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OFFON

LENNAR CORPORATION

(LEN)
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LENNAR : NEW/ Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

07/02/2021 | 04:31pm EDT
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 ended November 30, 2020.
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. 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.
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.
The 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 negative impact to our business of the ongoing coronavirus
("COVID-19") pandemic, the duration, impact and severity of which is highly
uncertain; 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; 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;
reduced availability of mortgage financing or increased interest rates; our
inability to successfully execute our strategies, including our land lighter
strategy and our planned spin-off of certain businesses; 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 force us to 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 ended November 30, 2020 and our
other filings with the SEC 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.
                                       26
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Outlook

The housing market remains very strong. Demand has continued to strengthen while
the supply of new and existing homes has remained constrained. New home
construction cannot ramp up quickly enough to fill the void of the
underproduction of homes for the past decade. The bottom line is that supply of
homes is short and while land, labor and supply chain are limiting factors in
the drive to meet current demand, we believe that the housing shortage is likely
to remain for some time to come. Even though home prices have moved much higher
and interest rates have ticked up slightly higher, overall affordability remains
strong and interest rates are still lower than they were a year ago. Personal
savings for deposits are strong and wages seem to be rising faster than monthly
payments. Millennials are moving out of their parents' homes and forming
families, while apartment dwellers are finding a first-time home. We believe we
are uniquely positioned to capitalize and drive even greater growth in our
bottom line on this demand given our focus on orderly, targeted growth, with our
sales pace tightly matched with our pace of production, which enables price
appreciation to offset future cost escalations to maximize margins. We do not
currently see the rising cost of homes reducing demand for the homes we build.
We believe we are making up for the years of underproduction of homes now, which
should keep the housing market thriving for some time to come.
The housing market is not only very strong, but it is also going through some
structural changes that will promote stability in the market, and extend housing
benefits to the breadth of a diverse society. The iBuyer and single-family for
rent participants are providing additional liquidity to the marketplace to
purchase and sell homes, as they evolve and provide ever more frictionless
transactions. They are also solving important industry problems that have needed
solutions for a very long time. The iBuyers, led by Opendoor, are becoming more
than just a home sale option. They are an ever more effective and instrumental
convenience provider, as the coordination of a new home is being complicated by
supply chain disruption. Additionally, in the single-family for rent space, our
Upward America Venture facilitates a better time delivery of our homes with
reduced cycle times and makes the single-family lifestyle accessible to more
families. Professional ownership of homes enables renters to access a
single-family lifestyle, while they build the resources to own, and while
commercial and professional owners manage the risk profile, which enables better
housing for more families, and more diverse families, without weakening the
mortgage market. Capitalized with $1.25 billion of equity from blue-chip
institutional investors, the Upward America Venture had a pipeline of 2,534
homes with a total purchase price of $596 million at the end of the second
quarter.
The combined effects of this strong housing market along with structural
changes, which we are in position to capitalize on through our strategic
investments, puts Lennar in position to continue to drive returns and should
position us for consistent continued growth into fiscal 2022. We are focused on
cash flow, debt reduction, and stock buyback, land controlled versus owned,
return on capital, and return on equity, and on innovative technologies. In
addition, we have been carefully managing a stressed supply chain by maintaining
our delivery targets for the year rather than increasing them. We still expect
to deliver between 62,000 and 64,000 homes in 2021, but with a now higher
expected gross margin of 26.5% to 27.0% and expected SG&A of 7.3% to 7.5% for
the year. Our return on equity stands now at 18.8%, which is a 550 basis point
improvement over last year. Our return on capital is now 15.0%, and a 500-basis
point improvement. We have remained focused on our optioned versus owned land
strategy, and achieved 50% land controlled through options or similar agreements
two quarters earlier than expected. We ended the second quarter with a 3.3 years
supply of land owned, compared to a 3.9 years supply of land owned at the same
time last year. Among other things, this has enabled us to reduce debt, such
that our second quarter homebuilding debt-to-total capital ratio improved to
23.1%, from 31.2% in the prior year.
These points of improvement have enabled us to reconsider the size of our
spin-off and aim for a larger asset base in order to further fortify the new
company. Accordingly, we are now targeting an asset base of $5 billion to $6
billion, which will leave the remaining pure-play homebuilding and financial
services company with an appropriately liquid balance sheet and no material loss
of reported earnings. The new company will be an independent and active asset
management business that raises third-party capital to support its ongoing
business vertical. Two of these verticals, the multifamily platform and LSFR,
our single-family rental platform, have already raised third-party capital and
are active asset managers. Additionally, we have a dynamic and growing
independent land development business, and we have a growing technology
investment business, which is part of LENX. This separation of these businesses
from the homebuilder will enable them to thrive in ways they cannot while they
are part of Lennar.
As a company we are recasting the cost structure all the way from hard costs
like labor and materials, to the softer costs around SG&A. We are re-wiring the
way that this business operates, including through the technologies that we are
incorporating into our business, the efficiency of our land program, our
just-in-time delivery of land and the emergent inventory management component of
our single-family for rent program. Additionally, as we bring debt down, we have
less capital cost, and that is continuing to help our margin picture. We believe
that we have never been better positioned financially, organizationally and
technologically to thrive and grow in an evolving and exciting housing market.
The market conditions remain strong for the foreseeable future, and we expect a
strong second half of 2021, and continued strength in the market as we begin to
look to 2022.

                                       27
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(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 ended May 31, 2021 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, a variety of factors can alter seasonal patterns.
Our net earnings attributable to Lennar were $831.4 million, or $2.65 per
diluted share ($2.66 per basic share), in the second quarter of 2021, compared
to net earnings attributable to Lennar of $517.4 million, or $1.65 per diluted
share ($1.66 per basic share), in the second quarter of 2020. Our net earnings
attributable to Lennar were $1.8 billion, or $5.85 per diluted share ($5.86 per
basic share), in the six months ended May 31, 2021, compared to net earnings
attributable to Lennar of $915.9 million, or $2.91 per diluted share ($2.92 per
basic share), in the six months ended May 31, 2020.
                                       28
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Financial information relating to our operations was as follows:

                                                                                            Three Months Ended May 31, 2021

(In thousands)                              Homebuilding          Financial Services          Multifamily           Lennar Other             Corporate              Total
Revenues:
Sales of homes                            $   5,980,731                     -                       -                       -                      -             5,980,731
Sales of land                                    38,785                     -                       -                       -                      -                38,785
Other revenues                                    8,525               218,747                 177,473                   5,984                      -               410,729
Total revenues                                6,028,041               218,747                 177,473                   5,984                      -             6,430,245
Costs and expenses:
Costs of homes sold                           4,421,373                     -                       -                       -                      -             4,421,373
Costs of land sold                               32,979                     -                       -                       -                      -                32,979
Selling, general and administrative
expenses                                        455,164                     -                       -                       -                      -               455,164
Other costs and expenses                              -                97,427                 168,930                   5,732                      -               272,089
Total costs and expenses                      4,909,516                97,427                 168,930                   5,732                      -             5,181,605
Equity in earnings (loss) from
unconsolidated entities, Multifamily
other gain and Lennar Other other income
(expense), net                                   (1,688)                    -                  13,854                  63,221                      -                75,387
Other expense, net                               (4,362)                    -                       -                       -                      -                (4,362)
Lennar Other realized and unrealized gain
(loss)                                                -                     -                       -                (117,570)                     -    

(117,570)

Operating earnings (loss)                 $   1,112,475               121,320                  22,397                 (54,097)                     -             1,202,095
Corporate general and administrative
expenses                                              -                     -                       -                       -                 90,717                90,717
Charitable foundation contribution                    -                     -                       -                       -                 14,493                14,493
Earnings (loss) before income taxes       $   1,112,475               121,320                  22,397                 (54,097)              (105,210)            1,096,885


                                                                                           Three Months Ended May 31, 2020
(In thousands)                               Homebuilding          Financial 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                         $     631,361               147,326                    (638)             (18,021)                    -               760,028
Corporate general and administrative
expenses                                               -                     -                       -                    -                78,183       

78,183

Charitable foundation contribution                     -                     -                       -                    -                 5,268       

5,268

Earnings (loss) before income taxes        $     631,361               147,326                    (638)             (18,021)              (83,451)              676,577



                                       29
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                                                                                                     Six Months Ended May 31, 2021
(In thousands)                              Homebuilding           Financial Services          Multifamily          Lennar Other           Corporate and unallocated              Total
Revenues:
Sales of homes                            $   10,871,645                     -                       -                     -                              -                    10,871,645
Sales of land                                     86,428                     -                       -                     -                              -                        86,428
Other revenues                                    13,024               462,816                 308,916                12,884                              -                       797,640
Total revenues                                10,971,097               462,816                 308,916                12,884                              -                    11,755,713
Costs and expenses:
Costs of homes sold                            8,088,235                     -                       -                     -                              -                     8,088,235
Costs of land sold                                74,167                     -                       -                     -                              -                        74,167
Selling, general and administrative
expenses                                         865,400                     -                       -                     -                              -                       865,400
Other costs and expenses                               -               195,289                 299,979                 9,984                              -                       505,252
Total costs and expenses                       9,027,802               195,289                 299,979                 9,984                              -                     9,533,054
Equity in earnings (loss) from
unconsolidated entities and Multifamily
other gain                                        (6,253)                    -                  12,586                62,174                              -                        68,507
Other income, net                                  8,613                     -                       -                     -                              -                         8,613
Lennar Other realized and unrealized gain
(loss)                                                 -                     -                       -               352,175                              -                       352,175
Operating earnings                        $    1,945,655               267,527                  21,523               417,249                              -                     2,651,954
Corporate general and administrative
expenses                                               -                     -                       -                     -                        201,248                       201,248
Charitable foundation contribution                     -                     -                       -                     -                         26,807                        26,807
Earnings (loss) before income taxes       $    1,945,655               267,527                  21,523               417,249                       (228,055)                    2,423,899


                                                                                                     Six Months Ended May 31, 2020
(In thousands)                               Homebuilding          Financial Services          Multifamily          Lennar Other           Corporate and unallocated              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              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                                               -                     -                       -                     -                        160,817                      160,817
Charitable foundation contribution                     -                     -                       -                     -                          9,481                        9,481
Earnings (loss) before income taxes        $   1,091,759               194,643                   1,147               (17,122)                      (170,298)                   1,100,129


Three Months Ended May 31, 2021 versus Three Months Ended May 31, 2020
Revenues from home sales increased 21% in the second quarter of 2021 to $6.0
billion from $4.9 billion in the second quarter of 2020. Revenues were higher
primarily due to a 14% increase in the number of home deliveries, excluding
unconsolidated entities, and a 6% increase in the average sales price. New home
deliveries, excluding unconsolidated entities, increased to 14,462 homes in the
second quarter of 2021 from 12,653 homes in the second quarter of 2020. The
average sales price of homes delivered was $414,000 in the second quarter of
2021, compared to $389,000 in the second quarter of 2020.
                                       30
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Gross margin on home sales were $1.6 billion, or 26.1%, in the second quarter of
2021, compared to $1.1 billion, or 21.6%, in the second quarter of 2020. The
gross margin percentage on home sales increased primarily as a result of pricing
power as the increase in revenue per square foot outpaced the increase in cost
per square foot. Additionally, we continued to focus on controlling construction
costs. Gross margin on land sales in the second quarter of 2021 was $5.8 million
compared to a loss of $23.5 million in the second quarter of 2020. The loss in
the second quarter of 2020 was primarily due to a write-off of costs as a result
of us not moving forward with a naval base development in Concord, California,
northeast of San Francisco.
Selling, general and administrative expenses were $455.2 million in the second
quarter of 2021, compared to $407.2 million in the second quarter of 2020. As a
percentage of revenues from home sales, selling, general and administrative
expenses improved to 7.6% in the second quarter of 2021, from 8.3% in the second
quarter of 2020. This was the lowest percentage for a second quarter in our
history primarily due to a decrease in broker commissions and benefits of our
technology efforts.
Operating earnings for the Financial Services segment were $121.2 million in the
second quarter of 2021, compared to $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). The second
quarter of 2020 included a $61.4 million gain on the deconsolidation of a
previously consolidated entity. Excluding this gain, the improvement in
operating earnings was primarily due to an increase in margin in the mortgage
business and an increase in volume and margin in the title business.
Operating earnings for the Multifamily segment were $22.4 million in the second
quarter of 2021, compared to an operating loss of $0.6 million in the second
quarter of 2020. Operating loss for the Lennar Other segment was $54.1 million
in the second quarter of 2021, compared to $18.0 million in the second quarter
of 2020. In the second quarter of 2021, we recorded mark to market losses on our
Opendoor Technologies, Inc ("Opendoor") and Sunnova Energy International Inc.
("Sunnova") investments of $234.3 million and $38.3 million, respectively. This
was partially offset by a gain of $151.5 million recognized during the quarter
related to the sale of our solar business to Sunnova.
Six Months Ended May 31, 2021 versus Six Months Ended May 31, 2020
Revenues from home sales increased 20% in the six months ended May 31, 2021 to
$10.9 billion from $9.1 billion in the six months ended May 31, 2020. Revenues
were higher primarily due to a 17% increase in the number of home deliveries,
excluding unconsolidated entities. New home deliveries, excluding unconsolidated
entities, increased to 26,764 homes in the six months ended May 31, 2021 from
22,966 homes in the six months ended May 31, 2020. The average sales price of
homes delivered was $406,000 in the six months ended May 31, 2021, compared to
$395,000 in the six months ended May 31, 2020.
Gross margin on home sales were $2.8 billion, or 25.6%, in the six months ended
May 31, 2021, compared to $1.9 billion or 21.1%, in the six months ended May 31,
2020. The gross margin percentage on home sales increased primarily as a result
of pricing power as the increase in revenue per square foot outpaced the
increase in cost per square foot. Additionally, we continued to focus on
controlling construction costs. Gross margin on land sales in the six months
ended May 31, 2021 was $12.3 million, compared to a loss of $23.8 million in the
six months ended May 31, 2020. The loss in the six months ended May 31, 2020 was
primarily due to a write-off of costs in the second quarter of 2020 as a result
of us not moving forward with a naval base development in Concord, California,
northeast of San Francisco.
Selling, general and administrative expenses were $865.4 million in the six
months ended May 31, 2021, compared to $786.1 million in the six months ended
May 31, 2020. As a percentage of revenues from home sales, selling, general and
administrative expenses improved to 8.0% in the six months ended May 31, 2021,
from 8.7% in the six months ended May 31, 2020. The improvement was primarily
due to a decrease in broker commissions and benefits of our technology efforts.
Operating earnings for the Financial Services segment were $267.4 million in the
six months ended May 31, 2021, compared to $208.8 million in the six months
ended May 31, 2020 (which included $194.6 million in operating earnings and an
add back of $14.1 million net loss attributable to noncontrolling interests).
The six months ended May 31, 2020 included a $61.4 million gain on the
deconsolidation of a previously consolidated entity. Excluding this gain, the
improvement in operating earnings was primarily due to an increase in volume and
margin in the mortgage and title businesses.
Operating earnings for the Multifamily segment were $21.5 million in the six
months ended May 31, 2021, compared to operating earnings of $1.1 million in the
six months ended May 31, 2020. Operating earnings for the Lennar Other segment
were $417.2 million in the six months ended May 31, 2021, compared to an
operating loss of $17.1 million in the six months ended May 31, 2020. The
operating earnings for the six months ended May 31, 2021 were primarily due to
the net gain related to the mark to market of our shareholdings in Opendoor,
which began trading on the Nasdaq stock market in December 2020, and the gain on
the sale of our solar business to Sunnova.
                                       31
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Homebuilding Segments
At May 31, 2021, our reportable Homebuilding segments and Homebuilding Other are
outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements.
The following tables set forth selected financial and operational information
related to our homebuilding operations for the periods indicated:
Selected Financial and Operational Data
                                                                                                                        Three Months Ended May 31, 2021
                                                  Gross Margins                                                                                                Operating Earnings (Loss)
                                                                                                                                                                            Equity in Earnings
                         Sales of Homes         Costs of Sales of                                 Net Margins on          Gross Margins on                                     (Loss) from                 Other Income            Operating Earnings
($ in thousands)            Revenue                   Homes               Gross Margin %        Sales of Homes (1)         Sales of Land           Other Revenue         Unconsolidated Entities          (Expense), net                 (Loss)
East                    $   1,551,030                 1,115,010                   28.1  %                307,978                  1,335               1,768                            (59)                   (1,195)                       309,827
Central                     1,093,190                   846,427                   22.6  %                157,429                    774                 579                            317                       (51)                       159,048
Texas                         790,391                   551,067                   30.3  %                173,803                  1,837                 562                            387                      (532)                       176,057
West                        2,543,263                 1,893,148                   25.6  %                491,223                  1,860               1,311                           (921)                     (662)                       492,811
Other (2)                       2,857                    15,721                 (450.3) %                (26,239)                     -               4,305                         (1,412)                   (1,922)                       (25,268)
Totals                  $   5,980,731                 4,421,373                   26.1  %              1,104,194                  5,806               8,525                         (1,688)                   (4,362)                     1,112,475


                                                                                                                      Three Months Ended May 31, 2020
                                                Gross Margins                                                                                               Operating Earnings (Loss)
                                                                                                                        Gross Margins                                   Equity in Earnings
                        Sales of Homes         Costs of Sales of                                Net Margins on         (Loss) on Sales                                     (Loss) from                 Other Income            Operating Earnings
($ in thousands)           Revenue                   Homes               Gross Margin %       Sales of Homes (1)           of Land             Other Revenue         Unconsolidated Entities          (Expense), net                 (Loss)
East                   $   1,276,275                   978,677                  23.3  %               185,194                (1,126)              1,156                            218                     7,445                        192,887
Central                      984,248                   800,736                  18.6  %               102,873                   280               1,074                             19                      (342)                       103,904
Texas                        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


                                                                                                                        Six Months Ended May 31, 2021
                                                Gross Margins                                                                                                  Operating Earnings (Loss)
                                                                                                                                                                            Equity in Earnings
                       Sales of Homes          Costs of Sales of                                 Net Margins on          Gross Margins on                                      (Loss) from                 Other Income            Operating Earnings
(In thousands)             Revenue                   Homes               Gross Margin %        Sales of Homes (1)          Sales of Land           Other Revenue         Unconsolidated Entities          (Expense), net                 (Loss)
East                  $    2,898,641                 2,103,873                   27.4  %                549,512                   6,411               3,186                           (551)                   13,352                        571,910
Central                    2,019,628                 1,559,973                   22.8  %                289,528                     751                 984                            415                      (607)                       291,071
Texas                      1,426,801                 1,002,264                   29.8  %                302,964                   2,871                 820                            541                    (1,496)                       305,700
West                       4,520,071                 3,400,875                   24.8  %                809,213                   2,228               2,361                             41                       674                        814,517
Other (2)                      6,504                    21,250                 (226.7) %                (33,207)                      -               5,673                         (6,699)                   (3,310)                       (37,543)
Totals                $   10,871,645                 8,088,235                   25.6  %              1,918,010                  12,261              13,024                         (6,253)                    8,613                      1,945,655


                                                                                                                          Six Months Ended May 31, 2020
                                                Gross Margins                                                                                                   Operating Earnings (Loss)
                                                                                                                                                                                Equity in Earnings
                       Sales of Homes         Costs of Sales of                                 Net Margins on          Gross Margins on Sales                                      (Loss) from                Other Income            Operating Earnings
(In thousands)            Revenue                   Homes               Gross Margin %        Sales of Homes (1)                of Land                 Other Revenue         Unconsolidated Entities         (Expense), net                 (Loss)
East                  $   2,426,996                 1,859,895                   23.4  %                340,019                        (1,577)              2,618                           577                         4                        341,641
Central                   1,770,945                 1,458,018                   17.7  %                157,277                          (647)              1,525                           572                       900                        159,627
Texas                     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


(1)Net margins on sales of homes include selling, general and administrative
expenses.
(2)Negative gross and net margins were due to period costs and impairments in
Urban divisions that impact costs of homes sold without sufficient sales of
homes revenue to offset those costs.
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Summary of Homebuilding Data
Deliveries:
                                                                               Three Months Ended
                                          Homes                           Dollar Value (In thousands)                    Average Sales Price
                                         May 31,                                    May 31,                                    May 31,
                                 2021                2020                  2021                  2020                 2021                 2020
East                              4,480               3,814          $   1,560,934            1,282,553          $   348,000              336,000
Central                           2,761               2,579              1,093,190              984,247              396,000              382,000
Texas                             2,747               2,462                790,391              694,110              288,000              282,000
West                              4,502               3,804              2,543,263            1,957,435              565,000              515,000
Other                                 3                  13                  2,857               13,013              952,000            1,001,000
Total                            14,493              12,672          $   5,990,635            4,931,358          $   413,000              389,000


Of the total homes delivered listed above, 31 homes with a dollar value of $9.9
million and an average sales price of $319,000 represent home deliveries from
unconsolidated entities for the three months ended May 31, 2021, compared to 19
home deliveries with a dollar value of $6.3 million and an average sales price
of $330,000 for the three months ended May 31, 2020.
                                                                                Six Months Ended
                                          Homes                           Dollar Value (In thousands)                    Average Sales Price
                                         May 31,                                    May 31,                                    May 31,
                                 2021                2020                  2021                   2020                 2021                2020
East                              8,400               7,202          $    2,912,235            2,436,268          $   347,000             338,000
Central                           5,180               4,622               2,019,628            1,770,945              390,000             383,000
Texas                             5,096               4,039               1,426,802            1,157,907              280,000             287,000
West                              8,124               7,108               4,520,071            3,688,948              556,000             519,000
Other                                 7                  22                   6,504               21,052              929,000             957,000
Total                            26,807              22,993          $   10,885,240            9,075,120          $   406,000             395,000


Of the total homes delivered listed above, 43 homes with a dollar value of $13.6
million and an average sales price of $316,000 represent home deliveries from
unconsolidated entities for the six months ended May 31, 2021, compared to 27
home deliveries with a dollar value of $9.3 million and an average sales price
of $343,000 for the six months ended May 31, 2020.
New Orders (1):
                                                                                         Three Months Ended
                            Active Communities                            Homes                         Dollar Value (In thousands)                   Average Sales Price
                                 May 31,                                 May 31,                                  May 31,                                   May 31,
                        2021                  2020               2021                2020                 2021                 2020                 2021                2020
East                     351                   344                5,351              4,126          $   1,987,929           1,360,519          $   372,000            330,000
Central                  297                   325                3,416              2,699              1,399,730           1,024,724              410,000            380,000
Texas                    232                   221                3,250              2,582              1,000,013             670,139              308,000            260,000
West                     342                   352                5,135              3,608              3,172,569           1,802,705              618,000            500,000
Other                      3                     3                    5                  -                  5,146                   -            1,029,000                  -
Total                  1,225                 1,245               17,157             13,015          $   7,565,387           4,858,087          $   441,000            373,000


Of the total homes listed above, 32 homes with a dollar value of $9.9 million
and an average sales price of $373,000 represent homes in four active
communities from unconsolidated entities for the three months ended May 31,
2021, compared to 25 homes with a dollar value of $9.0 million and an average
sales price of $361,000 in four active communities for the three months ended
May 31, 2020.
(1)Homes represent the number of new sales contracts executed with homebuyers,
net of cancellations, during the three and six months ended May 31, 2021 and
May 31, 2020.
                                                                                  Six Months Ended
                                             Homes                          Dollar Value (In thousands)                   Average Sales Price
                                            May 31,                                   May 31,                                   May 31,
                                    2021                2020                 2021                  2020                 2021                2020
East                                10,165              7,857          $    3,688,041           2,634,872          $   363,000            335,000
Central                              6,742              5,366               2,733,356           2,043,167              405,000            381,000
Texas                                6,025              4,581               1,812,182           1,243,218              301,000            271,000
West                                 9,787              7,573               5,864,964           3,928,337              599,000            519,000
Other                                    8                 14                   8,121              13,581            1,015,000            970,000
Total                               32,727             25,391          $   14,106,664           9,863,175          $   431,000            388,000


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Of the total homes listed above, 67 homes with a dollar value of $23.5 million
and an average sales price of $351,000 represent homes from unconsolidated
entities for the six months ended May 31, 2021, compared to 51 homes with a
dollar value of $17.1 million and an average sales price of $335,000 for the six
months ended May 31, 2020.
Backlog:
                                                                                          At
                                              Homes                          Dollar Value (In thousands)                   Average Sales Price
                                             May 31,                                   May 31,                                   May 31,
                                     2021                2020                 2021                  2020                 2021                2020
East                                  7,778              6,345          $    3,086,740           2,224,974          $   397,000             351,000
Central                               5,933              3,894               2,475,900           1,516,188              417,000             389,000
Texas                                 3,752              2,712               1,209,965             798,648              322,000             294,000
West                                  7,275              5,023               4,258,324           2,547,649              585,000             507,000
Other                                     3                  1                   3,465               1,138            1,155,000           1,138,000
Total                                24,741             17,975          $   11,034,394           7,088,597          $   446,000             394,000


Of the total homes in backlog listed above, 62 homes with a backlog dollar value
of $21.4 million and an average sales price of $345,000 represent the backlog
from unconsolidated entities at May 31, 2021, compared to 55 homes with a
backlog dollar value of $18.0 million and an average sales price of $327,000 at
May 31, 2020.
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 May 31, 2021 versus Three Months Ended May 31, 2020
Homebuilding East: Revenues from home sales increased in the second quarter of
2021 compared to the second quarter of 2020, primarily due to an increase in the
number of home deliveries in all the states of the segment except in
Pennsylvania and an increase in the average sales price of homes delivered in
all the states of the segment except in New Jersey. The increase in the number
of home deliveries was primarily due to higher demand as the number of
deliveries per active community increased. The decrease in the number of home
deliveries in Pennsylvania was primarily due to a decrease in the number of
communities due to the timing of opening and closing of communities. The
increase in the average sales price of homes delivered was primarily due to
favorable market conditions. The decrease in the average sales price of homes
delivered in New Jersey 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 second quarter of 2021 increased compared
to the same period last year primarily due to an increase in the revenue per
square foot of homes delivered, which outpaced increases in costs per square
foot.
Homebuilding Central: Revenues from home sales increased in the second quarter
of 2021 compared to the second quarter of 2020, primarily due to an increase in
the number of home deliveries in all the states of the segment except in
Georgia, Tennessee and Virginia, and an increase in the average sales price of
homes delivered in all the states of 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. The decrease in the number of home deliveries in
Georgia, Tennessee and Virginia was primarily due to a decrease in the number of
communities due to the timing of opening and closing of communities. The
increase in the average sales price of homes delivered was primarily due to
favorable market conditions. Gross margin percentage on home deliveries in the
second quarter of 2021 increased compared to the same period last year primarily
due to an increase in revenue per square foot of homes delivered, which outpaced
increases in cost per square foot.
Homebuilding Texas: Revenues from home sales increased in the second quarter of
2021 compared to the second quarter of 2020, primarily due to an increase in the
number of home deliveries and an increase 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 increase
in the average sales price of homes delivered was primarily due to favorable
market conditions. Gross margin percentage on home deliveries in the second
quarter of 2021 increased compared to the same period last year primarily due to
an increase in revenue per square foot of homes delivered, which outpaced
increases in cost per square foot.
Homebuilding West: Revenues from home sales increased in the second quarter of
2021 compared to the second quarter of 2020, primarily due to an increase in the
number of home deliveries in all the states of the segment except in Oregon and
an increase in the average sales price of homes delivered in all the states of
the segment except in Colorado. The increase in the number of home deliveries
was primarily due to higher demand as the number of deliveries per active
community increased during the quarter. The decrease in the number of home
deliveries in Oregon was primarily due to a decrease in the number of
                                       34
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deliveries per active community due to the timing of opening and closing of
communities. The increase in the average sales price of homes delivered was
primarily due to favorable market conditions. The decrease in the average sales
price of homes delivered in Colorado 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 second quarter of 2021 increased
compared to the same period last year primarily due to an increase in revenue
per square foot of homes delivered, which outpaced increases in cost per square
foot.
Six Months Ended May 31, 2021 versus Six Months Ended May 31, 2020
Homebuilding East: Revenues from home sales increased in the six months ended
May 31, 2021 compared to the six months ended May 31, 2020, primarily due to an
increase in the number of home deliveries in all the states of the segment
except in Pennsylvania and an increase in the average sales price of homes
delivered in all the states of the segment except in New Jersey. The increase in
the number of home deliveries was primarily due to higher demand as the number
of deliveries per active community increased. The decrease in the number of home
deliveries in Pennsylvania was primarily due to a decrease in the number of
communities due to the timing of opening and closing of communities. The
increase in the average sales price of homes delivered was primarily due to
favorable market conditions. The decrease in the average sales price of homes
delivered in New Jersey 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 six months ended May 31, 2021 increased
compared to the same period last year primarily due to an increase in the
revenue per square foot of homes delivered while cost per square foot were
unchanged.
Homebuilding Central: Revenues from home sales increased in the six months ended
May 31, 2021 compared to the six months ended May 31, 2020, primarily due to an
increase in the number of home deliveries in all the states of the segment
except in Georgia, Maryland and Virginia, and an increase in the average sales
price of homes delivered in all the states of the segment except in North
Carolina and Indiana. The increase in the number of home deliveries was
primarily due to higher demand as the number of deliveries per active community
increased. The decrease in the number of home deliveries in Georgia, Maryland
and Virginia was primarily due to a decrease in the number of communities due to
the timing of opening and closing of communities. The increase in the average
sales price of homes delivered was primarily due to favorable market conditions.
The decrease in the average sales price of homes delivered in North Carolina and
Indiana 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 six months ended May 31, 2021 increased compared to the
same period last year primarily due to an increase in revenue per square foot of
homes delivered.
Homebuilding Texas: Revenues from home sales increased in the six months ended
May 31, 2021 compared to the six months ended May 31, 2020, 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
ended May 31, 2021 increased compared to the same period last year primarily due
to an increase in revenue per square foot of homes delivered while cost per
square foot were unchanged.
Homebuilding West: Revenues from home sales increased in the six months ended
May 31, 2021 compared to the six months ended May 31, 2020, primarily due to an
increase in the number of home deliveries in all states of the segment and an
increase in the average sales price of homes delivered in all the states of the
segment except in Colorado. The increase in the number of home deliveries in all
states of the segment was primarily due to higher demand as the number of
deliveries per active community increased during the quarter. The increase in
the average sales price of homes delivered was primarily due to favorable market
conditions. The decrease in average sales price of homes delivered in Colorado
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 ended May 31, 2021 increased compared to the same period last year
primarily due to an increase in revenue per square foot of homes delivered,
which outpaced increases in cost per square foot.
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.
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The following table sets forth selected financial and operational information
related to the residential mortgage and title activities of our Financial
Services segment:
                                                             Three Months Ended                                     Six Months Ended
                                                                  May 31,                                                May 31,
(Dollars in thousands)                                2021                       2020                        2021                        2020

Dollar value of mortgages originated           $      3,186,000                  3,258,000                     5,947,000                 5,478,000
Number of mortgages originated                            9,500                     10,100                        17,900                    17,000
Mortgage capture rate of Lennar homebuyers                   74  %                      82  %                         75  %                     79  %
Number of title and closing service
transactions                                             17,100                     14,400                        32,100                    25,500


At May 31, 2021 and November 30, 2020, the carrying value of Financial Services'
commercial mortgage-backed securities ("CMBS") was $162.9 million and $164.2
million, respectively. Details of these securities and related debt are within
Note 2 of the Notes to Condensed Consolidated Financial Statements.
Multifamily Segment
We have been actively involved, primarily through unconsolidated entities, in
the development, construction and property management of multifamily rental
properties. Our Multifamily segment focuses on developing a geographically
diversified portfolio of institutional quality multifamily rental properties in
select U.S. markets.
Originally, our Multifamily segment focused on building multifamily properties
and selling them shortly after they were completed. However, more recently we
have focused on creating and participating in ventures that build multifamily
properties with the intention of retaining them after they are completed.
The following tables provide information related to our investment in the
Multifamily segment:
Balance Sheets
(In thousands)                                                       May 31, 2021           November 30, 2020

Multifamily investments in unconsolidated entities                 $     691,330                 724,647
Lennar's net investment in Multifamily                                   936,941                 906,632


Statements of Operations                                            Three Months Ended                      Six Months Ended
                                                                         May 31,                                May 31,
(Dollars in thousands)                                            2021               2020              2021                  2020

Number of operating properties/investments sold through joint ventures

                                                               1                -                  1                     2
Lennar's share of gains on the sale of operating
properties/investments                                        $   14,784                -             14,784                 3,000


Lennar Other Segment
At May 31, 2021 and November 30, 2020, we had $1.1 billion and $521.7 million,
respectively, of assets in our Lennar Other segment, which included investments
in unconsolidated entities of $379.2 million and $387.1 million, respectively.
The increase in assets during the six months ended May 31, 2021 was due to an
increase in the value of our strategic technology investments, primarily managed
by our LENX subsidiary. This increase was largely related to our strategic
investments in Opendoor and Sunnova. During the three months ended May 31, 2021,
we completed the sale of our residential solar business to Sunnova for shares in
the entity. The following is a detail of Lennar Other realized and unrealized
gain (loss):
                                       Three Months Ended                 Six Months Ended
                                             May 31,                          May 31,
(In thousands)                           2021              2020         2021               2020

Opendoor (OPEN) mark to market $ (234,290) - 235,455

                 -
Sunnova (NOVA) mark to market                (38,335)        -       (38,335)                -
Gain on sale of solar business               151,475         -       151,475                 -
Other realized gain                            3,580         -         3,580                 -
                                 $          (117,570)        -       352,175                 -


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(2) Financial Condition and Capital Resources
At May 31, 2021, we had cash and cash equivalents and restricted cash related to
our homebuilding, financial services, multifamily and other operations of $2.8
billion, compared to $2.9 billion at November 30, 2020 and $1.7 billion at
May 31, 2020.
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 ended May 31, 2021 and May 31, 2020, cash provided by
operating activities totaled $718.1 million and $1.3 billion, respectively.
During the six months ended May 31, 2021, cash provided by operating activities
was impacted primarily by our net earnings, a decrease in loans held-for-sale of
$444.4 million primarily related to the sale of loans originated by our
Financial Services segment, an increase in accounts payable and other
liabilities of $184.7 million, and a decrease in receivables of $117.9 million,
partially offset by an increase in inventories due to strategic land purchases,
and land development and construction costs of $1.6 billion.
During the six months ended May 31, 2020, cash provided by operating activities
was impacted primarily by our net earnings and a decrease in loans held-for-sale
of $479.4 million primarily related to the sale of loans originated by our
Financial Services segment, partially offset by an increase in inventories due
to strategic land purchases, land development and construction costs of $159.1
million and increase in other assets of $148.1 million.
Investing Cash Flow Activities
During the six months ended May 31, 2021 and May 31, 2020, cash used in
investing activities totaled $50.1 million and $174.0 million, respectively.
During the six months ended May 31, 2021, our cash used in investing activities
was primarily due to cash contributions of $282.2 million to unconsolidated
entities, which included (1) $178.6 million to Homebuilding unconsolidated
entities, (2) $57.8 million to Multifamily unconsolidated entities, and (3)
$45.8 million to the strategic technology investments included in the Lennar
Other segment. This was partially offset by distributions of capital from
unconsolidated entities of $231.5 million, which primarily included (1) $134.2
million from Homebuilding unconsolidated entities, (2) $80.1 million from
Multifamily unconsolidated entities, and (3) $17.2 million from the
unconsolidated Rialto real estate funds included in our Lennar Other segment.
During the six months ended May 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.
Financing Cash Flow Activities
During the six months ended May 31, 2021 and May 31, 2020, cash used in
financing activities totaled $817.8 million and $948.6 million, respectively.
During the six months ended May 31, 2021, cash used in financing activities was
primarily impacted by (1) $535.7 million of net repayments under our Financial
Services' warehouse facilities, which included the LMF Commercial warehouse
repurchase facilities; (2) $156.3 million of dividend payments; and (3)
repurchases of our common stock for $173.6 million, which included $141.6
million of repurchases under our repurchase program and $32.1 million of
repurchases related to our equity compensation plan. These were partially offset
by $301.9 million of proceeds from liabilities related to consolidated inventory
not owned due to land sales to land banks.
During the six months ended May 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 due May 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.
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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:
(Dollars in thousands)                                 May 31, 2021              November 30, 2020                 May 31, 2020
Homebuilding debt                                     $  5,894,342                         5,955,758                    7,495,674
Stockholders' equity                                    19,576,108                        17,994,856                   16,542,703
Total capital                                         $ 25,470,450                        23,950,614                   24,038,377
Homebuilding debt to total capital                            23.1  %                           24.9  %                      31.2  %
Homebuilding debt                                     $  5,894,342                         5,955,758                    7,495,674
Less: Homebuilding cash and cash equivalents             2,581,583                         2,703,986                    1,398,682
Net Homebuilding debt                                 $  3,312,759                         3,251,772                    6,096,992
Net Homebuilding debt to total capital (1)                    14.5  %                           15.3  %                      26.9  %


(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.
At May 31, 2021, Homebuilding debt to total capital was lower compared to
May 31, 2020, primarily as a result of a decrease in Homebuilding debt and an
increase in stockholders' equity due to net earnings. At May 31, 2021,
Homebuilding debt to total capital was lower compared to November 30, 2020,
primarily as a result of 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 of 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 as well as letters of
credit and surety bonds are summarized within Note 7 of the Notes to Condensed
Consolidated Financial Statements. Our Homebuilding average debt outstanding and
the average rates of interest was as follows:
                                                          Six Months Ended
                                                              May 31,
        (Dollars in thousands)                         2021              2020
        Homebuilding average debt outstanding     $ 5,981,490       $ 8,171,686
        Average interest rate                             4.9  %            4.9  %
        Interest incurred                         $   142,517       $   184,198


As of May 31, 2021, the maximum borrowings on our Credit Facility were $2.5
billion and included a $300 million accordion feature, subject to additional
commitments, thus the maximum borrowings could be $2.8 billion 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, we are subject to debt covenants. The maturity, details and debt
covenants of the Credit Facility are unchanged from the disclosure in the
Financial Condition and Capital Resources section of our Form 10-K for the year
ended November 30, 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 May 31, 2021:
                                                 Level Achieved as of
(Dollars in thousands)      Covenant Level           May 31, 2021
Minimum net worth test     $    9,290,371                13,075,167
Maximum leverage ratio               65.0  %                   18.8  %
Liquidity test                       1.00                      9.09


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Financial Services Warehouse Facilities
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 origination and
securitization activities and were secured by up to an 80% interest in the
originated commercial loans financed. These facilities and the related
borrowings and collateral are detailed in Note 2 of the Notes to Condensed
Consolidated Financial Statements.
Changes in Capital Structure
In January 2021, 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 replaced a
January 2019 authorization and has no expiration date. The details of our Class
A and Class B common stock under this program for both the three and six months
ended May 31, 2021 and 2020 are included in Note 4 of the Notes to Condensed
Consolidated Financial Statements.
During the six months ended May 31, 2021, treasury stock increased due to our
repurchase of 1.9 million shares of Class A and Class B common stock due
primarily to our repurchase of 1.5 million shares of Class A and Class B common
stock through our stock repurchase program. During the six months ended May 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.
On June 18, 2021, our Board of Directors declared a quarterly cash dividend of
$0.25 per share on both our Class A and Class B common stock, payable on July
19, 2021 to holders of record at the close of business on July 2, 2021. On May
5, 2021, we paid cash dividends of $0.25 per share on both our Class A and Class
B common stock to holders of record at the close of business on April 21, 2021,
as declared by our Board of Directors on April 7, 2021. We approved and paid
cash dividends of $0.125 per share for each of the first three quarters of 2020
and $0.25 per share in fourth quarter of 2020 on both our Class A and Class B
common stock and first two quarter of 2021 on both its Class A and Class B
common stock.
Based on our current financial condition and credit relationships, we believe
that our operations and borrowing resources will provide for our current and
long-term capital requirements at our anticipated levels of activity.
Supplemental Financial Information
Currently, substantially all of our 100% owned homebuilding subsidiaries are
guaranteeing all our senior notes. The guarantees are full and unconditional.
The indentures governing our senior notes require that, if any of our 100% owned
subsidiaries, other than our finance company subsidiaries and foreign
subsidiaries, directly or indirectly guarantee at least $75 million principal
amount of debt of Lennar Corporation (other than senior notes), those
subsidiaries must also guarantee Lennar Corporation's obligations with regard to
its senior notes. Included in the following tables as part of "Obligors"
together with Lennar Corporation are subsidiary entities that are not finance
company subsidiaries or foreign subsidiaries and were guaranteeing the senior
notes because at May 31, 2021 they were guaranteeing Lennar Corporation's letter
of credit facilities and its Credit Facility, disclosed in Note 7 of the Notes
to Condensed Consolidated Financial Statements. The guarantees are full,
unconditional and joint and several and the guarantor subsidiaries are 100%
directly or indirectly owned by Lennar Corporation. A subsidiary's guarantee of
Lennar senior notes will be suspended at any time when it is not directly or
indirectly guaranteeing at least $75 million principal amount of debt of Lennar
Corporation (other than senior notes), and a subsidiary will be released from
its guarantee and any other obligations it may have regarding the senior notes
if all or substantially all its assets, or all of its capital stock, are sold or
otherwise disposed.
Supplemental information for the Obligors, which excludes non-guarantor
subsidiaries and intercompany transactions, at May 31, 2021 is included in the
following tables. Intercompany balances and transactions within the Obligors
have been eliminated and amounts attributable to the Obligor's investment in
consolidated subsidiaries that have not issued or guaranteed the senior notes
have been excluded. Amounts due from and transactions with nonobligor
subsidiaries and related parties are separately disclosed:
(In thousands)                          May 31, 2021      November 30, 2020
Due from non-guarantor subsidiaries    $  3,501,212         2,655,503
Equity method investments                 1,008,979           951,579
Total assets                             29,645,023        27,695,067
Total liabilities                         9,824,021         9,599,718


                                       39
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                                        Six Months Ended
(In thousands)                            May 31, 2021
Total revenues                         $      11,065,793
Operating earnings                             2,009,860
Earnings before income taxes                   1,784,336
Net earnings attributable to Lennar            1,363,838


Off-Balance Sheet Arrangements
Homebuilding: Investments in Unconsolidated Entities
As of May 31, 2021, we had equity investments in 42 active homebuilding and land
unconsolidated entities (of which three had recourse debt, 13 had non-recourse
debt and 26 had no debt) compared to 38 active homebuilding and land
unconsolidated entities at November 30, 2020. 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. Details regarding these
investments, balances and debt are included in Note 3 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 of
May 31, 2021 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               2021               2022               2023             Thereafter           

Other


Debt without recourse to Lennar          $        1,204,527             97,054            224,668             19,255            863,550             

-

Land seller and CDD and other debt                   11,208                  -                  -                  -                  -                

11,208

Maximum recourse debt exposure to
Lennar                                                3,599                  -              3,599                  -                  -                     -
Debt issuance costs                                 (13,118)                 -                  -                  -                  -               (13,118)
Total                                    $        1,206,216             97,054            228,267             19,255            863,550                (1,910)


Multifamily: Investments in Unconsolidated Entities
At May 31, 2021, Multifamily had equity investments in 16 unconsolidated
entities that are engaged in multifamily residential developments (of which 10
had non-recourse debt and six had no debt), compared to 22 unconsolidated
entities at November 30, 2020. 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 select U.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 ended May 31, 2021 are included in Note 3
of the Notes to Condensed Consolidated Financial Statements.
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
                                       40
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the debt covenants, we evaluate and assess possible impairment of our
investment. We believe all of the joint ventures were in compliance with
applicable debt covenants at May 31, 2021.
The following table summarizes the principal maturities of our Multifamily
unconsolidated entities debt as per current debt arrangements as of May 31, 2021
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               2021                2022                 2023                Thereafter                Other

Debt without recourse to
Lennar                           $        2,865,860             288,422             529,886              758,597             1,288,955                       -
Debt issuance costs                         (26,220)                  -                   -                    -                     -                 (26,220)
Total                            $        2,839,640             288,422             529,886              758,597             1,288,955                 (26,220)


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 of May 31, 2021 and November 30, 2020, we had strategic technology
investments in unconsolidated entities of $178.2 million and $196.7 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):
                                                  Controlled Homesites                                                                                     Years of
May 31, 2021                      Optioned                 JVs                  Total              Owned Homesites           Total Homesites           Supply Owned (1)
East                                  55,537               5,750                  61,287                   55,218               116,505
Central                               24,283                  92                  24,375                   41,816                66,191
Texas                                 43,447                   -                  43,447                   38,332                81,779
West                                  52,347               3,444                  55,791                   51,336               107,127
Other                                      4               7,569                   7,573                    2,235                 9,808
Total homesites                      175,618              16,855                 192,473                  188,937               381,410                        3.3
% of total homesites                                                                  50  %                    50  %


                                                 Controlled Homesites                                                                                     Years of
May 31, 2020                      Optioned                 JVs                 Total              Owned Homesites           Total Homesites           Supply Owned (1)
East                                  22,812              13,608                 36,420                   63,932               100,352
Central                               13,271                 122                 13,393                   43,203                56,596
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  %


(1)Based on trailing twelve months of home deliveries.
Details on option contracts and related consolidated inventory not owned and
exposure are included in Note 10 of the Notes to Condensed Consolidated
Financial Statements.
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 ended November 30, 2020. There were no outstanding
borrowings under our Credit Facility as of May 31, 2021.
                                       41
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(3) New Accounting Pronouncements
See Note 1 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 six months ended May 31, 2021 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 ended November 30, 2020.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks related to fluctuations in interest rates on our
investments, debt obligations, loans held-for-sale and loans
held-for-investment. We utilize forward commitments and option contracts to
mitigate the risks associated with our mortgage loan portfolio.
As of May 31, 2021, we had no outstanding borrowings under our Credit Facility.
As of May 31, 2021, our borrowings under Financial Services' warehouse
repurchase facilities totaled $671.5 million under residential facilities and
$104.2 million under LMF Commercial facilities.
                Information Regarding Interest Rate Sensitivity
                         Principal (Notional) Amount by
                  Expected Maturity and Average Interest Rate
                                  May 31, 2021
                                  Six Months
                               Ending November
                                     30,                                                  Years Ending November 30,                                                                                         Fair Value at May 31,
(Dollars in millions)                2021                  2022                 2023                2024                 2025                 2026               Thereafter               Total                     2021
LIABILITIES:
Homebuilding:
Senior Notes and
other debts payable:
Fixed rate                     $    355.2                  1,539.7               99.0               1,557.2               591.8                402.9                1,297.5               5,843.3                 6,381.0
Average interest rate                 5.6     %                4.5  %             4.2  %                5.0  %              4.8  %               5.2  %                 4.7  %                4.8  %                    -
Variable rate                  $     33.0                        -                  -                     -                   -                    -                      -                  33.0                    33.3
Average interest rate                 4.6     %                  -                  -                     -                   -                    -                      -                   4.6  %                    -
Financial Services:
Notes and other
debts payable:
Fixed rate                     $        -                        -                  -                     -                   -                    -                  152.4                 152.4                   153.3
Average interest rate                   -                        -                  -                     -                   -                    -                    3.4  %                3.4  %                    -
Variable rate                  $    775.8                        -                  -                     -                   -                    -                      -                 775.8                   775.8
Average interest rate                 2.4     %                  -                  -                     -                   -                    -                      -                   2.4  %                    -

Lennar Other:
Notes and other
debts payable:
Fixed rate                     $      1.9                        -                  -                     -                   -                    -                      -                   1.9                     1.9
Average interest rate                 3.0     %                  -                  -                     -                   -                    -                      -                   3.0  %                    -


For additional information regarding our market risk refer to Item 7A.
Quantitative and Qualitative Disclosures About Market Risk in our Annual Report
on Form 10-K for the year ended November 30, 2020.
Item 4. Controls and Procedures
Each of our Co-Chief Executive Officers and Co-Presidents ("Co-CEOs") and Chief
Financial Officer participated in an evaluation by our management of the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. Based on their participation in that evaluation,
our Co-CEOs and CFO concluded that our disclosure controls and procedures were
effective as of May 31, 2021 to ensure that information required to be disclosed
in our reports filed or
                                       42
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submitted under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and to ensure that
information required to be disclosed in our reports filed or furnished under the
Securities Exchange Act of 1934, as amended, is accumulated and communicated to
our management, including both of our Co-CEOs and CFO, as appropriate, to allow
timely decisions regarding required disclosures.
Both of our Co-CEOs and CFO also participated in an evaluation by our management
of any changes in our internal control over financial reporting that occurred
during the quarter ended May 31, 2021. That evaluation did not identify any
changes that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
                                       43

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