LENNAR CORPORATION The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included under Item 1 of this Report and our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K, for our fiscal year endedNovember 30, 2019 . Some of the statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q, are "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contained herein may include opinions or beliefs regarding market conditions and similar matters. In many instances, those opinions and beliefs are based upon general observations by members of our management, anecdotal evidence and our experience in the conduct of our businesses, without specific investigation or analyses. Therefore, while they reflect our view of the industries and markets in which we are involved, they should not be viewed as reflecting verifiable views or views that are necessarily shared by all who are involved in those industries or markets. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These forward-looking statements typically include the words "anticipate," "believe," "consider," "estimate," "expect," "forecast," "intend," "objective," "plan," "predict," "projection," "seek," "strategy," "target," "will" or other words of similar meaning. These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from what is anticipated by our forward-looking statements. The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to: the negative impact of the coronavirus (COVID-19) outbreak on our financial position and ability to continue our Homebuilding or Multifamily development activities at normal levels or at all in affected regions; the duration, impact and severity of the COVID-19 outbreak; an extended slowdown in the real estate markets across the nation, including a slowdown in the market for single family homes or the multifamily rental market; increases in operating costs, including costs related to construction materials, labor, real estate taxes and insurance, and our inability to manage our cost structure, both in our Homebuilding and Multifamily businesses; reduced availability of mortgage financing or increased interest rates; our inability to successfully execute our strategies, including our land lighter strategy; changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit; our inability to acquire land at anticipated prices; the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods; decreased demand for our homes or multifamily rental properties; the possibility that the benefit from our increasing use of technology will not justify its cost; increased competition for home sales from other sellers of new and resale homes; our inability to pay down debt; whether government actions or other factors related to COVID-19 force us to delay or terminate our program of repurchasing our stock; a decline in the value of our land inventories and resulting write-downs of the carrying value of our real estate assets; the failure of the participants in various joint ventures to honor their commitments; difficulty obtaining land-use entitlements or construction financing; natural disasters and other unforeseen events for which our insurance does not provide adequate coverage; new laws or regulatory changes that adversely affect the profitability of our businesses; our inability to refinance our debt on terms that are acceptable to us; and changes in accounting conventions that adversely affect our reported earnings. Please see our Form 10-K for the fiscal year endedNovember 30, 2019 and other filings with theSEC for a further discussion of these and other risks and uncertainties which could affect our future results. We undertake no obligation, other than those imposed by securities laws, to publicly revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events. OutlookThe United States economy in general and our business specifically have been dramatically affected by the coronavirus (COVID-19) pandemic. There are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it. For that reason, we are unable to predict the long-term impact of the pandemic on our business at this time. Our first priority with regard to the COVID-19 pandemic is to do everything we can to ensure the safety, health and hygiene of our associates, customers, suppliers and others with whom we partner in our business activities. Subject to that and through the use of appropriate risk mitigation and safety practices, we are doing everything we can to continue our business operations in this unprecedented business environment in which we find ourselves. Part of our strategy includes accelerating various technology initiatives to accommodate our safety first mandate and to continue our business in these difficult times. Subsequent to our first quarter earnings call, a number of states, counties and municipalities issued orders requiring persons who were not engaged in essential activities and businesses to remain at home. Other jurisdictions without stay-at-home orders required non-essential businesses to close. Some states designated residential homebuilding as an essential business activity. However, several states and municipalities did not include residential construction as an essential business 32 -------------------------------------------------------------------------------- and required that construction cease. Late in March, theUnited States Department of Homeland Security added construction to its list of critical infrastructure activities, though this is not binding on state and local governments. Presently, certain markets in which we do business have stopped our construction and sales of homes. While we continue to build and sell homes in our other markets, traffic in ourWelcome Home Centers and sales have slowed significantly. With a near shutdown of large portions of our national economy, we expect sales to continue to slow, even while we maintain and innovate our sales, construction and closing operations. In response to these rapidly changing market conditions, we are taking all appropriate steps to reduce construction costs, SG&A expenses and other cash outflows. While we have a strong liquidity position as ofFebruary 29, 2020 with$785 million of cash and$2.1 billion of unused committed capacity under our revolving credit facility, we are taking steps to maximize positive cash flow, in case a lack of liquidity in the economy resulting from the responses to the COVID-19 pandemic limits our access to third party funding. We are doing this by limiting cash expenditures as much as possible, including working collaboratively through our strong relationships with national, regional and local developers to extend the closing date of our land purchases and defer land development activities. Our mortgage lending operations have not yet experienced a significant slowdown in loan originations as a result of the COVID-19 pandemic. However, a material reduction in our home sales would significantly reduce our residential mortgage lending activities. To the extent we are able to continue originating residential mortgage loans, we expect to be able to continue selling them into the secondary mortgage market. We do not know to what extent the financial effects of the responses to the COVID-19 pandemic will impact the demand for commercial mortgage loans of the type we originate, but they are likely to make it more difficult for us to sell loans we originate into securitization vehicles. This could require us to reduce our commercial mortgage lending even if demand is not adversely affected. If the COVID-19 pandemic continues to curtail economic activity for a substantial period, it is likely to lead to rent arrearages by tenants in multifamily residential buildings in which our Multifamily segment has investments. All of our other business activities are likely to be affected by COVID-19 related reductions in economic activity. Nobody knows the total effects the COVID-19 pandemic will have on the economy during the remainder of 2020. Our senior management team is monitoring its impact on a daily basis and will continue to adjust our operations as necessary. (1) Results of Operations Overview We historically have experienced, and expect to continue to experience, variability in quarterly results. Our results of operations for the three months endedFebruary 29, 2020 are not necessarily indicative of the results to be expected for the full year. Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second and third fiscal quarters and increased deliveries in the second half of our fiscal year. However, periods of economic downturn in the industry can alter seasonal patterns as noted in the Outlook section above. Our net earnings attributable to Lennar were$398.5 million , or$1.27 per diluted share ($1.27 per basic share), in the first quarter of 2020, compared to net earnings attributable to Lennar of$239.9 million , or$0.74 per diluted share ($0.74 per basic share), in the first quarter of 2019. 33 --------------------------------------------------------------------------------
Financial information relating to our operations was as follows:
Three Months Ended February 29, 2020
Financial Lennar
(In thousands) Homebuilding Services Multifamily Other Corporate Total
Revenues:
Sales of homes $ 4,140,767 - - - - 4,140,767
Sales of land 26,867 - - - - 26,867
Other revenues 4,482 198,661 132,617 1,943 - 337,703
Total revenues 4,172,116 198,661 132,617 1,943 - 4,505,337
Costs and expenses:
Costs of homes sold 3,291,779 - - - - 3,291,779
Costs of land sold 27,135 - - - - 27,135
Selling, general and
administrative expenses 378,892 - - - - 378,892
Other costs and expenses - 151,344 137,348 2,574 - 291,266
Total costs and expenses 3,697,806 151,344 137,348 2,574 - 3,989,072
Equity in earnings (loss) from
unconsolidated entities and
Multifamily other gain (4,546 ) - 6,516 119 - 2,089
Other income (expense), net (9,366 ) - - 1,411 - (7,955 )
Operating earnings $ 460,398 47,317 1,785 899 - 510,399
Corporate general and
administrative expenses - -
- - 86,847 86,847
Earnings before income taxes
Three Months Ended February 28, 2019
Financial
(In thousands) Homebuilding Services Multifamily Lennar Other Corporate Total
Revenues:
Sales of homes $ 3,608,129 - - - - 3,608,129
Sales of land 13,783 - - - - 13,783
Other revenues 1,809 143,311 97,394 3,656 - 246,170
Total revenues 3,623,721 143,311 97,394 3,656 - 3,868,082
Homebuilding costs and expenses:
Costs of homes sold 2,882,050 - - - - 2,882,050
Costs of land sold 13,526 - - - - 13,526
Selling, general and
administrative 343,259 - - - - 343,259
Other costs and expenses - 124,339 101,178 1,622 227,139
Total costs and expenses 3,238,835 124,339 101,178 1,622 - 3,465,974
Equity in earnings (loss) from
unconsolidated entities and
Multifamily other gain (13,756 ) - 10,581 8,330 - 5,155
Other expense, net (1,535 ) - - (7,261 ) - (8,796 )
Operating earnings $ 369,595 18,972 6,797 3,103 - 398,467
Corporate general and
administrative expenses - - - - 79,343 79,343
Earnings before income taxes $ 369,595 18,972 6,797 3,103 (79,343 ) 319,124
34-------------------------------------------------------------------------------- Three Months EndedFebruary 29, 2020 versus Three Months EndedFebruary 28, 2019 Revenues from home sales increased 15% in the first quarter of 2020 to$4.1 billion from$3.6 billion in the first quarter of 2019. Revenues were higher primarily due to a 17% increase in the number of home deliveries, excluding unconsolidated entities, partially offset by a 2% decrease in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, increased to 10,313 homes in the first quarter of 2020 from 8,802 homes in the first quarter of 2019, as a result of an increase in home deliveries in all homebuilding segments. The average sales price of homes delivered was$402,000 in the first quarter of 2020, compared to$410,000 in the first quarter of 2019. The decrease in average sales price primarily resulted from a continuing to shift to lower-priced communities. Gross margin on home sales were$849.0 million , or 20.5%, in the first quarter of 2020, compared to$726.1 million , or 20.1% in the first quarter of 2019. The gross margin percentage on home sales increased primarily due to our focus on reducing construction costs. Selling, general and administrative expenses were$378.9 million in the first quarter of 2020, compared to$343.3 million in the first quarter of 2019. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 9.2% in the first quarter of 2020, from 9.5% in the first quarter of 2019, due to improved operating leverage primarily as a result of an increase in home deliveries. Operating earnings for the Financial Services segment were$58.2 million in the first quarter of 2020 (which included$47.3 million of operating earnings and an add back of$10.9 million of net loss attributable to noncontrolling interests) compared to$21.8 million in the first quarter of 2019 (which included$19.0 million of operating earnings and an add back of$2.8 million of net loss attributable to noncontrolling interests). Operating earnings increased due to an improvement in the mortgage business as a result of an increase in volume and margin, as well as reductions in loan origination costs driven in part by technology initiatives. Additionally, operating earnings of our title business increased primarily due to an increase in volume. Operating earnings for the Multifamily segment were$1.8 million in the first quarter of 2020 (which included$0.1 million of net earnings attributable to noncontrolling interests), compared to$6.8 million in the first quarter of 2019. Operating earnings for the Lennar Other segment were$0.9 million in the first quarter of 2020, compared to$3.1 million in the first quarter of 2019 (which included$0.1 million of net earnings attributable to noncontrolling interests). For the three months endedFebruary 29, 2020 andFebruary 28, 2019 , we had a tax provision of$32.3 million and$79.7 million , respectively and our overall effective income tax rate of 7.5% and 24.9%, respectively. The reduction in the overall effective income tax rate is primarily due to the extension of the new energy efficient home tax credit during the first quarter of 2020. Homebuilding Segments AtFebruary 29, 2020 , our reportable Homebuilding segments and Homebuilding Other consisted of homebuilding divisions located in: East:Florida ,New Jersey ,North Carolina ,Pennsylvania andSouth Carolina Central:Georgia ,Illinois ,Indiana ,Maryland ,Minnesota ,Tennessee andVirginia Texas :Texas West:Arizona ,California ,Colorado ,Nevada ,Oregon ,Utah andWashington Other: Urban divisions and other homebuilding related investments primarily inCalifornia , including FivePoint Holdings, LLC ("FivePoint") 35 --------------------------------------------------------------------------------
The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated: Selected Financial and Operational Data
Three Months Ended
Gross Margins Operating Earnings (Loss)
Equity in
Earnings (Loss)
Costs of Net Margins on Gross Margins from Operating
Sales of Homes Sales of Sales of Homes on Sales of Other Unconsolidated Other Income
Earnings
(In thousands) Revenue Homes Gross Margin % (1) Land Revenue Entities (Expense), net (Loss) East$ 1,402,672 1,085,109 22.6 %$ 181,295 (743 ) 1,683 359 (7,589 ) 175,005 Central 534,746 453,391 15.2 % 27,934 (635 ) 230 553 1,390 29,472 Texas 463,796 360,273 22.3 % 53,127 1,673 517 203 (2,447 ) 53,073 West 1,731,514 1,379,291 20.3 % 218,507 (563 ) 1,814 3,940 1,209 224,907 Other (2) 8,039 13,715 (70.6 )% (10,767 ) - 238 (9,601 ) (1,929 ) (22,059 ) Totals$ 4,140,767 3,291,779 20.5 %$ 470,096 (268 ) 4,482 (4,546 ) (9,366 ) 460,398
Three Months Ended
Gross Margins Operating Earnings (Loss)
Equity in
Earnings (Loss)
Costs of Net Margins on Gross Margins from Operating
Sales of Homes Sales of Sales of Homes on Sales of Other Unconsolidated Other Income Earnings
(In thousands) Revenue Homes Gross Margin % (1) Land Revenue Entities (Expense), net (Loss)
East $ 1,222,644 969,866 20.7 % $ 134,286 2,372 609 (99 ) (1,785 ) 135,383
Central 433,125 358,361 17.3 % 30,065 403 164 69 225 30,926
Texas 412,430 332,103 19.5 % 31,989 1,464 54 (120 ) (1,109 ) 32,278
West 1,537,503 1,216,746 20.9 % 193,896 (3,981 ) 982 (311 ) 75 190,661
Other (2) 2,427 4,974 (104.9 )% (7,416 ) (1 ) - (13,295 ) 1,059 (19,653 )
Totals $ 3,608,129 2,882,050 20.1 % $ 382,820 257 1,809 (13,756 ) (1,535 ) 369,595
(1) Net margins on sales of homes include selling, general and administrative
expenses.
(2) Negative gross and net margins were due to period costs in Urban divisions
that impact costs of homes sold without any sales of homes revenue.
Summary of Homebuilding Data
Deliveries:
Three Months Ended
Homes Dollar Value (In thousands) Average Sales Price
February 29, February 28, February 29, February 28, February 29, February 28,
2020 2019 2020 2019 2020 2019
East 4,065 3,612 $ 1,405,667 1,226,435 $ 346,000 340,000
Central 1,366 1,124 534,746 433,125 391,000 385,000
Texas 1,577 1,251 463,796 412,429 294,000 330,000
West 3,304 2,825 1,731,514 1,537,503 524,000 544,000
Other 9 8 8,039 7,758 893,000 970,000
Total 10,321 8,820 $ 4,143,762 3,617,250 $ 401,000 410,000
Of the total homes delivered listed above, eight homes with a dollar value of
$3.0 million and an average sales price of $374,000 represent home deliveries
from unconsolidated entities for the three months ended February 29, 2020 ,
compared to 18 home deliveries with a dollar value of $9.1 million and an
average sales price of $507,000 for the three months ended February 28, 2019 .
36
--------------------------------------------------------------------------------
New Orders (1):
Three Months Ended
Active Communities Homes Dollar Value (In thousands) Average Sales Price
February 29, February 28, February 29, February 28, February 29, February 28, February 29, February 28,
2020 2019 2020 2019 2020 2019 2020 2019
East 424 447 4,625 4,493 $ 1,597,298 1,521,431 $ 345,000 339,000
Central 243 248 1,773 1,422 695,498 537,596 392,000 378,000
Texas 236 245 1,999 1,424 573,079 456,959 287,000 321,000
West 352 348 3,965 3,112 2,125,632 1,629,814 536,000 524,000
Other 3 4 14 12 13,581 11,313 970,000 943,000
Total 1,258 1,292 12,376 10,463 $ 5,005,088 4,157,113 $ 404,000 397,000
Of the total new orders listed above, 26 homes with a dollar value of $8.1
million and an average sales price of $310,000 represent new orders in five
active communities from unconsolidated entities for the three months ended
February 29, 2020 , compared to 15 new orders with a dollar value of $9.7 million
and an average sales price of $647,000 in five active communities for the three
months ended February 28, 2019 .
(1) New orders represent the number of new sales contracts executed with
homebuyers, net of cancellations, during the three months ended
2020 and
Backlog:
Homes Dollar Value (In thousands) Average Sales Price
February 29, February 28, February 29, February 28, February 29, February 28,
2020 2018 2020 2019 2020 2019
East 7,387 7,956 $ 2,640,129 2,817,706 $ 357,000 354,000
Central 2,420 2,284 982,589 894,724 406,000 392,000
Texas 2,592 2,321 822,620 805,250 317,000 347,000
West 5,219 4,688 2,702,535 2,579,762 518,000 550,000
Other 14 10 13,995 12,543 1,000,000 1,254,000
Total 17,632 17,259 $ 7,161,868 7,109,985 $ 406,000 412,000
Of the total homes in backlog listed above, 49 homes with a backlog dollar value
of $15.2 million and an average sales price of $311,000 represent the backlog
from unconsolidated entities at February 29, 2020 , compared to 14 homes with a
backlog dollar value of $7.7 million and an average sales price of $552,000 at
February 28, 2019 .
Backlog represents the number of homes under sales contracts. Homes are sold
using sales contracts, which are generally accompanied by sales deposits. In
some instances, purchasers are permitted to cancel sales if they fail to qualify
for financing or under certain other circumstances. Various state and federal
laws and regulations may sometimes give purchasers a right to cancel homes in
backlog. We do not recognize revenue on homes under sales contracts until the
sales are closed and title passes to the new homeowners.
Three Months Ended February 29, 2020 versus Three Months Ended February 28, 2019
Homebuilding East: Revenues from home sales increased in the first quarter of
2020 compared to the first quarter of 2019, primarily due to an increase in the
number of home deliveries and in the average sales price of homes delivered in
Florida and New Jersey , partially offset by a decrease in the number of home
deliveries and the average sales price of homes delivered in the Carolinas and
Pennsylvania . The increase in the number of home deliveries in Florida and New
Jersey was primarily due to higher demand as the number of deliveries per active
community increased. The decrease in the number of home deliveries in the
Carolinas and Pennsylvania was primarily due to a decrease in active
communities. The increase in the average sales price of homes delivered in
Florida and New Jersey was primarily driven by a change in product mix due to a
higher percentage of deliveries in higher-priced communities. The decrease in
the average sales price of homes delivered in the Carolinas and Pennsylvania was
primarily driven by a change in product mix due to a higher percentage of
deliveries in lower-priced communities. Gross margin percentage on home
deliveries in the first quarter of 2020 increased compared to the same period
last year primarily due to reducing our construction costs and a slight increase
in the average sales price of homes delivered.
Homebuilding Central: Revenues from home sales increased in the first quarter of
2020 compared to the first quarter of 2019, primarily due to an increase in the
number of home deliveries in all the states in the segment. The increase in the
number of home deliveries was primarily due to higher demand as the number of
deliveries per active community increased. Gross margin percentage on home
deliveries in the first quarter of 2020 decreased compared to the same period
last year primarily due to impairments taken in a few communities during first
quarter of 2020.
37
--------------------------------------------------------------------------------
Homebuilding Texas: Revenues from home sales increased in the first quarter of
2020 compared to the first quarter of 2019, primarily due to an increase in the
number of home deliveries, partially offset by a decrease in the average sales
price of homes delivered. The increase in the number of deliveries was primarily
due to higher demand as the number of deliveries per active community increased.
The decrease in average sales price of homes delivered was primarily due to
closing out higher priced communities and shifting into lower priced
communities. Gross margin percentage on home deliveries in the first quarter of
2020 increased compared to the same period last year primarily due to reducing
our construction costs.
Homebuilding West: Revenues from home sales increased in the first quarter of
2020 compared to the first quarter of 2019, primarily due to an increase in the
number of home deliveries in all states of the segment except Oregon and Utah ,
partially offset by a decrease in the average sales price of homes delivered in
all states of the segment except Utah . The increase in the number of home
deliveries in all states of the segment except Oregon and Utah was primarily due
to higher demand as the number of deliveries per active community increased. The
decrease in the number of home deliveries in Oregon and Utah was primarily due
to timing of the opening and closing of communities. The decrease in the average
sales price of homes delivered in all states of the segment except Utah was
primarily driven by a change in product mix due to a higher percentage of
deliveries in lower-priced communities. The increase in the average sales price
of homes delivered in Utah was primarily driven by a change in product mix due
to a higher percentage of deliveries in higher-priced communities. Gross margin
percentage on home deliveries in the first quarter of 2020 decreased compared to
the same period last year primarily due to a decrease in the average sales price
of homes delivered, partially offset by a reduction in our construction costs.
Financial Services Segment
Our Financial Services reportable segment provides mortgage financing, title and
closing services primarily for buyers of our homes. The segment also originates
and sells into securitizations commercial mortgage loans through its LMF
Commercial business. Our Financial Services segment sells substantially all of
the residential loans it originates within a short period in the secondary
mortgage market, the majority of which are sold on a servicing released,
non-recourse basis. After the loans are sold, we retain potential liability for
possible claims by purchasers that we breached certain limited industry-standard
representations and warranties in the loan sale agreements.
The following table sets forth selected financial and operational information
related to our Financial Services segment:
Three Months Ended
(Dollars in thousands) February 29, 2020 February 28, 2019
Dollar value of mortgages originated $ 2,221,000 1,937,000
Number of mortgages originated 6,900 6,200
Mortgage capture rate of Lennar homebuyers 77 % 73 %
Number of title and closing service transactions 11,200 14,600
At February 29, 2020 and November 30, 2019 , the carrying value of Financial
Services' commercial mortgage-backed securities ("CMBS") was $165.3 million and
$166.0 million , respectively. These securities were purchased at discounts
ranging from 6% to 84% with coupon rates ranging from 2.0% to 5.3%, stated and
assumed final distribution dates between October 2027 and December 2028 , and
stated maturity dates between October 2050 and December 2051 . Our Financial
Services segment classifies these securities as held-to-maturity based on its
intent and ability to hold the securities until maturity.
LMF Commercial
LMF Commercial originates and sells into securitizations five, seven and ten
year commercial first mortgage loans, which are secured by income producing
properties.
During the three months ended February 29, 2020 , LMF Commercial originated
commercial loans with a total principal balance of $412.3 million , all of which
were recorded as loans held-for-sale and sold $314.4 million of commercial loans
into two separate securitizations. As of November 30, 2019 , there were no
unsettled transactions.
During the three months ended February 28, 2019 , LMF Commercial originated
commercial loans with a total principal balance of $270.1 million , all of which
were recorded as loans held-for-sale, and sold $200.5 million of loans into two
separate securitizations.
38
--------------------------------------------------------------------------------
Multifamily Segment
The following tables provide information related to our investment in the
Multifamily segment:
Balance Sheets February 29, 2020 November 30, 2019
(Dollars in thousands)
Multifamily investments in unconsolidated entities $ 589,646 561,190
Lennar's net investment in Multifamily 868,302 829,537
Statement of Operations Three Months Ended
(Dollars in thousands) February 29,
2020
2 2
Lennar's share of gains on the sale of operating
properties/investments $ 3,000 15,500
(2) Financial Condition and Capital Resources
At February 29, 2020 , we had cash and cash equivalents and restricted cash
related to our homebuilding, financial services, multifamily and other
operations of $1.1 billion , compared to $1.5 billion at November 30, 2019 and
$1.1 billion at February 28, 2019 .
We finance all of our activities, including homebuilding, financial services,
multifamily, other and general operating needs, primarily with cash generated
from our operations, debt issuances and cash borrowed under our warehouse lines
of credit and our unsecured revolving credit facility (the "Credit Facility").
Operating Cash Flow Activities
During the three months ended February 29, 2020 and February 28, 2019 , cash
provided by (used in) operating activities totaled $383.0 million and ($524.4)
million , respectively. During the three months ended February 29, 2020 , cash
provided by operating activities was impacted primarily by our net earnings, a
decrease in receivables of $245.7 million and a decrease in loans held-for-sale
of $474.2 million primarily related to the sale of loans originated by Financial
Services, partially offset by an increase in inventories due to strategic land
purchases, land development and construction costs of $777.0 million and
increase in other assets of $121.5 million .
During the three months ended February 28, 2019 , cash used in operating
activities was impacted primarily by an increase in inventories due to strategic
land purchases, land development and construction costs of $1.1 billion , and a
decrease in accounts payable and other liabilities of $387.7 million . This was
partially offset by our net earnings, a decrease in receivables of $394.7
million primarily related to a decrease in Financial Services' receivables, net,
which are loans sold to investors for which we have not been paid, and a
decrease in loans held-for-sale of $156.7 million .
Investing Cash Flow Activities
During the three months ended February 29, 2020 and February 28, 2019 , cash
provided by (used in) investing activities totaled $13.2 million and ($78.0)
million , respectively. During the three months ended February 29, 2020 , our cash
provided by investing activities was primarily due to distributions of capital
from unconsolidated entities of $86.3 million , which primarily included (1)
$17.1 million from Multifamily unconsolidated entities, (2) $27.8 million from
the unconsolidated Rialto real estate funds included in our Lennar Other segment
and (3) $41.4 million from Homebuilding unconsolidated entities. This was
partially offset by net additions to operating properties and equipment of $17.9
million and cash contributions of $78.6 million to unconsolidated entities,
which included (1) $12.6 million to Homebuilding unconsolidated entities, (2)
$35.8 million to Multifamily unconsolidated entities, and (3) $30.2 million to
the strategic technology investments included in the Lennar Other segment.
During the three months ended February 28, 2019 , our cash used in investing
activities was primarily due to cash contributions of $133.9 million to
unconsolidated entities, which included (1) $92.9 million to Homebuilding
unconsolidated entities, (2) $33.8 million to Multifamily unconsolidated
entities primarily for working capital; and (3) $7.2 million to the
unconsolidated Rialto real estate funds included in our Lennar Other segment.
This was offset by distributions of capital from unconsolidated entities of
$70.1 million , which included (1) $33.2 million from Homebuilding unconsolidated
entities; (2) $12.9 million from Multifamily unconsolidated entities; (3) $12.7
million from Financial Services unconsolidated entities; and (4) $11.3 million
from the unconsolidated Rialto real estate funds included in our Lennar Other
segment.
39
--------------------------------------------------------------------------------
Financing Cash Flow Activities
During the three months ended February 29, 2020 and February 28, 2019 , cash
(used in) provided by financing activities totaled ($789.8) million and $69.0
million , respectively. During the three months ended February 29, 2020 , cash
used in financing activities was primarily impacted by (1) $755.6 million of net
repayments under our Financial Services' warehouse facilities, which included
the LMF Commercial warehouse repurchase facilities; (2) repurchases of our
common stock for $296.0 million , which included $288.5 million of repurchases
under our repurchase program and $7.4 million of repurchases related to our
equity compensation plan and (3) $93.3 million of principal payments on notes
payable and other borrowings. These were partially offset by (1) $300.0 million
of net borrowings under our Credit Facility; and (2) $88.9 million of receipts
related to noncontrolling interests.
During the three months ended February 28, 2019 , cash provided by financing
activities was primarily impacted by $725.0 million of net borrowings under our
Credit Facilities, partially offset by $508.7 million of net repayments under
our Financial Services' warehouse facilities which included the LMF Commercial
warehouse repurchase facilities, $93.0 million of principal payments on other
borrowings and repurchases of our common stock of $49.1 million , which included
$47.0 million of repurchases of our stock under our repurchase program and $2.1
million of repurchases related to employee stock plans.
Debt to total capital ratios are financial measures commonly used in the
homebuilding industry and are presented to assist in understanding the leverage
of our homebuilding operations. Homebuilding debt to total capital and net
Homebuilding debt to total capital are calculated as follows:
February 29, November 30, February 28,
(Dollars in thousands) 2020 2019 2019
Homebuilding debt $ 8,115,498 7,776,638 9,256,423
Stockholders' equity 16,044,599 15,949,517 14,786,814
Total capital $ 24,160,097 23,726,155 24,043,237
Homebuilding debt to total capital 33.6 % 32.8 % 38.5 %
Homebuilding debt $ 8,115,498 7,776,638 9,256,423
Less: Homebuilding cash and cash equivalents 784,950 1,200,832 852,551
Net Homebuilding debt $ 7,330,548 6,575,806 8,403,872
Net Homebuilding debt to total capital (1) 31.4 % 29.2 % 36.2 %
(1) Net homebuilding debt to total capital is a non-GAAP financial measure
defined as net homebuilding debt (homebuilding debt less homebuilding cash
and cash equivalents) divided by total capital (net homebuilding debt plus
stockholders' equity). We believe the ratio of net homebuilding debt to total
capital is a relevant and a useful financial measure to investors in
understanding the leverage employed in homebuilding operations. However,
because net homebuilding debt to total capital is not calculated in
accordance with GAAP, this financial measure should not be considered in
isolation or as an alternative to financial measures prescribed by GAAP.
Rather, this non-GAAP financial measure should be used to supplement our GAAP
results.
AtFebruary 29, 2020 , Homebuilding debt to total capital improved compared toFebruary 28, 2019 , as a result of an increase in stockholders' equity primarily related to our net earnings, partially offset by stock repurchases. AtFebruary 29, 2020 , Homebuilding debt to total capital was higher compared toNovember 30, 2019 , as a result of an increase in Homebuilding debt primarily due to an increase in outstanding borrowings under our Credit Facility, partially offset by a net increase in stockholders' equity primarily related to our net earnings. We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunities and increase our revenues and earnings. These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit other financing alternatives. In connection with some of our non-homebuilding businesses, we are also considering other types of transactions such as sales, restructurings, joint ventures, spin-offs or initial public offerings as we continue to move back towards being a pure play homebuilding company. Our Homebuilding senior notes and other debts payable are summarized within Note 7 of the Notes to the Condensed Consolidated Financial Statements. AtFebruary 29, 2020 , we had an unsecured revolving credit facility (the "Credit Facility") with maximum borrowings of$2.45 billion with$50 million maturing inJune 2020 and the balance due in 2024. The Credit Facility agreement (the "Credit Agreement") provides that up to$500 million in commitments may be used for letters of credit. Under the Credit Agreement, as of the end of the fiscal quarter, we are subject to debt covenants. The maturity, details and debt covenants of the Credit Facility are unchanged from the disclosure in our Financial Condition and Capital Resources section in its Form 10-K for the year endedNovember 30, 2019 . In addition to the Credit Facility, we have other letter of credit facilities with different financial institutions. 40 --------------------------------------------------------------------------------
Our letter of credit and surety bond facilities are described below:
February 29, November 30,
2020 2019
(In thousands)
Performance letters of credit $ 739,944 715,793
Financial letters of credit 208,871 184,075
Surety bonds 2,966,393 2,946,167
Anticipated future costs related to site
improvements related to performance surety bonds 1,440,444 1,427,145
Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our senior notes (the "Guaranteed Notes"). The guarantees are full and unconditional. However, they will terminate as to a subsidiary any time it is not directly or indirectly guaranteeing at least$75 million ofLennar Corporation debt or when the subsidiary is sold. These guarantees are outlined in Note 13 of the Notes to the Condensed Consolidated Financial Statements. Our Homebuilding average debt outstanding with an average rate of interest was as follows: Three Months Ended February 29, February 28, (Dollars in thousands) 2020 2019
Homebuilding average debt outstanding
4.9 % 4.9 %
Interest incurred related to Homebuilding debt for the three months ended
February 29, 2020 was $93.3 million , compared to $104.4 million for the three
months ended February 28, 2019 .
Under the amended Credit Facility agreement executed in April 2019 (the "Credit
Agreement"), as of the end of each fiscal quarter, we are required to maintain
minimum consolidated tangible net worth of approximately $7.1 billion plus the
sum of 50% of the cumulative consolidated net income for each completed fiscal
quarter subsequent to February 28, 2019 , if positive, and 50% of the net cash
proceeds from any equity offerings from and after February 28, 2019 , minus the
lesser of 50% of the amount paid after April 11, 2019 to repurchase common stock
and $375.0 million . We are required to maintain a leverage ratio that shall not
exceed 65% and may be reduced by 2.5% per quarter if our interest coverage ratio
is less than 2.25:1.00 for two consecutive fiscal calendar quarters. The
leverage ratio will have a floor of 60%. If our interest coverage ratio
subsequently exceeds 2.25:1.00 for two consecutive fiscal calendar quarters, the
leverage ratio we will be required to maintain will be increased by 2.5% per
quarter to a maximum of 65%. As of the end of each fiscal quarter, we are also
required to maintain either (1) liquidity in an amount equal to or greater than
1.00x consolidated interest incurred for the last twelve months then ended or
(2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last
twelve months then ended. We believe that we were in compliance with our debt
covenants at February 29, 2020 .
The following summarizes our debt covenant requirements and our actual levels or
ratios with respect to those covenants as calculated per the Credit Agreement as
of February 29, 2020 :
Level Achieved as of
(Dollars in thousands) Covenant Level February 29, 2020
Minimum net worth test $ 7,686,753 10,611,854
Maximum leverage ratio 65.0 % 38.0 %
Liquidity test 1.00 2.08
41--------------------------------------------------------------------------------
At
Maximum Aggregate Commitment
Residential facilities maturing:
March 2020 (1) $ 100,000
May 2020 300,000
June 2020 300,000
October 2020 500,000
Total - Residential facilities $ 1,200,000
LMF Commercial facilities maturingNovember 2020 $
200,000
December 2020
650,000
December 2020 (two - one year extensions) (2)
50,000
Total - LMF Commercial facilities $ 900,000 Total $ 2,100,000
(1) Subsequent to
(2) LMF Commercial uses this warehouse repurchase facility to finance the
origination of floating rate accrual loans, which are reported as accrual
loans within loans held-for-investment, net. There were no borrowings under
this facility as of
Our Financial Services segment uses the residential facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature. The LMF Commercial facilities finance LMF Commercial loan originations and securitization activities and were secured by a 75% interest in the originated commercial loans financed. Borrowings and collateral under the facilities and their prior year predecessors were as follows: (In thousands) February 29, 2020 November 30, 2019 Borrowings under the residential facilities $ 674,848 $ 1,374,063 Collateral under the residential facilities 698,369 1,423,650 Borrowings under the LMF Commercial facilities 161,546 216,870 If the facilities are not renewed or replaced, the borrowings under the lines of credit will be repaid by selling the mortgage loans held-for-sale to investors and by collecting receivables on loans sold but not yet paid for. Without the facilities, the Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities. Changes in Capital Structure InJanuary 2019 , our Board of Directors authorized the repurchase of up to the lesser of$1.0 billion in value, or 25 million in shares, of our outstanding Class A and Class B common stock. The repurchase authorization has no expiration date. The following table represents the repurchase of our Class A and Class B common stocks, under this program, for the three months endedFebruary 29, 2020 andFebruary 28, 2019 : Three Months Ended February 29, 2020 February 28, 2019 (Dollars in thousands, except price per share) Class A Class B Class A Class B Shares repurchased 4,250,000 115,000 1,000,000 - Principal$ 282,274 $ 6,155 $ 46,998 $ - Average price per share$ 66.42 $ 53.52 $ 46.98 $ - During the three months endedFebruary 29, 2020 , treasury stock increased due to our repurchase of 4.4 million shares of Class A and Class B common stock through our stock repurchase program. During the three months endedFebruary 28, 2019 , treasury stock increased by 1.0 million shares of Class A common stock due primarily to our repurchase of one million shares of Class A common stock through our stock repurchase program. OnApril 7, 2020 , our Board of Directors declared a quarterly cash dividend of$0.125 per share on both our Class A and Class B common stock, payable onMay 5, 2020 to holders of record at the close of business onApril 21, 2020 . OnFebruary 7, 2020 , we paid cash dividends of$0.125 per share on both our Class A and Class B common stock to holders of record at the close of business onJanuary 24, 2020 , as declared by our Board of Directors onJanuary 9, 2020 . We declared and paid cash 42 -------------------------------------------------------------------------------- dividends of$0.04 per share on both our Class A and Class B common stock in each quarter for the year endedNovember 30, 2019 . Based on our current financial condition and credit relationships, we believe that, assuming our operations are not significantly affected by the COVID-19 pandemic for a protracted period, our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity. Off-Balance Sheet Arrangements Homebuilding: Investments in Unconsolidated Entities AtFebruary 29, 2020 , we had equity investments in 48 homebuilding and land unconsolidated entities (of which three had recourse debt, ten had non-recourse debt and 35 had no debt) compared to 50 homebuilding and land unconsolidated entities atNovember 30, 2019 . Historically, we have invested in unconsolidated entities that acquired and developed land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for sale to third-party homebuyers. Through these entities, we have primarily sought to reduce and share our risk by limiting the amount of our capital invested in land, while obtaining access to potential future homesites and allowing us to participate in strategic ventures. The use of these entities also, in some instances, has enabled us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner. Participants in these joint ventures have been land owners/developers, other homebuilders and financial or strategic partners. Joint ventures with land owners/developers have given us access to homesites owned or controlled by our partners. Joint ventures with other homebuilders have provided us with the ability to bid jointly with our partners for large land parcels. Joint ventures with financial partners have allowed us to combine our homebuilding expertise with access to our partners' capital. Joint ventures with strategic partners have allowed us to combine our homebuilding expertise with the specific expertise (e.g. commercial or infill experience) of our partners. Each joint venture is governed by an executive committee consisting of members from the partners. As ofFebruary 29, 2020 andNovember 30, 2019 , our recorded investments in Homebuilding unconsolidated entities were$946.7 million and$1.0 billion , respectively, while the underlying equity related to our investments in Homebuilding unconsolidated entities partners' net assets as of bothFebruary 29, 2020 andNovember 30, 2019 were$1.3 billion . The basis difference is primarily as a result of us contributing our investment in three strategic joint ventures with a higher fair value than book value for an investment in the FivePoint entity and deferring equity in earnings on land sales to us. Included in our recorded investments in Homebuilding unconsolidated entities is our 40% ownership of FivePoint. As ofFebruary 29, 2020 andNovember 30, 2019 , the carrying amount of our investment in FivePoint was$366.8 million and$374.0 million , respectively. The Homebuilding unconsolidated entities in which we have investments usually finance their activities with a combination of partner equity and debt financing. In some instances, we and our partners have guaranteed debt of unconsolidated entities. Indebtedness of an unconsolidated entity is secured by its own assets. Some unconsolidated entities own multiple properties and other assets. There is no cross collateralization of debt of different unconsolidated entities. We also do not use our investment in one unconsolidated entity as collateral for the debt of another unconsolidated entity or commingle funds among Homebuilding unconsolidated entities. In connection with loans to a Homebuilding unconsolidated entity, we and our partners often guarantee to a lender, either jointly and severally or on a several basis, any or all of the following: (i) the completion of the development, in whole or in part, (ii) indemnification of the lender against losses from environmental issues, (iii) indemnification of the lender from "bad boy acts" of the unconsolidated entity (or full recourse liability in the event of an unauthorized transfer or bankruptcy) and (iv) that the loan to value and/or loan to cost will not exceed a certain percentage (maintenance or remargining guarantee) or that a percentage of the outstanding loan will be repaid (repayment guarantee). The total debt of the Homebuilding unconsolidated entities in which we have investments was$1.1 billion as of bothFebruary 29, 2020 andNovember 30, 2019 , of which our maximum recourse exposure was$4.9 million and$10.8 million as ofFebruary 29, 2020 andNovember 30, 2019 , respectively. In most instances in which we have guaranteed debt of a Homebuilding unconsolidated entity, our partners have also guaranteed that debt and are required to contribute their share of the guarantee payment. In a repayment guarantee, we and our venture partners guarantee repayment of a portion or all of the debt in the event of a default before the lender would have to exercise its rights against the collateral. In connection with many of the loans to Homebuilding unconsolidated entities, we and our joint venture partners (or entities related to them) have been required to give guarantees of completion to the lenders. Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained. If the construction is to be done in phases, the guarantee generally is limited to completing only the phases as to which construction has already commenced and for which loan proceeds were used. If we are required to make a payment under any guarantee, the payment would generally constitute a capital contribution or loan to the Homebuilding unconsolidated entity and increase our share of any funds the unconsolidated entity distributes. 43 -------------------------------------------------------------------------------- As ofFebruary 29, 2020 andNovember 30, 2019 , the fair values of the repayment, maintenance, and completion guarantees were not material. We believe that as ofFebruary 29, 2020 , in the event we become legally obligated to perform under a guarantee of the obligation of a Homebuilding unconsolidated entity due to a triggering event under a guarantee, the collateral would be sufficient to repay at least a significant portion of the obligation or we and our partners would contribute additional capital into the venture. In certain instances, we have placed performance letters of credit and surety bonds with municipalities with regard to obligations of our joint ventures (see Note 7 of the Notes to Condensed Consolidated Financial Statements). The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as ofFebruary 29, 2020 and it does not represent estimates of future cash payments that will be made to reduce debt balances. Many JV loans have extension options in the loan agreements that would allow the loans to be extended into future years. Principal Maturities of Unconsolidated JVs by Period (In thousands) Total JV Debt 2020 2021 2022 Thereafter Other Maximum recourse debt exposure to Lennar$ 4,932 - - 4,932 - - Debt without recourse to Lennar 1,090,853 49,093 252,073 142,123 647,564 - Land seller and CDD debt 9,429 - - - - 9,429 Debt issuance costs (13,612 ) - - - - (13,612 ) Total$ 1,091,602 49,093 252,073 147,055 647,564 (4,183 ) Multifamily: Investments in Unconsolidated Entities AtFebruary 29, 2020 , Multifamily had equity investments in 21 unconsolidated entities that are engaged in multifamily residential developments (of which seven had non-recourse debt and 14 had no debt), compared to 19 unconsolidated entities atNovember 30, 2019 . We invest in unconsolidated entities that acquire and develop land to construct multifamily rental properties. Through these entities, we are focusing on developing a geographically diversified portfolio of institutional quality multifamily rental properties in selectU.S. markets. Initially, we participated in building multifamily developments and selling them soon after they were completed. Recently, however, we have been focused on developing properties with the intention of retaining them. Participants in these joint ventures have been financial partners. Joint ventures with financial partners have allowed us to combine our development and construction expertise with access to our partners' capital. Each joint venture is governed by an operating agreement that provides significant substantive participating voting rights on major decisions to our partners. The Multifamily segment includes LMV I and LMV II, which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets. Details of each as of and during the three months endedFebruary 29, 2020 are included below: February 29, 2020 (In thousands) LMV I LMV II Lennar's carrying value of investments$ 365,823 181,479 Equity commitments 2,204,016 1,257,700 Equity commitments called 2,110,545 677,398 Lennar's equity commitments 504,016 381,000 Lennar's equity commitments called 489,655
204,084
Lennar's remaining commitments 14,361
176,916
Distributions to Lennar during the three months endedFebruary 29, 2020 5,646
-
We regularly monitor the results of both our Homebuilding and Multifamily unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations. We also monitor the performance of joint ventures in which we have investments on a regular basis to assess compliance with debt covenants. For those joint ventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment. We believe all of the joint ventures were in compliance with their debt covenants atFebruary 29, 2020 . 44 -------------------------------------------------------------------------------- The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as ofFebruary 29, 2020 and it does not represent estimates of future cash payments that will be made to reduce debt balances. Principal Maturities of Unconsolidated JVs by Period (In thousands) Total JV Debt 2020 2021 2022 Thereafter Other Debt without recourse to Lennar$ 2,203,797 378,230 564,890 331,291 929,386 - Debt issuance costs (28,888 ) - - - - (28,888 ) Total$ 2,174,909 378,230 564,890 331,291 929,386 (28,888 ) Lennar Other: Investments in Unconsolidated Entities As part of the sale of the Rialto investment and asset management platform, we retained our ability to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds. We periodically receive advance distributions related to the carried interests in order to cover income tax obligations resulting from allocations of taxable income to the carried interests. These distributions are not subject to clawbacks but will reduce future carried interest payments to which we become entitled from the applicable funds and have been recorded as revenues. As ofFebruary 29, 2020 andNovember 30, 2019 , we had strategic technology investments in unconsolidated entities of$192.1 million and$124.3 million , respectively. Option Contracts We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the options. The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties ("optioned") or unconsolidated JVs (i.e., controlled homesites) atFebruary 29, 2020 andFebruary 28, 2019 : Controlled Homesites Years of Total Supply February 29, 2020 Optioned JVs Total Owned Homesites Homesites Owned (1) East 28,869 15,420 44,289 80,741 125,030 Central 6,476 122 6,598 31,038 37,636 Texas 19,914 - 19,914 38,365 58,279 West 12,275 2,940 15,215 62,048 77,263 Other - 8,514 8,514 2,084 10,598 Total homesites 67,534 26,996 94,530 214,276 308,806 4.0 % of total homesites 31 % 69 % Controlled Homesites Years of Total Supply February 28, 2019 Optioned JVs Total Owned Homesites Homesites Owned (1) East 26,174 3,482 29,656 76,699 106,355 Central 6,328 - 6,328 31,754 38,082 Texas 18,845 - 18,845 35,131 53,976 West 7,257 4,525 11,782 63,810 75,592 Other - 979 979 2,845 3,824 Total homesites 58,604 8,986 67,590 210,239 277,829 4.4 % of total homesites 24 % 76 %
(1) Based on trailing twelve months of home deliveries.
We evaluate certain option contracts for land to determine whether they are VIEs and, if so, whether we are the primary beneficiary of certain of these option contracts. Although we do not have legal title to the optioned land, if we are deemed to be the primary beneficiary or make a significant deposit for optioned land, we may need to consolidate the land under option at the purchase price of the optioned land. Consolidated land purchase options are reflected in the accompanying condensed consolidated balance sheets as consolidated inventory not owned. Over the next several years, we plan to increase the controlled homesites to 40%-50% of our entire homesite inventory from approximately 31% as ofFebruary 29, 2020 . Recently, we have undertaken several strategic land initiatives which include acquiring fully developed homesites from regional developers and may also include building homes in bulk for landowners who will retain them as rental properties. 45 -------------------------------------------------------------------------------- During the three months endedFebruary 29, 2020 , consolidated inventory not owned increased by$104.3 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as ofFebruary 29, 2020 . The increase was primarily due to the consolidation of option contracts, partially offset by us exercising our options to acquire land under previously consolidated contracts. To reflect the purchase price of the inventory that was consolidated, we had a net reclass related to option deposits from consolidated inventory not owned to land under development in the accompanying condensed consolidated balance sheet as ofFebruary 29, 2020 . The liabilities related to consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned land and our cash deposits. Our exposure to losses related to option contracts with third parties and unconsolidated entities consisted of non-refundable option deposits and pre-acquisition costs totaling$306.0 million and$320.5 million atFebruary 29, 2020 andNovember 30, 2019 , respectively. Additionally, we had posted$75.0 million of letters of credit in lieu of cash deposits under certain land and option contracts as ofFebruary 29, 2020 andNovember 30, 2019 , respectively. Contractual Obligations and Commercial Commitments Our contractual obligations and commercial commitments have not changed materially from those reported in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year endedNovember 30, 2019 , except for$300.0 million of outstanding borrowings under our Credit Facility. (3) New Accounting Pronouncements See Note 12 of the Notes to Condensed Consolidated Financial Statements included under Item 1 of this Report for a discussion of new accounting pronouncements applicable to our company. (4) Critical Accounting Policies We believe that there have been no significant changes to our critical accounting policies during the three months endedFebruary 29, 2020 as compared to those we disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, for the year endedNovember 30, 2019 . 46
--------------------------------------------------------------------------------
© Edgar Online, source
