate and as aggregate expectation of cash flows. The
excess of the cash flows expected to be collected over the cost of the loans acquired is referred to as the accretable yield
and is recognized in interest income over the remaining life of the loans using the effective yield method. The difference
between the contractually required payments and the cash flows expected to be collected at acquisition is referred to as
the nonaccretable difference. This difference is neither accreted into income nor recorded on our consolidated balance
sheets. Changes in the expected cash flows of loans receivable from the date of acquisition will either impact the
accretable yield or result in a charge to the provision for loan losses in the period in which the changes become probable.
Prepayments are treated as a reduction of cash flows expected to be collected and a reduction of contractually required
payments such that the nonaccretable difference is not affected. Subsequent significant decreases to the expected cash
flows will generally result in a charge to the provision for loan losses, resulting in an increase to the allowance for loan
losses, and a reclassification from accretable yield to nonaccretable difference. Subsequent probable and significant
increases in the cash flows will result in a recovery of any previously recorded allowance for loan losses, to the extent
67
applicable, and a reclassification from nonaccretable difference to accretable yield. Amounts related to the ASC 310-30
loans are estimates and may change as we obtain additional information related to the respective loans and the inherent
uncertainty associated with estimating the amount and timing of the expected cash flows associated with distressed
residential and commercial real estate loans. The timing and amount of expected cash flows and related accretable yield
can also be impacted by disposal of loans, loan payoffs or expected foreclosures, which result in removal of the loans
from the pools. Since the cash flows are based on projections, they are subjective and can change due to unexpected
changes in economic conditions and loan performance. During the fourth quarter of 2014, in an effort to better reflect the
performance of the loan portfolios, we changed from recording accretable yield income on a loan pool basis to recording
income on a cost recovery basis per loan as expected cash flows on the remaining loan portfolios could no longer be
reasonably estimated. At November 30, 2014, these loans were classified as nonaccrual loans.
We believe that the accounting related to loans with deteriorated credit quality and that the accounting for
accretable yield are critical accounting policies because of the significant judgment involved.
Nonaccrual Loans - Revenue Recognition and Impairment
For loans in which forecasted principal and interest could not be reasonably estimated at the loan acquisition
date, management classified these loans as nonaccrual and accounts for these assets in accordance with ASC 310-10,
Receivables, (“ASC 310-10”). When a loan is classified as nonaccrual, any subsequent cash receipt is accounted for
using the recovery method. In accordance with ASC 310-10, a loan is considered impaired when based on current
information and events; it is probable that all amounts due according to the contractual terms of the loan agreement will
not be collected.
A provision for loan losses is recognized when the recorded investments in the loan is in excess of its fair value.
The fair value of the loan is determined by using either the present value of expected future cash flows discounted at the
loan's effective interest rate or the fair value of the collateral less estimated costs to sell.
We believe that the accounting for nonaccrual loans is a critical accounting estimate because of the significant
judgment involved.
As described above, during the fourth quarter of 2014, in an effort to better reflect the performance of the loan
portfolios accounted under ASC 310-30, we changed from recording accretable yield income on a loan pool basis to
recording income on a cost recovery basis per loan as expected cash flows on the remaining loan portfolios could no
longer be reasonable estimated. At November 30, 2014, those loans that were accounted under ASC 310-30 were
classified as nonaccrual loans.
Real Estate Owned
REO represents real estate that our Rialto segment has taken control or has effective control of in partial or full
satisfaction of loans receivable. At the time of acquisition of a property through foreclosure of a loan, REO is recorded at
fair value less estimated costs to sell if classified as held-for-sale or at fair value if classified as held-and-used, which
becomes the property’s new basis. The fair values of these assets are determined in part by placing reliance on third-party
appraisals of the properties and/or internally prepared analyses of recent offers or prices on comparable properties in the
proximate vicinity. The third-party appraisals and internally developed analyses are significantly impacted by the local
market economy, market supply and demand, competitive conditions and prices on comparable properties, adjusted for
date of sale, location, property size, and other factors. Each REO is unique and is analyzed in the context of the particular
market where the property is located. In order to establish the significant assumptions for a particular REO, we analyze
historical trends, including trends achieved by our local homebuilding operations, if applicable, and current trends in the
market and economy impacting the REO. Using available trend information, we then calculate our best estimate of fair
value, which can include projected cash flows discounted at a rate we believe a market participant would determine to be
commensurate with the inherent risks associated with the assets and related estimated cash flow streams.
Changes in economic factors, consumer demand and market conditions, among other things, could materially
impact estimates used in the third-party appraisals and/or internally prepared analyses of recent offers or prices on
comparable properties. Thus, estimates can differ significantly from the amounts ultimately realized by our Rialto
segment from disposition of these assets. The amount by which the recorded investment in the loan is less than the
REO’s fair value (net of estimated cost to sell if held-for-sale), is recorded as an unrealized gain on foreclosure in our
consolidated statement of operations. The amount by which the recorded investment in the loan is greater than the REO’s
fair value (net of estimated cost to sell if held-for-sale) is initially recorded as an impairment in our consolidated
statement of operations.
Subsequent to obtaining REO via foreclosure or directly from a financial institution, management periodically
performs valuations using the methodologies described above such that the real estate is carried at the lower of its
carrying value or current fair value, less estimated costs to sell if classified as held-for-sale. Held-and-used assets are
tested for recoverability whenever changes in circumstances indicate that the carrying value may not be recoverable, and
impairment losses are recorded for any amount by which the carrying value exceeds its fair value. Any subsequent
68
impairment losses, operating expenses or income, and gains and losses on disposition of such properties are also
recognized in our Rialto other income (expense), net. REO assets classified as held-and-used are depreciated using a
useful life of forty years for commercial properties and twenty seven and a half years for residential properties. REO
assets classified as held-for-sale are not depreciated. Occasionally an asset will require certain improvements to yield a
higher return. In accordance with ASC 970-340-25, Real Estate, construction costs incurred prior to acquisition or during
development of the asset may be capitalized.
We believe that the accounting related to REO is a critical accounting policy because of the significant
judgment required in the third-party appraisals and/or internally prepared analysis of recent offers or prices of
comparable properties in the proximate vicinity used to estimate the fair value of REOs.
Rialto Mortgage Finance - Loans Held-for Sale
The originated mortgage loans are classified as loans held-for-sale on the consolidated balance sheets and are
recorded at fair value. We elected the fair value option for RMF's loans held-for-sale in accordance with ASC 825,
Financial Instruments, which permits entities to measure various financial instruments and certain other items at fair
value on a contract-by-contract basis. Changes in fair values of the loans are reflected in our Rialto revenues in the
accompanying consolidated statements of operations. Interest income on these loans is calculated based on the interest
rate of the loan and is recorded within Rialto revenues in the accompanying consolidated statements of operations.
Substantially all of the mortgage loans originated are sold within a short period of time in a securitization on a servicing
released, non-recourse basis; although, we remain liable for certain limited industry-standard representations and
warranties related to loan sales. We recognize revenue on the sale of loans into securitizations trusts when control of the
loans has been relinquished.
We believe this is a critical accounting policy due to the significant judgment involved in estimating the fair
values of loans held-for-sale during the period between time the loan is originated and the time the loan is sold and of its
significance to our Rialto segment.
Consolidations of Variable Interest Entities
In 2010, our Rialto segment acquired indirectly 40% managing member equity interests in two limited liability
companies (“LLCs”), in partnership with the FDIC. We determined that each of the LLCs met the definition of a variable
interest entity (“VIE”) and we were the primary beneficiary. In accordance with ASC 810-10-65-2, Consolidations,
(“ASC 810-10-65-2”), we identified the activities that most significantly impact the LLCs’ economic performance and
determined that we have the power to direct those activities. The economic performance of the LLCs is most
significantly impacted by the performance of the LLCs’ portfolios of assets, which consist primarily of distressed
residential and commercial mortgage loans. Thus, the activities that most significantly impact the LLCs’ economic
performance are the servicing and disposition of mortgage loans and real estate obtained through foreclosure of loans,
restructuring of loans, or other planned activities associated with the monetizing of loans.
The FDIC does not have the unilateral power to terminate our role in managing the LLCs and servicing the loan
portfolios. While the FDIC has the right to prevent certain types of transactions (i.e., bulk sales, selling assets with
recourse back to the selling entity, selling assets with representations and warranties and financing the sales of assets
without the FDIC’s approval), the FDIC does not have full voting or blocking rights over the LLCs’ activities, making
their voting rights protective in nature, not substantive participating voting rights. Other than as described in the
preceding sentence, which are not the primary activities of the LLCs, we can cause the LLCs to enter into both the
disposition and restructuring of loans without any involvement of the FDIC. Additionally, the FDIC has no voting rights
with regard to the operation/management of the operating properties that are acquired upon foreclosure of loans (e.g.
REO) and no voting rights over the business plans of the LLCs. The FDIC can make suggestions regarding the business
plans, but we can decide not to follow the FDIC’s suggestions and not to incorporate them in the business plans. Since
the FDIC’s voting rights are protective in nature and not substantive participating voting rights, we have the power to
direct the activities that most significantly impact the LLCs’ economic performance.
In accordance with ASC 810-10-65-2, we determined that we had an obligation to absorb losses of the LLCs
that could potentially be significant to the LLCs or the right to receive benefits from the LLCs that could potentially be
significant to the LLCs based on the following factors:
• Rialto/Lennar owns 40% of the equity of the LLCs and has the power to direct the activities of the LLCs
that most significantly impact their economic performance through loan resolutions and the sale of REO.
• Rialto/Lennar has a management/servicer contract under which we earn a 0.5% servicing fee.
• Rialto/Lennar has guaranteed, as the servicer, its obligations under the servicing agreement up to $10
million.
We are aware that the FDIC, as the owner of 60% of the equity of each of the LLCs, may also have an
obligation to absorb losses of the LLCs that could potentially be significant to the LLCs. However, in accordance with
ASC 810-10-25-38A, only one enterprise, if any, is expected to be identified as the primary beneficiary of a VIE.
69
Since both criteria for consolidation in ASC 810-10-65-2 are met, we consolidated the LLCs. We believe that
our assessment that we are the primary beneficiary of the LLCs is a critical accounting policy because of the significant
judgment required in evaluating all of the key factors and circumstances in determining the primary beneficiary.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks related to fluctuations in interest rates on our investments, debt obligations,
loans held-for-sale and loans held-for-investment. We utilize forward commitments and option contracts to mitigate the
risks associated with our mortgage loan portfolio. The table below provides information at November 30, 2014 about our
significant financial instruments that are sensitive to changes in interest rates. For loans held-for-sale, loans held-for-
investment, net and investments held-to-maturity, senior notes and other debts payable and notes and other debts
payable, the table presents principal cash flows and related weighted average effective interest rates by expected maturity
dates and estimated fair values at November 30, 2014. Weighted average variable interest rates are based on the variable
interest rates at November 30, 2014. Rialto loans receivable, net are not included in the table below because these loans
were acquired having deteriorated credit quality, thus, we believe they are not sensitive to changes in interest rates. See
Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and Notes 1 and 15
of the notes to consolidated financial statements in Item 8 for a further discussion of these items and our strategy of
mitigating our interest rate risk.
70
Information Regarding Interest Rate Sensitivity
Principal (Notional) Amount by
Expected Maturity and Average Interest Rate
November 30, 2014
Years Ending November 30,
Fair Value at
November 30,
2015
2016
2017
2018
2019
Thereafter
Total
2014
(Dollars in millions)
ASSETS
Rialto:
Investments held-to-maturity:
Fixed rate . . . . . . . . . . . . . . $ —
—
Average interest rate . . . . . .
Loans held-for-sale:
Fixed rate . . . . . . . . . . . . . . $ —
—
Average interest rate . . . . . .
Lennar Financial Services:
Loans held-for-sale:
Fixed rate . . . . . . . . . . . . . . $ —
—
Average interest rate . . . . . .
Variable rate . . . . . . . . . . . . $ —
—
Average interest rate . . . . . .
Loans held-for-investment, net
and investments held-to-
maturity:
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
17.3
4.0%
17.3
4.0%
113.6
113.6
4.7%
4.7%
676.2
676.2
4.1%
62.2
3.2%
4.1%
62.2
3.2%
Fixed rate . . . . . . . . . . . . . . $
Average interest rate . . . . . .
Variable rate . . . . . . . . . . . . $
Average interest rate . . . . . .
20.2
1.2%
0.1
4.0%
13.3
1.2%
0.1
4.0%
6.2
2.0%
0.1
4.0%
0.8
5.5%
0.1
4.0%
1.8
3.6%
0.1
4.0%
26.2
5.3%
2.9
4.0%
68.5
3.0%
3.4
4.0%
17.2
—
113.6
—
676.2
—
62.2
—
68.3
—
3.5
—
LIABILITIES
Lennar Homebuilding:
Senior notes and other debts
payable:
Fixed rate . . . . . . . . . . . . . . $ 614.0
Average interest rate . . . . . .
Variable rate . . . . . . . . . . . . $
Average interest rate . . . . . .
5.4%
45.4
3.3%
294.9
6.1%
122.9
2.2%
401.2
12.1%
10.9
2.5%
651.0
1,125.5
1,424.4
4,511.0
5.6%
—
—
4.4%
—
—
3.8%
—
—
5.3%
179.2
2.5%
5,576.1
—
184.0
—
Rialto:
Notes and other debts payable:
—
—
—
—
—
—
—
—
—
—
—
—
421.3
5.0%
201.9
3.1%
704.1
2.5%
441.7
—
198.6
—
704.1
—
Fixed rate . . . . . . . . . . . . . . $
Average interest rate . . . . . .
Variable rate . . . . . . . . . . . . $ 141.3
Average interest rate . . . . . .
3.4
7.3%
2.5%
63.7
3.8%
30.3
4.5%
1.1
5.9%
30.3
4.5%
353.1
5.2%
—
—
Lennar Financial Services:
Notes and other debts payable:
Variable rate . . . . . . . . . . . . $ 698.4
Average interest rate . . . . . .
2.5%
—
—
5.7
10.0%
—
—
71
Item 8.
Item 8.
Financial Statements and Supplementary Data.
Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Lennar Corporation
To the Board of Directors and Stockholders of Lennar Corporation
We have audited the accompanying consolidated balance sheets of Lennar Corporation and subsidiaries (the
We have audited the accompanying consolidated balance sheets of Lennar Corporation and subsidiaries (the
“Company”) as of November 30, 2014 and 2013, and the related consolidated statements of operations, equity, and cash
“Company”) as of November 30, 2014 and 2013, and the related consolidated statements of operations, equity, and cash
flows for each of the three years in the period ended November 30, 2014. These financial statements are the
flows for each of the three years in the period ended November 30, 2014. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
position of Lennar Corporation and subsidiaries as of November 30, 2014 and 2013, and the results of their operations
position of Lennar Corporation and subsidiaries as of November 30, 2014 and 2013, and the results of their operations
and their cash flows for each of the three years in the period ended November 30, 2014, in conformity with accounting
and their cash flows for each of the three years in the period ended November 30, 2014, in conformity with accounting
principles generally accepted in the United States of America.
principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of November 30, 2014, based on the criteria
(United States), the Company’s internal control over financial reporting as of November 30, 2014, based on the criteria
established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations
established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated January 23, 2015 expressed an unqualified opinion on the Company’s
of the Treadway Commission and our report dated January 23, 2015 expressed an unqualified opinion on the Company’s
internal control over financial reporting.
internal control over financial reporting.
Certified Public Accountants
Certified Public Accountants
Miami, Florida
Miami, Florida
January 23, 2015
January 23, 2015
72
72
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 30, 2014 and 2013
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 30, 2014 and 2013
2014 (1)
2013 (1)
(Dollars in thousands, except shares
and per share amounts)
2014 (1)
2013 (1)
ASSETS
Rialto:
Rialto:
ASSETS
Lennar Homebuilding:
Lennar Homebuilding:
(Dollars in thousands, except shares
and per share amounts)
885,729
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
695,424
9,849
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,150
885,729
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
695,424
93,444
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,935
9,849
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,150
Inventories:
93,444
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,935
3,082,345
Finished homes and construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . .
2,269,116
Inventories:
4,601,802
Land and land under development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,871,773
3,082,345
Finished homes and construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . .
2,269,116
52,453
Consolidated inventory not owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
460,159
4,601,802
Land and land under development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,871,773
7,736,600
Total inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,601,048
52,453
Consolidated inventory not owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
460,159
656,837
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
716,949
7,736,600
Total inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,601,048
672,589
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
748,629
656,837
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
716,949
10,055,048
8,850,135
672,589
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
748,629
10,055,048
8,850,135
303,889
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
201,496
46,975
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,593
303,889
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
201,496
153,773
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
111,833
46,975
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,593
130,105
Loans receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
278,392
153,773
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
111,833
113,596
Loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,228
130,105
Loans receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
278,392
190,535
Real estate owned - held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
197,851
113,596
Loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,228
255,795
Real estate owned - held-and-used, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
428,989
190,535
Real estate owned - held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
197,851
175,700
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
154,573
255,795
Real estate owned - held-and-used, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
428,989
87,784
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,358
175,700
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
154,573
1,458,152
1,479,313
87,784
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,358
1,177,053
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
796,710
1,458,152
1,479,313
268,014
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147,089
1,177,053
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
796,710
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,958,267
11,273,247
268,014
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147,089
(1) Under certain provisions of Accounting Standards Codification (“ASC”) Topic 810, Consolidations, (“ASC 810”) the Company
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,958,267
11,273,247
is required to separately disclose on its consolidated balance sheets the assets of consolidated variable interest entities (“VIEs”)
that are owned by the consolidated VIEs and liabilities of consolidated VIEs as to which there is no recourse against the
(1) Under certain provisions of Accounting Standards Codification (“ASC”) Topic 810, Consolidations, (“ASC 810”) the Company
Company.
is required to separately disclose on its consolidated balance sheets the assets of consolidated variable interest entities (“VIEs”)
that are owned by the consolidated VIEs and liabilities of consolidated VIEs as to which there is no recourse against the
As of November 30, 2014, total assets include $929.1 million related to consolidated VIEs of which $11.7 million is included in
Company.
Lennar Homebuilding cash and cash equivalents, $0.3 million in restricted cash, $0.2 million in Lennar Homebuilding
receivables, net, $0.2 million in Lennar Homebuilding finished homes and construction in progress, $208.2 million in Lennar
As of November 30, 2014, total assets include $929.1 million related to consolidated VIEs of which $11.7 million is included in
Homebuilding land and land under development, $52.5 million in Lennar Homebuilding consolidated inventory not owned, $23.9
Lennar Homebuilding cash and cash equivalents, $0.3 million in restricted cash, $0.2 million in Lennar Homebuilding
million in Lennar Homebuilding investments in unconsolidated entities, $104.6 million in Lennar Homebuilding other assets,
receivables, net, $0.2 million in Lennar Homebuilding finished homes and construction in progress, $208.2 million in Lennar
$75.8 million in Rialto cash and cash equivalents, $128.9 million in Rialto loans receivable, net, $128.2 million in Rialto real
Homebuilding land and land under development, $52.5 million in Lennar Homebuilding consolidated inventory not owned, $23.9
estate owned held-for-sale, $172.7 million in Rialto real estate owned held-and-used, net, $0.7 million in Rialto investments in
million in Lennar Homebuilding investments in unconsolidated entities, $104.6 million in Lennar Homebuilding other assets,
unconsolidated entities, $2.1 million in Rialto other assets and $19.2 million in Lennar Multifamily assets.
$75.8 million in Rialto cash and cash equivalents, $128.9 million in Rialto loans receivable, net, $128.2 million in Rialto real
estate owned held-for-sale, $172.7 million in Rialto real estate owned held-and-used, net, $0.7 million in Rialto investments in
As of November 30, 2013, total assets include $1,195.3 million related to consolidated VIEs of which $8.3 million is included in
unconsolidated entities, $2.1 million in Rialto other assets and $19.2 million in Lennar Multifamily assets.
Lennar Homebuilding cash and cash equivalents, $17.7 million in restricted cash, $2.4 million in Lennar Homebuilding
receivables, net, $94.8 million in Lennar Homebuilding land and land under development, $243.6 million in Lennar
As of November 30, 2013, total assets include $1,195.3 million related to consolidated VIEs of which $8.3 million is included in
Homebuilding consolidated inventory not owned, $14.7 million in Lennar Homebuilding investments in unconsolidated entities,
Lennar Homebuilding cash and cash equivalents, $17.7 million in restricted cash, $2.4 million in Lennar Homebuilding
$86.8 million in Lennar Homebuilding other assets, $44.8 million in Rialto cash and cash equivalents, $244.0 million in Rialto
receivables, net, $94.8 million in Lennar Homebuilding land and land under development, $243.6 million in Lennar
loans receivable, net, $122.0 million in Rialto real estate owned held-for-sale, $313.8 million in Rialto real estate owned held-
Homebuilding consolidated inventory not owned, $14.7 million in Lennar Homebuilding investments in unconsolidated entities,
and-used, net, $0.7 million in Rialto investments in unconsolidated entities and $1.8 million in Rialto other assets.
$86.8 million in Lennar Homebuilding other assets, $44.8 million in Rialto cash and cash equivalents, $244.0 million in Rialto
loans receivable, net, $122.0 million in Rialto real estate owned held-for-sale, $313.8 million in Rialto real estate owned held-
and-used, net, $0.7 million in Rialto investments in unconsolidated entities and $1.8 million in Rialto other assets.
See accompanying notes to consolidated financial statements.
73
See accompanying notes to consolidated financial statements.
73
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 30, 2014 and 2013
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 30, 2014 and 2013
2014 (2)
2013 (2)
Lennar Homebuilding:
LIABILITIES AND EQUITY
Lennar Homebuilding:
LIABILITIES AND EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities related to consolidated inventory not owned . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Senior notes and other debts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities related to consolidated inventory not owned . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior notes and other debts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity:
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity:
Class A common stock of $0.10 par value per share; Authorized: 2014 and 2013 -
300,000,000 shares; Issued: 2014 - 174,241,570 shares; 2013 - 184,833,120 shares .
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class B common stock of $0.10 par value per share; Authorized: 2014 and 2013 -
Class A common stock of $0.10 par value per share; Authorized: 2014 and 2013 -
(Dollars in thousands, except shares
and per share amounts)
2014 (2)
2013 (2)
(Dollars in thousands, except shares
and per share amounts)
412,558
45,028
412,558
4,690,213
45,028
863,236
4,690,213
6,011,035
863,236
747,044
6,011,035
896,643
747,044
52,243
896,643
7,706,965
52,243
7,706,965
—
271,365
384,876
271,365
4,194,432
384,876
712,931
4,194,432
5,563,604
712,931
497,008
5,563,604
543,639
497,008
41,526
543,639
6,645,777
41,526
6,645,777
—
17,424
—
18,483
—
3,298
90,000,000 shares, Issued: 2014 - 32,982,815 shares; 2013 - 32,982,815 shares . . . .
17,424
300,000,000 shares; Issued: 2014 - 174,241,570 shares; 2013 - 184,833,120 shares .
2,239,704
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class B common stock of $0.10 par value per share; Authorized: 2014 and 2013 -
3,298
90,000,000 shares, Issued: 2014 - 32,982,815 shares; 2013 - 32,982,815 shares . . . .
2,660,034
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,239,704
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost; 2014 - 505,420 shares of Class A common stock and
1,679,620 shares of Class B common stock; 2013 - 12,063,466 shares of Class A
2,660,034
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(93,440)
common stock and 1,679,620 shares of Class B common stock . . . . . . . . . . . . . . . . .
Treasury stock, at cost; 2014 - 505,420 shares of Class A common stock and
4,827,020
Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,679,620 shares of Class B common stock; 2013 - 12,063,466 shares of Class A
(93,440)
common stock and 1,679,620 shares of Class B common stock . . . . . . . . . . . . . . . . .
424,282
Noncontrolling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,827,020
Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,251,302
Total equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
424,282
Noncontrolling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,958,267
Total equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,251,302
Total liabilities and equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,958,267
3,298
18,483
2,721,246
3,298
2,053,893
2,721,246
2,053,893
(628,019)
4,168,901
(628,019)
458,569
4,168,901
4,627,470
458,569
11,273,247
4,627,470
(2) As of November 30, 2014, total liabilities include $149.8 million related to consolidated VIEs as to which there was no recourse
11,273,247
against the Company, of which $6.8 million is included in Lennar Homebuilding accounts payable, $45.0 million in Lennar
Homebuilding liabilities related to consolidated inventory not owned, $61.6 million in Lennar Homebuilding senior notes and
(2) As of November 30, 2014, total liabilities include $149.8 million related to consolidated VIEs as to which there was no recourse
other debts payable, $14.8 million in Lennar Homebuilding other liabilities and $21.5 million in Rialto liabilities.
against the Company, of which $6.8 million is included in Lennar Homebuilding accounts payable, $45.0 million in Lennar
Homebuilding liabilities related to consolidated inventory not owned, $61.6 million in Lennar Homebuilding senior notes and
As of November 30, 2013, total liabilities include $294.8 million related to consolidated VIEs as to which there was no recourse
other debts payable, $14.8 million in Lennar Homebuilding other liabilities and $21.5 million in Rialto liabilities.
against the Company, of which $3.0 million is included in Lennar Homebuilding accounts payable, $191.6 million in Lennar
Homebuilding liabilities related to consolidated inventory not owned, $75.1 million in Lennar Homebuilding senior notes and
As of November 30, 2013, total liabilities include $294.8 million related to consolidated VIEs as to which there was no recourse
other debts payable, $4.9 million in Lennar Homebuilding other liabilities and $20.2 million in Rialto liabilities.
against the Company, of which $3.0 million is included in Lennar Homebuilding accounts payable, $191.6 million in Lennar
Homebuilding liabilities related to consolidated inventory not owned, $75.1 million in Lennar Homebuilding senior notes and
other debts payable, $4.9 million in Lennar Homebuilding other liabilities and $20.2 million in Rialto liabilities.
See accompanying notes to consolidated financial statements.
74
See accompanying notes to consolidated financial statements.
74
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended November 30, 2014, 2013 and 2012
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended November 30, 2014, 2013 and 2012
2014
2013
2012
(Dollars in thousands, except per share amounts)
2013
2014
2012
Revenues:
(Dollars in thousands, except per share amounts)
Revenues:
Cost and expenses:
Cost and expenses:
Lennar Homebuilding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding equity in earnings (loss) from unconsolidated
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
entities (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding equity in earnings (loss) from unconsolidated
Lennar Homebuilding other income, net (3) . . . . . . . . . . . . . . . . . . . . . .
entities (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding other income, net (3) . . . . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . . .
Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto other income (expense), net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . . .
Lennar Multifamily equity in earnings (loss) from unconsolidated
Rialto other income (expense), net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily equity in earnings (loss) from unconsolidated
entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Provision) benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (including net earnings (loss) attributable to
noncontrolling interests). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Provision) benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (including net earnings (loss) attributable to
Less: Net earnings (loss) attributable to noncontrolling interests (4)
noncontrolling interests). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to Lennar. . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: Net earnings (loss) attributable to noncontrolling interests (4)
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net earnings attributable to Lennar. . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Comprehensive earnings attributable to Lennar . . . . . . . . . . . . . . . . $
Diluted earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Comprehensive earnings (loss) attributable to noncontrolling
Comprehensive earnings attributable to Lennar . . . . . . . . . . . . . . . . $
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Comprehensive earnings (loss) attributable to noncontrolling
(1) Lennar Homebuilding costs and expenses included $9.9 million, $7.5 million and $15.6 million, respectively, of inventory
5,354,947
427,342
5,354,947
138,060
427,342
14,746
138,060
5,935,095
14,746
5,935,095
4,579,108
341,556
4,579,108
151,072
341,556
31,463
151,072
146,060
31,463
5,249,259
146,060
5,249,259
23,803
27,346
23,803
(93,913)
27,346
22,353
(93,913)
16,787
22,353
16,787
(271)
681,941
(271)
(177,015)
681,941
504,926
(177,015)
25,252
504,926
479,674
25,252
2.48
479,674
2.15
2.48
479,674
2.15
25,252
479,674
7,025,130
454,381
7,025,130
230,521
454,381
69,780
230,521
7,779,812
69,780
7,779,812
5,962,029
374,243
5,962,029
249,114
374,243
95,227
249,114
177,161
95,227
6,857,774
177,161
6,857,774
(355)
7,526
(355)
(36,551)
7,526
59,277
(36,551)
3,395
59,277
3,395
14,454
969,784
14,454
(341,091)
969,784
628,693
(341,091)
(10,223)
628,693
638,916
(10,223)
3.12
638,916
2.80
3.12
638,916
2.80
(10,223)
638,916
3,581,232
384,618
3,581,232
138,856
384,618
426
138,856
4,105,132
426
4,105,132
3,216,366
299,836
3,216,366
138,990
299,836
6,306
138,990
127,338
6,306
3,788,836
127,338
3,788,836
(26,672)
15,144
(26,672)
(94,353)
15,144
41,483
(94,353)
(29,780)
41,483
(29,780)
(4)
222,114
(4)
435,218
222,114
657,332
435,218
(21,792)
657,332
679,124
(21,792)
3.58
679,124
3.11
3.58
679,124
3.11
(21,792)
679,124
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1) Lennar Homebuilding costs and expenses included $9.9 million, $7.5 million and $15.6 million, respectively, of inventory
(2) Lennar Homebuilding equity in earnings (loss) from unconsolidated entities included $4.6 million and $12.1 million of the
valuation adjustments and write-offs of option deposits and pre-acquisition costs for the years ended November 30, 2014, 2013
and 2012.
valuation adjustments and write-offs of option deposits and pre-acquisition costs for the years ended November 30, 2014, 2013
Company’s share of valuation adjustments related to assets of unconsolidated entities for the years ended November 30, 2014 and
and 2012.
2012, respectively.
Company’s share of valuation adjustments related to assets of unconsolidated entities for the years ended November 30, 2014 and
other assets for the year ended November 30, 2014.
2012, respectively.
(2) Lennar Homebuilding equity in earnings (loss) from unconsolidated entities included $4.6 million and $12.1 million of the
(3) Lennar Homebuilding other income, net included $3.2 million in write-offs of other receivables and valuation adjustments of
(21,792)
(10,223)
25,252
(4) Net earnings (loss) attributable to noncontrolling interests for the years ended November 30, 2014, 2013 and 2012 included
(3) Lennar Homebuilding other income, net included $3.2 million in write-offs of other receivables and valuation adjustments of
(4) Net earnings (loss) attributable to noncontrolling interests for the years ended November 30, 2014, 2013 and 2012 included
($22.5) million, $6.2 million and ($14.4) million, respectively, of net earnings (loss) related to the FDIC’s interest in the portfolio
other assets for the year ended November 30, 2014.
of real estate loans that the Company acquired in partnership with the FDIC.
($22.5) million, $6.2 million and ($14.4) million, respectively, of net earnings (loss) related to the FDIC’s interest in the portfolio
of real estate loans that the Company acquired in partnership with the FDIC.
See accompanying notes to consolidated financial statements.
75
See accompanying notes to consolidated financial statements.
75
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended November 30, 2014, 2013 and 2012
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended November 30, 2014, 2013 and 2012
2014
2014
2013
(Dollars in thousands)
2013
2012
2012
(Dollars in thousands)
Class A common stock:
Class A common stock:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Employee stock and director plans . . . . . . . . . . . . . . . . . . . . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Retirement of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock and director plans . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of 2.00% convertible senior notes due 2020 to
shares of Class A common stock . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of 2.00% convertible senior notes due 2020 to
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
shares of Class A common stock . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class B common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,483
114
18,483
(1,173)
114
(1,173)
—
17,424
—
17,424
3,298
17,240
243
17,240
—
243
—
1,000
18,483
1,000
18,483
3,298
Class B common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital:
3,298
3,298
Additional paid-in capital:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock and director plans . . . . . . . . . . . . . . . . . . . . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock and director plans . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from employee stock plans, vesting of restricted
stock and conversion of 2.00% convertible senior notes due
Retirement of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from employee stock plans, vesting of restricted
stock and conversion of 2.00% convertible senior notes due
Amortization of restricted stock and performance-based stock
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of restricted stock and performance-based stock
Conversion of 2.00% convertible senior notes due 2020 to
options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
shares of Class A common stock . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of 2.00% convertible senior notes due 2020 to
Equity adjustment related to purchase of noncontrolling
shares of Class A common stock . . . . . . . . . . . . . . . . . . . . . . . .
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity adjustment related to purchase of noncontrolling
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained Earnings:
Retained Earnings:
Treasury stock, at cost:
Treasury stock, at cost:
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to Lennar . . . . . . . . . . . . . . . . . . . . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends - Class A common stock. . . . . . . . . . . . . . . . . . . .
Net earnings attributable to Lennar . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends - Class B common stock . . . . . . . . . . . . . . . . . . .
Cash dividends - Class A common stock. . . . . . . . . . . . . . . . . . . .
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends - Class B common stock . . . . . . . . . . . . . . . . . . .
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock and directors plans . . . . . . . . . . . . . . . . . . . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock and directors plans . . . . . . . . . . . . . . . . . . . . . . .
Reissuance of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reissuance of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) attributable to noncontrolling interests. . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receipts related to noncontrolling interests . . . . . . . . . . . . . . . . .
Net earnings (loss) attributable to noncontrolling interests. . . . . .
Payments related to noncontrolling interests. . . . . . . . . . . . . . . . .
Receipts related to noncontrolling interests . . . . . . . . . . . . . . . . .
Non-cash consolidations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments related to noncontrolling interests. . . . . . . . . . . . . . . . .
Non-cash purchase or activity of noncontrolling interests . . . . . .
Non-cash consolidations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity adjustment related to purchase of noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash purchase or activity of noncontrolling interests . . . . . .
Equity adjustment related to purchase of noncontrolling
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Balance at November 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Noncontrolling interests:
Noncontrolling interests:
2,721,246
1,514
2,721,246
(541,019)
1,514
(541,019)
17,382
2,421,941
17,423
2,421,941
—
17,423
—
17,162
17,382
40,581
17,162
33,559
40,581
—
33,559
293,106
—
—
2,239,704
—
2,239,704
2,053,893
638,916
2,053,893
(27,766)
638,916
(5,009)
(27,766)
2,660,034
(5,009)
2,660,034
(628,019)
(7,613)
(628,019)
542,192
(7,613)
—
542,192
(93,440)
—
4,827,020
(93,440)
4,827,020
458,569
(10,223)
458,569
12,859
(10,223)
(155,625)
12,859
118,272
(155,625)
430
118,272
430
—
424,282
—
5,251,302
424,282
5,251,302
293,106
(61,945)
2,721,246
(61,945)
2,721,246
1,605,131
479,674
1,605,131
(25,635)
479,674
(5,277)
(25,635)
2,053,893
(5,277)
2,053,893
(632,846)
4,827
(632,846)
—
4,827
—
—
(628,019)
—
4,168,901
(628,019)
4,168,901
586,444
25,252
586,444
8,236
25,252
(201,655)
8,236
2,242
(201,655)
(63,500)
2,242
(63,500)
101,550
458,569
101,550
4,627,470
458,569
4,627,470
See accompanying notes to consolidated financial statements.
76
See accompanying notes to consolidated financial statements.
76
16,910
330
16,910
—
330
—
—
17,240
—
17,240
3,298
3,298
2,341,079
29,006
2,341,079
—
29,006
—
22,544
22,544
29,312
29,312
—
—
—
2,421,941
—
2,421,941
956,401
679,124
956,401
(25,387)
679,124
(5,007)
(25,387)
1,605,131
(5,007)
1,605,131
(621,220)
(17,149)
(621,220)
—
(17,149)
5,523
—
(632,846)
5,523
3,414,764
(632,846)
3,414,764
607,057
(21,792)
607,057
1,659
(21,792)
(480)
1,659
—
(480)
—
—
—
—
586,444
—
4,001,208
586,444
4,001,208
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended November 30, 2014, 2013 and 2012
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
2014
Years Ended November 30, 2014, 2013 and 2012
2013
(Dollars in thousands)
2014
2013
628,693
(Dollars in thousands)
504,926
Cash flows from operating activities:
Net earnings (including net earnings (loss) attributable to noncontrolling interests) . $
Cash flows from operating activities:
Adjustments to reconcile net earnings to net cash used in operating activities: . . . . .
Net earnings (including net earnings (loss) attributable to noncontrolling interests) . $
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net earnings to net cash used in operating activities: . . . . .
Amortization of discount/premium on debt, net. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Homebuilding equity in (earnings) loss from unconsolidated entities. . . . .
Amortization of discount/premium on debt, net. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions of earnings from Lennar Homebuilding unconsolidated entities . . . .
Lennar Homebuilding equity in (earnings) loss from unconsolidated entities. . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . .
Distributions of earnings from Lennar Homebuilding unconsolidated entities . . . .
Distributions of earnings from Rialto unconsolidated entities . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily equity in (earnings) loss from unconsolidated entities . . . . . .
Distributions of earnings from Rialto unconsolidated entities . . . . . . . . . . . . . . . . .
Distributions of earnings from Lennar Multifamily unconsolidated entities . . . . . .
Lennar Multifamily equity in (earnings) loss from unconsolidated entities . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions of earnings from Lennar Multifamily unconsolidated entities . . . . . .
Tax benefit from share-based awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from share-based awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax (benefit) expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on retirement of Lennar Homebuilding debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax (benefit) expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on retirement of Rialto notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on retirement of Lennar Homebuilding debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of operating property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on retirement of Rialto notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on retirement of Lennar Homebuilding senior notes . . . . . . . . . . . . . . . . . . . .
Gain on sale of operating property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized and realized gains on Rialto real estate owned, net . . . . . . . . . . . . . . . .
Loss on retirement of Lennar Homebuilding senior notes . . . . . . . . . . . . . . . . . . . .
Unrealized gain on Rialto bargain purchase acquisition . . . . . . . . . . . . . . . . . . . . .
Unrealized and realized gains on Rialto real estate owned, net . . . . . . . . . . . . . . . .
Impairments of Rialto loans receivable and real estate owned, net . . . . . . . . . . . . .
Unrealized gain on Rialto bargain purchase acquisition . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments and write-offs of option deposits and pre-acquisition costs,
other receivables and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments of Rialto loans receivable and real estate owned, net . . . . . . . . . . . . .
Changes in assets and liabilities:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments and write-offs of option deposits and pre-acquisition costs,
other receivables and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in inventories, excluding valuation adjustments and write-offs of
option deposits and pre-acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in inventories, excluding valuation adjustments and write-offs of
option deposits and pre-acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in Rialto loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in Lennar Financial Services loans held-for-sale . . . . . . . .
Increase in Rialto loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in Lennar Financial Services loans held-for-sale . . . . . . . .
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Increase in accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . .
628,693
38,542
21,387
38,542
355
21,387
5,316
355
(59,277)
5,316
2,466
(59,277)
(14,454)
2,466
14,469
(14,454)
40,718
14,469
—
40,718
(7,497)
—
75,324
(7,497)
—
75,324
(4,555)
—
—
(4,555)
—
—
(36,901)
—
—
(36,901)
76,450
—
13,088
76,450
13,088
(18,930)
(113,001)
(18,930)
(1,367,415)
(113,001)
(13,990)
(1,367,415)
(69,269)
(13,990)
(326,094)
(69,269)
326,087
(326,094)
(788,488)
326,087
2012
2012
657,332
657,332
28,081
21,450
28,081
26,672
21,450
1,005
26,672
(41,483)
1,005
18,399
(41,483)
4
18,399
—
4
31,745
—
22,544
31,745
(10,814)
22,544
(467,561)
(10,814)
(988)
(467,561)
—
(988)
—
—
6,510
—
(19,771)
6,510
—
(19,771)
37,248
—
16,647
37,248
504,926
30,349
23,497
30,349
(23,803)
23,497
3,381
(23,803)
(22,353)
3,381
648
(22,353)
271
648
—
271
33,689
—
17,162
33,689
(10,148)
17,162
151,619
(10,148)
(1,000)
151,619
—
(1,000)
(14,432)
—
—
(14,432)
(48,358)
—
(8,532)
(48,358)
32,229
(8,532)
8,435
32,229
8,435
(6,430)
16,647
3,841
(62,708)
(6,430)
(1,627,136)
(62,708)
4,279
(1,627,136)
(44,000)
4,279
86,130
(44,000)
164,571
86,130
(807,714)
164,571
17,370
3,841
(563,051)
17,370
(35,041)
(563,051)
—
(35,041)
(202,916)
—
28,129
(202,916)
(424,648)
28,129
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(788,488)
(807,714)
(424,648)
See accompanying notes to consolidated financial statements.
77
See accompanying notes to consolidated financial statements.
77
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended November 30, 2014, 2013 and 2012
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
2014
Years Ended November 30, 2014, 2013 and 2012
2013
Cash flows from investing activities:
Decrease (increase) in restricted cash related to LOCs. . . . . . . . . . . . . . . . . . . . . . . . $
(Dollars in thousands)
2014
2013
(Dollars in thousands)
37
(21,527)
Cash flows from investing activities:
Net additions of operating properties and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in restricted cash related to LOCs. . . . . . . . . . . . . . . . . . . . . . . . $
Proceeds from the sale of operating properties and equipment . . . . . . . . . . . . . . . . .
Net additions of operating properties and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in and contributions to Lennar Homebuilding unconsolidated entities .
Proceeds from the sale of operating properties and equipment . . . . . . . . . . . . . . . . .
Distributions of capital from Lennar Homebuilding unconsolidated entities . . . . . . .
Investments in and contributions to Lennar Homebuilding unconsolidated entities .
Investments in and contributions to Rialto unconsolidated entities . . . . . . . . . . . . . .
Distributions of capital from Lennar Homebuilding unconsolidated entities . . . . . . .
Distributions of capital from Rialto unconsolidated entities. . . . . . . . . . . . . . . . . . . .
Investments in and contributions to Rialto unconsolidated entities . . . . . . . . . . . . . .
Investments in and contributions to Lennar Multifamily unconsolidated entities . . .
Distributions of capital from Rialto unconsolidated entities. . . . . . . . . . . . . . . . . . . .
Distributions of capital from Lennar Multifamily unconsolidated entities. . . . . . . . .
Investments in and contributions to Lennar Multifamily unconsolidated entities . . .
Decrease (increase) in Rialto defeasance cash to retire notes payable . . . . . . . . . . . .
Distributions of capital from Lennar Multifamily unconsolidated entities. . . . . . . . .
Receipts of principal payments on Rialto loans receivable. . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in Rialto defeasance cash to retire notes payable . . . . . . . . . . . .
Proceeds from sales of Rialto real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receipts of principal payments on Rialto loans receivable. . . . . . . . . . . . . . . . . . . . .
Purchases of commercial mortgage-backed securities bond
Proceeds from sales of Rialto real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of commercial mortgage-backed securities bond . . . . . . . . . . . .
Purchases of commercial mortgage-backed securities bond
Improvements to Rialto real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of commercial mortgage-backed securities bond . . . . . . . . . . . .
Purchases of loans receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements to Rialto real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of Lennar Homebuilding investments available-for-sale . . . . . . . . . . . . . .
Purchases of loans receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of Lennar Homebuilding investments available-for-sale . . . . . .
Purchases of Lennar Homebuilding investments available-for-sale . . . . . . . . . . . . . .
Acquisitions, net of cash acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of Lennar Homebuilding investments available-for-sale . . . . . .
Increase in Rialto loans held-for-investment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in Lennar Financial Services loans held-for-investment, net . . .
Increase in Rialto loans held-for-investment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of Lennar Financial Services investment securities . . . . . . . . . . . . . . . . . .
Decrease (increase) in Lennar Financial Services loans held-for-investment, net . . .
Proceeds from maturities of Lennar Financial Services investments securities . . . . .
Purchases of Lennar Financial Services investment securities . . . . . . . . . . . . . . . . . .
Net cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . $
Proceeds from maturities of Lennar Financial Services investments securities . . . . .
(22,599)
37
43,937
(22,599)
(87,501)
43,937
143,451
(87,501)
(41,523)
143,451
68,914
(41,523)
(30,759)
68,914
66,941
(30,759)
—
66,941
24,019
—
269,698
24,019
(8,705)
269,698
9,171
(8,705)
(14,278)
9,171
—
(14,278)
(21,274)
—
51,934
(21,274)
(5,489)
51,934
(7,000)
(5,489)
1,102
(7,000)
(40,627)
1,102
38,910
(40,627)
438,359
38,910
(8,126)
(21,527)
140,564
(8,126)
(57,067)
140,564
158,076
(57,067)
(66,953)
158,076
42,556
(66,953)
(22,748)
42,556
38,857
(22,748)
223,813
38,857
66,788
223,813
239,215
66,788
—
239,215
—
—
(9,407)
—
(5,450)
(9,407)
(28,708)
(5,450)
5,906
(28,708)
(5,623)
5,906
—
(5,623)
(730)
—
(30,333)
(730)
30,146
(30,333)
689,249
30,146
2012
2012
—
(2,822)
—
—
(2,822)
(72,611)
—
34,030
(72,611)
(43,555)
34,030
83,368
(43,555)
—
83,368
10,626
—
(4,427)
10,626
81,648
(4,427)
183,883
81,648
—
183,883
—
—
(13,945)
—
—
(13,945)
(11,403)
—
14,486
(11,403)
—
14,486
—
—
2,919
—
(51,138)
2,919
34,232
(51,138)
245,291
34,232
Net cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . $
438,359
689,249
245,291
See accompanying notes to consolidated financial statements.
78
See accompanying notes to consolidated financial statements.
78
LENNAR CORPORATION AND SUBSIDIARIES
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
Years Ended November 30, 2014, 2013 and 2012
Years Ended November 30, 2014, 2013 and 2012
2014
2014
2013
2013
(Dollars in thousands)
(Dollars in thousands)
2012
2012
Cash flows from financing activities:
Cash flows from financing activities:
Net borrowings (repayments) under Lennar Financial Services debt. . . . . . . . . . . . . . . . . $ 324,281
Net borrowings (repayments) under Lennar Financial Services debt. . . . . . . . . . . . . . . . . $ 324,281
Net borrowings under Rialto warehouse repurchase facilities . . . . . . . . . . . . . . . . . . . . . .
65,254
Net borrowings under Rialto warehouse repurchase facilities . . . . . . . . . . . . . . . . . . . . . .
65,254
Proceeds from Lennar Homebuilding senior notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
850,500
Proceeds from Lennar Homebuilding senior notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
850,500
Proceeds from Lennar Homebuilding convertible senior notes . . . . . . . . . . . . . . . . . . . . .
—
Proceeds from Lennar Homebuilding convertible senior notes . . . . . . . . . . . . . . . . . . . . .
—
Proceeds from Rialto senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
104,525
Proceeds from Rialto senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
104,525
Proceeds from Rialto structured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94,444
Proceeds from Rialto structured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94,444
Debt issuance costs of senior notes and convertible senior notes. . . . . . . . . . . . . . . . . . . .
(9,989)
Debt issuance costs of senior notes and convertible senior notes. . . . . . . . . . . . . . . . . . . .
(9,989)
Redemption and partial redemption of senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(250,000)
Redemption and partial redemption of senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(250,000)
Principal payments on Rialto structured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(36,509)
Principal payments on Rialto structured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(36,509)
Principal repayments on Rialto notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(39,370)
Principal repayments on Rialto notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(39,370)
Proceeds from other borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,424
Proceeds from other borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,424
Principal payments on other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(299,713)
Principal payments on other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(299,713)
Exercise of land option contracts from an unconsolidated land investment venture . . . . .
(1,540)
Exercise of land option contracts from an unconsolidated land investment venture . . . . .
(1,540)
Receipts related to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,859
Receipts related to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,859
Payments related to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(155,625)
Payments related to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(155,625)
Excess tax benefits from share-based awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,497
Excess tax benefits from share-based awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,497
Common stock:
Common stock:
Issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,599
Issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,599
Repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(20,424)
Repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(20,424)
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(32,775)
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(32,775)
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . .
661,438
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . .
661,438
Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
311,309
Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
311,309
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
970,505
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
970,505
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,281,814
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,281,814
Summary of cash and cash equivalents:
Summary of cash and cash equivalents:
Lennar Homebuilding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 885,729
Lennar Homebuilding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 885,729
Lennar Financial Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,010
Lennar Financial Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,010
Rialto. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
303,889
Rialto. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
303,889
Lennar Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,186
Lennar Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,186
$1,281,814
$1,281,814
(83,828)
(83,828)
76,017
76,017
500,000
500,000
—
—
250,000
250,000
—
—
(12,935)
(12,935)
(63,751)
(63,751)
—
—
(471,255)
(471,255)
92,596
92,596
(287,359)
(287,359)
(28,869)
(28,869)
8,236
8,236
(201,655)
(201,655)
10,148
10,148
34,114
34,114
(12,320)
(12,320)
(30,912)
(30,912)
(221,773)
(221,773)
(340,238)
(340,238)
1,310,743
1,310,743
970,505
970,505
695,424
695,424
73,066
73,066
201,496
201,496
519
519
970,505
970,505
47,860
47,860
—
—
750,000
750,000
50,000
50,000
—
—
—
—
(9,118)
(9,118)
(210,862)
(210,862)
—
—
(191,221)
(191,221)
41,500
41,500
(97,891)
(97,891)
(50,396)
(50,396)
1,659
1,659
(480)
(480)
10,814
10,814
32,174
32,174
(17,149)
(17,149)
(30,394)
(30,394)
326,496
326,496
147,139
147,139
1,163,604
1,163,604
1,310,743
1,310,743
1,146,302
1,146,302
58,566
58,566
105,310
105,310
565
565
1,310,743
1,310,743
79
79
LENNAR CORPORATION AND SUBSIDIARIES
LENNAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
Years Ended November 30, 2014, 2013 and 2012
Years Ended November 30, 2014, 2013 and 2012
2014
2014
2013
2013
(Dollars in thousands)
(Dollars in thousands)
2012
2012
Supplemental disclosures of cash flow information:
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
68,366
Cash paid for interest, net of amounts capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
68,366
Cash paid for income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 202,374
Cash paid for income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 202,374
Supplemental disclosures of non-cash investing and financing activities:
Supplemental disclosures of non-cash investing and financing activities:
Lennar Homebuilding and Lennar Multifamily:
Lennar Homebuilding and Lennar Multifamily:
Purchases of inventories, land under development and other assets financed by sellers . . $ 129,881
Purchases of inventories, land under development and other assets financed by sellers . . $ 129,881
Non-cash contributions to Lennar Homebuilding unconsolidated entities. . . . . . . . . . . . . $
10,844
Non-cash contributions to Lennar Homebuilding unconsolidated entities. . . . . . . . . . . . . $
10,844
Inventory acquired in satisfaction of other assets including investments available-for-
Inventory acquired in satisfaction of other assets including investments available-for-
sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash purchases of investments available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash purchases of investments available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash reduction of equity due to purchase of noncontrolling interest . . . . . . . . . . . . . $
Non-cash reduction of equity due to purchase of noncontrolling interest . . . . . . . . . . . . . $
Non-cash purchase of noncontrolling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash purchase of noncontrolling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash contributions to Lennar Multifamily unconsolidated entities . . . . . . . . . . . . . . $
Non-cash contributions to Lennar Multifamily unconsolidated entities . . . . . . . . . . . . . . $
—
—
—
—
—
—
—
—
95,288
95,288
Real estate owned acquired in satisfaction/partial satisfaction of loans receivable . . . . . . $
Real estate owned acquired in satisfaction/partial satisfaction of loans receivable . . . . . . $
Real estate owned acquired in bargain purchase acquisition . . . . . . . . . . . . . . . . . . . . . . . $
Real estate owned acquired in bargain purchase acquisition . . . . . . . . . . . . . . . . . . . . . . . $
Net liabilities assumed in bargain purchase acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net liabilities assumed in bargain purchase acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash acquisition of Servicer Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash acquisition of Servicer Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Reductions in loans receivable from deficiency settlements . . . . . . . . . . . . . . . . . . . . . . . $
Reductions in loans receivable from deficiency settlements . . . . . . . . . . . . . . . . . . . . . . . $
Lennar Financial Services:
Lennar Financial Services:
Purchase of mortgage servicing rights financed by seller . . . . . . . . . . . . . . . . . . . . . . . . . $
Purchase of mortgage servicing rights financed by seller . . . . . . . . . . . . . . . . . . . . . . . . . $
Consolidation/deconsolidation of unconsolidated/consolidated entities, net:
Consolidation/deconsolidation of unconsolidated/consolidated entities, net:
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 155,021
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 155,021
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (30,647)
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (30,647)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(7,218)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(7,218)
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (117,156)
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (117,156)
57,390
57,390
—
—
—
—
8,317
8,317
—
—
5,697
5,697
Rialto:
Rialto:
112,694
112,694
11,433
11,433
108,879
108,879
26,687
26,687
167,134
167,134
227,243
227,243
—
—
—
—
101,550
101,550
63,500
63,500
59,555
59,555
70,237
70,237
31,818
31,818
6,200
6,200
—
—
619
619
—
—
—
—
—
—
—
—
—
—
89,063
89,063
720
720
103,114
103,114
12,520
12,520
—
—
—
—
13,674
13,674
183,911
183,911
—
—
—
—
—
—
3,068
3,068
—
—
—
—
—
—
—
—
—
—
80
80
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of Lennar Corporation and all
subsidiaries, partnerships and other entities in which Lennar Corporation has a controlling interest and VIEs (see Note
16) in which Lennar Corporation is deemed the primary beneficiary (the “Company”). The Company’s investments in
both unconsolidated entities in which a significant, but less than controlling, interest is held and in VIEs in which the
Company is not deemed to be the primary beneficiary are accounted for by the equity method. All intercompany
transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual results could differ from those
estimates.
Revenue Recognition
Revenues from sales of homes are recognized when the sales are closed and title passes to the new homeowner,
the new homeowner’s initial and continuing investment is adequate to demonstrate a commitment to pay for the home,
the new homeowner’s receivable is not subject to future subordination and the Company does not have a substantial
continuing involvement with the new home. Revenues from sales of land are recognized when a significant down
payment is received, the earnings process is complete, title passes and collectability of the receivable is reasonably
assured. See Lennar Financial Services, Rialto and Lennar Multifamily within this Note for disclosure of other revenue
recognition policies related to those segments.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs were $45.2 million, $31.9 million and
$33.0 million for the years ended November 30, 2014, 2013 and 2012, respectively.
Share-Based Payments
The Company has share-based awards outstanding under the 2007 Equity Incentive Plan (the "Plan"), which
provides for the granting of stock options, stock appreciation rights, restricted common stock (“nonvested shares”) and
other shared based awards to officers, associates and directors. The exercise prices of stock options may not be less than
the market value of the common stock on the date of the grant. Exercises are permitted in installments determined when
options are granted. Each stock option will expire on a date determined at the time of the grant, but not more than ten
years after the date of the grant. The Company accounts for stock option awards and nonvested share awards granted
under the Plan based on the estimated grant date fair value.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less
to be cash equivalents. Due to the short maturity period of cash equivalents, the carrying amounts of these instruments
approximate their fair values. Cash and cash equivalents as of November 30, 2014 and 2013 included $263.2 million and
$172.3 million, respectively, of cash held in escrow for approximately three days.
Restricted Cash
Lennar Homebuilding restricted cash consists of customer deposits on home sales held in restricted accounts
until title transfers to the homebuyer, as required by the state and local governments in which the homes were sold, as
well as funds on deposit to secure and support performance obligations. Rialto restricted cash consists of cash held in
escrow by the Company's loan servicer provider on behalf of customers and lenders and is disbursed in accordance with
agreements between transacting parties.
81
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Inventories
Finished homes and construction in progress are included within inventories. Inventories are stated at cost
unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written
down to fair value. Inventory costs include land, land development and home construction costs, real estate taxes,
deposits on land purchase contracts and interest related to development and construction. Construction overhead and
selling expenses are expensed as incurred. Homes held-for-sale are classified as inventories until delivered. Land, land
development, amenities and other costs are accumulated by specific area and allocated to homes within the respective
areas. The Company reviews its inventory for indicators of impairment by evaluating each community during each
reporting period. The inventory within each community is categorized as finished homes and construction in progress or
land under development based on the development state of the community. There were 622 and 535 active communities,
excluding unconsolidated entities, as of November 30, 2014 and 2013, respectively. If the undiscounted cash flows
expected to be generated by a community are less than its carrying amount, an impairment charge is recorded to write
down the carrying amount of such community to its estimated fair value.
In conducting its review for indicators of impairment on a community level, the Company evaluates, among
other things, the margins on homes that have been delivered, margins on homes under sales contracts in backlog,
projected margins with regard to future home sales over the life of the community, projected margins with regard to
future land sales and the estimated fair value of the land itself. The Company pays particular attention to communities in
which inventory is moving at a slower than anticipated absorption pace and communities whose average sales price and/
or margins are trending downward and are anticipated to continue to trend downward. From this review, the Company
identifies communities whose carrying values exceed their undiscounted cash flows.
The Company estimates the fair value of its communities using a discounted cash flow model. The projected
cash flows for each community are significantly impacted by estimates related to market supply and demand, product
type by community, homesite sizes, sales pace, sales prices, sales incentives, construction costs, sales and marketing
expenses, the local economy, competitive conditions, labor costs, costs of materials and other factors for that particular
community. Every division evaluates the historical performance of each of its communities as well as current trends in
the market and economy impacting the community and its surrounding areas. These trends are analyzed for each of the
estimates listed above. For example, during the downturn in the housing market, the Company found ways to reduce its
construction costs in many communities, and this reduction in construction costs in addition to changes in product type
in many communities impacted future estimated cash flows.
Each of the homebuilding markets in which the Company operates is unique, as homebuilding has historically
been a local business driven by local market conditions and demographics. Each of the Company’s homebuilding
markets has specific supply and demand relationships reflective of local economic conditions. The Company’s projected
cash flows are impacted by many assumptions. Some of the most critical assumptions in the Company’s cash flow model
are projected absorption pace for home sales, sales prices and costs to build and deliver homes on a community by
community basis.
In order to arrive at the assumed absorption pace for home sales included in the Company’s cash flow model,
the Company analyzes its historical absorption pace in the community as well as other comparable communities in the
geographical area. In addition, the Company considers internal and external market studies and trends, which generally
include, but are not limited to, statistics on population demographics, unemployment rates and availability of competing
product in the geographic area where the community is located. When analyzing the Company’s historical absorption
pace for home sales and corresponding internal and external market studies, the Company places greater emphasis on
more current metrics and trends such as the absorption pace realized in its most recent quarters as well as forecasted
population demographics, unemployment rates and availability of competing product. Generally, if the Company notices
a variation from historical results over a span of two fiscal quarters, the Company considers such variation to be the
establishment of a trend and adjusts its historical information accordingly in order to develop assumptions on the
projected absorption pace in the cash flow model for a community.
In order to determine the assumed sales prices included in its cash flow models, the Company analyzes the
historical sales prices realized on homes it delivered in the community and other comparable communities in the
geographical area as well as the sales prices included in its current backlog for such communities. In addition, the
Company considers internal and external market studies and trends, which generally include, but are not limited to,
statistics on sales prices in neighboring communities and sales prices on similar products in non-neighboring
communities in the geographic area where the community is located. When analyzing its historical sales prices and
corresponding market studies, the Company also places greater emphasis on more current metrics and trends such as
future forecasted sales prices in neighboring communities as well as future forecasted sales prices for similar products in
non-neighboring communities. Generally, if the Company notices a variation from historical results over a span of two
fiscal quarters, the Company considers such variation to be the establishment of a trend and adjusts its historical
information accordingly in order to develop assumptions on the projected sales prices in the cash flow model for a
community.
82
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In order to arrive at the Company’s assumed costs to build and deliver homes, the Company generally assumes
a cost structure reflecting contracts currently in place with its vendors adjusted for any anticipated cost reduction
initiatives or increases in cost structure. Those costs assumed are used in the cash flow model for the Company’s
communities.
Since the estimates and assumptions included in the Company’s cash flow models are based upon historical
results and projected trends, they do not anticipate unexpected changes in market conditions or strategies that may lead
the Company to incur additional impairment charges in the future.
Using all available information, the Company calculates its best estimate of projected cash flows for each
community. While many of the estimates are calculated based on historical and projected trends, all estimates are
subjective and change from market to market and community to community as market and economic conditions change.
The determination of fair value also requires discounting the estimated cash flows at a rate the Company believes a
market participant would determine to be commensurate with the inherent risks associated with the assets and related
estimated cash flow streams. The discount rate used in determining each asset’s fair value depends on the community’s
projected life and development stage. The Company generally uses a discount rate of approximately 20%, subject to the
perceived risks associated with the community’s cash flow streams relative to its inventory.
The Company estimates the fair value of inventory evaluated for impairment based on market conditions and
assumptions made by management at the time the inventory is evaluated, which may differ materially from actual results
if market conditions or assumptions change. For example, market deterioration or changes in assumptions may lead the
Company to incur additional impairment charges on previously impaired inventory, as well as on inventory not currently
impaired but for which indicators of impairment may arise if market deterioration occurs.
For November 30, 2014, the Company reviewed its communities for potential indicators of impairments and
identified 26 homebuilding communities with 1,774 homesites and a carrying value of $145.3 million as having potential
indicators of impairment. Of those communities, the Company recorded valuation adjustments of $2.9 million on 120
homesites in one community with a carrying value of $8.1 million.
For November 30, 2013, the Company reviewed its communities for potential indicators of impairments and
identified 35 homebuilding communities with 1,515 homesites and a carrying value of $130.5 million as having potential
indicators of impairment. Of those communities, the Company recorded valuation adjustments of $4.5 million on 99
homesites in 3 communities with a carrying value of $16.5 million.
The table below summarizes the most significant unobservable inputs used in the Company's discounted cash
flow model to determine the fair value of its communities for which the Company recorded valuation adjustments during
the years ended November 30, 2014, 2013 and 2012:
2014
2013
2012
November 30,
Unobservable inputs
Average selling price. . . . . . . . . . . . . . . . . . . . . . . . . . . . $164,000
Absorption rate per quarter (homes) . . . . . . . . . . . . . . . .
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20%
12
Range
$163,000 - $279,000
Range
$83,000 - $340,000
2 - 34
20%
1 - 20
20%
The Company also has access to land inventory through option contracts, which generally enables the Company
to defer acquiring portions of properties owned by third parties and unconsolidated entities until it has determined
whether to exercise its option. A majority of the Company’s option contracts require a non-refundable cash deposit or
irrevocable letter of credit based on a percentage of the purchase price of the land. The Company’s option contracts are
recorded at cost. In determining whether to walk away from an option contract, the Company evaluates the option
primarily based upon its expected cash flows from the property under option. If the Company intends to walk away from
an option contract, it records a charge to earnings in the period such decision is made for the deposit amount and any
related pre-acquisition costs associated with the option contract.
Lennar Homebuilding and Lennar Multifamily Investments in Unconsolidated Entities
The Company evaluates its investments in unconsolidated entities for indicators of impairment during each
reporting period. A series of operating losses of an investee or other factors may indicate that a decrease in the fair value
of the Company’s investment in the unconsolidated entity below its carrying amount has occurred which is other-than-
temporary. The amount of impairment recognized is the excess of the investment’s carrying amount over its estimated
fair value.
The evaluation of the Company’s investments in unconsolidated entities includes certain critical assumptions
made by management: (1) projected future distributions from the unconsolidated entities, (2) discount rates applied to the
future distributions and (3) various other factors.
83
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company’s assumptions on the projected future distributions from the unconsolidated entities are
dependent on market conditions. Specifically, distributions are dependent on cash to be generated from the sale of
inventory by the Lennar Homebuilding unconsolidated entities or assets by Lennar Multifamily unconsolidated entities.
Such inventory is also reviewed for potential impairment by the unconsolidated entities. The unconsolidated entities
generally use a discount rate of approximately 20% in their reviews for impairment, subject to the perceived risks
associated with the community’s cash flow streams relative to its inventory. If a valuation adjustment is recorded by an
unconsolidated entity related to its assets, the Company’s proportionate share is reflected in the Company's Lennar
Homebuilding or Lennar Multifamily equity in earnings (loss) from unconsolidated entities with a corresponding
decrease to its Lennar Homebuilding or Lennar Multifamily investment in unconsolidated entities. In certain instances,
the Company may be required to record additional losses relating to its investment in unconsolidated entities, if the
Company’s investment in the unconsolidated entity, or a portion thereof, is deemed to be other than temporarily
impaired. These losses are included in Lennar Homebuilding other income, net or in Lennar Multifamily costs and
expenses.
Additionally, the Company considers various qualitative factors to determine if a decrease in the value of an
investment is other-than-temporary. These factors include age of the venture, intent and ability for the Company to
recover its investment in the entity, financial condition and long-term prospects of the unconsolidated entity, short-term
liquidity needs of the unconsolidated entity, trends in the general economic environment of the land, entitlement status of
the land held by the unconsolidated entity, overall projected returns on investment, defaults under contracts with third
parties (including bank debt), recoverability of the investment through future cash flows and relationships with the other
partners and banks. If the Company believes that the decline in the fair value of the investment is temporary, then no
impairment is recorded.
The Company tracks its share of cumulative earnings and distributions of its joint ventures (“JVs”). For
purposes of classifying distributions received from JVs in the Company’s consolidated statements of cash flows,
cumulative distributions are treated as returns on capital to the extent of cumulative earnings and included in the
Company’s consolidated statements of cash flows as operating activities. Cumulative distributions in excess of the
Company’s share of cumulative earnings are treated as returns of capital and included in the Company’s consolidated
statements of cash flows as investing activities.
Consolidation of Variable Interest Entities
GAAP requires the consolidation of VIEs in which an enterprise has a controlling financial interest. A
controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE
that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that
could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be
significant to the VIE.
The Company’s variable interest in VIEs may be in the form of (1) equity ownership, (2) contracts to purchase
assets, (3) management and development agreements between the Company and a VIE, (4) loans provided by the
Company to a VIE or other partner and/or (5) guarantees provided by members to banks and other third parties. The
Company examines specific criteria and uses its judgment when determining if it is the primary beneficiary of a VIE.
Factors considered in determining whether the Company is the primary beneficiary include risk and reward sharing,
experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating
decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights or voting rights, level of
economic disproportionality, if any, between the Company and the other partner(s) and contracts to purchase assets from
VIEs. The determination whether an entity is a VIE and, if so, whether the Company is the primary beneficiary may
require it to exercise significant judgment.
Generally, all major decision making in the Company’s joint ventures is shared among all partners. In particular,
business plans and budgets are generally required to be unanimously approved by all partners. Usually, management and
other fees earned by the Company are nominal and believed to be at market and there is no significant economic
disproportionality between the Company and other partners. Generally, the Company purchases less than a majority of
the JV’s assets and the purchase prices under its option contracts are believed to be at market.
Generally, Lennar Homebuilding unconsolidated entities become VIEs and consolidate when the other partner
(s) lack the intent and financial wherewithal to remain in the entity. As a result, the Company continues to fund
operations and debt paydowns through partner loans or substituted capital contributions.
Operating Properties and Equipment
Operating properties and equipment are recorded at cost and are included in other assets in the consolidated
balance sheets. The assets are depreciated over their estimated useful lives using the straight-line method. At the time
operating properties and equipment are disposed of, the asset and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is credited or charged to earnings. The estimated useful life for operating
84
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
properties is thirty years, for furniture, fixtures and equipment is two to ten years and for leasehold improvements is five
years or the life of the lease, whichever is shorter. Operating properties are reviewed for possible impairment if there are
indicators that their carrying amounts are not recoverable.
Investment Securities
Investment securities are classified as available-for-sale unless they are classified as trading or held-to-maturity.
Securities classified as trading are carried at fair value and unrealized holding gains and losses are recorded in earnings.
Available-for-sale securities are recorded at fair value. Any unrealized holding gains or losses on available-for-sale
securities are reported as accumulated other comprehensive gain or loss, which is a separate component of stockholders’
equity, net of tax, until realized. Securities classified as held-to-maturity are carried at amortized cost because they are
purchased with the intent and ability to hold to maturity.
At November 30, 2014 and 2013, the Lennar Homebuilding segment had available-for-sale securities totaling
$0.5 million and $40.0 million, respectively, included in Lennar Homebuilding other assets, which consist primarily of
investments in community development district bonds that mature in 2039. Certain of these bonds are in default by the
borrower, which may allow the Company to foreclose on the underlying real estate collateral. Unrealized holding gain
(losses) during the years ended November 30, 2014 and 2013 were deferred as a result of the Company's continuing
involvement in the underlying collateral, thus no gains were recognized during the years ended November 30, 2014 and
2013. At November 30, 2014 and 2013, the Lennar Financial Services segment had investment securities classified as
held-to-maturity totaling $45.0 million and $62.3 million, respectively. The Lennar Financial Services held-to-maturity
securities consist mainly of corporate bonds, certificates of deposit and U.S. treasury securities that mature at various
dates within a year. In addition, at November 30, 2014 and 2013, the Rialto segment had investment securities classified
as held-to-maturity totaling $17.3 million and $16.1 million, respectively. The Rialto segment held-to-maturity securities
consist of commercial mortgage-backed securities (“CMBS”). At both November 30, 2014 and 2013, the Company had
no investment securities classified as trading.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business
combinations. Evaluating goodwill for impairment involves the determination of the fair value of the Company’s
reporting units in which the Company has recorded goodwill. A reporting unit is a component of an operating segment
for which discrete financial information is available and reviewed by the Company’s management on a regular basis.
Inherent in the determination of fair value of the Company’s reporting units are certain estimates and judgments,
including the interpretation of current economic indicators and market valuations as well as the Company’s strategic
plans with regard to its operations. To the extent additional information arises or the Company’s strategies change, it is
possible that the Company’s conclusion regarding goodwill impairment could change, which could have an effect on the
Company’s financial position and results of operations.
The Company reviews goodwill annually (or whenever indicators of impairment exist) for impairment. The
Company evaluated the carrying value of the Lennar Financial Services and Rialto segments' goodwill in the fourth
quarter of 2014. The Company estimated the fair value of Lennar Financial Services title and mortgage operations and
Rialto operations based on the income approach and concluded that a goodwill impairment was not required for 2014. As
of both November 30, 2014 and 2013, there were no significant identifiable intangible assets, other than goodwill.
At both November 30, 2014 and 2013, accumulated goodwill impairments totaled $217.4 million, which
includes $27.2 million and $190.2 million of previous Lennar Financial Services and Lennar Homebuilding goodwill
impairments, respectively. At November 30, 2014, goodwill was $44.3 million, of which $38.9 million related to the
Lennar Financial Services segment and $5.4 million related to the Rialto segment. At November 30, 2013, goodwill was
$34.0 million, all of which related to the Lennar Financial Services segment. The changes in goodwill were due to the
acquisitions of a Colorado-based mortgage company by Lennar Financial Services and of the 100% acquisition of the
loan servicing business segment of a financial services company (the "Servicer Provider") in which a subsidiary of Rialto
had an approximately 5% investment at the time of acquisition.
Interest and Real Estate Taxes
Interest and real estate taxes attributable to land and homes are capitalized as inventory costs while they are
being actively developed. Interest related to homebuilding and land, including interest costs relieved from inventories, is
included in cost of homes sold and cost of land sold. Interest expense related to the Lennar Financial Services operations
is included in its costs and expenses.
During the years ended November 30, 2014, 2013 and 2012, interest incurred by the Company’s homebuilding
operations related to homebuilding debt was $273.4 million, $261.5 million and $222.0 million, respectively; interest
capitalized into inventories was $236.9 million, $167.6 million and $127.7 million, respectively.
85
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Interest expense was included in cost of homes sold, cost of land sold and other interest expense as follows:
(In thousands)
Interest expense in cost of homes sold . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest expense in cost of land sold . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
161,371
3,617
36,551
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
201,539
2013
2012
117,781
2,562
93,913
214,256
85,125
1,907
94,353
181,385
Years Ended November 30,
Income Taxes
The Company records income taxes under the asset and liability method, whereby deferred tax assets and
liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and attributable to operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted.
Interest related to unrecognized tax benefits is recognized in the financial statements as a component of income tax
expense.
A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the
available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish
valuation allowances for deferred tax assets is assessed each reporting period by the Company based on the consideration
of all available positive and negative evidence using a "more-likely-than-not" standard with respect to whether deferred
tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current
and cumulative losses, actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the
Company’s experience with loss carryforwards not expiring unused and tax planning alternatives.
Based on the analysis of positive and negative evidence, the Company believed that there was enough positive
evidence for the Company to conclude that it was more likely than not that the Company would realize the majority of its
deferred tax assets. As of November 30, 2014 and 2013, the Company's net deferred tax assets included a valuation
allowance of $8.0 million and $12.7 million, respectively. See Note 10 for additional information.
Product Warranty
Warranty and similar reserves for homes are established at an amount estimated to be adequate to cover
potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the
delivery of a home. Reserves are determined based on historical data and trends with respect to similar product types and
geographical areas. The Company regularly monitors the warranty reserve and makes adjustments to its pre-existing
warranties in order to reflect changes in trends and historical data as information becomes available. Warranty reserves
are included in Lennar Homebuilding other liabilities in the consolidated balance sheets. The activity in the Company’s
warranty reserve was as follows:
(In thousands)
Warranty reserve, beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Warranties issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to pre-existing warranties from changes in estimates (1) . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty reserve, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
102,580
60,856
12,685
(60,194)
115,927
84,188
50,695
19,687
(51,990)
102,580
(1) The adjustments to pre-existing warranties from changes in estimates during the year ended November 30, 2014 and 2013
primarily related to specific claims related to certain of our homebuilding communities and other adjustments.
Self-Insurance
Certain insurable risks such as construction defects, general liability, medical and workers’ compensation are
self-insured by the Company up to certain limits. Undiscounted accruals for claims under the Company’s self-insurance
program are based on claims filed and estimates for claims incurred but not yet reported. The Company’s self-insurance
reserve as of November 30, 2014 and 2013 was $103.2 million and $108.7 million, respectively, of which $69.3 million
and $74.5 million, respectively, was included in Lennar Financial Services’ other liabilities in the respective years.
Amounts incurred in excess of the Company's self-insurance occurrence or aggregate retention limits are covered by
86
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
insurance up to the Company's purchased coverage levels. The Company's insurance policies are maintained with highly-
rated underwriters for whom the Company believes counterparty default risk is not significant.
Earnings per Share
Basic earnings per share is computed by dividing net earnings attributable to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in earnings of the Company.
All outstanding nonvested shares that contain non-forfeitable rights to dividends or dividend equivalents that
participate in undistributed earnings with common stock are considered participating securities and are included in
computing earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula
that determines earnings per share for each class of common stock and participating securities according to dividends or
dividend equivalents and participation rights in undistributed earnings. The Company’s restricted common stock
(“nonvested shares”) are considered participating securities.
Lennar Financial Services
Revenue Recognition
Title premiums on policies issued directly by the Company are recognized as revenue on the effective date of
the title policies and escrow fees and loan origination revenues are recognized at the time the related real estate
transactions are completed, usually upon the close of escrow. Revenues from title policies issued by independent agents
are recognized as revenue when notice of issuance is received from the agent, which is generally when cash payment is
received by the Company. Expected gains and losses from the sale of loans and their related servicing rights are included
in the measurement of all written loan commitments that are accounted for at fair value through earnings at the time of
commitment. Interest income on loans held-for-sale and loans held-for-investment is recognized as earned over the terms
of the mortgage loans based on the contractual interest rates.
Loans Held-for-Sale
Loans held-for-sale by the Lennar Financial Services segment are carried at fair value and changes in fair value
are reflected in earnings. Premiums and discounts recorded on these loans are presented as an adjustment to the carrying
amount of the loans and are not amortized. Management believes carrying loans held-for-sale at fair value improves
financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the
derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions.
In addition, the Lennar Financial Services segment recognizes the fair value of its rights to service a mortgage
loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of these
servicing rights is included in the Company’s loans held-for-sale and Financial Services other assets as of November 30,
2014 and 2013. Fair value of the servicing rights is determined based on values in the Company’s servicing sales
contracts. At November 30, 2014 and 2013, loans held-for-sale, all of which were accounted for at fair value, had an
aggregate fair value of $738.4 million and $414.2 million, respectively, and an aggregate outstanding principal balance
of $706.0 million and $399.0 million at November 30, 2014 and 2013, respectively.
Provision for Losses
Substantially all of the loans the Lennar Financial Services segment originates are sold within a short period in
the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, the Company retains
potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and
warranties in the loan sale agreement. During recent years there has been an increased industry-wide effort by purchasers
to defray their losses by purporting to have found inaccuracies related to sellers’ representations and warranties in
particular loan sale agreements. The Company’s mortgage operations have established reserves for possible losses
associated with mortgage loans previously originated and sold to investors. The Company establishes reserves for such
possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potential
repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans, as
well as previous settlements. While the Company believes that it has adequately reserved for known losses and projected
repurchase requests, given the volatility in the mortgage industry and the uncertainty regarding the ultimate resolution of
these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s
expectations, additional recourse expense may be incurred. Loan origination liabilities are included in Lennar Financial
Services’ liabilities in the consolidated balance sheets. The activity in the Company’s loan origination liabilities was as
follows:
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LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands)
Loan origination liabilities, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Provision for losses (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments/settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan origination liabilities, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
9,311
2,908
(401)
11,818
7,250
2,427
(366)
9,311
(1) Provision for losses included adjustments to pre-existing provisions for losses from changes in estimates. For the year ended
November 30, 2013, provision for losses included an adjustment for additional repurchase requests that were received beyond the
estimated provision that was recorded due to an increase in potential issues identified by certain investors.
The Lennar Financial Services segment also provides an allowance for loan losses. The provision recorded and
the adequacy of the related allowance is determined by management’s continuing evaluation of the loan portfolio in light
of past loan loss experience, credit worthiness and nature of underlying collateral, present economic conditions and other
factors considered relevant by the Company’s management. Anticipated changes in economic factors, which may
influence the level of the allowance, are considered in the evaluation by the Company’s management when the likelihood
of the changes can be reasonably determined. While the Company’s management uses the best information available to
make such evaluations, future adjustments to the allowance may be necessary as a result of future economic and other
conditions that may be beyond management’s control.
Loans Held-for-Investment, Net
Loans for which the Company has the positive intent and ability to hold to maturity consist of mortgage loans
carried at lower of cost, net of unamortized discounts or fair value on a nonrecurring basis. Discounts are amortized over
the estimated lives of the loans using the interest method.
For Lennar Financial Services loans held-for-investment, net, a loan is deemed impaired when, based on current
information and events, it is probable that the Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Interest income is not accrued or recognized on impaired loans unless payment
is received. Impaired loans are written-off if and when the loan is no longer secured by collateral. The total unpaid
principal balance of the impaired loans was as follows:
(In thousands)
Impaired loans unpaid principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in impaired loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
7,576
(3,730)
3,846
7,897
(3,891)
4,006
The average recorded investment in impaired loans totaled approximately $3.9 million and $3.5 million, for the
years ended November 30, 2014 and 2013, respectively.
Derivative Financial Instruments
The Lennar Financial Services segment, in the normal course of business, uses derivative financial instruments
to reduce its exposure to fluctuations in mortgage-related interest rates. The segment uses mortgage-backed securities
(“MBS”) forward commitments, option contracts and investor commitments to protect the value of fixed rate-locked loan
commitments and loans held-for-sale from fluctuations in mortgage-related interest rates. These derivative financial
instruments are carried at fair value with the changes in fair value included in Lennar Financial Services revenues.
Rialto
Management Fees Revenue
The Rialto segment provides services to a variety of legal entities and investment vehicles such as funds, joint
ventures, co-invests, and other private equity structures to manage their respective investments. As a result, Rialto earns
and receives management fees, underwriting fees and due diligence fees. These fees related to the Rialto segment are
included in Rialto revenues and are recorded over the period in which the services are performed, fees are determinable
and collectability is reasonably assured. Rialto receives investment management fees from investment vehicles based on
1) a percentage of committed capital during the commitment period and after the commitment period ends and 2) a
percentage of invested capital less the portion of such invested capital utilized to acquire investments that have been sold
(in whole or in part) or liquidated. Fees earned for underwriting and due diligence services are based on actual costs
incurred. In certain situations, Rialto may earn additional fees when the return on assets managed exceeds contractually
established thresholds. Such revenue is only booked when the contract terms are met, the contract is at, or near,
completion and the amounts are known and collectability is reasonably assured. Since such revenue is recognized at the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
end of the life of the investment vehicle, after substantially all of the assets have been sold and investment gains and
losses realized, the possibility of claw backs is limited.
Loans Receivable – Revenue Recognition
All of the acquired loans for which (1) there was evidence of credit quality deterioration since origination and
(2) for which it was deemed probable that the Company would be unable to collect all contractually required principal
and interest payments were accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated
Credit Quality, (“ASC 310-30”). For loans accounted for under ASC 310-30, management determined upon acquisition
the loan’s value based on due diligence regarding each of the loans, the underlying properties and the borrowers. The
Company determined fair value by discounting the cash flows expected to be collected adjusted for factors that a market
participant would consider when determining fair value. Factors considered in the valuation were projected cash flows
for the loans, type of loan and related collateral, classification status and current discount rates. Since the estimates are
based on projections, all estimates are subjective and can change due to unexpected changes in economic conditions or
loan performance.
Under ASC 310-30, loans were pooled together according to common risk characteristics. A pool is then
accounted for as a single asset with a single component interest rate and as aggregate expectation of cash flows. The
excess of the cash flows expected to be collected over the cost of the loans acquired is referred to as the accretable yield
and is recognized in interest income over the remaining life of the loans using the effective yield method. The difference
between the contractually required payments and the cash flows expected to be collected at acquisition is referred to as
the nonaccretable difference. This difference is neither accreted into income nor recorded on our consolidated balance
sheets. Changes in the expected cash flows of loans receivable from the date of acquisition will either impact the
accretable yield or result in a charge to the provision for loan losses in the period in which the changes become probable.
Prepayments are treated as a reduction of cash flows expected to be collected and a reduction of contractually required
payments such that the nonaccretable difference is not affected. Subsequent significant decreases to the expected cash
flows will generally result in a charge to the provision for loan losses, resulting in an increase to the allowance for loan
losses, and a reclassification from accretable yield to nonaccretable difference. Subsequent probable and significant
increases in the cash flows will result in a recovery of any previously recorded allowance for loan losses, to the extent
applicable, and a reclassification from nonaccretable difference to accretable yield. Amounts related to the ASC 310-30
loans are estimates and may change as we obtain additional information related to the respective loans and the inherent
uncertainty associated with estimating the amount and timing of the expected cash flows associated with distressed
residential and commercial real estate loans. The timing and amount of expected cash flows and related accretable yield
can also be impacted by disposal of loans, loan payoffs or expected foreclosures, which result in removal of the loans
from the pools. Since the cash flows are based on projections, they are subjective and can change due to unexpected
changes in economic conditions and loan performance. During the fourth quarter of 2014, in an effort to better reflect the
performance of the loan portfolios, the Company changed from recording accretable yield income on a loan pool basis to
recording income on a cost recovery basis per loan as expected cash flows on the remaining loan portfolios could no
longer be reasonably estimated. At November 30, 2014, these loans were classified as nonaccrual loans.
Nonaccrual Loans- Revenue Recognition & Impairment
At November 30, 2014 and 2013, there were loans receivable with a carrying value of $130.1 million and $8.3
million, respectively, for which interest income was not being recognized as they were classified as nonaccrual. When
forecasted principal and interest cannot be reasonably estimated at the loan acquisition date, management classifies the
loan as nonaccrual and accounts for these assets in accordance with ASC 310-10, Receivable, (“ASC 310-10”). When a
loan is classified as nonaccrual, any subsequent cash receipt is accounted for using the cost recovery method. In
accordance with ASC 310-10, a loan is considered impaired when based on current information and events, it is probable
that all amounts due according to the contractual terms of the loan agreement will not be collected.
A provision for loan losses is recognized when the recorded investment in the loan is in excess of its fair value.
The fair value of the loan is determined by using either the present value of expected future cash flows discounted at the
loan’s effective interest rate or the fair value of the collateral less estimated costs to sell.
Real Estate Owned
Real estate owned (“REO”) represents real estate that the Rialto segment has taken control or has effective
control of in partial or full satisfaction of loans receivable. At the time of acquisition of a property through foreclosure of
a loan, REO is recorded at fair value less estimated costs to sell if classified as held-for-sale or at fair value if classified
as held-and-used, which becomes the property’s new basis. The fair values of these assets are determined in part by
placing reliance on third-party appraisals of the properties and/or internally prepared analyses of recent offers or prices
on comparable properties in the proximate vicinity. The third-party appraisals and internally developed analyses are
significantly impacted by the local market economy, market supply and demand, competitive conditions and prices on
comparable properties, adjusted for date of sale, location, property size, and other factors. Each REO is unique and is
analyzed in the context of the particular market where the property is located. In order to establish the significant
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
assumptions for a particular REO, the Company analyzes historical trends, including trends achieved by the Company's
local homebuilding operations, if applicable, and current trends in the market and economy impacting the REO. Using
available trend information, the Company then calculates its best estimate of fair value, which can include projected cash
flows discounted at a rate the Company believes a market participant would determine to be commensurate with the
inherent risks associated with the assets and related estimated cash flow streams. These methods use unobservable inputs
to develop fair value for the Company’s REO. Due to the volume and variance of unobservable inputs, resulting from the
uniqueness of each of the Company's REO, the Company does not use a standard range of unobservable inputs with
respect to its evaluation of REO. However, for operating properties within REO, the Company may also use estimated
cash flows multiplied by a capitalization rate to determine the fair value of the property. For the year ended
November 30, 2014, the capitalization rates used to estimate fair value ranged from 8% to 12% and varied based on the
location of the asset, asset type and occupancy rates for the operating properties.
Changes in economic factors, consumer demand and market conditions, among other things, could materially
impact estimates used in the third-party appraisals and/or internally prepared analyses of recent offers or prices on
comparable properties. Thus, estimates can differ significantly from the amounts ultimately realized by the Rialto
segment from disposition of these assets. The amount by which the recorded investment in the loan is less than the
REO’s fair value (net of estimated cost to sell if held-for-sale), is recorded as an unrealized gain upon foreclosure in the
Company’s consolidated statement of operations. The amount by which the recorded investment in the loan is greater
than the REO’s fair value (net of estimated cost to sell if held-for-sale) is generally recorded as a provision for loan
losses in the Company’s consolidated statement of operations.
At times, the Company may foreclose on a loan from an accrual loan pool in which the removal of the loan does
not cause an overall decrease in the expected cash flows of the loan pool, and as such, no provision for loan losses is
required to be recorded. However, the amount by which the recorded investment in the loan is greater than the REO’s
fair value (net of estimated cost to sell if held-for-sale) is recorded as an unrealized loss upon foreclosure.
Additionally, REO includes real estate which Rialto has purchased directly from financial institutions. These
REOs are recorded at cost or allocated cost if purchased in a bulk transaction.
Subsequent to obtaining REO via foreclosure or directly from a financial institution, management periodically
performs valuations using the methodologies described above such that the real estate is carried at the lower of its
carrying value or current fair value, less estimated costs to sell if classified as held-for-sale. Held-and-used assets are
tested for recoverability whenever changes in circumstances indicate that the carrying value may not be recoverable, and
impairment losses are recorded for any amount by which the carrying value exceeds its fair value. Any subsequent
valuation adjustments, operating expenses or income, and gains and losses on disposition of such properties are also
recognized in Rialto other income (expense), net. REO assets classified as held-and-used are depreciated using a useful
life of forty years for commercial properties and twenty seven and a half years for residential properties. REO assets
classified as held-for-sale are not depreciated. Occasionally an asset will require certain improvements to yield a higher
return. In accordance with ASC 970-340-25, Real Estate, construction costs incurred prior to acquisition or during
development of the asset may be capitalized.
Rialto Mortgage Finance - Loans Held-for-Sale
The originated mortgage loans are classified as loans held-for-sale on the consolidated balance sheets and are
recorded at fair value. The Company elected the fair value option for Rialto Mortgage Finance's ("RMF's") loans held-
for-sale in accordance with ASC 825, Financial Instruments, which permits entities to measure various financial
instruments and certain other items at fair value on a contract-by-contract basis. Management believes that carrying loans
held-for-sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring
the fair value of the loans and the derivative instruments, which are also carried at fair value, used to economically hedge
them without having to apply complex hedge accounting provisions. Changes in fair values of the loans are reflected in
Rialto revenues in the accompanying consolidated statements of operations. Interest income on these loans is calculated
based on the interest rate of the loan and is recorded within Rialto revenues in the accompanying consolidated statements
of operations. Substantially all of the mortgage loans originated are sold within a short period of time in a securitization
on a servicing released, non-recourse basis; although, the Company remains liable for certain limited industry-standard
representations and warranties related to loan sales.
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LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidations of Variable Interest Entities
In 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability
companies (“LLCs”), in partnership with the FDIC. The Company determined that each of the LLCs met the definition
of a VIE and that the Company was the primary beneficiary. In accordance with ASC 810-10-65-2, Consolidations,
(“ASC 810-10-65-2”), the Company identified the activities that most significantly impact the LLCs’ economic
performance and determined that it has the power to direct those activities. The economic performance of the LLCs is
most significantly impacted by the performance of the LLCs’ portfolios of assets, which consisted primarily of distressed
residential and commercial mortgage loans. Thus, the activities that most significantly impact the LLCs’ economic
performance are the servicing and disposition of mortgage loans and real estate obtained through foreclosure of loans,
restructuring of loans, or other planned activities associated with the monetizing of loans.
The FDIC does not have the unilateral power to terminate the Company’s role in managing the LLCs and
servicing the loan portfolios. While the FDIC has the right to prevent certain types of transactions (i.e., bulk sales, selling
assets with recourse back to the selling entity, selling assets with representations and warranties and financing the sales
of assets without the FDIC’s approval), the FDIC does not have full voting or blocking rights over the LLCs’ activities,
making their voting rights protective in nature, not substantive participating voting rights. Other than as described in the
preceding sentence, which are not the primary activities of the LLCs, the Company can cause the LLCs to enter into both
the disposition and restructuring of loans without any involvement of the FDIC. Additionally, the FDIC has no voting
rights with regard to the operation/management of the operating properties that are acquired upon foreclosure of loans
(e.g. REO) and no voting rights over the business plans of the LLCs. The FDIC can make suggestions regarding the
business plans, but the Company can decide not to follow the FDIC’s suggestions and not to incorporate them in the
business plans. Since the FDIC’s voting rights are protective in nature and not substantive participating voting rights, the
Company has the power to direct the activities that most significantly impact the LLCs’ economic performance.
In accordance with ASC 810-10-65-2, the Company determined that it had an obligation to absorb losses of the
LLCs that could potentially be significant to the LLCs or the right to receive benefits from the LLCs that could
potentially be significant to the LLCs based on the following factors:
• Rialto/Lennar owns 40% of the equity of the LLCs and has the power to direct the activities of the LLCs
that most significantly impact their economic performance through loan resolutions and the sale of REO.
• Rialto/Lennar has a management/servicer contract under which the Company earns a 0.5% servicing fee.
• Rialto/Lennar has guaranteed, as the servicer, its obligations under the servicing agreement up to $10
million.
The Company is aware that the FDIC, as the owner of 60% of the equity of each of the LLCs, may also have an
obligation to absorb losses of the LLCs that could potentially be significant to the LLCs. However, in accordance with
ASC 810-10-25-38A, only one enterprise, if any, is expected to be identified as the primary beneficiary of a VIE.
Since both criteria for consolidation in ASC 810-10-65-2 are met, the Company consolidated the LLCs.
Voting Interest Entities
Rialto Real Estate Fund, LP ("Fund I"), Rialto Real Estate Fund II, LP ("Fund II") and the Rialto Mezzanine
Partners Fund ("Mezzanine Fund") are unconsolidated entities and are accounted for under the equity method of
accounting. They were determined to have the attributes of an investment company in accordance with ASC Topic 946,
Financial Services – Investment Companies, the attributes of which are different from the attributes that would cause a
company to be an investment company for purposes of the Investment Company Act of 1940. As a result, Fund I, Fund II
and the Mezzanine Fund’s assets and liabilities are recorded at fair value with increases/decreases in fair value recorded
in their respective statements of operations, the Company’s share of which will be recorded in the Rialto equity in
earnings (loss) from unconsolidated entities financial statement line item. The Company determined that Fund I, Fund II
and the Mezzanine Fund are not variable interest entities but rather voting interest entities due to the following factors:
• The Company determined that Rialto’s general partner interest and all the limited partners’ interests qualify
as equity investment at risk.
• Based on the capital structure of Fund I, Fund II and the Mezzanine Fund (100% capitalized via equity
contributions), the Company was able to conclude that the equity investment at risk was sufficient to allow
Fund I, Fund II and the Mezzanine Fund to finance its activities without additional subordinated financial
support.
• The general partner and the limited partners in Fund I, Fund II and the Mezzanine Fund, collectively, have
full decision-making ability as they collectively have the power to direct the activities of Fund I, Fund II
and the Mezzanine Fund, since Rialto, in addition to being a general partner with a substantive equity
investment in Fund I, Fund II and the Mezzanine Fund, also provides services to Fund I, Fund II and the
Mezzanine Fund under a management agreement and an investment agreement, which are not separable
from Rialto’s general partnership interest.
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LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• As a result of all these factors, the Company has concluded that the power to direct the activities of Fund I,
Fund II and the Mezzanine Fund reside in its general partnership interest and thus with the holders of the
equity investment at risk.
•
•
In addition, there are no guaranteed returns provided to the equity investors and the equity contributions
are fully subjected to Fund I, Fund II and the Mezzanine Fund's operational results, thus the equity
investors absorb the expected negative and positive variability relative to Fund I, Fund II and the
Mezzanine Fund.
Finally, substantially all of the activities of Fund I, Fund II and the Mezzanine Fund are not conducted on
behalf of any individual investor or related group that has disproportionately few voting rights (i.e., on
behalf of any individual limited partner).
Having concluded that Fund I, Fund II and the Mezzanine Fund are voting interest entities, the Company has
evaluated the funds under the voting interest entity model to determine whether, as general partner, it has control over
Fund I, Fund II or the Mezzanine Fund. The Company determined that it does not control Fund I, Fund II or the
Mezzanine Fund as its general partner, because the unaffiliated limited partners have substantial kick-out rights and can
remove Rialto as general partner at any time for cause or without cause through a simple majority vote of the limited
partners. In addition, there are no significant barriers to the exercise of these rights. As a result of determining that the
Company does not control Fund I, Fund II or the Mezzanine Fund under the voting interest entity model, Fund I, Fund II
and the Mezzanine Fund are not consolidated in the Company’s financial statements.
Lennar Multifamily
Management Fees and General Contractor Revenue
The Lennar Multifamily segment provides management services with respect to the development, construction
and management of rental projects in joint ventures in which the Company has investments. As a result, the Lennar
Multifamily segment earns and receives fees, which are based upon a stated percentage of development and construction
costs. These fees are included in Lennar Multifamily revenue and are recorded over the period in which the services are
performed, fees are determinable and collectability is reasonably assured. In addition, the Lennar Multifamily provides
general contractor services for the construction of some of its rental projects and recognizes the revenue over the period
in which the services are performed under the percentage of completion method.
New Accounting Pronouncements
In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, (“ASU
2011-11”), which requires entities to disclose information about offsetting and related arrangements of financial
instruments and derivative instruments. In January 2013, this guidance was amended by ASU 2013-01, Clarifying the
Scope of Disclosures about Offsetting assets and Liabilities ("ASU 2013-01"). ASU 2013-01 limits the scope of ASU
2011-11 to certain derivatives, repurchase and reverse repurchase agreements, and securities borrowing and lending
transactions. The guidance was effective for the Company's fiscal year beginning December 1, 2013 and subsequent
interim periods. The adoption of this guidance, which is related to disclosure only, did not have a material effect on the
Company’s consolidated financial statements.
In April 2013, the FASB issued ASU 2013-04, Liabilities, (“ASU 2013-04”). ASU 2013-04 provides guidance
for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for
which the total amount of the obligation is fixed at the reporting date. ASU 2013-04 is effective for the Company’s fiscal
year beginning December 1, 2014 and subsequent interim periods. The adoption of ASU 2013-04 is not expected to have
a material effect on the Company’s consolidated financial statements.
In June 2013, the FASB issued ASU 2013-08, Investment Companies, (“ASU 2013-08”), which amends the
criteria for an entity to qualify as an investment company under ASC 946, Financial Services - Investment Companies,
(“ASC 946”). While ASU 2013-08 is not expected to significantly change which entities qualify for the specialized
investment company accounting in ASC 946, it (1) introduces new disclosure requirements that apply to all investment
companies and (2) amends the measurement criteria for certain interests in other investment companies. ASU 2013-08
also amends the requirements in ASC 810 related to qualifying for the “investment company deferral” as well as the
requirements in ASC 820, Fair Value Measurement, related to qualifying for the “net asset value practical expedient.”
ASU 2013-08 was effective for the Company’s second fiscal quarter beginning March 1, 2014. The adoption of ASU
2013-08 did not have a material effect on the Company’s consolidated financial statements.
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a similar Tax Loss, or a Tax Credit Carryforward Exists, (“ASU 2013-11”). ASU 2013-13
is intended to end inconsistent practices regarding the presentation of a unrecognized tax benefits when a net operating
loss ("NOL"), a similar tax loss or a tax credit carryforward is available to reduce the taxable income or tax payable that
would result from the disallowance of a tax position. ASU 2013-11 is effective for the Company’s fiscal year beginning
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LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 1, 2014 and subsequent interim periods. The adoption of ASU 2013-11 is not expected to have a material
effect on the Company’s consolidated financial statements.
In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements and Property, Plant, and
Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, (“ASU
2014-08”). ASU 2014-08 is intended to change the criteria for reporting discontinued operations and enhance disclosures
in this area. Under the new guidance, only disposals representing a strategic shift in operations that has a major effect on
the entity's operations and financial results should be presented as discontinued operations. If the disposal does qualify as
a discontinued operation, the entity will be required to provide expanded disclosures as well as disclosure of the pretax
income attributable to the disposal of a significant part of an entity that does not qualify as a discontinued operation.
ASU 2014-08 is effective for the Company’s fiscal year beginning December 1, 2014 and subsequent interim periods.
The adoption of ASU 2014-08 is not expected to have a material effect on the Company’s consolidated financial
statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, (“ASU 2014-09”). ASU
2014-09 provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with
customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU
2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
This update creates a five-step model that requires entities to exercise judgment when considering the terms of the
contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance
obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate
performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. ASU 2014-09 will
be effective for the Company’s fiscal year beginning December 1, 2017 and subsequent interim periods The Company
has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or
retrospectively with the cumulative effect of applying this ASU recognized at the date of initial application. Early
adoption is not permitted. The Company is currently evaluating the method by which it will implement ASU 2014-09
and the impact the adoption of this ASU will have on the Company's consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern
(Subtopic 205-40): Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern, (“ASU
2014-15”). ASU 2014-15 requires management to perform interim and annual assessments on whether there are
conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year
of the date the financial statements are issued and to provide related disclosures, if required. ASU 2014-15 will be
effective for the Company’s fiscal year beginning December 1, 2016 and subsequent interim periods. The adoption of
ASU 2014-15 is not expected to have a material effect on the Company’s consolidated financial statements.
In January 2015, the FASB issued ASU 2015-01, Income Statement - Extraordinary and Unusual Items
(Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,
(“ASU 2015-01”). ASU 2015-01 eliminates the concept of an extraordinary item from GAAP. As a result, an entity will
no longer be required to segregate extraordinary items from the results of ordinary operations, to separately present an
extraordinary item on its income statement, net of tax, after income from continuing operations or to disclose income
taxes and earnings-per-share data applicable to an extraordinary item. However, ASU 2015-01 will still retain the
presentation and disclosure guidance for items that are unusual in nature and occur infrequently. ASU 2015-01 will be
effective for the Company’s fiscal year beginning December 1, 2016 and subsequent interim periods. The adoption of
ASU 2015-015 is not expected to have a material effect on the Company’s consolidated financial statements.
2. Operating and Reporting Segments
The Company’s operating segments are aggregated into reportable segments, based primarily upon similar
economic characteristics, geography and product type. The Company’s reportable segments consist of:
(1) Homebuilding East
(2) Homebuilding Central
(3) Homebuilding West
(4) Homebuilding Southeast Florida
(5) Homebuilding Houston
(6) Financial Services
(7) Rialto
(8) Lennar Multifamily
Information about homebuilding activities in which the Company’s homebuilding activities are not
economically similar to other states in the same geographic area is grouped under “Homebuilding Other,” which is not
considered a reportable segment.
93
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes.
Operations of the Company’s homebuilding segments primarily include the construction and sale of single-family
attached and detached homes, as well as the purchase, development and sale of residential land directly and through the
Company’s unconsolidated entities. Operating earnings (loss) for the homebuilding segments consist of revenues
generated from the sales of homes and land, equity in earnings (loss) from unconsolidated entities and other income
(expense), net, less the cost of homes sold and land sold, selling, general and administrative expenses and other interest
expense of the segment.
The Company’s reportable homebuilding segments and all other homebuilding operations not required to be
reported separately, have operations located in:
East: Florida(1), Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia
Central: Arizona, Colorado and Texas(2)
West: California and Nevada
Southeast Florida: Southeast Florida
Houston: Houston, Texas
Other: Illinois, Minnesota, Oregon, Tennessee and Washington
(1) Florida in the East reportable segment excludes Southeast Florida, which is its own reportable segment.
(2) Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.
Operations of the Lennar Financial Services segment include primarily mortgage financing, title insurance and
closing services for both buyers of the Company’s homes and others. The Lennar Financial Services sells substantially
all of the loans it originates within a short period in the secondary mortgage market, the majority of which are sold on a
servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible
claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale
agreements. Lennar Financial Services’ operating earnings consist of revenues generated primarily from mortgage
financing, title insurance and closing services, less the cost of such services and certain selling, general and
administrative expenses incurred by the segment. The Lennar Financial Services segment operates generally in the same
states as the Company’s homebuilding operations as well as in other states.
Operations of the Rialto segment include raising, investing and managing third-party capital, originating and
securitizing commercial mortgage loans as well as investing its own capital in real estate related mortgage loans,
properties and related securities. Rialto utilizes its vertically-integrated investment and operating platform to underwrite,
diligence, acquire, manage, workout and add value to diverse portfolios of real estate loans, properties and securities as
well as providing strategic real estate capital. Rialto’s operating earnings consists of revenues generated primarily from
gains from securitization transactions and interest income from the RMF business, interest income associated with
portfolios of real estate loans acquired in partnership with the FDIC and other portfolios of real estate loans and assets
acquired, asset management, due diligence and underwriting fees derived from the segment's investments in the real
estate investment funds managed by the Rialto segment, fees for sub-advisory services, other income (expense), net,
consisting primarily of gains upon foreclosure of real estate owned (“REO”) and gains on sale of REO, and equity in
earnings (loss) from unconsolidated entities, less the costs incurred by the segment for managing portfolios, costs related
to RMF, REO expenses and other general and administrative expenses.
Operations of the Lennar Multifamily segment include revenues generated from the sales of land, revenue from
construction activities and management fees generated from joint ventures and equity in earnings (loss) from
unconsolidated entities, less the cost of sales of land, expenses related to construction activities and general and
administrative expenses.
Each reportable segment follows the same accounting policies described in Note 1—“Summary of Significant
Accounting Policies” to the consolidated financial statements. Operational results of each segment are not necessarily
indicative of the results that would have occurred had the segment been an independent, stand-alone entity during the
periods presented.
94
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Financial information relating to the Company’s operations was as follows:
(In thousands)
Assets:
November 30,
2014
2013
1,890,138
963,815
3,108,395
757,125
307,864
808,496
1,479,313
796,710
147,089
1,014,302
11,273,247
19,569
56,136
600,622
36,595
2,074
1,953
716,949
154,573
46,301
—
34,046
Homebuilding East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Homebuilding Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Southeast Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,323,978
1,233,991
3,454,611
722,706
398,538
880,912
1,458,152
1,177,053
268,014
1,040,312
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,958,267
Lennar Homebuilding investments in unconsolidated entities:
Homebuilding East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Homebuilding Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Southeast Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Lennar Homebuilding investments in unconsolidated entities . . . . . $
Rialto investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Lennar Multifamily investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . $
Rialto goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Lennar Financial Services goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
10,620
35,772
564,643
32,670
162
12,970
656,837
175,700
105,674
5,396
38,854
95
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended November 30,
2014
2013
2012
(In thousands)
Revenues:
Homebuilding East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Homebuilding Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding West. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Southeast Florida. . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,247,681
936,940
1,796,375
692,898
713,113
638,123
454,381
230,521
69,780
1,842,162
743,475
1,161,332
502,175
641,161
464,642
427,342
138,060
14,746
1,299,980
506,388
697,289
367,641
471,623
238,311
384,618
138,856
426
Total revenues (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,779,812
5,935,095
4,105,132
Operating earnings (loss):
Homebuilding East (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Homebuilding Central (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding West (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Southeast Florida (5) . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Other (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating earnings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate general and administrative expenses . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . $
340,108
75,585
292,719
161,963
107,622
55,724
80,138
44,079
(10,993)
1,146,945
177,161
969,784
251,117
55,203
211,155
106,889
80,819
27,892
85,786
26,128
(16,988)
828,001
146,060
681,941
113,997
24,827
(14,027)
71,057
46,275
16,856
84,782
11,569
(5,884)
349,452
127,338
222,114
(1) Total revenues were net of sales incentives of $449.2 million ($21,400 per home delivered) for the year ended November 30,
2014, $373.1 million ($20,500 per home delivered) for the year ended November 30, 2013 and $388.2 million ($28,300 per home
delivered) for the year ended November 30, 2012.
(2) For the year ended November 30, 2012, operating earnings included $2.4 million of valuation adjustments to finished homes, CIP
and land on which the Company intends to build homes, $1.8 million in write-offs of option deposits and pre-acquisition costs
and $1.0 million in write-offs of other receivables.
(3) For the year ended November 30, 2014, operating earnings included $1.1 million in write-offs of option deposits and pre-
acquisition costs and $2.0 million in write-offs of other receivables.
(4) For the year ended November 30, 2014, operating earnings included $2.0 million in write-offs of option deposits and pre-
acquisition costs and $4.3 million of the Company's share of valuation adjustments primarily related to assets of a Lennar
Homebuilding unconsolidated entity. For the year ended November 30, 2013, operating earnings included a $14.4 million gain on
the sale of an operating property, $19.8 million of our share of equity in earnings as a result of sales of homesites to third parties
by one unconsolidated entity. For the year ended November 30, 2012, operating loss included $5.2 million of valuation
adjustments to finished homes, CIP and land on which the Company intends to build homes and $12.1 million of the Company's
share of valuation adjustments primarily related to strategic asset sales at Lennar Homebuilding unconsolidated entities.
(5) For the year ended November 30, 2014, operating earnings included $3.0 million of valuation adjustments to finished homes, CIP
and land on which the Company intends to build homes and $1.0 million of valuation adjustments to other assets. For the year
ended November 30, 2013, operating earnings included $4.0 million of valuation adjustments to finished homes, CIP and land on
which the Company intends to build homes. For the year ended November 30, 2012, operating earnings included a $15.0 million
gain on the sale of an operating property, partially offset by $3.6 million of valuation adjustments to finished homes, CIP and land
on which the Company intends to build homes.
(6) For the year ended November 30, 2014, operating earnings included $1.5 million in write-offs of option deposits and pre-
acquisition costs.
Changes in market conditions and other specific developments may cause the Company to re-evaluate its
strategy regarding certain assets that could result in further valuation adjustments and/or additional write-offs of option
deposits and pre-acquisition costs due to abandonment of those options contracts.
96
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands)
Lennar Homebuilding interest expense:
Years Ended November 30,
2014
2013
2012
Homebuilding East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Homebuilding Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Southeast Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,437
24,593
58,999
21,307
14,914
16,289
Total Lennar Homebuilding interest expense. . . . . . . . . . . . . . . . . . . $
201,539
Lennar Financial Services interest income, net
$
6,585
Depreciation and amortization:
Homebuilding East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Homebuilding Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Southeast Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net additions (disposals) to operating properties and equipment:
Homebuilding East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Homebuilding Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding West (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Southeast Florida (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,860
5,568
14,533
3,039
3,252
5,729
4,539
7,367
595
23,641
79,123
350
578
6,719
(42,780)
6
1,042
4,502
4,361
1,907
1,977
65,123
28,534
63,106
19,237
16,412
21,844
214,256
5,154
8,955
3,569
10,594
2,047
2,647
4,213
2,755
5,588
484
23,056
63,908
97
201
(128,058)
78
—
561
3,648
4,052
92
401
60,026
24,765
49,096
17,282
13,800
16,416
181,385
3,697
6,039
2,165
9,225
1,889
1,692
3,228
2,863
6,998
—
23,294
57,393
597
114
724
4
—
193
960
—
12
218
Total net additions (disposals) to operating properties and
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(21,338)
(118,928)
2,822
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities
Homebuilding East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Homebuilding Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding West (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Southeast Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homebuilding Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Lennar Homebuilding equity in earnings (loss) from
unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . . . . . . . . $
Lennar Multifamily equity in earnings (loss) from unconsolidated entities . . $
2,254
(131)
(1,647)
(576)
121
(376)
(355)
59,277
14,454
678
(87)
542
(514)
22,039
(25,415)
(152)
2,079
(754)
23,803
22,353
(271)
(961)
(35)
(289)
(26,672)
41,483
(4)
(1) For the year ended November 30, 2013, net disposals of operating properties and equipment included the sale of an operating
property with a basis of $127.1 million.
(2) For the year ended November 30, 2014, net disposals to operating properties and equipment included the sale of an operating
property with a basis of $44.1 million.
(3) For the year ended November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities related primarily to the
Company's share of operating losses of the Company's Lennar Homebuilding unconsolidated entities, which included $4.3
million of the Company's share of valuation adjustments related to assets of Lennar Homebuilding's unconsolidated entities,
partially offset by the Company's share of operating earnings of $4.7 million related to third-party land sales by one
97
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
unconsolidated entity. For the year ended November 30, 2013, Lennar Homebuilding equity in earnings from unconsolidated
entities included $19.8 million of equity in earnings primarily as a result of sales of homesites to third parties by one
unconsolidated entity. For the year ended November 30, 2012, equity in loss from unconsolidated entities related primarily to the
Company's share of operating losses of the Company's Lennar Homebuilding unconsolidated entities, which included $12.1
million of the Company's share of valuation adjustments primarily related to assets of Lennar Homebuilding unconsolidated
entities.
3. Lennar Homebuilding Receivables
(In thousands)
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Mortgage and notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
November 30,
2014
2013
44,368
41,326
10,620
96,314
(2,870)
93,444
32,677
14,550
7,432
54,659
(2,724)
51,935
At November 30, 2014 and 2013, Lennar Homebuilding accounts receivable related primarily to other
receivables and rebates. The Company performs ongoing credit evaluations of its customers and generally does not
require collateral for accounts receivable. Mortgages and notes receivable arising from the sale of land are generally
collateralized by the property sold to the buyer. Allowances are maintained for potential credit losses based on historical
experience, present economic conditions and other factors considered relevant by the Company.
4. Lennar Homebuilding Investments in Unconsolidated Entities
Summarized condensed financial information on a combined 100% basis related to Lennar Homebuilding’s
unconsolidated entities that are accounted for by the equity method was as follows:
Statements of Operations
(In thousands)
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) of unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . $
Lennar Homebuilding equity in earnings (loss) from unconsolidated
entities (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended November 30,
2014
263,395
291,993
—
(28,598)
2013
2012
570,910
425,282
14,602
160,230
353,902
418,905
10,515
(54,488)
(355)
23,803
(26,672)
(1) For the year ended November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities related primarily to the
Company's share of operating losses of Lennar Homebuilding unconsolidated entities, which included $4.6 million of valuation
adjustments related to assets of Lennar Homebuilding's unconsolidated entities, partially offset by $4.7 million of equity in
earnings as a result of third-party land sales by one unconsolidated entity. For the year ended November 30, 2013, Lennar
Homebuilding equity in earnings from unconsolidated entities included $19.8 million of equity in earnings primarily as a result of
sales of homesites to third parties by one unconsolidated entity. For the year ended November 30, 2012, Lennar Homebuilding
equity in loss from unconsolidated entities included $12.1 million of valuation adjustments primarily related to strategic asset
sales at Lennar Homebuilding's unconsolidated entities.
98
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Balance Sheets
(In thousands)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2014
2013
243,597
2,889,267
155,470
Liabilities and equity:
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
271,638
737,755
2,278,941
3,288,334
$
3,288,334
184,521
2,904,795
147,410
3,236,726
272,940
450,457
2,513,329
3,236,726
As of November 30, 2014 and 2013, the Company’s recorded investments in Lennar Homebuilding
unconsolidated entities were $656.8 million and $716.9 million, respectively, while the underlying equity in Lennar
Homebuilding unconsolidated entities partners’ net assets as of November 30, 2014 and 2013 was $722.6 million and
$829.5 million, respectively. The basis difference is primarily as a result of the Company buying an interest in a partner's
equity in a Lennar Homebuilding unconsolidated entity at a discount to book value and contributing non-monetary assets
to an unconsolidated entity with a higher fair value than book value.
The Company’s partners generally are unrelated homebuilders, land owners/developers and financial or other
strategic partners. The unconsolidated entities follow accounting principles that are in all material respects the same as
those used by the Company. The Company shares in the profits and losses of these unconsolidated entities generally in
accordance with its ownership interests. In many instances, the Company is appointed as the day-to-day manager under
the direction of a management committee that has shared powers amongst the partners of the unconsolidated entities and
receives management fees and/or reimbursement of expenses for performing this function. During the years ended
November 30, 2014, 2013 and 2012, the Company received management fees and reimbursement of expenses from the
Homebuilding unconsolidated entities totaling $30.7 million, $18.8 million and $20.6 million, respectively.
The Company and/or its partners sometimes obtain options or enter into other arrangements under which the
Company can purchase portions of the land held by the unconsolidated entities. Option prices are generally negotiated
prices that approximate fair value when the Company receives the options. During the years ended November 30, 2014,
2013 and 2012, $59.0 million, $192.5 million and $130.3 million, respectively, of the unconsolidated entities’ revenues
were from land sales to the Company. The Company does not include in its Lennar Homebuilding equity in earnings
(loss) from unconsolidated entities its pro rata share of unconsolidated entities’ earnings resulting from land sales to its
homebuilding divisions. Instead, the Company accounts for those earnings as a reduction of the cost of purchasing the
land from the unconsolidated entities. This in effect defers recognition of the Company’s share of the unconsolidated
entities’ earnings related to these sales until the Company delivers a home and title passes to a third-party homebuyer.
In fiscal 2007, the Company sold a portfolio of land to a strategic land investment venture with Morgan Stanley
Real Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc. ("MSR"), in which the Company has a 20%
ownership interest and 50% voting rights. Due to the nature of the Company’s continuing involvement, the transaction
did not qualify as a sale by the Company under GAAP; thus, the inventory remained on the Company’s consolidated
balance sheet in consolidated inventory not owned. As of November 30, 2013, the portfolio of land (including land
development costs) of $241.8 million was also reflected as inventory in the summarized condensed financial information
related to Lennar Homebuilding’s unconsolidated entities. In 2014, the Company entered into a new agreement with the
joint venture, which required $155.0 million of inventory assets to remain consolidated due to the existence of option
contracts on substantially all of the homesites and were reclassified into land and land under development. The
remaining $70.3 million of inventory assets no longer under option by the Company were deconsolidated.
The Lennar Homebuilding entities in which the Company has investments usually finance their activities with a
combination of partner equity and debt financing. In some instances, the Company and its partners have guaranteed debt
of certain unconsolidated entities.
99
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The total debt of the Lennar Homebuilding unconsolidated entities in which the Company has investments was
as follows:
November 30,
(Dollars in thousands)
The Company’s net recourse exposure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Reimbursement agreements from partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company’s maximum recourse exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-recourse bank debt and other debt (partner’s share of several recourse) . . . . . . . . . $
Non-recourse land seller debt or other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-recourse debt with completion guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-recourse debt without completion guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-recourse debt to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
24,481
—
24,481
56,573
4,022
442,854
209,825
713,274
Total debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
737,755
2013
27,496
13,500
40,996
61,008
20,454
245,821
82,178
409,461
450,457
The Company’s maximum recourse exposure as a % of total JV debt . . . . . . . . . . . . . .
3%
9%
In most instances in which the Company has guaranteed debt of a Lennar Homebuilding unconsolidated entity,
the Company’s partners have also guaranteed that debt and are required to contribute their share of the guarantee
payments. Historically, the Company has had repayment guarantees and/or maintenance guarantees. In a repayment
guarantee, the Company and its venture partners guarantee repayment of a portion or all of the debt in the event of
default before the lender would have to exercise its rights against the collateral. In the event of default, if the Company’s
venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement,
the Company may be liable for more than its proportionate share, up to its maximum recourse exposure, which is the full
amount covered by the joint and several guarantee. The maintenance guarantees only apply if the value or the collateral
(generally land and improvements) is less than a specified percentage of the loan balance. As of both November 30, 2014
and 2013, the Company does not have any maintenance guarantees related to its Lennar Homebuilding unconsolidated
entities.
In connection with many of the loans to Lennar Homebuilding unconsolidated entities, the Company and its
joint venture partners (or entities related to them) have been required to give guarantees of completion to the lenders.
Those completion guarantees may require that the guarantors complete the construction of the improvements for which
the financing was obtained. If the construction is to be done in phases, the guarantee generally is limited to completing
only the phases as to which construction has already commenced and for which loan proceeds were used.
If the Company is required to make a payment under any guarantee, the payment would constitute a capital
contribution or loan to the Lennar Homebuilding unconsolidated entity and increase the Company's investment in the
unconsolidated entity and its share of any funds the entity distributes.
As of both November 30, 2014 and 2013, the fair values of the repayment guarantees and completion
guarantees were not material. The Company believes that as of November 30, 2014, in the event it becomes legally
obligated to perform under a guarantee of the obligation of a Lennar Homebuilding unconsolidated entity due to a
triggering event under a guarantee, most of the time the collateral should be sufficient to repay at least a significant
portion of the obligation or the Company and its partners would contribute additional capital into the venture. In certain
instances, the Company has placed performance letters of credit and surety bonds with municipalities for its joint
ventures (see Note 6).
100
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5. Lennar Homebuilding Operating Properties and Equipment
(In thousands)
Operating properties (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
November 30,
2014
2013
161,741
32,890
36,464
231,095
(87,931)
143,164
205,707
29,681
29,827
265,215
(83,792)
181,423
(1) Operating properties primarily include multi-level residential buildings that have been converted to rental operations. During the
year ended November 30, 2014, the Company sold one of its operating properties with a basis of $44.1 million.
Operating properties and equipment are included in Lennar Homebuilding other assets in the consolidated
balance sheets.
6. Lennar Homebuilding Senior Notes and Other Debts Payable
(Dollars in thousands)
5.60% senior notes due 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6.50% senior notes due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.25% senior notes due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.75% senior notes due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.95% senior notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.125% senior notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.500% senior notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.50% senior notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.75% convertible senior notes due 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.25% convertible senior notes due 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.750% senior notes due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.50% senior notes due 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgages notes on land and other debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2014
2013
500,272
249,923
396,278
399,250
248,485
274,995
500,477
350,000
431,042
400,000
571,439
—
368,052
500,527
249,886
395,312
399,250
248,167
274,995
—
—
416,041
400,000
571,012
249,640
489,602
$
4,690,213
4,194,432
At November 30, 2014, the Company had a $1.5 billion unsecured revolving credit facility (the "Credit
Facility"), which includes a $248 million accordion feature, subject to additional commitments, with certain financial
institutions that matures in June 2018. The proceeds available under the Credit Facility, which are subject to specified
conditions for borrowing, may be used for working capital and general corporate purposes. The credit agreement also
provides that up to $500 million in commitments may be used for letters of credit. As of both November 30, 2014 and
2013, the Company had no outstanding borrowings under the Credit Facility. Under the Credit Facility agreement, the
Company is required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a
liquidity or an interest coverage ratio. These ratios are calculated per the Credit Facility agreement, which involves
adjustments to GAAP financial measures. For more details refer to Management's Discussion and Analysis of Financial
Conditions and Results of Operations in Item 7. The Company believes it was in compliance with its debt covenants at
November 30, 2014. In addition, the Company had $125 million letter of credit facilities with a financial institution and a
$140 million letter of credit facility with a different financial institution.
The Company’s performance letters of credit outstanding were $234.1 million and $160.6 million at
November 30, 2014 and 2013, respectively. The Company’s financial letters of credit outstanding were $190.4 million
and $212.8 million at November 30, 2014 and 2013, respectively. Performance letters of credit are generally posted with
regulatory bodies to guarantee the Company’s performance of certain development and construction activities. Financial
letters of credit are generally posted in lieu of cash deposits on option contracts, for insurance risks, credit enhancements
and as other collateral. Additionally, at November 30, 2014, the Company had outstanding performance and surety bonds
related to site improvements at various projects (including certain projects of the Company’s joint ventures) of $923.3
million. Although significant development and construction activities have been completed related to these site
improvements, these bonds are generally not released until all development and construction activities are completed. As
101
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
of November 30, 2014, there were approximately $363.7 million, or 39%, of anticipated future costs to complete related
to these site improvements. The Company does not presently anticipate any draws upon these bonds or letters of credit,
but if any such draws occur, the Company does not believe they would have a material effect on its financial position,
results of operations or cash flows.
The terms of each of the Company's senior and convertible senior notes outstanding at November 30, 2014 were
as follows:
Senior and Convertible Senior Notes Outstanding (1)
(Dollars in thousands)
5.60% senior notes due 2015 . . . . . . . . . . . . . .
6.50% senior notes due 2016 . . . . . . . . . . . . . .
12.25% senior notes due 2017 . . . . . . . . . . . . .
4.75% senior notes due 2017 . . . . . . . . . . . . . .
6.95% senior notes due 2018 . . . . . . . . . . . . . .
4.125% senior notes due 2018 (4). . . . . . . . . . .
4.500% senior notes due 2019 . . . . . . . . . . . . .
4.50% senior notes due 2019 . . . . . . . . . . . . . .
2.75% convertible senior notes due 2020 . . . . .
3.25% convertible senior notes due 2021 . . . . .
Principal
Amount
Net Proceeds (2)
Price
Dates Issued
$
500,000
$
250,000
400,000
400,000
250,000
275,000
500,000
350,000
446,000
400,000
501,400
248,900
386,700
395,900
243,900
271,718
495,725
347,016
436,400
391,600
(3)
April 2005, July 2005
99.873%
98.098%
April 2006
April 2009
100% July 2012, August 2012
98.929%
99.998%
(5)
100%
100%
100%
May 2010
February 2013
February 2014
November 2014
November 2010
November 2011,
December 2011
4.750% senior notes due 2022 (4). . . . . . . . . . . . .
575,000
567,585
(6) October 2012, February
2013, April 2013
(1) Interest is payable semi-annually for each of the series of senior and convertible senior notes. The senior and convertible senior
notes are unsecured and unsubordinated, but are guaranteed by substantially all of the Company's 100% owned homebuilding
subsidiaries.
(2) The Company generally uses the net proceeds for working capital and general corporate purposes, which can include the
repayment or repurchase of other outstanding senior notes.
(3) The Company issued $300 million aggregate principal amount at a price of 99.771% and $200 million aggregate principal
amount at a price of 101.407%.
(4) During 2013, the Company incurred additional interest with respect to the 4.125% senior notes due 2018 and to the 4.750%
senior notes due 2022 because the registration statements relating to the notes did not become effective by, and the exchange
offers were not consummated by, the dates specified in the Registration Rights Agreement related to such notes.
(5) The Company issued $400 million aggregate principal amount at a price of 100% and $100 million aggregate principal amount at
a price of 100.5%.
(6) The Company issued $350 million aggregate principal amount at a price of 100%, $175 million aggregate principal amount at a
price of 98.073% and $50 million aggregate principal amount at a price of 98.250%.
In September 2014, the Company retired its $250 million 5.50% senior notes for 100% of the outstanding
principal amount, plus accrued and unpaid interest as of the maturity date. At November 30, 2013, the carrying value of
the 5.50% Senior Notes was $249.6 million.
The 3.25% convertible senior notes due 2021 (the "3.25% Convertible Senior Notes") are convertible into
shares of Class A common stock at any time prior to maturity or redemption at the initial conversion rate of 42.5555
shares of Class A common stock per $1,000 principal amount of the 3.25% Convertible Senior Notes or 17,022,200
shares of Class A common stock if all the 3.25% Convertible Senior Notes are converted, which is equivalent to an initial
conversion price of approximately $23.50 per share of Class A common stock, subject to anti-dilution adjustments. The
shares are included in the calculation of diluted earnings per share. Holders of the 3.25% Convertible Senior Notes have
the right to require the Company to repurchase them for cash equal to 100% of their principal amount, plus accrued but
unpaid interest on November 15, 2016. The Company has the right to redeem the 3.25% Convertible Senior Notes at any
time on or after November 20, 2016 for 100% of their principal amount, plus accrued but unpaid interest.
The 2.75% convertible senior notes due 2020 (the “2.75% Convertible Senior Notes”) are convertible into cash,
shares of Class A common stock or a combination of both, at the Company’s election. However, it is the Company’s
intent to settle the face value of the 2.75% Convertible Senior Notes in cash. Holders may convert the 2.75% Convertible
Senior Notes at the initial conversion rate of 45.1794 shares of Class A common stock per $1,000 principal amount or
20,150,012 shares of Class A common stock if all the 2.75% Convertible Senior Notes are converted, which is equivalent
to an initial conversion price of approximately $22.13 per share of Class A common stock, subject to anti-dilution
adjustments. For the years ended November 30, 2014 and 2013, the Company's volume weighted average stock price
was $39.96 and $37.06, respectively, which exceeded the conversion price, thus 9.0 million shares and 8.2 million
shares, respectively, were included in the calculation of diluted earnings per share.
102
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Holders of the 2.75% Convertible Senior Notes have the right to convert them, during any fiscal quarter (and
only during such fiscal quarter), if the last reported sale price of the Company’s Class A common stock for at least 20
trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day
of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable
trading day. Holders of the 2.75% Convertible Senior Notes have the right to require the Company to repurchase them
for cash equal to 100% of their principal amount, plus accrued but unpaid interest, on December 15, 2015. The Company
has the right to redeem the 2.75% Convertible Senior Notes at any time on or after December 20, 2015 for 100% of their
principal amount, plus accrued but unpaid interest.
For its 2.75% Convertible Senior Notes, the Company will be required to pay contingent interest with regard to
any interest period beginning with the interest period commencing December 20, 2015 and ending June 14, 2016, and for
each subsequent six-month period commencing on an interest payment date to, but excluding, the next interest payment
date, if the average trading price of the 2.75% Convertible Senior Notes during the five consecutive trading days ending
on the second trading day immediately preceding the first day of the applicable interest period exceeds 120% of the
principal amount of the 2.75% Convertible Senior Notes. The amount of contingent interest payable per $1,000 principal
amount of notes during the applicable interest period will equal 0.75% per year of the average trading price of such
$1,000 principal amount of 2.75% Convertible Senior Notes during the five trading day reference period.
Certain provisions under ASC 470, Debt, require the issuer of certain convertible debt instruments that may be
settled in cash on conversion to separately account for the liability and equity components of the instrument in a manner
that reflects the issuer’s non-convertible debt borrowing rate. The Company has applied these provisions to its 2.75%
Convertible Senior Notes. At issuance, the Company estimated the fair value of the 2.75% Convertible Senior Notes
using similar debt instruments that did not have a conversion feature and allocated the residual value to an equity
component that represented the estimated fair value of the conversion feature at issuance. The debt discount of the 2.75%
Convertible Senior Notes is being amortized over five years and the annual effective interest rate is 7.1% after giving
effect to the amortization of the discount and deferred financing costs. At both November 30, 2014 and 2013, the
principal amount of the 2.75% Convertible Senior Notes was $446.0 million. At November 30, 2014 and 2013, the
carrying amount of the equity component included in stockholders’ equity was $15.0 million and $30.0 million,
respectively, and the net carrying amount of the 2.75% Convertible Senior Notes included in Lennar Homebuilding
senior notes and other debts payable was $431.0 million and $416.0 million, respectively. During the years ended
November 30, 2014 and 2013, the amount of interest recognized relating to both the contractual interest and amortization
of the discount was $27.3 million and $26.5 million, respectively.
Although the guarantees by substantially all of the Company's 100% owned homebuilding subsidiaries are full,
unconditional and joint and several while they are in effect, (i) a subsidiary will cease to be a guarantor at any time when
it is not directly or indirectly guaranteeing at least $75 million of debt of Lennar Corporation (the parent company), and
(ii) a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all
or substantially all its assets, or all of its capital stock, are sold or otherwise disposed of.
At November 30, 2014, the Company had mortgage notes on land and other debt due at various dates through
2028 bearing interest at rates up to 9.0% with an average interest rate of 3.2%. At November 30, 2014 and 2013, the
carrying amount of the mortgage notes on land and other debt was $368.1 million and $489.6 million, respectively.
During the years ended November 30, 2014 and 2013, the Company retired $285.9 million and $285.4 million,
respectively, of mortgage notes on land and other debt.
The minimum aggregate principal maturities of senior notes and other debts payable during the five years
subsequent to November 30, 2014 and thereafter are as follows:
(In thousands)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt
Maturities (1)
659,378
417,880
412,026
650,998
1,125,472
1,424,459
(1) Some of the debt maturities included in these amounts relate to convertible senior notes that are putable to the Company at earlier
dates than in this table, as described in the detail description of each of the convertible senior notes.
103
November 30,
2014
2013
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
7. Lennar Financial Services Segment
The assets and liabilities related to the Lennar Financial Services segment were as follows:
(In thousands)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held-for-sale (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held-for-investment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,010
8,609
150,858
738,396
26,894
45,038
38,854
78,394
Liabilities:
Notes and other debts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
704,143
192,500
896,643
$
1,177,053
73,066
10,283
127,223
414,231
26,356
62,344
34,046
49,161
796,710
374,166
169,473
543,639
(1) Receivables, net, primarily related to loans sold to investors for which the Company had not yet been paid as of November 30,
2014 and 2013, respectively.
(2) Loans held-for-sale related to unsold loans carried at fair value.
(3) Other assets included mortgage loan commitments carried at fair value of $12.7 million and $7.3 million as of November 30,
2014 and 2013, respectively. Other assets also included forward contracts carried at fair value of $1.4 million as of November 30,
2013. In addition, other assets included mortgage servicing rights carried at fair value of $17.4 million and $11.5 million as of
November 30, 2014 and 2013, respectively, and other investment securities of $16.8 million as of November 30, 2014.
(4) Other liabilities included $69.3 million and $74.5 million as of November 30, 2014 and 2013, respectively, of certain of the
Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation. Other liabilities
also included forward contracts carried at fair value of $7.6 million as of November 30, 2014.
At November 30, 2014, the financial services warehouse facilities were as follows:
Warehouse Repurchase Facilities (In thousands)
364-day warehouse repurchase facility that matures December 2014 (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . $
364-day warehouse repurchase facility that matures January 2015 (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
364-day warehouse repurchase facility that matures February 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
364-day warehouse repurchase facility that matures June 2015 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum
Aggregate
Commitment
325,000
300,000
150,000
150,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
925,000
(1) In December 2014, the Lennar Financial Services segment amended its 364-day warehouse repurchase facility that matured in
December 2014 increasing the maximum aggregate commitment from $325 million to $350 million through the second quarter of
fiscal 2015 and to $450 million for the third and fourth quarter of fiscal 2015. The maturity date was extended to December 2015.
(2) Maximum aggregate commitment includes a $100 million accordion feature that is usable 10 days prior to fiscal quarter-end
through 20 days after fiscal quarter-end.
(3) Maximum aggregate commitment includes a $50 million accordion feature that is available beginning on the tenth (10th)
calendar day immediately preceding the first day of a fiscal quarter through 20 days after fiscal quarter-end.
The Lennar Financial Services segment uses these facilities to finance its lending activities until the mortgage
loans are sold to investors and the proceeds are collected. The facilities are expected to be renewed or replaced with other
facilities when they mature. Borrowings under the facilities and their prior year predecessors were $698.4 million and
$374.2 million at November 30, 2014 and 2013, respectively, and were collateralized by mortgage loans and receivables
on loans sold to investors but not yet paid for with outstanding principal balances of $732.1 million and $452.5 million at
November 30, 2014 and 2013, respectively. The combined effective interest rate on the facilities at November 30, 2014
was 2.5%. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling
the mortgage loans held-for-sale to investors and by collecting on receivables on loans sold but not yet paid. Without the
facilities, the Lennar Financial Services segment would have to use cash from operations and other funding sources to
finance its lending activities.
104
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In April 2014, the Lennar Financial Services segment acquired a Colorado-based mortgage company. At
acquisition date the fair value of the assets acquired was $1.4 million and the goodwill recorded was $4.8 million.
8. Rialto Segment
The assets and liabilities related to the Rialto segment were as follows:
(In thousands)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held-for-sale (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate owned - held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate owned - held-and-used, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2014
2013
303,889
46,975
153,773
130,105
113,596
190,535
255,795
175,700
17,290
70,494
201,496
2,593
111,833
278,392
44,228
197,851
428,989
154,573
16,070
43,288
$
1,458,152
1,479,313
Liabilities:
Notes payable and other debts payable (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
623,246
123,798
747,044
441,883
55,125
497,008
(1) Receivables, net primarily related to loans sold but not settled as of November 30, 2014 and 2013.
(2) Loans held-for-sale related to unsold loans originated by RMF carried at fair value.
(3) Notes and other debts payable included $351.9 million and $250.0 million related to the 7.00% Senior Notes due 2018 ("7.00%
Senior Notes") as of November 30, 2014 and 2013, respectively, $141.3 million and $76.0 million related to the RMF warehouse
repurchase financing agreements as of November 30, 2014 and 2013, respectively, and $58.0 million related to notes issued
through a structured note offering as of November 30, 2014.
Rialto’s operating earnings were as follows:
Years Ended November 30,
(In thousands)
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . .
Rialto other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating earnings (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
230,521
249,114
59,277
3,395
44,079
2013
2012
138,060
151,072
22,353
16,787
26,128
138,856
138,990
41,483
(29,780)
11,569
(1) Costs and expenses for the years ended November 30, 2014, 2013 and 2012 included loan impairments of $57.1 million, $16.1
million and $28.0 million, respectively, primarily associated with the segment's FDIC loans portfolio (before noncontrolling
interests).
(2) Operating earnings for the years ended November 30, 2014, 2013 and 2012 included net earnings (loss) attributable to
noncontrolling interests of ($22.5) million, $6.2 million and ($14.4) million, respectively.
105
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following is a detail of Rialto other income (expense), net for the periods indicated:
(In thousands)
Realized gains on REO sales, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unrealized losses on transfer of loans receivable to REO and
impairments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REO and other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on bargain purchase acquisition. . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended November 30,
2014
2013
2012
43,671
48,785
21,649
(26,107)
(58,067)
43,898
—
3,395
(16,517)
(44,282)
20,269
8,532
16,787
(11,160)
(56,745)
16,476
—
(29,780)
Loans Receivable
In February 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited
liability companies (“LLCs”), in partnership with the FDIC, which retained 60% equity interest in the LLCs, for
approximately $243 million (net of transaction costs and a $22 million working capital reserve). If the LLCs exceed
expectations and meet certain internal rate of return and distribution thresholds, the Company’s equity interest in the
LLCs could be reduced from 40% down to 30%, with a corresponding increase to the FDIC’s equity interest from 60%
up to 70%. As these thresholds have not been met, distributions continue being shared 60% / 40% with the FDIC. During
the years ended November 30, 2014 and 2013, the LLCs distributed $184.9 million and $46.7 million, respectively, of
which $110.9 million and $28.4 million, respectively, was distributed to the FDIC and $74.0 million and $18.3 million,
respectively, was distributed to Rialto, the parent company.
The LLCs meet the accounting definition of VIEs and since the Company was determined to be the primary
beneficiary, the Company consolidated the LLCs. The Company was determined to be the primary beneficiary because it
has the power to direct the activities of the LLCs that most significantly impact the LLCs’ performance through Rialto's
management and servicer contracts. At November 30, 2014, these consolidated LLCs had total combined assets and
liabilities of $508.4 million and $21.5 million, respectively. At November 30, 2013, these consolidated LLCs had total
combined assets and liabilities of $727.1 million and $20.2 million, respectively.
In September 2010, the Rialto segment acquired approximately 400 distressed residential and commercial real
estate loans (“Bank Portfolios”) and over 300 REO properties from three financial institutions. The Company paid
$310.0 million for the distressed real estate and real estate related assets of which $124 million was financed through a 5-
year senior unsecured note provided by one of the selling institutions. As of November 30, 2014 and 2013, there was
$60.6 million and $90.9 million outstanding, respectively.
In May 2014, Rialto issued $73.8 million principal amount of notes through a structured note offering (the
"Structured Notes") collateralized by certain assets originally acquired in the Bank Portfolios transaction at a price of
100%, with an annual coupon rate of 2.85%. Proceeds from the offering, after payment of expenses and hold backs for a
cash reserve, were $69.1 million. In November 2014, Rialto issued an additional $20.8 million of the Structured Notes at
a price of 99.5%, with an annual coupon rate of 5.0%. Proceeds from the offering, after payment of expenses, were $20.7
million. The estimated final payment date of the Structured Notes is December 15, 2015. As of November 30, 2014,
there was $58.0 million outstanding related to the Structured Notes.
The following table displays the loans receivable, net by aggregate collateral type:
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Single family homes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
89,603
20,402
7,286
12,814
130,105
166,950
59,647
38,060
13,735
278,392
With regards to loans accounted for under ASC 310-30, the Rialto segment estimated the cash flows, at
acquisition, it expected to collect on the FDIC Portfolios and Bank Portfolios. In accordance with ASC 310-30, the
difference between the contractually required payments and the cash flows expected to be collected at acquisition is
referred to as the nonaccretable difference. This difference is neither accreted into income nor recorded on the
Company’s consolidated balance sheets. The excess of cash flows expected to be collected over the cost of the loans
acquired is referred to as the accretable yield and is recognized in interest income over the remaining life of the loans
using the effective yield method.
106
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Rialto segment periodically evaluates its estimate of cash flows expected to be collected on its FDIC
Portfolios and Bank Portfolios. These evaluations require the continued use of key assumptions and estimates, similar to
those used in the initial estimate of fair value of the loans to allocate purchase price. Subsequent changes in the estimated
cash flows expected to be collected may result in changes in the accretable yield and nonaccretable difference or
reclassifications from nonaccretable yield to accretable yield. Increases in the cash flows expected to be collected will
generally result in an increase in interest income over the remaining life of the loan or pool of loans. Decreases in
expected cash flows will generally result in an impairment charge recognized as a provision for loan losses, resulting in
an increase to the allowance for loan losses but can reversed if conditions improve.
During the fourth quarter of 2014, in an effort to better reflect the performance of the FDIC Portfolios and Bank
Portfolios, the Company changed from recording accretable yield income on a loan pool basis to recording income on a
cost recovery basis per loan as expected cash flows on the remaining loan portfolios could no longer be reasonably
estimated. At November 30, 2014, these loans were classified as nonaccrual loans. The change from accrual to
nonaccrual in accordance with ASC 310-30, resulted in an additional impairment charge of $10.1 million within the
FDIC Portfolios and a recovery of $0.1 million in the Bank Portfolios.
The outstanding balance and carrying value of loans accounted for under ASC 310-30 were as follows:
(In thousands)
Outstanding principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
—
—
586,901
270,075
The activity in the accretable yield for the FDIC Portfolios and Bank Portfolios for the years ended
November 30, 2014 and 2013 was as follows:
(In thousands)
Accretable yield, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deletions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretable yield, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
73,144
8,988
(54,482)
(27,650)
—
112,899
70,077
(60,582)
(49,250)
73,144
Additions primarily represent reclasses from nonaccretable yield to accretable yield on the portfolios. Deletions
represent loan impairments, net of recoveries, and disposal of loans, which includes foreclosure of underlying collateral
and result in the removal of the loans from the accretable yield portfolios. During the year ended November 30, 2014,
deletions also included a reclassification to nonaccretable difference due to the change from accrual to nonaccrual
described above.
When forecasted principal and interest cannot be reasonably estimated at the loan acquisition date, management
classifies the loan as nonaccrual and accounts for these assets in accordance with ASC 310-10. When a loan is classified
as nonaccrual, any subsequent cash receipt is accounted for using the cost recovery method. In accordance with ASC
310-10, a loan is considered impaired when based on current information and events it is probable that all amounts due
according to the contractual terms of the loan agreement will not be collected. Although these loans met the definition of
ASC 310-10, these loans were not considered impaired relative to the Company’s recorded investment at the time of the
acquisition since they were acquired at a substantial discount to their unpaid principal balance. A provision for loan
losses is recognized when the recorded investment in the loan is in excess of its fair value. The fair value of the loan is
determined by using either the present value of expected future cash flows discounted at the loan’s effective interest rate
or the fair value of the collateral less estimated costs to sell.
107
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables represents nonaccrual loans in the FDIC Portfolios and Bank Portfolios accounted for
under ASC 310-10 aggregated by collateral type:
November 30, 2014
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Single family homes . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial properties . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30, 2013
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Single family homes . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial properties . . . . . . . . . . . . . . . . . . . . . . .
Loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unpaid
Principal
Balance
228,245
66,183
34,048
64,284
392,760
Unpaid
Principal
Balance
6,791
15,125
3,400
25,316
Recorded Investment
With
Allowance
Without
Allowance
85,912
18,096
3,368
5
107,381
3,691
2,306
3,918
12,809
22,724
Total
Recorded
Investment
89,603
20,402
7,286
12,814
130,105
Recorded Investment
With
Allowance
Without
Allowance
Total
Recorded
Investment
249
519
498
1,266
2,304
4,119
628
7,051
2,553
4,638
1,126
8,317
The average recorded investment in impaired loans totaled approximately $69 million and $24 million for the
years ended November 30, 2014 and 2013, respectively.
The loans receivable portfolios consist of loans acquired at a discount. Based on the nature of these loans, the
portfolios are managed by assessing the risks related to the likelihood of collection of payments from borrowers and
guarantors, as well as monitoring the value of the underlying collateral.
Accrual — Loans in which forecasted cash flows under the loan agreement, as it might be modified from time
to time, can be reasonably estimated at the date of acquisition. The risk associated with loans in this category relates to
the possible default by the borrower with respect to principal and interest payments and/or the possible decline in value
of the underlying collateral and thus, both could cause a decline in the forecasted cash flows used to determine accretable
yield income and the recognition of an impairment through an allowance for loan losses but can be reversed if conditions
improve. The activity in the Company's allowance rollforward related to accrual loans was as follows:
(In thousands)
Allowance on accrual loans, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification to nonaccrual (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance on accrual loans, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
18,952
44,577
(53,265)
(10,264)
—
12,178
14,241
—
(7,467)
18,952
(1) During the fourth quarter of 2014, the Company changed from recording accretable yield income on a loan pool basis to
recording income on a cost recovery basis per loan as expected cash flows on the remaining loan portfolios could no longer be
reasonably estimated. At November 30, 2014, these loans were classified as nonaccrual loans.
Nonaccrual — Loans in which forecasted principal and interest could not be reasonably estimated at the date of
acquisition or subsequently. Although the Company believes the recorded investment balance will ultimately be realized,
the risk of nonaccrual loans relates to a decline in the value of the collateral securing the outstanding obligation and the
recognition of an impairment through an allowance for loan losses if the recorded investment in the loan exceeds the fair
value of the collateral less estimated cost to sell. The activity in the Company's allowance rollforward related to
nonaccrual loans was as follows:
108
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands)
Allowance on nonaccrual loans, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . $
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification from accrual (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance on nonaccrual loans, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
1,213
12,536
53,265
(8,688)
58,326
3,722
1,898
—
(4,407)
1,213
(1) During the fourth quarter of 2014, the Company changed from recording accretable yield income on a loan pool basis to
recording income on a cost recovery basis per loan as expected cash flows on the remaining loan portfolios could no longer be
reasonably estimated. At November 30, 2014, these loans were classified as nonaccrual loans.
Accrual and nonaccrual loans receivable, net by risk categories were as follows:
November 30, 2014
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Single family homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrual
Nonaccrual
Total
—
—
—
—
—
89,603
20,402
7,286
12,814
130,105
89,603
20,402
7,286
12,814
130,105
November 30, 2013
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Single family homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrual
Nonaccrual
Total
164,397
55,009
36,934
13,735
270,075
2,553
4,638
1,126
—
8,317
166,950
59,647
38,060
13,735
278,392
In order to assess the risk associated with each risk category, Rialto management evaluates the forecasted cash
flows and the value of the underlying collateral securing loans receivable on a quarterly basis or when an event occurs
that suggests a decline in the collaterals’ fair value.
Real Estate Owned
The acquisition of properties acquired through, or in lieu of, loan foreclosure are reported within the
consolidated balance sheets as REO held-and-used, net and REO held-for-sale. When a property is determined to be
held-and-used, net the asset is recorded at fair value and depreciated over its useful life using the straight line method.
When certain criteria set forth in ASC 360, Property, Plant and Equipment, are met, the property is classified as held-for-
sale. When a real estate asset is classified as held-for-sale, the property is recorded at the lower of its cost basis or fair
value less estimated costs to sell. The fair value of REO held-for-sale is determined in part by placing reliance on third-
party appraisals of the properties and/or internally prepared analyses of recent offers or prices on comparable properties
in the proximate vicinity.
The following tables present the activity in REO:
(In thousands)
REO - held-for-sale, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments and unrealized losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to/from held-and-used, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to Lennar Homebuilding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REO - held-for-sale, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
109
November 30,
2014
2013
197,851
—
8,176
(226,027)
(9,441)
219,976
—
190,535
134,161
15,985
5,791
(190,430)
(5,573)
247,397
(9,480)
197,851
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands)
REO - held-and-used, net, beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to held-for-sale (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REO - held-and-used, net, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
428,989
55,407
6,102
(11,501)
(3,226)
(219,976)
255,795
601,022
86,262
3,616
(10,517)
(3,997)
(247,397)
428,989
(1) During the years ended November 30, 2014 and 2013, the Rialto segment transferred certain properties to/from REO held-and-
used, net to REO held-for-sale as a result of changes made in the disposition strategy of the real estate assets.
For the years ended November 30, 2014, 2013 and 2012, the Company recorded net losses of $6.8 million, $0.4
million and $1.9 million, respectively, from acquisitions of REO through foreclosure. These net losses are recorded in
Rialto other income (expense), net.
Rialto Mortgage Finance
In July 2013, RMF was formed to originate and sell into securitizations five, seven and ten year commercial
first mortgage loans, generally with principal amounts between $2 million and $75 million, which are secured by income
producing properties. During the year ended November 30, 2014, RMF had originated loans with a total principal
balance of $1.6 billion and sold $1.3 billion of these originated loans into eight separate securitizations. During the year
ended November 30, 2013, RMF had originated loans with a principal balance of $690.3 million and sold $537.0 million
of loans into three separate securitizations. As of November 30, 2014 and 2013, $147.2 million and $109.3 million,
respectively, of these originated loans were sold into a securitization trust but not settled and thus were included as
receivables, net. As of November 30, 2014 and 2013, RMF had two warehouse repurchase financing agreements that
mature in fiscal year 2015 with commitments totaling $650 million and $500 million, respectively, to help finance the
loans it makes. Borrowings under these facilities were $141.3 million and $76.0 million as of November 30, 2014 and
2013, respectively.
In November 2013, the Rialto segment issued $250 million aggregate principal amount of the 7.00% Senior
Notes, at a price of 100% in a private placement. Proceeds from the offering, after payment of expenses, were
approximately $245 million. Rialto used a majority of the net proceeds of the sale of the 7.00% Senior Notes as working
capital for RMF and used $100 million to repay sums that had been advanced to RMF from Lennar to enable it to begin
originating and securitizing commercial mortgage loans. In March 2014, the Rialto segment issued an additional $100
million of the 7.00% Senior Notes at a price of 102.25% of their face value in a private placement. Proceeds from the
offering, after payment of expenses, were approximately $102 million. Rialto used the net proceeds of the offering to
provide additional working capital for RMF, and to make investments in the funds that Rialto manages, as well as for
general corporate purposes. Interest on the 7.00% Senior Notes is due semi-annually. At November 30, 2014 and 2013,
the carrying amount of the 7.00% Senior Notes was $351.9 million and $250.0 million, respectively. Under the
indenture, Rialto is subject to certain covenants limiting, among other things, Rialto’s ability to incur indebtedness, to
make investments, to make distributions to, or enter into transactions with, Lennar or to create liens, subject to certain
exceptions and qualifications. Rialto also has quarterly and annual reporting requirements, similar to an SEC registrant,
to holders of the 7.00% Senior Notes. The Company believes Rialto was in compliance with its debt covenants at
November 30, 2014.
Investments
All of Rialto's investments in funds have the attributes of an investment company in accordance with ASC 946,
Financial Services – Investment Companies, as amended by ASU 2013-08, Financial Services - Investment Companies
(Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, the attributes of which are different
from the attributes that would cause a company to be an investment company for purposes of the Investment Company
Act of 1940. As a result, the assets and liabilities of Rialto's funds investment are recorded at fair value with increases/
decreases in fair value recorded in their respective statements of operations and the Company’s share is recorded in
Rialto equity in earnings from unconsolidated entities in the Company's statement of operations.
110
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table reflects Rialto's investments in funds that invest in and manage real estate related assets and
other investments:
November 30,
2014
November 30,
2014
November 30,
2013
(Dollars in thousands)
Rialto Real Estate Fund, LP. . .
Rialto Real Estate Fund II, LP .
Rialto Mezzanine Partners
Fund . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . .
Inception
Year
Equity
Commitments
Equity
Commitments
Called
Commitment
to fund by the
Company
Funds
contributed
by the
Company
Investment
2010
2012
$ 700,006
$ 700,006
$
75,000
$ 75,000
$ 71,831
1,305,000
760,058
100,000
58,242
67,652
2013
251,100
188,600
27,299
20,504
20,226
15,991
75,729
53,103
16,724
9,017
$ 175,700
154,573
Rialto's share of earnings from unconsolidated entities was as follows:
(In thousands)
Rialto Real Estate Fund, LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto Real Estate Fund II, LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto Mezzanine Partners Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . $
Years Ended November 30,
2014
2013
2012
30,612
15,929
1,913
10,823
59,277
19,391
2,523
354
85
22,353
21,026
—
—
20,457
41,483
During the year ended November 30, 2014, the Company received a $34.7 million advanced distribution with
regard to Rialto's carried interest in Fund I in order to cover the income tax obligation, which resulted from allocations of
taxable income to Rialto's general partner interest. This was included in the Rialto segment revenues.
In addition to the acquisition and management of the FDIC and Bank portfolios, an affiliate in the Rialto
segment was a sub-advisor to the AllianceBernstein L.P. (“AB”) fund formed under the Federal government’s Public-
Private Investment Program (“PPIP”) to purchase real estate related securities from banks and other financial institutions.
The sub-advisor received management fees for sub-advisory services. At the end of 2012, the AB PPIP fund finalized the
last sales of the underlying securities in the fund and made substantially all of the final liquidating distributions to the
partners, including the Company. As the Company’s role as sub-advisor to the AB PPIP fund has been completed, no
further management fees will be received for these services. During the year ended November 30, 2012, the Company
contributed $1.9 million and received distributions of $87.6 million. Of the distributions received during the year ended
November 30, 2012, $83.5 million related to the unwinding of the AB PPIP fund's operations. During the year ended
November 30, 2013, the Company also earned $9.1 million in fees from the segment's role as a sub-advisor to the AB
PPIP fund, which were included in the Rialto segment revenues.
111
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Summarized condensed financial information on a combined 100% basis related to Rialto’s investments in
unconsolidated entities that are accounted for by the equity method was as follows:
Balance Sheets
(In thousands)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loans receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2014
2013
141,609
512,034
378,702
795,306
311,037
45,451
332,968
523,249
285,565
381,555
149,350
191,624
Liabilities and equity:
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partner loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
20,573
395,654
—
1,767,912
2,184,139
108,514
398,445
163,940
1,193,412
1,864,311
$
2,184,139
1,864,311
Statements of Operations
Years Ended November 30,
(In thousands)
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings of unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto equity in earnings from unconsolidated entities . . . . . . . . . . . . $
2014
150,452
95,629
479,929
534,752
59,277
2013
2012
251,533
252,563
187,446
186,416
22,353
414,027
243,483
713,710
884,254
41,483
(1) Other income, net for the year ended November 30, 2014 included Fund I, Fund II, Mezzanine Fund and other investments
realized and unrealized gains on investments as well as other income from REO. Other income, net for the year ended November
30, 2013 included Fund I, Fund II and other investments realized and unrealized gains on investments as well as other income
from REO. Other income, net for the year ended November 30, 2012 included the AB PPIP Fund’s mark-to-market unrealized
gains and losses, and realized gains from the sale of investments in the portfolio underlying the AB PPIP fund, all of which the
Company's portion was a small percentage.
In 2010, the Rialto segment invested in non-investment grade CMBS at a 55% discount to par value. The
carrying value of the investment securities at November 30, 2014 and 2013 was $17.3 million and $16.1 million,
respectively. These securities bear interest at a coupon rate of 4% and have a stated and assumed final distribution date of
November 2020 and a stated maturity date of October 2057. The Rialto segment reviews changes in estimated cash flows
periodically to determine if other-than-temporary impairment has occurred on its investment securities. Based on the
Rialto segment’s assessment, no impairment charges were recorded during the years ended November 30, 2014, 2013
and 2012. The Rialto segment classified these securities as held-to-maturity based on its intent and ability to hold the
securities until maturity.
In a CMBS transaction, monthly interest received from all of the pooled loans is paid to the investors, starting
with those investors holding the highest rated bonds and progressing in an order of seniority based on the class of
security. Based on the aforementioned, the principal and interest repayments of a particular class are dependent upon
collections on the underlying mortgages, which are affected by prepayments, extensions and defaults.
In January 2014, Rialto acquired 100% of the Servicer Provider in which a subsidiary of Rialto had an
approximately 5% investment, in exchange for its investment interest. The Servicer Provider has a business segment that
provides service and infrastructure to the residential home loan market, which provides loan servicing support for all of
Rialto's owned and managed portfolios and asset management services for Rialto's small balance loan program. At
acquisition date, the fair value of the assets acquired was $20.8 million, the goodwill recorded was $5.1 million and the
fair value of the liabilities assumed was $17.6 million. As of November 30, 2013, the carrying value of the Company’s
investment in the Servicer Provider was $8.3 million.
112
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
9. Lennar Multifamily Segment
The Company is actively involved, primarily through unconsolidated entities, in the development of
multifamily rental properties. The Lennar Multifamily segment focuses on developing a geographically diversified
portfolio of institutional quality multifamily rental properties in select U.S. markets.
The assets and liabilities related to the Lennar Multifamily segment were as follows:
(In thousands)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Land under development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated inventory not owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating properties and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities related to consolidated inventory not owned . . . . . . . . . . . . . . . . . . . . .
$
$
November 30,
2014
2013
2,186
120,666
5,508
105,674
15,740
18,240
268,014
48,235
—
4,008
52,243
519
88,260
10,500
46,301
—
1,509
147,089
17,518
13,858
10,150
41,526
The unconsolidated entities in which the Lennar Multifamily segment has investments usually finance their
activities with a combination of partner equity and debt financing. In connection with many of the loans to Lennar
Multifamily unconsolidated entities, the Company (or entities related to them) have been required to give guarantees of
completion and cost over-runs to the lenders and partners. Those completion guarantees may require that the guarantors
complete the construction of the improvements for which the financing was obtained. If the construction is to be done in
phases, the guarantee generally is limited to completing only the phases as to which construction has already commenced
and for which loan proceeds were used. Additionally, the Company guarantees the construction costs of the project.
Generally construction cost over-runs would be paid by the Company. Generally, these payments are increases to our
investments in the entities and would increase our share of funds the entities distribute after the achievement of certain
thresholds. As of both November 30, 2014 and 2013, the fair value of the completion guarantees was immaterial.
Additionally, as of November 30, 2014 and 2013, the Lennar Multifamily segment had $23.5 million and $28.2 million,
respectively, of letters of credit outstanding primarily for credit enhancements for the bank debt of certain of its
unconsolidated entities. These letters of credit outstanding were included in the disclosure in Note 6 related to the
Company's performance and financial letters of credit. As of November 30, 2014 and 2013, the Lennar Multifamily
segment's unconsolidated entities had non-recourse debt with completion guarantees of $163.4 million and $51.6 million,
respectively.
In many instances, the Lennar Multifamily segment is appointed as the day-to-day manager of certain of its
Lennar Multifamily unconsolidated entities and receives fees for performing this function. During the years ended
November 30, 2014 and 2013, the Lennar Multifamily segment received fees from its unconsolidated entities totaling
$13.5 million and $4.0 million, respectively.
During the year ended November 30, 2014, the Lennar Multifamily segment provided general contractors
services for the construction of some of its rental properties and received fees totaling $50.9 million, which are offset by
costs related to those services of $49.0 million.
113
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Summarized condensed financial information on a combined 100% basis related to Lennar Multifamily's
investments in unconsolidated entities that are accounted for by the equity method was as follows:
Balance Sheets
(In thousands)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating properties and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and equity:
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
November 30,
2014
2013
25,319
637,259
14,742
677,320
87,151
163,376
426,793
677,320
5,800
236,528
3,460
245,788
11,147
51,604
183,037
245,788
Statements of Operations
(In thousands)
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) of unconsolidated entities . . . . . . . . . . . . . . . . . . . . $
Lennar Multifamily equity in earnings (loss) from unconsolidated
entities (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended November 30,
2014
2013
2012
4,855
7,435
35,068
32,488
14,454
—
1,493
—
(1,493)
(271)
—
29
—
(29)
(4)
(1) Other income, net, included the gains related to the sale of two operating properties during the year ended November 30, 2014.
(2) For the year ended November 30, 2014, Lennar Multifamily equity in earnings from unconsolidated entities included Lennar
Multifamily's share of gains totaling $14.7 million related to the sale of two operating properties by unconsolidated entities. The
Company’s share of profits and cash distributions from the sales of the two operating properties was higher compared to the
Company’s ownership interests in the two unconsolidated entities due to the achievement of specified internal rate of return
milestones.
10. Income Taxes
The benefit (provision) for income taxes consisted of the following:
Years Ended November 30,
2014
2013
2012
(261,306)
3,340
(257,966)
(42,847)
(40,278)
(83,125)
(341,091)
(2,495)
(5,740)
(8,235)
(207,588)
38,808
(168,780)
(177,015)
(3,790)
(5,860)
(9,650)
350,165
94,703
444,868
435,218
(In thousands)
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
114
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reconciliation of the statutory rate and the effective tax rate was as follows:
Statutory rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal income tax benefit . . . . . . .
Domestic production activities deduction . . . . . . . . . . . . . . . .
Tax reserves and interest expense. . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset valuation reversal . . . . . . . . . . . . . . . . . . . .
Tax credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss adjustment (1) . . . . . . . . . . . . . . . . . . . . . . .
Nondeductible compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of Pretax Income
2014
2013
2012
35.00%
35.00%
35.00 %
3.17
(2.81)
0.59
(0.28)
(0.41)
—
—
(0.46)
34.80%
3.16
—
0.56
(10.22)
(0.45)
—
—
(1.09)
26.96%
3.79
—
5.00
(212.55)
(0.10)
(8.32)
0.40
(1.65)
(178.43%)
(1) During the year ended November 30, 2012, the Company recorded adjustments to its NOL carryforwards as a result of the
conclusion of an IRS examination and additional state net operating loss adjustments.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of
significant temporary differences that give rise to the net deferred tax assets were as follows:
(In thousands)
Deferred tax assets:
Inventory valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Reserves and accruals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets after valuation allowance. . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Capitalized expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt basis difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
The detail of the Company's net deferred tax assets were as follows:
November 30,
2014
2013
59,208
158,858
115,850
66,768
24,843
32,904
458,431
(8,029)
450,402
64,448
5,833
22,262
7,707
36,323
136,573
313,829
68,170
125,756
231,735
71,739
1,012
29,017
527,429
(12,705)
514,724
75,921
11,684
16,268
4,467
29,585
137,925
376,799
(In thousands)
Deferred tax assets (liabilities)
Lennar Homebuilding . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . $
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . .
Balance Sheet Presentation
Net deferred tax assets . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
325,779
(3,335)
(8,615)
313,829
388,647
(7,815)
(4,033)
376,799
115
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of November 30, 2014 and 2013, the net deferred tax assets included a valuation allowance of $8.0 million
and $12.7 million, respectively, primarily related to state net operating loss ("NOL") carryforwards that are not more
likely than not to be utilized due to an inability to carry back these losses in most states and short carryforward periods
that exist in certain states. During the year ended November 30, 2014, the Company reversed $4.7 million of valuation
allowance, primarily due to the utilization of federal and state net operating losses. The Company continues to evaluate
both positive and negative evidence in determining the need for a valuation allowance with respect to its tax benefits for
state NOL carryforwards. In future periods, the remaining allowance could be reversed if additional sufficient positive
evidence is present indicating that it is more likely than not that a portion or all of the Company's remaining deferred tax
assets will be realized.
During the year ended November 30, 2013, the Company concluded that it was more likely than not that the
majority of its deferred tax assets would be utilized. This conclusion was based on a detailed evaluation of all relevant
evidence, both positive and negative. The positive evidence included factors such as consecutive quarters of earnings,
actual and forecasted profitability, generating cumulative pre-tax earnings over a rolling four year period including the
pre-tax earnings achieved during 2013, the expectation of continued earnings and evidence of a sustained recovery in the
housing markets that the Company operates.
For the year ended November 30, 2013, the Company reversed $67.1 million of its valuation allowance
primarily against its state deferred tax assets. This reversal was offset by a tax provision of $244.1 million, primarily
related to pre-tax earnings during the year ended November 30, 2013, resulting in a $177.0 million provision for income
taxes for the year ended November 30, 2013.
At November 30, 2014 and 2013, the Company had federal tax effected NOL carryforwards totaling $2.0 million
and $88.1 million, respectively, that may be carried forward up to 20 years to offset future taxable income and begin to
expire in 2025. At November 30, 2014 and 2013, the Company had state tax effected NOL carryforwards totaling $113.8
million and $143.6 million, respectively, that may be carried forward from 5 to 20 years, depending on the tax
jurisdiction, with losses expiring between 2015 and 2034. As of November 30, 2014, state tax effected NOL
carryforwards totaling $2.0 million may expire over the next twelve months, if sufficient taxable income is not generated
to utilize the NOLs.
The following table summarizes the changes in gross unrecognized tax benefits:
(In thousands)
Gross unrecognized tax benefits, beginning of year. . . . . . . . . . . . . . . $
Increases due to tax positions taken during the period (1) . . . . . . . . . .
Decreases due to settlements with taxing authorities (2) . . . . . . . . . . .
Gross unrecognized tax benefits, end of year. . . . . . . . . . . . . . . . . . . . $
Years Ended November 30,
2014
2013
2012
10,459
—
(3,202)
7,257
12,297
1,982
(3,820)
10,459
36,739
—
(24,442)
12,297
(1) Increased the Company's effective tax rate for the year ended November 30, 2013 from 26.71% to 26.96%.
(2) Decreased the Company's effective tax rate for the year ended November 30, 2014 from 35.13% to 34.80% and for the year
ended November 30, 2012 from (178.03)% to (178.43)%. The decrease for the year ended November 30, 2013 had no effect on
the Company's effective tax rate.
If the Company were to recognize its gross unrecognized tax benefits as of November 30, 2014, $4.7 million
would affect the Company’s effective tax rate. The Company does not expect the total amount of unrecognized tax
benefits to increase or decrease by a material amount within the following twelve months.
At November 30, 2014 and 2013, the Company had $31.5 million and $19.1 million, respectively, accrued for
interest and penalties, of which $14.0 million and $3.8 million, were recorded during the years ended November 30,
2014 and 2013, respectively. During the years ended November 30, 2014 and 2013, the accrual for interest and penalties
was reduced by $1.6 million and $5.2 million, respectively, as a result of the payment of interest related to state tax
payments resulting from settled IRS examinations and various state issues.
The IRS is currently examining the Company’s federal income tax return for fiscal year 2013, and certain state
taxing authorities are examining various fiscal years. The final outcome of these examinations is not yet determinable.
The statute of limitations for the Company’s major tax jurisdictions remains open for examination for fiscal year 2005
and subsequent years. The Company participates in an IRS examination program, Compliance Assurance Process,
"CAP." This program operates as a contemporaneous exam throughout the year in order to keep exam cycles current and
achieve a higher level of compliance.
116
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
11. Earnings Per Share
Basic and diluted earnings per share were calculated as follows:
(In thousands, except per share amounts)
2014
2013
2012
Years Ended November 30,
Numerator:
Net earnings attributable to Lennar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
638,916
Less: distributed earnings allocated to nonvested shares . . . . . . . . . . . . . . . . .
Less: undistributed earnings allocated to nonvested shares . . . . . . . . . . . . . . .
414
7,379
Numerator for basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
631,123
Plus: interest on 3.25% convertible senior notes due 2021 and 2.00%
convertible senior notes due 2020 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: undistributed earnings allocated to convertible shares . . . . . . . . . . . . . .
Less: undistributed earnings reallocated to convertible shares. . . . . . . . . . . . .
7,928
7,379
6,632
Numerator for diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
639,798
Denominator:
479,674
458
6,356
472,860
11,302
6,356
5,506
485,012
679,124
531
10,397
668,196
11,330
10,397
9,050
680,873
Denominator for basic earnings per share - weighted average common
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
202,209
190,473
186,662
Effect of dilutive securities:
Shared based payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
26,023
254
35,193
984
31,049
Denominator for diluted earnings per share - weighted average common
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
228,240
225,920
218,695
3.12
2.80
2.48
2.15
3.58
3.11
(1) Interest on the 2.00% convertible senior notes due 2020 was included for the years ended November 30, 2013 and 2012 because
the holders of the 2.00% convertible senior notes due 2020 converted the notes into shares of Class A common stock on
November 30, 2013.
For the years ended November 30, 2014, 2013 and 2012, there were no options to purchase shares of common
stock that were outstanding and anti-dilutive.
12. Comprehensive Income (Loss)
Comprehensive income attributable to Lennar represents changes in stockholders’ equity from non-owner
sources. For the years ended November 30, 2014, 2013 and 2012, comprehensive income attributable to Lennar was the
same as net earnings attributable to Lennar. Comprehensive income (loss) attributable to noncontrolling interests for the
years ended November 30, 2014, 2013 and 2012 was the same as the net earnings (loss) attributable to noncontrolling
interests. There was no accumulated other comprehensive income at November 30, 2014 and 2013.
13. Capital Stock
Preferred Stock
The Company is authorized to issue 500,000 shares of preferred stock with a par value of $10 per share and 100
million shares of participating preferred stock with a par value of $0.10 per share. No shares of preferred stock or
participating preferred stock have been issued as of November 30, 2014 and 2013.
Common Stock
During the years ended November 30, 2014, 2013 and 2012, the Company’s Class A and Class B common
stockholders received a per share annual dividend of $0.16. The only significant difference between the Class A common
stock and Class B common stock is that Class A common stock entitles holders to one vote per share and the Class B
common stock entitles holders to ten votes per share.
As of November 30, 2014, Stuart A. Miller, the Company’s Chief Executive Officer and a Director, directly
owned, or controlled through family-owned entities, shares of Class A and Class B common stock, which represented
approximately 44% voting power of the Company’s stock.
The Company has a stock repurchase program, which originally authorized the purchase up to 20 million shares
of its outstanding common stock. During the years ended November 30, 2014, 2013 and 2012, there were no share
117
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
repurchases of common stock under the stock repurchase program. As of November 30, 2014, the remaining authorized
shares that can be purchased under the stock repurchase program were 6.2 million shares of common stock.
During the year ended November 30, 2014, treasury stock decreased by 11.6 million shares of Class A common
stock primarily due to the retirement of 11.7 million shares of Class A common stock authorized by the Company's
Board of Directors, partially offset by activity related to the Company's equity compensation plan. The retirement of
Class A common stock resulted in a reclass between treasury stock and additional paid-in capital within stockholders'
equity. During the year ended November 30, 2013, treasury stock decreased by 0.4 million shares of Class A common
stock due to activity related to the Company’s equity compensation plan.
Restrictions on Payment of Dividends
There are no restrictions on the payment of dividends on common stock by the Company. There are no
agreements which restrict the payment of dividends by subsidiaries of the Company other than to maintain the financial
ratios and net worth requirements under the Lennar Financial Services segment’s warehouse lines of credit, which
restrict the payment of dividends from the Company’s mortgage subsidiaries following the occurrence and during the
continuance of an event of default thereunder and limit dividends to 50% of net income in the absence of an event of
default and the restriction under Rialto's 7.00% Senior Notes indenture that limits Rialto's ability to make distributions to
Lennar.
401(k) Plan
Under the Company’s 401(k) Plan (the “Plan”), contributions made by associates can be invested in a variety of
mutual funds or proprietary funds provided by the Plan trustee. The Company may also make contributions for the
benefit of associates. The Company records as compensation expense its contribution to the Plan. For the years ended
November 30, 2014, 2013 and 2012, this amount was $10.2 million, $8.0 million and $6.2 million, respectively.
14. Share-Based Payments
Compensation expense related to the Company’s share-based awards was as follows:
(In thousands)
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nonvested shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total compensation expense for share-based awards . . . . . . . . . . $
Years ended November 30,
2014
2013
2012
137
40,581
40,718
130
33,559
33,689
2,433
29,312
31,745
Cash flows resulting from tax benefits related to tax deductions in excess of the compensation expense
recognized are classified as financing cash flows. For the years ended November 30, 2014, 2013 and 2012 there was $7.5
million, $10.1 million and $10.8 million, respectively, of excess tax benefits from share based awards.
Cash received from stock options exercised during the years ended November 30, 2014, 2013 and 2012 was
$0.3 million, $16.7 million and $26.5 million, respectively. The tax benefit related to stock options exercised during the
years ended November 30, 2014, 2013, and 2012 was $0.1 million, $12.0 million and $14.8 million, respectively.
The fair value of each of the Company’s stock option awards is estimated on the date of grant using a Black-
Scholes option-pricing model that uses the assumptions noted in the table below. The fair value of the Company’s stock
option awards, which are subject to graded vesting, is expensed on a straight-line basis over the vesting life of the stock
options. Expected volatility is based on historical volatility of the Company’s stock over the most recent period equal to
the expected life of the award. The risk-free rate for periods within the contractual life of the stock option award is based
on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award is granted with a maturity
equal to the expected term of the stock option award granted. The Company uses historical data to estimate stock option
exercises and forfeitures within its valuation model. The expected life of stock option awards granted is derived from
historical exercise experience under the Company’s share-based payment plans and represents the period of time that
stock option awards granted are expected to be outstanding.
118
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The fair value of these options was determined at the date of the grant using the Black-Scholes option-pricing
model. The significant weighted average assumptions were as follows:
Dividends yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected option life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
0.4%
35.6%
0.2%
1.5
2013
0.4%
35.3%
0.2%
1.5
2012
0.6%
47%
0.2%
1.5
A summary of the Company’s stock option activity for the year ended November 30, 2014 was as follows:
Stock Options
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Life
Aggregate
Intrinsic Value
(In thousands)
Outstanding at November 30, 2013 . . . . . . . . .
Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at November 30, 2014 . . . . . . . . .
Vested and expected to vest in the future at
November 30, 2014 . . . . . . . . . . . . . . . . . . . .
Exercisable at November 30, 2014 . . . . . . . . . .
Available for grant at November 30, 2014 . . . .
52,500
$
$
20,000
(15,000) $
$
57,500
57,500
57,500
$
$
9,551,316
28.62
39.62
18.19
35.16
35.16
35.16
1.4 years
1.4 years
1.4 years
$
$
$
694
694
694
The weighted average fair value of options granted during the years ended November 30, 2014, 2013 and 2012
was $6.76, $6.59 and $5.72, respectively. The total intrinsic value of options exercised during the years ended
November 30, 2014, 2013 and 2012 was $0.3 million, $30.8 million and $38.1 million, respectively.
The fair value of nonvested shares is determined based on the trading price of the Company’s common stock on
the grant date. The weighted average fair value of nonvested shares granted during the years ended November 30, 2014,
2013 and 2012 was $41.89, $35.04 and $30.62, respectively. A summary of the Company’s nonvested shares activity for
the year ended November 30, 2014 was as follows:
Shares
Weighted Average
Grant Date
Fair Value
Nonvested restricted shares at November 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested restricted shares at November 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . .
2,472,068
$
$
1,119,356
(1,244,045) $
(58,253) $
$
2,289,126
30.66
41.89
28.23
34.12
37.38
At November 30, 2014, there was $67.9 million of unrecognized compensation expense related to unvested
share-based awards granted under the Company’s share-based payment plan, all of which relates to nonvested shares
with a weighted average remaining contractual life of 2.0 years. During the years ended November 30, 2014, 2013 and
2012, 1.2 million nonvested shares, 1.3 million nonvested shares and 1.7 million nonvested shares, respectively, vested.
For the years ended November 30, 2014, 2013, and 2012, the Company recorded an excess tax benefit related to
nonvested share activity of $7.4 million, $6.9 million and $11.7 million, respectively.
119
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
15. Financial Instruments and Fair Value Disclosures
The following table presents the carrying amounts and estimated fair values of financial instruments held by the
Company at November 30, 2014 and 2013, using available market information and what the Company believes to be
appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the
estimates of fair value. The use of different market assumptions and/or estimation methodologies might have a material
effect on the estimated fair value amounts. The table excludes cash and cash equivalents, restricted cash, receivables, net,
and accounts payable, all of which had fair values approximating their carrying amounts due to the short maturities and
liquidity of these instruments.
Fair Value
Carrying
Amount
November 30,
2014
2013
Fair
Value
Carrying
Amount
Fair
Value
Hierarchy
(In thousands)
ASSETS
Rialto:
Loans receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . Level 3
Investments held-to-maturity . . . . . . . . . . . . . . . . . . . Level 3
Lennar Financial Services:
Loans held-for-investment, net . . . . . . . . . . . . . . . . . . Level 3
Investments held-to-maturity . . . . . . . . . . . . . . . . . . . Level 2
LIABILITIES
Lennar Homebuilding senior notes and other debts
payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Level 2
Rialto notes payable and other debts payable . . . . . . . Level 2
Lennar Financial Services notes and other debts
payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Level 2
Lennar Multifamily notes payable . . . . . . . . . . . . . . . Level 2
$
$
$
$
130,105
17,290
135,881
17,155
278,392
16,070
305,810
15,952
26,894
45,038
26,723
45,051
26,356
62,344
26,095
62,580
$ 4,690,213
5,760,075
4,194,432
4,971,500
$
$
$
623,246
640,335
441,883
438,373
704,143
704,143
—
—
374,166
13,858
374,166
13,858
The following methods and assumptions are used by the Company in estimating fair values:
Lennar Homebuilding and Lennar Multifamily—For senior notes and other debts payable, the fair value of
fixed-rate borrowings is based on quoted market prices and the fair value of variable-rate borrowings is based on
expected future cash flows calculated using current market forward rates.
Rialto—The fair values for loans receivable, net are based on the fair value of the collateral less estimated cost
to sell or discounted cash flows, if estimable. The fair value for investments held-to-maturity is based on discounted cash
flows. For notes and other debts payable, the fair value is calculated based on discounted cash flows using the
Company’s weighted average borrowing rate and for the warehouse repurchase financing agreements fair values
approximate their carrying value due to their short maturities.
Lennar Financial Services—The fair values above are based on quoted market prices, if available. The fair
values for instruments that do not have quoted market prices are estimated by the Company on the basis of discounted
cash flows or other financial information.
Fair Value Measurements
GAAP provides a framework for measuring fair value, expands disclosures about fair value measurements and
establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value summarized as follows:
Level 1: Fair value determined based on quoted prices in active markets for identical assets.
Level 2: Fair value determined using significant other observable inputs.
Level 3: Fair value determined using significant unobservable inputs.
120
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company’s financial instruments measured at fair value on a recurring basis are summarized below:
Financial Instruments
(In thousands)
Lennar Financial Services:
Fair
Value
Hierarchy
Fair Value at
November 30,
2014
Fair Value at
November 30,
2013
Loans held-for-sale (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loan commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage servicing rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Level 2
Level 2
Level 2
Level 3
Lennar Homebuilding:
Investments available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Level 3
Rialto:
Loans held-for-sale (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Level 3
$
$
$
$
$
$
738,396
12,687
(7,576)
17,353
414,231
7,335
1,444
11,455
480
40,032
113,596
44,228
(1) The aggregate fair value of Lennar Financial Services loans held-for-sale of $738.4 million at November 30, 2014 exceeds their
aggregate principal balance of $706.0 million by $32.4 million. The aggregate fair value of loans held-for-sale of $414.2 million
at November 30, 2013 exceeds their aggregate principal balance of $399.0 million by $15.3 million.
(2) The aggregate fair value of Rialto loans held-for-sale of $113.6 million at November 30, 2014 exceeds their aggregate principal
balance of $111.8 million by $1.8 million. The aggregate fair value of Rialto loans held-for-sale of $44.2 million at November 30,
2013 exceeds their aggregate principal balance of $44.0 million by $0.2 million.
The estimated fair values of the Company’s financial instruments have been determined by using available
market information and what the Company believes to be appropriate valuation methodologies. Considerable judgment
is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions
and/or estimation methodologies might have a material effect on the estimated fair value amounts. The following
methods and assumptions are used by the Company in estimating fair values:
Lennar Financial Services loans held-for-sale— Fair value is based on independent quoted market prices,
where available, or the prices for other mortgage whole loans with similar characteristics. Management believes carrying
loans held-for-sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by
measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to
apply complex hedge accounting provisions. In addition, the Company recognizes the fair value of its rights to service a
mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of
these servicing rights is included in Lennar Financial Services’ loans held-for-sale as of November 30, 2014 and 2013.
Fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics.
Lennar Financial Services mortgage loan commitments— Fair value of commitments to originate loans is
based upon the difference between the current value of similar loans and the price at which the Lennar Financial Services
segment has committed to originate the loans. The fair value of commitments to sell loan contracts is the estimated
amount that the Lennar Financial Services segment would receive or pay to terminate the commitments at the reporting
date based on market prices for similar financial instruments. In addition, the Company recognizes the fair value of its
rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower.
The fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar
characteristics. The fair value of the mortgage loan commitments and related servicing rights is included in Lennar
Financial Services’ other assets.
Lennar Financial Services forward contracts— Fair value is based on quoted market prices for similar
financial instruments. As of November 30, 2014, the fair value of forward contracts is included in the Lennar Financial
Services segment's other liabilities. As of November 30, 2013, the fair value of forward contracts is included in the
Lennar Financial Services segment's other assets.
Lennar Financial Services mortgage servicing rights — Lennar Financial Services records mortgage
servicing rights when it sells loans on a servicing-retained basis, at the time of securitization or through the acquisition or
assumption of the right to service a financial asset. The fair value of the mortgage servicing rights is calculated using
third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the
mortgage servicing rights include mortgage prepayment rates, discount rates and delinquency rates. As of November 30,
2014, the key assumptions used in determining the fair value include a 13.2% mortgage prepayment rate, a 6.5%
delinquency rate and a 12.0% discount rate. The fair value of mortgage servicing rights is included in the Lennar
Financial Services segment's other assets.
121
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Lennar Homebuilding investments available-for-sale— The fair value of these investments is based on third-
party valuations and/or estimated by the Company on the basis of discounted cash flows and it is included in the Lennar
Homebuilding segment's other assets.
Rialto loans held-for-sale— The fair value of loans held-for-sale is calculated from model-based techniques
that use discounted cash flow assumptions and the Company’s own estimates of CMBS spreads, market interest rate
movements and the underlying loan credit quality. Loan values are calculated by allocating the change in value of an
assumed CMBS capital structure to each loan. The value of an assumed CMBS capital structure is calculated, generally,
by discounting the cash flows associated with each CMBS class at market interest rates and at the Company’s own
estimate of CMBS spreads. The Company estimates CMBS spreads by observing the pricing of recent CMBS offerings,
secondary CMBS markets, changes in the CMBX index, and general capital and commercial real estate market
conditions. Considerations in estimating CMBS spreads include comparing the Company’s current loan portfolio with
comparable CMBS offerings containing loans with similar duration, credit quality and collateral composition. These
methods use unobservable inputs in estimating a discount rate that is used to assign a value to each loan. While the cash
payments on the loans are contractual, the discount rate used and assumptions regarding the relative size of each class in
the CMBS capital structure can significantly impact the valuation. Therefore, the estimates used could differ materially
from the fair value determined when the loans are sold to a securitization trust.
The changes in fair value for Level 1 and Level 2 financial instruments measured on a recurring basis are shown
below by financial instrument and financial statement line item:
(In thousands)
Changes in fair value included in Lennar Financial Services
revenues:
Years Ended November 30,
2014
2013
2012
Loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Mortgage loan commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17,124
5,352
(9,020)
(7,927)
(5,378)
4,014
11,654
8,521
(1,166)
Interest income on Lennar Financial Services loans held-for-sale measured at fair value is calculated based on
the interest rate of the loan and recorded as revenues in the Lennar Financial Services’ statement of operations.
The Lennar Financial Services segment uses mandatory mortgage-backed securities (“MBS”) forward
commitments, option contracts and investor commitments to hedge its mortgage-related interest rate exposure. These
instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk associated with MBS
forward commitments, option contracts and loan sales transactions is managed by limiting the Company’s counterparties
to investment banks, federally regulated bank affiliates and other investors meeting the Company’s credit standards. The
segment’s risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the
MBS forward commitments and option contracts. At November 30, 2014, the segment had open commitments
amounting to $771.0 million to sell MBS with varying settlement dates through February 2015.
122
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables represents the reconciliations of the beginning and ending balance for the Level 3
recurring fair value measurements:
(In thousands)
Mortgage servicing rights, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Purchases and retention of mortgage servicing rights (1) . . . . . . . . . . . . . . . . . . . . .
Disposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in fair value (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage servicing rights, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
11,455
9,314
(2,308)
(1,108)
17,353
4,749
5,675
(790)
1,821
11,455
(1) For the year ended November 30, 2014, purchases and retention of mortgage servicing rights included the $5.7 million
acquisition of a portfolio of mortgage servicing rights.
(2) Amount represents changes in fair value included in Lennar Financial Services revenues.
(In thousands)
Investments available-for-sale, beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . $
Purchases and other (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in fair value (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments available-for-sale, end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
November 30,
2014
2013
40,032
21,274
(51,934)
7,379
(16,271)
480
19,591
25,518
(5,618)
748
(207)
40,032
(1) Represents investments in community development district bond that mature at 2039.
(2) The changes in fair value were not included in other comprehensive income because the changes in fair value were deferred as a
result of the Company's continuing involvement in the underlying real estate collateral.
(3) The investments available-for-sale that were settled during the year ended November 30, 2014 related to investments in
community development district bonds, which were in default by the borrower and regarding which the Company redeemed the
bonds.
(In thousands)
Rialto loans held-for-sale, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loan originations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Originated loans sold, including those not settled . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and principal paydowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in fair value (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto loans held-for-sale, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1) Amount represents changes in fair value included in Rialto revenues.
November 30,
2014
2013
44,228
1,562,748
(1,494,075)
(800)
1,495
113,596
—
690,266
(646,266)
195
33
44,228
123
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company’s assets measured at fair value on a nonrecurring basis are those assets for which the Company
has recorded valuation adjustments and write-offs. The fair values included in the tables below represent only those
assets whose carrying values were adjusted to fair value during the respective periods disclosed. The assets measured at
fair value on a nonrecurring basis are summarized below:
Years Ended November 30,
2014
2013
2012
Fair
Value
Hierarchy
Carrying
Value
Fair
Value
Total
Gains
(Losses)
(1)
Carrying
Value
Fair
Value
Total
Gains
(Losses)
(1)
Carrying
Value
Fair
Value
Total
Gains
(Losses)
(1)
(In thousands)
Financial Assets
Rialto:
Impaired loans
receivable . . . . . . . . Level 3
$187,218
130,105
(57,113)
237,829
221,690
(16,139)
354,687
326,721
(27,966)
Non-financial assets
Lennar Homebuilding:
Finished homes and
construction in
progress (2) . . . . . . . Level 3
Land and land under
$ 8,071
4,498
(3,573)
16,453
11,995
(4,458)
25,784
14,755
(11,029)
development (2). . . . Level 3
$ 7,013
6,143
(870)
—
—
—
18,044
16,166
(1,878)
Investments in
unconsolidated
entities (3) . . . . . . . . Level 3
Rialto:
REO - held-for-sale (4)
Upon acquisition/
transfer. . . . . . . . . . . Level 3
Upon management
periodic valuations . Level 3
REO - held-and-used,
net (5)
Upon acquisition/
transfer. . . . . . . . . . . . . Level 3
Upon management
periodic valuations . Level 3
$
—
—
—
20,921
20,024
(897)
—
—
—
$ 26,750
25,145
(1,605)
14,367
15,985
1,618
14,325
9,987
(4,338)
$ 50,115
42,279
(7,836)
26,772
21,199
(5,573)
19,718
17,139
(2,579)
$ 60,572
55,407
(5,165)
79,775
86,262
6,487
172,654
175,114
2,460
$ 39,728
28,227
(11,501)
22,743
12,226
(10,517)
33,003
26,300
(6,703)
(1) Represents losses due to valuation adjustments, write-offs, gains (losses) from transfers or acquisitions of real estate through
foreclosure and REO impairments recorded during the years ended November 30, 2014, 2013 and 2012.
(2) Valuation adjustments were included in Lennar Homebuilding costs and expenses in the Company's consolidated statement of
operations for the years ended November 30, 2014, 2013 and 2012.
(3) Valuation adjustments were included in Lennar Homebuilding other income, net in the Company's consolidated statement of
operations for the year ended November 30, 2013.
(4) REO held-for-sale assets are initially recorded at fair value less estimated costs to sell at the time of the transfer or acquisition
through, or in lieu of, loan foreclosure. The fair value of REO held-for-sale is based upon appraised value at the time of
foreclosure or management's best estimate. In addition, management periodically performs valuations of its REO held-for-sale.
The gains (losses) upon the transfer or acquisition of REO and impairments were included in Rialto other income (expense), net,
in the Company’s consolidated statement of operations for the years ended November 30, 2014, 2013 and 2012.
(5) REO held-and-used, net, assets are initially recorded at fair value at the time of acquisition through, or in lieu of, loan
foreclosure. The fair value of REO held-and-used, net, is based upon the appraised value at the time of foreclosure or
management’s best estimate. In addition, management periodically performs valuations of its REO held-and-used, net. The gains
(losses) upon acquisition of REO held-and-used, net and impairments were included in Rialto other income (expense), net, in the
Company’s consolidated statement of operations for the years ended November 30, 2014, 2013 and 2012.
See Note 1 for a detailed description of the Company’s process for identifying and recording valuation
adjustments related to Lennar Homebuilding inventory, Lennar Homebuilding investments in unconsolidated entities and
Rialto REO assets.
124
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
16. Consolidation of Variable Interest Entities
GAAP requires the consolidation of VIEs in which an enterprise has a controlling financial interest. A
controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE
that most significantly impact the VIEs economic performance and (b) the obligation to absorb losses of the VIE that
could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be
significant to the VIE.
The Company evaluated the joint venture agreements of its joint ventures that were formed or that had
reconsideration events during the year ended November 30, 2014. Based on the Company’s evaluation, in the third
quarter of 2014, the Company consolidated entities within its Lennar Multifamily segment that had combined total assets
of $17.9 million. In the second quarter of 2014, the Company entered into a new option agreement with MSR, which
resulted in the consolidation of certain VIEs because of the Company having options on substantially all of the
homesites. The VIEs that consolidated had total combined assets of $158.5 million and non-recourse liabilities of $1.6
million.
At November 30, 2014 and 2013, the Company’s recorded investments in Lennar Homebuilding unconsolidated
entities were $656.8 million and $716.9 million, respectively, the Rialto segment’s investments in unconsolidated entities
were $175.7 million and $154.6 million, respectively, and the Lennar Multifamily segment's investments in
unconsolidated entities were $105.7 million and $46.3 million, respectively.
Consolidated VIEs
As of November 30, 2014, the carrying amount of the VIEs’ assets and non-recourse liabilities that consolidated
were $929.1 million and $149.8 million, respectively. As of November 30, 2013, the carrying amount of the VIEs’ assets
and non-recourse liabilities that consolidated were $1,195.3 million and $294.8 million, respectively. Those assets are
owned by, and those liabilities are obligations of, the VIEs, not the Company.
A VIE’s assets can only be used to settle obligations of that VIE. The VIEs are not guarantors of the Company’s
senior notes and other debts payable. In addition, the assets held by a VIE usually are collateral for that VIE’s debt. The
Company and other partners do not generally have an obligation to make capital contributions to a VIE unless the
Company and/or the other partner(s) have entered into debt guarantees with the VIE’s banks. Other than debt guarantee
agreements with a VIE’s banks, there are no liquidity arrangements or agreements to fund capital or purchase assets that
could require the Company to provide financial support to a VIE. While the Company has option contracts to purchase
land from certain of its VIEs, the Company is not required to purchase the assets and could walk away from the
contracts.
Consolidated Joint Ventures
During the year ended November 30, 2013, in a joint venture transaction, the Company bought out its 50%
partners for $82.3 million, paying $18.8 million in cash and financing the remainder with a short-term note. The
Company's consolidated joint venture then contributed certain assets to a new unconsolidated joint venture and brought
in a new, long-term partner for $125 million, or a 31.25% interest. During the year ended November 30, 2013, the new
unconsolidated joint venture subsequently distributed $125 million of cash to the Company as a return of capital.
Unconsolidated VIEs
At November 30, 2014 and 2013, the Company’s recorded investments in VIEs that are unconsolidated and its
estimated maximum exposure to loss were as follows:
November 30, 2014
(In thousands)
Lennar Homebuilding (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Investments in
Unconsolidated
VIEs
Lennar’s
Maximum
Exposure to Loss
124,311
17,290
41,600
183,201
194,321
17,290
65,810
277,421
125
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
November 30, 2013
(In thousands)
Lennar Homebuilding (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rialto (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Investments in
Unconsolidated
VIEs
Lennar’s
Maximum
Exposure to Loss
195,720
24,393
25,874
245,987
301,315
24,393
55,002
380,710
(1) At November 30, 2014, the maximum exposure to loss of Lennar Homebuilding’s investments in unconsolidated VIEs was
limited to its investment in the unconsolidated VIEs, except with regard to $70.0 million remaining commitment to fund an
unconsolidated entity for further expenses up until the unconsolidated entity obtains permanent financing. At November 30,
2013, the maximum exposure to loss of Lennar Homebuilding’s investments in unconsolidated entities was limited to its
investment in the unconsolidated VIEs, except with regard to $90.5 million remaining commitment to fund an unconsolidated
entity that was formed in 2013 for further expenses up until the unconsolidated entity obtains permanent financing and $15.0
million of recourse debt of an unconsolidated VIEs, which was included in the Company’s maximum recourse related to Lennar
Homebuilding unconsolidated entities.
(2) At both November 30, 2014 and 2013, the maximum recourse exposure to loss of Rialto’s investments in unconsolidated VIEs
was limited to its investments in the unconsolidated entities. At November 30, 2014 and 2013, investments in unconsolidated
VIEs and Lennar’s maximum exposure to loss included $17.3 million and $16.1 million, respectively, related to Rialto’s
investments held-to-maturity.
(3) At November 30, 2014 and 2013, the maximum exposure to loss of Lennar Multifamily's investments in unconsolidated VIEs
was limited to its investments in the unconsolidated VIEs, except with regard to $23.4 million and $28.0 million, respectively, of
letters of credit outstanding for certain of the unconsolidated VIEs that could be drawn upon in the event of default under their
debt agreements.
While these entities are VIEs, the Company has determined that the power to direct the activities of the VIEs
that most significantly impact the VIEs’ economic performance is generally shared. While the Company generally
manages the day-to-day operations of the VIEs, each of these VIEs has an executive committee made up of
representatives from each partner. The members of the executive committee have equal votes and major decisions
require unanimous consent and approval from all members. The Company does not have the unilateral ability to exercise
participating voting rights without partner consent.
The Company and other partners do not generally have an obligation to make capital contributions to the VIEs,
except for $23.4 million of letters of credit outstanding for certain Lennar Multifamily unconsolidated VIEs that could be
drawn upon in the event of default under their debt agreements. In addition, there are no liquidity arrangements or
agreements to fund capital or purchase assets that could require the Company to provide financial support to the VIEs,
except with regard to a $70.0 million remaining commitment to fund an unconsolidated entity for further expenses up
until the unconsolidated entity obtains permanent financing. Except for the unconsolidated VIEs discussed above, the
Company and the other partners did not guarantee any debt of the other unconsolidated VIEs. While the Company has
option contracts to purchase land from certain of its unconsolidated VIEs, the Company is not required to purchase the
assets and could walk away from the contracts.
Option Contracts
The Company has access to land through option contracts, which generally enables it to control portions of
properties owned by third parties (including land funds) and unconsolidated entities until the Company has determined
whether to exercise the option.
A majority of the Company’s option contracts require a non-refundable cash deposit or irrevocable letter of
credit based on a percentage of the purchase price of the land. The Company’s option contracts sometimes include price
adjustment provisions, which adjust the purchase price of the land to its approximate fair value at the time of acquisition
or are based on the fair value at the time of takedown.
The Company’s investments in option contracts are recorded at cost unless those investments are determined to
be impaired, in which case the Company’s investments are written down to fair value. The Company reviews option
contracts for indicators of impairment during each reporting period. The most significant indicator of impairment is a
decline in the fair value of the optioned property such that the purchase and development of the optioned property would
no longer meet the Company’s targeted return on investment with appropriate consideration given to the length of time
available to exercise the option. Such declines could be caused by a variety of factors including increased competition,
decreases in demand or changes in local regulations that adversely impact the cost of development. Changes in any of
these factors would cause the Company to re-evaluate the likelihood of exercising its land options.
Some option contracts contain a predetermined take-down schedule for the optioned land parcels. However, in
almost all instances, the Company is not required to purchase land in accordance with those take-down schedules. In
substantially all instances, the Company has the right and ability to not exercise its option and forfeit its deposit without
126
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
further penalty, other than termination of the option and loss of any unapplied portion of its deposit and pre-acquisition
costs. Therefore, in substantially all instances, the Company does not consider the take-down price to be a firm
contractual obligation.
When the Company does not intend to exercise an option, it writes off any unapplied deposit and pre-
acquisition costs associated with the option contract. For the years ended November 30, 2014, 2013 and 2012, the
Company wrote-off $4.6 million, $1.9 million and $2.4 million, respectively, of option deposits and pre-acquisition costs
related to land under option that it does not intend to purchase.
The Company evaluates all option contracts for land to determine whether they are VIEs and, if so, whether the
Company is the primary beneficiary of certain of these option contracts. Although the Company does not have legal title
to the optioned land, if the Company is deemed to be the primary beneficiary or makes a significant deposit for optioned
land, it may need to consolidate the land under option at the purchase price of the optioned land. Due to the new
agreement with MSR discussed in Note 4, $155.0 million of consolidated inventory not owned was reclassified to land
and land under development and $70.3 million of consolidated inventory not owned was deconsolidated during the year
ended November 30, 2014.
In addition to this transaction, during the year ended November 30, 2014, consolidated inventory not owned
decreased by $182.4 million with a corresponding decrease to liabilities related to consolidated inventory not owned in
the accompanying consolidated balance sheet as of November 30, 2014. The decrease was primarily due to the purchase
of land that was the subject of a previously consolidated option contract. To reflect the purchase price of the inventory
consolidated, the Company had a net reclass related to option deposits from consolidated inventory not owned to land
under development in the accompanying consolidated balance sheet as of November 30, 2014. The liabilities related to
consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned
land and the Company’s cash deposits.
The Company’s exposure to loss related to its option contracts with third parties and unconsolidated entities
consisted of its non-refundable option deposits and pre-acquisition costs totaling $85.6 million and $129.2 million at
November 30, 2014 and 2013, respectively. Additionally, the Company had posted $34.5 million and $29.9 million of
letters of credit in lieu of cash deposits under certain option contracts as of November 30, 2014 and 2013, respectively.
17. Commitments and Contingent Liabilities
The Company is party to various claims, legal actions and complaints arising in the ordinary course of business.
In the opinion of management, the disposition of these matters will not have a material adverse effect on the Company’s
consolidated financial statements. The Company is also a party to various lawsuits involving purchases and sales of real
property. These lawsuits include claims regarding representations and warranties made in connection with the transfer of
the property and disputes regarding the obligation to purchase or sell the property.
The Company has been engaged in litigation since 2008 in the United States District Court for the District of
Maryland regarding whether the Company is required by a contract it entered into in 2005 to purchase a property in
Maryland. After entering into the contract, the Company later renegotiated the purchase price, reducing it from $200
million to $134 million, $20 million of which has been paid and subsequently written off, leaving a balance of $114
million. In July 2014, the Court ruled that the Company may be obligated to purchase the property. As a result of changes
in zoning for the property during the litigation, the Court ordered further proceedings to determine whether the sellers are
entitled to specific performance and, if so, whether a further reduction in the purchase price is required. In January 2015,
the Court rendered a decision ordering the Company to purchase the property for the $114 million balance of the contract
price, to pay interest at the rate of 12% per annum from May 27, 2008, and to reimburse the seller for real estate taxes
and attorneys’ fees. The Company believes the decision is contrary to applicable law and will appeal the decision. The
Company does not believe it is probable that a loss has occurred and, therefore, no liability has been recorded with
respect to this case.
The Company does not believe that the ultimate resolution of these claims or lawsuits will have a material
adverse effect on its business or financial position. However, the financial effect of litigation concerning purchases and
sales of property may depend upon the value of the subject property, which may have changed from the time the
agreement for purchase or sale was entered into.
In December 2013, the Company was awarded by a civil jury compensatory damages and punitive damages
against a former unconsolidated joint venture partner on court findings of defamation and conspiracy to extort money
from the Company in 2008 and 2009. The Company does not expect to be able to collect the amount awarded to it and
thus has not recorded any amounts receivable in its financial statements related to the award.
The Company is subject to the usual obligations associated with entering into contracts (including option
contracts) for the purchase, development and sale of real estate, which it does in the routine conduct of its business.
Option contracts generally enable the Company to control portions of properties owned by third parties (including land
funds) and unconsolidated entities until the Company determines whether to exercise the option. The use of option
127
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
contracts allows the Company to reduce the financial risks associated with long-term land holdings. At November 30,
2014, the Company had $85.6 million of non-refundable option deposits and pre-acquisition costs related to certain of
these homesites, which were included in inventories in the consolidated balance sheet.
The Company has entered into agreements to lease certain office facilities and equipment under operating
leases. Future minimum payments under the non-cancellable leases in effect at November 30, 2014 were as follows:
(In thousands)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease
Payments
34,358
28,524
23,695
19,885
13,994
16,658
Rental expense for the years ended November 30, 2014, 2013 and 2012 was $48.9 million, $41.9 million and
$38.7 million, respectively.
The Company is committed, under various letters of credit, to perform certain development and construction
activities and provide certain guarantees in the normal course of business. Outstanding letters of credit under these
arrangements totaled $424.6 million at November 30, 2014. The Company also had outstanding performance and surety
bonds related to site improvements at various projects (including certain projects in the Company’s joint ventures) of
$923.3 million. Although significant development and construction activities have been completed related to these site
improvements, these bonds are generally not released until all development and construction activities are completed. As
of November 30, 2014, there were approximately $363.7 million, or 39%, of costs to complete related to these site
improvements. The Company does not presently anticipate any draws upon these bonds that would have a material effect
on its consolidated financial statements.
18. Supplemental Financial Information
The indentures governing the Company’s 5.60% senior notes due 2015, 6.50% senior notes due 2016, 12.25%
senior notes due 2017, 4.75% senior notes due 2017, 6.95% senior notes due 2018, 4.125% senior notes due 2018,
4.500% senior notes due 2019, 4.50% senior notes due 2019, 2.75% convertible senior notes due 2020, 3.25%
convertible senior notes due 2021 and 4.750% senior notes due 2022 require that, if any of the Company’s 100% owned
subsidiaries, other than its finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least
$75 million principal amount of debt of Lennar Corporation, those subsidiaries must also guarantee Lennar
Corporation’s obligations with regard to its senior notes. The entities referred to as “guarantors” in the following tables
are subsidiaries that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes
because at November 30, 2014 they were guaranteeing Lennar Corporation's $125 million letter of credit facilities, it's
$140 million letter of credit facility and its Credit Facility. The guarantees are full, unconditional and joint and several
and the guarantor subsidiaries are 100% directly or indirectly owned by Lennar Corporation. A subsidiary's guarantee
will be suspended at any time when it is not directly or indirectly guaranteeing at least $75 million principal amount of
debt of Lennar Corporation, and a subsidiary will be released from its guarantee and any other obligations it may have
regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed of.
For purposes of the condensed consolidating statement of cash flows included in the following supplemental
financial information, the Company's accounting policy is to treat cash received by Lennar Corporation ("the Parent")
from its subsidiaries, to the extent of net earnings from such subsidiaries as a dividend and accordingly a return on
investment within cash flows from operating activities. Distributions of capital received by the Parent from its
subsidiaries are reflected as cash flows from investing activities. The cash outflows associated with the return on
investment dividends and distributions of capital received by the Parent are reflected by the Guarantor and Non-
Guarantor subsidiaries in the Dividends line item within cash flows from financing activities. All other cash flows
between the Parent and its subsidiaries represent the settlement of receivables and payables between such entities in
conjunction with the Parent's centralized cash management arrangement with its subsidiaries, which operates with the
characteristics of a revolving credit facility, and are accordingly reflected net in the Intercompany line item within cash
flows from investing activities for the Parent and net in the Intercompany line item within cash flows from financing
activities for the Guarantor and Non-Guarantor subsidiaries.
128
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Supplemental information for the subsidiaries that were guarantor subsidiaries at November 30, 2014 was as
follows:
Consolidating Balance Sheet
November 30, 2014
Lennar
Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
(In thousands)
ASSETS
Lennar Homebuilding:
Cash and cash equivalents, restricted
cash and receivables, net. . . . . . . . . . . . $
653,491
323,325
Inventories . . . . . . . . . . . . . . . . . . . . . . . .
— 7,528,633
Investments in unconsolidated entities. . .
Other assets . . . . . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries. . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . .
—
159,564
4,073,687
4,709,544
632,973
402,076
299,432
—
9,596,286
9,186,439
12,206
207,967
23,864
104,619
6,330
— (4,373,119)
— (4,709,544)
(9,076,333)
348,656
—
989,022
— 7,736,600
—
656,837
672,589
—
—
10,055,048
Rialto real estate owned - held-and-used,
net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto all other assets . . . . . . . . . . . . . . . .
Lennar Financial Services. . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . .
—
Total assets. . . . . . . . . . . . . . . . . . . . $ 9,596,286
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable and other liabilities . . . $
Liabilities related to consolidated
inventory not owned . . . . . . . . . . . . . . .
Senior notes and other debts payable . . . .
4,322,162
Intercompany . . . . . . . . . . . . . . . . . . . . . .
— 4,579,314
4,769,266
5,669,033
Rialto. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services. . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . .
—
Total liabilities . . . . . . . . . . . . . . . . . $ 4,769,266
4,827,020
Stockholders’ equity. . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
76,428
248,784
255,795
1,202,357
1,100,625
19,230
9,511,651
2,926,663
—
255,795
— 1,202,357
— 1,177,053
—
(9,076,333)
268,014
12,958,267
447,104
756,991
71,699
— 1,275,794
45,028
287,700
—
28,705
52,150
5,749,888
3,761,763
—
3,761,763
9,511,651
—
80,351
130,230
282,280
747,044
861,608
93
1,891,025
611,356
424,282
1,035,638
2,926,663
—
45,028
— 4,690,213
(4,709,544)
(4,709,544)
—
6,330
—
(4,703,214)
(4,373,119)
—
(4,373,119)
(9,076,333)
—
6,011,035
747,044
896,643
52,243
7,706,965
4,827,020
424,282
5,251,302
12,958,267
Noncontrolling interests . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . .
4,827,020
Total liabilities and equity . . . . . . . $ 9,596,286
—
129
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidating Balance Sheet
November 30, 2013
Lennar
Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
(In thousands)
ASSETS
Lennar Homebuilding:
Cash and cash equivalents, restricted
cash and receivables, net. . . . . . . . . . . . $
562,134
192,945
Inventories . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated entities. . .
Other assets . . . . . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries. . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . .
Rialto real estate owned - held-and-used,
net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto all other assets . . . . . . . . . . . . . . . .
— 6,507,172
—
116,657
4,305,887
3,191,611
702,291
539,264
325,906
—
8,176,289
8,267,578
28,430
93,876
14,658
86,773
5,935
— (4,631,793)
— (3,191,611)
(7,817,469)
223,737
—
783,509
— 6,601,048
—
716,949
748,629
—
—
8,850,135
—
—
—
—
—
76,160
147,089
428,989
1,050,324
720,550
—
8,490,827
2,423,600
—
428,989
— 1,050,324
—
—
(7,817,469)
796,710
147,089
11,273,247
Lennar Financial Services. . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . .
—
Total assets. . . . . . . . . . . . . . . . . . . . $ 8,176,289
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable and other liabilities . . . $
Liabilities related to consolidated
inventory not owned . . . . . . . . . . . . . . .
Senior notes and other debts payable . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . .
302,558
623,709
58,029
—
3,704,830
384,876
400,044
— 3,183,664
4,007,388
4,592,293
—
—
984,296
384,876
— 4,194,432
(3,191,611)
(3,191,611)
—
5,935
—
(3,185,676)
(4,631,793)
—
(4,631,793)
(7,817,469)
—
5,563,604
497,008
543,639
41,526
6,645,777
4,168,901
458,569
4,627,470
11,273,247
—
89,558
7,947
155,534
497,008
507,659
—
1,160,201
804,830
458,569
1,263,399
2,423,600
—
—
Rialto. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Financial Services. . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . . . . .
—
Total liabilities . . . . . . . . . . . . . . . . . $ 4,007,388
4,168,901
Stockholders’ equity. . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . .
4,168,901
Total liabilities and equity . . . . . . . $ 8,176,289
—
—
30,045
41,526
4,663,864
3,826,963
—
3,826,963
8,490,827
130
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidating Statement of Operations
Year Ended November 30, 2014
Lennar
Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
(In thousands)
Revenues:
Lennar Homebuilding . . . . . . . . . . . . . . . $
Lennar Financial Services . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . .
— 7,023,678
—
—
—
161,145
—
69,780
1,452
315,123
230,521
—
— 7,254,603
547,096
— 7,025,130
(21,887)
—
—
(21,887)
(8,477)
(12,894)
—
—
5,062
(16,309)
—
(216)
5,794
—
—
—
—
—
(794,360)
454,381
230,521
69,780
7,779,812
5,962,029
374,243
249,114
95,227
177,161
6,857,774
(355)
7,526
(36,551)
59,277
3,395
14,454
969,784
(341,091)
—
Cost and expenses:
Lennar Homebuilding . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . .
Corporate general and administrative . . .
Total costs and expenses . . . . . . . . . .
Lennar Homebuilding equity in earnings
(loss) from unconsolidated entities . . . . . . .
Lennar Homebuilding other income, net. . . . .
Other interest expense . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated
entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto other income, net . . . . . . . . . . . . . . . . .
Lennar Multifamily equity in earnings from
unconsolidated entities. . . . . . . . . . . . . . . . .
Earnings (loss) before income taxes . . . . . . . .
Benefit (provision) for income taxes. . . . . . . .
Equity in earnings from subsidiaries . . . . . . . .
Net earnings (including net loss attributable
to noncontrolling interests) . . . . . . . . . . . . .
— 5,968,866
153,975
—
95,226
—
1,640
233,162
249,114
1
—
6,218,067
483,917
(3,882)
7,488
(36,551)
—
—
14,454
1,018,045
(351,787)
39,623
3,527
—
—
59,277
3,395
—
129,378
(51,122)
—
—
—
—
172,099
172,099
—
254
(5,794)
—
—
—
(177,639)
61,818
754,737
638,916
705,881
78,256
(794,360)
628,693
Less: Net loss attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to Lennar . . . . . . $
Comprehensive earnings attributable to
Lennar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
—
638,916
705,881
(10,223)
88,479
—
(794,360)
(10,223)
638,916
638,916
705,881
88,479
(794,360)
638,916
Comprehensive loss attributable to
noncontrolling interests . . . . . . . . . . . . . . . $
—
—
(10,223)
—
(10,223)
131
— 5,354,947
(21,071)
—
—
(21,071)
7,309
(28,175)
—
—
5,061
(15,805)
—
(504)
5,770
—
—
—
—
—
(616,563)
427,342
138,060
14,746
5,935,095
4,579,108
341,556
151,072
31,463
146,060
5,249,259
23,803
27,346
(93,913)
22,353
16,787
(271)
681,941
(177,015)
—
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidating Statement of Operations
Year Ended November 30, 2013
Lennar
Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
(In thousands)
Revenues:
Lennar Homebuilding . . . . . . . . . . . . . . . $
Lennar Financial Services . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . .
— 5,317,890
—
—
—
162,939
—
14,746
37,057
285,474
138,060
—
— 5,495,575
460,591
Cost and expenses:
Lennar Homebuilding . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . .
Corporate general and administrative . . .
Total costs and expenses . . . . . . . . . .
Lennar Homebuilding equity in earnings
from unconsolidated entities . . . . . . . . . . . .
Lennar Homebuilding other income, net. . . . .
Other interest expense . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated
entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto other income, net . . . . . . . . . . . . . . . . .
Lennar Multifamily equity in loss from
unconsolidated entities. . . . . . . . . . . . . . . . .
Earnings (loss) before income taxes . . . . . . . .
Benefit (provision) for income taxes. . . . . . . .
Equity in earnings from subsidiaries . . . . . . . .
Net earnings (including net earnings
attributable to noncontrolling interests) . . . .
— 4,547,431
157,351
—
31,463
—
24,368
212,380
151,072
—
—
4,736,245
387,820
22,966
27,308
(93,913)
—
—
(271)
715,420
(198,292)
45,015
837
—
—
22,353
16,787
—
112,748
(33,076)
—
—
—
—
140,999
140,999
—
542
(5,770)
—
—
—
(146,227)
54,353
571,548
479,674
562,143
79,672
(616,563)
504,926
Less: Net earnings attributable to
noncontrolling interests . . . . . . . . . . . . . . . .
Net earnings attributable to Lennar . . . . . . $
Comprehensive earnings attributable to
Lennar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Comprehensive earnings attributable to
noncontrolling interests . . . . . . . . . . . . . . . $
—
—
479,674
562,143
25,252
54,420
—
(616,563)
25,252
479,674
479,674
562,143
54,420
(616,563)
479,674
—
—
25,252
—
25,252
132
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidating Statement of Operations
Year Ended November 30, 2012
Lennar
Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
(In thousands)
Revenues:
Lennar Homebuilding . . . . . . . . . . . . . . . $
Lennar Financial Services . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . .
— 3,580,827
—
—
—
156,478
—
426
405
246,566
138,856
—
— 3,737,731
385,827
— 3,581,232
(18,426)
—
—
(18,426)
(542)
(17,038)
—
—
5,061
(12,519)
384,618
138,856
426
4,105,132
3,216,366
299,836
138,990
6,306
127,338
3,788,836
— 3,201,036
—
—
—
122,277
122,277
151,455
—
6,306
—
15,872
165,419
138,990
—
—
3,358,797
320,281
—
(26,153)
(519)
—
(26,672)
(90)
(5,779)
15,106
(94,353)
—
—
128
5,779
—
—
—
(128,146)
20,711
786,559
—
—
(4)
273,530
457,850
44,815
41,483
(29,780)
—
76,730
(43,343)
—
—
—
—
—
—
(831,374)
15,144
(94,353)
41,483
(29,780)
(4)
222,114
435,218
—
679,124
776,195
33,387
(831,374)
657,332
Cost and expenses:
Lennar Homebuilding . . . . . . . . . . . . . . .
Lennar Financial Services . . . . . . . . . . . .
Rialto . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lennar Multifamily . . . . . . . . . . . . . . . . .
Corporate general and administrative . . .
Total costs and expenses . . . . . . . . . .
Lennar Homebuilding equity in loss from
unconsolidated entities. . . . . . . . . . . . . . . . .
Lennar Homebuilding other income
(expense), net . . . . . . . . . . . . . . . . . . . . . . . .
Other interest expense . . . . . . . . . . . . . . . . . . .
Rialto equity in earnings from unconsolidated
entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rialto other expense, net . . . . . . . . . . . . . . . . .
Lennar Multifamily equity in loss from
unconsolidated entities. . . . . . . . . . . . . . . . .
Earnings (loss) before income taxes . . . . . . . .
Benefit (provision) for income taxes. . . . . . . .
Equity in earnings from subsidiaries . . . . . . . .
Net earnings (including net loss attributable
to noncontrolling interests) . . . . . . . . . . . . .
Less: Net loss attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to Lennar . . . . . . $
Comprehensive earnings attributable to
Lennar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Comprehensive loss attributable to
noncontrolling interests . . . . . . . . . . . . . . . $
—
—
679,124
776,195
(21,792)
55,179
—
(831,374)
(21,792)
679,124
679,124
776,195
55,179
(831,374)
679,124
—
—
(21,792)
—
(21,792)
133
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidating Statement of Cash Flows
Year Ended November 30, 2014
(In thousands)
Cash flows from operating activities:
Lennar
Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
Net earnings (including net loss attributable
to noncontrolling interests) . . . . . . . . . . . . . $
Distributions of earnings from guarantor and
non-guarantor subsidiaries. . . . . . . . . . . . . .
Other adjustments to reconcile net earnings
(including net loss attributable to
noncontrolling interests) to net cash
provided by (used in) operating activities . .
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Distributions of capital from Lennar
Homebuilding unconsolidated entities, net
of investments in and contributions to. . . . .
Distributions of capital from Rialto
unconsolidated entities, net of investments
in and contributions to . . . . . . . . . . . . . . . . .
Distributions of capital from Lennar
Multifamily unconsolidated entities, net of
investments in and contributions to. . . . . . .
Receipts of principal payments on Rialto
loans receivable, net . . . . . . . . . . . . . . . . . .
Proceeds from sales of Rialto real estate
owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of operating properties. . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions of capital from guarantor and
non-guarantor subsidiaries. . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Net borrowings under Lennar Financial
Services debt . . . . . . . . . . . . . . . . . . . . . . . .
Net borrowings under Rialto warehouse
repurchase facilities . . . . . . . . . . . . . . . . . . .
Net proceeds from senior notes and
structured notes . . . . . . . . . . . . . . . . . . . . . .
Redemption of senior notes. . . . . . . . . . . . . . .
Principal repayments on Rialto notes payable
Net repayments on other borrowings . . . . . . .
Exercise of land option contracts from an
unconsolidated land investment venture . . .
Net payments related to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based awards .
Common stock: . . . . . . . . . . . . . . . . . . . . . . . .
Issuances. . . . . . . . . . . . . . . . . . . . . . . .
Repurchases . . . . . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities. . . . . .
Net increase in cash and cash equivalents . . . . .
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . $
638,916
705,881
78,256
(794,360)
628,693
754,737
39,623
—
(794,360)
—
(583,119)
(1,227,547)
(400,875)
794,360
(1,417,181)
810,534
(482,043)
(322,619)
(794,360)
(788,488)
—
—
—
—
54,065
1,885
—
27,391
36,182
—
—
24,019
—
—
—
—
—
—
—
55,950
27,391
36,182
24,019
269,698
43,937
(18,818)
—
—
(2,347)
232,200
(1,515,367)
—
43,937
17,491
65,200
—
269,698
—
(33,962)
(297,400)
—
— 1,515,367
—
—
(1,285,514)
216,875
289,031
1,217,967
438,359
—
—
—
—
843,300
(250,000)
—
—
—
—
—
(255,397)
324,281
65,254
196,180
—
(75,879)
(9,892)
—
(1,540)
—
—
7,497
—
—
13,599
(20,424)
(32,775)
—
—
(771,081)
— 1,395,934
367,916
102,748
561,197
86,217
547,101
633,318
152,753
255,501
134
(142,766)
—
—
—
(320,679)
119,433
155,932
122,344
270,651
392,995
—
—
324,281
65,254
— 1,039,480
(250,000)
—
(75,879)
—
(265,289)
—
—
—
—
—
—
1,091,760
(1,515,367)
(423,607)
—
(1,540)
(142,766)
7,497
13,599
(20,424)
(32,775)
—
661,438
311,309
—
970,505
— 1,281,814
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidating Statement of Cash Flows
Year Ended November 30, 2013
Lennar
Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
(In thousands)
Cash flows from operating activities:
Net earnings (including net earnings
attributable to noncontrolling interests) . . $
Distributions of earnings from guarantor
and non-guarantor subsidiaries . . . . . . . . .
Other adjustments to reconcile net earnings
(including net earnings attributable to
noncontrolling interests) to net cash
provided by (used in) operating activities.
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Distributions of capital from Lennar
Homebuilding unconsolidated entities,
net of investments in and contributions to
Investments in and contributions to Rialto
unconsolidated entities, net of
distributions of capital. . . . . . . . . . . . . . . .
Decrease in Rialto defeasance cash to retire
notes payable. . . . . . . . . . . . . . . . . . . . . . .
Receipts of principal payments on Rialto
loans receivable, net . . . . . . . . . . . . . . . . .
Proceeds from sales of Rialto real estate
owned . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of operating properties .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Net repayments under Lennar Financial
Services debt . . . . . . . . . . . . . . . . . . . . . . .
Net borrowings under Rialto warehouse
repurchase facilities. . . . . . . . . . . . . . . . . .
Net proceeds from convertible and senior
notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of senior notes . . . . . . . . . . . . .
Net proceeds from Rialto senior notes . . . . .
Principal repayments on Rialto notes
payable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net repayments on other borrowings . . . . . .
Exercise of land option contracts from an
unconsolidated land investment venture . .
Net payments related to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based
awards . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock:
Issuances . . . . . . . . . . . . . . . . . . . . . .
Repurchases . . . . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
479,674
562,143
79,672
(616,563)
504,926
571,548
45,015
—
(616,563)
—
(555,792)
(1,421,646)
48,235
616,563
(1,312,640)
495,430
(814,488)
127,907
(616,563)
(807,714)
—
—
—
—
98,819
2,190
—
—
—
(24,397)
223,813
66,788
—
—
—
—
—
—
(233)
(1,333,932)
—
—
(30,213)
—
239,215
140,564
(27,297)
—
—
—
— 1,333,932
101,009
(24,397)
223,813
66,788
239,215
140,564
(57,743)
—
(1,334,165)
68,606
620,876
1,333,932
689,249
—
—
494,329
(63,001)
—
—
—
—
—
10,148
—
—
—
(750)
—
—
(67,984)
(28,869)
—
—
(83,828)
76,017
—
—
242,736
(471,255)
(126,779)
—
(193,419)
—
—
—
—
—
—
—
—
—
—
—
34,114
(12,320)
(30,912)
—
—
(562,143)
— 1,366,008
—
—
(54,420)
(32,076)
—
—
616,563
(1,333,932)
(83,828)
76,017
494,329
(63,751)
242,736
(471,255)
(194,763)
(28,869)
(193,419)
10,148
34,114
(12,320)
(30,912)
—
432,358
706,262
(643,024)
(717,369)
(221,773)
(406,377)
(39,620)
105,759
—
(340,238)
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . $
953,478
547,101
192,373
152,753
164,892
270,651
— 1,310,743
970,505
—
135
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidating Statement of Cash Flows
Year Ended November 30, 2012
(In thousands)
Cash flows from operating activities:
Lennar
Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
Net earnings (including net loss
attributable to noncontrolling interests) . . $
Distributions of earnings from guarantor
and non-guarantor subsidiaries. . . . . . . . .
Other adjustments to reconcile net earnings
(including net loss attributable to
noncontrolling interests) to net cash
provided by (used in) operating activities
Net cash provided by (used in) operating
activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Investments in and contributions to Lennar
Homebuilding unconsolidated entities,
net of distributions of capital . . . . . . . . . .
Distributions of capital from Rialto
unconsolidated entities, net of
investments and contributions to . . . . . . .
Increase in Rialto defeasance cash to retire
notes payable . . . . . . . . . . . . . . . . . . . . . .
Receipts of principal payments on Rialto
loans receivable, net . . . . . . . . . . . . . . . . .
Proceeds from sales of Rialto real estate
owned . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Net borrowings (repayments) under Lennar
Financial Services debt. . . . . . . . . . . . . . .
Net proceeds from convertible and senior
notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partial redemption of senior notes . . . . . . . .
Net repayments on other borrowings. . . . . .
Exercise of land option contracts from an
unconsolidated land investment venture .
Net receipts related to noncontrolling
interests. . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based
awards. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock: . . . . . . . . . . . . . . . . . . . . . .
Issuances . . . . . . . . . . . . . . . . . . . . . .
Repurchases . . . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . .
Intercompany . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in cash and cash equivalents. . . .
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period. . . $
679,124
776,195
33,387
(831,374)
657,332
318,998
44,815
—
(363,813)
—
(783,282)
(962,447)
(167,625)
831,374
(1,081,980)
214,840
(141,437)
(134,238)
(363,813)
(424,648)
—
—
—
—
—
(27,113)
(842)
—
—
—
—
39,813
(4,427)
81,648
183,883
(31,173)
—
—
—
—
—
—
—
700,846
(27,955)
39,813
(4,427)
81,648
183,883
(27,671)
—
(218)
(700,846)
3,720
—
(701,064)
(23,393)
268,902
700,846
245,291
(76)
—
—
(51,918)
(50,396)
—
—
—
—
(308,634)
596,209
185,185
20,355
172,018
192,373
47,936
—
—
(195,694)
—
1,179
—
—
—
(55,179)
104,637
(97,121)
37,543
127,349
164,892
—
—
—
—
—
47,860
790,882
(210,862)
(247,612)
(50,396)
1,179
—
10,814
—
—
363,813
(700,846)
(337,033)
—
32,174
(17,149)
(30,394)
—
326,496
147,139
— 1,163,604
— 1,310,743
—
790,882
(210,862)
—
—
—
10,814
32,174
(17,149)
(30,394)
—
575,465
89,241
864,237
953,478
136
LENNAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
19. Quarterly Data (unaudited)
First
Second
Third
Fourth
(In thousands, except per share amounts)
2014
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit from sales of homes . . . . . . . . . . . . . . . $
Earnings before income taxes . . . . . . . . . . . . . . . . . . $
Net earnings attributable to Lennar. . . . . . . . . . . . . . $
Earnings per share:
1,363,095
286,053
125,876
78,117
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.38
0.35
2013
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit from sales of homes . . . . . . . . . . . . . . . $
Earnings before income taxes . . . . . . . . . . . . . . . . . . $
Net earnings attributable to Lennar. . . . . . . . . . . . . . $
Earnings per share:
990,243
188,997
53,321
57,492
1,818,745
409,615
203,630
137,719
0.67
0.61
1,426,881
303,284
162,289
137,436
2,014,034
456,162
262,335
177,757
0.87
0.78
1,602,768
360,946
189,359
120,662
2,583,938
584,403
377,943
245,323
1.20
1.07
1,915,203
465,033
276,972
164,084
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.30
0.26
0.71
0.61
0.62
0.54
0.84
0.73
Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of
per share amounts for the quarters may not agree with per share amounts for the year.
137
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer participated in an evaluation by our management of
the effectiveness of our disclosure controls and procedures as of the end of the period cover by this report. Based on their
participation in that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective
as of November 30, 2014 to ensure that information required to be disclosed in our reports filed or submitted under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in
the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed in
our reports filed or furnished under the Securities Exchange Act of 1934, as amended, is accumulated and communicated
to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required
disclosures.
Our CEO and CFO also participated in an evaluation by our management of any changes in our internal control
over financial reporting that occurred during the quarter ended November 30, 2014. That evaluation did not identify any
changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Management’s Annual Report on Internal Control Over Financial Reporting and the Report of Independent
Registered Public Accounting Firm obtained from Deloitte & Touche LLP relating to the effectiveness of Lennar
Corporation’s internal control over financial reporting are included elsewhere in this document.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of
our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in Internal Control—Integrated Framework (1992) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in
Internal Control—Integrated Framework (1992), our management concluded that our internal control over financial
reporting was effective as of November 30, 2014. The effectiveness of our internal control over financial reporting as of
November 30, 2014 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their attestation report which is included herein.
138
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Lennar Corporation
To the Board of Directors and Stockholders of Lennar Corporation
We have audited the internal control over financial reporting of Lennar Corporation and subsidiaries (the
We have audited the internal control over financial reporting of Lennar Corporation and subsidiaries (the
“Company”) as of November 30, 2014, based on the criteria established in Internal Control — Integrated Framework
“Company”) as of November 30, 2014, based on the criteria established in Internal Control — Integrated Framework
To the Board of Directors and Stockholders of Lennar Corporation
(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s
(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of
We have audited the internal control over financial reporting of Lennar Corporation and subsidiaries (the
management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual
“Company”) as of November 30, 2014, based on the criteria established in Internal Control — Integrated Framework
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
management is responsible for maintaining effective internal control over financial reporting and for its assessment of
internal control over financial reporting based on our audit.
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
internal control over financial reporting based on our audit.
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
for our opinion.
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
company’s principal executive and principal financial officers, or persons performing similar functions, and effected by
company’s principal executive and principal financial officers, or persons performing similar functions, and effected by
for our opinion.
the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the
the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
company’s principal executive and principal financial officers, or persons performing similar functions, and effected by
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
financial statements.
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
collusion or improper management override of controls, material misstatements due to error or fraud may not be
collusion or improper management override of controls, material misstatements due to error or fraud may not be
financial statements.
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control
over financial reporting to future periods are subject to the risk that the controls may become inadequate because of
Because of the inherent limitations of internal control over financial reporting, including the possibility of
over financial reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
collusion or improper management override of controls, material misstatements due to error or fraud may not be
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control
In our opinion, the Company maintained, in all material respects, effective internal control over financial
In our opinion, the Company maintained, in all material respects, effective internal control over financial
over financial reporting to future periods are subject to the risk that the controls may become inadequate because of
reporting as of November 30, 2014, based on the criteria established in Internal Control — Integrated Framework (1992)
reporting as of November 30, 2014, based on the criteria established in Internal Control — Integrated Framework (1992)
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Because of the inherent limitations of internal control over financial reporting, including the possibility of
Because of the inherent limitations of internal control over financial reporting, including the possibility of
In our opinion, the Company maintained, in all material respects, effective internal control over financial
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
reporting as of November 30, 2014, based on the criteria established in Internal Control — Integrated Framework (1992)
(United States), the consolidated financial statements as of and for the year ended November 30, 2014 of the Company
(United States), the consolidated financial statements as of and for the year ended November 30, 2014 of the Company
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
and our report dated January 23, 2015 expressed an unqualified opinion on those financial statements.
and our report dated January 23, 2015 expressed an unqualified opinion on those financial statements.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements as of and for the year ended November 30, 2014 of the Company
and our report dated January 23, 2015 expressed an unqualified opinion on those financial statements.
Certified Public Accountants
Certified Public Accountants
Miami, Florida
Miami, Florida
January 23, 2015
January 23, 2015
Certified Public Accountants
Miami, Florida
January 23, 2015
139
139
139
Item 9B. Other Information.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item for executive officers is set forth under the heading “Executive Officers
of Lennar Corporation” in Part I. We have adopted a Code of Business Conduct and Ethics that applies to our Chief
Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Code of Business Conduct and Ethics is
located on our internet web site at www.lennar.com under “Investor Relations – Corporate Governance.” We intend to
provide disclosure of any amendments or waivers of our Code of Business Conduct and Ethics on our website within
four business days following the date of the amendment or waiver. The other information called for by this item is
incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange
Commission not later than March 30, 2015 (120 days after the end of our fiscal year).
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to our definitive proxy statement, which will
be filed with the Securities and Exchange Commission not later than March 30, 2015 (120 days after the end of our fiscal
year).
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item is incorporated by reference to our definitive proxy statement, which will
be filed with the Securities and Exchange Commission not later than March 30, 2015 (120 days after the end of our fiscal
year), except for the information required by Item 201(d) of Regulation S-K, which is provided below.
The following table summarizes our equity compensation plans as of November 30, 2014:
Plan category
Equity compensation plans approved by stockholders. . . . . . .
Equity compensation plans not approved by stockholders. . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) Both Class A and Class B common stock may be issued.
Number of shares
to be issued upon
exercise of
outstanding
options, warrants
and rights
(a)
Weighted-average
exercise price of
outstanding
options, warrants
and rights (b)
57,500
—
57,500
$
$
35.16
—
35.16
Number of shares
remaining available
for future issuance
under equity
compensation plans
(excluding shares
reflected in column
(a)) c(1)
9,551,316
—
9,551,316
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated by reference to our definitive proxy statement, which will
be filed with the Securities and Exchange Commission not later than March 30, 2015 (120 days after the end of our fiscal
year).
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated by reference to our definitive proxy statement, which
will be filed with the Securities and Exchange Commission not later than March 30, 2015 (120 days after the end of our
fiscal year).
140
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Documents filed as part of this Report.
1. The following financial statements are contained in Item 8:
Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of November 30, 2014 and 2013
Consolidated Statements of Operations for the Years Ended November 30, 2014, 2013 and 2012
Consolidated Statements of Equity for the Years Ended November 30, 2014, 2013 and 2012
Consolidated Statements of Cash Flows for the Years Ended November 30, 2014, 2013 and 2012
Notes to Consolidated Financial Statements
2. The following financial statement schedule is included in this Report:
Financial Statement Schedule
Report of Independent Registered Public Accounting Firm
Schedule II—Valuation and Qualifying Accounts
Page in this
Report
72
73
75
76
77
81
Page in this
Report
145
146
Information required by other schedules has either been incorporated in the consolidated financial statements
and accompanying notes or is not applicable to us.
3. The following exhibits are filed with this Report or incorporated by reference:
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Restated Certificate of Incorporation of the Company, dated January 14, 2015-filed herewith.
Bylaws of the Company, as amended effective October 3, 2013-Incorporated by reference to Exhibit 3.6 of the
Company’s Current Report on Form 8-K, dated October 4, 2013.
Indenture, dated as of December 31, 1997, between Lennar Corporation and Bank One Trust Company, N.A.,
as trustee-Incorporated by reference to Exhibit 4 of the Company’s Registration Statement on Form S-3,
Registration No. 333-45527, filed with the Commission on February 3, 1998.
Indenture, dated April 28, 2005, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to
Lennar’s 5.60% Senior Notes due 2015)-Incorporated by reference to Exhibit 4.1 of the Company’s
Registration Statement on Form S-4, Registration No. 333-127839, filed with the Commission on August 25,
2005.
Indenture, dated April 26, 2006, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to
Lennar’s 6.50% Senior Notes due 2016)-Incorporated by reference to Exhibit 10.2 of the Company’s Current
Report on Form 8-K, dated April 26, 2006.
Indenture, dated April 30, 2009, between Lennar and The Bank of New York Mellon, as trustee (relating to
Lennar’s 12.25% Senior Notes due 2017)-Incorporated by reference to Exhibit 99.1 of the Company’s Current
Report on Form 8-K, dated April 30, 2009.
Indenture, dated May 4, 2010, between Lennar and The Bank of New York Mellon, as trustee (relating to
Lennar’s 6.95% Senior Notes due 2018)- Incorporated by reference to Exhibit 4.1 of the Company’s
Registration Statement on Form S-4, Registration No. 333-167622, filed with the Commission on June 18,
2010.
Indenture, dated November 10, 2010, between Lennar and The Bank of New York Mellon, as trustee (relating
to Lennar’s 2.75% Convertible Senior Notes due 2020)-Incorporated by reference to Exhibit 4.10 of the
Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2010.
Indenture, dated November 23, 2011, between Lennar and The Bank of New York Mellon, as trustee (relating
to Lennar’s 3.25% Convertible Senior Notes due 2021)-Incorporated by reference to Exhibit 4.1 of the
Company's Current Report on Form 8-K, dated February 1, 2012.
Indenture, dated July 20, 2012, between Lennar and The Bank of New York Mellon Trust Company, N.A., as
trustee (relating to Lennar’s 4.75% Senior Notes due 2017)-Incorporated by reference to Exhibit 4.1 of the
Company's Registration Statement on Form S-4, Registration No. 333-183755, filed with the Commission on
September 6, 2012.
141
4.9
4.10
4.11
4.12
Indenture, dated October 23, 2012, between Lennar and The Bank of New York Mellon Trust Company, N.A.,
as trustee (relating to Lennar’s 4.750% Senior Notes due 2022).
Indenture, dated February 4, 2013, between Lennar and The Bank of New York Mellon Trust Company, N.A.,
as trustee (relating to Lennar’s 4.125% Senior Notes due 2018)-Incorporated by reference to Exhibit 10.1 of
the Company's Current Report on Form 10-Q for the quarter ended February 28, 2013.
Eighth Supplemental Indenture, dated as of February 12, 2014, among Lennar Corporation, each of the
guarantors identified therein and The Bank of New York Mellon, as trustee, including the form of 4.50%
Senior Notes due 2019-Incorporated by reference to Exhibit 4.12 of the Company’s Current Report on Form 8-
K, dated February 13, 2014.
Ninth Supplemental Indenture, dated as of November 25, 2014, among Lennar Corporation, each of the
guarantors identified therein and The Bank of New York Mellon, as trustee, including the form of 4.50%
Senior Notes due 2019-Incorporated by reference to Exhibit 4.13 of the Company’s Current Report on Form 8-
K, dated November 25, 2014.
10.1* Lennar Corporation 2007 Equity Incentive Plan, as amended effective January 12, 2012-Incorporated by
reference to Exhibit 1 of the Company’s Proxy Statement on Schedule 14A dated March 2, 2012.
10.2* Lennar Corporation 2012 Incentive Compensation Plan-Incorporated by reference to Exhibit 2 of the
Company’s Proxy Statement on Schedule 14A dated March 2, 2012.
10.3*
Lennar Corporation Nonqualified Deferred Compensation Plan-Incorporated by reference to Exhibit 10 of the
Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2002.
10.4* Aircraft Time-Sharing Agreement, dated August 17, 2005, between U.S. Home Corporation and Stuart Miller-
Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated August 17,
2005.
10.5* Amendment No. 1 to Aircraft Time-Sharing Agreement, dated September 1, 2005, between U.S. Home
Corporation and Stuart Miller-Incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on
Form 10-K for the fiscal year ended November 30, 2005.
10.6* Amended and Restated Aircraft Dry Lease Agreement, dated December 1, 2008, between U.S. Home
Corporation and Stuart Miller-Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on
Form 8-K, dated February 18, 2009.
10.7 Membership Interest Purchase Agreement, dated as of November 30, 2007, by and among Lennar, Lennar
Homes of California, Inc., the Sellers named in the agreement and MS Rialto Residential Holdings, LLC.-
Incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-K for the fiscal year
ended November 30, 2007.
10.8* Aircraft Time-Sharing Agreement, dated January 26, 2011, between U.S. Home Corporation and Richard
Beckwitt -Incorporated by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K for the
fiscal year ended November 30, 2010.
10.9
Amended and Restated Credit Agreement, dated as of June 11, 2013, among Lennar Corporation, as borrower,
JPMorgan Chase Bank, N.A., as swingline lender, issuing lender, and administrative agent, the several lenders
from time to time parties thereto, and the other parties and agents thereto-Incorporated by reference to Exhibit
10.18 of the Company’s Current Report on Form 8-K, dated June 14, 2013.
10.10 Amended and Restated Guarantee Agreement, dated as of June 11, 2013, among certain of Lennar
Corporation’s subsidiaries in favor of guaranteed parties referred to therein-Incorporated by reference to
Exhibit 10.19 of the Company’s Current Report on Form 8-K, dated June 14, 2013.
10.11
10.12
10.13
Second Amended and Restated Credit Agreement, dated as of June 25, 2014, among Lennar Corporation, as
borrower, JPMorgan Chase Bank, N.A., as swingline lender, issuing lender, and administrative agent, the
several lenders from time to time parties thereto, and the other parties and agents thereto-Incorporated by
reference to Exhibit 10.21 of the Company’s Current Report on Form 8-K, dated June, 30, 2014.
Second Amended and Restated Guarantee Agreement, dated as of June 25, 2014, among certain of Lennar
Corporation’s subsidiaries in favor of guaranteed parties referred to therein -Incorporated by reference to
Exhibit 10.22 of the Company’s Current Report on Form 8-K, dated June, 30, 2014.
Indenture, dated November 14, 2013, among Rialto Holdings, LLC, Rialto Corporation, the Guarantors named
therein and Wells Fargo Bank, National Association, as trustee, including the form of 7.000% Senior Notes due
2018-Incorporated by reference to Exhibit 10.20 of the Company’s Current Report on Form 8-K, dated
November 14, 2013.
10.14 Master Repurchase Agreement, dated November 21, 2013, among JPMorgan Chase Bank, N.A., as a Buyer
and as Administrative Agent for the Buyers named from time to time thereunder, the Buyers party thereto, and
Universal American Mortgage Company of California and Universal American Mortgage Company, LLC, as
Sellers, as amended-filed herewith.
142
10.15 Amended and Restated Administration Agreement, dated as of December 20, 2014, by and among JPMorgan
Chase Bank, N.A., as a Buyer and as Administrative Agent for the Buyers named from time to time thereunder,
and Universal American Mortgage Company of California and Universal American Mortgage Company, LLC,
as Sellers-filed herewith.
10.16* 2013 Award Agreements for Stuart Miller, Rick Beckwitt, Jonathan Jaffe, Bruce Gross and Mark Sustana -
Incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K for the fiscal year
ended November 30, 2013.
10.17* 2014 Award Agreements for Stuart Miller, Rick Beckwitt, Jonathan Jaffe, Bruce Gross and Mark Sustana -
Incorporated by reference to Exhibit 10.20 of the Company’s Annual Report on Form 10-K for the fiscal year
ended November 30, 2013.
10.18* 2015 Award Agreements for Stuart Miller, Rick Beckwitt, Jonathan Jaffe, Bruce Gross and Mark Sustana -filed
21
23
31.1
31.2
32
101
herewith.
List of subsidiaries.
Consent of Independent Registered Public Accounting Firm.
Rule 13a-14a/15d-14(a) Certification of Stuart A. Miller.
Rule 13a-14a/15d-14(a) Certification of Bruce E. Gross.
Section 1350 Certifications of Stuart A. Miller and Bruce E. Gross.
The following financial statements from Lennar Corporation Annual Report on Form 10-K for the year ended
November 30, 2014, filed on January 23, 2015, formatted in XBRL (Extensible Business Reporting
Language); (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated
Statements of Cash Flows and (iv) the Notes to Consolidated Financial Statements (1).
* Management contract or compensatory plan or arrangement.
(1) In accordance with Rule 406T of Regulation S-T, the XBRL related to information in Exhibit 101 to this Annual
Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of Exchange Act, or otherwise
subject to the liability of that section, and shall not be part of any registration or other document filed under the
Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
143
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
LENNAR CORPORATION
/S/ STUART A. MILLER
Stuart A. Miller
Chief Executive Officer and Director
Date: January 23, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Principal Executive Officer:
Stuart A. Miller
/S/ STUART A. MILLER
Chief Executive Officer and Director
Date:
January 23, 2015
Principal Financial Officer:
Bruce E. Gross
Vice President and Chief Financial Officer
Date:
Principal Accounting Officer:
/S/ BRUCE E. GROSS
January 23, 2015
David M. Collins
Controller
Directors:
Irving Bolotin
Steven L. Gerard
Theron I. (“Tig”) Gilliam, Jr.
Sherrill W. Hudson
R. Kirk Landon
Sidney Lapidus
Teri McClure
Armando Olivera
Jeffrey Sonnenfeld
/S/ DAVID M. COLLINS
Date:
January 23, 2015
/S/ IRVING BOLOTIN
January 23, 2015
/S/ STEVEN L. GERARD
January 23, 2015
/s/ THERON I. (“TIG”) GILLIAM, JR.
January 23, 2015
/S/ SHERRILL W. HUDSON
January 23, 2015
/S/ R. KIRK LANDON
January 23, 2015
/S/ SIDNEY LAPIDUS
January 23, 2015
/S/ TERI MCCLURE
January 23, 2015
January 23, 2015
/S/ JEFFREY SONNENFELD
January 23, 2015
Date:
Date:
Date:
Date:
Date:
Date:
Date:
Date:
Date:
144
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Lennar Corporation
To the Board of Directors and Stockholders of Lennar Corporation
We have audited the consolidated financial statements of Lennar Corporation and subsidiaries (the “Company”) as of
We have audited the consolidated financial statements of Lennar Corporation and subsidiaries (the “Company”) as of
November 30, 2014 and 2013, and for each of the three years in the period ended November 30, 2014, and the
November 30, 2014 and 2013, and for each of the three years in the period ended November 30, 2014, and the
Company’s internal control over financial reporting as of November 30, 2014, and have issued our reports thereon dated
Company’s internal control over financial reporting as of November 30, 2014, and have issued our reports thereon dated
January 23, 2015; such consolidated financial statements and reports are included elsewhere in this Form 10-K. Our
January 23, 2015; such consolidated financial statements and reports are included elsewhere in this Form 10-K. Our
audits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated
audits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated
financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an
financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an
opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation
opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information
to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information
set forth therein.
set forth therein.
Certified Public Accountants
Certified Public Accountants
Miami, Florida
Miami, Florida
January 23, 2015
January 23, 2015
145
145
LENNAR CORPORATION AND SUBSIDIARIES
Schedule II—Valuation and Qualifying Accounts
Years Ended November 30, 2014, 2013 and 2012
Additions
Beginning
balance
Charged to costs
and expenses
Charged
(credited) to
other accounts
Deductions
Ending
balance
(In thousands)
Year ended November 30, 2014
Allowances deducted from assets to
which they apply:
Allowances for doubtful
accounts and notes and other
receivables . . . . . . . . . . . . . . . $
Allowance for loan losses and
Year ended November 30, 2013
Allowances deducted from assets to
which they apply:
Allowances for doubtful
accounts and notes and other
receivables . . . . . . . . . . . . . . . $
Allowance for loan losses and
Year ended November 30, 2012
Allowances deducted from assets to
which they apply:
Allowances for doubtful
accounts and notes and other
receivables . . . . . . . . . . . . . . . $
Allowance for loan losses and
3,067
207
loans receivable . . . . . . . . . . . $
24,687
57,207
Allowance against net deferred
tax assets . . . . . . . . . . . . . . . . . $
12,706
—
323
—
—
(340)
3,257
(19,790)
62,104
(4,677)
8,029
3,183
605
407
(1,128)
3,067
loans receivable . . . . . . . . . . . $
21,353
16,744
(167)
(13,243)
24,687
Allowance against net deferred
tax assets . . . . . . . . . . . . . . . . . $
88,794
—
—
(76,088)
12,706
3,376
558
(101)
(650)
3,183
loans receivable . . . . . . . . . . . $
6,868
28,828
52
(14,395)
21,353
Allowance against net deferred
tax assets . . . . . . . . . . . . . . . . . $
576,890
—
51,259
(539,355)
88,794
146
CHIEF EXECUTIVE OFFICER'S CERTIFICATION
CHIEF EXECUTIVE OFFICER'S CERTIFICATION
I, Stuart A. Miller, certify that:
I, Stuart A. Miller, certify that:
1. I have reviewed this annual report on Form 10-K of Lennar Corporation;
1. I have reviewed this annual report on Form 10-K of Lennar Corporation;
Exhibit 31.1
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its
to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that
d. Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
significant role in the registrant's internal control over financial reporting.
Date: January 23, 2015
Date: January 23, 2015
Name: Stuart A. Miller
Name: Stuart A. Miller
Title: Chief Executive Officer
Title: Chief Executive Officer
147
147
CHIEF FINANCIAL OFFICER'S CERTIFICATION
CHIEF FINANCIAL OFFICER'S CERTIFICATION
I, Bruce E. Gross, certify that:
I, Bruce E. Gross, certify that:
1. I have reviewed this annual report on Form 10-K of Lennar Corporation;
1. I have reviewed this annual report on Form 10-K of Lennar Corporation;
Exhibit 31.2
Exhibit 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its
to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that
d. Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
significant role in the registrant's internal control over financial reporting.
Date: January 23, 2015
Date: January 23, 2015
Name: Bruce E. Gross
Name: Bruce E. Gross
Title: Vice President and Chief Financial Officer
Title: Vice President and Chief Financial Officer
148
148
Officers' Section 1350 Certifications
Officers' Section 1350 Certifications
Officers' Section 1350 Certifications
Officers' Section 1350 Certifications
Each of the undersigned officers of Lennar Corporation, a Delaware corporation (the "Company"), hereby certifies
Each of the undersigned officers of Lennar Corporation, a Delaware corporation (the "Company"), hereby certifies
that (i) the Company's Annual Report on Form 10-K for the year ended November 30, 2014 fully complies with the
that (i) the Company's Annual Report on Form 10-K for the year ended November 30, 2014 fully complies with the
Each of the undersigned officers of Lennar Corporation, a Delaware corporation (the "Company"), hereby certifies
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the
Each of the undersigned officers of Lennar Corporation, a Delaware corporation (the "Company"), hereby certifies
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the
that (i) the Company's Annual Report on Form 10-K for the year ended November 30, 2014 fully complies with the
Company's Annual Report on Form 10-K for the year ended November 30, 2014 fairly presents, in all material respects,
Company's Annual Report on Form 10-K for the year ended November 30, 2014 fairly presents, in all material respects,
that (i) the Company's Annual Report on Form 10-K for the year ended November 30, 2014 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the
the financial condition and results of operations of the Company, at and for the periods indicated.
the financial condition and results of operations of the Company, at and for the periods indicated.
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the
Company's Annual Report on Form 10-K for the year ended November 30, 2014 fairly presents, in all material respects,
Company's Annual Report on Form 10-K for the year ended November 30, 2014 fairly presents, in all material respects,
the financial condition and results of operations of the Company, at and for the periods indicated.
the financial condition and results of operations of the Company, at and for the periods indicated.
Exhibit 32
Exhibit 32
Exhibit 32
Exhibit 32
Name: Stuart A. Miller
Name: Stuart A. Miller
Title: Chief Executive Officer
Title: Chief Executive Officer
Name: Stuart A. Miller
Name: Stuart A. Miller
Title: Chief Executive Officer
Title: Chief Executive Officer
Name: Bruce E. Gross
Name: Bruce E. Gross
Title: Vice President and Chief Financial Officer
Title: Vice President and Chief Financial Officer
Name: Bruce E. Gross
Name: Bruce E. Gross
Title: Vice President and Chief Financial Officer
Title: Vice President and Chief Financial Officer
Date: January 23, 2015
Date: January 23, 2015
Date: January 23, 2015
Date: January 23, 2015
149
149
149
149
LENNAR CORPORATION AND SUBSIDIARIES
STOCKHOLDER INFORMATION
Annual Meeting
The Annual Stockholders' Meeting will be
held at 11:00 a.m. on Wednesday, April 8, 2015
at Lennar Corporation,
700 Northwest 107th Avenue, Second Floor
Miami, Florida 33172
Registrar and Transfer Agent
Computershare Investor Services
P.O. Box 30170
College Station, Texas 77842
Listing
New York Stock Exchange (LEN, LEN.B)
Corporate Counsel
K&L Gates LLP
599 Lexington Avenue
New York, New York 10022
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
333 SE 2nd Avenue, Suite 3600
Miami, FL 33131