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 potential continuing negative impact of the ongoing coronavirus ("COVID-19") pandemic, the duration, impact and severity of which is highly uncertain; 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. Outlook Early in the second quarter, the economy was shuttering and unemployment was rising rapidly as the coronavirus ("COVID-19") pandemic was dramatically affectingthe United States economy in general and our business specifically. While the economy is still trying to recover after the shut-down, the homebuilding industry only stalled from mid-March through April. By the end of April, most states and municipalities across the country had deemed housing an essential service, which enabled us to continue building, selling, and delivering homes to our customers. During May and for the first few weeks of June, the market for new homes had steadily strengthened in almost all areas where we have communities under development. We believe this is the result of low interest rates and short supply, together with what appears to be a desire by many people to move out of crowded urban areas into new homes in the suburbs. The strength in the market may also be partially attributable to pent up demand from the earlier part of our second quarter when more restrictive stay at home orders were in place in many of our markets and when public concern over COVID-19 was much greater. Our first priority with regard to the COVID-19 pandemic was to do everything we could to ensure the safety, health and hygiene of our associates, customers, suppliers and others with whom we partner in our business activities. We, like many 37 -------------------------------------------------------------------------------- businesses, required or permitted many of our associates to work remotely. This did not seem to have had a material negative impact on our business activities. However, it did require us to increase our cybersecurity monitoring. Subject to that and through the use of appropriate risk mitigation and safety practices, we continued to strategically manage our business in this unprecedented environment in which we find ourselves. Part of our strategy included accelerating various technology initiatives to accommodate our safety first mandate and to continue our business in these difficult times. We are selling homes in person by appointment, virtually or by self-guided tours. Additionally, we are implementing a virtual new home orientation process so our home buyers can walk and view their completed home via FaceTime and even get keys to the front door digitally. Additionally we have increased the number of digital closings, with digital document signings and where permitted digital notarization. We have worked closely with our trade partners, including through our focus on an even flow approach to production, which enabled our trade partners to lower their costs and reduce their prices to us. This drove a year-over-year 200-basis point improvement in cost as a percentage of revenue in the second quarter. Also in our second quarter, our cost per square foot was down 130 basis points from the prior quarter and 240 basis from the same period in the prior year. The benefit of pricing power and reduced costs will not all flow through to margins, as we are also focused on producing affordable housing. However, we do expect further margin improvement during the remainder of 2020. We also slowed our land purchases, land development activities and home starts. As a result, our land positions were temporarily altered, and we ended the quarter with a 3.9 year supply of land owned, compared to a 4.5 year supply of land owned in the second quarter of 2019. The portion of land we controlled through options or similar agreements was 32%, up from 25% last year. As home sales started to recover, we restarted our development activities. However, because of the mid-March through April slowdown in construction at some of our communities, we expect to have fewer deliveries in the third and fourth quarters. We expect to deliver between 50,500 and 51,000 homes in fiscal year 2020. While community count is difficult to predict, particularly in the current environment with municipal offices shutting down and being less available to provide permits for land development, we expect our community count to dip slightly in the third quarter and stabilize in the fourth quarter. OurLennar Financial Services business continues to lead the way for the Company on innovation and enhanced customer experiences. Confronted with limitations on the ability of borrowers to engage in normal mortgage borrowing procedures, ourLennar Financial Services business accelerated its rollout of certain technologies that enabled it to have a strong second quarter in spite of those limitations. These enhancements represent a permanent improvement in our mortgage processing procedures. In our Multifamily business, despite the disruptions to businesses and employment resulting from the COVID-19 pandemic, occupancy in the properties in which we have investments did not change substantially, and we did not encounter a significant increase in rent delinquencies. We believe the reason we were not substantially affected by people moving from urban apartments to single family homes is because people are leaving the lower quality, less-amenitized apartments, but not higher quality residential buildings such as those offered by our Multifamily business. There are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it and therefore, the unpredictable environment in our country will evolve over time. However, we believe that we will be well positioned through hard work, focused leadership, and innovative technology. (1) Results of Operations Overview We historically have experienced, and expect to continue to experience, variability in quarterly results. Our results of operations for the three and six months endedMay 31, 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. Our net earnings attributable to Lennar were$517.4 million , or$1.65 per diluted share ($1.66 per basic share), in the second quarter of 2020, compared to net earnings attributable to Lennar of$421.5 million , or$1.30 per diluted share ($1.31 per basic share), in the second quarter of 2019. Our net earnings attributable to Lennar were$915.9 million , or$2.91 per diluted share ($2.92 per basic share), in the six months endedMay 31, 2020 , compared to net earnings attributable to Lennar of$661.4 million , or$2.03 per diluted share ($2.05 per basic share), in the six months endedMay 31, 2019 . 38 --------------------------------------------------------------------------------
Financial information relating to our operations was as follows:
Three Months Ended May 31, 2020 Financial (In thousands) Homebuilding Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 4,925,081 - - - - 4,925,081 Sales of land 19,833 - - - - 19,833 Other revenues 4,570 196,263 123,117 18,509 - 342,459 Total revenues 4,949,484 196,263 123,117 18,509 - 5,287,373 Costs and expenses: Costs of homes sold 3,862,771 - - - - 3,862,771 Costs of land sold 43,369 - - - - 43,369 Selling, general and administrative expenses 407,191 - - - - 407,191 Other costs and expenses - 110,355 123,473 (1,072) - 232,756 Total costs and expenses 4,313,331 110,355 123,473 (1,072) - 4,546,087 Equity in loss from unconsolidated entities (9,100) - (282) (26,642) - (36,024) Financial Services gain on deconsolidation - 61,418 - - - 61,418 Other income (expense), net 4,308 - - (10,960) - (6,652) Operating earnings (loss)$ 631,361 147,326 (638) (18,021) - 760,028 Corporate general and administrative expenses - - - - 83,451 83,451 Earnings (loss) before income taxes$ 631,361 147,326 (638) (18,021) (83,451) 676,577 Three Months Ended May 31, 2019 Financial (In thousands) Homebuilding Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 5,176,116 - - - - 5,176,116 Sales of land 16,455 - - - - 16,455 Other revenues 3,028 204,216 147,412 15,663 - 370,319 Total revenues 5,195,599 204,216 147,412 15,663 - 5,562,890
Costs and expenses: Costs of homes sold 4,137,529 - - - - 4,137,529 Costs of land sold 14,008 - - - - 14,008 Selling, general and administrative expenses 435,722 - - - - 435,722 Other costs and expenses - 147,999 148,716 3,194 - 299,909 Total costs and expenses 4,587,259 147,999 148,716 3,194 - 4,887,168 Equity in earnings (loss) from unconsolidated entities and Multifamily other gain 19,614 - (3,018) (4,978) - 11,618 Other expense, net (46,165) - - (5,663) - (51,828) Operating earnings (loss)$ 581,789 56,217 (4,322) 1,828 - 635,512 Corporate general and administrative expenses - - - - 76,113 76,113 Earnings (loss) before income taxes$ 581,789 56,217 (4,322) 1,828 (76,113) 559,399 39
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Six Months Ended May 31, 2020 Financial (In thousands) Homebuilding Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 9,065,848 - - - - 9,065,848 Sales of land 46,700 - - - - 46,700 Other revenues 9,052 394,924 255,734 20,452 - 680,162 Total revenues 9,121,600 394,924 255,734 20,452 - 9,792,710 Costs and expenses: Costs of homes sold 7,154,550 - - - - 7,154,550 Costs of land sold 70,504 - - - - 70,504 Selling, general and administrative expenses 786,083 - - - - 786,083 Other costs and expenses - 261,699 260,821 1,502 - 524,022 Total costs and expenses 8,011,137 261,699 260,821 1,502 - 8,535,159 Equity in earnings (loss) from unconsolidated entities and Multifamily other gain (13,646) - 6,234 (26,523) - (33,935) Financial Services gain on deconsolidation - 61,418 - - - 61,418 Other expense, net (5,058) - - (9,549) - (14,607) Operating earnings (loss)$ 1,091,759 194,643 1,147 (17,122) - 1,270,427 Corporate general and administrative expenses - - - - 170,298 170,298 Earnings (loss) before income taxes$ 1,091,759 194,643 1,147 (17,122) (170,298) 1,100,129 Six Months Ended May 31, 2019 Financial (In thousands) Homebuilding Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 8,784,245 - - - - 8,784,245 Sales of land 30,238 - - - - 30,238 Other revenues 4,837 347,527 244,806 19,319 - 616,489 Total revenues 8,819,320 347,527 244,806 19,319 - 9,430,972 Homebuilding costs and expenses: Costs of homes sold 7,019,579 - - - - 7,019,579 Costs of land sold 27,534 - - - - 27,534 Selling, general and administrative 778,981 - - - - 778,981 Other costs and expenses - 272,338 249,894 4,816 527,048 Total costs and expenses 7,826,094 272,338 249,894 4,816 - 8,353,142 Equity in earnings from unconsolidated entities and Multifamily other gain 5,858 - 7,563 3,352 - 16,773 Other expense, net (47,700) - - (12,924) - (60,624) Operating earnings$ 951,384 75,189 2,475 4,931 - 1,033,979 Corporate general and administrative expenses - - - - 155,456 155,456 Earnings (loss) before income taxes$ 951,384 75,189 2,475 4,931 (155,456) 878,523 Three Months EndedMay 31, 2020 versus Three Months EndedMay 31, 2019 Revenues from home sales decreased 5% in the second quarter of 2020 to$4.9 billion from$5.2 billion in the second quarter of 2019. Revenues were lower primarily due to a 4% decrease in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, of 12,653 homes in the second quarter of 2020 were flat compared to 12,706 homes in the second quarter of 2019, as a result of the COVID-19 pandemic and the economic shutdown. The average sales price of homes delivered was$389,000 in the second quarter of 2020, compared to$407,000 in the second quarter of 2019. The decrease in average sales price primarily resulted from continuing to shift to lower-priced communities and regional product mix due to COVID-19 stay-at-home orders in certain higher priced markets. 40 -------------------------------------------------------------------------------- Gross margin on home sales was$1.1 billion , or 21.6%, in the second quarter of 2020, compared to$1.0 billion , or 20.1% in the second quarter of 2019. The gross margin percentage on home sales increased primarily due to our continued focus on reducing construction costs. Loss on land sales in the second quarter of 2020 was$23.5 million , primarily due to a write-off of costs as a result of us not moving forward with a naval base development inConcord, California , northeast ofSan Francisco . Gross margin on land sales were$2.4 million in the second quarter of 2019. Selling, general and administrative expenses were$407.2 million in the second quarter of 2020, compared to$435.7 million in the second quarter of 2019. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.3% in the second quarter of 2020, from 8.4% in the second quarter of 2019. Operating earnings for our Financial Services segment were$150.6 million in the second quarter of 2020 (which included$147.3 million of operating earnings and an add back of$3.3 million of net loss attributable to noncontrolling interests) compared to$62.5 million in the second quarter of 2019 (which included$56.2 million of operating earnings and an add back of$6.3 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 and a$5.0 million gain on the sale of a servicing portfolio. Additionally, our Financial Services segment recorded a$61.4 million gain on the deconsolidation of a previously consolidated entity. Operating loss for our Multifamily segment was$0.6 million in the second quarter of 2020, compared to$4.3 million ($3.9 million net of noncontrolling interest) in the second quarter of 2019. Operating loss for our Lennar Other segment was$18.0 million in the second quarter of 2020 primarily due to a$25.0 million write-down of assets held by Rialto legacy funds because of disruption in the capital markets as a result of COVID-19 and the economic shutdown. This compared to operating earnings of$1.8 million ($2.2 million net of noncontrolling interest) in the second quarter of 2019. Six Months EndedMay 31, 2020 versus Six Months EndedMay 31, 2019 Revenues from home sales increased 3% in the six months endedMay 31, 2020 to$9.1 billion from$8.8 billion in the six months endedMay 31, 2019 . Revenues were higher primarily due to a 7% increase in the number of home deliveries, excluding unconsolidated entities. Despite new home deliveries in the second quarter of 2020 being consistent with the second quarter of 2019 as a result of COVID-19 and the economic shutdown, new home deliveries, excluding unconsolidated entities, increased to 22,966 homes in the six months endedMay 31, 2020 from 21,508 homes in the six months endedMay 31, 2019 , as a result of an increase in home deliveries in all of Homebuilding's segments except Other. The average sales price of homes delivered was$395,000 in the six months endedMay 31, 2020 , compared to$408,000 in the six months endedMay 31, 2019 . The decrease in average sales price primarily resulted from continuing to shift to lower-priced communities and regional product mix due to COVID-19 stay-at-home orders in certain higher priced markets. Gross margin on home sales was$1.9 billion , or 21.1%, in the six months endedMay 31, 2020 , compared to$1.8 billion , or 20.1% in the six months endedMay 31, 2019 . The gross margin percentage on home sales increased primarily due to our continued focus on reducing construction costs. Loss on land sales in the six months endedMay 31, 2020 was$23.8 million , primarily due to a write-off of costs as a result of us not moving forward with a naval base development inConcord, California , northeast ofSan Francisco . Gross margin on land sales were$2.7 million in the six months endedMay 31, 2019 . Selling, general and administrative expenses were$786.1 million in the six months endedMay 31, 2020 , compared to$779.0 million in the six months endedMay 31, 2019 . As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.7% in the six months endedMay 31, 2020 , from 8.9% in the six months endedMay 31, 2019 . Operating earnings for our Financial Services segment were$208.8 million in the six months endedMay 31, 2020 (which included$194.6 million of operating earnings and an add back of$14.1 million of net loss attributable to noncontrolling interests), compared to$84.2 million in the six months endedMay 31, 2019 (which included$75.2 million of operating earnings and an add back of$9.1 million of net loss attributable to noncontrolling interests). Operating earnings increased due to an improvement in the mortgage and title businesses as a result of an increase in volume and margin, as well as reductions in loan origination costs and a$5.0 million gain on the sale of a servicing portfolio. Additionally, our Financial Services segment recorded a$61.4 million gain on the deconsolidation of a previously consolidated entity. Operating earnings for our Multifamily segment were$1.1 million in the six months endedMay 31, 2020 , compared to$2.5 million ($2.9 million net of noncontrolling interest) in the six months endedMay 31, 2019 . Operating loss for our Lennar Other segment was$17.1 million in the six months endedMay 31, 2020 primarily due to a$25.0 million write-down of assets held by Rialto legacy funds because of disruption in the capital markets as a result of COVID-19 and the economic shutdown. 41 -------------------------------------------------------------------------------- This compared to operating earnings of$4.9 million ($5.2 million net of noncontrolling interest) in the six months endedMay 31, 2019 . For the six months endedMay 31, 2020 andMay 31, 2019 , we had a tax provision of$192.8 million and$220.2 million , respectively, which resulted in an overall effective income tax rate of 17.4% and 25.0%, respectively. The reduction in the overall effective income tax rate is primarily due to the extension of the new energy efficient home tax credit during the first quarter of 2020. Homebuilding Segments AtMay 31, 2020 , our reportable Homebuilding segments and Homebuilding Other consisted of homebuilding divisions located in: East:Florida ,New Jersey ,North Carolina ,Pennsylvania andSouth Carolina Central:Georgia ,Illinois ,Indiana ,Maryland ,Minnesota ,Tennessee andVirginia Texas :Texas West:Arizona ,California ,Colorado ,Nevada ,Oregon ,Utah andWashington Other: Urban divisions and other homebuilding related investments primarily inCalifornia , including FivePoint Holdings, LLC ("FivePoint") The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated: Selected Financial and Operational Data Three Months Ended May 31, 2020 Gross Margins Operating Earnings (Loss) Equity in Earnings (Loss) Sales of Homes Costs of Sales of Gross Margin Net Margins on Gross Margins on from Unconsolidated Other Income
Operating
($ in thousands) Revenue Homes % Sales of Homes (1) Sales of Land Other Revenue Entities (Expense), net Earnings (Loss) East$ 1,576,083 1,218,337 22.7 %$ 221,798 (1,093) 1,592 218 7,211 229,726 Central 684,440 561,076 18.0 % 66,269 247 638 19 (108) 67,065Texas 694,110 530,004 23.6 % 98,566 1,524 250 1 (454) 99,887 West 1,957,435 1,533,513 21.7 % 279,509 (776) 1,914 (40) (513) 280,094 Other (2) 13,013 19,841 (52.5) % (11,023) (23,438) 176 (9,298) (1,828) (45,411) Totals$ 4,925,081 3,862,771 21.6 %$ 655,119 (23,536) 4,570 (9,100) 4,308 631,361 Three Months Ended May 31, 2019 Gross Margins Operating Earnings (Loss) Gross Margins Equity in Earnings (Loss) Sales of Homes Costs of Sales of Gross Margin Net Margins on on Sales of from Unconsolidated Other Income
Operating
($ in thousands) Revenue Homes % Sales of Homes (1) Land Other Revenue Entities (Expense), net Earnings (Loss) East$ 1,732,216 1,374,798 20.6 %$ 208,535 1,633 1,110 (135) (679) 210,464 Central 609,195 500,071 17.9 % 54,684 171 112 69 308 55,344Texas 687,011 547,648 20.3 % 75,055 811 201 278 (971) 75,374 West 2,140,637 1,706,645 20.3 % 270,321 (168) 425 (186) 2,512 272,904 Other (2) 7,057 8,367 (18.6) % (5,730) - 1,180 19,588 (47,335) (32,297) Totals$ 5,176,116 4,137,529 20.1 %$ 602,865 2,447 3,028 19,614 (46,165) 581,789 42
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Six Months Ended May 31, 2020 Gross Margins Operating Earnings (Loss) Equity in Earnings (Loss) Sales of Homes Costs of Sales of Gross Margin Net Margins on Gross Margins on from Unconsolidated Other Income Operating Earnings ($ in thousands) Revenue Homes % Sales of Homes (1) Sales of Land Other Revenue Entities (Expense), net (Loss) East$ 2,978,755 2,303,446 22.7 %$ 403,093 (1,836) 3,275 577 (378) 404,731 Central 1,219,186 1,014,467 16.8 % 94,203 (388) 868 572 1,282 96,537Texas 1,157,907 890,278 23.1 % 151,693 3,197 767 204 (2,901) 152,960 West 3,688,948 2,912,803 21.0 % 498,016 (1,339) 3,728 3,900 696 505,001 Other (2) 21,052 33,556 (59.4) % (21,790) (23,438) 414 (18,899) (3,757) (67,470) Totals$ 9,065,848 7,154,550 21.1 %$ 1,125,215 (23,804) 9,052 (13,646) (5,058) 1,091,759 Six Months Ended May 31, 2019 Gross Margins Operating Earnings (Loss) Gross Margins Equity in Earnings (Loss) Sales of Homes Costs of Sales of Gross Margin Net Margins on on Sales of from Unconsolidated Other Income
Operating
($ in thousands) Revenue Homes % Sales of Homes (1) Land Other Revenue Entities (Expense), net Earnings (Loss) East$ 2,954,860 2,344,664 20.7 %$ 342,821 4,005 1,719 (234) (2,464) 345,847 Central 1,042,320 858,432 17.6 % 84,749 574 276 138 533 86,270Texas 1,099,440 879,750 20.0 % 107,044 2,275 255 158 (2,080) 107,652 West 3,678,141 2,923,392 20.5 % 464,217 (4,149) 1,407 (497) 2,587 463,565 Other (2) 9,484 13,341 (40.7) % (13,146) (1) 1,180 6,293 (46,276) (51,950) Totals$ 8,784,245 7,019,579 20.1 %$ 985,685 2,704 4,837 5,858 (47,700) 951,384 (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. Negative gross margins on sales of land for the three and six months endedMay 31, 2020 was primarily due to a write-off of costs as a result of us not moving forward with a naval base development inConcord, California . Summary of Homebuilding Data Deliveries: Three Months Ended Homes Dollar Value (In thousands) Average Sales Price May 31, May 31, May 31, 2020 2019 2020 2019 2020 2019 East 4,630 5,061$ 1,582,360 1,735,165$ 342,000 343,000 Central 1,763 1,568 684,440 609,195 388,000 389,000 Texas 2,462 2,149 694,110 687,011 282,000 320,000 West 3,804 3,934 1,957,435 2,140,638 515,000 544,000 Other 13 17 13,013 17,273 1,001,000 1,016,000 Total 12,672 12,729$ 4,931,358 5,189,282$ 389,000 408,000 Of the total homes delivered listed above, 19 homes with a dollar value of$6.3 million and an average sales price of$330,000 represent home deliveries from unconsolidated entities for the three months endedMay 31, 2020 , compared to 23 home deliveries with a dollar value of$13.2 million and an average sales price of$572,000 for the three months endedMay 31, 2019 . 43 -------------------------------------------------------------------------------- Six Months Ended Homes Dollar Value (In thousands) Average Sales Price May 31, May 31, May 31, 2020 2019 2020 2019 2020 2019 East 8,695 8,673$ 2,988,027 2,961,600$ 344,000 341,000 Central 3,129 2,692 1,219,186 1,042,320 390,000 387,000 Texas 4,039 3,400 1,157,907 1,099,440 287,000 323,000 West 7,108 6,759 3,688,948 3,678,141 519,000 544,000 Other 22 25 21,052 25,032 957,000 1,001,000 Total 22,993 21,549$ 9,075,120 8,806,533$ 395,000 409,000 Of the total homes delivered listed above, 27 homes with a dollar value of$9.3 million and an average sales price of$343,000 represent home deliveries from unconsolidated entities for the six months endedMay 31, 2020 , compared to 41 home deliveries with a dollar value of$22.3 million and an average sales price of$544,000 for the six months endedMay 31, 2019 . New Orders (1): Three Months Ended Active Communities Homes Dollar Value (In thousands) Average Sales Price AtMay 31 ,May 31 ,May 31 , May 31, 2020 2019 2020 2019 2020 2019 2020 2019 East 423 458 4,919 5,591$ 1,644,275 1,939,901$ 334,000 347,000 Central 246 253 1,906 2,062 740,968 798,080 389,000 387,000 Texas 221 246 2,582 2,424 670,139 744,586 260,000 307,000 West 352 364 3,608 4,420 1,802,705 2,298,540 500,000 520,000 Other 3 4 - 21 - 15,238 - 726,000 Total 1,245 1,325 13,015 14,518$ 4,858,087 5,796,345$ 373,000 399,000 Of the total new orders listed above, 25 homes with a dollar value of$9.0 million and an average sales price of$361,000 represent new orders in four active communities from unconsolidated entities for the three months endedMay 31, 2020 , compared to 32 new orders with a dollar value of$15.1 million and an average sales price of$471,000 in five active communities for the three months endedMay 31, 2019 . Six Months Ended Homes Dollar Value (In thousands) Average Sales Price May 31, May 31, May 31, 2020 2019 2020 2019 2020 2019 East 9,544 10,084$ 3,241,573 3,461,332$ 340,000 343,000 Central 3,679 3,484 1,436,466 1,335,676 390,000 383,000 Texas 4,581 3,848 1,243,218 1,201,545 271,000 312,000 West 7,573 7,532 3,928,337 3,928,354 519,000 522,000 Other 14 33 13,581 26,551 970,000 805,000 Total 25,391 24,981$ 9,863,175 9,953,458$ 388,000 398,000 Of the total new orders listed above, 51 homes with a dollar value of$17.1 million and an average sales price of$335,000 represent new orders from unconsolidated entities for the six months endedMay 31, 2020 , compared to 47 new orders with a dollar value of$24.8 million and an average sales price of$527,000 for the six months endedMay 31, 2019 . (1)New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three and six months endedMay 31, 2020 andMay 31, 2019 . 44 --------------------------------------------------------------------------------
Backlog: Homes Dollar Value (In thousands) Average Sales Price May 31, May 31, May 31, 2020 2019 2020 2019 2020 2019 East (1) 7,676 8,499$ 2,702,044 3,025,598$ 352,000 356,000 Central 2,563 2,778 1,039,118 1,083,608 405,000 390,000 Texas 2,712 2,596 798,648 862,826 294,000 332,000 West 5,023 5,174 2,547,649 2,737,664 507,000 529,000 Other 1 14 1,138 10,507 1,138,000 751,000 Total 17,975 19,061$ 7,088,597 7,720,203$ 394,000 405,000 Of the total homes in backlog listed above, 55 homes with a backlog dollar value of$18.0 million and an average sales price of$327,000 represent the backlog from unconsolidated entities atMay 31, 2020 , compared to 13 homes with a backlog dollar value of$5.2 million and an average sales price of$397,000 atMay 31, 2019 . (1)During both the three and six months endedMay 31, 2019 , we acquired 13 homes in backlog. Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by sales deposits. In some instances, purchasers are permitted to cancel sales if they fail to qualify for financing or under certain other circumstances. Various state and federal laws and regulations may sometimes give purchasers a right to cancel homes in backlog. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners. Three Months EndedMay 31, 2020 versus Three Months EndedMay 31, 2019 Homebuilding East: Revenues from home sales decreased in the second quarter of 2020 compared to the second quarter of 2019, primarily due to a decrease in the number of home deliveries in the Carolinas,Florida andPennsylvania . The decrease in the number of home deliveries was primarily due to the effects of COVID-19 and the economic shutdown. The average sales price of homes delivered was consistent in the second quarter of 2020 compared to the second quarter of 2019. Gross margin percentage on home deliveries in the second quarter of 2020 improved compared to the same period last year primarily due to reducing our construction costs. Homebuilding Central: Revenues from home sales increased in the second quarter of 2020 compared to the second quarter of 2019, primarily due to an increase in the number of home deliveries in all the states in the segment, except inVirginia andMinnesota . The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased. The average sales price of homes delivered was consistent in the second quarter of 2020 compared to the second quarter of 2019. Gross margin percentage on home deliveries in the second quarter of 2020 improved slightly compared to the same period last year primarily due to reducing our construction costs. Homebuilding Texas: Revenues from home sales increased in the second quarter of 2020 compared to the second 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 second quarter of 2020 improved compared to the same period last year primarily due to reducing our construction costs. Homebuilding West: Revenues from home sales decreased in the second quarter of 2020 compared to the second quarter of 2019, primarily due to a decrease in the number of home deliveries in all states of the segment exceptArizona and due to a decrease in the average sales price of homes delivered in all states of the segment exceptUtah . The decrease in the number of home deliveries in all states of the segment exceptArizona was primarily due to the effects of COVID-19 and the economic shutdown. The increase in the number of home deliveries inArizona was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the average sales price of homes delivered in all states of the segment exceptUtah was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities due to COVID-19 stay-at-home orders in certain high priced markets. The increase in the average sales price of homes delivered inUtah 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 second quarter of 2020 improved compared to the same period last year primarily due to reducing our construction costs. 45 -------------------------------------------------------------------------------- Six Months EndedMay 31, 2020 versus Six Months EndedMay 31, 2019 Homebuilding East: Revenues from home sales increased slightly in the six months endedMay 31, 2020 compared to the six months endedMay 31, 2019 , primarily due to an increase in the number of home deliveries inFlorida , partially offset by a decrease in the number of home deliveries in the Carolinas andPennsylvania . The increase in the number of home deliveries inFlorida was primarily due to higher demand as the number of deliveries per active community increased during the first quarter, partially offset by the impact of COVID-19 and economic shutdown during the second quarter. The decrease in the number of home deliveries in the Carolinas andPennsylvania was primarily due to the impact of COVID-19 and economic shutdown during the second quarter. The average sales price of homes delivered was consistent in the six months endedMay 31, 2020 , compared to the same period last year. Gross margin percentage on home deliveries in the six months endedMay 31, 2020 improved compared to the same period last year primarily due to reducing our construction costs. Homebuilding Central: Revenues from home sales increased in the six months endedMay 31, 2020 compared to the six months endedMay 31, 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 six months endedMay 31, 2020 decreased compared to the same period last year primarily due to valuation adjustments taken in a few communities during the six months endedMay 31, 2020 . Homebuilding Texas: Revenues from home sales increased in the six months endedMay 31, 2020 compared to the six months endedMay 31, 2019 , primarily due to an increase in the number of home deliveries, partially offset by a decrease in the average sales price of homes delivered. The increase in the number of deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in average sales 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 six months endedMay 31, 2020 improved compared to the same period last year primarily due to reducing our construction costs. Homebuilding West: Revenues from home sales increased slightly in the six months endedMay 31, 2020 compared to the second quarter of 2019, primarily due to an increase in the number of home deliveries in all states of the segment exceptOregon ,Utah andWashington , partially offset by a decrease in the average sales price of homes delivered in all states of the segment exceptUtah . The increase in the number of home deliveries in all states of the segment exceptOregon ,Utah andWashington was primarily due to higher demand as the number of deliveries per active community increased during the first quarter, partially offset by the impact of COVID-19 and economic shutdown during the second quarter. The decrease in the number of home deliveries inOregon ,Utah andWashington was primarily due to the impact of COVID-19 and economic shutdown during the second quarter. The decrease in the average sales price of homes delivered in all states of the segment exceptUtah was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities due to COVID-19 stay-at-home orders in certain higher priced markets. The increase in the average sales price of homes delivered inUtah 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 six months endedMay 31, 2020 improved compared to the same period last year primarily due to reducing 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 Six Months Ended May 31, May 31, (Dollars in thousands) 2020 2019 2020 2019 Dollar value of mortgages originated$ 3,258,000 2,620,000$ 5,478,000 4,557,000 Number of mortgages originated 10,100 8,250 17,000 14,500 Mortgage capture rate of Lennar homebuyers 82 % 75 % 79 % 74 % Number of title and closing service transactions 14,400 13,500 25,500 28,100 46 -------------------------------------------------------------------------------- AtMay 31, 2020 andNovember 30, 2019 , the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was$164.9 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 betweenOctober 2027 andDecember 2028 , and stated maturity dates betweenOctober 2050 andDecember 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 six months endedMay 31, 2020 , LMF Commercial originated commercial loans with a total principal balance of$417.7 million , all of which were recorded as loans held-for-sale and sold$457.4 million of commercial loans into three separate securitizations. As ofMay 31, 2020 , there were$146.4 million of originated commercial loans were sold into a securitization trust but not settled and thus were included as receivables, net. During the six months endedMay 31, 2019 , LMF Commercial originated commercial loans with a total principal balance of$720.6 million , of which$705.3 million were recorded as loans held-for-sale, and sold$500.5 million of loans into five separate securitizations. Multifamily Segment The following tables provide information related to our investment in the Multifamily segment: Balance Sheets May 31, 2020 November 30, 2019 (Dollars in thousands) Multifamily investments in unconsolidated entities$ 621,465 561,190 Lennar's net investment in Multifamily 888,218 829,537 Statements of Operations Three Months Ended Six Months Ended (Dollars in thousands) May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019 Number of operating properties/investments sold through joint ventures - - 2 2 Lennar's share of gains on the sale of operating properties/investments $ - - 3,000 15,500 Despite widespread reductions in economic activity due to the COVID-19 pandemic, the properties in which the Multifamily segment has investments did not, overall, experience significant increases in vacancies or in delinquent rent payments to date. 47 -------------------------------------------------------------------------------- (2) Financial Condition and Capital Resources AtMay 31, 2020 , we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of$1.7 billion , compared to$1.5 billion atNovember 30, 2019 and$1.0 billion atMay 31, 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 six months endedMay 31, 2020 andMay 31, 2019 , cash provided by (used in) operating activities totaled$1.3 billion and($429.9) million , respectively. During the six months endedMay 31, 2020 , cash provided by operating activities was impacted primarily by our net earnings and a decrease in loans held-for-sale of$481.6 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$159.1 million and an increase in other assets of$148.1 million . During the six months endedMay 31, 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$1.5 billion , an increase in loans held-for-sale of$206.3 million and a decrease in accounts payable and other liabilities of$192.5 million . This was partially offset by our net earnings, a decrease in receivables of$542.1 million primarily related to a decrease in Financial Services' receivables, net, which are loans sold to investors for which we have not been paid, deferred income tax expense of$101.5 million and a decrease in other assets of$66.5 million . Investing Cash Flow Activities During the six months endedMay 31, 2020 andMay 31, 2019 , cash used in investing activities totaled$174.0 million and$91.6 million , respectively. During the six months endedMay 31, 2020 , our cash used in investing activities was primarily due to$302.8 million of investments in and contributions to unconsolidated entities and deconsolidation of a previously consolidated entity, which included (1)$31.2 million to Homebuilding unconsolidated entities; (2)$79.7 million to Multifamily unconsolidated entities; (3)$39.3 million in strategic technology investments included in our Lennar Other segment; and (4) derecognition of$152.5 million of cash as of the date of deconsolidation of a previously consolidated Financial Services entity. This was partially offset by distributions of capital from unconsolidated entities of$115.1 million , which primarily included (1)$33.4 million from Multifamily unconsolidated entities, (2)$36.4 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment and (3)$45.3 million from Homebuilding unconsolidated entities. During the six months endedMay 31, 2019 , our cash used in investing activities was primarily due to cash contributions of$230.7 million to unconsolidated entities, which included (1)$136.3 million to Homebuilding unconsolidated entities, (2)$60.0 million to Multifamily unconsolidated entities primarily for working capital; and (3)$31.8 million to the unconsolidated Rialto real estate funds and strategic investments included in our Lennar Other segment. This was partially offset by distributions of capital from unconsolidated entities of$140.9 million , which included (1)$52.4 million from Multifamily unconsolidated entities; (2)$46.5 million from Homebuilding unconsolidated entities; (3)$29.3 million from the unconsolidated Rialto real estate funds and strategic technology investments included in our Lennar Other segment; and (4)$12.7 million from Financial Services unconsolidated entities. Financing Cash Flow Activities During the six months endedMay 31, 2020 andMay 31, 2019 , cash used in financing activities totaled$948.6 million and$53.4 million , respectively. During the six months endedMay 31, 2020 , cash used in financing activities was primarily impacted by (1)$310.2 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities; (2) the redemption of$300.0 million aggregate principal amount of our 6.625% senior notes dueMay 2020 ; (3) repurchases of our common stock, which included$288.5 million of repurchases under our repurchase program and$7.5 million of repurchases related to our equity compensation plan; and (4)$174.4 million of principal payments on notes payable and other borrowings. These were partially offset by$169.1 million of receipts related to noncontrolling interests. During the six months endedMay 31, 2019 , cash used in financing activities was primarily impacted by$365.2 million of net repayments under our Financial Services' warehouse facilities, which included the RMF warehouse repurchase facilities,$123.7 million principal payment on other borrowings and repurchases of our common stock of$101.2 million , which included$98.8 million of repurchases of our stock under our repurchase program and$2.5 million of repurchases related to equity 48 --------------------------------------------------------------------------------
compensation plans, partially offset by
Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our homebuilding operations. Homebuilding debt to total capital and net Homebuilding debt to total capital are calculated as follows:
May 31, November 30, May 31, (Dollars in thousands) 2020 2019 2019 Homebuilding debt$ 7,495,674 7,776,638 9,390,941 Stockholders' equity 16,542,703 15,949,517 15,159,304 Total capital$ 24,038,377 23,726,155 24,550,245 Homebuilding debt to total capital 31.2 % 32.8 % 38.3 % Homebuilding debt$ 7,495,674 7,776,638 9,390,941 Less: Homebuilding cash and cash equivalents 1,398,682 1,200,832 800,678 Net Homebuilding debt$ 6,096,992 6,575,806 8,590,263 Net Homebuilding debt to total capital (1) 26.9 % 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. AtMay 31, 2020 , Homebuilding debt to total capital improved compared toMay 31, 2019 andNovember 30, 2019 , primarily as a result of a decrease in Homebuilding debt and an increase in stockholders' equity due to net earnings. We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunities and increase our revenues and earnings. These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit 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. AtMay 31, 2020 , we had an unsecured revolving credit facility (the "Credit Facility") with maximum borrowings of$2.45 billion with maturing in 2024. The Credit Facility agreement (the "Credit Agreement") provides that up to$500 million in commitments may be used for letters of credit. Under the Credit Agreement, as of the end of the fiscal quarter, we are subject to debt covenants. The maturity, details and debt covenants of the Credit Facility are unchanged from the disclosure in our Financial Condition and Capital Resources section in its Form 10-K for the year endedNovember 30, 2019 . In addition to the Credit Facility, we have other letter of credit facilities with different financial institutions. Our letter of credit and surety bond facilities are described below: May 31, November 30, 2020 2019 (In thousands) Performance letters of credit$ 726,191 715,793 Financial letters of credit 220,264 184,075 Surety bonds 2,995,941 2,946,167
Anticipated future costs related to site improvements subject to performance surety bonds
1,496,571 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. 49 -------------------------------------------------------------------------------- Our Homebuilding average debt outstanding with an average rate of interest was as follows: Six Months Ended May 31, May 31, (Dollars in thousands) 2020 2019
Homebuilding average debt outstanding
4.9 % 4.9 % Interest incurred 184,198 212,559 Under the amended Credit Facility agreement executed inApril 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 toFebruary 28, 2019 , if positive, and 50% of the net cash proceeds from any equity offerings from and afterFebruary 28, 2019 , minus the lesser of 50% of the amount paid afterApril 11, 2019 to repurchase common stock and$375.0 million . We are required to maintain a leverage ratio that shall not exceed 65% and may be reduced by 2.5% per quarter if our interest coverage ratio is less than 2.25:1.00 for two consecutive fiscal calendar quarters. The leverage ratio will have a floor of 60%. If our interest coverage ratio subsequently exceeds 2.25:1.00 for two consecutive fiscal calendar quarters, the leverage ratio we will be required to maintain will be increased by 2.5% per quarter to a maximum of 65%. As of the end of each fiscal quarter, we are also required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last twelve months then ended. We believe that we were in compliance with our debt covenants atMay 31, 2020 . The following summarizes our debt covenant requirements and our actual levels or ratios with respect to those covenants as calculated per the Credit Agreement as ofMay 31, 2020 : (Dollars in thousands) Covenant Level Level Achieved as of May 31, 2020 Minimum net worth test$ 7,928,483 11,090,017 Maximum leverage ratio 65.0 % 33.0 % Liquidity test 1.00 3.81 AtMay 31, 2020 , the Financial Services warehouse facilities were all 364-day repurchase facilities and used to fund residential mortgages or commercial mortgages for LMF Commercial as follows: (In thousands) Maximum Aggregate Commitment Residential facilities maturing: June 2020 (1) $ 500,000 July 2020 300,000 January 2021 500,000 March 2021 300,000 Total - Residential facilities $ 1,600,000 LMF Commercial facilities maturing: November 2020 $ 200,000 December 2020 (2) 700,000 Total - LMF Commercial facilities $ 900,000 Total $ 2,500,000 (1)Subsequent toMay 31, 2020 , the maturity date was extended toJune 2021 . (2)Includes$50.0 million LMF Commercial warehouse repurchase facility used to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans held-for-investment, net. There were borrowings under this facility of$11.4 million as ofMay 31, 2020 . Our Financial Services segment uses the residential facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature. The LMF Commercial facilities finance LMF Commercial loan originations and securitization activities and were secured by a 75% interest in the originated commercial loans financed. Borrowings and collateral under the facilities and their prior year predecessors were as follows: 50 -------------------------------------------------------------------------------- (In thousands) May 31, 2020 November 30, 2019 Borrowings under the residential facilities$ 1,054,588 $
1,374,063
Collateral under the residential facilities 1,085,503
1,423,650
Borrowings under the LMF Commercial facilities 227,003
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 describes the repurchase of our Class A and Class B common stocks, under this program, for the three and six months endedMay 31, 2020 and 2019: Three Months Ended Six Months EndedMay 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019 (Dollars in thousands, except price per share) Class A Class B Class A Class B Class A Class B Class A Class B Shares repurchased - - 1,000,000 - 4,250,000 115,000 2,000,000 - Purchase amount $ - $ -$ 51,783 $ -$ 282,274 $ 6,155 $ 98,781 $ - Average price per $ - $ -$ 51.76 $ -$ 66.42 $ 53.52 $ 49.37 $ - share During the six months endedMay 31, 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 six months endedMay 31, 2019 , treasury stock increased by 2.1 million shares of Class A common stock due primarily to our repurchase of 2.0 million shares of Class A common stock through our stock repurchase program. OnJune 25, 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 onJuly 24, 2020 to holders of record at the close of business onJuly 10, 2020 . OnMay 5, 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 onApril 21, 2020 , as declared by our Board of Directors onApril 7, 2020 . We declared and paid cash 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 the effects of the COVID-19 pandemic and resulting governmental actions on our operations do not significantly worsen for a protracted period, our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity. Off-Balance Sheet Arrangements Homebuilding: Investments in Unconsolidated Entities AtMay 31, 2020 , we had equity investments in 49 homebuilding and land unconsolidated entities (of which three had recourse debt, 10 had non-recourse debt and 36 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 ofMay 31, 2020 andNovember 30, 2019 , our recorded investments in Homebuilding unconsolidated entities were$973.0 million and$1.0 billion , respectively, while the underlying equity related to our investments in Homebuilding unconsolidated entities partners' net assets as of bothMay 31, 2020 andNovember 30, 2019 were$1.3 billion . The basis 51 -------------------------------------------------------------------------------- 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 ofMay 31, 2020 andNovember 30, 2019 , the carrying amount of our investment in FivePoint was$376.9 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 bothMay 31, 2020 andNovember 30, 2019 , of which our maximum recourse exposure was$4.9 million and$10.8 million as ofMay 31, 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. As ofMay 31, 2020 andNovember 30, 2019 , the fair values of the repayment, maintenance, and completion guarantees were not material. We believe that as ofMay 31, 2020 , in the event we become legally obligated to perform under a guarantee of the obligation of a Homebuilding unconsolidated entity due to a triggering event under a guarantee, the collateral would be sufficient to repay at least a significant portion of the obligation or we and our partners would contribute additional capital into the venture. In certain instances, we have placed performance letters of credit and surety bonds with municipalities with regard to obligations of our joint ventures (see Note 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 ofMay 31, 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 1,116,812 49,412 262,858 150,224 654,318 - Land seller and CDD debt 9,045 - - - - 9,045 Debt issuance costs (12,415) - - - - (12,415) Total$ 1,118,374 49,412 262,858 155,156 654,318 (3,370) Multifamily: Investments in Unconsolidated Entities AtMay 31, 2020 , Multifamily had equity investments in 21 unconsolidated entities that are engaged in multifamily residential developments (of which 7 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 52 -------------------------------------------------------------------------------- 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 six months endedMay 31, 2020 are included below: May 31, 2020 (In thousands) LMV I LMV II Lennar's carrying value of investments$ 355,136 213,635 Equity commitments 2,204,016 1,257,700 Equity commitments called 2,127,560 754,177 Lennar's equity commitments 504,016 381,000 Lennar's equity commitments called 493,730 227,372 Lennar's remaining commitments 10,286 153,628
Distributions to Lennar during the six months ended
19,969 - 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 atMay 31, 2020 . The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as ofMay 31, 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$ 2,345,974 88,790 653,144 453,455 1,150,585 - Debt issuance costs (31,789) - - - - (31,789) Total$ 2,314,185 88,790 653,144 453,455 1,150,585 (31,789) 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 ofMay 31, 2020 andNovember 30, 2019 , we had investments in strategic technology unconsolidated entities of$189.5 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. 53 -------------------------------------------------------------------------------- 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) atMay 31, 2020 andMay 31, 2019 : Controlled Homesites Years of Supply Owned May 31, 2020 Optioned JVs Total Owned Homesites Total Homesites (1) East 28,763 13,608 42,371 77,370 119,741 Central 7,320 122 7,442 29,765 37,207 Texas 23,164 - 23,164 36,179 59,343 West 12,355 2,900 15,255 59,777 75,032 Other - 8,681 8,681 2,071 10,752 Total homesites 71,602 25,311 96,913 205,162 302,075 3.9 % of total homesites 32 % 68 % Controlled Homesites Years of Supply Owned May 31, 2019 Optioned JVs Total Owned Homesites Total Homesites (1) East 26,688 3,482 30,170 79,313 109,483 Central 6,627 132 6,759 32,559 39,318 Texas 23,119 - 23,119 35,987 59,106 West 8,066 4,493 12,559 63,757 76,316 Other - 919 919 3,610 4,529 Total homesites 64,500 9,026 73,526 215,226 288,752 4.5 % of total homesites 25 % 75 % (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 50% of our entire homesite inventory from approximately 32% as ofMay 31, 2020 . Recently, we have undertaken several strategic land initiatives which include acquiring fully developed homesites from regional developers and may also include building homes in bulk for landowners who will retain them as rental properties. During the six months endedMay 31, 2020 , consolidated inventory not owned increased by$86.7 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as ofMay 31, 2020 . The increase was primarily due to the consolidation of option contracts, partially offset by us exercising our options to acquire land under previously consolidated contracts. To reflect the purchase 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 ofMay 31, 2020 . The liabilities related to consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned land and our cash deposits. 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$282.1 million and$320.5 million atMay 31, 2020 andNovember 30, 2019 , respectively. Additionally, we had posted$72.5 million and$75.0 million of letters of credit in lieu of cash deposits under certain land and option contracts as ofMay 31, 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 . There was no outstanding borrowings under our Credit Facility as ofMay 31, 2020 . (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. 54 -------------------------------------------------------------------------------- (4) Critical Accounting Policies We believe that there have been no significant changes to our critical accounting policies during the six months endedMay 31, 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 . 55
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