UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 20202021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _______ To _______
Commission File Number: 1-11749
Lennar Corporation
(Exact name of registrant as specified in its charter)
| | 95-4337490 | | | | | | |
Delaware | | 95-4337490 |
| (State or other jurisdiction of
incorporation or organization)
| (I.R.S. Employer
Identification No.)
|
700 Northwest 107th Avenue,, Miami,, Florida33172
(Address of principal executive offices) (Zip Code)
(305) (305) 559-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
| | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A Common Stock, par value $.10
| LEN | New York Stock Exchange |
Class B Common Stock, par value $.10
| LEN.B | New 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 Yesý☑ 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 Yesý☑ 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 filer | ýR | | Accelerated filer | ¨ | Emerging growth company | ☐ |
| Non-accelerated filer | ¨ | | Smaller reporting 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 August 31, 2020:2021:
Class A 275,115,747271,852,156
Class B 37,621,152
Class B 37,621,166
| | | | | | | | | | | | | | |
| LENNAR CORPORATION | | |
| | | | |
LENNAR CORPORATIONFORM 10-Q | | |
| | | | |
FORM 10-Q | | |
For the period ended August 31, 20202021 | | |
| | | | |
| Part I | | | | |
| Item 1. | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Item 2. | | | | |
| Item 3. | | | | |
| Item 4. | | | | |
| | | | |
| Part II | | | | |
| Item 1. | | | | |
| Item 1A. | | | | |
| Item 2. | | | | |
| Item 3 - 5. | | | | |
| Item 6. | | | | |
| | | | |
Part I. Financial Information
Item 1. Financial Statements
Lennar Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
| | | | | | | | | | | |
| August 31, | | November 30, |
| 2021 (1) | | 2020 (1) |
| ASSETS | | | |
| Homebuilding: | | | |
| Cash and cash equivalents | $ | 2,623,320 | | | 2,703,986 | |
| Restricted cash | 21,519 | | | 15,211 | |
| Receivables, net | 369,492 | | | 298,671 | |
| Inventories: | | | |
| Finished homes and construction in progress | 10,891,592 | | | 8,593,399 | |
| Land and land under development | 7,210,032 | | | 7,495,262 | |
| Consolidated inventory not owned | 1,004,319 | | | 836,567 | |
| Total inventories | 19,105,943 | | | 16,925,228 | |
| Investments in unconsolidated entities | 983,429 | | 953,177 | |
| Goodwill | 3,442,359 | | 3,442,359 | |
| Other assets | 1,034,691 | | 1,190,793 | |
| 27,580,753 | | | 25,529,425 | |
| Financial Services | 2,282,873 | | 2,708,118 | |
| Multifamily | 1,226,692 | | 1,175,908 | |
| Lennar Other | 1,653,872 | | | 521,726 | |
| Total assets | $ | 32,744,190 | | | 29,935,177 | |
|
| | | | | | |
| | August 31, | | November 30, |
| | 2020 (1) | | 2019 (1) |
| ASSETS | | | |
| Homebuilding: | | | |
| Cash and cash equivalents | $ | 1,966,796 |
| | 1,200,832 |
|
| Restricted cash | 11,959 |
| | 9,698 |
|
| Receivables, net | 295,958 |
| | 329,124 |
|
| Inventories: | | | |
| Finished homes and construction in progress | 9,288,624 |
| | 9,195,721 |
|
| Land and land under development | 7,987,149 |
| | 8,267,647 |
|
| Consolidated inventory not owned | 395,489 |
| | 313,139 |
|
| Total inventories | 17,671,262 |
| | 17,776,507 |
|
| Investments in unconsolidated entities | 940,695 |
| | 1,009,035 |
|
| Goodwill | 3,442,359 |
| | 3,442,359 |
|
| Other assets | 1,137,137 |
| | 1,021,684 |
|
| | 25,466,166 |
| | 24,789,239 |
|
| Financial Services | 2,209,549 |
| | 3,006,024 |
|
| Multifamily | 1,184,086 |
| | 1,068,831 |
|
| Lennar Other | 455,484 |
| | 495,417 |
|
| Total assets | $ | 29,315,285 |
| | 29,359,511 |
|
| |
(1) | (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, nor any of its subsidiaries, has any obligations. |
As of August 31, 2020,2021, total assets include $960.5 million$1.0 billion related to consolidated VIEs of which $21.3$61.1 million is included in Homebuilding cash and cash equivalents, $4.4 million in Homebuilding receivables, net, $14.3 million in Homebuilding finished homes and construction in progress, $623.9 million in Homebuilding land and land under development, $284.7 million in Homebuilding consolidated inventory not owned, $1.3 million in Homebuilding investments in unconsolidated entities, $17.1 million in Homebuilding other assets and $17.7 million in Multifamily assets.
As of November 30, 2020, total assets include $1.1 billion related to consolidated VIEs of which $32.1 million is included in Homebuilding cash and cash equivalents, $0.1 million in Homebuilding receivables, net, $15.8$14.2 million in Homebuilding finished homes and construction in progress, $481.0$486.8 million in Homebuilding land and land under development, $386.6$426.3 million in Homebuilding consolidated inventory not owned, $2.1$1.6 million in Homebuilding investments in unconsolidated entities, $8.9$120.6 million in Homebuilding other assets and $44.7$39.9 million in Multifamily assets.
As of November 30, 2019, total assets include $980.2 million relatedSee accompanying notes to condensed consolidated VIEs of which $15.5 million is included in Homebuilding cash and cash equivalents, $0.2 million in Homebuilding receivables, net, $97.5 million in Homebuilding finished homes and construction in progress, $283.2 million in Homebuilding land and land under development, $301.0 million in Homebuilding consolidated inventory not owned, $2.5 million in Homebuilding investments in unconsolidated entities, $10.0 million in Homebuilding other assets, $221.2 million in Financial Services assets and $49.1 million in Multifamily assets.financial statements.
Lennar Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
(In thousands, except share amounts)
(unaudited)
| | | | | | | | | | | |
| August 31, | | November 30, |
| 2021 (2) | | 2020 (2) |
| LIABILITIES AND EQUITY | | | |
| Homebuilding: | | | |
| Accounts payable | $ | 1,230,577 | | | 1,037,338 | |
| Liabilities related to consolidated inventory not owned | 841,539 | | | 706,691 | |
| Senior notes and other debts payable, net | 5,542,513 | | | 5,955,758 | |
| Other liabilities | 2,716,872 | | | 2,225,864 | |
| 10,331,501 | | | 9,925,651 | |
| Financial Services | 1,272,218 | | | 1,644,248 | |
| Multifamily | 259,145 | | | 252,911 | |
| Lennar Other | 101,787 | | | 12,966 | |
| Total liabilities | 11,964,651 | | | 11,835,776 | |
| Stockholders’ equity: | | | |
| Preferred stock | — | | | — | |
| Class A common stock of $0.10 par value; Authorized: August 31, 2021 and November 30, 2020 - 400,000,000 shares; Issued: August 31, 2021 - 300,499,577 shares and November 30, 2020 - 298,942,836 shares | 30,050 | | | 29,894 | |
| Class B common stock of $0.10 par value; Authorized: August 31, 2021 and November 30, 2020 - 90,000,000 shares; Issued: August 31, 2021 - 39,443,168 shares and November 30, 2020 - 39,443,168 shares | 3,944 | | | 3,944 | |
| Additional paid-in capital | 8,778,609 | | | 8,676,056 | |
| Retained earnings | 13,570,626 | | | 10,564,994 | |
| Treasury stock, at cost; August 31, 2021 - 28,647,421 shares of Class A common stock and 1,822,016 shares of Class B common stock; November 30, 2020 - 23,864,589 shares of Class A common stock and 1,822,016 shares of Class B common stock | (1,731,741) | | | (1,279,227) | |
| Accumulated other comprehensive loss | (1,300) | | | (805) | |
| Total stockholders’ equity | 20,650,188 | | | 17,994,856 | |
| Noncontrolling interests | 129,351 | | | 104,545 | |
| Total equity | 20,779,539 | | | 18,099,401 | |
| Total liabilities and equity | $ | 32,744,190 | | | 29,935,177 | |
(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 VIEs and liabilities of consolidated VIEs as to which neither Lennar Corporation, nor any of its subsidiaries, has any obligations.
|
| | | | | | |
| | August 31, | | November 30, |
| | 2020 (2) | | 2019 (2) |
| LIABILITIES AND EQUITY | | | |
| Homebuilding: | | | |
| Accounts payable | $ | 1,140,341 |
| | 1,069,179 |
|
| Liabilities related to consolidated inventory not owned | 324,544 |
| | 260,266 |
|
| Senior notes and other debts payable, net | 7,180,274 |
| | 7,776,638 |
|
| Other liabilities | 1,944,247 |
| | 1,900,955 |
|
| | 10,589,406 |
| | 11,007,038 |
|
| Financial Services | 1,197,847 |
| | 2,056,450 |
|
| Multifamily | 236,059 |
| | 232,155 |
|
| Lennar Other | 11,628 |
| | 30,038 |
|
| Total liabilities | 12,034,940 |
| | 13,325,681 |
|
| Stockholders’ equity: | | | |
| Preferred stock | 0 |
| | 0 |
|
| Class A common stock of $0.10 par value; Authorized: August 31, 2020 and November 30, 2019 - 400,000,000 shares; Issued: August 31, 2020 - 298,935,646 shares and November 30, 2019 - 297,119,153 shares | 29,894 |
| | 29,712 |
|
| Class B common stock of $0.10 par value; Authorized: August 31, 2020 and November 30, 2019 - 90,000,000 shares; Issued: August 31, 2020 - 39,443,130 shares and November 30, 2019 - 39,443,064 shares | 3,944 |
| | 3,944 |
|
| Additional paid-in capital | 8,654,954 |
| | 8,578,219 |
|
| Retained earnings | 9,760,165 |
| | 8,295,001 |
|
| Treasury stock, at cost; August 31, 2020 - 23,819,899 shares of Class A common stock and 1,821,964 shares of Class B common stock; November 30, 2019 - 18,964,973 shares of Class A common stock and 1,704,630 shares of Class B common stock | (1,276,691 | ) | | (957,857 | ) |
| Accumulated other comprehensive income (loss) | (163 | ) | | 498 |
|
| Total stockholders’ equity | 17,172,103 |
| | 15,949,517 |
|
| Noncontrolling interests | 108,242 |
| | 84,313 |
|
| Total equity | 17,280,345 |
| | 16,033,830 |
|
| Total liabilities and equity | $ | 29,315,285 |
| | 29,359,511 |
|
| |
(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 VIEs and liabilities of consolidated VIEs as to which neither Lennar Corporation, nor any of its subsidiaries, has any obligations. |
As of August 31, 2020,2021, total liabilities include $473.8$320.6 million related to consolidated VIEs as to which there was no recourse against the Company, of which $20.0$25.4 million is included in Homebuilding accounts payable, $315.4$232.8 million in Homebuilding liabilities related to consolidated inventory not owned, $118.4$50.0 million in Homebuilding senior notes and other debts payable $9.3and $12.5 million in Homebuilding other liabilities and $10.7 million in Multifamily liabilities.
As of November 30, 2019,2020, total liabilities include $549.7$528.5 million related to consolidated VIEs as to which there was no recourse against the Company, of which $13.7$28.4 million is included in Homebuilding accounts payable, $247.5$351.4 million in Homebuilding liabilities related to consolidated inventory not owned, $47.1$129.1 million in Homebuilding senior notes and other debt payable, $8.9$9.9 million in Homebuilding other liabilities $231.1 million in Financial Services liabilities and $1.4$9.8 million in Multifamily liabilities.
See accompanying notes to condensed consolidated financial statements.
4
Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Dollars inIn thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Revenues: | | | | | | | |
| Homebuilding | $ | 6,558,509 | | | 5,505,120 | | | 17,529,606 | | | 14,626,720 | |
| Financial Services | 206,973 | | | 237,068 | | | 669,789 | | | 631,992 | |
| Multifamily | 167,921 | | | 115,170 | | | 476,837 | | | 370,904 | |
| Lennar Other | 8,000 | | | 12,896 | | | 20,884 | | | 33,348 | |
| Total revenues | 6,941,403 | | | 5,870,254 | | | 18,697,116 | | | 15,662,964 | |
| Costs and expenses: | | | | | | | |
| Homebuilding | 5,225,497 | | | 4,673,158 | | | 14,253,299 | | | 12,684,295 | |
| Financial Services | 94,890 | | | 101,989 | | | 290,179 | | | 363,688 | |
| Multifamily | 174,410 | | | 118,786 | | | 474,389 | | | 379,607 | |
| Lennar Other | 9,010 | | | 2,062 | | | 18,994 | | | 3,564 | |
| Corporate general and administrative | 94,942 | | | 85,998 | | | 296,190 | | | 246,815 | |
| Charitable foundation contribution | 15,199 | | | 6,663 | | | 42,006 | | | 16,144 | |
| Total costs and expenses | 5,613,948 | | | 4,988,656 | | | 15,375,057 | | | 13,694,113 | |
| Homebuilding equity in earnings (loss) from unconsolidated entities | 2,391 | | | (6,431) | | | (3,862) | | | (20,077) | |
| Homebuilding other income (expense), net | (5,570) | | | (11,787) | | | 3,043 | | | (16,845) | |
| Financial Services gain on deconsolidation | — | | | — | | | — | | | 61,418 | |
| Multifamily equity in earnings (loss) from unconsolidated entities and other gain | (2,904) | | | (1,532) | | | 9,682 | | | 4,702 | |
| Lennar Other realized and unrealized gain (loss) | 495,202 | | | — | | | 847,377 | | | — | |
| Lennar Other equity in earnings (loss) from unconsolidated entities and other income (expense), net | (2,220) | | | (2,835) | | | 59,954 | | | (38,907) | |
| Earnings before income taxes | 1,814,354 | | | 859,013 | | | 4,238,253 | | | 1,959,142 | |
| Provision for income taxes | (405,136) | | | (189,690) | | | (975,354) | | | (382,498) | |
| Net earnings (including net earnings (loss) attributable to noncontrolling interests) | 1,409,218 | | | 669,323 | | | 3,262,899 | | | 1,576,644 | |
| Less: Net earnings (loss) attributable to noncontrolling interests | 2,330 | | | 2,905 | | | 23,279 | | | (5,632) | |
| Net earnings attributable to Lennar | $ | 1,406,888 | | | 666,418 | | | 3,239,620 | | | 1,582,276 | |
| Other comprehensive income (loss), net of tax: | | | | | | | |
| Net unrealized gain (loss) on securities available-for-sale | $ | 131 | | | 175 | | | (495) | | | (209) | |
| Reclassification adjustments for loss included in earnings, net of tax | — | | | — | | | — | | | (452) | |
| Total other comprehensive income (loss), net of tax | $ | 131 | | | 175 | | | (495) | | | (661) | |
| Total comprehensive income attributable to Lennar | $ | 1,407,019 | | | 666,593 | | | 3,239,125 | | | 1,581,615 | |
| Total comprehensive income (loss) attributable to noncontrolling interests | $ | 2,330 | | | 2,905 | | | 23,279 | | | (5,632) | |
| Basic earnings per share | $ | 4.52 | | | 2.13 | | | 10.37 | | | 5.05 | |
| Diluted earnings per share | $ | 4.52 | | | 2.12 | | | 10.36 | | | 5.03 | |
| | | | | | | |
|
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | August 31, | | August 31, |
| | 2020 | | 2019 | | 2020 | | 2019 |
| Revenues: | | | | | | | |
| Homebuilding | $ | 5,505,120 |
| | 5,438,998 |
| | 14,626,720 |
| | 14,258,318 |
|
| Financial Services | 237,068 |
| | 224,502 |
| | 631,992 |
| | 572,029 |
|
| Multifamily | 115,170 |
| | 183,958 |
| | 370,904 |
| | 428,764 |
|
| Lennar Other | 12,896 |
| | 9,600 |
| | 33,348 |
| | 28,919 |
|
| Total revenues | 5,870,254 |
| | 5,857,058 |
| | 15,662,964 |
| | 15,288,030 |
|
| Costs and expenses: | | | | | | | |
| Homebuilding | 4,673,158 |
| | 4,781,932 |
| | 12,684,295 |
| | 12,608,026 |
|
| Financial Services | 101,989 |
| | 149,804 |
| | 363,688 |
| | 422,142 |
|
| Multifamily | 118,786 |
| | 181,616 |
| | 379,607 |
| | 431,510 |
|
| Lennar Other | 2,062 |
| | 2,734 |
| | 3,564 |
| | 7,550 |
|
| Corporate general and administrative | 92,661 |
| | 92,615 |
| | 262,959 |
| | 248,071 |
|
| Total costs and expenses | 4,988,656 |
| | 5,208,701 |
| | 13,694,113 |
| | 13,717,299 |
|
| Homebuilding equity in loss from unconsolidated entities | (6,431 | ) | | (10,459 | ) | | (20,077 | ) | | (4,601 | ) |
| Homebuilding other income (expense), net | (11,787 | ) | | 12,375 |
| | (16,845 | ) | | (35,325 | ) |
| Financial Services gain on deconsolidation | 0 |
| | 0 |
| | 61,418 |
| | 0 |
|
| Multifamily equity in earnings (loss) from unconsolidated entities and other gain | (1,532 | ) | | 7,883 |
| | 4,702 |
| | 15,446 |
|
| Lennar Other equity in earnings (loss) from unconsolidated entities | (2,189 | ) | | 8,903 |
| | (28,712 | ) | | 12,255 |
|
| Lennar Other income (expense), net | (646 | ) | | 24 |
| | (10,195 | ) | | (12,900 | ) |
| Earnings before income taxes | 859,013 |
| | 667,083 |
| | 1,959,142 |
| | 1,545,606 |
|
| Provision for income taxes | (189,690 | ) | | (154,440 | ) | | (382,498 | ) | | (374,670 | ) |
| Net earnings (including net earnings (loss) attributable to noncontrolling interests) | 669,323 |
| | 512,643 |
| | 1,576,644 |
| | 1,170,936 |
|
| Less: Net earnings (loss) attributable to noncontrolling interests | 2,905 |
| | (723 | ) | | (5,632 | ) | | (3,812 | ) |
| Net earnings attributable to Lennar | $ | 666,418 |
| | 513,366 |
| | 1,582,276 |
| | 1,174,748 |
|
| Other comprehensive income (loss), net of tax: | | | | | | | |
| Net unrealized gain (loss) on securities available-for-sale | $ | 175 |
| | 180 |
| | (209 | ) | | 949 |
|
| Reclassification adjustments for loss included in earnings, net of tax | 0 |
| | 0 |
| | (452 | ) | | (176 | ) |
| Total other comprehensive income (loss), net of tax | $ | 175 |
| | 180 |
| | (661 | ) | | 773 |
|
| Total comprehensive income attributable to Lennar | $ | 666,593 |
| | 513,546 |
| | 1,581,615 |
| | 1,175,521 |
|
| Total comprehensive income (loss) attributable to noncontrolling interests | $ | 2,905 |
| | (723 | ) | | (5,632 | ) | | (3,812 | ) |
| Basic earnings per share | $ | 2.13 |
| | 1.60 |
| | 5.05 |
| | 3.64 |
|
| Diluted earnings per share | $ | 2.12 |
| | 1.59 |
| | 5.03 |
| | 3.63 |
|
See accompanying notes to condensed consolidated financial statements.
Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| August 31, |
| 2021 | | 2020 |
| Cash flows from operating activities: | | | |
| Net earnings (including net earnings (loss) attributable to noncontrolling interests) | $ | 3,262,899 | | | 1,576,644 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | |
| Depreciation and amortization | 65,845 | | | 68,771 | |
| Amortization of discount/premium on debt, net | (6,257) | | | (18,632) | |
| Equity in (earnings) loss from unconsolidated entities | (64,571) | | | 50,971 | |
| Distributions of earnings from unconsolidated entities | 40,552 | | | 39,036 | |
| Share-based compensation expense | 105,386 | | | 83,799 | |
| | | |
| Deferred income tax expense | 288,259 | | | 124,906 | |
| | | |
| Loans held-for-sale unrealized loss | 26,156 | | | — | |
| Lennar Other unrealized/realized gain | (847,377) | | | — | |
| Gain on sale of other assets and operating properties and equipment | (18,596) | | | (15,846) | |
| Loss on consolidation | — | | | 4,824 | |
| Gain on deconsolidation of previously consolidated entity | — | | | (61,418) | |
| | | |
| Gain on sale of interest in unconsolidated entity and other Multifamily gain | (1,167) | | | (4,661) | |
| Gain on sale of Financial Services' portfolio/businesses | (2,528) | | | (5,014) | |
| | | |
| | | |
| Valuation adjustments and write-offs of option deposits and pre-acquisition costs | 16,020 | | | 76,630 | |
| Changes in assets and liabilities: | | | |
| | | |
| Decrease in receivables | 131,282 | | | 264,643 | |
| (Increase) decrease in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs | (2,252,820) | | | 113,429 | |
| Increase in other assets | (154,005) | | | (124,641) | |
| Decrease in loans held-for-sale | 209,262 | | | 557,757 | |
| Increase in accounts payable and other liabilities | 514,007 | | | 165,646 | |
| Net cash provided by operating activities | 1,312,347 | | | 2,896,844 | |
| Cash flows from investing activities: | | | |
| | | |
| Net additions of operating properties and equipment | (39,959) | | | (42,856) | |
| Proceeds from the sale of operating properties and equipment, other assets | 36,882 | | | 33,096 | |
| | | |
| | | |
| | | |
| Investments in and contributions to unconsolidated entities | (354,588) | | | (412,474) | |
| Distributions of capital from unconsolidated entities | 292,466 | | | 135,677 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Proceeds from sale of investment in consolidated joint venture | 15,950 | | | — | |
| | | |
| | | |
| | | |
| | | |
| Proceeds from sale of commercial mortgage-backed securities bonds | 11,307 | | | 3,248 | |
| Proceeds from sale of Financial Services' portfolio/business | 3,327 | | | 14,978 | |
| Increase in Financial Services loans held-for-investment, net | 13,249 | | | 2,427 | |
| Purchases of investment securities | (121,675) | | | (49,293) | |
| Proceeds from maturities/sales of investment securities | 11,861 | | | 46,091 | |
| | | |
| Other receipts, net | 12 | | | 1,639 | |
| Net cash used in investing activities | $ | (131,168) | | | (267,467) | |
See accompanying notes to condensed consolidated financial statements.
6
Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)(continued)
(In thousands)
(unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| August 31, |
| 2021 | | 2020 |
| Cash flows from financing activities: | | | |
| | | |
| Net repayments under warehouse facilities | $ | (357,472) | | | (789,339) | |
| | | |
| | | |
| Redemption of senior notes | (299,999) | | | (313,000) | |
| Principal payments on notes payable and other borrowings | (165,403) | | | (550,256) | |
| Proceeds from other borrowings | 13,973 | | | 70,032 | |
| Proceeds from liabilities related to consolidated inventory not owned | 441,177 | | | — | |
| | | |
| | | |
| Payments related to consolidated inventory not owned | (238,273) | | | — | |
| (Payments) proceeds related to other liabilities, net | (7,142) | | | 6,559 | |
| | | |
| | | |
| Receipts related to noncontrolling interests | 18,575 | | | 175,565 | |
| Payments related to noncontrolling interests | (20,859) | | | (29,450) | |
| | | |
| | | |
| Common stock: | | | |
| | | |
| Repurchases | (452,508) | | | (318,989) | |
| Dividends | (233,988) | | | (117,112) | |
| Net cash used in financing activities | $ | (1,301,919) | | | (1,865,990) | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | (120,740) | | | 763,387 | |
| Cash and cash equivalents and restricted cash at beginning of period | 2,932,730 | | | 1,468,691 | |
| Cash and cash equivalents and restricted cash at end of period | $ | 2,811,990 | | | 2,232,078 | |
| Summary of cash and cash equivalents and restricted cash: | | | |
| Homebuilding | $ | 2,623,320 | | | 1,966,796 | |
| Financial Services | 137,021 | | | 217,442 | |
| Multifamily | 15,302 | | | 21,591 | |
| Lennar Other | 3,498 | | | 3,302 | |
| Homebuilding restricted cash | 21,519 | | | 11,959 | |
| Financial Services restricted cash | 11,330 | | | 10,988 | |
| $ | 2,811,990 | | | 2,232,078 | |
| Supplemental disclosures of non-cash investing and financing activities: | | | |
| Homebuilding and Multifamily: | | | |
| Purchases of inventories and other assets financed by sellers | $ | 139,111 | | | 117,097 | |
| Non-cash contributions to unconsolidated entities | 20,423 | | | 13,859 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Consolidation/deconsolidation of unconsolidated/consolidated entities, net: | | | |
| Financial Services assets | $ | — | | | 217,565 | |
| Financial Services liabilities | — | | | (115,175) | |
| Financial Services noncontrolling interests | — | | | (102,390) | |
| Inventories | — | | | 95,476 | |
| | | |
| Operating properties and equipment and other assets | — | | | 6,870 | |
| | | |
| Investments in unconsolidated entities | — | | | (68,290) | |
| Notes payable | — | | | (44,924) | |
| | | |
| Other liabilities | — | | | (1,455) | |
| Noncontrolling interests | — | | | 12,323 | |
See accompanying notes to condensed consolidated financial statements.
7
|
| | | | | | |
| | Nine Months Ended |
| | August 31, |
| | 2020 | | 2019 |
| Cash flows from operating activities: | | | |
| Net earnings (including net loss attributable to noncontrolling interests) | $ | 1,576,644 |
| | 1,170,936 |
|
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | |
| Depreciation and amortization | 68,771 |
| | 63,822 |
|
| Amortization of discount/premium and accretion on debt, net | (18,632 | ) | | (19,841 | ) |
| Equity in loss (earnings) from unconsolidated entities | 50,971 |
| | (12,235 | ) |
| Distributions of earnings from unconsolidated entities | 39,036 |
| | 9,175 |
|
| Share-based compensation expense | 83,799 |
| | 65,438 |
|
| Deferred income tax expense | 124,906 |
| | 144,969 |
|
| Gain on sale of other assets, operating properties and equipment and real estate owned | (15,846 | ) | | (10,907 | ) |
| Loss on consolidation | 4,824 |
| | 48,874 |
|
| Gain on deconsolidation of previously consolidated entity | (61,418 | ) | | 0 |
|
| Gain on sale of interest in unconsolidated entity and other Multifamily gain | (4,661 | ) | | (10,865 | ) |
| Gain on sale of Financial Services' portfolio/businesses | (5,014 | ) | | (2,368 | ) |
| Valuation adjustments and write-offs of option deposits and pre-acquisition costs | 76,630 |
| | 15,912 |
|
| Changes in assets and liabilities: | | | |
| Decrease in receivables | 264,643 |
| | 527,990 |
|
| Decrease (increase) in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs | 113,429 |
| | (1,610,329 | ) |
| (Increase) decrease in other assets | (124,641 | ) | | 48,263 |
|
| Decrease (increase) in loans held-for-sale | 557,757 |
| | (14,992 | ) |
| Increase (decrease) in accounts payable and other liabilities | 165,646 |
| | (115,549 | ) |
| Net cash provided by operating activities | 2,896,844 |
| | 298,293 |
|
| Cash flows from investing activities: | | | |
| Net additions of operating properties and equipment | (42,856 | ) | | (69,557 | ) |
| Proceeds from the sale of operating properties and equipment, other assets and real estate owned | 33,096 |
| | 58,578 |
|
| Proceeds from sale of investment in unconsolidated entity | 0 |
| | 17,790 |
|
| Proceeds from sale of Financial Services' portfolio/businesses | 14,978 |
| | 24,446 |
|
| Investments in and contributions to unconsolidated entities/deconsolidation of previously consolidated entity | (412,474 | ) | | (329,858 | ) |
| Distributions of capital from unconsolidated entities | 135,677 |
| | 250,265 |
|
| Receipts of principal payments on loans receivable and other | 0 |
| | 2,152 |
|
| Proceeds from sale of commercial mortgage-backed securities bonds | 3,248 |
| | 0 |
|
| Decrease (increase) in Financial Services loans held-for-investment, net | 2,427 |
| | (2,902 | ) |
| Purchases of investment securities | (49,293 | ) | | (31,879 | ) |
| Proceeds from maturities/sales of investments securities | 46,091 |
| | 41,608 |
|
| Other receipts, net | 1,639 |
| | 0 |
|
| Net cash used in investing activities | $ | (267,467 | ) | | (39,357 | ) |
Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(unaudited)
|
| | | | | | |
| | Nine Months Ended |
| | August 31, |
| | 2020 | | 2019 |
| Cash flows from financing activities: | | | |
| Net borrowings under revolving line of credit | $ | 0 |
| | 700,000 |
|
| Net repayments under warehouse facilities | (789,339 | ) | | (423,123 | ) |
| Redemption of senior notes | (313,000 | ) | | (500,000 | ) |
| Principal payments on notes payable and other borrowings | (550,256 | ) | | (154,736 | ) |
| Proceeds from other borrowings | 70,032 |
| | 62,634 |
|
| Net proceeds related to other liabilities | 6,559 |
| | (2,533 | ) |
| Conversions, exchanges and redemption of convertible senior notes | 0 |
| | (1,288 | ) |
| Receipts related to noncontrolling interests | 175,565 |
| | 27,395 |
|
| Payments related to noncontrolling interests | (29,450 | ) | | (35,689 | ) |
| Common stock: | | | |
| Issuances | 0 |
| | 388 |
|
| Repurchases | (318,989 | ) | | (419,322 | ) |
| Dividends | (117,112 | ) | | (38,776 | ) |
| Net cash used in financing activities | $ | (1,865,990 | ) | | (785,050 | ) |
| Net increase (decrease) in cash and cash equivalents and restricted cash | 763,387 |
| | (526,114 | ) |
| Cash and cash equivalents and restricted cash at beginning of period | 1,468,691 |
| | 1,595,978 |
|
| Cash and cash equivalents and restricted cash at end of period | $ | 2,232,078 |
| | 1,069,864 |
|
| Summary of cash and cash equivalents and restricted cash: | | | |
| Homebuilding | $ | 1,978,755 |
| | 808,643 |
|
| Financial Services | 228,430 |
| | 238,406 |
|
| Multifamily | 21,591 |
| | 16,478 |
|
| Lennar Other | 3,302 |
| | 6,337 |
|
| | $ | 2,232,078 |
| | 1,069,864 |
|
| Supplemental disclosures of non-cash investing and financing activities: | | | |
| Homebuilding and Multifamily: | | | |
| Purchases of inventories and other assets financed by sellers | $ | 117,097 |
| | 84,624 |
|
| Non-cash contributions to unconsolidated entities | 13,859 |
| | 107,368 |
|
| Consolidation/deconsolidation of unconsolidated/consolidated entities, net: | | | |
| Financial Services assets | $ | 217,565 |
| | 0 |
|
| Financial Services liabilities | (115,175 | ) | | 0 |
|
| Financial Services noncontrolling interests | (102,390 | ) | | 0 |
|
| Inventories | 95,476 |
| | 187,506 |
|
| Receivables | 0 |
| | 102,959 |
|
| Operating properties and equipment and other assets | 6,870 |
| | 53,412 |
|
| Investments in unconsolidated entities | (68,290 | ) | | 67,925 |
|
| Notes payable | (44,924 | ) | | (383,212 | ) |
| Other liabilities | (1,455 | ) | | (19,696 | ) |
| Noncontrolling interests | 12,323 |
| | (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 variable interest entities ("VIEs") (see Note 10 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, 2019.2020. The basis of consolidation is unchanged from the disclosure in the Company's Notes to Consolidated Financial Statements section in its Form 10-K for the year ended November 30, 2020. 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 nine months ended August 31, 20202021 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.
Cash and Cash Equivalents
Homebuilding cash and cash equivalents as of August 31, 20202021 and November 30, 20192020 included $396.9$666.8 million and $565.8$314.3 million, respectively, of cash held in escrow. On average for the three months ended August 31, 2021, cash was held in escrow for approximately three days.
Share-based Payments
During the three and ninemonths ended August 31, 2021, the Company granted employees an immaterial number of nonvested shares. During the three months ended August 31, 2020, the Company granted employees 0.9 million of nonvested shares. During the nine months ended August 31, 2021 and 2020, the Company granted employees 1.4 million and 1.8 million nonvested shares, respectively. During both the three and nine months ended August 31, 2019, the Company granted employees 2.1 million nonvested shares.
Recently Adopted Accounting Pronouncements
In MarchJune 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02,Accounting Standard Update ("ASU") 2016-13, LeasesFinancial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-02"2016-13"), which provides guidance. ASU 2016-13 significantly changes the impairment model for accounting for leases.most financial assets and certain other instruments. ASU 2016-022016-13 requires lesseesimmediate recognition of estimated credit losses expected to classify leases as either finance or operating leases and to record a right-of-use (“ROU”) asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification determined whether the lease expense was recognized based on an effective interest rate method or on a straight line basisoccur over the termremaining life of the lease. Accountingmany financial assets, which generally results in earlier recognition of allowances for lessors remains largely unchanged from current GAAP.credit losses on loans and other financial instruments. ASU 2016-022016-13 was effective for the CompanyCompany's fiscal year beginning December 1, 2019.2020. The Company elected the available practical expedients on adoption. Additionally, in preparation for adoption of the standard, the Company implemented internal controls and key system functionality to enable the preparation of financial information. The standardASU 2016-13 did not have a material impact on ourthe Company's condensed consolidated statementsfinancial statements.
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 operations and comprehensive income (loss) or ourgoodwill. ASU 2017-04 was effective for the Company’s fiscal year beginning December 1, 2020. The adoption of ASU 2017-04 did not have a material impact on the Company's condensed consolidated statements of cash flows. As a result offinancial statements.
New Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 will be effective for the Company’s fiscal year beginning December 1, 2021. The Company is currently evaluating the impact the adoption as of December 1, 2019,ASU 2019-12 will have on the Company has recorded $150.7 million of ROU assets and $159.7 million of lease liabilities on itsCompany's condensed consolidated balance sheets within other assetsfinancial statements.
Lennar Corporation and accounts payable or other liabilities of the respective segments.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 20202021 presentation. The Company's segments were adjusted, effective December 1, 2019,Company reclassed the balance of its investment in Doma, formerly States Title, to reflectwhich the North Carolina divisions withinCompany sold the Central segment, which were previously partmajority of the East segment.Financial Services segment's retail title agency business and title insurance underwriter in the first quarter of 2019, from the Financial Services segment to the Lennar Other segment in the condensed consolidated balance sheets for all periods presented. This was duereclassed to be included in our strategic technology investments as the entity had announced that it would merge with a changepublicly traded special purpose acquisition company and during the three months ended August 31, 2021 completed the merger and became a publicly traded entity. In addition, the Company reflected its contributions to its charitable foundation in operations.a new line on its condensed consolidated statements of operations for all periods presented. This reclassification was between segmentspreviously reflected in the Corporate general and administrative line. These reclassifications had no impact on the Company's total assets, total equity, revenuerevenues or net incomeearnings in theits condensed consolidated financial statements.
Lennar Corporation(2)Operating and SubsidiariesReporting Segments
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
| |
(2) | 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. The Company's chief operating decision makers manage and assess the Company’s performance at a regional level. Therefore, the Company performed an assessment of its operating segments in accordance with ASC 280, Segment Reporting, and determined that the following are its operating and reportable segments:
Homebuilding segments: (1) Homebuilding East
(2) Homebuilding Central
(3) Homebuilding Texas
(4) Homebuilding West
(5) Financial Services
(6) Multifamily
(7) Lennar Other
The assets and liabilities related to the Company’s segments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | August 31, 2021 |
| Assets: | Homebuilding | | Financial
Services | | Multifamily | | Lennar
Other | | Total |
| Cash and cash equivalents | $ | 2,623,320 | | | 137,021 | | | 15,302 | | | 3,498 | | | 2,779,141 | |
| Restricted cash | 21,519 | | | 11,330 | | | — | | | — | | | 32,849 | |
| Receivables, net (1) | 369,492 | | | 408,367 | | | 96,649 | | | — | | | 874,508 | |
| Inventories | 19,105,943 | | | — | | | 351,753 | | | — | | | 19,457,696 | |
| Loans held-for-sale (2) | — | | | 1,254,589 | | | — | | | — | | | 1,254,589 | |
| | | | | | | | | |
| Investments in equity securities (3) | — | | | — | | | — | | | 1,149,520 | | | 1,149,520 | |
| Investments available-for-sale (4) | — | | | — | | | — | | | 41,695 | | | 41,695 | |
| Loans held-for-investment, net | — | | | 61,283 | | | — | | | — | | | 61,283 | |
| Investments held-to-maturity | — | | | 161,532 | | | — | | | — | | | 161,532 | |
| Investments in unconsolidated entities | 983,429 | | | — | | | 682,819 | | | 387,453 | | | 2,053,701 | |
| Goodwill | 3,442,359 | | | 189,699 | | | — | | | — | | | 3,632,058 | |
| Other assets | 1,034,691 | | | 59,052 | | | 80,169 | | | 71,706 | | | 1,245,618 | |
| $ | 27,580,753 | | | 2,282,873 | | | 1,226,692 | | | 1,653,872 | | | 32,744,190 | |
| Liabilities: | | | | | | | | | |
| Notes and other debts payable, net | $ | 5,542,513 | | | 1,106,447 | | | — | | | 1,906 | | | 6,650,866 | |
| Other liabilities | 4,788,988 | | | 165,771 | | | 259,145 | | | 99,881 | | | 5,313,785 | |
| $ | 10,331,501 | | | 1,272,218 | | | 259,145 | | | 101,787 | | | 11,964,651 | |
|
| | | | | | | | | | | | | | | |
| (In thousands) | August 31, 2020 |
| Assets: | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Total |
| Cash and cash equivalents | $ | 1,966,796 |
| | 217,442 |
| | 21,591 |
| | 3,302 |
| | 2,209,131 |
|
| Restricted cash | 11,959 |
| | 10,988 |
| | 0 |
| | 0 |
| | 22,947 |
|
| Receivables, net (1) | 295,958 |
| | 316,717 |
| | 86,725 |
| | 0 |
| | 699,400 |
|
| Inventories | 17,671,262 |
| | 0 |
| | 336,493 |
| | 0 |
| | 18,007,755 |
|
| Loans held-for-sale (2) | 0 |
| | 1,087,182 |
| | 0 |
| | 0 |
| | 1,087,182 |
|
| Loans held-for-investment, net | 0 |
| | 67,219 |
| | 0 |
| | 1,419 |
| | 68,638 |
|
| Investments held-to-maturity | 0 |
| | 164,588 |
| | 0 |
| | 0 |
| | 164,588 |
|
| Investments available-for-sale (3) | 0 |
| | 0 |
| | 0 |
| | 53,770 |
| | 53,770 |
|
| Investments in unconsolidated entities (4) | 940,695 |
| | 70,218 |
| | 656,012 |
| | 386,247 |
| | 2,053,172 |
|
| Goodwill | 3,442,359 |
| | 189,699 |
| | 0 |
| | 0 |
| | 3,632,058 |
|
| Other assets (5) | 1,137,137 |
| | 85,496 |
| | 83,265 |
| | 10,746 |
| | 1,316,644 |
|
| | $ | 25,466,166 |
| | 2,209,549 |
| | 1,184,086 |
| | 455,484 |
| | 29,315,285 |
|
| Liabilities: | | | | | | | | | |
| Notes and other debts payable, net | $ | 7,180,274 |
| | 956,414 |
| | 0 |
| | 1,906 |
| | 8,138,594 |
|
| Other liabilities (6) | 3,409,132 |
| | 241,433 |
| | 236,059 |
| | 9,722 |
| | 3,896,346 |
|
| | $ | 10,589,406 |
| | 1,197,847 |
| | 236,059 |
| | 11,628 |
| | 12,034,940 |
|
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | November 30, 2020 |
| Assets: | Homebuilding | | Financial
Services | | Multifamily | | Lennar
Other | | Total |
| Cash and cash equivalents | $ | 2,703,986 | | | 116,171 | | | 38,963 | | | 3,918 | | | 2,863,038 | |
| Restricted cash | 15,211 | | | 54,481 | | | — | | | — | | | 69,692 | |
| Receivables, net (1) | 298,671 | | | 552,779 | | | 86,629 | | | — | | | 938,079 | |
| Inventories | 16,925,228 | | | — | | | 249,920 | | | — | | | 17,175,148 | |
| Loans held-for-sale (2) | — | | | 1,490,105 | | | — | | | — | | | 1,490,105 | |
| | | | | | | | | |
| Investments in equity securities (3) | — | | | — | | | — | | | 68,771 | | | 68,771 | |
| Investments available-for-sale (4) | — | | | — | | | — | | | 53,497 | | | 53,497 | |
| Loans held-for-investment, net | — | | | 72,626 | | | — | | | — | | | 72,626 | |
| Investments held-to-maturity | — | | | 164,230 | | | — | | | — | | | 164,230 | |
| Investments in unconsolidated entities | 953,177 | | | — | | | 724,647 | | | 387,097 | | | 2,064,921 | |
| Goodwill | 3,442,359 | | | 189,699 | | | — | | | — | | | 3,632,058 | |
| Other assets | 1,190,793 | | | 68,027 | | | 75,749 | | | 8,443 | | | 1,343,012 | |
| $ | 25,529,425 | | | 2,708,118 | | | 1,175,908 | | | 521,726 | | | 29,935,177 | |
| Liabilities: | | | | | | | | | |
| Notes and other debts payable, net | $ | 5,955,758 | | | 1,463,919 | | | — | | | 1,906 | | | 7,421,583 | |
| Other liabilities | 3,969,893 | | | 180,329 | | | 252,911 | | | 11,060 | | | 4,414,193 | |
| $ | 9,925,651 | | | 1,644,248 | | | 252,911 | | | 12,966 | | | 11,835,776 | |
(1)Receivables, net for Financial Services primarily related to loans sold to investors for which the Company had not yet been paid. |
| | | | | | | | | | | | | | | |
| (In thousands) | November 30, 2019 |
| Assets: | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Total |
| Cash and cash equivalents | $ | 1,200,832 |
| | 234,113 |
| | 8,711 |
| | 2,340 |
| | 1,445,996 |
|
| Restricted cash | 9,698 |
| | 12,022 |
| | 0 |
| | 975 |
| | 22,695 |
|
| Receivables, net (1) | 329,124 |
| | 500,847 |
| | 76,906 |
| | 0 |
| | 906,877 |
|
| Inventories | 17,776,507 |
| | 0 |
| | 315,107 |
| | 0 |
| | 18,091,614 |
|
| Loans held-for-sale (2) | 0 |
| | 1,644,939 |
| | 0 |
| | 0 |
| | 1,644,939 |
|
| Loans held-for-investment, net | 0 |
| | 73,867 |
| | 0 |
| | 0 |
| | 73,867 |
|
| Investments held-to-maturity | 0 |
| | 190,289 |
| | 0 |
| | 54,117 |
| | 244,406 |
|
| Investments available-for-sale (3) | 0 |
| | 3,732 |
| | 48,206 |
| | 0 |
| | 51,938 |
|
| Investments in unconsolidated entities (4) | 1,009,035 |
| | 0 |
| | 561,190 |
| | 403,688 |
| | 1,973,913 |
|
| Goodwill | 3,442,359 |
| | 215,516 |
| | 0 |
| | 0 |
| | 3,657,875 |
|
| Other assets (5) | 1,021,684 |
| | 130,699 |
| | 58,711 |
| | 34,297 |
| | 1,245,391 |
|
| | $ | 24,789,239 |
| | 3,006,024 |
| | 1,068,831 |
| | 495,417 |
| | 29,359,511 |
|
| Liabilities: | | | | | | | | | |
| Notes and other debts payable, net | $ | 7,776,638 |
| | 1,745,755 |
| | 36,125 |
| | 15,178 |
| | 9,573,696 |
|
| Other liabilities (6) | 3,230,400 |
| | 310,695 |
| | 196,030 |
| | 14,860 |
| | 3,751,985 |
|
| | $ | 11,007,038 |
| | 2,056,450 |
| | 232,155 |
| | 30,038 |
| | 13,325,681 |
|
| |
(1) | Receivables, net for Financial Services primarily related to loans sold to investors for which the Company had not yet been paid as of August 31, 2020 and November 30, 2019, 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) | Lennar Other investments in unconsolidated entities decreased primarily due to a $25.0 million write-down of assets held by Rialto legacy funds because of the disruption in the capital markets as a result of the coronavirus pandemic ("COVID-19") and the economic shutdown. |
| |
(5) | As of August 31, 2020 and November 30, 2019, Financial Services other assets included mortgage loan commitments carried at fair value of $40.5 million and $16.3 million, respectively, and mortgage servicing rights carried at fair value of $1.4 million and $24.7 million, respectively. |
| |
(6) | As of August 31, 2020 and November 30, 2019, Financial Services other liabilities included $67.3 million and $60.7 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation. In addition, as of August 31, 2020 and November 30, 2019, Financial Services other liabilities also included forward contracts carried at fair value of $4.9 million and $3.9 million, respectively. |
(4)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.
Financial information relating to the Company’s segments was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended August 31, 2021 |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate and
unallocated | | Total |
| Revenues | $ | 6,558,509 | | | 206,973 | | | 167,921 | | | 8,000 | | | — | | | 6,941,403 | |
| Operating earnings (loss) | 1,329,833 | | | 112,083 | | | (9,393) | | | 491,972 | | | — | | | 1,924,495 | |
| Corporate general and administrative expenses | — | | | — | | | — | | | — | | | 94,942 | | | 94,942 | |
| Charitable foundation contribution | — | | | — | | | — | | | — | | | 15,199 | | | 15,199 | |
| Earnings (loss) before income taxes | 1,329,833 | | | 112,083 | | | (9,393) | | | 491,972 | | | (110,141) | | | 1,814,354 | |
| | | | | | | | | | | |
| Three Months Ended August 31, 2020 |
| Revenues | $ | 5,505,120 | | | 237,068 | | | 115,170 | | | 12,896 | | | — | | | 5,870,254 | |
| Operating earnings (loss) | 813,744 | | | 135,079 | | | (5,148) | | | 7,999 | | | — | | | 951,674 | |
| Corporate general and administrative expenses | — | | | — | | | — | | | — | | | 85,998 | | | 85,998 | |
| Charitable foundation contribution | — | | | — | | | — | | | — | | | 6,663 | | | 6,663 | |
| Earnings (loss) before income taxes | 813,744 | | | 135,079 | | | (5,148) | | | 7,999 | | | (92,661) | | | 859,013 | |
|
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended August 31, 2020 |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate and unallocated | | Total |
| Revenues | $ | 5,505,120 |
| | 237,068 |
| | 115,170 |
| | 12,896 |
| | 0 |
| | 5,870,254 |
|
| Operating earnings (loss) | 813,744 |
| | 135,079 |
| | (5,148 | ) | | 7,999 |
| | 0 |
| | 951,674 |
|
| Corporate general and administrative expenses | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 92,661 |
| | 92,661 |
|
| Earnings (loss) before income taxes | 813,744 |
| | 135,079 |
| | (5,148 | ) | | 7,999 |
| | (92,661 | ) | | 859,013 |
|
| | | | | | | | | | | | |
| | Three Months Ended August 31, 2019 |
| Revenues | $ | 5,438,998 |
| | 224,502 |
| | 183,958 |
| | 9,600 |
| | 0 |
| | 5,857,058 |
|
| Operating earnings | 658,982 |
| | 74,698 |
| | 10,225 |
| | 15,793 |
| | 0 |
| | 759,698 |
|
| Corporate general and administrative expenses | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 92,615 |
| | 92,615 |
|
| Earnings before income taxes | 658,982 |
| | 74,698 |
| | 10,225 |
| | 15,793 |
| | (92,615 | ) | | 667,083 |
|
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended August 31, 2021 |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate and
unallocated | | Total |
| Revenues | $ | 17,529,606 | | | 669,789 | | | 476,837 | | | 20,884 | | | — | | | 18,697,116 | |
| Operating earnings | 3,275,488 | | | 379,610 | | | 12,130 | | | 909,221 | | | — | | | 4,576,449 | |
| Corporate general and administrative expenses | — | | | — | | | — | | | — | | | 296,190 | | | 296,190 | |
| Charitable foundation contribution | — | | | — | | | — | | | — | | | 42,006 | | | 42,006 | |
| Earnings before income taxes | 3,275,488 | | | 379,610 | | | 12,130 | | | 909,221 | | | (338,196) | | | 4,238,253 | |
| | | | | | | | | | | |
| Nine Months Ended August 31, 2020 |
| Revenues | $ | 14,626,720 | | | 631,992 | | | 370,904 | | | 33,348 | | | — | | | 15,662,964 | |
| Operating earnings (loss) (1) | 1,905,503 | | | 329,722 | | | (4,001) | | | (9,123) | | | — | | | 2,222,101 | |
| Corporate general and administrative expenses | — | | | — | | | — | | | — | | | 246,815 | | | 246,815 | |
| Charitable foundation contribution | — | | | — | | | — | | | — | | | 16,144 | | | 16,144 | |
| Earnings (loss) before income taxes | 1,905,503 | | | 329,722 | | | (4,001) | | | (9,123) | | | (262,959) | | | 1,959,142 | |
(1)Operating loss for Lennar Other for the nine months ended August 31, 2020 included a $25.0 million write-down of assets held by Rialto legacy funds because of the disruption in the capital markets as a result of COVID-19 and the economic shutdown. |
| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended August 31, 2020 |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate and unallocated | | Total |
| Revenues | $ | 14,626,720 |
| | 631,992 |
| | 370,904 |
| | 33,348 |
| | 0 |
| | 15,662,964 |
|
| Operating earnings (loss) (1) | 1,905,503 |
| | 329,722 |
| | (4,001 | ) | | (9,123 | ) | | 0 |
| | 2,222,101 |
|
| Corporate general and administrative expenses | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 262,959 |
| | 262,959 |
|
| Earnings (loss) before income taxes | 1,905,503 |
| | 329,722 |
| | (4,001 | ) | | (9,123 | ) | | (262,959 | ) | | 1,959,142 |
|
| | | | | | | | | | | | |
| | Nine Months Ended August 31, 2019 |
| Revenues | $ | 14,258,318 |
| | 572,029 |
| | 428,764 |
| | 28,919 |
| | 0 |
| | 15,288,030 |
|
| Operating earnings | 1,610,366 |
| | 149,887 |
| | 12,700 |
| | 20,724 |
| | 0 |
| | 1,793,677 |
|
| Corporate general and administrative expenses | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 248,071 |
| | 248,071 |
|
| Earnings before income taxes | 1,610,366 |
| | 149,887 |
| | 12,700 |
| | 20,724 |
| | (248,071 | ) | | 1,545,606 |
|
| |
(1) | Operating loss for Lennar Other for the nine months ended August 31, 2020 included a $25.0 million write-down of assets held by Rialto legacy funds because of the disruption in the capital markets as a result of COVID-19 and the economic shutdown. |
Homebuilding Segments
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 Homebuilding segments primarily include the construction and sale of single-family attached and detached homes as well as the purchase, development and sale of residential land directly and through the Company’s unconsolidated entities. Operating earnings (loss) for the Homebuilding segments consist of revenues generated from the sales of homes and land, 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.
The Company’s reportable Homebuilding segments and all other homebuilding operations not required to be reported separately have homebuilding divisions located in:
East: Florida, New Jersey, Pennsylvania and South Carolina
Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina and Virginia
Texas: Texas
West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington
Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint Holdings, LLC ("FivePoint")
The assets related to the Company’s homebuilding segments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (In thousands) | East | | Central | | Texas | | West | | Other | | Corporate and Unallocated | | Total Homebuilding |
| August 31, 2021 | $ | 5,909,905 | | | 3,889,907 | | | 2,714,717 | | | 11,281,110 | | | 1,369,977 | | | 2,415,137 | | | 27,580,753 | |
| November 30, 2020 | 5,308,114 | | | 3,438,600 | | | 2,150,916 | | | 10,504,374 | | | 1,301,618 | | | 2,825,803 | | | 25,529,425 | |
Financial information relating to the Company’s homebuilding segments was as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended August 31, 2021 |
| (In thousands) | East | | Central | | Texas | | West | | Other | | Total Homebuilding |
| Revenues | $ | 1,678,851 | | | 1,268,817 | | | 827,229 | | | 2,775,556 | | | 8,056 | | | 6,558,509 | |
| Operating earnings (loss) | 356,895 | | | 197,229 | | | 186,008 | | | 608,815 | | | (19,114) | | | 1,329,833 | |
| | | | | | | | | | | |
| Three Months Ended August 31, 2020 |
| Revenues | $ | 1,478,659 | | | 1,063,621 | | | 747,934 | | | 2,212,211 | | | 2,695 | | | 5,505,120 | |
| Operating earnings (loss) | 244,189 | | | 132,678 | | | 116,111 | | | 342,834 | | | (22,068) | | | 813,744 | |
|
| | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | |
| Assets: | East | | Central | | Texas | | West | | Other | | Corporate and Unallocated | | Total Homebuilding |
| Balance at August 31, 2020 | $ | 5,586,328 |
| | 3,494,566 |
| | 2,204,192 |
| | 10,800,281 |
| | 1,257,126 |
| | 2,123,673 |
| | 25,466,166 |
|
| Balance at November 30, 2019 | 5,804,764 |
| | 3,636,694 |
| | 2,246,893 |
| | 10,663,666 |
| | 1,173,163 |
| | 1,264,059 |
| | 24,789,239 |
|
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Financial information relating to the Company’s homebuilding segments was as follows: |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended August 31, 2020 |
| (In thousands) | East | | Central | | Texas | | West | | Other | | Total Homebuilding |
| Revenues | $ | 1,478,659 |
| | 1,063,621 |
| | 747,934 |
| | 2,212,211 |
| | 2,695 |
| | 5,505,120 |
|
| Operating earnings (loss) | 244,189 |
| | 132,678 |
| | 116,111 |
| | 342,834 |
| | (22,068 | ) | | 813,744 |
|
| | | | | | | | | | | | |
| | Three Months Ended August 31, 2019 |
| Revenues | $ | 1,502,004 |
| | 1,066,418 |
| | 713,376 |
| | 2,063,324 |
| | 93,876 |
| | 5,438,998 |
|
| Operating earnings (loss) | 219,335 |
| | 116,589 |
| | 78,298 |
| | 259,424 |
| | (14,664 | ) | | 658,982 |
|
|
| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended August 31, 2020 |
| (In thousands) | East | | Central | | Texas | | West | | Other | | Total Homebuilding |
| Revenues | $ | 3,908,421 |
| | 2,839,415 |
| | 1,933,918 |
| | 5,920,804 |
| | 24,162 |
| | 14,626,720 |
|
| Operating earnings (loss) | 586,104 |
| | 292,031 |
| | 269,071 |
| | 847,835 |
| | (89,538 | ) | | 1,905,503 |
|
| | | | | | | | | | | | |
| | Nine Months Ended August 31, 2019 |
| Revenues | $ | 3,837,673 |
| | 2,743,757 |
| | 1,825,105 |
| | 5,747,243 |
| | 104,540 |
| | 14,258,318 |
|
| Operating earnings (loss) | 503,803 |
| | 264,238 |
| | 185,950 |
| | 722,989 |
| | (66,614 | ) | | 1,610,366 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended August 31, 2021 |
| (In thousands) | East | | Central | | Texas | | West | | Other | | Total Homebuilding |
| Revenues | $ | 4,602,560 | | | 3,294,842 | | | 2,270,566 | | | 7,338,906 | | | 22,732 | | | 17,529,606 | |
| Operating earnings (loss) | 928,805 | | | 488,300 | | | 491,708 | | | 1,423,332 | | | (56,657) | | | 3,275,488 | |
| | | | | | | | | | | |
| Nine Months Ended August 31, 2020 |
| Revenues | $ | 3,908,421 | | | 2,839,415 | | | 1,933,918 | | | 5,920,804 | | | 24,162 | | | 14,626,720 | |
| Operating earnings (loss) | 586,104 | | | 292,031 | | | 269,071 | | | 847,835 | | | (89,538) | | | 1,905,503 | |
Financial Services
Operations of the Financial Services segment include primarily mortgage financing, title and closing services primarily for buyers of the Company’s homes. It also includes originating and selling into securitizations commercial mortgage loans through its LMF Commercial business, formerly Rialto Mortgage Finance. The Financial Services segment sells substantially all of the residential loans it originates within a short period of time in the secondary mortgage market. The segment applies residential mortgage financing underwriting standards it believes are in-line with industry standards. The majority of the residential loans 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.business. Financial Services’ operating earnings consist of revenues generated primarily from mortgage financing, title and closing services, and property and casualty insurance, less the cost of such services and certain selling, general and administrative expenses incurred by the segment. The Financial Services segment operates generally in the same states as the Company’s homebuilding operations.
At August 31, 2020,2021, the Financial Services warehouse facilities were all 364-day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows:
|
| | | |
| (In thousands) | Maximum Aggregate Commitment |
| Residential facilities maturing: | |
| January 2021 | $ | 500,000 |
|
| March 2021 | 300,000 |
|
| June 2021 | 600,000 |
|
| July 2021 | 200,000 |
|
| Total - Residential facilities | $ | 1,600,000 |
|
| LMF Commercial facilities maturing | |
| November 2020 | $ | 200,000 |
|
| December 2020 (1) | 700,000 |
|
| Total - LMF Commercial facilities | $ | 900,000 |
|
| Total | $ | 2,500,000 |
|
| | | | | |
| (In thousands) | Maximum Aggregate Commitment |
| Residential facilities maturing: | |
| October 2021 | $ | 200,000 | |
| December 2021 | 500,000 | |
| April 2022 | 100,000 | |
| July 2022 | 600,000 | |
| Total - Residential facilities | $ | 1,400,000 | |
| LMF Commercial facilities maturing | |
| November 2021 | $ | 100,000 | |
| December 2021 (1) | 411,438 | |
| July 2023 | 50,000 | |
| |
(1) | Includes $50.0 millionTotal - LMF Commercial warehouse repurchase facility used to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans held-for-investment, net. There were borrowings under this facility of $11.4 million as of August 31, 2020.facilities | $ | 561,438 | |
| Total | $ | 1,961,438 | |
(1)Includes $11.4 million warehouse repurchase facility used by LMF Commercial to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans held-for-investment, net.
The Financial Services segment uses the residential 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
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
renewed or replaced with other facilities when they mature. The LMF Commercial facilities finance LMF Commercial loan originations and securitization activities and were secured by a 75%up to an 80% interest in the originated commercial loans financed.
Borrowings and collateral under the facilities and their prior year predecessors were as follows:
|
| | | | | | |
| (In thousands) | August 31, 2020 | | November 30, 2019 |
| Borrowings under the residential facilities | $ | 699,016 |
| | 1,374,063 |
|
| Collateral under the residential facilities | 727,319 |
| | 1,423,650 |
|
| Borrowings under the LMF Commercial facilities | 103,667 |
| | 216,870 |
|
| | | | | | | | | | | |
| (In thousands) | August 31, 2021 | | November 30, 2020 |
| Borrowings under the residential facilities | $ | 900,332 | | | 1,185,797 | |
| Collateral under the residential facilities | 934,345 | | | 1,231,619 | |
| Borrowings under the LMF Commercial facilities | 54,990 | | | 124,617 | |
If the facilities are not renewed or replaced, the borrowings under the lines of credit will be repaid by selling the mortgage loans held-for-sale to investors and by collecting receivables on loans sold but not yet paid for. Without the facilities, the 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 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. Purchasers sometimes try to defray 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
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
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 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 Ended |
| | August 31, | | August 31, |
| (In thousands) | 2020 | | 2019 | | 2020 | | 2019 |
| Loan origination liabilities, beginning of period | $ | 10,880 |
| | 7,424 |
| | 9,364 |
| | 48,584 |
|
| Provision for losses | 1,234 |
| | 1,006 |
| | 3,149 |
| | 2,593 |
|
| Payments/settlements | (24 | ) | | (109 | ) | | (423 | ) | | (42,856 | ) |
| Loan origination liabilities, end of period | $ | 12,090 |
| | 8,321 |
| | 12,090 |
| | 8,321 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| (In thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Loan origination liabilities, beginning of period | $ | 9,454 | | | 10,880 | | | 7,569 | | | 9,364 | |
| Provision for losses | 1,147 | | | 1,234 | | | 3,227 | | | 3,149 | |
| | | | | | | |
| | | | | | | |
| Payments/settlements | (237) | | | (24) | | | (432) | | | (423) | |
| Loan origination liabilities, end of period | $ | 10,364 | | | 12,090 | | | 10,364 | | | 12,090 | |
LMF Commercial - loans held-for-sale
LMF Commercial originated commercial loans as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| (Dollars in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Originations (1) | $ | 178,669 | | | 164,380 | | | 594,667 | | | 582,030 | |
| | | | | | | |
| | | | | | | |
| Sold | 226,357 | | | 164,874 | | | 665,062 | | | 622,251 | |
| Securitizations | 1 | | 1 | | 4 | | | 4 | |
| | | | | | | |
(1)During both the three and nine months ended August 31, 2021 and 2020 LMF Commercial originatedall the commercial loans with a total principal balance of $582.0 million, all of whichoriginated were recorded as loans held-for-sale, and sold $622.3 million of commercial loans into 4 separate securitizations. As of August 31, 2020, there were 0 unsettled transactions.
During the nine months ended August 31, 2019, LMF Commercial originated commercial loans with a total principal balance of $984.5 million, of which $969.2 million were recorded as loans held-for-sale, $15.3 million were recorded as loans held-for-investments, and sold $848.3 million of commercial loans into 7 separate securitizations.are held at fair value.
Investments held-to-maturity
At August 31, 20202021 and November 30, 2019,2020, the carrying value of Financial Services'Services segment held commercial mortgage-backed securities ("CMBS") was $164.6 million and $166.0 million, respectively.. These securities were purchased at discounts ranging from 6%are classified as held-to-maturity based on its intent and ability to 84% with coupon rates ranging from 2.0% to 5.3%, statedhold the securities until maturity and assumed final distribution dates between October 2027 and December 2028, and stated maturity dates between October 2050 and December 2051. The Financial Services segment reviews changes in estimated cash flows are reviewed periodically to determine if an other-than-temporary impairment has occurred on its CMBS.occurred. Based on the segment’s assessment, 0no impairment charges were recorded during either the three or nine months ended August 31, 20202021 or 2019. The Financial Services segment classifies these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.2020. The Company has financing agreements to finance CMBS that have been purchased as investments by the Financial Services segment. At August 31, 2020 and November 30, 2019, the carrying amount,
Lennar Corporation and SubsidiariesDetails related to Financial Services' CMBS were as follows:
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued) | | | | | | | | | | | |
| (Dollars in thousands) | August 31, 2021 | | November 30, 2020 |
| Carrying value | $ | 161,532 | | | 164,230 | |
| Outstanding debt, net of debt issuance costs | 151,124 | | | 153,505 | |
| Incurred interest rate | 3.4 | % | | 3.4 | % |
net of debt issuance costs, of outstanding debt in these agreements was $153.7 million and $154.7 million, respectively, and interest is incurred at a rate of 3.4%. | | | | | | | | | | | |
| August 31, 2021 |
| Discount rates at purchase | 6% | — | 84% |
| Coupon rates | 2.0% | — | 5.3% |
| Distribution dates | October 2027 | — | December 2028 |
| Stated maturity dates | October 2050 | — | December 2051 |
Multifamily
The Company is actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. The Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.
Operations of the 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.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Lennar Other
Lennar Other primarily includes strategic investments in technology companies, primarily managed by the Company's LENX subsidiary, and fund interests the Company retained when it sold the Rialto asset and investment management platform, as well as strategic investments in technology companies.platform. 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, gains (losses) from investments in equity securities and other income (expense), net from the remaining assets related to the Company's former Rialto segment.
During the nine months ended August 31, 2021, the Company completed the sale of the Company's residential solar business to Sunnova Energy International Inc. ("Sunnova") for shares in Sunnova. The Company recorded a gain of $153.0 million upon the closing of the sale. The calculation of the gain included the fair value of the 3.1 million shares in initial consideration received at closing and the fair value of potential shares to be received upon achievement of earnouts. The significant unobservable fair value assumptions used in the calculation were a terminal value multiple of 3 and a 15% discount rate. The fair value of the earnouts was also based on the probability of achieving full or partial earnouts. | |
(3) | Investments in Unconsolidated Entities |
The investments in Opendoor Technologies, Inc. ("Opendoor"), Sunnova, Hippo Holdings, Inc. ("Hippo"), SmartRent, Inc. ("SmartRent") and Blend Labs, Inc. ("Blend") are held at market and will therefore change depending on the value of the Company's share holdings in those entities on the last day of each quarter. The following is a detail of Lennar Other realized and unrealized gain (loss): | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Hippo (HIPO) mark to market | $ | 324,855 | | | — | | | 324,855 | | | — | |
| SmartRent (SMRT) mark to market | 100,793 | | | — | | | 100,793 | | | — | |
| Opendoor (OPEN) mark to market | 37,301 | | | — | | | 272,756 | | | — | |
| Sunnova (NOVA) mark to market | 23,870 | | | — | | | (14,465) | | | — | |
| Blend Labs (BLND) mark to market | 6,852 | | | — | | | 6,852 | | | — | |
| Gain on sale of solar business | 1,531 | | | — | | | 153,006 | | | — | |
| Other realized gain | — | | | — | | | 3,580 | | | — | |
| $ | 495,202 | | | — | | | 847,377 | | | — | |
During the nine months ended August 31, 2021, Opendoor, Hippo, SmartRent and Blend began trading and the Company began to mark to market the Company's share holdings in the public entities. The mark to market recognition was due to the entities in which the Company holds the investments going public and the loss of a contractual right to a board seat, where applicable, during the nine months ended August 31, 2021 and the investments now being accounted for as investments in equity securities which are held at fair value and the changes in fair value are recognized through earnings. As of November 30, 2020, the investments were included in the Company's investments in unconsolidated entities and were accounted for using the equity method. In addition, as previously noted, Doma Holdings, Inc. ("Doma") went public during the three months ended August 31, 2021. Doma is an investment that continues to be accounted for under the equity method due to the Company's significant ownership interest which allows the Company to exercise significant influence. As of August 31, 2021, the Company owns approximately 25% of Doma and the carrying amount of the Company's investment is $62.4 million.
(3)Investments in Unconsolidated Entities
Homebuilding Unconsolidated Entities
As of August 31, 2020 and November 30, 2019,The investments in the Company’s recorded investments inCompany's Homebuilding unconsolidated entities were as follows:
| | | | | | | | | | | | | | |
| | | | |
| (In thousands) | | August 31, 2021 | | November 30, 2020 |
| Investments in unconsolidated entities (1) (2) | | $ | 983,429 | | | 953,177 | |
| Underlying equity in unconsolidated entities' net assets (1) | | 1,291,535 | | | 1,269,701 | |
(1)$940.7 million and $1.0 billion, respectively, while the underlying equity in Homebuilding unconsolidated entities partners’ net assets as of August 31, 2020 and November 30, 2019 was $1.2 billion and $1.3 billion, respectively. The basis difference was primarily as a result of the Company contributing its investment in 3three 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.
(2)Included in the Company's recorded investments in Homebuilding unconsolidated entities is the Company's 40% ownership of FivePoint. As of August 31, 20202021 and November 30, 2019,2020, the carrying amountsamount of the Company's FivePoint investment were $376.4was $389.8 million and $374.0$392.1 million, respectively.
The totalCompany has an immaterial amount of recourse exposure to debt of the Homebuilding unconsolidated entities in which it has investments. While the Company has investments was $1.1 billion as of both August 31, 2020 and November 30, 2019, of which the Company's maximum recourse exposure was $4.9 million and $10.8 million as of August 31, 2020 and November 30, 2019, respectively. In most instances in which the Company has guaranteedsometimes guarantees debt of an unconsolidated entity,entities, in most instances the Company’s partners have also guaranteed that debt and are required to contribute their shareshares of the guaranteeany 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.most
If the Company is required to make a payment under any guarantee, the payment would constitute a capital contribution or loan to the Homebuilding unconsolidated entity and increase the Company’s investment in the unconsolidated entity and its share of any funds the unconsolidated entity distributes.14
As of both August 31, 2020 and November 30, 2019, the fair values of the repayment guarantees, maintenance guarantees, and completion guarantees were not material. The Company believes that as of August 31, 2020, in the event it becomes legally obligated to perform under a guarantee of the obligation of a 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 7 of the Notes to the Condensed Consolidated Financial Statements).
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
In the first quarter of 2021, the Company formed the Upward America Venture ("the Venture"). The Venture acquires single family homes for rent in high growth markets across the United States. The Venture raised equity to get to a total commitment of $1.25 billion led by institutional investors. Including leverage, the Venture will be positioned to acquire over $4.0 billion of new single family homes and townhomes from Lennar and potentially other homebuilders.
Multifamily Unconsolidated Entities
The unconsolidated entities in which the Multifamily segment has investments usually finance their activities with a combination of partner equity and debt financing. In connection with many of the bank loans to Multifamily unconsolidated entities, the Company (or entities related to them) has been required to give guarantees of completion and cost over-runs to the lenders and partners. Those completion guarantees may require thatThe details related to these are unchanged from 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 increasedisclosure in the Company's investmentNotes to the Financial Statements section in its Form 10-K for the entities and would increase its share of funds the entities distribute after the achievement of certain thresholds.year ended November 30, 2020. As of both August 31, 20202021 and November 30, 2019,2020, the fair value of the completion guarantees was immaterial. As of August 31, 20202021 and November 30, 2019,2020, Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $933.2$866.9 million and $867.3$722.9 million, respectively.
In many instances, the Multifamily segment is appointed as the construction, development and property manager for its Multifamily unconsolidated entities and receives fees for performing this function. During the three and nine months ended August 31, 2020, the Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $14.1 million and $42.5 million, respectively. During the three and nine months ended August 31, 2019, the Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $14.3 million and $40.7 million, respectively.
The 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. Duringinvestments. The details of the three and nine months ended August 31, 2020, the Multifamily segment provided general contractor services, net of deferrals, totaling $101.1 million and $299.5 million, respectively, which were partially offset by costs related to those services of $97.2 million and $287.6 million, respectively. During the three and nine months ended August 31, 2019, the Multifamily segment provided general contractor services, net of deferrals, totaling $83.2 million and $264.8 million, respectively, which were partially offset by costs related to those services of $79.9 million and $254.5 million, respectively.activity was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| (In thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| General contractor services, net of deferrals | $ | 138,038 | | | 101,103 | | | 402,328 | | | 299,468 | |
| General contractor costs | 137,860 | | | 97,181 | | | 391,096 | | | 287,646 | |
| Management fee income | 13,822 | | | 14,067 | | | 42,881 | | | 42,464 | |
The Multifamily segment includes Multifamily Venture Fund I (the "LMV("LMV I") and Multifamily Venture Fund II LP (the "LMV("LMV II"), which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets. Details of each as of and during the nine months ended August 31, 20202021 are included below:
| | | | | | | | | | | |
| August 31, 2021 |
| (In thousands) | LMV I | | LMV II |
| Lennar's carrying value of investments | $ | 274,093 | | | 333,778 | |
| Equity commitments | 2,204,016 | | | 1,257,700 | |
| Equity commitments called | 2,148,090 | | | 1,196,418 | |
| Lennar's equity commitments | 504,016 | | | 381,000 | |
| Lennar's equity commitments called | 498,730 | | | 361,381 | |
| Lennar's remaining commitments | 5,286 | | | 19,619 | |
| Distributions to Lennar during the nine months ended August 31, 2021 | 54,393 | | | 1,307 | |
|
| | | | | | |
| | August 31, 2020 |
| (In thousands) | LMV I | | LMV II |
| Lennar's carrying value of investments | $ | 348,561 |
| | 250,777 |
|
| Equity commitments | 2,204,016 |
| | 1,257,700 |
|
| Equity commitments called | 2,137,746 |
| | 861,508 |
|
| Lennar's equity commitments | 504,016 |
| | 381,000 |
|
| Lennar's equity commitments called | 496,082 |
| | 259,886 |
|
| Lennar's remaining commitments | 7,934 |
| | 121,114 |
|
| Distributions to Lennar during the nine months ended August 31, 2020 | 23,822 |
| | 0 |
|
Lennar Other's unconsolidated entities includes fund investments the Company retained when it sold the Rialto assets and investment management platform, as well as strategic investments in technology companies, primarily managed by the Company's LENX subsidiary. These strategic investments include the Company's investment in Doma, formerly known as States Title, which was reclassified from the Financial Services segment.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
The following tables reflect 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 the three and nine months ended August 31, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended August 31, 2021 | | |
| (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 |
| Balance at May 31, 2021 | $ | 19,702,098 | | | 30,049 | | | 3,944 | | | 8,755,020 | | | (1,452,874) | | | (1,431) | | | 12,241,400 | | | 125,990 | |
| Net earnings (including net earnings attributable to noncontrolling interests) | 1,409,218 | | | — | | | — | | | — | | | — | | | — | | | 1,406,888 | | | 2,330 | |
| Employee stock and directors plans | (32,426) | | | 1 | | | — | | | 55 | | | (32,482) | | | — | | | — | | | — | |
| Purchases of treasury stock | (246,385) | | | — | | | — | | | — | | | (246,385) | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Amortization of restricted stock | 24,752 | | | — | | | — | | | 24,752 | | | — | | | — | | | — | | | — | |
| Cash dividends | (77,662) | | | — | | | — | | | — | | | — | | | — | | | (77,662) | | | — | |
| | | | | | | | | | | | | | | |
| Receipts related to noncontrolling interests | 4,670 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,670 | |
| Payments related to noncontrolling interests | (3,633) | | | — | | | — | | | — | | | — | | | — | | | — | | | (3,633) | |
| Non-cash purchase or activity of noncontrolling interests, net | (1,224) | | | — | | | — | | | (1,218) | | | — | | | — | | | — | | | (6) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total other comprehensive income, net of tax | 131 | | | — | | | — | | | — | | | — | | | 131 | | | — | | | — | |
| Balance at August 31, 2021 | $ | 20,779,539 | | | 30,050 | | | 3,944 | | | 8,778,609 | | | (1,731,741) | | | (1,300) | | | 13,570,626 | | | 129,351 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended August 31, 2020 | | |
| (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 |
| Balance at May 31, 2020 | $ | 16,632,624 | | | 29,804 | | | 3,944 | | | 8,630,442 | | | (1,253,863) | | | (338) | | | 9,132,714 | | | 89,921 | |
| Net earnings (including net earnings attributable to noncontrolling interests) | 669,323 | | | — | | | — | | | — | | | — | | | — | | | 666,418 | | | 2,905 | |
| Employee stock and directors plans | (22,843) | | | 90 | | | — | | | (105) | | | (22,828) | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Amortization of restricted stock | 28,658 | | | — | | | — | | | 28,658 | | | — | | | — | | | — | | | — | |
| Cash dividends | (38,967) | | | — | | | — | | | — | | | — | | | — | | | (38,967) | | | — | |
| | | | | | | | | | | | | | | |
| Receipts related to noncontrolling interests | 6,504 | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,504 | |
| Payments related to noncontrolling interests | (7,949) | | | — | | | — | | | — | | | — | | | — | | | — | | | (7,949) | |
| Non-cash consolidations/deconsolidations, net | 17,079 | | | — | | | — | | | — | | | — | | | — | | | — | | | 17,079 | |
| Non-cash purchase or activity of noncontrolling interests, net | (4,259) | | | — | | | — | | | (4,041) | | | — | | | — | | | — | | | (218) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total other comprehensive loss, net of tax | 175 | | | — | | | — | | | — | | | — | | | 175 | | | — | | | — | |
| Balance at August 31, 2020 | $ | 17,280,345 | | | 29,894 | | | 3,944 | | | 8,654,954 | | | (1,276,691) | | | (163) | | | 9,760,165 | | | 108,242 | |
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended August 31, 2020 | | |
| (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 |
| Balance at May 31, 2020 | $ | 16,632,624 |
| | 29,804 |
| | 3,944 |
| | 8,630,442 |
| | (1,253,863 | ) | | (338 | ) | | 9,132,714 |
| | 89,921 |
|
| Net earnings (including net earnings attributable to noncontrolling interests) | 669,323 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 666,418 |
| | 2,905 |
|
| Employee stock and directors plans | (22,843 | ) | | 90 |
| | — |
| | (105 | ) | | (22,828 | ) | | — |
| | — |
| | — |
|
| Amortization of restricted stock | 28,658 |
| | — |
| | — |
| | 28,658 |
| | — |
| | — |
| | — |
| | — |
|
| Cash dividends | (38,967 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (38,967 | ) | | — |
|
| Receipts related to noncontrolling interests | 6,504 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6,504 |
|
| Payments related to noncontrolling interests | (7,949 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (7,949 | ) |
Non-cash purchase or activity of noncontrolling interests, net
| (4,259 | ) | | — |
| | — |
| | (4,041 | ) | | — |
| | — |
| | — |
| | (218 | ) |
| Non-cash consolidations/deconsolidations, net | 17,079 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 17,079 |
|
| Total other comprehensive income, net of tax | 175 |
| | — |
| | — |
| | — |
| | — |
| | 175 |
| | — |
| | — |
|
| Balance at August 31, 2020 | $ | 17,280,345 |
| | 29,894 |
| | 3,944 |
| | 8,654,954 |
| | (1,276,691 | ) | | (163 | ) | | 9,760,165 |
| | 108,242 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended August 31, 2019 | | |
| (In thousands) | Total Equity | | Class A
Common Stock | | Class B
Common Stock | | Additional
Paid - in Capital | | Treasury Stock | | Accumulated Other Comprehensive Income) | | Retained Earnings | | Noncontrolling Interests |
| Balance at May 31, 2019 | $ | 15,246,535 |
| | 29,503 |
| | 3,944 |
| | 8,529,828 |
| | (537,106 | ) | | 227 |
| | 7,132,908 |
| | 87,231 |
|
| Net earnings (including net loss attributable to noncontrolling interests) | 512,643 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 513,366 |
| | (723 | ) |
| Employee stock and directors plans | (22,359 | ) | | 206 |
| | — |
| | (400 | ) | | (22,165 | ) | | — |
| | — |
| | — |
|
| Purchases of treasury stock | (295,930 | ) | | — |
| | — |
| | — |
| | (295,930 | ) | | — |
| | — |
| | — |
|
| Amortization of restricted stock | 34,048 |
| | — |
| | — |
| | 34,048 |
| | — |
| | — |
| | — |
| | — |
|
| Cash dividends | (12,899 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| — |
| (12,899 | ) | | — |
|
| Receipts related to noncontrolling interests | 18,458 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 18,458 |
|
| Payments related to noncontrolling interests | (12,372 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (12,372 | ) |
| Non-cash activity related to noncontrolling interests | (2,357 | ) | | — |
| | — |
| | (3,772 | ) | | — |
| | — |
| | — |
| | 1,415 |
|
| Total other comprehensive income, net of tax | 180 |
| | — |
| | — |
| | — |
| | — |
| | 180 |
| | — |
| | — |
|
| Balance at August 31, 2019 | $ | 15,465,947 |
| | 29,709 |
| | 3,944 |
| | 8,559,704 |
| | (855,201 | ) | | 407 |
| | 7,633,375 |
| | 94,009 |
|
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended August 31, 2021 | | |
| (In thousands) | Total
Equity | | Class A
Common Stock | | Class B
Common Stock | | Additional
Paid - in Capital | | Treasury
Stock | | Accumulated Other Comprehensive Loss | | Retained
Earnings | | Noncontrolling
Interests |
| Balance at November 30, 2020 | $ | 18,099,401 | | | 29,894 | | | 3,944 | | | 8,676,056 | | | (1,279,227) | | | (805) | | | 10,564,994 | | | 104,545 | |
| Net earnings (including net earnings attributable to noncontrolling interests) | 3,262,899 | | | — | | | — | | | — | | | — | | | — | | | 3,239,620 | | | 23,279 | |
| Employee stock and directors plans | (63,242) | | | 156 | | | — | | | 1,161 | | | (64,559) | | | — | | | — | | | — | |
| Purchases of treasury stock | (387,955) | | | — | | | — | | | — | | | (387,955) | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Amortization of restricted stock | 105,846 | | | — | | | — | | | 105,846 | | | — | | | — | | | — | | | — | |
| Cash dividends | (233,988) | | | — | | | — | | | — | | | — | | | — | | | (233,988) | | | — | |
| Receipts related to noncontrolling interests | 18,575 | | | — | | | — | | | — | | | — | | | — | | | — | | | 18,575 | |
| Payments related to noncontrolling interests | (20,859) | | | — | | | — | | | — | | | — | | | — | | | — | | | (20,859) | |
| | | | | | | | | | | | | | | |
| Non-cash purchase or activity of noncontrolling interests, net | (643) | | | — | | | — | | | (4,454) | | | — | | | — | | | — | | | 3,811 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total other comprehensive loss, net of tax | (495) | | | — | | | — | | | — | | | — | | | (495) | | | — | | | — | |
| Balance at August 31, 2021 | $ | 20,779,539 | | | 30,050 | | | 3,944 | | | 8,778,609 | | | (1,731,741) | | | (1,300) | | | 13,570,626 | | | 129,351 | |
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended August 31, 2020 | | |
| (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 |
| Balance at November 30, 2019 | $ | 16,033,830 |
| | 29,712 |
| | 3,944 |
| | 8,578,219 |
| | (957,857 | ) | | 498 |
| | 8,295,001 |
| | 84,313 |
|
| Net earnings (including net loss attributable to noncontrolling interests) | 1,576,644 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,582,276 |
| | (5,632 | ) |
| Employee stock and directors plans | (29,616 | ) | | 182 |
| | — |
| | 521 |
| | (30,319 | ) | | — |
| | — |
| | — |
|
| Purchases of treasury stock | (288,515 | ) | | — |
| | — |
| | — |
| | (288,515 | ) | | — |
| | — |
| | — |
|
| Amortization of restricted stock | 83,799 |
| | — |
| | — |
| | 83,799 |
| | — |
| | — |
| | — |
| | — |
|
| Cash dividends | (117,112 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| — |
| (117,112 | ) | | — |
|
| Receipts related to noncontrolling interests | 175,565 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 175,565 |
|
| Payments related to noncontrolling interests | (29,450 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (29,450 | ) |
Non-cash purchase or activity of noncontrolling interests, net
| (9,427 | ) | | — |
| | — |
| | (7,585 | ) | | — |
| | — |
| | — |
| | (1,842 | ) |
| Non-cash consolidations/deconsolidations, net | (114,712 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (114,712 | ) |
| Total other comprehensive loss, net of tax | (661 | ) | | — |
| | — |
| | — |
| | — |
| | (661 | ) | | — |
| | — |
|
| Balance at August 31, 2020 | $ | 17,280,345 |
| | 29,894 |
| | 3,944 |
| | 8,654,954 |
| | (1,276,691 | ) | | (163 | ) | | 9,760,165 |
| | 108,242 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended August 31, 2019 | | |
| (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 |
| 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) | 1,170,936 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,174,748 |
| | (3,812 | ) |
| Employee stock and directors plans | (23,050 | ) | | 210 |
| | — |
| | 1,361 |
| | (24,621 | ) | | — |
| | — |
| | — |
|
| Purchases of treasury stock | (394,711 | ) | | — |
| | — |
| | — |
| | (394,711 | ) | | — |
| | — |
| | — |
|
| Amortization of restricted stock | 65,438 |
| | — |
| | — |
| | 65,438 |
| | — |
| | — |
| | — |
| | — |
|
| Cash dividends | (38,776 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| — |
| (38,776 | ) | | — |
|
| Receipts related to noncontrolling interests | 27,395 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 27,395 |
|
| Payments related to noncontrolling interests | (35,689 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (35,689 | ) |
| Non-cash consolidations, net | 8,894 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 8,894 |
|
| Cumulative-effect of accounting change | 9,753 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 9,753 |
| | 0 |
|
| Non cash activity related to noncontrolling interests | (7,973 | ) | | — |
| | — |
| | (3,772 | ) | | — |
| | — |
| | — |
| | (4,201 | ) |
| Total other comprehensive income, net of tax | 773 |
| | — |
| | — |
| | — |
| | — |
| | 773 |
| | — |
| | — |
|
| Balance at August 31, 2019 | $ | 15,465,947 |
| | 29,709 |
| | 3,944 |
| | 8,559,704 |
| | (855,201 | ) | | 407 |
| | 7,633,375 |
| | 94,009 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended August 31, 2020 | | |
| (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 |
| Balance at November 30, 2019 | $ | 16,033,830 | | | 29,712 | | | 3,944 | | | 8,578,219 | | | (957,857) | | | 498 | | | 8,295,001 | | | 84,313 | |
| Net earnings (including net loss attributable to noncontrolling interests) | 1,576,644 | | | — | | | — | | | — | | | — | | | — | | | 1,582,276 | | | (5,632) | |
| Employee stock and directors plans | (29,616) | | | 182 | | | — | | | 521 | | | (30,319) | | | — | | | — | | | — | |
| Purchases of treasury stock | (288,515) | | | — | | | — | | | — | | | (288,515) | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Amortization of restricted stock | 83,799 | | | — | | | — | | | 83,799 | | | — | | | — | | | — | | | — | |
| Cash dividends | (117,112) | | | — | | | — | | | — | | | — | | | — | | — | | (117,112) | | | — | |
| | | | | | | | | | | | | | | |
| Receipts related to noncontrolling interests | 175,565 | | | — | | | — | | | — | | | — | | | — | | | — | | | 175,565 | |
| Payments related to noncontrolling interests | (29,450) | | | — | | | — | | | — | | | — | | | — | | | — | | | (29,450) | |
| Non-cash consolidations/deconsolidations, net | (114,712) | | | — | | | — | | | — | | | — | | | — | | | — | | | (114,712) | |
| Non-cash purchase or activity of noncontrolling interests, net | (9,427) | | | — | | | — | | | (7,585) | | | — | | | — | | | — | | | (1,842) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total other comprehensive loss, net of tax | (661) | | | — | | | — | | | — | | | — | | | (661) | | | — | | | — | |
| Balance at Aug 31, 2020 | $ | 17,280,345 | | | 29,894 | | | 3,944 | | | 8,654,954 | | | (1,276,691) | | | (163) | | | 9,760,165 | | | 108,242 | |
On October 1, 2020,September 29, 2021, the Company's Board of Directors increased its annual dividend to $1.00 per share from $0.50 per share resulting indeclared a quarterly cash dividend of $0.25 per share on both its Class A and Class B common stock, payable on October 30, 202028, 2021 to holders of record at the close of business on October 16, 2020.14, 2021. On July 24, 2020,19, 2021, the Company paid cash dividends of $0.125$0.25 per share on both its Class A and Class B common stock to holders of record at the close of business on July 10, 2020,2, 2021, as declared by its Board of Directors on June 25, 2020.18, 2021. The Company approved and paid cash dividends of $0.04$0.125 per share for each of the first three quarters of 2020 and $0.25 per share in the fourth quarter of 2020 and each of the first three quarters of 2021 on both its Class A and Class B common stock in each quarter for the year ended November 30, 2019.stock.
In January 2019,2021, the Company's Board of Directors authorized the repurchase of up to the lesser of $1 billion in value, excluding commissions, or 25 million in shares, of the Company's outstanding Class A and Class B common stock. The repurchase has no expiration date. The following table represents the repurchase of the Company's Class A and Class B common stocks under this program and its predecessor for the three and nine months ended August 31, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | August 31, 2021 | | August 31, 2020 | | August 31, 2021 | | August 31, 2020 |
| (Dollars in thousands, except price per share) | | Class A | | Class B | | Class A | | Class B | | Class A | | Class B | | Class A | | Class B |
| Shares repurchased | | 2,500,000 | | | — | | | — | | | — | | | 4,010,000 | | | — | | | 4,250,000 | | | 115,000 | |
| Total purchase price | | $ | 246,335 | | | $ | — | | | $ | — | | | $ | — | | | $ | 387,875 | | | $ | — | | | $ | 282,274 | | | $ | 6,155 | |
| Average price per share | | $ | 98.53 | | | $ | — | | | $ | — | | | $ | — | | | $ | 96.73 | | | $ | — | | | $ | 66.42 | | | $ | 53.52 | |
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | August 31, 2020 | | August 31, 2019 | | August 31, 2020 | | August 31, 2019 |
| (Dollars in thousands, except price per share) | | Class A | | Class B | | Class A | | Class B | | Class A | | Class B | | Class A | | Class B |
| Shares repurchased | | 0 |
| | 0 |
| | 6,110,000 |
| | 0 |
| | 4,250,000 |
| | 115,000 |
| | 8,110,000 |
| | 0 |
|
| Principal | | $ | 0 |
| | $ | 0 |
| | $ | 295,930 |
| | $ | 0 |
| | $ | 282,274 |
| | $ | 6,155 |
| | $ | 394,710 |
| | $ | 0 |
|
| Average price per share | | $ | 0 |
| | $ | 0 |
| | $ | 48.41 |
| | $ | 0 |
| | $ | 66.42 |
| | $ | 53.52 |
| | $ | 48.65 |
| | $ | 0 |
|
The provision for income taxes and effective tax rate were as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| (Dollars in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Provision for income taxes | $405,136 | | | 189,690 | | | 975,354 | | | 382,498 | |
| Effective tax rate (1) | 22.4 | % | | 22.2 | % | | 23.1 | % | | 19.5 | % |
(1)For both the three and nine months ended August 31, 2021 and 2020, the effective tax rate included state income tax expense and non-deductible executive compensation, partially offset by new energy efficient home and solar tax credits. The nine months ended August 31, 2020 also included benefits related to the years ended November 30, 2018 and 2019, due to Congress retroactively extending the new energy efficient home tax credit in December 2019.
(6)Earnings Per Share
|
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | August 31, | | August 31, |
| (Dollars in thousands) | 2020 | | 2019 | | 2020 | | 2019 |
| Provision for income taxes |
| $189,690 |
| | 154,440 |
| | 382,498 |
| | 374,670 |
|
| Effective tax rate (1) | 22.2 | % | | 23.1 | % | | 19.5 | % | | 24.2 | % |
| |
(1) | For both the three and nine months ended August 31, 2020, the effective tax rate included state income tax expense and non-deductible executive compensation, partially offset by new energy efficient home and solar tax credits, as well as a benefit related to years ended November 30, 2018 and 2019, due to Congress retroactively extending the new energy efficient home tax credit in December 2019. |
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.
Basic and diluted earnings per share were calculated as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| (In thousands, except per share amounts) | 2021 | | 2020 | | 2021 | | 2020 |
| Numerator: | | | | | | | |
| Net earnings attributable to Lennar | $ | 1,406,888 | | | 666,418 | | | 3,239,620 | | | 1,582,276 | |
| Less: distributed earnings allocated to nonvested shares | 776 | | | 324 | | | 2,182 | | | 1,014 | |
| Less: undistributed earnings allocated to nonvested shares | 15,918 | | | 7,474 | | | 38,329 | | | 17,433 | |
| Numerator for basic earnings per share | 1,390,194 | | | 658,620 | | | 3,199,109 | | | 1,563,829 | |
| Less: net amount attributable to Rialto's Carried Interest Incentive Plan (1) | 785 | | | 3,606 | | | 2,907 | | | 6,928 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Numerator for diluted earnings per share | $ | 1,389,409 | | | 655,014 | | | 3,196,202 | | | 1,556,901 | |
| Denominator: | | | | | | | |
| Denominator for basic earnings per share - weighted average common shares outstanding | 307,296 | | | 308,889 | | | 308,403 | | | 309,492 | |
| Effect of dilutive securities: | | | | | | | |
| Shared based payments | — | | | 1 | | | — | | | 1 | |
| | | | | | | |
| Denominator for diluted earnings per share - weighted average common shares outstanding | 307,296 | | | 308,890 | | | 308,403 | | | 309,493 | |
| Basic earnings per share | $ | 4.52 | | | 2.13 | | | 10.37 | | | 5.05 | |
| Diluted earnings per share | $ | 4.52 | | | 2.12 | | | 10.36 | | | 5.03 | |
|
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | August 31, | | August 31, |
| (In thousands, except per share amounts) | 2020 | | 2019 | | 2020 | | 2019 |
| Numerator: | | | | | | | |
| Net earnings attributable to Lennar | $ | 666,418 |
| | 513,366 |
| | 1,582,276 |
| | 1,174,748 |
|
| Less: distributed earnings allocated to nonvested shares | 324 |
| | 119 |
| | 1,014 |
| | 312 |
|
| Less: undistributed earnings allocated to nonvested shares | 7,474 |
| | 4,401 |
| | 17,433 |
| | 9,271 |
|
| Numerator for basic earnings per share | 658,620 |
| | 508,846 |
| | 1,563,829 |
| | 1,165,165 |
|
| Less: net amount attributable to Rialto's Carried Interest Incentive Plan (1) | 3,606 |
| | 1,498 |
| | 6,928 |
| | 4,655 |
|
| Numerator for diluted earnings per share | $ | 655,014 |
| | 507,348 |
| | 1,556,901 |
| | 1,160,510 |
|
| Denominator: | | | | | | | |
| Denominator for basic earnings per share - weighted average common shares outstanding | 308,889 |
| | 318,103 |
| | 309,492 |
| | 319,924 |
|
| Effect of dilutive securities: | | | | | | | |
| Shared based payments | 1 |
| | 1 |
| | 1 |
| | 3 |
|
| Denominator for diluted earnings per share - weighted average common shares outstanding | 308,890 |
| | 318,104 |
| | 309,493 |
| | 319,927 |
|
| Basic earnings per share | $ | 2.13 |
| | 1.60 |
| | 5.05 |
| | 3.64 |
|
| Diluted earnings per share | $ | 2.12 |
| | 1.59 |
| | 5.03 |
| | 3.63 |
|
| |
(1) | The amounts presented relate to Rialto's Carried Interest Incentive Plan and represent the difference between the advanced tax distributions received from the Rialto funds included in the Lennar Other segment and the amount Lennar is assumed to own. |
For both the three and nine months ended August 31, 20202021 and August 31, 2019,2020, there were 0no 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)
(7)Homebuilding Senior Notes and Other Debts Payable
| | | (Dollars in thousands) | August 31,
2020 | | November 30,
2019 | (Dollars in thousands) | August 31, 2021 | | November 30, 2020 |
| 2.95% senior notes due 2020 | $ | 299,857 |
| | 299,421 |
| |
| 8.375% senior notes due 2021 | 393,135 |
| | 418,860 |
| |
| 4.750% senior notes due 2021 | 499,479 |
| | 498,893 |
| |
| 6.25% senior notes due December 2021 | 306,479 |
| | 310,252 |
| |
| 4.125% senior notes due 2022 | 598,628 |
| | 597,885 |
| |
| | 4.125% senior notes due 2022 (1) | | 4.125% senior notes due 2022 (1) | $ | 599,619 | | | 598,876 | |
| 5.375% senior notes due 2022 | 256,056 |
| | 258,198 |
| 5.375% senior notes due 2022 | 253,199 | | | 255,342 | |
| 4.750% senior notes due 2022 | 572,345 |
| | 571,644 |
| 4.750% senior notes due 2022 | 573,570 | | | 572,724 | |
| 4.875% senior notes due December 2023 | 397,250 |
| | 396,553 |
| 4.875% senior notes due December 2023 | 398,147 | | | 397,347 | |
| 4.500% senior notes due 2024 | 647,347 |
| | 646,802 |
| 4.500% senior notes due 2024 | 648,072 | | | 647,528 | |
| 5.875% senior notes due 2024 | 444,653 |
| | 448,158 |
| 5.875% senior notes due 2024 | 439,978 | | | 443,484 | |
| 4.750% senior notes due 2025 | 497,891 |
| | 497,558 |
| 4.750% senior notes due 2025 | 498,335 | | | 498,002 | |
| 5.25% senior notes due 2026 | 407,012 |
| | 407,921 |
| 5.25% senior notes due 2026 | 405,800 | | | 406,709 | |
| 5.00% senior notes due 2027 | 352,604 |
| | 352,892 |
| 5.00% senior notes due 2027 | 352,220 | | | 352,508 | |
| 4.75% senior notes due 2027 | 894,573 |
| | 893,046 |
| 4.75% senior notes due 2027 | 895,322 | | | 894,760 | |
| 6.625% senior notes due 2020 | 0 |
| | 303,668 |
| |
| 6.25% senior notes due December 2021 | | 6.25% senior notes due December 2021 | — | | | 305,221 | |
| Mortgage notes on land and other debt | 612,965 |
| | 874,887 |
| Mortgage notes on land and other debt | 478,251 | | | 583,257 | |
| | $ | 7,180,274 |
| | 7,776,638 |
| | $ | 5,542,513 | | | 5,955,758 | |
The carrying amounts of the senior notes in the table above are net of debt issuance costs of $17.9$12.4 million and $22.9$15.9 million as of August 31, 20202021 and November 30, 2019,2020, respectively.
AtIn June 2021, the Company redeemed $300 million aggregate principal amount of its 6.25% senior notes due December 2021. The redemption price, which was paid in cash, was 100% of the principal amount plus accrued unpaid interest.
As of August 31, 2020,2021 the Company had anmaximum available borrowings on the Company's unsecured revolving credit facility (the "Credit Facility") withwere $2.5 billion and included a $300 million accordion feature, subject to additional commitments, thus the maximum borrowings of $2.4could be $2.8 billionmaturing in 2024. The Credit Facility agreement (the "Credit Agreement") provides that up to $500 million in commitments may be used for letters of credit.credit. The maturity, debt covenants and details of the Credit Facility are unchanged from the disclosure in the Company's Financial Condition and Capital Resources section in its Form 10-K for the year ended November 30, 2019. Under the Credit 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 Agreement, which involves adjustments to GAAP financial measures. The Company believes it was in compliance with its debt covenants at August 31, 2020. In addition to the Credit Facility, the Company has other letter of credit facilities with different financial institutions.
PerformanceProcedures related to performance letters of credit, are generally posted with regulatory bodies to guarantee the Company’s performance of certain development and construction activities. Financialfinancial 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 August 31, 2020, the Company had outstanding surety bonds including performance surety bonds related to site improvements at various projects (including certain projectsare unchanged from the disclosure in the Company’s joint ventures)Company's Financial Condition 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. The Company does not presently anticipate any draws upon these bonds or letters of credit, but if any such draws occur,Capital Resources section in its Form 10-K for the Company does not believe they would have a material effect on its financial position, results of operations or cash flows.
year ended November 30, 2020. The Company's outstanding performance letters of credit and surety bonds are described below:
|
| | | | | | | |
| (In thousands) | | August 31,
2020 | | November 30,
2019 |
| Performance letters of credit | | $ | 770,527 |
| | 715,793 |
|
| Financial letters of credit | | 258,703 |
| | 184,075 |
|
| Surety bonds | | 3,041,946 |
| | 2,946,167 |
|
| Anticipated future costs primarily for site improvements related to performance surety bonds | | 1,498,173 |
| | 1,427,145 |
|
| | | | | | | | | | | | | | |
| (In thousands) | | August 31, 2021 | | November 30, 2020 |
| | | | |
| | | | |
| Performance letters of credit | | $ | 874,820 | | | 752,096 | |
| Surety bonds | | 3,465,134 | | | 3,087,711 | |
| Anticipated future costs primarily for site improvements related to performance surety bonds | | 1,595,800 | | | 1,584,642 | |
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 theThese guarantees are full, unconditionalunchanged from the disclosure in the Company's Financial Condition and joint and several while they areCapital Resources section in effect, (i) a subsidiary will cease to be a guarantor at any time when it is not directly or indirectly guaranteeing at leastits Form 10-K for the year ended November 30, 2020.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)(8)Product Warranty
$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.
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 activity in
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
the Company’s warranty reserve, which are included in Homebuilding other liabilities, was as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| (In thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Warranty reserve, beginning of the period | $ | 361,741 | | | 301,462 | | | 341,765 | | | 294,138 | |
| Warranties issued | 55,236 | | | 50,324 | | | 149,854 | | | 134,867 | |
| Adjustments to pre-existing warranties from changes in estimates (1) | 8,288 | | | 3,640 | | | 27,048 | | | 17,251 | |
| | | | | | | |
| Payments | (50,290) | | | (36,677) | | | (143,692) | | | (127,507) | |
| Warranty reserve, end of period | $ | 374,975 | | | 318,749 | | | 374,975 | | | 318,749 | |
|
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | August 31, | | August 31, |
| (In thousands) | 2020 | | 2019 | | 2020 | | 2019 |
| Warranty reserve, beginning of the period | $ | 301,462 |
| | 291,624 |
| | 294,138 |
| | 319,109 |
|
| Warranties issued | 50,324 |
| | 49,603 |
| | 134,867 |
| | 131,429 |
|
| Adjustments to pre-existing warranties from changes in estimates (1) | 3,640 |
| | 1,097 |
| | 17,251 |
| | (6,426 | ) |
| Payments | (36,677 | ) | | (51,808 | ) | | (127,507 | ) | | (153,596 | ) |
| Warranty reserve, end of period | $ | 318,749 |
| | 290,516 |
| | 318,749 |
| | 290,516 |
|
| |
(1) | The adjustments to pre-existing warranties from changes in estimates during the three and nine months ended August 31, 2020 and 2019 primarily related to specific claims in certain of the Company's homebuilding communities and other adjustments. |
| |
(9) | Financial Instruments and Fair Value Disclosures |
(9)Financial Instruments and Fair Value Disclosures
The following table presents the carrying amounts and estimated fair values of financial instruments held or issued by the Company at August 31, 20202021 and November 30, 2019,2020, 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, 2020 | | November 30, 2019 |
| (In thousands) | Fair Value Hierarchy | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| ASSETS | | | | | | | | | |
| Financial Services: | | | | | | | | | |
| Loans held-for-investment, net | Level 3 | | $ | 67,219 |
| | 64,377 |
| | 73,867 |
| | 69,708 |
|
| Investments held-to-maturity | Level 3 | | $ | 164,588 |
| | 196,246 |
| | 166,012 |
| | 195,962 |
|
| Investments held-to-maturity | Level 2 | | $ | 0 |
| | 0 |
| | 24,277 |
| | 24,257 |
|
| Lennar Other: | | | | | | | | | |
| Investments held-to-maturity | Level 3 | | $ | 0 |
| | 0 |
| | 54,117 |
| | 56,415 |
|
| LIABILITIES | | | | | | | | | |
| Homebuilding senior notes and other debts payable, net | Level 2 | | $ | 7,180,274 |
| | 7,670,550 |
| | 7,776,638 |
| | 8,144,632 |
|
| Financial Services notes and other debts payable, net | Level 2 | | $ | 956,414 |
| | 957,832 |
| | 1,745,755 |
| | 1,745,782 |
|
| Multifamily note payable, net | Level 2 | | $ | 0 |
| | 0 |
| | 36,125 |
| | 36,125 |
|
| Lennar Other notes and other debts payable, net | Level 2 | | $ | 1,906 |
| | 1,906 |
| | 15,178 |
| | 15,178 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | August 31, 2021 | | November 30, 2020 |
| (In thousands) | Fair Value Hierarchy | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| ASSETS | | | | | | | | | |
| Financial Services: | | | | | | | | | |
| Loans held-for-investment, net | Level 3 | | $ | 61,283 | | | 61,332 | | | 72,626 | | | 70,808 | |
| Investments held-to-maturity | Level 3 | | 161,532 | | | 192,510 | | | 164,230 | | | 196,047 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| LIABILITIES | | | | | | | | | |
| Homebuilding senior notes and other debts payable, net | Level 2 | | $ | 5,542,513 | | | 6,040,708 | | | 5,955,758 | | | 6,581,798 | |
| Financial Services notes and other debts payable, net | Level 2 | | 1,106,447 | | | 1,107,301 | | | 1,463,919 | | | 1,464,850 | |
| | | | | | | | | |
| Lennar Other notes and other debts payable, net | Level 2 | | 1,906 | | | 1,906 | | | 1,906 | | | 1,906 | |
The following methods and assumptions are used by the Company in estimating fair values:
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 majority of the borrowings.
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.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
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.
Lennar Other—The fair value for investments held-to-maturity is based on discounted cash flow. 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: | | | | | | | | | | | | | | | | | |
| Fair Value Hierarchy | | Fair Value at |
| (In thousands) | | August 31, 2021 | | November 30, 2020 |
| Financial Services Assets: | | | | | |
| Residential loans held-for-sale | Level 2 | | $ | 1,141,460 | | | 1,296,517 | |
| LMF Commercial loans held-for-sale | Level 3 | | 113,129 | | | 193,588 | |
| | | | | |
| | | | | |
| | | | | |
| Mortgage servicing rights | Level 3 | | 2,382 | | | 2,113 | |
| Lennar Other: | | | | | |
| Investments in equity securities | Level 1 | | $ | 1,085,571 | | | — | |
| Investments available-for-sale | Level 3 | | 41,695 | | | 53,497 | |
|
| | | | | | | | |
| (In thousands) | Fair Value Hierarchy | | Fair Value at
August 31,
2020 | | Fair Value at
November 30,
2019 |
| Financial Services Assets: | | | | | |
| Residential loans held-for-sale (1) | Level 2 | | $ | 930,151 |
| | 1,447,715 |
|
| LMF Commercial loans held-for-sale (2) | Level 3 | | $ | 157,031 |
| | 197,224 |
|
| Mortgage servicing rights | Level 3 | | $ | 1,356 |
| | 24,679 |
|
| Lennar Other: | | | | | |
| Investments available-for-sale | Level 3 | | $ | 53,770 |
| | 0 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| August 31, 2021 | | November 30, 2020 |
| | | |
| (In thousands) | Aggregate Principal Balance | | | | Change in Fair Value | | Aggregate Principal Balance | | | | Change in Fair Value |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Residential loans held-for-sale | $ | 1,103,647 | | | | | 37,813 | | | 1,232,548 | | | | | 63,969 | |
| LMF Commercial loans held-for-sale | 116,010 | | | | | (2,881) | | | 194,362 | | | | | (774) | |
| |
(1) | The aggregate fair value of residential loans held-for-sale of $930.2 million at August 31, 2020 exceeded their aggregate principal balance of $887.9 million by $42.2 million. The aggregate fair value of residential loans held-for-sale of $1.4 billion at November 30, 2019 exceeded their aggregate principal balance of $1.4 billion by $42.2 million. |
| |
(2) | The aggregate fair value of LMF Commercial loans held-for-sale of $157.0 million at August 31, 2020 exceeded their aggregate principal balance of $155.5 million by $1.6 million. The aggregate fair value of LMF Commercial loans held-for-sale of $197.2 million at November 30, 2019 exceeded their aggregate principal balance of $196.3 million by $0.9 million. |
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, theThe 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 isare included in Financial Services’ loans held-for-sale as of August 31, 20202021 and November 30, 2019.2020. Fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics.
LMF Commercial 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 valuesThe details and methods of the calculation are calculated by allocatingunchanged from the change infair 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, changesdisclosure in the CMBX index, and general capital and commercial real estate market conditions. ConsiderationsCompany's Notes to the Financial Statements section in estimating CMBS spreads include comparingits Form 10-K for the Company’s current loan portfolio with comparable CMBS offerings containing loans with similar duration, credit quality and collateral composition.year ended November 30, 2020. 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.
Mortgage servicing rights - 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 and are noted below:
| | | | | | | | | | | |
| | | |
| Unobservable inputs | As of August 31, 2021 | | As of November 30, 2020 |
| | | |
| Mortgage prepayment rate | 14% | | 18% |
| Discount rate | 14% | | 12% |
| Delinquency rate | 3% | | 4% |
Lennar CorporationOther investments in equity securities - The fair value of investments in equity securities was calculated based on independent quoted market prices. The Company’s investments in equity securities were recorded at fair value with all changes in fair value recorded to Lennar Other unrealized gain of the Company’s condensed consolidated statements of operations and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
|
| |
| As of August 31, 2020 |
Unobservable inputs | |
Mortgage prepayment rate | 17% |
Discount rate | 12% |
Delinquency rate | 4% |
Lennar Other investments available-for-sale - The fair value of investments available-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.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
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 Ended |
| | August 31, | | August 31, |
| (In thousands) | 2020 | | 2019 | | 2020 | | 2019 |
| Changes in fair value included in Financial Services revenues: | | | | | | | |
| Loans held-for-sale | $ | 2,229 |
| | (2,490 | ) | | 6 |
| | 397 |
|
| Mortgage loan commitments | (4,534 | ) | | 646 |
| | 24,177 |
| | 9,498 |
|
| Forward contracts | (205 | ) | | 1,646 |
| | (1,088 | ) | | 734 |
|
| Changes in fair value included in other comprehensive income (loss), net of tax: | | | | | | | |
| Lennar Other investments available-for-sale | 175 |
| | 0 |
| | (163 | ) | | 0 |
|
| Financial Services investments available-for-sale | 0 |
| | 180 |
| | (46 | ) | | 949 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| (In thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Changes in fair value included in Financial Services revenues: | | | | | | | |
| Loans held-for-sale | $ | 4,196 | | | 2,229 | | | (26,156) | | | 6 | |
| Mortgage loan commitments | 118 | | | (4,534) | | | 260 | | | 24,177 | |
| Forward contracts | 1,649 | | | (205) | | | 11,934 | | | (1,088) | |
| | | | | | | |
| Changes in fair value included in Lennar Other realized and unrealized gain (loss): | | | | | | | |
| Investments in equity securities | $ | 493,671 | | | — | | | 690,791 | | | — | |
| Changes in fair value included in other comprehensive loss, net of tax: | | | | | | | |
| Lennar Other investments available-for-sale | $ | 131 | | | 175 | | | (495) | | | (209) | |
| | | | | | | |
Interest on Financial Services loans held-for-sale and LMF Commercial loans held-for-sale measured at fair value is calculated based on the interest rate of the loans and recorded as revenues in the Financial Services’ statement of operations.
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 in the Company's Financial Services segment:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| August 31, 2021 | | August 31, 2020 |
| (In thousands) | Mortgage servicing rights | | LMF Commercial loans held-for-sale | | Mortgage servicing rights | | LMF Commercial loans held-for-sale |
| Beginning balance | $ | 2,602 | | | 163,920 | | | 1,238 | | | 159,885 | |
| Purchases/loan originations | 56 | | | 178,669 | | | 563 | | | 164,380 | |
| Sales/loan originations sold, including those not settled | — | | | (226,357) | | | — | | | (164,527) | |
| Disposals/settlements | (127) | | | (4,092) | | | (34) | | | — | |
| Changes in fair value (2) | (149) | | | 1,391 | | | (411) | | | (1,165) | |
| Interest and principal paydowns | — | | | (402) | | | — | | | (1,542) | |
| Ending balance | $ | 2,382 | | | 113,129 | | | 1,356 | | | 157,031 | |
| | | | Three Months Ended | | Nine Months Ended |
| | August 31, 2020 | | August 31, 2019 | | August 31, 2021 | | August 31, 2020 |
| (In thousands) | Mortgage servicing rights | | LMF Commercial loans held-for-sale | | Mortgage servicing rights | | LMF Commercial loans held-for-sale | (In thousands) | Mortgage servicing rights | | LMF Commercial loans held-for-sale | | Mortgage servicing rights | | LMF Commercial loans held-for-sale |
| Beginning balance | $ | 1,238 |
| | 159,885 |
| | 29,419 |
| | 259,599 |
| Beginning balance | $ | 2,113 | | | 193,588 | | | 24,679 | | | 197,224 | |
| Purchases/loan originations | 563 |
| | 164,380 |
| | 449 |
| | 263,888 |
| Purchases/loan originations | 499 | | | 599,465 | | | 1,917 | | | 582,030 | |
| Sales/loan originations sold, including those not settled | 0 |
| | (164,527 | ) | | 0 |
| | (347,713 | ) | Sales/loan originations sold, including those not settled | — | | | (665,062) | | | — | | | (622,251) | |
| Disposals/settlements | (34 | ) | | 0 |
| | (1,544 | ) | | 0 |
| |
| Changes in fair value (1) | (411 | ) | | (1,165 | ) | | (5,252 | ) | | 3,502 |
| |
| Disposals/settlements (1) | | Disposals/settlements (1) | (1,222) | | | (11,392) | | | (10,231) | | | — | |
| Changes in fair value (2) | | Changes in fair value (2) | 992 | | | (2,551) | | | (15,009) | | | 2,102 | |
| Interest and principal paydowns | 0 |
| | (1,542 | ) | | 0 |
| | (572 | ) | Interest and principal paydowns | — | | | (919) | | | — | | | (2,074) | |
| Ending balance | $ | 1,356 |
| | 157,031 |
| | 23,072 |
| | 178,704 |
| Ending balance | $ | 2,382 | | | 113,129 | | | 1,356 | | | 157,031 | |
|
| | | | | | | | | | | | |
| | Nine Months Ended |
| | August 31, 2020 | | August 31, 2019 |
| (In thousands) | Mortgage servicing rights | | LMF Commercial loans held-for-sale | | Mortgage servicing rights | | LMF Commercial loans held-for-sale |
| Beginning balance | $ | 24,679 |
| | 197,224 |
| | 37,206 |
| | 61,691 |
|
| Purchases/loan originations | 1,917 |
| | 582,030 |
| | 2,707 |
| | 969,200 |
|
| Sales/loan originations sold, including those not settled | 0 |
| | (622,251 | ) | | 0 |
| | (848,262 | ) |
| Disposals/settlements (2) | (10,231 | ) | | 0 |
| | (3,830 | ) | | (9,920 | ) |
| Changes in fair value (1) | (15,009 | ) | | 2,102 |
| | (13,011 | ) | | 6,825 |
|
| Interest and principal paydowns | 0 |
| | (2,074 | ) | | 0 |
| | (830 | ) |
| Ending balance | $ | 1,356 |
| | 157,031 |
| | 23,072 |
| | 178,704 |
|
| |
(1) | Changes in fair value for LMF Commercial loans held-for-sale and Financial Services mortgage servicing rights are included in Financial Services' revenues. |
| |
(2) | Includes $7.5 million related to the sale of a servicing portfolio. |
(2)Changes in fair value for LMF Commercial loans held-for-sale and Financial Services mortgage servicing rights are included in Financial Services' revenues.
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, 2020 | | August 31, 2019 |
| (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: | | | | | | | | | | | | | |
| Finished homes and construction in progress (1) | Level 3 | | $ | 20,650 |
| | 18,089 |
| | (2,561 | ) | | 4,922 |
| | 4,142 |
| | (780 | ) |
| Land and land under development (1) | Level 3 | | $ | 21,621 |
| | 12,650 |
| | (8,971 | ) | | 1,300 |
| | 85 |
| | (1,215 | ) |
|
| | | | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended |
| | | | August 31, 2020 | | August 31, 2019 |
| (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: | | | | | | | | | | | | | |
| Finished homes and construction in progress (1) | Level 3 | | $ | 162,459 |
| | 138,493 |
| | (23,966 | ) | | 4,922 |
| | 4,142 |
| | (780 | ) |
| Land and land under development (1) | Level 3 | | $ | 86,683 |
| | 34,019 |
| | (52,664 | ) | | 8,253 |
| | 3,085 |
| | (5,168 | ) |
| |
(1) | Valuation adjustments were included in Homebuilding costs and expenses in the Company's condensed consolidated statements of operations and comprehensive income (loss). |
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | August 31, 2021 | | August 31, 2020 |
| (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: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Finished homes and construction in progress (1) | Level 3 | | $ | 3,968 | | | 2,287 | | | (1,681) | | | 20,650 | | | 18,089 | | | (2,561) | |
| Land and land under development (1) | Level 3 | | 1,625 | | | 862 | | | (763) | | | 21,621 | | | 12,650 | | | (8,971) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended |
| | | August 31, 2021 | | August 31, 2020 |
| (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: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Finished homes and construction in progress (1) | Level 3 | | $ | 25,752 | | | 11,015 | | | (14,737) | | | 162,459 | | | 138,493 | | | (23,966) | |
| Land and land under development (1) | Level 3 | | 2,145 | | | 862 | | | (1,283) | | | 86,683 | | | 34,019 | | | (52,664) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(1)Valuation adjustments were included in Homebuilding costs and expenses in the Company's condensed consolidated statements of operations and comprehensive income (loss).
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, 2019.2020.
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. This was particularly the case with regard to inventory owned at August 31, 2020, because of the need to consider the effect of the COVID-19 pandemic and related government actions in determining whether there was a need for valuation adjustments and write-offs. 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.
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, 2019.2020. On a quarterly basis, the Company reviews its active communities for indicators of potential impairments. As of August 31, 2020 and August 31, 2019, there were 1,194 and 1,295 active communities, excluding unconsolidated entities, respectively. The table below summarizes communities reviewed for indicators of impairment and communities with valuation adjustments recorded:
|
| | | | | | | | | | | | |
| | | | Communities with valuation adjustments
|
| | # of communities with potential indicator of impairment | | # of communities | | Fair Value (in thousands) | | Valuation Adjustments (in thousands) |
| At or for the Nine Months Ended | | | | | | | |
| August 31, 2020 | 28 | | 14 |
| | $ | 76,115 |
| | $ | 40,364 |
|
| August 31, 2019 | 47 | | 1 |
| | 4,226 |
| | 1,995 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Communities with valuation adjustments |
| At or for the Nine Months Ended | # of active communities | | # of communities with potential indicator of impairment | | | | | | # of communities | | | | | | Fair Value (in thousands) | | Valuation Adjustments (in thousands) |
| | | | | | | | | | | | | | | | | |
| August 31, 2021 | 1,192 | | 8 | | | | | | 1 | | | | | | $ | 17,117 | | | $ | 11,849 | |
| August 31, 2020 | 1,194 | | 28 | | | | | | 14 | | | | | | 76,115 | | | 40,364 | |
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:
| | | | | | | | | | | | | | | | | | | |
| Nine Months Ended August 31, |
| |
| 2021 | | 2020 |
| Unobservable inputs | | | Range |
| Average selling price | $635,000 | | | | 201,000 | | - | 970,000 |
| Absorption rate per quarter (homes) | 11 | | | | 3 | - | 15 |
| Discount rate | 20% | | 20% |
|
| | | | | | | | | | | |
| | Nine Months Ended |
| | August 31, 2020 | | August 31, 2019 |
| Unobservable inputs | Range | | |
| Average selling price | $ | 201,000 |
| - | $ | 970,000 |
| | $ | 167,000 |
|
| Absorption rate per quarter (homes) | 3 | - | 15 | | 12 |
| Discount rate | 20% | | 20% |
| |
(10) | Variable Interest Entities |
The Company evaluated the joint venture ("JV") agreements of its JV's that were formed or that had reconsideration events, such as changes in the governing documents or to debt arrangements during the nine months ended August 31, 2020. Based2021 and based on the Company's evaluation, during the nine months ended August 31, 2021, the Company consolidated 1 Homebuilding entity and 1 Multifamily entitytwo entities that had a total combined assets and liabilities of $140.0$30.7 million and $51.2 million and $49.4 million and $0.9$0.7 million, respectively. The Company deconsolidated 2 Multifamily entities that had total assets of $37.2 million and an immaterial amount of liabilities. In addition,During the Company's Financial Services segment deconsolidated 1 entity that had total assets and liabilities of $291.2 million and $204.1 million, respectively. In January 2019, this JV was formed by the sale of the Company’s retail title agency and its retail title insurance business to this JV entity. In exchange for the sale of the retail agency and retail title insurance business, the Company received 20% of the JV entity’s preferred stock, warrants exercisable to purchase additional shares of preferred stock in the JV entity and a note due from the JV to the Company. The JV entity’s reconsideration event was due to a significant equity raise that was completed during the threenine months ended MayAugust 31, 2020. The proceeds of the equity raise resulted in approximately a 43% reduction of the principal amount of debt owed by the JV entity to the Company as well as an approximately 20% reduction of the Company’s ownership interest in the JV. The JV remains a VIE; however, the Company has concluded2021, there were no VIEs that it is no longer the primary beneficiary as the Company no longer has the power to direct the VIE. In particular, the additional infusion of equity from third party investors provides evidence that the JV entity is no longer financially dependent on the Company. The Company does not have the voting or economic power to direct the activities of the JV entity. As a result, the Company concluded that the JV entity should be deconsolidated which required fair value accounting for its equity investment and note receivable. The valuation assumptions used in determining fair value of the equity investment began by utilizing the capital raise discounted by public company comparable transactions that took into account the impact of
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
COVID-19 and the economic shutdown and the lack of marketability of the Company’s investment. The valuation of the note receivable utilized the underlying cash flows and applied a discount, which was determined by using market comparables. The Company used discount rates ranging from 16% to 30% for the fair value calculations. In aggregate, the resulting fair value of the equity investment and note receivable totaled $123.4 million, of which $70.8 million was included in Financial Services investments in unconsolidated entities at the time of deconsolidation. Upon deconsolidation, the Company recorded a gain of $61.4 million.were deconsolidated.
The carrying amount of ourthe Company's consolidated VIE's assets and non-recourse liabilities are disclosed in the footnote to the condensed consolidated balance sheets.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
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 lenders. Other than debt guarantee agreements with a VIE’s lenders, 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
At August 31, 2020 and November 30, 2019, theThe Company’s recorded investments in VIEs that are unconsolidated and its estimated maximum exposure to loss were as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| August 31, 2021 | | November 30, 2020 |
| (In thousands) | Investments in
Unconsolidated VIEs | | Lennar’s Maximum
Exposure to Loss | | Investments in
Unconsolidated VIEs | | Lennar’s Maximum
Exposure to Loss |
| Homebuilding (1) | $ | 101,371 | | | 241,484 | | | 89,654 | | | 89,828 | |
| Multifamily (2) | 611,676 | | | 645,606 | | | 619,540 | | | 717,271 | |
| Financial Services | 161,532 | | | 161,532 | | | 164,230 | | | 164,230 | |
| Lennar Other (3) | 9,751 | | | 9,751 | | | 76,023 | | | 130,177 | |
| $ | 884,330 | | | 1,058,373 | | | 949,447 | | | 1,101,506 | |
|
| | | | | | | | | | | | |
| | August 31, 2020 | | November 30, 2019 |
| (In thousands) | Investments in Unconsolidated VIEs | | Lennar’s Maximum Exposure to Loss (1) | | Investments in
Unconsolidated VIEs | | Lennar’s Maximum
Exposure to Loss (1) |
| Homebuilding | $ | 85,733 |
| | 85,914 |
| | 80,939 |
| | 81,118 |
|
| Multifamily (2) | 608,911 |
| | 755,394 |
| | 533,018 |
| | 768,651 |
|
| Financial Services (3) | 234,806 |
| | 287,614 |
| | 166,012 |
| | 166,012 |
|
| Lennar Other | 7,152 |
| | 7,152 |
| | 60,882 |
| | 60,882 |
|
| | $ | 936,602 |
| | 1,136,074 |
| | 840,851 |
| | 1,076,663 |
|
| |
(1) | Limited to investments in unconsolidated VIEs, except as noted below. |
| |
(2) | As of August 31, 2020 and November 30, 2019, the maximum exposure to loss of Multifamily's investments in unconsolidated VIEs was primarily limited to its investments in the unconsolidated VIEs, except with regard to the remaining equity commitment of $129.0 million and $224.2 million, respectively, to fund LMV I and LMV II for future expenditures related to the construction and development of its projects. |
| |
(3) | As of August 31, 2020, the maximum exposure to loss of Financial Services' investments in unconsolidated entities included a note receivable. |
(2)As of August 31, 2021 and November 30, 2020, the maximum exposure to loss of Multifamily's investments in unconsolidated VIEs was primarily limited to its investments in the unconsolidated VIEs, except with regard to the remaining equity commitment of $24.9 million and $88.1 million, respectively, to fund LMV I and LMV II for future expenditures related to the construction and development of its projects. The decrease was due to the funding of capital for LMV I and LMV II.
(3)As of August 31, 2021, the decrease in investments in unconsolidated VIEs and maximum exposure to loss was related to an entity which had a reconsideration event due to the payoff of a note receivable which caused the entity to no longer be considered a VIE.
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 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.
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 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 enable 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 options.
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 nine months ended August 31, 2020,2021, consolidated inventory not owned increased by $82.4$167.8 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
balance sheet as of August 31, 2020.2021. The increase was primarily relateddue to additions in the nine months ended August 31, 2021 as the Company entering into option contracts, which required consolidation during the period,focused on increasing its controlled homesites, partially offset by the Company exercising its options to acquire land under previously consolidated contracts.takedowns. To reflect the purchase price of the inventory consolidated,homesite takedowns, 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 August 31, 2020.2021. 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.
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
The Company’sCompany's exposure to losses related toon its option contracts with third parties and unconsolidated entities consisted of its non-refundable option deposits and pre-acquisition costs totaling $325.4 million and $320.5 million at August 31, 2020 and November 30, 2019, respectively. Additionally, the Company had posted $76.8 million and $75.0 million of letters of credit in lieu of cash deposits under certain land and option contractswere as of August 31, 2020 and November 30, 2019, respectively. As a result of the COVID-19 pandemic, the Company reviewed its option contracts as of August 31, 2020 and had no write-offs of costs related to option contracts because of the COVID-19 pandemic during the nine months ended August 31, 2020.follows:
| | | | | | | | | | | |
| (Dollars in thousands) | August 31, 2021 | | November 30, 2020 |
| Non-refundable option deposits and pre-acquisition costs | $ | 1,079,078 | | | 414,154 | |
| Letters of credit in lieu of cash deposits under certain land and option contracts | 153,116 | | | 87,537 | |
(11)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. From time to time, 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.
The Company does not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on its business or financial position. However, the financial effect of litigation concerning purchases and sales of property may depend upon the value of the subject property, which may have changed from the time the agreement for purchase or sale was entered into.
Leases
The Company has entered into agreements to lease certain office facilities and equipment under operating leases. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. ROU assets and right-of-use lease liabilities are recorded on the balance sheet for all leases, except leases with an initial term of 12 months or less. Many of the Company's leases include options to renew. The exercise of lease renewal options is at the Company's option and therefore renewal option payments have not been included in the ROU assets or lease liabilities. The following table includes additional information about the Company's leases:
|
| | | |
| (Dollars in thousands) | August 31, 2020 |
| Right-of-use assets | $ | 121,728 |
|
| Lease liabilities | $ | 131,325 |
|
| Weighted-average remaining lease term (in years) | 2.7 |
|
| Weighted-average discount rate | 3.1 | % |
| | | | | | | | | | | |
| (Dollars in thousands) | August 31, 2021 | | November 30, 2020 |
| Right-of-use assets | $ | 157,164 | | | 113,390 | |
| Lease liabilities | 165,095 | | | 122,836 | |
| Weighted-average remaining lease term (in years) | 8.3 | | 2.6 |
| Weighted-average discount rate | 2.9 | % | | 3.1 | % |
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
The Company has entered into agreements to lease certain office facilities and equipment under operating leases. Future minimum payments under the noncancellable leases in effect at August 31, 20202021 were as follows:
| | | | | |
| (In thousands) | Lease Payments |
| 2021 | $ | 7,982 | |
| 2022 | 34,360 | |
| 2023 | 28,283 | |
| 2024 | 23,113 | |
| 2025 | 18,702 | |
| 2026 and thereafter | 74,108 | |
| Total future minimum lease payments (1) | $ | 186,548 | |
| Less: Interest (2) | 21,453 | |
| Present value of lease liabilities (2) | $ | 165,095 | |
|
| | | |
| (Dollars in thousands) | Lease Payments |
| 2020 | $ | 8,897 |
|
| 2021 | 36,049 |
|
| 2022 | 28,843 |
|
| 2023 | 21,804 |
|
| 2024 | 15,853 |
|
| 2025 and thereafter | 30,861 |
|
| Total future minimum lease payments (1) | $ | 142,307 |
|
| Less: Interest (2) | 10,982 |
|
| Present value of lease liabilities (2) | $ | 131,325 |
|
| |
(1) | Total future minimum lease payments exclude variable lease costs of $12.7 million and short-term lease costs of $2.3(1)Total future minimum lease payments exclude variable lease costs of $26.2 million and short-term lease costs of $2.1 million. This also does not include minimum lease payments for executed and legally enforceable leases that have not yet commenced. As of August 31, 2020, the minimum lease payments for these leases that have not yet commenced were immaterial. |
| |
(2) | The Company's leases do not include a readily determinable implicit rate. As such, the Company has estimated the discount rate for these leases to determine the present value of lease payments at the lease commencement date or as of December 1, 2019, which was the effective date of ASU 2016-02. As of August 31, 2020, the weighted average remaining lease term and weighted average discount rate used in calculating the lease liabilities were 2.7 years and 3.1%, respectively. The Company recognized the lease liabilities on its condensed consolidated balance sheets within accounts payable or other liabilities of the respective segments. |
Rental expense for the nine months ended August 31, 2020,2021, the minimum lease payments for these leases that have not yet commenced were immaterial.
(2)The Company's leases do not include a readily determinable implicit rate. As such, the Company has estimated the discount rate for these leases to determine the present value of lease payments at the lease commencement date or as of December 1, 2019, which was $62.6 million. Paymentsthe effective date of ASU 2016-02. As of August 31, 2021, the weighted average remaining lease term and weighted average discount rate used in calculating the lease liabilities were 8.3 years and 2.9%, respectively. The Company recognized the lease liabilities on its condensed consolidated balance sheets within accounts payable or other liabilities of the respective segments.
The Company's rental expense and payments on lease liabilities during the nine months ended August 31, 2020 totaled $40.4 million. Rental expense includes costs for all leases. were as follows:
| | | | | | | | | | | |
| Nine months ended |
| (In thousands) | August 31, 2021 | | August 31, 2020 |
| Rental expense | $ | 63,232 | | | 62,554 | |
| Payment on lease liabilities | 22,174 | | | 40,359 | |
On occasion, the Company may sublease rented space which is no longer used for the Company's operations. For both the nine months ended August 31, 2021 and 2020, the Company had an immaterial amount of sublease income.
Lennar Corporation and Subsidiaries25
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
| |
(12) | New Accounting Pronouncements |
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. While the Company is continuing to evaluate the impact of the adoption of ASU 2016-13, the Company does not expect the adoption to have a material impact on its condensed consolidated financial statements. Subsequent to the issuance of ASU 2016-13, the FASB issued ASU 2018-19, Codification 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 the guidance in ASU 2016-13. 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 2016-13.
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.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 will be effective for the Company’s fiscal year beginning December 1, 2022. The Company is currently evaluating the impact the adoption of ASU 2019-12 will have on the Company's condensed consolidated financial statements.
| |
(13) | Supplemental Financial Information |
The indentures governing the Company’s senior notes require that, if any of the Company’s 100% owned subsidiaries, other than its finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least $75 million principal amount of debt of Lennar Corporation, those subsidiaries must also guarantee Lennar Corporation’s obligations with regard to its senior notes. The entities referred to as "guarantors" in the following tables are subsidiaries that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at August 31, 2020 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 7 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") 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.
Supplemental information for the subsidiaries that were guarantor subsidiaries at August 31, 2020 was as follows:
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Condensed Consolidating Balance Sheet
August 31, 2020
|
| | | | | | | | | | | | | | | |
| (In thousands) | Lennar
Corporation | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating Adjustments | | Total |
| ASSETS | | | | | | | | | |
| Homebuilding: | | | | | | | | | |
| Cash and cash equivalents, restricted cash and receivables, net | $ | 1,645,161 |
| | 602,845 |
| | 26,707 |
| | 0 |
| | 2,274,713 |
|
| Inventories | 0 |
| | 17,174,841 |
| | 496,421 |
| | 0 |
| | 17,671,262 |
|
| Investments in unconsolidated entities | 0 |
| | 938,584 |
| | 2,111 |
| | 0 |
| | 940,695 |
|
| Goodwill | 0 |
| | 3,442,359 |
| | — |
| | 0 |
| | 3,442,359 |
|
| Other assets | 397,033 |
| | 413,928 |
| | 362,541 |
| | (36,365 | ) | | 1,137,137 |
|
| Investments in subsidiaries | 10,166,689 |
| | 43,534 |
| | 0 |
| | (10,210,223 | ) | | 0 |
|
| Intercompany | 12,272,981 |
| | 0 |
| | 0 |
| | (12,272,981 | ) | | 0 |
|
| | 24,481,864 |
| | 22,616,091 |
| | 887,780 |
| | (22,519,569 | ) | | 25,466,166 |
|
| Financial Services | 0 |
| | 287,907 |
| | 1,923,928 |
| | (2,286 | ) | | 2,209,549 |
|
| Multifamily | 0 |
| | 0 |
| | 1,184,086 |
| | 0 |
| | 1,184,086 |
|
| Lennar Other | 0 |
| | 193,874 |
| | 282,728 |
| | (21,118 | ) | | 455,484 |
|
| Total assets | $ | 24,481,864 |
| | 23,097,872 |
| | 4,278,522 |
| | (22,542,973 | ) | | 29,315,285 |
|
| LIABILITIES AND EQUITY | | | | | | | | | |
| Homebuilding: | | | | | | | | | |
| Accounts payable and other liabilities | $ | 773,363 |
| | 2,033,906 |
| | 337,088 |
| | (59,769 | ) | | 3,084,588 |
|
| Liabilities related to consolidated inventory not owned | 0 |
| | 324,544 |
| | — |
| |
|
| | 324,544 |
|
| Senior notes and other debts payable | 6,536,398 |
| | 525,482 |
| | 118,394 |
| |
|
| | 7,180,274 |
|
| Intercompany | 0 |
| | 9,924,870 |
| | 2,348,111 |
| | (12,272,981 | ) | | 0 |
|
| | 7,309,761 |
| | 12,808,802 |
| | 2,803,593 |
| | (12,332,750 | ) | | 10,589,406 |
|
| Financial Services | 0 |
| | 30,921 |
| | 1,166,926 |
| | 0 |
| | 1,197,847 |
|
| Multifamily | 0 |
| | 0 |
| | 236,059 |
| | 0 |
| | 236,059 |
|
| Lennar Other | 0 |
| | 0 |
| | 11,628 |
| | 0 |
| | 11,628 |
|
| Total liabilities | 7,309,761 |
| | 12,839,723 |
| | 4,218,206 |
| | (12,332,750 | ) | | 12,034,940 |
|
| Total stockholders’ equity | 17,172,103 |
| | 10,258,149 |
| | (47,926 | ) | | (10,210,223 | ) | | 17,172,103 |
|
| Noncontrolling interests | 0 |
| | 0 |
| | 108,242 |
| | 0 |
| | 108,242 |
|
| Total equity | 17,172,103 |
| | 10,258,149 |
| | 60,316 |
| | (10,210,223 | ) | | 17,280,345 |
|
| Total liabilities and equity | $ | 24,481,864 |
| | 23,097,872 |
| | 4,278,522 |
| | (22,542,973 | ) | | 29,315,285 |
|
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Condensed Consolidating Balance Sheet
November 30, 2019
|
| | | | | | | | | | | | | | | |
| (In thousands) | Lennar Corporation | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Consolidating Adjustments | | Total |
| ASSETS | | | | | | | | | |
| Homebuilding: | | | | | | | | | |
| Cash and cash equivalents, restricted cash and receivables, net | $ | 722,172 |
| | 794,588 |
| | 22,894 |
| | 0 |
| | 1,539,654 |
|
| Inventories | 0 |
| | 17,396,139 |
| | 380,368 |
| | 0 |
| | 17,776,507 |
|
| Investments in unconsolidated entities | 0 |
| | 1,006,541 |
| | 2,494 |
| | 0 |
| | 1,009,035 |
|
| Goodwill | 0 |
| | 3,442,359 |
| | — |
| | 0 |
| | 3,442,359 |
|
| Other assets | 344,941 |
| | 500,356 |
| | 217,607 |
| | (41,220 | ) | | 1,021,684 |
|
| Investments in subsidiaries | 10,453,165 |
| | 26,773 |
| | 0 |
| | (10,479,938 | ) | | 0 |
|
| Intercompany | 12,027,996 |
| | 0 |
| | 0 |
| | (12,027,996 | ) | | 0 |
|
| | 23,548,274 |
| | 23,166,756 |
| | 623,363 |
| | (22,549,154 | ) | | 24,789,239 |
|
| Financial Services | 0 |
| | 275,812 |
| | 2,731,285 |
| | (1,073 | ) | | 3,006,024 |
|
| Multifamily | 0 |
| | 0 |
| | 1,068,831 |
| | 0 |
| | 1,068,831 |
|
| Lennar Other | 0 |
| | 158,194 |
| | 339,988 |
| | (2,765 | ) | | 495,417 |
|
| Total assets | $ | 23,548,274 |
| | 23,600,762 |
| | 4,763,467 |
| | (22,552,992 | ) |
| 29,359,511 |
|
| LIABILITIES AND EQUITY | | | | | | | | | |
| Homebuilding: | | | | | | | | | |
| Accounts payable and other liabilities | $ | 760,981 |
| | 1,935,366 |
| | 318,845 |
| | (45,058 | ) | | 2,970,134 |
|
| Liabilities related to consolidated inventory not owned | 0 |
| | 260,266 |
| | 0 |
| | 0 |
| | 260,266 |
|
| Senior notes and other debts payable | 6,837,776 |
| | 885,783 |
| | 53,079 |
| | 0 |
| | 7,776,638 |
|
| Intercompany | 0 |
| | 10,122,374 |
| | 1,905,622 |
| | (12,027,996 | ) | | 0 |
|
| | 7,598,757 |
| | 13,203,789 |
| | 2,277,546 |
| | (12,073,054 | ) | | 11,007,038 |
|
| Financial Services | 0 |
| | 40,235 |
| | 2,016,215 |
| | 0 |
| | 2,056,450 |
|
| Multifamily | 0 |
| | 0 |
| | 232,155 |
| | 0 |
| | 232,155 |
|
| Lennar Other | 0 |
| | 0 |
| | 30,038 |
| | 0 |
| | 30,038 |
|
| Total liabilities | 7,598,757 |
| | 13,244,024 |
| | 4,555,954 |
| | (12,073,054 | ) | | 13,325,681 |
|
| Total stockholders’ equity | 15,949,517 |
| | 10,356,738 |
| | 123,200 |
| | (10,479,938 | ) | | 15,949,517 |
|
| Noncontrolling interests | 0 |
| | 0 |
| | 84,313 |
| | 0 |
| | 84,313 |
|
| Total equity | 15,949,517 |
| | 10,356,738 |
| | 207,513 |
| | (10,479,938 | ) | | 16,033,830 |
|
| Total liabilities and equity | $ | 23,548,274 |
| | 23,600,762 |
| | 4,763,467 |
| | (22,552,992 | ) | | 29,359,511 |
|
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended August 31, 2020 |
| | | | | | | | | | | | | | | |
| (In thousands) | Lennar
Corporation | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating Adjustments | | Total |
| Revenues: | | | | | | | | | |
| Homebuilding | $ | 0 |
| | 5,493,155 |
| | 11,965 |
| | 0 |
| | 5,505,120 |
|
| Financial Services | 0 |
| | 40,163 |
| | 202,882 |
| | (5,977 | ) | | 237,068 |
|
| Multifamily | 0 |
| | 0 |
| | 115,170 |
| | 0 |
| | 115,170 |
|
| Lennar Other | 0 |
| | 0 |
| | 12,896 |
| | 0 |
| | 12,896 |
|
| Total revenues | 0 |
| | 5,533,318 |
| | 342,913 |
| | (5,977 | ) | | 5,870,254 |
|
| Cost and expenses: | | | | | | | | | |
| Homebuilding | 0 |
| | 4,659,970 |
| | 13,424 |
| | (236 | ) | | 4,673,158 |
|
| Financial Services | 0 |
| | 19,262 |
| | 89,414 |
| | (6,687 | ) | | 101,989 |
|
| Multifamily | 0 |
| | 0 |
| | 118,786 |
| | 0 |
| | 118,786 |
|
| Lennar Other | 0 |
| | 232 |
| | 1,830 |
| | 0 |
| | 2,062 |
|
| Corporate general and administrative | 88,977 |
| | 2,419 |
| | 0 |
| | 1,265 |
| | 92,661 |
|
| Total costs and expenses | 88,977 |
|
| 4,681,883 |
|
| 223,454 |
|
| (5,658 | ) |
| 4,988,656 |
|
| Homebuilding equity in earnings (loss) from unconsolidated entities | 0 |
| | (6,557 | ) | | 126 |
| | 0 |
| | (6,431 | ) |
| Homebuilding other income (expense), net | (319 | ) | | (12,722 | ) | | 935 |
| | 319 |
| | (11,787 | ) |
| Multifamily equity in loss from unconsolidated entities and other gain | 0 |
| | 0 |
| | (1,532 | ) | | 0 |
| | (1,532 | ) |
| Lennar Other equity in earnings (loss) from unconsolidated entities | 0 |
| | (4,145 | ) | | 1,956 |
| | 0 |
| | (2,189 | ) |
| Lennar Other income (expense), net | 0 |
| | 437 |
| | (1,083 | ) | | 0 |
| | (646 | ) |
| Earnings (loss) before income taxes | (89,296 | ) | | 828,448 |
| | 119,861 |
| | 0 |
| | 859,013 |
|
| Benefit (provision) for income taxes | 20,823 |
| | (182,045 | ) | | (28,468 | ) | | 0 |
| | (189,690 | ) |
| Equity in earnings from subsidiaries | 734,891 |
| | 81,609 |
| | — |
| | (816,500 | ) | | — |
|
| Net earnings (including net earnings attributable to noncontrolling interests) | 666,418 |
| | 728,012 |
| | 91,393 |
| | (816,500 | ) | | 669,323 |
|
| Less: Net earnings attributable to noncontrolling interests | 0 |
| | 0 |
| | 2,905 |
| | 0 |
| | 2,905 |
|
| Net earnings attributable to Lennar | $ | 666,418 |
| | 728,012 |
| | 88,488 |
| | (816,500 | ) | | 666,418 |
|
| Other comprehensive income, net of tax: | | | | | | | | | |
| Net unrealized gain on securities available-for-sale | $ | 0 |
| | 0 |
| | 175 |
| | 0 |
| | 175 |
|
| Total other comprehensive income, net of tax | $ | 0 |
| | 0 |
| | 175 |
| | 0 |
| | 175 |
|
| Total comprehensive income attributable to Lennar | $ | 666,418 |
| | 728,012 |
| | 88,663 |
| | (816,500 | ) | | 666,593 |
|
| Total comprehensive income attributable to noncontrolling interests | $ | 0 |
| | 0 |
| | 2,905 |
| | 0 |
| | 2,905 |
|
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended August 31, 2019
|
| | | | | | | | | | | | | | | |
| (In thousands) | Lennar
Corporation | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating Adjustments | | Total |
| Revenues: | | | | | | | | | |
| Homebuilding | $ | 0 |
| | 5,413,602 |
| | 25,396 |
| | 0 |
| | 5,438,998 |
|
| Financial Services | 0 |
| | 36,409 |
| | 192,960 |
| | (4,867 | ) | | 224,502 |
|
| Multifamily | 0 |
| | 0 |
| | 183,958 |
| | 0 |
| | 183,958 |
|
| Lennar Other | 0 |
| | 0 |
| | 9,600 |
| | 0 |
| | 9,600 |
|
| Total revenues | 0 |
| | 5,450,011 |
| | 411,914 |
| | (4,867 | ) | | 5,857,058 |
|
| Cost and expenses: | | | | | | | | | |
| Homebuilding | 0 |
| | 4,758,852 |
| | 24,009 |
| | (929 | ) | | 4,781,932 |
|
| Financial Services | 0 |
| | 17,707 |
| | 137,148 |
| | (5,051 | ) | | 149,804 |
|
| Multifamily | 0 |
| | 0 |
| | 181,616 |
| | 0 |
| | 181,616 |
|
| Lennar Other | 0 |
| | 0 |
| | 2,734 |
| | 0 |
| | 2,734 |
|
| Corporate general and administrative | 86,846 |
| | 4,503 |
| | 0 |
| | 1,266 |
| | 92,615 |
|
| Total costs and expenses | 86,846 |
| | 4,781,062 |
| | 345,507 |
| | (4,714 | ) | | 5,208,701 |
|
| Homebuilding equity in loss from unconsolidated entities | 0 |
| | (10,455 | ) | | (4 | ) | | 0 |
| | (10,459 | ) |
| Homebuilding other income (expense), net | (153 | ) | | 7,101 |
| | 5,274 |
| | 153 |
| | 12,375 |
|
| Multifamily equity in earnings from unconsolidated entities and other gain | 0 |
| | 0 |
| | 7,883 |
| | 0 |
| | 7,883 |
|
| Lennar Other equity in earnings from unconsolidated entities | 0 |
| | 561 |
| | 8,342 |
| | 0 |
| | 8,903 |
|
| Lennar Other income, net | 0 |
| | 0 |
| | 24 |
| | 0 |
| | 24 |
|
| Earnings (loss) before income taxes | (86,999 | ) | | 666,156 |
| | 87,926 |
| | 0 |
| | 667,083 |
|
| Benefit (provision) for income taxes | 19,816 |
| | (151,808 | ) | | (22,448 | ) | | 0 |
| | (154,440 | ) |
| Equity in earnings from subsidiaries | 580,549 |
| | 42,876 |
| | 0 |
| | (623,425 | ) | | 0 |
|
| Net earnings (including net loss attributable to noncontrolling interests) | 513,366 |
| | 557,224 |
| | 65,478 |
| | (623,425 | ) | | 512,643 |
|
| Less: Net loss attributable to noncontrolling interests | 0 |
| | 0 |
| | (723 | ) | | 0 |
| | (723 | ) |
| Net earnings attributable to Lennar | $ | 513,366 |
| | 557,224 |
| | 66,201 |
| | (623,425 | ) | | 513,366 |
|
| Other comprehensive income, net of tax: | | | | | | | | | |
| Net unrealized gain on securities available-for-sale | $ | 0 |
| | 0 |
| | 180 |
| | 0 |
| | 180 |
|
| Total other comprehensive income, net of tax | $ | 0 |
| | 0 |
| | 180 |
| | 0 |
| | 180 |
|
| Total comprehensive income attributable to Lennar | $ | 513,366 |
| | 557,224 |
| | 66,381 |
| | (623,425 | ) | | 513,546 |
|
| Total comprehensive loss attributable to noncontrolling interests | $ | 0 |
| | 0 |
| | (723 | ) | | 0 |
| | (723 | ) |
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended August 31, 2020
|
| | | | | | | | | | | | | | | |
| (In thousands) | Lennar
Corporation | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating Adjustments | | Total |
| Revenues: | | | | | | | | | |
| Homebuilding | $ | 0 |
| | 14,589,155 |
| | 37,565 |
| | 0 |
| | 14,626,720 |
|
| Financial Services | 0 |
| | 104,691 |
| | 545,247 |
| | (17,946 | ) | | 631,992 |
|
| Multifamily | 0 |
| | 0 |
| | 370,904 |
| | 0 |
| | 370,904 |
|
| Lennar Other | 0 |
| | 0 |
| | 33,348 |
| | 0 |
| | 33,348 |
|
| Total revenues | 0 |
| | 14,693,846 |
| | 987,064 |
| | (17,946 | ) | | 15,662,964 |
|
| Cost and expenses: | | | | | | | | | |
| Homebuilding | 0 |
| | 12,647,627 |
| | 44,071 |
| | (7,403 | ) | | 12,684,295 |
|
| Financial Services | 0 |
| | 56,861 |
| | 320,141 |
| | (13,314 | ) | | 363,688 |
|
| Multifamily | 0 |
| | 0 |
| | 379,607 |
| | 0 |
| | 379,607 |
|
| Lennar Other | 0 |
| | 232 |
| | 3,332 |
| | 0 |
| | 3,564 |
|
| Corporate general and administrative | 253,531 |
| | 5,632 |
| | 0 |
| | 3,796 |
| | 262,959 |
|
| Total costs and expenses | 253,531 |
| | 12,710,352 |
| | 747,151 |
| | (16,921 | ) | | 13,694,113 |
|
| Homebuilding equity in earnings (loss) from unconsolidated entities | 0 |
| | (20,513 | ) | | 436 |
| | 0 |
| | (20,077 | ) |
| Homebuilding other income (expense), net | (1,025 | ) | | (20,961 | ) | | 4,116 |
| | 1,025 |
| | (16,845 | ) |
| Financial Services gain on deconsolidation | 0 |
| | 61,418 |
| | 0 |
| | 0 |
| | 61,418 |
|
| Multifamily equity in earnings from unconsolidated entities and other gain | 0 |
| | 0 |
| | 4,702 |
| | 0 |
| | 4,702 |
|
| Lennar Other equity in loss from unconsolidated entities | 0 |
| | (12,997 | ) | | (15,715 | ) | | 0 |
| | (28,712 | ) |
| Lennar Other income (expense), net | 0 |
| | 443 |
| | (10,638 | ) | | 0 |
| | (10,195 | ) |
| Earnings (loss) before income taxes | (254,556 | ) | | 1,990,884 |
| | 222,814 |
| | 0 |
| | 1,959,142 |
|
| Benefit (provision) for income taxes | 49,562 |
| | (373,756 | ) | | (58,304 | ) | | 0 |
| | (382,498 | ) |
| Equity in earnings from subsidiaries | 1,787,270 |
| | 162,444 |
| | 0 |
| | (1,949,714 | ) | | 0 |
|
| Net earnings (including net earnings (loss) attributable to noncontrolling interests) | 1,582,276 |
| | 1,779,572 |
| | 164,510 |
| | (1,949,714 | ) | | 1,576,644 |
|
| Less: Net earnings (loss) attributable to noncontrolling interests | 0 |
| | 0 |
| | (5,632 | ) | | 0 |
| | (5,632 | ) |
| Net earnings attributable to Lennar | $ | 1,582,276 |
| | 1,779,572 |
| | 170,142 |
| | (1,949,714 | ) | | 1,582,276 |
|
| Other comprehensive loss, net of tax: | | | | | | | | | |
| Net unrealized loss on securities available-for-sale | $ | 0 |
| | 0 |
|
| (209 | ) |
| 0 |
| | (209 | ) |
| Reclassification adjustments for gain included in earnings, net of tax | 0 |
| | 0 |
|
| (452 | ) |
| 0 |
| | (452 | ) |
| Total other comprehensive loss, net of tax | $ | 0 |
| | 0 |
| | (661 | ) | | 0 |
| | (661 | ) |
| Total comprehensive income attributable to Lennar | $ | 1,582,276 |
| | 1,779,572 |
| | 169,481 |
| | (1,949,714 | ) | | 1,581,615 |
|
| Total comprehensive loss attributable to noncontrolling interests | $ | 0 |
| | 0 |
| | (5,632 | ) | | 0 |
| | (5,632 | ) |
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended August 31, 2019
|
| | | | | | | | | | | | | | | |
| (In thousands) | Lennar
Corporation | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating Adjustments | | Total |
| Revenues: | | | | | | | | | |
| Homebuilding | $ | 0 |
| | 14,202,932 |
| | 55,386 |
| | 0 |
| | 14,258,318 |
|
| Financial Services | 0 |
| | 121,679 |
| | 464,938 |
| | (14,588 | ) | | 572,029 |
|
| Multifamily | 0 |
| | 0 |
| | 428,764 |
| | 0 |
| | 428,764 |
|
| Lennar Other | 0 |
| | 0 |
| | 28,919 |
| | 0 |
| | 28,919 |
|
| Total revenues | 0 |
| | 14,324,611 |
| | 978,007 |
| | (14,588 | ) | | 15,288,030 |
|
| Cost and expenses: | | | | | | | | | |
| Homebuilding | 0 |
| | 12,546,016 |
| | 55,910 |
| | 6,100 |
| | 12,608,026 |
|
| Financial Services | 0 |
| | 76,914 |
| | 368,926 |
| | (23,698 | ) | | 422,142 |
|
| Multifamily | 0 |
| | 0 |
| | 431,510 |
| | 0 |
| | 431,510 |
|
| Lennar Other | 0 |
| | 0 |
| | 7,550 |
| | 0 |
| | 7,550 |
|
| Corporate general and administrative | 238,696 |
| | 5,579 |
| | 0 |
| | 3,796 |
| | 248,071 |
|
| Total costs and expenses | 238,696 |
| | 12,628,509 |
| | 863,896 |
| | (13,802 | ) | | 13,717,299 |
|
| Homebuilding equity in earnings (loss) from unconsolidated entities | 0 |
| | (4,869 | ) | | 268 |
| | 0 |
| | (4,601 | ) |
| Homebuilding other income (expense), net | (783 | ) | | (43,845 | ) | | 8,517 |
| | 786 |
| | (35,325 | ) |
| Multifamily equity in earnings from unconsolidated entities and other gain | 0 |
| | 0 |
| | 15,446 |
| | 0 |
| | 15,446 |
|
| Lennar Other equity in earnings (loss) from unconsolidated entities | 0 |
| | (7,024 | ) | | 19,279 |
| | 0 |
| | 12,255 |
|
| Lennar Other expense, net | 0 |
| | 0 |
| | (12,900 | ) | | 0 |
| | (12,900 | ) |
| Earnings (loss) before income taxes | (239,479 | ) | | 1,640,364 |
| | 144,721 |
| | 0 |
| | 1,545,606 |
|
| Benefit (provision) for income taxes | 57,906 |
| | (394,383 | ) | | (38,193 | ) | | 0 |
| | (374,670 | ) |
| Equity in earnings from subsidiaries | 1,356,321 |
| | 76,352 |
| | 0 |
| | (1,432,673 | ) | | 0 |
|
| Net earnings (including net loss attributable to noncontrolling interests) | 1,174,748 |
| | 1,322,333 |
| | 106,528 |
| | (1,432,673 | ) | | 1,170,936 |
|
| Less: Net loss attributable to noncontrolling interests | 0 |
| | 0 |
| | (3,812 | ) | | 0 |
| | (3,812 | ) |
| Net earnings attributable to Lennar | $ | 1,174,748 |
| | 1,322,333 |
| | 110,340 |
| | (1,432,673 | ) | | 1,174,748 |
|
| Other comprehensive income, net of tax: | | | | | | | | | |
| Net unrealized gain on securities available-for-sale | $ | 0 |
| | 0 |
| | 949 |
| | 0 |
| | 949 |
|
| Reclassification adjustments for loss included in earnings, net of tax | 0 |
| | 0 |
| | (176 | ) | | 0 |
| | (176 | ) |
| Total other comprehensive income, net of tax | $ | 0 |
| | 0 |
| | 773 |
| | 0 |
| | 773 |
|
| Total comprehensive income attributable to Lennar | $ | 1,174,748 |
| | 1,322,333 |
| | 111,113 |
| | (1,432,673 | ) | | 1,175,521 |
|
| Total comprehensive loss attributable to noncontrolling interests | $ | 0 |
| | 0 |
| | (3,812 | ) | | 0 |
| | (3,812 | ) |
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended August 31, 2020
|
| | | | | | | | | | | | | | | |
| (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) | $ | 1,582,276 |
| | 1,779,572 |
| | 164,510 |
| | (1,949,714 | ) | | 1,576,644 |
|
| Distributions of earnings from guarantor and non-guarantor subsidiaries | 1,787,270 |
| | 162,444 |
| | 0 |
| | (1,949,714 | ) | | 0 |
|
| Other adjustments to reconcile net earnings (including net loss attributable to noncontrolling interests) to net cash provided by operating activities | (1,757,490 | ) | | 395,502 |
| | 732,474 |
| | 1,949,714 |
| | 1,320,200 |
|
| Net cash provided by operating activities | 1,612,056 |
| | 2,337,518 |
| | 896,984 |
| | (1,949,714 | ) | | 2,896,844 |
|
| Cash flows from investing activities: | | | | | | | | | |
| Investments in and contributions to unconsolidated entities/deconsolidation of a previously consolidated entity, net of distributions of capital | 0 |
| | (71,695 | ) | | (205,102 | ) | | 0 |
| | (276,797 | ) |
| Proceeds from the sales of operating properties and equipment and other assets | 0 |
| | 33,096 |
| | 0 |
| | 0 |
| | 33,096 |
|
| Other | (3,414 | ) | | 32,229 |
| | (52,581 | ) | | 0 |
| | (23,766 | ) |
| Distributions of capital from guarantor and non-guarantor subsidiaries | 100,000 |
| | 50,000 |
| | 0 |
| | (150,000 | ) | | 0 |
|
| Intercompany | (62,896 | ) | | 0 |
| | 0 |
| | 62,896 |
| | 0 |
|
| Net cash provided by (used in) investing activities | 33,690 |
| | 43,630 |
| | (257,683 | ) | | (87,104 | ) | | (267,467 | ) |
| Cash flows from financing activities: | | | | | | | | | |
| Net borrowings (repayments) under unsecured revolving credit facilities | — |
| | 1,476 |
| | (790,815 | ) | | 0 |
| | (789,339 | ) |
| Net borrowings (repayments) on senior notes, other borrowings, other liabilities, and other notes payable | (280,630 | ) | | (481,524 | ) | | 121,604 |
| | 0 |
| | (640,550 | ) |
| Common stock: | | | | | | | | |
|
| Repurchases | (318,989 | ) | | 0 |
| | 0 |
| | 0 |
| | (318,989 | ) |
| Dividends | (117,112 | ) | | (1,879,572 | ) | | (220,142 | ) | | 2,099,714 |
| | (117,112 | ) |
| Intercompany | 0 |
| | (185,180 | ) | | 248,076 |
| | (62,896 | ) | | 0 |
|
| Net cash used in financing activities | (716,731 | ) | | (2,544,800 | ) | | (641,277 | ) | | 2,036,818 |
| | (1,865,990 | ) |
| Net increase (decrease) in cash and cash equivalents and restricted cash | 929,015 |
| | (163,652 | ) | | (1,976 | ) | | 0 |
| | 763,387 |
|
| Cash and cash equivalents and restricted cash at beginning of period | 713,828 |
| | 532,304 |
| | 222,559 |
| | 0 |
| | 1,468,691 |
|
| Cash and cash equivalents and restricted cash at end of period | $ | 1,642,843 |
| | 368,652 |
| | 220,583 |
| | 0 |
| | 2,232,078 |
|
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended August 31, 2019
|
| | | | | | | | | | | | | | | |
| (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) | $ | 1,174,748 |
| | 1,322,333 |
| | 106,528 |
| | (1,432,673 | ) | | 1,170,936 |
|
| Distributions of earnings from guarantor and non-guarantor subsidiaries | 1,356,321 |
| | 76,352 |
| | 0 |
| | (1,432,673 | ) | | 0 |
|
| Other adjustments to reconcile net earnings (including net loss attributable to noncontrolling interests) to net cash provided by operating activities | (1,261,601 | ) | | (1,342,672 | ) | | 298,957 |
| | 1,432,673 |
| | (872,643 | ) |
| Net cash provided by operating activities | 1,269,468 |
| | 56,013 |
| | 405,485 |
| | (1,432,673 | ) | | 298,293 |
|
| Cash flows from investing activities: | | | | | | | | | |
| Investments in and contributions to unconsolidated entities and consolidated entities, net of distributions of capital | 0 |
| | (135,395 | ) | | 55,802 |
| | 0 |
| | (79,593 | ) |
| Proceeds from sales of real estate owned | 0 |
| | 0 |
| | 8,560 |
| | 0 |
| | 8,560 |
|
| Proceeds from sale of investment in unconsolidated entities | 0 |
| | 0 |
| | 17,790 |
| | 0 |
| | 17,790 |
|
| Proceeds from sales of Financial Services' business | 0 |
| | 21,517 |
| | 2,929 |
| | 0 |
| | 24,446 |
|
| Other | (2,164 | ) | | 34,935 |
| | (43,331 | ) | | 0 |
| | (10,560 | ) |
| Intercompany | (1,256,112 | ) | | 0 |
| | 0 |
| | 1,256,112 |
| | 0 |
|
| Net cash provided by (used in) investing activities | (1,258,276 | ) | | (78,943 | ) | | 41,750 |
| | 1,256,112 |
| | (39,357 | ) |
| Cash flows from financing activities: | | | | | | | | | |
| Net borrowings under unsecured revolving credit facilities | 700,000 |
| | 0 |
| | 0 |
| | 0 |
| | 700,000 |
|
| Net repayments under warehouse facilities | 0 |
| | (9 | ) | | (423,114 | ) | | 0 |
| | (423,123 | ) |
| Net borrowings (repayments) on convertible senior notes, other borrowings, other liabilities, and other notes payable | (500,000 | ) | | (117,444 | ) | | 21,521 |
| | 0 |
| | (595,923 | ) |
| Net repayments related to noncontrolling interests | 0 |
| | 0 |
| | (8,294 | ) | | 0 |
| | (8,294 | ) |
| Common stock: | | | | | | | | |
|
| Issuances | 388 |
| | 0 |
| | 0 |
| | 0 |
| | 388 |
|
| Repurchases | (419,322 | ) | | 0 |
| | 0 |
| | 0 |
| | (419,322 | ) |
| Dividends | (38,776 | ) | | (1,322,333 | ) | | (110,340 | ) | | 1,432,673 |
| | (38,776 | ) |
| Intercompany | 0 |
| | 1,181,304 |
| | 74,808 |
| | (1,256,112 | ) | | 0 |
|
| Net cash used in financing activities | (257,710 | ) | | (258,482 | ) | | (445,419 | ) | | 176,561 |
| | (785,050 | ) |
| Net increase (decrease) in cash and cash equivalents and restricted cash | (246,518 | ) | | (281,412 | ) | | 1,816 |
| | 0 |
| | (526,114 | ) |
| Cash and cash equivalents and restricted cash at beginning of period | 624,694 |
| | 721,603 |
| | 249,681 |
| | 0 |
| | 1,595,978 |
|
| Cash and cash equivalents and restricted cash at end of period | $ | 378,176 |
| | 440,191 |
| | 251,497 |
| | 0 |
| | 1,069,864 |
|
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, 2019.2020.
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. 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. 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.
The 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: the potential negative impact to our business of the ongoing coronavirus (“COVID-19”) pandemic, the duration, impact and severity of which is highly uncertain; increases in operating costs, includingcontinuation of supply shortages and increased costs related to construction materials labor,and labor; cost increases related to real estate taxes and insurance,insurance; reduced availability of mortgage financing, increased interest rates and increased competition in the mortgage industry; reductions in the market value of our inability to manage our cost structure, bothinvestments in our Homebuilding and Multifamily businesses;public companies; an extended slowdown in the real estate markets across the nation, including a slowdown in either the market for single family homes or the multifamily rental market; reduced availability of mortgage financing or increased interest rates; our inability to successfully execute our strategies, including our land lighter strategy and our strategy to monetize non-core assets; 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 Multifamily rental properties; 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; our inability to pay down debt; whether government actions or other factors related to COVID-19that might force us to further delay or terminate our program of repurchasing our 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; 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;as favorable as our current arrangements; and changes in accounting conventions that adversely affect our reported earnings.
Please see our Form 10-K for the fiscal year ended November 30, 2019, Part II, Item 1A of this quarterly report on Form 10-Q2020 and our 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
Our third quarter was a solid quarter for Lennar, reflectingThe housing market remains strong. Demand has been strong while the robust statesupply of new and existing homes has remained constrained. New home construction cannot ramp up quickly enough to fill the void of the housingunderproduction of homes for the past decade, and short supply is likely to remain for some time to come. The supply chain for both land and construction is significantly stressed. Given supply chain challenges, we believe the industry will not be able to quickly remedy the supply shortage with increased production. Accordingly, we expect the market across the country. As a resultto remain in its current imbalance for an extended period of the COVID-19 pandemic, the home has become more and more essential to the way we live and to the qualitytime. We remain focused on orderly, targeted growth, with our sales pace tightly matched with our pace of our lives. Inventories are limited and demand remains strong driven by low interest rates and a customer focus on owning and controlling their lifestyle. Our measured growth strategy in the current market is to focus on selling current inventory,production, which improves our inventory turn, while being patient with longer-term sales, which enables expected price appreciation to offset future cost escalations to maximize margin.margins. Even though home prices have moved much higher, overall affordability remains strong as interest rates are still lower than they were a year ago. Personal savings for deposits are strong and wages seem to be rising faster than monthly payments. Millennials are moving out of their parents’ homes and forming families, while apartment dwellers are finding a first-time single-family home.
As expected, our closingsThe housing market is not only strong, but it is also going through some structural changes that will promote stability in the third quarter were limitedmarket, and extend housing benefits to the breadth of a diverse society. The iBuyer and single-family for rent participants are providing additional liquidity to the marketplace to purchase and sell homes, as they evolve and provide ever more frictionless transactions. They are also solving important industry problems that have needed solutions for a very long time. The iBuyers, led by the production pause we took in March, AprilOpendoor, are becoming more than just a home sale option. They are an ever more effective and May as we assessed the impact of COVID-19 on the housing market. We increased productioninstrumental convenience provider, as the coordination of a new home is being complicated by supply chain disruption. Additionally, the single-family for rent participants, including our Upward America Venture, are also providing more liquidity while making a single-family home lifestyle accessible to more families. The solution to higher home prices causing affordability issues is building more housing and making a growing portion of that housing stock available to more families to rent if they cannot yet meet the requirements for home ownership. Professional ownership of homes enables renters to access a single-family lifestyle while they build the credentials to own. Better housing for families produces better outcomes for families and the industry is rewiring to provide those solutions.
The combined effects of this strong housing market recoveredalong with structural changes, which we are in position to capitalize on through our strategic investments, puts Lennar in a position to continue to drive returns. We are focused on cash flow, debt reduction, stock buyback, land controlled versus owned, return on capital, and expect this to generate increased deliveries asreturn on equity, and on innovative technologies. While we move into 2021. We expect to deliver between 15,500have been carefully managing our supply chain, the supply chain for both land and 16,000 homes in the fourth quarter of 2020. While community countconstruction is difficult to predict,significantly stressed. Accordingly, we expect our community count to increase approximately 10% in 2021.
Forat the short term, we are already extremely well positioned to manage costs and meet demand. While we're selling through communities somewhat faster than expected, we are well fortified with strong land positions thatend of the 2021 fiscal year will be brought online. And while lumber, in particular, and other costs are rising,up only approximately 7% versus the 10% we are actively managing sales pace, primarilypreviously guided. In addition, we expect our deliveries for the fourth quarter of 2021 will be approximately 18,000 versus the 19,000 to started homes in order to manage that cost risk. During the third quarter, our ability to raise prices together with our focus on cost controls enabled us to increase21,000 we previously guided. We expect our gross margin to be about 28% and operating margins by 270 basis points and 310 basis points, respectively. In addition, our laser focus on improving our SG&A leverage combined with the benefits of our increased use of technology helped drivewe expect our SG&A to be about 6.7% for the fourth quarter, though these amounts will move up or down a historical third quarter low of 8.0% of home sale revenues. We believe our strong margins will continue throughout 2021, and we expect our bottom line to grow faster than our top line.
Forbit depending on the intermediate term, we are and have been accelerating starts and productionnumber of homes under construction, while also accelerating the readiness of new communities that we control wherever possible. And for the longer term, we are focuseddelivered. Our return on ramping up our land purchases for new communities as we believe the industry will have a sustained expansion for the foreseeable future.equity stands now at 21.9%, which is an 800 basis point improvement over last year. We have remained focused on our optioned versus owned land strategy and will continue to manage towards a 50%-50% target. At the end ofstrategy. We ended the third quarter the portion of land we controlled through options or similar agreements was 35%, up from 30% in the third quarter of 2019. In addition, we ended the quarter with a 3.8 year3.3 years supply of land owned, compared to a 4.4 year3.8 years supply of land owned at the same time last year, and our homesites controlled percentage increased to 53% from 35% in the third quarter of 2019.prior year. Among other things, this has increased our cash flow, which enabled us to reduce debt, such that our quarter-endthird quarter homebuilding debt-to-total capital ratio improved to 21.2%, from 29.5%. in the prior year.
We expecthave continued to work on the structural components and organization of our spin company. The new company will be in a strong cashconfigured as an independent and liquidity position, and plan to continue to pay down debt, resume some form of a stock reacquisition program and look at other ways to properly deployactive asset management business that raises third-party capital to enhance returns.
support ongoing business verticals. As previously noted, two of these verticals have already raised third-party capital, of which our subsidiaries are active asset managers. Our financial services segment also had an excellent quarter, benefiting from an increase in volumemultifamily platform has approximately $9 billion of gross capital under management and margins,is raising its third fund now. Our growing single family for rent platform currently manages approximately $1.25 billion of equity already raised. Both of these programs are neatly configured as well asindependent, self-sustaining operations. Additionally, we have a dynamic and growing independent land and land management business that has been refined and we have a growing technology enabled efficiencies.investment business, LENX, that is performing exceptionally well. We are also focused on monetizing non-core assets,considering including our Multifamily platform, which we view as a blue-chip asset, but does not generate the type of returns we get from our core businesses.
With a solid balance sheet, leading positions in almost allthem, or at least portions of our homebuilding marketsinvestments in them, in the spin-off.
In spite of the miss of deliveries and continued execution of our core operating strategies,the supply chain disruption that is affecting us and the industry, we believe we have never been better positioned financially, organizationally and technologically to thrive and grow in this evolving housing market demand. As we begin to look to 2022, we see continued strength in the market and double-digit growth in sales, starts, deliveries and community count for Lennar. The story remains that supply is short and demand is strong. Some are concerned that demand is slowing as prices move higher and interest rates move. It feels to us that sales are slowing because many sales were made early and the industry is building through those sales slower than expected. We believe that home production has been constrained for a decade and we are well positionedmaking up the deficit now, which should keep the housing market thriving for some time to meet demand, drive high margins and cash flow and continue to grow with the market.come.
(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 nine months ended August 31, 20202021 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 quarters and increased deliveries in the second half of our fiscal year. However, a variety of factors such as the COVID-19 pandemic, can alter seasonal patterns.
Our net earnings attributable to Lennar were $1.4 billion, or $4.52 per diluted share ($4.52 per basic share), in the third quarter of 2021, compared to net earnings attributable to Lennar of $666.4 million, or $2.12 per diluted share ($2.13 per basic share), in the third quarter of 2020,2020. Our net earnings attributable to Lennar were $3.2 billion, or $10.36 per diluted share ($10.37 per basic share), in the nine months ended August 31, 2021, compared to net earnings attributable to Lennar of $513.4 million, or $1.59 per diluted share ($1.60 per basic share), in the third quarter of 2019. Our net earnings attributable to Lennar were $1.6 billion, or $5.03 per diluted share ($5.05 per basic share), in the nine months ended August 31, 2020, compared to net earnings attributable to Lennar of $1.2 billion, or $3.63 per diluted share ($3.64 per basic share), in the nine months ended August 31, 2019.
Financial information relating to our operations was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended August 31, 2021 | | |
| | | | | |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate | | Total | | | | |
| Revenues: | | | | | | | | | | | | | | | |
| Sales of homes | $ | 6,505,708 | | | — | | | — | | | — | | | — | | | 6,505,708 | | | | | |
| Sales of land | 45,055 | | | — | | | — | | | — | | | — | | | 45,055 | | | | | |
| Other revenues | 7,746 | | | 206,973 | | | 167,921 | | | 8,000 | | | — | | | 390,640 | | | | | |
| Total revenues | 6,558,509 | | | 206,973 | | | 167,921 | | | 8,000 | | | — | | | 6,941,403 | | | | | |
| Costs and expenses: | | | | | | | | | | | | | | | |
| Costs of homes sold | 4,732,403 | | | — | | | — | | | — | | | — | | | 4,732,403 | | | | | |
| Costs of land sold | 39,378 | | | — | | | — | | | — | | | — | | | 39,378 | | | | | |
| Selling, general and administrative expenses | 453,716 | | | — | | | — | | | — | | | — | | | 453,716 | | | | | |
| Other costs and expenses | — | | | 94,890 | | | 174,410 | | | 9,010 | | | — | | | 278,310 | | | | | |
| Total costs and expenses | 5,225,497 | | | 94,890 | | | 174,410 | | | 9,010 | | | — | | | 5,503,807 | | | | | |
| Equity in earnings (loss) from unconsolidated entities, Multifamily other gain (loss) and Lennar Other other income (expense), net | 2,391 | | | — | | | (2,904) | | | (2,220) | | | — | | | (2,733) | | | | | |
| Other expense, net | (5,570) | | | — | | | — | | | — | | | — | | | (5,570) | | | | | |
| Lennar Other realized and unrealized gain | — | | | — | | | — | | | 495,202 | | | — | | | 495,202 | | | | | |
| Operating earnings (loss) | $ | 1,329,833 | | | 112,083 | | | (9,393) | | | 491,972 | | | — | | | 1,924,495 | | | | | |
| Corporate general and administrative expenses | — | | | — | | | — | | | — | | | 94,942 | | | 94,942 | | | | | |
| Charitable foundation contribution | — | | | — | | | — | | | — | | | 15,199 | | | 15,199 | | | | | |
| Earnings (loss) before income taxes | $ | 1,329,833 | | | 112,083 | | | (9,393) | | | 491,972 | | | (110,141) | | | 1,814,354 | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended August 31, 2020 |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate | | Total |
| Revenues: | | | | | | | | | | | |
| Sales of homes | $ | 5,467,364 |
| | — |
| | — |
| | — |
| | — |
| | 5,467,364 |
|
| Sales of land | 34,323 |
| | — |
| | — |
| | — |
| | — |
| | 34,323 |
|
| Other revenues | 3,433 |
| | 237,068 |
| | 115,170 |
| | 12,896 |
| | — |
| | 368,567 |
|
| Total revenues | 5,505,120 |
| | 237,068 |
| | 115,170 |
| | 12,896 |
| | — |
| | 5,870,254 |
|
| Costs and expenses: | | | | | | | | | | | |
| Costs of homes sold | 4,204,814 |
| | — |
| | — |
| | — |
| | — |
| | 4,204,814 |
|
| Costs of land sold | 32,395 |
| | — |
| | — |
| | — |
| | — |
| | 32,395 |
|
| Selling, general and administrative expenses | 435,949 |
| | — |
| | — |
| | — |
| | — |
| | 435,949 |
|
| Other costs and expenses | — |
| | 101,989 |
| | 118,786 |
| | 2,062 |
| | — |
| | 222,837 |
|
| Total costs and expenses | 4,673,158 |
| | 101,989 |
| | 118,786 |
| | 2,062 |
| | — |
| | 4,895,995 |
|
| Equity in loss from unconsolidated entities and Multifamily other gain | (6,431 | ) | | — |
| | (1,532 | ) | | (2,189 | ) | | — |
| | (10,152 | ) |
| Other expense, net | (11,787 | ) | | — |
| | — |
| | (646 | ) | | — |
| | (12,433 | ) |
| Operating earnings (loss) | $ | 813,744 |
| | 135,079 |
| | (5,148 | ) | | 7,999 |
| | — |
| | 951,674 |
|
| Corporate general and administrative expenses | — |
| | — |
| | — |
| | — |
| | 92,661 |
| | 92,661 |
|
| Earnings (loss) before income taxes | $ | 813,744 |
| | 135,079 |
| | (5,148 | ) | | 7,999 |
| | (92,661 | ) | | 859,013 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended August 31, 2020 | | |
| | | | | |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate | | Total | | | | |
| Revenues: | | | | | | | | | | | | | | | |
| Sales of homes | $ | 5,467,364 | | | — | | | — | | | — | | | — | | | 5,467,364 | | | | | |
| Sales of land | 34,323 | | | — | | | — | | | — | | | — | | | 34,323 | | | | | |
| Other revenues | 3,433 | | | 237,068 | | | 115,170 | | | 12,896 | | | — | | | 368,567 | | | | | |
| Total revenues | 5,505,120 | | | 237,068 | | | 115,170 | | | 12,896 | | | — | | | 5,870,254 | | | | | |
| Costs and expenses: | | | | | | | | | | | | | | | |
| Costs of homes sold | 4,204,814 | | | — | | | — | | | — | | | — | | | 4,204,814 | | | | | |
| Costs of land sold | 32,395 | | | — | | | — | | | — | | | — | | | 32,395 | | | | | |
| Selling, general and administrative expenses | 435,949 | | | — | | | — | | | — | | | — | | | 435,949 | | | | | |
| Other costs and expenses | — | | | 101,989 | | | 118,786 | | | 2,062 | | | — | | | 222,837 | | | | | |
| Total costs and expenses | 4,673,158 | | | 101,989 | | | 118,786 | | | 2,062 | | | — | | | 4,895,995 | | | | | |
| Equity in loss from unconsolidated entities | (6,431) | | | — | | | (1,532) | | | (2,835) | | | — | | | (10,798) | | | | | |
| Other expense, net | (11,787) | | | — | | | — | | | — | | | — | | | (11,787) | | | | | |
| Operating earnings (loss) | $ | 813,744 | | | 135,079 | | | (5,148) | | | 7,999 | | | — | | | 951,674 | | | | | |
| Corporate general and administrative expenses | — | | | — | | | — | | | — | | | 85,998 | | | 85,998 | | | | | |
| Charitable foundation contribution | — | | | — | | | — | | | — | | | 6,663 | | | 6,663 | | | | | |
| Earnings (loss) before income taxes | $ | 813,744 | | | 135,079 | | | (5,148) | | | 7,999 | | | (92,661) | | | 859,013 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended August 31, 2021 | | |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate and unallocated | | Total | | | | |
| Revenues: | | | | | | | | | | | | | | | |
| Sales of homes | $ | 17,377,353 | | | — | | | — | | | — | | | — | | | 17,377,353 | | | | | |
| Sales of land | 131,483 | | | — | | | — | | | — | | | — | | | 131,483 | | | | | |
| Other revenues | 20,770 | | | 669,789 | | | 476,837 | | | 20,884 | | | — | | | 1,188,280 | | | | | |
| Total revenues | 17,529,606 | | | 669,789 | | | 476,837 | | | 20,884 | | | — | | | 18,697,116 | | | | | |
| Costs and expenses: | | | | | | | | | | | | | | | |
| Costs of homes sold | 12,820,638 | | | — | | | — | | | — | | | — | | | 12,820,638 | | | | | |
| Costs of land sold | 113,545 | | | — | | | — | | | — | | | — | | | 113,545 | | | | | |
| Selling, general and administrative expenses | 1,319,116 | | | — | | | — | | | — | | | — | | | 1,319,116 | | | | | |
| Other costs and expenses | — | | | 290,179 | | | 474,389 | | | 18,994 | | | — | | | 783,562 | | | | | |
| Total costs and expenses | 14,253,299 | | | 290,179 | | | 474,389 | | | 18,994 | | | — | | | 15,036,861 | | | | | |
| Equity in earnings (loss) from unconsolidated entities and Multifamily other gain (loss) and Lennar Other other income (expense), net | (3,862) | | | — | | | 9,682 | | | 59,954 | | | — | | | 65,774 | | | | | |
| Other income, net | 3,043 | | | — | | | — | | | — | | | — | | | 3,043 | | | | | |
| Lennar Other realized and unrealized gain | — | | | — | | | — | | | 847,377 | | | — | | | 847,377 | | | | | |
| Operating earnings | $ | 3,275,488 | | | 379,610 | | | 12,130 | | | 909,221 | | | — | | | 4,576,449 | | | | | |
| Corporate general and administrative expenses | — | | | — | | | — | | | — | | | 296,190 | | | 296,190 | | | | | |
| Charitable foundation contribution | — | | | — | | | — | | | — | | | 42,006 | | | 42,006 | | | | | |
| Earnings (loss) before income taxes | $ | 3,275,488 | | | 379,610 | | | 12,130 | | | 909,221 | | | (338,196) | | | 4,238,253 | | | | | |
| | | | Three Months Ended August 31, 2019 | | Nine Months Ended August 31, 2020 | |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate | | Total | (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate and unallocated | | Total | |
| Revenues: | | | | | | | | | | | | Revenues: | | | | | | | | | | | | |
| Sales of homes | $ | 5,330,694 |
| | — |
| | — |
| | — |
| | — |
| | 5,330,694 |
| Sales of homes | $ | 14,533,212 | | | — | | | — | | | — | | | — | | | 14,533,212 | | |
| Sales of land | 104,338 |
| | — |
| | — |
| | — |
| | — |
| | 104,338 |
| Sales of land | 81,023 | | | — | | | — | | | — | | | — | | | 81,023 | | |
| Other revenues | 3,966 |
| | 224,502 |
| | 183,958 |
| | 9,600 |
| | — |
| | 422,026 |
| Other revenues | 12,485 | | | 631,992 | | | 370,904 | | | 33,348 | | | — | | | 1,048,729 | | |
| Total revenues | 5,438,998 |
| | 224,502 |
| | 183,958 |
| | 9,600 |
| | — |
| | 5,857,058 |
| Total revenues | 14,626,720 | | | 631,992 | | | 370,904 | | | 33,348 | | | — | | | 15,662,964 | | |
| Costs and expenses: | | | | | | | | | | | | Costs and expenses: | | | | |
| Costs of homes sold | 4,245,061 |
| | — |
| | — |
| | — |
| | — |
| | 4,245,061 |
| Costs of homes sold | 11,359,364 | | | — | | | — | | | — | | | — | | | 11,359,364 | | |
| Costs of land sold | 92,151 |
| | — |
| | — |
| | — |
| | — |
| | 92,151 |
| Costs of land sold | 102,899 | | | — | | | — | | | — | | | — | | | 102,899 | | |
| Selling, general and administrative expenses | 444,720 |
| | — |
| | — |
| | — |
| | — |
| | 444,720 |
| Selling, general and administrative expenses | 1,222,032 | | | — | | | — | | | — | | | — | | | 1,222,032 | | |
| Other costs and expenses | — |
| | 149,804 |
| | 181,616 |
| | 2,734 |
| | — |
| | 334,154 |
| Other costs and expenses | — | | | 363,688 | | | 379,607 | | | 3,564 | | | 746,859 | | |
| Total costs and expenses | 4,781,932 |
| | 149,804 |
| | 181,616 |
| | 2,734 |
| | — |
| | 5,116,086 |
| Total costs and expenses | 12,684,295 | | | 363,688 | | | 379,607 | | | 3,564 | | | — | | | 13,431,154 | | |
| Equity in earnings (loss) from unconsolidated entities and Multifamily other gain | (10,459 | ) | | — |
| | 7,883 |
| | 8,903 |
| | — |
| | 6,327 |
| Equity in earnings (loss) from unconsolidated entities and Multifamily other gain | (20,077) | | | — | | | 4,702 | | | (28,712) | | | — | | | (44,087) | | |
| Other income, net | 12,375 |
| | — |
| | — |
| | 24 |
| | — |
| | 12,399 |
| |
| Operating earnings | $ | 658,982 |
| | 74,698 |
| | 10,225 |
| | 15,793 |
| | — |
| | 759,698 |
| |
| Financial Services gain on deconsolidation | | Financial Services gain on deconsolidation | — | | | 61,418 | | | — | | | — | | | — | | | 61,418 | | |
| Other expense, net | | Other expense, net | (16,845) | | | — | | | — | | | (10,195) | | | — | | | (27,040) | | |
| Operating earnings (loss) | | Operating earnings (loss) | $ | 1,905,503 | | | 329,722 | | | (4,001) | | | (9,123) | | | — | | | 2,222,101 | | |
| Corporate general and administrative expenses | — |
| | — |
| | — |
| | — |
| | 92,615 |
| | 92,615 |
| Corporate general and administrative expenses | — | | | — | | | — | | | — | | | 246,815 | | | 246,815 | | |
| Charitable foundation contribution | | Charitable foundation contribution | — | | | — | | | — | | | — | | | 16,144 | | | 16,144 | | |
| Earnings (loss) before income taxes | $ | 658,982 |
| | 74,698 |
| | 10,225 |
| | 15,793 |
| | (92,615 | ) | | 667,083 |
| Earnings (loss) before income taxes | $ | 1,905,503 | | | 329,722 | | | (4,001) | | | (9,123) | | | (262,959) | | | 1,959,142 | | |
|
| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended August 31, 2020 |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate | | Total |
| Revenues: | | | | | | | | | | | |
| Sales of homes | $ | 14,533,212 |
| | — |
| | — |
| | — |
| | — |
| | 14,533,212 |
|
| Sales of land | 81,023 |
| | — |
| | — |
| | — |
| | — |
| | 81,023 |
|
| Other revenues | 12,485 |
| | 631,992 |
| | 370,904 |
| | 33,348 |
| | — |
| | 1,048,729 |
|
| Total revenues | 14,626,720 |
| | 631,992 |
| | 370,904 |
| | 33,348 |
| | — |
| | 15,662,964 |
|
| Costs and expenses: | | | | | | | | | | | |
| Costs of homes sold | 11,359,364 |
| | — |
| | — |
| | — |
| | — |
| | 11,359,364 |
|
| Costs of land sold | 102,899 |
| | — |
| | — |
| | — |
| | — |
| | 102,899 |
|
| Selling, general and administrative expenses | 1,222,032 |
| | — |
| | — |
| | — |
| | — |
| | 1,222,032 |
|
| Other costs and expenses | — |
| | 363,688 |
| | 379,607 |
| | 3,564 |
| | — |
| | 746,859 |
|
| Total costs and expenses | 12,684,295 |
| | 363,688 |
| | 379,607 |
| | 3,564 |
| | — |
| | 13,431,154 |
|
| Equity in earnings (loss) from unconsolidated entities and Multifamily other gain | (20,077 | ) | | — |
| | 4,702 |
| | (28,712 | ) | | — |
| | (44,087 | ) |
| Financial Services gain on deconsolidation | — |
| | 61,418 |
| | — |
| | — |
| | — |
| | 61,418 |
|
| Other expense, net | (16,845 | ) | | — |
| | | | (10,195 | ) | | — |
| | (27,040 | ) |
| Operating earnings (loss) | $ | 1,905,503 |
| | 329,722 |
| | (4,001 | ) | | (9,123 | ) | | — |
| | 2,222,101 |
|
| Corporate general and administrative expenses | — |
| | — |
| | — |
| | — |
| | 262,959 |
| | 262,959 |
|
| Earnings (loss) before income taxes | $ | 1,905,503 |
| | 329,722 |
| | (4,001 | ) | | (9,123 | ) | | (262,959 | ) | | 1,959,142 |
|
|
| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended August 31, 2019 |
| (In thousands) | Homebuilding | | Financial Services | | Multifamily | | Lennar Other | | Corporate | | Total |
| Revenues: | | | | | | | | | | | |
| Sales of homes | $ | 14,114,939 |
| | — |
| | — |
| | — |
| | — |
| | 14,114,939 |
|
| Sales of land | 134,576 |
| | — |
| | — |
| | — |
| | — |
| | 134,576 |
|
| Other revenues | 8,803 |
| | 572,029 |
| | 428,764 |
| | 28,919 |
| | — |
| | 1,038,515 |
|
| Total revenues | 14,258,318 |
| | 572,029 |
| | 428,764 |
| | 28,919 |
| | — |
| | 15,288,030 |
|
| Homebuilding costs and expenses: | | | | | | | | | | | |
| Costs of homes sold | 11,264,640 |
| | — |
| | — |
| | — |
| | — |
| | 11,264,640 |
|
| Costs of land sold | 119,685 |
| | — |
| | — |
| | — |
| | — |
| | 119,685 |
|
| Selling, general and administrative | 1,223,701 |
| | — |
| | — |
| | — |
| | — |
| | 1,223,701 |
|
| Other costs and expenses | — |
| | 422,142 |
| | 431,510 |
| | 7,550 |
| | | | 861,202 |
|
| Total costs and expenses | 12,608,026 |
| | 422,142 |
| | 431,510 |
| | 7,550 |
| | — |
| | 13,469,228 |
|
| Equity in earnings (loss) from unconsolidated entities and Multifamily other gain | (4,601 | ) | | — |
| | 15,446 |
| | 12,255 |
| | — |
| | 23,100 |
|
| Other expense, net | (35,325 | ) | | — |
| | — |
| | (12,900 | ) | | — |
| | (48,225 | ) |
| Operating earnings | $ | 1,610,366 |
| | 149,887 |
| | 12,700 |
| | 20,724 |
| | — |
| | 1,793,677 |
|
| Corporate general and administrative expenses | — |
| | — |
| | — |
| | — |
| | 248,071 |
| | 248,071 |
|
| Earnings (loss) before income taxes | $ | 1,610,366 |
| | 149,887 |
| | 12,700 |
| | 20,724 |
| | (248,071 | ) | | 1,545,606 |
|
Three Months Ended August 31, 20202021 versus Three Months Ended August 31, 20192020
Revenues from home sales increased 3%19% in the third quarter of 20202021 to $5.5$6.5 billion from $5.3$5.5 billion in the third quarter of 2019.2020. Revenues were higher primarily due to a 2%10% increase in the number of home deliveries excluding unconsolidated entities, and a 1%an 8% increase in the average sales price of homes delivered.price. New home deliveries excluding unconsolidated entities, increased to 13,80915,199 homes in the third quarter of 20202021 from 13,51313,842 homes in the third quarter of 2019.2020. The average sales price of homes delivered was $428,000 in the third quarter of 2021, compared to $396,000 in the third quarter of 2020, compared to $394,000 in the third quarter of 2019.2020.
Gross margin on home sales were $1.8 billion, or 27.3%, in the third quarter of 2021, compared to $1.3 billion, or 23.1%, in the third quarter of 2020, compared to $1.1 billion, or 20.4%, in the third quarter of 2019.2020. The gross margin percentage on home sales increased primarily due to our focus on reducing construction costs.
Selling, general and administrative expenses were $453.7 million in the third quarter of 2021, compared to $435.9 million in the third quarter of 2020, compared to $444.7 million in the third quarter of 2019.2020. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 7.0% in the third quarter of 2021, from 8.0% in the third quarter of 2020, from 8.3%2020. This was the lowest percentage for a quarter in the third quarter of 2019 as we focused on improving our leverage combined with thehistory primarily due to a decrease in broker commissions and benefits of our technology efforts.
Operating earnings for our Financial Services segment were $111.9 million in the third quarter of 2021, compared to $135.1 million in the third quarter of 2020, compared to $74.7 million ($78.8 million net of noncontrolling interests)2020. The decrease in the third quarter of 2019. Operatingoperating earnings increasedwas primarily due to an improvement in thelower mortgage business as a result ofnet margins driven by an increase in volume and margin. Additionally, operating earnings of our title business increased primarily due tocompetition. This was partially offset by an increase in volume.title operating earnings due to higher volume and an increase in profit per transaction derived from technology initiatives.
Operating loss for our Multifamily segment was $9.4 million in the third quarter of 2021, compared to $5.1 million in the third quarter of 2020, compared to operating earnings of $10.2 million ($10.5 million net of noncontrolling interests) in the third quarter of 2019, which included the sale of an operating property.2020. Operating earnings for our Lennar Other segment werewas $492.0 million in the third quarter of 2021, compared to $8.0 million in the third quarter of 2020, compared to $15.8 million ($15.9 million net of noncontrolling interests) in2020. In the third quarter of 2019.2021, we recorded mark to market gains on our investments in newly public companies (Hippo, SmartRent and Blend) of $433 million and on our current investments (Opendoor and Sunnova) of $61 million.
Nine Months Ended August 31, 20202021 versus Nine Months Ended August 31, 20192020
Revenues from home sales increased 3%20% in the nine months ended August 31, 20202021 to $14.5$17.4 billion from $14.1$14.5 billion in the nine months ended August 31, 2019.2020. Revenues were higher primarily due to a 5%14% increase in the number of home deliveries excluding unconsolidated entities.and a 5% increase in the average sales price. New home deliveries excluding unconsolidated entities, increased to 36,77542,006 homes in the nine months ended August 31, 20202021 from 35,02136,835 homes in the nine months ended August 31, 2019.2020. The average sales price of homes
delivered was $414,000 in the nine months ended August 31, 2021, compared to $395,000 in the nine months ended August 31, 2020, compared to $403,0002020.
Gross margin on home sales were $4.6 billion, or 26.2%, in the nine months ended August 31, 2019. The decrease in average sales price primarily resulted from continuing2021, compared to shift to lower-priced communities and regional product mix due to COVID-19 stay-at-home orders in certain higher priced markets.
Gross margin on home sales were $3.2 billion or 21.8%, in the nine months ended August 31, 2020, compared to $2.9 billion or 20.2%, in the nine months ended August 31, 2019.2020. The gross margin percentage on home sales increased primarily due to our continued focus on reducing construction costs. Lossas a result of price appreciation as the increase in revenue per square foot outpaced the increase in cost per square foot. Gross margin on land sales in the nine months ended August 31, 2021 was $17.9 million, compared to a loss of $21.9 million in the nine months ended August 31, 2020. The loss in the nine months ended August 31, 2020 was $21.9 million, primarily due to a write-off of costs in the second quarter of 2020 as a result of usLennar not moving forward with a naval base development in Concord, California, northeast of San Francisco. Gross margin on land sales
Selling, general and administrative expenses were $14.9 million$1.3 billion in the nine months ended August 31, 2019.
Selling, general and administrative expenses were2021, compared to $1.2 billion in both the nine months ended August 31, 2020 and 2019.2020. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 7.6% in the nine months ended August 31, 2021, from 8.4% in the nine months ended August 31, 2020, from 8.7%2020. The improvement was primarily due to a decrease in the nine months ended August 31, 2019.broker commissions and benefits of our technology efforts.
Operating earnings for our Financial Services segment were $329.7$379.3 million ($343.8in the nine months ended August 31, 2021, compared to $343.8 million net of noncontrolling interests) in the nine months ended August 31, 2020 compared to $149.9(which included $329.7 million ($163.0operating earnings and an add back of $14.1 million net ofloss attributable to noncontrolling interests) in the. The nine months ended August 31, 2019. Operating earnings increased due to an improvement in our mortgage and title businesses as a result of an increase in volume and margin, as well as reductions in loan origination costs. Additionally, in the second quarter of 2020 our Financial Services segment recordedincluded a $61.4 million gain on the deconsolidation of a previously consolidated entity. Excluding this gain, the improvement in operating earnings was primarily due to an increase in volume and margin in the mortgage and title businesses.
Operating lossearnings for our Multifamily segment waswere $12.1 million in the nine months ended August 31, 2021, compared to an operating loss of $4.0 million in the nine months ended August 31, 2020, compared to operating2020. Operating earnings of $12.7for our Lennar Other segment were $909.2 million ($13.4 million net of noncontrolling interests) in the nine months ended August 31, 2019. Operating2021, compared to an operating loss for our Lennar Other segment wasof $9.1 million in the nine months ended August 31, 2020, compared to2020. The operating earnings of $20.7 million ($21.2 million net of noncontrolling interests) infor the nine months ended August 31, 2019.
For2021 was primarily due to mark to market gains on strategic investments that went public during the nine months ended August 31, 20202021 (Opendoor, Hippo, SmartRent and 2019, we had a tax provisionBlend) and the sale of $382.5 million and $374.7 million, respectively, which resulted in an overall effective income tax rate of 19.5% and 24.2%, respectively. The reduction in the overall effective income tax rate is primarily dueour solar business to the extension of the new energy efficient home tax credit during the first quarter of 2020.Sunnova.
Homebuilding Segments
At August 31, 2020,2021, our reportable Homebuilding segments and Homebuilding Other consistedare outlined in Note 2 of homebuilding divisions located in:
East: Florida, New Jersey, Pennsylvania and South Carolina
Central: Georgia, Illinois, Indiana, Maryland, North Carolina, Minnesota, Tennessee and Virginia
Texas: Texas
West: Arizona, California, Colorado, Nevada, Oregon, Utah and Washington
Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint Holdings, LLC ("FivePoint")
the Notes to Condensed Consolidated Financial Statements. The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated:
Selected Financial and Operational Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended August 31, 2021 | | |
| Gross Margins | | Operating Earnings (Loss) | | | | |
| ($ in thousands) | Sales of Homes Revenue | | Costs of Sales of Homes | | Gross Margin % | | Net Margins on Sales of Homes (1) | | Gross Margins on Sales of Land | | Other Revenue | | Equity in Earnings (Loss) from Unconsolidated Entities | | Other Income (Expense), net | | Operating Earnings (Loss) | | | | |
| East | $ | 1,655,301 | | | 1,174,592 | | | 29.0 | % | | 350,305 | | | 3,147 | | | 1,867 | | | 3,493 | | | (1,917) | | | 356,895 | | | | | |
| Central | 1,262,540 | | | 974,843 | | | 22.8 | % | | 196,103 | | | 95 | | | 589 | | | 526 | | | (84) | | | 197,229 | | | | | |
| Texas | 818,869 | | | 570,228 | | | 30.4 | % | | 184,267 | | | 1,835 | | | 365 | | | 7 | | | (466) | | | 186,008 | | | | | |
| West | 2,764,857 | | | 2,004,108 | | | 27.5 | % | | 603,721 | | | 600 | | | 1,600 | | | 4,263 | | | (1,369) | | | 608,815 | | | | | |
| Other (2) | 4,141 | | | 8,632 | | | (108.5) | % | | (14,807) | | | — | | | 3,325 | | | (5,898) | | | (1,734) | | | (19,114) | | | | | |
| Totals | $ | 6,505,708 | | | 4,732,403 | | | 27.3 | % | | 1,319,589 | | | 5,677 | | | 7,746 | | | 2,391 | | | (5,570) | | | 1,329,833 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended August 31, 2020 | | |
| Gross Margins | | Operating Earnings (Loss) | | | | |
| ($ in thousands) | Sales of Homes Revenue | | Costs of Sales of Homes | | Gross Margin % | | Net Margins on Sales of Homes (1) | | Gross Margins (Loss) on Sales of Land | | Other Revenue | | Equity in Earnings (Loss) from Unconsolidated Entities | | Other Income (Expense), net | | Operating Earnings (Loss) | | | | |
| East | $ | 1,477,273 | | | 1,112,035 | | | 24.7 | % | | 241,904 | | | (103) | | | 638 | | | 897 | | | 853 | | | 244,189 | | | | | |
| Central | 1,062,799 | | | 842,764 | | | 20.7 | % | | 134,395 | | | (57) | | | 1,341 | | | 70 | | | (3,071) | | | 132,678 | | | | | |
| Texas | 719,467 | | | 538,480 | | | 25.2 | % | | 114,954 | | | 2,016 | | | 203 | | | 242 | | | (1,304) | | | 116,111 | | | | | |
| West | 2,205,235 | | | 1,706,530 | | | 22.6 | % | | 343,353 | | | 72 | | | 1,145 | | | 48 | | | (1,784) | | | 342,834 | | | | | |
| Other (2) | 2,590 | | | 5,005 | | | (93.2) | % | | (8,005) | | | — | | | 106 | | | (7,688) | | | (6,481) | | | (22,068) | | | | | |
| Totals | $ | 5,467,364 | | | 4,204,814 | | | 23.1 | % | | 826,601 | | | 1,928 | | | 3,433 | | | (6,431) | | | (11,787) | | | 813,744 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended August 31, 2021 | | |
| Gross Margins | | Operating Earnings (Loss) | | | | |
| (In thousands) | Sales of Homes Revenue | | Costs of Sales of Homes | | Gross Margin % | | Net Margins on Sales of Homes (1) | | Gross Margins on Sales of Land | | Other Revenue | | Equity in Earnings (Loss) from Unconsolidated Entities | | Other Income (Expense), net | | Operating Earnings (Loss) | | | | |
| East | $ | 4,553,941 | | | 3,278,463 | | | 28.0 | % | | 899,817 | | | 9,558 | | | 5,053 | | | 2,942 | | | 11,435 | | | 928,805 | | | | | |
| Central | 3,282,168 | | | 2,534,816 | | | 22.8 | % | | 485,631 | | | 846 | | | 1,573 | | | 941 | | | (691) | | | 488,300 | | | | | |
| Texas | 2,245,671 | | | 1,572,494 | | | 30.0 | % | | 487,231 | | | 4,706 | | | 1,185 | | | 548 | | | (1,962) | | | 491,708 | | | | | |
| West | 7,284,928 | | | 5,404,983 | | | 25.8 | % | | 1,412,934 | | | 2,828 | | | 3,961 | | | 4,304 | | | (695) | | | 1,423,332 | | | | | |
| Other (2) | 10,645 | | | 29,882 | | | (180.7) | % | | (48,014) | | | — | | | 8,998 | | | (12,597) | | | (5,044) | | | (56,657) | | | | | |
| Totals | $ | 17,377,353 | | | 12,820,638 | | | 26.2 | % | | 3,237,599 | | | 17,938 | | | 20,770 | | | (3,862) | | | 3,043 | | | 3,275,488 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended August 31, 2020 | | |
| Gross Margins | | Operating Earnings (Loss) |
| (In thousands) | Sales of Homes Revenue | | Costs of Sales of Homes | | Gross Margin % | | Net Margins on Sales of Homes (1) | | Gross Margins on Sales of Land | | Other Revenue | | Equity in Earnings (Loss) from Unconsolidated Entities | | Other Income (Expense), net | | Operating Earnings (Loss) | | | | |
| East | $ | 3,904,268 | | | 2,971,929 | | | 23.9 | % | | 581,923 | | | (1,681) | | | 3,913 | | | 1,474 | | | 475 | | | 586,104 | | | | | |
| Central | 2,833,745 | | | 2,300,783 | | | 18.8 | % | | 291,672 | | | (703) | | | 2,209 | | | 642 | | | (1,789) | | | 292,031 | | | | | |
| Texas | 1,877,374 | | | 1,428,758 | | | 23.9 | % | | 266,647 | | | 5,213 | | | 970 | | | 446 | | | (4,205) | | | 269,071 | | | | | |
| West | 5,894,183 | | | 4,619,334 | | | 21.6 | % | | 841,369 | | | (1,267) | | | 4,873 | | | 3,948 | | | (1,088) | | | 847,835 | | | | | |
| Other (2) | 23,642 | | | 38,560 | | | (63.1) | % | | (29,795) | | | (23,438) | | | 520 | | | (26,587) | | | (10,238) | | | (89,538) | | | | | |
| Totals | $ | 14,533,212 | | | 11,359,364 | | | 21.8 | % | | 1,951,816 | | | (21,876) | | | 12,485 | | | (20,077) | | | (16,845) | | | 1,905,503 | | | | | |
(1)Net margins on sales of homes include selling, general and administrative expenses. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended August 31, 2020 |
| | Gross Margins | | Operating Earnings (Loss) |
| (In thousands) | Sales of Homes Revenue | | Costs of Sales of Homes | | Gross Margin % | | Net Margins on Sales of Homes (1) | | Gross Margins on Sales of Land | | Other Revenue | | Equity in Earnings (Loss) from Unconsolidated Entities | | Other Income (Expense), net | | Operating Earnings (Loss) |
| East | $ | 1,477,273 |
| | 1,112,035 |
| | 24.7 | % | | 241,904 |
| | (103 | ) | | 638 |
| | 897 |
| | 853 |
| | 244,189 |
|
| Central | 1,062,799 |
| | 842,764 |
| | 20.7 | % | | 134,395 |
| | (57 | ) | | 1,341 |
| | 70 |
| | (3,071 | ) | | 132,678 |
|
| Texas | 719,467 |
| | 538,480 |
| | 25.2 | % | | 114,954 |
| | 2,016 |
| | 203 |
| | 242 |
| | (1,304 | ) | | 116,111 |
|
| West | 2,205,235 |
| | 1,706,530 |
| | 22.6 | % | | 343,353 |
| | 72 |
| | 1,145 |
| | 48 |
| | (1,784 | ) | | 342,834 |
|
| Other (2) | 2,590 |
| | 5,005 |
| | (93.2 | )% | | (8,005 | ) | | — |
| | 106 |
| | (7,688 | ) | | (6,481 | ) | | (22,068 | ) |
| Totals | $ | 5,467,364 |
| | 4,204,814 |
| | 23.1 | % | | $ | 826,601 |
| | 1,928 |
| | 3,433 |
| | (6,431 | ) | | (11,787 | ) | | 813,744 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended August 31, 2019 |
| | Gross Margins | | Operating Earnings (Loss) |
| (In thousands) | Sales of Homes Revenue | | Costs of Sales of Homes | | Gross Margin % | | Net Margins on Sales of Homes (1) | | Gross Margins on Sales of Land | | Other Revenue | | Equity in Earnings (Loss) from Unconsolidated Entities | | Other Income (Expense), net | | Operating Earnings (Loss) |
| East | $ | 1,500,056 |
| | 1,167,440 |
| | 22.2 | % | | 209,610 |
| | 119 |
| | 1,083 |
| | (184 | ) | | 8,707 |
| | 219,335 |
|
| Central | 1,054,715 |
| | 858,434 |
| | 18.6 | % | | 108,564 |
| | 4,113 |
| | 699 |
| | 14 |
| | 3,199 |
| | 116,589 |
|
| Texas | 696,903 |
| | 555,561 |
| | 20.3 | % | | 75,213 |
| | 3,322 |
| | 253 |
| | 176 |
| | (666 | ) | | 78,298 |
|
| West | 2,060,740 |
| | 1,646,254 |
| | 20.1 | % | | 253,844 |
| | 727 |
| | 1,336 |
| | 655 |
| | 2,862 |
| | 259,424 |
|
| Other (2) | 18,280 |
| | 17,372 |
| | 5.0 | % | | (6,318 | ) | | 3,906 |
| | 595 |
| | (11,120 | ) | | (1,727 | ) | | (14,664 | ) |
| Totals | $ | 5,330,694 |
| | 4,245,061 |
| | 20.4 | % | | $ | 640,913 |
| | 12,187 |
| | 3,966 |
| | (10,459 | ) | | 12,375 |
| | 658,982 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended August 31, 2020 |
| | Gross Margins | | Operating Earnings (Loss) |
| (In thousands) | Sales of Homes Revenue | | Costs of Sales of Homes | | Gross Margin % | | Net Margins on Sales of Homes (1) | | Gross Margins on Sales of Land | | Other Revenue | | Equity in Earnings (Loss) from Unconsolidated Entities | | Other Income (Expense), net | | Operating Earnings (Loss) |
| East | $ | 3,904,268 |
| | 2,971,929 |
| | 23.9 | % | | 581,923 |
| | (1,681 | ) | | 3,913 |
| | 1,474 |
| | 475 |
| | 586,104 |
|
| Central | 2,833,745 |
| | 2,300,783 |
| | 18.8 | % | | 291,672 |
| | (703 | ) | | 2,209 |
| | 642 |
| | (1,789 | ) | | 292,031 |
|
| Texas | 1,877,374 |
| | 1,428,758 |
| | 23.9 | % | | 266,647 |
| | 5,213 |
| | 970 |
| | 446 |
| | (4,205 | ) | | 269,071 |
|
| West | 5,894,183 |
| | 4,619,334 |
| | 21.6 | % | | 841,369 |
| | (1,267 | ) | | 4,873 |
| | 3,948 |
| | (1,088 | ) | | 847,835 |
|
| Other (2) | 23,642 |
| | 38,560 |
| | (63.1 | )% | | (29,795 | ) | | (23,438 | ) | | 520 |
| | (26,587 | ) | | (10,238 | ) | | (89,538 | ) |
| Totals | $ | 14,533,212 |
| | 11,359,364 |
| | 21.8 | % | | $ | 1,951,816 |
| | (21,876 | ) | | 12,485 |
| | (20,077 | ) | | (16,845 | ) | | 1,905,503 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended August 31, 2019 |
| | Gross Margins | | Operating Earnings (Loss) |
| (In thousands) | Sales of Homes Revenue | | Costs of Sales of Homes | | Gross Margin % | | Net Margins on Sales of Homes (1) | | Gross Margins on Sales of Land | | Other Revenue | | Equity in Earnings (Loss) from Unconsolidated Entities | | Other Income (Expense), net | | Operating Earnings (Loss) |
| East | $ | 3,828,659 |
| | 2,998,113 |
| | 21.7 | % | | 491,322 |
| | 3,854 |
| | 2,802 |
| | (418 | ) | | 6,243 |
| | 503,803 |
|
| Central | 2,723,292 |
| | 2,230,857 |
| | 18.1 | % | | 254,422 |
| | 4,957 |
| | 975 |
| | 152 |
| | 3,732 |
| | 264,238 |
|
| Texas | 1,796,343 |
| | 1,435,311 |
| | 20.1 | % | | 182,257 |
| | 5,597 |
| | 508 |
| | 334 |
| | (2,746 | ) | | 185,950 |
|
| West | 5,738,881 |
| | 4,569,646 |
| | 20.4 | % | | 718,061 |
| | (3,422 | ) | | 2,743 |
| | 158 |
| | 5,449 |
| | 722,989 |
|
| Other (2) | 27,764 |
| | 30,713 |
| | (10.6 | )% | | (19,464 | ) | | 3,905 |
| | 1,775 |
| | (4,827 | ) | | (48,003 | ) | | (66,614 | ) |
| Totals | $ | 14,114,939 |
| | 11,264,640 |
| | 20.2 | % | | $ | 1,626,598 |
| | 14,891 |
| | 8,803 |
| | (4,601 | ) | | (35,325 | ) | | 1,610,366 |
|
| |
(1) | Net margins on sales of homes include selling, general and administrative expenses. |
| |
(2) | Negative gross and net margins were due to period costs in Urban divisions that impact costs of homes sold without sufficient sales of homes revenue to offset those costs. |
Summary of Homebuilding Data
Deliveries:
| | | | Three Months Ended | | Three Months Ended |
| | Homes | | Dollar Value (In thousands) | | Average Sales Price | | Homes | | Dollar Value (In thousands) | | Average Sales Price |
| | August 31, | | August 31, | | August 31, | | August 31, | | August 31, | | August 31, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| East | 4,309 |
| | 4,521 |
| | $ | 1,488,022 |
| | 1,502,780 |
| | $ | 345,000 |
| | 332,000 |
| East | 4,568 | | | 4,309 | | | $ | 1,660,357 | | | 1,488,022 | | | $ | 363,000 | | | 345,000 | |
| Central | 2,767 |
| | 2,809 |
| | 1,062,799 |
| | 1,054,715 |
| | 384,000 |
| | 375,000 |
| Central | 3,211 | | | 2,767 | | | 1,262,540 | | | 1,062,799 | | | 393,000 | | | 384,000 | |
| Texas | 2,598 |
| | 2,260 |
| | 719,467 |
| | 696,904 |
| | 277,000 |
| | 308,000 |
| Texas | 2,747 | | | 2,598 | | | 818,869 | | | 719,467 | | | 298,000 | | | 277,000 | |
| West | 4,165 |
| | 3,908 |
| | 2,205,235 |
| | 2,060,740 |
| | 529,000 |
| | 527,000 |
| West | 4,669 | | | 4,165 | | | 2,764,856 | | | 2,205,235 | | | 592,000 | | | 529,000 | |
| Other | 3 |
| | 24 |
| | 2,590 |
| | 18,280 |
| | 863,000 |
| | 762,000 |
| Other | 4 | | | 3 | | | 4,141 | | | 2,590 | | | 1,035,000 | | | 863,000 | |
| Total | 13,842 |
| | 13,522 |
| | $ | 5,478,113 |
| | 5,333,419 |
| | $ | 396,000 |
| | 394,000 |
| Total | 15,199 | | | 13,842 | | | $ | 6,510,763 | | | 5,478,113 | | | $ | 428,000 | | | 396,000 | |
Of the total homes delivered listed above, 15 homes with a dollar value of $5.1 million and an average sales price of $337,000 represent home deliveries from unconsolidated entities for the three months ended August 31, 2021, compared to 33 homeshome deliveries with a dollar value of $10.7 million and an average sales price of $326,000 for the three months ended August 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| Homes | | Dollar Value (In thousands) | | Average Sales Price |
| August 31, | | August 31, | | August 31, |
| 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| East | 12,968 | | | 11,511 | | | $ | 4,572,592 | | | 3,924,289 | | | $ | 353,000 | | | 341,000 | |
| Central | 8,391 | | | 7,389 | | | 3,282,168 | | | 2,833,745 | | | 391,000 | | | 384,000 | |
| Texas | 7,843 | | | 6,637 | | | 2,245,671 | | | 1,877,374 | | | 286,000 | | | 283,000 | |
| West | 12,793 | | | 11,273 | | | 7,284,927 | | | 5,894,183 | | | 569,000 | | | 523,000 | |
| Other | 11 | | | 25 | | | 10,645 | | | 23,642 | | | 968,000 | | | 946,000 | |
| Total | 42,006 | | | 36,835 | | | $ | 17,396,003 | | | 14,553,233 | | | $ | 414,000 | | | 395,000 | |
Of the total homes delivered listed above, 58 homes with a dollar value of $18.7 million and an average sales price of $322,000 represent home deliveries from unconsolidated entities for the threenine months ended August 31, 2020,2021, compared to nine60 home deliveries with a dollar value of $2.7 million and an average sales price of $303,000 for the three months ended August 31, 2019.
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended |
| | Homes | | Dollar Value (In thousands) | | Average Sales Price |
| | August 31, | | August 31, | | August 31, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 |
| East | 11,511 |
| | 11,502 |
| | $ | 3,924,289 |
| | 3,838,124 |
| | $ | 341,000 |
| | 334,000 |
|
| Central | 7,389 |
| | 7,193 |
| | 2,833,745 |
| | 2,723,291 |
| | 384,000 |
| | 379,000 |
|
| Texas | 6,637 |
| | 5,660 |
| | 1,877,374 |
| | 1,796,344 |
| | 283,000 |
| | 317,000 |
|
| West | 11,273 |
| | 10,667 |
| | 5,894,183 |
| | 5,738,881 |
| | 523,000 |
| | 538,000 |
|
| Other | 25 |
| | 49 |
| | 23,642 |
| | 43,312 |
| | 946,000 |
| | 884,000 |
|
| Total | 36,835 |
| | 35,071 |
| | $ | 14,553,233 |
| | 14,139,952 |
| | $ | 395,000 |
| | 403,000 |
|
Of the total homes delivered listed above, 60 homes with a dollar value of $20.0 million and an average sales price of $334,000 represent home deliveries from unconsolidated entities for the nine months ended August 31, 2020, compared to 50 home deliveries2020.
New Orders (1):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| Active Communities | | Homes | | Dollar Value (In thousands) | | Average Sales Price |
| August 31, | | August 31, | | August 31, | | August 31, |
| 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| East | 329 | | | 340 | | | 5,308 | | | 4,655 | | | $ | 2,100,466 | | | 1,631,349 | | | $ | 396,000 | | | 350,000 | |
| Central | 281 | | | 297 | | | 3,189 | | | 3,375 | | | 1,352,814 | | | 1,298,792 | | | 424,000 | | | 385,000 | |
| Texas | 233 | | | 217 | | | 3,203 | | | 2,746 | | | 988,644 | | | 743,553 | | | 309,000 | | | 271,000 | |
| West | 350 | | | 341 | | | 4,571 | | | 4,786 | | | 3,006,501 | | | 2,580,328 | | | 658,000 | | | 539,000 | |
| Other | 3 | | | 3 | | | 6 | | | 2 | | | 5,974 | | | 1,452 | | | 996,000 | | | 726,000 | |
| Total | 1,196 | | | 1,198 | | | 16,277 | | | 15,564 | | | $ | 7,454,399 | | | 6,255,474 | | | $ | 458,000 | | | 402,000 | |
Of the total homes listed above, 35 homes with a dollar value of $25.0$13.1 million and an average sales price of $500,000$375,000 represent homes in four active communities from unconsolidated entities for the ninethree months ended August 31, 2019.
New Orders (1):
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
| | Active Communities | | Homes | | Dollar Value (In thousands) | | Average Sales Price |
| | August 31, | | August 31, | | August 31, | | August 31, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 |
| East | 340 |
| | 361 |
| | 4,655 |
| | 4,530 |
| | $ | 1,631,349 |
| | 1,462,210 |
| | $ | 350,000 |
| | 323,000 |
|
| Central | 297 |
| | 338 |
| | 3,375 |
| | 2,632 |
| | 1,298,792 |
| | 1,003,818 |
| | 385,000 |
| | 381,000 |
|
| Texas | 217 |
| | 235 |
| | 2,746 |
| | 2,221 |
| | 743,553 |
| | 660,304 |
| | 271,000 |
| | 297,000 |
|
| West | 341 |
| | 362 |
| | 4,786 |
| | 3,949 |
| | 2,580,328 |
| | 2,049,404 |
| | 539,000 |
| | 519,000 |
|
| Other | 3 |
| | 4 |
| | 2 |
| | 37 |
| | 1,452 |
| | 33,896 |
| | 726,000 |
| | 916,000 |
|
| Total | 1,198 |
| | 1,300 |
| | 15,564 |
| | 13,369 |
| | $ | 6,255,474 |
| | 5,209,632 |
| | $ | 402,000 |
| | 390,000 |
|
Of the total new orders listed above,2021, compared to 34 homes with a dollar value of $9.7 million and an average sales price of $286,000 represent new orders in four active communities from unconsolidated entities for the three months ended August 31, 2020, compared to 21 new orders with a dollar value of $7.3 million and an average sales price of $349,000 in five active communities for the three months ended August 31, 2019.2020.
(1)Homes represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three and nine months ended August 31, 2021 and August 31, 2020. | | | | Nine Months Ended | | Nine Months Ended |
| | Homes | | Dollar Value (In thousands) | | Average Sales Price | | Homes | | Dollar Value (In thousands) | | Average Sales Price |
| | August 31, | | August 31, | | August 31, | | August 31, | | August 31, | | August 31, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| East | 12,512 |
| | 12,756 |
| | $ | 4,266,221 |
| | 4,242,708 |
| | $ | 341,000 |
| | 333,000 |
| East | 15,473 | | | 12,512 | | | $ | 5,788,506 | | | 4,266,221 | | | $ | 374,000 | | | 341,000 | |
| Central | 8,741 |
| | 7,974 |
| | 3,341,959 |
| | 3,020,328 |
| | 382,000 |
| | 379,000 |
| Central | 9,931 | | | 8,741 | | | 4,086,170 | | | 3,341,959 | | | 411,000 | | | 382,000 | |
| Texas | 7,327 |
| | 6,069 |
| | 1,986,770 |
| | 1,861,849 |
| | 271,000 |
| | 307,000 |
| Texas | 9,228 | | | 7,327 | | | 2,800,826 | | | 1,986,770 | | | 304,000 | | | 271,000 | |
| West | 12,359 |
| | 11,481 |
| | 6,508,509 |
| | 5,977,758 |
| | 527,000 |
| | 521,000 |
| West | 14,358 | | | 12,359 | | | 8,871,465 | | | 6,508,509 | | | 618,000 | | | 527,000 | |
| Other | 16 |
| | 70 |
| | 15,189 |
| | 60,447 |
| | 949,000 |
| | 864,000 |
| Other | 14 | | | 16 | | | 14,095 | | | 15,189 | | | 1,007,000 | | | 949,000 | |
| Total | 40,955 |
| | 38,350 |
| | $ | 16,118,648 |
| | 15,163,090 |
| | $ | 394,000 |
| | 395,000 |
| Total | 49,004 | | | 40,955 | | | $ | 21,561,062 | | | 16,118,648 | | | $ | 440,000 | | | 394,000 | |
Of the total new ordershomes listed above, 102 homes with a dollar value of $36.7 million and an average sales price of $359,000 represent homes from unconsolidated entities for the nine months ended August 31, 2021, compared to 85 homes with a dollar value of $26.8 million and an average sales price of $316,000 represent new orders from unconsolidated entities for the nine months ended August 31, 2020, compared to 68 new orders with a dollar value of $32.1 million and an average sales price of $472,000 for the nine months ended August 31, 2019.
| |
(1) | New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three and nine months ended August 31, 2020 and August 31, 2019. |
| | | | | | | | | | | | | | | At |
| | Homes | | Dollar Value (In thousands) | | Average Sales Price | | Homes | | Dollar Value (In thousands) | | Average Sales Price |
| | August 31, | | August 31, | | August 31, | | August 31, | | August 31, | | August 31, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| East | 6,691 |
| | 6,999 |
| | $ | 2,368,300 |
| | 2,419,795 |
| | $ | 354,000 |
| | 346,000 |
| East | 8,518 | | | 6,691 | | | $ | 3,526,849 | | | 2,368,300 | | | $ | 414,000 | | | 354,000 | |
| Central | 4,502 |
| | 4,110 |
| | 1,752,180 |
| | 1,597,944 |
| | 389,000 |
| | 389,000 |
| Central | 5,911 | | | 4,502 | | | 2,566,174 | | | 1,752,180 | | | 434,000 | | | 389,000 | |
| Texas | 2,860 |
| | 2,557 |
| | 822,734 |
| | 826,226 |
| | 288,000 |
| | 323,000 |
| Texas | 4,208 | | | 2,860 | | | 1,379,740 | | | 822,734 | | | 328,000 | | | 288,000 | |
| West | 5,644 |
| | 5,215 |
| | 2,922,743 |
| | 2,726,329 |
| | 518,000 |
| | 523,000 |
| West | 7,177 | | | 5,644 | | | 4,499,969 | | | 2,922,743 | | | 627,000 | | | 518,000 | |
| Other | — |
| | 27 |
| | — |
| | 26,123 |
| | — |
| | 968,000 |
| Other | 5 | | | — | | | 5,298 | | | — | | | 1,060,000 | | | — | |
| Total | 19,697 |
| | 18,908 |
| | $ | 7,865,957 |
| | 7,596,417 |
| | $ | 399,000 |
| | 402,000 |
| Total | 25,819 | | | 19,697 | | | $ | 11,978,030 | | | 7,865,957 | | | $ | 464,000 | | | 399,000 | |
Of the total homes in backlog listed above, 82 homes with a backlog dollar value of $29.5 million and an average sales price of $359,000 represent the backlog from unconsolidated entities at August 31, 2021, compared to 56 homes with a backlog dollar value of $17.0 million and an average sales price of $303,000 represent the backlog from unconsolidated entities at August 31, 2020, compared to 25 homes with a backlog dollar value of $9.8 million and an average sales price of $391,000 at August 31, 2019.2020.
| |
(1) | During the nine months ended August 31, 2019, we acquired 13 homes in 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. Various state and federal laws and regulations may sometimes give purchasers a right to cancel homes in backlog. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.
Three Months Ended August 31, 20202021 versus Three Months Ended August 31, 20192020
Homebuilding East: Revenues from home sales decreasedincreased in the third quarter of 20202021 compared to the third quarter of 2019,2020, primarily due to a decreasean increase in the number of home deliveries in all the states of the segment except in New Jersey, partially offset byPennsylvania and an increase in the average sales price of homes delivered in all the states of the segment except in Pennsylvania.New Jersey. The decreaseincrease in the number of home deliveries was primarily due to higher demand as the effectsnumber of COVID-19deliveries per active community increased. The decrease in the number of home deliveries in Pennsylvania was primarily due to a decrease in the number of communities due to the timing of opening and closing of communities. The increase in the economic shutdown.average sales price of homes delivered was
primarily due to favorable market conditions. The decrease in the average sales price of homes delivered in New Jersey 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 third quarter of 2021 increased compared to the same period last year primarily due to price appreciation as the increase in revenue per square foot of homes delivered outpaced the increase in cost per square foot.
Homebuilding Central: Revenues from home sales increased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to an increase in the number of home deliveries in all the states of the segment except in Minnesota, and an increase in the average sales price of homes delivered in all the states of the segment except in Virginia and Tennessee. The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the number of home deliveries in Minnesota was primarily due to a decrease in the number of communities due to the timing of opening and closing of communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered in Virginia and Tennessee 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 third quarter of 2021 increased compared to the same period last year primarily due to price appreciation as the increase in revenue per square foot of homes delivered outpaced the increase in cost per square foot.
Homebuilding Texas: Revenues from home sales increased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to an increase in the number of home deliveries and an increase 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 increase in the average sales price of homes delivered was primarily due to favorable market conditions. Gross margin percentage on home deliveries in the third quarter of 2021 increased compared to the same period last year primarily due to price appreciation as the increase in revenue per square foot of homes delivered outpaced the increase in cost per square foot.
Homebuilding West: Revenues from home sales increased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to an increase in the number of home deliveries in all the states of the segment except in Colorado and Oregon and an increase in the average sales price of homes delivered in all the states of the segment. The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased during the quarter. The decrease in the number of home deliveries in Colorado and Oregon was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. Gross margin percentage on home deliveries in the third quarter of 2021 increased compared to the same period last year primarily due to price appreciation as the increase in revenue per square foot of homes delivered outpaced the increase in cost per square foot.
Nine Months Ended August 31, 2021 versus Nine Months Ended August 31, 2020
Homebuilding East: Revenues from home sales increased in the nine months ended August 31, 2021 compared to the nine months ended August 31, 2020, primarily due to an increase in the number of home deliveries in all the states of the segment except in Pennsylvania and an increase in the average sales price of homes delivered in all the states of the segment except in New Jersey. The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the number of home deliveries in Pennsylvania was primarily due to a decrease in the number of communities due to the timing of opening and closing of communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered in New Jersey 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 nine months ended August 31, 2021 increased compared to the same period last year primarily due to price appreciation as the increase in revenue per square foot of homes delivered outpaced the increase in cost per square foot.
Homebuilding Central: Revenues from home sales increased in the nine months ended August 31, 2021 compared to the nine months ended August 31, 2020, primarily due to an increase in the number of home deliveries in all the states of the segment except in Virginia, and an increase in the average sales price of homes delivered in all the states of the segment except in Virginia and Tennessee. The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the number of home deliveries in Virginia was primarily due to a decrease in the number of communities due to the timing of opening and closing of communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered in Virginia and Tennessee 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 nine months ended August 31, 2021 increased compared to the same period last year primarily due to price appreciation as the increase in revenue per square foot of homes delivered outpaced the increase in cost per square foot.
Homebuilding Texas: Revenues from home sales increased in the nine months ended August 31, 2021 compared to the nine months ended August 31, 2020, primarily due to an increase in the number of home deliveries and an increase 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 increase in average sales price of homes delivered was primarily due to favorable market conditions. Gross margin percentage on home deliveries in the nine months ended August 31, 2021 increased compared to the same period last year primarily due to price appreciation as the increase in revenue per square foot of homes delivered outpaced the increase in cost per square foot.
Homebuilding West: Revenues from home sales increased in the nine months ended August 31, 2021 compared to the nine months ended August 31, 2020, primarily due to an increase in the number of home deliveries in all states of the segment except in Colorado and an increase in the average sales price of homes delivered in all the states of the segment. The increase in the number of home deliveries in New Jerseyall states of the segment was primarily due to higher demand as the number of deliveries per active community increased during the quarter. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered in Pennsylvania 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 third quarter of 2020 increased compared to the same period last year primarily due to reducing our construction costs and an increase in the average sales price of homes delivered.
Homebuilding Central: Revenues from home sales increased in the third quarter of 2020 compared to the third quarter of 2019, primarily due to an increase in the average sales price of homes delivered in all the states of the segment except in Indiana, North Carolina and Tennessee, partially offset by a decrease in the number of home deliveries in all the states in the segment except in Maryland, Minnesota and Tennessee. The decrease in the number of home deliveries was primarily due to the effects of COVID-19 and the economic shutdown. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. Gross margin percentage on home deliveries in the third quarter of 2020 increased compared to the same period last year primarily due to reducing our construction costs and an increase in the average sales price of homes delivered.
Homebuilding Texas: Revenues from home sales increased in the third quarter of 2020 compared to the third quarter of 2019, primarily due to an increase in the number of home deliveries, partially 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 third quarter of 2020 increased compared to the same period last year primarily due to reducing our construction costs.
Homebuilding West: Revenues from home sales increased in the third quarter of 2020 compared to the third quarter of 2019, primarily due to an increase in the number of home deliveries in all states of the segment except Arizona and Oregon. The increase in the number of home deliveries in all states of the segment except Arizona and Oregon was primarily due to higher demand as the number of deliveries per active community increased during the quarter. The decrease in the number of home deliveries in Arizona and Oregon was primarily due to the effects of COVID-19 and the economic shutdown. Gross margin percentage on home deliveries in the third quarter of 2020 increased compared to the same period last year primarily due to reducing our construction costs.
Nine Months Ended August 31, 2020 versus Nine Months Ended August 31, 2019
Homebuilding East: Revenues from home sales increased in the nine months ended August 31, 2020 compared to the nine months ended August 31, 2019, primarily due to an increase in the average sales price of homes delivered in Florida and New Jersey, partially offset by a decrease in the average sales price of homes delivered in Pennsylvania and South Carolina. The increase in the average sales price of homes delivered in Florida and New Jersey was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered in the South Carolina and Pennsylvania 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 nine months ended August 31, 20202021 increased compared to the same period last year primarily due to reducing our construction costs and anprice appreciation as the increase in the average sales price of homes delivered.
Homebuilding Central: Revenues from home sales increased in the nine months ended August 31, 2020 compared to the nine months ended August 31, 2019, primarily due to an increase in the number of home deliveries in all the states in the segment except in North Carolina and Virginia. The increase in the number of home deliveries was primarily due to higher demand as the number of deliveriesrevenue per active community increased. The decrease in the number of homes deliveries in North Carolina and Virginia was primarily due to the effects of COVID-19 and the economic shutdown. Gross margin percentage on home deliveries in the nine months ended August 31, 2020 increased compared to the same period last year primarily due to reducing our construction costs, partially offset by valuation adjustments taken in a few communities.
Homebuilding Texas: Revenues from home sales increased in the nine months ended August 31, 2020 compared to the nine months ended August 31, 2019, primarily due to an increase in the number of home deliveries, partially 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 pricesquare foot of homes delivered was primarily due to closing out higher priced communities and shifting into lower priced communities. Gross margin
percentage on home deliveries inoutpaced the nine months ended August 31, 2020 increased compared to the same period last year primarily due to reducing our construction costs.
Homebuilding West: Revenues from home sales increased in the nine months ended August 31, 2020 compared to the nine months ended August 31, 2019, primarily due to an increase in the number of home deliveries in all the states of the segment except Oregon, Washington and Utah, partially offset by a decrease in the average sales price of homes delivered in all the states of the segment except Arizona. The increase in the number of home deliveries in all the states of the segment except Oregon, Washington and Utah was primarily due to higher demand as the number of deliveriescost per active community increased. The decrease in the number of home deliveries in Oregon, Washington and Utah was primarily due to the effects of COVID-19 and the economic shutdown. The decrease in the average sales price of homes delivered in all the states of the segment except Arizona was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. The increase in the average sales price of homes delivered in Arizona was primarily due to favorable market conditions. Gross margin percentage on home deliveries in the nine months ended August 31, 2020 increased compared to the same period last year primarily due to reducing our construction costs.square foot.
Financial Services Segment
Our Financial Services reportable segment provides mortgage financing, title and closing services primarily for buyers of our homes. The segment also originates and sells into securitizations commercial mortgage loans through its LMF Commercial business. Our 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.
The following table sets forth selected financial and operational information related to the residential mortgage and title activities of our Financial Services segment: | | | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | August 31, | | August 31, | | August 31, | | August 31, |
| (Dollars in thousands) | 2020 | | 2019 | | 2020 | | 2019 | (Dollars in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Dollar value of mortgages originated | $ | 3,529,000 |
| | 2,883,000 |
| | 9,007,000 |
| | 7,440,000 |
| Dollar value of mortgages originated | $ | 3,281,000 | | | 3,529,000 | | | 9,228,000 | | | 9,007,000 | |
| Number of mortgages originated | 10,800 |
| | 9,200 |
| | 27,800 |
| | 23,700 |
| Number of mortgages originated | 9,400 | | | 10,800 | | | 27,300 | | | 27,800 | |
| Mortgage capture rate of Lennar homebuyers | 82 | % | | 77 | % | | 80 | % | | 75 | % | Mortgage capture rate of Lennar homebuyers | 73 | % | | 82 | % | | 75 | % | | 80 | % |
| Number of title and closing service transactions | 16,400 |
| | 14,300 |
| | 42,000 |
| | 42,400 |
| Number of title and closing service transactions | 16,900 | | | 16,400 | | | 49,000 | | | 42,000 | |
At August 31, 20202021 and November 30, 2019,2020, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $164.6$161.5 million and $166.0$164.2 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 assumed final distribution dates between October 2027 and December 2028, and stated maturity dates between October 2050 and December 2051. Our Financial Services segment classifiesDetails of these securities as held-to-maturity based on its intent and abilityrelated debt are within Note 2 of the Notes to hold the securities until maturity.Condensed Consolidated Financial Statements.
LMF Commercial
LMF Commercial originates and sells into securitizations five, seven and ten year commercial first mortgage loans, which are secured by income producing properties.
During the nine months ended August 31, 2020, LMF Commercial originated commercial loans with a total principal balance of $582.0 million, all of which were recorded as loans held-for-sale and sold $622.3 million of commercial loans into four separate securitizations. As of August 31, 2020, there were no unsettled transactions.
During the nine months ended August 31, 2019, LMF Commercial originated commercial loans with a total principal balance of $984.5 million, all of which were recorded as loans held-for-sale, and sold $848.3 million of loans into seven separate securitizations.
Multifamily Segment
We have been actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. Our Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.
Originally, our Multifamily segment focused on building multifamily properties and selling them shortly after they were completed. However, more recently we have focused on creating and participating in ventures that build multifamily properties with the intention of retaining them after they are completed.
The following tables provide information related to our investment in the Multifamily segment:
| | | | | | | | | | | |
| Balance Sheets | | | |
| (In thousands) | August 31, 2021 | | November 30, 2020 |
| | | |
| | | |
| Multifamily investments in unconsolidated entities | $ | 682,819 | | | 724,647 | |
| Lennar's net investment in Multifamily | 950,636 | | | 906,632 | |
| | | |
|
| | | | | | |
| Balance Sheets | August 31, 2020 | | November 30, 2019 |
| (Dollars in thousands) | | | |
Multifamily investments in unconsolidated entities
| $ | 656,012 |
| | 561,190 |
|
| Lennar's net investment in Multifamily | 930,213 |
| | 829,537 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Statements of Operations | Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| (Dollars in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| | | | | | | |
| Number of operating properties/investments sold through joint ventures | — | | | — | | | 1 | | | 2 | |
| Lennar's share of gains on the sale of operating properties/investments | $ | — | | | — | | | 14,784 | | | 3,001 | |
| | | | | | | |
|
| | | | | | | | | | | | | | |
| Statements of Operations | Three Months Ended | | Nine Months Ended |
| | August 31, | | August 31, |
| (Dollars in thousands) | 2020 | | 2019 | | 2020 | | 2019 |
| Number of operating properties/investments sold through joint ventures | — |
| | 1 |
| | 2 |
| | 3 |
|
| Lennar's share of gains on the sale of operating properties/investments | $ | — |
| | 12,620 |
| | $ | 3,001 |
| | $ | 28,128 |
|
Despite widespread reductionsAt August 31, 2021 and November 30, 2020, we had $1.7 billion and $521.7 million, respectively, of assets in economic activityour Lennar Other segment, which included investments in unconsolidated entities of $387.5 million and $387.1 million, respectively. The increase in assets during the nine months ended August 31, 2021 was due to an increase in the COVID-19 pandemic,value of our strategic technology investments, primarily managed by our LENX subsidiary. This increase was largely related to our strategic investments in Hippo, SmartRent, Opendoor and Sunnova. During the propertiesnine months ended August 31, 2021, we completed the sale of our residential solar business to Sunnova for shares in which the Multifamily segment has investments did not, overall, experience significant increases in vacancies or in delinquent rent payments to date.entity. The following is a detail of Lennar Other realized and unrealized gain (loss):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| August 31, | | August 31, |
| (In thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Hippo (HIPO) mark to market | $ | 324,855 | | | — | | | 324,855 | | | — | |
| SmartRent (SMRT) mark to market | 100,793 | | | — | | | 100,793 | | | — | |
| Opendoor (OPEN) mark to market | 37,301 | | | — | | | 272,756 | | | — | |
| Sunnova (NOVA) mark to market | 23,870 | | | — | | | (14,465) | | | — | |
| Blend Labs (BLND) mark to market | 6,852 | | | — | | | 6,852 | | | — | |
| Gain on sale of solar business | 1,531 | | | — | | | 153,006 | | | — | |
| Other realized gain | — | | | — | | | 3,580 | | | — | |
| $ | 495,202 | | | — | | | 847,377 | | | — | |
| | | | | | | |
| | | | | | | |
(2) Financial Condition and Capital Resources
At August 31, 2020,2021, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $2.2$2.8 billion, compared to $1.5$2.9 billion at November 30, 20192020 and $1.1$2.2 billion at August 31, 2019.2020.
We finance all of our activities, including homebuilding, financial services, 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 (the "Credit Facility").
Operating Cash Flow Activities
During the nine months ended August 31, 20202021 and 2019,2020, cash provided by operating activities totaled $1.3 billion and $2.9 billion, respectively. During the nine months ended August 31, 2021, cash provided by operating activities was impacted primarily by our net earnings, net of Lennar Other unrealized/realized gain of $847.4 million primarily due to mark to market gains on strategic investments that went public during the nine months ended August 31, 2021, (Opendoor, Sunnova, Hippo, SmartRent and $298.3Blend) and the sale of our solar business to Sunnova. In addition there was a decrease in loans held-for-sale of $209.3 million respectively. primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of $514.0 million, and a decrease in receivables of $131.3 million, partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $2.3 billion.
During the nine months ended August 31, 2020, cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of $557.8 million primarily related to the sale of loans originated by Financial Services, a decrease in receivables of $264.6 million and an increase in accounts payable and other liabilities of $165.6 million, partially offset by an increase in other assets of $124.6 million.
During the nine months ended August 31, 2019, cash provided by operating activities was impacted primarily by our net earnings, a decrease in receivables of $528.0 million, partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $1.6 billion.
Investing Cash Flow Activities
During the nine months ended August 31, 20202021 and 2019,2020, cash used in investing activities totaled $131.2 million and $267.5 million, respectively. During the nine months ended August 31, 2021, our cash used in investing activities was primarily due to cash contributions of $354.6 million to unconsolidated entities, which included (1) $164.0 million to Homebuilding unconsolidated entities, (2) $66.8 million to Multifamily unconsolidated entities, and $39.4(3) $123.8 million respectively. to the strategic technology investments included in the Lennar Other segment. This was partially offset by distributions of capital from unconsolidated entities of $292.5 million, which primarily included (1) $159.3 million from Homebuilding unconsolidated entities, (2) $107.2 million from Multifamily unconsolidated entities, and (3) $26.0 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment.
During the nine months ended August 31, 2020, our cash used in investing activities was primarily due to cash contributions of $412.5 million to unconsolidated entities and deconsolidation of a previously consolidated entity, which included (1) $86.9 million to Homebuilding unconsolidated entities, (2) $122.7 million to Multifamily unconsolidated entities, (3) $50.3 million to the strategic technology investments included in the Lennar Other segment; and (4) the derecognition of $152.5 million of cash as of the date of deconsolidation of a previously consolidated Financial Services entity. This was partially offset by distributions of capital from unconsolidated entities of $135.7 million, which primarily included (1) $58.3 million from Homebuilding unconsolidated entities, (2) $39.1 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment; and (3) $38.3 million from Multifamily unconsolidated entities.
During the nine months ended August 31, 2019, cash used in investing activities was primarily due to cash contributions of $329.9 million to unconsolidated entities, which included (1) $196.4 million to Homebuilding unconsolidated entities, (2) $80.2 million to Multifamily unconsolidated entities primarily for working capital; and (3) $52.9 million to the unconsolidated Rialto real estate funds and strategic investments included in our Lennar Other segment; and $69.6 million of net addition to operating properties and equipment. This was partially offset by distributions of capital from unconsolidated and consolidated entities of $250.3 million, which included (1) $107.2 million from Multifamily unconsolidated entities; (2) $78.7 million from Homebuilding unconsolidated entities; (3) $41.6 million from the unconsolidated Rialto real estate funds and strategic investments included in our Lennar Other segment; and (4)$22.9 million from Financial Services consolidated entities. In addition, cash used in investing activities was also offset by $50.0 million of proceeds from the sale of two Homebuilding operating properties and other assets, and $41.6 million of proceeds from the sales of available-for-sale securities.
Financing Cash Flow Activities
During the nine months ended August 31, 20202021 and 2019,2020, cash used in financing activities totaled $1.3 billion and $1.9 billion, respectively. During the nine months ended August 31, 2021, cash used in financing activities was primarily impacted by (1) $357.5 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities; (2) the redemption of $300.0 million aggregate principal amount of our senior notes; (3) $234.0 million of dividend payments; and $785.1(4) repurchases of our common stock for $452.5 million, respectively. which included $388.0 million of repurchases under our repurchase program and $64.6 million of repurchases related to our equity compensation plan. These were partially offset by $441.2 million of proceeds from liabilities related to consolidated inventory not owned due to land sales to land banks.
During the nine months ended August 31, 2020, cash used in financing activities was primarily impacted by (1) $789.3 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities; (2) $550.3 million of principal payments on notes payable and other borrowings; (3) the redemption of $313$313.0 million aggregate principal amount of our senior notes; and (4) repurchases of our common stock for $319.0 million, which included $288.5 million of repurchases under our repurchase program and $30.3 million of repurchases related to our equity compensation plan. These were partially offset by $175.6 million of receipts related to noncontrolling interests.
During the nine months ended August 31, 2019, cash used in financing activities was primarily impacted by (1) payment at maturity of $500.0 million aggregate principal amount of our 4.50% senior notes due June 2019; (2) $423.1 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities; (3) $154.7 million principal payment on other borrowings; and (4) repurchases of our common stock for $419.3 million, which included $394.7 million of repurchases of our stock under our repurchase program and $24.6 million of repurchases related to our equity compensation plan. These were partially offset by (1) $700 million of net borrowings under our Credit Facility; and (2) $62.6 million proceeds from 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 homebuilding operations. Homebuilding debt to total capital and net Homebuilding debt to total capital are calculated as follows: | | | | | | | | | | | | | | | | | |
| (Dollars in thousands) | August 31, 2021 | | November 30, 2020 | | August 31, 2020 |
| Homebuilding debt | $ | 5,542,513 | | | 5,955,758 | | | 7,180,274 | |
| Stockholders’ equity | 20,650,188 | | | 17,994,856 | | | 17,172,103 | |
| Total capital | $ | 26,192,701 | | | 23,950,614 | | | 24,352,377 | |
| Homebuilding debt to total capital | 21.2 | % | | 24.9 | % | | 29.5 | % |
| Homebuilding debt | $ | 5,542,513 | | | 5,955,758 | | | 7,180,274 | |
| Less: Homebuilding cash and cash equivalents | 2,623,320 | | | 2,703,986 | | | 1,966,796 | |
| Net Homebuilding debt | $ | 2,919,193 | | | 3,251,772 | | | 5,213,478 | |
| Net Homebuilding debt to total capital (1) | 12.4 | % | | 15.3 | % | | 23.3 | % |
|
| | | | | | | | | |
| (Dollars in thousands) | August 31,
2020 | | November 30,
2019 | | August 31,
2019 |
| Homebuilding debt | $ | 7,180,274 |
| | 7,776,638 |
| | 9,075,016 |
|
| Stockholders’ equity | 17,172,103 |
| | 15,949,517 |
| | 15,371,938 |
|
| Total capital | $ | 24,352,377 |
| | 23,726,155 |
| | 24,446,954 |
|
| Homebuilding debt to total capital | 29.5 | % |
| 32.8 | % | | 37.1 | % |
| Homebuilding debt | $ | 7,180,274 |
| | 7,776,638 |
| | 9,075,016 |
|
| Less: Homebuilding cash and cash equivalents | 1,966,796 |
| | 1,200,832 |
| | 795,405 |
|
| Net Homebuilding debt | $ | 5,213,478 |
| | 6,575,806 |
| | 8,279,611 |
|
| Net Homebuilding debt to total capital (1) | 23.3 | % | | 29.2 | % | | 35.0 | % |
| |
(1) | Net homebuilding debt to total capital is a non-GAAP financial measure defined as net homebuilding debt (homebuilding debt less homebuilding cash and cash equivalents) divided by total capital (net homebuilding debt plus stockholders' equity). We believe the ratio of net homebuilding debt to total capital is a relevant and a useful financial measure to investors in understanding the leverage employed in homebuilding operations. However, because net 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 August 31, 2020,2021, Homebuilding debt to total capital improvedwas lower compared to November 30, 2020 and August 31, 2019 and November 30, 2019,2020, primarily as a result of a decrease in Homebuilding debt and an increase in stockholders' equity due to 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, 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 the pursuit of other financing alternatives. In connection with some of our non-homebuilding businesses, we are also considering other types of transactions such as sales, restructurings, joint ventures, spin-offs or initial public offerings as we continue to move back towards being a pure play homebuilding company.
Our Homebuilding senior notes and other debts payable as well as letters of credit and surety bonds are summarized within Note 7 of the Notes to the Condensed Consolidated Financial Statements. Our Homebuilding average debt outstanding and the average rates of interest was as follows:
At | | | | | | | | | | | |
| Nine Months Ended |
| August 31, |
| (Dollars in thousands) | 2021 | | 2020 |
| Homebuilding average debt outstanding | $ | 5,848,865 | | | $ | 7,896,372 | |
| Average interest rate | 4.9 | % | | 4.9 | % |
| Interest incurred | $ | 210,575 | | | $ | 272,347 | |
Subsequent to August 31, 2020,2021, we had anprovided notice that we would redeem on October 15, 2021 our $600 million 4.125% senior unsecured revolving credit facility (the "Credit Facility") withnotes, which have a scheduled maturity of January 15, 2022.
As of August 31, 2021, the maximum borrowings of $2.4on our Credit Facility were $2.5 billion and included a $300 million accordion feature, subject to additional commitments, thus the maximum borrowings could be $2.8 billionmaturing in 2024. The Credit Facility agreement (the "Credit Agreement") provides that up to $500 million in commitments may be used for letters of credit.credit. Under the Credit Agreement, as of the end of the fiscal quarter, we are subject to debt covenants. The maturity, details and debt covenants of the Credit Facility are unchanged from the disclosure in the Financial Condition and Capital Resources section of our Form 10-K for the year ended November 30, 2019. In addition to the Credit Facility, we have other letter of credit facilities with different financial institutions.
Our outstanding letters of credit and surety bonds are described below:
|
| | | | | | | |
| | | August 31,
2020 | | November 30,
2019 |
| (In thousands) | | | | |
| Performance letters of credit | | $ | 770,527 |
| | 715,793 |
|
| Financial letters of credit | | 258,703 |
| | 184,075 |
|
| Surety bonds | | 3,041,946 |
| | 2,946,167 |
|
| Anticipated future costs primarily for site improvements related to performance surety bonds | | 1,498,173 |
| | 1,427,145 |
|
Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our senior notes (the "Guaranteed Notes"). The guarantees are full and unconditional. However, they will terminate as to a subsidiary any time it is not directly or indirectly guaranteeing at least $75 million of Lennar Corporation debt or when the subsidiary is sold. These guarantees are outlined in Note 13 of the Notes to the Condensed Consolidated Financial Statements.
Our Homebuilding average debt outstanding and the average rates of interest was as follows:
|
| | | | | | | |
| | Nine Months Ended |
| (Dollars in thousands) | August 31,
2020 | | August 31,
2019 |
| Homebuilding average debt outstanding | $ | 7,896,372 |
| | $ | 9,191,109 |
|
| Average interest rate | 4.9 | % | | 4.8 | % |
| Interest incurred | 272,347 |
| | 320,960 |
|
Under the amended Credit Facility agreement executed in April 2019 (the "Credit Agreement"), as of the end of each fiscal quarter, we are required to maintain minimum consolidated tangible net worth of approximately $7.1 billion plus the sum of 50% of the cumulative consolidated net income for each completed fiscal quarter subsequent to February 28, 2019, if positive, and 50% of the net cash proceeds from any equity offerings from and after February 28, 2019, minus the lesser of 50% of the amount paid after April 11, 2019 to repurchase common stock and $375.0 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. We believe that we were in compliance with our debt covenants at August 31, 2020.
The following summarizes our debt covenant requirements and our actual levels or ratios with respect to those covenants as calculated per the Credit Agreement as of August 31, 2020:2021: | | | | | | | | | | | |
| (Dollars in thousands) | Covenant Level | | Level Achieved as of
August 31, 2021 |
| Minimum net worth test | $ | 9,781,069 | | | 13,563,839 | |
| Maximum leverage ratio | 65.0 | % | | 17.0 | % |
| Liquidity test | 1.00 | | | 9.78 | |
|
| | | | | | |
| (Dollars in thousands) | Covenant Level | | Level Achieved as of
August 31, 2020 |
| Minimum net worth test | $ | 8,370,211 |
| | 11,621,827 |
|
| Maximum leverage ratio | 65.0 | % | | 27.8 | % |
| Liquidity test | 1.00 |
| | 5.68 |
|
At August 31, 2020, the Financial Services warehouse facilities were all 364-day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows:Warehouse Facilities
|
| | | |
| (In thousands) | Maximum Aggregate Commitment |
| Residential facilities maturing: | |
| January 2021 | $ | 500,000 |
|
| March 2021 | 300,000 |
|
| June 2021 | 600,000 |
|
| July 2021 | 200,000 |
|
| Total - Residential facilities | $ | 1,600,000 |
|
| LMF Commercial facilities maturing | |
| November 2020 | $ | 200,000 |
|
| December 2020 (1) | 700,000 |
|
| Total - LMF Commercial facilities | $ | 900,000 |
|
| Total | $ | 2,500,000 |
|
| |
(1) | Includes $50.0 million LMF Commercial warehouse repurchase facility used to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans held-for-investment, net. There were borrowings under this facility of $11.4 million as of August 31, 2020. |
Our Financial Services segment uses the residential 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 us and are expected to be renewed or replaced with other facilities when they mature. The LMF Commercial facilities finance LMF Commercial loan originationsorigination and securitization activities and were secured by a 75%up to an 80% interest in the originated commercial loans financed.
Borrowings These facilities and the related borrowings and collateral underare detailed in Note 2 of the facilities and their prior year predecessors were as follows:
|
| | | | | | | |
| (In thousands) | | August 31, 2020 | | November 30, 2019 |
| Borrowings under the residential facilities | | $ | 699,016 |
| | 1,374,063 |
|
| Collateral under the residential facilities | | 727,319 |
| | 1,423,650 |
|
| Borrowings under the LMF Commercial facilities | | 103,667 |
| | 216,870 |
|
If the facilities are not renewed or replaced, the borrowings under the lines of credit will be repaid by selling the mortgage loans held-for-saleNotes to investors and by collecting receivables on loans sold but not yet paid for. Without the facilities, theCondensed Consolidated Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.Statements.
Changes in Capital Structure
In January 2019,2021, our Board of Directors authorized the repurchase of up to the lesser of $1.0 billion in value, or 25 million in shares, of our outstanding Class A and Class B common stock. The repurchase authorization replaced a January 2019 authorization and has no expiration date. The following table represents the repurchasedetails of our Class A and Class B common stocks,stock under this program for both the three and nine months ended August 31, 2021 and 2020 and 2019:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | August 31, 2020 | | August 31, 2019 | | August 31, 2020 | | August 31, 2019 |
| (Dollars in thousands, except price per share) | | Class A | | Class B | | Class A | | Class B | | Class A | | Class B | | Class A | | Class B |
| Shares repurchased | | — |
| | — |
| | 6,110,000 |
| | — |
| | 4,250,000 |
| | 115,000 |
| | 8,110,000 |
| | — |
|
| Principal | | $ | — |
| | $ | — |
| | $ | 295,930 |
| | $ | — |
| | $ | 282,274 |
| | $ | 6,155 |
| | $ | 394,710 |
| | $ | — |
|
| Average price per share | | $ | — |
| | $ | — |
| | $ | 48.41 |
| | $ | — |
| | $ | 66.42 |
| | $ | 53.52 |
| | $ | 48.65 |
| | $ | — |
|
During the nine months ended August 31, 2020,2021, treasury stock increased primarily due to our repurchase of 4.44.8 million shares of Class A and Class B common stock due primarily to our repurchase of 4.0 million shares of Class A and Class B common stock through our stock repurchase program. During the nine months ended August 31, 2019,2020, treasury stock increased due to our repurchase of 8.14.4 million shares of Class A and Class B common stock during the nine months ended August 31, 2019 through our stock repurchase program and 0.6 million shares of Class A common stock primarily due to activity related to our equity compensation plan.program.
On October 1, 2020,September 29, 2021, our Board of Directors increased our annual dividend to $1.00 per share from $0.50 per share resulting indeclared a quarterly cash dividend of $0.25 per share on both our Class A and Class B common stock, payable on October 30, 202028, 2021 to holders of record at the close of business on October 16, 2020.14, 2021. On July 24, 2020,19, 2021, we paid cash dividends of $0.125$0.25 per share on both our Class A and Class B common stock to holders of record at the close of business on July 10, 2020,2, 2021, as
declared by our Board of Directors on June 25, 2020.18, 2021. We declaredapproved and paid cash dividends of $0.04$0.125 per share for each of the first three quarters of 2020 and $0.25 per share in the fourth quarter of 2020 and each of the first three quarters of 2021 on both our Class A and Class B common stock in each quarter for the year ended November 30, 2019.stock.
Based on our current financial condition and credit relationships, we believe that assuming the effects of the COVID-19 pandemic and resulting governmental actions on our operations do not significantly worsen for a protracted period, our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity.
Supplemental Financial Information
Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our senior notes. The guarantees are full and unconditional.
The indentures governing our senior notes require that, if any of our 100% owned subsidiaries, other than our finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least $75 million principal amount of debt of Lennar Corporation (other than senior notes), those subsidiaries must also guarantee Lennar Corporation’s obligations with regard to its senior notes. Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at August 31, 2021 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 7 of the Notes to 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 (other than senior notes), 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.
Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at August 31, 2021 is included in the following tables. Intercompany balances and transactions within the Obligors have been eliminated and amounts attributable to the Obligor’s investment in consolidated subsidiaries that have not issued or guaranteed the senior notes have been excluded. Amounts due from and transactions with nonobligor subsidiaries and related parties are separately disclosed:
| | | | | | | | | | | | | | | | | |
| (In thousands) | August 31, 2021 | | November 30, 2020 | | | | | | |
| Due from non-guarantor subsidiaries | $ | 4,154,085 | | | 2,655,503 | | | | | | | |
| Equity method investments | 963,859 | | | 951,579 | | | | | | | |
| Total assets | 31,009,452 | | | 27,695,067 | | | | | | | |
| Total liabilities | 10,079,001 | | | 9,599,718 | | | | | | | |
| | | | | |
| Nine Months Ended |
| (In thousands) | August 31, 2021 |
| Total revenues | $ | 17,650,640 | |
| Operating earnings | 3,366,200 | |
| Earnings before income taxes | 3,031,800 | |
| Net earnings attributable to Lennar | 2,335,695 | |
Off-Balance Sheet Arrangements
Homebuilding: Investments in Unconsolidated Entities
AtAs of August 31, 2020,2021, we had equity investments in 3940 active homebuilding and land unconsolidated entities (of which three had recourse debt, nine11 had non-recourse debt and 2726 had no debt) compared to 3638 active homebuilding and land unconsolidated entities at November 30, 2019.2020. 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.
As of August 31, 2020 Details regarding these investments, balances and November 30, 2019, our recorded investmentsdebt are included in Homebuilding unconsolidated entities were $940.7 million and $1.0 billion, respectively, while the underlying equity related to our investments in Homebuilding unconsolidated entities partners’ net assets as of August 31, 2020 and November 30, 2019 were $1.2 billion and $1.3 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. Included in our recorded investments in Homebuilding unconsolidated entities is our 40% ownership of FivePoint. As of August 31, 2020 and November 30, 2019, the carrying amounts of our investment in FivePoint were $376.4 million and $374.0 million, respectively.
The total debt of the Homebuilding unconsolidated entities in which we have investments was $1.1 billion as of both August 31, 2020 and November 30, 2019, of which our maximum recourse exposure was $4.9 million and $10.8 million as of August 31, 2020 and November 30, 2019, respectively. In most instances in which we have guaranteed debt of a 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 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 Homebuilding unconsolidated entity and increase our share of any funds the unconsolidated entity distributes.
As of August 31, 2020 and November 30, 2019, the fair values of the repayment, maintenance, and completion guarantees were not material. We believe that as of August 31, 2020, in the event we become legally obligated to perform under a guarantee of the obligation of a 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 73 of the Notes to Condensed Consolidated Financial Statements).Statements.
The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of August 31, 20202021 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 Period |
| (In thousands) | | (In thousands) | | Total JV Debt | | 2021 | | 2022 | | 2023 | | Thereafter | | Other |
| | | | Principal Maturities of Unconsolidated JVs by Period | |
| (In thousands) | Total JV Debt | | 2020 | | 2021 | | 2022 | | Thereafter | | Other | |
| Debt without recourse to Lennar | $ | 1,088,048 |
| | 49,497 |
| | 211,460 |
| | 164,396 |
| | 662,695 |
| | — |
| Debt without recourse to Lennar | | $ | 1,199,582 | | | — | | | 256,958 | | | 65,591 | | | 877,033 | | | — | |
| Land seller and CDD debt | 8,200 |
| | — |
| | — |
| | — |
| | — |
| | 8,200 |
| |
| Land seller and CDD and other debt | | Land seller and CDD and other debt | | 5,837 | | | — | | | — | | | — | | | — | | | 5,837 | |
| Maximum recourse debt exposure to Lennar | 4,932 |
| | — |
| | — |
| | 4,932 |
| | — |
| | — |
| Maximum recourse debt exposure to Lennar | | 3,599 | | | — | | | 3,599 | | | — | | | — | | | — | |
| Debt issuance costs | (11,930 | ) | | — |
| | — |
| | — |
| | — |
| | (11,930 | ) | Debt issuance costs | | (13,089) | | | — | | | — | | | — | | | — | | | (13,089) | |
| Total | $ | 1,089,250 |
| | 49,497 |
| | 211,460 |
| | 169,328 |
| | 662,695 |
| | (3,730 | ) | Total | | $ | 1,195,929 | | | — | | | 260,557 | | | 65,591 | | | 877,033 | | | (7,252) | |
Multifamily: Investments in Unconsolidated Entities
At August 31, 2020,2021, Multifamily had equity investments in 2118 unconsolidated entities that are engaged in multifamily residential developments (of which seven11 had non-recourse debt and 14seven had no debt), compared to 1922 unconsolidated entities at November 30, 2019.2020. 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. Initially, we participated in building multifamily developments and selling them soon after they were completed. Recently, however, we have been focused on developing properties with the intention of retaining them. 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 Multifamily segment includes LMV I and LMV II, which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets. Details of each as of and during the nine months ended August 31, 20202021 are included below:
|
| | | | | | | |
| | | August 31, 2020 |
| (In thousands) | | LMV I | | LMV II |
| Lennar's carrying value of investments | | $ | 348,561 |
| | 250,777 |
|
| Equity commitments | | 2,204,016 |
| | 1,257,700 |
|
| Equity commitments called | | 2,137,746 |
| | 861,508 |
|
| Lennar's equity commitments | | 504,016 |
| | 381,000 |
|
| Lennar's equity commitments called | | 496,082 |
| | 259,886 |
|
| Lennar's remaining commitments | | 7,934 |
| | 121,114 |
|
Distributions to Lennar during the nine months ended August 31, 2020
| | 23,822 |
| | — |
|
We regularly monitor the results of both our Homebuilding and Multifamily 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 theirapplicable debt covenants at August 31, 2020.2021.
The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of August 31, 20202021 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 | | 2020 | | 2021 | | 2022 | | Thereafter | | Other |
| Debt without recourse to Lennar | $ | 2,466,461 |
| | 92,629 |
| | 676,916 |
| | 478,041 |
| | 1,218,875 |
| | — |
|
| Debt issuance costs | (28,246 | ) | | — |
| | — |
| | — |
| | — |
| | (28,246 | ) |
| Total | $ | 2,438,215 |
| | 92,629 |
| | 676,916 |
| | 478,041 |
| | 1,218,875 |
| | (28,246 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Principal Maturities of Unconsolidated JVs by Period |
| (In thousands) | | | Total JV Debt | | 2021 | | 2022 | | 2023 | | Thereafter | | Other |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Debt without recourse to Lennar | | | $ | 3,167,395 | | | 234,288 | | | 494,173 | | | 896,485 | | | 1,542,449 | | | — | |
| Debt issuance costs | | | (24,839) | | | — | | | — | | | — | | | — | | | (24,839) | |
| Total | | | $ | 3,142,556 | | | 234,288 | | | 494,173 | | | 896,485 | | | 1,542,449 | | | (24,839) | |
Lennar Other: Investments in Unconsolidated Entities
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 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.
As of August 31, 20202021 and November 30, 2019,2020, we had strategic technology investments in unconsolidated entities of $196.1$187.6 million and $124.3$196.7 million, respectively.
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 August 31, 2020 and August 31, 2019:: |
| | | | | | | | | | | | | | | | | |
| | Controlled Homesites | | | | | | Years of |
| August 31, 2020 | Optioned | | JVs | | Total | | Owned Homesites | | Total Homesites | | Supply Owned (1) |
| East | 30,683 |
| | 12,718 |
| | 43,401 |
| | 62,256 |
| | 105,657 |
| | |
| Central | 14,504 |
| | 122 |
| | 14,626 |
| | 42,785 |
| | 57,411 |
| | |
| Texas | 25,556 |
| | — |
| | 25,556 |
| | 35,560 |
| | 61,116 |
| | |
| West | 14,911 |
| | 2,854 |
| | 17,765 |
| | 59,475 |
| | 77,240 |
| | |
| Other | 1,137 |
| | 7,544 |
| | 8,681 |
| | 2,068 |
| | 10,749 |
| | |
| Total homesites | 86,791 |
| | 23,238 |
| | 110,029 |
| | 202,144 |
| | 312,173 |
| | 3.8 |
|
| % of total homesites | | |
|
| | 35 | % | | 65 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Controlled Homesites | | | | | | Years of |
| August 31, 2021 | Optioned | | JVs | | Total | | Owned Homesites | | Total Homesites | | Supply Owned (1) |
| East | 74,056 | | | — | | | 74,056 | | | 54,069 | | | 128,125 | | | |
| Central | 27,772 | | | — | | | 27,772 | | | 42,407 | | | 70,179 | | | |
| Texas | 53,434 | | | — | | | 53,434 | | | 40,274 | | | 93,708 | | | |
| West | 50,867 | | | — | | | 50,867 | | | 51,587 | | | 102,454 | | | |
| Other | 3,657 | | | 6,594 | | | 10,251 | | | 2,056 | | | 12,307 | | | |
| Total homesites | 209,786 | | | 6,594 | | | 216,380 | | | 190,393 | | | 406,773 | | | 3.3 | |
| % of total homesites | | | | | 53 | % | | 47 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Controlled Homesites | | | | | | Years of |
| August 31, 2020 | Optioned | | JVs | | Total | | Owned Homesites | | Total Homesites | | Supply Owned (1) |
| East | 30,683 | | | 12,718 | | | 43,401 | | | 62,256 | | | 105,657 | | | |
| Central | 14,504 | | | 122 | | | 14,626 | | | 42,785 | | | 57,411 | | | |
| Texas | 25,556 | | | — | | | 25,556 | | | 35,560 | | | 61,116 | | | |
| West | 14,911 | | | 2,854 | | | 17,765 | | | 59,475 | | | 77,240 | | | |
| Other | 1,137 | | | 7,544 | | | 8,681 | | | 2,068 | | | 10,749 | | | |
| Total homesites | 86,791 | | | 23,238 | | | 110,029 | | | 202,144 | | | 312,173 | | | 3.8 | |
| % of total homesites | | | | | 35 | % | | 65 | % | | | | |
|
| | | | | | | | | | | | | | | | | |
| | Controlled Homesites | | | | | | Years of |
| August 31, 2019 | Optioned | | JVs | | Total | | Owned Homesites | | Total Homesites | | Supply Owned (1) |
| East | 24,269 |
| | 16,613 |
| | 40,882 |
| | 68,308 |
| | 109,190 |
| | |
| Central | 14,760 |
| | 132 |
| | 14,892 |
| | 43,802 |
| | 58,694 |
| | |
| Texas | 24,049 |
| | — |
| | 24,049 |
| | 37,603 |
| | 61,652 |
| | |
| West | 8,193 |
| | 3,304 |
| | 11,497 |
| | 64,627 |
| | 76,124 |
| | |
| Other | — |
| | 1,310 |
| | 1,310 |
| | 3,234 |
| | 4,544 |
| | |
| Total homesites | 71,271 |
| | 21,359 |
| | 92,630 |
| | 217,574 |
| | 310,204 |
| | 4.4 |
|
| % of total homesites | | |
|
| | 30 | % | | 70 | % | | | | |
| |
(1) | BasedDetails on trailing twelve months of home deliveries. |
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. Consolidated land purchase options are reflected in the accompanying condensed consolidated balance sheets as consolidated inventory not owned. Over the next several years, we plan to increase the controlled homesites to 50% of our entire homesite inventory from approximately 35% as of August 31, 2020. 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 nine months ended August 31, 2020,related consolidated inventory not owned increased by $82.4 million with a corresponding increase to liabilities related to consolidated inventory not ownedand exposure are included in the accompanying condensed consolidated balance sheet as of August 31, 2020. The increase was primarily due to the consolidation of option contracts, partially offset by us exercising our options to acquire land under previously consolidated contracts. To reflect the purchase priceNote 10 of the inventory consolidated, we had a net reclass relatedNotes to option deposits from consolidated inventory not owned to land under development in the accompanying condensed consolidated balance sheet as of August 31, 2020. 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.Condensed Consolidated Financial Statements.
Our exposure to losses related to option contracts with third parties and unconsolidated entities consisted of non-refundable option deposits and pre-acquisition costs totaling $325.4 million and $320.5 million at August 31, 2020 and November 30, 2019, respectively. Additionally, we had posted $76.8 million and $75.0 million of letters of credit in lieu of cash deposits under certain land and option contracts as of August 31, 2020 and November 30, 2019, 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, 2019.2020. There were no outstanding borrowings under our Credit Facility as of August 31, 2020.2021.
(3) New Accounting Pronouncements
See Note 121 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.
(4) Critical Accounting Policies
We believe that there have been no significant changes to our critical accounting policies during the nine months ended August 31, 20202021 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, 2019.2020.
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 of August 31, 2020,2021, we had no outstanding borrowings under our Credit Facility.
As of August 31, 2020,2021, our borrowings under Financial Services' warehouse repurchase facilities totaled $699.0$900.3 million under residential facilities and $103.7$55.0 million under LMF Commercial facilities.
Information Regarding Interest Rate Sensitivity
Principal (Notional) Amount by
Expected Maturity and Average Interest Rate
August 31, 20202021
| | | | Three Months Ending November 30, | | Years Ending November 30, | | | | | | Fair Value at August 31, | | Three Months Ending November 30, | | Years Ending November 30, | | Fair Value at Aug 31, |
| (Dollars in millions) | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total | | 2020 | (Dollars in millions) | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total | | 2021 |
| LIABILITIES: | | | | | | | | | | | | | | | | | | LIABILITIES: | | | | | | | | | | | | | | | | | |
| Homebuilding: | | | | | | | | | | | | | | | | | | Homebuilding: | |
Senior Notes and
other debts payable: | | | | | | | | | | | | | | | | | | Senior Notes and
other debts payable: | |
| Fixed rate | $ | 345.1 |
| | 1,039.1 |
| | 1,793.6 |
| | 56.8 |
| | 1,519.3 |
| | 571.7 |
| | 1,674.1 |
| | 6,999.7 |
| | 7,513.0 |
| Fixed rate | $ | 19.9 | | | 1,559.0 | | | 99.5 | | | 1,560.5 | | | 591.8 | | | 402.9 | | | 1,294.6 | | | 5,528.2 | | | 6,040.7 | |
| Average interest rate | 2.9 | % | | 6.0 | % | | 4.9 | % | | 4.5 | % | | 5.0 | % | | 4.8 | % | | 5.0 | % | | 5.0 | % | | — |
| Average interest rate | 4.2 | % | | 4.5 | % | | 4.2 | % | | 5.0 | % | | 4.8 | % | | 5.2 | % | | 4.9 | % | | 4.8 | % | | — | |
| Variable rate | $ | — |
| | 150.3 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 150.3 |
| | 157.6 |
| |
| Average interest rate | — |
| | 5.3 | % | | — |
| | — |
| | — |
| | — |
| | — |
| | 5.3 | % | | — |
| |
| | Financial Services: | | | | | | | | | | | | | | | | | | Financial Services: | |
Notes and other
debts payable: | | | | | | | | | | | | | | | | | | Notes and other
debts payable: | |
| Fixed rate | $ | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 153.7 |
| | 153.7 |
| | 155.1 |
| Fixed rate | $ | — | | | — | | | — | | | — | | | — | | | — | | | 151.1 | | | 151.1 | | | 152.0 | |
| Average interest rate | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3.4 | % | | 3.4 | % | | — |
| Average interest rate | — | | | — | | | — | | | — | | | — | | | — | | | 3.4 | % | | 3.4 | % | | — | |
| Variable rate | $ | 802.7 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 802.7 |
| | 802.7 |
| Variable rate | $ | 939.5 | | | 11.4 | | | 4.4 | | | — | | | — | | | — | | | — | | | 955.3 | | | 955.3 | |
| Average interest rate | 2.8 | % | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2.8 | % | | — |
| Average interest rate | 2.1 | % | | 2.2 | % | | 2.3 | % | | — | | | — | | | — | | | — | | | 2.1 | % | | — | |
| | Lennar Other: | | | | | | | | | | | | | | | | | | Lennar Other: | |
Notes and other
debts payable: | | | | | | | | | | | | | | | | | | Notes and other
debts payable: | |
| Fixed rate | $ | 1.9 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1.9 |
| | 1.9 |
| Fixed rate | $ | 1.9 | | | — | | | — | | | — | | | — | | | — | | | — | | | 1.9 | | | 1.9 | |
| Average interest rate | 3.0 | % | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3.0 | % | | — |
| Average interest rate | 3.0 | % | | — | | | — | | | — | | | — | | | — | | | — | | | 3.0 | % | | — | |
|
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, 2019.2020.
Item 4. Controls and Procedures
Our ChiefEach of our Co-Chief Executive OfficerOfficers and Co-Presidents ("Co-CEOs") 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 CEOCo-CEOs and CFO concluded that our disclosure controls and procedures were effective as of August 31, 20202021 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 both of our CEOCo-CEOs and CFO, as appropriate, to allow timely decisions regarding required disclosures.
Our CEOBoth of our Co-CEOs 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 August 31, 2020.2021. That evaluation did not identify any changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
We are a party to various claims legal actions and complaints arisinglawsuits which arise in the ordinary course of business. Inbusiness, but we do not consider the opinionvolume of management,our claims and lawsuits unusual given the dispositionnumber of homes we deliver and the fact that the lawsuits often relate to homes delivered several years before the lawsuits are commenced. Although the specific allegations in the lawsuits differ, they most commonly involve claims that we failed to construct homes in particular communities in accordance with plans and specifications or applicable construction codes and seek reimbursement for sums allegedly needed to remedy the alleged deficiencies, assert contract issues or relate to personal injuries. Lawsuits of these matters will not havetypes are common within the homebuilding industry. We are a material adverse effect onplaintiff in a number of cases in which we seek contribution from our condensed consolidated financial statements.subcontractors for home repair costs. The costs incurred by us in construction defect lawsuits may be offset by warranty reserves, our third-party insurers,
subcontractor insurers or indemnity contributions from subcontractors. From time to time, we are also a party to various lawsuits involving purchases and sales of real property. These lawsuits often include claims regarding representations and warranties made in connection with the transfer of propertiesthe property and disputes regarding the obligation to purchase or sell properties.the property. From time-to-time, we also receive notices from environmental agencies or other regulators regarding alleged violations of environmental or other laws. We typically settle these matters before they reach litigation for amounts that are not material to us.
We do not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on our business or financial position.
Item 1A. Risk Factors
Our results of operations and financial condition may be adversely affected by the COVID-19 pandemic and resulting governmental actions.
Demand for our homes is dependent on a variety of macroeconomic factors, such as employment levels, interest rates,There have been no material changes in stock market valuations, consumer confidence, housing demand, availability of financingour risk factors from those disclosed in our Annual Report on Form 10-K for home buyers, availability and prices of new homes compared to existing inventory, and demographic trends. These factors, in particular consumer confidence, can be significantly adversely affected by a variety of factors beyond our control. The COVID-19 pandemic has caused the shutdown of large portions of our national economy. While portions of the national economy have reopened, there is still significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy and consumer confidence. With the exception of a period in March and April, the COVID-19 pandemic and its effects on the economy do not appear to have adversely affected our home sales through the quarteryear ended August 31,November 30, 2020. However, this may not continue to be the case. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the continuing severity of COVID-19, whether there are additional outbreaks of COVID-19, and the actions taken to contain it or treat its impact. If the virus continues to cause significant negative impacts to economic conditions or consumer confidence, our results of operations, financial condition and cash flows could be materially adversely impacted.
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 August 31, 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| 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, 2021 | 390,000 | | | $ | 97.33 | | | 390,000 | | | 23,100,000 | |
| July 1 to July 31, 2021 | 1,794,778 | | | $ | 97.62 | | | 1,794,778 | | | 21,305,222 | |
| August 1 to August 31, 2021 | 635,739 | | | $ | 103.17 | | | 315,222 | | | 20,990,000 | |
|
| | | | | | | | | | | | |
| 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, 2020 | 14,401 |
| | $ | 63.55 |
| | — |
| | 10,860,271 |
|
| July 1 to July 31, 2020 | 363,624 |
| | $ | 60.05 |
| | — |
| | 10,860,271 |
|
| August 1 to August 31, 2020 | 997 |
| | $ | 74.55 |
| | — |
| | 10,860,271 |
|
| |
(1) | Includes 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 January 2019, our Board of Directors authorized a stock repurchase program, which replaced the June 2001 stock repurchase program, under which we are authorized to purchase up to the lesser of $1.0 billion in value, excluding commission, or 25 million in shares, of our outstanding Class A or Class B common stock. This repurchase authorization has no expiration. |
(2)In January 2021, our Board of Directors authorized a stock repurchase program, which replaced a January 2019 stock repurchase program, under which we are authorized to purchase up to the lesser of $1.0 billion in value, excluding commission, or 25 million in shares, of our outstanding Class A or Class B common stock. This repurchase authorization has no expiration.
Items 3 - 5. Not Applicable
Item 6. Exhibits
|
| | | | |
| 31.1* | |
| 31.2* | |
| 31.3* | |
| 32.* | |
| 101.* | The following financial statements from Lennar Corporation's Quarterly Report on Form 10-Q for the quarter ended August 31, 2020,2021, filed on October 1, 2020,2021, 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. |
| 101.INS* | iXBRL Instance Document. |
| 101.SCH* | iXBRL Taxonomy Extension Schema Document. |
| 101.CAL* | iXBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF* | iXBRL Taxonomy Extension Definition. |
| 101.LAB* | iXBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE* | iXBRL Taxonomy Presentation Linkbase Document. |
| 104** | The cover page from Lennar Corporation's Quarterly Report on Form 10-Q for the quarter ended August 31, 20202021 was formatted in iXBRL. |
* Filed herewith.
** Included in Exhibit 101.
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: | | | Lennar Corporation |
| | | (Registrant) |
| | | |
Date: | October 1, 20202021 | | /s/ Diane Bessette |
| | | Diane Bessette |
| | | Vice President, Chief Financial Officer and Treasurer |
| | | |
| Date: | October 1, 20202021 | | /s/ David Collins |
| | | David Collins |
| | | Vice President and Controller |