Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Lennar Corporation

We have audited the accompanying consolidated balance sheets of Lennar Corporation and subsidiaries (the “Company”) as of November 30, 2015 and 2014, and the related consolidated statements of operations and comprehensive income (loss), equity, and cash flows for each of the three years in the period ended November 30, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Lennar Corporation and subsidiaries as of November 30, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 2015, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of November 30, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 22, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

January 22, 2016

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2015 and 2014

	2015 (1)				2014 (1)
	(Dollars in thousands, except shares and per share amounts)
ASSETS
Lennar Homebuilding:
Cash and cash equivalents	$	893,408			885,729
Restricted cash	13,505				9,849
Receivables, net	74,538				93,444
Inventories:
Finished homes and construction in progress	3,957,167				3,082,345
Land and land under development	4,724,578				4,601,802
Consolidated inventory not owned	58,851				52,453
Total inventories	8,740,596				7,736,600
Investments in unconsolidated entities	741,551				656,837
Other assets	609,222				643,642
	11,072,820				10,026,101
Rialto	1,505,500				1,451,983
Lennar Financial Services	1,425,837				1,177,053
Lennar Multifamily	415,352				268,014
Total assets	$	14,419,509			12,923,151

(1)	Under certain provisions of Accounting Standards Codification (“ASC”) Topic 810, Consolidations, (“ASC 810”) the Company is required to separately disclose on its consolidated balance sheets the assets of consolidated variable interest entities (“VIEs”) that are owned by the consolidated VIEs and liabilities of consolidated VIEs as to which there is no recourse against the Company.

As of November 30, 2015, total assets include $652.3 million related to consolidated VIEs of which $9.6 million is included in Lennar Homebuilding cash and cash equivalents, $0.5 million in Lennar Homebuilding receivables, net, $3.9 million in Lennar Homebuilding finished homes and construction in progress, $154.2 million in Lennar Homebuilding land and land under development, $58.9 million in Lennar Homebuilding consolidated inventory not owned, $35.8 million in Lennar Homebuilding investments in unconsolidated entities, $22.7 million in Lennar Homebuilding other assets, $355.2 million in Rialto assets and $11.5 million in Lennar Multifamily assets.

As of November 30, 2014, total assets include $929.1 million related to consolidated VIEs of which $11.7 million is included in Lennar Homebuilding cash and cash equivalents, $0.3 million in restricted cash, $0.2 million in Lennar Homebuilding receivables, net, $0.2 million in Lennar Homebuilding finished homes and construction in progress, $208.2 million in Lennar Homebuilding land and land under development, $52.5 million in Lennar Homebuilding consolidated inventory not owned, $23.9 million in Lennar Homebuilding investments in unconsolidated entities, $104.6 million in Lennar Homebuilding other assets, $508.4 million in Rialto assets and $19.2 million in Lennar Multifamily assets.

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2015 and 2014

	2015 (2)				2014 (2)
	(Dollars in thousands, except shares and per share amounts)
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable	$	475,909			412,558
Liabilities related to consolidated inventory not owned	51,431				45,028
Senior notes and other debts payable	5,025,130				4,661,266
Other liabilities	899,815				863,236
	6,452,285				5,982,088
Rialto	866,224				740,875
Lennar Financial Services	1,083,978				896,643
Lennar Multifamily	66,950				52,243
Total liabilities	8,469,437				7,671,849
Stockholders’ equity:
Preferred stock	—				—
Class A common stock of $0.10 par value per share; Authorized: 2015 and 2014 - 300,000,000 shares; Issued: 2015 - 180,658,550 shares; 2014 - 174,241,570 shares	18,066				17,424
Class B common stock of $0.10 par value per share; Authorized: 2015 and 2014 - 90,000,000 shares, Issued: 2015 - 32,982,815 shares; 2014 - 32,982,815 shares	3,298				3,298
Additional paid-in capital	2,305,560				2,239,574
Retained earnings	3,429,736				2,660,034
Treasury stock, at cost; 2015 - 815,959 shares of Class A common stock and 1,679,620 shares of Class B common stock; 2014 - 505,420 shares of Class A common stock and 1,679,620 shares of Class B common stock	(107,755		)		(93,440	)
Accumulated other comprehensive income	39				130
Total stockholders’ equity	5,648,944				4,827,020
Noncontrolling interests	301,128				424,282
Total equity	5,950,072				5,251,302
Total liabilities and equity	$	14,419,509			12,923,151

(2)

As of November 30, 2015, total liabilities include $84.4 million related to consolidated VIEs as to which there was no recourse against the Company, of which $2.0 million is included in Lennar Homebuilding accounts payable, $51.4 million in Lennar Homebuilding liabilities related to consolidated inventory not owned, $15.6 million in Lennar Homebuilding other liabilities, $11.3 million in Rialto liabilities and $4.0 million in Lennar Multifamily liabilities.

As of November 30, 2014, total liabilities include $149.8 million related to consolidated VIEs as to which there was no recourse against the Company, of which $6.8 million is included in Lennar Homebuilding accounts payable, $45.0 million in Lennar Homebuilding liabilities related to consolidated inventory not owned, $61.6 million in Lennar Homebuilding senior notes and other debts payable, $14.8 million in Lennar Homebuilding other liabilities and $21.5 million in Rialto liabilities.

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Years Ended November 30, 2015, 2014 and 2013

	2015				2014			2013
	(Dollars in thousands, except per share amounts)
Revenues:
Lennar Homebuilding	$	8,466,945			7,025,130			5,354,947
Lennar Financial Services	620,527				454,381			427,342
Rialto	221,923				230,521			138,060
Lennar Multifamily	164,613				69,780			14,746
Total revenues	9,474,008				7,779,812			5,935,095
Cost and expenses:
Lennar Homebuilding	7,264,839				5,962,029			4,579,108
Lennar Financial Services	492,732				374,243			341,556
Rialto	222,875				249,114			151,072
Lennar Multifamily	191,302				95,227			31,463
Corporate general and administrative	216,244				177,161			146,060
Total costs and expenses	8,387,992				6,857,774			5,249,259
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	63,373				(355	)		23,803
Lennar Homebuilding other income, net	18,616				7,526			27,346
Other interest expense	(12,454		)		(36,551	)		(93,913	)
Rialto equity in earnings from unconsolidated entities	22,293				59,277			22,353
Rialto other income, net	12,254				3,395			16,787
Lennar Multifamily equity in earnings (loss) from unconsolidated entities	19,518				14,454			(271	)
Earnings before income taxes	1,209,616				969,784			681,941
Provision for income taxes	(390,416		)		(341,091	)		(177,015	)
Net earnings (including net earnings (loss) attributable to noncontrolling interests)	819,200				628,693			504,926
Less: Net earnings (loss) attributable to noncontrolling interests	16,306				(10,223	)		25,252
Net earnings attributable to Lennar	$	802,894			638,916			479,674
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on securities available-for-sale	(65		)		130			—
Reclassification adjustments for (gain) loss included in net earnings, net of tax	(26		)		—			—
Other comprehensive income attributable to Lennar	$	802,803			639,046			479,674
Other comprehensive income (loss) attributable to noncontrolling interests	$	16,306			(10,223	)		25,252
Basic earnings per share	$	3.87			3.12			2.48
Diluted earnings per share	$	3.46			2.80			2.15

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

Years Ended November 30, 2015, 2014 and 2013

	2015				2014			2013
	(Dollars in thousands)
Class A common stock:
Beginning balance	$	17,424			18,483			17,240
Employee stock and director plans	122				114			243
Retirement of treasury stock	—				(1,173	)		—
Conversion of convertible senior notes to shares of Class A common stock	520				—			1,000
Balance at November 30,	18,066				17,424			18,483
Class B common stock - Balance at November 30,	3,298				3,298			3,298
Additional paid-in capital:
Beginning balance	2,239,574				2,721,246			2,421,941
Employee stock and director plans	1,451				1,384			17,423
Retirement of treasury stock	—				(541,019	)		—
Tax benefit from employee stock plans, vesting of restricted stock and conversion of convertible senior notes	21,313				17,382			17,162
Amortization of restricted stock and performance-based stock options	43,742				40,581			33,559
Conversion of convertible senior notes to shares of Class A common stock	(520		)		—			293,106
Equity adjustment related to purchase of noncontrolling interests	—				—			(61,945	)
Balance at November 30,	2,305,560				2,239,574			2,721,246
Retained earnings:
Beginning balance	2,660,034				2,053,893			1,605,131
Net earnings attributable to Lennar	802,894				638,916			479,674
Cash dividends - Class A common stock ($0.16 per share)	(28,183		)		(27,766	)		(25,635	)
Cash dividends - Class B common stock ($0.16 per share)	(5,009		)		(5,009	)		(5,277	)
Balance at November 30,	3,429,736				2,660,034			2,053,893
Treasury stock, at cost:
Beginning balance	(93,440		)		(628,019	)		(632,846	)
Employee stock and directors plans	(14,315		)		(7,613	)		4,827
Retirement of treasury stock	—				542,192			—
Balance at November 30,	(107,755		)		(93,440	)		(628,019	)
Accumulated comprehensive other income:
Beginning balance	130				—			—
Other comprehensive income (loss), net of tax	(91		)		130			—
Balance at November 30,	39				130			—
Total stockholders’ equity	5,648,944				4,827,020			4,168,901
Noncontrolling interests:
Beginning balance	424,282				458,569			586,444
Net earnings (loss) attributable to noncontrolling interests	16,306				(10,223	)		25,252
Receipts related to noncontrolling interests	1,296				12,859			8,236
Payments related to noncontrolling interests	(133,374		)		(155,625	)		(201,655	)
Non-cash consolidations (deconsolidations), net	(13,253		)		118,272			2,242
Non-cash purchase or activity of noncontrolling interests	5,871				430			(63,500	)
Equity adjustment related to purchase of noncontrolling interests	—				—			101,550
Balance at November 30,	301,128				424,282			458,569
Total equity	$	5,950,072			5,251,302			4,627,470

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended November 30, 2015, 2014 and 2013

	2015				2014			2013
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings (including net earnings (loss) attributable to noncontrolling interests)	$	819,200			628,693			504,926
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization	43,666				38,542			30,349
Amortization of discount/premium on debt, net	19,874				21,387			23,497
Equity in earnings from unconsolidated entities	(105,184		)		(73,376	)		(45,885	)
Distributions of earnings from unconsolidated entities	60,753				22,251			4,029
Share-based compensation expense	43,873				40,718			33,689
Excess tax benefits from share-based awards	(113		)		(7,497	)		(10,148	)
Deferred income tax (benefit) expense	(5,637		)		75,324			151,619
Loss (gain) on retirement of debt and notes payable	3,632				(4,555	)		(1,000	)
Gain on sale of operating property and equipment	(5,945		)		—			(14,432	)
Unrealized and realized gains on real estate owned	(36,380		)		(36,901	)		(48,358	)
Unrealized gain on Rialto bargain purchase acquisition	—				—			(8,532	)
Impairments of loans receivable and real estate owned	25,179				76,450			32,229
Valuation adjustments and write-offs of option deposits and pre-acquisition costs, other receivables and other assets	31,002				13,088			8,435
Changes in assets and liabilities:
Decrease (increase) in restricted cash	20,876				(18,930	)		(6,430	)
Increase in receivables	(86,432		)		(113,001	)		(62,708	)
Increase in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs	(1,126,907		)		(1,367,415	)		(1,627,136	)
(Increase) decrease in other assets	(28,154		)		(13,990	)		4,279
(Increase) decrease in loans held-for-sale	(318,739		)		(395,363	)		42,130
Increase in accounts payable and other liabilities	225,790				326,087			181,733
Net cash used in operating activities	(419,646		)		(788,488	)		(807,714	)
Cash flows from investing activities:
Increase (decrease) in restricted cash related to LOCs	2,030				37			(21,527	)
Net additions to operating properties and equipment	(91,355		)		(22,599	)		(8,126	)
Proceeds from the sale of operating properties and equipment	73,732				43,937			140,564
Investments in and contributions to unconsolidated entities	(314,937		)		(159,783	)		(146,768	)
Distributions of capital from unconsolidated entities	218,996				279,306			239,489
Decrease in Rialto defeasance cash to retire notes payable	—				—			223,813
Proceeds from sales of real estate owned	155,295				269,698			239,215
Improvements to real estate owned	(8,477		)		(14,278	)		(9,407	)
Receipts of principal payments on loans receivable	28,389				24,019			66,788
Purchases of loans receivable and real estate owned	(3,228		)		—			(5,450	)
Originations of loans receivable	(78,703		)		(7,000	)		—
Purchase of investment carried at cost	(18,000		)		—			—
Purchases of commercial mortgage-backed securities bond	(13,973		)		(8,705	)		—
Proceeds from sale of commercial mortgage-backed securities bond	7,014				9,171			—
Acquisitions, net of cash acquired	—				(5,489	)		(5,623	)
Purchases of Lennar Homebuilding investments available-for-sale	(28,093		)		(21,274	)		(28,708	)
Proceeds from sales of Lennar Homebuilding investments available-for-sale	—				51,934			5,906
(Increase) decrease in Lennar Financial Services held-for-investment, net	(5,022		)		1,102			(730	)
Purchases of Lennar Financial Services investment securities	(45,687		)		(40,627	)		(30,333	)
Proceeds from maturities/sales of Lennar Financial Services investments securities	23,626				38,910			30,146
Net cash provided by (used in) investing activities	$	(98,393	)		438,359			689,249
Cash flows from financing activities:
Net borrowings (repayments) under warehouse facilities	$	366,290			389,535			(7,811	)
Proceeds from senior notes	1,146,647				955,025			750,000
Debt issuance costs	(11,807		)		(9,989	)		(12,935	)
Redemption and partial redemption of senior notes	(500,000		)		(250,000	)		(63,751	)
Conversions and exchanges on convertible senior notes	(212,107		)		—			—
Proceeds from Rialto structured notes	—				94,444			—
Principal repayments on Rialto notes payable including structured notes	(58,923		)		(75,879	)		(471,255	)
Proceeds from other borrowings	101,618				34,424			92,596
Principal payments on other borrowings	(258,108		)		(299,713	)		(287,359	)
Exercise of land option contracts from an unconsolidated land investment venture	—				(1,540	)		(28,869	)
Receipts related to noncontrolling interests	1,296				12,859			8,236
Payments related to noncontrolling interests	(133,374		)		(155,625	)		(201,655	)
Excess tax benefits from share-based awards	113				7,497			10,148
Common stock:
Issuances	9,405				13,599			34,114
Repurchases	(23,188		)		(20,424	)		(12,320	)
Dividends	(33,192		)		(32,775	)		(30,912	)
Net cash provided by (used in) financing activities	394,670				661,438			(221,773	)
Net increase (decrease) in cash and cash equivalents	(123,369		)		311,309			(340,238	)
Cash and cash equivalents at beginning of year	1,281,814				970,505			1,310,743
Cash and cash equivalents at end of year	$	1,158,445			1,281,814			970,505
Summary of cash and cash equivalents:
Lennar Homebuilding	$	893,408			885,729			695,424
Rialto	150,219				303,889			201,496
Lennar Financial Services	106,777				90,010			73,066
Lennar Multifamily	8,041				2,186			519
	$	1,158,445			1,281,814			970,505
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	$	87,132			68,366			112,694
Cash paid for income taxes, net	$	336,796			202,374			11,433
Supplemental disclosures of non-cash investing and financing activities:
Lennar Homebuilding and Lennar Multifamily:
Purchases of inventories, land under development and other assets financed by sellers	$	66,819			129,881			167,134
Non-cash contributions to unconsolidated entities	$	205,327			106,132			286,798
Inventory acquired in satisfaction of other assets including investments available-for-sale	$	28,093			—			—
Inventory acquired in partner buyout	$	64,440			—			—
Non-cash sale of operating properties and equipment	$	(59,397	)		—			—
Non-cash reduction of equity due to purchase of noncontrolling interest	$	—			—			101,550
Non-cash purchase of noncontrolling interests	$	—			—			63,500
Rialto:
Real estate owned acquired in satisfaction/partial satisfaction of loans receivable	$	17,248			57,390			70,237
Real estate owned acquired in bargain purchase acquisition	$	—			—			31,818
Net liabilities assumed in bargain purchase acquisition	$	—			—			6,200
Non-cash acquisition of Servicer Provider	$	—			8,317			—
Lennar Financial Services:
Purchase of mortgage servicing rights financed by seller	$	—			5,697			—
Consolidation/deconsolidation of unconsolidated/consolidated entities, net:
Inventories	$	—			155,021			—
Operating properties and equipment and other assets	$	(17,421	)		(7,218	)		—
Investments in unconsolidated entities	$	2,948			(30,647	)		—
Other liabilities	$	1,220			—			—
Noncontrolling interests	$	13,253			(117,156	)		—

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of Lennar Corporation and all subsidiaries, partnerships and other entities in which Lennar Corporation has a controlling interest and VIEs (see Note 15) in which Lennar Corporation is deemed the primary beneficiary (the “Company”). The Company’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in VIEs in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Changes in Accounting Principles

In November 2015, the Company adopted Accounting Standard Update (“ASU”) 2015-03, Interest - Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”), which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability. As a result, as of November 30, 2015 and 2014 the Company reclassified $26.4 million and $28.9 million, respectively, of Lennar Homebuilding’s debt issuance costs from Lennar Homebuilding other assets to Lennar Homebuilding notes and other debts payable, and $3.7 million and $6.2 million, respectively, of Rialto’s debt issuance costs from Rialto assets to Rialto liabilities, in the Company’s consolidated balance sheets.

In addition, in accordance with ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, the Company determined to continue presenting the debt issuance costs associated with the Company's revolving credit facility, letters of credit facilities and warehouse facilities as other assets included within Lennar Homebuilding, Lennar Financial Services and Rialto assets in the Company's consolidated balance sheets and continue amortizing those deferred costs over the term of the facilities.

Revenue Recognition

Revenues from sales of homes are recognized when the sales are closed and title passes to the new homeowner, the new homeowner’s initial and continuing investment is adequate to demonstrate a commitment to pay for the home, the new homeowner’s receivable is not subject to future subordination and the Company does not have a substantial continuing involvement with the new home. Revenues from sales of land are recognized when a significant down payment is received, the earnings process is complete, title passes and collectability of the receivable is reasonably assured. See Lennar Financial Services, Rialto and Lennar Multifamily within this Note for disclosure of other revenue recognition policies related to those segments.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $47.9 million, $45.2 million and $31.9 million for the years ended November 30, 2015, 2014 and 2013, respectively.

Share-Based Payments

The Company has share-based awards outstanding under the 2007 Equity Incentive Plan (the "Plan"), which provides for the granting of stock options, stock appreciation rights, restricted common stock (“nonvested shares”) and other share based awards to officers, associates and directors. The exercise prices of stock options may not be less than the market value of the common stock on the date of the grant. Exercises are permitted in installments determined when options are granted. Each stock option will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant. The Company accounts for stock option awards and nonvested share awards granted under the Plan based on the estimated grant date fair value.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Due to the short maturity period of cash equivalents, the carrying amounts of these instruments approximate their fair values. Cash and cash equivalents as of November 30, 2015 and 2014 included $414.9 million and $263.2 million, respectively, of cash held in escrow for approximately 3 days.

Restricted Cash

Lennar Homebuilding restricted cash consists of customer deposits on home sales held in restricted accounts until title transfers to the homebuyer, as required by the state and local governments in which the homes were sold, as well as funds on deposit to secure and support performance obligations. Rialto restricted cash consists of cash held in escrow by the Company's loan servicer provider on behalf of customers and lenders and is disbursed in accordance with agreements between transacting parties.

Inventories

Finished homes and construction in progress are included within inventories. Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value. Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction. Construction overhead and selling expenses are expensed as incurred. Homes held-for-sale are classified as inventories until delivered. Land, land development, amenities and other costs are accumulated by specific area and allocated to homes within the respective areas. The Company reviews its inventory for indicators of impairment by evaluating each community during each reporting period. The inventory within each community is categorized as finished homes and construction in progress or land under development based on the development state of the community. There were 662 and 622 active communities, excluding unconsolidated entities, as of November 30, 2015 and 2014, respectively. If the undiscounted cash flows expected to be generated by a community are less than its carrying amount, an impairment charge is recorded to write down the carrying amount of such community to its estimated fair value.

In conducting its review for indicators of impairment on a community level, the Company evaluates, among other things, the margins on homes that have been delivered, margins on homes under sales contracts in backlog, projected margins with regard to future home sales over the life of the community, projected margins with regard to future land sales and the estimated fair value of the land itself. The Company pays particular attention to communities in which inventory is moving at a slower than anticipated absorption pace and communities whose average sales price and/or margins are trending downward and are anticipated to continue to trend downward. From this review, the Company identifies communities whose carrying values exceed their undiscounted projected cash flows.

The Company estimates the fair value of its communities using a discounted cash flow model. The projected cash flows for each community are significantly impacted by estimates related to market supply and demand, product type by community, homesite sizes, sales pace, sales prices, sales incentives, construction costs, sales and marketing expenses, the local economy, competitive conditions, labor costs, costs of materials and other factors for that particular community. Every division evaluates the historical performance of each of its communities as well as current trends in the market and economy impacting the community and its surrounding areas. These trends are analyzed for each of the estimates listed above. For example, during the downturn in the housing market, the Company found ways to reduce its construction costs in many communities, and this reduction in construction costs in addition to changes in product type in many communities impacted future estimated cash flows.

Each of the homebuilding markets in which the Company operates is unique, as homebuilding has historically been a local business driven by local market conditions and demographics. Each of the Company’s homebuilding markets has specific supply and demand relationships reflective of local economic conditions. The Company’s projected cash flows are impacted by many assumptions. Some of the most critical assumptions in the Company’s cash flow model are projected absorption pace for home sales, sales prices and costs to build and deliver homes on a community by community basis.

In order to arrive at the assumed absorption pace for home sales included in the Company’s cash flow model, the Company analyzes its historical absorption pace in the community as well as other comparable communities in the geographical area. In addition, the Company considers internal and external market studies and trends, which generally include, but are not limited to, statistics on population demographics, unemployment rates and availability of competing product in the geographic area where the community is located. When analyzing the Company’s historical absorption pace for home sales and corresponding internal and external market studies, the Company places greater emphasis on more current metrics and trends such as the absorption pace realized in its most recent quarters as well as forecasted population demographics, unemployment rates and availability of competing product. Generally, if the Company notices a variation from historical results over a span of

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

two fiscal quarters, the Company considers such variation to be the establishment of a trend and adjusts its historical information accordingly in order to develop assumptions on the projected absorption pace in the cash flow model for a community.

In order to determine the assumed sales prices included in its cash flow models, the Company analyzes the historical sales prices realized on homes it delivered in the community and other comparable communities in the geographical area as well as the sales prices included in its current backlog for such communities. In addition, the Company considers internal and external market studies and trends, which generally include, but are not limited to, statistics on sales prices in neighboring communities and sales prices on similar products in non-neighboring communities in the geographic area where the community is located. When analyzing its historical sales prices and corresponding market studies, the Company also places greater emphasis on more current metrics and trends such as future forecasted sales prices in neighboring communities as well as future forecasted sales prices for similar products in non-neighboring communities. Generally, if the Company notices a variation from historical results over a span of two fiscal quarters, the Company considers such variation to be the establishment of a trend and adjusts its historical information accordingly in order to develop assumptions on the projected sales prices in the cash flow model for a community.

In order to arrive at the Company’s assumed costs to build and deliver homes, the Company generally assumes a cost structure reflecting contracts currently in place with its vendors adjusted for any anticipated cost reduction initiatives or increases in cost structure. Those costs assumed are used in the cash flow model for the Company’s communities.

Since the estimates and assumptions included in the Company’s cash flow models are based upon historical results and projected trends, they do not anticipate unexpected changes in market conditions or strategies that may lead the Company to incur additional impairment charges in the future.

Using all available information, the Company calculates its best estimate of projected cash flows for each community. While many of the estimates are calculated based on historical and projected trends, all estimates are subjective and change from market to market and community to community as market and economic conditions change. The determination of fair value also requires discounting the estimated cash flows at a rate the Company believes a market participant would determine to be commensurate with the inherent risks associated with the assets and related estimated cash flow streams. The discount rate used in determining each asset’s fair value depends on the community’s projected life and development stage. The Company generally uses a discount rate of approximately 20%, subject to the perceived risks associated with the community’s cash flow streams relative to its inventory.

The Company estimates the fair value of inventory evaluated for impairment based on market conditions and assumptions made by management at the time the inventory is evaluated, which may differ materially from actual results if market conditions or assumptions change. For example, 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.

As of November 30, 2015, the Company reviewed its communities for potential indicators of impairments and identified 13 homebuilding communities with 931 homesites and a carrying value of $121.7 million as having potential indicators of impairment. Of those communities, the Company recorded valuation adjustments of $8.1 million on 209 homesites in 5 communities with a carrying value of $19.4 million.

As of November 30, 2014, the Company reviewed its communities for potential indicators of impairments and identified 26 homebuilding communities with 1,774 homesites and a carrying value of $145.3 million as having potential indicators of impairment. Of those communities, the Company recorded valuation adjustments of $2.9 million on 120 homesites in one community with a carrying value of $8.1 million.

The table below summarizes the most significant unobservable inputs used in the Company's discounted cash flow model to determine the fair value of its communities for which the Company recorded valuation adjustments during the years ended November 30, 2015, 2014 and 2013:

	November 30,
	2015					2014		2013
Unobservable inputs	Range							Range
Average selling price	$158,000		-	$1,300,000		$164,000		$163,000		-	$279,000
Absorption rate per quarter (homes)	3		-	16		12		2		-	34
Discount rate	12	%	-	20%		20%		20%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company also has access to land inventory through option contracts, which generally enables the Company to defer acquiring portions of properties owned by third parties and unconsolidated entities until it has determined whether to exercise its option.

A majority of the Company’s option contracts require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land. The Company’s option contracts sometimes include price adjustment provisions, which adjust the purchase price of the land to its approximate fair value at the time of acquisition or are based on the fair value at the time of takedown.

In determining whether to walk away from an option contract, the Company evaluates the option primarily based upon its expected cash flows from the property under option. If the Company intends to walk away from an option contract, it records a charge to earnings in the period such decision is made for the deposit amount and any related pre-acquisition costs associated with the option contract.

The Company’s investments in option contracts are recorded at cost unless those investments are determined to be impaired, in which case the Company’s investments are written down to fair value. The Company reviews option contracts for indicators of impairment during each reporting period. The most significant indicator of impairment is a decline in the fair value of the optioned property such that the purchase and development of the optioned property would no longer meet the Company’s targeted return on investment with appropriate consideration given to the length of time available to exercise the option. Such declines could be caused by a variety of factors including increased competition, decreases in demand or changes in local regulations that adversely impact the cost of development. Changes in any of these factors would cause the Company to re-evaluate the likelihood of exercising its land options.

Some option contracts contain a predetermined take-down schedule for the optioned land parcels. However, in almost all instances, the Company is not required to purchase land in accordance with those take-down schedules. In substantially all instances, the Company has the right and ability to not exercise its option and forfeit its deposit without further penalty, other than termination of the option and loss of any unapplied portion of its deposit and pre-acquisition costs. Therefore, in substantially all instances, the Company does not consider the take-down price to be a firm contractual obligation.

When the Company does not intend to exercise an option, it writes off any unapplied deposit and pre-acquisition costs associated with the option contract. For the years ended November 30, 2015, 2014 and 2013, the Company wrote-off $3.1 million, $4.6 million and $1.9 million, respectively, of option deposits and pre-acquisition costs related to land under option that it does not intend to purchase.

Lennar Homebuilding and Lennar Multifamily Investments in Unconsolidated Entities

The Company evaluates the long-lived assets in unconsolidated entities for indicators of impairment during each reporting period generally using a discount rate between 10% and 20%, subject to the perceived risks associated with the community’s cash flow streams relative to its inventory or operating assets. If a valuation adjustment is recorded by an unconsolidated entity related to its assets, the Company’s proportionate share is reflected in the Company's Lennar Homebuilding or Lennar Multifamily equity in earnings (loss) from unconsolidated entities with a corresponding decrease to its Lennar Homebuilding or Lennar Multifamily investment in unconsolidated entities.

Additionally, the Company evaluates if a decrease in the value of an investment is other-than-temporary. This evaluation includes certain critical assumptions made by management: (1) projected future distributions from the unconsolidated entities, (2) discount rates applied to the future distributions and (3) various other factors, which include age of the venture, relationships with the other partners and banks, general economic market conditions, land status and liquidity needs of the unconsolidated entity. If the decline in the fair value of the investment is other-than-temporary, then these losses are included in Lennar Homebuilding other income, net or Lennar Multifamily costs and expenses.

The Company tracks its share of cumulative earnings and distributions of its joint ventures (“JVs”). For purposes of classifying distributions received from JVs in the Company’s consolidated statements of cash flows, cumulative distributions are treated as returns on capital to the extent of cumulative earnings and included in the Company’s consolidated statements of cash flows as operating activities. Cumulative distributions in excess of the Company’s share of cumulative earnings are treated as returns of capital and included in the Company’s consolidated statements of cash flows as cash from investing activities.

Consolidation of Variable Interest Entities

GAAP requires the consolidation of VIEs in which an enterprise has a controlling financial interest. A controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s variable interest in VIEs may be in the form of (1) equity ownership, (2) contracts to purchase assets, (3) management and development agreements between the Company and a VIE, (4) loans provided by the Company to a VIE or other partner and/or (5) guarantees provided by members to banks and other third parties. The Company examines specific criteria and uses its judgment when determining if it is the primary beneficiary of a VIE. Factors considered in determining whether the Company is the primary beneficiary include risk and reward sharing, experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights or voting rights, level of economic disproportionality, if any, between the Company and the other partner(s) and contracts to purchase assets from VIEs. The determination whether an entity is a VIE and, if so, whether the Company is the primary beneficiary may require it to exercise significant judgment.

Generally, all major decision making in the Company’s joint ventures is shared among all partners. In particular, business plans and budgets are generally required to be unanimously approved by all partners. Usually, management and other fees earned by the Company are nominal and believed to be at market and there is no significant economic disproportionality between the Company and other partners. Generally, the Company purchases less than a majority of the JV’s assets and the purchase prices under its option contracts are believed to be at market.

Generally, Lennar Homebuilding and Lennar Multifamily unconsolidated entities become VIEs and consolidate when the other partner(s) lack the intent and financial wherewithal to remain in the entity. As a result, the Company continues to fund operations and debt paydowns through partner loans or substituted capital contributions.

Operating Properties and Equipment

Operating properties and equipment are recorded at cost and are included in other assets in the consolidated balance sheets. The assets are depreciated over their estimated useful lives using the straight-line method. At the time operating properties and equipment are disposed of, the asset and related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to earnings. The estimated useful life for operating properties is thirty years, for furniture, fixtures and equipment is two to ten years and for leasehold improvements is five years or the life of the lease, whichever is shorter. Operating properties are reviewed for possible impairment if there are indicators that their carrying amounts are not recoverable.

Investment Securities

Investment securities are classified as available-for-sale unless they are classified as trading or held-to-maturity. Securities classified as trading are carried at fair value and unrealized holding gains and losses are recorded in earnings. Available-for-sale securities are recorded at fair value. Any unrealized holding gains or losses on available-for-sale securities are reported as accumulated other comprehensive gain or loss, which is a separate component of stockholders’ equity, net of tax, until realized. Securities classified as held-to-maturity are carried at amortized cost because they are purchased with the intent and ability to hold to maturity.

At both November 30, 2015 and 2014, the Lennar Homebuilding segment had available-for-sale securities totaling $0.5 million included in Lennar Homebuilding other assets, which consist primarily of investments in community development district bonds that mature in 2039. Certain of these bonds are in default by the borrower, which may allow the Company to foreclose on the underlying real estate collateral. Unrealized holding gain (losses) during the years ended November 30, 2015 and 2014 were deferred as a result of the Company's continuing involvement in the underlying collateral, thus no gains were recognized during the years ended November 30, 2015 and 2014.

At November 30, 2015 and 2014, the Lennar Financial Services segment had investment securities classified as held-to-maturity totaling $40.2 million and $45.0 million, respectively, which consist mainly of corporate debt obligations, U.S. government agency obligations, certificates of deposit and U.S. treasury securities that mature at various dates, mainly within five years. Also, at November 30, 2015 and 2014, the Lennar Financial Services segment had available-for-sale securities totaling $42.8 million and $16.8 million, respectively, which consist primarily of preferred stock and mutual funds. These investments available-for-sale are carried at fair value with changes recorded as a component of accumulated other comprehensive income (loss). As of November 30, 2015 and 2014, investments available-for-sale had net cumulative unrealized gains, net of tax, of $39 thousand and $130 thousand, respectively. During the years ended November 30, 2015 and 2014, the Company recorded unrealized gains (losses) in other comprehensive income (loss), net of tax of ($65) thousand and $130 thousand, respectively.

In addition, at November 30, 2015 and 2014, the Rialto segment had investment securities classified as held-to-maturity totaling $25.6 million and $17.3 million, respectively. The Rialto segment held-to-maturity securities consist of commercial mortgage-backed securities (“CMBS”).

At both November 30, 2015 and 2014, the Company had no investment securities classified as trading.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest and Real Estate Taxes

Interest and real estate taxes attributable to land and homes are capitalized as inventory costs while they are being actively developed. Interest related to homebuilding and land, including interest costs relieved from inventories, is included in cost of homes sold and cost of land sold. Interest expense related to the Lennar Financial Services operations is included in its costs and expenses.

During the years ended November 30, 2015, 2014 and 2013, interest incurred by the Company’s homebuilding operations related to homebuilding debt was $288.5 million, $273.4 million and $261.5 million, respectively; interest capitalized into inventories was $276.1 million, $236.9 million and $167.6 million, respectively.

Interest expense was included in cost of homes sold, cost of land sold and other interest expense as follows:

	Years Ended November 30,
(In thousands)	2015				2014			2013
Interest expense in cost of homes sold	$	205,200			161,371			117,781
Interest expense in cost of land sold	2,493				3,617			2,562
Other interest expense	12,454				36,551			93,913
Total interest expense	$	220,147			201,539			214,256

Income Taxes

The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted. Interest related to unrecognized tax benefits is recognized in the financial statements as a component of income tax expense.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting period by the Company based on the consideration of all available positive and negative evidence using a "more-likely-than-not" standard with respect to whether deferred tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with loss carryforwards not expiring unused and tax planning alternatives.

Based on the analysis of positive and negative evidence, the Company believed that there was enough positive evidence for the Company to conclude that it was more likely than not that the Company would realize the majority of its deferred tax assets. As of November 30, 2015 and 2014, the Company's net deferred tax assets included a valuation allowance of $5.9 million and $8.0 million, respectively. See Note 10 for additional information.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Product Warranty

Warranty and similar reserves for homes are established at an amount estimated to be adequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a home. Reserves are determined based on historical data and trends with respect to similar product types and geographical areas. The Company regularly monitors the warranty reserve and makes adjustments to its pre-existing warranties in order to reflect changes in trends and historical data as information becomes available. Warranty reserves are included in Lennar Homebuilding other liabilities in the consolidated balance sheets. The activity in the Company’s warranty reserve was as follows:

	November 30,
(In thousands)	2015				2014
Warranty reserve, beginning of year	$	115,927			102,580
Warranties issued	81,505				60,856
Adjustments to pre-existing warranties from changes in estimates (1)	11,451				12,685
Payments	(78,030		)		(60,194	)
Warranty reserve, end of year	$	130,853			115,927

(1)	The adjustments to pre-existing warranties from changes in estimates during the years ended November 30, 2015 and 2014 primarily related to specific claims related to certain of our homebuilding communities and other adjustments.

Self-Insurance

Certain insurable risks such as construction defects, general liability, medical and workers’ compensation are self-insured by the Company up to certain limits. Undiscounted accruals for claims under the Company’s self-insurance program are based on claims filed and estimates for claims incurred but not yet reported. The Company’s self-insurance reserve as of November 30, 2015 and 2014 was $96.5 million and $103.2 million, respectively, of which $65.0 million and $69.3 million, respectively, was included in Lennar Financial Services’ other liabilities in the respective years. Amounts incurred in excess of the Company's self-insurance occurrence or aggregate retention limits are covered by insurance up to the Company's purchased coverage levels. The Company's insurance policies are maintained with highly-rated underwriters for whom the Company believes counterparty default risk is not significant.

Earnings per Share

Basic earnings per share is computed by dividing net earnings attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings of the Company.

All outstanding nonvested shares that contain non-forfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings. The Company’s restricted common stock (“nonvested shares”) are considered participating securities.

Lennar Financial Services

Revenue Recognition

Title premiums on policies issued directly by the Company are recognized as revenue on the effective date of the title policies and escrow fees and loan origination revenues are recognized at the time the related real estate transactions are completed, usually upon the close of escrow. Revenues from title policies issued by independent agents are recognized as revenue when notice of issuance is received from the agent, which is generally when cash payment is received by the Company. Expected gains and losses from the sale of loans and their related servicing rights are included in the measurement of all written loan commitments that are accounted for at fair value through earnings at the time of commitment. Interest income on loans held-for-sale and loans held-for-investment is recognized as earned over the terms of the mortgage loans based on the contractual interest rates.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Loans Held-for-Sale

Loans held-for-sale by the Lennar Financial Services segment, including the rights to service the mortgage loans, are carried at fair value and changes in fair value are reflected in earnings. Premiums and discounts recorded on these loans are presented as an adjustment to the carrying amount of the loans and are not amortized. Management believes carrying loans held-for-sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions. At November 30, 2015 and 2014, loans held-for-sale, all of which were accounted for at fair value, had an aggregate fair value of $843.3 million and $738.4 million, respectively, and an aggregate outstanding principal balance of $815.0 million and $706.0 million at November 30, 2015 and 2014, respectively.

In addition, the Lennar Financial Services segment recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of these servicing rights is included in Lennar Financial Services' other assets as of November 30, 2015 and 2014. Fair value of the servicing rights is determined based on values in the Company’s servicing sales contracts.

Provision for Losses

The Company establishes reserves for possible losses associated with mortgage loans previously originated and sold to investors 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. Loan origination liabilities are included in Lennar Financial Services’ liabilities in the consolidated balance sheets. The activity in the Company’s loan origination liabilities was as follows:

	November 30,
(In thousands)	2015				2014
Loan origination liabilities, beginning of year	$	11,818			9,311
Provision for losses	4,040				2,908
Adjustments to pre-existing provisions for losses from changes in estimates (1)	4,415				—
Payments/settlements	(781		)		(401	)
Loan origination liabilities, end of year	$	19,492			11,818

(1)	Provision for losses included an adjustment for additional repurchase requests that were received beyond the estimated provision that was recorded.

Loans Held-for-Investment, Net

Loans for which the Company has the positive intent and ability to hold to maturity consist of mortgage loans carried at lower of cost, net of unamortized discounts. Discounts are amortized over the estimated lives of the loans using the interest method.

The Lennar Financial Services segment also provides an allowance for loan losses. The provision recorded and the adequacy of the related allowance is determined by management’s continuing evaluation of the loan portfolio in light of past loan loss experience, credit worthiness and nature of underlying collateral, present economic conditions and other factors considered relevant by the Company’s management. Anticipated changes in economic factors, which may influence the level of the allowance, are considered in the evaluation by the Company’s management when the likelihood of the changes can be reasonably determined. While the Company’s management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary as a result of future economic and other conditions that may be beyond management’s control.

Derivative Financial Instruments

The Lennar Financial Services segment, in the normal course of business, uses derivative financial instruments to reduce its exposure to fluctuations in mortgage-related interest rates. The segment uses mortgage-backed securities (“MBS”) forward commitments, option contracts and investor commitments to protect the value of fixed rate-locked loan commitments and loans held-for-sale from fluctuations in mortgage-related interest rates. These derivative financial instruments are carried at fair value with the changes in fair value included in Lennar Financial Services revenues.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Rialto

Management Fee Revenue

The Rialto segment provides services to a variety of legal entities and investment vehicles such as funds, joint ventures, co-invests, and other private equity structures to manage their respective investments. As a result, Rialto earns and receives management fees, underwriting fees and due diligence fees. These fees are included in Rialto revenues and are recorded over the period in which the services are performed, fees are determinable and collectability is reasonably assured. Rialto receives investment management fees from investment vehicles based on 1) a percentage of committed capital during the commitment period and after the commitment period ends and 2) a percentage of invested capital less the portion of such invested capital utilized to acquire investments that have been sold (in whole or in part) or liquidated. Fees earned for underwriting and due diligence services are based on actual costs incurred. In certain situations, Rialto may earn additional fees when the return on assets managed exceeds contractually established thresholds. Such revenue is only booked when the contract terms are met, the contract is at, or near, completion and the amounts are known and collectability is reasonably assured. Since such revenue is recognized during the latter half of the life of the investment vehicle, after substantially all of the assets have been sold and investment gains and losses realized, the possibility of claw backs is limited. In addition, Rialto may also receive tax distributions in order to cover income tax obligations resulting from allocations of taxable income due to Rialto's carried interests in the funds. These distributions are not subject to clawbacks and therefore are recorded as revenue when received.

Rialto Mortgage Finance - Loans Held-for-Sale

The originated mortgage loans are classified as loans held-for-sale and are recorded at fair value. The Company elected the fair value option for Rialto Mortgage Finance's ("RMF's") loans held-for-sale in accordance with ASC 825, Financial Instruments, which permits entities to measure various financial instruments and certain other items at fair value on a contract-by-contract basis. Management believes that carrying loans held-for-sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments, which are also carried at fair value, used to economically hedge them without having to apply complex hedge accounting provisions. Changes in fair values of the loans are reflected in Rialto revenues in the accompanying consolidated statements of operations. Interest income on these loans is calculated based on the interest rate of the loan and is recorded in Rialto revenues in the accompanying consolidated statements of operations. Substantially all of the mortgage loans originated are sold within a short period of time in a securitization on a servicing released, non-recourse basis; although, the Company remains liable for certain limited industry-standard representations and warranties related to loan sales. The Company recognizes revenue on the sale of loans into securitization trusts when control of the loans has been relinquished.

Nonaccrual Loans- Revenue Recognition & Impairment

At November 30, 2015 and 2014, there were loans receivable with a carrying value of $88.7 million and $130.1 million, respectively, for which interest income was not being recognized as they were classified as nonaccrual. When forecasted principal and interest cannot be reasonably estimated at the loan acquisition date or subsequently, management classifies the loan as nonaccrual and accounts for these assets in accordance with ASC 310-10, Receivable, (“ASC 310-10”). When a loan is classified as nonaccrual, any subsequent cash receipt is accounted for using the cost recovery method. In accordance with ASC 310-10, a loan is considered impaired when based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected.

A provision for loan losses is recognized when the recorded investment in the loan is in excess of its fair value. The fair value of the loan is determined by using either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral less estimated costs to sell. The fair value of the real estate is determined through a combination of appraisals, broker opinions of value and management's best estimate. The fair value of the underlying collateral is determined in part by placing reliance on independent third-party appraisals of the properties and/or internally prepared analyses of recent offers or prices on comparable properties in the proximate vicinity.

Real Estate Owned

Real estate owned (“REO”) represents real estate that the Rialto segment has taken control in partial or full satisfaction of loans receivable. At the time of acquisition of a property through foreclosure of a loan, REO is recorded at fair value less estimated costs to sell if classified as held-for-sale or at fair value if classified as held-and-used, which becomes the property’s new basis. The fair values of these assets are determined in part by placing reliance on third-party appraisals of the properties and/or internally prepared analyses of recent offers or prices on comparable properties in the proximate vicinity. The third-party appraisals and internally developed analyses are significantly impacted by the local market economy, market supply and demand, competitive conditions and prices on comparable properties, adjusted for anticipated date of sale, location, property

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

size, and other factors. Each REO is unique and is analyzed in the context of the particular market where the property is located. In order to establish the significant assumptions for a particular REO, the Company analyzes historical trends, including trends achieved by the Company's local homebuilding operations, if applicable, and current trends in the market and economy impacting the REO. Using available trend information, the Company then calculates its best estimate of fair value, which can include projected cash flows discounted at a rate the Company believes a market participant would determine to be commensurate with the inherent risks associated with the assets and related estimated cash flow streams. These methods use unobservable inputs to develop fair value for the Company’s REO. Due to the volume and variance of unobservable inputs, resulting from the uniqueness of each of the Company's REO, the Company does not use a standard range of unobservable inputs with respect to its evaluation of REO. However, for operating properties included within REO, the Company may also use estimated cash flows multiplied by a capitalization rate to determine the fair value of the property. Generally, the capitalization rates used to estimate fair value ranged from 8% to 12% and varied based on the location of the asset, asset type and occupancy rates for the operating properties.

Changes in economic factors, consumer demand and market conditions, among other things, could materially impact estimates used in the third-party appraisals and/or internally prepared analyses of recent offers or prices on comparable properties. Thus, estimates can differ significantly from the amounts ultimately realized by the Rialto segment from disposition of these assets. The amount by which the recorded investment in the loan is less than the REO’s fair value (net of estimated cost to sell if held-for-sale), is recorded as an unrealized gain upon foreclosure in the Company’s consolidated statements of operations. The amount by which the recorded investment in the loan is greater than the REO’s fair value (net of estimated cost to sell if held-for-sale) is generally recorded as a provision for loan losses in the Company’s consolidated statements of operations.

Additionally, REO includes real estate which Rialto has purchased directly from financial institutions. These REOs are recorded at cost or allocated cost if purchased in a bulk transaction.

Subsequent to obtaining REO via foreclosure or directly from a financial institution, management periodically performs valuations using the methodologies described above such that the real estate is carried at the lower of its carrying value or current fair value, less estimated costs to sell if classified as held-for-sale. Held-and-used assets are tested for recoverability whenever changes in circumstances indicate that the carrying value may not be recoverable, and impairment losses are recorded for any amount by which the carrying value exceeds its fair value. Any subsequent impairment losses, operating expenses or income, and gains and losses on disposition of such properties are also recognized in Rialto other income (expense), net. REO assets classified as held-and-used are depreciated using a useful life of forty years for commercial properties and twenty seven and a half years for residential properties. REO assets classified as held-for-sale are not depreciated. Occasionally an asset will require certain improvements to yield a higher return. In accordance with ASC 970-340-25, Real Estate, construction costs incurred prior to acquisition or during development of the asset may be capitalized.

Derivative Instruments

The Rialto segment, in the normal course of business, uses derivative financial instruments on loans held-for-sale in order to minimize its exposure to fluctuations in mortgage-related interest rates as well as lessen its credit risk. The segment hedges interest rate exposure by entering into interest rate swaps and swap futures. These derivative financial instruments are carried at fair value with derivative instruments in gain positions recorded in other assets while derivative instruments in loss positions are recorded in other liabilities.

Consolidations of Variable Interest Entities

In 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies (“LLCs”), in partnership with the FDIC. The Company determined that each of the LLCs met the definition of a VIE and that the Company was the primary beneficiary. In accordance with ASC 810-10-65-2, Consolidations, (“ASC 810-10-65-2”), the Company identified the activities that most significantly impact the LLCs’ economic performance and determined that it has the power to direct those activities. The economic performance of the LLCs is most significantly impacted by the performance of the LLCs’ portfolios of assets, which consisted primarily of distressed residential and commercial mortgage loans. Thus, the activities that most significantly impact the LLCs’ economic performance are the servicing and disposition of mortgage loans and real estate obtained through foreclosure of loans, restructuring of loans, or other planned activities associated with the monetizing of loans. At November 30, 2015, these consolidated LLCs had total combined assets and liabilities of $355.2 million and $11.3 million, respectively. At November 30, 2014, these consolidated LLCs had total combined assets and liabilities of $508.4 million and $21.5 million, respectively.

The FDIC does not have the unilateral power to terminate the Company’s role in managing the LLCs and servicing the loan portfolios. While the FDIC has the right to prevent certain types of transactions (i.e., bulk sales, selling assets with recourse back to the selling entity, selling assets with representations and warranties and financing the sales of assets without

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the FDIC’s approval), the FDIC does not have full voting or blocking rights over the LLCs’ activities, making their voting rights protective in nature, not substantive participating voting rights. Other than as described in the preceding sentence, which are not the primary activities of the LLCs, the Company can cause the LLCs to enter into both the disposition and restructuring of loans without any involvement of the FDIC. Additionally, the FDIC has no voting rights with regard to the operation/management of the operating properties that are acquired upon foreclosure of loans (e.g. REO) and no voting rights over the business plans of the LLCs. The FDIC can make suggestions regarding the business plans, but the Company can decide not to follow the FDIC’s suggestions and not to incorporate them in the business plans. Since the FDIC’s voting rights are protective in nature and not substantive participating voting rights, the Company has the power to direct the activities that most significantly impact the LLCs’ economic performance.

In accordance with ASC 810-10-65-2, the Company determined that it had an obligation to absorb losses of the LLCs that could potentially be significant to the LLCs or the right to receive benefits from the LLCs that could potentially be significant to the LLCs based on the following factors:

•	Rialto/Lennar owns 40% of the equity of the LLCs and has the power to direct the activities of the LLCs that most significantly impact their economic performance through loan resolutions and the sale of REO.

•	Rialto/Lennar has a management/servicer contract under which the Company earns a 0.5% servicing fee.

•	Rialto/Lennar has guaranteed, as the servicer, its obligations under the servicing agreement up to $10 million.

The Company is aware that the FDIC, as the owner of 60% of the equity of each of the LLCs, may also have an obligation to absorb losses of the LLCs that could potentially be significant to the LLCs. However, in accordance with ASC 810-10-25-38A, only one enterprise, if any, is expected to be identified as the primary beneficiary of a VIE.

Since both criteria for consolidation in ASC 810-10-65-2 are met, the Company consolidated the LLCs.

Voting Interest Entities

Rialto Real Estate Fund, LP ("Fund I"), Rialto Real Estate Fund II, LP ("Fund II"), Rialto Real Estate Fund III ("Fund III") and the Rialto Mezzanine Partners Fund, LP ("Mezzanine Fund") are unconsolidated entities and are accounted for under the equity method of accounting. They were determined to have the attributes of an investment company in accordance with ASC Topic 946, Financial Services – Investment Companies, the attributes of which are different from the attributes that would cause a company to be an investment company for purposes of the Investment Company Act of 1940. As a result, Fund I, Fund II, Fund III and the Mezzanine Fund's assets and liabilities are recorded at fair value with increases/decreases in fair value recorded in their respective statements of operations, the Company’s share of which will be recorded in the Rialto equity in earnings (loss) from unconsolidated entities financial statement line item. The Company determined that Fund I, Fund II, Fund III and the Mezzanine Fund are not variable interest entities but rather voting interest entities due to the following factors:

•	The Company determined that Rialto’s general partner interest and all the limited partners’ interests qualify as equity investment at risk.

•	Based on the capital structure of Fund I, Fund II, Fund III and the Mezzanine Fund (100% capitalized via equity contributions), the Company was able to conclude that the equity investment at risk was sufficient to allow Fund I, Fund II, Fund III and the Mezzanine Fund to finance its activities without additional subordinated financial support.

•

The general partner and the limited partners in Fund I, Fund II, Fund III and the Mezzanine Fund, collectively, have full decision-making ability as they collectively have the power to direct the activities of Fund I, Fund II, Fund III and the Mezzanine Fund, since Rialto, in addition to being a general partner with a substantive equity investment in Fund I, Fund II, Fund III and the Mezzanine Fund, also provides services to Fund I, Fund II, Fund III and the Mezzanine Fund under a management agreement and an investment agreement, which are not separable from Rialto’s general partnership interest.

•	As a result of all these factors, the Company has concluded that the power to direct the activities of Fund I, Fund II, Fund III and the Mezzanine Fund reside in its general partnership interest and thus with the holders of the equity investment at risk.

•	In addition, there are no guaranteed returns provided to the equity investors and the equity contributions are fully subjected to Fund I, Fund II, Fund III and the Mezzanine Fund's operational results, thus the equity investors absorb the expected negative and positive variability relative to Fund I, Fund II, Fund III and the Mezzanine Fund.

•	Finally, substantially all of the activities of Fund I, Fund II, Fund III and the Mezzanine Fund are not conducted on behalf of any individual investor or related group that has disproportionately few voting rights (i.e., on behalf of any individual limited partner).

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Having concluded that Fund I, Fund II, Fund III and the Mezzanine Fund are voting interest entities, the Company has evaluated the funds under the voting interest entity model to determine whether, as general partner, it has control over Fund I, Fund II, Fund III and the Mezzanine Fund. The Company determined that it does not control Fund I, Fund II, Fund III or the Mezzanine Fund as its general partner, because the unaffiliated limited partners have substantial kick-out rights and can remove Rialto as general partner at any time for cause or without cause through a simple majority vote of the limited partners. In addition, there are no significant barriers to the exercise of these rights. As a result of determining that the Company does not control Fund I, Fund II, Fund III or the Mezzanine Fund under the voting interest entity model, Fund I, Fund II, Fund III and the Mezzanine Fund are not consolidated in the Company’s financial statements.

Lennar Multifamily

Management Fees and General Contractor Revenue

The Lennar Multifamily segment provides management services with respect to the development, construction and property management of rental projects in joint ventures in which the Company has investments. As a result, the Lennar Multifamily segment earns and receives fees, which are generally based upon a stated percentage of development and construction costs and a percentage of gross rental collections. These fees are included in Lennar Multifamily revenue and are recorded over the period in which the services are performed, fees are determinable and collectability is reasonably assured. In addition, the Lennar Multifamily provides general contractor services for the construction of some of its rental projects and recognizes the revenue over the period in which the services are performed under the percentage of completion method.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers, (“ASU 2014-09”). ASU 2014-09 provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. In July 2015, the FASB deferred the effective date by one year and permitted early adoption of the standard, but not before the original effective date. ASU 2014-09 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The Company has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of applying this ASU recognized at the date of initial application. The Company is currently evaluating the method and impact the adoption of ASU 2014-09 will have on the Company's consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 amends the consolidation requirements and significantly changes the consolidation analysis required. ASU 2015-02 requires management to reevaluate all legal entities under a revised consolidation model specifically (i) modify the evaluation of whether limited partnership and similar legal entities are VIEs, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidation analysis of reporting entities that are involved with VIEs particularly those that have fee arrangements and related party relationships, and (iv) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Act of 1940 for registered money market funds. ASU 2015-02 will be effective for the Company’s fiscal year beginning December 1, 2016 and subsequent interim periods. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customers' Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2015-05”). ASU 2015-05 provides guidance for a customer to determine whether a cloud computing arrangement contains a software license or should be accounted for as a service contract. ASU 2015-05 will be effective for the Company’s fiscal year beginning December 1, 2016 and subsequent interim periods. As permitted, the Company has elected early adoption. The adoption of ASU 2015-05 will not have a material effect on the Company’s consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU 2015-16 will be effective

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

for the Company’s fiscal year beginning December 1, 2017 and subsequent interim periods. The adoption of ASU 2015-16 is not expected to have a material effect on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820, Fair Value Measurements, and as such these investments may be measured at cost. ASU 2016-01 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2016-01 is not expected to have a material effect on the Company’s consolidated financial statements.

2. Operating and Reporting Segments

As of and for the year ended November 30, 2015, the Company’s operating segments are aggregated into reportable segments, based primarily upon similar economic characteristics, geography and product type. The Company’s reportable segments consist of:

(1)	Homebuilding East

(2)	Homebuilding Central

(3)	Homebuilding West

(4)	Homebuilding Southeast Florida

(5)	Homebuilding Houston

(6)	Lennar Financial Services

(7)	Rialto

(8)	Lennar Multifamily

Information about homebuilding activities in which the Company’s homebuilding activities are not economically similar to other states in the same geographic area is grouped under “Homebuilding Other,” which is not considered a reportable segment.

Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes. Operations of the Company’s homebuilding segments primarily include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through the Company’s unconsolidated entities. Operating earnings (loss) for the homebuilding segments consist of revenues generated from the sales of homes and land, equity in earnings (loss) from unconsolidated entities and other income (expense), net, less the cost of homes sold and land sold, selling, general and administrative expenses and other interest expense of the segment.

As of November 30, 2015, the Company’s reportable homebuilding segments and all other homebuilding operations not required to be reported separately, have operations located in:

East: Florida(1), Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia

Central: Arizona, Colorado and Texas(2)

West: California and Nevada

Southeast Florida: Southeast Florida

Houston: Houston, Texas

Other: Illinois, Minnesota, Oregon, Tennessee and Washington

(1)	Florida in the East reportable segment excludes Southeast Florida, which is its own reportable segment.

(2)	Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.

Operations of the Lennar Financial Services segment include primarily mortgage financing, title insurance and closing services for both buyers of the Company’s homes and others. The Lennar Financial Services segment sells substantially all of the loans it originates within a short period in the secondary mortgage market, the majority of which are sold on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Lennar Financial Services’ operating earnings consist of revenues generated primarily from mortgage financing, title insurance and closing services, less the cost of such services and certain selling, general and administrative expenses incurred by the segment. The Lennar Financial Services segment operates generally in the same states as the Company’s homebuilding operations as well as in other states.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Operations of the Rialto segment include raising, investing and managing third-party capital, originating and securitizing commercial mortgage loans as well as investing its own capital in real estate related mortgage loans, properties and related securities. Rialto utilizes its vertically-integrated investment and operating platform to underwrite, diligence, acquire, manage, workout and add value to diverse portfolios of real estate loans, properties and real estate related securities as well as providing strategic real estate capital. Rialto’s operating earnings consists of revenues generated primarily from gains from securitization transactions and interest income from the RMF business, interest income associated with portfolios of real estate loans acquired and other portfolios of real estate loans and assets acquired, asset management, due diligence and underwriting fees derived from the real estate investment funds managed by the Rialto segment, fees for sub-advisory services, other income (expense), net, consisting primarily of gains upon foreclosure of REO and gains on sale of REO, and equity in earnings (loss) from unconsolidated entities, less the costs incurred by the segment for managing portfolios, costs related to RMF, REO expenses and other general and administrative expenses.

Operations of the Lennar Multifamily segment include revenues generated from the sales of land, revenue from construction activities and management fees generated from joint ventures, and equity in earnings (loss) from unconsolidated entities, less the cost of sales of land, expenses related to construction activities and general and administrative expenses.

Each reportable segment follows the same accounting policies described in Note 1—“Summary of Significant Accounting Policies” to the consolidated financial statements. Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented.

Financial information relating to the Company’s operations was as follows:

	November 30,
(In thousands)	2015				2014			2013
Assets:
Homebuilding East	$	2,423,389			2,323,978			1,890,138
Homebuilding Central	1,421,195				1,233,991			963,815
Homebuilding West	4,157,616				3,454,611			3,108,395
Homebuilding Southeast Florida	717,215				722,706			757,125
Homebuilding Houston	481,386				398,538			307,864
Homebuilding Other	858,000				880,912			808,496
Rialto	1,505,500				1,451,983			1,474,591
Lennar Financial Services	1,425,837				1,177,053			796,710
Lennar Multifamily	415,352				268,014			147,089
Corporate and unallocated	1,014,019				1,011,365			985,662
Total assets	$	14,419,509			12,923,151			11,239,885
Lennar Homebuilding investments in unconsolidated entities:
Homebuilding East	$	7,852			10,620			19,569
Homebuilding Central	35,850				35,772			56,136
Homebuilding West	649,170				564,643			600,622
Homebuilding Southeast Florida	32,721				32,670			36,595
Homebuilding Houston	75				162			2,074
Homebuilding Other	15,883				12,970			1,953
Total Lennar Homebuilding investments in unconsolidated entities	$	741,551			656,837			716,949
Rialto investments in unconsolidated entities	$	224,869			175,700			154,573
Lennar Multifamily investments in unconsolidated entities	$	250,876			105,674			46,301
Rialto goodwill	$	5,396			5,396			—
Lennar Financial Services goodwill	$	38,854			38,854			34,046

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Years Ended November 30,
(In thousands)	2015				2014			2013
Revenues:
Homebuilding East	$	2,761,824			2,247,681			1,842,162
Homebuilding Central	1,213,600				936,940			743,475
Homebuilding West	2,365,519				1,796,375			1,161,332
Homebuilding Southeast Florida	801,854				692,898			502,175
Homebuilding Houston	730,712				713,113			641,161
Homebuilding Other	593,436				638,123			464,642
Lennar Financial Services	620,527				454,381			427,342
Rialto	221,923				230,521			138,060
Lennar Multifamily	164,613				69,780			14,746
Total revenues (1)	$	9,474,008			7,779,812			5,935,095
Operating earnings (loss):
Homebuilding East	$	409,185			340,108			251,117
Homebuilding Central	112,752				75,585			55,203
Homebuilding West (2)	435,818				292,719			211,155
Homebuilding Southeast Florida	171,678				161,963			106,889
Homebuilding Houston	95,946				107,622			80,819
Homebuilding Other	46,262				55,724			27,892
Lennar Financial Services	127,795				80,138			85,786
Rialto	33,595				44,079			26,128
Lennar Multifamily	(7,171		)		(10,993	)		(16,988	)
Total operating earnings	1,425,860				1,146,945			828,001
Corporate general and administrative expenses	216,244				177,161			146,060
Earnings before income taxes	$	1,209,616			969,784			681,941

(1)	Total revenues were net of sales incentives of $518.1 million ($21,400 per home delivered) for the year ended November 30, 2015, $449.2 million ($21,400 per home delivered) for the year ended November 30, 2014 and $373.1 million ($20,500 per home delivered) for the year ended November 30, 2013.

(2)	For the year ended November 30, 2015, operating earnings included $82.8 million of equity in earnings related to transactions by Heritage Fields El Toro, one of the Company's unconsolidated entities ("El Toro"), and a $6.5 million gain on the sale of an operating property.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Years Ended November 30,
(In thousands)	2015				2014			2013
Lennar Homebuilding interest expense:
Homebuilding East	$	71,439			65,437			65,123
Homebuilding Central	26,745				24,593			28,534
Homebuilding West	70,397				58,999			63,106
Homebuilding Southeast Florida	22,986				21,307			19,237
Homebuilding Houston	14,535				14,914			16,412
Homebuilding Other	14,045				16,289			21,844
Total Lennar Homebuilding interest expense	$	220,147			201,539			214,256
Lennar Financial Services interest income, net	$	13,547			6,585			5,154
Rialto interest expense	$	43,127			36,531			13,163
Depreciation and amortization:
Homebuilding East	$	13,529			10,860			8,955
Homebuilding Central	6,640				5,568			3,569
Homebuilding West	17,683				14,533			10,594
Homebuilding Southeast Florida	3,348				3,039			2,047
Homebuilding Houston	3,241				3,252			2,647
Homebuilding Other	4,477				5,729			4,213
Lennar Financial Services	6,100				4,539			2,755
Rialto	7,758				7,367			5,588
Lennar Multifamily	1,110				595			484
Corporate and unallocated	23,522				23,641			23,056
Total depreciation and amortization	$	87,408			79,123			63,908
Net additions to (disposals of) operating properties and equipment:
Homebuilding East	$	251			350			97
Homebuilding Central	(18		)		578			201
Homebuilding West (1)	(11,482		)		6,719			(128,058	)
Homebuilding Southeast Florida (2)	65				(42,780	)		78
Homebuilding Houston	—				6			—
Homebuilding Other (3)	(72,472		)		1,042			561
Lennar Financial Services	3,306				4,502			3,648
Rialto	9,382				4,361			4,052
Lennar Multifamily	2,147				1,907			92
Corporate and unallocated	27,466				1,977			401
Total net disposals of operating properties and equipment	$	(41,355	)		(21,338	)		(118,928	)
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities:
Homebuilding East	$	532			2,254			678
Homebuilding Central	57				(131	)		(87	)
Homebuilding West (4)	62,960				(1,647	)		22,039
Homebuilding Southeast Florida	(414		)		(576	)		(152	)
Homebuilding Houston	18				121			2,079
Homebuilding Other	220				(376	)		(754	)
Total Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	$	63,373			(355	)		23,803
Rialto equity in earnings from unconsolidated entities	$	22,293			59,277			22,353
Lennar Multifamily equity in earnings (loss) from unconsolidated entities	$	19,518			14,454			(271	)

(1)	For the years ended November 30, 2015 and 2013, net disposals of operating properties and equipment included the sale of operating properties with a basis of $59.4 million and $127.1 million, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2)	For the year ended November 30, 2014, net disposals of operating properties and equipment included the sale of an operating property with a basis of $44.1 million.

(3)	For the year ended November 30, 2015, net disposals of operating properties and equipment included the sale of an operating property with a basis of $73.3 million.

(4)

For the year ended November 30, 2015, Lennar Homebuilding equity in earnings from unconsolidated entities included $82.8 million of equity in earnings from El Toro, for details refer to Note 4. For the year ended November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities related primarily to the Company's share of operating losses from various Lennar Homebuilding West unconsolidated entities, which included $4.3 million of the Company's share of valuation adjustments related to assets of Lennar Homebuilding's unconsolidated entities, partially offset by $4.7 million of equity in earnings as a result of third-party land sales by one unconsolidated entity. For the year ended November 30, 2013, Lennar Homebuilding equity in earnings from unconsolidated entities included $19.8 million of equity in earnings primarily as a result of sales of homesites to third parties by one unconsolidated entity.

3. Lennar Homebuilding Receivables

	November 30,
(In thousands)	2015				2014
Accounts receivable	$	41,653			44,368
Mortgage and notes receivable	22,365				41,326
Income tax receivables	10,620				10,620
	74,638				96,314
Allowance for doubtful accounts	(100		)		(2,870	)
	$	74,538			93,444

At November 30, 2015 and 2014, Lennar Homebuilding accounts receivable related primarily to other receivables and rebates. The Company performs ongoing credit evaluations of its customers and generally does not require collateral for accounts receivable. Mortgages and notes receivable arising from the sale of land are generally collateralized by the property sold to the buyer. Allowances are maintained for potential credit losses based on historical experience, present economic conditions and other factors considered relevant by the Company.

4. Lennar Homebuilding Investments in Unconsolidated Entities

Summarized condensed financial information on a combined 100% basis related to Lennar Homebuilding’s unconsolidated entities that are accounted for by the equity method was as follows:

Statements of Operations
	Years Ended November 30,
(In thousands)	2015				2014			2013
Revenues	$	1,309,517			263,395			570,910
Costs and expenses	969,509				291,993			425,282
Other income	49,343				—			14,602
Net earnings (loss) of unconsolidated entities	$	389,351			(28,598	)		160,230
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	$	63,373			(355	)		23,803

For the year ended November 30, 2015, net earnings of unconsolidated entities included the sale of approximately 1,800 homesites and a commercial property by El Toro for $1.1 billion that resulted in $373.2 million of gross profit, of which (1) approximately 300 homesites were sold to Lennar for $139.6 million that resulted in $49.3 million of gross profit, of which the Company's portion was deferred, (2) approximately 800 homesites were sold to a joint venture in which the Company has a 50% investment and for which the Company's portion of the gross profit from the sale was deferred, and (3) approximately 700 homesites and a commercial property were sold to third parties. In addition, net earnings for the year ended November 30, 2015 included a gain on debt extinguishment related to a debt paydown by El Toro. These transactions resulted primarily in the recognition of $82.8 million of Lennar Homebuilding equity in earnings for the year ended November 30, 2015.

For the year ended November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities related primarily to the Company's share of operating losses from various Lennar Homebuilding unconsolidated entities, which included $4.6 million of valuation adjustments related to assets of Lennar Homebuilding's unconsolidated entities, partially offset by $4.7 million of equity in earnings as a result of third-party land sales by one unconsolidated entity. For the year ended November 30, 2013, Lennar Homebuilding equity in earnings from unconsolidated entities included $19.8 million of equity in earnings primarily as a result of sales of homesites to third parties by one unconsolidated entity.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Balance Sheets
	November 30,
(In thousands)	2015				2014
Assets:
Cash and cash equivalents	$	248,980			243,597
Inventories	3,059,054				2,889,267
Other assets	465,404				155,470
	$	3,773,438			3,288,334
Liabilities and equity:
Accounts payable and other liabilities	$	288,192			271,638
Debt	792,886				737,755
Equity	2,692,360				2,278,941
	$	3,773,438			3,288,334

As of November 30, 2015 and 2014, the Company’s recorded investments in Lennar Homebuilding unconsolidated entities were $741.6 million and $656.8 million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of November 30, 2015 and 2014 was $839.5 million and $722.6 million, respectively. The basis difference is primarily as a result of the Company buying an interest in a partner's equity in a Lennar Homebuilding unconsolidated entity at a discount to book value, contributing non-monetary assets to an unconsolidated entity with a higher fair value than book value and deferring equity in earnings on land sales.

During the year ended November 30, 2015, the Company bought out the partner of one of its unconsolidated entities for approximately $10 million of which $7 million was paid in cash and the remainder was financed with a short-term note. As a result, the Company's $70 million investment in the unconsolidated entity was reclassified primarily to inventory.

During the year ended November 30, 2015, El Toro sold approximately 800 homesites to a joint venture, in which the Company has a 50% investment, for $472.0 million of which $320 million was financed through a non-recourse note. This transaction resulted in $157.4 million of gross profit, of which the Company's portion was deferred. In addition, this transaction resulted in an increase in inventory, other assets and debt of the Lennar Homebuilding unconsolidated entities reflected in the summarized condensed financial information presented in the previous table.

The Company’s partners generally are unrelated homebuilders, land owners/developers and financial or other strategic partners. The unconsolidated entities follow accounting principles that are in all material respects the same as those used by the Company. The Company shares in the profits and losses of these unconsolidated entities generally in accordance with its ownership interests. In many instances, the Company is appointed as the day-to-day manager under the direction of a management committee that has shared powers amongst the partners of the unconsolidated entities and receives management fees and/or reimbursement of expenses for performing this function. During the years ended November 30, 2015, 2014 and 2013, the Company received management fees and reimbursement of expenses from Lennar Homebuilding unconsolidated entities totaling $31.3 million, $30.7 million and $18.8 million, respectively.

The Company and/or its partners sometimes obtain options or enter into other arrangements under which the Company can purchase portions of the land held by the unconsolidated entities. Option prices are generally negotiated prices that approximate fair value when the Company receives the options. During the years ended November 30, 2015, 2014 and 2013, $177.6 million, $59.0 million and $192.5 million, respectively, of the unconsolidated entities’ revenues were from land sales to the Company. The Company does not include in its Lennar Homebuilding equity in earnings (loss) from unconsolidated entities its pro-rata share of unconsolidated entities’ earnings resulting from land sales to its homebuilding divisions. Instead, the Company accounts for those earnings as a reduction of the cost of purchasing the land from the unconsolidated entities. This in effect defers recognition of the Company’s share of the unconsolidated entities’ earnings related to these sales until the Company delivers a home and title passes to a third-party homebuyer.

The Lennar Homebuilding entities in which the Company has investments usually finance their activities with a combination of partner equity and debt financing. In some instances, the Company and its partners have guaranteed debt of certain unconsolidated entities.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The total debt of the Lennar Homebuilding unconsolidated entities in which the Company has investments was as follows:

	November 30,
(Dollars in thousands)	2015				2014
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	50,411			56,573
Non-recourse land seller debt and other debt (1)	324,000				4,022
Non-recourse debt with completion guarantees (2)	146,760				442,854
Non-recourse debt without completion guarantees	260,734				209,825
Non-recourse debt to the Company	781,905				713,274
The Company’s maximum recourse exposure	10,981				24,481
Total debt	$	792,886			737,755
The Company’s maximum recourse exposure as a % of total JV debt	1		%		3	%

(1)	Non-recourse land seller debt and other debt as of November 30, 2015 included a $320 million non-recourse note related to a transaction between El Toro and an unconsolidated joint venture, described previously.

(2)	The decrease in non-recourse debt with completion guarantees was primarily related to a debt paydown by El Toro as a result of sales of homesites and debt extinguishment.

In most instances in which the Company has guaranteed debt of a Lennar Homebuilding unconsolidated entity, the Company’s partners have also guaranteed that debt and are required to contribute their share of the guarantee payments. Historically, the Company has had repayment guarantees and/or maintenance guarantees. In a repayment guarantee, the Company and its venture partners guarantee repayment of a portion or all of the debt in the event of default before the lender would have to exercise its rights against the collateral. In the event of default, if the Company’s venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, the Company may be liable for more than its proportionate share, up to its maximum recourse exposure, which is the full amount covered by the joint and several guarantee. The maintenance guarantees only apply if the value or the collateral (generally land and improvements) is less than a specified percentage of the loan balance. As of both November 30, 2015 and 2014, the Company did not have any maintenance guarantees related to its Lennar Homebuilding unconsolidated entities.

In connection with many of the loans to Lennar Homebuilding unconsolidated entities, the Company and its joint venture partners (or entities related to them) have been required to give guarantees of completion to the lenders. Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained. If the construction is to be done in phases, the guarantee generally is limited to completing only the phases as to which construction has already commenced and for which loan proceeds were used.

If the Company is required to make a payment under any guarantee, the payment would constitute a capital contribution or loan to the Lennar Homebuilding unconsolidated entity and increase the Company's investment in the unconsolidated entity and its share of any funds the entity distributes.

As of both November 30, 2015 and 2014, the fair values of the repayment guarantees and completion guarantees were not material. The Company believes that as of November 30, 2015, in the event it becomes legally obligated to perform under a guarantee of the obligation of a Lennar Homebuilding unconsolidated entity due to a triggering event under a guarantee, most of the time the collateral should be sufficient to repay at least a significant portion of the obligation or the Company and its partners would contribute additional capital into the venture. In certain instances, the Company has placed performance letters of credit and surety bonds with municipalities for its joint ventures (see Note 6).

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Lennar Homebuilding Operating Properties and Equipment

Operating properties and equipment are included in Lennar Homebuilding other assets in the consolidated balance sheets and were as follows:

	November 30,
(In thousands)	2015				2014
Operating properties (1)	$	93,174			161,741
Leasehold improvements	34,064				32,890
Furniture, fixtures and equipment	66,670				36,464
	193,908				231,095
Accumulated depreciation and amortization	(78,351		)		(87,931	)
	$	115,557			143,164

(1)	Operating properties primarily include rental operations and commercial properties. During the years ended November 30, 2015 and 2014, the Company sold operating properties with a basis of $132.7 million and $44.1 million, respectively.

6. Lennar Homebuilding Senior Notes and Other Debts Payable

	November 30,
(Dollars in thousands)	2015				2014
6.50% senior notes due 2016	$	249,905			249,735
12.25% senior notes due 2017	396,252				394,415
4.75% senior notes due 2017	397,736				396,994
6.95% senior notes due 2018	247,632				246,816
4.125% senior notes due 2018	273,319				272,747
4.500% senior notes due 2019	497,210				496,419
4.50% senior notes due 2019	596,622				347,027
2.75% convertible senior notes due 2020	233,225				429,005
3.25% convertible senior notes due 2021	398,194				393,721
4.750% senior notes due 2022	567,325				566,243
4.875% senior notes due 2023	393,545				—
4.750% senior notes due 2025	495,784				—
5.60% senior notes due 2015	—				500,092
Mortgages notes on land and other debt	278,381				368,052
	$	5,025,130			4,661,266

The carrying amount of the senior notes listed above are net of debt issuance costs as the Company adopted ASU 2015-03 (see Note 1). Debt issuance costs as of November 30, 2015 and 2014 were $26.4 million and $28.9 million, respectively

In April 2015, the Company amended its unsecured revolving credit facility (the "Credit Facility") to reduce the interest rate and increase the maximum potential borrowing capacity. At November 30, 2015, the Company had a $1.6 billion Credit Facility, which includes a $163 million accordion feature, subject to additional commitments with certain financial institutions. The maturity for $1.3 billion of the Credit Facility is in June 2019, with the remainder maturing in June 2018. The proceeds available under the Credit Facility, which are subject to specified conditions for borrowing, may be used for working capital and general corporate purposes. The credit agreement also provides that up to $500 million in commitments may be used for letters of credit. As of both November 30, 2015 and 2014, the Company had no outstanding borrowings under the Credit Facility. Under the Credit Facility agreement, the Company is required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio. These ratios are calculated per the Credit Facility agreement, which involves adjustments to GAAP financial measures. The Company believes it was in compliance with its debt covenants at November 30, 2015. In addition, the Company had $315 million letter of credit facilities with different financial institutions.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s performance letters of credit outstanding were $236.5 million and $234.1 million at November 30, 2015 and 2014, respectively. The Company’s financial letters of credit outstanding were $216.7 million and $190.4 million at November 30, 2015 and 2014, respectively. Performance letters of credit are generally posted with regulatory bodies to guarantee the Company’s performance of certain development and construction activities. Financial letters of credit are generally posted in lieu of cash deposits on option contracts, for insurance risks, credit enhancements and as other collateral. Additionally, at November 30, 2015, the Company had outstanding performance and surety bonds related to site improvements at various projects (including certain projects of the Company’s joint ventures) of $1.3 billion, which includes $223.4 million related to pending litigation. Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all development and construction activities are completed. As of November 30, 2015, there were approximately $490.0 million, or 38%, of anticipated future costs to complete related to these site improvements. The Company does not presently anticipate any draws upon these bonds or letters of credit, but if any such draws occur, the Company does not believe they would have a material effect on its financial position, results of operations or cash flows.

The terms of each of the Company's senior and convertible senior notes outstanding at November 30, 2015 were as follows:

Senior and Convertible Senior Notes Outstanding (1)		Principal Amount				Net Proceeds (2)				Price			Dates Issued
(Dollars in thousands)
6.50% senior notes due 2016		$	250,000			$	248,900			99.873	%		April 2006
12.25% senior notes due 2017		400,000				386,700				98.098	%		April 2009
4.75% senior notes due 2017		400,000				395,900				100	%		July 2012, August 2012
6.95% senior notes due 2018		250,000				243,900				98.929	%		May 2010
4.125% senior notes due 2018 (3)		275,000				271,718				99.998	%		February 2013
4.500% senior notes due 2019		500,000				495,725				(4)			February 2014
4.50% senior notes due 2019		600,000				595,801				(5)			November 2014, February 2015
2.75% convertible senior notes due 2020 (6)		446,000				436,400				100	%		November 2010
3.25% convertible senior notes due 2021		400,000				391,600				100	%		November 2011, December 2011
4.750% senior notes due 2022 (3)		575,000				567,585				(7)			October 2012, February 2013, April 2013
4.875% senior notes due 2023		400,000				393,622				99.169	%		November 2015
4.750% senior notes due 2025		500,000				495,528				100	%		April 2015

(1)	Interest is payable semi-annually for each of the series of senior and convertible senior notes. The senior and convertible senior notes are unsecured and unsubordinated, but are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries.

(2)	The Company generally uses the net proceeds for working capital and general corporate purposes, which can include the repayment or repurchase of other outstanding senior notes.

(3)	During 2013, the Company incurred additional interest with respect to the 4.125% senior notes due 2018 and the 4.750% senior notes due 2022 because the registration statements relating to the notes did not become effective by, and the exchange offers were not consummated by, the dates specified in the Registration Rights Agreement related to such notes.

(4)	The Company issued $400 million aggregate principal amount at a price of 100% and $100 million aggregate principal amount at a price of 100.5%.

(5)	The Company issued $350 million aggregate principal amount at a price of 100% and $250 million aggregate principal amount at a price of 100.25%.

(6)	As of November 30, 2015, the principal amount outstanding for the 2.75% convertible senior notes was $233.9 million.

(7)	The Company issued $350 million aggregate principal amount at a price of 100%, $175 million aggregate principal amount at a price of 98.073% and $50 million aggregate principal amount at a price of 98.250%.

In April 2015, the Company retired its 5.60% senior notes due May 2015 (the "5.60% Senior Notes") for 100% of the $500 million outstanding principal amount, plus accrued and unpaid interest. At November 30, 2014, the carrying value of the 5.60% Senior Notes was $500.1 million.

The 3.25% convertible senior notes due 2021 (the "3.25% Convertible Senior Notes") are convertible into shares of Class A common stock at any time prior to maturity or redemption at the initial conversion rate of 42.5555 shares of Class A common stock per $1,000 principal amount of the 3.25% Convertible Senior Notes or 17,022,200 shares of Class A common stock if all the 3.25% Convertible Senior Notes are converted, which is equivalent to an initial conversion price of approximately $23.50 per share of Class A common stock, subject to anti-dilution adjustments. The shares are included in the calculation of diluted earnings per share. Holders of the 3.25% Convertible Senior Notes have the right to require the Company

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

to repurchase them for cash equal to 100% of their principal amount, plus accrued but unpaid interest on November 15, 2016. The Company has the right to redeem the 3.25% Convertible Senior Notes at any time on or after November 20, 2016 for 100% of their principal amount, plus accrued but unpaid interest.

The 2.75% convertible senior notes due 2020 (the “2.75% Convertible Senior Notes”) are convertible into cash, shares of Class A common stock or a combination of both, at the Company’s election. However, it is the Company’s intent to settle the face value of the 2.75% Convertible Senior Notes in cash. Shares are included in the calculation of diluted earnings per share because even though it is the Company's intent to settle the face value of the 2.75% Convertible Senior Notes in cash, the Company's volume weighted average stock price exceeded the conversion price. For the years ended November 30, 2015, 2014 and 2013, the Company's volume weighted average stock price was $48.61, $39.96 and $37.06, respectively, which exceeded the conversion price, thus 8.6 million shares, 9.0 million shares and 8.2 million shares, respectively, were included in the calculation of diluted earnings per share.

At November 30, 2015, holders may convert the 2.75% Convertible Senior Notes at the initial conversion rate of 45.1794 shares of Class A common stock per $1,000 principal amount or 10,567,145 shares of Class A common stock if all the remaining 2.75% Convertible Senior Notes are converted, which is equivalent to an initial conversion price of approximately $22.13 per share of Class A common stock, subject to anti-dilution adjustments. Holders of the 2.75% Convertible Senior Notes have the right to convert them during any fiscal quarter (and only during such fiscal quarter, except if they are called for redemption or about to mature), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day. Holders of the 2.75% Convertible Senior Notes had the right to require the Company to repurchase them for cash equal to 100% of their principal amount, plus accrued but unpaid interest, on December 15, 2015, but none of them elected to do so. The Company has the right to redeem the 2.75% Convertible Senior Notes at any time on or after December 20, 2015 for 100% of their principal amount, plus accrued but unpaid interest.

During the year ended November 30, 2015, the Company exchanged and converted approximately $212 million in aggregate principal amount of the 2.75% Convertible Senior Notes for approximately $213 million in cash and 5.2 million shares of Class A common stock, including accrued and unpaid interest through the dates of completion of the exchanges and conversions. Subsequent to November 30, 2015, the Company exchanged and converted approximately $89 million in aggregate principal amount of the 2.75% Convertible Senior Notes for approximately $89 million in cash and 2.1 million shares of Class A common stock, including accrued and unpaid interest through the date of completion of the conversion.

For its 2.75% Convertible Senior Notes, the Company will be required to pay contingent interest with regard to any interest period beginning with the interest period commencing December 20, 2015 and ending June 14, 2016, and for each subsequent six-month period commencing on an interest payment date to, but excluding, the next interest payment date, if the average trading price of the 2.75% Convertible Senior Notes during the five consecutive trading days ending on the second trading day immediately preceding the first day of the applicable interest period exceeds 120% of the principal amount of the 2.75% Convertible Senior Notes. The amount of contingent interest payable per $1,000 principal amount of notes during the applicable interest period will equal 0.75% per year of the average trading price of such $1,000 principal amount of 2.75% Convertible Senior Notes during the five trading day reference period.

Certain provisions under ASC 470, Debt, require the issuer of certain convertible debt instruments that may be settled in cash on conversion to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. The Company has applied these provisions to its 2.75% Convertible Senior Notes. At issuance, the Company estimated the fair value of the 2.75% Convertible Senior Notes using similar debt instruments that did not have a conversion feature and allocated the residual value to an equity component that represented the estimated fair value of the conversion feature at issuance. The debt discount of the 2.75% Convertible Senior Notes was amortized over the five years ended November 30, 2015, and the annual effective interest rate was 7.1% after giving effect to the amortization of the discount and deferred financing costs. At November 30, 2015 and 2014, the principal amount of the 2.75% Convertible Senior Notes was $233.9 million and $446.0 million, respectively. At November 30, 2015 and 2014, the carrying amount of the equity component included in stockholders’ equity was $0.6 million and $15.0 million, respectively, and the net carrying amount, net of debt issuance costs, of the 2.75% Convertible Senior Notes included in Lennar Homebuilding senior notes and other debts payable was $233.2 million and $429.0 million, respectively. During the years ended November 30, 2015 and 2014, the amount of interest incurred relating to both the contractual interest and amortization of the discount was $21.2 million and $27.3 million, respectively.

Although the guarantees by substantially all of the Company's 100% owned homebuilding subsidiaries are full, unconditional and joint and several while they are in effect, (i) a subsidiary will cease to be a guarantor at any time when it is not directly or indirectly guaranteeing at least $75 million of debt of Lennar Corporation (the parent company), and (ii) a

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed of.

At November 30, 2015, the Company had mortgage notes on land and other debt due at various dates through 2030 bearing interest at rates up to 7.5% with an average interest rate of 3.2%. At November 30, 2015 and 2014, the carrying amount of the mortgage notes on land and other debt was $278.4 million and $368.1 million, respectively. During the years ended November 30, 2015 and 2014, the Company retired $258.1 million and $285.9 million, respectively, of mortgage notes on land and other debt.

The minimum aggregate principal maturities of senior notes and other debts payable during the five years subsequent to November 30, 2015 and thereafter are as follows:

(In thousands)	Debt Maturities (1)
2016	$	374,665
2017	489,285
2018	655,824
2019	1,377,857
2020	2,857
Thereafter	2,161,026

(1)	Some of the debt maturities included in these amounts relate to convertible senior notes that are putable to the Company at earlier dates than in this table, as described in the detailed description of each of the convertible senior notes.

The Company expects to pay its near-term maturities as they come due through cash generated from operations, the issuance of additional debt or equity offerings as well as cash borrowed under the Company's Credit Facility.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7. Lennar Financial Services Segment

The assets and liabilities related to the Lennar Financial Services segment were as follows:

	November 30,
(In thousands)	2015				2014
Assets:
Cash and cash equivalents	$	106,777			90,010
Restricted cash	13,961				8,609
Receivables, net (1)	242,808				150,858
Loans held-for-sale (2)	843,252				738,396
Loans held-for-investment, net	30,998				26,894
Investments held-to-maturity	40,174				45,038
Investments available-for-sale	42,827				16,799
Goodwill	38,854				38,854
Other (3)	66,186				61,595
	$	1,425,837			1,177,053
Liabilities:
Notes and other debts payable	$	858,300			704,143
Other (4)	225,678				192,500
	$	1,083,978			896,643

(1)	Receivables, net, primarily related to loans sold to investors for which the Company had not yet been paid as of November 30, 2015 and 2014, respectively.

(2)	Loans held-for-sale related to unsold loans carried at fair value.

(3)	As of November 30, 2015 and 2014, other assets included mortgage loan commitments carried at fair value of $13.1 million and $12.7 million, respectively, and mortgage servicing rights carried at fair value of $16.8 million and $17.4 million, respectively. In addition, other assets also included forward contracts carried at fair value of $0.5 million as of November 30, 2015.

(4)	Other liabilities included $65.0 million and $69.3 million as of November 30, 2015 and 2014, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation. Other liabilities also included forward contracts carried at fair value of $7.6 million as of November 30, 2014.

At November 30, 2015, the financial services warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures August 2016 (1)	$	600,000
364-day warehouse repurchase facility that matures August 2016	300,000
364-day warehouse repurchase facility that matures October 2016 (2)	450,000
Total	$	1,350,000

(1)	In accordance with the amended warehouse repurchase facility agreement, the maximum aggregate commitment will be decreased to $400 million in the first quarter of fiscal 2016 and will be increased to $600 million in the second quarter of fiscal 2016.

(2)	Maximum aggregate commitment includes an uncommitted amount of $250 million.

The Lennar Financial Services segment uses these facilities to finance its lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are expected to be renewed or replaced with other facilities when they mature. Borrowings under the facilities and their prior year predecessors were $858.3 million and $698.4 million at November 30, 2015 and 2014, respectively, and were collateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $916.9 million and $732.1 million at November 30, 2015 and 2014, respectively. The combined effective interest rate on the facilities at November 30, 2015 was 2.5%. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the mortgage loans held-for-sale to investors and by collecting on receivables on loans sold but not yet paid. Without the facilities, the Lennar Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. Rialto Segment

The assets and liabilities related to the Rialto segment were as follows:

	November 30,
(In thousands)	2015				2014
Assets:
Cash and cash equivalents	$	150,219			303,889
Restricted cash	15,061				46,975
Receivables, net (1)	154,948				153,773
Loans held-for-sale (2)	316,275				113,596
Loans receivable, net	164,826				137,124
Real estate owned - held-for-sale	183,052				190,535
Real estate owned - held-and-used, net	153,717				255,795
Investments in unconsolidated entities	224,869				175,700
Investments held-to-maturity	25,625				17,290
Other (3)	116,908				57,306
	$	1,505,500			1,451,983
Liabilities:
Notes and other debts payable	$	771,728			617,077
Other (4)	94,496				123,798
	$	866,224			740,875

(1)	Receivables, net primarily related to loans sold but not settled as of November 30, 2015 and 2014.

(2)	Loans held-for-sale related to unsold loans originated by RMF carried at fair value.

(3)	Other assets included credit default swaps carried at fair value of $6.2 million and $1.7 million as of November 30, 2015 and 2014, respectively, and interest rate swaps and swap futures carried at fair value of $0.3 million as of November 30, 2015.

(4)	Other liabilities included interest rate swaps and swap future carried at fair value of $1.0 million and $1.4 million as of November 30, 2015 and 2014, respectively, and credit default swaps carried at fair value of $0.7 million and $0.8 million as of November 30, 2015 and 2014, respectively.

In the years ended November 30, 2015, 2014 and 2013, Rialto costs and expenses included loan impairments of $10.4 million, $57.1 million and $16.1 million, respectively, primarily associated with the segment's FDIC loans portfolio (before noncontrolling interests). In addition, for the years ended November 30, 2015, 2014 and 2013, Rialto operating earnings included net earnings (loss) attributable to noncontrolling interests of $4.8 million, ($22.5) million and $6.2 million, respectively.

The following is a detail of Rialto other income, net:

	Years Ended November 30,
(In thousands)	2015				2014			2013
Realized gains on REO sales, net	$	35,242			43,671			48,785
Unrealized losses on transfer of loans receivable to REO and impairments, net	(13,678		)		(26,107	)		(16,517	)
REO and other expenses	(57,740		)		(58,067	)		(44,282	)
Rental and other income	48,430				43,898			20,269
Gain on bargain purchase acquisition	—				—			8,532
Rialto other income, net	$	12,254			3,395			16,787

Loans Receivable

The loans receivable portfolios consist primarily of loans acquired at a discount. In 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies in partnership with the FDIC (“FDIC Portfolios”) and acquired 400 distressed residential and commercial real estate loans (“Bank Portfolios”) and over 300 REO properties from three financial institutions.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Based on the nature of these loans, the portfolios are managed by assessing the risks related to the likelihood of collection of payments from borrowers and guarantors, as well as monitoring the value of the underlying collateral. As of November 30, 2015 and 2014 management classified all loans receivable within the FDIC Portfolios and Bank Portfolios as nonaccrual loans as forecasted principal and interest cannot be reasonably estimated and accounted for these assets in accordance with ASC 310-10.

The following table represents loans receivable, net by type:

	November 30,
(In thousands)	2015				2014
Nonaccrual loans: FDIC and Bank Portfolios	$	88,694			130,105
Accrual loans (1)	76,132				7,019
Loans receivable, net	$	164,826			137,124

(1)	As of November 30, 2015 accrual loans included loans originated of which $17.1 million relates to a convertible land loan maturing in July 2016 and $59.1 million relates to floating rate commercial property loans maturing between May 2016 and July 2018.

The following tables represents nonaccrual loans in the FDIC Portfolios and Bank Portfolios accounted for under ASC 310-10 aggregated by collateral type:

November 30, 2015

					Recorded Investment
(In thousands)	Unpaid Principal Balance				With Allowance			Without Allowance			Total Recorded Investment
Land	$	145,417			59,740			1,165			60,905
Single family homes	39,659				8,344			3,459			11,803
Commercial properties	13,458				1,368			1,085			2,453
Other	78,279				—			13,533			13,533
Loans receivable	$	276,813			69,452			19,242			88,694

November 30, 2014

					Recorded Investment
(In thousands)	Unpaid Principal Balance				With Allowance			Without Allowance			Total Recorded Investment
Land	$	228,245			85,912			3,691			89,603
Single family homes	66,183				18,096			2,306			20,402
Commercial properties	34,048				3,368			3,918			7,286
Other	64,284				5			12,809			12,814
Loans receivable	$	392,760			107,381			22,724			130,105

The average recorded investment in impaired loans totaled approximately $109 million and $69 million for the years ended November 30, 2015 and 2014, respectively.

In order to assess the risk associated with each risk category, management evaluates the forecasted cash flows and the value of the underlying collateral securing loans receivable on a quarterly basis or when an event occurs that suggests a decline in the collateral’s fair value.

With regard to accrual loans that were accounted under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30"), prior to the fourth quarter of 2014, Rialto estimated the cash flows, at acquisition, it expected to collect on the FDIC Portfolios and Bank Portfolios and the difference between the contractually required payments and the cash flows expected to be collected at acquisition was referred to as the nonaccretable difference. This difference was neither accreted into income nor recorded on the Company’s consolidated balance sheets. The excess of cash flows expected to be collected over the cost of the loans acquired was referred to as the accretable yield and was recognized in interest income over the remaining life of the loans using the effective yield method. During the fourth quarter of 2014, in an effort to better reflect the performance of the FDIC Portfolios and Bank Portfolios, Rialto changed from recording accretable yield income on a loan pool basis to recording income on a cost recovery basis per loan as the timing and amount of expected cash flows on the remaining loan portfolios could no longer be reasonably estimated.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the year ended November 30, 2015, there was no activity in the accretable yield for the FDIC Portfolios and Bank Portfolios as all the remaining accreting loans were classified as nonaccrual loans during the fourth quarter of 2014, as explained above. For the year ended November 30, 2014, the activity in the accretable yield was as follows:

(In thousands)	November 30, 2014
Accretable yield, beginning of year	$	73,144
Additions	8,988
Deletions	(54,482		)
Accretions	(27,650		)
Accretable yield, end of year	$	—

Additions primarily represented reclasses from nonaccretable yield to accretable yield on the portfolios. Deletions represented loan impairments, net of recoveries, and disposal of loans, which included foreclosure of underlying collateral and resulted in the removal of the loans from the accretable yield portfolios.

Allowance for Loan Losses

The allowance for loan losses is a valuation reserve established through provisions for loan losses charged against Rialto’s operating earnings.

Nonaccrual — Loans in which forecasted principal and interest could not be reasonably estimated. The risk of nonaccrual loans relates to a decline in the value of the collateral securing the outstanding obligation and the recognition of an impairment through an allowance for loan losses if the recorded investment in the loan exceeds its fair value. The activity in the Company's allowance rollforward related to nonaccrual loans was as follows:

	November 30,
(In thousands)	2015				2014
Allowance on nonaccrual loans, beginning of year	$	58,326			1,213
Provision for loan losses	10,363				12,536
Reclassification from accrual (1)	—				53,265
Charge-offs	(33,064		)		(8,688	)
Allowance on nonaccrual loans, end of year	$	35,625			58,326

(1)	During the fourth quarter of 2014, the Company changed from recording accretable yield income on a loan pool basis to recording income on a cost recovery basis per loan as the timing and amount of expected cash flows on the remaining loan portfolios could no longer be reasonably estimated. As of November 30, 2014, these loans were classified as nonaccrual loans.

Accrual — Loans in which forecasted cash flows under the loan agreement, as it might be modified from time to time, can be reasonably estimated at the date of acquisition. The risk associated with loans in this category relates to the possible default by the borrower with respect to principal and interest payments and/or the possible decline in value of the underlying collateral and thus, both could cause a decline in the forecasted cash flows used to determine accretable yield income (under ASC 310-30) and the recognition of an impairment through an allowance for loan losses but can be reversed if conditions improve. For the year ended November 30, 2015, there was no activity in the Company's allowance related to accrual loans. For the year ended November 30, 2014, the activity in the Company's allowance rollforward related to accrual loans accounted for under ASC 310-30 was as follows:

(In thousands)	November 30, 2014
Allowance on accrual loans, beginning of year	$	18,952
Provision for loan losses, net of recoveries	44,577
Reclassification to nonaccrual (1)	(53,265		)
Charge-offs	(10,264		)
Allowance on accrual loans, end of year	$	—

(1)	During the fourth quarter of 2014, the Company changed from recording accretable yield income on a loan pool basis to recording income on a cost recovery basis per loan as the timing and amount of expected cash flows on the remaining loan portfolios could no longer be reasonably estimated. As of November 30, 2014, these loans were classified as nonaccrual loans.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Real Estate Owned

The acquisition of properties acquired through, or in lieu of, loan foreclosure are reported within the consolidated balance sheets as REO held-and-used, net and REO held-for-sale. When a property is determined to be held-and-used, net the asset is recorded at fair value and depreciated over its useful life using the straight line method. When certain criteria set forth in ASC 360, Property, Plant and Equipment, are met, the property is classified as held-for-sale. When a real estate asset is classified as held-for-sale, the property is recorded at the lower of its cost basis or fair value less estimated costs to sell. The fair value of REO held-for-sale is determined in part by placing reliance on third-party appraisals of the properties and/or internally prepared analyses of recent offers or prices on comparable properties in the proximate vicinity.

The following tables present the activity in REO:

	November 30,
(In thousands)	2015				2014
REO - held-for-sale, beginning of year	$	190,535			197,851
Improvements	5,535				8,176
Sales	(120,053		)		(226,027	)
Impairments and unrealized losses	(12,192		)		(9,441	)
Transfers to/from held-and-used, net (1)	119,227				219,976
REO - held-for-sale, end of year	$	183,052			190,535

	November 30,
(In thousands)	2015				2014
REO - held-and-used, net, beginning of year	$	255,795			428,989
Additions	20,134				55,407
Improvements	2,942				6,102
Impairments	(2,624		)		(11,501	)
Depreciation	(2,339		)		(3,226	)
Transfers to held-for-sale (1)	(119,227		)		(219,976	)
Other	(964		)		—
REO - held-and-used, net, end of year	$	153,717			255,795

(1)	During the years ended November 30, 2015 and 2014, the Rialto segment transferred certain properties to/from REO held-and-used, net to REO held-for-sale as a result of changes made in the disposition strategy of the real estate assets.

For the years ended November 30, 2015, 2014 and 2013, the Company recorded net losses of $1.3 million, $6.8 million and $0.4 million, respectively, from acquisitions of REO through foreclosure. These net losses are recorded in Rialto other income, net.

Rialto Mortgage Finance - loans held-for-sale

During the year ended November 30, 2015, RMF originated loans with a total principal balance of $2.6 billion and sold $2.4 billion of loans into twelve separate securitizations. During the year ended November 30, 2014, RMF originated loans with a principal balance of $1.6 billion and sold $1.3 billion of loans into eight separate securitizations. As of November 30, 2015 and 2014, $151.8 million and $147.2 million, respectively, of these originated loans were sold into a securitization trust but not settled and thus were included as receivables, net.

Notes and Other Debts Payable

In November 2013, the Rialto segment originally issued $250 million aggregate principal amount of the 7.00% senior notes due 2018 ("7.00% Senior Notes"), at a price of 100% in a private placement. In March 2014, the Rialto segment issued an additional $100 million of the 7.00% Senior Notes at a price of 102.25% of their face value in a private placement. Proceeds from the offerings, after payment of expenses, were approximately $347 million. Rialto used the net proceeds of the sale of the 7.00% Senior Notes to provide additional working capital for RMF, to make investments in the funds that Rialto manages, as well as for general corporate purposes. In addition, Rialto used $100 million of the net proceeds to repay sums that had been advanced to RMF from Lennar to enable it to begin originating and securitizing commercial mortgage loans. Interest on the 7.00% Senior Notes is due semi-annually. As of November 30, 2015 and 2014, the carrying amount, net of debt issuance costs,

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of the 7.00% Senior Notes was $347.9 million and $347.1 million, respectively. Under the indenture, Rialto is subject to certain covenants limiting, among other things, Rialto’s ability to incur indebtedness, to make investments, to make distributions to, or enter into transactions with Lennar or to create liens, subject to certain exceptions and qualifications. Rialto also has quarterly and annual reporting requirements, similar to an SEC registrant, to holders of the 7.00% Senior Notes. The Company believes Rialto was in compliance with its debt covenants at November 30, 2015.

At November 30, 2015, RMF warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures March 2016 (1)	$	250,000
364-day warehouse repurchase facility that matures August 2016 (1)	250,000
364-day warehouse repurchase facility that matures October 2016 (one year extension) (1)	400,000
Warehouse repurchase facility that matures August 2018 (two - one year extensions) (2)	100,000
Totals	$	1,000,000

(1)	RMF uses these facilities to finance its loan origination and securitization business.

(2)	In August 2015, Rialto entered into a separate repurchase facility to finance the origination of floating rate accrual loans. Loans financed under this new facility will be held as accrual loans within loans receivable, net. Borrowings under this facility were $36.3 million as of November 30, 2015.

In December 2015, RMF entered into an additional warehouse repurchase facility with commitments totaling $100 million that matures in December 2017.

Borrowings under the facilities that finance RMF's loan originations and securitization activities were $317.1 million and $141.3 million as of November 30, 2015 and 2014, respectively and were secured by a 75% interest in the originated commercial loans financed. The facilities require immediate repayment of the 75% interest in the secured commercial loans when the loans are sold in a securitization and the proceeds are collected. These warehouse repurchase facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature.

In 2010, Rialto paid $310 million for the Bank Portfolios and for over 300 REO properties, of which $124 million was financed through a 5-year senior unsecured note provided by one of the selling institutions for which the maturity was extended subsequently. The remaining balance is due in December 2016. As of November 30, 2015 and 2014, the outstanding amount related to the 5-year senior unsecured note was $30.3 million and $60.6 million, respectively.

In May 2014, the Rialto segment issued $73.8 million principal amount of notes through a structured note offering (the "Structured Notes") collateralized by certain assets originally acquired in the Bank Portfolios transaction at a price of 100%, with an annual coupon rate of 2.85%. Proceeds from the offering, after payment of expenses and hold backs for a cash reserve, were $69.1 million. In November 2014, Rialto issued an additional $20.8 million of the Structured Notes at a price of 99.5%, with an annual coupon rate of 5.0%. Proceeds from the offering, after payment of expenses, were $20.7 million. The estimated final payment date of the Structured Notes is April 15, 2017. As of November 30, 2015 and 2014, the outstanding amount, net of debt issuance costs, related to the Structured Notes was $31.3 million and $56.6 million, respectively.

Investments

All of Rialto's investments in funds have the attributes of an investment company in accordance with ASC 946, Financial Services – Investment Companies, as amended by ASU 2013-08, Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, the attributes of which are different from the attributes that would cause a company to be an investment company for purposes of the Investment Company Act of 1940. As a result, the assets and liabilities of the funds in which Rialto has investments in are recorded at fair value with increases/decreases in fair value recorded in their respective statements of operations and the Company’s share is recorded in Rialto equity in earnings from unconsolidated entities in the Company's statement of operations.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table reflects Rialto's investments in funds that invest in and manage real estate related assets and other investments:

															November 30, 2015				November 30, 2015				November 30, 2014
(Dollars in thousands)	Inception Year		Equity Commitments				Equity Commitments Called				Commitment to fund by the Company				Funds contributed by the Company				Investment
Rialto Real Estate Fund, LP	2010		$	700,006			$	700,006			$	75,000			$	75,000			$	68,570			71,831
Rialto Real Estate Fund II, LP	2012		1,305,000				1,305,000				100,000				100,000				99,947				67,652
Rialto Mezzanine Partners Fund, LP	2013		300,000				300,000				33,799				33,799				32,344				20,226
Rialto Capital CMBS Fund, LP	2014		70,660				70,660				23,735				23,735				23,233				15,266
Rialto Real Estate Fund III (1)	2015		510,233				—				100,000				—				—				—
Other investments																			775				725
																			$	224,869			175,700

(1)	In November 2015, Rialto completed the first closing of commitments from the entities that comprise Rialto Real Estate Fund III ("Fund III"). Fund III's objective is to invest in commercial real estate related debt and preferred equity opportunities of all types, as well as value add real estate acquisitions and real estate property requiring repositioning.

Rialto's share of earnings (loss) from unconsolidated entities was as follows:

	Years Ended November 30,
(In thousands)	2015				2014			2013
Rialto Real Estate Fund, LP	$	9,676			30,612			19,391
Rialto Real Estate Fund II, LP	7,440				15,929			2,523
Rialto Mezzanine Partners Fund, LP	2,194				1,913			354
Rialto Capital CMBS Fund, LP	3,013				10,823			—
Rialto Real Estate Fund III (1)	(78		)		—			—
Other investments	48				—			85
Rialto equity in earnings from unconsolidated entities	$	22,293			59,277			22,353

(1)	Equity in loss from Fund III for the year ended November 30, 2015 relates to formation costs incurred in November 2015.

During the years ended November 30, 2015 and 2014, the Company received $20.0 million and $34.7 million, respectively, of advance distributions with regard to Rialto's carried interests in the Rialto real estate funds in order to cover the income tax obligations resulting from allocations of taxable income to Rialto's carried interests in these funds. These advance distributions are not subject to clawbacks and are included in Rialto's revenues.

In June 2015, Rialto adopted a Carried Interest Plan (the "Plan"), which provides participants in the Plan the opportunity to participate in distributions made by a fund or other investment vehicle (a "Fund") managed by a subsidiary of Rialto. Under the Plan, Rialto may distribute to some employees who are involved in the management of the Fund, units of the limited liability company (the "Carried Interest Entity") that entitle its holders to specified percentages of distributions made from the Fund to the Carried Interest Entity. Rialto may distribute to some of its employees units entitling them up to 40% of the distributions received by the Carried Interest Entity. The units issued to employees will be subject to vesting schedules and forfeiture or repurchase provisions in the case of a termination of employment. The Carried Interest Entity will make advanced tax distributions to participants to enable them to pay taxes to the extent that the taxes they are required to pay are more than the total distributions they have received.

A total of 70% of the Plan awards vest in annual increments after the date of the first closing of the related Fund, with 10% vesting during the first year and 15% during each of the next four years. The final 30% vests as the remaining distributions are received by the Carried Interest Entity. During the year ended November 30, 2015, Rialto recorded $3.0 million related to the amortization of compensation expense over the vesting period.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized condensed financial information on a combined 100% basis related to Rialto’s investments in unconsolidated entities that are accounted for by the equity method was as follows:

Balance Sheets
	November 30,
(In thousands)	2015				2014
Assets:
Cash and cash equivalents	$	188,147			141,609
Loans receivable	473,997				512,034
Real estate owned	506,609				378,702
Investment securities	1,092,476				795,306
Investments in partnerships	429,979				311,037
Other assets	30,340				45,451
	$	2,721,548			2,184,139
Liabilities and equity:
Accounts payable and other liabilities	$	29,462			20,573
Notes payable	374,498				395,654
Equity	2,317,588				1,767,912
	$	2,721,548			2,184,139

Statements of Operations
	Years Ended November 30,
(In thousands)	2015				2014			2013
Revenues	$	170,921			150,452			251,533
Costs and expenses	97,162				95,629			252,563
Other income, net (1)	144,941				479,929			187,446
Net earnings of unconsolidated entities	$	218,700			534,752			186,416
Rialto equity in earnings from unconsolidated entities	$	22,293			59,277			22,353

(1)	Other income, net included realized and unrealized gains (losses) on investments.

In 2010, the Rialto segment invested in non-investment grade CMBS at a 55% discount to par value with a coupon rate of 4%, a stated and assumed final distribution date of November 2020 and a stated maturity date of October 2057. In September 2015, the Rialto segment made a net investment of $7.1 million in another CMBS bond at a 39% discount to par value with a coupon rate of 3.4%, a stated and assumed final distribution date of September 2025 and a stated maturity date of September 2058. The aggregate carrying value of these investment securities at November 30, 2015 and 2014 was $25.6 million and $17.3 million, respectively. The Rialto segment reviews changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on its investment securities. Based on the Rialto segment’s assessment, no impairment charges were recorded during the years ended November 30, 2015, 2014 and 2013. The Rialto segment classified these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.

In December 2014, the Rialto segment invested $18 million in a private commercial real estate services company. The investment is carried at cost at November 30, 2015 and is included in Rialto's other assets.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. Lennar Multifamily Segment

The Company is actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. The Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.

The assets and liabilities related to the Lennar Multifamily segment were as follows:

	November 30,
(In thousands)	2015				2014
Assets:
Cash and cash equivalents	$	8,041			2,186
Land under development	115,982				120,666
Consolidated inventory not owned	5,508				5,508
Investments in unconsolidated entities	250,876				105,674
Operating properties and equipment	621				15,740
Other assets	34,324				18,240
	$	415,352			268,014
Liabilities:
Accounts payable and other liabilities	$	62,943			48,235
Liabilities related to consolidated inventory not owned	4,007				4,008
	$	66,950			52,243

The unconsolidated entities in which the Lennar Multifamily segment has investments usually finance their activities with a combination of partner equity and debt financing. In connection with many of the loans to Lennar Multifamily unconsolidated entities, the Company (or entities related to them) has been required to give guarantees of completion and cost over-runs to the lenders and partners. Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained. If the construction is to be done in phases, the guarantee generally is limited to completing only the phases as to which construction has already commenced and for which loan proceeds were used. Additionally, the Company guarantees the construction costs of the project as construction cost over-runs would be paid by the Company. Generally, these payments would be increases to our investments in the entities and would increase our share of funds the entities distribute after the achievement of certain thresholds. As of both November 30, 2015 and 2014, the fair value of the completion guarantees was immaterial. Additionally, as of November 30, 2015 and 2014, the Lennar Multifamily segment had $37.9 million and $23.5 million, respectively, of letters of credit outstanding primarily for credit enhancements for the bank debt of certain of its unconsolidated entities. These letters of credit outstanding were included in the disclosure in Note 6 related to the Company's performance and financial letters of credit. As of November 30, 2015 and 2014, the Lennar Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $466.7 million and $163.4 million, respectively.

In many instances, the Lennar Multifamily segment is appointed as the construction and property manager of certain of its Lennar Multifamily unconsolidated entities and receives fees for performing this function. During the years ended November 30, 2015 and 2014, the Lennar Multifamily segment received fees from its unconsolidated entities totaling $27.2 million and $13.5 million, respectively.

During the years ended November 30, 2015 and 2014, the Lennar Multifamily segment provided general contractor services for the construction of some of its rental properties owned by unconsolidated entities in which the Company has an investment and received fees totaling $142.7 million and $50.9 million, respectively, which were offset by costs related to those services of $138.6 million and $49.0 million, respectively.

In July 2015, the Lennar Multifamily segment completed the initial closing of the Lennar Multifamily Venture (the "Venture") for the development, construction and property management of class-A multifamily assets. The Venture has approximately $1.1 billion of equity commitments, including a $504 million co-investment commitment by Lennar comprised of cash, undeveloped land and preacquisition costs. It will be seeded with 22 undeveloped multifamily assets that were previously purchased or under contract by the Lennar Multifamily segment totaling approximately 7,100 apartments with projected project costs of $2.4 billion as of November 30, 2015. During the year ended November 30, 2015, $275.5 million of the $1.1 billion in equity commitments were called, of which the Company contributed its portion of $125.7 million, resulting in a remaining equity commitment of $378.3 million. As of November 30, 2015, the carrying value of the Company's investment in the Venture was $122.5 million.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized condensed financial information on a combined 100% basis related to Lennar Multifamily's investments in unconsolidated entities that are accounted for by the equity method was as follows:

Balance Sheets
	November 30,
(In thousands)	2015				2014
Assets:
Cash and cash equivalents	$	39,579			25,319
Operating properties and equipment	1,398,244				637,259
Other assets	25,925				14,742
	$	1,463,748			677,320
Liabilities and equity:
Accounts payable and other liabilities	$	179,551			87,151
Notes payable	466,724				163,376
Equity	817,473				426,793
	$	1,463,748			677,320

Statements of Operations
	Years Ended November 30,
(In thousands)	2015				2014			2013
Revenues	$	16,309			4,855			—
Costs and expenses	27,190				7,435			1,493
Other income, net	43,340				35,068			—
Net earnings (loss) of unconsolidated entities	$	32,459			32,488			(1,493	)
Lennar Multifamily equity in earnings (loss) from unconsolidated entities (1)	$	19,518			14,454			(271	)

(1)	During each of the years ended November 30, 2015 and 2014, the Lennar Multifamily segment sold two operating properties through unconsolidated entities resulting in the segment's $22.2 million and $14.7 million share of gains, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. Income Taxes

The benefit (provision) for income taxes consisted of the following:

	Years Ended November 30,
(In thousands)	2015				2014			2013
Current:
Federal	$	(343,635	)		(261,306	)		(2,495	)
State	(52,420		)		3,340			(5,740	)
	$	(396,055	)		(257,966	)		(8,235	)
Deferred:
Federal	$	12,872			(42,847	)		(207,588	)
State	(7,233		)		(40,278	)		38,808
	5,639				(83,125	)		(168,780	)
	$	(390,416	)		(341,091	)		(177,015	)

A reconciliation of the statutory rate and the effective tax rate was as follows:

	Percentage of Pretax Income
	2015			2014			2013
Statutory rate	35.00	%		35.00	%		35.00	%
State income taxes, net of federal income tax benefit	3.22			3.17			3.16
Domestic production activities deduction	(3.01	)		(2.81	)		—
Tax reserves and interest expense	2.64			0.59			0.56
Deferred tax asset valuation reversal	(0.09	)		(0.28	)		(10.22	)
State net operating loss adjustment (1)	(3.00	)		—			—
Tax credits	(1.92	)		(0.41	)		(0.45	)
Other	(0.12	)		(0.46	)		(1.09	)
Effective rate	32.72	%		34.80	%		26.96	%

(1)	During the year ended November 30, 2015, the Company recorded a benefit for additional state net operating loss carryforwards as a result of the conclusion of a state tax examination.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax assets were as follows:

	November 30,
(In thousands)	2015				2014
Deferred tax assets:
Inventory valuation adjustments	$	58,902			59,208
Reserves and accruals	197,980				158,858
Net operating loss carryforwards	122,573				115,850
Capitalized expenses	91,873				66,768
Investments in unconsolidated entities	10,407				24,843
Other assets	45,725				32,904
Total deferred tax assets	527,460				458,431
Valuation allowance	(5,945		)		(8,029	)
Total deferred tax assets after valuation allowance	521,515				450,402
Deferred tax liabilities:
Capitalized expenses	32,954				64,448
Convertible debt basis difference	229				5,833
Rialto investments in partnerships	11,055				22,262
Deferred income	104,270				7,707
Other	32,282				36,323
Total deferred tax liabilities	180,790				136,573
Net deferred tax assets	$	340,725			313,829

The detail of the Company's net deferred tax assets were as follows:

	November 30,
(In thousands)	2015				2014
Deferred tax assets (liabilities): (1)
Lennar Homebuilding	$	327,645			325,779
Rialto	10,518				(3,335	)
Lennar Financial Services	2,562				(8,615	)
Net deferred tax assets	$	340,725			313,829

(1)	Deferred tax assets are included in other assets and deferred tax liabilities are included in other liabilities in the respective assets and liabilities for each segment detailed above.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting period by the Company based on the consideration of all available positive and negative evidence using a "more-likely-than-not" standard with respect to whether deferred tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with loss carryforwards not expiring unused and tax planning alternatives.

As of November 30, 2015 and 2014, the net deferred tax assets included a valuation allowance of $5.9 million and $8.0 million, respectively, primarily related to state net operating loss ("NOL") carryforwards that are not more likely than not to be utilized due to an inability to carry back these losses in most states and short carryforward periods that exist in certain states. During the year ended November 30, 2015, the Company reversed $2.1 million of valuation allowance due to the utilization or expiration of state net operating losses. During the year ended November 30, 2014, the Company reversed $4.7 million of valuation allowance, primarily due to the utilization of federal and state net operating losses.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At November 30, 2015 and 2014, the Company had federal tax effected NOL carryforwards totaling $1.9 million and $2.0 million, respectively, that may be carried forward up to 20 years to offset future taxable income and begin to expire in 2029. At November 30, 2015 and 2014, the Company had state tax effected NOL carryforwards totaling $120.7 million and $113.8 million, respectively, that may be carried forward from 5 to 20 years, depending on the tax jurisdiction, with losses expiring between 2016 and 2035. State tax effected NOL carryforwards increased during the year ended November 30, 2015 primarily as a result of the conclusion of a state tax examination.

The following table summarizes the changes in gross unrecognized tax benefits:

	Years Ended November 30,
(In thousands)	2015				2014			2013
Gross unrecognized tax benefits, beginning of year	$	7,257			10,459			12,297
Increase due to tax positions taken during prior period (1)	5,028				—			—
Increases due to tax positions taken during the current period (2)	—				—			1,982
Decreases due to settlements with taxing authorities (3)	—				(3,202	)		(3,820	)
Gross unrecognized tax benefits, end of year	$	12,285			7,257			10,459

(1)	Increased the Company's effective tax rate for the year ended November 30, 2015 from 32.30% to 32.72% due to state audits.

(2)	Increased the Company's effective tax rate for the year November 30, 2013 from 26.71% to 26.96%.

(3)	Decreased the Company's effective tax rate for the year ended November 30, 2014 from 35.13% to 34.80%. The decrease for the year ended November 30, 2013 had no effect on the Company's effective tax rate.

If the Company were to recognize its gross unrecognized tax benefits as of November 30, 2015, $8.0 million would affect the Company’s effective tax rate. The Company does not expect the total amount of unrecognized tax benefits to increase or decrease by a material amount within the following twelve months.

The following summarizes the changes in interest and penalties accrued with respect to gross unrecognized tax benefits:

	November 30,
(In thousands)	2015				2014
Accrued interest and penalties, beginning of the year	$	31,469			19,124
Accrual of interest and penalties (primarily related to federal and state audits)	33,841				13,956
Reduction of interest and penalties	(165		)		(1,611	)
Accrued interest and penalties, end of the year	$	65,145			31,469

The IRS is currently examining the Company’s federal income tax returns for fiscal years 2013 and 2014, and certain state taxing authorities are examining various fiscal years. The final outcome of these examinations is not yet determinable. The statute of limitations for the Company’s major tax jurisdictions remains open for examination for fiscal year 2005 and subsequent years. The Company participates in an IRS examination program, Compliance Assurance Process, "CAP." This program operates as a contemporaneous exam throughout the year in order to keep exam cycles current and achieve a higher level of compliance.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

	Years Ended November 30,
(In thousands, except per share amounts)	2015				2014			2013
Numerator:
Net earnings attributable to Lennar	$	802,894			638,916			479,674
Less: distributed earnings allocated to nonvested shares	361				414			458
Less: undistributed earnings allocated to nonvested shares	8,371				7,379			6,356
Numerator for basic earnings per share	794,162				631,123			472,860
Less: net amount attributable to noncontrolling interests in Rialto's Carried Interest Incentive Plan (1)	4,120				—			—
Plus: interest on 3.25% convertible senior notes due 2021 and 2.00% convertible senior notes due 2020 (2)	7,928				7,928			11,302
Plus: undistributed earnings allocated to convertible shares	8,371				7,379			6,356
Less: undistributed earnings reallocated to convertible shares	7,528				6,632			5,506
Numerator for diluted earnings per share	$	798,813			639,798			485,012
Denominator:
Denominator for basic earnings per share - weighted average common shares outstanding	205,189				202,209			190,473
Effect of dilutive securities:
Shared based payments	9				8			254
Convertible senior notes	25,614				26,023			35,193
Denominator for diluted earnings per share - weighted average common shares outstanding	230,812				228,240			225,920
Basic earnings per share	$	3.87			3.12			2.48
Diluted earnings per share	$	3.46			2.80			2.15

(1)

During the year ended November 30, 2015, Rialto adopted the Plan which provides participants in the Plan an equity interest in a Rialto subsidiary that entitles them to a specified percentages of distributions made to a Rialto subsidiary from real estate funds or other investment vehicles managed by the Rialto subsidiary. Some Rialto employees may receive up to 40% of the distributions received by the Rialto subsidiary (see Note 8). The amount presented above represents the difference between the advanced tax distributions received by Rialto's subsidiary and the amount Lennar, as the parent company, is assumed to own.

(2)	Interest on the 2.00% convertible senior notes due 2020 was included for the year ended November 30, 2013 because the holders of the 2.00% convertible senior notes due 2020 converted the notes into shares of Class A common stock on November 30, 2013.

For the years ended November 30, 2015, 2014 and 2013, there were no options to purchase shares of common stock that were outstanding and anti-dilutive.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12. Capital Stock

Preferred Stock

The Company is authorized to issue 500,000 shares of preferred stock with a par value of $10 per share and 100 million shares of participating preferred stock with a par value of $0.10 per share. No shares of preferred stock or participating preferred stock have been issued as of November 30, 2015 and 2014.

Common Stock

During each of the years ended November 30, 2015, 2014 and 2013, the Company’s Class A and Class B common stockholders received a per share annual dividend of $0.16. The only significant difference between the Class A common stock and Class B common stock is that Class A common stock entitles holders to one vote per share and the Class B common stock entitles holders to ten votes per share.

As of November 30, 2015, Stuart A. Miller, the Company’s Chief Executive Officer and a Director, directly owned, or controlled through family-owned entities, shares of Class A and Class B common stock, which represented approximately 44% voting power of the Company’s stock.

The Company has a stock repurchase program, which originally authorized the purchase of up to 20 million shares of its outstanding common stock. During the years ended November 30, 2015, 2014 and 2013, there were no share repurchases of common stock under the stock repurchase program. As of November 30, 2015, the remaining authorized shares that could be purchased under the stock repurchase program were 6.2 million shares of common stock.

During the year ended November 30, 2015, treasury stock increased by 0.3 million shares of Class A common stock primarily due to activity related to the Company's equity compensation plan. During the year ended November 30, 2014, treasury stock decreased by 11.6 million shares of Class A common stock primarily due to the retirement of 11.7 million shares of Class A common stock authorized by the Company's Board of Directors, partially offset by activity related to the Company's equity compensation plan.

Restrictions on Payment of Dividends

There are no restrictions on the payment of dividends on common stock by the Company. There are no agreements which restrict the payment of dividends by subsidiaries of the Company other than (i) the need to maintain the financial ratios and net worth requirements under the Lennar Financial Services segment’s warehouse lines of credit, which restrict the payment of dividends from the Company’s mortgage subsidiaries following the occurrence and during the continuance of an event of default thereunder and limit dividends to 50% of net income in the absence of an event of default, and (ii) the restriction under Rialto's 7.00% Senior Notes indenture that limits Rialto's ability to make distributions to Lennar.

401(k) Plan

Under the Company’s 401(k) Plan (the “Plan”), contributions made by associates can be invested in a variety of mutual funds or proprietary funds provided by the Plan trustee. The Company may also make contributions for the benefit of associates. The Company records as compensation expense its contribution to the Plan. For the years ended November 30, 2015, 2014 and 2013, this amount was $13.5 million, $10.2 million and $8.0 million, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13. Share-Based Payments

Compensation expense related to the Company’s share-based awards was as follows:

	Years ended November 30,
(In thousands)	2015				2014			2013
Nonvested shares	$	43,742			40,581			33,559
Stock options (1)	131				137			130
Total compensation expense for share-based awards	$	43,873			40,718			33,689

(1)	Stock options expense relates to stock option awards granted to Lennar's non-employee directors in each of the years presented. The fair value of these stock option awards was estimated on the date of grant using a Black-Scholes option-pricing model.

Cash flows resulting from tax benefits related to tax deductions in excess of the compensation expense recognized are classified as financing cash flows. For the years ended November 30, 2015, 2014 and 2013 there was $0.1 million, $7.5 million and $10.1 million, respectively, of excess tax benefits from share-based awards.

The fair value of nonvested shares is determined based on the trading price of the Company’s common stock on the grant date. The weighted average fair value of nonvested shares granted during the years ended November 30, 2015, 2014 and 2013 was $49.01, $41.89 and $35.04, respectively. A summary of the Company’s nonvested shares activity for the year ended November 30, 2015 was as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested shares at November 30, 2014	2,289,126			$	37.38
Grants	1,186,960			$	49.01
Vested	(1,180,977	)		$	35.79
Forfeited	(43,556	)		$	39.66
Nonvested shares at November 30, 2015	2,251,553			$	44.30

At November 30, 2015, there was $79.7 million of unrecognized compensation expense related to unvested share-based awards granted under the Company’s share-based payment plan, all of which relates to nonvested shares with a weighted average remaining contractual life of 2.1 years. During both the years ended November 30, 2015 and 2014, 1.2 million nonvested shares were vested. For the year ended November 30, 2013, 1.3 million nonvested shares were vested. For the year ended November 30, 2015, the Company recorded no excess tax benefit related to vested shares. For the years ended November 30, 2014 and 2013, the Company recorded an excess tax benefit related to vested shares of $7.4 million and $6.9 million, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14. Financial Instruments and Fair Value Disclosures

The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at November 30, 2015 and 2014, 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.

			November 30,
			2015							2014
	Fair Value		Carrying				Fair			Carrying			Fair
(In thousands)	Hierarchy		Amount				Value			Amount			Value
ASSETS
Rialto:
Loans receivable, net	Level 3		$	164,826			169,302			137,124			142,900
Investments held-to-maturity	Level 3		$	25,625			25,227			17,290			17,155
Lennar Financial Services:
Loans held-for-investment, net	Level 3		$	30,998			29,931			26,894			26,723
Investments held-to-maturity	Level 2		$	40,174			40,098			45,038			45,051
LIABILITIES
Lennar Homebuilding senior notes and other debts payable	Level 2		$	5,025,130			5,936,327			4,661,266			5,731,128
Rialto notes and other debts payable	Level 2		$	771,728			803,013			617,077			634,166
Lennar Financial Services notes and other debts payable	Level 2		$	858,300			858,300			704,143			704,143

The following methods and assumptions are used by the Company in estimating fair values:

Rialto—The fair values for loans receivable, net are based on the fair value of the collateral less estimated cost to sell or discounted cash flows, if estimable. The fair value for investments held-to-maturity is based on discounted cash flows. For notes and other debts payable, the fair value is calculated based on discounted cash flows using the Company’s weighted average borrowing rate and for the warehouse repurchase financing agreements fair values approximate their carrying value due to their short-term maturities.

Lennar Financial Services—The fair values above are based on quoted market prices, if available. The fair values for instruments that do not have quoted market prices are estimated by the Company on the basis of discounted cash flows or other financial information. For notes and other debt payable, the fair values approximate their carrying value due to variable interest pricing terms and short-term nature of the borrowing.

Lennar Homebuilding—For senior notes and other debts payable, the fair value of fixed-rate borrowings is based on quoted market prices and the fair value of variable-rate borrowings is based on expected future cash flows calculated using current market forward rates.

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 CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s financial instruments measured at fair value on a recurring basis are summarized below:

(In thousands)	Fair Value Hierarchy		Fair Value at November 30, 2015				Fair Value at November 30, 2014
Lennar Homebuilding Assets:
Investments available-for-sale	Level 3		$	523			480
Rialto Financial Assets:
Loans held-for-sale (1)	Level 3		$	316,275			113,596
Interest rate swaps and swap futures	Level 1		$	280			—
Credit default swaps	Level 2		$	6,153			1,694
Rialto Financial Liabilities:
Interest rate swaps and swap futures	Level 1		$	978			1,376
Credit default swaps	Level 2		$	720			766
Lennar Financial Services Assets:
Loans held-for-sale (2)	Level 2		$	843,252			738,396
Investments available-for-sale	Level 1		$	42,827			16,799
Mortgage loan commitments	Level 2		$	13,060			12,687
Forward contracts	Level 2		$	531			(7,576	)
Mortgage servicing rights	Level 3		$	16,770			17,353

(1)	The aggregate fair value of Rialto loans held-for-sale of $316.3 million at November 30, 2015 exceeds their aggregate principal balance of $314.3 million by $2.0 million. The aggregate fair value of Rialto loans held-for-sale of $113.6 million at November 30, 2014 exceeds their aggregate principal balance of $111.8 million by $1.8 million.

(2)	The aggregate fair value of Lennar Financial Services loans held-for-sale of $843.3 million at November 30, 2015 exceeds their aggregate principal balance of $815.0 million by $28.2 million. The aggregate fair value of loans held-for-sale of $738.4 million at November 30, 2014 exceeds their aggregate principal balance of $706.0 million by $32.4 million.

The estimated fair values of the Company’s financial instruments have been determined by using available market information and what the Company believes to be appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies might have a material effect on the estimated fair value amounts. The following methods and assumptions are used by the Company in estimating fair values:

Lennar Homebuilding investments available-for-sale— The fair value of these investments is based on third-party valuations and/or estimated by the Company on the basis of discounted cash flows and it is included in the Lennar Homebuilding segment's other assets.

Rialto loans held-for-sale— The fair value of loans held-for-sale is calculated from model-based techniques that use discounted cash flow assumptions and the Company’s own estimates of CMBS spreads, market interest rate movements and the underlying loan credit quality. Loan values are calculated by allocating the change in value of an assumed CMBS capital structure to each loan. The value of an assumed CMBS capital structure is calculated, generally, by discounting the cash flows associated with each CMBS class at market interest rates and at the Company’s own estimate of CMBS spreads. The Company estimates CMBS spreads by observing the pricing of recent CMBS offerings, secondary CMBS markets, changes in the CMBX index, and general capital and commercial real estate market conditions. Considerations in estimating CMBS spreads include comparing the Company’s current loan portfolio with comparable CMBS offerings containing loans with similar duration, credit quality and collateral composition. These methods use unobservable inputs in estimating a discount rate that is used to assign a value to each loan. While the cash payments on the loans are contractual, the discount rate used and assumptions regarding the relative size of each class in the CMBS capital structure can significantly impact the valuation. Therefore, the estimates used could differ materially from the fair value determined when the loans are sold to a securitization trust.

Rialto interest rate swaps and swap futures— The fair value of interest rate swaps (derivatives) is based on observable values for underlying interest rates and market determined risk premiums. The fair value of interest rate swap futures (derivatives) is based on quoted market prices for identical investments traded in active markets.

Rialto credit default swaps— The fair value of credit default swaps (derivatives) is based on quoted market prices for similar investments traded in active markets.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Lennar Financial Services loans held-for-sale— Fair value is based on independent quoted market prices, where available, or the prices for other mortgage whole loans with similar characteristics. Management believes carrying loans held-for-sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions. In addition, the Company recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of these servicing rights is included in Lennar Financial Services’ loans held-for-sale as of November 30, 2015 and 2014. Fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics.

Lennar Financial Services investments available-for-sale— The fair value of these investments is based on the quoted market prices for similar financial instruments.

Lennar Financial Services mortgage loan commitments— Fair value of commitments to originate loans is based upon the difference between the current value of similar loans and the price at which the Lennar Financial Services segment has committed to originate the loans. The fair value of commitments to sell loan contracts is the estimated amount that the Lennar Financial Services segment would receive or pay to terminate the commitments at the reporting date based on market prices for similar financial instruments. In addition, the Company recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics. The fair value of the mortgage loan commitments and related servicing rights is included in Lennar Financial Services’ other assets.

Lennar Financial Services forward contracts— Fair value is based on quoted market prices for similar financial instruments. The fair value of forward contracts is included in the Lennar Financial Services segment's other assets as of November 30, 2015. The fair value of forward contracts is included in the Lennar Financial Services segment's other liabilities as of November 30, 2014.

The Lennar Financial Services segment uses mandatory mortgage-backed securities (“MBS”) forward commitments, option contracts and investor commitments to hedge its mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk associated with MBS forward commitments, option contracts and loan sales transactions is managed by limiting the Company’s counterparties to investment banks, federally regulated bank affiliates and other investors meeting the Company’s credit standards. The segment’s risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and option contracts. At November 30, 2015, the segment had open commitments amounting to $1.0 billion to sell MBS with varying settlement dates through February 2016.

Lennar Financial Services mortgage servicing rights — Lennar Financial Services records mortgage servicing rights when it sells loans on a servicing-retained basis or through the acquisition or assumption of the right to service a financial asset. The fair value of the mortgage servicing rights is calculated using third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and delinquency rates. As of November 30, 2015, the key assumptions used in determining the fair value include a 12.2% mortgage prepayment rate, a 12.1% discount rate and a 7.5% delinquency rate. The fair value of mortgage servicing rights is included in the Lennar Financial Services segment's other assets.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The changes in fair value for Level 1 and Level 2 financial instruments measured on a recurring basis are shown below by financial instrument and financial statement line item:

	Years Ended November 30,
(In thousands)	2015				2014			2013
Changes in fair value included in Lennar Financial Services revenues:
Loans held-for-sale	$	(4,137	)		17,124			(7,927	)
Mortgage loan commitments	$	373			5,352			(5,378	)
Forward contracts	$	8,107			(9,020	)		4,014
Investments available-for-sale	$	26			—			—
Changes in fair value included in Rialto revenues:
Financial Assets:
Interest rate swaps and swap futures	$	280			—			—
Credit default swaps	$	477			(288	)		—
Financial Liabilities:
Interest rate swaps and swap futures	$	398			(1,346	)		(31	)
Credit default swaps	$	(148	)		349			(318	)
Changes in fair value included in other comprehensive income (loss), net of tax:
Lennar Financial Services investments available-for-sale	$	(65	)		130			—

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

The following table represents the reconciliations of the beginning and ending balance for the Level 3 recurring fair value measurements:

	Years Ended November 30,
	2015										2014
	Lennar Financial Services				Lennar Homebuilding			Rialto			Lennar Financial Services			Lennar Homebuilding			Rialto
(In thousands)	Mortgage servicing rights				Investments available-for-sale			Loans held-for-sale			Mortgage servicing rights			Investments available-for-sale			Loans held-for-sale
Beginning of year	$	17,353			480			113,596			11,455			40,032			44,228
Purchases/loan originations (1)	3,290				28,093			2,628,019			9,314			21,274			1,562,748
Sales/loan originations sold, including those not settled	—				—			(2,424,478	)		—			(51,934	)		(1,494,075	)
Disposals/settlements (2)	(3,577		)		(28,093	)		—			(2,308	)		(16,271	)		—
Changes in fair value (3)	(296		)		43			(899	)		(1,108	)		7,379			1,495
Interest and principal paydowns	—				—			37			—			—			(800	)
End of year	$	16,770			523			316,275			17,353			480			113,596

(1)	For the year ended November 30, 2014, the Lennar Financial Services mortgage and servicing rights included the $5.7 million acquisition of a portfolio of mortgage servicing rights. Lennar Homebuilding investments available-for-sale represent investments in community development district bonds that mature at various dates.

(2)	The Lennar Homebuilding investments available-for-sale that were settled related to investments in community development district bonds, which were in default upon purchase and reissued by the municipalities prior to being settled with third parties.

(3)

Changes in fair value for Rialto loans held-for-sale and Lennar Financial Services mortgage servicing rights are included in Rialto's and Lennar Financial Services' revenues, respectively. The changes in fair value in Lennar Homebuilding investments available-for-sale were not included in other comprehensive income (loss) because the changes in fair value were deferred as a result of the Company's continuing involvement in the underlying real estate collateral.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded valuation adjustments and write-offs. The fair values included in the tables below represent only those assets whose carrying values were adjusted to fair value during the respective periods disclosed. The assets measured at fair value on a nonrecurring basis are summarized below:

	Years Ended November 30,
			2015										2014									2013
(In thousands)	Fair Value Hierarchy		Carrying Value				Fair Value			Total Gains (Losses) (1)			Carrying Value			Fair Value			Total Losses (1)			Carrying Value			Fair Value			Total Gains (Losses) (1)
Financial assets
Rialto:
Impaired loans receivable	Level 3		$	127,319			116,956			(10,363	)		187,218			130,105			(57,113	)		237,829			221,690			(16,139	)
Non-financial assets
Lennar Homebuilding:
Finished homes and construction in progress (2)	Level 3		$	59,913			47,898			(12,015	)		8,071			4,498			(3,573	)		16,453			11,995			(4,458	)
Land and land under development (2)	Level 3		$	32,500			20,033			(12,467	)		7,013			6,143			(870	)		—			—			—
Investments in unconsolidated entities (3)	Level 3		$	—			—			—			—			—			—			20,921			20,024			(897	)
Rialto:
REO - held-for-sale (4)
Upon acquisition/transfer	Level 3		$	40,833			38,383			(2,450	)		26,750			25,145			(1,605	)		14,367			15,985			1,618
Upon management periodic valuations	Level 3		$	36,730			26,988			(9,742	)		50,115			42,279			(7,836	)		26,772			21,199			(5,573	)
REO - held-and-used, net (5)
Upon acquisition/transfer	Level 3		$	18,996			20,134			1,138			60,572			55,407			(5,165	)		79,775			86,262			6,487
Upon management periodic valuations	Level 3		$	8,066			5,442			(2,624	)		39,728			28,227			(11,501	)		22,743			12,226			(10,517	)

(1)	Represents losses due to valuation adjustments, write-offs, gains (losses) from transfers or acquisitions of real estate through foreclosure and REO impairments recorded during the years ended November 30, 2015, 2014 and 2013.

(2)	Valuation adjustments were included in Lennar Homebuilding costs and expenses in the Company's consolidated statement of operations for the years ended November 30, 2015, 2014 and 2013.

(3)	Valuation adjustments were included in Lennar Homebuilding other income, net in the Company's consolidated statement of operations for the year ended November 30, 2013.

(4)

REO held-for-sale assets are initially recorded at fair value less estimated costs to sell at the time of the transfer or acquisition through, or in lieu of, loan foreclosure. The fair value of REO held-for-sale is based upon appraised value at the time of foreclosure or management's best estimate. In addition, management periodically performs valuations of its REO held-for-sale. The gains (losses) upon the transfer or acquisition of REO and impairments were included in Rialto other income, net, in the Company’s consolidated statement of operations for the years ended November 30, 2015, 2014 and 2013.

(5)

REO held-and-used, net, assets are initially recorded at fair value at the time of acquisition through, or in lieu of, loan foreclosure. The fair value of REO held-and-used, net, is based upon the appraised value at the time of foreclosure or management’s best estimate. In addition, management periodically performs valuations of its REO held-and-used, net. The gains (losses) upon acquisition of REO held-and-used, net and impairments were included in Rialto other income, net, in the Company’s consolidated statement of operations for the years ended November 30, 2015, 2014 and 2013.

See Note 1 for a detailed description of the Company’s process for identifying and recording valuation adjustments related to Lennar Homebuilding inventory, Lennar Homebuilding investments in unconsolidated entities and Rialto REO assets and loans receivables.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15. Consolidation of Variable Interest Entities

The Company evaluated the joint venture agreements of its joint ventures that were formed or that had reconsideration events during the year ended November 30, 2015. Based on the Company’s evaluation, no VIEs were consolidated during the year ended November 30, 2015. In addition, during the year ended November 30, 2015, the Company deconsolidated an entity within its Lennar Multifamily segment that had total combined assets of $17.4 million (primarily operating properties and equipment) and liabilities of $1.2 million.

The Company’s recorded investments in unconsolidated entities were as follows:

	November 30,
(In thousands)	2015				2014
Lennar Homebuilding	$	741,551			656,837
Rialto	$	224,869			175,700
Lennar Multifamily	$	250,876			105,674

Consolidated VIEs

As of November 30, 2015, the carrying amount of the VIEs’ assets and non-recourse liabilities that consolidated were $652.3 million and $84.4 million, respectively. As of November 30, 2014, the carrying amount of the VIEs’ assets and non-recourse liabilities that consolidated were $929.1 million and $149.8 million, respectively. Those assets are owned by, and those liabilities are obligations of, the VIEs, not the Company.

A VIE’s assets can only be used to settle obligations of that VIE. The VIEs are not guarantors of the Company’s senior notes and other debts payable. In addition, the assets held by a VIE usually are collateral for that VIE’s debt. The Company and other partners do not generally have an obligation to make capital contributions to a VIE unless the Company and/or the other partner(s) have entered into debt guarantees with the VIE’s banks. Other than debt guarantee agreements with a VIE’s banks, there are no liquidity arrangements or agreements to fund capital or purchase assets that could require the Company to provide financial support to a VIE. While the Company has option contracts to purchase land from certain of its VIEs, the Company is not required to purchase the assets and could walk away from the contracts.

Unconsolidated VIEs

At November 30, 2015 and 2014, the Company’s recorded investments in VIEs that are unconsolidated and its estimated maximum exposure to loss were as follows:

November 30, 2015
(In thousands)	Investments in Unconsolidated VIEs				Lennar’s Maximum Exposure to Loss
Lennar Homebuilding (1)	$	102,706			111,215
Rialto (2)	25,625				25,625
Lennar Multifamily (3)	177,359				586,842
	$	305,690			723,682

November 30, 2014
(In thousands)	Investments in Unconsolidated VIEs				Lennar’s Maximum Exposure to Loss
Lennar Homebuilding (1)	$	124,311			194,321
Rialto (2)	17,290				17,290
Lennar Multifamily (3)	41,600				65,810
	$	183,201			277,421

(1)

At November 30, 2015 and 2014, the maximum exposure to loss of Lennar Homebuilding’s investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs, except with regard to $8.3 million and $70.0 million, respectively, remaining commitment to fund an unconsolidated entity for further expenses up until the unconsolidated entity obtains permanent financing. During the year ended November 30, 2015, the remaining commitment was reduced by $61.7 million as the unconsolidated entity obtained financing. In addition, during the year ended November 30, 2015, the Company bought out the partner of one of its unconsolidated entities for approximately $10 million of which $7 million was paid in cash and the remainder was financed with a short-

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

term note. As a result, the Company's $70 million investment in the unconsolidated entity was reclassified primarily to inventory. These transactions reduced Lennar's maximum recourse exposure.

(2)	At both November 30, 2015 and 2014, the maximum recourse exposure to loss of Rialto’s investments in unconsolidated VIEs was limited to its investments in the unconsolidated entities. At November 30, 2015 and 2014, investments in unconsolidated VIEs and Lennar’s maximum exposure to loss included $25.6 million and $17.3 million, respectively, related to Rialto’s investments held-to-maturity.

(3)

As of November 30, 2015, the remaining equity commitment of $378.3 million to fund the Venture for future expenditures related to the construction and development of the projects is included in Lennar's maximum exposure to loss. In addition, at November 30, 2015 and 2014, the maximum exposure to loss of Lennar Multifamily's investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs, except with regard to $30.0 million and $23.4 million, respectively, of letters of credit outstanding for certain of the unconsolidated VIEs that could be drawn upon in the event of default under their debt agreements.

While these entities are VIEs, the Company has determined that the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance is generally shared 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.

The Company and other partners do not generally have an obligation to make capital contributions to the VIEs, except for $378.3 million remaining equity commitment to fund the Venture for future expenditures related to the construction and development of the projects and $30.0 million of letters of credit outstanding for certain Lennar Multifamily unconsolidated VIEs that could be drawn upon in the event of default under their debt agreements. In addition, there are no liquidity arrangements or agreements to fund capital or purchase assets that could require the Company to provide financial support to the VIEs, except with regard to a $8.3 million remaining commitment to fund a Lennar Homebuilding unconsolidated entity for further expenses up until the unconsolidated entity obtains permanent financing. Except for the unconsolidated VIEs discussed above, the Company and the other partners did not guarantee any debt of the other unconsolidated VIEs. While the Company has option contracts to purchase land from certain of its unconsolidated VIEs, the Company is not required to purchase the assets and could walk away from the contracts.

Option Contracts

The Company has access to land through option contracts, which generally enables it to control portions of properties owned by third parties (including land funds) and unconsolidated entities until the Company has determined whether to exercise the option.

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 year ended November 30, 2015, consolidated inventory not owned increased by $6.4 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2015. The increase was primarily due to more construction started on homesites not owned than homesite takedowns. To reflect the purchase price of the inventory consolidated, the Company had a net reclass related to option deposits from consolidated inventory not owned to land under development in the accompanying consolidated balance sheet as of November 30, 2015. The liabilities related to consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned land and the Company’s cash deposits.

The Company’s exposure to loss related to its option contracts with third parties and unconsolidated entities consisted of its non-refundable option deposits and pre-acquisition costs totaling $89.2 million and $85.6 million at November 30, 2015 and 2014, respectively. Additionally, the Company had posted $70.4 million and $34.5 million of letters of credit in lieu of cash deposits under certain land and option contracts as of November 30, 2015 and 2014, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. Commitments and Contingent Liabilities

The Company is party to various claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, the disposition of these matters will not have a material adverse effect on the Company’s consolidated financial statements. The Company is also a party to various lawsuits involving purchases and sales of real property. These lawsuits include claims regarding representations and warranties made in connection with the transfer of properties and disputes regarding the obligation to purchase or sell properties.

The Company has been engaged in litigation since 2008 in the United States District Court for the District of Maryland regarding whether the Company is required by a contract it entered into in 2005 to purchase a property in Maryland. After entering into the contract, the Company later renegotiated the purchase price, reducing it from $200 million to $134 million, $20 million of which has been paid and subsequently written off, leaving a balance of $114 million. In January 2015, the District Court rendered a decision ordering the Company to purchase the property for the $114 million balance of the contract price, to pay interest at the rate of 12% per annum from May 27, 2008, and to reimburse the seller for real estate taxes and attorneys’ fees. The Company believes the decision is contrary to applicable law and has appealed the decision. The Company does not believe it is probable that a loss has occurred and, therefore, no liability has been recorded with respect to this case.

If the District Court decision were affirmed in its entirety, the Company would purchase the property and record it at fair value, which the Company believes would not result in an impairment. The amount of interest the Company would be required to pay has been the subject of further proceedings before the court. On June 29, 2015, the court ruled that interest will be calculated as simple interest at the rate of 12% per annum from May 27, 2008 until the date the Company purchases the property. Simple interest on $114 million at 12% per annum will accrue at the rate of $13.7 million per year, totaling approximately $103 million as of November 30, 2015. In addition, if the Company is required to purchase the property, it will be obligated to reimburse the seller for real estate taxes, which currently total $1.6 million. The Company has not engaged in discovery regarding the amount of the plaintiffs’ attorneys’ fees. If the District Court decision was totally reversed on appeal, the Company would not have to purchase the property or pay interest, real estate taxes or attorneys’ fees.

In its June 29, 2015 ruling, the District Court determined that the Company will be permitted to stay the judgment during appeal by posting a bond in the amount of $223.4 million related to pending litigation. The District Court calculated this amount by adding 12% per annum simple interest to the $114 million purchase price for the period beginning May 27, 2008 through May 26, 2016, the date the District Court estimates the appeal of the case will be concluded. The posting of this bond did not have a material impact on the Company's consolidated financial statements.

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.

The Company is subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate, which it does in the routine conduct of its business. Option contracts generally enable the Company to control portions of properties owned by third parties (including land funds) and unconsolidated entities until the Company determines whether to exercise the option. The use of option contracts allows the Company to reduce the financial risks associated with long-term land holdings. At November 30, 2015, the Company had $89.2 million of non-refundable option deposits and pre-acquisition costs related to certain of these homesites, which were included in inventories in the consolidated balance sheet.

The Company has entered into agreements to lease certain office facilities and equipment under operating leases. Future minimum payments under the noncancellable leases in effect at November 30, 2015 were as follows:

(In thousands)	Lease Payments
2016	$	34,387
2017	33,034
2018	28,212
2019	20,780
2020	14,761
Thereafter	24,747

Rental expense for the years ended November 30, 2015, 2014 and 2013 was $55.9 million, $48.9 million and $41.9 million, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company is committed, under various letters of credit, to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit under these arrangements totaled $453.2 million at November 30, 2015. The Company also had outstanding performance and surety bonds related to site improvements at various projects (including certain projects in the Company’s joint ventures) of $1.3 billion, which includes $223.4 million related to pending litigation. Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all development and construction activities are completed. As of November 30, 2015, there were approximately $490.0 million, or 38%, of costs to complete related to these site improvements. The Company does not presently anticipate any draws upon these bonds that would have a material effect on its consolidated financial statements.

Substantially all of the loans the Lennar Financial Services segment originates are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Over the last several years there has been an industry-wide effort by purchasers to defray their losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular loan sale agreements. Mortgage investors could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations have established reserves for possible losses associated with mortgage loans previously originated and sold to investors. While the Company believes that it has adequately reserved for known losses and projected repurchase requests, given the volatility in the mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s expectations, additional recourse expense may be incurred.

17. Supplemental Financial Information

The indentures governing the Company’s 6.50% senior notes due 2016, 12.25% senior notes due 2017, 4.75% senior notes due 2017, 6.95% senior notes due 2018, 4.125% senior notes due 2018, 4.500% senior notes due 2019, 4.50% senior notes due 2019, 2.75% convertible senior notes due 2020, 3.25% convertible senior notes due 2021, 4.750% senior notes due 2022, 4.875% senior notes due 2023 and 4.750% senior notes due 2025 require that, if any of the Company’s 100% owned subsidiaries, other than its finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least $75 million principal amount of debt of Lennar Corporation, those subsidiaries must also guarantee Lennar Corporation’s obligations with regard to its senior notes. The entities referred to as “guarantors” in the following tables are subsidiaries that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at November 30, 2015 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 6. The guarantees are full, unconditional and joint and several and the guarantor subsidiaries are 100% directly or indirectly owned by Lennar Corporation. A subsidiary's guarantee will be suspended at any time when it is not directly or indirectly guaranteeing at least $75 million principal amount of debt of Lennar Corporation, and a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed of.

For purposes of the condensed consolidating statement of cash flows included in the following supplemental financial information, the Company's accounting policy is to treat cash received by Lennar Corporation ("the Parent") from its subsidiaries, to the extent of net earnings from such subsidiaries as a dividend and accordingly a return on investment within cash flows from operating activities. Distributions of capital received by the Parent from its subsidiaries are reflected as cash flows from investing activities. The cash outflows associated with the return on investment dividends and distributions of capital received by the Parent are reflected by the Guarantor and Non-Guarantor subsidiaries in the Dividends line item within cash flows from financing activities. All other cash flows between the Parent and its subsidiaries represent the settlement of receivables and payables between such entities in conjunction with the Parent's centralized cash management arrangement with its subsidiaries, which operates with the characteristics of a revolving credit facility, and are accordingly reflected net in the Intercompany line item within cash flows from investing activities for the Parent and net in the Intercompany line item within cash flows from financing activities for the Guarantor and Non-Guarantor subsidiaries.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Supplemental information for the subsidiaries that were guarantor subsidiaries at November 30, 2015 was as follows:

Consolidating Balance Sheet November 30, 2015
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
ASSETS
Lennar Homebuilding:
Cash and cash equivalents, restricted cash and receivables, net	$	595,921			372,146			13,384			—			981,451
Inventories	—				8,571,769			168,827			—			8,740,596
Investments in unconsolidated entities	—				692,879			48,672			—			741,551
Other assets	193,360				324,050			75,108			16,704			609,222
Investments in subsidiaries	3,958,687				176,660			—			(4,135,347	)		—
Intercompany	6,227,193				—			—			(6,227,193	)		—
	10,975,161				10,137,504			305,991			(10,345,836	)		11,072,820
Rialto	—				—			1,505,500			—			1,505,500
Lennar Financial Services	—				89,532			1,341,565			(5,260	)		1,425,837
Lennar Multifamily	—				—			426,796			(11,444	)		415,352
Total assets	$	10,975,161			10,227,036			3,579,852			(10,362,540	)		14,419,509
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable and other liabilities	$	579,468			710,460			85,796			—			1,375,724
Liabilities related to consolidated inventory not owned	—				51,431			—			—			51,431
Senior notes and other debts payable	4,746,749				267,531			10,850			—			5,025,130
Intercompany	—				5,514,610			712,583			(6,227,193	)		—
	5,326,217				6,544,032			809,229			(6,227,193	)		6,452,285
Rialto	—				—			866,224			—			866,224
Lennar Financial Services	—				36,229			1,047,749			—			1,083,978
Lennar Multifamily	—				—			66,950			—			66,950
Total liabilities	$	5,326,217			6,580,261			2,790,152			(6,227,193	)		8,469,437
Stockholders’ equity	5,648,944				3,646,775			488,572			(4,135,347	)		5,648,944
Noncontrolling interests	—				—			301,128			—			301,128
Total equity	5,648,944				3,646,775			789,700			(4,135,347	)		5,950,072
Total liabilities and equity	$	10,975,161			10,227,036			3,579,852			(10,362,540	)		14,419,509

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Balance Sheet November 30, 2014
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
ASSETS
Lennar Homebuilding:
Cash and cash equivalents, restricted cash and receivables, net	$	653,491			321,765			13,766			—			989,022
Inventories	—				7,517,261			219,339			—			7,736,600
Investments in unconsolidated entities	—				622,663			34,174			—			656,837
Other assets	130,617				385,143			120,591			7,291			643,642
Investments in subsidiaries	4,073,687				299,432			—			(4,373,119	)		—
Intercompany	4,709,544				—			—			(4,709,544	)		—
	9,567,339				9,146,264			387,870			(9,075,372	)		10,026,101
Rialto	—				—			1,451,983			—			1,451,983
Lennar Financial Services	—				76,428			1,100,625			—			1,177,053
Lennar Multifamily	—				—			268,975			(961	)		268,014
Total assets	$	9,567,339			9,222,692			3,209,453			(9,076,333	)		12,923,151
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable and other liabilities	$	447,104			748,991			79,699			—			1,275,794
Liabilities related to consolidated inventory not owned	—				45,028			—			—			45,028
Senior notes and other debts payable	4,293,215				287,700			80,351			—			4,661,266
Intercompany	—				4,350,505			359,039			(4,709,544	)		—
	4,740,319				5,432,224			519,089			(4,709,544	)		5,982,088
Rialto	—				—			740,875			—			740,875
Lennar Financial Services	—				28,705			861,608			6,330			896,643
Lennar Multifamily	—				—			52,243			—			52,243
Total liabilities	$	4,740,319			5,460,929			2,173,815			(4,703,214	)		7,671,849
Stockholders’ equity	4,827,020				3,761,763			611,356			(4,373,119	)		4,827,020
Noncontrolling interests	—				—			424,282			—			424,282
Total equity	4,827,020				3,761,763			1,035,638			(4,373,119	)		5,251,302
Total liabilities and equity	$	9,567,339			9,222,692			3,209,453			(9,076,333	)		12,923,151

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Operations and Comprehensive Income (Loss) Year Ended November 30, 2015
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues:
Lennar Homebuilding	$	—			8,466,945			—			—			8,466,945
Lennar Financial Services	—				194,993			445,535			(20,001	)		620,527
Rialto	—				—			221,923			—			221,923
Lennar Multifamily	—				—			164,639			(26	)		164,613
Total revenues	—				8,661,938			832,097			(20,027	)		9,474,008
Cost and expenses:
Lennar Homebuilding	—				7,231,495			49,327			(15,983	)		7,264,839
Lennar Financial Services	—				181,805			316,003			(5,076	)		492,732
Rialto	—				—			223,933			(1,058	)		222,875
Lennar Multifamily	—				—			191,302			—			191,302
Corporate general and administrative	210,377				806			—			5,061			216,244
Total costs and expenses	210,377				7,414,106			780,565			(17,056	)		8,387,992
Lennar Homebuilding equity in earnings from unconsolidated entities	—				49,134			14,239			—			63,373
Lennar Homebuilding other income (expense), net	(1,124		)		4,903			17,660			(2,823	)		18,616
Other interest expense	(5,794		)		(12,454	)		—			5,794			(12,454	)
Rialto equity in earnings from unconsolidated entities	—				—			22,293			—			22,293
Rialto other income, net	—				—			12,254			—			12,254
Lennar Multifamily equity in earnings from unconsolidated entities	—				—			19,518			—			19,518
Earnings (loss) before income taxes	(217,295		)		1,289,415			137,496			—			1,209,616
Benefit (provision) for income taxes	71,099				(412,301	)		(49,214	)		—			(390,416	)
Equity in earnings from subsidiaries	949,090				51,956			—			(1,001,046	)		—
Net earnings (including net earnings attributable to noncontrolling interests)	802,894				929,070			88,282			(1,001,046	)		819,200
Less: Net earnings attributable to noncontrolling interests	—				—			16,306			—			16,306
Net earnings attributable to Lennar	$	802,894			929,070			71,976			(1,001,046	)		802,894
Other comprehensive loss, net of tax:
Net unrealized loss on securities available-for-sale	$	—			—			(65	)		—			(65	)
Reclassification adjustments for gains included in net earnings, net of tax	—				—			(26	)		—			(26	)
Other comprehensive income attributable to Lennar	$	802,894			929,070			71,885			(1,001,046	)		802,803
Other comprehensive income attributable to noncontrolling interests	$	—			—			16,306			—			16,306

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Operations and Comprehensive Income (Loss) Year Ended November 30, 2014
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues:
Lennar Homebuilding	$	—			7,023,678			1,452			—			7,025,130
Lennar Financial Services	—				161,145			315,123			(21,887	)		454,381
Rialto	—				—			230,521			—			230,521
Lennar Multifamily	—				—			69,780			—			69,780
Total revenues	—				7,184,823			616,876			(21,887	)		7,779,812
Cost and expenses:
Lennar Homebuilding	—				5,961,062			9,444			(8,477	)		5,962,029
Lennar Financial Services	—				153,975			233,162			(12,894	)		374,243
Rialto	—				—			249,114			—			249,114
Lennar Multifamily	—				—			95,227			—			95,227
Corporate general and administrative	172,099				—			—			5,062			177,161
Total costs and expenses	172,099				6,115,037			586,947			(16,309	)		6,857,774
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	—				(4,140	)		3,785			—			(355	)
Lennar Homebuilding other income, net	254				4,726			2,762			(216	)		7,526
Other interest expense	(5,794		)		(36,551	)		—			5,794			(36,551	)
Rialto equity in earnings from unconsolidated entities	—				—			59,277			—			59,277
Rialto other income, net	—				—			3,395			—			3,395
Lennar Multifamily equity in earnings from unconsolidated entities	—				—			14,454			—			14,454
Earnings (loss) before income taxes	(177,639		)		1,033,821			113,602			—			969,784
Benefit (provision) for income taxes	61,818				(357,277	)		(45,632	)		—			(341,091	)
Equity in earnings from subsidiaries	754,737				39,691			—			(794,428	)		—
Net earnings (including net loss attributable to noncontrolling interests)	638,916				716,235			67,970			(794,428	)		628,693
Less: Net loss attributable to noncontrolling interests	—				—			(10,223	)		—			(10,223	)
Net earnings attributable to Lennar	$	638,916			716,235			78,193			(794,428	)		638,916
Other comprehensive earnings, net of tax:
Net unrealized loss on securities available-for-sale	$	—			—			130			—			130
Other comprehensive earnings attributable to Lennar	$	638,916			716,235			78,323			(794,428	)		639,046
Other comprehensive loss attributable to noncontrolling interests	$	—			—			(10,223	)		—			(10,223	)

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Operations and Comprehensive Income (Loss) Year Ended November 30, 2013
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues:
Lennar Homebuilding	$	—			5,317,890			37,057			—			5,354,947
Lennar Financial Services	—				162,939			285,474			(21,071	)		427,342
Rialto	—				—			138,060			—			138,060
Lennar Multifamily	—				—			14,746			—			14,746
Total revenues	—				5,480,829			475,337			(21,071	)		5,935,095
Cost and expenses:
Lennar Homebuilding	—				4,546,670			25,129			7,309			4,579,108
Lennar Financial Services	—				157,351			212,380			(28,175	)		341,556
Rialto	—				—			151,072			—			151,072
Lennar Multifamily	—				—			31,463			—			31,463
Corporate general and administrative	140,999				—			—			5,061			146,060
Total costs and expenses	140,999				4,704,021			420,044			(15,805	)		5,249,259
Lennar Homebuilding equity in earnings from unconsolidated entities	—				22,966			837			—			23,803
Lennar Homebuilding other income (expense), net	542				27,446			(138	)		(504	)		27,346
Other interest expense	(5,770		)		(93,913	)		—			5,770			(93,913	)
Rialto equity in earnings from unconsolidated entities	—				—			22,353			—			22,353
Rialto other income, net	—				—			16,787			—			16,787
Lennar Multifamily equity in loss from unconsolidated entities	—				—			(271	)		—			(271	)
Earnings (loss) before income taxes	(146,227		)		733,307			94,861			—			681,941
Benefit (provision) for income taxes	54,353				(204,940	)		(26,428	)		—			(177,015	)
Equity in earnings from subsidiaries	571,548				44,980			—			(616,528	)		—
Net earnings (including net earnings attributable to noncontrolling interests)	479,674				573,347			68,433			(616,528	)		504,926
Less: Net earnings attributable to noncontrolling interests	—				—			25,252			—			25,252
Net earnings attributable to Lennar	$	479,674			573,347			43,181			(616,528	)		479,674
Comprehensive earnings attributable to Lennar	$	479,674			573,347			43,181			(616,528	)		479,674
Comprehensive earnings attributable to noncontrolling interests	$	—			—			25,252			—			25,252

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows Year Ended November 30, 2015
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Cash flows from operating activities:
Net earnings (including net earnings attributable to noncontrolling interests)	$	802,894			929,070			88,282			(1,001,046	)		819,200
Distributions of earnings from guarantor and non-guarantor subsidiaries	949,090				51,956			—			(1,001,046	)		—
Other adjustments to reconcile net earnings (including net earnings attributable to noncontrolling interests) to net cash provided by (used in) operating activities	(782,575		)		(861,284	)		(596,033	)		1,001,046			(1,238,846	)
Net cash provided by (used in) operating activities	969,409				119,742			(507,751	)		(1,001,046	)		(419,646	)
Cash flows from investing activities:
Investments in and contributions to unconsolidated entities, net of distributions of capital	—				(90,267	)		(5,674	)		—			(95,941	)
Proceeds from sales of real estate owned	—				—			155,295			—			155,295
Receipts of principal payments on loans receivable	—				—			28,389			—			28,389
Proceeds from sale of operating properties	—				73,732			—			—			73,732
Originations of loans receivable	—				—			(78,703	)		—			(78,703	)
Other	(5,988		)		(96,180	)		(78,997	)		—			(181,165	)
Distributions of capital from guarantor and non-guarantor subsidiaries	115,000				115,050			—			(230,050	)		—
Intercompany	(1,514,775		)		—			—			1,514,775			—
Net cash provided by (used in) investing activities	(1,405,763		)		2,335			20,310			1,284,725			(98,393	)
Cash flows from financing activities:
Net borrowings under warehouse facilities	—				—			366,290			—			366,290
Proceeds from senior notes and debt issuance costs	1,137,826				—			(2,986	)		—			1,134,840
Redemption of senior notes and conversion and exchanges of convertible senior notes	(712,107		)		—			—			—			(712,107	)
Principal repayments on Rialto notes payable including structured notes	—				—			(58,923	)		—			(58,923	)
Net repayments on other borrowings	—				(156,490	)		—			—			(156,490	)
Net payments related to noncontrolling interests	—				—			(132,078	)		—			(132,078	)
Excess tax benefits from share-based awards	113				—			—			—			113
Common stock:
Issuances	9,405				—			—			—			9,405
Repurchases	(23,188		)		—			—			—			(23,188	)
Dividends	(33,192		)		(1,044,070	)		(187,026	)		1,231,096			(33,192	)
Intercompany	—				1,161,617			353,158			(1,514,775	)		—
Net cash provided by (used in) financing activities	378,857				(38,943	)		338,435			(283,679	)		394,670
Net increase (decrease) in cash and cash equivalents	(57,497		)		83,134			(149,006	)		—			(123,369	)
Cash and cash equivalents at beginning of period	633,318				252,914			395,582			—			1,281,814
Cash and cash equivalents at end of period	$	575,821			336,048			246,576			—			1,158,445

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows Year Ended November 30, 2014
(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)	$	638,916			716,235			67,970			(794,428	)		628,693
Distributions of earnings from guarantor and non-guarantor subsidiaries	754,737				39,691			—			(794,428	)		—
Other adjustments to reconcile net earnings (including net loss attributable to noncontrolling interests) to net cash provided by (used in) operating activities	(583,119		)		(1,108,430	)		(520,060	)		794,428			(1,417,181	)
Net cash provided by (used in) operating activities	810,534				(352,504	)		(452,090	)		(794,428	)		(788,488	)
Cash flows from investing activities:
Distributions of capital from unconsolidated entities, net of investments in and contributions to	—				63,990			55,533			—			119,523
Proceeds from sales of real estate owned	—				—			269,698			—			269,698
Receipts of principal payments on loans receivable, net	—				—			24,019			—			24,019
Proceeds from sale of operating properties	—				43,937			—			—			43,937
Other	(2,347		)		19,027			(35,498	)		—			(18,818	)
Distributions of capital from guarantor and non-guarantor subsidiaries	232,200				65,200			—			(297,400	)		—
Intercompany	(1,515,367		)		—			—			1,515,367			—
Net cash provided by (used in) investing activities	(1,285,514		)		192,154			313,752			1,217,967			438,359
Cash flows from financing activities:
Net borrowings under warehouse facilities	—				—			389,535			—			389,535
Net proceeds from senior notes and structured notes	843,300				—			196,180			—			1,039,480
Redemption of senior notes	(250,000		)		—			—			—			(250,000	)
Principal repayments on Rialto notes payable	—				—			(75,879	)		—			(75,879	)
Net repayments on other borrowings	—				(241,539	)		(23,750	)		—			(265,289	)
Exercise of land option contracts from an unconsolidated land investment venture	—				(1,540	)		—			—			(1,540	)
Net payments related to noncontrolling interests	—				—			(142,766	)		—			(142,766	)
Excess tax benefits from share-based awards	7,497				—			—			—			7,497
Common stock:
Issuances	13,599				—			—			—			13,599
Repurchases	(20,424		)		—			—			—			(20,424	)
Dividends	(32,775		)		(781,435	)		(310,393	)		1,091,828			(32,775	)
Intercompany	—				1,285,786			229,581			(1,515,367	)		—
Net cash provided by financing activities	561,197				261,272			262,508			(423,539	)		661,438
Net increase in cash and cash equivalents	86,217				100,922			124,170			—			311,309
Cash and cash equivalents at beginning of period	547,101				151,992			271,412			—			970,505
Cash and cash equivalents at end of period	$	633,318			252,914			395,582			—			1,281,814

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows Year Ended November 30, 2013
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Cash flows from operating activities:
Net earnings (including net earnings attributable to noncontrolling interests)	$	479,674			573,347			68,433			(616,528	)		504,926
Distributions of earnings from guarantor and non-guarantor subsidiaries	571,548				44,980			—			(616,528	)		—
Other adjustments to reconcile net earnings (including net earnings attributable to noncontrolling interests) to net cash provided by (used in) operating activities	(555,792		)		(1,322,939	)		(50,437	)		616,528			(1,312,640	)
Net cash provided by (used in) operating activities	495,430				(704,612	)		17,996			(616,528	)		(807,714	)
Cash flows from investing activities:
Distributions of capital and (investments in and contributions to) from unconsolidated entities, net	—				98,819			(22,207	)		—			76,612
Proceeds from sales of real estate owned	—				—			239,215			—			239,215
Decrease in Rialto defeasance cash to retire notes payable	—				—			223,813			—			223,813
Receipts of principal payments on loans receivable, net	—				—			66,788			—			66,788
Proceeds from sale of operating properties	—				—			140,564			—			140,564
Other	(233		)		(46,230	)		(11,280	)		—			(57,743	)
Intercompany	(1,333,932		)		—			—			1,333,932			—
Net cash provided by (used in) investing activities	(1,334,165		)		52,589			636,893			1,333,932			689,249
Cash flows from financing activities:
Net repayments under warehouse facilities	—				—			(7,811	)		—			(7,811	)
Net proceeds from convertible and senior notes	494,329				—			—			—			494,329
Redemption of senior notes	(63,001		)		(750	)		—			—			(63,751	)
Net proceeds from Rialto senior notes	—				—			242,736			—			242,736
Principal repayments on Rialto notes payable	—				—			(471,255	)		—			(471,255	)
Net repayments on other borrowings	—				(67,984	)		(126,779	)		—			(194,763	)
Exercise of land option contracts from an unconsolidated land investment venture	—				(28,869	)		—			—			(28,869	)
Net payments related to noncontrolling interests	—				—			(193,419	)					(193,419	)
Excess tax benefits from share-based awards	10,148				—			—			—			10,148
Common stock:
Issuances	34,114				—			—			—			34,114
Repurchases	(12,320		)		—			—			—			(12,320	)
Dividends	(30,912		)		(573,347	)		(43,181	)		616,528			(30,912	)
Intercompany	—				1,283,156			50,776			(1,333,932	)		—
Net cash provided by (used in) financing activities	432,358				612,206			(548,933	)		(717,404	)		(221,773	)
Net increase (decrease) in cash and cash equivalents	(406,377		)		(39,817	)		105,956			—			(340,238	)
Cash and cash equivalents at beginning of period	953,478				191,809			165,456			—			1,310,743
Cash and cash equivalents at end of period	$	547,101			151,992			271,412			—			970,505

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18. Quarterly Data (unaudited)

	First				Second			Third			Fourth
(In thousands, except per share amounts)
2015
Revenues	$	1,644,139			2,392,604			2,491,698			2,945,567
Gross profit from sales of homes	$	324,772			495,854			531,362			651,066
Earnings before income taxes	$	176,643			279,810			320,658			432,505
Net earnings attributable to Lennar	$	114,963			183,016			223,312			281,603
Earnings per share:
Basic	$	0.56			0.89			1.07			1.34
Diluted	$	0.50			0.79			0.96			1.21
2014
Revenues	$	1,363,095			1,818,745			2,014,034			2,583,938
Gross profit from sales of homes	$	286,053			409,615			456,162			584,403
Earnings before income taxes	$	125,876			203,630			262,335			377,943
Net earnings attributable to Lennar	$	78,117			137,719			177,757			245,323
Earnings per share:
Basic	$	0.38			0.67			0.87			1.20
Diluted	$	0.35			0.61			0.78			1.07

Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters may not agree with per share amounts for the year.