Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Lennar Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lennar Corporation and subsidiaries (the "Company") as of November 30, 2018 and 2017, 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, 2018, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2018, 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) (PCAOB), the Company's internal control over financial reporting as of November 30, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 28, 2019, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Miami, Florida

January 28, 2019

We have served as the Company's auditor since 1994.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2018 and 2017

	2018 (1)				2017 (1)
	(Dollars in thousands)
ASSETS
Lennar Homebuilding:
Cash and cash equivalents	$	1,337,807			2,282,925
Restricted cash	12,399				8,740
Receivables, net	236,841				137,667
Inventories:
Finished homes and construction in progress	8,681,357				4,676,279
Land and land under development	8,178,388				5,791,338
Consolidated inventory not owned	208,959				393,273
Total inventories	17,068,704				10,860,890
Investments in unconsolidated entities	996,926				900,769
Goodwill	3,442,359				136,566
Other assets	1,355,782				863,404
	24,450,818				15,190,961
Lennar Financial Services	2,346,899				1,689,508
Lennar Multifamily	874,219				710,725
Rialto	894,245				1,153,840
Total assets	$	28,566,181			18,745,034

(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, 2018, total assets include $666.2 million related to consolidated VIEs of which $57.6 million is included in Lennar Homebuilding cash and cash equivalents, $0.2 million in Lennar Homebuilding receivables, net, $81.7 million in Lennar Homebuilding finished homes and construction in progress, $293.1 million in Lennar Homebuilding land and land under development, $209.0 million in Lennar Homebuilding consolidated inventory not owned, $3.8 million in Lennar Homebuilding investments in unconsolidated entities, $10.5 million in Lennar Homebuilding other assets and $10.3 million in Rialto assets.

As of November 30, 2017, total assets include $799.4 million related to consolidated VIEs of which $15.8 million is included in Lennar Homebuilding cash and cash equivalents, $0.2 million in Lennar Homebuilding receivables, net, $53.2 million in Lennar Homebuilding finished homes and construction in progress, $229.0 million in Lennar Homebuilding land and land under development, $393.3 million in Lennar Homebuilding consolidated inventory not owned, $4.6 million in Lennar Homebuilding investments in unconsolidated entities, $11.8 million in Lennar Homebuilding other assets, $42.7 million in Lennar Multifamily assets and $48.8 million in Rialto assets.

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2018 and 2017

	2018 (2)				2017 (2)
	(Dollars in thousands, except shares and per share amounts)
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable	$	1,154,782			604,953
Liabilities related to consolidated inventory not owned	175,590				380,720
Senior notes and other debts payable	8,543,868				6,410,003
Other liabilities	1,902,658				1,315,641
	11,776,898				8,711,317
Lennar Financial Services	1,537,760				1,177,814
Lennar Multifamily	170,616				149,715
Rialto	397,950				720,056
Total liabilities	13,883,224				10,758,902
Stockholders’ equity:
Preferred stock	—				—
Class A common stock of $0.10 par value per share; Authorized: 2018 - 400,000,000 shares; 2017 - 300,000,000 shares; Issued: 2018 - 294,992,562 shares; 2017 - 205,429,942 shares	29,499				20,543
Class B common stock of $0.10 par value per share; Authorized: 2018 and 2017 - 90,000,000 shares, Issued: 2018 - 39,442,219 shares; 2017 - 37,687,505 shares	3,944				3,769
Additional paid-in capital	8,496,677				3,142,013
Retained earnings	6,487,650				4,840,978
Treasury stock, at cost; 2018 - 8,498,203 shares of Class A common stock and 1,698,424 shares of Class B common stock; 2017 - 1,473,590 shares of Class A common stock and 1,679,650 shares of Class B common stock	(435,869		)		(136,020	)
Accumulated other comprehensive income (loss)	(366		)		1,034
Total stockholders’ equity	14,581,535				7,872,317
Noncontrolling interests	101,422				113,815
Total equity	14,682,957				7,986,132
Total liabilities and equity	$	28,566,181			18,745,034

(2)

As of November 30, 2018, total liabilities include $242.5 million related to consolidated VIEs as to which there was no recourse against the Company, of which $11.4 million is included in Lennar Homebuilding accounts payable, $51.9 million in Lennar Homebuilding senior notes and other debts payable, $175.6 million in Lennar Homebuilding liabilities related to consolidated inventory not owned, $2.6 million in Lennar Homebuilding other liabilities and $1.0 million in Rialto liabilities.

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, $2.2 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, 2018**,** 2017 and 2016

	2018				2017			2016
	(Dollars in thousands, except per share amounts)
Revenues:
Lennar Homebuilding	$	19,077,597			11,200,242			9,741,337
Lennar Financial Services	867,831				770,109			687,255
Lennar Multifamily	421,132				394,771			287,441
Rialto	205,071				281,243			233,966
Total revenues	20,571,631				12,646,365			10,949,999
Costs and expenses:
Lennar Homebuilding	16,936,873				9,752,269			8,399,881
Lennar Financial Services	680,401				614,585			523,638
Lennar Multifamily	429,759				407,078			301,786
Rialto	190,413				247,549			229,769
Acquisition and integration costs related to CalAtlantic	152,980				—			—
Corporate general and administrative	343,934				285,889			232,562
Total costs and expenses	18,734,360				11,307,370			9,687,636
Lennar Homebuilding equity in loss from unconsolidated entities	(91,915		)		(61,708	)		(49,275	)
Lennar Homebuilding other income, net	205,841				22,774			52,751
Lennar Homebuilding loss due to litigation	—				(140,000	)		—
Lennar Multifamily equity in earnings from unconsolidated entities and other gain	51,322				85,739			85,519
Rialto equity in earnings from unconsolidated entities	25,816				25,447			18,961
Rialto other expense, net	(62,058		)		(81,636	)		(39,850	)
Gain on sale of Rialto investment and asset management platform	296,407				—			—
Earnings before income taxes	2,262,684				1,189,611			1,330,469
Provision for income taxes (1)	(545,171		)		(417,857	)		(417,378	)
Net earnings (including net earnings (loss) attributable to noncontrolling interests)	1,717,513				771,754			913,091
Less: Net earnings (loss) attributable to noncontrolling interests	21,682				(38,726	)		1,247
Net earnings attributable to Lennar	$	1,695,831			810,480			911,844
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on securities available-for-sale	(1,634		)		1,331			(295	)
Reclassification adjustments for (gains) loss included in net earnings	234				12			(53	)
Total other comprehensive income (loss), net of tax	$	(1,400	)		1,343			(348	)
Total comprehensive income attributable to Lennar	$	1,694,431			811,823			911,496
Total comprehensive income (loss) attributable to noncontrolling interests	$	21,682			(38,726	)		1,247
Basic earnings per share	$	5.46			3.38			4.05
Diluted earnings per share	$	5.44			3.38			3.86

(1)	Provision for income taxes for the year ended November 30, 2018 includes a non-cash one-time write down of deferred tax assets of $68.6 million resulting from the Tax Cuts and Jobs Act enacted in December 2017.

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

Years Ended November 30, 2018**,** 2017 and 2016

	2018				2017			2016
	(Dollars in thousands, except per share amounts)
Class A common stock:
Beginning balance	$	20,543			20,409			18,066
Employee stock and director plans	183				134			124
Stock issuance in connection with CalAtlantic acquisition	8,408				—			—
Conversion of convertible senior notes to shares of Class A common stock	365				—			2,219
Balance at November 30,	29,499				20,543			20,409
Class B common stock:
Beginning balance	3,769				3,298			3,298
Stock dividends - Class B common stock	—				471			—
Stock issuance in connection with CalAtlantic acquisition	168				—			—
Conversion of convertible senior notes to shares of Class B common stock	7				—			—
Balance at November 30,	3,944				3,769			3,298
Additional paid-in capital:
Beginning balance	3,142,013				2,805,349			2,305,560
Employee stock and director plans	3,797				2,086			1,487
Stock issuance in connection with CalAtlantic acquisition	5,061,430				—			—
Tax benefit from employee stock plans, vesting of restricted stock and conversion of convertible senior notes	—				35,543			45,803
Amortization of restricted stock	72,655				61,356			55,516
Conversion of convertible senior notes to shares of Class A common stock	216,782				—			396,983
Stock dividends - Class B common stock	—				237,679			—
Balance at November 30,	8,496,677				3,142,013			2,805,349
Retained earnings:
Beginning balance	4,840,978				4,306,256			3,429,736
Net earnings attributable to Lennar	1,695,831				810,480			911,844
Cash dividends - Class A common stock ($0.16 per share)	(43,195		)		(32,600	)		(30,315	)
Cash dividends - Class B common stock ($0.16 per share)	(5,964		)		(5,008	)		(5,009	)
Stock dividends - Class B common stock	—				(238,150	)		—
Balance at November 30,	6,487,650				4,840,978			4,306,256
Treasury stock, at cost:
Beginning balance	(136,020		)		(108,961	)		(107,755	)
Employee stock and directors plans	(49,939		)		(27,059	)		(1,206	)
Purchases of treasury stock	(249,910		)		—			—
Balance at November 30,	(435,869		)		(136,020	)		(108,961	)
Accumulated other comprehensive income (loss):
Beginning balance	1,034				(309	)		39
Total other comprehensive income (loss), net of tax	(1,400		)		1,343			(348	)
Balance at November 30,	(366		)		1,034			(309	)
Total stockholders’ equity	14,581,535				7,872,317			7,026,042
Noncontrolling interests:
Beginning balance	113,815				185,525			301,128
Net earnings (loss) attributable to noncontrolling interests	21,682				(38,726	)		1,247
Receipts related to noncontrolling interests	18,126				5,786			353
Payments related to noncontrolling interests	(89,575		)		(74,372	)		(127,410	)
Non-cash distributions to noncontrolling interests	—				—			(5,033	)
Non-cash consolidations, net	—				37,292			12,478
Non-cash purchase or activity of noncontrolling interests, net	37,374				(1,690	)		2,762
Balance at November 30,	101,422				113,815			185,525
Total equity	$	14,682,957			7,986,132			7,211,567

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended November 30, 2018**,** 2017 and 2016

	2018				2017			2016
	(In thousands)
Cash flows from operating activities:
Net earnings (including net earnings (loss) attributable to noncontrolling interests)	$	1,717,513			771,754			913,091
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	91,181				66,324			50,219
Amortization of discount/premium on debt, net	(23,544		)		11,312			14,619
Equity in loss (earnings) from unconsolidated entities	30,518				(49,478	)		(55,205	)
Distributions of earnings from unconsolidated entities	113,096				137,669			101,965
Share-based compensation expense	72,655				61,356			55,516
Excess tax benefits from share-based awards	—				(1,981	)		(7,039	)
Deferred income tax expense	268,037				91,050			97,485
Loss on retirement of debt and notes payable	—				—			1,569
Gain on sale of Rialto investment and asset management platform	(296,407		)		—			—
Gain on sale of operating properties and equipment	(11,499		)		(10,339	)		(14,457	)
Gain on sale of interest in unconsolidated entity	(164,880		)		—			—
Unrealized and realized gains on real estate owned	(3,734		)		(5,119	)		(21,380	)
Gain on sale of other assets (investment carried at cost)/CMBS bonds	(464		)		(2,450	)		—
Impairments of loans receivable and real estate owned	39,053				97,786			45,201
Valuation adjustments and write-offs of option deposits and pre-acquisition costs, other receivables and other assets	49,338				16,339			11,283
Changes in assets and liabilities:
Decrease in restricted cash	16,132				14,490			9,716
(Increase) decrease in receivables	(431,183		)		253,111			(260,844	)
Increase in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs	(135,870		)		(661,494	)		(503,527	)
Increase in other assets	(36,934		)		(44,535	)		(41,933	)
Decrease (increase) in loans held-for-sale	5,805				(105,600	)		90,093
Increase in accounts payable and other liabilities	412,796				356,669			21,432
Net cash provided by operating activities	$	1,711,609			996,864			507,804
Cash flows from investing activities:
Decrease (increase) in restricted cash related to investments or LOCs	10,825				(18,000	)		—
Net additions to operating properties and equipment	(130,439		)		(111,773	)		(76,439	)
Proceeds from the sale of operating properties and equipment	38,633				60,326			25,288
Proceeds from sale of investments in unconsolidated entities	225,267				—			—
Investments in and contributions to unconsolidated entities	(405,547		)		(430,304	)		(425,761	)
Distributions of capital from unconsolidated entities	362,516				207,327			323,190
Proceeds from sales of real estate owned	32,221				86,565			97,871
Receipts of principal payments on loans held-for-sale	—				11,251			—
Receipts of principal payments on loans receivable and other	4,339				165,413			84,433
Originations of loans receivable	—				(98,375	)		(56,507	)
Proceeds from sale of other assets (investment carried at cost)	—				3,610			—
Purchases of commercial mortgage-backed securities bonds	(31,068		)		(107,262	)		(42,436	)
Proceeds from sale of Rialto investment and asset management platform	340,000				—			—
Proceeds from sale of commercial mortgage-backed securities bonds	14,222				—			—
Acquisitions, net of cash acquired	(1,103,275		)		(611,103	)		(725	)
Proceeds from sales of investments available-for-sale	—				—			541
Decrease (increase) in Lennar Financial Services held-for-investment, net	(3,603		)		(14,257	)		963
Purchases of Lennar Financial Services investment securities	(47,305		)		(53,558	)		(37,764	)
Proceeds from maturities/sales of investment securities	85,237				41,765			23,963
Other payments, net	(145		)		(1,442	)		(2,454	)
Net cash used in investing activities	$	(608,122	)		(869,817	)		(85,837	)

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Years Ended November 30, 2018**,** 2017 and 2016

	2018				2017			2016
	(In thousands)
Cash flows from financing activities:
Net repayments under revolving lines of credit	$	(454,700	)		—			—
Net borrowings (repayments) under warehouse facilities	272,920				(199,684	)		107,465
Proceeds from senior notes	—				2,450,000			499,024
Debt issuance costs	(14,661		)		(28,590	)		(4,740	)
Redemption of senior notes	(1,100,000		)		(1,058,595	)		(250,000	)
Conversions and exchanges on convertible senior notes	(59,145		)		—			(234,028	)
Proceeds from Rialto notes payable	33,724				99,630			—
Principal payments on Rialto notes payable including structured notes	(359,016		)		(24,964	)		(39,026	)
Proceeds from other borrowings	44,374				31,230			37,163
(Payments) proceeds to/from other liabilities	(3,542		)		195,541			—
Principal payments on other borrowings	(138,475		)		(139,725	)		(210,968	)
Receipts related to noncontrolling interests	18,126				5,786			353
Payments related to noncontrolling interests	(89,575		)		(74,372	)		(127,410	)
Excess tax benefits from share-based awards	—				1,981			7,039
Common stock:
Issuances	3,061				720			19,471
Repurchases	(299,833		)		(27,054	)		(19,902	)
Dividends	(49,159		)		(37,608	)		(35,324	)
Net cash (used in) provided by financing activities	$	(2,195,901	)		1,194,296			(250,883	)
Net (decrease) increase in cash and cash equivalents	(1,092,414		)		1,321,343			171,084
Cash and cash equivalents at beginning of year	2,650,872				1,329,529			1,158,445
Cash and cash equivalents at end of year	$	1,558,458			2,650,872			1,329,529
Summary of cash and cash equivalents:
Lennar Homebuilding	$	1,337,807			2,282,925			1,050,138
Lennar Financial Services	185,990				117,410			123,964
Lennar Multifamily	7,832				8,676			6,600
Rialto	26,829				241,861			148,827
	$	1,558,458			2,650,872			1,329,529
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	$	128,877			89,485			66,570
Cash paid for income taxes, net	$	376,609			199,557			374,731
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	$	163,519			279,323			101,504
Net non-cash contributions to unconsolidated entities	$	162,281			62,618			107,935
Conversions of and exchanges on convertible senior notes to equity	217,154				—			399,206
Equity component of acquisition consideration	$	5,070,006			—			—
Rialto:
Real estate owned acquired in satisfaction/partial satisfaction of loans receivable	$	—			1,140			8,476
Consolidation/deconsolidation of unconsolidated/consolidated entities, net:
Inventories	$	35,430			48,656			111,347
Receivables	$	7,198			—			—
Operating properties and equipment and other assets	$	—			(1,716	)		—
Investments in unconsolidated entities	$	(25,614	)		(9,692	)		(2,445	)
Liabilities related to consolidated inventory not owned	$	—			—			(96,424	)
Other liabilities	$	(17,014	)		44			—
Noncontrolling interests	$	—			(37,292	)		(12,478	)

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 revenue recognition policies related to those segments.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $72.1 million, $47.0 million and $40.9 million for the years ended November 30, 2018, 2017 and 2016, respectively. The increase in 2018 is primarily related to the CalAtlantic acquisition.

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 10 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, 2018 and 2017 included $926.1 million and $569.8 million, respectively, of cash held in escrow for approximately three days.

Restricted Cash

Lennar Homebuilding restricted cash consists of customer deposits on home sales held in restricted accounts until title transfers to the homebuyer, as required by the state and local governments in which the homes were sold, as well as funds on deposit to secure and support performance obligations. Rialto restricted cash 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 1,324 and 761 active communities, excluding unconsolidated entities, as of November 30, 2018 and 2017, 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.

LENNAR CORPORATION AND SUBSIDIARIES

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, 2018, the Company reviewed its communities for potential indicators of impairments and identified 25 homebuilding communities with 1,121 homesites and a carrying value of $211.3 million as having potential indicators of impairment. For the year ended November 30, 2018, the Company recorded valuation adjustments of $31.3 million on 733 homesites in six communities with a carrying value of $64.6 million.

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.

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, 2018 and 2017:

	Years ended November 30,
	2018								2017
Unobservable inputs	Range								Range
Average selling price		$233,000		-		$843,000				$125,000		-	$567,000
Absorption rate per quarter (homes)	4			-	16				4			-	10
Discount rate	20%								20%

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

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

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.

LENNAR CORPORATION AND SUBSIDIARIES

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, 2018 and 2017, the Lennar Financial Services segment had investment securities classified as held-to-maturity totaling $52.5 million and $52.3 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 three years. Also, at November 30, 2018 and 2017, the Lennar Financial Services segment had available-for-sale securities totaling $4.2 million and $57.4 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, 2018 and 2017, the Rialto segment had investment securities classified as held-to-maturity totaling $197.0 million and $179.7 million, respectively. The Rialto segment held-to-maturity securities consist of commercial mortgage-backed securities ("CMBS").

At both November 30, 2018 and 2017, 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, 2018, 2017 and 2016, interest incurred by the Company’s homebuilding operations related to homebuilding debt was $423.7 million, $290.3 million and $281.4 million, respectively; interest capitalized into inventories was $412.5 million, $283.2 million and $276.8 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)	2018				2017			2016
Interest expense in costs of homes sold	$	301,339			260,650			235,148
Interest expense in costs of land sold	3,567				9,995			5,287
Other interest expense (1)	11,258				7,164			4,626
Total interest expense	$	316,164			277,809			245,061

(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, 2018 and 2017, the Company's net deferred tax assets included a valuation allowance of $7.2 million and $6.4 million, respectively. See Note 11 for additional information.

Other Liabilities

Reflected within the consolidated balance sheets, the other liabilities balance as of November 30, 2018 and 2017, 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:

	Years Ended November 30,
(In thousands)	2018				2017
Warranty reserve, beginning of year	$	164,619			135,403
Warranties issued	175,410				109,359
Adjustments to pre-existing warranties from changes in estimates (1)	3,116				16,027
Warranties assumed related to acquisitions	140,959				6,345
Payments	(164,995		)		(102,515	)
Warranty reserve, end of year	$	319,109			164,619

(1)	The adjustments to pre-existing warranties from changes in estimates during the years ended November 30, 2018 and 2017 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, 2018 and 2017 was $101.4 million and $90.2 million of which $60.3 million and $57.7 million, respectively, was included in Lennar Financial Services’ other liabilities as of November 30, 2018 and 2017. 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, 2018 and 2017. 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:

	Years Ended November 30,
(In thousands)	2018				2017
Loan origination liabilities, beginning of year	$	22,543			24,905
Provision for losses	5,787				3,861
Adjustments to pre-existing provisions for losses from changes in estimates	4,625				(4,440	)
Origination liabilities assumed related to CalAtlantic acquisition	29,959				—
Payments/settlements	(14,330		)		(1,783	)
Loan origination liabilities, end of year	$	48,584			22,543

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.

LENNAR CORPORATION AND SUBSIDIARIES

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 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.

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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. ASU 2014-09 became effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The Company had the option to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of applying this ASU recognized at the date of initial application. Subsequent to the issuance of ASU 2014-09, the FASB has issued several ASUs such as ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients among others. These ASUs do not change the core principle of the guidance stated in ASU 2014-09, instead these amendments are intended to clarify and improve operability of certain topics included within the revenue standard. These ASUs have the same effective date and transition requirements as ASU 2014-09. The Company is adopting the modified retrospective method. The Company has substantially completed its evaluation and does not expect the adoption of these ASUs and ASU 2014-09 will have a material impact on the Company's consolidated financial statements and disclosures.

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

In March 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"), which provides guidance for accounting for leases. ASU 2016-02 requires lessees to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight line basis over the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02 will be effective for the Company’s fiscal year beginning December 1, 2019 and subsequent interim periods. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on the Company's consolidated financial statements. Subsequent to the issuance of ASU 2016-02, the FASB issued ASUs 2018-01, Land Easement Practical Expedient for Transition to Topic 842, 2018-10, Codification Improvements to Topic 842, Leases, 2018-11, Leases (Topic 842): Targeted Improvements and 2018-20, Narrow-Scope Improvements for Lessors. These ASUs do not change the core principle of the guidance in ASU 2016-02, instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses standard. This ASU will have the same effective date and transition requirements as ASU 2016-02.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. ASU 2016-13 is effective for the Company's fiscal year beginning December 1, 2020 and subsequent interim periods. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements. Subsequent to the issuance of ASU 2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. This ASU does not change the core principle of the guidance in ASU 2016-13, instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses standard. This ASU will have the same effective date and transition requirements as ASU 2016-13.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 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 2018 presentation. These reclassifications had no impact on the Company's consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2. Business Acquisition

Acquisition of CalAtlantic Group, Inc.

On February 12, 2018, the Company completed the acquisition of CalAtlantic Group, Inc. (“CalAtlantic”) through a transaction in which CalAtlantic was merged with and into a wholly-owned subsidiary of the Company (“Merger Sub”), with Merger Sub continuing as the surviving corporation and a wholly-owned subsidiary of the Company (the “Merger”). CalAtlantic was a homebuilder which built homes across the homebuilding spectrum, from entry level to luxury, in 43 metropolitan statistical areas spanning 19 states. CalAtlantic also provided mortgage, title and escrow services. A primary reason for the acquisition was to increase local market concentration in order to generate synergies and efficiencies.

Based on an evaluation of the provisions of ASC Topic 805, Business Combinations, ("ASC 805"), Lennar Corporation was determined to be the acquirer for accounting purposes. The purchase price accounting reflected in the accompanying financial statements is provisional and is based upon estimates and assumptions that are subject to change within the measurement period (up to one year from the acquisition date pursuant to ASC 805). The measurement period remains open pending the completion of valuation procedures related to the acquired assets and assumed liabilities. The $3.3 billion provisional amount allocated to goodwill in Lennar Homebuilding and the provisional amount of $175 million allocated to goodwill in Lennar Financial Services represents the excess of the purchase price over the estimated fair value of assets acquired and liabilities assumed.

The following table summarizes the purchase price allocation based on the estimated fair value of net assets acquired and liabilities assumed at the date of acquisition:

(Dollars in thousands)
CalAtlantic shares of common stock outstanding	118,025,879
CalAtlantic shares electing cash conversion	24,083,091
CalAtlantic shares exchanged	93,942,788
Exchange ratio for Class A common stock	0.885
Exchange ratio for Class B common stock	0.0177
Number of shares of Lennar Class A common stock issued in exchange	83,138,277
Number of shares of Lennar Class B common stock issued in exchange (due to Class B common stock dividend)	1,662,172
Consideration attributable to Class A common stock	$	4,933,425
Consideration attributable to Class B common stock	77,823
Consideration attributable to equity awards that convert upon change of control	58,758
Consideration attributable to cash including fractional shares	1,162,341
Total purchase price	$	6,232,347

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands)
ASSETS
Homebuilding:
Cash and cash equivalents, restricted cash and receivables, net	$	55,191
Inventories	6,239,147
Intangible asset (1)	8,000
Investments in unconsolidated entities	151,900
Goodwill (2)	3,305,792
Other assets	561,151
Total Homebuilding assets	10,321,181
Financial Services (2)	355,128
Total assets	$	10,676,309
LIABILITIES
Homebuilding:
Accounts payable	$	306
Senior notes payable and other debts	3,926,152
Other liabilities (3)	374,656
Total Homebuilding liabilities	4,301,114
Financial Services	124,418
Total liabilities	4,425,532
Noncontrolling interests (4)	18,430
Total purchase price	$	6,232,347

(1)	Intangible asset includes trade name. The amortization period for the trade name was approximately six months.

(2)

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, and it is generally not deductible for income tax purposes. As of the Merger date, goodwill consisted primarily of expected greater efficiencies and opportunities due to increased concentration of local market share, reduced general and administrative costs and reduced homebuilding costs resulting from the merger and cost savings as a result of additional homebuilding and non-homebuilding synergies. The assignment of goodwill among the Company's reporting segments included $1.1 billion to Homebuilding East, $495.0 million to Homebuilding Central, $342.2 million to Homebuilding Texas, $1.4 billion to Homebuilding West, and $175.4 million to Lennar Financial Services.

(3)

Other liabilities includes contingencies assumed at the Merger date, which includes warranty and legal reserves. Warranty reserves for homes are established at an amount estimated to be adequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a home. Warranty reserves are determined based on historical data and trends with respect to similar product types and geographical areas. Consistent with ASC 450, Contingencies, ("ASC450") legal reserves are established when a loss is considered probable and the amount of loss can be reasonably estimated.

(4)	Fair value of noncontrolling interests was measured using discounted cash flows of expected future contributions and distributions.

For the year ended November 30, 2018, Lennar Homebuilding revenue included $7.0 billion of revenues, and earnings before income taxes included $491.3 million of pre-tax earnings from CalAtlantic since the date of acquisition, which included acquisition and integration costs of $153.0 million. These acquisition and integration costs were comprised mainly of severance expenses and transaction costs and were included within the acquisition and integration costs related to CalAtlantic line item in the consolidated statement of operations for the year ended November 30, 2018.

The following presents summarized unaudited supplemental pro forma operating results as if CalAtlantic had been included in the Company's Consolidated Statements of Operations beginning December 1, 2016.

		Years Ended November 30,
(Dollars in thousands, except per share amounts)		2018				2017
Revenues from home sales		$	20,355,615			17,471,128
Net earnings (1)		$	1,693,325			1,232,917
Earnings per share:
Basic		$	5.19			3.78
Diluted		$	5.18			3.75

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(1)

Net earnings for the year ended November 30, 2018 include a pre-tax impact from acquisition and integration costs related to CalAtlantic of $153.0 million. Additionally, net earnings for the year ended November 30, 2018 include purchase accounting adjustments of $414.6 million on CalAtlantic homes that were in backlog/construction in progress at the acquisition date that were subsequently delivered.

The supplemental pro forma operating results have been determined after adjusting the operating results of CalAtlantic to reflect additional amortization that would have been recorded assuming the fair value adjustment to intangible assets had been applied beginning December 1, 2016. Certain other adjustments, including those related to conforming accounting policies and adjusting acquired inventory to fair value, have not been reflected in the supplemental pro forma operating results due to the impracticability of estimating their impacts.

Acquisition of WCI Communities, Inc.

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, Lennar Corporation was determined to be the acquirer for accounting purposes. The following table summarizes the purchase price allocation based on the estimated fair value of net assets acquired and liabilities assumed at the date of acquisition:

(In thousands)
Assets:
Cash and cash equivalents, restricted cash and receivables, net	$	42,079
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

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

(2)

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

For the 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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. Operating and Reporting Segments

The Company's homebuilding operations construct and sell homes primarily for first-time, move-up and active adult homebuyers primarily under the Lennar brand name. In addition, the Company's homebuilding operations purchase, develop and sell land to third parties. In connection with the CalAtlantic acquisition, the Company experienced significant growth in its operations. As a result, the Company's chief operating decision makers ("CODM") reassessed how they evaluate the business and allocate resources. The CODM manages and assesses the Company’s performance at a regional level. Therefore, the Company performed an assessment of its operating segments in accordance with ASC 280, Segment Reporting, (“ASC 280”) and determined that each of its four homebuilding regions, financial services operations, multifamily operations and Rialto operations are its operating segments. Prior to this change, in accordance with the aggregation criteria defined in ASC 280, the Company’s operating segments were aggregated into reportable segments, based primarily upon similar economic characteristics, geography and product type. As of and for the year ended November 30, 2018, the Company’s reportable segments consist of:

(1)	Homebuilding East

(2)	Homebuilding Central

(3)	Homebuilding Texas

(4)	Homebuilding West

(5)	Lennar Financial Services

(6)	Lennar Multifamily

(7)	Rialto

Information about homebuilding activities in the Company's urban divisions which are not economically similar to other divisions in the same geographic area is grouped under "Homebuilding Other," which is not considered a reportable segment. All prior periods have been adjusted to conform with the Company's current presentation.

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, New Jersey, North Carolina and South Carolina

Central: Georgia, Illinois, Indiana, Maryland, Minnesota, Tennessee and Virginia

Texas: Texas

West: Arizona, California, Colorado, Nevada, Oregon, Utah and Washington

Other: Urban divisions and other homebuilding related investments, including FivePoint

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, which was sold subsequent to November 30, 2018. 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.

Operations of the Rialto segment include commercial real estate investment, investment management, and finance company focused on raising, investing and managing third-party capital, originating and selling into securitizations commercial mortgage loans as well as investing our own capital in real estate related mortgage loans, properties and related securities. The Company sold its Rialto Investment and Asset Management platform on November 30, 2018. The Company retained its Rialto Mortgage Finance business, which moved into its Financial Services segment as of December 1, 2018. The Company also retained its fund investments along with its carried interests in various Rialto funds and investments in other Rialto balance sheet assets. The Company's limited partner investments in Rialto funds and investment vehicles totaled $297.4 million at November 30, 2018, and the Company is committed to invest as much as an additional $71.6 million in Rialto funds.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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)	2018				2017			2016
Assets:
Homebuilding East	$	7,183,758			3,817,454			2,824,403
Homebuilding Central	2,522,799				1,275,623			1,014,099
Homebuilding Texas	2,311,760				1,199,971			1,229,696
Homebuilding West	10,291,385				5,432,485			4,565,911
Homebuilding Other	1,140,092				1,125,160			1,044,049
Lennar Financial Services	2,346,899				1,689,508			1,754,672
Lennar Multifamily	874,219				710,725			526,131
Rialto	894,245				1,153,840			1,276,210
Corporate and unallocated	1,001,024				2,340,268			1,126,610
Total assets	$	28,566,181			18,745,034			15,361,781
Lennar Homebuilding investments in unconsolidated entities:
Homebuilding East	$	76,627			68,670			62,200
Homebuilding Central	6,510				2,971			3,770
Homebuilding Texas	1,902				—			41
Homebuilding West	311,200				225,803			217,322
Homebuilding Other	600,687				603,325			528,390
Total Lennar Homebuilding investments in unconsolidated entities (1)	$	996,926			900,769			811,723
Lennar Multifamily investments in unconsolidated entities	$	481,129			407,544			318,559
Rialto investments in unconsolidated entities	$	297,379			265,418			245,741
Lennar Homebuilding goodwill (2)	$	3,442,359			136,566			—
Lennar Financial Services goodwill (2)	$	237,688			59,838			39,838
Rialto goodwill	$	—			5,396			5,396

(1)	Does not include the ($62.0) million investment balance for one unconsolidated entity as it was reclassed to other liabilities.

(2)

In connection with the CalAtlantic acquisition, the Company recorded a provisional amount of homebuilding goodwill of $3.3 billion. The assignment of goodwill among the Company's reporting segments included $1.1 billion to Homebuilding East, $495.0 million to Homebuilding Central, $342.2 million to Homebuilding Texas, $1.4 billion to Homebuilding West, and $175.4 million to Lennar Financial Services. In connection with the WCI acquisition in 2017, the Company allocated $136.6 million of goodwill to the Lennar Homebuilding East reportable segment and $20.0 million to the Lennar Financial Services segment.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Years Ended November 30,
(In thousands)	2018				2017			2016
Revenues:
Homebuilding East	$	6,249,864			4,054,849			3,326,550
Homebuilding Central	2,290,887				923,518			928,980
Homebuilding Texas	2,421,399				1,697,731			1,543,112
Homebuilding West	8,059,850				4,447,084			3,848,539
Homebuilding Other	55,597				77,060			94,156
Lennar Financial Services	867,831				770,109			687,255
Lennar Multifamily	421,132				394,771			287,441
Rialto	205,071				281,243			233,966
Total revenues (1)	$	20,571,631			12,646,365			10,949,999
Operating earnings (loss):
Homebuilding East	$	759,221			575,701			562,075
Homebuilding Central (2)	182,608				(52,301	)		88,134
Homebuilding Texas	172,449				180,212			170,311
Homebuilding West	1,082,302				615,916			585,873
Homebuilding Other (3)	58,070				(50,489	)		(61,461	)
Lennar Financial Services	187,430				155,524			163,617
Lennar Multifamily (4)	42,695				73,432			71,174
Rialto (5)	(21,584		)		(22,495	)		(16,692	)
Total operating earnings	2,463,191				1,475,500			1,563,031
Gain on sale of Rialto investment and asset management platform	296,407				—			—
Acquisition and integration costs related to CalAtlantic	152,980				—			—
Corporate general and administrative expenses	343,934				285,889			232,562
Earnings before income taxes	$	2,262,684			1,189,611			1,330,469

(1)	Total revenues were net of sales incentives of $1.1 billion ($23,500 per home delivered) for the year ended November 30, 2018, $665.7 million ($22,700 per home delivered) for the year ended November 30, 2017 and $596.3 million ($22,500 per home delivered) for the year ended November 30, 2016.

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

(3)

For the year ended November 30, 2018, Homebuilding Other's operating earnings includes a $164.9 million gain on the sale of an 80% interest in one of the Company's strategic joint ventures, Treasure Island Holdings. For the years ended November 30, 2018 and 2017, Homebuilding Other's operating earnings (loss) included an equity in loss from unconsolidated entities of $92.0 million and $47.6 million, respectively.

(4)

For the years ended November 30, 2018, 2017 and 2016, Lennar Multifamily's operating earnings included $35.6 million, $85.7 million and $85.5 million, respectively, of equity in earnings from unconsolidated entities and other gain primarily as a result of $61.2 million share of gains from the sale of six operating properties and an investment in an operating property for the year ended November 30, 2018, and $96.7 million and $91.0 million share of gains from the sale of seven operating properties for the years ended November 30, 2017 and 2016, respectively, by its unconsolidated entities.

(5)

For the year ended November 30, 2018, Rialto's operating loss was primarily as a result of non-recurring expenses, partially offset by a decrease in real estate owned and loan impairments due to the liquidation of the FDIC and bank portfolios and a decrease in interest expense. 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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Years Ended November 30,
(In thousands)	2018				2017			2016
Lennar Homebuilding interest expense:
Homebuilding East	$	98,478			85,761			76,170
Homebuilding Central	28,471				21,061			22,530
Homebuilding Texas	32,930				34,237			33,009
Homebuilding West	151,823				135,574			111,784
Homebuilding Other	4,462				1,176			1,568
Total Lennar Homebuilding interest expense	$	316,164			277,809			245,061
Lennar Financial Services interest income, net	$	18,968			13,331			12,388
Rialto interest expense	$	24,312			42,004			40,303
Depreciation and amortization:
Homebuilding East	$	20,614			17,258			16,268
Homebuilding Central	5,285				3,879			3,727
Homebuilding Texas	9,041				8,228			7,370
Homebuilding West	36,013				27,403			23,391
Homebuilding Other	1,022				2,447			2,284
Lennar Financial Services	13,437				9,992			7,667
Lennar Multifamily	4,357				2,910			2,472
Rialto	5,723				5,194			7,590
Corporate and unallocated	66,261				50,369			34,966
Total depreciation and amortization	$	161,753			127,680			105,735
Net additions to (disposals of) operating properties and equipment:
Homebuilding East	$	26,402			(27	)		(10,452	)
Homebuilding Central	14,677				32			33
Homebuilding Texas	200				(40	)		2,340
Homebuilding West	42,525				32,995			43,479
Homebuilding Other	15,549				10,833			7,771
Lennar Financial Services	7,703				11,185			6,218
Lennar Multifamily	1,558				12,657			1,666
Rialto	6,416				4,115			1,908
Corporate and unallocated	55,364				40,023			12,645
Total net additions (disposals of) operating properties and equipment	$	170,394			111,773			65,608
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities:
Homebuilding East	$	(818	)		(754	)		(230	)
Homebuilding Central	691				(255	)		(74	)
Homebuilding Texas	469				8			364
Homebuilding West	(212		)		(13,095	)		(2,052	)
Homebuilding Other (1)	(92,045		)		(47,612	)		(47,283	)
Total Lennar Homebuilding equity in loss from unconsolidated entities	$	(91,915	)		(61,708	)		(49,275	)
Lennar Multifamily equity in earnings from unconsolidated entities	$	51,322			85,739			85,519
Rialto equity in earnings from unconsolidated entities	$	25,816			25,447			18,961

(1)

For the year ended November 30, 2018, equity in loss included the Company's share of operational net losses from unconsolidated entities driven by valuation adjustments and general and administrative expenses, partially offset by profits from land sales. For the years ended November 30, 2017 and 2016, 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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4. Lennar Homebuilding Receivables

	November 30,
(In thousands)	2018				2017
Accounts receivable	$	115,642			59,733
Mortgage and notes receivable	123,796				80,602
	239,438				140,335
Allowance for doubtful accounts	(2,597		)		(2,668	)
	$	236,841			137,667

At November 30, 2018 and 2017, 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)	2018				2017			2016
Revenues	$	525,931			471,899			439,874
Costs and expenses	729,700				616,217			578,831
Other income (1)	186,982				23,253			—
Net loss of unconsolidated entities (1)	$	(16,787	)		(121,065	)		(138,957	)
Lennar Homebuilding equity in loss from unconsolidated entities (1)	$	(91,915	)		(61,708	)		(49,275	)

(1)

During the year ended November 30, 2018, other income was primarily due to FivePoint Holdings, LLC ("FivePoint) recording income resulting from the Tax Cuts and Jobs Act of 2017’s reduction in its corporate tax rate to reduce its liability pursuant to its tax receivable agreement (“TRA Liability”) with its non-controlling interests. However, the Company has a 70% interest in the FivePoint TRA Liability. Therefore, the Company did not include in Lennar Homebuilding’s equity in loss from unconsolidated entities the pro-rata share of earnings related to the Company's portion of the TRA Liability. As a result, the Company's unconsolidated entities have net losses of only $16.8 million, but the Company has an equity in loss from unconsolidated entities of $91.9 million.

For the year ended November 30, 2018, Lennar Homebuilding equity in loss from unconsolidated entities was

primarily attributable to our share of net operating losses from our unconsolidated entities which were primarily driven by valuation adjustments related to assets of Lennar Homebuilding's unconsolidated entities and general and administrative expenses, partially offset by profits from land sales.

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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Balance Sheets
	November 30,
(In thousands)	2018				2017
Assets:
Cash and cash equivalents	$	782,565			953,261
Inventories	4,291,470				3,751,525
Other assets	1,251,884				1,061,507
	$	6,325,919			5,766,293
Liabilities and equity:
Accounts payable and other liabilities	$	875,380			832,151
Debt (1)	1,212,274				737,331
Equity	4,238,265				4,196,811
	$	6,325,919			5,766,293
Lennar Homebuilding investments in unconsolidated entities (2)	$	996,926			900,769

(1)	Debt presented above is net of debt issuance costs of $12.4 million and $5.7 million, as of November 30, 2018 and 2017, respectively. The increase in debt in 2018 was primarily related to $500 million of senior notes issued by FivePoint.

(2)	Does not include the ($62.0) million investment balance for one unconsolidated entity as it was reclassed to other liabilities.

In May 2017, FivePoint completed its initial public offering ("IPO"). Concurrent with the IPO, the Company invested an additional $100 million in FivePoint in a private placement. As of November 30, 2018, the Company owns approximately 40% of FivePoint and the carrying amount of the Company's investment was $342.7 million as of November 30, 2018.

As of November 30, 2018 and 2017, the Company’s recorded investments in Lennar Homebuilding unconsolidated entities were $996.9 million and $900.8 million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of both November 30, 2018 and 2017 was $1.3 billion. 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. In 2017, the Company's recorded investments in Lennar Homebuilding unconsolidated entities included $33.3 million of assets held-for-sale.

In 2017, the Company entered into a Membership Interest Purchase Agreement and Payment Escrow Agreement ("Agreement") with one of its strategic joint ventures under which the Company agreed to sell 80% of the Company's interest in the joint venture to a third-party. Under the terms of the Agreement, the sale transaction was contingent upon the satisfaction of certain conditions. In January 2018, conditions were fulfilled and the transaction was closed resulting in gains of $164.9 million recorded in Lennar Homebuilding other income, net within the accompanying consolidated statement of operations for the year ended November 30, 2018.

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, 2018, 2017 and 2016, the Company received management fees and reimbursement of expenses, net of deferrals, from Lennar Homebuilding unconsolidated entities totaling $7.0 million, $4.4 million and $13.2 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, 2018, 2017 and 2016, $169.5 million, $226.2 million and $130.4 million, respectively, of the unconsolidated entities’ revenues were from land sales to the Company. The Company does not include in its Lennar Homebuilding equity in earnings (loss) from unconsolidated entities its pro-rata share of unconsolidated entities’ earnings resulting from land sales to its homebuilding divisions. Instead, the Company accounts for those earnings as a reduction of the cost of purchasing the land from the unconsolidated entities. This in effect defers recognition of the Company’s share of the unconsolidated entities’ earnings related to these sales until the Company delivers a home and title passes to a third-party homebuyer.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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)	2018				2017
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	48,313			64,197
Non-recourse land seller debt and other debt	—				1,997
Non-recourse debt with completion guarantees	239,568				255,903
Non-recourse debt without completion guarantees (1)	871,088				351,800
Non-recourse debt to the Company	1,158,969				673,897
The Company’s maximum recourse exposure (2)	65,707				69,181
Debt issuance costs	(12,402		)		(5,747	)
Total debt	$	1,212,274			737,331
The Company’s maximum recourse exposure as a % of total JV debt	5		%		9	%

(1)	The increase in non-recourse debt without completion guarantees was primarily related to $500 million of senior notes issued by FivePoint.

(2)	As of November 30, 2018 and 2017, the Company's maximum recourse exposure was primarily related to the Company providing a repayment guarantee on four unconsolidated entities' debt and three 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, 2018 and 2017, the fair values of the repayment guarantees and completion guarantees were not material. The Company believes that as of November 30, 2018, 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)	2018				2017
Operating properties (1)	$	255,203			188,073
Leasehold improvements (2)	61,990				52,185
Furniture, fixtures and equipment (2)	141,466				79,082
	458,659				319,340
Accumulated depreciation and amortization	(138,798		)		(104,272	)
	$	319,861			215,068

(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.

(2)	Increase primarily related to assets from CalAtlantic acquisition.

7. Lennar Homebuilding Senior Notes and Other Debts Payable

	November 30,
(Dollars in thousands)	2018				2017
0.25% convertible senior notes due 2019	$	1,291			—
4.500% senior notes due 2019	499,585				498,793
4.50% senior notes due 2019	599,176				598,325
6.625% senior notes due 2020 (1)	311,735				—
2.95% senior notes due 2020	298,838				298,305
8.375% senior notes due 2021 (1)	435,897				—
4.750% senior notes due 2021	498,111				497,329
6.25% senior notes due December 2021 (1)	315,283				—
4.125% senior notes due 2022	596,894				595,904
5.375% senior notes due 2022 (1)	261,055				—
4.750% senior notes due 2022	570,564				569,484
4.875% senior notes due December 2023	395,759				394,964
4.500% senior notes due 2024	646,078				645,353
5.875% senior notes due 2024 (1)	452,833				—
4.750% senior notes due 2025	497,114				496,671
5.25% senior notes due 2026 (1)	409,133				—
5.00% senior notes due 2027 (1)	353,275				—
4.75% senior notes due 2027	892,297				892,657
4.125% senior notes due December 2018	—				274,459
6.95% senior notes due 2018	—				249,342
Mortgage notes on land and other debt	508,950				398,417
	$	8,543,868			6,410,003

(1)

These notes were obligations of CalAtlantic when it was acquired, and were subsequently exchanged in part for notes of Lennar Corporation as follows: $267.7 million principal amount of 6.625% senior notes due 2020, $397.6 million principal amount of 8.375% senior notes due 2021, $292.0 million principal amount of 6.25% senior notes due 2021, $240.8 million principal amount of 5.375% senior notes due 2022, $421.4 million principal amount of 5.875% senior notes due 2024, $395.5 million principal amount of 5.25% senior notes due 2026 and $347.3 million principal amount of 5.00% senior notes due 2027. As part of purchase accounting, the senior notes have been recorded at their fair value as of the date of acquisition (February 12, 2018).

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The carrying amounts of the senior notes listed above are net of debt issuance costs of $31.2 million and $33.5 million, as of November 30, 2018 and 2017, respectively.

In February 2018, the Company amended the credit agreement governing its unsecured revolving credit facility (the "Credit Facility") to increase the maximum borrowings from $2.0 billion to $2.6 billion and extended the maturity on $2.2 billion of the Credit Facility from June 2022 to April 2023, with $70 million maturing in June 2018 and the remaining $50 million maturing in June 2020. As of November 30, 2018, the Credit Facility included a $315 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, 2018 and 2017, 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, 2018. In addition, the Company had $285 million in letter of credit facilities with different financial institutions at November 30, 2018.

The Company’s performance letters of credit outstanding were $598.4 million and $384.4 million at November 30, 2018 and 2017, respectively. The Company’s financial letters of credit outstanding were $165.4 million and $127.4 million at November 30, 2018 and 2017, 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, 2018, the Company had outstanding surety bonds of $2.7 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, 2018, there were approximately $1.4 billion, or 52%, 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, 2018 were as follows:

Senior Notes Outstanding (1)		Principal Amount				Net Proceeds (2)				Price			Dates Issued
(Dollars in thousands)
0.25% convertible senior notes due 2019		$	1,300			(3)				(3)			(3)
4.500% senior notes due 2019		500,000				$	495,725			(4)			February 2014
4.50% senior notes due 2019		600,000				595,801				(5)			November 2014, February 2015
6.625% senior notes due 2020		300,000				(3)				(3)			(3)
2.95% senior notes due 2020		300,000				298,800				100	%		November 2017
8.375% senior notes due 2021		400,000				(3)				(3)			(3)
4.750% senior notes due 2021		500,000				495,974				100	%		March 2016
6.25% senior notes due December 2021		300,000				(3)				(3)			(3)
4.125% senior notes due 2022		600,000				595,160				100	%		January 2017
5.375% senior notes due 2022		250,000				(3)				(3)			(3)
4.750% senior notes due 2022		575,000				567,585				(6)			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
5.875% senior notes due 2024		425,000				(3)				(3)			(3)
4.750% senior notes due 2025		500,000				495,528				100	%		April 2015
5.25% senior notes due 2026		400,000				(3)				(3)			(3)
5.00% senior notes due 2027		350,000				(3)				(3)			(3)
4.75% senior notes due 2027		900,000				894,650				100	%		November 2017

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(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)	These notes were obligations of CalAtlantic when it was acquired, and were subsequently exchanged in part for notes of the Company. As part of purchase accounting, the senior notes have been recorded at their fair value as of the date of acquisition (February 12, 2018).

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

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

(6)	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%.

During the second quarter 2018, holders of $6.7 million principal amount of CalAtlantic’s 1.625% convertible senior notes due 2018 and $266.2 million principal amount of CalAtlantic’s 0.25% convertible senior notes due 2019 either caused the Company to purchase them for cash or converted them into a combination of the Company’s Class A and Class B common stock and cash, resulting in the Company issuing approximately 3,654,000 shares of Class A common stock and 72,000 shares of Class B common stock, and paying $59.1 million in cash to former noteholders. All but $1.3 million of the principal balance of the convertible senior notes had either been converted or redeemed.

In November 2018, the Company redeemed $275 million aggregate principal amount of 4.125% senior notes due

2018. The redemption price, which was paid in cash, was 100% of the principal amount plus accrued but unpaid interest.

In June 2018, the Company redeemed $250 million aggregate principal amount of the 6.95% senior notes due 2018. The redemption price, which was paid in cash, was 100% of the principal amount plus accrued but unpaid interest.

In May 2018, the Company redeemed $575 million aggregate principal amount of the 8.375% senior notes due 2018 ("8.375% Senior Notes"). The redemption price, which was paid in cash, was 100% of the principal amount plus accrued but unpaid interest. The 8.375% Senior Notes with $575 million in principal amount were obligations of CalAtlantic, when it was acquired, and $485.6 million principal amount was subsequently exchanged in part for notes of the Company.

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, 2018, 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 3.2%. At November 30, 2018 and 2017, the carrying amount of the mortgage notes on land and other debt was $509.0 million and $398.4 million, respectively. During the years ended November 30, 2018 and 2017, the Company retired $128.3 million and $139.7 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, 2018 and thereafter are as follows:

(In thousands)	Debt Maturities
2019	$	1,270,534
2020	738,921
2021	973,451
2022	1,745,130
2023	64,366
Thereafter	3,674,746

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)	2018				2017
Assets:
Cash and cash equivalents	$	185,990			117,410
Restricted cash	15,251				12,006
Receivables, net (1)	512,732				313,252
Loans held-for-sale (2)	1,152,198				937,516
Loans held-for-investment, net	70,216				44,193
Investments held-to-maturity	52,490				52,327
Investments available-for-sale (3)	4,161				57,439
Goodwill (4)	237,688				59,838
Other assets (5)	116,173				95,527
	$	2,346,899			1,689,508
Liabilities:
Notes and other debts payable	$	1,256,174			937,431
Other liabilities (6)	281,586				240,383
	$	1,537,760			1,177,814

(1)	Receivables, net, primarily related to loans sold to investors for which the Company had not yet been paid as of November 30, 2018 and 2017, 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, 2018, goodwill included $20 million related to the WCI acquisition and a provisional amount of $175.4 million related to the CalAtlantic acquisition (See Note 2).

(5)	As of November 30, 2018 and 2017, other assets included mortgage loan commitments carried at fair value of $16.4 million and $9.9 million, respectively, and mortgage servicing rights carried at fair value of $37.2 million and $31.2 million, respectively. In addition, other assets also included forward contracts carried at fair value of $1.7 million as of November 30, 2017, respectively.

(6)	As of November 30, 2018 and 2017, other liabilities included $60.3 million and $57.7 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation, and forward contracts carried at fair value of $10.4 million as of November 30, 2018.

At November 30, 2018, the Lennar Financial Services segment warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures December 2018 (1)	$	400,000
364-day warehouse repurchase facility that matures March 2019 (2)	300,000
364-day warehouse repurchase facility that matures June 2019	700,000
364-day warehouse repurchase facility that matures October 2019 (3)	500,000
Total	$	1,900,000

(1)	Subsequent to November 30, 2018, the maturity date was extended to February 2019. Maximum aggregate commitment includes an uncommitted amount of $250 million.

(2)	Maximum aggregate commitment includes an uncommitted amount of $300 million.

(3)	Maximum aggregate commitment includes an uncommitted amount of $400 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 $1.3 billion and $937.2 million at November 30, 2018 and 2017, respectively, and were collateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $1.3 billion and $974.1 million at November 30, 2018 and 2017, respectively. The combined effective interest rate on the facilities at November 30, 2018 was 4.5%. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

9. Lennar Multifamily Segment

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

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

	November 30,
(In thousands)	2018				2017
Assets:
Cash and cash equivalents	$	7,832			8,676
Receivables (1)	73,829				69,678
Land under development	277,894				208,618
Investments in unconsolidated entities	481,129				407,544
Other assets	33,535				16,209
	$	874,219			710,725
Liabilities:
Accounts payable and other liabilities	$	170,616			149,715
	$	170,616			149,715

(1)	Receivables primarily related to general contractor services, net of deferrals and management fee income receivables due from unconsolidated entities as of November 30, 2018 and 2017.

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 increase 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, 2018 and 2017, the fair value of the completion guarantees was immaterial. Additionally, as of November 30, 2018 and 2017, the Lennar Multifamily segment had $4.6 million and $4.7 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, 2018 and 2017, the Lennar Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $1.0 billion and $896.7 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, 2018, 2017 and 2016, the Lennar Multifamily segment received fee income, net of deferrals, from its unconsolidated entities of $48.8 million, $53.8 million and $38.5 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, 2018, 2017 and 2016, the Lennar Multifamily segment provided general contractor services, net of deferrals, totaling $353.2 million, $341.0 million and $237.1 million, respectively, which were offset by costs related to those services of $338.7 million, $330.4 million and $228.6 million, respectively.

The Lennar Multifamily Venture Fund I LP (the "Venture Fund") 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, 2018, $384.3 million in equity commitments were called, of which the Company contributed its portion of $90.1 million. During the year ended November 30, 2018, the Company received $18.0 million of distributions as a return of capital from the Venture Fund. As of November 30, 2018, $1.8 billion of the $2.2 billion

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

in equity commitments had been called, of which the Company had contributed $440.8 million representing its pro-rata portion of the called equity, resulting in a remaining equity commitment for the Company of $63.2 million. As of November 30, 2018 and 2017, the carrying value of the Company's investment in the Venture Fund was $383.4 million and $323.8 million, respectively.

In March 2018, the Lennar Multifamily segment completed the first closing of a second Lennar Multifamily Venture, Lennar Multifamily Venture II LP, ("Venture Fund II"), for the development, construction and property management of Class-A multifamily assets. As of November 30, 2018, Venture Fund II had approximately $787 million of equity commitments, including a $255 million co-investment commitment by Lennar comprised of cash, undeveloped land and preacquisition costs. As of and for the year ended November 30, 2018, $252.1 million in equity commitments were called, of which the Company contributed its portion of $81.2 million, which was made up of a $188.4 million inventory and cash contributions, offset by $107.2 million of distributions as a return of capital, resulting in a remaining equity commitment for the Company of $173.8 million. As of November 30, 2018, the carrying value of the Company's investment in Venture Fund II was $63.0 million. The difference between the Company's net contributions and the carrying value of the Company's investments was related to a basis difference. Venture Fund II is currently seeded with eight undeveloped multifamily assets that were previously purchased by the Lennar Multifamily segment totaling approximately 3,000 apartments with projected project costs of approximately $1.3 billion.

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)	2018				2017
Assets:
Cash and cash equivalents	$	61,571			37,073
Operating properties and equipment	3,708,613				2,952,070
Other assets	40,899				36,772
	$	3,811,083			3,025,915
Liabilities and equity:
Accounts payable and other liabilities	$	199,119			212,123
Notes payable (1)	1,381,656				879,047
Equity	2,230,308				1,934,745
	$	3,811,083			3,025,915
Lennar Multifamily investments in unconsolidated entities	$	481,129			407,544

(1)	Notes payable are net of debt issuance costs of $15.7 million and $17.6 million, as of November 30, 2018 and 2017, respectively.

Statements of Operations
	Years Ended November 30,
(In thousands)	2018				2017			2016
Revenues	$	117,985			67,578			45,287
Costs and expenses	172,089				108,610			68,976
Other income, net	93,778				207,793			191,385
Net earnings of unconsolidated entities	$	39,674			166,761			167,696
Lennar Multifamily equity in earnings from unconsolidated entities and other gain (1)	$	51,322			85,739			85,519

(1)

During the year ended November 30, 2018, the Lennar Multifamily segment sold, through its unconsolidated entities, six operating properties and an investment in an operating property resulting in the segment's $61.2 million share of gains. The gain of $15.7 million recognized on the sale of the investment in an operating property and recognition of the Company's share of deferred development fees that were capitalized at the joint venture level are included in Lennar Multifamily equity in earnings from unconsolidated entities and other gain, and are not included in net earnings of unconsolidated entities. During the years ended November 30, 2017 and 2016, the Lennar Multifamily segment sold seven operating properties, through its unconsolidated entities resulting in the segment's $96.7 million and $91.0 million share of gains, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. Rialto Segment

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

	November 30,
(In thousands)	2018				2017
Assets:
Cash and cash equivalents	$	26,829			241,861
Restricted cash (1)	9,868				22,466
Receivables, net (2)	218,437				—
Loans held-for-sale (3)	61,691				236,018
Real estate owned, net	25,632				86,047
Investments in unconsolidated entities	297,379				265,418
Investments held-to-maturity	196,956				179,659
Other assets	57,453				122,371
	$	894,245			1,153,840
Liabilities:
Notes and other debts payable (4)	$	317,016			625,081
Other liabilities	80,934				94,975
	$	397,950			720,056

(1)	As of November 30, 2018 and 2017, restricted cash primarily consisted of upfront deposits and application fees RMF receives before originating loans and is recognized as income once the loan has been originated and cash held in escrow by the Company’s loan servicer provider on behalf of customers and lenders and is disbursed in accordance with agreements between the transacting parties.

(2)	Receivables, net, is primarily related to loans sold but not settled as of November 30, 2018.

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

(4)

In March 2018, Rialto paid off the remaining principal balance of the 7.00% senior notes due 2018 (the "7.00% Senior Notes"). As of November 30, 2017, notes and other debts payable primarily included $349.4 million related to Rialto's 7.00% Senior Notes. In addition, as of November 30, 2018 and November 30, 2017, notes and other debt payable included $178.8 million and $162.1 million, respectively, related to RMF's warehouse repurchase facilities.

Sale of Asset and Investment Management Platform

The Company sold the Rialto asset and investment management platform on November 30, 2018 for a gain of $296.4 million. The Company retained its Rialto Mortgage Finance business, which moved into our Financial Services segment as of December 1, 2018. The Company also retained its fund investments along with its carried interests in various Rialto funds and investments in other Rialto balance sheet assets. The Company's limited partner investments in Rialto funds and investment vehicles totaled $297.4 million at November 30, 2018, and the Company is committed to invest as much as an additional $71.6 million in Rialto funds.

Rialto Mortgage Finance - loans held-for-sale

During the year ended November 30, 2018, RMF originated loans with a total principal balance of $1.4 billion, all of which was recorded as loans held-for-sale, and sold $1.5 billion of loans into 16 separate securitizations. During the year ended November 30, 2017, RMF originated loans with a 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. As of November 30, 2018, originated loans with an unpaid balance of $218.4 million were sold into a securitization trust but not settled and thus were included as receivables, net. As of November 30, 2017, there were no unsettled transactions.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At November 30, 2018, RMF warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures November 2019	$	200,000
364-day warehouse repurchase facility that matures December 2019	200,000
364-day warehouse repurchase facility that matures December 2019	250,000
364-day warehouse repurchase facility that matures December 2019	200,000
Total - Loans origination and securitization business	850,000
Warehouse repurchase facility that matures December 2019 (two - one year extensions) (1)	50,000
Total	$	900,000

(1)	RMF 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 both November 30, 2018 and 2017.

Borrowings under the facilities that finance RMF's loan originations and securitization activities were $178.8 million and $162.1 million as of November 30, 2018 and 2017, 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 held-to-maturity

At November 30, 2018 and 2017, the carrying value of Rialto's CMBS was $197.0 million and $179.7 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 December 2027, and stated maturity dates between November 2043 and March 2059. 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, 2018, 2017 and 2016. The Rialto segment classified these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.

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.

During the years ended November 30, 2018, 2017 and 2016, Rialto received $12.8 million, $7.3 million and $10.1 million, respectively, of advance distributions with regard to Rialto's carried interests in its real estate funds in order to cover income tax obligations resulting from allocations of taxable income to Rialto's carried interests in these funds. In addition, during the year ended November 30, 2018, Rialto received $12.7 million of distributions with regard to its carried interest in Rialto Real Estate Funds. During the year ended November 30, 2017, Rialto received $36.8 million of distributions with regard to its carried interest in one of Rialto's funds. These incentive income distributions are not subject to clawbacks and therefore are included in Rialto's revenues.

Rialto adopted carried interest plans under which the Company and participating employees will receive 60% and 40%, respectively, of carried interest payments, net of expenses, received by entities that are general partners of a number of Rialto funds or other investment vehicles. When Rialto's asset and investment management platform was sold, the Company retained its right to receive 60% of the distributions of carried interest payments received from funds that existed at the time of the sale.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Balance Sheets
	November 30,
(In thousands)	2018				2017
Assets:
Cash and cash equivalents	$	50,043			95,552
Loans receivable	705,414				538,317
Real estate owned	273,802				348,601
Investment securities	2,296,768				1,849,795
Investments in partnerships	380,290				393,874
Other assets	38,682				42,949
	$	3,744,999			3,269,088
Liabilities and equity:
Accounts payable and other liabilities	$	30,236			48,374
Notes payable (1)	595,491				576,810
Equity	3,119,272				2,643,904
	$	3,744,999			3,269,088
Rialto's investments in unconsolidated entities	$	297,379			265,418

(1)	Notes payable are net of debt issuance costs of $4.6 million and $3.1 million, as of November 30, 2018 and 2017, respectively.

Statements of Operations
	Years Ended November 30,
(In thousands)	2018				2017			2016
Revenues	$	373,355			238,981			200,346
Costs and expenses	103,138				104,343			96,343
Other income, net (1)	(58,757		)		109,927			49,342
Net earnings of unconsolidated entities	$	211,460			244,565			153,345
Rialto equity in earnings from unconsolidated entities	$	25,816			25,447			18,961

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

11. Income Taxes

The provision for income taxes consisted of the following:

	Years Ended November 30,
(In thousands)	2018				2017			2016
Current:
Federal	$	246,604			309,235			300,116
State	30,530				17,572			19,777
	$	277,134			326,807			319,893
Deferred:
Federal	$	189,096			40,641			43,775
State	78,941				50,409			53,710
	268,037				91,050			97,485
	$	545,171			417,857			417,378

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

	Percentage of Pretax Income
	2018			2017			2016
Statutory rate	22.22	%		35.00	%		35.00	%
State income taxes, net of federal income tax benefit	3.81			3.29			3.21
Domestic production activities deduction	(1.71	)		(2.77	)		(2.78	)
Tax reserves and interest expense, net	(0.39	)		0.27			(0.89	)
Deferred tax asset valuation allowance, net	(0.03	)		0.17			(0.01	)
Accounting method changes	(1.47	)		—			—
Changes in tax law (1)	3.06			—			—
Tax credits	(1.60	)		(2.03	)		(3.46	)
Other	0.44			0.09			0.33
Effective rate	24.33	%		34.02	%		31.40	%

(1)

In December, 2017, the Tax Cuts and Jobs Act was enacted which had a positive impact on our effective tax rate in 2018 and will have a positive impact in subsequent years. The tax reform bill reduced the maximum federal corporate income tax rate to 21%, which reduced the value of the Company's deferred tax assets. As a result, the Company recorded a non-cash one-time write down of deferred tax assets that resulted in income tax expense of $68.6 million in fiscal year 2018.

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)	2018				2017
Deferred tax assets:
Inventory valuation adjustments	$	315,006			54,511
Reserves and accruals	175,626				164,868
Net operating loss carryforwards	138,094				100,338
Rialto investments in partnerships	5,938				15,705
Capitalized expenses	51,477				197,204
Investments in unconsolidated entities	63,339				38,627
Other assets	115,266				68,857
Total deferred tax assets	864,746				640,110
Valuation allowance	(7,219		)		(6,423	)
Total deferred tax assets after valuation allowance	857,527				633,687
Deferred tax liabilities:
Capitalized expenses	153,392				79,440
Deferred income	156,376				244,969
Other liabilities	32,271				11,583
Total deferred tax liabilities	342,039				335,992
Net deferred tax assets	$	515,488			297,695

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

	Years Ended November 30,
(In thousands)	2018				2017
Net deferred tax assets (liabilities): (1)
Lennar Homebuilding	$	477,676			279,900
Lennar Financial Services	5,075				(1,176	)
Lennar Multifamily	15,272				(2,973	)
Rialto	17,465				21,944
Net deferred tax assets	$	515,488			297,695

(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, 2018 and 2017, the net deferred tax assets included a valuation allowance of $7.2 million and $6.4 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.

At November 30, 2018 and 2017, the Company had federal tax effected NOL carryforwards totaling $44.8 million and $34.1 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, 2018 and 2017, the Company had state tax effected NOL carryforwards totaling $93.3 million and $66.2 million, respectively, that may be carried forward from 5 to 20 years, depending on the tax jurisdiction, with losses expiring between 2019 and 2037.

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

	Years Ended November 30,
(In thousands)	2018				2017			2016
Gross unrecognized tax benefits, beginning of year	$	12,285			12,285			12,285
Increases due to tax positions taken during prior period	222				—			—
Decreases due to tax positions taken during prior period	(2,805		)		—			—
Lapse of statute of limitations	(2,052		)		—			—
Decreases due to settlements with tax authorities	(6,493		)		—			—
Increases due to the CalAtlantic acquisition	13,510				—			—
Gross unrecognized tax benefits, end of year	$	14,667			12,285			12,285

If the Company were to recognize its gross unrecognized tax benefits as of November 30, 2018, $11.6 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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

	Years Ended November 30,
(In thousands)	2018				2017
Accrued interest and penalties, beginning of the year	$	49,723			45,973
Additional interest and penalties (related to the acquisition of CalAtlantic)	1,515				—
Accrual of interest and penalties (primarily related to federal and state audits)	1,894				4,184
Reduction of interest and penalties	(190		)		(434	)
Accrued interest and penalties, end of the year	$	52,942			49,723

The IRS is currently examining the Company's federal tax income tax returns for fiscal year 2017, 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.

12. Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

	Years Ended November 30,
(In thousands, except per share amounts)	2018				2017			2016
Numerator:
Net earnings attributable to Lennar	$	1,695,831			810,480			911,844
Less: distributed earnings allocated to nonvested shares	429				377			337
Less: undistributed earnings allocated to nonvested shares	14,438				7,447			8,852
Numerator for basic earnings per share	1,680,964				802,656			902,655
Less: net amount attributable to noncontrolling interests in Rialto's Carried Interest Incentive Plan (1)	3,320				1,009			1,028
Plus: interest on convertible senior notes	80				—			5,528
Plus: undistributed earnings allocated to convertible shares	2,904				—			8,852
Less: undistributed earnings reallocated to convertible shares	2,899				—			8,438
Numerator for diluted earnings per share	$	1,677,729			801,647			907,569
Denominator:
Denominator for basic earnings per share - weighted average common shares outstanding	307,968				237,155			223,079
Effect of dilutive securities:
Share-based payments	48				1			3
Convertible senior notes	549				—			12,288
Denominator for diluted earnings per share - weighted average common shares outstanding	308,565				237,156			235,370
Basic earnings per share	$	5.46			3.38			4.05
Diluted earnings per share	$	5.44			3.38			3.86

(1)	The amounts presented above relate to Rialto's carried interest incentive plans (see Note 10) 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.

For the years ended November 30, 2018, 2017 and 2016, 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, 2018 and 2017.

Common Stock

During each of the years ended November 30, 2018, 2017 and 2016, 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, the Company 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, 2018, Stuart Miller, the Company’s Executive Chairman, directly owned, or controlled through family-owned entities, shares of Class A and Class B common stock, which represented approximately 33% voting power of the Company’s stock.

During fiscal 2018, the Company had 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 year ended November 30, 2018, under the Company's stock repurchase program, the Company repurchased 6.0 million shares of Class A common stock for $249.9 million at an average share price of $41.63. During the years ended November 30, 2017 and 2016, there were no share repurchases of common stock under the stock repurchase program.

Subsequent to November 30, 2018, the Company's Board of Directors authorized the Company to repurchase up to the lesser of $1 billion in value, or 25 million in shares, of the Company’s outstanding Class A or Class B common stock. The repurchase authorization has no expiration and replaced the Company's 2001 stock repurchase program.

During the year ended November 30, 2018, treasury stock increased by 7.0 million shares of Class A common stock primarily due to the repurchase of 6.0 million shares of common stock. During the year ended November 30, 2017, treasury stock increased by 0.6 million shares of Class A common stock primarily due to activity related to our 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 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.

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, 2018, 2017 and 2016, this amount was $25.3 million, $17.2 million and $15.7 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)	2018				2017			2016
Total compensation expense for nonvested share-based awards	$	72,655			61,356			55,516

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, 2018, 2017 and 2016 there was $2.5 million, $2.0 million, and $7.0 million, respectively, of excess tax benefits from share-based awards 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, 2018, 2017 and 2016 was $55.84, $51.92 and $45.10, respectively. A summary of the Company’s nonvested shares activity for the year ended November 30, 2018, adjusted for the Class B stock dividend, was as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested shares at November 30, 2017	2,399,866			$	49.33
Grants	2,658,928			$	55.84
Vested	(2,166,772	)		$	53.37
Forfeited	(154,670	)		$	50.94
Nonvested shares at November 30, 2018	2,737,352			$	52.37

At November 30, 2018, there was $96.3 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 years. For the years ended November 30, 2018, 2017 and 2016, 2.2 million, 1.2 million and 1.1 million nonvested shares, respectively, 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, 2018 and 2017, 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,
			2018							2017
	Fair Value		Carrying				Fair			Carrying			Fair
(In thousands)	Hierarchy		Amount				Value			Amount			Value
ASSETS
Lennar Financial Services:
Loans held-for-investment, net	Level 3		$	70,216			63,794			44,193			41,795
Investments held-to-maturity	Level 2		$	52,490			52,220			52,327			52,189
Rialto:
Investments held-to-maturity	Level 3		$	196,956			222,753			179,659			199,190
LIABILITIES
Lennar Homebuilding senior notes and other debts payable	Level 2		$	8,543,868			8,336,166			6,410,003			6,598,848
Lennar Financial Services notes and other debts payable	Level 2		$	1,256,174			1,256,174			937,431			937,431
Rialto notes and other debts payable	Level 2		$	317,016			318,032			625,081			644,644

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

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 primarily based on expected future cash flows calculated using current market forward rates.

Lennar Financial Services—The fair values of loans held-for-investment, net are based on the fair value of the collateral less estimated cost to sell or discounted cash flows, if estimable. 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.

Rialto—The fair value for investments held-to-maturity is based on discounted cash flows. For notes and other debts payable, the fair value is calculated based on discounted cash flows using quoted interest rates and for the warehouse repurchase financing agreements fair values approximate their carrying value due to their short-term maturities.

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, 2018				Fair Value at November 30, 2017
Lennar Financial Services Assets:
Loans held-for-sale (1)	Level 2		$	1,152,198			937,516
Investments available-for-sale	Level 1		$	4,161			57,439
Mortgage loan commitments	Level 2		$	16,373			9,873
Forward contracts	Level 2		$	(10,360	)		1,681
Mortgage servicing rights	Level 3		$	37,206			31,163
Rialto Financial Assets:
RMF loans held-for-sale (2)	Level 3		$	61,691			234,403

(1)	The aggregate fair value of Lennar Financial Services loans held-for-sale of $1.2 billion at November 30, 2018 exceeded their aggregate principal balance of $1.1 billion by $37.3 million. The aggregate fair value of Lennar Financial Services loans held-for-sale of $937.5 million at November 30, 2017 exceeded their aggregate principal balance of $908.8 million by $28.7 million.

(2)	The aggregate fair value of Rialto loans held-for-sale of $61.7 million at November 30, 2018 exceeded their aggregate principal balance of $61.0 million by $0.7 million. 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 estimated fair values of the Company’s financial instruments have been determined by using available market information and what the Company believes to be appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies might have a material effect on the estimated fair value amounts. The following methods and assumptions are used by the Company in estimating fair values:

Lennar Financial Services loans held-for-sale— Fair value is based on independent quoted market prices, where available, or the prices for other mortgage whole loans with similar characteristics. Management believes carrying loans held-for-sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions. In addition, the Company recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of these servicing rights is included in Lennar Financial Services’ loans held-for-sale as of November 30, 2018 and 2017. Fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics.

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

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

Lennar Financial Services forward contracts— Fair value is based on quoted market prices for similar financial instruments. The fair value of forward contracts is included in the Lennar Financial Services segment's other liabilities as of November 30, 2018. The fair value of forward contracts is included in the Lennar Financial Services segment's other assets as of November 30, 2017.

The Lennar Financial Services segment uses mandatory mortgage-backed securities ("MBS") forward commitments, option contracts and investor commitments to hedge its mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk associated with MBS forward commitments, option contracts and loan sales transactions is managed by limiting the Company’s counterparties to investment banks, federally regulated bank affiliates and other investors meeting the Company’s credit standards. The segment’s risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and option

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

contracts. At November 30, 2018, the segment had open commitments amounting to $1.5 billion to sell MBS with varying settlement dates through February 2019.

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, 2018, the key assumptions used in determining the fair value include an 11.9% mortgage prepayment rate, a 12.5% discount rate and an 8.4% delinquency rate. The fair value of mortgage servicing rights is included in the Lennar Financial Services segment's other assets.

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

The changes in fair 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)	2018				2017			2016
Changes in fair value included in Lennar Financial Services revenues:
Loans held-for-sale	$	8,621			20,309			(19,865	)
Mortgage loan commitments	$	6,500			2,436			(5,623	)
Forward contracts	$	(12,041	)		(24,786	)		25,936
Investments available-for-sale	$	(234	)		(12	)		53
Changes in fair value included in other comprehensive income (loss), net of tax:
Lennar Financial Services investments available-for-sale	$	(1,634	)		1,331			(295	)

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,
	2018							2017
	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	$	31,163			234,403			23,930			126,947
Purchases/loan originations	7,841				1,350,091			10,479			1,583,876
Sales/loan originations sold, including those not settled	—				(1,504,554	)		—			(1,474,714	)
Disposals/settlements	(6,948		)		(19,600	)		(3,912	)		—
Changes in fair value (1)	5,150				1,481			666			(301	)
Interest and principal paydowns	—				(130	)		—			(1,405	)
End of year	$	37,206			61,691			31,163			234,403

(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,
			2018										2017									2016
(In thousands)	Fair Value Hierarchy		Carrying Value				Fair Value			Total (Losses), Net (1)			Carrying Value			Fair Value			Total (Losses), Net (1)			Carrying Value			Fair Value			Total Gains (Losses), Net (1)
Financial assets
Rialto:
Impaired loans receivable	Level 3		$	—			—			—			31,561			18,885			(12,676	)		79,581			61,352			(18,229	)
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		$	4,019			3,473			(546	)		8,601			4,227			(4,374	)		—			—			—
Land and land under development (2)	Level 3		$	96,093			62,850			(33,243	)		6,771			3,094			(3,677	)		29,418			22,925			(6,493	)
Rialto:
REO, net (3)
Upon acquisition/transfer	Level 3		$	—			—			—			27,640			26,591			(1,049	)		53,154			54,443			1,289
Upon management periodic valuations	Level 3		$	58,721			25,632			(33,089	)		145,251			81,677			(63,574	)		105,830			81,454			(24,376	)

(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 year.

(2)	Valuation adjustments were included in Lennar Homebuilding costs and expenses in the Company's consolidated statement of operations for the years ended November 30, 2018, 2017 and 2016.

(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, 2018, 2017 and 2016.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. 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, 2018. Based on the Company’s evaluation, during the year ended November 30, 2018, the Company consolidated and deconsolidated the same VIE thus resulting in no change to the combined assets and liabilities during the year. In addition, during the year ended November 30, 2018, the Company consolidated a VIE that had total assets of $57.3 million and an immaterial amount of liabilities. During the year ended November 30, 2018, there was a VIE that was deconsolidated that had a total assets of $48.1 million.

Consolidated VIEs

As of November 30, 2018, the carrying amount of the VIEs’ assets and non-recourse liabilities that consolidated was $666.2 million and $242.5 million, respectively. 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. 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, 2018 and 2017, the Company’s recorded investments in VIEs that are unconsolidated and its estimated maximum exposure to loss were as follows:

	November 30,
	2018							2017
(In thousands)	Investments in Unconsolidated VIEs				Lennar’s Maximum Exposure to Loss			Investments in Unconsolidated VIEs			Lennar’s Maximum Exposure to Loss
Lennar Homebuilding (1)	$	127,009			188,890			181,804			248,909
Lennar Multifamily (2)	463,534				710,754			345,175			503,364
Rialto (3)	196,956				196,956			179,659			179,659
	$	787,499			1,096,600			706,638			931,932

(1)	At both November 30, 2018 and 2017, 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 $54.8 million and $61.6 million, respectively.

(2)

As of November 30, 2018, the remaining equity commitment of $237.0 million to fund the Venture Fund and Venture Fund II for future expenditures related to the construction and development of its projects was included in Lennar maximum exposure to loss. As of November 30, 2017, the remaining equity commitment of $153.3 million to fund the Venture Fund was included in Lennar's maximum exposure to loss. In addition, at both November 30, 2018 and 2017, the maximum exposure to loss of Lennar Multifamily's investments in unconsolidated VIEs also included its investments in the unconsolidated VIEs, except with regard to $4.6 million 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.

(3)

At both November 30, 2018 and 2017, 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, 2018 and 2017, investments in unconsolidated VIEs and Lennar’s maximum exposure to loss included $197.0 million and $179.7 million, respectively, related to Rialto’s investments held-to-maturity.

While these entities are VIEs, the Company has determined that the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance is generally shared 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, 2018, the Company and other partners do not generally have an obligation to make capital contributions to the VIEs, except for $237.0 million remaining equity commitment to fund the Venture Fund and Venture Fund

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

II 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 $54.8 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, 2018, consolidated inventory not owned decreased by $184.3 million with a corresponding decrease to liabilities related to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2018. The decrease was primarily due to a higher amount of homesite takedowns than construction started on homesites not owned. To reflect the purchase price of the inventory consolidated, the Company had a net reclass related to option deposits from consolidated inventory not owned to land under development in the accompanying condensed consolidated balance sheet as of November 30, 2018. 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 $209.5 million and $137.0 million at November 30, 2018 and 2017, respectively. Additionally, the Company had posted $72.4 million and $51.8 million of letters of credit in lieu of cash deposits under certain land and option contracts as of November 30, 2018 and 2017, respectively.

17. Commitments and Contingent Liabilities

The Company is party to various claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, the disposition of these matters will not have a material adverse effect on the Company’s consolidated financial statements. The Company is also a party to various lawsuits involving purchases and sales of real property. These lawsuits include claims regarding representations and warranties made in connection with the transfer of 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, 2018, the Company had $209.5 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.

In the first quarter of 2017, the Company recorded a $140 million loss due to litigation regarding a contract the Company entered into in 2005 to purchase a property in Maryland. As a result of the litigation, the Company purchased the property for $114 million, which approximated the Company's estimate of fair value for the property. In addition, the Company paid approximately $124 million in interest and other closing costs and have accrued for the amount it expects to pay as reimbursement for attorney's fees.

In July 2017, CalAtlantic Group, Inc., a subsidiary of the Company, was notified by the San Francisco Regional Water Quality Control Board of CalAtlantic’s non-compliance with the Clean Water Act at a development in San Ramon, CA. The

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Company expects to pay monetary sanctions to resolve this matter, which the Company does not currently expect will be material.

The Company's mortgage subsidiary was subpoenaed by the United States Department of Justice ("DOJ") regarding the adequacy of certain underwriting and quality control processes related to Federal Housing Administration loans originated and sold in prior years. The Company provided information related to these loans and our processes to the DOJ. In October 2018, the Company paid monetary sanctions and restitution to resolve this matter that were not material.

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, 2018 were as follows:

(In thousands)	Lease Payments
2019	$	50,433
2020	47,764
2021	38,878
2022	27,148
2023	19,743
Thereafter	42,068

Rental expense for the years ended November 30, 2018, 2017 and 2016 was $98.4 million, $74.6 million and $63.2 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 $763.8 million at November 30, 2018. Additionally, at November 30, 2018, the Company had outstanding surety bonds of $2.7 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, 2018, there were approximately $1.4 billion, or 52%, of anticipated future 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 decade 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 or others could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors. The Company establishes accruals for such possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as previous settlements. While the Company believes that it has adequately reserved for known losses and projected repurchase requests, given the volatility in the mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s expectations, additional recourse expense may be incurred. Loan origination liabilities are included in Lennar Financial Services’ liabilities in the Company's condensed consolidated balance sheets.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18. Supplemental Financial Information

The indentures governing the Company’s 4.500% senior notes due 2019, 4.50% senior notes due 2019, 6.625% senior notes due 2020, 2.95% senior notes due 2020, 8.375% senior notes due 2021, 4.750% senior notes due 2021, 6.25% senior notes due 2021, 4.125% senior notes due 2022, 5.375% senior notes due 2022, 4.750% senior notes due 2022, 4.875% senior notes due 2023, 4.500% senior notes due 2024, 5.875% senior notes due 2024, 4.750% senior notes due 2025, 5.25% senior notes due 2026, 5.00% senior notes due 2027 and 4.75% senior notes due 2027 require that, if any of the Company’s 100% owned subsidiaries, other than its finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least $75 million principal amount of debt of Lennar Corporation, those subsidiaries must also guarantee Lennar Corporation’s obligations with regard to its senior notes. In addition, some subsidiaries of CalAtlantic are guaranteeing CalAtlantic senior convertible notes that also are guaranteed by Lennar Corporation. The entities referred to as "guarantors" in the following tables are subsidiaries that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at November 30, 2018 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, 2018 was as follows:

Consolidating Balance Sheet November 30, 2018
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
ASSETS
Lennar Homebuilding:
Cash and cash equivalents, restricted cash and receivables, net	$	637,083			886,059			63,905			—			1,587,047
Inventories	—				16,679,245			389,459			—			17,068,704
Investments in unconsolidated entities	—				983,963			12,963			—			996,926
Goodwill	—				3,442,359			—			—			3,442,359
Other assets	339,307				878,582			164,848			(26,955	)		1,355,782
Investments in subsidiaries	10,562,273				89,044			—			(10,651,317	)		—
Intercompany	11,815,491				—			—			(11,815,491	)		—
	23,354,154				22,959,252			631,175			(22,493,763	)		24,450,818
Lennar Financial Services	—				232,632			2,115,156			(889	)		2,346,899
Lennar Multifamily	—				—			874,219			—			874,219
Rialto	—				—			894,245			—			894,245
Total assets	$	23,354,154			23,191,884			4,514,795			(22,494,652	)		28,566,181
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable and other liabilities	$	804,232			1,977,579			303,473			(27,844	)		3,057,440
Liabilities related to consolidated inventory not owned	—				162,090			13,500			—			175,590
Senior notes and other debts payable	7,968,387				523,589			51,892			—			8,543,868
Intercompany	—				10,116,590			1,698,901			(11,815,491	)		—
	8,772,619				12,779,848			2,067,766			(11,843,335	)		11,776,898
Lennar Financial Services	—				51,535			1,486,225			—			1,537,760
Lennar Multifamily	—				—			170,616			—			170,616
Rialto	—				—			397,950			—			397,950
Total liabilities	$	8,772,619			12,831,383			4,122,557			(11,843,335	)		13,883,224
Stockholders’ equity	14,581,535				10,360,501			290,816			(10,651,317	)		14,581,535
Noncontrolling interests	—				—			101,422			—			101,422
Total equity	14,581,535				10,360,501			392,238			(10,651,317	)		14,682,957
Total liabilities and equity	$	23,354,154			23,191,884			4,514,795			(22,494,652	)		28,566,181

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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
Lennar Multifamily	—				—			710,725			—			710,725
Rialto	—				—			1,153,840			—			1,153,840
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
Lennar Multifamily	—				—			149,715			—			149,715
Rialto	—				—			720,056			—			720,056
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 Statement of Operations and Comprehensive Income (Loss) Year Ended November 30, 2018
(In thousands)	Lennar Corporation				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenues:
Lennar Homebuilding	$	—			18,972,723			104,874			—			19,077,597
Lennar Financial Services	—				371,063			516,691			(19,923	)		867,831
Lennar Multifamily	—				—			421,132			—			421,132
Rialto	—				—			205,071			—			205,071
Total revenues	—				19,343,786			1,247,768			(19,923	)		20,571,631
Cost and expenses:
Lennar Homebuilding	—				16,831,780			104,950			143			16,936,873
Lennar Financial Services	—				339,211			372,672			(31,482	)		680,401
Lennar Multifamily	—				—			429,759			—			429,759
Rialto	—				—			198,861			(8,448	)		190,413
Acquisition and integration costs related to CalAtlantic	—				152,980			—			—			152,980
Corporate general and administrative	336,355				2,417			—			5,162			343,934
Total costs and expenses	336,355				17,326,388			1,106,242			(34,625	)		18,734,360
Lennar Homebuilding equity in (loss) earnings from unconsolidated entities	—				(92,317	)		402			—			(91,915	)
Lennar Homebuilding other income, net	14,740				192,951			12,852			(14,702	)		205,841
Lennar Multifamily equity in earnings from unconsolidated entities and other gain	—				—			51,322			—			51,322
Rialto equity in earnings from unconsolidated entities	—				—			25,816			—			25,816
Rialto other expense, net	—				—			(62,058	)		—			(62,058	)
Gain on sale of Rialto investment and asset management platform	—				—			296,407			—			296,407
Earnings (loss) before income taxes	(321,615		)		2,118,032			466,267			—			2,262,684
Benefit (provision) for income taxes	78,249				(498,424	)		(124,996	)		—			(545,171	)
Equity in earnings from subsidiaries	1,939,197				93,612			—			(2,032,809	)		—
Net earnings (including net earnings attributable to noncontrolling interests)	1,695,831				1,713,220			341,271			(2,032,809	)		1,717,513
Less: Net earnings attributable to noncontrolling interests	—				—			21,682			—			21,682
Net earnings attributable to Lennar	$	1,695,831			1,713,220			319,589			(2,032,809	)		1,695,831
Other comprehensive loss, net of tax:
Net unrealized loss on securities available-for-sale	$	—			—			(1,634	)		—			(1,634	)
Reclassification adjustments for losses included in net earnings, net of tax	—				—			234			—			234
Total other comprehensive loss, net of tax	—				—			(1,400	)		—			(1,400	)
Total comprehensive income attributable to Lennar	$	1,695,831			1,713,220			318,189			(2,032,809	)		1,694,431
Total comprehensive earnings attributable to noncontrolling interests	$	—			—			21,682			—			21,682

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Operations and Comprehensive Income (Loss) 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
Lennar Multifamily	—				—			394,906			(135	)		394,771
Rialto	—				—			281,243			—			281,243
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
Lennar Multifamily	—				—			407,078			—			407,078
Rialto	—				—			247,762			(213	)		247,549
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	)
Lennar Multifamily equity in earnings from unconsolidated entities	—				—			85,739			—			85,739
Rialto equity in earnings from unconsolidated entities	—				—			25,447			—			25,447
Rialto other expense, net	—				—			(81,636	)		—			(81,636	)
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 gain 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
Lennar Multifamily	—				—			287,527			(86	)		287,441
Rialto	—				—			233,966			—			233,966
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
Lennar Multifamily	—				—			301,786			—			301,786
Rialto	—				—			230,565			(796	)		229,769
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
Lennar Multifamily equity in earnings from unconsolidated entities	—				—			85,519			—			85,519
Rialto equity in earnings from unconsolidated entities	—				—			18,961			—			18,961
Rialto other income, net	—				—			(39,850	)		—			(39,850	)
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 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	$	—			—			(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 Cash Flows Year Ended November 30, 2018
(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)	$	1,695,831			1,713,220			341,271			(2,032,809	)		1,717,513
Distributions of earnings from guarantor and non-guarantor subsidiaries	1,939,197				93,612			—			(2,032,809	)		—
Other adjustments to reconcile net earnings (including net earnings attributable to noncontrolling interests) to net cash provided by operating activities	(1,731,335		)		598,250			(905,628	)		2,032,809			(5,904	)
Net cash provided by (used in) operating activities	1,903,693				2,405,082			(564,357	)		(2,032,809	)		1,711,609
Cash flows from investing activities:
Proceeds from sale of operating properties	—				38,633			—			—			38,633
(Investments in and contributions to) and distributions of capital from unconsolidated entities, net	—				(94,937	)		51,906			—			(43,031	)
Proceeds from sales of real estate owned	—				—			32,221			—			32,221
Proceeds from sale of investment in unconsolidated entity	—				199,654			25,613			—			225,267
Proceeds from sale of commercial mortgage-backed securities bonds	—				—			14,222			—			14,222
Proceeds from sale of Rialto investment and asset management platform	—				—			340,000			—			340,000
Purchases of commercial mortgage-backed securities bonds	—				—			(31,068	)		—			(31,068	)
Acquisition, net of cash acquired	(1,162,342		)		22,716			36,351			—			(1,103,275	)
Other	(56,050		)		(35,982	)		10,941			—			(81,091	)
Distributions of capital from guarantor and non-guarantor subsidiaries	94,987				40,987			—			(135,974	)		—
Intercompany	(728,546		)		—			—			728,546			—
Net cash (used in) provided by investing activities	(1,851,951		)		171,071			480,186			592,572			(608,122	)
Cash flows from financing activities:
Net repayments under unsecured revolving credit facility	—				(454,700	)		—			—			(454,700	)
Net (repayments) borrowings under warehouse facilities	—				(108	)		273,028			—			272,920
Debt issuance costs	(9,189		)		—			(5,472	)		—			(14,661	)
Redemption of senior notes	(1,010,626		)		(89,374	)		—			—			(1,100,000	)
Conversions and exchanges of convertible senior notes	—				(59,145	)		—			—			(59,145	)
Net payments on other borrowings, other liabilities, Rialto Senior Notes and other notes payable	—				(128,685	)		(294,250	)		—			(422,935	)
Net payments related to noncontrolling interests	—				—			(71,449	)		—			(71,449	)
Common stock:
Issuances	3,061				—			—			—			3,061
Repurchases	(299,833		)		—			—			—			(299,833	)
Dividends	(49,159		)		(1,799,207	)		(369,576	)		2,168,783			(49,159	)
Intercompany	—				306,199			422,347			(728,546	)		—
Net cash used in financing activities	(1,365,746		)		(2,225,020	)		(45,372	)		1,440,237			(2,195,901	)
Net (decrease) increase in cash and cash equivalents	(1,314,004		)		351,133			(129,543	)		—			(1,092,414	)
Cash and cash equivalents at beginning of period	1,937,674				359,087			354,111			—			2,650,872
Cash and cash equivalents at end of period	$	623,670			710,220			224,568			—			1,558,458

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 from 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)

19. Quarterly Data (unaudited)

	First				Second			Third			Fourth
(In thousands, except per share amounts)
2018
Revenues	$	2,980,791			5,459,061			5,672,569			6,459,210
Gross profit from sales of homes	$	516,628			840,042			1,057,903			1,274,241
Earnings before income taxes	$	269,428			390,810			565,918			1,036,528
Net earnings attributable to Lennar	$	136,215			310,257			453,211			796,148
Earnings per share:
Basic	$	0.53			0.95			1.37			2.42
Diluted	$	0.53			0.94			1.37			2.42
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	$	0.16			0.89			1.04			1.29
Diluted	$	0.16			0.89			1.04			1.29

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.

20. Subsequent Events

Subsequent to November 30, 2018, the Company sold the majority of its retail title agency business and its wholly owned title insurance carrier. In addition, the Company sold its real estate brokerage business, which operated only in Florida. The Company does not expect the net gain from these transactions to be material.

Subsequent to November 30, 2018, the Company's Board of Directors authorized the Company to repurchase up to the lesser of $1 billion in value, or 25 million in shares, of the Company’s outstanding Class A or Class B common stock. The repurchase authorization has no expiration.