0000920760 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2017-08-31


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended AugustMay 31, 20182019
Commission File Number: 1-11749
 
Lennar Corporation
(Exact name of registrant as specified in its charter)
 
Delaware 95-4337490
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
700 Northwest 107th Avenue, Miami, Florida 33172
(Address of principal executive offices) (Zip Code)
(305) 559-4000
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $.10

LENNew York Stock Exchange
Class B Common Stock, par value $.10

LEN.BNew York Stock Exchange
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  ý    NO  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES  ý    NO  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerý Accelerated filer¨
Non-accelerated filer¨ Smaller reporting company¨
   Emerging growth company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  ý
Common stock outstanding as of AugustMay 31, 2018:2019:
Class A 292,540,824284,403,290
Class B 37,744,39437,743,090



Part I. Financial Information
Item 1. Financial Statements

Lennar Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
August 31, November 30,May 31, November 30,
2018 (1) 2017 (1)2019 (1) 2018 (1)
ASSETS      
Lennar Homebuilding:   
Homebuilding:   
Cash and cash equivalents$833,274
 2,282,925
$800,678
 1,337,807
Restricted cash11,741
 8,740
11,687
 12,399
Receivables, net170,658
 137,667
303,595
 236,841
Inventories:      
Finished homes and construction in progress9,414,846
 4,676,279
10,045,155
 8,681,357
Land and land under development7,825,385
 5,791,338
8,334,678
 8,178,388
Consolidated inventory not owned328,841
 393,273
394,655
 208,959
Total inventories17,569,072
 10,860,890
18,774,488
 17,068,704
Investments in unconsolidated entities997,488
 900,769
983,683
 870,201
Goodwill3,457,999
 136,566
3,442,359
 3,442,359
Other assets1,482,200
 863,404
1,202,965
 1,355,782
24,522,432
 15,190,961
25,519,455
 24,324,093
Lennar Financial Services2,042,024
 1,689,508
Rialto834,882
 1,153,840
Lennar Multifamily890,057
 710,725
Financial Services2,468,263
 2,778,910
Multifamily1,046,196
 874,219
Lennar Other549,150
 588,959
Total assets$28,289,395
 18,745,034
$29,583,064
 28,566,181
(1)
Under certain provisions of Accounting Standards Codification ("ASC") Topic 810, Consolidations, ("ASC 810") the Company is required to separately disclose on its condensed consolidated balance sheets the assets owned by consolidated variable interest entities ("VIEs") and liabilities of consolidated VIEs as to which neither Lennar Corporation, or any of its subsidiaries, has any obligations.
As of AugustMay 31, 2019, total assets include $1.4 billion related to consolidated VIEs of which $52.9 million is included in Homebuilding cash and cash equivalents, $103.3 million in Homebuilding receivables, net, $240.1 million in Homebuilding finished homes and construction in progress, $301.0 million in Homebuilding land and land under development, $394.7 million in Homebuilding consolidated inventory not owned, $4.1 million in Homebuilding investments in unconsolidated entities, $10.4 million in Homebuilding other assets, $187.2 million in Financial Services assets, $50.8 million in Multifamily assets and $7.2 million in Lennar Other assets.
As of November 30, 2018, total assets include $775.7$666.2 million related to consolidated VIEs of which $48.5$57.6 million is included in Lennar Homebuilding cash and cash equivalents, $1.0$0.2 million in Lennar Homebuilding receivables, net, $78.4$81.7 million in Lennar Homebuilding finished homes and construction in progress, $243.7$293.1 million in Lennar Homebuilding land and land under development, $328.8$209.0 million in Lennar Homebuilding consolidated inventory not owned, $4.5$3.8 million in Lennar Homebuilding investments in unconsolidated entities, $10.5 million in Lennar Homebuilding other assets $12.0 million in Rialto assets and $48.1$10.3 million in Lennar Multifamily assets.
As of November 30, 2017, total assets include $799.4 million related to consolidated VIEs of which $15.8 million is included in Lennar Homebuilding cash and cash equivalents, $0.2 million in Lennar Homebuilding receivables, net, $53.2 million in Lennar Homebuilding finished homes and construction in progress, $229.0 million in Lennar Homebuilding land and land under development, $393.3 million in Lennar Homebuilding consolidated inventory not owned, $4.6 million in Lennar Homebuilding investments in unconsolidated entities, $11.8 million in Lennar Homebuilding other assets, $48.8 million in Rialto assets and $42.7 million in Lennar MultifamilyOther assets.
Lennar Corporation and Subsidiaries
Condensed Consolidated Balance Sheets – (Continued)
(Dollars inIn thousands, except shares and per share amounts)
(unaudited)

August 31, November 30,May 31, November 30,
2018 (2) 2017 (2)2019 (2) 2018 (2)
LIABILITIES AND EQUITY      
Lennar Homebuilding:   
Homebuilding:   
Accounts payable$956,597
 604,953
$1,067,984
 1,154,782
Liabilities related to consolidated inventory not owned280,546
 380,720
346,287
 175,590
Senior notes and other debts payable9,407,987
 6,410,003
9,390,941
 8,543,868
Other liabilities1,837,282
 1,315,641
1,804,956
 1,902,658
12,482,412
 8,711,317
12,610,168
 11,776,898
Lennar Financial Services1,241,108
 1,177,814
Rialto297,129
 720,056
Lennar Multifamily152,566
 149,715
Financial Services1,481,006
 1,868,202
Multifamily215,316
 170,616
Lennar Other30,039
 67,508
Total liabilities14,173,215
 10,758,902
14,336,529
 13,883,224
Stockholders’ equity:      
Preferred stock—
 —
—
 —
Class A common stock of $0.10 par value; Authorized: August 31, 2018 - 400,000,000 and November 30, 2017 - 300,000,000 shares; Issued: August 31, 2018 - 294,978,478 shares and November 30, 2017 - 205,429,942 shares29,498
 20,543
Class B common stock of $0.10 par value; Authorized: August 31, 2018 and November 30, 2017 - 90,000,000 shares; Issued: August 31, 2018 - 39,442,093 shares and November 30, 2017 - 37,687,505 shares3,944
 3,769
Class A common stock of $0.10 par value; Authorized: May 31, 2019 and November 30, 2018 - 400,000,000 shares; Issued: May 31, 2019 - 295,034,256 shares and November 30, 2018 - 294,992,562 shares29,503
 29,499
Class B common stock of $0.10 par value; Authorized: May 31, 2019 and November 30, 2018 - 90,000,000 shares; Issued: May 31, 2019 - 39,442,649 shares and November 30, 2018 - 39,442,219 shares3,944
 3,944
Additional paid-in capital8,480,034
 3,142,013
8,529,828
 8,496,677
Retained earnings5,704,676
 4,840,978
7,132,908
 6,487,650
Treasury stock, at cost; August 31, 2018 - 2,437,654 shares of Class A common stock and 1,697,699 shares of Class B common stock; November 30, 2017 - 1,473,590 shares of Class A common stock and 1,679,650 shares of Class B common stock(185,521) (136,020)
Treasury stock, at cost; May 31, 2019 - 10,630,966 shares of Class A common stock and 1,699,559 shares of Class B common stock; November 30, 2018 - 8,498,203 shares of Class A common stock and 1,698,424 shares of Class B common stock(537,106) (435,869)
Accumulated other comprehensive income (loss)(615) 1,034
227
 (366)
Total stockholders’ equity14,032,016
 7,872,317
15,159,304
 14,581,535
Noncontrolling interests84,164
 113,815
87,231
 101,422
Total equity14,116,180
 7,986,132
15,246,535
 14,682,957
Total liabilities and equity$28,289,395
 18,745,034
$29,583,064
 28,566,181
(2)Under certain provisions of ASC 810, the Company is required to separately disclose on its condensed consolidated balance sheets the assets owned by consolidated variable interest entities ("VIEs")VIEs and liabilities of consolidated VIEs as to which neither Lennar Corporation, or any of its subsidiaries, has any obligations.
As of AugustMay 31, 2018,2019, total liabilities include $345.3$928.9 million related to consolidated VIEs as to which there was no recourse against the Company, of which $6.1$17.3 million is included in Lennar Homebuilding accounts payable, $48.9$370.7 million in Lennar Homebuilding senior notes and other debts payable, $280.5$346.3 million in Lennar Homebuilding liabilities related to consolidated inventory not owned, $8.8$1.7 million in Homebuilding other liabilities, $190.6 million in Financial Services liabilities, $1.0 million in Multifamily liabilities and $1.3 million in Lennar Homebuilding other liabilities and $0.9 million in RialtoOther liabilities.
As of November 30, 2017,2018, total liabilities include $389.7$242.5 million related to consolidated VIEs as to which there was no recourse against the Company, of which $5.0$11.4 million is included in Lennar Homebuilding accounts payable, $380.7$51.9 million in LennarHomebuilding senior notes and other debt payable, $175.6 million in Homebuilding liabilities related to consolidated inventory not owned, $1.8$2.6 million in Lennar Homebuilding other liabilities and $2.2$1.0 million in RialtoLennar Other liabilities.
Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Dollars in thousands, except per share amounts)
(unaudited)


 Three Months Ended Nine Months Ended
 August 31, August 31,
 2018 2017 2018 2017
Revenues:       
Lennar Homebuilding$5,285,742
 2,885,195
 13,011,832
 7,789,630
Lennar Financial Services236,268
 215,056
 639,543
 571,462
Rialto49,495
 57,810
 149,033
 207,804
Lennar Multifamily101,064
 103,415
 312,013
 291,900
Total revenues5,672,569
 3,261,476
 14,112,421
 8,860,796
Costs and expenses:       
Lennar Homebuilding4,671,224
 2,492,065
 11,711,298
 6,829,109
Lennar Financial Services179,640
 165,999
 510,838
 458,014
Rialto39,435
 49,503
 120,784
 175,492
Lennar Multifamily103,187
 105,956
 317,572
 301,303
Acquisition and integration costs related to CalAtlantic11,992
 —
 140,062
 —
Corporate general and administrative96,346
 72,860
 249,071
 200,333
Total costs and expenses5,101,824
 2,886,383
 13,049,625
 7,964,251
Lennar Homebuilding equity in loss from unconsolidated entities(15,391) (9,651) (41,904) (42,691)
Lennar Homebuilding other income, net12,910
 2,797
 192,662
 12,364
Lennar Homebuilding loss due to litigation—
 —
 —
 (140,000)
Rialto equity in earnings from unconsolidated entities5,266
 4,858
 18,496
 11,310
Rialto other expense, net(5,882) (16,357) (21,187) (54,119)
Lennar Multifamily equity in earnings (loss) from unconsolidated entities(1,730) 11,645
 15,293
 44,219
Earnings before income taxes565,918
 368,385
 1,226,156
 727,628
Provision for income taxes (1)(98,298) (124,795) (306,870) (253,656)
Net earnings (including net earnings (loss) attributable to noncontrolling interests)467,620
 243,590
 919,286
 473,972
Less: Net earnings (loss) attributable to noncontrolling interests14,409
 (5,575) 19,603
 (26,918)
Net earnings attributable to Lennar$453,211
 249,165
 899,683
 500,890
Other comprehensive income (loss), net of tax:       
Net unrealized gain (loss) on securities available-for-sale$(110) 165
 (1,357) 1,556
Reclassification adjustments for (gains) losses included in earnings, net of tax(166) —
 (292) 4
Total other comprehensive income (loss), net of tax$(276) 165
 (1,649) 1,560
Total comprehensive income attributable to Lennar$452,935
 249,330
 898,034
 502,450
Total comprehensive income (loss) attributable to noncontrolling interests$14,409
 (5,575) 19,603
 (26,918)
Basic earnings per share (2)$1.37
 1.04
 2.95
 2.09
Diluted earnings per share (2)$1.37
 1.04
 2.94
 2.09
Cash dividends per each Class A and Class B common share$0.04
 0.04
 0.12
 0.12
 Three Months Ended Six Months Ended
 May 31, May 31,
 2019 2018 2019 2018
Revenues:       
Homebuilding$5,195,599
 5,063,997
 8,819,320
 7,726,090
Financial Services204,216
 249,709
 347,527
 445,796
Multifamily147,412
 117,693
 244,806
 210,949
Lennar Other15,663
 27,662
 19,319
 57,017
Total revenues5,562,890
 5,459,061
 9,430,972
 8,439,852
Costs and expenses:       
Homebuilding4,587,259
 4,636,063
 7,826,094
 7,040,096
Financial Services147,999
 193,935
 272,338
 364,160
Multifamily148,716
 117,186
 249,894
 214,385
Lennar Other3,194
 21,758
 4,816
 48,365
Acquisition and integration costs related to CalAtlantic—
 23,875
 —
 128,070
Corporate general and administrative76,113
 84,915
 155,456
 152,725
Total costs and expenses4,963,281
 5,077,732
 8,508,598
 7,947,801
Homebuilding equity in earnings (loss) from unconsolidated entities19,614
 (12,670) 5,858
 (26,798)
Homebuilding other income (expense), net (1)(46,165) 9,879
 (47,700) 179,874
Multifamily equity in earnings (loss) from unconsolidated entities and other gain(3,018) 14,281
 7,563
 17,023
Lennar Other equity in earnings (loss) from unconsolidated entities(4,978) 4,560
 3,352
 13,515
Lennar Other expense, net(5,663) (6,569) (12,924) (15,427)
Earnings before income taxes559,399
 390,810
 878,523
 660,238
Provision for income taxes (2)(140,530) (75,961) (220,230) (208,572)
Net earnings (including net earnings (loss) attributable to noncontrolling interests)418,869
 314,849
 658,293
 451,666
Less: Net earnings (loss) attributable to noncontrolling interests(2,603) 4,592
 (3,089) 5,194
Net earnings attributable to Lennar$421,472
 310,257
 661,382
 446,472
Other comprehensive income (loss), net of tax:       
Net unrealized gain (loss) on securities available-for-sale$561
 (589) 769
 (1,247)
Reclassification adjustments for gains included in earnings, net of tax(176) (126) (176) (126)
Total other comprehensive income (loss), net of tax$385
 (715) 593
 (1,373)
Total comprehensive income attributable to Lennar$421,857
 309,542
 661,975
 445,099
Total comprehensive income (loss) attributable to noncontrolling interests$(2,603) 4,592
 (3,089) 5,194
Basic earnings per share$1.31
 0.95
 2.05
 1.53
Diluted earnings per share$1.30
 0.94
 2.03
 1.52

(1)Homebuilding other expense, net for the three and six months ended May 31, 2019 includes a one-time loss of $48.9 million relating to the consolidation of a previously unconsolidated entity.
(2)Provision for income taxes for the ninesix months ended AugustMay 31, 2018 includes a non-cash one-time write down of deferred tax assets of $68.6 million resulting from the Tax Cuts and Jobs Act enacted in December 2017.
(2)Basic and diluted average shares outstanding and earnings per share calculations for the three and nine months ended August 31, 2017 have been adjusted to reflect 4.7 million of Class B shares distributed in the stock dividend on November 27, 2017.



Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)


Nine Months EndedSix Months Ended
August 31,May 31,
2018 20172019 2018
Cash flows from operating activities:      
Net earnings (including net earnings (loss) attributable to noncontrolling interests)$919,286
 473,972
$658,293
 451,666
Adjustments to reconcile net earnings to net cash provided by operating activities:   
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:   
Depreciation and amortization66,714
 46,907
40,986
 41,430
Amortization of discount/premium and accretion on debt, net(17,750) 7,079
(13,335) (11,984)
Equity in loss (earnings) from unconsolidated entities8,115
 (12,838)
Equity in loss from unconsolidated entities(5,908) (3,740)
Distributions of earnings from unconsolidated entities90,431
 59,927
4,037
 18,685
Share-based compensation expense55,638
 43,303
31,390
 33,720
Excess tax benefits from share-based awards—
 (1,980)
Deferred income tax (benefit) expense188,132
 (4,027)
Deferred income tax expense101,477
 46,895
Gain on sale of operating properties and equipment(5,107) —
—
 (5,107)
Gain on sale of interest in unconsolidated entity(164,880) —
Gain on sale of other assets(218) —
Loss on consolidation of previously unconsolidated entity48,874
 —
Gain on sale of interest in unconsolidated entities and other Multifamily gain(10,865) (164,880)
Gain on sale of Financial Services' businesses(2,168) —
Unrealized and realized gains on real estate owned(2,912) (5,064)(1,253) (1,770)
Impairments of loans receivable, loans held-for-sale and real estate owned8,526
 60,237
—
 6,009
Valuation adjustments and write-offs of option deposits and pre-acquisition costs40,531
 13,462
10,602
 25,807
Changes in assets and liabilities:      
Decrease in restricted cash22,254
 9,321
(Increase) decrease in receivables(13,341) 325,375
Decrease in receivables542,054
 44,248
Increase in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs(725,016) (902,585)(1,501,423) (408,913)
Increase in other assets(193,835) (47,160)
Decrease in loans held-for-sale130,528
 118,930
Increase in accounts payable and other liabilities341,357
 142,854
Net cash provided by operating activities748,671
 327,713
Decrease (increase) in other assets66,464
 (119,698)
Increase in loans held-for-sale(206,349) (43,903)
Increase (decrease) in accounts payable and other liabilities(192,548) 111,049
Net cash (used in) provided by operating activities(429,890) 19,514
Cash flows from investing activities:      
Net additions of operating properties and equipment(81,493) (67,107)(47,766) (58,935)
Proceeds from the sale of operating properties and equipment22,820
 —
—
 22,820
Proceeds from sale of investment in unconsolidated entity199,654
 —
Proceeds from sale of investment in unconsolidated entities17,790
 175,179
Proceeds from sale of Financial Services' businesses24,446
 —
Investments in and contributions to unconsolidated entities(302,333) (381,209)(230,744) (186,103)
Distributions of capital from unconsolidated entities227,754
 123,209
140,888
 196,073
Proceeds from sales of real estate owned28,697
 72,952
4,210
 21,658
Receipts of principal payment on loans held-for-sale—
 5,937
Receipts of principal payments on loans receivable and other3,271
 73,948
1,811
 2,147
Originations of loans receivable—
 (57,375)
Purchases of commercial mortgage-backed securities bonds(31,068) (70,187)—
 (31,068)
Acquisitions, net of cash acquired(1,103,338) (611,399)
Increase in Lennar Financial Services loans held-for-investment, net(2,062) (7,862)
Purchases of Lennar Financial Services investment securities(39,531) (38,733)
Proceeds from maturities/sales of Lennar Financial Services investments securities34,221
 25,039
Decrease (increase) in restricted cash for investments10,825
 (23,750)
Acquisitions, net of cash and restricted cash acquired—
 (1,077,964)
Increase in Financial Services loans held-for-investment, net(5,975) (3,012)
Purchases of investment securities(31,462) (32,369)
Proceeds from maturities/sales of investments securities35,416
 20,578
Other payments, net(459) (1,014)(200) (318)
Net cash used in investing activities$(1,033,042) (957,551)$(91,586) (951,314)





Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)



Nine Months EndedSix Months Ended
August 31,May 31,
2018 20172019 2018
Cash flows from financing activities:      
Net borrowings under revolving lines of credit$195,300
 —
$550,000
 495,300
Net repayments under warehouse facilities(100,963) (397,760)
Proceeds from senior notes—
 1,250,000
Debt issuance costs(12,459) (16,697)
Redemption of senior notes(825,000) (658,595)
Conversions and exchanges on convertible senior notes(59,145) —
Proceeds from Rialto notes payable32,226
 63,494
Principal payments on Rialto senior notes and other notes payable(350,770) (18,944)
Net (repayments) borrowings under warehouse facilities(365,184) 7,710
Proceeds from other borrowings38,096
 75,927
28,620
 64,072
Principal payments on other borrowings(85,265) (55,295)(123,681) (410,549)
Payments related to other liabilities(3,200) —
(1,046) (1,568)
Receipts related to noncontrolling interests4,008
 10,299
8,937
 3,882
Conversions, exchanges and redemption of convertible senior notes(1,288) (59,145)
Payments related to noncontrolling interests(68,627) (61,782)(23,317) (30,412)
Excess tax benefits from share-based awards—
 1,980
Debt issuance costs—
 (12,101)
Redemption of senior notes—
 (575,000)
Common stock:      
Issuances3,189
 693
634
 3,184
Repurchases(49,490) (27,104)(101,229) (28,526)
Dividends(35,985) (28,181)(25,877) (22,780)
Net cash provided by (used in) financing activities(1,318,085) 138,035
Net decrease in cash and cash equivalents(1,602,456) (491,803)
Cash and cash equivalents at beginning of period2,650,872
 1,329,529
Cash and cash equivalents at end of period$1,048,416
 837,726
Summary of cash and cash equivalents:   
Lennar Homebuilding$833,274
 564,591
Lennar Financial Services165,051
 115,016
Rialto36,343
 154,814
Lennar Multifamily13,748
 3,305
Net cash used in financing activities$(53,431) (565,933)
Net decrease in cash and cash equivalents and restricted cash(574,907) (1,497,733)
Cash and cash equivalents and restricted cash at beginning of period1,595,978
 2,694,084
Cash and cash equivalents and restricted cash at end of period$1,021,071
 1,196,351
Summary of cash and cash equivalents and restricted cash:   
Homebuilding$812,365
 949,262
Financial Services186,760
 175,884
Multifamily5,203
 15,380
Lennar Other16,743
 55,825
$1,048,416
 837,726
$1,021,071
 1,196,351
Supplemental disclosures of non-cash investing and financing activities:      
Lennar Homebuilding and Lennar Multifamily:   
Homebuilding and Multifamily:   
Purchases of inventories and other assets financed by sellers$46,631
 45,078
Non-cash contributions to unconsolidated entities$91,709
 62,659
$—
 87,269
Purchases of inventories and other assets financed by sellers$52,356
 108,726
Conversions and exchanges on convertible senior notes$217,154
 —
$—
 217,154
Equity component of acquisition consideration$5,070,006
 —
$—
 5,070,006
Consolidation/deconsolidation of unconsolidated/consolidated entities, net:      
Inventories$35,430
 —
$187,506
 35,430
Receivables$7,198
 —
$102,959
 7,198
Operating properties and equipment and other assets$53,412
 —
Investments in unconsolidated entities$(25,614) —
$67,925
 (25,614)
Notes payable$(383,212) —
Other liabilities$(17,014) —
$(19,696) (17,014)
Noncontrolling interests$(8,894) —


Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1)Basis of Presentation
Basis of Consolidation
The accompanying condensed 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 VIEsvariable interest entities ("VIEs") (see Note 16)16 of the Notes to the Condensed Consolidated Financial Statements) in which Lennar Corporation is deemed to be 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. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended November 30, 2017.2018. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the accompanying condensed consolidated financial statements have been made.
The Company has historically experienced, and expects to continue to experience, variability in quarterly results. The condensed consolidated statements of operations for the three and ninesix months ended AugustMay 31, 20182019 are not necessarily indicative of the results to be expected for the full year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Reclassifications/RevisionsRecently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("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 requires 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 became effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. Subsequent to the issuance of ASU 2014-09, the FASB has issued several ASUs such as ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients , and ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, among others. These ASUs do not change the core principle of the guidance stated in ASU 2014-09, instead these amendments are intended to clarify and improve operability of certain topics included within the revenue standard. These ASUs had the same effective date and transition requirements as ASU 2014-09. The Company has adopted the modified retrospective method. The Company recorded an immaterial net increase to retained earnings as of December 1, 2018, due to the cumulative impact of adopting ASU 2014-09, with the impact primarily related to the recognition of deferral of net margin from home deliveries.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows , including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. ASU 2016-15 was effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2016-15 did not have a material effect on the Company’s consolidated financial statements.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


The Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, effective December 1, 2018. The amendments in the standard require that the statement of cash flows explain the change during the period in the total of cash and cash equivalents and restricted cash. As a result, the Company's beginning-of-period and end-of-period cash balances presented in the condensed consolidated statements of cash flows were retrospectively adjusted to include restricted cash with cash and cash equivalents. In accordance with Securities and Exchange Commission ("SEC") Final Rule Release No. 33-10532, Disclosure Update and Simplification, the Company removed the presentation of cash dividends per each Class A and Class B common share from the accompanying condensed consolidated statements of operations and comprehensive income (loss). This is now disclosed with the analysis of changes in stockholders' equity within Note 5 of the Notes to the Condensed Consolidated Financial Statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities have to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820, Fair Value Measurements, and as such, these investments may be measured at cost. ASU 2016-01 was effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2016-01 did not have a material impact on the Company’s condensed consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017- 01 clarifies the definition of a business with the objective of addressing whether transactions involving in-substance nonfinancial assets, held directly or in a subsidiary, should be accounted for as acquisitions or disposals of nonfinancial assets or of businesses. ASU 2017-01 was effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2017-01 did not have a material impact on the Company’s condensed consolidated financial statements.
Revenue Recognition
Homebuilding revenues and related profits from sales of homes are recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the homebuyer. The Company’s performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date. Cash proceeds from home closings held in escrow for the Company’s benefit, typically for approximately three days, are included in Homebuilding cash and cash equivalents in the Condensed Consolidated Balance Sheets and disclosed in Note 11 of the Notes to the Condensed Consolidated Financial Statements. Contract liabilities include customer deposits liabilities related to sold but undelivered homes that are included in other liabilities in the Condensed Consolidated Balance Sheets. The Company periodically elects to sell parcels of land to third parties. Cash consideration from land sales is typically due on the closing date, which is generally when performance obligations are satisfied and revenue is recognized as title to and possession of the property are transferred to the buyer.
The Company’s financial services’ operations recognize revenues as follows: Title premiums on policies issued directly by the Company are recognized as revenue on the effective date of the title policies. 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.
The Company’s Multifamily segment provides management services with respect to the development, construction and property management of rental projects in joint ventures in which the Company has investments. As a result, the Multifamily segment earns and receives fees, which are generally based upon a stated percentage of development and construction costs and a percentage of gross rental collections. These fees are recorded over the period in which the services are performed using an input method, which properly depicts the level of effort required to complete the management services. In addition, the 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 using an input method, which properly depicts the level of effort required to complete the construction services. These customer contracts require the Company to provide management and general contractor services which represents a performance obligation that the Company satisfies over time. Management fees and general contractor services in the Multifamily segment are included in Multifamily revenue.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


Reclassifications
Certain prior year amounts in the condensed consolidated financial statements have been reclassified to conform with the 20182019 presentation. The Company's segments were adjusted to reflect Rialto Mortgage Finance ("RMF") and certain other Rialto assets within the Financial Services segment effective December 1, 2018. The remaining assets retained related to the Company's former Rialto segment were included in the Lennar Other segment. In addition, the Company's strategic technology investments, which were part of Homebuilding, were reclassified to be included in the Lennar Other segment. These reclassifications were between segments and had no impact on the Company's total assets, total equity, revenue or net income in the condensed consolidated financial statements.

(2)Business Acquisitions
Acquisition of CalAtlantic Group, Inc.
On February 12, 2018, the Company completed the acquisition of CalAtlantic Group, Inc. (“CalAtlantic”) through a transaction in which CalAtlantic was merged with and into a wholly-owned subsidiary of the Company (“Merger Sub”), with Merger Sub continuing as the surviving corporation and a wholly-owned subsidiary of the Company (the “Merger”). CalAtlantic was a homebuilder which built homes across the homebuilding spectrum, from entry level to luxury, in 43 metropolitan statistical areas spanning 19 states. CalAtlantic also provided mortgage, title and escrow services. A primary reason for the acquisition was to increase local market concentration in order to generate synergies and efficiencies.
Based on an evaluation of the provisions of ASC Topic 805, Business Combinations, ("ASC 805"), Lennar Corporation was determined to be the acquirer for accounting purposes. The purchase price accounting reflected in the accompanying financial statements is provisional and is based upon estimates and assumptions that are subject to change within the measurement period (up to one year from the acquisition date pursuant to ASC 805). The measurement period remains open pending the completion of valuation procedures related to the acquired assets and assumed liabilities. The $3.3 billion provisional amount allocated to Homebuilding goodwill in Lennar Homebuilding and the provisional amount of $169$175 million allocated to goodwill in Lennar Financial Services goodwill is final and represents the excess of the purchase price over the estimated fair value of assets acquired and liabilities assumed.

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)






The following table summarizes the purchase price allocation based on the estimated fair value of net assets acquired and liabilities assumed at the date of acquisition:
(Dollars in thousands) 
CalAtlantic shares of common stock outstanding118,025,879
CalAtlantic shares electing cash conversion24,083,091
CalAtlantic shares exchanged93,942,788
Exchange ratio for Class A common stock0.885
Exchange ratio for Class B common stock0.0177
Number of shares of Lennar Class A common stock issued in exchange83,138,277
Number of shares of Lennar Class B common stock issued in exchange (due to Class B common stock dividend)1,662,172
  
Consideration attributable to Class A common stock$4,933,425
Consideration attributable to Class B common stock77,823
Consideration attributable to equity awards that convert upon change of control58,758
Consideration attributable to cash including fractional shares1,162,341
Total purchase price$6,232,347

(In thousands)  
ASSETS  
Homebuilding:  
Cash and cash equivalents, restricted cash and receivables, net$55,612
$55,191
Inventories6,243,846
6,239,147
Intangible asset (1)8,000
8,000
Investments in unconsolidated entities151,900
151,900
Goodwill (2)3,321,433
3,305,792
Other assets608,705
561,151
Total Homebuilding assets10,389,496
10,321,181
Financial Services (2)346,503
355,128
Total assets10,735,999
10,676,309
LIABILITIES  
Homebuilding:  
Accounts payable85,448
306
Senior notes payable and other debts3,922,695
3,926,152
Other liabilities (3)361,286
374,656
Total Homebuilding liabilities4,369,429
4,301,114
Financial Services115,793
124,418
Total liabilities4,485,222
4,425,532
Noncontrolling interests (4)18,430
18,430
Total purchase price$6,232,347
$6,232,347
(1)Intangible asset includes trade name. The amortization period for the trade name is approximatelywas six months.
(2)Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, and it is generally not deductible for income tax purposes. As of the mergerMerger date, goodwill consisted primarily of expected greater efficiencies and opportunities due to increased concentration of local market share, reduced general and administrative costs and reduced homebuilding costs resulting from the merger and cost savings as a result of additional homebuilding and non-homebuilding synergies. The assignmentallocation of goodwill among the Company's reporting segments has not been completed yet, however, a provisional amount of goodwill of approximately $169included $1.1 billion to Homebuilding East, $495.0 million was allocated to LennarHomebuilding Central, $342.2 million to Homebuilding Texas, $1.4 billion to Homebuilding West, and $175.4 million to Financial Services.
(3)
Other liabilities includes contingencies assumed at the Merger date, which includes warranty and legal reserves. Warranty 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. Warranty reserves are determined based on historical data and trends with respect to similar product types and geographical areas. Consistent with ASC 450, Contingencies, legal reserves are established when a loss is considered probable and the amount of loss can be reasonably estimated.


established when a loss is considered probable and the amount of loss can be reasonably estimated.
(4)Fair value of noncontrolling interests was measured using discounted cash flows of expected future contributions and distributions.
For
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


Homebuilding revenue and net earnings attributable to Lennar for the three and ninesix months ended AugustMay 31, 2018 Lennar Homebuilding revenue included $2.2$2.1 billion and $4.7$2.5 billion, respectively, of home sales revenues, and earnings (loss) before income taxes included $209.3$56.5 million and $157.3($52.0) million, respectively, of a pre-tax earnings (loss) from CalAtlantic since the date of acquisition, which included acquisition and integration costs of $12.0$23.9 million and $140.1$128.1 million, respectively. These acquisition and integration costs were comprised mainly of severancetransaction expenses and transaction costs and were included within the acquisition and integration costs related to CalAtlantic line item in the accompanying condensed consolidated statement of operations for the three and ninesix months ended AugustMay 31, 2018.
The following presents summarized unaudited supplemental pro forma operating results as if CalAtlantic had been included in the Company's Consolidated Statements of Operations beginning December 1, 2016.
 Three Months Ended Nine Months Ended
 August 31, August 31,
(Dollars in thousands, except per share amounts)2018 2017 2018 2017
Revenues from home sales$5,223,787
 4,491,338
 14,404,000
 12,599,040
Net earnings (1)$453,211
 345,760
 897,178
 822,787
Earnings per share:       
Basic$1.37
 1.06
 2.75
 2.52
Diluted$1.37
 1.05
 2.74
 2.50

(1)Net earnings for the three and nine months ended August 31, 2018 include a pre-tax impact from acquisition and integration costs related to CalAtlantic of $12.0 million and $140.1 million, respectively. Additionally, net earnings for the three and nine months ended August 31, 2018 include purchase accounting adjustments of $84.2 million and $376.0 million, respectively, on CalAtlantic homes that were in backlog/construction in progress at the acquisition date that were subsequently delivered.
The supplemental pro forma operating results have been determined after adjusting the operating results of CalAtlantic to reflect additional amortization that would have been recorded assuming the fair value adjustment to intangible assets had been applied beginning December 1, 2016. Certain other adjustments, including those related to conforming accounting policies and adjusting acquired inventory to fair value, have not been reflected in the supplemental pro forma operating results due to the impracticability of estimating their impacts.
Acquisition of WCI Communities, Inc. in February 2017
On February 10, 2017, the Company acquired WCI Communities, Inc. ("WCI"), a homebuilder of luxury single and multifamily homes, including a small percentage of luxury high-rise tower units, with operations in Florida. WCI stockholders received $642.6 million in cash. The cash consideration was funded primarily from working capital and proceeds from the issuance of 4.125% senior notes due 2022 (see Note 12).
Based on an evaluation of the provisions of ASC 805, Lennar Corporation was determined to be the acquirer for accounting purposes. The following table summarizes the purchase price allocation based on the estimated fair value of net assets acquired and liabilities assumed at the date of acquisition:


(In thousands) 
ASSETS 
Cash and cash equivalents, restricted cash and receivables, net$42,079
Inventories613,495
Intangible assets (1)59,283
Goodwill (2)156,566
Deferred tax assets, net88,147
Other assets66,173
Total assets1,025,743
LIABILITIES 
Accounts payable26,735
Senior notes and other debts payable282,793
Other liabilities73,593
Total liabilities383,121
Total purchase price$642,622
(1)Intangible assets include non-compete agreements and a trade name. The amortization period for these intangible assets was six months for the non-compete agreements and 20 years for the trade name.
(2)
Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, and it is not deductible for income tax purposes. As of the merger date, goodwill consisted primarily of purchasing and other synergies resulting from the merger, expected production, savings in corporate and division overhead costs and expected expanded opportunities for growth through a higher-end more luxurious product, greater presence in the state of Florida and customer diversity. The amount of goodwill allocated to the Company's Homebuilding East segment was $136.6 million and to the Lennar Financial Services segment was $20.0 million. These amounts were based on the relative fair value of each acquired reporting unit in accordance with ASC 350, Intangibles-Goodwill and Other.
For the three and nine months ended August 31, 2017, Lennar Homebuilding revenues included $149.6 million and $351.9 million, respectively, of home sales revenues from WCI and earnings before income taxes included $20.0 million and $33.2 million, respectively, of pre-tax earnings from WCI since the date of acquisition, which included transaction-related expenses of $6.9 million and $25.9 million, respectively, comprised mainly of severance costs, general and administrative expenses, and amortization expense related to non-compete agreements and trade name since the date of acquisition. These transaction expenses were included primarily within Lennar Homebuilding selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three and nine months ended August 31, 2017. The pro forma effect of the acquisition on the results of operations is not presented as this acquisition was not considered material.

(3)Operating and Reporting Segments
The Company's homebuilding operations construct and sell homes primarily for first-time, move-up and active adult homebuyers primarily under the Lennar brand name. In addition, the Company's homebuilding operations purchase, develop and sell land to third parties. In connection with the CalAtlantic acquisition, the Company experienced significant growth in its operations. As a result, in 2018, the Company's chief operating decision makers ("CODM") reassessed how they evaluate the business and allocate resources. The CODM manage and assess the Company’s performance at a regional level. Therefore, in 2018 the Company performed an assessment of its operating segments in accordance with ASC 280, Segment Reporting, (“ASC 280”) and determined that each of its four homebuilding regions, financial services operations, multifamily operations and Rialto operations are its operating segments. Prior to this change, in accordance with the aggregation criteria defined in ASC 280, the Company’s operating segments arewere aggregated into reportable segments, based primarily upon similar economic characteristics, geography and product type. In addition, in the first quarter of 2019, as a result of the reclassification of RMF and certain other Rialto assets from the Rialto segment to the Financial Services segment effective December 1, 2018, the Company has renamed the Rialto segment as "Lennar Other" and included in this segment certain strategic technology investments, which were reclassified from Homebuilding to Lennar Other. Prior periods have been reclassified to conform with the 2019 presentation. The Company’s reportable segments consist of:
(1) Homebuilding East
(2) Homebuilding Central
(3) Homebuilding WestTexas
(4) LennarHomebuilding West
(5) Financial Services
(5) Rialto(6) Multifamily
(6)(7) Lennar MultifamilyOther
Information about homebuilding activities in states which are not economically similar to other states in the same geographic area is grouped under "Homebuilding Other," which is not considered a reportable segment.
Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes. Operations of the Company’s homebuildingHomebuilding 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 homebuildingHomebuilding segments consist of revenues generated from the sales of homes and land, other revenues from management fees and forfeited deposits, equity in earnings (loss) from unconsolidated entities and other income (expense), net, less the cost of homes sold and land sold, and selling, general and administrative expenses incurred by the segment and loss due to litigation.


segment.
The Company’s reportable homebuildingHomebuilding segments and all other homebuilding operations not required to be reported separately have homebuilding divisions located in:
East: Florida, Georgia, Maryland, New Jersey, North Carolina and South Carolina
Central: Georgia, Illinois, Indiana, Maryland, Minnesota and Virginia
Central:Texas: Arizona, Colorado and Texas
West: Arizona, California, Colorado, Nevada, Oregon, Utah and NevadaWashington
Other: Illinois, Indiana, Minnesota, Oregon, Tennessee, UtahUrban divisions and Washingtonother homebuilding related investments primarily in California, including FivePoint Holdings, LLC ("FivePoint")
Operations of the Lennar Financial Services segment include primarily mortgage financing, title insurance,and closing services and property and casualty insuranceprimarily for both buyers of the Company’s homes and others.homes. It also includes a real estate brokerage business acquired as part of the WCI transaction.originating and selling into securitizations commercial mortgage loans through its RMF business. The Lennar Financial Services segment sells substantially all of the loans it originates within a short period of time 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, and property and casualty insurance, closing services and real estate brokerage, 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
Lennar Corporation 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 platformSubsidiaries
Notes to underwrite, due diligence, acquire, manage, workout and add value to diverse portfolios of real estate loans, properties and real estate related securities as well as providing strategic real estate capital. Rialto’s operating earnings (loss) consist of revenues generated primarily from gains from securitization transactions and interest income from the Rialto Mortgage Finance ("RMF") business, interest income associated with portfolios of real estate loans acquired and other portfolios of real estate loans and assets acquired, asset management, due diligence and underwriting fees derived from the real estate investment funds managed by the Rialto segment, fees for sub-advisory services, other income (expense), net and equity in earnings (loss) from unconsolidated entities, less the costs incurred by the segment for managing portfolios, costs related to RMF and other general and administrative expenses.Condensed Consolidated Financial Statements (unaudited) - (Continued)


Operations of the Lennar Multifamily segment include revenues generated from the sales of land, revenue from construction activities, and management and promote fees generated from joint ventures and equity in earnings (loss) from unconsolidated entities and other gains (which includes sales of buildings), less the cost of sales of land sold, expenses related to construction activities and general and administrative expenses.
Operations of the Lennar Other segment include operating earnings (loss) consisting of revenues generated primarily from the Company's share of carried interests in the Rialto fund investments retained after the sale of Rialto's asset and investment management platform, along with equity in earnings (loss) from the Rialto fund investments and strategic technology investments, and other income (expense), net from the remaining assets related to the Company's former Rialto segment.
Each reportable segment follows the same accounting policies described in Note 1 – "Summary of Significant Accounting Policies" to the consolidated financial statements in the Company’s Form 10-K for the year ended November 30, 2017. Operational2018, except that as a result of the adoption of ASC 606 as of December 1, 2018, the Company updated its revenue recognition policies as noted in Note 1 of the Notes to the Condensed Consolidated Financial Statements. The Company's 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.
Financial information relating to the Company’s operations was as follows:
(In thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Assets:      
Homebuilding East$7,455,782
 4,754,581
$6,987,845
 7,183,758
Homebuilding Central3,414,907
 2,037,905
2,782,430
 2,522,799
Homebuilding Texas2,449,590
 2,311,760
Homebuilding West7,812,183
 5,165,218
10,954,282
 10,291,385
Homebuilding Other1,726,472
 960,541
1,238,115
 1,013,367
Lennar Financial Services2,042,024
 1,689,508
Rialto834,882
 1,153,840
Lennar Multifamily890,057
 710,725
Corporate and unallocated (1)4,113,088
 2,272,716
Financial Services2,468,263
 2,778,910
Multifamily1,046,196
 874,219
Lennar Other549,150
 588,959
Corporate and unallocated1,107,193
 1,001,024
Total assets$28,289,395
 18,745,034
$29,583,064
 28,566,181
Lennar Homebuilding goodwill (1)$3,457,999
 136,566
Lennar Financial Services goodwill (1)$231,245
 59,838
Rialto goodwill$5,396
 5,396
Homebuilding goodwill$3,442,359
 3,442,359
Financial Services goodwill (1)$215,516
 237,688

(1)In connection with the CalAtlantic acquisition, the Company recorded a provisional amount of homebuilding goodwill of $3.3 billion. The allocation of goodwill by homebuilding reporting segment has not yet been finalized. A provisional amount ofDecrease in goodwill related to the Financial Services' segment sale of substantially all of its retail mortgage and its real estate brokerage business.

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)

the CalAtlantic acquisition of $169 million was allocated to Lennar Financial Services. In connection with the WCI acquisition in 2017, the Company allocated $136.6 million of goodwill to the Lennar Homebuilding East reportable segment and $20 million to the Lennar Financial Services segment.
 Three Months Ended Nine Months Ended
 August 31, August 31,
(In thousands)2018 2017 2018 2017
Revenues:       
Homebuilding East$2,028,989
 1,255,797
 5,000,182
 3,218,413
Homebuilding Central1,231,170
 602,901
 3,041,003
 1,801,424
Homebuilding West1,505,858
 823,500
 3,775,488
 2,146,492
Homebuilding Other519,725
 202,997
 1,195,159
 623,301
Lennar Financial Services236,268
 215,056
 639,543
 571,462
Rialto49,495
 57,810
 149,033
 207,804
Lennar Multifamily101,064
 103,415
 312,013
 291,900
Total revenues (1)$5,672,569
 3,261,476
 14,112,421
 8,860,796
Operating earnings (loss) (2):       
Homebuilding East (3)$228,657
 179,908
 504,019
 277,906
Homebuilding Central135,978
 66,184
 264,463
 194,986
Homebuilding West (4)186,847
 112,749
 581,461
 237,333
Homebuilding Other60,555
 27,435
 101,349
 79,969
Lennar Financial Services56,628
 49,057
 128,705
 113,448
Rialto9,444
 (3,192) 25,558
 (10,497)
Lennar Multifamily(3,853) 9,104
 9,734
 34,816
Total operating earnings674,256
 441,245
 1,615,289
 927,961
Acquisition and integration costs related to CalAtlantic11,992
 —
 140,062
 —
Corporate general and administrative expenses96,346
 72,860
 249,071
 200,333
Earnings before income taxes$565,918
 368,385
 1,226,156
 727,628
 Three Months Ended Six Months Ended
 May 31, May 31,
(In thousands)2019 2018 2019 2018
Revenues:       
Homebuilding East$1,737,342
 1,566,743
 2,964,155
 2,479,706
Homebuilding Central613,785
 636,523
 1,048,852
 891,092
Homebuilding Texas693,212
 700,767
 1,111,729
 1,056,865
Homebuilding West2,143,023
 2,144,613
 3,683,920
 3,272,569
Homebuilding Other8,237
 15,351
 10,664
 25,858
Financial Services (1)204,216
 249,709
 347,527
 445,796
Multifamily147,412
 117,693
 244,806
 210,949
Lennar Other15,663
 27,662
 19,319
 57,017
Total revenues (2)$5,562,890
 5,459,061
 9,430,972
 8,439,852
Operating earnings (loss) (3):       
Homebuilding East$210,464
 153,893
 345,847
 255,222
Homebuilding Central55,344
 25,138
 86,270
 34,174
Homebuilding Texas75,374
 37,652
 107,652
 51,665
Homebuilding West272,904
 224,595
 463,565
 364,024
Homebuilding Other (4)(32,297) (16,135) (51,950) 133,985
Total Homebuilding operating earnings581,789
 425,143
 951,384
 839,070
Financial Services56,217
 55,774
 75,189
 81,636
Multifamily(4,322) 14,788
 2,475
 13,587
Lennar Other1,828
 3,895
 4,931
 6,740
Corporate and unallocated (5)(76,113) (108,790) (155,456) (280,795)
Earnings before income taxes$559,399
 390,810
 878,523
 660,238
(1)Financial Services revenues are lower period over period primarily due to the loss of revenues as a result of the sales of substantially all of the segment's retail mortgage business and the segment's real estate brokerage business.
(2)Total revenues were net of sales incentives of $289.0$338.1 million ($22,90026,600 per home delivered) and $717.0$560.4 million ($26,100 per home delivered) for the three and six months ended May 31, 2019, respectively, compared to $278.1 million ($23,000 per home delivered) and $428.0 million ($22,800 per home delivered) for the three and ninesix months ended AugustMay 31, 2018, respectively, compared to $165.4 million ($21,800 per home delivered) and $463.4 million ($22,400 per home delivered) for the three and nine months ended August 31, 2017, respectively.
(2)All homebuilding segments and Homebuilding Other were impacted by purchase accounting adjustments for the three and nine months ended August 31, 2018.
(3)All Homebuilding East operating earningssegments were impacted by purchase accounting adjustments that totaled $236.8 million and $291.9 million for the ninethree and six months ended AugustMay 31, 2017 included a $140 million loss due to litigation (see Note 17).2018, respectively.
(4)Homebuilding WestOther operating earnings includesduring the three and six months ended May 31, 2019 included a one-time loss of $48.9 million from the consolidation of a previously unconsolidated entity, partially offset by equity in earnings from one Homebuilding unconsolidated entity. Homebuilding Other operating earnings during the six months ended May 31, 2018 included $164.9 million related to a gain on the sale of an 80% interest in one of Lennar Homebuilding's strategic joint ventures, Treasure Island Holdings, duringHoldings.
(5)Corporate and unallocated includes corporate, general and administrative expenses, and for the ninethree and six months ended AugustMay 31, 2018.2018, $23.9 million and $128.1 million, respectively, of acquisition and integration costs related to the CalAtlantic acquisition.

(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
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(In thousands)2018 2017 2018 20172019 2018 2019 2018
Revenues$153,968
 144,966
 324,584
 323,689
$65,686
 100,952
 156,330
 169,141
Costs and expenses199,337
 151,643
 458,660
 421,554
90,363
 148,678
 214,114
 256,102
Other income (1)66,690
 12,578
 180,231
 18,695
75,868
 105,192
 76,065
 105,192
Net earnings (loss) of unconsolidated entities$21,321
 5,901
 46,155
 (79,170)
Lennar Homebuilding equity in loss from unconsolidated entities$(15,391) (9,651) (41,904) (42,691)
Net earnings of unconsolidated entities$51,191
 57,466
 18,281
 18,231
Homebuilding equity in earnings (loss) from unconsolidated entities$19,614
 (12,670) 5,858
 (26,798)

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


(1)During the ninethree and six months ended AugustMay 31, 2019, other income was primarily attributable to a $64.9 million gain on the settlement of contingent consideration recorded by one Homebuilding unconsolidated entity, of which the Company's pro-rata share was $25.9 million. During the three and six months ended May 31, 2018, other income was primarily due to FivePoint Holdings, LLC ("FivePoint") recording income resulting from the Tax Cuts and Jobs Act of 2017’s reduction in its corporate tax rate to reduce its liability pursuant to its tax receivable agreement (“TRA Liability”) with its non-controlling interests. However, the Company has a 70% interest in the FivePoint


TRA Liability. Therefore, the Company did not include in Lennar Homebuilding’s equity in loss TRA Liability. Therefore, the Company did not include in Homebuilding’s equity in earnings (loss) from unconsolidated entities its pro-rata share of earnings related to the Company’s portion of the TRA Liability. As a result, the Company’s unconsolidated entities have net earnings, but the Company has an equity in loss from unconsolidated entities.
For the three and six months ended May 31, 2019, Homebuilding equity in earnings from unconsolidated entities was primarily attributable to the Company's share of net operating income from one of Homebuilding's unconsolidated entities which was primarily attributable to a gain on settlement of contingent consideration.
For the three and ninesix months ended AugustMay 31, 2018, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to the Company's share of valuation adjustments related to assets of Lennar Homebuilding's unconsolidated entities and the Company's share of net operating losses from its unconsolidated entities excluding other income.
For both the three and nine months ended August 31, 2017, one of the Company’s unconsolidated entities had equity in earnings of $18.8 million relating to an equity method investee selling 475 homesites to a third-party land bank. Simultaneous with the purchase by the land bank, the Company entered into an option contract to purchase all 475 homesites from the land bank. Due to the Company’s continuing involvement with respect to the homesites sold from the investee entity, the Company deferred all of its equity in earnings from the unconsolidated entity relating to the sale transaction, which amounted to $7.8 million.
For the three months ended August 31, 2017, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to the Company's share of net operating losses from unconsolidated entities and its deferral of equity in earnings from the land sale transaction discussed above. The net earnings of unconsolidated entities were primarily driven by the unconsolidated entity’s equity in earnings relating to the land sale offset by general and administrative expenses during the three months ended August 31, 2017.
For the nine months ended August 31, 2017, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to the Company’s share of net operating losses from its unconsolidated entities and its deferral of equity in earnings from the land sale transaction discussed above. The net loss from unconsolidated entities was primarily driven by general and administrative expenses, partially offset by the unconsolidated entity’s equity in earnings from the land sale discussed above.
Balance Sheets
(In thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Assets:      
Cash and cash equivalents$912,250
 953,261
$651,681
 781,833
Inventories4,251,673
 3,751,525
4,177,728
 4,291,470
Other assets1,200,761
 1,061,507
988,714
 1,045,274
$6,364,684
 5,766,293
$5,818,123
 6,118,577
Liabilities and equity:      
Accounts payable and other liabilities$839,694
 832,151
$757,410
 874,355
Debt (1)1,212,470
 737,331
825,275
 1,202,556
Equity4,312,520
 4,196,811
4,235,438
 4,041,666
$6,364,684
 5,766,293
$5,818,123
 6,118,577
Homebuilding investments in unconsolidated entities (2)$983,683
 870,201
(1)Debt presented above is net of debt issuance costs of $13.2$9.9 million and $5.7$12.4 million, as of AugustMay 31, 20182019 and November 30, 2017,2018, respectively. The increasedecrease in debt was primarily related to $500the Company's consolidation of a previously unconsolidated entity as of May 31, 2019.
(2)Homebuilding investments in unconsolidated entities as of November 30, 2018, does not include $62.0 million of senior notes issued by FivePoint.the negative investment balance for one unconsolidated entity as it was reclassed to other liabilities.
In May 2017, FivePoint completed its initial public offering ("IPO"). Concurrent with the IPO, the Company invested an additional $100 million in FivePoint in a private placement. As of August 31, 2018, the Company owned approximately 40% of FivePoint and the carrying amount of the Company's investment was $358.9 million.
As of AugustMay 31, 20182019 and November 30, 2017,2018, the Company’s recorded investments in Lennar Homebuilding unconsolidated entities were $997.5$983.7 million and $900.8$870.2 million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of both AugustMay 31, 20182019 and November 30, 2017 were2018 was $1.3 billion.billion and $1.2 billion, respectively. The basis difference was primarily as a result of the Company contributing its investment in three strategic joint ventures with a higher fair value than book value for an investment in the FivePoint entity and deferring equity in earnings on land sales to the Company. Included in the Company's recorded investments in Homebuilding unconsolidated entities is the Company's 40% ownership of FivePoint. As of May 31, 2019 and November 30, 2018, the carrying amount of the Company's investment was $389.1 million and $342.7 million, respectively.
In 2017,During the six months ended May 31, 2018, the Company entered intosold 80% of a Membership Interest Purchase Agreement and a Payment Escrow Agreement (“Agreement”) with one of its strategic joint ventures under which the Company agreed to sell 80%venture to a third-party. Under the terms of the Agreement, the sale transaction was contingent upon the satisfaction of certain conditions. In January 2018, conditions were fulfilled and the transaction was closedthird-party resulting in gainsa gain of $164.9 million recorded in Lennar Homebuilding


other income, net within the accompanying condensed consolidated statementCondensed Consolidated Statement of operations for the nine months ended August 31, 2018.Operations and Comprehensive Income (Loss).
The Lennar Homebuilding unconsolidated 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.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


The total debt of the Lennar Homebuilding unconsolidated entities in which the Company has investments, including Lennar's maximum recourse exposure, were as follows:
(Dollars in thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Non-recourse bank debt and other debt (partner’s share of several recourse)$51,364
 64,197
$46,816
 48,313
Non-recourse land seller debt and other debt1,497
 1,997
Non-recourse debt with completion guarantees234,310
 255,903
144,588
 239,568
Non-recourse debt without completion guarantees (1)869,486
 351,800
Non-recourse debt without completion guarantees634,086
 861,371
Non-recourse debt to the Company1,156,657
 673,897
825,490
 1,149,252
The Company’s maximum recourse exposure (2)69,005
 69,181
The Company’s maximum recourse exposure (1)9,653
 65,707
Debt issuance costs(13,192) (5,747)(9,868) (12,403)
Total debt$1,212,470
 737,331
Total debt (1)$825,275
 1,202,556
The Company’s maximum recourse exposure as a % of total JV debt6% 9%1% 5%

(1)The increase in non-recourse debt without completion guarantees was primarily related to $500 million of senior notes issued by FivePoint.
(2)As of both AugustMay 31, 20182019 and November 30, 2017,2018, the Company's maximum recourse exposure was primarily related to the Company providing repayment guarantees on threetwo and four unconsolidated entities' debt.debt, respectively. The decrease in maximum recourse exposure and total debt was primarily related to the Company's consolidation of a previously unconsolidated entity as of May 31, 2019.
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. 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 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 unconsolidated entity distributes.
As of both AugustMay 31, 20182019 and November 30, 2017,2018, the fair values of the repayment guarantees, maintenance guarantees, and completion guarantees were not material. The Company believes that as of AugustMay 31, 2018,2019, 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, the collateral would 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 with regard to obligations of its joint ventures (see Note 12)12 of the Notes to the Condensed Consolidated Financial Statements).
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


(5)Stockholders' Equity
The following table reflects the changes in equity attributable to both Lennar Corporation and the noncontrolling interests of its consolidated subsidiaries in which it has less than a 100% ownership interest for both the ninesix months ended AugustMay 31, 20182019 and 2017:2018:
  Stockholders’ Equity    Stockholders’ Equity  
(In thousands)
Total
Equity
 Class A
Common Stock		 Class B
Common Stock		 Additional
Paid - in Capital		 
Treasury
Stock
 Accumulated Other Comprehensive Income (Loss) 
Retained
Earnings
 
Noncontrolling
Interests
Total
Equity
 Class A
Common Stock		 Class B
Common Stock		 Additional
Paid - in Capital		 
Treasury
Stock
 Accumulated Other Comprehensive Income (Loss) 
Retained
Earnings
 
Noncontrolling
Interests
Balance at November 30, 2017$7,986,132
 20,543
 3,769
 3,142,013
 (136,020) 1,034
 4,840,978
 113,815
Net earnings (including net earnings attributable to noncontrolling interests)919,286
 —
 —
 —
 —
 —
 899,683
 19,603
Balance at November 30, 2018$14,682,957
 29,499
 3,944
 8,496,677
 (435,869) (366) 6,487,650
 101,422
Net earnings (including net loss attributable to noncontrolling interests)658,293
 —
 —
 —
 —
 —
 661,382
 (3,089)
Employee stock and directors plans(45,148) 182
 —
 4,171
 (49,501) —
 —
 —
(691) 4
 —
 1,761
 (2,456) —
 —
 —
Stock issuance in connection with CalAtlantic acquisition5,070,006
 8,408
 168
 5,061,430
 —
 —
 —
 —
Conversions of convertible senior notes to Class A common stock217,154
 365
 7
 216,782
 —
 —
 —
 —
Purchases of treasury stock(98,781) —
 —
 —
 (98,781) —
 —
 —
Amortization of restricted stock55,638
 —
 —
 55,638
 —
 —
 —
 —
31,390
 —
 —
 31,390
 —
 —
 —
 —
Cash dividends(35,985) —
 —
 —
 —
 —
 (35,985) —
(25,877) —
 —
 —
 —
 —
 (25,877) —
Receipts related to noncontrolling interests4,008
 —
 —
 —
 —
 —
 —
 4,008
8,937
 —
 —
 —
 —
 —
 —
 8,937
Payments related to noncontrolling interests(68,627) —
 —
 —
 —
 —
 —
 (68,627)(23,317) —
 —
 —
 —
 —
 —
 (23,317)
Non-cash consolidations, net8,894
 —
 —
 —
 —
 —
 —
 8,894
Cumulative-effect of accounting change (see Note 1 to the Notes to the Condensed Consolidated Financial Statements)9,753
 —
 —
 —
 —
 —
 9,753
 —
Non-cash activity related to noncontrolling interests15,365
 —
 —
 —
 —
 —
 —
 15,365
(5,616) —
 —
 —
 —
 —
 —
 (5,616)
Total other comprehensive loss, net of tax(1,649) —
 —
 —
 —
 (1,649) —
 —
Balance at August 31, 2018$14,116,180
 29,498
 3,944
 8,480,034
 (185,521) (615) 5,704,676
 84,164
Total other comprehensive income, net of tax593
 —
 —
 —
 —
 593
 —
 —
Balance at May 31, 2019$15,246,535
 29,503
 3,944
 8,529,828
 (537,106) 227
 7,132,908
 87,231
  Stockholders’ Equity    Stockholders’ Equity  
(In thousands)
Total
Equity
 Class A
Common Stock		 Class B
Common Stock		 Additional
Paid - in Capital		 
Treasury
Stock
 Accumulated Other Comprehensive Income (Loss) 
Retained
Earnings
 
Noncontrolling
Interests
Total
Equity
 Class A
Common Stock		 Class B
Common Stock		 Additional
Paid - in Capital		 
Treasury
Stock
 Accumulated Other Comprehensive Income (Loss) 
Retained
Earnings
 
Noncontrolling
Interests
Balance at November 30, 2016$7,211,567
 20,409
 3,298
 2,805,349
 (108,961) (309) 4,306,256
 185,525
Net earnings (including net loss attributable to noncontrolling interests)473,972
 —
 —
 —
 —
 —
 500,890
 (26,918)
Balance at November 30, 2017$7,986,132
 20,543
 3,769
 3,142,013
 (136,020) 1,034
 4,840,978
 113,815
Net earnings (including net earnings attributable to noncontrolling interests)451,666
 —
 —
 —
 —
 —
 446,472
 5,194
Employee stock and directors plans(24,896) 134
 —
 2,079
 (27,109) —
 —
 —
(24,205) 57
 —
 4,266
 (28,532) —
 4
 —
Tax benefit from employee stock plans, vesting of restricted stock and conversions of convertible senior notes35,542
 —
 —
 35,542
 —
 —
 —
 —
Stock issuance in connection with CalAtlantic acquisition5,070,006
 8,408
 168
 5,061,430
 —
 —
 —
 —
Conversion of convertible senior notes to Class A common stock217,154
 365
 7
 216,782
 —
 —
 —
 —
Amortization of restricted stock43,303
 —
 —
 43,303
 —
 —
 —
 —
33,720
 —
 —
 33,720
 —
 —
 —
 —
Cash dividends(28,181) —
 —
 —
 —
 —
 (28,181) —
(22,780) —
 —
 —
 —
 —
 (22,780) —
Receipts related to noncontrolling interests10,299
 —
 —
 —
 —
 —
 —
 10,299
3,882
 —
 —
 —
 —
 —
 —
 3,882
Payments related to noncontrolling interests(61,782) —
 —
 —
 —
 —
 —
 (61,782)(30,412) —
 —
 —
 —
 —
 —
 (30,412)
Non-cash activity to noncontrolling interests(1,924) —
 —
 —
 —
 —
 —
 (1,924)15,080
 —
 —
 —
 —
 —
 —
 15,080
Total other comprehensive income, net of tax1,560
 —
 —
 —
 —
 1,560
 —
 —
Balance at August 31, 2017$7,659,460
 20,543
 3,298
 2,886,273
 (136,070) 1,251
 4,778,965
 105,200
Total other comprehensive loss, net of tax(1,373) —
 —
 —
 —
 (1,373) —
 —
Balance at May 31, 2018$13,698,870
 29,373
 3,944
 8,458,211
 (164,552) (339) 5,264,674
 107,559

On April 10, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.04 per share on both of its Class A and Class B common stock, payable on May 8, 2019 to holder of record at the close of business on April 24, 2019. On June 26, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.04 per share on both of its Class A and Class B common stock, payable on July 25, 2019 to holder of record at the close of business on July 11, 2019. The
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


Company approved and paid cash dividends of $0.04 per share for both its Class A and Class B common stock in each quarter for the year ended November 30, 2018.
In January 2019, the Company's Board of Directors authorized the repurchase of up to the lesser of $1 billion in value, or 25 million in shares of the Company's outstanding Class A and Class B common stock. The repurchase has no expiration date. During the three months ended May 31, 2019, under this repurchase program, the Company repurchased one million shares of its Class A common stock for approximately $51.8 million at an average share price of $51.76. During the six months ended May 31, 2019, under this repurchase program, the Company repurchased two million shares of its Class A common stock for approximately $98.8 million at an average share price of $49.37.
(6)Income Taxes
The provision for income taxes and effective tax rate were as follows:
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(Dollars in thousands)2018 2017 2018 20172019 2018 2019 2018
Provision for income taxes
$98,298
 124,795
 306,870
 253,656

$140,530
 75,961
 220,230
 208,572
Effective tax rate (1)17.8% 33.4% 25.4% 33.6%25.0% 19.7% 25.0% 31.8%
(1)For the three and six months ended AugustMay 31, 2019, the effective tax rate included state income tax expense and non-deductible executive compensation, partially offset by solar tax credits. For the three months ended May 31, 2018, the effective tax rate included tax benefits for tax accounting method changes implemented during the third quarter, energy credits and the domestic production activities deduction.deduction and energy tax credits, offset primarily by state income tax expenses. For the ninesix months ended AugustMay 31, 2018, the effective tax rate included a $68.6 million non-cash one-time write down of the deferred tax assets due to the enactment of the Tax Cuts and Jobs Act, offset primarily by tax accounting method changes, energy tax credits and tax benefits for the domestic production activities deduction. Excluding the one-time non-cash deferred tax asset write down of $68.6 million recorded in the first quarter of 2018 due to the tax reform bill and the $34.1 million benefit recorded in the third quarter of 2018, primarily related to tax accounting method changes and energy credits, the tax rate for the nine months ended August 31, 2018 would have been 22.6%. For the three months ended August 31, 2017, the effective tax rate included tax benefits for the domestic production activities deduction and energy tax credits, offset primarily by state incomecredits. Excluding the impact of the write down of the deferred tax expense and a valuation allowance recorded against state net operating losses the Company expects to expire unutilized. For the nine months ended August 31, 2017,assets, the effective tax rate included tax benefits for (1) settlements with the IRS, (2) the domestic production activities deduction, and (3) energy tax credits, offset primarily by state income tax expense, and a valuation allowance recorded against state net operating losses the Company expects to expire unutilized.six months ended May 31, 2018 was 21.4%.
As of AugustMay 31, 20182019 and November 30, 2017,2018, the Company's deferred tax assets, net, included in the condensed consolidated balance sheets were $639.6$413.5 million and $297.7$515.5 million, respectively. The increase in the deferred tax assets was primarily due to deferred tax assets recorded in the first quarter of 2018 from the acquisition of CalAtlantic, partially offset by the write down of the deferred tax assets in the first quarter of 2018 related to the Tax Cuts and Jobs Act, as described below, and tax accounting method changes implemented during the third quarter.
As of Augustboth May 31, 20182019 and November 30, 2017,2018, the Company had $25.8$14.7 million and $12.3 million, respectively, of gross unrecognized tax benefits.
At AugustMay 31, 2018,2019, the Company had $53.8$54.2 million accrued for interest and penalties, of which $1.5increased $1.3 million was due to the CalAtlantic acquisition and an additional $2.6 million was accrued during the ninesix months ended AugustMay 31, 2018.2019. At November 30, 2017,2018, the Company had $49.7$52.9 million accrued for interest and penalties.
On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act. This Act will materially affect the taxes owed by the Company in 2018 and subsequent years. Among other things, it reduced the maximum federal corporate income tax rate to 21%, which should have a positive effect on the Company's net earnings and earnings per share. It also limited or eliminated certain deductions to which the Company has been entitled in past years and reduced the value of the Company's deferred tax assets, which required the Company to recognize in the first quarter of fiscal year 2018 an income tax expense of $68.6 million.



(7)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 the 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") is considered participating securities.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


Basic and diluted earnings per share were calculated as follows:
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(In thousands, except per share amounts)2018 2017 2018 20172019 2018 2019 2018
Numerator:              
Net earnings attributable to Lennar$453,211
 249,165
 899,683
 500,890
$421,472
 310,257
 661,382
 446,472
Less: distributed earnings allocated to nonvested shares105
 88
 319
 290
94
 99
 193
 214
Less: undistributed earnings allocated to nonvested shares3,633
 2,358
 7,674
 4,600
3,063
 2,557
 4,987
 3,929
Numerator for basic earnings per share449,473
 246,719
 891,690
 496,000
418,315
 307,601
 656,202
 442,329
Less: net amount attributable to noncontrolling interests in Rialto's Carried Interest Incentive Plan (1)347
 294
 796
 845
3,331
 240
 3,654
 449
Plus: interest on convertible senior notes—
 —
 80
 —
—
 54
 —
 80
Plus: undistributed earnings allocated to convertible shares—
 —
 6
 —
—
 12
 —
 15
Numerator for diluted earnings per share$449,126
 246,425
 890,980
 495,155
$414,984
 307,427
 652,548
 441,975
Denominator:              
Denominator for basic earnings per share - weighted average common shares outstanding (2)327,214
 237,330
 302,046
 237,019
320,329
 325,259
 320,834
 289,462
Effect of dilutive securities:              
Shared based payments23
 1
 57
 1
1
 92
 6
 73
Convertible senior notes—
 —
 732
 —
—
 1,467
 —
 1,098
Denominator for diluted earnings per share - weighted average common shares outstanding327,237
 237,331
 302,835
 237,020
320,330
 326,818
 320,840
 290,633
Basic earnings per share (2)$1.37
 1.04
 2.95
 2.09
$1.31
 0.95
 2.05
 1.53
Diluted earnings per share (2)$1.37
 1.04
 2.94
 2.09
$1.30
 0.94
 2.03
 1.52

(1)The amounts presented relate to Rialto's Carried Interest Incentive Plan adopted in June 2015 (see Note 9) and represent the difference between the advanced tax distributions received by Rialto's subsidiaryfrom the Rialto funds included in the Lennar Other segment and the amount Lennar as the parent company, is assumed to own.
(2)
The weighted average common shares for the three and nine months ended August 31, 2017 has been retroactively adjusted to include 4.7 million of Class B shares distributed in the stock dividend on November 27, 2017. As a result, basic and diluted earnings per share have also been retroactively adjusted.
For both the three and ninesix months ended AugustMay 31, 20182019 and 2017,2018, there were no options to purchase shares of common stock that were outstanding and anti-dilutive.

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


(8)Lennar Financial Services Segment
The assets and liabilities related to the Lennar Financial Services segment were as follows:
(In thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Assets:      
Cash and cash equivalents$165,051
 117,410
$171,892
 188,485
Restricted cash12,111
 12,006
14,868
 17,944
Receivables, net (1)386,448
 313,252
230,452
 731,169
Loans held-for-sale (2)945,387
 937,516
1,420,275
 1,213,889
Loans held-for-investment, net74,669
 44,193
76,248
 70,216
Investments held-to-maturity64,203
 52,327
199,412
 189,472
Investments available-for-sale (3)47,034
 57,439
3,356
 4,161
Goodwill (4)231,245
 59,838
215,516
 237,688
Other assets (5)(4)115,876
 95,527
136,244
 125,886
$2,042,024
 1,689,508
$2,468,263
 2,778,910
Liabilities:      
Notes and other debts payable$966,626
 937,431
$1,214,017
 1,558,702
Other liabilities (6)(5)274,482
 240,383
266,989
 309,500
$1,241,108
 1,177,814
$1,481,006
 1,868,202
(1)Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of AugustMay 31, 20182019 and November 30, 2017,2018, respectively.
(2)Loans held-for-sale related to unsold residential and commercial loans carried at fair value.
(3)Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss) on the condensed consolidated balance sheet.
(4)As of AugustMay 31, 2018, goodwill included $20.0 million of goodwill related to the WCI acquisition. The assignment of goodwill to the Company's reporting segments related to the CalAtlantic acquisition has not been completed, however, a provisional amount of goodwill of approximately $169 million was allocated to Lennar Financial Services (see Note 2).
(5)As of August 31, 20182019 and November 30, 2017,2018, other assets included mortgage loan commitments carried at fair value of $19.3$25.2 million and $9.9$16.4 million, respectively, and mortgage servicing rights carried at fair value of $35.1$29.4 million and $31.2$37.2 million, respectively. In addition, other assets also included forward contracts carried at fair value of $1.7 million as of November 30, 2017.
(6)(5)As of AugustMay 31, 20182019 and November 30, 2017,2018, other liabilities included $60.4$61.0 million and $57.7$60.3 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation. In addition, as of May 31, 2019 and November 30, 2018, other liabilities also included forward contracts carried at fair value of $2.6$11.3 million as of August 31, 2018.and $10.4 million, respectively.
In connection with the sale of the majority of its retail title agency business and title insurance underwriter in the first quarter of 2019, the Company provided seller financing and received a substantial minority equity ownership stake in the buyer. The combination of both the equity and debt components of this transaction caused the transaction not to meet the accounting requirements for sale treatment and, therefore, the Company is required to consolidate the buyer’s results at this time.
At AugustMay 31, 20182019, the Lennar Financial Services segment warehouse facilities used to fund residential mortgages were as follows:
(In thousands)Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures September 2018 (1)$300,000
364-day warehouse repurchase facility that matures December 2018 (2)400,000
364-day warehouse repurchase facility that matures March 2019 (3)300,000
364-day warehouse repurchase facility that matures June 2019700,000
Total$1,700,000
(In thousands)Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures June 2019 (1)$700,000
364-day warehouse repurchase facility that matures August 2019 (2)300,000
364-day warehouse repurchase facility that matures October 2019 (3)500,000
364-day warehouse repurchase facility that matures March 2020 (4)300,000
Total$1,800,000
(1)Subsequent to AugustMay 31, 2018,2019, the warehouse repurchase facility maturity was extended to November 2018.June 2020 and the maximum aggregate commitment amount decreased to $500 million.
(2)Maximum aggregate commitment includes an uncommitted amount of $250$300 million.
(3)Maximum aggregate commitment includes an uncommitted amount of $400 million.
(4)Maximum aggregate commitment includes an uncommitted amount of $300 million.
The Lennar Financial Services segment uses these facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature. Borrowings under the facilities and their prior year predecessors were $966.5$882.0 million and $937.2 million$1.3 billion at AugustMay 31, 20182019 and November 30, 2017,2018, respectively, and were collateralized by residential mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $1.0$911.5 million and $1.3 billion and $974.1 million at AugustMay 31, 20182019 and November 30, 2017,2018, respectively. 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
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


by collecting receivables on loans sold but not yet paid for. Without the facilities, the Lennar Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.


Substantially all of the residential 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 agreements. Over the last several years, there has been an 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. Mortgage investors could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors. The Company establishes accruals 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 residential 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 Company's condensed consolidated balance sheets.
The activity in the Company’s loan origination liabilities was as follows:
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(In thousands)2018 2017 2018 20172019 2018 2019 2018
Loan origination liabilities, beginning of period$28,016
 25,912
 22,543
 24,905
$6,697
 27,110
 48,584
 22,543
Provision for losses1,059
 1,056
 2,696
 3,000
914
 990
 1,587
 1,637
Adjustments to pre-existing provision for losses from changes in estimates—
 (4,440) —
 (4,440)
Origination liabilities assumed related to CalAtlantic acquisition20,500
 —
 24,459
 —
—
 —
 —
 3,959
Payments/settlements(124) (651) (247) (1,588)(187) (84) (42,747) (123)
Loan origination liabilities, end of period$49,451
 21,877
 49,451
 21,877
$7,424
 28,016
 7,424
 28,016


(9)Rialto Segment
The assets and liabilities related to the Rialto segment were as follows:
(In thousands)August 31,
2018		 November 30,
2017
Assets:   
Cash and cash equivalents$36,343
 241,861
Restricted cash (1)11,274
 22,466
Loans held-for-sale (2)141,333
 236,018
Real estate owned, net52,644
 86,047
Investments in unconsolidated entities294,465
 265,418
Investments held-to-maturity211,097
 179,659
Other assets87,726
 122,371
 $834,882
 1,153,840
Liabilities:   
Notes and other debts payable (3)$239,392
 625,081
Other liabilities57,737
 94,975
 $297,129
 720,056

(1)As of August 31, 2018 and November 30, 2017, restricted cash primarily consisted of upfront deposits and application fees RMF receives before originating loans and is recognized as income once the loan has been originated, as well as 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 the transacting parties.
(2)Loans held-for-sale primarily related to unsold loans originated by RMF carried at fair value.
(3)In March 2018, Rialto had paid off the remaining principal balance of its 7.00% senior notes due December 2018. As of November 30, 2017, notes and other debts payable primarily included $349.4 million related to Rialto's 7.00% senior notes due December 2018. In addition, as of August 31, 2018 and November 30, 2017, notes and other debt payable included $94.5 million and $162.1 million, respectively, related to Rialto's warehouse repurchase facilities.

Rialto Mortgage Finance - loans held-for-sale
During the ninesix months ended AugustMay 31, 2018,2019, RMF originated commercial loans with a total principal balance of $997.5$720.6 million, of which $705.3 million were recorded as loans held-for-sale, and sold $1.1 billion$500.5 million of commercial loans into 12five separate securitizations. As of May 31, 2019, $61.0 million of originated loans were sold into a securitization trust but not settled and thus were included as receivables, net. As of November 30, 2018, there were no unsettled transactions.
During the ninesix months ended AugustMay 31, 2017,2018, RMF originated commercial loans with a total principal balance of $1.3 billion$663.8 million, all of which $1.3 billion were recorded as loans held-for-sale, and $57.4sold $556.3 million as accrual loans within loans receivable, net, and sold $1.1 billion of commercial loans into eightsix separate securitizations. As of August 31, 2018 and November 30, 2017, there were no unsettled transactions.
FDIC Portfolios
In 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies ("LLCs") in partnership with the FDIC Portfolios. The LLCs met 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.
In February 2017, the FDIC exercised its “clean-up call rights” under the Amended and Restated Limited Liability Company Agreement. As a result, Rialto had until July 10, 2017 to liquidate and sell the assets in the FDIC Portfolios. On July 10, 2017, Rialto and the FDIC entered into an agreement which extended the original agreement date to January 10, 2018. Since January 11, 2018, (1) the FDIC has had the right, at its discretion, to sell any remaining assets, or (2) Rialto has had the option to purchase the FDIC's interest in the portfolios. At August 31, 2018, the consolidated LLCs had total combined assets of $12.0 million, which primarily included $7.2 million in cash, $3.4 million of real estate owned, net, and $0.6 million of loans held-for-sale. At August 31, 2018, all remaining assets with carrying values were under contract to be sold. At November 30, 2017, the consolidated LLCs had total combined assets of $48.8 million, which primarily included $23.8 million in cash, $20.0 million of real estate owned, net and $1.6 million of loans held-for-sale.
Warehouse Facilities
At AugustMay 31, 2018, Rialto's2019, the RMF warehouse facilities were as follows:
(In thousands)Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures November 2018$200,000
364-day warehouse repurchase facility that matures December 2018 (extended from October 2018)250,000
364-day warehouse repurchase facility that matures December 2018200,000
364-day warehouse repurchase facility that matures December 2019200,000
Total - Loan origination and securitization business (RMF)$850,000
Warehouse repurchase facility that matures December 2018 (one year extensions) (1)50,000
Total$900,000
(In thousands)Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures November 2019$200,000
364-day warehouse repurchase facility that matures December 2019250,000
364-day warehouse repurchase facility that matures December 2019200,000
364-day warehouse repurchase facility that matures December 2019200,000
  Total - Loans origination and securitization business$850,000
Warehouse repurchase facility that matures December 2019 (two - one year extensions) (1)50,000
  Total$900,000
(1)
RialtoRMF uses this warehouse repurchase facility to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans receivable,held-for-investment, net. There were no borrowings under this facility as of both AugustMay 31, 20182019 and November 30, 2017.
2018.
Borrowings under the facilities that finance RMF's commercial loan originations and securitization activities were $94.5$155.9 million and $162.1$178.8 million as of AugustMay 31, 20182019 and November 30, 2017,2018, respectively, and were secured by a 75% interest in the originated commercial loans financed. The facilities require immediate repayment of the 75% interest in the
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


secured commercial loans when the loans are sold in a securitization and the proceeds are collected. These warehouse repurchase facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the loans held-for-sale to investors. Without the facilities, the RialtoFinancial Services segment would have to use cash from operations and other funding sources to finance its lending activities.
Investments held-to-maturity
At AugustMay 31, 20182019 and November 30, 2017,2018, the carrying value of Rialto'sFinancial Services' commercial mortgage-backed securities ("CMBS") was $211.1$167.0 million and $179.7$137.0 million, respectively. These securities were purchased at discounts ranging from 9%6% to 84% with coupon rates ranging from 1.3%2.0% to 5.0%5.3%, stated and assumed final distribution dates between November 2020October 2027 and December 2027,2028, and stated maturity dates between November 2043October 2050 and March 2059.December 2051. The RialtoFinancial Services segment reviews changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on its CMBS. Based on the Rialto segment’s assessment, no impairment charges were recorded during either the three or the ninesix months ended AugustMay 31, 20182019 or 2017.2018. The RialtoFinancial Services segment classifies these securities as held-to-maturity based on its intent and ability to hold the securities until maturity. The Company has financing agreements to finance CMBS that have been purchased as investments by

the RialtoFinancial Services segment. At AugustMay 31, 20182019 and November 30, 2017,2018, the carrying amount, net of debt issuance costs, of outstanding debt in these agreements was $122.6$155.4 million and $91.8$123.7 million, respectively, and the interest is incurred at a fixed rate of 3.2% to 3.3%4.1%.
Investments in Unconsolidated Entities
Generally, 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 the funds in which Rialto has investments in are recorded at fair value with increases/decreases in fair value recorded in their respective statements of operations and the Company’s share was recorded in Rialto equity in earnings from unconsolidated entities in the Company's statement of operations.
The following table reflects Rialto's investments in funds that invest in and manage real estate related assets and other investments:
         August 31,
2018		 August 31,
2018		 November 30,
2017
(Dollars in thousands)Inception Year Equity Commitments Equity Commitments Called Commitment to Fund by the Company Funds Contributed by the Company Investment
Rialto Real Estate Fund, LP2010 $700,006
 $700,006
 $75,000
 $75,000
 $39,608
 41,860
Rialto Real Estate Fund II, LP2012 1,305,000
 1,305,000
 100,000
 100,000
 84,606
 86,904
Rialto Mezzanine Partners Fund, LP2013 300,000
 300,000
 33,799
 33,799
 13,314
 19,189
Rialto Capital CMBS Funds2014 119,174
 119,174
 52,474
 52,474
 52,916
 54,018
Rialto Real Estate Fund III2015 1,887,000
 1,074,561
 140,000
 75,917
 71,293
 41,223
Rialto Credit Partnership, LP2016 220,000
 217,556
 19,999
 19,777
 12,257
 13,288
Other investments          20,471
 8,936
           $294,465
 265,418

During the three and nine months ended August 31, 2018, Rialto received $2.7 million and $10.1 million, respectively, of advance distributions with regard to Rialto's carried interests in its real estate funds in order to cover income tax obligations resulting from allocations of taxable income to Rialto's carried interests in these funds. During the three and nine months ended August 31, 2017, Rialto received $0.8 million and $3.9 million, respectively, of such advanced distributions. During the three and nine months ended August 31, 2018, Rialto received $3.7 million and $9.4 million, respectively, of distributions with regard to its carried interest in Rialto Real Estate Fund, LP, Rialto Real Estate Fund II, LP, and Rialto Capital CMBS Fund, LP. During the three and nine months ended August 31, 2017, Rialto received $10.6 million and $29.4 million, respectively, of such distributions with regard to its carried interest. These incentive income distributions are not subject to clawbacks and therefore are included in Rialto's revenues.
During 2015, Rialto adopted a Carried Interest Incentive Plan (the "Plan"), under which participating employees in the aggregate may receive up to 40% of the equity units of a limited liability company (a "Carried Interest Entity") that is entitled to carried interest distributions made by a fund or other investment vehicle (a "Fund") managed by a subsidiary of Rialto. As such, those employees receiving equity units in a Carried Interest Entity may benefit from distributions made by a Fund to the extent the Carried Interest Entity makes distributions to its equity holders. The units issued to employees are equity awards and are subject to vesting schedules and forfeiture or repurchase provisions in the case of a termination of employment.

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)August 31,
2018		 November 30,
2017
Assets:   
Cash and cash equivalents$36,406
 95,552
Loans receivable697,262
 538,317
Real estate owned266,406
 348,601
Investment securities2,219,660
 1,849,795
Investments in partnerships406,600
 393,874
Other assets43,046
 42,949
 $3,669,380
 3,269,088
Liabilities and equity:   
Accounts payable and other liabilities$32,081
 48,374
Notes payable (1)591,329
 576,810
Equity3,045,970
 2,643,904
 $3,669,380
 3,269,088
(1)
Notes payable are net of debt issuance costs of $2.9 million and $3.1 million, as of August 31, 2018 and November 30, 2017, respectively.
Statements of Operations
 Three Months Ended Nine Months Ended
 August 31, August 31,
(In thousands)2018 2017 2018 2017
Revenues$97,973
 64,267
 283,510
 182,453
Costs and expenses23,299
 26,752
 66,735
 83,753
Other income (expense), net (1)(22,644) 245
 (1,166) 9,893
Net earnings of unconsolidated entities$52,030
 37,760
 215,609
 108,593
Rialto equity in earnings from unconsolidated entities$5,266
 4,858
 18,496
 11,310
(1)Other income (expense), net, includes realized and unrealized gains (losses) on investments.

(10)(9)Lennar Multifamily Segment
The Company is actively involved, primarily through unconsolidated entities, in the development, construction and property management 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)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Assets:      
Cash and cash equivalents$13,748
 8,676
$5,203
 7,832
Receivables (1)66,265
 69,678
80,270
 73,829
Land under development294,104
 208,618
347,989
 277,894
Investments in unconsolidated entities482,241
 407,544
510,223
 481,129
Other assets33,699
 16,209
102,511
 33,535
$890,057
 710,725
$1,046,196
 874,219
Liabilities:      
Accounts payable and other liabilities$152,566
 149,715
$175,654
 170,616
Notes payable (2)39,662
 —
$215,316
 170,616
(1)Receivables primarily related to general contractor services, net of deferrals and management fee income receivables due from unconsolidated entities asentities.
(2)Notes payable are net of August 31, 2018 and November 30, 2017, respectively.debt issuance costs.


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 it)them) has 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. Additionally, the Company guarantees the construction costs of the project as construction cost over-runs would be paid by the Company. Generally, these payments would be increases toincrease the Company's investment in the entities and would increase its share of funds the entities distribute after the achievement of certain thresholds. As of both AugustMay 31, 20182019 and November 30, 2017,2018, the fair value of the completion guarantees was immaterial. Additionally, as of AugustMay 31, 20182019 and November 30, 2017,2018, the Lennar Multifamily segment had $4.6$1.2 million and $4.7$4.6 million, respectively, of letters of credit outstanding primarily for credit enhancements for the bank debt of certain of its unconsolidated entities and deposits on land purchase contracts. These letters of credit are included in the disclosure in Note 12 related to the Company's performance and financial letters of credit. As of Augustboth May 31, 20182019 and November 30, 2017, Lennar2018, Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $1.1 billion$1.0 billion.
Lennar Corporation and $896.7 million, respectively.Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


In many instances, the Lennar Multifamily segment is appointed as the construction, development and property manager for certain of its Lennar Multifamily unconsolidated entities and receives fees for performing this function. During the three and ninesix months ended AugustMay 31, 2018,2019, the Lennar Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $12.2$13.3 million and $36.1$26.4 million, respectively. During the three and ninesix months ended AugustMay 31, 2017,2018, the Lennar Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $13.1$12.4 million and $41.2$23.9 million, respectively.
The Lennar Multifamily segment also provides general contractor services for construction of some of the rental properties owned by unconsolidated entities in which the Company has an investment. During the three and ninesix months ended AugustMay 31, 2018,2019, the Lennar Multifamily segment provided general contractor services, net of deferrals, totaling $83.8$99.2 million and $262.6$181.6 million, respectively, which were partially offset by costs related to those services of $80.5$95.2 million and $252.7$174.6 million, respectively. During the three and ninesix months ended AugustMay 31, 2017,2018, the Lennar Multifamily segment provided general contractor services, net of deferrals, totaling $90.3$97.0 million and $250.7$178.8 million, respectively, which were partially offset by costs related to those services of $86.7$93.6 million and $243.7$172.2 million, respectively.
The Lennar Multifamily Venture Fund I (the "Venture Fund"("LMV I") is a long-term multifamily development investment vehicle involved in the development, construction and property management of class-A multifamily assets with $2.2 billion in equity commitments, including a $504 million co-investment commitment by Lennar comprised of cash, undeveloped land and preacquisition costs. During the ninesix months ended AugustMay 31, 2018, $316.12019, $121.8 million in equity commitments were called, of which the Company contributed its portion of $73.4$30.2 million. During the ninesix months ended AugustMay 31, 2018,2019, the Company received $11.8$9.5 million of distributions as a return of capital from the Venture Fund.LMV I. As of AugustMay 31, 2018, $1.82019, $1.9 billion of the $2.2 billion in equity commitments had been called, of which the Company had contributed $424.1$471.1 million, representing its pro-rata portion of the called equity, resulting in a remaining equity commitment for the Company of $79.9$32.9 million. As of AugustMay 31, 20182019 and November 30, 2017,2018, the carrying value of the Company's investment in the Venture FundLMV I was $378.2$395.4 million and $323.8$383.4 million, respectively.
In March 2018, the Lennar Multifamily segment completed the first closing of a second Lennar Multifamily Venture, Lennar Multifamily Venture II LP ("Venture FundLMV II"), for the development, construction and property management of class-A multifamily assets. During the three months ended May 31, 2019, LMV II's equity commitments were increased by an additional $471 million, including a $126 million additional co-investment commitment by Lennar. As of AugustMay 31, 2018, Venture Fund2019, LMV II had approximately $655 million$1.3 billion of equity commitments, including a $255$381 million co-investment commitment by Lennar comprised of cash, undeveloped land and preacquisition costs. As of and duringDuring the ninesix months ended AugustMay 31, 2018, $146.12019, $138.3 million in equity commitments were called, of which the Company contributed its portion of $55.4$23.5 million, which was made up of a $108.3$64.5 million of inventory and cash contributions, offset by $52.9$40.9 million of distributions as a return of capital resulting in a remaining equity commitment for the Company of $199.6$276.3 million. As of AugustMay 31, 2019, $349.4 million of the $1.3 billion in equity commitments had been called. As of May 31, 2019 and November 30, 2018, the carrying value of the Company's investment in Venture FundLMV II was $45.6 million.$85.0 million and $63.0 million, respectively. The difference between the Company's net contributions and the carrying value of the Company's investments was related to a basis difference. Venture FundLMV II was seeded initially with sixeight undeveloped multifamily assets that were previously purchased by the Lennar Multifamily segment totaling approximately 2,2003,000 apartments with projected project costs of approximately $900 million.


$1.3 billion. As of May 31, 2019, LMV II was seeded with ten undeveloped assets totaling approximately 3,800 apartments with projected costs of approximately $1.6 billion. Subsequent to May 31, 2019, the Multifamily segment announced the final closing of LMV II with $1.3 billion of equity commitments.
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)August 31,
2018		 November 30,
2017
(Dollars in thousands)May 31,
2019		 November 30,
2018
Assets:      
Cash and cash equivalents$30,472
 37,073
$28,217
 61,571
Operating properties and equipment3,623,800
 2,952,070
4,063,560
 3,708,613
Other assets38,309
 36,772
50,227
 40,899
$3,692,581
 3,025,915
$4,142,004
 3,811,083
Liabilities and equity:      
Accounts payable and other liabilities$201,301
 212,123
$190,785
 199,119
Notes payable (1)1,287,488
 879,047
1,596,850
 1,381,656
Equity2,203,792
 1,934,745
2,354,369
 2,230,308
$3,692,581
 3,025,915
$4,142,004
 3,811,083
Multifamily investments in unconsolidated entities$510,223
 481,129
(1)
Notes payable are net of debt issuance costs of $17.4$21.0 million and $17.6$15.7 million, as of both AugustMay 31, 20182019 and November 30, 2017, 2018,
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


respectively.
Statements of Operations
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(In thousands)2018 2017 2018 2017
(Dollars in thousands)2019 2018 2019 2018
Revenues$31,907
 18,822
 82,980
 44,414
$38,609
 27,121
 73,980
 51,073
Costs and expenses47,235
 28,904
 122,512
 75,727
55,085
 43,482
 111,213
 75,277
Other income, net13,588
 47,210
 52,457
 125,939
—
 31,562
 21,400
 38,869
Net earnings (loss) of unconsolidated entities$(1,740) 37,128
 12,925
 94,626
$(16,476) 15,201
 (15,833) 14,665
Lennar Multifamily equity in earnings (loss) from unconsolidated entities (1)$(1,730) 11,645
 15,293
 44,219
Multifamily equity in earnings (loss) from unconsolidated entities and other gain (1)$(3,018) 14,281
 7,563
 17,023
(1)
During the six months ended May 31, 2019, the Multifamily segment sold, through its unconsolidated entities, one operating property and an investment in an operating property resulting in the segment's $15.5 million share of gains. The gain of $11.9 million recognized on the sale of the investment in an operating property and recognition of the Company's share of deferred development fees that were capitalized at the joint venture level are included in Multifamily equity in earnings (loss) from unconsolidated entities and other gain, and are not included in net earnings (loss) of unconsolidated entities. During the three and ninesix months ended AugustMay 31, 2018, the Lennar Multifamily segment sold onetwo and fourthree operating properties, respectively, through its unconsolidated entities resulting in the segment's $1.7$17.4 million and $23.3$21.5 million share of gains, respectively. During the three and nine months ended August 31, 2017, the Lennar Multifamily segment sold two and five operating properties, respectively, through its unconsolidated entities resulting in the segment's $15.4 million and $52.9 million share of gains, respectively.

(10) Lennar Other
Lennar Other primarily includes fund investments the Company retained when it sold the Rialto asset and investment management platform, as well as strategic investments in technology companies.
The assets and liabilities related to Lennar Other were as follows:
(In thousands)May 31,
2019		 November 30,
2018
Assets:   
Cash and cash equivalents$15,768
 24,334
Restricted cash975
 7,175
Real estate owned, net6,758
 25,632
Investments in unconsolidated entities429,943
 424,104
Investments held-to-maturity60,449
 59,974
Other assets35,257
 47,740
 $549,150
 588,959
Liabilities:   
Notes and other debts payable$15,178
 14,488
Other liabilities14,861
 53,020
 $30,039
 67,508
Investments held-to-maturity
At May 31, 2019 and November 30, 2018, the carrying value of Lennar Other's CMBS was $60.4 million and $60.0 million, respectively. These securities were purchased at discounts ranging from 6.5% to 86.1% with coupon rates ranging from 1.3% to 4.0%, stated and assumed final distribution dates between November 2020 and October 2026, and stated maturity dates between November 2049 and March 2059. The Company reviews changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on its CMBS. Based on the Company’s assessment, no impairment charges were recorded during either the three or the six months ended May 31, 2019 or 2018. The Company classifies these securities as held-to-maturity based on its intent and ability to hold the securities until maturity. The Company has financing agreements to finance CMBS that have been purchased as investments by the segment. At May 31, 2019 and November 30, 2018, the carrying amount, net of debt issuance costs, of outstanding debt in these agreements was $13.3 million and $12.6 million, respectively, and the interest is incurred at a rate of 4.7% to 4.8%.
(11)Lennar Homebuilding Cash and Cash Equivalents
(11) Cash and Cash Equivalents and Restricted Cash
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. Homebuilding restricted cash consists of customer deposits on home sales held in restricted accounts until title
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


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. Financial Services’ restricted cash primarily consists of cash balances required by certain warehouse lines of credit agreements and proceeds from loan sales not yet remitted to a warehouse bank. Financial Services' restricted cash also included upfront deposits and application fees RMF receives before originating loans and is recognized as income once the loan has been originated, as well as 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 the transacting parties.
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported in the condensed consolidated statements of cash flows to the respective condensed consolidated balance sheets:
 May 31,
(In thousands)2019 2018
Homebuilding:   
Cash and cash equivalents$800,678
 931,753
Restricted cash11,687
 17,509
Financial Services:   
Cash and cash equivalents171,892
 162,992
Restricted cash14,868
 12,892
Multifamily:   
Cash and cash equivalents5,203
 15,380
Lennar Other:   
Cash and cash equivalents15,768
 43,729
Restricted cash975
 12,096
Total cash and cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows$1,021,071
 1,196,351

Homebuilding cash and cash equivalents as of AugustMay 31, 20182019 and November 30, 20172018 included $576.6$478.9 million and $569.8$926.1 million, respectively, of cash held in escrow for approximately three days.

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


(12)Lennar Homebuilding Senior Notes and Other Debts Payable
(Dollars in thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Unsecured revolving credit facility$650,000
 —
$550,000
 —
4.125% senior notes due December 2018274,887
 274,459
0.25% convertible senior notes due 20191,292
 —
4.500% senior notes due 2019499,364
 498,793
499,981
 499,585
4.50% senior notes due 2019598,997
 598,325
599,602
 599,176
6.625% senior notes due 2020 (1)313,752
 —
307,701
 311,735
2.95% senior notes due 2020298,692
 298,305
299,129
 298,838
8.375% senior notes due 2021 (1)440,156
 —
427,378
 435,897
4.750% senior notes due 2021497,915
 497,329
498,502
 498,111
6.25% senior notes due December 2021 (1)316,541
 —
312,768
 315,283
4.125% senior notes due 2022596,647
 595,904
597,390
 596,894
5.375% senior notes due 2022 (1)261,769
 —
259,627
 261,055
4.750% senior notes due 2022570,185
 569,484
571,104
 570,564
4.875% senior notes due December 2023395,662
 394,964
396,156
 395,759
4.500% senior notes due 2024645,897
 645,353
646,440
 646,078
5.875% senior notes due 2024 (1)454,001
 —
450,496
 452,833
4.750% senior notes due 2025497,003
 496,671
497,336
 497,114
5.25% senior notes due 2026 (1)409,436
 —
408,527
 409,133
5.00% senior notes due 2027 (1)353,371
 —
353,083
 353,275
4.75% senior notes due 2027892,110
 892,657
892,672
 892,297
6.95% senior notes due 2018—
 249,342
0.25% convertible senior notes due 2019—
 1,291
Mortgage notes on land and other debt440,310
 398,417
823,049
 508,950
$9,407,987
 6,410,003
$9,390,941
 8,543,868

(1)These notes were obligations of CalAtlantic when it was acquired, and were subsequently exchanged in part for notes of Lennar Corporation as follows: $267.7 million principal amount of 6.625% senior notes due 2020, $397.6 million principal amount of 8.375% senior notes due 2021, $292.0 million principal amount of 6.25% senior notes due 2021, $240.8 million principal amount of 5.375% senior notes due 2022, $421.4 million principal amount of 5.875% senior notes due 2024, $395.5 million principal amount of 5.25% senior notes due 2026 and $347.3 million principal amount of 5.00% senior notes due 2027. As part of purchase accounting, the senior notes have been recorded at their fair value as of the date of acquisition (February 12, 2018).
The carrying amounts of the senior notes listedin the table above are net of debt issuance costs totaling $33.5of $26.9 million and $31.2 million as of both AugustMay 31, 20182019 and November 30, 2017.2018, respectively.
In February 2018,April 2019, the Company amended the credit agreement governing its unsecured revolving credit facility (the "Credit Facility") to increase the maximum borrowingscommitments from $2.0$2.3 billion to $2.6$2.4 billion and extend the maturity on $2.2 billion of the Credit Facility from June 2022one year to April 2023,2024, with $70 million that matured in June 2018 and the remaining $50 million maturing in June 2020. As of August 31, 2018, theThe Credit Facility includedhas a $315$400 million accordion feature, subject to additional commitments.commitments, thus the maximum borrowings are $2.8 billion. 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. 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. The Company believes it was in compliance with its debt covenants at AugustMay 31, 2018.2019. In addition, the Company had $365$315 million of letter of credit facilities with different financial institutions.
The Company’s performance letters of credit outstanding were $542.2$663.0 million and $384.4$598.4 million, respectively, at AugustMay 31, 20182019 and November 30, 2017.2018, respectively. The Company’s financial letters of credit outstanding were $183.3$158.5 million and $127.4$165.4 million, at AugustMay 31, 20182019 and November 30, 2017,2018, 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 AugustMay 31, 2018,2019, the Company had outstanding surety bonds of $2.6$2.8 billion including performance surety bonds related to site improvements at various projects (including certain projects in the Company’s joint


ventures) and financial surety bonds. 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 AugustMay 31, 2018,2019, there were approximately $1.4$1.3 billion, or 52%46%, of anticipated future costs to complete related to these site
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


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.
During the second quarter 2018, holders of $6.7 million principal amount of CalAtlantic’s 1.625% convertible senior notes due 2018 and $266.2 million principal amount of CalAtlantic’s 0.25% convertible senior notes dueSubsequent to May 31, 2019, either caused the Company to purchase them for cash or converted them into a combination of the Company’s Class A and Class B common stock and cash, resulting in the Company issuing approximately 3,654,000 shares of Class A common stock and 72,000 shares of Class B common stock, and paying $59.1 million in cash to former noteholders. All but $1.3 million of the principal balance of the convertible senior notes had either been converted or redeemed.
In May 2018, the Company redeemed $575$500 million aggregate principal amount of the 8.375%its 4.500% senior notes due 2018 ("8.375% Senior Notes due 2018"). The redemption price, which was paid in cash, was 100% of the principal amount plus accrued but unpaid interest. The 8.375% Senior Notes due 2018 with $575 million of principal amount were obligations of CalAtlantic when it was acquired and $485.6 million principal amount was subsequently exchanged in part for notes of the Company.
In June 2018, the Company redeemed $250 million aggregate principal amount of the 6.95% senior notes due 2018.2019. The redemption price, which was paid in cash, was 100% of the principal amount plus accrued but unpaid interest.
The Company's senior notes are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries and some of the Company's other subsidiaries. Although the guarantees 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.

(13)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 condensed consolidated balance sheets. The activity in the Company’s warranty reserve was as follows:
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(In thousands)2018 2017 2018 20172019 2018 2019 2018
Warranty reserve, beginning of the period$294,710
 151,833
 164,619
 135,403
$295,622
 270,056
 319,109
 164,619
Warranties issued48,878
 28,795
 121,422
 78,945
47,855
 47,855
 81,826
 72,544
Adjustments to pre-existing warranties from changes in estimates (1)(4,785) 4,436
 5,310
 14,769
2,004
 7,227
 (7,523) 10,095
Warranties assumed related to acquisitions(5) —
 117,549
 6,345
—
 9,150
 —
 117,554
Payments(40,575) (25,758) (110,677) (76,156)(53,857) (39,578) (101,788) (70,102)
Warranty reserve, end of period$298,223
 159,306
 298,223
 159,306
$291,624
 294,710
 291,624
 294,710

(1)The adjustments to pre-existing warranties from changes in estimates during the three and nine months ended August 31, 2018 and 2017are primarily related to specific claims related tofor certain of the Company's homebuilding communities and other adjustments.



(14)Share-Based Payments
During the three and ninesix months ended AugustMay 31, 2019, the Company granted employees an immaterial number of nonvested shares. During the three months ended May 31, 2018, the Company granted employees 1.3 million and 1.7 millionan immaterial number of nonvested shares, respectively.shares. During both the three and ninesix months ended AugustMay 31, 2017,2018 the Company granted 1.30.4 million nonvested shares, respectively.shares. Compensation expense related to the Company’s nonvested shares for the three and ninesix months ended AugustMay 31, 20182019 was $21.9$14.5 million and $55.6$31.4 million, respectively. Compensation expense related to the Company’s nonvested shares for the three and ninesix months ended AugustMay 31, 20172018 was $18.5$16.0 million and $43.3$33.7 million, respectively.

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (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 AugustMay 31, 20182019 and November 30, 20172018, 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.
 August 31, 2018 November 30, 2017 May 31, 2019 November 30, 2018
(In thousands)
Fair Value
Hierarchy
 
Carrying
Amount
 Fair Value 
Carrying
Amount
 Fair Value
Fair Value
Hierarchy
 
Carrying
Amount
 Fair Value 
Carrying
Amount
 Fair Value
ASSETS                
Rialto:        
Investments held-to-maturityLevel 3 $211,097
 232,598
 179,659
 199,190
Lennar Financial Services:        
Financial Services:        
Loans held-for-investment, netLevel 3 $74,669
 67,474
 44,193
 41,795
Level 3 $76,248
 71,872
 70,216
 63,794
Investments held-to-maturityLevel 2 $64,203
 63,939
 52,327
 52,189
Level 3 $167,014
 194,796
 136,982
 149,767
Investments held-to-maturityLevel 2 $32,398
 32,366
 52,490
 52,220
Lennar Other:        
Investments held-to-maturityLevel 3 $60,449
 64,364
 59,974
 72,986
LIABILITIES                
Lennar Homebuilding senior notes and other debts payableLevel 2 $9,407,987
 9,385,243
 6,410,003
 6,598,848
Rialto notes payable and other debts payableLevel 2 $239,392
 248,520
 625,081
 644,644
Lennar financial services notes and other debts payableLevel 2 $966,626
 966,626
 937,431
 937,431
Homebuilding senior notes and other debts payableLevel 2 $9,390,941
 9,560,305
 8,543,868
 8,336,166
Financial Services notes and other debts payableLevel 2 $1,214,017
 1,215,548
 1,558,702
 1,559,718
Multifamily notes payableLevel 2 $39,662
 39,662
 —
 —
Lennar Other notes and other debts payableLevel 2 $15,178
 15,178
 14,488
 14,488

The following methods and assumptions are used by the Company in estimating fair values:
Rialto—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 quoted interest rates and for the warehouse repurchase financing agreements fair values approximate their carrying value due to their short-term 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. For notes and other debts payable, the fair values approximate their carrying value due to variable interest pricing terms and the short-term nature of the borrowings.
Lennar Other—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 quoted interest rates and for the warehouse repurchase financing agreements fair values approximate their carrying value due to their short-term maturities.
Homebuilding—For senior notes and other debts payable, the fair value of fixed-rate borrowings is primarily 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.
Multifamily—For notes payable, the fair values approximate their carrying value due to variable interest pricing terms and the short-term nature of the borrowings.
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.

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


The Company’s financial instruments measured at fair value on a recurring basis are summarized below:
(In thousands)
Fair Value
Hierarchy
 Fair Value at
August 31,
2018		 Fair Value at
November 30,
2017
Fair Value
Hierarchy
 Fair Value at
May 31,
2019		 Fair Value at
November 30,
2018
Rialto Financial Assets:    
Financial Services Assets (Liabilities):    
RMF loans held-for-sale (1)Level 3 $140,718
 234,403
Level 3 $259,599
 61,691
Lennar Financial Services Assets (Liabilities):    
Loans held-for-sale (2)Level 2 $945,387
 937,516
Financial Services residential loans held-for-sale (2)Level 2 $1,160,676
 1,152,198
Investments available-for-saleLevel 1 $47,034
 57,439
Level 1 $3,356
 4,161
Mortgage loan commitmentsLevel 2 $19,282
 9,873
Level 2 $25,225
 16,373
Forward contractsLevel 2 $(2,645) 1,681
Level 2 $(11,273) (10,360)
Mortgage servicing rightsLevel 3 $35,074
 31,163
Level 3 $29,419
 37,206

(1)The aggregate fair value of RialtoRMF loans held-for-sale of $140.7$259.6 million at AugustMay 31, 2019 exceeded their aggregate principal balance of $255.7 million by $3.9 million. The aggregate fair value of RMF loans held-for-sale of $61.7 million at November 30, 2018 exceeded their aggregate principal balance of $139.9$61.0 million by $0.8 million. The aggregate fair value of loans held-for-sale of $234.4 million at November 30, 2017 was below their aggregate principal balance of $235.4 million by $1.0$0.7 million.
(2)The aggregate fair value of Lennar Financial Services residential loans held-for-sale of $945.4 million$1.2 billion at AugustMay 31, 2019 exceeded their aggregate principal balance of $1.1 billion by $40.2 million. The aggregate fair value of Financial Services residential loans held-for-sale of $1.2 billion at November 30, 2018 exceeded their aggregate principal balance of $917.1 million$1.1 billion by $28.3 million. The aggregate fair value of Lennar Financial Services loans held-for-sale of $937.5 million at November 30, 2017 exceeded their aggregate principal balance of $908.8 million by $28.7$37.3 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:
RialtoRMF 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.
Lennar Financial Services residential 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 was included in Lennar Financial Services’ loans held-for-sale as of AugustMay 31, 20182019 and November 30, 2017.2018. Fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics.
Lennar Financial Services investments available-for-sale - The fair value of these investments is based on the quoted market prices for similar financial instruments.
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. The fair value of forward contracts was included in the Lennar Financial Services segment's other liabilities as of May 31, 2019 and November 30, 2018.

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


August 31, 2018. The fair value of forward contracts was included in the Lennar Financial Services segment's other assets as of November 30, 2017.
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 AugustMay 31, 2018,2019, the segment had open commitments amounting to $1.5 billion to sell MBS with varying settlement dates through November 2018.August 2019.
Lennar Financial Services mortgage servicing rights - Lennar Financial Services records mortgage servicing rights when it sells loans on a servicing-retained basis or through the acquisition or assumption of the right to service a financial asset. The fair value of the mortgage servicing rights is calculated using third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and delinquency rates. As of AugustMay 31, 2018,2019, the key assumptions used in determining the fair value include a 12.5%16.3% mortgage prepayment rate, a 12.5%12.4% discount rate and an 8.8%a 7.7% delinquency rate. The fair value of mortgage servicing rights is included in the Lennar Financial Services segment's other assets.
The changes in fair values for Level 1 and Level 2 financial instruments measured on a recurring basis are shown below by financial instrument and financial statement line item:
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(In thousands)2018 2017 2018 20172019 2018 2019 2018
Changes in fair value included in Lennar Financial Services revenues:       
Changes in fair value included in Financial Services revenues:       
Loans held-for-sale$(692) (5,804) (403) 18,233
$13,007
 16,586
 2,887
 289
Mortgage loan commitments$(5,810) (829) 9,409
 10,106
9,111
 13,438
 8,852
 15,219
Forward contracts$3,550
 1,267
 (4,326) (31,996)(9,766) (11,039) (913) (7,876)
Investments available-for-sale$166
 —
 292
 (4)176
 126
 176
 126
Changes in fair value included in other comprehensive income (loss), net of tax:              
Lennar Financial Services investment available-for-sale$(110) 165
 (1,357) 1,556
Financial Services investments available-for-sale561
 (589) 769
 (1,247)

Interest on Lennar Financial Services loans held-for-sale and RialtoRMF loans held-for-sale measured at fair value is calculated based on the interest rate of the loanloans and recorded as revenues in the Lennar Financial Services’ statement of operations and Rialto'sRMF's statement of operations, respectively.

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


The following table represents the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements:
Three Months Ended August 31,Three Months Ended May 31,
2018 20172019 2018
Lennar Financial Services Rialto Lennar Financial Services RialtoFinancial Services
(In thousands)Mortgage servicing rights RMF loans held-for-sale Mortgage servicing rights RMF loans held-for-saleMortgage servicing rights RMF loans held-for-sale Mortgage servicing rights RMF loans held-for-sale
Beginning balance$34,592
 325,373
 27,370
 82,803
$35,448
 131,042
 36,772
 123,398
Purchases/loan originations1,734
 333,680
 2,447
 439,266
672
 435,189
 1,857
 425,870
Sales/loan originations sold, including those not settled—
 (516,958) —
 (235,922)—
 (299,962) —
 (228,141)
Disposals/settlements(1,290) —
 (1,092) —
(1,378) (9,920) (3,326) —
Changes in fair value (1)38
 (1,400) (1,004) 707
(5,323) 3,022
 (711) 2,618
Interest and principal paydowns—
 23
 —
 (1,107)—
 228
 —
 1,628
Ending balance$35,074
 140,718
 27,721
 285,747
$29,419
 259,599
 34,592
 325,373
Nine Months Ended August 31,Six Months Ended May 31,
2018 20172019 2018
Lennar Financial Services Rialto Lennar Financial Services RialtoFinancial Services
(In thousands)Mortgage servicing rights RMF loans held-for-sale Mortgage servicing rights RMF loans held-for-saleMortgage servicing rights RMF loans held-for-sale Mortgage servicing rights RMF loans held-for-sale
Beginning balance$31,163
 234,403
 23,930
 126,947
$37,206
 61,691
 31,163
 234,403
Purchases/loan originations5,880
 997,515
 8,159
 1,262,926
2,259
 705,311
 4,145
 663,835
Sales/loan originations sold, including those not settled—
 (1,073,211) —
 (1,106,316)—
 (500,549) —
 (575,853)
Disposals/settlements(5,830) (19,600) (2,887) —
(2,287) (9,920) (4,539) —
Changes in fair value (1)3,861
 1,970
 (1,481) 3,205
(7,759) 3,324
 3,823
 3,370
Interest and principal paydowns—
 (359) —
 (1,015)—
 (258) —
 (382)
Ending balance$35,074
 140,718
 27,721
 285,747
$29,419
 259,599
 34,592
 325,373

(1)Changes in fair value for RialtoRMF loans held-for-sale and Lennar Financial Services mortgage servicing rights are included in Rialto'sRMF's and Lennar Financial Services' revenues, respectively.
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 table 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:
   Three Months Ended August 31,
   2018 2017
(In thousands)
Fair Value
Hierarchy
 Carrying Value Fair Value Total Losses, Net (1) Carrying Value Fair Value Total Gains (Losses), Net (1)
Financial assets             
Rialto:             
FDIC Portfolios loans held-for-saleLevel 3 $—
 —
 —
 20,863
 19,237
 (1,626)
Non-financial assets             
Lennar Homebuilding:             
Land and land under development (2)Level 3 $25,173
 13,373
 (11,800) —
 —
 —
Rialto:             
REO, net (3):             
Upon acquisition/transferLevel 3 $—
 —
 —
 1,200
 1,376
 176
Upon management periodic valuationsLevel 3 $17,663
 16,196
 (1,467) 35,507
 22,765
 (12,742)
   Three Months Ended May 31,
   2019 2018
(In thousands)
Fair Value
Hierarchy
 Carrying Value Fair Value Total Losses, Net (1) Carrying Value Fair Value Total Losses, Net (1)
Non-financial assets             
Homebuilding:             
Land and land under development (1)Level 3 $—
 —
 —
 13,858
 3,122
 (10,736)


   Six Months Ended May 31,
   2019 2018
(In thousands)
Fair Value
Hierarchy
 Carrying Value Fair Value Total Losses, Net (1) Carrying Value Fair Value Total Losses, Net (1)
Non-financial assets             
Homebuilding:             
Land and land under development (1)Level 3 $6,954
 3,001
 (3,953) 66,787
 46,687
 (20,100)

   Nine Months Ended August 31,
   2018 2017
(In thousands)
Fair Value
Hierarchy
 Carrying Value Fair Value Total Losses, Net (1) Carrying Value Fair Value Total Losses, Net (1)
Financial assets             
Rialto:             
Impaired loans receivableLevel 3 $—
 —
 —
 31,554
 18,885
 (12,669)
FDIC Portfolios loans held-for-saleLevel 3 $—
 —
 —
 26,081
 19,237
 (6,844)
Non-financial assets             
Lennar Homebuilding:             
Finished homes and construction in progress (2)Level 3 $—
 —
 —
 6,659
 2,745
 (3,914)
Land and land under development (2)Level 3 $91,960
 60,059
 (31,901) 6,771
 3,094
 (3,677)
Rialto:             
REO, net (3):             
Upon acquisition/transferLevel 3 $—
 —
 —
 31,503
 30,066
 (1,437)
Upon management periodic valuationsLevel 3 $23,629
 16,196
 (7,433) 118,497
 79,601
 (38,896)
(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 three and nine months ended August 31, 2018 and 2017.
(2)Valuation adjustments were included in Lennar Homebuilding costs and expenses in the Company's condensed consolidated statementstatements of operations for the three and nine months ended August 31, 2018 and 2017.comprehensive income (loss).
(3)The fair value of REO, net is based upon appraised value at the time of foreclosure or management's best estimate. In addition, management periodically performs valuations of its REO. The losses, net upon the transfer or acquisition of REO and impairments were included in Rialto other expense, net, in the Company’s condensed consolidated statement of operations for the three and nine months ended August 31, 2018 and 2017.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


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. The Company disclosed its accounting policy related to inventories and its review for indicators of impairment in the Summary of Significant Accounting Policies in its Form 10-K for the year ended November 30, 2017.2018.
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, changes in market conditions and other specific developments or changes in assumptions may cause the Company to re-evaluate its strategy regarding previously impaired inventory, as well as inventory not currently impaired but for which indicators of impairment may arise if market deterioration occurs, and certain other 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.
On a quarterly basis, the Company reviews its active communities for indicators of potential impairments. As of Augustboth May 31, 20182019 and 2017,2018, there were 1,307 and 7531,320 active communities, excluding unconsolidated entities, respectively. As of AugustMay 31, 2018,2019, the Company identified 1552 communities with 8432,213 homesites and a corresponding carrying value of $219.3$415.2 million as having potential indicators of impairment. For the ninesix months ended AugustMay 31, 2019, the Company recorded no valuation adjustments related to these communities.
As of May 31, 2018, the Company recorded valuation adjustments of $29.4 million on 688 homesites in fiveidentified 19 communities with a carrying value of $56.5 million.
As of August 31, 2017, the Company identified six communities with 4991,013 homesites and a corresponding carrying value of $31.9$113.2 million as having potential indicators of impairment. For the ninesix months ended AugustMay 31, 2017,2018, the Company recorded valuation adjustments of $7.5$17.6 million on 469570 homesites in sixthree communities with a carrying value of $12.0$31.3 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 ninesix months ended AugustMay 31, 2018 and 2017:2018:
Nine Months EndedSix Months Ended
August 31, 2018 August 31, 2017May 31, 2018
Unobservable inputsRange RangeRange
Average selling price$233,000-$843,000 $125,000-$567,000$233,000-$572,000
Absorption rate per quarter (homes)4-16 4-105-16
Discount rate20% 20%20%




(16)Variable Interest Entities
The Company evaluated the joint venture agreements of its joint ventures that were formed or that had reconsideration events, such as changes in the governing documents or to debt arrangements, during the ninesix months ended AugustMay 31, 2018.2019. Based on the Company's evaluation, during the ninesix months ended AugustMay 31, 2018,2019, the Company consolidated and deconsolidated the same VIE thus resulting in no change to thefour entities that had a total combined assets and liabilities during that period. In addition, duringof $500.7 million and $585.0 million, respectively. During the ninesix months ended AugustMay 31, 2018, the Company consolidated an entity2019, there were no VIEs that had total assets of $5.0 million.
The Company’s recorded investments in unconsolidated entities were as follows:
(In thousands)August 31,
2018		 November 30,
2017
Lennar Homebuilding$997,488
 900,769
Rialto$294,465
 265,418
Lennar Multifamily$482,241
 407,544

deconsolidated.
Consolidated VIEs
As of AugustMay 31, 2019, the carrying amounts of the VIEs’ assets and non-recourse liabilities that consolidated were $1.4 billion and $928.9 million, respectively. As of November 30, 2018, the carrying amounts of the VIEs’ assets and non-recourse liabilities that consolidated were $775.7$666.2 million and $345.3 million, respectively. As of November 30, 2017, the carrying amounts of the VIEs’ assets and non-recourse liabilities that consolidated were $799.4 million and $389.7$242.5 million, respectively. Those assets are owned by, and those liabilities are obligations of, the VIEs, not the Company.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


The increase in VIEs' assets and non-recourse liabilities during the six months ended May 31, 2019 was primarily due to the consolidation of a previously unconsolidated entity, which resulted from a reconsideration event that required the reassessment of a homebuilding unconsolidated entity. The reconsideration event was the change of the entity’s conclusion with respect to future capital calls required to fund operations and debt repayments. Upon reconsideration, the Company determined that the homebuilding entity continued to meet the accounting definition of a VIE and the Company was deemed to be the primary beneficiary. The Company consolidated the previously unconsolidated entity’s net assets at estimated fair value. The determination of fair value of the homebuilding entity’s net assets requires the discounting of estimated cash flows at a rate the Company believes a market participant would determine to be commensurate with the inherent risks associated with the homebuilding entity and related cash flow streams. The Company used a 15% discount rate in determining the fair value of the entity, which was subject to perceived risks associated with the entity’s cash flow streams. There was no non-controlling interest recorded in consolidation. As a result, the Company recorded a one-time loss of $48.9 million from the consolidation which was included in Homebuilding other income (expense), net on the condensed consolidated statements of operations. At May 31, 2019, the consolidated homebuilding entity had total assets and liabilities of $240.5 million and $356.4 million, respectively.
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 or other debts payable. 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 a 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.
Unconsolidated VIEs
TheAt May 31, 2019 and November 30, 2018, the Company’s recorded investments in VIEs that are unconsolidated and its estimated maximum exposure to loss were as follows:
As of August 31, 2018
(In thousands)
Investments in
Unconsolidated VIEs
 
Lennar’s Maximum
Exposure to Loss
Lennar Homebuilding (1)$82,296
 149,376
Rialto (2)211,097
 211,097
Lennar Multifamily (3)440,916
 725,821
 $734,309
 1,086,294
As of November 30, 2017
(In thousands)
Investments in
Unconsolidated VIEs
 
Lennar’s Maximum
Exposure to Loss
Lennar Homebuilding (1)$181,804
 248,909
Rialto (2)179,659
 179,659
Lennar Multifamily (3)345,175
 503,364
 $706,638
 931,932
 May 31, 2019 November 30, 2018
(In thousands)
Investments in
Unconsolidated VIEs
 
Lennar’s Maximum
Exposure to Loss
 Investments in
Unconsolidated VIEs		 Lennar’s Maximum
Exposure to Loss
Homebuilding (1)$103,818
 104,117
 123,064
 184,945
Multifamily (2)495,513
 810,723
 463,534
 710,754
Financial Services (3)167,014
 167,014
 136,982
 136,982
Lennar Other (4)65,374
 65,374
 63,919
 63,919
 $831,719
 1,147,228
 787,499
 1,096,600
(1)As of both AugustMay 31, 2018 and November 30, 2017,2019, the maximum exposure to loss of LennarHomebuilding’s investments in unconsolidated VIEs was limited primarily to its investments in the unconsolidated VIEs. As of November 30, 2018, the maximum exposure to loss of Homebuilding’s investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs, except with regard to repayment guarantees of one unconsolidated entities'entity's debt of $60.7 million and $61.6 million, respectively.$54.8 million.
(2)As of both AugustMay 31, 20182019 and November 30, 2017,2018, the maximum recourse exposure to loss of Rialto’sMultifamily's investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs. As of August 31, 2018 and November 30, 2017, investments in unconsolidated VIEs, and Lennar’s maximum exposureexcept with regard to loss included $211.1 million and $179.7 million, respectively, related to Rialto’s investments held-to-maturity.
(3)As of August 31, 2018, the remaining equity commitment of $279.5$309.2 million and $237.0 million, respectively, to fund the Venture FundLMV I and Venture FundLMV II for future expenditures related to the construction and development of its projects was includedand $1.2 million and $4.6 million, respectively, of letters of credit outstanding for certain of the unconsolidated VIEs that could be drawn upon in Lennar'sthe event of default under their debt agreements.
(3)At both May 31, 2019 and November 30, 2018, the maximum recourse exposure to loss. Asloss of the Financial Services segment was limited to its investments in the unconsolidated VIEs, which included $167.0 million and $137.0 million, respectively, related to the Financial Services' CMBS investments held-to-maturity.


November 30, 2017, the remaining equity commitment of $153.3 million to fund the Venture Fund was included in Lennar's maximum exposure for loss. In addition, as of August 31, 2018 and November 30, 2017, 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 $4.6 million and $4.6 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.
(4)At both May 31, 2019 and November 30, 2018, the maximum recourse exposure to loss of the Lennar Other segment was limited to its investments in the unconsolidated VIEs, which included $60.4 million and $60.0 million, respectively, related to the Lennar Other segment's CMBS investments held-to-maturity.
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.shared and the Company and its partners are not de-facto agents. 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.
As of AugustMay 31, 2018,2019, the Company and other partners did not have an obligation to make capital contributions to the VIEs, except for $279.5$309.2 million remaining equity commitment to fund the Venture FundLMV I and Venture FundLMV II for future expenditures related to the
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


construction and development of the projects and $4.6$1.2 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 $60.7 million repayment guarantees of two unconsolidated entities' debt.VIEs. 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.
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.
During the ninesix months ended AugustMay 31, 2018,2019, consolidated inventory not owned decreasedincreased by $64.4$185.7 million with a corresponding decreaseincrease to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as of AugustMay 31, 2018.2019. The decreaseincrease was primarily duerelated to a higher amountthe consolidation of homesite takedowns than construction started on homesites not owned.option contracts, partially offset by the Company exercising its options to acquire land under previously consolidated contracts. 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 condensed consolidated balance sheet as of AugustMay 31, 2018.2019. 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 losslosses related to its option contracts with third parties and unconsolidated entities consisted of its non-refundable option deposits and pre-acquisition costs totaling $241.1$326.8 million and $137.0$209.5 million at AugustMay 31, 20182019 and November 30, 2017,2018, respectively. Additionally, the Company had posted $72.2$69.1 million and $51.8$72.4 million of letters of credit in lieu of cash deposits under certain land and option contracts as of AugustMay 31, 20182019 and November 30, 2017,2018, respectively.

(17)Commitments and Contingent Liabilities
The Company is a 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 properties and disputes regarding the obligation to purchase or sell properties.
In the first quarter of 2017, the Company recorded a $140 million loss due to litigation regarding a contract the Company entered into in 2005 to purchase a property in Maryland. As a result of the litigation, the Company purchased the property for $114 million, which approximated the Company's estimate of fair value for the property. In addition, the Company paid approximately $124 million in interest and other closing costs and have accrued for the amount it expects to pay as reimbursement for attorney's fees.
In July 2017, CalAtlantic Group, Inc., a subsidiary of the Company, was notified by the San Francisco Regional Water Quality Control Board of CalAtlantic’s non-compliance with the Clean Water Act at a development in San Ramon, CA. The


Company expects to pay monetary sanctions to resolve this matter, which the Company does not currently expect will be material.
Our mortgage subsidiary has been subpoenaed by the United States Department of Justice ("DOJ") regarding the adequacy of certain underwriting and quality control processes related to Federal Housing Administration loans originated and sold in prior years. The Company has provided information related to these loans and the Company's processes to the DOJ, and communications are ongoing. The DOJ has to date not asserted any claim for damages or penalties.

(18)New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("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. In July 2015, the FASB deferred the effective date by one year and permitted early adoption of the standard, but not before the original effective date; therefore, ASU 2014-09 will be effective for the Company’s fiscal year beginning December 1, 2018 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. Subsequent to the issuance of ASU 2014-09, the FASB has issued several ASUs such as ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients among others. These ASUs do not change the core principle of the guidance stated in ASU 2014-09, instead these amendments are intended to clarify and improve operability of certain topics included within the revenue standard. These ASUs will have the same effective date and transition requirements as ASU 2014-09. The Company is currently planning to adopt the modified retrospective method. The Company does not believe the adoption of these ASUs and ASU 2014-09 will have a material impact on the Company's consolidated financial statements, but it is continuing to evaluate the impact the adoption of ASU 2014-09 will have on the Company's consolidated financial statements and disclosures.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820, Fair Value Measurements, and as such these investments may be measured at cost. ASU 2016-01 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2016-01 is not expected to have a material effect on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"), which provides guidance for accounting for leases. ASU 2016-02 requires lessees to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight line basis over the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02 will be effective for the Company’s fiscal year beginning December 1, 2019 and subsequent interim periods. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on the Company's condensed consolidated financial statements. Subsequent to the issuance of ASU 2016-02, the FASB issued ASUs 2018-01, Land Easement Practical Expedient for Transition to Topic 842, 2018-10, Codification Improvements to Topic 842, Leases, 2018-11, Leases (Topic 842): Targeted Improvements, 2018-20, Narrow-Scope Improvements for Lessors, and 2019-01, Leases (Topic 842) Codification Improvements. These ASUs do not change the core principle of the guidance in ASU 2016-02. Instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses standard. These ASUs will have the same effective date and transition requirements as ASU 2016-02.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. ASU 2016-13 is effective for the Company's fiscal year beginning December 1, 2020 and subsequent interim periods. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its condensed consolidated financial statements.


In August 2016, Subsequent to the issuance of ASU 2016-13, the FASB issued ASU 2016-15,2018-19, StatementCodification Improvements to Topic 326, Financial Instruments —Credit Losses and ASU 2019-05, Financial Instruments —Credit Losses (Topic 326) Targeted Transition Relief. These ASUs do not change the core principle of Cash Flows (Topic 230), Classification of Certain Cash Receiptsthe guidance in ASU 2016-13. Instead these amendments are intended to clarify and Cash Payments ("ASU 2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows, including providing additional guidance on how and what an entity should consider in determining the classificationimprove operability of certain cash flows. Additionally, in November 2016, the FASB issued ASU 2016-18, topicsStatement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"). ASU 2016-18 clarifies certain existing principles in ASC 230, Statement of Cash Flows, including providing additional guidance related
Lennar Corporation and Subsidiaries
Notes to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. Both ASU 2016-15 and ASU 2016-18 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2016-15 will modify the Company's current disclosures and reclassificationsCondensed Consolidated Financial Statements (unaudited) - (Continued)


included within the consolidated statement of cash flows but is not expected tocredit losses standard. These ASUs will have a material effect on the Company’s consolidated financial statements.
In January 2017, the FASB issuedsame effective date and transition requirements as ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business with the objective of addressing whether transactions involving in-substance nonfinancial assets, held directly or in a subsidiary, should be accounted for as acquisitions or disposals of nonfinancial assets or of businesses. ASU 2017-01 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2017-01 is not expected to have a material effect on the Company’s consolidated financial statements.2016-13.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Accounting for Goodwill Impairment(" ("ASU 2017-04"). ASU 2017-04 removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 will be effective for the Company’s fiscal year beginning December 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact the adoption of ASU 2017-04 will have on the Company's condensed consolidated financial statements.

(19)Supplemental Financial Information
The indentures governing the Company’s 4.125% senior notes due 2018, 0.25% convertible senior notes due 2019, 4.500% senior notes due 2019, 4.50% senior notes due 2019, 6.625% senior notes due 2020, 2.95% senior notes due 2020, 8.375% senior notes due 2021, 4.750% senior notes due 2021, 6.25% senior notes due 2021, 4.125% senior notes due 2022, 5.375% senior notes due 2022, 4.750% senior notes due 2022, 4.875% senior notes due 2023, 4.500% senior notes due 2024, 5.875% senior notes due 2024, 4.750% senior notes due 2025, 5.25% senior notes due 2026, 5.00% senior notes due 2027 and 4.75% senior notes due 2027 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. In addition, some subsidiaries of CalAtlantic are guaranteeing CalAtlantic senior convertible notes that also are guaranteed by Lennar Corporation. 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 AugustMay 31, 20182019 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 12 or were guaranteeing CalAtlantic convertible senior notes.of the Notes to the Condensed Consolidated Financial Statements. 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 of Lennar senior notes 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"(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.
(19) Supplemental Financial Information - (Continued)

Supplemental information for the subsidiaries that were guarantor subsidiaries at AugustMay 31, 20182019 was as follows:

Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) - (Continued)


Condensed Consolidating Balance Sheet
AugustMay 31, 20182019
(In thousands)Lennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments TotalLennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments Total
ASSETS                  
Lennar Homebuilding:         
Homebuilding:         
Cash and cash equivalents, restricted cash and receivables, net$433,760
 526,948
 54,965
 —
 1,015,673
$405,826
 549,492
 160,642
 —
 1,115,960
Inventories—
 17,232,267
 336,805
 —
 17,569,072
—
 18,233,687
 540,801
 —
 18,774,488
Investments in unconsolidated entities—
 983,963
 13,525
 —
 997,488
—
 979,605
 4,078
 —
 983,683
Goodwill—
 3,457,999
 —
 —
 3,457,999
—
 3,442,359
 —
 —
 3,442,359
Other assets399,731
 955,313
 150,714
 (23,558) 1,482,200
350,057
 699,458
 190,544
 (37,094) 1,202,965
Investments in subsidiaries10,715,911
 89,347
 —
 (10,805,258) —
10,455,362
 120,157
 —
 (10,575,519) —
Intercompany12,035,247
 —
 —
 (12,035,247) —
13,167,409
 —
 —
 (13,167,409) —
23,584,649
 23,245,837
 556,009
 (22,864,063) 24,522,432
24,378,654
 24,024,758
 896,065
 (23,780,022) 25,519,455
Lennar Financial Services—
 320,219
 1,722,864
 (1,059) 2,042,024
Rialto—
 —
 834,882
 —
 834,882
Lennar Multifamily—
 —
 890,057
 —
 890,057
Financial Services—
 237,468
 2,231,461
 (666) 2,468,263
Multifamily—
 —
 1,046,196
 —
 1,046,196
Lennar Other—
 119,083
 430,067
 —
 549,150
Total assets$23,584,649
 23,566,056
 4,003,812
 (22,865,122) 28,289,395
$24,378,654
 24,381,309
 4,603,789
 (23,780,688) 29,583,064
LIABILITIES AND EQUITY                  
Lennar Homebuilding:         
Homebuilding:         
Accounts payable and other liabilities$651,804
 1,866,606
 300,086
 (24,617) 2,793,879
$716,066
 1,882,106
 312,528
 (37,760) 2,872,940
Liabilities related to consolidated inventory not owned—
 267,046
 13,500
 —
 280,546
—
 346,287
 —
 —
 346,287
Senior notes and other debts payable8,900,829
 458,299
 48,859
 —
 9,407,987
8,503,284
 470,107
 417,550
 —
 9,390,941
Intercompany—
 10,487,330
 1,547,917
 (12,035,247) —
—
 11,290,326
 1,877,083
 (13,167,409) —
9,552,633
 13,079,281
 1,910,362
 (12,059,864) 12,482,412
9,219,350
 13,988,826
 2,607,161
 (13,205,169) 12,610,168
Lennar Financial Services—
 66,636
 1,174,472
 —
 1,241,108
Rialto—
 —
 297,129
 —
 297,129
Lennar Multifamily—
 —
 152,566
 —
 152,566
Financial Services—
 31,982
 1,449,024
 —
 1,481,006
Multifamily—
 —
 215,316
 —
 215,316
Lennar Other—
 —
 30,039
 —
 30,039
Total liabilities9,552,633
 13,145,917
 3,534,529
 (12,059,864) 14,173,215
9,219,350
 14,020,808
 4,301,540
 (13,205,169) 14,336,529
Stockholders’ equity14,032,016
 10,420,139
 385,119
 (10,805,258) 14,032,016
15,159,304
 10,360,501
 215,018
 (10,575,519) 15,159,304
Noncontrolling interests—
 —
 84,164
 —
 84,164
—
 —
 87,231
 —
 87,231
Total equity14,032,016
 10,420,139
 469,283
 (10,805,258) 14,116,180
15,159,304
 10,360,501
 302,249
 (10,575,519) 15,246,535
Total liabilities and equity$23,584,649
 23,566,056
 4,003,812
 (22,865,122) 28,289,395
$24,378,654
 24,381,309
 4,603,789
 (23,780,688) 29,583,064

(19) SupplementalLennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial InformationStatements (unaudited) - (Continued)


Condensed Consolidating Balance Sheet
November 30, 20172018
(In thousands)
Lennar
Corporation
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Consolidating Adjustments Total
Lennar
Corporation
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Consolidating Adjustments Total
ASSETS                  
Lennar Homebuilding:         
Homebuilding:         
Cash and cash equivalents, restricted cash and receivables, net$1,945,024
 462,336
 21,972
 —
 2,429,332
$637,083
 886,059
 63,905
 —
 1,587,047
Inventories—
 10,560,996
 299,894
 —
 10,860,890
—
 16,679,245
 389,459
 —
 17,068,704
Investments in unconsolidated entities—
 884,294
 16,475
 —
 900,769
—
 857,238
 12,963
 —
 870,201
Goodwill—
 136,566
 —
 —
 136,566
—
 3,442,359
 —
 —
 3,442,359
Other assets246,490
 520,899
 114,431
 (18,416) 863,404
339,307
 878,582
 164,848
 (26,955) 1,355,782
Investments in subsidiaries4,446,309
 52,237
 —
 (4,498,546) —
10,562,273
 89,044
 —
 (10,651,317) —
Intercompany7,881,306
 —
 —
 (7,881,306) —
11,815,491
 —
 —
 (11,815,491) —
14,519,129
 12,617,328
 452,772
 (12,398,268) 15,190,961
23,354,154
 22,832,527
 631,175
 (22,493,763) 24,324,093
Lennar Financial Services—
 130,184
 1,561,525
 (2,201) 1,689,508
Rialto—
 —
 1,153,840
 —
 1,153,840
Lennar Multifamily—
 —
 710,725
 —
 710,725
Financial Services—
 232,632
 2,547,167
 (889) 2,778,910
Multifamily—
 —
 874,219
 —
 874,219
Lennar Other—
 126,725
 462,234
 —
 588,959
Total assets$14,519,129
 12,747,512
 3,878,862
 (12,400,469)
18,745,034
$23,354,154
 23,191,884
 4,514,795
 (22,494,652)
28,566,181
LIABILITIES AND EQUITY                  
Lennar Homebuilding:         
Homebuilding:         
Accounts payable and other liabilities$635,227
 1,011,051
 294,933
 (20,617) 1,920,594
$804,232
 1,977,579
 303,473
 (27,844) 3,057,440
Liabilities related to consolidated inventory not owned—
 367,220
 13,500
 —
 380,720
—
 162,090
 13,500
 —
 175,590
Senior notes and other debts payable6,011,585
 394,365
 4,053
 —
 6,410,003
7,968,387
 523,589
 51,892
 —
 8,543,868
Intercompany—
 6,775,719
 1,105,587
 (7,881,306) —
—
 10,116,590
 1,698,901
 (11,815,491) —
6,646,812
 8,548,355
 1,418,073
 (7,901,923) 8,711,317
8,772,619
 12,779,848
 2,067,766
 (11,843,335) 11,776,898
Lennar Financial Services—
 48,700
 1,129,114
 —
 1,177,814
Rialto—
 —
 720,056
 —
 720,056
Lennar Multifamily—
 —
 149,715
 —
 149,715
Financial Services—
 51,535
 1,816,667
 —
 1,868,202
Multifamily—
 —
 170,616
 —
 170,616
Lennar Other—
 —
 67,508
 —
 67,508
Total liabilities6,646,812
 8,597,055
 3,416,958
 (7,901,923) 10,758,902
8,772,619
 12,831,383
 4,122,557
 (11,843,335) 13,883,224
Stockholders’ equity7,872,317
 4,150,457
 348,089
 (4,498,546) 7,872,317
14,581,535
 10,360,501
 290,816
 (10,651,317) 14,581,535
Noncontrolling interests—
 —
 113,815
 —
 113,815
—
 —
 101,422
 —
 101,422
Total equity7,872,317
 4,150,457
 461,904
 (4,498,546) 7,986,132
14,581,535
 10,360,501
 392,238
 (10,651,317) 14,682,957
Total liabilities and equity$14,519,129
 12,747,512
 3,878,862
 (12,400,469) 18,745,034
$23,354,154
 23,191,884
 4,514,795
 (22,494,652) 28,566,181


(19) SupplementalLennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial InformationStatements (unaudited) - (Continued)


Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended AugustMay 31, 20182019
(In thousands)Lennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments Total
Revenues:         
Lennar Homebuilding$—
 5,266,053
 19,689
 —
 5,285,742
Lennar Financial Services—
 104,233
 137,056
 (5,021) 236,268
Rialto—
 —
 49,495
 —
 49,495
Lennar Multifamily—
 —
 101,064
 —
 101,064
Total revenues—
 5,370,286
 307,304
 (5,021) 5,672,569
Cost and expenses:         
Lennar Homebuilding—
 4,649,490
 18,347
 3,387
 4,671,224
Lennar Financial Services—
 89,902
 100,803
 (11,065) 179,640
Rialto—
 —
 42,648
 (3,213) 39,435
Lennar Multifamily—
 —
 103,187
 —
 103,187
Acquisition and integration costs related to CalAtlantic—
 11,992
 —
 —
 11,992
Corporate general and administrative94,476
 604
 —
 1,266
 96,346
Total costs and expenses94,476

4,751,988

264,985

(9,625)
5,101,824
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities—
 (15,428) 37
 —
 (15,391)
Lennar Homebuilding other income, net4,614
 7,740
 5,160
 (4,604) 12,910
Rialto equity in earnings from unconsolidated entities—
 —
 5,266
 —
 5,266
Rialto other expense, net—
 —
 (5,882) —
 (5,882)
Lennar Multifamily equity in loss from unconsolidated entities—
 —
 (1,730) —
 (1,730)
Earnings (loss) before income taxes(89,862) 610,610
 45,170
 —
 565,918
Benefit (provision) for income taxes13,688
 (101,924) (10,062) —
 (98,298)
Equity in earnings from subsidiaries529,385
 19,889
 —
 (549,274) —
Net earnings (including net earnings attributable to noncontrolling interests)453,211
 528,575
 35,108
 (549,274) 467,620
Less: Net earnings attributable to noncontrolling interests—
 —
 14,409
 —
 14,409
Net earnings attributable to Lennar$453,211
 528,575
 20,699
 (549,274) 453,211
Other comprehensive loss, net of tax:         
Net unrealized loss on securities available-for-sale$—
 —
 (110) —
 (110)
Reclassification adjustments for loss included in earnings, net of tax—
 —
 (166) —
 (166)
Total other comprehensive loss, net of tax$—
 —
 (276) —
 (276)
Total comprehensive income attributable to Lennar$453,211
 528,575
 20,423
 (549,274) 452,935
Total comprehensive income attributable to noncontrolling interests$—
 —
 14,409
 —
 14,409
(In thousands)Lennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments Total
Revenues:         
Homebuilding$—
 5,175,289
 20,310
 —
 5,195,599
Financial Services—
 36,353
 172,729
 (4,866) 204,216
Multifamily—
 —
 147,412
 —
 147,412
Lennar Other—
 —
 15,663
 —
 15,663
Total revenues—
 5,211,642
 356,114
 (4,866) 5,562,890
Cost and expenses:         
Homebuilding—
 4,561,235
 19,594
 6,430
 4,587,259
Financial Services—
 20,829
 139,510
 (12,340) 147,999
Multifamily—
 —
 148,716
 —
 148,716
Lennar Other—
 —
 3,194
 —
 3,194
Corporate general and administrative74,321
 527
 —
 1,265
 76,113
Total costs and expenses74,321

4,582,591

311,014

(4,645)
4,963,281
Homebuilding equity in earnings from unconsolidated entities—
 19,537
 77
 —
 19,614
Homebuilding other income (expenses), net(222) (48,550) 2,386
 221
 (46,165)
Multifamily equity in loss from unconsolidated entities and other gain—
 —
 (3,018) —
 (3,018)
Lennar Other equity in loss from unconsolidated entities—
 (4,239) (739) —
 (4,978)
Lennar Other expense, net—
 —
 (5,663) —
 (5,663)
Earnings (loss) before income taxes(74,543) 595,799
 38,143
 —
 559,399
Benefit (provision) for income taxes18,653
 (148,736) (10,447) —
 (140,530)
Equity in earnings from subsidiaries477,362
 28,703
 —
 (506,065) —
Net earnings (including net loss attributable to noncontrolling interests)421,472
 475,766
 27,696
 (506,065) 418,869
Less: Net loss attributable to noncontrolling interests—
 —
 (2,603) —
 (2,603)
Net earnings attributable to Lennar$421,472
 475,766
 30,299
 (506,065) 421,472
Other comprehensive income, net of tax:         
Net unrealized gain on securities available-for-sale$—
 —
 561
 —
 561
Reclassification adjustments for gains included in earnings, net of tax—
 —
 (176) —
 (176)
Total other comprehensive income, net of tax$—
 —
 385
 —
 385
Total comprehensive income attributable to Lennar$421,472
 475,766
 30,684
 (506,065) 421,857
Total comprehensive loss attributable to noncontrolling interests$—
 —
 (2,603) —
 (2,603)


(19) SupplementalLennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial InformationStatements (unaudited) - (Continued)


Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended AugustMay 31, 20172018
(In thousands)Lennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments Total
Revenues:         
Lennar Homebuilding$—
 2,872,920
 12,275
 —
 2,885,195
Lennar Financial Services—
 90,220
 129,853
 (5,017) 215,056
Rialto—
 —
 57,810
 —
 57,810
Lennar Multifamily—
 —
 103,457
 (42) 103,415
Total revenues—
 2,963,140
 303,395
 (5,059) 3,261,476
Cost and expenses:         
Lennar Homebuilding—
 2,483,401
 12,107
 (3,443) 2,492,065
Lennar Financial Services—
 79,077
 89,656
 (2,734) 165,999
Rialto—
 —
 49,574
 (71) 49,503
Lennar Multifamily—
 —
 105,956
 —
 105,956
Corporate general and administrative71,285
 310
 —
 1,265
 72,860
Total costs and expenses71,285
 2,562,788
 257,293
 (4,983) 2,886,383
Lennar Homebuilding equity in loss from unconsolidated entities—
 (9,647) (4) —
 (9,651)
Lennar Homebuilding other income (expense), net
(67) 1,244
 1,544
 76
 2,797
Rialto equity in earnings from unconsolidated entities—
 —
 4,858
 —
 4,858
Rialto other expense, net—
 —
 (16,357) —
 (16,357)
Lennar Multifamily equity in earnings from unconsolidated entities—
 —
 11,645
 —
 11,645
Earnings (loss) before income taxes(71,352) 391,949
 47,788
 —
 368,385
Benefit (provision) for income taxes23,689
 (128,170) (20,314) —
 (124,795)
Equity in earnings from subsidiaries296,828
 22,477
 —
 (319,305) —
Net earnings (including net loss attributable to noncontrolling interests)249,165
 286,256
 27,474
 (319,305) 243,590
Less: Net loss attributable to noncontrolling interests—
 —
 (5,575) —
 (5,575)
Net earnings attributable to Lennar$249,165
 286,256
 33,049
 (319,305) 249,165
Other comprehensive income, net of tax:         
Net unrealized gain on securities available-for-sale$—
 —
 165
 —
 165
Total other comprehensive income, net of tax$—
 —
 165
 —
 165
Total comprehensive income attributable to Lennar$249,165
 286,256
 33,214
 (319,305) 249,330
Total comprehensive loss attributable to noncontrolling interests$—
 —
 (5,575) —
 (5,575)
(In thousands)Lennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments Total
Revenues:         
Homebuilding$—
 5,022,769
 41,228
 —
 5,063,997
Financial Services—
 100,257
 154,473
 (5,020) 249,710
Multifamily—
 —
 117,693
 —
 117,693
Lennar Other—
 —
 27,661
 —
 27,661
Total revenues—
 5,123,026
 341,055
 (5,020) 5,459,061
Cost and expenses:         
Homebuilding—
 4,597,434
 39,352
 (723) 4,636,063
Financial Services—
 89,752
 110,427
 (6,244) 193,935
Multifamily—
 —
 117,186
 —
 117,186
Lennar Other—
 —
 25,127
 (3,369) 21,758
Acquisition and integration costs related to CalAtlantic—
 23,875
 —
 —
 23,875
Corporate general and administrative82,962
 605
 —
 1,348
 84,915
Total costs and expenses82,962
 4,711,666
 292,092
 (8,988) 5,077,732
Homebuilding equity in earnings (loss) from unconsolidated entities—
 (12,789) 119
 —
 (12,670)
Homebuilding other income, net3,978
 6,889
 2,980
 (3,968) 9,879
Multifamily equity in earnings from unconsolidated entities and other gain—
 —
 14,281
 —
 14,281
Lennar Other equity in earnings from unconsolidated entities—
 444
 4,116
 —
 4,560
Lennar Other expense, net—
 (55) (6,514) —
 (6,569)
Earnings (loss) before income taxes(78,984) 405,849
 63,945
 —
 390,810
Benefit (provision) for income taxes13,957
 (74,781) (15,137) —
 (75,961)
Equity in earnings from subsidiaries375,284
 28,718
 —
 (404,002) —
Net earnings (including net earnings attributable to noncontrolling interests)310,257
 359,786
 48,808
 (404,002) 314,849
Less: Net earnings attributable to noncontrolling interests—
 —
 4,592
 —
 4,592
Net earnings attributable to Lennar$310,257
 359,786
 44,216
 (404,002) 310,257
Other comprehensive loss, net of tax:         
Net unrealized loss on securities available-for-sale$—
 —
 (589) —
 (589)
Reclassification adjustments for gains included in net earnings, net of tax—
 —
 (126) —
 (126)
Total other comprehensive loss, net of tax$—
 —
 (715) —
 (715)
Total comprehensive income attributable to Lennar$310,257
 359,786
 43,501
 (404,002) 309,542
Total comprehensive income attributable to noncontrolling interests$—
 —
 4,592
 —
 4,592


(19) SupplementalLennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial InformationStatements (unaudited) - (Continued)


Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
NineSix Months Ended AugustMay 31, 20182019
(In thousands)Lennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments Total
Revenues:         
Lennar Homebuilding$—
 12,942,016
 69,816
 —
 13,011,832
Lennar Financial Services—
 277,502
 377,056
 (15,015) 639,543
Rialto—
 —
 149,033
 —
 149,033
Lennar Multifamily—
 —
 312,013
 —
 312,013
Total revenues—
 13,219,518
 907,918
 (15,015) 14,112,421
Cost and expenses:         
Lennar Homebuilding—
 11,640,728
 69,940
 630
 11,711,298
Lennar Financial Services—
 254,130
 280,166
 (23,458) 510,838
Rialto—
 —
 127,366
 (6,582) 120,784
Lennar Multifamily—
 —
 317,572
 —
 317,572
Acquisition and integration costs related to CalAtlantic—
 140,062
 —
 —
 140,062
Corporate general and administrative243,361
 1,813
 —
 3,897
 249,071
Total costs and expenses243,361
 12,036,733
 795,044
 (25,513) 13,049,625
Lennar Homebuilding equity in loss from unconsolidated entities—
 (41,904) —
 —
 (41,904)
Lennar Homebuilding other income, net10,527
 182,870
 9,763
 (10,498) 192,662
Rialto equity in earnings from unconsolidated entities—
 —
 18,496
 —
 18,496
Rialto other expense, net—
 —
 (21,187) —
 (21,187)
Lennar Multifamily equity in earnings from unconsolidated entities—
 —
 15,293
 —
 15,293
Earnings (loss) before income taxes(232,834) 1,323,751
 135,239
 —
 1,226,156
Benefit (provision) for income taxes59,210
 (327,148) (38,932) —
 (306,870)
Equity in earnings from subsidiaries1,073,307
 58,807
 —
 (1,132,114) —
Net earnings (including net earnings attributable to noncontrolling interests)899,683
 1,055,410
 96,307
 (1,132,114) 919,286
Less: Net earnings attributable to noncontrolling interests—
 —
 19,603
 —
 19,603
Net earnings attributable to Lennar$899,683
 1,055,410
 76,704
 (1,132,114) 899,683
Other comprehensive loss, net of tax:         
Net unrealized loss on securities available-for-sale$—
 —

(1,357)
—
 (1,357)
Reclassification adjustments for loss included in earnings, net of tax—
 —

(292)
—
 (292)
Total other comprehensive loss, net of tax$—
 —
 (1,649) —
 (1,649)
Total comprehensive income attributable to Lennar$899,683
 1,055,410
 75,055
 (1,132,114) 898,034
Total comprehensive income attributable to noncontrolling interests$—
 —
 19,603
 —
 19,603
(In thousands)Lennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments Total
Revenues:         
Homebuilding$—
 8,789,330
 29,990
 —
 8,819,320
Financial Services—
 85,270
 271,978
 (9,721) 347,527
Multifamily—
 —
 244,806
 —
 244,806
Lennar Other—
 —
 19,319
 —
 19,319
Total revenues—
 8,874,600
 566,093
 (9,721) 9,430,972
Cost and expenses:         
Homebuilding—
 7,787,164
 31,901
 7,029
 7,826,094
Financial Services—
 59,207
 231,778
 (18,647) 272,338
Multifamily—
 —
 249,894
 —
 249,894
Lennar Other—
 —
 4,816
 —
 4,816
Corporate general and administrative151,850
 1,076
 —
 2,530
 155,456
Total costs and expenses151,850
 7,847,447
 518,389
 (9,088) 8,508,598
Homebuilding equity in earnings from unconsolidated entities—
 5,586
 272
 —
 5,858
 Homebuilding other income (expenses), net(630) (50,946) 3,243
 633
 (47,700)
Multifamily equity in earnings from unconsolidated entities and other gain—
 —
 7,563
 —
 7,563
Lennar Other equity in earnings (loss) from unconsolidated entities—
 (7,585) 10,937
 —
 3,352
Lennar Other expenses, net—
 —
 (12,924) —
 (12,924)
Earnings (loss) before income taxes(152,480) 974,208
 56,795
 —
 878,523
Benefit (provision) for income taxes38,090
 (242,575) (15,745) —
 (220,230)
Equity in earnings from subsidiaries775,772
 33,476
 —
 (809,248) —
Net earnings (including net earnings attributable to noncontrolling interests)661,382
 765,109
 41,050
 (809,248) 658,293
Less: Net loss attributable to noncontrolling interests—
 —
 (3,089) —
 (3,089)
Net earnings attributable to Lennar$661,382
 765,109
 44,139
 (809,248) 661,382
Other comprehensive income, net of tax:         
Net unrealized gain on securities available-for-sale$—
 —

769

—
 769
Reclassification adjustments for gains included in earnings, net of tax—
 —

(176)
—
 (176)
Total other comprehensive income, net of tax$—
 —
 593
 —
 593
Total comprehensive income attributable to Lennar$661,382
 765,109
 44,732
 (809,248) 661,975
Total comprehensive income attributable to noncontrolling interests$—
 —
 (3,089) —
 (3,089)


(19) SupplementalLennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial InformationStatements (unaudited) - (Continued)


Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
NineSix Months Ended AugustMay 31, 20172018
(In thousands)Lennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments Total
Revenues:         
Lennar Homebuilding$—
 7,761,414
 28,216
 —
 7,789,630
Lennar Financial Services—
 227,325
 359,152
 (15,015) 571,462
Rialto—
 —
 207,804
 —
 207,804
Lennar Multifamily—
 —
 292,009
 (109) 291,900
Total revenues—
 7,988,739
 887,181
 (15,124) 8,860,796
Cost and expenses:         
Lennar Homebuilding—
 6,802,418
 30,693
 (4,002) 6,829,109
Lennar Financial Services—
 205,875
 266,317
 (14,178) 458,014
Rialto—
 —
 175,705
 (213) 175,492
Lennar Multifamily—
 —
 301,303
 —
 301,303
Corporate general and administrative195,681
 856
 —
 3,796
 200,333
Total costs and expenses195,681
 7,009,149
 774,018
 (14,597) 7,964,251
Lennar Homebuilding equity in loss from unconsolidated entities—
 (42,675) (16) —
 (42,691)
Lennar Homebuilding other income (expense), net(498) 7,897
 4,438
 527
 12,364
Lennar Homebuilding loss due to litigation—
 (140,000) —
 —
 (140,000)
Rialto equity in earnings from unconsolidated entities—
 —
 11,310
 —
 11,310
Rialto other expense, net—
 —
 (54,119) —
 (54,119)
Lennar Multifamily equity in earnings from unconsolidated entities—
 —
 44,219
 —
 44,219
Earnings (loss) before income taxes(196,179) 804,812
 118,995
 —
 727,628
Benefit (provision) for income taxes65,955
 (263,886) (55,725) —
 (253,656)
Equity in earnings from subsidiaries631,114
 50,785
 —
 (681,899) —
Net earnings (including net loss attributable to noncontrolling interests)500,890
 591,711
 63,270
 (681,899) 473,972
Less: Net loss attributable to noncontrolling interests—
 —
 (26,918) —
 (26,918)
Net earnings attributable to Lennar$500,890
 591,711
 90,188
 (681,899) 500,890
Other comprehensive income, net of tax:         
Net unrealized gain on securities available-for-sale$—
 —
 1,556
 —
 1,556
Reclassification adjustments for loss included in earnings, net of tax—
 —
 4
 —
 4
Total other comprehensive earnings, net of tax
$—
 —
 1,560
 —
 1,560
Total comprehensive income attributable to Lennar$500,890
 591,711
 91,748
 (681,899) 502,450
Total comprehensive income attributable to noncontrolling interests$—
 —
 (26,918) —
 (26,918)
(In thousands)Lennar
Corporation		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Consolidating Adjustments Total
Revenues:         
Homebuilding$—
 7,675,963
 50,127
 —
 7,726,090
Financial Services—
 173,269
 282,522
 (9,994) 445,797
Multifamily—
 —
 210,949
 —
 210,949
Lennar Other—
 —
 57,016
 —
 57,016
Total revenues—
 7,849,232
 600,614
 (9,994) 8,439,852
Cost and expenses:         
Homebuilding—
 6,991,238
 51,615
 (2,757) 7,040,096
Financial Services—
 164,228
 212,324
 (12,393) 364,159
Multifamily—
 —
 214,385
 —
 214,385
Lennar Other—
 —
 51,735
 (3,369) 48,366
Acquisition and integration costs related to CalAtlantic—
 128,070
 —
 —
 128,070
Corporate general and administrative148,885
 1,209
 —
 2,631
 152,725
Total costs and expenses148,885
 7,284,745
 530,059
 (15,888) 7,947,801
Homebuilding equity in loss from unconsolidated entities—
 (26,761) (37) —
 (26,798)
Homebuilding other income, net5,913
 175,252
 4,603
 (5,894) 179,874
Multifamily equity in earnings from unconsolidated entities—
 —
 17,023
 —
 17,023
Lennar Other equity in earnings from unconsolidated entities—
 285
 13,230
 —
 13,515
Lennar Other expense, net—
 (122) (15,305) —
 (15,427)
Earnings (loss) before income taxes(142,972) 713,141
 90,069
 —
 660,238
Benefit (provision) for income taxes45,522
 (225,224) (28,870) —
 (208,572)
Equity in earnings from subsidiaries543,922
 38,918
 —
 (582,840) —
Net earnings (including net earnings attributable to noncontrolling interests)446,472
 526,835
 61,199
 (582,840) 451,666
Less: Net earnings attributable to noncontrolling interests—
 —
 5,194
 —
 5,194
Net earnings attributable to Lennar$446,472
 526,835
 56,005
 (582,840) 446,472
Other comprehensive loss, net of tax:         
Net unrealized loss on securities available-for-sale$—
 —
 (1,247) —
 (1,247)
Reclassification adjustments for gains included in earnings, net of tax—
 —
 (126) —
 (126)
Total other comprehensive loss, net of tax$—
 —
 (1,373) —
 (1,373)
Total comprehensive income attributable to Lennar$446,472
 526,835
 54,632
 (582,840) 445,099
Total comprehensive income attributable to noncontrolling interests$—
 —
 5,194
 —
 5,194


(19) SupplementalLennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial InformationStatements (unaudited) - (Continued)


Condensed Consolidating Statement of Cash Flows
NineSix Months Ended AugustMay 31, 20182019
(In thousands)
Lennar
Corporation
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Consolidating Adjustments Total
Cash flows from operating activities:         
Net earnings (including net earnings attributable to noncontrolling interests)$899,683
 1,055,410
 96,307
 (1,132,114) 919,286
Distributions of earnings from guarantor and non-guarantor subsidiaries1,073,307
 58,807
 —
 (1,132,114) —
Other adjustments to reconcile net earnings (including net earnings attributable to noncontrolling interests) to net cash provided by operating activities(1,142,961) (83,976) (75,792) 1,132,114
 (170,615)
Net cash provided by operating activities830,029
 1,030,241
 20,515
 (1,132,114) 748,671
Cash flows from investing activities:         
Investments in and contributions to unconsolidated entities, net of distributions of capital—
 (67,664) (6,915) —
 (74,579)
Proceeds from sales of real estate owned—
 —
 28,697
 —
 28,697
Proceeds from sale of investment in unconsolidated entity—
 199,654
 —
 —
 199,654
Purchases of commercial mortgage-backed securities bonds—
 —
 (31,068) —
 (31,068)
Acquisition, net of cash acquired(1,162,342) 22,654
 36,350
 —
 (1,103,338)
Other(27,136) (20,555) (4,717) —
 (52,408)
Distributions of capital from guarantor and non-guarantor subsidiaries65,000
 20,000
 —
 (85,000) —
Intercompany(1,035,226) —
 —
 1,035,226
 —
Net cash provided by (used in) investing activities(2,159,704) 154,089
 22,347
 950,226
 (1,033,042)
Cash flows from financing activities:         
Net borrowings (repayments) under unsecured revolving credit facilities650,000
 (454,700) —
 —
 195,300
Net repayments under warehouse facilities—
 (81) (100,882) —
 (100,963)
Debt issuance costs(9,189) —
 (3,270) —
 (12,459)
Redemption of senior notes(735,626) (89,374) —
 —
 (825,000)
Conversions and exchanges of convertible senior notes—
 (59,145) —
 —
 (59,145)
Net payments on other borrowings, other liabilities, Rialto Senior Notes and other notes payable—
 (78,528) (290,385) —
 (368,913)
Net payments related to noncontrolling interests—
 


 (64,619) —
 (64,619)
Excess tax benefits from share-based awards—
 —
 —
 —
 —
Common stock:        
Issuances3,189
 —
 —
 —
 3,189
Repurchases(49,490) —
 —
 —
 (49,490)
Dividends(35,985) (1,120,410) (96,704) 1,217,114
 (35,985)
Intercompany—
 651,665
 383,561
 (1,035,226) —
Net cash used in financing activities(177,101) (1,150,573) (172,299) 181,888
 (1,318,085)
Net increase (decrease) in cash and cash equivalents(1,506,776) 33,757
 (129,437) —
 (1,602,456)
Cash and cash equivalents at beginning of period1,937,674
 359,087
 354,111
 —
 2,650,872
Cash and cash equivalents at end of period$430,898
 392,844
 224,674
 —
 1,048,416
(In thousands)
Lennar
Corporation
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Consolidating Adjustments Total
Cash flows from operating activities:         
Net earnings (including net loss attributable to noncontrolling interests)$661,382
 765,109
 41,050
 (809,248) 658,293
Distributions of earnings from guarantor and non-guarantor subsidiaries775,772
 33,476
 —
 (809,248) —
Other adjustments to reconcile net earnings (including net loss attributable to noncontrolling interests) to net cash provided by operating activities(819,869) (1,222,713) 145,151
 809,248
 (1,088,183)
Net cash provided by (used in) operating activities617,285
 (424,128) 186,201
 (809,248) (429,890)
Cash flows from investing activities:         
Investments in and contributions to unconsolidated entities, net of distributions of capital—
 (99,052) 11,716
 —
 (87,336)
Proceeds from sales of real estate owned—
 —
 4,210
 —
 4,210
Proceeds from sale of investment in unconsolidated entity—
 —
 17,790
 —
 17,790
Proceeds from sales of Financial Services' businesses—
 21,317
 3,129
 —
 24,446
Other(170) (30,185) (20,341) —
 (50,696)
Intercompany(1,263,527) —
 —
 1,263,527
 —
Net cash provided by (used in) investing activities(1,263,697) (107,920) 16,504
 1,263,527
 (91,586)
Cash flows from financing activities:         
Net borrowings under unsecured revolving credit facilities550,000
 —
 —
 —
 550,000
Net borrowings (repayments) under warehouse facilities—
 170
 (365,354) —
 (365,184)
Net borrowings (repayments) on convertible senior notes, other borrowings, other liabilities, and other notes payable—
 (101,052) 3,657
 —
 (97,395)
Net repayments related to noncontrolling interests—
 —
 (14,380) —
 (14,380)
Common stock:        
Issuances634
 —
 —
 —
 634
Repurchases(101,229) —
 —
 —
 (101,229)
Dividends(25,877) (765,109) (44,139) 809,248
 (25,877)
Intercompany—
 1,057,135
 206,392
 (1,263,527) —
Net cash provided by (used in) financing activities423,528
 191,144
 (213,824) (454,279) (53,431)
Net decrease in cash and cash equivalents and restricted cash(222,884) (340,904) (11,119) —
 (574,907)
Cash and cash equivalents and restricted cash at beginning of period624,694
 721,603
 249,681
 —
 1,595,978
Cash and cash equivalents and restricted cash at end of period$401,810
 380,699
 238,562
 —
 1,021,071


(19) SupplementalLennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial InformationStatements (unaudited) - (Continued)


Condensed Consolidating Statement of Cash Flows
NineSix Months Ended AugustMay 31, 20172018
(In thousands)
Lennar
Corporation
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Consolidating Adjustments Total
Lennar
Corporation
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Consolidating Adjustments Total
Cash flows from operating activities:                  
Net earnings (including net loss attributable to noncontrolling interests)$500,890
 591,711
 63,270
 (681,899) 473,972
Net earnings (including net earnings attributable to noncontrolling interests)$446,472
 526,835
 61,199
 (582,840) 451,666
Distributions of earnings from guarantor and non-guarantor subsidiaries631,114
 50,785
 —
 (681,899) —
543,922
 38,918
 —
 (582,840) —
Other adjustments to reconcile net earnings (including net loss attributable to noncontrolling interests) to net cash provided by operating activities(495,120) (596,338) 263,300
 681,899
 (146,259)
Net cash provided by operating activities636,884
 46,158
 326,570
 (681,899) 327,713
Other adjustments to reconcile net earnings (including net earnings attributable to noncontrolling interests) to net cash provided by (used in) operating activities(712,549) (107,511) (194,932) 582,840
 (432,152)
Net cash provided by (used in) operating activities277,845
 458,242
 (133,733) (582,840) 19,514
Cash flows from investing activities:                  
Investments in and contributions to unconsolidated entities, net of distributions of capital—
 (232,378) (25,622) —
 (258,000)—
 24,013
 (14,043) —
 9,970
Proceeds from sales of real estate owned—
 —
 72,952
 —
 72,952
—
 —
 21,658
 —
 21,658
Originations of loans receivable—
 —
 (57,375) —
 (57,375)
Receipts of principal payments on loans held-for-sale—
 —
 5,937
 —
 5,937
Proceeds from sale of investment in unconsolidated entity—
 175,179
 —
 —
 175,179
Purchases of commercial mortgage-backed securities bonds—
 —
 (70,187) —
 (70,187)—
 —
 (31,068) —
 (31,068)
Acquisition, net of cash acquired(611,103) —
 (296) —
 (611,399)
Acquisition, net of cash and restricted cash acquired(1,140,367) 23,035
 39,368
 —
 (1,077,964)
Other(6,174) (36,168) 2,863
 —
 (39,479)(21,568) (5,933) (21,588) —
 (49,089)
Distributions of capital from guarantor and non-guarantor subsidiaries80,000
 80,000
 —
 (160,000) —
65,000
 20,000
 —
 (85,000) —
Intercompany(1,200,426) —
 —
 1,200,426
 —
(1,034,631) —
 —
 1,034,631
 —
Net cash used in investing activities(1,737,703) (188,546) (71,728) 1,040,426
 (957,551)
Net cash provided by (used in) investing activities(2,131,566) 236,294
 (5,673) 949,631
 (951,314)
Cash flows from financing activities:                  
Net repayments under warehouse facilities—
 (78) (397,682) —
 (397,760)
Proceeds from senior notes and debt issuance costs1,240,089
 —
 (6,786) —
 1,233,303
Net borrowings (repayments) under unsecured revolving credit facilities950,000
 (454,700) —
 —
 495,300
Net borrowings (repayments) under warehouse facilities—
 (54) 7,764
 —
 7,710
Debt issuance costs(9,109) —
 (2,992) —
 (12,101)
Net payments on other borrowings, other liabilities, Lennar Other senior notes and other notes payable—
 (52,999) (295,046) —
 (348,045)
Redemption of senior notes(400,000) (258,595) —
 —
 (658,595)(484,332) (90,668) —
 —
 (575,000)
Net proceeds on Rialto notes payable—
 —
 44,550
 —
 44,550
Net proceeds (payments) on other borrowings—
 (50,691) 71,323
 —
 20,632
Conversions and exchanges of convertible senior notes—
 (59,145) —
 —
 (59,145)
Net payments related to noncontrolling interests—
 


 (51,483) —
 (51,483)—
 —
 (26,530) —
 (26,530)
Excess tax benefits from share-based awards1,980
 —
 —
 —
 1,980
Common stock:        
        
Issuances693
 —
 —
 —
 693
3,184
 —
 —
 —
 3,184
Repurchases(27,104) —
 —
 —
 (27,104)(28,526) —
 —
 —
 (28,526)
Dividends(28,181) (671,711) (170,188) 841,899
 (28,181)(22,780) (591,835) (76,005) 667,840
 (22,780)
Intercompany—
 951,237
 249,189
 (1,200,426) —
—
 624,070
 410,561
 (1,034,631) —
Net cash provided by (used in) financing activities787,477
 (29,838) (261,077) (358,527) 138,035
408,437
 (625,331) 17,752
 (366,791) (565,933)
Net decrease in cash and cash equivalents(313,342) (172,226) (6,235) —
 (491,803)
Cash and cash equivalents at beginning of period697,112
 377,070
 255,347
 —
 1,329,529
Cash and cash equivalents at end of period$383,770
 204,844
 249,112
 —
 837,726
Net (decrease) increase in cash and cash equivalents and restricted cash(1,445,284) 69,205
 (121,654) —
 (1,497,733)
Cash and cash equivalents and restricted cash at beginning of period1,938,555
 366,946
 388,583
 —
 2,694,084
Cash and cash equivalents and restricted cash at end of period$493,271
 436,151
 266,929
 —
 1,196,351




Item 2. 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 our unaudited condensed consolidated financial statements and accompanying notes included under Item 1 of this Report and our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K, for our fiscal year ended November 30, 20172018.
Some of the statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q, are "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contained herein may include opinions or beliefs regarding market conditions and similar matters. In many instances, those opinions and beliefs are based upon general observations by members of our management, anecdotal evidence and our experience in the conduct of our businesses, without specific investigation or analyses. Therefore, while they reflect our view of the industries and markets in which we are involved, they should not be viewed as reflecting verifiable views or views that are necessarily shared by all who are involved in those industries or markets. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These forward-looking statements typically include the words “anticipate,” “believe,” “consider,” “estimate,” “expect,” “forecast,” “intend,” “objective,” “plan,” “predict,” “projection,” “seek,” “strategy,” “target,” “will” or other words of similar meaning.
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 what is anticipated by our forward-looking statements. The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to: an extended slowdown in the real estate markets across the nation, including a slowdown in the market for single family homes or the multifamily rental market; increases in operating costs, including costs related to construction materials, labor, real estate taxes construction materials and insurance; unfavorable outcomesinsurance, and our inability to manage our cost structure, both in legal proceedings;our Homebuilding and Multifamily businesses; reduced availability of mortgage financing or increased interest rates; our inability to realize all of the anticipated synergy benefits from the CalAtlantic Group, Inc. ("CalAtlantic") transactionacquisition or to realize them in the anticipated timeline; the pause in the progression of the housing recovery developing into a downturn in the market for residential real estate;our inability to successfully execute our strategies; changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit; our inability to acquire land at anticipated prices; the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods; decreased demand for our homes or Lennar Multifamilymultifamily rental properties, and our inability to successfully sell our apartments;properties; the possibility that the Tax Cuts and Jobs Act will have more negative than positive impact on us; the possibility that the benefit from our increasing use of technology will not justify its cost; increased competition for home sales from other sellers of new and resale homes; negative effects of increasing mortgage interest rates; our inability to reduce the ratio ofpay down debt and opportunistically repurchase our homebuilding debt to our total capital net of cash;stock; a decline in the value of our land inventories and resulting write-downs of the carrying value of our real estate assets; the failure of the participants in various joint ventures to honor their commitments; difficulty obtaining land-use entitlements or construction financing; natural disasters and other unforeseen events for which our insurance does not provide adequate coverage; the inability of Rialto to sell mortgages it originates into securitizations on favorable terms; our inability to reposition Rialto in connection with possible strategic alternatives relating to Rialto; new laws or regulatory changes that adversely affect the profitability of our businesses; our inability to refinance our debt on terms that are acceptable to us; and changes in accounting conventions that adversely affect our reported earnings.
Please see our Form 10-K for the fiscal year ended November 30, 20172018 and other filings with the SEC for a further discussion of these and other risks and uncertainties which could affect our future results. We undertake no obligation, other than those imposed by securities laws, 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.

Outlook
OverDuring the pastsecond quarter, the homebuying market data has sent mixed signals aboutsolidified and was supported by favorable underlying fundamentals. We saw traffic and sales continue to strengthen as the current statecombination of the housing market. Sales, permits, starts and existing home sales have all shown decelerating growth and there has been a natural mortgage application slow down, which is normal aslower interest rates have trended higher and the refinance business has dissipated. We believe that the increase in new and existing home sale prices over the past few years, together with the general migration of interest rates upward, have caused a pauseslower price appreciation and, in the progression of the housing recovery. Additionally, labor shortages, material price increases and limited approved land availability have both limited production and therefore limited supply and muted sentiment around the housing market strength and margin sustainability. Despite this natural pause, we believe that the market will adjust, and demand driven by fundamental economic strength will resume. We believe that strong employment,some instances, slightly lower prices, has positively impacted affordability. That, together with low unemployment, wage growth, consumer confidence and economic growth will drivedrove the consumer to catch up.
Even as price and interest rate increases have moderated demand inreturn to a more affordable housing market. While the current market weconditions would not be considered robust, they would be considered solid. We believe that the housing market remains strong and is primarily drivengenerally running in a performance channel that is bounded on the downside by the production deficit in production that has persisted for the past decade and has kept housing supply constrained, while it is moderated on the upside by rising land and labor costs as well as affordability limits. Within this channel the market is generally continuing to improve, and we believe, will continue to improve for the foreseeable future.
Our increased use of sales incentives during the market pause in 2018 helped us with our strategy of using pricing to maintain volume and we believe to keep our homebuilding business on track to deliver over 50,000 homes in fiscal 2019. We expect that our average sales price will continue to move lower going forward as many new entry-level communities come online, but that the last decade. The production deficit defines an overalllower average sales price will be offset by the drop in lumber prices, cost synergies and our production-first operating platform.


housing shortageOverall, we expect to see our margins improve steadily throughout the remainder of the year as incentives continue to subside as well as a combination of additional lumber savings and direct cost synergies. Accordingly, we expect to generate strong cash flow for the remainder of 2019 and expect to continue to use excess cash flow to both pay down debt, while opportunistically repurchasing stock.
We continue to invest capital in technology initiatives that cannot correct quickly with labor shortagesare redefining the future of both our company and limited approved land. Supplyour industry. We believe that our technology initiatives represent a significant opportunity and upside for the company as we create efficiencies in internal operations, improve our SG&A leverage and reduce our cost structure. In the second quarter, our SG&A expenses as a percentage of homes sale revenues continued its downward trend with our lowest second quarter level ever at 8.4%. We continue to be laser-focused on progress on our technology adoptions and change management, and this is being reflected in bottom line improvements and through enhancement to our customer experience and our customer interface.
We remain encouraged by both for saleour position and for rent, is short and demand remains strong, though perhaps slower and more normalized in the short term, as the market adjusts to higher prices and interest rates.
Even as market conditions fluctuate, we are enthusiastic aboutfor the evolving positionremainder of the year. With a solid balance sheet, leading market positions and continued execution of our business platform with size and market share in whatcore operating strategies, we believe are the best national markets and as the leader in the homebuilding industry. We not only believe that we are well positioned to execute on our current operational strategies, but we believe we have become even more adaptable and capableproduce strong results throughout the remainder of quickly adjusting to changing landscapes around us. We also believe that we are poised to continue to grow our business, to leverage scale in each of our markets, to drive efficiencies and to implement new technologies. Current market conditions enable us to grow, while management and company focus enable us to drive continued improvement and refinement of our business to enhance bottom line and free cash flow.
Against this strong backdrop we have continued to successfully integrate our strategic combination with CalAtlantic. We will continue to transition CalAtlantic communities to Lennar branding and our Everything’s Included® marketing model. We are already starting to see the power of consolidation with CalAtlantic at the corporate level and the benefits of leverage from additional volume and scale in local markets. We continue to expect synergy savings to be $160 million for 2018 and $380 million for 2019.
Using a combination of strong earnings and improving cash flow, we continued to improve our balance sheet as noted by the decrease in our homebuilding debt to total capital to 40.1%. This gives us great flexibility in the strategy that we deploy going forward. Through this year and next year, we expect to continue to grow our top line consistent with our land driven homesite growth strategy of 7% to 10% improvement per year. As we look ahead to 2020, given the extremely tight and expensive land market, we expect to begin to taper back that homesite growth target, driving our land acquisition program to the 5% to 7% range. We will continue to focus on our land soft pivot strategy and decrease the percentage of homesites we purchase outright versus control under option, generating higher rates of return and greater cash flow.
Additionally, we remain committed to our strategy of reverting to our pure-play core homebuilding platform. As discussed in previous quarters, we have engaged investment bankers and began a process that seeks to maximize the value in our Rialto investment and asset management platform. As part of our process, we received offers to monetize this business and we are currently evaluating those offers. We will act opportunistically and in the best interest of our shareholders.

(1) Results of Operations
Overview
We historically have experienced, and expect to continue to experience, variability in quarterly results. Our results of operations for the three and ninesix months ended AugustMay 31, 20182019 are not necessarily indicative of the results to be expected for the full year. Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second and third fiscal quarterquarters and increased deliveries in the second half of our fiscal year. However, periods of economic downturn in the industry can alter seasonal patterns.
Our net earnings attributable to Lennar were $453.2$421.5 million, or $1.37$1.30 per diluted share ($1.371.31 per basic share), in the thirdsecond quarter of 2018,2019, compared to net earnings attributable to Lennar of $249.2$310.3 million, or $1.04$0.94 per diluted share ($1.040.95 per basic share), in the thirdsecond quarter of 2017. Earnings in the third quarter of 2018 were reduced by $84.1 million ($0.21 per diluted share) of pretax backlog/construction in progress write-up related to purchase accounting and $12.0 million ($0.03 per diluted share) of pretax acquisition and integration costs related to the acquisition of CalAtlantic. This was partially offset by $34.1 million ($0.10 per diluted share) of tax benefits related to tax accounting method changes and energy credits.2018. Our net earnings attributable to Lennar were $899.7$661.4 million, or $2.94$2.03 per diluted share ($2.952.05 per basic share), in the ninesix months ended AugustMay 31, 2018,2019, compared to net earnings attributable to Lennar of $500.9$446.5 million, or $2.09$1.52 per diluted share ($2.091.53 per basic share), in the ninesix months ended AugustMay 31, 2017. Earnings in the nine months ended August 31, 2018 were reduced by $376.0 million ($1.00 per diluted share) of pretax backlog/construction in progress write-up related to purchase accounting, $140.1 million ($0.37 per diluted share) of pretax acquisition and integration costs related to the acquisition of CalAtlantic, and a $68.6 million ($0.23 per diluted share) write down of deferred tax assets due to the reduction in the maximum federal corporate income tax rate. This was partially offset by $34.1 million ($0.11 per diluted share) of tax benefits related to tax accounting method changes and energy credits recorded during the third quarter of 2018. Earnings in the nine months ended August 31, 2017 were reduced by $140 million ($0.39 per diluted share) of pretax Lennar Homebuilding loss due to litigation.




Financial information relating to our operations was as follows:
 Three Months Ended Nine Months Ended
 August 31, August 31,
(In thousands)2018 2017 2018 2017
Lennar Homebuilding revenues:       
Sales of homes$5,223,787
 2,847,731
 12,858,937
 7,701,871
Sales of land61,955
 37,464
 152,895
 87,759
Total Lennar Homebuilding revenues5,285,742
 2,885,195
 13,011,832
 7,789,630
Lennar Homebuilding costs and expenses:       
Costs of homes sold4,165,884
 2,197,320
 10,444,364
 6,015,420
Costs of land sold58,625
 32,278
 130,655
 78,853
Selling, general and administrative446,715
 262,467
 1,136,279
 734,836
Total Lennar Homebuilding costs and expenses4,671,224
 2,492,065
 11,711,298
 6,829,109
Lennar Homebuilding operating margins614,518
 393,130
 1,300,534
 960,521
Lennar Homebuilding equity in loss from unconsolidated entities(15,391) (9,651) (41,904) (42,691)
Lennar Homebuilding other income, net12,910
 2,797
 192,662
 12,364
Lennar Homebuilding loss due to litigation—
 —
 —
 (140,000)
Lennar Homebuilding operating earnings612,037
 386,276
 1,451,292
 790,194
Lennar Financial Services revenues236,268
 215,056
 639,543
 571,462
Lennar Financial Services costs and expenses179,640
 165,999
 510,838
 458,014
Lennar Financial Services operating earnings56,628
 49,057
 128,705
 113,448
Rialto revenues49,495
 57,810
 149,033
 207,804
Rialto costs and expenses39,435
 49,503
 120,784
 175,492
Rialto equity in earnings from unconsolidated entities5,266
 4,858
 18,496
 11,310
Rialto other expense, net(5,882) (16,357) (21,187) (54,119)
Rialto operating earnings (loss)9,444
 (3,192) 25,558
 (10,497)
Lennar Multifamily revenues101,064
 103,415
 312,013
 291,900
Lennar Multifamily costs and expenses103,187
 105,956
 317,572
 301,303
Lennar Multifamily equity in earnings (loss) from unconsolidated entities(1,730) 11,645
 15,293
 44,219
Lennar Multifamily operating earnings (loss)(3,853) 9,104
 9,734
 34,816
Total operating earnings674,256
 441,245
 1,615,289
 927,961
Acquisition and integration costs related to CalAtlantic(11,992) —
 (140,062) —
Corporate general and administrative expenses(96,346) (72,860) (249,071) (200,333)
Earnings before income taxes$565,918
 368,385
 1,226,156
 727,628
 Three Months Ended Six Months Ended
 May 31, May 31,
(In thousands)2019 2018 2019 2018
Homebuilding revenues:       
Sales of homes$5,176,116
 4,986,010
 8,784,245
 7,635,150
Sales of land16,455
 77,987
 30,238
 90,940
Other homebuilding revenues3,028
 —
 4,837
 —
Total Homebuilding revenues5,195,599
 5,063,997
 8,819,320
 7,726,090
Homebuilding costs and expenses:       
Costs of homes sold4,137,529
 4,145,968
 7,019,579
 6,278,480
Costs of land sold14,008
 57,647
 27,534
 72,015
Selling, general and administrative435,722
 432,448
 778,981
 689,601
Total Homebuilding costs and expenses4,587,259
 4,636,063
 7,826,094
 7,040,096
Homebuilding operating margins608,340
 427,934
 993,226
 685,994
Homebuilding equity in earnings (loss) from unconsolidated entities19,614
 (12,670) 5,858
 (26,798)
Homebuilding other income (expense), net(46,165) 9,879
 (47,700) 179,874
Homebuilding operating earnings581,789
 425,143
 951,384
 839,070
Financial Services revenues204,216
 249,709
 347,527
 445,796
Financial Services costs and expenses147,999
 193,935
 272,338
 364,160
Financial Services operating earnings56,217
 55,774
 75,189
 81,636
Multifamily revenues147,412
 117,693
 244,806
 210,949
Multifamily costs and expenses148,716
 117,186
 249,894
 214,385
Multifamily equity in earnings (loss) from unconsolidated entities and other gain(3,018) 14,281
 7,563
 17,023
Multifamily operating earnings (loss)(4,322) 14,788
 2,475
 13,587
Lennar Other revenues15,663
 27,662
 19,319
 57,017
Lennar Other costs and expenses3,194
 21,758
 4,816
 48,365
Lennar Other equity in earnings (loss) from unconsolidated entities(4,978) 4,560
 3,352
 13,515
Lennar Other expense, net(5,663) (6,569) (12,924) (15,427)
Lennar Other operating earnings1,828
 3,895
 4,931
 6,740
Total operating earnings635,512
 499,600
 1,033,979
 941,033
Acquisition and integration costs related to CalAtlantic—
 (23,875) —
 (128,070)
Corporate general and administrative expenses(76,113) (84,915) (155,456) (152,725)
Earnings before income taxes$559,399
 390,810
 878,523
 660,238
Effects of CalAtlantic Acquisition
In the first quarter offiscal year 2018, we stated that we expected to receiveexceeded our initial $100 million of synergy benefitssavings expectations from the CalAtlantic acquisition of CalAtlantic during 2018by $70 million and $365 million in 2019. During the second and third quarters of 2018, we had taken steps that made us believe that we are on track to meet or exceed our $100 million synergy savings expectations for 2018 by $60 million and our $365$380 million synergies target for 2019 by $15 million.2019. These steps included elimination of costs of having two publicly traded companies, significant reductions in combined headcount and renegotiation of both local and national supply contracts.
Our operating resultsHomebuilding revenue and net earnings attributable to Lennar for the three and ninesix months ended AugustMay 31, 2018 were adversely affected by $12.0included $2.1 billion and $2.5 billion, respectively, of home sales revenues, and earnings (loss) before income taxes included $56.5 million and $140.1($52.0) million, respectively, of a pre-tax earnings (loss) from CalAtlantic since the date of acquisition, which included acquisition and integration costs and $84.2of $23.9 million and $376.0$128.1 million, respectivelyrespectively. These transaction expenses were included within acquisition and integration costs related to CalAtlantic in the accompanying condensed consolidated statement of purchase accounting adjustments on CalAtlantic homes in backlog/construction in progress that were delivered inoperations for the three and ninesix months ended AugustMay 31, 2018. We will continue to incur integration costs during our fourth quarter. Additionally, our earnings in the fourth quarter will continue to be affected by purchase accounting adjustments impacting gross margins recognized on CalAtlantic homes in backlog/construction in progress at the date of acquisition.


The following table discloses homebuilding data for the combined Lennar and CalAtlantic companies as of and for the three months ended August 31, 2018. The table also has pro forma combined homebuilding data for Lennar and CalAtlantic for the three months ended August 31, 2017:
 As of and for the As of and for the
 Three Months Ended Three Months Ended
 August 31, August 31,
 2018 2017
   Lennar CalAtlantic Pro forma Combined
Deliveries12,613
 7,598
 3,729
 11,327
New Orders12,319
 7,610
 3,518
 11,128
Backlog19,220
 10,212
 7,461
 17,673
Three Months Ended AugustMay 31, 20182019 versus Three Months Ended AugustMay 31, 20172018
On February 12, 2018, we completed our acquisition of CalAtlantic. Prior year information includes only stand alone data for Lennar Corporation.
Revenues from home sales increased 83%4% in the thirdsecond quarter of 20182019 to $5.2 billion from $2.8$5.0 billion in the thirdsecond quarter of 2017.2018. Revenues were higher primarily due to a 66%5% increase in the number of home deliveries, excluding unconsolidated entities, andpartially offset by a 10% increase1% decrease in the average sales price of homes delivered. New home deliveries,


excluding unconsolidated entities, increased to 12,60012,706 homes in the thirdsecond quarter of 20182019 from 7,58812,078 homes in the thirdsecond quarter of 2017,2018, primarily as a result of the significantan increase in volumehome deliveries in all of our Homebuilding segmentsthe East and Homebuilder Other resulting from the CalAtlantic acquisition.Texas segments. The average sales price of homes delivered was $415,000$407,000 in the thirdsecond quarter of 2018,2019, compared to $375,000$413,000 in the thirdsecond quarter of 2017.2018. The increasedecrease in average sales price was primarily resultingresulted from product mix as a larger percentage of deliveries came from the CalAtlantic acquisition.East and Texas segments as well as the Texas segment continuing to shift to lower-priced communities. Sales incentives offered to homebuyers were $22,900$26,600 per home delivered in the thirdsecond quarter of 2018,2019, or 5.2%6.1% as a percentage of home sales revenue, compared to $21,800 per home delivered in the third quarter of 2017, or 5.5% as a percentage of home sales revenue, and $23,000 per home delivered in the second quarter of 2018, or 5.3% as a percentage of home sales revenue, and $25,300 per home delivered in the first quarter of 2019, or 5.8% as a percentage of home sales revenue.
Gross margins on home sales were $1.1$1.0 billion, or 20.3%20.1%, in the thirdsecond quarter of 2019, compared to $840.0 million, or 16.8% (21.6% excluding purchase accounting), in the second quarter of 2018. ExcludingThe gross margin percentage on home sales increased primarily because the second quarter of 2018 included $236.8 million or 480 basis points of backlog/construction in progress write-up of $84.2 million related to purchase accounting adjustments on CalAtlantic homes that were delivered in the third quarter of 2018, gross margins on home sales were $1.1 billion or 21.9%.that quarter. This compared to $650.4 million, or 22.8%, in the third quarter of 2017, which included insurance recoveries of $10.3 million that positively impacted gross margin percentage by 30 basis points. Gross margin percentage on home sales decreased compared to the third quarter of 2017 primarily due to higher construction and land costs,was partially offset by an increase in the averagehigher construction costs and increased sales price of homes delivered.incentives.
Selling, general and administrative expenses were $446.7$435.7 million in the thirdsecond quarter of 2018,2019, compared to $262.5$432.4 million in the thirdsecond quarter of 2017.2018. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.6%8.4% in the thirdsecond quarter of 2018,2019, from 9.2%8.7% in the thirdsecond quarter of 20172018, due to improved operating leverage primarily as a result of an increase in home deliveries and continued benefit from technology initiatives. WCI Communities, Inc. ("WCI") transaction-related expenses had a negative 20 basis point impact to selling, general and administrative expenses as a percentage of revenues from home sales in the third quarter of 2017.deliveries.
Gross profitsOther homebuilding revenue, gross margin on land sales, were $3.3homebuilding equity in earnings (loss) from unconsolidated entities and homebuilding other income (expense), net, totaled a loss of $21.1 million in the thirdsecond quarter of 2018,2019, compared to $5.2earnings of $17.5 million in the thirdsecond quarter of 2017. Lennar2018. Homebuilding equity in lossearnings (loss) from unconsolidated entities was $15.4$19.6 million in the thirdsecond quarter of 2018,2019, compared to $9.7($12.7) million in the thirdsecond quarter of 2017.2018. In the thirdsecond quarter of 2019, Homebuilding equity in earnings from unconsolidated entities was primarily attributable to our share of net operating income from one of our homebuilding unconsolidated entities. In the second quarter of 2018, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to our share of valuation adjustments related to assets of a Lennar Homebuildingin one homebuilding unconsolidated entity partially offset by our share of net operating earnings from our other unconsolidated entities. In the third quarter of 2017, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable toand our share of net operating losses from our homebuilding unconsolidated entities, which was primarily driven by general and administrative expenses, as there were no significant land sale transactions for which we recognized our share of earnings. Lennar entities.
Homebuilding other income (expense), net, was $12.9($46.2) million in the thirdsecond quarter of 2018,2019, compared to $2.8$9.9 million in the thirdsecond quarter of 2017.2018. Homebuilding other expense, net in the second quarter of 2019 was primarily due to a one-time loss of $48.9 million from the consolidation of a previously unconsolidated entity. In the second quarter of 2019, a reconsideration event occurred which required the reassessment of a homebuilding unconsolidated entity. The reconsideration event was the change of the entity’s conclusion with respect to future capital calls required to fund operations and debt repayments. Upon reconsideration, we determined that the homebuilding entity continued to meet the accounting definition of a variable interest entity ("VIE") and we were deemed to be the primary beneficiary. We consolidated the previously unconsolidated entity’s net assets at estimated fair value. The determination of fair value of the homebuilding entity’s net assets requires the discounting of estimated cash flows at a rate we believe a market participant would determine to be commensurate with the inherent risks associated with the homebuilding entity and related cash flow streams. We used a 15% discount rate in determining the fair value of the entity, which was subject to perceived risks associated with the entity’s cash flow streams. There was no non-controlling interest recorded in consolidation. At May 31, 2019, the consolidated homebuilding entity had total assets and liabilities of $240.5 million and $356.4 million, respectively.
Lennar Homebuilding interest expense was $86.9$99.7 million in the thirdsecond quarter of 20182019 ($83.096.2 million was included in costs of homes sold, $0.8$0.7 million in costs of land sold and $3.1$2.9 million in homebuilding other income,expense, net), compared to $71.8$75.8 million in the thirdsecond quarter of 20172018 ($68.671.9 million was included in costs of homes sold, $0.9 million in costs of land sold and $2.3$3.0 million in homebuilding other income (expense), net). Interest expense included in costs of homes sold increased primarily due to an increase in home deliveries.


Operating earnings for our Lennar Financial Services segment were $56.6 million in the third quarter of 2018, compared to $49.1 million in the third quarter of 2017. Operating earnings were Prior year's interest expense was favorably impacted by an increase in the segment's title and mortgage operations duepurchase accounting related to the acquisition of CalAtlantic's financial services operations, partially offset by a decrease in refinance transactions and lower mortgage profit per loan originated.CalAtlantic acquisition.
Operating earnings for the RialtoFinancial Services segment were $10.7$62.5 million in the thirdsecond quarter of 20182019 (which included $9.4$56.2 million of operating earnings and an add back of $1.2$6.3 million of net loss attributable to noncontrolling interests). Operating earnings in the thirdsecond quarter of 20172018 were $3.2$55.8 million. Operating earnings increased primarily due to improvement in the mortgage business as reductions in general and administrative expenses more than offset the decrease in retail origination volume, as a result of the sale of substantially all of the segment's retail mortgage business in the first quarter of 2019. In addition, there was an increase in operating earnings in the segment's Rialto Mortgage Finance ("RMF") business as a result of higher securitization dollar volume in the second quarter of 2019, compared to the second quarter of 2018. This was offset by a decrease in the operating earnings of the segment's title business due to a decrease in retail closed orders as a result of the sale of a majority of the retail agency business and title insurance underwriter in the first quarter of 2019. This decrease


in retail volume was partially offset by an increase in captive business volume and a decrease in general and administrative expenses.
Operating loss for the Multifamily segment was $3.9 million in the second quarter of 2019 (which included a $3.2$4.3 million of operating loss and an add back of $6.4$0.4 million of net loss attributable to noncontrolling interests). The increase in operating earnings was, primarily due to a decrease in real estate owned impairments due to the liquidation of the FDIC and bank portfolios earlier in the year as well as decreases in general and administrative expenses and interest expense. The increaseequity in loss as there were no sales of operating earnings wasproperties, partially offset by decreases in incentivemanagement fee income and interest income, as well as a decrease in Rialto Mortgage Finance ("RMF") securitization earnings due to a lower average net margin.
Operating loss for the Lennar Multifamily segment was $3.9 million in the third quarter of 2018, primarily driven by selling, general and administrative expenses of the segment and equity in loss related to Lennar Multifamily Venture Fund I (the "Venture Fund") and other Multifamily joint ventures as a result of incurring expenses that exceeded revenues while rental operations were reaching stabilization. This was partially offset by $1.7 million of our share of gains from the sale of one operating property by a Lennar Multifamily unconsolidated entity, as well as $5.1$3.7 million of promote revenue related to two properties in theLennar Multifamily Venture Fund.I (“LMV I”). In the thirdsecond quarter of 2017,2018, the Lennar Multifamily segment had operating earnings of $9.1$14.8 million primarily due to the segment's $15.4$17.4 million share of gains as a result of the sale of two operating properties by onetwo of Lennar Multifamily's unconsolidated entities and $5.2 million of promote revenue related to two properties in LMV I, partially offset by general and administrative expenses.
Operating earnings for the Lennar Other segment were $2.2 million in the second quarter of 2019 (which included $1.8 million of operating earnings and an add back of $0.4 million of net loss attributable to noncontrolling interests), compared to $4.0 million in the second quarter of 2018 (which included $3.9 million of operating earnings and an add back of $0.1 million of net loss attributable to noncontrolling interests).
Corporate general and administrative expenses were $96.3$76.1 million, or 1.7%1.4% as a percentage of total revenues, in the thirdsecond quarter of 2018,2019, compared to $72.9$84.9 million, or 2.2%1.6% as a percentage of total revenues, in the thirdsecond quarter of 2017.2018. The decrease in corporate general and administrative expenses as a percentage of total revenues was due to improved operating leverage as a result of an increase in home deliveries.
In the second quarter of 2019 and 2018, we had tax provisions of $140.5 million and $76.0 million, respectively. Our overall effective income tax rates were 25.0% and 19.7% in the second quarter of 2019 and 2018, respectively. The effective tax rate for the three months ended May 31, 2019 included state income tax expense and non-deductible executive compensation, partially offset by solar tax credits. For the three months ended May 31, 2018, the effective tax rate included tax benefits for the domestic production activities deduction and energy tax credits, offset primarily by state income tax expenses.
Six Months Ended May 31, 2019 versus Six Months Ended May 31, 2018
On February 12, 2018, Lennar Corporation completed its acquisition of CalAtlantic. Prior year information includes CalAtlantic only after the acquisition date.
Revenues from home sales increased 15% in the six months ended May 31, 2019 to $8.8 billion from $7.6 billion in the six months ended May 31, 2018. Revenues were higher primarily due to a 14% increase in the number of home deliveries, excluding unconsolidated entities. New home deliveries, excluding unconsolidated entities, increased to 21,508 homes in the six months ended May 31, 2019 from 18,812 homes in the six months ended May 31, 2018, primarily as a result of the increase in volume resulting from the CalAtlantic acquisition. The average sales price of homes delivered was $408,000 in the six months ended May 31, 2019, compared to $406,000 in the six months ended May 31, 2018. The increase in average sales price primarily resulted from the CalAtlantic acquisition, partially offset by the Texas segment continuing to shift to lower-priced communities. Sales incentives offered to homebuyers were $26,100 per home delivered in the six months ended May 31, 2019, or 6.0% as a percentage of home sales revenue, compared to $22,800 per home delivered in the six months ended May 31, 2018, or 5.3% as a percentage of home sales revenue.
Gross margins on home sales were $1.8 billion, or 20.1%, in the six months ended May 31, 2019, compared to $1.4 billion, or 17.8% (21.6% excluding purchase accounting), in the six months ended May 31, 2018. The gross margin percentage on home sales increased primarily because the six months ended May 31, 2018 included $291.9 million or 380 basis points of backlog/construction in progress write-up related to purchase accounting adjustments on CalAtlantic homes that were delivered in that period. This was partially offset by higher construction costs and increased sales incentives.
Selling, general and administrative expenses were $779.0 million in the six months ended May 31, 2019, compared to $689.6 million in the six months ended May 31, 2018. As a percentage of revenues from home sales, selling, general and administrative expenses improved slightly to 8.9% in the six months ended May 31, 2019, from 9.0% in the six months ended May 31, 2018, due to improved operating leverage as a result of an increase in home deliveries.
Other homebuilding revenue, gross margin on land sales, homebuilding equity in earnings (loss) from unconsolidated entities and homebuilding other income (expense), net, totaled a loss of $34.3 million in the six months ended May 31, 2019, compared to earnings of $172.0 million in the six months ended May 31, 2018. Homebuilding equity in earnings (loss) from unconsolidated entities was $5.9 million in the six months ended May 31, 2019, compared to ($26.8) million in the six months ended May 31, 2018. In the six months ended May 31, 2019, Homebuilding equity in earnings from unconsolidated entities was primarily attributable to our share of net operating income from one of our homebuilding unconsolidated entities. In the six months ended May 31, 2018, Homebuilding equity in loss from unconsolidated entities was primarily attributable to our share


of valuation adjustments related to assets of a homebuilding unconsolidated entity and our share of net operating losses from our homebuilding unconsolidated entities. Homebuilding other income (expense), net, was ($47.7) million in the six months ended May 31, 2019, compared to $179.9 million in the six months ended May 31, 2018. Homebuilding other expense, net in the six months ended May 31, 2019 was primarily due to a one-time loss of $48.9 million from the consolidation of a previously unconsolidated entity. In the six months ended May 31, 2018, Homebuilding other income, net, was primarily related to a gain on the sale of an 80% interest in one of Homebuilding's strategic joint ventures, Treasure Island Holdings.
Homebuilding interest expense was $164.3 million in the six months ended May 31, 2019 ($157.5 million was included in costs of homes sold, $1.0 million in costs of land sold and $5.9 million in other income (expense), net), compared to $127.1 million in the six months ended May 31, 2018 ($120.2 million was included in costs of homes sold, $1.4 million in costs of land sold and $5.4 million in other income (expense), net). Interest expense included in costs of homes sold increased primarily due to an increase in home deliveries. Prior year's interest expense was favorably impacted by purchase accounting related to the CalAtlantic acquisition.
Operating earnings for the Financial Services segment were $84.2 million in the six months ended May 31, 2019 (which included $75.2 million of operating earnings and an add back of $9.1 million of net loss attributable to noncontrolling interests), compared to $81.6 million in the six months ended May 31, 2018. Operating earnings increased primarily due to improvement in the mortgage business as reductions in general and administrative expenses more than offset the decrease in retail origination volume, as a result of the sale of substantially all of our retail mortgage business in the first quarter 2019. This was offset by a decrease in the operating earnings of our title business due to a decrease in retail closed orders as a result of the sale of a majority of the retail agency business and title insurance underwriter in the first quarter of 2019. This decrease in retail volume was partially offset by an increase in captive business volume and a decrease in general and administrative expenses.
Operating earnings for the Multifamily segment were $2.9 million in the six months ended May 31, 2019 (which included $2.5 million of operating earnings and an add back of $0.4 million of net loss attributable to noncontrolling interests), primarily due to the segment's $3.6 million share of a gain as a result of the sale of one operating property by Multifamily's unconsolidated entities, $11.9 million gain on the sale of an investment in an operating property and $5.6 million of promote revenue related to three properties in LMV I, partially offset by general and administrative expenses. In the six months ended May 31, 2018, the Multifamily segment had operating earnings of $13.6 million primarily due to the segment's $21.5 million share of gains as a result of the sale of three operating properties by Multifamily's unconsolidated entities and $5.2 million of promote revenue related to two properties in LMV I, partially offset by general and administrative expenses.
Operating earnings for the Lennar Other segment were $5.2 million in the six months ended May 31, 2019 (which included $4.9 million of operating earnings and an add back of $0.3 million of net loss attributable to noncontrolling interests), compared to $8.1 million in the six months ended May 31, 2018 (which included $6.7 million of operating earnings and an add back of $1.3 million of net loss attributable to noncontrolling interests).
Corporate general and administrative expenses were $155.5 million, or 1.6% as a percentage of total revenues, in the six months ended May 31, 2019, compared to $152.7 million, or 1.8% as a percentage of total revenues, in the six months ended May 31, 2018. The decrease in corporate general and administrative expenses as a percentage of total revenues was due to improved operating leverage as a result of an increase in revenues.
Net earnings (loss) attributable to noncontrolling interests were $14.4In the six months ended May 31, 2019 and 2018, we had tax provisions of $220.2 million and ($5.6) million in the third quarter of 2018 and 2017, respectively. Net earnings attributable to noncontrolling interests in the third quarter of 2018 were primarily attributable to net earnings related to the Lennar Homebuilding consolidated joint ventures. Net loss attributable to noncontrolling interests in the third quarter of 2017 was primarily attributable 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.
In the third quarter of 2018 and 2017, we had a tax provision of $98.3 million and $124.8$208.6 million, respectively. Our overall effective income tax rates were 17.8%25.0% and 33.4%31.8% in the third quarter ofsix months ended May 31, 2019 and 2018, and 2017, respectively. The effective tax rate for the third quarter of 2018 included tax benefits for the tax accounting method changes implemented during the third quarter, energy credits, and domestic production activities deduction.
Nine Months Ended August 31, 2018 versus Nine Months Ended August 31, 2017
On February 12, 2018, we completed our acquisition of CalAtlantic. Prior year information includes only stand alone data for Lennar Corporation.
Revenues from home sales increased 67% in the ninesix months ended AugustMay 31, 2018 to $12.9 billion from $7.7 billion in the nine months ended August 31, 2017. Revenues were higher primarily due to a 52% increase in the number of home deliveries, excluding unconsolidated entities,2019 included state income tax expense and a 10% increase in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, increased to 31,412 homes in the nine months ended August 31, 2018 from 20,708 homes in the nine months ended August 31, 2017, primarily as a result of the significant increase in volume in all of our Homebuilding segments and Homebuilding Other resulting from the CalAtlantic acquisition. The average sales price of homes delivered was $409,000 in the nine months ended August 31, 2018, compared to $372,000 in the nine months ended August 31, 2017. The increase in average sales price was primarily resulting from the CalAtlantic acquisition. Sales incentives offered to homebuyers were $22,800 per home delivered in the nine months ended August 31, 2018, or 5.3% as a percentage of home sales revenue, compared to $22,400 per home delivered in the nine months ended August 31, 2017, or 5.7% as a percentage of home sales revenue.
Gross margins on home sales were $2.4 billion, or 18.8%, in the nine months ended August 31, 2018. Excluding the backlog/construction in progress write-up of $376.0 million related to purchase accounting adjustments on CalAtlantic homes that were delivered in the nine months ended August 31, 2018, gross margins on home sales were $2.8 billion or 21.7%. This compared to gross margin on home sales of $1.7 billion, or 21.9%, in the nine months ended August 31, 2017. Gross margin percentage on home sales decreased compared to the nine months ended August 31, 2017 primarily due to higher construction and land costs,non-deductible executive compensation, partially offset by an increase insolar tax credits. For the average sales price of homes delivered.


Selling, general and administrative expenses were $1.1 billion in the ninesix months ended AugustMay 31, 2018, compared to $734.8 million in the nine months ended August 31, 2017. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.8% in the nine months ended August 31, 2018, from 9.5% in the nine months ended August 31, 2017, due to improved operating leverage as a result of an increase in home deliveries and continued benefit from technology initiatives. WCI transaction-related expenses had a negative 30 basis point impact to selling, general and administrative expenses as a percentage of revenues from home sales in the nine months ended August 31, 2017.
Gross profits on land sales were $22.2 million in the nine months ended August 31, 2018, which included profits of $15.0 million on two strategic land sales. This compared to gross profit on land sales of $8.9 million in the nine months ended August 31, 2017. Lennar Homebuilding equity in loss from unconsolidated entities was $41.9 million in the nine months ended August 31, 2018, compared to $42.7 million in the nine months ended August 31, 2017. In the nine months ended August 31, 2018, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to our share of valuation adjustments related to assets of a Lennar Homebuilding unconsolidated entity and our share of net operating losses from our unconsolidated entities. In the nine months ended August 31, 2017, Lennar Homebuilding equity in loss from unconsolidated entities was attributable to our share of net operating losses from our unconsolidated entities, which was primarily driven by general and administrative expenses as there were no significant land sale transactions for which we recognized our share of earnings. Lennar Homebuilding other income, net, was $192.7 million in the nine months ended August 31, 2018, compared to $12.4 million in the nine months ended August 31, 2017. In the nine months ended August 31, 2018, other income, net, was primarily related to a gain on the sale of an 80% interest in one of Lennar Homebuilding's strategic joint ventures, Treasure Island Holdings.
Lennar Homebuilding loss due to litigation of $140 million in the nine months ended August 31, 2017 was related to litigation regarding a contract we entered into in 2005 to purchase property in Maryland. As a result of the litigation, we purchased the property for $114 million, which approximated our estimate of fair value for the property. In addition, we paid approximately $124 million in interest and other closing costs and have accrued for the amount we expected to pay as reimbursement for attorney's fees.
Lennar Homebuilding interest expense was $214.0 million in the nine months ended August 31, 2018 ($203.2 million was included in costs of homes sold, $2.2 million in costs of land sold and $8.6 million in other income, net), compared to $196.1 million in the nine months ended August 31, 2017 ($187.2 million was included in costs of homes sold, $4.1 million in costs of land sold and $4.8 million in other income, net). Interest expense included in costs of homes sold increased primarily due to an increase in home deliveries.
Operating earnings for our Lennar Financial Services segment were $128.7 million in the nine months ended August 31, 2018, compared to $113.4 million in the nine months ended August 31, 2017. Operating earnings were impacted by an increase in the segment's title and mortgage operations due to the acquisition of CalAtlantic's financial services operations, partially offset by a decrease in refinance transactions and lower mortgage profit per loan originated.
Operating earnings for our Rialto segment were $28.1 million in the nine months ended August 31, 2018 (which included $25.6 million of operating earnings and an add back of $2.6 million of net loss attributable to noncontrolling interests). Operating earnings for the nine months ended August 31, 2017 were $21.4 million (which included a $10.5 million operating loss and an add back of $31.9 million of net loss attributable to noncontrolling interests). The increase in operating earnings was primarily due to a decrease in real estate owned and loan impairments due to the liquidation of the FDIC and bank portfolios and a decrease in general and administrative expenses and interest expense. This increase in operating earnings was partially offset by a decrease in RMF securitization revenues and earnings as a result of a lower average net margin and decreases in incentive, management fee and interest income.
Operating earnings for our Lennar Multifamily segment were $9.7 million in the nine months ended August 31, 2018, primarily due to the segment's $23.3 million share of gains as a result of the sale of four operating properties by Lennar Multifamily's unconsolidated entities and $10.3 million of promote revenue related to four properties in the Venture Fund, partially offset by general and administrative expenses. In the nine months ended August 31, 2017, our Lennar Multifamily segment had operating earnings of $34.8 million primarily due to the segment's $52.9 million share of gains as a result of the sale of five operating properties by Lennar Multifamily's unconsolidated entities and management fee income, partially offset by general and administrative expenses.
Corporate general and administrative expenses were $249.1 million, or 1.8% as a percentage of total revenues, in the nine months ended August 31, 2018, compared to $200.3 million, or 2.3% as a percentage of total revenues, in the nine months ended August 31, 2017. The decrease in corporate general and administrative expenses as a percentage of total revenues is due to improved operating leverage as a result of an increase in revenues.
Net earnings (loss) attributable to noncontrolling interests were $19.6 million and ($26.9) million in the nine months ended August 31, 2018 and 2017, respectively. Net earnings attributable to noncontrolling interests during the nine months ended August 31, 2018 were primarily attributable to net earnings related to our Lennar Homebuilding consolidated joint


ventures. Net loss attributable to noncontrolling interests in the nine months ended August 31, 2017 was primarily attributable 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 net earnings related to our Lennar Homebuilding consolidated joint ventures.
For the nine months ended August 31, 2018 and 2017, we had a tax provision of $306.9 million and $253.7 million, respectively. Our overall effective income tax rates were 25.4% and 33.6% in the nine months ended August 31, 2018 and 2017, respectively. The effective tax rate for the nine months ended August 31, 2018 included a $68.6 million non-cash one-time write down of the deferred tax assets due to the enactment of the Tax Cuts and Jobs Act and state income tax expense, offset primarily by tax benefits for tax accounting method changes implemented during the third quarter, energy tax credits, and the domestic production activities deduction. Excluding the one-time non-cash deferred tax asset write down of $68.6 million recorded in the first quarter of 2018 due to the tax reform bill and the $34.1 million benefit recorded in the third quarter of 2018, the tax rate for the nine months ended August 31, 2018 would have been 22.6%. The effective tax rate for the nine months ended August 31, 2017 included tax benefits for settlements with the IRS, the domestic production activities deduction, and energy tax credits, offset primarily by state incomecredits. Excluding the impact of the write down of the deferred tax expense, and valuation allowance recorded against state net operating losses we expected to expire unutilized.

assets, the effective tax rate for the six months ended May 31, 2018 was 21.4%.


Homebuilding Segments
We have aggregatedIn connection with the CalAtlantic acquisition, we experienced significant growth in our homebuilding activitiesoperations. As a result, at the end of fiscal 2018, our chief operating decision makers ("CODM") reassessed how they evaluate the business and allocate resources. The CODM manage and assess our performance at a regional level. Therefore, in 2018 we performed an assessment of our operating segments in accordance with ASC 280, Segment Reporting, (“ASC 280”) and determined that each of our four homebuilding regions, financial services operations, multifamily operations and Rialto operations are our operating segments. Prior to this change, in accordance with the aggregation criteria defined in ASC 280, our operating segments were aggregated into three reportable segments, which we refer to as Homebuilding East, Homebuilding Central, and Homebuilding West, based primarily upon similar economic characteristics, geography and product type. Information about homebuilding activitiesIn addition, in states that do notfirst quarter of 2019, as a result of the reclassification of RMF and certain other Rialto assets from the Rialto segment to the Financial Services segment effective December 1, 2018, we renamed the Rialto segment as "Lennar Other" and included in this segment certain strategic technology investments, which were reclassified from the Homebuilding segments to Lennar Other. Prior periods have economic characteristics that are similarbeen reclassified to those in other states inconform with the same geographic area is grouped under "Homebuilding Other," which is not a reportable segment. This includes Indiana and Utah which are states with operations acquired from CalAtlantic.2019 presentation. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to homebuildingHomebuilding segments are to those threefour reportable segments.
At AugustMay 31, 2018,2019, our reportable homebuildingHomebuilding segments and Homebuilding Other consisted of homebuilding divisions located in:
East: Florida, Georgia, Maryland, New Jersey, North Carolina and South Carolina
Central: Georgia, Illinois, Indiana, Maryland, Minnesota, Tennessee and Virginia
Central:Texas: Arizona, Colorado and Texas
West: Arizona, California, Colorado, Nevada, Oregon, Utah and NevadaWashington
Other: Illinois, Indiana, Minnesota, Oregon, Tennessee, UtahUrban divisions and Washingtonother homebuilding related investments primarily in California, including FivePoint Holdings, LLC ("FivePoint")


The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated:
Selected Financial and Operational Data
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(In thousands)2018 2017 2018 20172019 2018 2019 2018
Homebuilding revenues:              
East:              
Sales of homes$2,005,249
 1,236,619
 4,929,570
 3,198,756
$1,732,216
 1,546,977
 2,954,860
 2,456,562
Sales of land23,740
 19,178
 70,612
 19,657
4,016
 19,766
 7,576
 23,144
Other revenues1,110
 —
 1,719
 —
Total East2,028,989
 1,255,797
 5,000,182
 3,218,413
1,737,342
 1,566,743
 2,964,155
 2,479,706
Central:              
Sales of homes1,218,288
 589,572
 3,003,434
 1,750,495
609,195
 613,604
 1,042,320
 866,929
Sales of land12,882
 13,329
 37,569
 50,929
4,478
 22,919
 6,256
 24,163
Other revenues112
 —
 276
 —
Total Central1,231,170
 602,901
 3,041,003
 1,801,424
613,785
 636,523
 1,048,852
 891,092
Texas:       
Sales of homes687,011
 684,091
 1,099,440
 1,032,178
Sales of land6,000
 16,676
 12,034
 24,687
Other revenues201
 —
 255
 —
Total Texas693,212
 700,767
 1,111,729
 1,056,865
West:              
Sales of homes1,480,525
 820,028
 3,731,529
 2,134,972
2,140,637
 2,125,987
 3,678,141
 3,253,623
Sales of land25,333
 3,472
 43,959
 11,520
1,961
 18,626
 4,372
 18,946
Other revenues425
 —
 1,407
 —
Total West1,505,858
 823,500
 3,775,488
 2,146,492
2,143,023
 2,144,613
 3,683,920
 3,272,569
Other:              
Sales of homes519,725
 201,512
 1,194,404
 617,648
7,057
 15,351
 9,484
 25,858
Sales of land—
 1,485
 755
 5,653
Other revenues1,180
 —
 1,180
 —
Total Other519,725
 202,997
 1,195,159
 623,301
8,237
 15,351
 10,664
 25,858
Total homebuilding revenues$5,285,742
 2,885,195
 13,011,832
 7,789,630
$5,195,599
 5,063,997
 8,819,320
 7,726,090


Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(In thousands)2018 2017 2018 20172019 2018 2019 2018
Operating earnings:       
Homebuilding operating earnings (loss):       
East:              
Sales of homes$227,078
 178,380
 482,287
 411,607
$208,535
 133,051
 342,821
 234,792
Sales of land1,006
 2,095
 16,894
 1,580
1,633
 15,940
 4,005
 16,702
Equity in earnings (loss) from unconsolidated entities
1,384
 (354) 1,816
 1,661
Other homebuilding revenues1,110
 —
 1,719
 —
Equity in loss from unconsolidated entities(135) (202) (234) (314)
Other income (expense), net(811) (213) 3,022
 3,058
(679) 5,104
 (2,464) 4,042
Loss due to litigation—
 —
 —
 (140,000)
Total East228,657
 179,908
 504,019
 277,906
210,464
 153,893
 345,847
 255,222
Central:              
Sales of homes129,345
 64,858
 254,910
 192,908
54,684
 23,421
 84,749
 34,255
Sales of land2,662
 2,417
 7,581
 5,171
171
 1,282
 574
 (886)
Equity in earnings (loss) from unconsolidated entities7
 (4) 334
 42
Other homebuilding revenues112
 —
 276
 —
Equity in earnings from unconsolidated entities69
 84
 138
 458
Other income, net308
 351
 533
 347
Total Central55,344
 25,138
 86,270
 34,174
Texas:       
Sales of homes75,055
 34,489
 107,044
 47,744
Sales of land811
 2,938
 2,275
 4,952
Other homebuilding revenues201
 —
 255
 —
Equity in earnings from unconsolidated entities278
 220
 158
 284
Other income (expense), net3,964
 (1,087) 1,638
 (3,135)(971) 5
 (2,080) (1,315)
Total Central135,978
 66,184
 264,463
 194,986
Total Texas75,374
 37,652
 107,652
 51,665
West:              
Sales of homes200,206
 119,269
 452,139
 272,751
270,321
 221,173
 464,217
 359,262
Sales of land(359) 397
 (2,201) 1,679
Sales of land (1)(168) 180
 (4,149) 216
Other homebuilding revenues425
 —
 1,407
 —
Equity in loss from unconsolidated entities(16,716) (9,297) (43,985) (44,369)(186) (332) (497) (723)
Other income, net (1)3,716
 2,380
 175,508
 7,272
Other income, net2,512
 3,574
 2,587
 5,269
Total West186,847
 112,749
 581,461
 237,333
272,904
 224,595
 463,565
 364,024
Other:              
Sales of homes54,559
 25,437
 88,958
 74,349
Sales of homes (2)(5,730) (4,540) (13,146) (8,984)
Sales of land21
 277
 (34) 476
—
 —
 (1) (2,059)
Equity in earnings (loss) from unconsolidated entities(66) 4
 (69) (25)
Other income, net6,041
 1,717
 12,494
 5,169
Other homebuilding revenues1,180
 —
 1,180
 —
Equity in earnings (loss) from unconsolidated entities (3)19,588
 (12,440) 6,293
 (26,503)
Other income (expense), net (4)(47,335) 845
 (46,276) 171,531
Total Other60,555
 27,435
 101,349
 79,969
(32,297) (16,135) (51,950) 133,985
Total homebuilding operating earnings$612,037
 386,276
 1,451,292
 790,194
$581,789
 425,143
 951,384
 839,070
(1)For the six months ended May 31, 2019, sales of land included an impairment of $4.0 million related to contracts to sell land.
(2)Operating earnings related to sales of homes in Homebuilding WestOther is negative because there were not sufficient home sales to offset period costs in our urban divisions and selling, general and administrative expenses.
(3)For both the three and six months ended May 31, 2019, Homebuilding Other equity in earnings from unconsolidated entities was primarily attributable to our share of net operating income from one of our Homebuilding unconsolidated entities, which was primarily due to a gain on settlement of contingent consideration.
(4)For both the three and six months ended May 31, 2019, other income,expense, net of Homebuilding Other was primarily due to a one-time loss of $48.9 million from the consolidation of a previously unconsolidated entity. For the six months ended May 31, 2018, other expense, net of Homebuilding Other included $164.9 million related to a gain on the sale of an 80% interest in one of Lennar Homebuilding's strategic joint ventures, Treasure Island Holdings, during the nine months ended August 31, 2018.Holdings.




Summary of Homebuilding Data

Deliveries:
Three Months EndedThree Months Ended
Homes Dollar Value (In thousands) Average Sales PriceHomes Dollar Value (In thousands) Average Sales Price
August 31, August 31, August 31,May 31, May 31, May 31,
2018 2017 2018 2017 2018 20172019 2018 2019 2018 2019 2018
East5,681
 3,778
 $2,005,249
 1,236,619
 $353,000
 327,000
5,061
 4,553
 $1,735,165
 1,546,978
 $343,000
 340,000
Central3,250
 1,730
 1,218,288
 589,572
 375,000
 341,000
1,568
 1,589
 609,195
 613,603
 389,000
 386,000
Texas2,149
 1,974
 687,011
 684,091
 320,000
 347,000
West2,414
 1,656
 1,492,086
 827,713
 618,000
 500,000
3,934
 3,953
 2,140,638
 2,125,986
 544,000
 538,000
Other1,268
 434
 519,725
 201,511
 410,000
 464,000
17
 26
 17,273
 26,324
 1,016,000
 1,012,000
Total12,613
 7,598
 $5,235,348
 2,855,415
 $415,000
 376,000
12,729
 12,095
 $5,189,282
 4,996,982
 $408,000
 413,000
Of the total homes delivered listed above, 1323 homes with a dollar value of $11.6$13.2 million and an average sales price of $889,000$572,000 represent home deliveries from unconsolidated entities for the three months ended AugustMay 31, 2018,2019, compared to 1017 home deliveries with a dollar value of $7.7$11.0 million and an average sales price of $768,000$645,000 for the three months ended AugustMay 31, 2017.2018.

Nine Months EndedSix Months Ended
Homes Dollar Value (In thousands) Average Sales PriceHomes Dollar Value (In thousands) Average Sales Price
August 31, August 31, August 31,May 31, May 31, May 31,
2018 2017 2018 2017 2018 20172019 2018 2019 2018 2019 2018
East14,162
 9,869
 $4,929,570
 3,198,756
 $348,000
 324,000
8,673
 7,310
 $2,961,600
 2,456,563
 $341,000
 336,000
Central8,010
 5,177
 3,003,434
 1,750,495
 375,000
 338,000
2,692
 2,243
 1,042,320
 866,928
 387,000
 387,000
Texas3,400
 3,064
 1,099,440
 1,032,178
 323,000
 337,000
West6,427
 4,380
 3,776,656
 2,169,461
 588,000
 495,000
6,759
 6,178
 3,678,141
 3,253,622
 544,000
 527,000
Other2,874
 1,335
 1,194,404
 617,648
 416,000
 463,000
25
 65
 25,032
 59,425
 1,001,000
 914,000
Total31,473
 20,761
 $12,904,064
 7,736,360
 $410,000
 373,000
21,549
 18,860
 $8,806,533
 7,668,716
 $409,000
 407,000
Of the total homes delivered listed above, 6141 homes with a dollar value of $45.1$22.3 million and an average sales price of $740,000$544,000 represent home deliveries from unconsolidated entities for the ninesix months ended AugustMay 31, 2018,2019, compared to 5348 home deliveries with a dollar value of $34.5$33.6 million and an average sales price of $651,000$699,000 for the ninesix months ended AugustMay 31, 2017.

2018.
Sales Incentives (1):
Three Months EndedThree Months Ended
Sales Incentives
(In thousands)
 
Average Sales Incentives Per
Home Delivered
 
Sales Incentives
as a % of Revenue
Sales Incentives
(In thousands)
 
Average Sales Incentives Per
Home Delivered
 
Sales Incentives
as a % of Revenue
August 31, August 31, August 31,May 31, May 31, May 31,
2018 2017 2018 2017 2018 20172019 2018 2019 2018 2019 2018
East$134,597
 90,736
 $23,700
 24,000
 6.3% 6.8%$125,479
 113,514
 $24,800
 24,900
 6.8% 6.8%
Central92,458
 45,512
 28,400
 26,300
 7.1% 7.2%46,627
 43,296
 29,700
 27,200
 7.1% 6.6%
Texas63,830
 63,990
 29,700
 32,400
 8.5% 8.5%
West37,198
 22,237
 15,500
 13,500
 2.5% 2.6%99,952
 54,986
 25,400
 13,900
 4.5% 2.5%
Other24,796
 6,886
 19,600
 15,900
 4.6% 3.3%2,217
 2,268
 554,200
 252,000
 23.9% 12.9%
Total$289,049
 165,371
 $22,900
 21,800
 5.2% 5.5%$338,105
 278,054
 $26,600
 23,000
 6.1% 5.3%


 Nine Months Ended
 
Sales Incentives
(In thousands)
 
Average Sales Incentives Per
Home Delivered
 
Sales Incentives
as a % of Revenue
 August 31, August 31, August 31,
 2018 2017 2018 2017 2018 2017
East$350,424
 228,195
 $24,700
 23,100
 6.6% 6.7%
Central219,679
 139,169
 27,400
 26,900
 6.8% 7.4%
West89,636
 74,204
 14,100
 17,100
 2.3% 3.4%
Other57,300
 21,856
 19,900
 16,400
 4.6% 3.4%
Total$717,039
 463,424
 $22,800
 22,400
 5.3% 5.7%


 Six Months Ended
 
Sales Incentives
(In thousands)
 
Average Sales Incentives Per
Home Delivered
 
Sales Incentives
as a % of Revenue
 May 31, May 31, May 31,
 2019 2018 2019 2018 2019 2018
East$218,781
 181,258
 $25,300
 24,800
 6.9% 6.9%
Central80,802
 61,162
 30,000
 27,300
 7.2% 6.6%
Texas99,711
 99,840
 29,300
 32,600
 8.3% 8.8%
West158,313
 82,365
 23,400
 13,300
 4.1% 2.5%
Other2,825
 3,366
 470,800
 198,000
 23.0% 11.5%
Total$560,432
 427,991
 $26,100
 22,800
 6.0% 5.3%
(1)Sales incentives relate to home deliveries during the period, excluding deliveries by unconsolidated entities.

New Orders (2):
Three Months EndedThree Months Ended
Homes Dollar Value (In thousands) Average Sales PriceHomes Dollar Value (In thousands) Average Sales Price
August 31, August 31, August 31,May 31, May 31, May 31,
2018 2017 2018 2017 2018 20172019 2018 2019 2018 2019 2018
East6,145
 3,841
 $2,135,774
 1,250,446
 $348,000
 326,000
5,591
 5,643
 $1,939,901
 1,956,130
 $347,000
 347,000
Central2,779
 1,657
 1,002,033
 558,782
 361,000
 337,000
2,062
 2,004
 798,080
 785,639
 387,000
 392,000
Texas2,424
 2,346
 744,586
 778,028
 307,000
 332,000
West2,334
 1,689
 1,489,874
 909,209
 638,000
 538,000
4,420
 4,426
 2,298,540
 2,492,083
 520,000
 563,000
Other1,061
 423
 443,208
 204,784
 418,000
 484,000
21
 21
 15,238
 21,098
 726,000
 1,005,000
Total12,319
 7,610
 $5,070,889
 2,923,221
 $412,000
 384,000
14,518
 14,440
 $5,796,345
 6,032,978
 $399,000
 418,000
Of the total new orders listed above, 1332 homes with a dollar value of $9.8$15.1 million and an average sales price of $751,000$471,000 represent new orders from unconsolidated entities for the three months ended AugustMay 31, 2018,2019, compared to 1615 new orders with a dollar value of $12.8 million and an average sales price of $798,000$856,000 for the three months ended AugustMay 31, 2017.2018.

Nine Months EndedSix Months Ended
Homes Dollar Value (In thousands) Average Sales PriceHomes Dollar Value (In thousands) Average Sales Price
August 31, August 31, August 31,May 31, May 31, May 31,
2018 2017 2018 2017 2018 20172019 2018 2019 2018 2019 2018
East16,721
 11,056
 $5,802,948
 3,573,399
 $347,000
 323,000
10,084
 9,206
 $3,461,332
 3,108,547
 $343,000
 338,000
Central8,403
 5,354
 3,062,270
 1,806,948
 364,000
 337,000
3,484
 2,789
 1,335,676
 1,094,068
 383,000
 392,000
Texas3,848
 3,720
 1,201,545
 1,210,206
 312,000
 325,000
West6,949
 5,274
 4,281,652
 2,723,279
 616,000
 516,000
7,532
 7,131
 3,928,354
 3,942,319
 522,000
 553,000
Other3,142
 1,307
 1,325,998
 625,769
 422,000
 479,000
33
 50
 26,551
 46,839
 805,000
 937,000
Total35,215
 22,991
 $14,472,868
 8,729,395
 $411,000
 380,000
24,981
 22,896
 $9,953,458
 9,401,979
 $398,000
 411,000
Of the total new orders listed above, 5447 homes with a dollar value of $38.9$24.8 million and an average sales price of $721,000$527,000 represent new orders from unconsolidated entities for the ninesix months ended AugustMay 31, 2018,2019, compared to 3741 new orders with a dollar value of $28.2$29.2 million and an average sales price of $762,000$711,000 for the ninesix months ended AugustMay 31, 2017.2018.
(2)New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three and ninesix months ended AugustMay 31, 20182019 and 2017.2018.



Backlog:
Homes Dollar Value (In thousands) Average Sales PriceHomes Dollar Value (In thousands) Average Sales Price
August 31, August 31, August 31,May 31, May 31, May 31,
2018 (1) 2017 2018 2017 2018 20172019 2018 (1) 2019 2018 2019 2018
East (2)9,468
 4,789
 $3,492,052
 1,625,820
 $369,000
 339,000
8,499
 7,910
 $3,025,598
 2,899,199
 $356,000
 367,000
Central4,327
 2,498
 1,682,602
 877,607
 389,000
 351,000
2,778
 2,555
 1,083,608
 1,020,044
 390,000
 399,000
Texas2,596
 2,912
 862,826
 1,039,320
 332,000
 357,000
West3,667
 2,424
 2,444,333
 1,302,318
 667,000
 537,000
5,174
 6,231
 2,737,664
 3,592,036
 529,000
 576,000
Other1,758
 501
 734,345
 264,161
 418,000
 527,000
14
 14
 10,507
 17,211
 751,000
 1,229,000
Total19,220
 10,212
 $8,353,332
 4,069,906
 $435,000
 399,000
19,061
 19,622
 $7,720,203
 8,567,810
 $405,000
 437,000
Of the total homes in backlog listed above, 13 homes with a backlog dollar value of $5.2 million and an average sales price of $397,000 represent the backlog from unconsolidated entities at May 31, 2019, compared to 16 homes with a backlog dollar value of $8.9$10.7 million and an average sales price of $559,000 represent the backlog from unconsolidated entities$672,000 at AugustMay 31, 2018, compared to 14 homes with a backlog dollar value of $9.7 million and an average sales price of $692,000 at August 31, 2017.2018.
(1)During the ninesix months ended AugustMay 31, 2018, we acquired 6,530a total of 6,651 homes in backlog fromin connection with the CalAtlantic acquisition. Of the homes in backlog acquired, 2,5962,202 homes were in the East, 1,7431,294 homes were in the Central, 1,116917 homes were in Texas and 2,238 homes were in the West and 1,075 homes were in Other.West.
(2)During both the ninethree and six months ended AugustMay 31, 2017,2019, we acquired 35913 homes in backlog from the WCI acquisition.backlog.
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 homebuildingHomebuilding segments and Homebuilding Otherother as follows:
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
2018 2017 2018 20172019 2018 2019 2018
East13% 15% 13% 14%15% 12% 15% 13%
Central20% 20% 16% 18%10% 8% 11% 8%
Texas21% 15% 23% 16%
West15% 14% 12% 13%13% 10% 15% 11%
Other13% 8% 10% 10%13% 19% 11% 12%
Total15% 16% 13% 15%15% 11% 16% 12%
Active Communities:
August 31,May 31,
2018 (2) 20172019 2018 (1)
East (1)591
 360
458
 484
Central347
 211
253
 236
Texas246
 256
West216
 137
364
 344
Other158
 50
4
 5
Total1,312
 758
1,325
 1,325
Of the total active communities listed above, five communities represent active communities being developed by unconsolidated entities as of both AugustMay 31, 2019 and 2018, and 2017.respectively.

(1)We acquired 51 active communities related to the WCI acquisition on February 10, 2017.
(2)We acquired 542 active communities related to the CalAtlantic acquisition on February 12, 2018. Of the communities acquired, 231177 were in the East, 149135 were in the Central, 6999 were in Texas and 131 were in the West and 93 were in Other.West.


The following table details our gross margins on home sales for the three and ninesix months ended AugustMay 31, 20182019 and 20172018 for each of our reportable homebuildingHomebuilding segments and Homebuilding Other:
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
August 31, August 31,May 31, May 31,
(Dollars in thousands)2018 (1) 2017 2018 (1) 20172019 2018 (1) 2019 2018 (1)
East:                
Sales of homes$2,005,249
 1,236,619
 $4,929,570
 3,198,756
 $1,732,216
 1,546,977
 $2,954,860
 2,456,562
 
Costs of homes sold1,594,991
 933,809
 3,974,445
 2,452,802
 1,374,798
 1,261,747
 2,344,664
 1,976,269
 
Gross margins on home sales410,258
 20.5% 302,810
 24.5% 955,125
 19.4% 745,954
 23.3%357,418
 20.6% 285,230
 18.4% 610,196
 20.7% 480,293
 19.6%
Central:                
Sales of homes1,218,288
 589,572
 3,003,434
 1,750,495
 609,195
 613,604
 1,042,320
 866,929
 
Costs of homes sold982,252
 466,891
 2,475,004
 1,387,705
 500,071
 538,174
 858,432
 753,880
 
Gross margins on home sales236,036
 19.4% 122,681
 20.8% 528,430
 17.6% 362,790
 20.7%109,124
 17.9% 75,430
 12.3% 183,888
 17.6% 113,049
 13.0%
Texas:        
Sales of homes687,011
 684,091
 1,099,440
 1,032,178
 
Costs of homes sold547,648
 576,591
 879,750
 870,659
 
Gross margins on home sales139,363
 20.3% 107,500
 15.7% 219,690
 20.0% 161,519
 15.6%
West:                
Sales of homes1,480,525
 820,028
 3,731,529
 2,134,972
 2,140,637
 2,125,987
 3,678,141
 3,253,623
 
Costs of homes sold1,172,555
 642,279
 3,005,011
 1,697,285
 1,706,645
 1,754,878
 2,923,392
 2,652,957
 
Gross margins on home sales307,970
 20.8% 177,749
 21.7% 726,518
 19.5% 437,687
 20.5%433,992
 20.3% 371,109
 17.5% 754,749
 20.5% 600,666
 18.5%
Other:                
Sales of homes519,725
 201,512
 1,194,404
 617,648
 7,057
 15,351
 9,484
 25,858
 
Costs of homes sold416,086
 154,341
 989,905
 477,628
 
Costs of homes sold (2)8,367
 14,578
 13,341
 24,715
 
Gross margins on home sales103,639
 19.9% 47,171
 23.4% 204,499
 17.1% 140,020
 22.7%(1,310) (18.6)% 773
 5.0% (3,857) (40.7)% 1,143
 4.4%
Total gross margins on home sales$1,057,903
 20.3% 650,411
 22.8% $2,414,572
 18.8% 1,686,451
 21.9%$1,038,587
 20.1% 840,042
 16.8% $1,764,666
 20.1% 1,356,670
 17.8%
(1)
During the three and ninesix months ended AugustMay 31, 2018, gross marginmargins on home sales included $84.2$236.8 million and $376.0$291.9 million, respectively, ofpurchase accounting adjustments on CalAtlantic homes in backlog/construction in progress that were delivered in the respective periods.



(2)Costs of homes sold include period costs in our urban divisions that impact costs of homes sold without any sales of homes revenue.
Three Months Ended AugustMay 31, 20182019 versus Three Months Ended AugustMay 31, 20172018
Homebuilding East: Revenues from home sales increased in the thirdsecond quarter of 20182019 compared to the thirdsecond quarter of 2017,2018, primarily due to an increase in the number of home deliveries in all the states in the segment. Revenues from home sales also increased as a result of the increase in the average sales price of homes delivered in the Carolinas and New Jersey. The average sales price of homes delivered in Florida were consistent from the second quarter of 2018 to the second quarter of 2019. The increase in the number of home deliveries is primarily due to higher demand as the number of deliveries per active community increased. The increase in the average sales price of homes delivered in the Carolinas and New Jersey was primarily due to an increase in home deliveries in higher-priced communities, including higher-priced communities acquired from CalAtlantic. Gross margin percentage on home deliveries in the second quarter of 2019 increased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries in the second quarter of 2018.
Homebuilding Central: Revenues from home sales were consistent in the second quarter of 2019 compared to the second quarter of 2018, primarily due to a decrease in the number of deliveries in Maryland and a decrease in the average sales price in Georgia, offset by an increase in the number of deliveries in Virginia. The decrease in the number of home deliveries in Maryland was primarily due to a decrease in active communities and timing of opening and closing of communities. The increase in the number of home deliveries in Virginia was primarily due to an increase in active communities. The decrease in the average sales price of homes delivered in Georgia was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. Gross margin percentage on home deliveries in the second quarter of 2019 increased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries in the second quarter of 2018. This was partially offset by higher construction costs and increased sales incentives.


Homebuilding Texas: Revenues from home sales were consistent in the second quarter of 2019 compared to the second quarter of 2018 due to an increase in the number of home deliveries offset by a decrease in the average sales price of homes delivered. The increase in the number of deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in average sales price of homes delivered was primarily due to closing out higher priced communities and shifting into lower priced communities. Gross margin percentage on home deliveries in the second quarter of 2019 increased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries in the second quarter of 2018. This was partially offset by higher construction costs and increased sales incentives.
Homebuilding West: Revenues from home sales increased slightly in the second quarter of 2019 compared to the second quarter of 2018. The number of home deliveries were consistent period to period with slight increases in Arizona, Oregon and Washington and slight decreases in California, Colorado and Nevada. The average sales price of homes delivered was also consistent period to period with slight increases in all states except Arizona, which had a slight decrease. Gross margin percentage on home deliveries in the second quarter of 2019 increased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries in the second quarter of 2018. This was partially offset by higher construction costs and increased sales incentives.
Six Months Ended May 31, 2019 versus Six Months Ended May 31, 2018
Homebuilding East: Revenues from home sales increased in the six months ended May 31, 2019 compared to the six months ended May 31, 2018, primarily due to an increase in the number of home deliveries in all the states in the segment. Revenues from home sales also increased as a result of an increase in the average sales price of homes delivered in Florida and the Carolinas, partially offset by a decrease in the average sales price of homes delivered in Georgia and New Jersey. The increase in the number of home deliveries was primarily due to an increase in active communities including communities acquired from CalAtlantic. The increase in the average sales price of homes delivered in Florida Maryland and the Carolinas was primarily due to an increase in home deliveries in higher-priced communities, including higher-priced communities acquired from CalAtlantic. The decrease in the average sales price of homes delivered in Georgia and New Jersey was primarily driven by a change in product mix due to closing out the remaining homes in higher-priced communities and opening lower-priced communities. Gross margin percentage on home salesdeliveries in the third quarter of 2018 decreased compared to the same period last year primarily due to increases in construction and land costs and purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries.
Homebuilding Central: Revenues from home salessix months ended May 31, 2019 increased in the third quarter of 2018 compared to the third quarter of 2017, primarily due to an increase in the number of home deliveries and the average sales price in all the states in the segment. The increase in the number of home deliveries was primarily due to an increase in active communities including communities acquired from CalAtlantic. The increase in the average sales price of homes delivered was primarily due to an increase in home deliveries in higher-priced communities, including higher-priced communities acquired from CalAtlantic. Gross margin percentage on home sales in the third quarter of 2018 decreased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries.
Homebuilding West: Revenues from home sales increased in the third quarter of 2018 compared to the third quarter of 2017, primarily due to an increase in the number of home deliveries and the average sales price in all the states in the segment. The increase in the number of home deliveries was primarily due to an increase in active communities due to communities acquired from CalAtlantic. The increase in the average sales price of homes delivered was primarily due to an increase in home deliveries in higher-priced communities, including higher-priced communities acquired from CalAtlantic. Gross margin percentage on home sales in the third quarter of 2018 decreased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries and increases in landthe six months ended May 31, 2018. This was partially offset by higher construction costs.
Homebuilding Other:Central: Revenues from home sales increased in the third quarter of 2018six months ended May 31, 2019 compared to the third quarter of 2017,six months ended May 31, 2018, primarily due to an increase in the number of home deliveries in all the states of Homebuilding Other partially offset by a decreasein the segment, except in Maryland and Tennessee, and an increase in the average sales price primarily in Minnesota.Georgia, Illinois, Indiana and Tennessee. The increase in the number of home deliveries was primarily due to an increase in active communities including communities acquired from CalAtlantic. The decrease in the number of home deliveries in Tennessee was primarily due to a decrease in deliveries per community as a result of timing of opening and closing of communities. The increase in the average sales price of homes delivered in Georgia, Illinois, Indiana and Tennessee was primarily due to an increase in home deliveries in higher-priced communities. The decrease in the average sales price of homes delivered in Maryland, Minnesota, and Virginia was primarily driven by a change in product mix due to closing out the remaining homes in higher-priced communities and opening lower-priced communities. Gross margin percentage on home salesdeliveries in the third quarter of 2018 decreased compared to the same period last year primarily due to increases in construction costs and purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries.
Nine Months Ended August 31, 2018 versus Nine Months Ended August 31, 2017
Homebuilding East: Revenues from home sales increased for the ninesix months ended AugustMay 31, 2018 compared to the nine months ended August 31, 2017, primarily due to an increase in the number of home deliveries in all the states in the segment. Revenues from home sales also2019 increased as a result of the increase in the average sales price of homes delivered in Florida, Maryland and the Carolinas partially offset by a decrease in the average sales price of homes delivered in Georgia and New Jersey. The increase in the number of home deliveries was primarily due to an increase in active communities including communities acquired from CalAtlantic. The increase in the average sales price of homes delivered in Florida, Maryland and the Carolinas was primarily due to an increase in home deliveries in higher-priced communities, including higher-priced communities acquired from CalAtlantic. The decrease in the average sales price of homes delivered in Georgia and New Jersey was primarily driven by a change in product mix due to closing out the remaining homes in higher-priced communities and opening lower-priced communities. Gross margin percentage on home sales for the nine months ended August 31, 2018 decreased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries in the six months ended May 31, 2018. This was partially offset by higher construction costs and increases in construction and land costs.increased sales incentives.
Homebuilding Central:Texas: Revenues from home sales increased forin the ninesix months ended AugustMay 31, 20182019 compared to the ninesix months ended AugustMay 31, 2017,2018, primarily due to an increase in the number of home deliveries and the average sales price


in all the states in the segment. The increase in the number of home deliveries was primarily due to an increase in active communities including communities acquired from CalAtlantic. The increasepartially offset by a decrease in the average sales price of homes delivered was primarily due to an increase in home deliveries in higher-priced communities, including higher-priced communities acquired from CalAtlantic. Gross margin percentage on home sales for the nine months ended August 31, 2018 decreased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries.
Homebuilding West: Revenues from home sales increased for the nine months ended August 31, 2018 compared to the nine months ended August 31, 2017, primarily due to an increase in the number of home deliveries and average sales price in all the states in the segment.price. The increase in the number of home deliveries was primarily due to an increase in active communities due to communities acquired from CalAtlantic. The increasedecrease in the average sales price of homes delivered was primarily due to an increase in home deliveries in higher-pricedclosing out higher priced communities including higher-priced communities acquired from CalAtlantic.and shifting into lower priced communities. Gross margin percentage on home sales fordeliveries in the ninesix months ended AugustMay 31, 2018 decreased2019 increased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries in the six months ended May 31, 2018 and increases in land costs. The decrease in gross margin percentage on homedecreased sales incentives. This was partially offset by the increase in the average sales price of homes delivered.higher construction costs.
Homebuilding Other:West: Revenues from home sales increased forin the ninesix months ended AugustMay 31, 20182019 compared to the ninesix months ended AugustMay 31, 2017,2018, primarily due to an increase in the number of home deliveries in all the states of Homebuilding Other, in the segment,


except Oregon, partially offset by a decreaseColorado and Nevada, and an increase in the average sales price primarily in Minnesota.all states in the segment. The increase in the number of home deliveries was primarily due to an increase in active communities includingdue to communities acquired from CalAtlantic. The decrease in the number of home deliveries in OregonColorado was primarily due to a decrease in active communities and timing of opening and closing of communities. The decrease in the number of home deliveries in Nevada was primarily due to a decrease in deliveries per active community as a result of timing of opening and closing of communities. The decreaseincrease in the average sales price of homes delivered in Minnesota was primarily driven by a change in product mix due to closing out the remaining homesan increase in home deliveries in higher-priced communities, and opening lower-priced communities.including higher-priced communities acquired from CalAtlantic. Gross margin percentage on home sales fordeliveries in the ninesix months ended AugustMay 31, 2018 decreased2019 increased compared to the same period last year primarily due to purchase accounting adjustments on CalAtlantic homes that were in backlog/construction in progress when we acquired CalAtlantic, which reduced the gross margin percentage for those deliveries in the six months ended May 31, 2018 and increases inlower land costs. This was partially offset by higher construction costs.costs and increased sales incentives.
Lennar Financial Services Segment
Our Lennar Financial Services reportable segment primarily provides mortgage financing, title insurance,and closing services and property and casualty insuranceprimarily for both buyers of our homeshomes. The segment also originates and others. It also includes a real estate brokerage business acquired as part of the WCI transaction.sells into securitizations commercial mortgage loans through its RMF business. Our Lennar Financial Services segment sells substantially all of the residential 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.
As part of the CalAtlantic acquisition in February 2018, CalAtlantic's financial services business was merged into Lennar Financial Services. This business operates in the same states as CalAtlantic's homebuilding divisions.
The following table sets forth selected financial and operational information related to our Lennar Financial Services segment:
 Three Months Ended Nine Months Ended
 August 31, August 31,
(Dollars in thousands)2018 2017 2018 2017
Revenues$236,268
 215,056
 639,543
 571,462
Costs and expenses179,640
 165,999
 510,838
 458,014
Operating earnings$56,628
 49,057
 128,705
 113,448
Dollar value of mortgages originated$3,044,000
 2,355,000
 7,941,000
 6,493,000
Number of mortgages originated10,000
 8,300
 26,400
 23,100
Mortgage capture rate of Lennar homebuyers (1)71% 80% 72% 80%
Number of title and closing service transactions32,500
 30,000
 87,300
 81,500
Number of title policies issued75,900
 79,400
 219,600
 239,400
(1)During the three and nine months ended August 31, 2018, mortgage capture rate is combined for Lennar and CalAtlantic homebuyers. Mortgage capture rate excluding CalAtlantic homebuyers was 77% and 78% for the three and nine months ended August 31, 2018, respectively.
 Three Months Ended Six Months Ended
 May 31, May 31,
(Dollars in thousands)2019 2018 2019 2018
Revenues$204,216
 249,709
 347,527
 445,796
Costs and expenses147,999
 193,935
 272,338
 364,160
Operating earnings$56,217
 55,774
 75,189
 81,636
Net loss attributable to noncontrolling interests(6,267) —
 (9,057) —
Operating earnings net of noncontrolling interests$62,484
 55,774
 84,246
 81,636
Dollar value of mortgages originated$2,620,000
 2,949,000
 4,557,000
 4,897,000
Number of mortgages originated8,250
 9,700
 14,500
 16,300
Mortgage capture rate of Lennar homebuyers75% 70% 74% 73%
Number of title and closing service transactions13,500
 31,400
 28,100
 54,800
Number of title policies issued—
 75,500
 19,800
 143,700


Rialto Segment
Our Rialto reportable segment isConsistent with our reversion to a commercialpure-play homebuilder, during the first quarter of 2019, we sold the majority of our retail title agency business and title insurance underwriter, substantially all of our retail mortgage business and our real estate investment, investment management,brokerage business. These transactions resulted in a net gain of $1.7 million.
In connection with the sale of the majority of our retail title agency business and finance company focused on raising, investingtitle insurance underwriter, we provided seller financing and managing third-party capital, originatingreceived a substantial minority equity ownership stake in the buyer. Due to the combination of both the equity and selling into securitizationsdebt components of this transaction, the transaction did not meet the accounting requirements for sale treatment and, therefore, we are required to consolidate the buyer’s results at this time.
At May 31, 2019 and November 30, 2018, the carrying value of Financial Services' commercial mortgage loans as well as investing our own capital in real estate related mortgage loans, propertiesmortgage-backed securities ("CMBS") was $167.0 million and related securities. Rialto utilizes its vertically-integrated investment$137.0 million, respectively. These securities were purchased at discounts ranging from 6% to 84% with coupon rates ranging from 2.0% to 5.3%, stated and operating platform to underwrite, perform diligence, acquire, manage, workoutassumed final distribution dates between October 2027 and add value to diverse portfolios of real estate loans, propertiesDecember 2028, and stated maturity dates between October 2050 and December 2051. The Financial Services segment classifies these securities as well as providing strategic real estate capital. Rialto's primary focus isheld-to-maturity based on its intent and ability to manage third-party capital and to originate and sell into securitizations commercial mortgage loans. Rialto has continuedhold 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.until maturity.
Rialto's operating earnings (loss) was as follows:
 Three Months Ended Nine Months Ended
 August 31, August 31,
(In thousands)2018 2017 2018 2017
Revenues$49,495
 57,810
 149,033
 207,804
Costs and expenses (1)39,435
 49,503
 120,784
 175,492
Rialto equity in earnings from unconsolidated entities5,266
 4,858
 18,496
 11,310
Rialto other expense, net (2)(5,882) (16,357) (21,187) (54,119)
Operating earnings (loss) (3)$9,444
 (3,192) 25,558
 (10,497)
(1)Costs and expenses included loan impairments of $1.6 million and $19.5 million for the three and nine months ended August 31, 2017, respectively, primarily associated with the segment's FDIC loans portfolio (before noncontrolling interests).
(2)Rialto other expense, net, included REO impairments of $1.5 million and $7.5 million for the three and nine months ended August 31, 2018, respectively, and REO impairments of $12.7 million and $38.9 million for the three and nine months ended August 31, 2017, respectively.
(3)
Operating earnings for the three and nine months ended August 31, 2018 included net loss attributable to noncontrolling interests of $1.2 million and $2.6 million, respectively. Operating loss for the three and nine months ended August 31, 2017 included net loss attributable to noncontrolling interests of $6.4 million and $31.9 million, respectively.
Rialto Mortgage Finance
RMF originates and sells into securitizations five, seven and ten year commercial first mortgage loans, which are secured by income producing properties. This business is a significant contributor to Rialto's revenues.
During the ninesix months ended AugustMay 31, 2018,2019, RMF originated commercial loans with a total principal amountbalance of $997.5$720.6 million, of which $705.3 million were recorded as loans held-for-sale, and sold $500.5 million of commercial loans into five separate securitizations. As of May 31, 2019, $61.0 million of originated loans were sold into a securitization trust but not settled and thus were included as receivables, net. As of November 30, 2018, there were no unsettled transactions.



During the six months ended May 31, 2018, RMF originated commercial loans with a total principal balance of $663.8 million, all of which were recorded as loans held-for-sale, and sold $1.1 billion$556.3 million of loans into 12six separate securitizations. During the nine months ended August 31, 2017, RMF originated loans with a total principal amount of $1.3 billion, of which $1.3 billion were recorded as loans held-for-sale and $57.4 million as accrual loans within loans receivable, net, and sold $1.1 billion of loans into eight separate securitizations. As of August 31, 2018 and November 30, 2017, there were no unsettled transactions.
FDIC Portfolios
In 2010, Rialto acquired indirectly 40% managing member equity interests in two limited liability companies ("LLCs") in partnership with the FDIC ("FDIC Portfolios"). The LLCs met the accounting definition of variable interest entities ("VIEs") and since we were determined to be the primary beneficiary, we consolidated the LLCs. In February 2017, the FDIC exercised its “clean-up call rights” under the Amended and Restated Limited Liability Company Agreement. As a result, Rialto had until July 10, 2017 to liquidate and sell the assets in the FDIC Portfolios. On July 10, 2017, Rialto and the FDIC entered into an agreement which extended the original agreement date to January 10, 2018. Since January 11, 2018, (1) the FDIC has had the right, at its discretion, to sell any remaining assets, or (2) Rialto has had the option to purchase the FDIC's interest in the portfolios. At August 31, 2018, the consolidated LLCs had total combined assets of $12.0 million, which primarily included $7.2 million in cash, $3.4 million of real estate owned, net, and $0.6 million of loans held-for-sale. At August 31, 2018, all remaining assets with carrying values were under contract to be sold. At November 30, 2017, the consolidated LLCs had total combined assets of $48.8 million, which primarily included $23.8 million in cash, $20.0 million of real estate owned, net and $1.6 million of loans held-for-sale.


Investments
Rialto is the sponsor of and an investor in private equity vehicles that invest in and manage real estate related assets and other related investments. This includes:
Private Equity VehicleInception YearCommitment
Rialto Real Estate Fund, LP2010$700 million (including $75 million by us)
Rialto Real Estate Fund II, LP2012$1.3 billion (including $100 million by us)
Rialto Mezzanine Partners Fund, LP2013$300 million (including $34 million by us)
Rialto Capital CMBS Funds2014$119 million (including $52 million by us)
Rialto Real Estate Fund III2015$1.9 billion (including $140 million by us)
Rialto Credit Partnership, LP2016$220 million (including $20 million by us)
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.
At August 31, 2018 and November 30, 2017, the carrying value of Rialto's commercial mortgage-backed securities ("CMBS") was $211.1 million and $179.7 million, respectively. These securities were purchased at discounts ranging from 9% to 84% with coupon rates ranging from 1.3% to 5.0%, stated and assumed final distribution dates between November 2020 and December 2027, and stated maturity dates between November 2043 and March 2059. The Rialto segment classified these securities as held-to-maturity based on its intent and ability to hold the securities until maturity. We have financing agreements to finance CMBS that have been purchased as investments by the Rialto segment. At August 31, 2018 and November 30, 2017, the carrying amount, net of debt issuance costs, of outstanding debt in these agreements was $122.6 million and $91.8 million, respectively, and the interest is incurred at a fixed rate of 3.2% to 3.3%.
We have retained investment bankers to assist with strategic alternatives regarding Rialto, which may include sale of all or a portion of it.
Lennar Multifamily Segment
We have been actively involved, primarily through unconsolidated entities, in the development, construction and property management 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 AugustMay 31, 20182019 and November 30, 2017,2018, our condensed consolidated balance sheetsheets had $890.1 million$1.0 billion and $710.7$874.2 million, respectively, of assets related to our Lennar Multifamily segment, which included investments in unconsolidated entities of $482.2$510.2 million and $407.5$481.1 million, respectively. Our net investment in the Lennar Multifamily segment as of AugustMay 31, 20182019 and November 30, 20172018 was $737.5$822.4 million and $561.0$703.6 million, respectively. During the three and nine months ended August 31, 2018, our Lennar Multifamily segment sold one and four operating properties, respectively, through its unconsolidated entities resulting in the segment's $1.7 million and $23.3 million share of gains, respectively. During the three and nine months ended August 31, 2017, our Lennar Multifamily segment sold two and five operating properties, respectively, through its unconsolidated entities resulting in the segment's $15.4 million and $52.9 million share of gains, respectively.
Our Lennar Multifamily segment had equity investments in 2418 and 2822 unconsolidated entities (including the Lennar Multifamily Venture FundI, "LMV I" and Lennar Multifamily Venture Fund II LP, ("Venture Fund"LMV II")) as of AugustMay 31, 20182019 and November 30, 2017,2018, respectively. As of AugustMay 31, 2018,2019, our Lennar Multifamily segment had interests in 6855 communities with development costs of approximately $8.1$6.5 billion, of which 22 communities were completed and operating, 49 communities were partially completed and leasing, 2321 communities were under construction and the remaining communities were either owned or under contract.by unconsolidated entities. As of AugustMay 31, 2018,2019, our Lennar Multifamily segment also had a pipeline of 15 potential future projects, which were under contract or had letters of intent, totaling approximately $2.0$3.0 billion in development costs across a number of states that will be developed primarily by future unconsolidated entities.
The Venture FundLMV I is a long-term multifamily development investment vehicle involved in the development, construction and property management of class-A multifamily assets with $2.2 billion in equity commitments, including a $504 million co-investment commitment by us comprised of cash, undeveloped land and preacquisition costs.
In March 2018, the Lennar Multifamily segment completed the first closing of a second Lennar Multifamily Venture, Venture FundLMV II, for the development, construction and property management of class-A multifamily assets. WithDuring the first close, Venture Fund II has approximately $655 million ofsix months ended May 31, 2019, LMV II's equity commitments were increased by an additional $471 million, including a $255$126 million co-investment commitment by Lennarus comprised of cash, undeveloped land and preacquisition costs. As of May 31, 2019, LMV II had approximately $1.3 billion of equity commitments, including a $381 million co-investment commitment by us. Subsequent to May 31, 2019, the Multifamily segment announced the final closing of LMV II with $1.3 billion of equity commitments.
Lennar Other Segment
Our Lennar Other segment includes fund investments we retained subsequent to the sale of the Rialto investment and duringasset management platform as well as strategic investments in technology companies that are looking to improve the ninehomebuilding and financial services industries to better serve our customers and increase efficiencies. As of May 31, 2019 and November 30, 2018, our balance sheet had $549.2 million and $589.0 million, respectively, of assets in the Lennar Other segment, which included investments in unconsolidated entities of $429.9 million and $424.1 million, respectively.
During the three and six months ended AugustMay 31, 2019, our Lennar Other segment had operating earnings of $1.8 million and $4.9 million, respectively, which related to the fund investments we retained when we sold the Rialto investment and asset management platform as well as our strategic investments in technology companies. Operating earnings for the three and six months ended May 31, 2018 $146.1were $3.9 million in equity commitments were called, ofand $6.7 million, respectively, which we contributed our portion of $55.4 million,primarily included the Rialto investment and asset management platform, which was sold on November 30, 2018, and the Rialto fund investments we retained when we sold the Rialto investment and asset management platform. Our strategic investments in technology companies did not have a material impact to the Lennar Other segment for the three and six months ended May 31, 2018.


made up of a $108.3 million inventoryAt May 31, 2019 and cash contributions, offset by $52.9 million of distributions as a return of capital resulting in a remaining equity commitment for us of $199.6 million. As of August 31,November 30, 2018, the carrying value of Lennar Other's CMBS was $60.4 million and $60.0 million, respectively. These securities were purchased at discounts ranging from 6.5% to 86.1% with coupon rates ranging from 1.3% to 4.0%, stated and assumed final distribution dates between November 2020 and October 2026, and stated maturity dates between November 2049 and March 2059. We classify these securities as held-to-maturity based on our investment inintent and ability to hold the Venture Fund II was $45.6 million. The difference between our net contributions and carrying value of our investments was related to a basis difference. Venture Fund II was seeded initially with six undeveloped multifamily assets that were previously purchased by the Lennar Multifamily segment totaling approximately 2,200 apartments with projected project costs of approximately $900 million.

securities until maturity.


(2) Financial Condition and Capital Resources
At AugustMay 31, 20182019, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, Rialtomultifamily and multifamilyother operations of $1.0 billion, compared to $2.7$1.6 billion at November 30, 20172018 and $837.7 million$1.2 billion at AugustMay 31, 20172018.
We finance all of our activities, including homebuilding, financial services, Rialto, multifamily, other and general operating needs, primarily with cash generated from our operations, debt issuances and cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility.facility (the "Credit Facility").
Operating Cash Flow Activities
During the ninesix months ended AugustMay 31, 2019 and 2018, and 2017, cash (used in) provided by operating activities totaled $748.7($429.9) million and $327.7$19.5 million, respectively. During the ninesix months ended AugustMay 31, 2019, cash used in operating activities was impacted primarily by an increase in inventories due to strategic land purchases, land development and construction costs of $1.5 billion, an increase in loans held-for-sale of $206.3 million and a decrease in accounts payable and other liabilities of $192.5 million. This was partially offset by our net earnings, a decrease in receivables of $542.1 million primarily related to a decrease in Financial Services' receivables, net, which are loans sold to investors for which we have not been paid, deferred income tax expense of $101.5 million and a decrease in other assets of $66.5 million.
During the six months ended May 31, 2018, cash provided by operating activities was positively impacted by our net earnings, an increase in accounts payable and other liabilities of $341.4 million, deferred income tax expense of 188.1$111.0 million and a decrease in loans held-for-salereceivables of $130.5$44.2 million, of which $73.9 million related to Rialto and $56.6 million related to Lennar Financial Services. This was partially offset by an increase in inventories due to strategic land purchases,purchase, land development and construction costs of $725.0$408.9 million, and an increase in other assets of $193.8$119.7 million and an increase in loans held-for-sale of $43.9 million, of which $110.8 million related to RMF originated commercial loans that are reported within the Financial Services segment, offset by a decrease in Financial Services loans held-for-sale of $66.9 million. For the ninesix months ended AugustMay 31, 2018, distributions of earnings from unconsolidated entities were $90.4$18.7 million, which included (1) $67.5$16.2 million from Lennar Homebuilding unconsolidated entities; (2) $18.7 million from Lennar Multifamily unconsolidated entities; and (3) $4.2(2) $2.5 million from the unconsolidated Rialto unconsolidated entities.
During the nine months ended August 31, 2017, cash provided by operating activities was positively impacted byreal estate funds included in our net earnings, a decrease in receivables as a result of the timing of the settlement of RMF securitizations and Lennar Financial Services loans sold to investors, an increase in accounts payable and other liabilities, and a net decrease in loans held-for-sale of $118.9 million, of which $277.6 million related to Lennar Financial Services, partially offset by an increase in loans held-for-sale of $159.8 million related to Rialto. Cash provided by operating activities was negatively impacted by an increase in inventories due to strategic land purchases, land development and construction costs of $902.6 million. For the nine months ended August 31, 2017, distributions of earnings from unconsolidated entities were $59.9 million, which included (1) $48.5 million from Lennar Multifamily unconsolidated entities; (2) $10.5 million from Rialto unconsolidated entities; and (3) $0.9 million from Lennar Homebuilding unconsolidated entities.Other segment.
Investing Cash Flow Activities
During the ninesix months ended AugustMay 31, 20182019 and 2017,2018, cash used in investing activities totaled $1.0 billion$91.6 million and $957.6$951.3 million, respectively. During the ninesix months ended AugustMay 31, 2019, our cash used in investing activities was primarily due to cash contributions of $230.7 million to unconsolidated entities, which included (1) $136.3 million to Homebuilding unconsolidated entities, (2) $60.0 million to Multifamily unconsolidated entities primarily for working capital; and (3) $31.8 million to the unconsolidated Rialto real estate funds and strategic investments included in our Lennar Other segment. This was partially offset by distributions of capital from unconsolidated entities of $140.9 million, which included (1) $52.4 million from Multifamily unconsolidated entities; (2) $46.5 million from Homebuilding unconsolidated entities; (3) $29.3 million from the unconsolidated Rialto real estate funds and strategic investments included in our Lennar Other segment; and (4) $12.7 million from Financial Services unconsolidated entities.
During the six months ended May 31, 2018, our cash used in investing activities was primarily due to theour $1.1 billion of cash used for the acquisition of CalAtlantic, net of cash acquired. In addition, we made cash contributions of $302.3$186.1 million to unconsolidated entities, which included (1) $156.7$81.2 million to Lennar Homebuilding unconsolidated entities, (2) $93.8$60.4 million to Lennar Multifamily unconsolidated entities primarily for working capital; andcapital, (3) $51.9$44.5 million to the unconsolidated Rialto unconsolidated entities comprised primarily of $35.8 million contributed to Rialto Real Estate Fund III ("Fund III"), $5.3 million contributed to Rialto Credit Partnership Fund, LP ("RCP Fund"), and $10.8 million contributed to other investments.real estate funds included in our Lennar Other segment. Cash used in investing activities was also impacted by purchases of CMBS bonds by our RialtoLennar Other segment. This was partially offset by the receipt of $199.7$175.2 million of proceeds from the sale of an 80% interest in one of Lennar Homebuilding's strategic joint ventures, Treasure Island Holdings, and distributions of capital from unconsolidated entities of $227.8$196.1 million, which included (1) $93.8$105.2 million from Lennar Homebuilding unconsolidated entities; (2) $96.8 million from Lennar Multifamily unconsolidated entities; and (3) $37.1 million from Rialto unconsolidated entities, comprised of $10.3 million distributed by Fund III, $7.2 million distributed by Mezzanine Partners Fund, LP (the "Mezzanine Fund"), $5.0 million distributed by Rialto Capital CMBS Funds (the "CMBS Funds"), $7.2 million distributed by Rialto Real Estate Fund II, LP ("Fund II"), and $7.4 million distributed by RCP Fund.
During the nine months ended August 31, 2017, our cash used in investing activities was primarily due to our $611.4 million acquisition of WCI, net of cash acquired. In addition, we had cash contributions of $381.2 million, which included (1) $257.2 million to Lennar Homebuilding unconsolidated entities, including $120.7(2) $66.1 million to FivePoint Holdings, LLC ("FivePoint"), primarily for working capital and paydowns of joint venture debt, (2) $88.4 million to Lennarfrom Multifamily unconsolidated entities, primarily for working capital, and (3) $35.6$24.8 million tofrom the Rialto real estate funds unconsolidated entities comprised


primarily of $26.3 million contributed to Fund III, $8.0 million contributed to RCP Fund and $1.3 million contributed to other investments. Cash usedincluded in investing activities was also impacted by purchases of CMBS bonds by our RialtoLennar Other segment. This was partially offset by the receipt of $73.9 million of principal payments on loans receivable and other, $73.0 million of proceeds from the sales of REO and distributions of capital from unconsolidated entities of $123.2 million, which included (1) $63.7 million from Lennar Multifamily unconsolidated entities, of which $25.8 million was distributed by the Venture Fund; (2) $32.6 million from Rialto unconsolidated entities comprised of $19.3 million distributed by Fund II, $3.6 million distributed by Fund III, $4.4 million distributed by CMBS Funds, $4.7 million distributed by Mezzanine Fund and $0.6 million distributed by RCP Fund; and (3) $25.0 million from Lennar Homebuilding unconsolidated entities.
Financing Cash Flow Activities
During the ninesix months ended AugustMay 31, 2019 and 2018, and 2017, cash (used in) provided byused in financing activities totaled ($1.3) billion$53.4 million and $138.0$565.9 million, respectively. During the ninesix months ended AugustMay 31, 2019, cash used in financing activities was primarily impacted by $365.2 million of net repayments under our Financial Services' warehouse facilities, which included the RMF warehouse repurchase facilities, $123.7 million principal payment on other borrowings and repurchases of our common stock of $101.2 million, which included $98.8 million of repurchases of our stock under our repurchase program and $2.5 million of repurchases related to employee stock and director plans, partially offset by $550.0 million of net borrowings under our Credit Facility and $28.6 million proceeds from other borrowings.
During the six months ended May 31, 2018, cash used in financing activities was primarily impacted by (1) payment at maturity of $575$575.0 million aggregate principal redemptionamount of the 8.375% Senior Notes due 2018 (the "8.375% Senior Notes due 2018");2018; (2) $350.8$410.5 million of principal


payment on other borrowings, which included $350.6 million of aggregate principal payment on Rialto'sthe Lennar other segment's 7.00% senior notes due December 2018; (3) $250$59.1 million aggregate principal redemption of the 6.95%exchanges and conversions of our 1.625% and 0.25% convertible senior notes due 2018 (the "6.95% Senior Notes");and 2019, respectively, and; (4) $85.3 million principal payments on other borrowings; (5) $68.6$30.4 million of payments related to noncontrolling interests, and (6) 101.0 million of net repayments under our Lennar Financial Services and Rialto warehouse facilities.interests. This was partially offset by $195.3(1) $495.3 million of net borrowings under our Credit Facilities as we replaced the amount outstanding under the CalAtlantic revolving credit facility with borrowings under our unsecured revolving credit facility, which had $650$950 million outstanding as of AugustMay 31, 2018.
During the nine months ended August 31, 2017, our cash provided by financing activities was primarily attributed to the receipt of proceeds related to the (1) issuance of $600 million aggregate principal amount of 4.125% senior notes due 2022,2018; (2) issuance of $650 million aggregate principal amount of 4.50% senior notes due 2024, (3) $75.9$64.1 million of proceeds from other borrowings, and (4) $63.5 million of proceeds from issuance of Rialto notes payable. This was partially offset by (1) the retirement of $400 million aggregate principal amount of our 12.25% senior notes due 2017, (2) the redemption of $250 million principal amount of our 6.875% senior notes due 2021 that had been issued by WCI, (3) $397.8 million of net repayments under our warehouse facilities, which was comprised of $357.5 million of net repayments under our Lennar Financial Services warehouse repurchase facilities and $40.3 million of net repayments under our Rialto warehouse facilities, (4) $61.8 million of payments related to noncontrolling interests, and (5) $55.3 million of principal payments on other borrowings.
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 Homebuildinghomebuilding operations. Lennar Homebuilding debt to total capital and net Lennar Homebuilding debt to total capital are calculated as follows:
(Dollars in thousands)August 31,
2018		 November 30,
2017		 August 31,
2017
Lennar Homebuilding debt$9,407,987
 6,410,003
 5,523,765
Stockholders’ equity14,032,016
 7,872,317
 7,554,260
Total capital$23,440,003
 14,282,320
 13,078,025
Lennar Homebuilding debt to total capital40.1%
44.9% 42.2%
Lennar Homebuilding debt$9,407,987
 6,410,003
 5,523,765
Less: Lennar Homebuilding cash and cash equivalents833,274
 2,282,925
 564,591
Net Lennar Homebuilding debt$8,574,713
 4,127,078
 4,959,174
Net Lennar Homebuilding debt to total capital (1)37.9% 34.4% 39.6%
(Dollars in thousands)May 31,
2019		 November 30,
2018		 May 31,
2018
Homebuilding debt$9,390,941
 8,543,868
 9,985,615
Stockholders’ equity15,159,304
 14,581,535
 13,591,311
Total capital$24,550,245
 23,125,403
 23,576,926
Homebuilding debt to total capital38.3%
36.9% 42.4%
Homebuilding debt$9,390,941
 8,543,868
 9,985,615
Less: Homebuilding cash and cash equivalents800,678
 1,337,807
 931,753
Net Homebuilding debt$8,590,263
 7,206,061
 9,053,862
Net Homebuilding debt to total capital (1)36.2% 33.1% 40.0%
(1)Net Lennar Homebuilding debt to total capital is a non-GAAP financial measure defined as net Lennar Homebuilding debt (Lennar Homebuilding(Homebuilding debt less Lennar Homebuilding cash and cash equivalents) divided by total capital (net Lennar Homebuilding debt plus stockholders' equity). Our management believes the ratio of net Lennar Homebuilding debt to total capital is a relevant and a useful financial measure to investors in understanding the leverage employed in our Lennar Homebuildinghomebuilding 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 our GAAP results.
At AugustMay 31, 2018, Lennar2019, Homebuilding debt to total capital was lower compared to AugustMay 31, 2017, primarily2018, as a result of an increase in stockholders' equity primarily related to the issuance of shares in connection with the CalAtlantic acquisition andour net earnings, partially offset by stock repurchases and a decrease in Homebuilding debt. At May 31, 2019, Homebuilding debt to total capital was higher compared to November 30, 2018, as a result of an increase in Homebuilding debt primarily due to an increase in outstanding borrowings under our Credit Facility during the period and from our consolidation of a previously unconsolidated entity as of May 31, 2019, partially offset by an increase in homebuilding debtstockholders' equity primarily related to an increase in Lennar Homebuilding debt due to the CalAtlantic acquisition.our net earnings.
We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunities and increase our revenues and earnings. These transactions may include the issuance of additional


indebtedness, the repurchase of our outstanding indebtedness for cash or equity, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of 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 non-homebuilding businesses, such as Rialto and Lennar Multifamily, we are also considering other types of transactions such as sales, restructuring,restructurings, joint ventures, spin-offs or initial public offerings as we intendcontinue to move back towards being a pure play homebuilding company over time. We have engaged Wells Fargo Securities and Deutsche Bank Securities to help us with strategic alternatives that may be available with regard to our subsidiary Rialto Capital Management. If anycompany. During the first quarter of these transactions are implemented, they could materially impact2019, we sold the amount and compositionmajority of our indebtedness outstanding, increase or decreaseretail title agency business and its wholly owned title insurance carrier. In addition, we sold our interest expense, dilute our existing stockholders and/or affect the net book valuereal estate brokerage business, which operated only in Florida, and substantially all of our assets.retail mortgage business. At AugustMay 31, 2018,2019, we had no agreements regarding any significant transactions.


The following table summarizes our Lennar Homebuilding senior notes and other debts payable including those we became subject to, on a consolidated basis, through the CalAtlantic acquisition:
(Dollars in thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Unsecured revolving credit facility$650,000
 —
$550,000
 —
4.125% senior notes due December 2018274,887
 274,459
0.25% convertible senior notes due 20191,292
 —
4.500% senior notes due 2019499,364
 498,793
499,981
 499,585
4.50% senior notes due 2019598,997
 598,325
599,602
 599,176
6.625% senior notes due 2020 (1)313,752
 —
307,701
 311,735
2.95% senior notes due 2020298,692
 298,305
299,129
 298,838
8.375% senior notes due 2021 (1)440,156
 —
427,378
 435,897
4.750% senior notes due 2021497,915
 497,329
498,502
 498,111
6.25% senior notes due December 2021 (1)316,541
 —
312,768
 315,283
4.125% senior notes due 2022596,647
 595,904
597,390
 596,894
5.375% senior notes due 2022 (1)261,769
 —
259,627
 261,055
4.750% senior notes due 2022570,185
 569,484
571,104
 570,564
4.875% senior notes due December 2023395,662
 394,964
396,156
 395,759
4.500% senior notes due 2024645,897
 645,353
646,440
 646,078
5.875% senior notes due 2024 (1)454,001
 —
450,496
 452,833
4.750% senior notes due 2025497,003
 496,671
497,336
 497,114
5.25% senior notes due 2026 (1)409,436
 —
408,527
 409,133
5.00% senior notes due 2027 (1)353,371
 —
353,083
 353,275
4.75% senior notes due 2027892,110
 892,657
892,672
 892,297
6.95% senior notes due 2018—
 249,342
0.25% convertible senior notes due 2019—
 1,291
Mortgage notes on land and other debt440,310
 398,417
823,049
 508,950
$9,407,987
 6,410,003
$9,390,941
 8,543,868
(1)These notes were obligations of CalAtlantic when it was acquired, and were subsequently exchanged in part for notes of Lennar Corporation as follows: $267.7 million principal amount of 6.625% senior notes due 2020, $397.6 million principal amount of 8.375% senior notes due 2021, $292.0 million principal amount of 6.25% senior notes due 2021, $240.8 million principal amount of 5.375% senior notes due 2022, $421.4 million principal amount of 5.875% senior notes due 2024, $395.5 million principal amount of 5.25% senior notes due 2026 and $347.3 million principal amount of 5.00% senior notes due 2027. As part of purchase accounting, the senior notes have been recorded at their fair value as of the date of acquisition (February 12, 2018).
The carrying amounts of the senior notes listedin the table above are net of debt issuance costs of $33.5$26.9 million and $31.2 million as of both AugustMay 31, 20182019 and November 30, 2017.
During the second quarter 2018, holders of $6.7 million principal amount of CalAtlantic’s 1.625% convertible senior notes due 2018 and $266.2 million principal amount of CalAtlantic’s 0.25% convertible senior notes due 2019 either caused us to purchase them for cash or converted them into a combination of our Class A and Class B common stock and cash, resulting in our issuing approximately 3,654,000 shares of Class A common stock and 72,000 shares of Class B common stock, and paying $59.1 million in cash to former noteholders. All but $1.3 million of the principal balance of the convertible senior notes had either been converted or redeemed.


In May 2018, we redeemed $575 million aggregate principal amount of the 8.375% Senior Notes due 2018. The redemption price, which was paid in cash, was 100% of the principal amount plus accrued but unpaid interest. The 8.375% Senior Notes due 2018 with $575 million of principal amount were obligations of CalAtlantic when it was acquired and $485.6 million of principal amount was subsequently exchanged in part for Lennar notes.
In June 2018, we redeemed $250 million aggregate principal amount of the 6.95% Senior Notes. The redemption price, which was paid in cash, was 100% of the principal amount plus accrued but unpaid interest.respectively.
Our Lennar Homebuilding average debt outstanding was $9.1$9.2 billion with an average rate for interest incurred of 4.9% for the six months ended May 31, 2019, compared to $8.8 billion with an average rate for interest incurred of 4.8% for the ninesix months ended AugustMay 31, 2018, compared to $5.6 billion with an average rate for interest incurred of 4.9% for the nine months ended August 31, 2017.2018. Interest incurred related to Lennar Homebuilding debt for the ninesix months ended AugustMay 31, 20182019 was $314.0$212.6 million, compared to $219.9$201.0 million for the ninesix months ended AugustMay 31, 2017.2018.
In February 2018,April 2019, we amended our credit agreement governing our Credit Facility to increase the maximum borrowingscommitments from $2.0$2.3 billion to $2.6$2.4 billion and extend the maturity on $2.2 billion of the Credit Facility from June 2022one year to April 2023,2024, with $70 million that matured in June 2018 and the remaining $50 million maturing in June 2020. As of August 31, 2018, theOur Credit Facility includedhas a $315$400 million accordion feature, subject to additional commitments.commitments, thus the maximum borrowings are $2.8 billion. The proceeds available under our Credit Facility, which are subject to specified conditions for borrowing, may be used for working capital and general corporate purposes. TheOur credit agreement also provides that up to $500 million in commitments may be used for letters of credit. As of August 31, 2018, we had $650 million of outstanding borrowings under our Credit Facility. As of November 30, 2017, we had no outstanding borrowings under our Credit Facility. We may from time to time, borrow and repay amounts under our Credit Facility. Consequently, the amount outstanding underUnder our Credit Facility atagreement, we are 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 end of a period may not be reflective of the total amounts outstanding during the period.Credit Facility agreement, which involves adjustments to GAAP financial measures. We believe that we were in compliance with our debt covenants at AugustMay 31, 2018.2019. In addition, we had $365$315 million of letter of credit facilities with different financial institutions.
Our performance letters of credit outstanding were $542.2$663.0 million and $384.4$598.4 million, respectively, at AugustMay 31, 20182019 and November 30, 2017.2018, respectively. Our financial letters of credit outstanding were $183.3$158.5 million and $127.4$165.4 million at AugustMay 31, 20182019 and November 30, 2017,2018, 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, as credit enhancements and as other collateral. Additionally, at August


May 31, 2018,2019, we had outstanding surety bonds of $2.6$2.8 billion including performance surety bonds related to site improvements at various projects (including certain projects of our joint ventures) and financial surety bonds.
Subsequent to May 31, 2019, we redeemed $500 million aggregate principal amount of our 4.500% senior notes due June 2019. The redemption price, which was paid in cash, was 100% of the principal amount plus accrued but unpaid interest.
Under the amended Credit Facility agreement executed in February 2018April 2019 (the "Credit Agreement"), as of the end of each fiscal quarter, we are required to maintain minimum consolidated tangible net worth of approximately $6.0$7.1 billion plus the sum of 50% of the cumulative consolidated net income for each completed fiscal quarter subsequent to February 28, 2018,2019, if positive, and 50% of the net cash proceeds from any equity offerings from and after February 28, 2018,2019, minus the lesser of 50% of the amount paid after February 12, 2018April 11, 2019 to repurchase common stock and $100$375 million. 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 summarizes our required debt covenants and our actual levels or ratios with respect to those covenants as calculated per the Credit Agreement as of AugustMay 31, 2018:2019:
(Dollars in thousands)Covenant Level Level Achieved as of
August 31, 2018		Covenant Level Level Achieved as of
May 31, 2019
Minimum net worth test$6,359,954
 8,746,035
$7,310,484
 9,826,907
Maximum leverage ratio65.0% 47.2%65.0% 43.6%
Liquidity test (1)1.00
 2.29
1.00
 1.88
(1)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 our liquidity test.
The terms minimum net worth test, maximum leverage ratio, liquidity test and interest coverage ratio used in the Credit Agreement are specifically calculated per the Credit Agreement and differ in specified ways from comparable GAAP or common usage terms.
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 those subsidiaries as any other holders of a material amount of our unsecured debt. Therefore, the guarantees of the Guaranteed Notes will remain in effect with regard to a guarantor subsidiary only while it guarantees 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. In addition, some subsidiaries of CalAtlantic are guaranteeing CalAtlantic convertible senior notes that are also guaranteed by Lennar Corporation.
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. 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 AugustMay 31, 2018, our Lennar2019, the Financial Services segment warehouse facilities used to fund residential mortgages were as follows:
(In thousands)Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures June 2019 (1)$700,000
364-day warehouse repurchase facility that matures August 2019 (2)300,000
364-day warehouse repurchase facility that matures October 2019 (3)500,000
364-day warehouse repurchase facility that matures March 2020 (4)300,000
Total$1,800,000

(In thousands)Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures September 2018 (1)$300,000
364-day warehouse repurchase facility that matures December 2018 (2)400,000
364-day warehouse repurchase facility that matures March 2019 (3)300,000
364-day warehouse repurchase facility that matures June 2019700,000
Total$1,700,000

(1)Subsequent to AugustMay 31, 2018,2019, the warehouse repurchase facility maturity was extended to November 2018.June 2020 and the maximum aggregate commitment amount decreased to $500 million.
(2)Maximum aggregate commitment includes an uncommitted amount of $250$300 million.
(3)Maximum aggregate commitment includes an uncommitted amount of $400 million.
(4)Maximum aggregate commitment includes an uncommitted amount of $300 million.
Our Lennar Financial Services segment uses these facilities to finance its residential mortgage lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature. Borrowings under the facilities and their prior year predecessors were $966.5$882.0 million and $937.2 million$1.3 billion at AugustMay 31, 20182019 and November 30, 2017,2018, respectively, and were collateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $1.0$911.5 million and $1.3 billion, and $974.1 million, at AugustMay 31, 20182019 and November 30, 2017,2018, respectively. Without the facilities, our Lennar Financial Services segment would have to use cash from operations and other funding sources to finance its residential mortgage 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 and by collecting on receivables on loans sold to investors but not yet paid for.
At AugustMay 31, 2018, Rialto's2019, the RMF warehouse facilities were as follows:
(In thousands)Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures November 2018$200,000
364-day warehouse repurchase facility that matures December 2018 (extended from October 2018)250,000
364-day warehouse repurchase facility that matures December 2018200,000
364-day warehouse repurchase facility that matures December 2019200,000
Total - Loan origination and securitization business (RMF)$850,000
Warehouse repurchase facility that matures December 2018 (one year extensions) (1)50,000
Total$900,000
(In thousands)Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures November 2019$200,000
364-day warehouse repurchase facility that matures December 2019250,000
364-day warehouse repurchase facility that matures December 2019200,000
364-day warehouse repurchase facility that matures December 2019200,000
  Total - Loans origination and securitization business$850,000
Warehouse repurchase facility that matures December 2019 (two - one year extensions) (1)50,000
  Total$900,000
(1)
RialtoRMF uses this warehouse repurchase facility to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans receivable,held-for-investment, net. There were no borrowings under this facility as of either Augustboth May 31, 2018 or 2019 and November 30, 2017.
2018.
Borrowings under the facilities that finance RMF's commercial loan originations and securitization activities were $94.5$155.9 million and $162.1$178.8 million as of AugustMay 31, 20182019 and November 30, 2017,2018, respectively, and were secured by a 75% interest in the originated commercial loans financed. The facilities require immediate repayment of the 75% interest in the secured


commercial loans when the loans are sold in a securitization and the proceeds are collected. These warehouse repurchase facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the loans held-for-sale to investors. Without the facilities, the RialtoFinancial Services segment would have to use cash from operations and other funding sources to finance its lending activities.
In March 2018, Rialto paid off the remaining principal balance of its 7.00% senior notes due December 2018 (the "7.00% Senior Notes"). As of November 30, 2017, the carrying amount, net of debt issuance costs, of the 7.00% Senior Notes was $349.4 million.
Changes in Capital Structure
In January 2019, our Board of Directors authorized us to repurchase up to the lesser of $1 billion in value, or 25 million in shares, of our outstanding Class A and Class B common stock. The repurchase authorization has no expiration date. During the ninethree months ended AugustMay 31, 2019, under this repurchase program, we repurchased one million shares of our Class A common stock for approximately $51.8 million at an average share price of $51.76. During the six months ended May 31, 2019, under this repurchase program, we repurchased two million shares of our Class A common stock for approximately $98.8 million at an average share price of $49.37.
During the six months ended May 31, 2019, treasury stock increased by 2.1 million shares of Class A common stock due primarily to our repurchase of two million shares of Class A common stock during the six months ended May 31, 2019 through our stock repurchase program. During the six months ended May 31, 2018, treasury stock increased by 1.00.5 million shares of Class A common stock primarily due to activity related to our equity compensation plan.
On July 26, 2018,May 8, 2019, we paid cash dividends of $0.04 per share for both our Class A and Class B common stock to holders of record at the close of business on July 12, 2018,April 24, 2019, as declared by our Board of Directors on April 10, 2019. On June 27, 2018. On October 4, 2018,26, 2019, our Board of Directors declared a quarterly cash dividend of $0.04 per share on both of our Class A and Class B common stock, payable November 2, 2018on July 25, 2019 to holders of record at the close of business on October 19,July 11, 2019. We approved and paid cash dividends of $0.04 per share for both its Class A and Class B common stock in each quarter for the year ended November 30, 2018.


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 AugustMay 31, 2018,2019, we had equity investments in 5854 homebuilding and land unconsolidated entities (of which fourat May 31, 2019, three had recourse debt, teneight had non-recourse debt and 4443 had no debt), compared to 3851 homebuilding and land unconsolidated entities at November 30, 2017. This includes 20 unconsolidated entities in which CalAtlantic or a subsidiary is the participant.2018. Historically, we have 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 have 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, has 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 partners. Each joint venture is governed by an executive committee consisting of members from the partners.
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 and Selected Information
 Three Months Ended Nine Months Ended
 August 31, August 31,
(Dollars in thousands)2018 2017 2018 2017
Revenues$153,968
 144,966
 324,584
 323,689
Costs and expenses199,337
 151,643
 458,660
 421,554
Other income (1)66,690
 12,578
 180,231
 18,695
Net earnings (loss) of unconsolidated entities$21,321
 5,901
 46,155
 (79,170)
Lennar Homebuilding equity in loss from unconsolidated entities$(15,391) (9,651) (41,904) (42,691)
Lennar Homebuilding cumulative share of net earnings - deferred at August 31, 2018 and 2017, respectively    25,933
 35,246
Lennar Homebuilding investments in unconsolidated entities    997,488
 1,016,588
Equity of the Lennar Homebuilding unconsolidated entities    4,312,520
 4,368,576
Lennar Homebuilding investment % in the unconsolidated entities (2)  

 23% 23%
   As of or for the
 Three Months Ended Six Months Ended
 May 31, May 31,
(Dollars in thousands)2019 2018 2019 2018
Revenues$65,686
 100,952
 156,330
 169,141
Costs and expenses90,363
 148,678
 214,114
 256,102
Other income (1)75,868
 105,192
 76,065
 105,192
Net earnings of unconsolidated entities$51,191
 57,466
 18,281
 18,231
Homebuilding equity in earnings (loss) from unconsolidated entities$19,614
 (12,670) 5,858
 (26,798)
Homebuilding cumulative share of net earnings - deferred at May 31, 2019 and 2018, respectively    $31,969
 28,744
Homebuilding investments in unconsolidated entities    $983,683
 913,576
Equity of the Homebuilding unconsolidated entities    $4,235,438
 4,187,485
Homebuilding investment % in the unconsolidated entities (2)

 

 23% 22%
(1)During the three and ninesix months ended AugustMay 31, 2019, other income was primarily attributable to a $64.9 million gain on the settlement of contingent consideration recorded by one Homebuilding unconsolidated entity, of which our pro-rata share was $25.9 million. During the three and six months ended May 31, 2018, other income was primarily due to FivePoint, a publicly traded company, recording income resulting from the Tax Cuts and Jobs Act of 2017’s reduction in its corporate tax rate to reduce its liability pursuant to its tax receivable agreement (“TRA Liability”) with its non-controlling interests. However, we have a 70% interest in the FivePoint TRA Liability. Therefore, we did not include in Lennar Homebuilding’s equity in lossearnings (loss) from unconsolidated entities its pro-rata share of earnings related to our portion of the TRA Liability. As a result, our unconsolidated entities have net earnings, but we have an equity in loss from unconsolidated entities.
(2)Our share of profit and cash distributions from the sales of land could be higher or lower compared to our ownership interest in unconsolidated entities if certain specified internal rate of return or cash flow milestones are achieved.


Balance Sheets
(In thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Assets:      
Cash and cash equivalents$912,250
 953,261
$651,681
 781,833
Inventories4,251,673
 3,751,525
4,177,728
 4,291,470
Other assets1,200,761
 1,061,507
988,714
 1,045,274
$6,364,684
 5,766,293
$5,818,123
 6,118,577
Liabilities and equity:      
Accounts payable and other liabilities$839,694
 832,151
$757,410
 874,355
Debt (1)1,212,470
 737,331
825,275
 1,202,556
Equity4,312,520
 4,196,811
4,235,438
 4,041,666
$6,364,684
 5,766,293
$5,818,123
 6,118,577
(1)Debt presented above is net of debt issuance costs of $13.2$9.9 million and $5.7$12.4 million, as of AugustMay 31, 20182019 and November 30, 2017,2018, respectively. The increasedecrease in debt was primarily related to $500 millionthe consolidation of senior notes issued by FivePoint.an entity as of May 31, 2019.
In May 2017, FivePoint completed its initial public offering ("IPO"). Concurrent with the IPO, we invested an additional $100 million in FivePoint in a private placement. As of August 31, 2018, we owned approximately 40% of FivePoint and the carrying amount of our investment was $358.9 million.
As of AugustMay 31, 20182019 and November 30, 2017,2018, our recorded investments in Lennar Homebuilding unconsolidated entities were $997.5$983.7 million and $900.8$870.2 million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of both AugustMay 31, 20182019 and November 30, 2017 was2018 were $1.3 billion.billion and $1.2 billion, respectively. The basis difference is primarily as a result of us contributing our investment in three strategic joint ventures with a higher fair value than book value for an investment in the FivePoint entity and deferring equity in earnings on land sales to us.
In 2017, we entered into a Membership Interest Purchase Agreement Included in our recorded investments in Homebuilding unconsolidated entities is our 40% ownership of FivePoint. As of May 31, 2019 and a Payment Escrow Agreement (“Agreement”) with oneNovember 30, 2018, the carrying amount of our investment was $389.1 million and $342.7 million, respectively.
During the six months ended May 31, 2018, we sold 80% of a strategic joint ventures under which we agreed to sell 80%venture to a third-party. Under the terms of the Agreement, the sale transaction was contingent upon the satisfaction of certain conditions. In January 2018, conditions were fulfilled and the transaction was closedthird-party resulting in a gain of $164.9 million recorded in Lennar Homebuilding other income, net within the accompanying condensed consolidated statementCondensed Consolidated Statement of operations for the nine months ended August 31, 2018.Operations and Comprehensive Income (Loss).
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:
(Dollars in thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Debt (1)$1,212,470
 737,331
$825,275
 1,202,556
Equity4,312,520
 4,196,811
4,235,438
 4,041,666
Total capital$5,524,990
 4,934,142
$5,060,713
 5,244,222
Debt to total capital of our unconsolidated entities21.9% 14.9%16.3% 22.9%
(1)Debt presented above is net of debt issuance costs of $9.9 million and $12.4 million, as of May 31, 2019 and November 30, 2018, respectively. The increasedecrease in debt was primarily related to $500 millionour consolidation of senior notes issued by FivePoint.a previously unconsolidated entity as of May 31, 2019.
Our investments in Lennar Homebuilding unconsolidated entities by type of venture were as follows:
(In thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Land development$957,160
 868,015
$908,415
 805,678
Homebuilding40,328
 32,754
75,268
 64,523
Total investments(1)$997,488
 900,769
$983,683
 870,201
(1)As of November 30, 2018, total investments does not include the ($62.0) million balance for one unconsolidated entity as it was reclassed to other liabilities.
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 of 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:
(Dollars in thousands)August 31,
2018		 November 30,
2017		May 31,
2019		 November 30,
2018
Non-recourse bank debt and other debt (partner’s share of several recourse)$51,364
 64,197
$46,816
 48,313
Non-recourse land seller debt and other debt1,497
 1,997
Non-recourse debt with completion guarantees234,310
 255,903
144,588
 239,568
Non-recourse debt without completion guarantees (1)869,486
 351,800
Non-recourse debt without completion guarantees634,086
 861,371
Non-recourse debt to Lennar1,156,657
 673,897
825,490
 1,149,252
Lennar's maximum recourse exposure (2)69,005
 69,181
Lennar's maximum recourse exposure (1)9,653
 65,707
Debt issue costs(13,192) (5,747)(9,868) (12,403)
Total debt$1,212,470
 737,331
Total debt (1)$825,275
 1,202,556
Lennar’s maximum recourse exposure as a % of total JV debt6% 9%1% 5%
(1)The increase in non-recourse debt without completion guarantees was primarily related to $500 million of senior notes issued by FivePoint.
(2)As of both AugustMay 31, 20182019 and November 30, 2017,2018, our maximum recourse exposure was primarily related to us providing repayment guarantees on threetwo and four unconsolidated entities' debt.debt, respectively. The decrease in maximum recourse exposure and total debt was primarily related to our consolidation of a previously unconsolidated entity as of May 31, 2019.
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.
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. 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 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 both AugustMay 31, 20182019 and November 30, 2017,2018, the fair values of the repayment, maintenance, and completion guarantees were not material. We believe that as of AugustMay 31, 2018,2019, in the event we become legally obligated to perform under a guarantee of the obligation of a Lennar Homebuilding unconsolidated entity due to a triggering event under a guarantee, the collateral would 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 have placed performance letters of credit and surety bonds with municipalities with regard to obligations of our joint ventures (see Note 12 of the Notes to Condensed Consolidated Financial Statements).


The following table summarizes the principal maturities of our Lennar Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of AugustMay 31, 20182019 and it does not represent 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.
Principal Maturities of Unconsolidated JVs by PeriodPrincipal Maturities of Unconsolidated JVs by Period
(In thousands)Total JV Debt 2018 2019 2020 Thereafter OtherTotal JV Debt 2019 2020 2021 Thereafter Other
Maximum recourse debt exposure to Lennar$69,005
 —
 40,251
 28,754
 —
 —
$9,653
 —
 —
 3,387
 6,266
 —
Debt without recourse to Lennar1,156,657
 103,808
 293,751
 162,543
 595,058
 1,497
825,490
 35,627
 118,735
 157,394
 513,734
 —
Debt issuance costs(13,192) —
 —
 —
 —
 (13,192)(9,868) —
 —
 —
 —
 (9,868)
Total$1,212,470
 103,808
 334,002
 191,297
 595,058
 (11,695)$825,275
 35,627
 118,735
 160,781
 520,000
 (9,868)
The table below indicates the assets, debt and equity of our 10 largest Lennar Homebuilding unconsolidated joint venture investments by the carrying value of Lennar's investment as of AugustMay 31, 20182019:
(Dollars in thousands)
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
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
Top Ten JVs (1):                          
FivePoint$358,856
 2,958,282
 —
 565,130
 565,130
 1,888,227
 23%$389,119
 2,885,550
 —
 500,000
 500,000
 1,929,353
 21%
Dublin Crossings78,395
 242,735
 —
 —
 —
 218,606
 —%
Heritage Fields El Toro45,131
 1,189,063
 —
 5,919
 5,919
 1,042,081
 1%
Hawk Land Investors44,108
 6,086
 —
 —
 —
 6,055
 —%
SC East Landco41,750
 98,860
 —
 —
 —
 98,573
 —%
Heritage Hills Irvine87,311
 262,898
 8,225
 57,576
 65,801
 191,115
 26%34,090
 78,886
 —
 —
 —
 75,930
 —%
Dublin Crossings (2)74,120
 226,509
 —
 —
 —
 201,072
 —%
Opendoor (3)70,136
 —
 —
 —
 —
 —
 —%
Heritage Fields El Toro45,131
 1,174,700
 —
 5,919
 5,919
 1,016,608
 1%
SC East Landco38,417
 90,750
 —
 —
 —
 90,450
 —%
Mesa Canyon Community Partners33,815
 139,392
 —
 38,364
 38,364
 101,111
 28%
E.L. Urban Communities33,463
 63,501
 —
 15,911
 15,911
 44,515
 26%
Runkle Canyon38,415
 81,129
 —
 4,128
 4,128
 76,830
 5%33,098
 66,843
 —
 —
 —
 66,197
 —%
BHCSP (2)36,968
 62,602
 —
 —
 —
 61,521
 —%
Ballpark Village28,180
 83,555
 —
 25,235
 25,235
 56,360
 31%
Mesa Canyon Community Partners (2)27,766
 120,139
 —
 37,112
 37,112
 83,382
 31%
BHCSP30,002
 85,161
 3,387
 23,708
 27,095
 50,521
 35%
10 largest JV investments805,300
 5,060,564
 8,225
 695,100
 703,325
 3,665,565
 16%762,971
 4,856,077
 3,387
 583,902
 587,289
 3,632,942
 14%
Other JVs192,188
 1,304,120
 60,780
 460,060
 520,840
 646,955
 45%220,712
 962,046
 6,266
 241,588
 247,854
 602,496
 29%
Total$997,488
 6,364,684
 69,005
 1,155,160
 1,224,165
 4,312,520
 22%$983,683
 5,818,123
 9,653
 825,490
 835,143
 4,235,438
 16%
Land seller debt and other debt    —
 1,497
 1,497
    
Debt issuance costs    —
 (13,192) (13,192)        —
 (9,868) (9,868)    
Total JV debt    $69,005
 1,143,465
 1,212,470
        $9,653
 815,622
 825,275
    
(1)The 10 largest joint ventures presented above represent the majority of our total JVs assets and equity 12% of total JV maximum recourse debt exposure to Lennar and 60%71% of total JV debt without recourse to Lennar. In addition, all of the joint ventures presented in the table above operate in our Homebuilding West segment. Treasure Island Community Developmentsegment except Hawk Land Investors, which is no longer included above due to the sale of an 80% interest in Treasure Island Holdings.
(2)Joint ventures acquired from CalAtlantic.
(3)Financial statements are not publicly available and thus have not been included in the table above.Homebuilding East.


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:
         August 31,
2018		 August 31,
2018		 November 30,
2017
(In thousands)Inception Year Equity Commitments Equity Commitments Called Commitment to Fund by the Company Funds Contributed by the Company Investment
Rialto Real Estate Fund, LP2010 $700,006
 $700,006
 $75,000
 $75,000
 $39,608
 41,860
Rialto Real Estate Fund II, LP2012 1,305,000
 1,305,000
 100,000
 100,000
 84,606
 86,904
Rialto Mezzanine Partners Fund, LP2013 300,000
 300,000
 33,799
 33,799
 13,314
 19,189
Rialto Capital CMBS Funds2014 119,174
 119,174
 52,474
 52,474
 52,916
 54,018
Rialto Real Estate Fund III2015 1,887,000
 1,074,561
 140,000
 75,917
 71,293
 41,223
Rialto Credit Partnership, LP2016 220,000
 217,556
 19,999
 19,777
 12,257
 13,288
Other Investments          20,471
 8,936
           $294,465
 265,418
As manager of real estate funds, Rialto is entitled to receive additional revenue through carried interests if the funds meet certain performance thresholds. Rialto also periodically receives advance distributions related to Rialto's carried interests in order to cover income tax obligations resulting from allocations of taxable income to its carried interests in its real estate funds. These distributions are not subject to clawbacks but will reduce future carried interest payments to which Rialto becomes entitled from the applicable funds and have been recorded as revenues. The amounts presented in the table below include advance and carried interest distributions received as follows:
 Three Months Ended Nine Months Ended
 August 31, August 31,
(In thousands)2018 2017 2018 2017
Rialto Real Estate Fund, LP (1)$3,544
 10,577
 9,286
 29,537
Rialto Real Estate Fund II, LP (1)94
 —
 4,303
 156
Rialto Real Estate Fund III, LP1,500
 —
 3,510
 1,448
Rialto Mezzanine Partners Fund, LP225
 32
 340
 246
Rialto Capital CMBS Fund, LP999
 765
 1,895
 1,900
Rialto Credit Partnership, LP—
 —
 137
 —
 $6,362
 11,374
 19,471
 33,287
(1)During the three and nine months ended August 31, 2018, Rialto received $3.4 million and $9.1 million, respectively, of carried interest distributions, net of prior advance distributions, with regard to its carried interest in Rialto Real Estate Fund, LP and Rialto Real Estate Fund II, LP. During the three and nine months ended August 31, 2017, Rialto received $10.6 million and $29.4 million, respectively, of carried interest distributions, net of prior advance distributions, with regard to its carried interest in Rialto Real Estate Fund, LP and Rialto Real Estate Fund II, LP.
The following table represents amounts Rialto would have received had the funds ceased operations and hypothetically liquidated all their investments at their estimated fair values on August 31, 2018, both gross and net of amounts already received as advanced tax distributions. The actual amounts Rialto may receive could be materially different from amounts presented in the table below.
 August 31, 2018
(In thousands)Hypothetical Carried Interest Paid as Advanced Tax Distribution Paid as Carried Interest Hypothetical Carried Interest, Net
Rialto Real Estate Fund, LP$171,396
 52,486
 45,687
 73,223
Rialto Real Estate Fund II, LP (1)56,364
 14,723
 719
 40,922
 $227,760
 67,209
 46,406
 114,145
(1)Net of interests of participating employees (refer to paragraph below).
During 2015, Rialto adopted a Carried Interest Incentive Plan (the "Plan"), under which participating employees in the aggregate may receive up to 40% of the equity units of a limited liability company (a "Carried Interest Entity") that is entitled to carried interest distributions made by a fund or other investment vehicle (a "Fund") managed by a subsidiary of Rialto. As


such, those employees receiving equity units in a Carried Interest Entity may benefit from distributions made by a Fund to the extent the Carried Interest Entity makes distributions to its equity holders. The units issued to employees are equity awards and are subject to vesting schedules and forfeiture or repurchase provisions in the case of termination of employment.
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)August 31,
2018		 November 30,
2017
Assets:   
Cash and cash equivalents$36,406
 95,552
Loans receivable697,262
 538,317
Real estate owned266,406
 348,601
Investment securities2,219,660
 1,849,795
Investments in partnerships406,600
 393,874
Other assets43,046
 42,949
 $3,669,380
 3,269,088
Liabilities and equity:   
Accounts payable and other liabilities$32,081
 48,374
Notes payable (1)591,329
 576,810
Equity3,045,970
 2,643,904
 $3,669,380
 3,269,088
(1)
Notes payable are net of debt issuance costs of $2.9 million and $3.1 million, as of August 31, 2018 and November 30, 2017, respectively.
Statements of Operations
 Three Months Ended Nine Months Ended
 August 31, August 31,
(Dollars in thousands)2018 2017 2018 2017
Revenues$97,973
 64,267
 283,510
 182,453
Costs and expenses23,299
 26,752
 66,735
 83,753
Other income (expense), net (1)(22,644) 245
 (1,166) 9,893
Net earnings of unconsolidated entities$52,030
 37,760
 215,609
 108,593
Rialto equity in earnings from unconsolidated entities$5,266
 4,858
 18,496
 11,310
Rialto's investments in unconsolidated entities    $294,465
 249,551
Equity of the unconsolidated entities    $3,045,970
 2,514,797
Rialto's investment % in the unconsolidated entities    10% 10%
(1)Other income (expense), net, includes realized and unrealized gains (losses) on investments.
Lennar Multifamily: Investments in Unconsolidated Entities
At AugustMay 31, 2018, Lennar2019, Multifamily had equity investments in 2418 unconsolidated entities that are engaged in multifamily residential developments (of which 116 had non-recourse debt and 1312 had no debt), compared to 2722 unconsolidated entities at November 30, 2017.2018. 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 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 Venture FundLMV I is a long-term multifamily development investment vehicle involved in the development, construction and property management of class-A multifamily assets with $2.2 billion in equity commitments, including a $504 million co-investment commitment by us comprised of cash, undeveloped land and preacquisition costs. The Venture FundLMV I has 39 multifamily assets totaling approximately 12,00011,700 apartments with projected project costs of $4.1 billion as of AugustMay 31, 2018.2019. There are 1318 completed and operating multifamily assets with 3,9565,111 apartments. During the ninesix months ended AugustMay 31, 2018, $316.12019, $121.8 million in equity commitments were called, of which we contributed $73.4$30.2 million representing our pro-rata


portion of the called equity. During the ninesix months ended AugustMay 31, 2018,2019, we received $11.8$9.5 million of distributions as a return of capital from the Venture Fund.LMV I. As of AugustMay 31, 2018, $1.82019, $1.9 billion of the $2.2 billion in equity commitments had been called, of which we had contributed $424.1


$471.1 million representing our pro-rata portion of the called equity, resulting in a remaining equity commitment for us of $79.9$32.9 million. As of AugustMay 31, 20182019 and November 30, 2017,2018, the carrying value of our investment in the Venture FundLMV I was $378.2$395.4 million and $323.8$383.4 million, respectively.
In March 2018, the Lennarour Multifamily segment completed the first closing of a second Lennar Multifamily Venture, Venture FundLMV II, for the development, construction and property management of class-A multifamily assets. WithDuring the first close, Venture Fundthree months ended May 31, 2019, LMV II's equity commitments were increased by an additional $471 million, including $126 million additional co-investment commitment by us. As of May 31, 2019, LMV II hashad approximately $655 million$1.3 billion of equity commitments, including a $255$381 million co-investment commitment by Lennarus comprised of cash, undeveloped land and preacquisition costs. As of and duringDuring the ninesix months ended AugustMay 31, 2018, $146.12019, $138.3 million in equity commitments were called, of which we contributed our portion of $55.4$23.5 million, which was made up of a $108.3$64.5 million of inventory and cash contributions, offset by $52.9$40.9 million of distributions as a return of capital resulting in a remaining equity commitment for us of $199.6$276.3 million. As of AugustMay 31, 2019, $349.4 million of the $1.3 billion in equity commitments had been called of which we had contributed $104.5 million, representing our pro-rata share of the called equity. As of May 31, 2019 and November 30, 2018, the carrying value of our investment in the Venture FundLMV II was $45.6 million.$85.0 million and $63.0 million, respectively. The difference between our net contributions and the carrying value of our investments was related to a basis difference. Venture FundLMV II was seeded initially with sixeight undeveloped multifamily assets that were previously purchased by the Lennarour Multifamily segment totaling approximately 2,2003,000 apartments with projected project costs of approximately $900 million.$1.3 billion. As of May 31, 2019, LMV II was seeded with ten undeveloped assets totaling approximately 3,800 apartments with projected costs of approximately $1.6 billion. Subsequent to May 31, 2019, the Multifamily segment announced the final closing of LMV II with $1.3 billion of equity commitments.
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. We believe all of the joint ventures were in compliance with their debt covenants at AugustMay 31, 2018.2019.
Summarized 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)August 31,
2018		 November 30,
2017
(Dollars in thousands)May 31,
2019		 November 30,
2018
Assets:      
Cash and cash equivalents$30,472
 37,073
$28,217
 61,571
Operating properties and equipment3,623,800
 2,952,070
4,063,560
 3,708,613
Other assets38,309
 36,772
50,227
 40,899
$3,692,581
 3,025,915
$4,142,004
 3,811,083
Liabilities and equity:      
Accounts payable and other liabilities$201,301
 212,123
$190,785
 199,119
Notes payable (1)1,287,488
 879,047
1,596,850
 1,381,656
Equity2,203,792
 1,934,745
2,354,369
 2,230,308
$3,692,581
 3,025,915
$4,142,004
 3,811,083
(1)Notes payable are net of debt issuance costs of $17.4$21.0 million and $17.6$15.7 million, as of AugustMay 31, 20182019 and November 30, 2017.2018, respectively.
The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of May 31, 2019 and it does not represent estimates of future cash payments that will be made to reduce debt balances.
 Principal Maturities of Unconsolidated JVs by Period
(In thousands)Total JV Debt 2019 2020 2021 Thereafter Other
Debt without recourse to Lennar$1,617,892
 30,869
 788,933
 246,818
 551,272
 —
Debt issuance costs(21,042) —
 —
 —
 —
 (21,042)
Total$1,596,850
 30,869
 788,933
 246,818
 551,272
 (21,042)



Statements of Operations and Selected Information
Three Months Ended Nine Months Ended    As of or for the
August 31, August 31,Three Months Ended Six Months Ended
(In thousands)2018 2017 2018 2017
May 31, May 31,
(Dollars in thousands)2019 2018 2019 2018
Revenues$31,907
 18,822
 82,980
 44,414
$38,609
 27,121
 73,980
 51,073
Costs and expenses47,235
 28,904
 122,512
 75,727
55,085
 43,482
 111,213
 75,277
Other income, net13,588
 47,210
 52,457
 125,939
—
 31,562
 21,400
 38,869
Net earnings (loss) of unconsolidated entities$(1,740) 37,128
 12,925
 94,626
$(16,476) 15,201
 (15,833) 14,665
Lennar Multifamily equity in earnings (loss) from unconsolidated entities (1)$(1,730) 11,645
 15,293
 44,219
Multifamily equity in earnings (loss) from unconsolidated entities and other gain (1)$(3,018) 14,281
 7,563
 17,023
Our investments in unconsolidated entities    $482,241
 397,119
    $510,223
 480,298
Equity of the unconsolidated entities    $2,203,792
 1,877,982
    $2,354,369
 2,185,992
Our investment % in the unconsolidated entities

 

 22% 21%

 

 22% 22%
(1)During the six months ended May 31, 2019, our Multifamily segment sold, through its unconsolidated entities, one operating property and an investment in an operating property resulting in the segment's $15.5 million share of gains. The gain of $11.9 million recognized on the sale of the investment in an operating property and recognition of our share of deferred development fees that were capitalized at the joint venture level are included in Multifamily equity in earnings (loss) from unconsolidated entities and other gain, and are not included in net earnings (loss) of unconsolidated entities. During the three and ninesix months ended AugustMay 31, 2018, our Lennar Multifamily segment sold onetwo and fourthree operating properties, respectively, through its unconsolidated entities resulting in the segment's $1.7$17.4 million and $23.3$21.5 million share of gains, respectively. During
Lennar Other: Investments in Unconsolidated Entities
We sold our Rialto Management Group on November 30, 2018. We retained our fund investments along with our carried interests in various Rialto funds and investments in other balance sheet assets. Our limited partner investments in Rialto funds and investment vehicles totaled $301.7 million at May 31, 2019. We are committed to invest as much as an additional $49.0 million in Rialto funds.
As part of the sale of the Rialto investment and asset management platform, we retained our ability to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds. We will periodically receive advance distributions related to the carried interests in order to cover income tax obligations resulting from allocations of taxable income to the carried interests. These distributions are not subject to clawbacks but will reduce future carried interest payments to which we become entitled from the applicable funds and have been recorded as revenues.
The following table represents amounts our Lennar Other segment would have received had the Rialto funds ceased operations and hypothetically liquidated all their investments at their estimated fair values on May 31, 2019, both gross and net of amounts already received as advanced tax distributions. The actual amounts we may receive could be materially different from amounts presented in the table below.
 May 31, 2019
(In thousands)Hypothetical Carried Interest Paid as Advanced Tax Distribution Paid as Carried Interest Hypothetical Carried Interest, Net (2)
Rialto Real Estate Fund, LP (1)$180,393
 52,711
 52,090
 75,592
Rialto Real Estate Fund II, LP (1)109,677
 19,297
 394
 89,986
 $290,070
 72,008
 52,484
 165,578
(1)Gross of interests of participating employees (refer to note below).
(2)Rialto previously adopted carried interest plans under which we and participating employees will receive 60% and 40%, respectively, of carried interest payments, net of expenses, received by entities that are general partners of a number of Rialto funds or other investment vehicles. When Rialto Management Group was sold, we retained our right to receive 60% of the three and nine months ended August 31, 2017, our Lennar Multifamily segment sold two and five operating properties,distributions of carried interest payments received from funds that existed at the time of the sale.
At May 31, 2019 and November 30, 2018, we had strategic equity investments in ten and nine unconsolidated entities, respectively, which totaled $128.2 million and $126.7 million, respectively.


respectively, through its unconsolidated entities resulting in the segment's $15.4 million and $52.9 million share of gains.
Option Contracts
We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the options.
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 AugustMay 31, 20182019 and 2017:2018:
Controlled Homesites    Controlled Homesites    
August 31, 2018Optioned JVs Total 
Owned
Homesites
 
Total
Homesites
May 31, 2019Optioned JVs Total 
Owned
Homesites
 
Total
Homesites
East23,399
 3,482
 26,881
 92,657
 119,538
26,688
 3,482
 30,170
 79,313
 109,483
Central12,007
 —
 12,007
 44,948
 56,955
6,627
 132
 6,759
 32,559
 39,318
Texas23,119
 —
 23,119
 35,987
 59,106
West5,815
 6,049
 11,864
 49,386
 61,250
8,066
 4,493
 12,559
 63,757
 76,316
Other5,948
 —
 5,948
 17,908
 23,856
—
 919
 919
 3,610
 4,529
Total homesites (1)47,169
 9,531
 56,700
 204,899
 261,599
Total homesites64,500
 9,026
 73,526
 215,226
 288,752
Controlled Homesites    Controlled Homesites    
August 31, 2017Optioned JVs Total 
Owned
Homesites
 
Total
Homesites
May 31, 2018Optioned JVs Total 
Owned
Homesites
 
Total
Homesites
East15,960
 482
 16,442
 66,772
 83,214
27,581
 3,482
 31,063
 66,413
 97,476
Central7,911
 1,135
 9,046
 32,634
 41,680
6,511
 —
 6,511
 31,457
 37,968
Texas14,862
 —
 14,862
 31,109
 45,971
West3,388
 3,935
 7,323
 35,659
 42,982
7,829
 6,141
 13,970
 65,732
 79,702
Other1,861
 —
 1,861
 6,405
 8,266
—
 —
 —
 257
 257
Total homesites (1)29,120
 5,552
 34,672
 141,470
 176,142
Total homesites56,783
 9,623
 66,406
 194,968
 261,374
(1)The increase in homesites at August 31, 2018 was primarily due to the acquisition of approximately 68,000 homesites as part of the CalAtlantic acquisition.
We evaluate certain 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. Over the next several years, we plan to increase the controlled homesites to approximately 40% of our entire homesite inventory from approximately 22%25% as of AugustMay 31, 2018.2019. Recently, we have undertaken several strategic land initiatives which include acquiring fully developed homesites from regional developers and may also include building homes in bulk for landowners who will retain them as rental properties.
During the ninesix months ended AugustMay 31, 2018,2019, consolidated inventory not owned decreasedincreased by $64.4$185.7 million with a corresponding decreaseincrease to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as of AugustMay 31, 2018.2019. The decreaseincrease was primarily due to a higher amountthe consolidation of homesite takedowns than construction started on homesites not owned.option contracts, partially offset by us exercising our options to acquire land under previously consolidated contracts. To reflect the purchase price of the inventory that was consolidated, we had a net reclass related to option deposits from consolidated inventory not owned to land under development in the accompanying condensed consolidated balance sheet as of AugustMay 31, 2018.2019. 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 option contracts with third parties and unconsolidated entities consisted of non-refundable option deposits and pre-acquisition costs totaling $241.1$326.8 million and $137.0$209.5 million at AugustMay 31, 20182019 and November 30, 2017,2018, respectively. Additionally, we had posted $72.2$69.1 million and $51.8$72.4 million of letters of credit in lieu of cash deposits under certain land and option contracts as of AugustMay 31, 20182019 and November 30, 2017,2018, respectively.



Contractual Obligations and Commercial Commitments
Our contractual obligations and commercial commitments have not changed materially from those reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 30, 2017,2018, due to the following:
As part of the CalAtlantic acquisition on February 12, 2018, we became subject, on a consolidated basis, to $3.9 billion of senior notes payable and other debts payable.
In May 2018, we redeemed $575 million aggregate principal amount of the 8.375% Senior Notes due 2018.
In June 2018, we redeemed $250 million aggregate principal amount of the 6.95% Senior Notes.
As of August 31, 2018, we had $650 million of outstanding borrowings under our Credit Facility.
As of August 31, 2018, borrowings under Rialto's and Lennar Financial Services' warehouse repurchase facilities were $94.5 million and $966.5 million, respectively.
The following summarizes our contractual obligations with regard to our long-term debt and interest commitments as of August 31, 2018:
 Payments Due by Period
(In thousands)Total Three Months ending November 30, 2018 December 1, 2018 through November 30, 2019 December 1, 2019 through November 30, 2021 December 1, 2021 through November 30, 2023 Thereafter
Lennar Homebuilding - Senior notes and other debts payable (1)$9,319,092
 45,331
 1,525,905
 1,626,363
 2,429,018
 3,692,475
Rialto - Notes and other debt payable (2)247,898
 116,799
 —
 1,121
 15,596
 114,382
Lennar Financial Services - Notes and other debts payable966,626
 966,551
 75
 —
 —
 —
Interest commitments under interest bearing debt (3)2,081,642
 115,059
 427,689
 685,408
 454,245
 399,241
Other contractual obligations (4)279,466
 79,003
 142,779
 57,684
 —
 —
Total contractual obligations$12,894,724
 1,322,743
 2,096,448
 2,370,576
 2,898,859
 4,206,098
(1)The amounts presented in the table above exclude debt issuance costs, any discounts/premiums and purchase accounting adjustments.
(2)Primarily includes notes payable and other debts payable of $94.5 million related to the Rialto warehouse repurchase facilities and $131.1 million related to Rialto's long-term loan facilities ("CMBS Loan Facilities") to finance the purchase of CMBS. These amounts exclude debt issuance costs and any discounts/premiums.
(3)Interest commitments on variable interest-bearing debt are determined based on the interest rates as of August 31, 2018.
(4)Amounts include $79.9 million remaining equity commitment to fund the Venture Fund for future expenditures related to the construction and development of projects and $199.6 million remaining equity commitment to fund Venture Fund II for future expenditures related to construction and development of projects.
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 or unconsolidated entities until we have determined whether to exercise our options. This reduces our financial risk associated with land holdings. At AugustMay 31, 2018,2019, we had access to 56,70073,526 homesites through option contracts with third parties and unconsolidated entities in which we have investments. At AugustMay 31, 2018,2019, we had $241.1$326.8 million of non-refundable option deposits and pre-acquisition costs related to certain of these homesites and had posted $72.2$69.1 million of letters of credit in lieu of cash deposits under certain land and option contracts.
At AugustMay 31, 2018,2019, we had letters of credit outstanding in the amount of $725.5$821.5 million (which included $72.2the $69.1 million of letters of credit described 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 AugustMay 31, 2018,2019, we had outstanding surety bonds of $2.6$2.8 billion including performance surety bonds related to site improvements at various projects (including certain projects of our joint ventures) and financial surety bonds. 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 AugustMay 31, 2018,2019, there were approximately $1.4$1.3 billion, or 52%46%, of anticipated future costs to complete related to these site improvements. We do not presently anticipate any draws upon these bonds or letters of credit, 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 residential mortgage loan applications in process of $4.8$4.2 billion at AugustMay 31, 2018.2019. Loans in process for which interest rates were committed to the borrowers totaled approximately $802.2$744.2 million as of AugustMay 31, 2018.2019. 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 because 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, futures 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 forward commitments, option contracts, futures 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 AugustMay 31, 2018,2019, we had open commitments amounting to $1.5 billion to sell MBS with varying settlement dates through November 2018August 2019 and there were no open futures contracts in the amount of $280 million with settlement dates through June 2025.

contracts.
(3) New Accounting Pronouncements
See Note 18 of the Notes to Condensed Consolidated Financial Statements included under Item 1 of this Report for a discussion of new accounting pronouncements applicable to our Company.

company.
(4) Critical Accounting Policies
We believe that there have been no significant changes to our critical accounting policies during the ninesix months ended AugustMay 31, 20182019 as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, for the year ended November 30, 20172018., except those policies as a result of the adoption of ASC 606 as of December 1, 2018, for which we updated our revenue recognition policies as noted in Note 1 of the Notes to the Condensed Consolidated Financial Statements and as included below:
Revenue Recognition
Homebuilding revenues and related profits from sales of homes are recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the homebuyer. Our performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date. Cash proceeds from home closings held in escrow for our benefit, typically for approximately three days, are included in Homebuilding cash and cash equivalents in the Condensed Consolidated Balance Sheets and disclosed in footnote 11 of the Notes to the Condensed Consolidated Financial Statements. Contract liabilities include customer deposits liabilities related to sold but undelivered homes that are included in


other liabilities in the Condensed Consolidated Balance Sheets. We periodically elects to sell parcels of land to third parties. Cash consideration from land sales is typically due on the closing date, which is generally when performance obligations are satisfied and revenue is recognized as title to and possession of the property are transferred to the buyer.
Our financial services’ operations recognize revenues as follows: Title premiums on policies issued directly by us are recognized as revenue on the effective date of the title policies. 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.
Our Multifamily segment provides management services with respect to the development, construction and property management of rental projects in joint ventures in which we have investments. As a result, the Multifamily segment earns and receives fees, which are generally based upon a stated percentage of development and construction costs and a percentage of gross rental collections. These fees are recorded over the period in which the services are performed using an input method, which properly depicts the level of effort required to complete the management services. In addition, the 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 using an input method, which properly depicts the level of effort required to complete the construction services. These customer contracts require us to provide management and general contractor services which represents a performance obligation that we satisfy over time. Management fees and general contractor services in the Multifamily segment are included in Multifamily revenue.



Item 3. 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.
As part of the CalAtlantic acquisition on February 12, 2018, we became subject, on a consolidated basis, to $3.9 billion of senior notes payable and other debts payable.
In May 2018, we redeemed $575 million aggregate principal amount of the 8.375% Senior Notes due 2018.
In June 2018, we redeemed $250 million aggregate principal amount of the 6.95% Senior Notes.
As of August 31, 2018,2019, we had $650$550 million of outstanding borrowings under our Credit Facility.
As of May 31, 2019, borrowings under Financial Services' warehouse repurchase facilities totaled $882.0 million under residential loan facilities and $155.9 million under RMF facilities.
Information Regarding Interest Rate Sensitivity
Principal (Notional) Amount by
Expected Maturity and Average Interest Rate
AugustMay 31, 20182019
Three Months Ending November 30, Years Ending November 30,     Fair Value at August 31,Six Months Ending November 30, Years Ending November 30,     Fair Value at May 31,
(Dollars in millions)2018 2019 2020 2021 2022 2023 Thereafter Total 20182019 2020 2021 2022 2023 2024 Thereafter Total 2019
LIABILITIES:                                  
Lennar Homebuilding:                 
Homebuilding:                 
Senior Notes and
other debts payable:		                                  
Fixed rate$45.3
 1,525.9
 650.3
 926.1
 1,745.1
 48.1
 3,692.5
 8,633.3
 8,651.8
$1,232.0
 898.5
 1,043.2
 1,747.6
 91.5
 1,479.2
 2,191.1
 8,683.1
 8,872.7
Average interest rate3.4% 4.3% 4.5% 6.2% 4.9% 5.2% 4.9% 4.9% —
4.4% 4.0% 6.1% 4.9% 4.4% 5.0% 4.9% 4.9% —
Variable rate$—
 —
 39.1
 10.9
 —
 635.8
 —
 685.8
 733.4
$—
 74.5
 33.4
 —
 —
 538.6
 —
 646.5
 687.6
Average interest rate—
 —
 4.6% 4.1% —
 3.8% —
 3.9% —
—
 5.1% 3.0% —
 —
 3.9% —
 4.0% —
Rialto:                 
Financial Services:                 
Notes and other
debts payable:		                                  
Fixed rate$1.7
 —
 —
 1.1
 15.6
 —
 114.4
 132.8
 133.4
$0.2
 7.5
 13.0
 —
 —
 —
 155.4
 176.1
 177.6
Average interest rate3.3% —
 —
 3.3% 3.3% —
 3.3% 3.3% —
5.5% 2.8% 1.3% —
 —
 —
 3.4% 3.2% —
Variable rate$115.1
 —
 —
 —
 —
 —
 —
 115.1
 115.1
$1,037.9
 —
 —
 —
 —
 —
 —
 1,037.9
 1,037.9
Average interest rate4.4% —
 —
 —
 —
 —
 —
 0.8% —
4.4% —
 —
 —
 —
 —
 —
 4.4% —
Lennar Financial Services:                 
Multifamily:                 
Notes payable:                 
Variable rate$36.1
 3.6
 —
 —
 —
 —
 —
 39.7
 39.7
Average interest rate4.7% 5.9% —
 —
 —
 —
 —
 5.3% —
Lennar Other:                 
Notes and other
debts payable:		                                  
Fixed rate$—
 0.1
 —
 —
 —
 —
 —
 0.1
 0.1
$1.9
 —
 —
 —
 —
 —
 —
 1.9
 1.9
Average interest rate—
 4.0% —
 —
 —
 —
 —
 4.0% —
2.9% —
 —
 —
 —
 —
 —
 2.9% —
Variable rate$966.5
 —
 —
 —
 —
 —
 —
 966.5
 966.5
$13.3
 —
 —
 —
 —
 —
 —
 13.3
 13.3
Average interest rate4.2% —
 —
 —
 —
 —
 —
 4.2% —
4.7% —
 —
 —
 —
 —
 —
 4.7% —
For additional information regarding our market risk refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended November 30, 2017.2018.



Item 4. 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 covered 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 AugustMay 31, 20182019 to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, 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 AugustMay 31, 20182019. That evaluation did not identify any changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than the need to transition CalAtlantic's internal controls to our internal control system.reporting.

Part II. Other Information

Item 1. Legal Proceedings
We are a 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 our condensed consolidated financial statements. 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 properties and disputes regarding the obligation to purchase or sell properties.
In July 2017, CalAtlantic Group, Inc., a subsidiary of ours, was notified by the San Francisco Regional Water Quality Control Board of CalAtlantic’s non-compliance with the Clean Water Act at a development in San Ramon, CA. We expect to pay monetary sanctions to resolve this matter, which we do not currently expect will be material.
Our mortgage subsidiary has been subpoenaed by the United States Department of Justice ("DOJ") regarding the adequacy of certain underwriting and quality control processes related to Federal Housing Administration loans originated and sold in prior years. We have provided information related to these loans and our processes to the DOJ, and communications are ongoing. The DOJ has to date not asserted any claim for damages or penalties.
Item 1A. Risk Factors
There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended November 30, 2017.2018.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about our repurchases of common stock during the three months ended AugustMay 31, 2018:2019:
Period:Total Number of Shares Purchased (1) Average Price Paid Per Share 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)
June 1 to June 30, 20182,814
 $51.55
 —
 6,218,968
July 1 to July 31, 2018400,769
 $51.94
 —
 6,218,968
August 1 to August 31, 2018610
 $51.05
 —
 6,218,968
Period:Total Number of Shares Purchased (1) Average Price Paid Per Share 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)
March 1 to March 31, 2019947
 $49.11
 —
 24,000,000
April 1 to April 30, 2019147,169
 $51.67
 142,408
 23,857,592
May 1 to May 31, 2019857,592
 $51.77
 857,592
 23,000,000
(1)RepresentsIncludes 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,January 2019, our Board of Directors authorized a stock repurchase program, which replaced the June 2001 stock repurchase program, under which we wereare authorized to purchase up to 20the lesser of $1.0 billion in value, or 25 million in shares, of our outstanding Class A common stock or Class B common stock. This repurchase authorization has no expiration date.expiration.
Items 3 - 5. Not Applicable


Item 6. Exhibits
10.1
Seventh Amended and Restated Credit Agreement, dated as of April 11, 2019, among Lennar Corporation, as borrower, JPMorgan Chase Bank, N.A., as 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 10.1 of the Company’s Current Report on Form 8-K, dated April 11, 2019.
10.2
Seventh Amended and Restated Guarantee Agreement, dated as of April 11, 2019, among certain of Lennar Corporation’s subsidiaries in favor of guarantee - Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated April 11, 2019.
31.1
Rule 13a-14(a) certification by Richard Beckwitt, Chief Executive Officer.
31.2
Rule 13a-14(a) certification by Diane Bessette, Vice President, Chief Financial Officer and Treasurer.
32.
Section 1350 certifications by Richard Beckwitt, Chief Executive Officer, and Diane Bessette, Vice President, Chief Financial Officer and Treasurer.
101.
The following financial statements from Lennar CorporationCorporation's Quarterly Report on Form 10-Q for the quarter ended AugustMay 31, 2018,2019, filed on October 9, 2018,July 3, 2019, were formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements.


SIGNATURES
Pursuant to the requirements 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.
 
   Lennar Corporation
   (Registrant)
    
Date:October 9, 2018July 3, 2019 /s/    Diane Bessette        
   Diane Bessette
   Vice President, Chief Financial Officer and Treasurer
    
Date:October 9, 2018July 3, 2019 /s/    David Collins        
   David Collins
   Controller


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