Edgar Filing: LENNAR CORP /NEW/

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2017

Commission File Number: 1-11749

Lennar Corporation

(Exact name of registrant as specified in its charter)



Delaware		95-4337490
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

700 Northwest 107th Avenue, Miami, Florida 33172

(Address of principal executive offices) (Zip Code)

(305) 559-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ý NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO ý

Common stock outstanding as of March 31, 2017:

Class A 203,159,885

Class B 31,303,195

Part I. Financial Information

Item 1. Financial Statements

Lennar Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Dollars in thousands, except shares and per share amounts)

(unaudited)



	February 28,		November 30,
	2017 (1)		2016 (1)
ASSETS
Lennar Homebuilding:
Cash and cash equivalents	$	640,816	1,050,138
Restricted cash	12,850		5,977
Receivables, net	81,299		106,976
Inventories:
Finished homes and construction in progress	4,672,246		3,951,716
Land and land under development	5,640,275		5,106,191
Consolidated inventory not owned	156,155		121,019
Total inventories	10,468,676		9,178,926
Investments in unconsolidated entities	910,084		811,723
Goodwill	143,298		—
Other assets	902,347		651,028
	13,159,370		11,804,768
Rialto	1,228,874		1,276,210
Lennar Financial Services	1,231,708		1,754,672
Lennar Multifamily	610,161		526,131
Total assets	$	16,230,113	15,361,781


(1)	Under certain provisions of Accounting Standards Codification ("ASC") Topic 810, Consolidations, ("ASC 810") the Company is required to separately disclose on its condensed consolidated balance sheets the assets owned by consolidated variable interest entities ("VIEs") and liabilities of consolidated VIEs as to which neither Lennar Corporation, or any of its subsidiaries, has any obligations.

As of February 28, 2017, total assets include $651.1 million related to consolidated VIEs of which $9.5 million is included in Lennar Homebuilding cash and cash equivalents, $0.1 million in Lennar Homebuilding receivables, net, $72.4 million in Lennar Homebuilding finished homes and construction in progress, $177.5 million in Lennar Homebuilding land and land under development, $156.2 million in Lennar Homebuilding consolidated inventory not owned, $4.6 million in Lennar Homebuilding investments in unconsolidated entities, $16.4 million in Lennar Homebuilding other assets, $173.2 million in Rialto assets and $41.2 million in Lennar Multifamily assets.

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

See accompanying notes to condensed consolidated financial statements.

Lennar Corporation and Subsidiaries

Condensed Consolidated Balance Sheets – (Continued)

(Dollars in thousands, except shares and per share amounts)

(unaudited)



	February 28,			November 30,
	2017 (2)			2016 (2)
LIABILITIES AND EQUITY
Lennar Homebuilding:
Accounts payable	$	473,802		478,546
Liabilities related to consolidated inventory not owned	153,445			110,006
Senior notes and other debts payable	5,778,306			4,575,977
Other liabilities	994,766			841,449
	7,400,319			6,005,978
Rialto	680,120			707,980
Lennar Financial Services	788,339			1,318,283
Lennar Multifamily	105,560			117,973
Total liabilities	8,974,338			8,150,214
Stockholders’ equity:
Preferred stock	—			—
Class A common stock of $0.10 par value; Authorized: February 28, 2017 and November 30, 2016 - 300,000,000 shares; Issued: February 28, 2017 - 204,113,406 shares and November 30, 2016 - 204,089,447 shares	20,411			20,409
Class B common stock of $0.10 par value; Authorized: February 28, 2017 and November 30, 2016 - 90,000,000 shares; Issued: February 28, 2017 - 32,982,815 shares and November 30, 2016 - 32,982,815 shares	3,298			3,298
Additional paid-in capital	2,855,793			2,805,349
Retained earnings	4,334,936			4,306,256
Treasury stock, at cost; February 28, 2017 - 951,887 shares of Class A common stock and 1,679,620 shares of Class B common stock; November 30, 2016 - 917,447 shares of Class A common stock and 1,679,620 shares of Class B common stock	(109,048		)	(108,961	)
Accumulated other comprehensive income (loss)	663			(309	)
Total stockholders’ equity	7,106,053			7,026,042
Noncontrolling interests	149,722			185,525
Total equity	7,255,775			7,211,567
Total liabilities and equity	$	16,230,113		15,361,781

(2)

As of February 28, 2017, total liabilities include $170.1 million related to consolidated VIEs as to which there was no recourse against the Company, of which $4.2 million is included in Lennar Homebuilding accounts payable, $153.4 million in Lennar Homebuilding liabilities related to consolidated inventory not owned, $2.9 million in Lennar Homebuilding other liabilities and $9.6 million in Rialto liabilities.

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

See accompanying notes to condensed consolidated financial statements.

Lennar Corporation and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Dollars in thousands, except per share amounts)

(unaudited)



	Three Months Ended
	February 28,			February 29,
	2017			2016
Revenues:
Lennar Homebuilding	$	2,018,694		1,786,481
Lennar Financial Services	148,043			123,956
Rialto	82,006			43,711
Lennar Multifamily	88,685			39,516
Total revenues	2,337,428			1,993,664
Costs and expenses:
Lennar Homebuilding	1,801,561			1,568,205
Lennar Financial Services	127,379			109,025
Rialto	66,913			42,907
Lennar Multifamily	92,649			47,020
Corporate general and administrative	60,699			47,668
Total costs and expenses	2,149,201			1,814,825
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	(11,534		)	3,000
Lennar Homebuilding other income (expense), net	5,739			(638	)
Lennar Homebuilding loss due to litigation accrual	(140,000		)	—
Rialto equity in earnings from unconsolidated entities	722			1,497
Rialto other expense, net	(16,658		)	(691	)
Lennar Multifamily equity in earnings from unconsolidated entities	23,147			19,686
Earnings before income taxes	49,643			201,693
Provision for income taxes	(19,969		)	(56,241	)
Net earnings (including net earnings (loss) attributable to noncontrolling interests)	29,674			145,452
Less: Net earnings (loss) attributable to noncontrolling interests	(8,406		)	1,372
Net earnings attributable to Lennar	$	38,080		144,080
Other comprehensive income, net of tax:
Net unrealized gain (loss) on securities available-for-sale	972			(437	)
Other comprehensive income attributable to Lennar	$	39,052		143,643
Other comprehensive income (loss) attributable to noncontrolling interests	$	(8,406	)	1,372
Basic earnings per share	$	0.16		0.68
Diluted earnings per share	$	0.16		0.63
Cash dividends per each Class A and Class B common share	$	0.04		0.04

See accompanying notes to condensed consolidated financial statements.

Lennar Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)



	Three Months Ended
	February 28,			February 29,
	2017			2016
Cash flows from operating activities:
Net earnings (including net earnings (loss) attributable to noncontrolling interests)	$	29,674		145,452
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization	11,743			10,077
Amortization of discount/premium and accretion on debt, net	3,132			4,777
Equity in earnings from unconsolidated entities	(12,335		)	(24,183	)
Distributions of earnings from unconsolidated entities	31,949			27,207
Share-based compensation expense	12,505			11,142
Excess tax benefits from share-based awards	(1,953		)	(7,029	)
Deferred income tax (benefit) expense	(36,229		)	43,402
Unrealized and realized gains on real estate owned	(1,698		)	(7,230	)
Impairments of loans receivable and real estate owned	25,484			5,976
Valuation adjustments and write-offs of option deposits and pre-acquisition costs and other assets	1,930			1,164
Changes in assets and liabilities:
Decrease in restricted cash	10,842			19,958
Decrease in receivables	264,714			262,453
Increase in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs	(601,711		)	(677,078	)
Decrease (increase) in other assets	12,846			(9,825	)
Decrease in loans held-for-sale	339,492			228,316
Decrease in accounts payable and other liabilities	(11,061		)	(250,466	)
Net cash provided by (used in) operating activities	79,324			(215,887	)
Cash flows from investing activities:
Net additions of operating properties and equipment	(25,785		)	(18,453	)
Investments in and contributions to unconsolidated entities	(151,706		)	(103,971	)
Distributions of capital from unconsolidated entities	39,961			69,356
Proceeds from sales of real estate owned	24,215			20,256
Improvements to real estate owned	157			(1,194	)
Purchases of real estate owned	(100		)	—
Receipts of principal payments on loans receivable and other	1,972			2,725
Originations of loans receivable	(9,330		)	(10,046	)
Purchases of commercial mortgage-backed securities bonds	(40,357		)	(23,078	)
Acquisition, net of cash acquired	(596,172		)	(600	)
(Increase) decrease in Lennar Financial Services loans held-for-investment, net	(2,025		)	766
Purchases of Lennar Financial Services investment securities	(12,204		)	(6,968	)
Proceeds from maturities/sales of Lennar Financial Services investments securities	5,292			4,621
Net cash used in investing activities	$	(766,082	)	(66,586	)

See accompanying notes to condensed consolidated financial statements.

Lennar Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)



	Three Months Ended
	February 28,			February 29,
	2017			2016
Cash flows from financing activities:
Net borrowings under unsecured revolving credit facility	$	250,000		500,000
Net repayments under warehouse facilities	(543,356		)	(395,233	)
Proceeds from senior notes	600,000			—
Debt issuance costs	(10,848		)	(684	)
Conversions and exchanges on convertible senior notes	—			(162,852	)
Proceeds from Rialto notes payable	35,460			—
Principal payments on Rialto notes payable	(2,971		)	(669	)
Proceeds from other borrowings	7,395			6,763
Principal payments on other borrowings	(16,242		)	(59,146	)
Receipts related to noncontrolling interests	153			65
Payments related to noncontrolling interests	(25,871		)	(42,015	)
Excess tax benefits from share-based awards	1,953			7,029
Common stock:
Issuances	99			—
Repurchases	(83		)	(219	)
Dividends	(9,400		)	(8,552	)
Net cash provided by (used in) financing activities	286,289			(155,513	)
Net decrease in cash and cash equivalents	(400,469		)	(437,986	)
Cash and cash equivalents at beginning of period	1,329,529			1,158,445
Cash and cash equivalents at end of period	$	929,060		720,459
Summary of cash and cash equivalents:
Lennar Homebuilding	$	640,816		510,878
Rialto	162,513			112,305
Lennar Financial Services	119,308			91,214
Lennar Multifamily	6,423			6,062
	$	929,060		720,459
Supplemental disclosures of non-cash investing and financing activities:
Lennar Homebuilding and Lennar Multifamily:
Non-cash contributions to unconsolidated entities	$	25,315		19,248
Non-cash increase in consolidated inventory not owned	$	115,000		—
Purchases of inventories and other assets financed by sellers	$	80,919		20,714
Rialto:
Real estate owned acquired in satisfaction/partial satisfaction of loans receivable	$	70		5,183
Consolidation/deconsolidation of unconsolidated/consolidated entities, net:
Inventories	$	—		14,923
Investments in unconsolidated entities	$	—		(2,445	)
Noncontrolling interests	$	—		(12,478	)

See accompanying notes to condensed consolidated financial statements.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)


(1)	Basis of Presentation

Basis of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Lennar Corporation and all subsidiaries, partnerships and other entities in which Lennar Corporation has a controlling interest and VIEs (see Note 16) in which Lennar Corporation is deemed to be the primary beneficiary (the "Company"). The Company’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in VIEs in which the Company is not deemed to be the primary beneficiary, are accounted for by the equity method. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended November 30, 2016. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the accompanying condensed consolidated financial statements have been made.

The Company has historically experienced, and expects to continue to experience, variability in quarterly results. The condensed consolidated statements of operations for the three months ended February 28, 2017 are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications/Revisions

As a result of the Company's change in reportable segments during fiscal year 2016, the Company restated certain prior year amounts in the condensed consolidated financial statements to conform with the 2017 presentation (see Note 3). In addition, certain prior year amounts in the condensed consolidated financial statements have been reclassified to conform with the 2017 presentation. These reclassifications had no impact on the Company's condensed consolidated financial statements.


(2)	Business Acquisition

On February 10, 2017, the Company acquired WCI Communities, Inc. ("WCI") a luxury homebuilder of single and multi-family homes, including a small percentage of luxury high-rise tower units, with operations in Florida. WCI stockholders received $642.6 million in cash. The cash consideration was funded primarily from working capital and from proceeds from the issuance of 4.125% senior notes due 2022 (see Note 12).

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



(In thousands)
Assets:
Cash and cash equivalents, restricted cash and receivables, net	$	42,079
Inventories	621,008
Intangible assets (1)	48,000
Goodwill (2)	163,298
Deferred tax assets, net	87,326
Other assets	66,173
Total assets	1,027,884
Liabilities:
Accounts payable	26,735
Senior notes and other debts payable	282,804
Other liabilities	75,723
Total liabilities	385,262
Total purchase price	$	642,622


(1)	Intangible assets include non-compete agreements and a trade name. The amortization period for these intangible assets is up to one year for the non-compete agreements and 20 years for the trade name.

(2)

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, and it is not deductible for income tax purposes. As of the merger date, goodwill consisted primarily of purchasing and other synergies resulting from the merger, expected production, savings in corporate and division overhead costs and expected expanded opportunities for growth through a higher-end more luxurious product, greater presence in the state of Florida and customer diversity. The provisional amount of goodwill allocated to the Company's Homebuilding East segment was $143.3 million and to the Lennar Financial Services segment was $20.0 million. These provisional amounts were based on the relative fair value of each acquired reporting unit in accordance with ASC 350, Intangibles-Goodwill and Other.

Lennar Homebuilding revenue and net earnings attributable to Lennar for the three months ended February 28, 2017 included $19.5 million of home sales revenue and $8.9 million of a pre-tax loss from WCI from the date of acquisition to February 28, 2017, which included transaction expenses of $11.0 million comprised mainly of severance costs. These transaction expenses were included primarily within Lennar Homebuilding selling, general and administrative expenses within the accompanying condensed consolidated statement of operations for the three months ended February 28, 2017. The pro-forma effect of the acquisition on the results of operations is not presented as this acquisition was not considered material.


(3)	Operating and Reporting Segments

The Company’s operating segments are aggregated into reportable segments, based primarily upon similar economic characteristics, geography and product type. The Company’s reportable segments consist of:

(1) Homebuilding East

(2) Homebuilding Central

(3) Homebuilding West

(4) Lennar Financial Services

(5) Rialto

(6) Lennar Multifamily

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

Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes. Operations of the Company’s homebuilding segments primarily include the construction and sale of single-family attached and detached homes as well as the purchase, development and sale of residential land directly and through the Company’s unconsolidated entities. Operating earnings (loss) for the homebuilding segments consist of revenues generated from the sales of homes and land, equity in earnings (loss) from unconsolidated entities and other income (expense), net, less the cost of homes sold and land sold, selling, general and administrative expenses and loss due to litigation accrual of the segment.

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

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

Central: Arizona, Colorado and Texas

West: California and Nevada

Other: Illinois, Minnesota, Oregon, Tennessee and Washington


(1)	Florida includes the financial information related to WCI from the date of acquisition (February 10, 2017) to February 28, 2017.

Operations of the Lennar Financial Services segment include primarily mortgage financing, title insurance and closing services for both buyers of the Company’s homes and others. The Lennar Financial Services segment sells substantially all of the loans it originates within a short period in the secondary mortgage market, the majority of which are sold on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Lennar Financial Services’ operating earnings consist of revenues generated primarily from mortgage financing, title insurance and closing services, less the cost of such services and certain selling, general and administrative expenses incurred by the segment. The Lennar Financial Services segment operates generally in the same states as the Company’s homebuilding operations as well as in other states.

Operations of the Rialto segment include raising, investing and managing third-party capital, originating and securitizing commercial mortgage loans as well as investing its own capital in real estate related mortgage loans, properties and related securities. Rialto utilizes its vertically-integrated investment and operating platform to underwrite, diligence, acquire, manage, workout and add value to diverse portfolios of real estate loans, properties and real estate related securities as well as providing strategic real estate capital. Rialto’s operating earnings consist of revenues generated primarily from gains from securitization transactions and interest income from the Rialto Mortgage Finance ("RMF") business, interest income associated with portfolios of real estate loans acquired and other portfolios of real estate loans and assets acquired, asset management, due diligence and underwriting fees derived from the real estate investment funds managed by the Rialto segment, fees for sub-advisory services, other income (expense), net and equity in earnings (loss) from unconsolidated entities, less the costs incurred by the segment for managing portfolios, costs related to RMF and other general and administrative expenses.

Operations of the Lennar Multifamily segment include revenues generated from the sales of land, revenue from construction activities and management fees generated from joint ventures and equity in earnings (loss) from unconsolidated entities, less the cost of sales of land, expenses related to construction activities and general and administrative expenses.

Each reportable segment follows the same accounting policies described in Note 1 – "Summary of Significant Accounting Policies" to the consolidated financial statements in the Company’s Form 10-K for the year ended November 30, 2016. Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented.

Financial information relating to the Company’s operations was as follows:



(In thousands)	February 28, 2017		November 30, 2016
Assets:
Homebuilding East (1)	$	4,791,376	3,512,990
Homebuilding Central	2,070,652		1,993,403
Homebuilding West	4,606,982		4,318,924
Homebuilding Other	900,876		907,523
Rialto	1,228,874		1,276,210
Lennar Financial Services	1,231,708		1,754,672
Lennar Multifamily	610,161		526,131
Corporate and unallocated	789,484		1,071,928
Total assets	$	16,230,113	15,361,781
Lennar Homebuilding goodwill (2)	$	143,298	—
Rialto goodwill	$	5,396	5,396
Lennar Financial Services goodwill (2)	$	59,838	39,838


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


(2)	In connection with the WCI acquisition, the Company allocated $143.3 million of goodwill to the Lennar Homebuilding East reportable segment and $20.0 million to the Lennar Financial Services segment. These amounts are provisional pending completion of the fair value analysis of acquired assets and liabilities.



	Three Months Ended
	February 28,			February 29,
(In thousands)	2017			2016
Revenues:
Homebuilding East	$	767,726		659,054
Homebuilding Central	516,181			413,840
Homebuilding West	552,798			551,339
Homebuilding Other	181,989			162,248
Lennar Financial Services	148,043			123,956
Rialto	82,006			43,711
Lennar Multifamily	88,685			39,516
Total revenues (1)	$	2,337,428		1,993,664
Operating earnings (loss):
Homebuilding East (2)		($55,709	)	84,706
Homebuilding Central	52,858			33,195
Homebuilding West	53,360			88,834
Homebuilding Other	20,829			13,903
Lennar Financial Services	20,664			14,931
Rialto	(843		)	1,610
Lennar Multifamily	19,183			12,182
Total operating earnings	110,342			249,361
Corporate general and administrative expenses	60,699			47,668
Earnings before income taxes	$	49,643		201,693


(1)	Total revenues were net of sales incentives of $123.5 million ($22,700 per home delivered) for the three months ended February 28, 2017, compared to $103.7 million ($21,600 per home delivered) for the three months ended February 29, 2016.


(2)	Homebuilding East operating loss for the three months ended February 28, 2017 included a $140 million loss on litigation accrual (see Note 17).


(4)	Lennar Homebuilding Investments in Unconsolidated Entities

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

Statements of Operations



	Three Months Ended
	February 28,			February 29,
(In thousands)	2017			2016
Revenues	$	46,136		99,726
Costs and expenses	79,066			97,200
Net earnings (loss) of unconsolidated entities	$	(32,930	)	2,526
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	$	(11,534	)	3,000

For the three months ended February 28, 2017, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to the Company’s share of net operating losses from its unconsolidated entities. The operating losses from the Company's unconsolidated entities were primarily driven by general and administrative expenses, as there were not sufficient land sale transactions to offset those expenses during the three months ended February 28, 2017.

For the three months ended February 29, 2016, Lennar Homebuilding equity in earnings included $6.0 million of equity in earnings from one of the Company's unconsolidated entities primarily due to sales of approximately 220 homesites to third parties.

Balance Sheets



(In thousands)	February 28, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	436,872	221,334
Inventories	3,977,388		3,889,795
Other assets	982,702		1,334,116
	$	5,396,962	5,445,245
Liabilities and equity:
Accounts payable and other liabilities	$	711,107	791,245
Debt (1)	770,587		888,664
Equity	3,915,268		3,765,336
	$	5,396,962	5,445,245


(1)	Debt presented above is net of debt issuance costs of $6.1 million and $4.2 million, as of February 28, 2017 and November 30, 2016, respectively.

On May 2, 2016 (the "Closing Date"), the Company contributed, or obtained the right to contribute, its investment in three strategic joint ventures previously managed by FivePoint Communities in exchange for an investment in a FivePoint entity. The fair values of the assets contributed to this FivePoint entity, included within the unconsolidated entities summarized condensed balance sheet presented above, are preliminary and may be adjusted when additional information is obtained during the transaction’s measurement period (a period of up to one year from the Closing Date) that may change the fair value allocation as of the acquisition date. A portion of the assets of one of the three strategic joint ventures transferred to a new unconsolidated entity was retained by Lennar and its venture partner. The transactions did not have a material impact to the Company’s financial position or cash flows for the year ended November 30, 2016. For the year ended November 30, 2016, the Company recorded $42.6 million of its share of combination costs and operational net losses in equity in loss from unconsolidated entities on the consolidated statement of operations.

As of February 28, 2017 and November 30, 2016, the Company’s recorded investments in Lennar Homebuilding unconsolidated entities were $910.1 million and $811.7 million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of February 28, 2017 and November 30, 2016 was $1.3 billion and $1.2 billion, respectively. The basis difference is primarily as a result of the Company contributing its investment in three strategic joint ventures with a higher fair value than book value for an investment in the FivePoint entity and deferring equity in earnings on land sales to the Company.

The Lennar Homebuilding unconsolidated entities in which the Company has investments usually finance their activities with a combination of partner equity and debt financing. In some instances, the Company and its partners have guaranteed debt of certain unconsolidated entities.

The total debt of the Lennar Homebuilding unconsolidated entities in which the Company has investments, including Lennar's maximum recourse exposure, were as follows:



(Dollars in thousands)	February 28, 2017			November 30, 2016
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	72,162		48,945
Non-recourse land seller debt and other debt (1)	3,995			323,995
Non-recourse debt with completion guarantees	298,319			147,100
Non-recourse debt without completion guarantees	325,115			320,372
Non-recourse debt to the Company	699,591			840,412
The Company’s maximum recourse exposure (2)	77,119			52,438
Debt issuance costs	(6,123		)	(4,186	)
Total debt	$	770,587		888,664
The Company’s maximum recourse exposure as a % of total JV debt	10		%	6	%


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


(2)	As of February 28, 2017, the Company's maximum recourse exposure was primarily related to the Company providing repayment guarantees on three unconsolidated entities' debt.

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

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

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

As of both February 28, 2017 and November 30, 2016, the fair values of the repayment guarantees and completion guarantees were not material. The Company believes that as of February 28, 2017, in the event it becomes legally obligated to perform under a guarantee of the obligation of a Lennar Homebuilding unconsolidated entity due to a triggering event under a guarantee, the collateral would be sufficient to repay at least a significant portion of the obligation or the Company and its partners would contribute additional capital into the venture. In certain instances, the Company has placed performance letters of credit and surety bonds with municipalities with regard to obligations of its joint ventures (see Note 12).


(5)	Stockholders' Equity

The following table reflects the changes in equity attributable to both Lennar Corporation and the noncontrolling interests of its consolidated subsidiaries in which it has less than a 100% ownership interest for both the three months ended February 28, 2017 and February 29, 2016:



				Stockholders’ Equity
(In thousands)	Total Equity			Class A Common Stock	Class B Common Stock	Additional Paid - in Capital	Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Noncontrolling Interests
Balance at November 30, 2016	$	7,211,567		20,409	3,298	2,805,349	(108,961	)	(309	)	4,306,256		185,525
Net earnings (including net loss attributable to noncontrolling interests)	29,674			—	—	—	—		—		38,080		(8,406	)
Employee stock and directors plans	72			2	—	157	(87	)	—		—		—
Tax benefit from employee stock plans, vesting of restricted stock and conversions of convertible senior notes	35,515			—	—	35,515	—		—		—		—
Amortization of restricted stock	12,505			—	—	12,505	—		—		—		—
Cash dividends	(9,400		)	—	—	—	—		—		(9,400	)	—
Receipts related to noncontrolling interests	153			—	—	—	—		—		—		153
Payments related to noncontrolling interests	(25,871		)	—	—	—	—		—		—		(25,871	)
Non-cash activity related to noncontrolling interests	588			—	—	2,267	—		—		—		(1,679	)
Other comprehensive income, net of tax	972			—	—	—	—		972		—		—
Balance at February 28, 2017	$	7,255,775		20,411	3,298	2,855,793	(109,048	)	663		4,334,936		149,722



			Stockholders’ Equity
(In thousands)	Total Equity		Class A Common Stock	Class B Common Stock	Additional Paid - in Capital	Treasury Stock		Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Noncontrolling Interests
Balance at November 30, 2015	$	5,950,072	18,066	3,298	2,305,560	(107,755	)	39	3,429,736	301,128
Net earnings (including net earnings attributable to noncontrolling interests)	145,452		—	—	—	—		—	144,080	1,372
Employee stock and directors p