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, 2017 and 2016, 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, 2017. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company's 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, the consolidated financial statements present fairly, in all material respects, the financial position of Lennar Corporation and subsidiaries as of November 30, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 2017, 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, 2017, 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 24, 2018 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

January 24, 2018

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2017 and 2016

	2017 (1)				2016 (1)
	(Dollars in thousands)
ASSETS
Lennar Homebuilding:
Cash and cash equivalents	$	2,282,925			1,050,138
Restricted cash	8,740				5,977
Receivables, net	137,667				106,976
Inventories:
Finished homes and construction in progress	4,676,279				3,951,716
Land and land under development	5,791,338				5,106,191
Consolidated inventory not owned	393,273				121,019
Total inventories	10,860,890				9,178,926
Investments in unconsolidated entities	900,769				811,723
Goodwill	136,566				—
Other assets	863,404				651,028
	15,190,961				11,804,768
Lennar Financial Services	1,689,508				1,754,672
Rialto	1,153,840				1,276,210
Lennar Multifamily	710,725				526,131
Total assets	$	18,745,034			15,361,781

(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, 2017, total assets include $799.4 million related to consolidated VIEs of which $15.8 million is included in Lennar Homebuilding cash and cash equivalents, $0.2 million in Lennar Homebuilding receivables, net, $53.2 million in Lennar Homebuilding finished homes and construction in progress, $229.0 million in Lennar Homebuilding land and land under development, $393.3 million in Lennar Homebuilding consolidated inventory not owned, $4.6 million in Lennar Homebuilding investments in unconsolidated entities, $11.8 million in Lennar Homebuilding other assets, $48.8 million in Rialto assets and $42.7 million in Lennar Multifamily assets.

As of November 30, 2016, total assets include $536.3 million related to consolidated VIEs of which $13.3 million is included in Lennar Homebuilding cash and cash equivalents, $0.2 million in Lennar Homebuilding receivables, net, $54.2 million in Lennar Homebuilding finished homes and construction in progress, $106.3 million in Lennar Homebuilding land and land under development, $121.0 million in Lennar Homebuilding consolidated inventory not owned, $4.6 million in Lennar Homebuilding investments in unconsolidated entities, $13.9 million in Lennar Homebuilding other assets, $213.8 million in Rialto assets and $8.8 million in Lennar Multifamily assets.

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2017 and 2016

	2017 (2)				2016 (2)
	(Dollars in thousands, except shares and per share amounts)
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable	$	604,953			478,546
Liabilities related to consolidated inventory not owned	380,720				110,006
Senior notes and other debts payable	6,410,003				4,575,977
Other liabilities	1,315,641				841,449
	8,711,317				6,005,978
Lennar Financial Services	1,177,814				1,318,283
Rialto	720,056				707,980
Lennar Multifamily	149,715				117,973
Total liabilities	10,758,902				8,150,214
Stockholders’ equity:
Preferred stock	—				—
Class A common stock of $0.10 par value per share; Authorized: 2017 and 2016 - 300,000,000 shares; Issued: 2017 - 205,429,942 shares; 2016 - 204,089,447 shares	20,543				20,409
Class B common stock of $0.10 par value per share; Authorized: 2017 and 2016 - 90,000,000 shares, Issued: 2017 - 37,687,505 shares; 2016 - 32,982,815 shares	3,769				3,298
Additional paid-in capital	3,142,013				2,805,349
Retained earnings	4,840,978				4,306,256
Treasury stock, at cost; 2017 - 1,473,590 shares of Class A common stock and 1,679,650 shares of Class B common stock; 2016 - 917,449 shares of Class A common stock and 1,679,620 shares of Class B common stock	(136,020		)		(108,961	)
Accumulated other comprehensive income (loss)	1,034				(309	)
Total stockholders’ equity	7,872,317				7,026,042
Noncontrolling interests	113,815				185,525
Total equity	7,986,132				7,211,567
Total liabilities and equity	$	18,745,034			15,361,781

(2)

As of November 30, 2017, total liabilities include $389.7 million related to consolidated VIEs as to which there was no recourse against the Company, of which $5.0 million is included in Lennar Homebuilding accounts payable, $380.7 million in Lennar Homebuilding liabilities related to consolidated inventory not owned, $1.8 million in Lennar Homebuilding other liabilities and $2.2 million in Rialto liabilities.

As of November 30, 2016, total liabilities include $126.4 million related to consolidated VIEs as to which there was no recourse against the Company, of which $3.6 million is included in Lennar Homebuilding accounts payable, $110.0 million in Lennar Homebuilding liabilities related to consolidated inventory not owned, $2.5 million in Lennar Homebuilding other liabilities, $10.3 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, 2017, 2016 and 2015

	2017				2016			2015
	(Dollars in thousands, except per share amounts)
Revenues:
Lennar Homebuilding	$	11,200,242			9,741,337			8,466,945
Lennar Financial Services	770,109				687,255			620,527
Rialto	281,243				233,966			221,923
Lennar Multifamily	394,771				287,441			164,613
Total revenues	12,646,365				10,949,999			9,474,008
Costs and expenses:
Lennar Homebuilding	9,752,269				8,399,881			7,264,839
Lennar Financial Services	614,585				523,638			492,732
Rialto	247,549				229,769			222,875
Lennar Multifamily	407,078				301,786			191,302
Corporate general and administrative	285,889				232,562			216,244
Total costs and expenses	11,307,370				9,687,636			8,387,992
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	(61,708		)		(49,275	)		63,373
Lennar Homebuilding other income, net	22,774				52,751			6,162
Lennar Homebuilding loss due to litigation	(140,000		)		—			—
Rialto equity in earnings from unconsolidated entities	25,447				18,961			22,293
Rialto other income (expense), net	(81,636		)		(39,850	)		12,254
Lennar Multifamily equity in earnings from unconsolidated entities	85,739				85,519			19,518
Earnings before income taxes	1,189,611				1,330,469			1,209,616
Provision for income taxes	(417,857		)		(417,378	)		(390,416	)
Net earnings (including net earnings (loss) attributable to noncontrolling interests)	771,754				913,091			819,200
Less: Net earnings (loss) attributable to noncontrolling interests	(38,726		)		1,247			16,306
Net earnings attributable to Lennar	$	810,480			911,844			802,894
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on securities available-for-sale	1,331				(295	)		(65	)
Reclassification adjustments for (gains) loss included in net earnings	12				(53	)		(26	)
Total other comprehensive income (loss), net of tax	$	1,343			(348	)		(91	)
Total comprehensive income attributable to Lennar	$	811,823			911,496			802,803
Total comprehensive income (loss) attributable to noncontrolling interests	$	(38,726	)		1,247			16,306
Basic earnings per share (1)	$	3.38			4.05			3.78
Diluted earnings per share (1)	$	3.38			3.86			3.39

(1)	Basic and diluted average shares outstanding and earnings per share calculations have been adjusted to reflect 4.7 million Class B shares distributed as a part of the stock dividend on November 27, 2017.

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

Years Ended November 30, 2017, 2016 and 2015

	2017				2016			2015
	(Dollars in thousands, except per share amounts)
Class A common stock:
Beginning balance	$	20,409			18,066			17,424
Employee stock and director plans	134				124			122
Conversion of convertible senior notes to shares of Class A common stock	—				2,219			520
Balance at November 30,	20,543				20,409			18,066
Class B common stock:
Beginning balance	3,298				3,298			3,298
Stock dividends - Class B common stock	471				—			—
Balance at November 30,	3,769				3,298			3,298
Additional paid-in capital:
Beginning balance	2,805,349				2,305,560			2,239,574
Employee stock and director plans	2,086				1,487			1,451
Tax benefit from employee stock plans, vesting of restricted stock and conversion of convertible senior notes	35,543				45,803			21,313
Amortization of restricted stock	61,356				55,516			43,742
Conversion of convertible senior notes to shares of Class A common stock	—				396,983			(520	)
Stock dividends - Class B common stock	237,679				—			—
Balance at November 30,	3,142,013				2,805,349			2,305,560
Retained earnings:
Beginning balance	4,306,256				3,429,736			2,660,034
Net earnings attributable to Lennar	810,480				911,844			802,894
Cash dividends - Class A common stock ($0.16 per share)	(32,600		)		(30,315	)		(28,183	)
Cash dividends - Class B common stock ($0.16 per share)	(5,008		)		(5,009	)		(5,009	)
Stock dividends - Class B common stock	(238,150		)		—			—
Balance at November 30,	4,840,978				4,306,256			3,429,736
Treasury stock, at cost:
Beginning balance	(108,961		)		(107,755	)		(93,440	)
Employee stock and directors plans	(27,059		)		(1,206	)		(14,315	)
Balance at November 30,	(136,020		)		(108,961	)		(107,755	)
Accumulated other comprehensive income (loss):
Beginning balance	(309		)		39			130
Total other comprehensive income (loss), net of tax	1,343				(348	)		(91	)
Balance at November 30,	1,034				(309	)		39
Total stockholders’ equity	7,872,317				7,026,042			5,648,944
Noncontrolling interests:
Beginning balance	185,525				301,128			424,282
Net earnings (loss) attributable to noncontrolling interests	(38,726		)		1,247			16,306
Receipts related to noncontrolling interests	5,786				353			1,296
Payments related to noncontrolling interests	(74,372		)		(127,410	)		(133,374	)
Non-cash distributions to noncontrolling interests	—				(5,033	)		—
Non-cash consolidations (deconsolidations), net	37,292				12,478			(13,253	)
Non-cash purchase or activity of noncontrolling interests	(1,690		)		2,762			5,871
Balance at November 30,	113,815				185,525			301,128
Total equity	$	7,986,132			7,211,567			5,950,072

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended November 30, 2017, 2016 and 2015

	2017				2016			2015
	(In thousands)
Cash flows from operating activities:
Net earnings (including net earnings (loss) attributable to noncontrolling interests)	$	771,754			913,091			819,200
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization	66,324				50,219			43,666
Amortization of discount/premium on debt, net	11,312				14,619			19,874
Equity in earnings from unconsolidated entities	(49,478		)		(55,205	)		(105,184	)
Distributions of earnings from unconsolidated entities	137,669				101,965			60,753
Share-based compensation expense	61,356				55,516			43,873
Excess tax benefits from share-based awards	(1,981		)		(7,039	)		(113	)
Deferred income tax expense (benefit)	91,050				97,485			(5,637	)
Loss on retirement of debt and notes payable	—				1,569			3,632
Gain on sale of operating properties and equipment	(10,339		)		(14,457	)		(5,945	)
Unrealized and realized gains on real estate owned	(5,119		)		(21,380	)		(36,380	)
Gain on sale of other assets (investment carried at cost)	(2,450		)		—			—
Impairments of loans receivable and real estate owned	97,786				45,201			25,179
Valuation adjustments and write-offs of option deposits and pre-acquisition costs, other receivables and other assets	16,339				11,283			31,002
Changes in assets and liabilities:
Decrease in restricted cash	14,490				9,716			20,876
Decrease (increase) in receivables	253,111				(260,844	)		(86,432	)
Increase in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs	(661,494		)		(503,527	)		(1,126,907	)
Increase in other assets	(44,535		)		(41,933	)		(28,154	)
(Increase) decrease in loans held-for-sale	(105,600		)		90,093			(318,739	)
Increase in accounts payable and other liabilities	356,669				21,432			225,790
Net cash provided by (used in) operating activities	996,864				507,804			(419,646	)
Cash flows from investing activities:
(Increase) decrease in restricted cash related to investments or LOCs	(18,000		)		—			2,030
Net additions to operating properties and equipment	(111,773		)		(76,439	)		(91,355	)
Proceeds from the sale of operating properties and equipment	60,326				25,288			73,732
Investments in and contributions to unconsolidated entities	(430,304		)		(425,761	)		(314,937	)
Distributions of capital from unconsolidated entities	207,327				323,190			218,996
Proceeds from sales of real estate owned	86,565				97,871			155,295
Improvements to real estate owned	(1,294		)		(1,906	)		(8,477	)
Receipts of principal payments on loans held-for-sale	11,251				—			—
Receipts of principal payments on loans receivable and other	165,413				84,433			28,389
Purchases of loans receivable and real estate owned	(148		)		(548	)		(3,228	)
Originations of loans receivable	(98,375		)		(56,507	)		(78,703	)
Purchase of investment carried at cost	—				—			(18,000	)
Proceeds from sale of other assets (investment carried at cost)	3,610				—			—
Purchases of commercial mortgage-backed securities bonds	(107,262		)		(42,436	)		(13,973	)
Proceeds from sale of commercial mortgage-backed securities bonds	—				—			7,014
Acquisitions, net of cash acquired	(611,103		)		(725	)		—
Purchases of Lennar Homebuilding investments available-for-sale	—				—			(28,093	)
Proceeds from sales of Lennar Homebuilding investments available-for-sale	—				541			—
Decrease (increase) in Lennar Financial Services held-for-investment, net	(14,257		)		963			(5,022	)
Purchases of Lennar Financial Services investment securities	(53,558		)		(37,764	)		(45,687	)
Proceeds from maturities/sales of Lennar Financial Services investment securities	41,765				23,963			23,626
Net cash used in investing activities	$	(869,817	)		(85,837	)		(98,393	)

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Years Ended November 30, 2017, 2016 and 2015

	2017				2016			2015
	(In thousands)
Cash flows from financing activities:
Net (repayments) borrowings under warehouse facilities	$	(199,684	)		107,465			366,290
Proceeds from senior notes	2,450,000				499,024			1,146,647
Debt issuance costs	(28,590		)		(4,740	)		(11,807	)
Redemption of senior notes	(1,058,595		)		(250,000	)		(500,000	)
Conversions and exchanges on convertible senior notes	—				(234,028	)		(212,107	)
Proceeds from Rialto notes payable	99,630				—			—
Principal payments on Rialto notes payable including structured notes	(24,964		)		(39,026	)		(58,923	)
Proceeds from other borrowings	31,230				37,163			101,618
Proceeds from other liabilities	195,541				—			—
Principal payments on other borrowings	(139,725		)		(210,968	)		(258,108	)
Receipts related to noncontrolling interests	5,786				353			1,296
Payments related to noncontrolling interests	(74,372		)		(127,410	)		(133,374	)
Excess tax benefits from share-based awards	1,981				7,039			113
Common stock:
Issuances	720				19,471			9,405
Repurchases	(27,054		)		(19,902	)		(23,188	)
Dividends	(37,608		)		(35,324	)		(33,192	)
Net cash provided by (used in) financing activities	1,194,296				(250,883	)		394,670
Net increase (decrease) in cash and cash equivalents	1,321,343				171,084			(123,369	)
Cash and cash equivalents at beginning of year	1,329,529				1,158,445			1,281,814
Cash and cash equivalents at end of year	$	2,650,872			1,329,529			1,158,445
Summary of cash and cash equivalents:
Lennar Homebuilding	$	2,282,925			1,050,138			893,408
Rialto	241,861				148,827			150,219
Lennar Financial Services	117,410				123,964			106,777
Lennar Multifamily	8,676				6,600			8,041
	$	2,650,872			1,329,529			1,158,445
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	$	89,485			66,570			87,132
Cash paid for income taxes, net	$	199,557			374,731			336,796
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	$	279,323			101,504			66,819
Net non-cash contributions to unconsolidated entities	$	62,618			107,935			205,327
Conversion of convertible senior notes to equity	$	—			399,206			—
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	)
Rialto:
Real estate owned acquired in satisfaction/partial satisfaction of loans receivable	$	1,140			8,476			17,248
Consolidation/deconsolidation of unconsolidated/consolidated entities, net:
Inventories	$	48,656			111,347			—
Operating properties and equipment and other assets	$	(1,716	)		—			(17,421	)
Investments in unconsolidated entities	$	(9,692	)		(2,445	)		2,948
Liabilities related to consolidated inventory not owned	$	—			(96,424	)		—
Other liabilities	$	44			—			1,220
Noncontrolling interests	$	(37,292	)		(12,478	)		13,253

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 16) in which Lennar Corporation is deemed the primary beneficiary (the "Company"). The Company’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in VIEs in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

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

Revenue Recognition

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

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $47.0 million, $40.9 million and $47.9 million for the years ended November 30, 2017, 2016 and 2015, respectively.

Share-Based Payments

The Company has share-based awards outstanding under the 2007 Equity Incentive Plan and the 2016 Equity Incentive Plan (the "Plans"), each of 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 Plans based on the estimated grant date fair value.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Due to the short maturity period of cash equivalents, the carrying amounts of these instruments approximate their fair values. Cash and cash equivalents as of November 30, 2017 and 2016 included $569.8 million and $460.5 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 primarily consisted of cash set aside for future investments on behalf of a real estate investment trust that Rialto is a sub-advisor to. It also included upfront deposits and application fees Rialto Mortgage Finance ("RMF") receives before originating loans and is recognized as income once the loan has been originated, as well as cash held in escrow by the Company’s loan servicer provider on behalf of customers and lenders and is disbursed in accordance with agreements between the transacting parties.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Inventories

Finished homes and construction in progress are included within inventories. Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value. Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction. Construction overhead and selling expenses are expensed as incurred. Homes held-for-sale are classified as inventories until delivered. Land, land development, amenities and other costs are accumulated by specific area and allocated to homes within the respective areas.

The Company reviews its inventory for indicators of impairment by evaluating each community during each reporting period. The inventory within each community is categorized as finished homes and construction in progress or land under development based on the development state of the community. There were 761 and 693 active communities, excluding unconsolidated entities, as of November 30, 2017 and 2016, 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 in which to assess if the 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.

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 and the assumed sales prices included in the Company’s cash flow model, the Company analyzes its historical absorption pace and historical sales prices in the community and in other comparable communities in the geographical area. In addition, the Company considers internal and external market studies and places greater emphasis on more current metrics and trends, which generally include, but are not limited to, statistics and forecasts on population demographics and on sales prices in neighboring communities, unemployment rates and availability and sales prices of competing product in the geographical area where the community is located as well as the absorption pace realized in its most recent quarters and the sales prices included in the Company's current backlog for such 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 absorption pace and 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The determination of fair value 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, 2017, the Company reviewed its communities for potential indicators of impairments and identified ten homebuilding communities with 630 homesites and a carrying value of $100.4 million as having potential indicators of impairment. For the year ended November 30, 2017, the Company recorded valuation adjustments of $7.9 million on 473 homesites in seven communities with a carrying value of $13.9 million.

As of November 30, 2016, the Company reviewed its communities for potential indicators of impairments and identified 11 homebuilding communities with 663 homesites and a carrying value of $180.9 million as having potential indicators of impairment. For the year ended November 30, 2016, the Company recorded no valuation adjustments.

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, 2017 and 2016:

	Years ended November 30,
	2017								2016
Unobservable inputs	Range								Range
Average selling price		$125,000		-		$567,000				$158,000		-	$1,300,000
Absorption rate per quarter (homes)	4			-	10				3			-	16
Discount rate	20%								12		%	-	20%

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

A majority of the Company’s option contracts require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land. The Company’s option contracts 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.

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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. If a valuation adjustment is recorded by an unconsolidated entity related to its assets, the Company generally uses 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. The Company’s proportionate share of a valuation adjustment 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 below its carrying value 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.

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 30 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investment Securities

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

At November 30, 2017 and 2016, the Lennar Financial Services segment had investment securities classified as held-to-maturity totaling $52.3 million and $42.0 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, 2017 and 2016, the Lennar Financial Services segment had available-for-sale securities totaling $57.4 million and $53.6 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).

In addition, at November 30, 2017 and 2016, the Rialto segment had investment securities classified as held-to-maturity totaling $179.7 million and $71.3 million, respectively. The Rialto segment held-to-maturity securities consist of commercial mortgage-backed securities ("CMBS").

At both November 30, 2017 and 2016, the Company had no investment securities classified as trading.

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 costs of homes sold and costs 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, 2017, 2016 and 2015, interest incurred by the Company’s homebuilding operations related to homebuilding debt was $290.3 million, $281.4 million and $288.5 million, respectively; interest capitalized into inventories was $283.2 million, $276.8 million and $276.1 million, respectively.

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

	Years Ended November 30,
(In thousands)	2017				2016			2015
Interest expense in costs of homes sold	$	260,650			235,148			205,200
Interest expense in costs of land sold	9,995				5,287			2,493
Other interest expense (1)	7,164				4,626			12,454
Total interest expense	$	277,809			245,061			220,147

(1)	Included in Lennar Homebuilding other income, net.

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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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, 2017 and 2016, the Company's net deferred tax assets included a valuation allowance of $6.4 million and $5.8 million, respectively. See Note 11 for additional information.

Other Liabilities

Reflected within the consolidated balance sheets, the other liabilities balance as of November 30, 2017 and 2016, included accrued interest payable, product warranty (as noted below), accrued bonuses, accrued wages and benefits, deferred income, customer deposits, income taxes payable, and other accrued liabilities.

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)	2017				2016
Warranty reserve, beginning of year	$	135,403			130,853
Warranties issued	109,359				96,934
Adjustments to pre-existing warranties from changes in estimates (1)	16,027				2,079
Warranties assumed related to the WCI acquisition	6,345				—
Payments	(102,515		)		(94,463	)
Warranty reserve, end of year	$	164,619			135,403

(1)	The adjustments to pre-existing warranties from changes in estimates during the years ended November 30, 2017 and 2016 primarily related to specific claims in certain of the Company's 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, 2017 and 2016 was $90.2 million and $87.6 million of which $57.7 million and $57.4 million, respectively, was included in Lennar Financial Services’ other liabilities as of November 30, 2017 and 2016. 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 CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Lennar Financial Services

Revenue Recognition

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

Loans Held-for-Sale

Loans held-for-sale by the Lennar Financial Services segment, 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.

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, 2017 and 2016. 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)	2017				2016
Loan origination liabilities, beginning of year	$	24,905			19,492
Provision for losses	3,861				4,627
Adjustments to pre-existing provisions for losses from changes in estimates	(4,440		)		1,224
Payments/settlements	(1,783		)		(438	)
Loan origination liabilities, end of year	$	22,543			24,905

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 the principal amount outstanding, net of unamortized discounts and allowance for loan losses. 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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, future contracts and investor commitments to protect the value of fixed rate-locked loan commitments and loans held-for-sale from fluctuations in mortgage-related interest rates. These derivative financial instruments are carried at fair value with the changes in fair value included in Lennar Financial Services revenues.

Rialto

Management 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 or called capital during the commitment period and called capital 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 RMF's loans held-for-sale in accordance with Accounting Standards Codification ("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. In 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies ("LLCs") in partnership with the FDIC ("FDIC Portfolios"). The LLCs met the accounting definition of VIEs and since the Company was determined to be the primary beneficiary, the Company consolidated the LLCs. The Company was determined to be the primary beneficiary because it has the power to direct the activities of the LLCs that most significantly impact the LLCs' performance through Rialto's management and servicer contracts. In February 2017, the FDIC exercised its “clean-up call rights” under the Amended and Restated Limited Liability Company Agreement. As a result, Rialto had until July 10, 2017 to liquidate and sell the assets in the FDIC Portfolios. On July 10, 2017, Rialto and the FDIC entered into an agreement which extended the original agreement date to January 10, 2018. At November 30, 2017, the consolidated LLCs had total combined assets of $48.8 million, which primarily included $23.8 million in cash, $20.0 million of real estate owned, net and $1.6 million of loans held-for-sale. As of January 11, 2018, (1) the FDIC can, at its discretion, sell any remaining assets, or (2) Rialto has the option to purchase the FDIC's interest in the portfolios. As of January 19, 2018, there were only four assets with a carrying value totaling $0.3 million which were not under contract to sell.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 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 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, 2017, these consolidated LLCs had total combined assets and liabilities of $48.8 million and $2.2 million, respectively. At November 30, 2016, these consolidated LLCs had total combined assets and liabilities of $213.8 million and $10.3 million, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The FDIC does not have the unilateral power to terminate the Company’s role in managing the LLCs and servicing the loan portfolios. While the FDIC has the right to prevent certain types of transactions (i.e., bulk sales, selling assets with recourse back to the selling entity, selling assets with representations and warranties and financing the sales of assets without the FDIC’s approval), the FDIC does not have full voting or blocking rights over the LLCs’ activities, making their voting rights protective in nature, not substantive participating voting rights. Other than as described in the preceding sentence, which are not the primary activities of the LLCs, the Company can cause the LLCs to enter into both the disposition and restructuring of loans without any involvement of the FDIC. Additionally, the FDIC has no voting rights with regard to the operation/management of the operating properties that are acquired upon foreclosure of loans (e.g. REO) and no voting rights over the business plans of the LLCs. The FDIC can make suggestions regarding the business plans, but the Company can decide not to follow the FDIC’s suggestions and not to incorporate them in the business plans. Since the FDIC’s voting rights are protective in nature and not substantive participating voting rights, the Company has the power to direct the activities that most significantly impact the LLCs’ economic performance.

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

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

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

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

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

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

Voting Interest Entities

Rialto Real Estate Fund, LP ("Fund I"), Rialto Real Estate Fund II, LP ("Fund II"), Rialto Real Estate Fund III ("Fund III"), Rialto Mezzanine Partners Fund, LP ("Mezzanine Fund") and the Rialto Credit Partnership, LP ("RCP") 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, Mezzanine Fund, and the RCP'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 is 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, Mezzanine Fund, and the RCP 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, Mezzanine Fund, and the RCP (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, Mezzanine Fund and the RCP to finance its activities without additional subordinated financial support.

•

The general partner and the limited partners in Fund I, Fund II, Fund III, Mezzanine Fund and the RCP, collectively, have full decision-making ability as they collectively have the power to direct the activities of Fund I, Fund II, Fund III, Mezzanine Fund and the RCP, since Rialto, in addition to being a general partner with a substantive equity investment in Fund I, Fund II, Fund III, Mezzanine Fund and the RCP, also provides services to Fund I, Fund II, Fund III, Mezzanine Fund and the RCP, 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, Mezzanine Fund, and the RCP 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, Mezzanine Fund and the RCP's operational results, thus the equity investors absorb the expected negative and positive variability relative to Fund I, Fund II, Fund III, Mezzanine Fund and the RCP.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Having concluded that Fund I, Fund II, Fund III, Mezzanine Fund and the RCP 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, Mezzanine Fund and the RCP. The Company determined that it does not control Fund I, Fund II, Fund III, Mezzanine Fund or the RCP 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 or in the case of the RCP, and individual limited partner. 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, Mezzanine Fund or the RCP under the voting interest entity model, Fund I, Fund II, Fund III, Mezzanine Fund and the RCP 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; therefore, ASU 2014-09 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The Company has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of applying this ASU recognized at the date of initial application. The Company is currently planning to adopt the modified retrospective method and is continuing to evaluate the impact the adoption of ASU 2014-09 will have on the Company's consolidated financial statements.

Subsequent to the issuance of ASU 2014-09, the FASB has issued several ASUs such as ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients among others. These ASUs do not change the core principle of the guidance stated in ASU 2014-09, instead these amendments are intended to clarify and improve operability of certain topics included within the revenue standard. These ASUs will have the same effective date and transition requirements as ASU 2014-09. The Company is continuing to evaluate the method and impact the adoption of these ASUs and ASU 2014-09 will have 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 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

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820, Fair Value Measurements, and as such these investments may be measured at cost. ASU 2016-01 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2016-01 is not expected to have a material effect on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"), which provides guidance for accounting for leases. ASU 2016-02 requires lessees to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight line basis over the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02 will be effective for the Company’s fiscal year beginning December 1, 2019 and subsequent interim periods. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU 2016-07, Investments- Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting ("ASU 2016-07"). ASU 2016-07 eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. ASU 2016-07 will be effective for the Company’s fiscal year beginning December 1, 2017 and subsequent interim periods. The adoption of ASU 2016-07 is not expected to have a material effect on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects related to the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. ASU 2016-09 will be effective for the Company’s fiscal year beginning December 1, 2017 and subsequent interim periods. The adoption of ASU 2016-09 is not expected to have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes the impairment model for most

financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses

expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of

allowances for credit losses on loans and other financial instruments. ASU 2016-13 is effective for the Company's fiscal year

beginning December 1, 2020 and subsequent interim periods. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows, including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. Additionally, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"). ASU 2016-18 clarifies certain existing principles in ASC 230, Statement of Cash Flows, including providing additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. Both ASU 2016-15 and ASU 2016-18 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2016-15 will modify the Company's current disclosures and reclassifications within the consolidated statement of cash flows but is not expected to have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business with the objective of addressing whether transactions involving in-substance nonfinancial assets, held directly or in a subsidiary, should be accounted for as acquisitions or disposals of nonfinancial assets or of businesses. ASU 2017-01 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2017-01 is not expected to have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Accounting for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 will be effective for the Company’s fiscal year beginning December 1, 2020. Early adoption is permitted for interim or annual goodwill impairment

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact the adoption of ASU 2017-04 will have on the Company's consolidated financial statements.

Reclassifications/Revisions

Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the 2017 presentation. These reclassifications had no impact on the Company's consolidated financial statements.

2. Business Acquisition

On October 29, 2017, the Company and a wholly-owned subsidiary of the Company (“Merger Sub”) entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with CalAtlantic Group, Inc. (" CalAtlantic"), a Delaware corporation. Subject to the terms and conditions of the Merger Agreement, CalAtlantic will be merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Merger”). CalAtlantic builds homes in over 43 metropolitan statistical areas spanning 19 states. CalAtlantic also provides mortgage, title and escrow services.

Under the terms of the Merger Agreement, CalAtlantic’s stockholders will receive 0.885 shares of the Company’s Class A common stock and 0.0177 shares of the Company's Class B common stock for each share of CalAtlantic’s common stock. However, the Company will pay $48.26 per share in cash for 24,083,091 of the shares of CalAtlantic common stock (the "Cash Election Option") in lieu of receiving the Company’s Class A and Class B common stock, which will total approximately $1.16 billion. The Cash Election Option will be subject to proration to the extent they exceed the maximum cash amount. No fractional shares of the Company’s Class A or Class B common stock will be issued in the Merger. Any holder of CalAtlantic’s common stock who would be entitled to receive a fraction of a share of the Company’s Class A or Class B common stock will instead receive cash equal to the market value of a share of such Class A common stock (based on the last sale price reported on the New York Stock Exchange on the last trading day before the closing date). On a pro forma basis, CalAtlantic stockholders are expected to own approximately 26% of the combined company. The transaction is expected to close in February 2018.

On February 10, 2017, the Company acquired WCI Communities, Inc. ("WCI") a homebuilder of luxury single and multifamily homes, including a small percentage of luxury high-rise tower units, with operations in Florida. WCI stockholders received 642.6 million in cash. The cash consideration was funded primarily from working capital and from proceeds from the issuance of 4.125% senior notes due 2022 (see Note 7).

Based on an evaluation of the provisions of ASC Topic 805, Business Combinations, ("ASC 805"), Lennar Corporation was determined to be the acquirer for accounting purposes. The following table summarizes the provisional purchase price allocation based on the estimated fair value of net assets acquired and liabilities assumed at the date of acquisition, which are subject to change within a measurement period of up to one year from the acquisition date pursuant to ASC 805. The purchase price allocation of WCI is provisional pending completion of the fair value analysis of acquired assets and liabilities assumed:

(In thousands)
Assets:
Cash and cash equivalents, restricted cash and receivables, net	$	42,079
Inventories	613,495
Intangible assets (1)	59,283
Goodwill (2)	156,566
Deferred tax assets, net	88,147
Other assets	66,173
Total assets	1,025,743
Liabilities:
Accounts payable	26,735
Senior notes and other debts payable	282,793
Other liabilities	73,593
Total liabilities	383,121
Total purchase price	$	642,622

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(1)	Intangible assets include non-compete agreements and a trade name. The amortization period for these intangible assets was six months for the non-compete agreements and 20 years for the trade name.

(2)

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, and it is not deductible for income tax purposes. As of the merger date, goodwill consisted primarily of purchasing and other synergies resulting from the merger, expected production, savings in corporate and division overhead costs and expected expanded opportunities for growth through a higher-end more luxurious product, greater presence in the state of Florida and customer diversity. The provisional amount of goodwill allocated to the Company's Homebuilding East segment was $136.6 million and to the Lennar Financial Services segment was $20.0 million. These provisional amounts were based on the relative fair value of each acquired reporting unit in accordance with ASC 350, Intangibles-Goodwill and Other.

For the year ended November 30, 2017, Lennar Homebuilding revenues included $494.7 million of home sales revenues from WCI and earnings before income taxes included $51.7 million of pre-tax earnings from WCI since the date of acquisition, which included transaction-related expenses of $28.1 million comprised mainly of severance costs, general and administrative expenses, and amortization expense related to non-compete agreements and trade name since the date of acquisition. These transaction expenses were included primarily within Lennar Homebuilding selling, general and administrative expenses in the accompanying consolidated statement of operations for the year ended November 30, 2017. The pro forma effect of the acquisition on the results of operations is not presented as this acquisition was not considered material.

3. Operating and Reporting Segments

As of and for the year ended November 30, 2017, 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)	Lennar Financial Services

(5)	Rialto

(6)	Lennar Multifamily

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

Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes. Operations of the Company’s homebuilding segments primarily include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through the Company’s unconsolidated entities. Operating earnings (loss) for the homebuilding segments consist of revenues generated from the sales of homes and land, 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 incurred by the segment and loss due to litigation.

The Company’s reportable homebuilding segments and all other homebuilding operations not required to be reported separately, have homebuilding divisions located in:

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

Central: Arizona, Colorado and Texas

West: California and Nevada

Other: Illinois, Minnesota, Oregon, Tennessee and Washington

(1) Florida includes information related to WCI from the date of acquisition (February 10, 2017) to November 30, 2017.

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. It also includes a real estate brokerage business acquired as part of the WCI transaction. 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 and commissions on realty estate brokerage, less the cost of such services and certain selling, general and administrative expenses incurred by the segment. The Lennar Financial Services segment operates generally in the same states as the Company’s homebuilding operations as well as in other states.

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, perform 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 consist 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, and equity in earnings from unconsolidated entities, less the costs incurred by the segment for managing portfolios, costs related to RMF and other general and administrative expenses.

Operations of the Lennar Multifamily segment include revenues generated from land sales, revenue from construction activities and management fees generated from joint ventures, and equity in earnings from unconsolidated entities, less the cost of land sold, 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)	2017				2016			2015
Assets:
Homebuilding East (1)	$	4,754,581			3,512,990			3,140,604
Homebuilding Central	2,037,905				1,993,403			1,902,581
Homebuilding West	5,165,218				4,318,924			4,157,616
Homebuilding Other	960,541				907,523			858,000
Lennar Financial Services	1,689,508				1,754,672			1,425,837
Rialto	1,153,840				1,276,210			1,505,500
Lennar Multifamily	710,725				526,131			415,352
Corporate and unallocated	2,272,716				1,071,928			1,014,019
Total assets	$	18,745,034			15,361,781			14,419,509
Lennar Homebuilding investments in unconsolidated entities:
Homebuilding East	$	68,670			62,900			40,573
Homebuilding Central	25,220				36,031			35,925
Homebuilding West	791,995				696,471			649,170
Homebuilding Other	14,884				16,321			15,883
Total Lennar Homebuilding investments in unconsolidated entities	$	900,769			811,723			741,551
Rialto investments in unconsolidated entities	$	265,418			245,741			224,869
Lennar Multifamily investments in unconsolidated entities	$	407,544			318,559			250,876
Lennar Homebuilding goodwill (2)	$	136,566			—			—
Lennar Financial Services goodwill (2)	$	59,838			39,838			38,854
Rialto goodwill	$	5,396			5,396			5,396

(1)	Homebuilding East segment includes the provisional fair values of homebuilding assets acquired as part of the WCI acquisition.

(2)	In connection with the WCI acquisition, the Company allocated $136.6 million of goodwill to the Lennar Homebuilding East reportable segment and $20.0 million to the Lennar Financial Services segment. These amounts are provisional pending completion of the fair value analysis of acquired assets and liabilities.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Years Ended November 30,
(In thousands)	2017				2016			2015
Revenues:
Homebuilding East	$	4,612,565			3,941,336			3,563,678
Homebuilding Central	2,509,292				2,283,579			1,944,312
Homebuilding West	3,197,174				2,757,658			2,365,519
Homebuilding Other	881,211				758,764			593,436
Lennar Financial Services	770,109				687,255			620,527
Rialto	281,243				233,966			221,923
Lennar Multifamily	394,771				287,441			164,613
Total revenues (1)	$	12,646,365			10,949,999			9,474,008
Operating earnings (loss):
Homebuilding East (2)	$	483,684			617,175			580,863
Homebuilding Central	269,462				245,975			208,698
Homebuilding West (3)	403,935				396,346			435,818
Homebuilding Other	111,958				85,436			46,262
Lennar Financial Services	155,524				163,617			127,795
Rialto (4)	(22,495		)		(16,692	)		33,595
Lennar Multifamily (5)	73,432				71,174			(7,171	)
Total operating earnings	1,475,500				1,563,031			1,425,860
Corporate general and administrative expenses	285,889				232,562			216,244
Earnings before income taxes	$	1,189,611			1,330,469			1,209,616

(1)	Total revenues were net of sales incentives of $665.7 million ($22,700 per home delivered) for the year ended November 30, 2017, $596.3 million ($22,500 per home delivered) for the year ended November 30, 2016 and $518.1 million ($21,400 per home delivered) for the year ended November 30, 2015.

(2)	Homebuilding East operating earnings for the year ended November 30, 2017 included a $140 million loss due to litigation (see Note 17).

(3)	For the years ended November 30, 2017 and 2016, Homebuilding West's operating earnings included an equity in loss from unconsolidated entities of $55.2 million and $49.7 million, respectively, refer to the following table for additional details.

(4)

For the year ended November 30, 2017, Rialto's operating loss included $96.2 million of gross REO and loan impairments ($44.7 million net of noncontrolling interests) as Rialto liquidated most of the remaining assets of the FDIC portfolio. For the year ended November 30, 2016, Rialto's operating loss included a $16.0 million write-off of uncollectible receivables related to a hospital, which was acquired through the resolution of one of Rialto's loans from a 2010 portfolio.

(5)

For the years ended November 30, 2017, 2016 and 2015, Lennar Multifamily's operating earnings included $85.7 million, $85.5 million and $19.5 million of equity in earnings from unconsolidated entities primarily as a result of $96.7 million, $91.0 million and $22.2 million, respectively, share of gains from the sale of seven, seven and two operating properties, respectively, by its unconsolidated entities.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Years Ended November 30,
(In thousands)	2017				2016			2015
Lennar Homebuilding interest expense:
Homebuilding East	$	100,288			92,541			94,425
Homebuilding Central	55,212				48,879			41,280
Homebuilding West	103,100				87,293			70,397
Homebuilding Other	19,209				16,348			14,045
Total Lennar Homebuilding interest expense	$	277,809			245,061			220,147
Lennar Financial Services interest income, net	$	13,331			12,388			13,547
Rialto interest expense	$	42,004			40,303			43,127
Depreciation and amortization:
Homebuilding East	$	19,922			18,713			16,877
Homebuilding Central	11,007				10,328			9,881
Homebuilding West	22,741				19,437			17,683
Homebuilding Other	4,772				4,562			4,477
Lennar Financial Services	9,992				7,667			6,100
Rialto	5,194				7,590			7,758
Lennar Multifamily	2,910				2,472			1,110
Corporate and unallocated	51,142				34,966			23,522
Total depreciation and amortization	$	127,680			105,735			87,408
Net additions to (disposals of) operating properties and equipment:
Homebuilding East	$	2			(10,379	)		316
Homebuilding Central	(48		)		2,385			(18	)
Homebuilding West (1)	13,912				24,438			(11,482	)
Homebuilding Other (2)	29,927				26,727			(72,472	)
Lennar Financial Services	11,185				6,218			3,306
Rialto	4,115				1,908			9,382
Lennar Multifamily	12,657				1,666			2,147
Corporate and unallocated	40,023				12,645			27,466
Total net additions (disposals of) operating properties and equipment	$	111,773			65,608			(41,355	)
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities:
Homebuilding East	$	1,413			(230	)		118
Homebuilding Central	(7,447		)		401			75
Homebuilding West (3)	(55,181		)		(49,731	)		62,960
Homebuilding Other	(493		)		285			220
Total Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	$	(61,708	)		(49,275	)		63,373
Rialto equity in earnings from unconsolidated entities	$	25,447			18,961			22,293
Lennar Multifamily equity in earnings from unconsolidated entities	$	85,739			85,519			19,518

(1)	For the year ended November 30, 2017, net disposals of operating properties and equipment included the sale of an operating property with a basis of $47.0 million. 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 $59.4 million.

(2)	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.

(3)

For the year ended November 30, 2017, equity in loss included the Company's share of operational net losses from unconsolidated entities driven by general and administrative expenses and valuation adjustments, partially offset by profits from land sales. For the year ended November 30, 2016, equity in loss included the Company's share of costs associated with the FivePoint combination (described in Note 5) and operational net losses from the new FivePoint unconsolidated entity, totaling $42.6 million, partially offset by $12.7 million of equity in earnings primarily due to sales of homesites to third parties by one of the Company's unconsolidated entities. For the year ended November 30, 2015, equity in earnings included $82.8 million of equity in earnings from one of the Company's unconsolidated entities.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4. Lennar Homebuilding Receivables

	November 30,
(In thousands)	2017				2016
Accounts receivable	$	59,733			67,296
Mortgage and notes receivable	80,602				39,788
	140,335				107,084
Allowance for doubtful accounts	(2,668		)		(108	)
	$	137,667			106,976

At November 30, 2017 and 2016, 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 homes and 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.

5. 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)	2017				2016			2015
Revenues	$	471,899			439,874			1,309,517
Costs and expenses	616,217				578,831			969,509
Other income	23,253				—			49,343
Net earnings (loss) of unconsolidated entities	$	(121,065	)		(138,957	)		389,351
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	$	(61,708	)		(49,275	)		63,373

For the year ended November 30, 2017, one of the Company’s unconsolidated entities had equity in earnings of $11.9 million relating to an equity method investee selling 475 homesites to a third-party land bank. Simultaneous with the purchase by the land bank, the Company entered into an option contract to purchase all 475 homesites from the land bank. Due to the Company’s continuing involvement with respect to the homesites sold from the investee entity, the Company deferred all of its equity in earnings from the unconsolidated entity relating to the sale transaction, which amounted to $4.9 million.

For the year ended November 30, 2017, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to the Company's share of net operating losses from the Company's unconsolidated entities which were primarily driven by general and administrative expenses and valuation adjustments related to assets of Lennar Homebuilding unconsolidated entities, partially offset by the profits from land sales.

For the year ended November 30, 2016, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to the Company's share of costs associated with the FivePoint combination and operational net losses from the new FivePoint unconsolidated entity, totaling $42.6 million. This was partially offset by $12.7 million of equity in earnings primarily due to sales of homesites to third parties by one of the Company's unconsolidated entities.

For the year ended November 30, 2015, Lennar Homebuilding equity in earnings included $82.8 million of equity in earnings from one of the Company's unconsolidated entities primarily due to (1) sales of approximately 800 homesites 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, (2) sales of approximately 700 homesites and a commercial property to third parties and (3) a gain on debt extinguishment. In addition, for the year ended November 30, 2015, net earnings of unconsolidated entities included sales of approximately 300 homesites to Lennar by one of the Company's unconsolidated entities that resulted in $49.3 million of gross profit, of which the Company's portion was deferred.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Balance Sheets
	November 30,
(In thousands)	2017				2016
Assets:
Cash and cash equivalents	$	953,261			221,334
Inventories	3,751,525				3,889,795
Other assets	1,061,507				1,334,116
	$	5,766,293			5,445,245
Liabilities and equity:
Accounts payable and other liabilities	$	832,151			791,245
Debt (1)	737,331				888,664
Equity	4,196,811				3,765,336
	$	5,766,293			5,445,245

(1)	Debt presented above is net of debt issuance costs of $5.7 million and $4.2 million, as of November 30, 2017 and 2016, respectively.

In May 2016, the Company contributed, or obtained the right to contribute, its investment in three strategic joint ventures previously managed by FivePoint Communities in exchange for an investment in a FivePoint entity. The fair values of the assets contributed to this FivePoint entity are included within the unconsolidated entities summarized condensed balance sheet presented above. A portion of the assets of one of the three strategic joint ventures transferred to a new unconsolidated entity was retained by Lennar and its venture partner. The transactions did not have a material impact to the Company’s financial position or cash flows for the year ended November 30, 2016. For the year ended November 30, 2016, the Company recorded $42.6 million of its share of combination costs and operational net losses associated with FivePoint in equity in loss from unconsolidated entities on the consolidated statement of operations.

In May 2017, FivePoint completed its initial public offering ("IPO"). Concurrent with the IPO, the Company invested an additional $100 million in FivePoint in a private placement. As of November 30, 2017, the Company owns approximately 40% of FivePoint and the carrying amount of the Company's investment is $359.2 million.

As of November 30, 2017 and 2016, the Company’s recorded investments in Lennar Homebuilding unconsolidated entities were $900.8 million and $811.7 million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of November 30, 2017 and 2016 was $1.3 billion and $1.2 billion, respectively. The basis difference is primarily as a result of the Company contributing its investment in three strategic joint ventures with a higher fair value than book value for an investment in the FivePoint entity and deferring equity in earnings on land sales to the Company. The Company's recorded investments in Lennar Homebuilding unconsolidated entities included $33.3 million of assets held-for-sale.

During the year ended November 30, 2015, one of the Company's unconsolidated entities sold approximately 800 homesites to a joint venture, in which the Company has a 50% investment, for $472 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.

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 the Company receives management fees and/or reimbursement of expenses for performing this function. During the years ended November 30, 2017, 2016 and 2015, the Company received management fees and reimbursement of expenses, net of deferrals, from Lennar Homebuilding unconsolidated entities totaling $4.4 million, $13.2 million and $31.3 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, 2017, 2016 and 2015, $226.2 million, $130.4 million and $177.6 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

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

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

	November 30,
(Dollars in thousands)	2017				2016
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	64,197			48,945
Non-recourse land seller debt and other debt (1)	1,997				323,995
Non-recourse debt with completion guarantees	255,903				147,100
Non-recourse debt without completion guarantees	351,800				320,372
Non-recourse debt to the Company	673,897				840,412
The Company’s maximum recourse exposure (2)	69,181				52,438
Debt issuance costs	(5,747		)		(4,186	)
Total debt	$	737,331			888,664
The Company’s maximum recourse exposure as a % of total JV debt	9		%		6	%

(1)	Non-recourse land seller debt and other debt as of November 30, 2016, included a $320 million non-recourse note related to a transaction between one of the Company's unconsolidated entities and another unconsolidated joint venture, which was settled in December 2016.

(2)	As of November 30, 2017 and 2016, the Company's maximum recourse exposure was primarily related to the Company providing a repayment guarantee on three unconsolidated entities' debt and two unconsolidated entities' debt, respectively.

In most instances in which the Company has guaranteed debt of a Lennar Homebuilding unconsolidated entity, the Company’s partners have also guaranteed that debt and are required to contribute their share of the guarantee payments. In a repayment guarantee, the Company and its venture partners guarantee repayment of a portion or all of the debt in the event of default before the lender would have to exercise its rights against the collateral.

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

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

As of both November 30, 2017 and 2016, the fair values of the repayment guarantees and completion guarantees were not material. The Company believes that as of November 30, 2017, in the event it becomes legally obligated to perform under a guarantee of the obligation of a Lennar Homebuilding unconsolidated entity due to a triggering event under a guarantee, the collateral 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 7).

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. 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)	2017				2016
Operating properties (1)	$	188,073			151,461
Leasehold improvements	52,185				40,513
Furniture, fixtures and equipment	79,082				68,579
	319,340				260,553
Accumulated depreciation and amortization	(104,272		)		(86,939	)
	$	215,068			173,614

(1)	Operating properties primarily include rental operations and commercial properties. During the year ended November 30, 2017, the Company acquired an operating property with an allocated fair value of $34.0 million as part of the WCI acquisition and sold an operating property with a basis of $47.0 million.

7. Lennar Homebuilding Senior Notes and Other Debts Payable

	November 30,
(Dollars in thousands)	2017				2016
6.95% senior notes due 2018	$	249,342			248,474
4.125% senior notes due December 2018	274,459				273,889
4.500% senior notes due 2019	498,793				498,002
4.50% senior notes due 2019	598,325				597,474
2.95% senior notes due 2020	298,305				—
4.750% senior notes due 2021	497,329				496,547
4.125% senior notes due 2022	595,904				—
4.750% senior notes due 2022	569,484				568,404
4.875% senior notes due December 2023	394,964				394,170
4.500% senior notes due 2024	645,353				—
4.750% senior notes due 2025	496,671				496,226
4.75% senior notes due 2027	892,657				—
4.75% senior notes due December 2017	—				398,479
12.25% senior notes due 2017	—				398,232
Mortgage notes on land and other debt	398,417				206,080
	$	6,410,003			4,575,977

The carrying amounts of the senior notes listed above are net of debt issuance costs of $33.5 million and $22.1 million, as of November 30, 2017 and 2016, respectively.

In May 2017, the Company amended the credit agreement governing its unsecured revolving credit facility (the "Credit Facility") to increase the maximum borrowings from $1.8 billion to $2.0 billion and extended the maturity on $1.4 billion of the Credit Facility from June 2020 to June 2022, with $160 million maturing in June 2018 and the remaining $50 million maturing in June 2020. As of November 30, 2017, the Credit Facility included a $403 million accordion feature, subject to additional commitments. 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, 2017 and 2016, 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, 2017. In addition, the Company had $330 million in letter of credit facilities with different financial institutions at November 30, 2017.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s performance letters of credit outstanding were $384.4 million and $270.8 million at November 30, 2017 and 2016, respectively. The Company’s financial letters of credit outstanding were $127.4 million and $210.3 million at November 30, 2017 and 2016, 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, 2017, the Company had outstanding surety bonds of $1.3 billion including performance surety bonds related to site improvements at various projects (including certain projects of the Company’s joint ventures) and financial surety bonds. Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all development and construction activities are completed. As of November 30, 2017, there were approximately $570.4 million, or 44%, 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 notes outstanding at November 30, 2017 were as follows:

Senior Notes Outstanding (1)		Principal Amount				Net Proceeds (2)			Price			Dates Issued
(Dollars in thousands)
6.95% senior notes due 2018		$	250,000			243,900			98.929	%		May 2010
4.125% senior notes due December 2018		275,000				271,718			99.998	%		February 2013
4.500% senior notes due 2019		500,000				495,725			(3)			February 2014
4.50% senior notes due 2019		600,000				595,801			(4)			November 2014, February 2015
2.95% senior notes due 2020		300,000				298,800			100	%		November 2017
4.750% senior notes due 2021		500,000				495,974			100	%		March 2016
4.125% senior notes due 2022		600,000				595,160			100	%		January 2017
4.750% senior notes due 2022		575,000				567,585			(5)			October 2012, February 2013, April 2013
4.875% senior notes due December 2023		400,000				393,622			99.169	%		November 2015
4.500% senior notes due 2024		650,000				644,838			100	%		April 2017
4.750% senior notes due 2025		500,000				495,528			100	%		April 2015
4.75% senior notes due 2027		900,000				894,650			100	%		November 2017

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

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

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

(4)	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%.

(5)	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 November 2017, the Company redeemed the $400 million principal amount of its 4.75% Senior Notes due 2017. The redemption price, which was paid in cash, was 100% of the principal amount plus accrued interest.

In November 2017, the Company issued $300 million aggregate principal amount of 2.95% Senior Notes due 2020 (the “2.95% Senior Notes”) and $900 million aggregate principal amount of its 4.750% Senior Notes due 2027 (the “4.750% Senior Notes”) at a price of 100% in a private placement. Proceeds from the offering, after payment of initial purchaser’s discount and certain expenses, were $1.19 billion. The Company intends to use the net proceeds of this offering to fund a portion of the Cash Election Option payable by the Company in connection with the CalAtlantic merger (the “Merger”), to pay expenses related to the Merger and for general corporate purposes. Interest on the 2.95% Senior Notes and 4.750% Senior Notes is due semi-annually beginning May 29, 2018. The 2.95% Senior Notes and 4.750% Senior Note are unsecured and unsubordinated, but are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries.

In August 2017, the Company redeemed the $250 million principal amount of the 6.875% senior notes due 2021 (the "6.875% Senior Notes") that we assumed as a result of the acquisition of WCI in February 2017. The redemption price, which

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

was paid in cash, was 103.438% of the principal amount, plus accrued and unpaid interest up to, but not including, the redemption date. There was no gain or loss recorded on redemption of the 6.875% senior notes as it had been recorded at fair value on the acquisition date.

In April 2017, the Company issued $650 million aggregate principal amount of 4.50% senior notes due 2024 (the "4.50% Senior Notes") at a price of 100%. Proceeds from the offering, after payment of expenses, were $644.8 million. The Company used the net proceeds from the sales of the 4.500% Senior Notes for (1) the retirement of its 12.25% senior notes due 2017 for 100% of the $400 million outstanding principal amount, plus accrued and unpaid interest and (2) the redemption of its 6.875% senior notes due 2021 for 103.438% of the $250 million outstanding principal amount plus accrued but unpaid interest up to, but not including, the redemption date. Interest on the 4.50% Senior Notes is due semi-annually beginning October 30, 2017. The 4.50% Senior Notes are unsecured and unsubordinated, but are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries.

In January 2017, the Company issued $600 million aggregate principal amount of 4.125% senior notes due 2022 (the "4.125% Senior Notes") at a price of 100%. Proceeds from the offering, after payment of expenses, were $595.2 million. The Company used the net proceeds from the sales of the 4.125% Senior Notes to fund a portion of the cash consideration for the Company's acquisition of WCI and to pay for costs and expenses related to this acquisition as well as for general corporate purposes. Interest on the 4.125% Senior Notes is due semi-annually beginning July 15, 2017. The 4.125% Senior Notes are unsecured and unsubordinated, but are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries.

The Company's senior notes are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries and some of the Company's other subsidiaries. Although the guarantees are full, unconditional and joint and several while they are in effect, (i) a subsidiary will cease to be a guarantor at any time when it is not directly or indirectly guaranteeing at least $75 million of debt of Lennar Corporation (the parent company), and (ii) a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed of.

At November 30, 2017, the Company had mortgage notes on land and other debt due at various dates through 2036 bearing interest at rates up to 7.5% with an average interest rate of 3.1%. At November 30, 2017 and 2016, the carrying amount of the mortgage notes on land and other debt was $398.4 million and $206.1 million, respectively. During the years ended November 30, 2017 and 2016, the Company retired $139.7 million and $211.0 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, 2017 and thereafter are as follows:

(In thousands)	Debt Maturities
2018	$	357,655
2019	1,481,943
2020	371,104
2021	534,095
2022	1,192,260
Thereafter	2,511,447

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 borrowings under the Company's Credit Facility.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. Lennar Financial Services Segment

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

	November 30,
(In thousands)	2017				2016
Assets:
Cash and cash equivalents	$	117,410			123,964
Restricted cash	12,006				17,053
Receivables, net (1)	313,252				409,528
Loans held-for-sale (2)	937,516				939,405
Loans held-for-investment, net	44,193				30,004
Investments held-to-maturity	52,327				41,991
Investments available-for-sale (3)	57,439				53,570
Goodwill (4)	59,838				39,838
Other (5)	95,527				99,319
	$	1,689,508			1,754,672
Liabilities:
Notes and other debts payable	$	937,431			1,077,228
Other (6)	240,383				241,055
	$	1,177,814			1,318,283

(1)	Receivables, net, primarily related to loans sold to investors for which the Company had not yet been paid as of November 30, 2017 and 2016, respectively.

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

(3)	Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss).

(4)	As of November 30, 2017, goodwill included $20 million related to the WCI acquisition. The amount provided herein is provisional, pending completion of the fair value analysis of WCI's acquired assets and liabilities assumed.

(5)

As of November 30, 2017 and 2016, other assets included mortgage loan commitments carried at fair value of $9.9 million and $7.4 million, respectively, and mortgage servicing rights carried at fair value of $31.2 million and $23.9 million, respectively. In addition, other assets also included forward contracts carried at fair value of $1.7 million and $26.5 million as of November 30, 2017 and November 30, 2016, respectively.

(6)	As of November 30, 2017 and 2016, other liabilities included $57.7 million and $57.4 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation.

At November 30, 2017, the Lennar Financial Services segment warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures December 2017 (1) (2)	$	400,000
364-day warehouse repurchase facility that matures March 2018 (3)	150,000
364-day warehouse repurchase facility that matures June 2018	600,000
364-day warehouse repurchase facility that matures September 2018	300,000
Total	$	1,450,000

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

(2)	Subsequent to November 30, 2017, the warehouse repurchase facility maturity was extended to December 2018.

(3)	Maximum aggregate commitment includes an uncommitted amount of $75 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 non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature. Borrowings under the facilities and their prior year predecessors were $937.2 million and $1.1 billion at November 30, 2017 and 2016, respectively, and were collateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $974.1 million and $1.1 billion at November 30, 2017 and 2016, respectively. The combined effective interest rate on the facilities at November 30, 2017 was 3.6%. 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

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

facilities, the Lennar Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.

9. Rialto Segment

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

	November 30,
(In thousands)	2017				2016
Assets:
Cash and cash equivalents	$	241,861			148,827
Restricted cash	22,466				9,935
Receivables, net (1)	—				204,518
Loans held-for-sale (2)	236,018				126,947
Loans receivable, net	1,933				111,608
Real estate owned, net	86,047				243,703
Investments in unconsolidated entities	265,418				245,741
Investments held-to-maturity	179,659				71,260
Other	120,438				113,671
	$	1,153,840			1,276,210
Liabilities:
Notes and other debts payable (3)	$	625,081			622,335
Other	94,975				85,645
	$	720,056			707,980

(1)	Receivables, net primarily related to loans sold but not settled as of November 30, 2016.

(2)	Loans held-for-sale related to unsold loans originated by RMF carried at fair value and loans in the FDIC Portfolios carried at lower of cost or market.

(3)	As of November 30, 2017 and 2016, notes and other debts payable primarily included $349.4 million and $348.7 million, respectively, related to Rialto's 7.00% senior notes due 2018 (the "7.00% Senior Notes"), and $162.1 million and $223.5 million, respectively, related to Rialto's warehouse repurchase facilities.

Rialto Mortgage Finance - loans held-for-sale

During the year ended November 30, 2017, RMF originated loans with a total principal balance of $1.7 billion of which $1.6 billion were recorded as loans held-for-sale and $98.4 million were recorded as accrual loans within loans receivable, net, and sold $1.5 billion of loans into 12 separate securitizations. During the year ended November 30, 2016, RMF originated loans with a principal balance of $1.8 billion of which $1.7 billion were recorded as loans held-for-sale and $81.2 million were recorded as accrual loans within loans receivable, net, and sold $1.9 billion of loans into 11 separate securitizations. As of November 30, 2017, there were no unsettled transactions. As of November 30, 2016, originated loans with an unpaid principal balance of $199.8 million were sold into a securitization trust but not settled and thus were included as receivables, net.

FDIC Portfolios

In 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies ("LLCs") in partnership with the FDIC Portfolios. The LLCs met the accounting definition of VIEs and since the Company was determined to be the primary beneficiary, the Company consolidated the LLCs. The Company was determined to be the primary beneficiary because it has the power to direct the activities of the LLCs that most significantly impact the LLCs' performance through Rialto's management and servicer contracts.

In February 2017, the FDIC exercised its “clean-up call rights” under the Amended and Restated Limited Liability Company Agreement. As a result, Rialto had until July 10, 2017 to liquidate and sell the assets in the FDIC Portfolios. On July 10, 2017, Rialto and the FDIC entered into an agreement which extended the original agreement date to January 10, 2018. At November 30, 2017, the consolidated LLCs had total combined assets of $48.8 million, which primarily included $23.8 million in cash, $20.0 million of real estate owned, net and $1.6 million of loans held-for-sale. As of January 11, 2018, (1) the FDIC can, at its discretion, sell any remaining assets, or (2) Rialto has the option to purchase the FDIC's interest in the portfolios. As

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of January 19, 2018, there were only four assets with a carrying value totaling $0.3 million which were not under contract to sell.

At November 30, 2017, Rialto warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
Warehouse repurchase facility that matures December 2017 (1)	$	200,000
364-day warehouse repurchase facility that matures January 2018 (2)	250,000
364-day warehouse repurchase facility that matures October 2018	400,000
364-day warehouse repurchase facility that matures November 2018 (one year extension)	200,000
Total - Loans origination and securitization business (RMF)	$	1,050,000
Warehouse repurchase facility that matures August 2018 (two - one year extensions) (3)	100,000
Totals	$	1,150,000

(1)	Subsequent to November 30, 2017, the warehouse repurchase facility maturity date was extended to December 2019.

(2)	Subsequent to November 30, 2017, the warehouse repurchase facility maturity date was extended to December 2018 and maximum aggregate commitment of the facility was reduced to $200 million.

(3)	Rialto uses this warehouse repurchase facility to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans receivable, net. There were no borrowings under this facility as of November 30, 2017. Borrowings under this facility were $43.3 million as of November 30, 2016.

Borrowings under the facilities that finance RMF's loan originations and securitization activities were $162.1 million and $180.2 million as of November 30, 2017 and 2016, 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. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the loans held-for-sale to investors. Without the facilities, the Rialto segment would have to use cash from operations and other funding sources to finance its lending activities.

Investments in Unconsolidated Entities

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

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

															November 30, 2017				November 30, 2017				November 30, 2016
(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			$	41,860			58,116
Rialto Real Estate Fund II, LP	2012		1,305,000				1,305,000				100,000				100,000				86,904				96,192
Rialto Mezzanine Partners Fund, LP	2013		300,000				300,000				33,799				33,799				19,189				23,643
Rialto Capital CMBS Funds	2014		119,174				119,174				52,474				52,474				54,018				50,519
Rialto Real Estate Fund III	2015		1,887,000				569,482				140,000				40,104				41,223				9,093
Rialto Credit Partnership, LP	2016		220,000				159,886				19,999				14,534				13,288				5,794
Other investments																			8,936				2,384
																			$	265,418			245,741

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the years ended November 30, 2017, 2016 and 2015, Rialto received $7.3 million, $10.1 million and $20.0 million, respectively, of advance distributions with regard to Rialto's carried interests in its real estate funds in order to cover income tax obligations resulting from allocations of taxable income to Rialto's carried interests in these funds. In addition, during the year ended November 30, 2017, Rialto received $36.8 million of distributions with regard to its carried interest in its real estate funds. Rialto Real Estate Fund, LP. These incentive income distributions are not subject to clawbacks and therefore are included in Rialto's revenues.

During 2015, Rialto adopted a Carried Interest Incentive Plan (the "Plan"), under which participating employees in the aggregate may receive up to 40% of the equity units of a limited liability company (a "Carried Interest Entity") that is entitled to carried interest distributions made by a fund or other investment vehicle (a "Fund") managed by a subsidiary of Rialto. As such, those employees receiving equity units in a Carried Interest Entity may benefit from distributions made by a Fund to the extent the Carried Interest Entity makes distributions to its equity holders. The units issued to employees are equity awards and are subject to vesting schedules and forfeiture or repurchase provisions in the case of a termination of employment.

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

Balance Sheets
	November 30,
(In thousands)	2017				2016
Assets:
Cash and cash equivalents	$	95,552			230,229
Loans receivable	538,317				406,812
Real estate owned	348,601				439,191
Investment securities	1,849,795				1,379,155
Investments in partnerships	393,874				398,535
Other assets	42,949				29,036
	$	3,269,088			2,882,958
Liabilities and equity:
Accounts payable and other liabilities	$	48,374			36,131
Notes payable (1)	576,810				532,264
Equity	2,643,904				2,314,563
	$	3,269,088			2,882,958

(1)	Notes payable are net of debt issuance costs of $3.1 million and $2.9 million, as of November 30, 2017 and 2016, respectively.

Statements of Operations
	Years Ended November 30,
(In thousands)	2017				2016			2015
Revenues	$	238,981			200,346			170,921
Costs and expenses	104,343				96,343			97,162
Other income, net (1)	109,927				49,342			144,941
Net earnings of unconsolidated entities	$	244,565			153,345			218,700
Rialto equity in earnings from unconsolidated entities	$	25,447			18,961			22,293

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

Investments held-to-maturity

At November 30, 2017 and 2016, the carrying value of Rialto's commercial mortgage-backed securities ("CMBS") was $179.7 million and $71.3 million, respectively. These securities were purchased at discount rates ranging from 9% to 84% with coupon rates ranging from 1.3% to 5.0%, stated and assumed final distribution dates between November 2020 and October 2027, and stated maturity dates between November 2043 and March 2059. During 2017, Rialto purchased a 5% vertical strip in three separate CMBS transactions. A vertical interest is an equal interest in each class of securities issued in the securitization (e.g., 5.0% of each class) or a single vertical security entitling the holder to a specific percentage of the amounts paid on each class of those securities. As part of the Dodd-Frank Wall Street Reform and Protection Act that came into effect in December

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2016, originators that contribute loans to a CMBS trust are required to satisfy risk retention rules. Some risk retention rules permit the retention of risk by third parties, and the risk may be held by purchasing vertical, horizontal or other combined strips in a securitization.

The Rialto segment reviews changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on its CMBS. Based on management’s assessment, no impairment charges were recorded during any of the years ended November 30, 2017, 2016 and 2015. The Rialto segment classified these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.

10. 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)	2017				2016
Assets:
Cash and cash equivalents	$	8,676			6,600
Receivables (1)	69,678				58,929
Land under development	208,618				139,713
Investments in unconsolidated entities	407,544				318,559
Other assets	16,209				2,330
	$	710,725			526,131
Liabilities:
Accounts payable and other liabilities	$	149,715			117,973
	$	149,715			117,973

(1)	Receivables primarily related to general contractor services, net of deferrals and management fee income receivables due from unconsolidated entities as of November 30, 2017 and 2016.

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. 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 the Company's investment in the entities and would increase its share of funds the entities distribute after the achievement of certain thresholds. As of both November 30, 2017 and 2016, the fair value of the completion guarantees was immaterial. Additionally, as of November 30, 2017 and 2016, the Lennar Multifamily segment had $4.7 million and $32.0 million, respectively, of letters of credit outstanding primarily for credit enhancements for the bank debt of certain of its unconsolidated entities and deposits on land purchase contracts. These letters of credit outstanding are included in the disclosure in Note 7 related to the Company's performance and financial letters of credit. As of November 30, 2017 and 2016, the Lennar Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $896.7 million and $589.4 million, respectively.

In many instances, the Lennar Multifamily segment is appointed as the construction, development and property manager of certain of its Lennar Multifamily unconsolidated entities and receives fees for performing this function. During the years ended November 30, 2017, 2016 and 2015, the Lennar Multifamily segment received fee income, net of deferrals, from its unconsolidated entities of $53.8 million, $38.5 million and $27.2 million, respectively.

The Lennar Multifamily segment also provides general contractor services for construction of some of the rental properties owned by unconsolidated entities in which the Company has investments. During the years ended November 30, 2017, 2016 and 2015, the Lennar Multifamily segment provided general contractor services, net of deferrals, totaling $341.0 million, $237.1 million and $142.7 million, respectively, which were offset by costs related to those services of $330.4 million, $228.6 million and $138.6 million, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Lennar Multifamily Venture (the "Venture") is a long-term multifamily development investment vehicle involved in the development, construction and property management of class-A multifamily assets with $2.2 billion in equity commitments, including a $504 million co-investment commitment by Lennar comprised of cash, undeveloped land and preacquisition costs. During the year ended November 30, 2017, $586.4 million in equity commitments were called, of which the Company contributed its portion of $134.9 million. During the year ended November 30, 2017, the Company received $26.8 million distributions as a return of capital from the Venture. As of November 30, 2017, $1.5 billion of the $2.2 billion in equity commitments had been called, of which the Company has contributed $350.7 million representing its pro-rata portion of the called equity, resulting in a remaining equity commitment for the Company of $153.3 million. As of November 30, 2017 and 2016, the carrying value of the Company's investment in the Venture was $323.8 million and $198.2 million, respectively.

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)	2017				2016
Assets:
Cash and cash equivalents	$	37,073			43,658
Operating properties and equipment	2,952,070				2,210,627
Other assets	36,772				33,703
	$	3,025,915			2,287,988
Liabilities and equity:
Accounts payable and other liabilities	$	212,123			196,617
Notes payable (1)	879,047				577,085
Equity	1,934,745				1,514,286
	$	3,025,915			2,287,988

(1)	Notes payable are net of debt issuance costs of $17.6 million and $12.3 million, as of November 30, 2017 and 2016, respectively.

Statements of Operations
	Years Ended November 30,
(In thousands)	2017				2016			2015
Revenues	$	67,578			45,287			16,309
Costs and expenses	108,610				68,976			27,190
Other income, net	207,793				191,385			43,340
Net earnings of unconsolidated entities	$	166,761			167,696			32,459
Lennar Multifamily equity in earnings from unconsolidated entities (1)	$	85,739			85,519			19,518

(1)	During the year ended November 30, 2017, 2016 and 2015, the Lennar Multifamily segment sold seven, seven and two operating properties, respectively, through its unconsolidated entities resulting in the segment's $96.7 million, $91.0 million and $22.2 million share of gains, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Income Taxes

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

	Years Ended November 30,
(In thousands)	2017				2016			2015
Current:
Federal	$	(309,235	)		(300,116	)		(343,635	)
State	(17,572		)		(19,777	)		(52,420	)
	$	(326,807	)		(319,893	)		(396,055	)
Deferred:
Federal	$	(40,641	)		(43,775	)		12,872
State	(50,409		)		(53,710	)		(7,233	)
	(91,050		)		(97,485	)		5,639
	$	(417,857	)		(417,378	)		(390,416	)

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

	Percentage of Pretax Income
	2017			2016			2015
Statutory rate	35.00	%		35.00	%		35.00	%
State income taxes, net of federal income tax benefit	3.29			3.21			3.22
Domestic production activities deduction	(2.77	)		(2.78	)		(3.01	)
Tax reserves and interest expense	0.27			(0.89	)		2.64
Deferred tax asset valuation allowance	0.17			(0.01	)		(0.09	)
State net operating loss adjustment (1)	—			—			(3.00	)
Tax credits	(2.03	)		(3.46	)		(1.92	)
Other	0.09			0.33			(0.12	)
Effective rate	34.02	%		31.40	%		32.72	%

(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)	2017				2016
Deferred tax assets:
Inventory valuation adjustments	$	54,511			56,733
Reserves and accruals	164,868				198,270
Net operating loss carryforwards	100,338				92,362
Rialto investments in partnerships	15,705				11,352
Capitalized expenses	197,204				106,270
Investments in unconsolidated entities	38,627				42,796
Other assets	68,857				57,890
Total deferred tax assets	640,110				565,673
Valuation allowance	(6,423		)		(5,773	)
Total deferred tax assets after valuation allowance	633,687				559,900
Deferred tax liabilities:
Capitalized expenses	79,440				30,632
Deferred income	244,969				226,195
Other	11,583				25,675
Total deferred tax liabilities	335,992				282,502
Net deferred tax assets	$	297,695			277,398

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

	November 30,
(In thousands)	2017				2016
Net deferred tax assets (liabilities): (1)
Lennar Homebuilding	$	279,900			249,714
Rialto	21,944				26,547
Lennar Financial Services	(1,176		)		5,919
Lennar Multifamily	(2,973		)		(4,782	)
Net deferred tax assets	$	297,695			277,398

(1)	Net deferred tax assets and net deferred tax liabilities detailed above are included within other assets and other liabilities in the respective segments.

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, 2017 and 2016, the net deferred tax assets included a valuation allowance of $6.4 million and $5.8 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, 2016, the Company reversed $0.2 million, of valuation allowance primarily due to the utilization of state net operating losses. During the year ended November 30, 2017, the Company increased its valuation allowance against deferred tax assets relating to state net operating losses by $0.7 million.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At November 30, 2017 and 2016, the Company had federal tax effected NOL carryforwards totaling $34.1 million and $1.8 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, 2017 and 2016, the Company had state tax effected NOL carryforwards totaling $66.2 million and $90.6 million, respectively, that may be carried forward from 5 to 20 years, depending on the tax jurisdiction, with losses expiring between 2018 and 2036.

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

	Years Ended November 30,
(In thousands)	2017				2016			2015
Gross unrecognized tax benefits, beginning of year	$	12,285			12,285			7,257
Increase due to tax positions taken during prior period (1)	—				—			5,028
Gross unrecognized tax benefits, end of year	$	12,285			12,285			12,285

(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.

If the Company were to recognize its gross unrecognized tax benefits as of November 30, 2017, $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)	2017				2016
Accrued interest and penalties, beginning of the year	$	45,973			65,145
Accrual of interest and penalties (primarily related to federal and state audits)	4,184				3,251
Reduction of interest and penalties (1)	(434		)		(22,423	)
Accrued interest and penalties, end of the year	$	49,723			45,973

(1)	The Company's accrual for interest and penalties was reduced during the year ended November 30, 2016 primarily due to a settlement with the IRS.

The IRS is currently examining the Company’s federal income tax returns for fiscal year 2016, 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.

On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act. This Act will materially affect the taxes owed by the Company in 2018 and subsequent years. Among other things, it will reduce the maximum federal corporate income tax rate to 21%, which should have a positive effect on the Company's net earnings and earnings per share. It will also limit or eliminate certain deductions to which the Company has been entitled in past years and it will reduce the value of the Company's deferred tax assets, which will require the Company to recognize in the first quarter of fiscal year 2018 a charge against earnings for impairment of those assets of approximately $70 million.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12. Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

	Years Ended November 30,
(In thousands, except per share amounts)	2017				2016			2015
Numerator:
Net earnings attributable to Lennar	$	810,480			911,844			802,894
Less: distributed earnings allocated to nonvested shares	377				337			361
Less: undistributed earnings allocated to nonvested shares	7,447				8,852			8,371
Numerator for basic earnings per share	802,656				902,655			794,162
Less: net amount attributable to noncontrolling interests in Rialto's Carried Interest Incentive Plan (1)	1,009				1,028			4,120
Plus: interest on 3.25% convertible senior notes due 2021	—				5,528			7,928
Plus: undistributed earnings allocated to convertible shares	—				8,852			8,371
Less: undistributed earnings reallocated to convertible shares	—				8,438			7,528
Numerator for diluted earnings per share	$	801,647			907,569			798,813
Denominator:
Denominator for basic earnings per share - weighted average common shares outstanding (2)	237,155				223,079			209,847
Effect of dilutive securities:
Share-based payments	1				3			9
Convertible senior notes	—				12,288			25,614
Denominator for diluted earnings per share - weighted average common shares outstanding	237,156				235,370			235,470
Basic earnings per share (2)	$	3.38			4.05			3.78
Diluted earnings per share (2)	$	3.38			3.86			3.39

(1)	The amounts presented above relate to Rialto's Carried Interest Incentive Plan adopted in June 2015 (see Note 9) and represent the difference between the advanced tax distributions received by Rialto's subsidiary and the amount Lennar, as the parent company, is assumed to own.

(2)	The weighted average common shares for the periods presented have been retroactively adjusted to include 4.7 million of Class B shares distributed as part of the stock dividend on November 27, 2017. As a result, basic and diluted earnings per share have also been retroactively adjusted.

For the years ended November 30, 2017, 2016 and 2015, 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)

13. Capital Stock

Preferred Stock

The Company is authorized to issue 500,000 shares of preferred stock with a par value of $10 per share and 100 million shares of participating preferred stock with a par value of $0.10 per share. No shares of preferred stock or participating preferred stock have been issued as of November 30, 2017 and 2016.

Common Stock

During each of the years ended November 30, 2017, 2016 and 2015, 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.

On November 27, 2017, we paid a stock dividend of one share of Class B common stock for each 50 shares of Class A common stock or Class B common stock to holders of record at the close of business on November 10, 2017, as declared by the Company's Board of Directors on October 30, 2017.

As of November 30, 2017, Stuart 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 39% voting power of the Company’s stock.

The Company has a stock repurchase program adopted in 2001, which originally authorized the purchase of up to 20 million shares of its outstanding common stock. During the years ended November 30, 2017, 2016 and 2015, there were no share repurchases of common stock under the stock repurchase program. As of November 30, 2017, the remaining authorized shares that could be purchased under the stock repurchase program were 6.2 million shares of common stock.

During the years ended November 30, 2017 and 2016, treasury stock increased by 0.6 million shares and 0.1 million shares of Class A common stock, respectively, primarily due to activity related to the Company's equity compensation plan.

Restrictions on Payment of Dividends

There are no restrictions on the payment of dividends on common stock by the Company. There are no agreements which restrict the payment of dividends by subsidiaries of the Company other than (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, 2017, 2016 and 2015, this amount was $17.2 million, $15.7 million and $13.5 million, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14. Share-Based Payments

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

	Years ended November 30,
(In thousands)	2017				2016			2015
Nonvested shares	$	61,356			55,516			43,742
Stock options (1)	—				—			131
Total compensation expense for share-based awards	$	61,356			55,516			43,873

(1)	Stock options expense relates to stock option awards granted to Lennar's non-employee directors for the year ended November 30, 2015. 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, 2017, 2016 and 2015 there was $2.0 million, $7.0 million, and $0.1 million, respectively, of excess tax benefits from share-based awards primarily related to nonvested shares.

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, 2017, 2016 and 2015 was $51.92, $45.10 and $49.01, respectively. A summary of the Company’s nonvested shares activity for the year ended November 30, 2017, adjusted for the Class B stock dividend, was as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested shares at November 30, 2016 (1)	2,328,614			$	45.95
Grants	1,348,065			$	51.92
Vested	(1,227,865	)		$	45.88
Forfeited	(48,948	)		$	46.45
Nonvested shares at November 30, 2017	2,399,866			$	49.33

(1)	Nonvested shares and weighted average fair value at November 30, 2016 have been adjusted to reflect the Class B shares issued as a part of the stock dividend on November 27, 2017.

At November 30, 2017, there was $79.2 million of unrecognized compensation expense related to unvested share-based awards granted under the Company’s share-based payment plan, all of which relates to nonvested shares with a weighted average remaining contractual life of 2.0 years. For the years ended November 30, 2017, 2016 and 2015, 1.2 million, 1.1 million and 1.2 million nonvested shares, respectively, were vested each year.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15. Financial Instruments and Fair Value Disclosures

The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at November 30, 2017 and 2016, 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,
			2017							2016
	Fair Value		Carrying				Fair			Carrying			Fair
(In thousands)	Hierarchy		Amount				Value			Amount			Value
ASSETS
Rialto:
Loans receivable, net	Level 3		$	1,933			1,933			111,608			113,747
Investments held-to-maturity	Level 3		$	179,659			199,190			71,260			69,992
Lennar Financial Services:
Loans held-for-investment, net	Level 3		$	44,193			41,795			30,004			31,233
Investments held-to-maturity	Level 2		$	52,327			52,189			41,991			42,058
LIABILITIES
Lennar Homebuilding senior notes and other debts payable	Level 2		$	6,410,003			6,598,848			4,575,977			4,669,643
Rialto notes and other debts payable	Level 2		$	625,081			644,644			622,335			646,366
Lennar Financial Services notes and other debts payable	Level 2		$	937,431			937,431			1,077,228			1,077,228

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 quoted interest rates and for the warehouse repurchase financing agreements fair values approximate their carrying value due to their short-term maturities.

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

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

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, 2017				Fair Value at November 30, 2016
Rialto Financial Assets:
RMF loans held-for-sale (1)	Level 3		$	234,403			126,947
Credit default swaps (2)	Level 2		$	995			2,863
Lennar Financial Services Assets:
Loans held-for-sale (3)	Level 2		$	937,516			939,405
Investments available-for-sale	Level 1		$	57,439			53,570
Mortgage loan commitments	Level 2		$	9,873			7,437
Forward contracts	Level 2		$	1,681			26,467
Mortgage servicing rights	Level 3		$	31,163			23,930

(1)	The aggregate fair value of Rialto loans held-for-sale of $234.4 million at November 30, 2017 were below their aggregate principal balance of $235.4 million by $1.0 million. The aggregate fair value of Rialto loans held-for-sale of $126.9 million at November 30, 2016 were below their aggregate principal balance of $127.8 million by $0.9 million.

(2)	Rialto's credit default swaps are included within Rialto's other assets.

(3)	The aggregate fair value of Lennar Financial Services loans held-for-sale of $937.5 million at November 30, 2017 exceeds their aggregate principal balance of $908.8 million by $28.7 million. The aggregate fair value of Lennar Financial Services loans held-for-sale of $939.4 million at November 30, 2016 exceeds their aggregate principal balance of $931.0 million by $8.4 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:

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 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 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, 2017 and 2016. 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

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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, 2017 and November 30, 2016.

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, 2017, the segment had open commitments amounting to $1.1 billion to sell MBS with varying settlement dates through February 2018.

Lennar Financial Services mortgage servicing rights — Lennar Financial Services records the value of 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, 2017, the key assumptions used in determining the fair value include a 13.1% mortgage prepayment rate, a 12.3% discount rate and a 9.9% delinquency rate. The fair value of mortgage servicing rights is included in the Lennar Financial Services segment's other assets.

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

	Years Ended November 30,
(In thousands)	2017				2016			2015
Changes in fair value included in Lennar Financial Services revenues:
Loans held-for-sale	$	20,309			(19,865	)		(4,137	)
Mortgage loan commitments	$	2,436			(5,623	)		373
Forward contracts	$	(24,786	)		25,936			8,107
Investments available-for-sale	$	(12	)		53			26
Changes in fair value included in Rialto revenues:
Credit default swaps	$	(2,367	)		(2,063	)		477
Changes in fair value included in other comprehensive income (loss), net of tax:
Lennar Financial Services investments available-for-sale	$	1,331			(295	)		(65	)

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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

	Years Ended November 30,
	2017							2016
	Lennar Financial Services				Rialto			Lennar Financial Services			Rialto
(In thousands)	Mortgage servicing rights				RMF loans held-for-sale			Mortgage servicing rights			RMF loans held-for-sale
Beginning of year	$	23,930			126,947			16,770			316,275
Purchases/loan originations	10,479				1,583,876			9,195			1,696,188
Sales/loan originations sold, including those not settled	—				(1,474,714	)		—			(1,881,682	)
Disposals/settlements	(3,912		)		—			(4,063	)		—
Changes in fair value (1)	666				(301	)		2,028			(1,759	)
Interest and principal paydowns	—				(1,405	)		—			(2,075	)
End of year	$	31,163			234,403			23,930			126,947

(1)	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 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,
			2017										2016									2015
(In thousands)	Fair Value Hierarchy		Carrying Value				Fair Value			Total Gains (Losses) (1)			Carrying Value			Fair Value			Total Gains (Losses) (1)			Carrying Value			Fair Value			Total Gains (Losses) (1)
Financial assets
Rialto:
Impaired loans receivable	Level 3		$	31,561			18,885			(12,676	)		79,581			61,352			(18,229	)		127,319			116,956			(10,363	)
FDIC Portfolios loans held-for-sale	Level 3		32,018				12,072			(19,946	)		—			—			—			—			—			—
Non-financial assets
Lennar Homebuilding:
Finished homes and construction in progress (2)	Level 3		$	8,601			4,227			(4,374	)		—			—			—			59,913			47,898			(12,015	)
Land and land under development (2)	Level 3		$	6,771			3,094			(3,677	)		29,418			22,925			(6,493	)		32,500			20,033			(12,467	)
Rialto:
REO, net (3)
Upon acquisition/transfer	Level 3		$	27,640			26,591			(1,049	)		53,154			54,443			1,289			59,829			58,517			(1,312	)
Upon management periodic valuations	Level 3		$	145,251			81,677			(63,574	)		105,830			81,454			(24,376	)		44,796			32,430			(12,366	)

(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, 2017, 2016 and 2015.

(2)	Valuation adjustments were included in Lennar Homebuilding costs and expenses in the Company's consolidated statement of operations for the year ended November 30, 2017, 2016 and 2015.

(3)

REO held-for-sale assets are initially recorded at fair value less estimated costs to sell at the time of the transfer or acquisition through, or in lieu of, loan foreclosure. The fair value of REO held-for-sale is based upon appraised value at the time of foreclosure or management's best estimate. In addition, management periodically performs valuations of its REO held-for-sale. The gains (losses) upon the transfer or acquisition of REO and impairments were included in Rialto other income (expense), net, in the Company’s consolidated statement of operations for the years ended November 30, 2017, 2016 and 2015.

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

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. 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, 2017. Based on the Company’s evaluation, during the year ended November 30, 2017, the Company consolidated an entity that had total combined assets of $48.7 million and liabilities of $1.5 million. During the year ended November 30, 2017, there were no VIEs that were deconsolidated.

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

	November 30,
(In thousands)	2017				2016
Lennar Homebuilding	$	900,769			811,723
Rialto	$	265,418			245,741
Lennar Multifamily	$	407,544			318,559

Consolidated VIEs

As of November 30, 2017, the carrying amount of the VIEs’ assets and non-recourse liabilities that consolidated was $799.4 million and $389.7 million, respectively. As of November 30, 2016, the carrying amount of the VIEs’ assets and non-recourse liabilities that consolidated was $536.3 million and $126.4 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. 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, 2017 and 2016, the Company’s recorded investments in VIEs that are unconsolidated and its estimated maximum exposure to loss were as follows:

November 30, 2017
(In thousands)	Investments in Unconsolidated VIEs				Lennar’s Maximum Exposure to Loss
Lennar Homebuilding (1)	$	181,804			248,909
Rialto (2)	179,659				179,659
Lennar Multifamily (3)	345,175				503,364
	$	706,638			931,932

November 30, 2016
(In thousands)	Investments in Unconsolidated VIEs				Lennar’s Maximum Exposure to Loss
Lennar Homebuilding (1)	$	120,940			164,804
Rialto (2)	71,260				71,260
Lennar Multifamily (3)	240,928				549,093
	$	433,128			785,157

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(1)	At both November 30, 2017 and 2016, 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 repayment guarantees of unconsolidated entities' debt of $61.6 million and $43.4 million, respectively.

(2)	At both November 30, 2017 and 2016, the maximum recourse exposure to loss of Rialto’s investments in unconsolidated VIEs was limited to its investments in the unconsolidated entities VIEs. At November 30, 2017 and 2016, investments in unconsolidated VIEs and Lennar’s maximum exposure to loss included $179.7 million and $71.3 million, respectively, related to Rialto’s investments held-to-maturity.

(3)

As of November 30, 2017 and 2016, the remaining equity commitment of $153.3 million and $288.2 million, respectively, to fund the Venture for future expenditures related to the construction and development of its projects was included in Lennar's maximum exposure to loss. In addition, at November 30, 2017 and 2016, the maximum exposure to loss of Lennar Multifamily's investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs, except with regard to $4.6 million and $19.7 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.

As of November 30, 2017, the Company and other partners do not generally have an obligation to make capital contributions to the VIEs, except for $153.3 million remaining equity commitment to fund the Venture for future expenditures related to the construction and development of the projects and $4.6 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 $61.6 million repayment guarantees of two unconsolidated entities' debt. 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, 2017, consolidated inventory not owned increased by $272.3 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2017. The increase was primarily related to a transaction in which one of the Company’s unconsolidated entities sold 475 homesites to a third-party land bank and simultaneous with the purchase by the land bank, the Company entered into an option contract to purchase all 475 homesites from the land bank. The Company consolidated the option contract with the land bank due to an amount that the Company would have to pay if the Company defaults under the option contract. The consolidation resulted in a $320.1 million increase in consolidated inventory not owned and liabilities related to consolidated not owned. The increase from the land bank transaction was partially offset by the Company exercising its option to acquire land under previously consolidated contracts. To reflect the purchase price of the inventory consolidated, the Company had a net reclass related to option deposits from land under development to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2017. 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 $137.0 million and $85.0 million at November 30, 2017 and 2016, respectively. Additionally, the Company had posted $51.8 million and $45.1 million of letters of credit in lieu of cash deposits under certain land and option contracts as of November 30, 2017 and 2016, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

17. Commitments and Contingent Liabilities

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

The Company does not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on its business or financial position. However, the financial effect of litigation concerning purchases and sales of property may depend upon the value of the subject property, which may have changed from the time the agreement for purchase or sale was entered into.

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, 2017, the Company had $137.0 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 was in litigation since 2008 in the United States District Court for the District of Maryland regarding whether the Company was 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 during the downturn, 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 believed the decision was contrary to applicable law and appealed the decision.

On March 23, 2017, the United States Court of Appeals for the Fourth Circuit held oral argument in the appeal. Following oral argument, the Company concluded that it was appropriate to establish an accrual of $140 million for the litigation. The accrual represented the expected liability associated with the litigation, and did not include the Company’s estimate of the fair value of the property. On April 12, 2017, the United States Court of Appeals for the Fourth Circuit issued a decision upholding the lower court’s decision. The Company subsequently purchased the property for $114 million, which approximated the Company's estimate of the fair value of the property, and paid approximately $124 million in interest and other closing costs. The Company previously accrued for the amount it expected to pay as reimbursement for attorney’s fees.

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, 2017 were as follows:

(In thousands)	Lease Payments
2018	$	37,891
2019	35,403
2020	27,669
2021	21,091
2022	10,320
Thereafter	12,461

Rental expense for the years ended November 30, 2017, 2016 and 2015 was $74.6 million, $63.2 million and $55.9 million, respectively.

The Company is committed, under various letters of credit, to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit under these arrangements totaled $511.8 million at November 30, 2017. Additionally, at November 30, 2017, the Company had outstanding surety bonds of $1.3 billion including performance surety bonds related to site improvements at various projects(including certain projects in the Company’s joint ventures) and financial surety bonds. Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all development and construction activities are completed. As of November 30, 2017, there were approximately $570.4 million, or 44%, of anticipated future

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

18. Supplemental Financial Information

The indentures governing the Company’s 6.95% senior notes due 2018, 4.125% senior notes due 2018, 4.500% senior notes due 2019, 4.50% senior notes due 2019, 2.95% senior notes due 2020, 4.750% senior notes due 2021, 4.125% senior notes due 2022, 4.750% senior notes due 2022, 4.875% senior notes due 2023, 4.500% senior notes due 2024, 4.750% senior notes due 2025 and 4.75% senior notes due 2027 require that, if any of the Company’s 100% owned subsidiaries, other than its finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least $75 million principal amount of debt of Lennar Corporation, those subsidiaries must also guarantee Lennar Corporation’s obligations with regard to its senior notes. 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, 2017 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, described in Note 7. 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 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, 2017 was as follows:

Consolidating Balance Sheet November 30, 2017
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
ASSETS
Lennar Homebuilding:
Cash and cash equivalents, restricted cash and receivables, net	$	1,945,024			462,336			21,972			—			2,429,332
Inventories	—				10,560,996			299,894			—			10,860,890
Investments in unconsolidated entities	—				884,294			16,475			—			900,769
Goodwill	—				136,566			—			—			136,566
Other assets	246,490				520,899			114,431			(18,416	)		863,404
Investments in subsidiaries	4,446,309				52,237			—			(4,498,546	)		—
Intercompany	7,881,306				—			—			(7,881,306	)		—
	14,519,129				12,617,328			452,772			(12,398,268	)		15,190,961
Lennar Financial Services	—				130,184			1,561,525			(2,201	)		1,689,508
Rialto	—				—			1,153,840			—			1,153,840
Lennar Multifamily	—				—			710,725			—			710,725
Total assets	$	14,519,129			12,747,512			3,878,862			(12,400,469	)		18,745,034
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable and other liabilities	$	635,227			1,011,051			294,933			(20,617	)		1,920,594
Liabilities related to consolidated inventory not owned	—				367,220			13,500			—			380,720
Senior notes and other debts payable	6,011,585				394,365			4,053			—			6,410,003
Intercompany	—				6,775,719			1,105,587			(7,881,306	)		—
	6,646,812				8,548,355			1,418,073			(7,901,923	)		8,711,317
Lennar Financial Services	—				48,700			1,129,114			—			1,177,814
Rialto	—				—			720,056			—			720,056
Lennar Multifamily	—				—			149,715			—			149,715
Total liabilities	$	6,646,812			8,597,055			3,416,958			(7,901,923	)		10,758,902
Stockholders’ equity	7,872,317				4,150,457			348,089			(4,498,546	)		7,872,317
Noncontrolling interests	—				—			113,815			—			113,815
Total equity	7,872,317				4,150,457			461,904			(4,498,546	)		7,986,132
Total liabilities and equity	$	14,519,129			12,747,512			3,878,862			(12,400,469	)		18,745,034

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Balance Sheet November 30, 2016
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
ASSETS
Lennar Homebuilding:
Cash and cash equivalents, restricted cash and receivables, net	$	705,126			436,090			21,875			—			1,163,091
Inventories	—				8,901,874			277,052			—			9,178,926
Investments in unconsolidated entities	—				793,840			17,883			—			811,723
Other assets	227,267				346,865			84,224			(7,328	)		651,028
Investments in subsidiaries	3,918,687				130,878			—			(4,049,565	)		—
Intercompany	7,017,962				—			—			(7,017,962	)		—
	11,869,042				10,609,547			401,034			(11,074,855	)		11,804,768
Lennar Financial Services loans held-for-sale	—				—			939,405			—			939,405
Lennar Financial Services all other assets	—				103,000			715,758			(3,491	)		815,267
Rialto	—				—			1,276,210			—			1,276,210
Lennar Multifamily	—				—			526,131			—			526,131
Total assets	$	11,869,042			10,712,547			3,858,538			(11,078,346	)		15,361,781
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable and other liabilities	$	473,103			778,249			79,462			(10,819	)		1,319,995
Liabilities related to consolidated inventory not owned	—				13,582			96,424			—			110,006
Senior notes and other debts payable	4,369,897				203,572			2,508			—			4,575,977
Intercompany	—				6,071,778			946,184			(7,017,962	)		—
	4,843,000				7,067,181			1,124,578			(7,028,781	)		6,005,978
Lennar Financial Services	—				38,530			1,279,753			—			1,318,283
Rialto	—				—			707,980			—			707,980
Lennar Multifamily	—				—			117,973			—			117,973
Total liabilities	$	4,843,000			7,105,711			3,230,284			(7,028,781	)		8,150,214
Stockholders’ equity	7,026,042				3,606,836			442,729			(4,049,565	)		7,026,042
Noncontrolling interests	—				—			185,525			—			185,525
Total equity	7,026,042				3,606,836			628,254			(4,049,565	)		7,211,567
Total liabilities and equity	$	11,869,042			10,712,547			3,858,538			(11,078,346	)		15,361,781

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Operations and Comprehensive Income Year Ended November 30, 2017
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues:
Lennar Homebuilding	$	—			11,118,553			81,689			—			11,200,242
Lennar Financial Services	—				307,892			482,227			(20,010	)		770,109
Rialto	—				—			281,243			—			281,243
Lennar Multifamily	—				—			394,906			(135	)		394,771
Total revenues	—				11,426,445			1,240,065			(20,145	)		12,646,365
Cost and expenses:
Lennar Homebuilding	—				9,676,548			79,338			(3,617	)		9,752,269
Lennar Financial Services	—				280,349			355,147			(20,911	)		614,585
Rialto	—				—			247,762			(213	)		247,549
Lennar Multifamily	—				—			407,078			—			407,078
Corporate general and administrative	279,490				1,338			—			5,061			285,889
Total costs and expenses	279,490				9,958,235			1,089,325			(19,680	)		11,307,370
Lennar Homebuilding equity in loss from unconsolidated entities	—				(61,400	)		(308	)		—			(61,708	)
Lennar Homebuilding other income (expense), net	(427		)		17,488			5,248			465			22,774
Lennar Homebuilding loss due to litigation	—				(140,000	)		—			—			(140,000	)
Rialto equity in earnings from unconsolidated entities	—				—			25,447			—			25,447
Rialto other expense, net	—				—			(81,636	)		—			(81,636	)
Lennar Multifamily equity in earnings from unconsolidated entities	—				—			85,739			—			85,739
Earnings (loss) before income taxes	(279,917		)		1,284,298			185,230			—			1,189,611
Benefit (provision) for income taxes	95,228				(427,961	)		(85,124	)		—			(417,857	)
Equity in earnings from subsidiaries	995,169				72,104			—			(1,067,273	)		—
Net earnings (including net loss attributable to noncontrolling interests)	810,480				928,441			100,106			(1,067,273	)		771,754
Less: Net loss attributable to noncontrolling interests	—				—			(38,726	)		—			(38,726	)
Net earnings attributable to Lennar	$	810,480			928,441			138,832			(1,067,273	)		810,480
Other comprehensive income, net of tax:
Net unrealized gains on securities available-for-sale	$	—			—			1,331			—			1,331
Reclassification adjustments for losses included in net earnings, net of tax	—				—			12			—			12
Total other comprehensive income, net of tax	—				—			1,343			—			1,343
Total comprehensive income attributable to Lennar	$	810,480			928,441			140,175			(1,067,273	)		811,823
Total comprehensive loss attributable to noncontrolling interests	$	—			—			(38,726	)		—			(38,726	)

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Operations and Comprehensive Income (Loss) Year Ended November 30, 2016
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues:
Lennar Homebuilding	$	—			9,731,122			10,215			—			9,741,337
Lennar Financial Services	—				215,737			491,536			(20,018	)		687,255
Rialto	—				—			233,966			—			233,966
Lennar Multifamily	—				—			287,527			(86	)		287,441
Total revenues	—				9,946,859			1,023,244			(20,104	)		10,949,999
Cost and expenses:
Lennar Homebuilding	—				8,389,469			23,424			(13,012	)		8,399,881
Lennar Financial Services	—				192,572			340,463			(9,397	)		523,638
Rialto	—				—			230,565			(796	)		229,769
Lennar Multifamily	—				—			301,786			—			301,786
Corporate general and administrative	226,482				1,019			—			5,061			232,562
Total costs and expenses	226,482				8,583,060			896,238			(18,144	)		9,687,636
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	—				(49,662	)		387			—			(49,275	)
Lennar Homebuilding other income (expense), net	(1,922		)		49,976			2,737			1,960			52,751
Rialto equity in earnings from unconsolidated entities	—				—			18,961			—			18,961
Rialto other expense, net	—				—			(39,850	)		—			(39,850	)
Lennar Multifamily equity in earnings from unconsolidated entities	—				—			85,519			—			85,519
Earnings (loss) before income taxes	(228,404		)		1,364,113			194,760			—			1,330,469
Benefit (provision) for income taxes	71,719				(419,596	)		(69,501	)		—			(417,378	)
Equity in earnings from subsidiaries	1,068,529				63,278			—			(1,131,807	)		—
Net earnings (including net earnings attributable to noncontrolling interests)	911,844				1,007,795			125,259			(1,131,807	)		913,091
Less: Net earnings attributable to noncontrolling interests	—				—			1,247			—			1,247
Net earnings attributable to Lennar	$	911,844			1,007,795			124,012			(1,131,807	)		911,844
Other comprehensive loss, net of tax:
Net unrealized loss on securities available-for-sale	$	—			—			(295	)		—			(295	)
Reclassification adjustments for gains included in net earnings, net of tax	$	—			—			(53	)		—			(53	)
Total other comprehensive loss, net of tax	—				—			(348	)		—			(348	)
Total comprehensive income attributable to Lennar	$	911,844			1,007,795			123,664			(1,131,807	)		911,496
Total comprehensive income attributable to noncontrolling interests	$	—			—			1,247			—			1,247

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	(6,918		)		(7,551	)		17,660			2,971			6,162
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 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	$	—			—			(26	)		—			(26	)
Total other comprehensive loss, net of tax	—				—			(91	)		—			(91	)
Total comprehensive income attributable to Lennar	$	802,894			929,070			71,885			(1,001,046	)		802,803
Total comprehensive income attributable to noncontrolling interests	$	—			—			16,306			—			16,306

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows Year Ended November 30, 2017
(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)	$	810,480			928,441			100,106			(1,067,273	)		771,754
Distributions of earnings from guarantor and non-guarantor subsidiaries	995,169				72,104			—			(1,067,273	)		—
Other adjustments to reconcile net earnings (including net loss attributable to noncontrolling interests) to net cash provided by operating activities	(739,947		)		(246,983	)		144,767			1,067,273			225,110
Net cash provided by operating activities	1,065,702				753,562			244,873			(1,067,273	)		996,864
Cash flows from investing activities:
Proceeds from sale of operating properties	—				60,326			—			—			60,326
Investments in and contributions to unconsolidated entities, net of distributions of capital	—				(181,101	)		(41,876	)		—			(222,977	)
Proceeds from sales of real estate owned	—				—			86,565			—			86,565
Receipts of principal payments on loans held-for-sale	—				—			11,251			—			11,251
Originations of loans receivable	—				—			(98,375	)		—			(98,375	)
Purchases of commercial mortgage-backed securities bonds	—				—			(107,262	)		—			(107,262	)
Acquisition, net of cash acquired	(611,103		)		—			—			—			(611,103	)
Other	(35,251		)		(49,356	)		96,365			—			11,758
Distributions of capital from guarantor and non-guarantor subsidiaries	115,000				80,000			—			(195,000	)		—
Intercompany	(865,364		)		—			—			865,364			—
Net cash used in investing activities	(1,396,718		)		(90,131	)		(53,332	)		670,364			(869,817	)
Cash flows from financing activities:
Net repayments under warehouse facilities	—				(104	)		(199,580	)		—			(199,684	)
Proceeds from senior notes and debt issuance costs	2,433,539				—			(12,129	)		—			2,421,410
Redemption of senior notes	(800,000		)		(258,595	)		—			—			(1,058,595	)
Net proceeds on Rialto notes payable	—				—			74,666			—			74,666
Net proceeds on other borrowings	—				(104,471	)		(4,024	)		—			(108,495	)
Proceeds on other liabilities	—				—			195,541			—			195,541
Net payments related to noncontrolling interests	—				—			(68,586	)		—			(68,586	)
Excess tax benefits from share-based awards	1,981				—			—			—			1,981
Common stock:
Issuances	720				—			—			—			720
Repurchases	(27,054		)		—			—			—			(27,054	)
Dividends	(37,608		)		(1,018,441	)		(243,832	)		1,262,273			(37,608	)
Intercompany	—				700,197			165,167			(865,364	)		—
Net cash provided by (used in) financing activities	1,571,578				(681,414	)		(92,777	)		396,909			1,194,296
Net increase (decrease) in cash and cash equivalents	1,240,562				(17,983	)		98,764			—			1,321,343
Cash and cash equivalents at beginning of period	697,112				377,070			255,347			—			1,329,529
Cash and cash equivalents at end of period	$	1,937,674			359,087			354,111			—			2,650,872

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows Year Ended November 30, 2016
(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)	$	911,844			1,007,795			125,259			(1,131,807	)		913,091
Distributions of earnings from guarantor and non-guarantor subsidiaries	1,068,529				63,278			—			(1,131,807	)		—
Other adjustments to reconcile net earnings (including net earnings attributable to noncontrolling interests) to net cash provided by (used in) operating activities	(1,083,418		)		(231,877	)		(221,799	)		1,131,807			(405,287	)
Net cash provided by (used in) operating activities	896,955				839,196			(96,540	)		(1,131,807	)		507,804
Cash flows from investing activities:
Proceeds from sale of operating properties	—				25,288			—			—			25,288
(Investments in and contributions to) and distributions of capital from unconsolidated entities, net	—				(139,533	)		36,962			—			(102,571	)
Proceeds from sales of real estate owned	—				—			97,871			—			97,871
Receipts of principal payments on loans receivable and other	—				—			84,433			—			84,433
Originations of loans receivable	—				—			(56,507	)		—			(56,507	)
Purchases of commercial mortgage-backed securities bonds	—				—			(42,436	)		—			(42,436	)
Other	(11,709		)		(56,627	)		(23,579	)		—			(91,915	)
Distributions of capital from guarantor and non-guarantor subsidiaries	40,000				34,000			—			(74,000	)		—
Intercompany	(787,185		)		—			—			787,185			—
Net cash provided by (used in) investing activities	(758,894		)		(136,872	)		96,744			713,185			(85,837	)
Cash flows from financing activities:
Net borrowings under warehouse facilities	—				116			107,349			—			107,465
Proceeds from senior notes and debt issuance costs	495,974				—			(1,690	)					494,284
Redemption of senior notes	(250,000		)		—			—			—			(250,000	)
Conversions and exchanges of convertible senior notes	(234,028		)		—			—			—			(234,028	)
Principal payments on Rialto notes payable including structured notes	—				—			(39,026	)		—			(39,026	)
Net payments on other borrowings	—				(165,463	)		(8,342	)		—			(173,805	)
Net payments related to noncontrolling interests	—				—			(127,057	)		—			(127,057	)
Excess tax benefits from share-based awards	7,039				—			—			—			7,039
Common stock:
Issuances	19,471				—			—			—			19,471
Repurchases	(19,902		)		—			—			—			(19,902	)
Dividends	(35,324		)		(1,047,795	)		(158,012	)		1,205,807			(35,324	)
Intercompany	—				551,840			235,345			(787,185	)		—
Net cash provided by (used in) financing activities	(16,770		)		(661,302	)		8,567			418,622			(250,883	)
Net increase in cash and cash equivalents	121,291				41,022			8,771			—			171,084
Cash and cash equivalents at beginning of period	575,821				336,048			246,576			—			1,158,445
Cash and cash equivalents at end of period	$	697,112			377,070			255,347			—			1,329,529

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:
Proceeds from sale of operating properties	—				73,732			—			—			73,732
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 and other	—				—			28,389			—			28,389
Origination of Rialto 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	(500,000		)		—			—			—			(500,000	)
Conversion and exchanges of convertible senior notes	(212,107		)		—			—			—			(212,107	)
Principal payments on Rialto notes payable including structured notes	—				—			(58,923	)		—			(58,923	)
Net payments 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)

19. Quarterly Data (unaudited)

	First				Second			Third			Fourth
(In thousands, except per share amounts)
2017
Revenues	$	2,337,428			3,261,892			3,261,476			3,785,569
Gross profit from sales of homes	$	419,165			616,875			650,411			747,502
Earnings before income taxes	$	49,643			309,600			368,385			461,983
Net earnings attributable to Lennar	$	38,080			213,645			249,165			309,590
Earnings per share:
Basic (1)	$	0.16			0.89			1.04			1.29
Diluted (1)	$	0.16			0.89			1.04			1.29
2016
Revenues	$	1,993,664			2,745,815			2,833,894			3,376,626
Gross profit from sales of homes	$	398,946			561,523			551,676			683,519
Earnings before income taxes	$	201,693			327,839			339,558			461,379
Net earnings attributable to Lennar	$	144,080			218,469			235,842			313,453
Earnings per share:
Basic (1)	$	0.66			0.99			1.02			1.34
Diluted (1)	$	0.62			0.93			0.99			1.31

(1)	Basic and diluted earnings per share calculations have been retroactively adjusted in each of the periods presented to reflect the 4.7 million Class B shares distributed as a part of the stock dividend on November 27, 2017.

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.