What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-01-26 compared with 2023-01-26 · 200 added, 184 removed, 516 unchanged (43% of the section changed)

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It also should be read in conjunction with the disclosure under “Special Note Regarding Forward-Looking Statements” in Part I of this Form 10-K.

We had strong 2022 results, particularly in view of the difficult home sale market in the second half of the year.

Market conditions continued to deteriorate in the fourth quarter as the now well-documented interest rate driven sales slowdown and pricing correction intersected with the still stressed supply chain, high labor and material costs and elongated cycle times (i.e., the time it takes to build a home).

Sales and sales prices are down across both the new and existing home markets.

We believe that production of single family and multifamily dwellings nationally will be down between a quarter to a third in 2023.

In addition, the supply of existing homes for sale has come down as homeowners hold on to extremely low mortgage rates.

This, combined with the housing production shortfall over the past decade, leaves the industry in the middle of what we believe should be a fairly short duration market correction and, unlike previous market corrections, there currently is no inventory overhang to resolve.

Against this backdrop, we have developed a strategy that we believe should enable us to maintain sales pace and increase market share despite the difficult market:

• We have adjusted prices in various communities to levels that are intended to enable us to maintain reasonable volume.

The result is that margin, as opposed to volume, becomes the shock absorber.

• We are working with our trade partners to right size our cost structure to current market conditions.

Although our trade partners are still completing homes that were started in the first half of 2022, the amount of new work they are receiving is down substantially.

We are offering a steady flow of starts in exchange for price reductions.

• We are being extremely selective on new land acquisitions and new communities.

We have re-reviewed and re-underwritten land purchases in our pipeline and are not going forward with land purchases that do not meet our standards under current market conditions.

• We will continue to improve our cost of doing business by focusing on and reducing SG&A expenses.

Over the past several years, we have seen quarter over quarter improvement in our SG&A expenses as a percentage of home sale revenues achieving record lows.

However, as average sales prices come down, the percentages will not hold without additional cost cuts.

Further, we know that in more difficult times there will be upward pressure on some of our sales and marketing costs in order to drive new sales.

• We will maintain tight control of our inventory under construction.

We will pace home starts to meet expected sales volume.

Nonetheless, inventory dollars related to inventory under construction has grown through the year because of expanded cycle times due to the supply chain disruption.

We expect to bring down our cycle time during the next few quarters.

This will free up a significant amount of cash that currently is tied up in the increased inventory dollars related to homes under construction.

We will continue to focus on our cash flow and bottom line to protect and enhance our already strong balance sheet.

While we continue to have many strong markets, in our more challenging areas we have had to adjust base sales prices, offer mortgage buy down programs and increase sales incentives to maintain or regain sales momentum.

Our cancellation rate increased significantly during our third quarter and into the beginning of our fourth quarter.

However, our cancellation rate peaked in October and declined significantly in November.

Our construction playbook has three primary areas of focus:

lowering construction costs, reducing cycle time, and achieving even flow production.

We expect what has been a steady increase in construction costs over the last few years due to supply shortages will reverse over the course of fiscal 2023, as many homebuilders reduce or totally curtail new starts.

Similarly, we expect cycle times, which increased significantly due to shortages of materials and labor, to start to return to normal as the number of homes being built falls as a result of market conditions.

During the fourth quarter of 2022, the average cycle time was the same as in the third quarter despite the continuing effect of supply chain disruptions and two hurricanes that delayed production in Florida and parts of the Carolinas.

Even flow production is a core focus for us and is a pillar for being the builder of choice for the trades as it maximizes efficiencies for them.

By maintaining our starts pace at a time when many homebuilders are reducing or stopping construction starts, we have been able to obtain cost reductions from our trade partners and increase our market share in many markets.

We continue to strategically acquire land, primarily through options.

Our continued focus on our land-light strategy resulted in ending fiscal 2022 with a percentage of homesites controlled rather than owned of 63%, up from 59% last year.

years’ supply of owned home sites decreased to 2.5 years as compared to 3.0 years at the end of the prior year.

From a leverage perspective, we continue to benefit from our paydown of senior notes and strong generation of earnings which brought our homebuilding debt to total capital down to 14.4% at year-end, our lowest ever, and an improvement from 18.3% at the end of the prior year.

While we did repurchase some stock in the fourth quarter, given the current market conditions and as a matter of careful capital allocation, we decided to go slow.

We expect to continue to look at repurchasing stock in the future as opportunities present themselves.

Regarding the planned spin-off of our multifamily and single-family rental investment and property management companies, current market conditions are not favorable so we are going to postpone the spin-off for the time being and wait for the right timing.

Given the uncertainty about market conditions, it is difficult to provide the targeted guidance about our expected future performance that we provided in the past.

Instead, we are providing broad ranges to give some boundaries for various components of our expected results during the first quarter of 2023.

We expect our new orders for the first quarter of 2023 to be in the range of 12,000 to 13,500 homes, and we anticipate our first quarter deliveries to be in the range of 12,000 to 13,500 homes.

We expect gross margins will be about 21.0%, though this number will adjust somewhat based on the number of deliveries.

We expect our SG&A expenses as a percentage of home sale revenues will be about 8%, but that percentage will adjust based on deliveries and homebuilding revenue.

We expect our first quarter ending community count to be about the same as the community count at the end of 2022, as we walked away from deals that would have produced new active communities.

Our first quarter average sales price should be in the range of $440,000 to $450,000 as we continue to price to market.

We believe our fiscal 2023 deliveries will be between 60,000 to 65,000 homes.

We ended the year with the highest revenues, the highest profit, the highest cash flow, and the highest liquidity in Lennar's history.

We have a plan of execution as we move into the uncertainties of 2023 with a focus on maintaining volume, maximizing margin through cost reductions, managing inventories, driving cash flow, managing land spend, and further enhancing our balance sheet in spite of challenging market conditions.

We effectively executed our operating plan in fiscal 2023 and as a result we have never been better positioned, both by our balance sheet and with our operating strategy, to address market conditions in 2024.

Higher interest rates during 2023 constrained homebuilding consumers’ ability to purchase new homes, but consumers were employed and buyers that could purchase homes did so.

There has been a very short supply of affordable homes and very strong demand for those affordable homes.

That is partly because the market for existing homes has been quiet, as current homeowners are reluctant to lose the benefit of their low interest rate mortgages.

Throughout 2023, our consistent operating strategy was

• reduce our land assets while growing our business,

• drive strong and consistent earnings while concurrently generating net cash flow,

• reduce the time it takes us to build a home while increasing the rate at which we absorb inventory, and

• enhance our return on equity and our return on inventory by focusing on allocation of cash and other liquid assets.

As other homebuilders pulled back, we grew the pace at which we produced and sold homes, using pricing and incentives to keep our homes affordable, with reduced margins absorbing the cost of doing this.

The strategic benefits of driving volume resulted in advantages that both were immediately valuable and will have durable benefits.

• By driving volume, particularly in a difficult interest rate environment, we:

◦ Increased our market position in many core markets as we moved forward when some others pulled back.

◦ Refined relationships with strategic land banks.

The ability to use land banks to gain future access to land without having to own it is an invaluable tool in our current approach to land acquisition.

◦ Improved our sales, marketing and dynamic pricing machine into what has become an advanced digital engine that is helping us price offerings in various markets and generate sales at the rate necessary to match our sales pace to the pace at which we are producing homes.

• We enhanced our position as builder of choice for existing and new trade partners, as our strategy of maintaining volume made us a dependable and consistent source of work.

Our relationships with trade partners in local markets improved the efficiency of our operations, reduced the time it takes us to build homes and helped our inventory absorption.

• We positioned ourselves with land and new communities for strong volume in all of our operating markets.

As we drove volume and delivered homes, we optioned new land and started additional communities for next year’s deliveries.

We continued to option land to replace communities, especially when others walked away.

Owners and developers of critical land assets saw us as a consistent market participant, even when market conditions became more tenuous.

Our variable land pricing tool enables home site values to move up or down as a percentage of the sale price of a home as markets move up and down.

While market conditions have been challenging, we have consistently found ways to address market needs.

Demand is strong and there is a chronic housing supply shortage that needs to be filled.

We will continue to drive production to meet that housing shortage.

And, if interest rates subside, we will be well prepared to meet the resulting release of pent up demand.

We have continued our land light strategy of seeking land purchase options and purchasing primarily finished homesites on which we are ready to start, or have already started, building homes.

At the end of 2023, 76% of our homesites were controlled through options or other contracts, rather than owned.

The years supply of homesites we owned improved during 2023 to end the year with a 1.4 years owned supply, compared with a 1.9 years owned supply in the prior year.

We delivered over 73,000 homes in 2023, which represents a 10% increase over 2022.

Our net earnings and diluted earnings per share were $3.9 billion, and $13.73 per share, respectively.

We also delivered substantially increased homebuilding cash flow.

We are well-positioned with land and community count to expect to deliver 80,000 homes in 2024, which would be a 10% increase over 2023.

We expect to begin fiscal 2024 with strong starts, sales and closings.

We are expecting to deliver between 16,500 and 17,000 homes in the first quarter of 2024, with a margin of 21.00% to 21.25% as lower margin sales from the fourth quarter of 2023 when interest rates spiked get delivered.

Margins should increase as the year progresses.

At the end of our 2023 year, we had 1,260 active communities.

We expect our community count to increase during 2024 by mid-to-high single digits.

Our balance sheet has never been stronger.

We ended 2023 with $6.3 billion of homebuilding cash and no outstanding borrowings under our $2.6 billion revolving credit facility.

We did this while spending $1.1 billion to redeem/repurchase homebuilding senior notes and an additional $1.1 billion to repurchase 10 million shares of our stock.

At the end of 2023, our cash substantially exceeded our total homebuilding debt by $3.5 billion.

Based on the strength of our balance sheet and our ability to thrive even under adverse market conditions, we are confident that in 2024, Lennar will continue to grow and will achieve new levels of performance.

Results of Operations

Our net earnings attributable to Lennar were $4.6 billion, or $15.72 per diluted share ($15.74 per basic share) in 2022 and $4.4 billion, or $14.27 per diluted share ($14.28 per basic share) in 2021.

Our net earnings attributable to Lennar were $3.9 billion, or $13.73 per diluted and basic share in 2023 and $4.6 billion, or $15.72 per diluted share ($15.74 per basic share) in 2022.

Financial information relating to our operations was as follows:

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Total costs and expenses 27,223,645 467,398 573,658 27,681 — 28,292,382

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (17,235) — 52,821 (91,689) — (56,103)

Homebuilding other income, net 4,516 — — — — 4,516

Lennar Other unrealized loss from technology investments — — — (655,094) — (655,094)

Equity in losses from unconsolidated entities (3,886) — (52,073) (88,651) — (144,610)

Other income (expense), net and other gains (losses) 94,251 — 1,595 (65,329) — 30,517

Lennar Other unrealized losses from technology investments — — — (50,162) — (50,162)

Operating earnings (loss) 5,527,707 509,461 (50,651) (209,788) — 5,776,729

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Total costs and expenses 25,161,299 426,378 848,931 32,258 — 26,468,866

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (14,205) — 9,031 231,731 — 226,557

Homebuilding other income, net 3,266 — — — — 3,266

Lennar Other unrealized gain from technology investments — — — 510,802 — 510,802

Operating earnings 5,031,762 491,014 21,453 733,035 — 6,277,264

Equity in earnings (loss) from unconsolidated entities (17,235) — 52,603 (71,669) — (36,301)

Other income (expense), net and other gains (losses) 4,516 — 218 (20,020) — (15,286)

Lennar Other unrealized losses from technology investments — — — (655,094) — (655,094)

Operating earnings (loss) 6,777,317 383,302 69,493 (734,649) — 6,495,463

Corporate general and administrative expenses — — — — 414,498 414,498

Charitable foundation contribution — — — — 66,399 66,399

Earnings before income taxes $ 5,031,762 491,014 21,453 733,035 (458,206) 5,819,058

(1) During the year ended November 30, 2021, the Company realized a gain of $158.1 million on the sale of its residential solar business

Earnings (loss) before income taxes $ 6,777,317 383,302 69,493 (734,649) (480,897) 6,014,566

(1) During the year ended November 30, 2022 , other revenues in our Multifamily segment included land sales to unconsolidated entities of $237.5 million .

2023 versus 2022

Revenues from home sales increased 2% in the year ended November 30, 2023 to $32.5 billion from $31.8 billion in the year ended November 30, 2022.

Revenues were higher primarily due to an 11% increase in the number of home deliveries and a 13% increase in the average sales price.

Revenues were higher primarily due to a 10% increase in the number of home deliveries, partially offset by a 7% decrease in the average sales price of homes delivered.

New home deliveries increased to 73,087 homes in the year ended November 30, 2023 from 66,399 homes in the year ended November 30, 2022.

The average sales price of homes delivered was $446,000 in the year ended November 30, 2023, compared to $480,000 in the year ended November 30, 2022.

Gross margins on home sales were $8.8 billion, or 27.5% (27.7% pre-impairment), in the year ended November 30, 2022, compared to $6.8 billion, or 26.8%, in the year ended November 30, 2021.

Gross margins in the year ended November 30, 2022 include $33.6 million of homebuilding impairments in nine communities and $18.1 million of impairments to our homes in backlog taken during the year.

During the year ended November 30, 2022, an increase in costs per square foot primarily due to higher materials and labor costs, was mostly offset by an increase in revenues per square foot.

Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Gross loss on land sales was $28.5 million in the year ended November 30, 2022, which includes $47.9 million of deposit write-offs as we walked away from 42,000 controlled homesites.

This compared to gross margin on land sales of $24.3 million in the year ended November 30, 2021.

The decrease in average sales price of homes delivered in the year ended November 30, 2023 compared to the same period last year was primarily due to pricing to market through an increased use of incentives and product mix.

Gross margins on home sales were $7.6 billion, or 23.3%, in the year ended November 30, 2023, compared to $8.8 billion, or 27.5%, in the year ended November 30, 2022.

Gross margins in the year ended November 30, 2023 decreased because of a decrease in average sales price, which was partially offset by a decrease in costs per square foot as we continued to focus on construction cost savings.

Selling, general and administrative expenses were $2.2 billion in the year ended November 30, 2023, compared to $2.0 billion in the year ended November 30, 2022.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.2% in the year ended November 30, 2022, from 7.1% in the year ended November 30, 2021, due to a decrease in broker commissions, an increase in leverage, and benefits of our technology efforts.

Operating earnings for our Financial Services segment were $381.9 million in the year ended November 30, 2022.The operating earnings included a $35.5 million one-time charge due to an increase in a litigation accrual in the third quarter related to a court judgment.

We have appealed this judgment since we believe there were clear errors of law made by the trial court.

Excluding this one-time charge, operating earnings were $417.4 million, compared to operating earnings of $490.4 million in the year ended November 30, 2021.

The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market, partially offset by an increase in rate lock volume.

Mortgage results were partially offset by our title earnings, which increased primarily due to higher revenues per transaction and lower costs due to benefits of our technology efforts .

Operating earnings for the Multifamily segment were $66.8 million in the year ended November 30, 2022, compared to $21.5 million in the year ended November 30, 2021.

Operating loss for the Lennar Other segment was $735.6 million in the year ended November 30, 2022, compared to operating earnings of $733.0 million in the year ended November 30, 2021.

Lennar Other operating loss for the year ended November 30, 2022 was primarily due to negative mark-to-market adjustments on our publicly traded technology investments.

The operating earnings for the year ended November 30, 2021 were primarily due to positive mark-to-market adjustments on our publicly traded technology investments and the gain on the sale of the our solar business.

For both the years ended November 30, 2022 and 2021, we had a tax provision of $1.4 billion, which resulted in an overall effective income tax rate of 22.8% and 23.5%, respectively.

Our overall effective income tax rate was lower in 2022 primarily due to the resolution of an uncertain state tax position and the retroactive reinstatement of the energy efficient home credits for 2022, resulting from the passage of the Inflation Reduction Act by Congress.

As a percentage of revenues from home sales, selling, general and administrative expenses increased to 6.9% in the year ended November 30, 2023, from 6.2% in the year ended November 30, 2022, primarily due to an increase in the use of brokers due to current market conditions.

During the year ended November 30, 2023, our homebuilding operating earnings included $141.2 million of interest income due to an increase in cash balances and higher interest rates, which was partially offset by an impairment of $36.8 million of an investment in a joint venture.

Operating earnings for our Financial Services segment were $507.1 million in the year ended November 30, 2023, compared to operating earnings of $381.9 million in the year ended November 30, 2022.The increase in operating earnings was primarily due to a higher profit per locked loan in our mortgage business as a result of higher margins, and higher lock volume because of an increase in capture rate and deliveries.

There was also an increase in profitability from our title business due to higher volume and productivity as a result of continued implementation of technology initiatives.

The operating earnings in the year ended November 30, 2022 included a $35.5 million one-time charge due to an increase in a litigation accrual in the third quarter of fiscal 2022 related to a court judgment.

We have appealed this judgment since we believe there were clear errors of

law made by the trial court.

Excluding this one-time charge, operating earnings in the year ended November 30, 2022 were $417.4 million.

Operating loss for the Multifamily segment was $50.6 million in the year ended November 30, 2023, compared to operating earnings of $69.5 million in the year ended November 30, 2022.

Operating loss for the Lennar Other segment was $211.2 million in the year ended November 30, 2023, compared to an operating loss of $735.6 million in the year ended November 30, 2022.

Lennar Other operating loss for the year ended November 30, 2023 was primarily due to negative mark-to-market adjustments of $50.2 million on our publicly traded technology investments and a $65.0 million write-off of one of our non-public technology investments.

The operating loss for the year ended November 30, 2022 was primarily due to negative mark-to-market adjustments of $655.1 million on our publicly traded technology investments.

For the years ended November 30, 2023 and 2022, we had a tax provision of $1.2 billion and $1.4 billion, which resulted in an overall effective income tax rate of 24.0% and 22.8%, respectively.

Our overall effective income tax rate was higher than last year, primarily due to the resolution of an uncertain state tax position and the retroactive reinstatement of the new energy efficient home credit, both during 2022.

Homebuilding Segments

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Revenues Costs of Sales

of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Loss on Sales of Land (2) Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss)

of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Margins (Loss) on Sales of Land (2) Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss)

East $ 9,563,108 6,776,991 29.1 % $ 2,030,953 17,266 30,702 20,165 48,244 2,147,330

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Revenues Costs of Sales

of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Margins on Sales of Land Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss)

East $ 9,201,412 6,341,272 31.1 % $ 2,222,835 (10,701) 3,991 1,300 22,831 2,240,256

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(1) Net margins on sales of homes include selling, general and administrative expenses.

(2) Gross loss on sales of land includes $47.9 million of deposit write-offs as we walked away from 42,000 controlled homesites.

(3) Negative gross and net margins were due to period costs in Urban divisions that impact costs of homes sold without sufficient sales of homes revenues to offset those costs.

(2) For the years ended November 30, 2023 and 2022, gross margins (loss) on sales of land included $19.9 million and $47.9 million of deposit write-offs as we walked away from 10,600 and 42,000 controlled homesites, respectively.

(3) Negative gross and net margins were due to period costs and/or impairments in Urban divisions that impact costs of homes sold without sufficient sales of homes revenue to offset those costs.

Summary of Homebuilding Data

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Of the total homes in backlog listed above, 147 homes with a backlog dollar value of $74.5 million and an average sales price of $507,000 represent the backlog from unconsolidated entities at November 30, 2023, compared to 166 homes with a backlog dollar value of $77.8 million and an average sales price of $469,000 at November 30, 2022.

During the year ended November 30, 2022, we acquired 339 homes and 53 homes in backlog in the East and Central Homebuilding segments, respectively.

Backlog represents the number of homes under sales contracts.

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Homebuilding East:

Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries and the average sales price 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 increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

For the year ended November 30, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Revenues from home sales increased in 2023 compared to 2022, primarily due to an increase in the number of home deliveries in all the states in the segment except in New Jersey.

This was partially offset by a decrease in the average sales price of homes delivered in all the states in the segment except in New Jersey and Pennsylvania.

The increase in the number of home deliveries in Alabama, Florida, Pennsylvania and South Carolina was primarily due to an increase in the number of active communities.

The decrease in the number of home deliveries in New Jersey was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities.

The increase in the average sales price of homes delivered in New Jersey and Pennsylvania was primarily due to product mix.

The decrease in the average sales price of homes delivered in Alabama, Florida and South Carolina was primarily due to pricing to market and product mix.

For the year ended November 30, 2023, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher material and labor costs.

In addition, land costs increased year over year.

Thus gross margin percentage of home deliveries decreased year over year.

Homebuilding Central:

Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries in all the states of the segment except for Georgia and Virginia and an increase in the average sales price in all the states of the segment.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in Georgia and Virginia was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

For the year ended November 30, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margins remained flat year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Revenues from home sales increased in 2023 compared to 2022, primarily due to an increase in the number of home deliveries in all the states in the segment except in Georgia and Virginia.

This was partially offset by a decrease in the average sales price of homes delivered in all the states in the segment except in Illinois, Maryland and Tennessee.

The increase in the number of home deliveries in Illinois, Indiana, Maryland, Minnesota, Tennessee and North Carolina was primarily due to an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in other states in the segment was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities.

The decrease in the average sales price of homes delivered in Georgia, Indiana, Minnesota, North Carolina and Virginia was primarily due to pricing to market and product mix.

The increase in the average sales price of homes delivered in Illinois, Maryland and Tennessee was primarily due to product mix.

For the year ended November 30, 2023, a decrease in revenues per square foot was partially offset by a decrease in costs per square foot.

Overall, gross margins remained flat year over year as land costs remained flat while interest expense decreased as a result of our focus on reducing debt.

Homebuilding Texas:

Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries and the average sales price.

The increase in the number of home 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 price appreciation year over year.

For the year ended November 30, 2022, gross margins decreased year over year as an increase in costs per square foot was partially offset by an increase in revenues per square foot.

Revenues from home sales increased in 2023 compared to 2022, primarily due to an increase in the number of home deliveries, which was partially offset by a decrease in the average sales price of homes delivered.

The increase in the number of home deliveries was primarily due to an increase in the number of active communities.

The decrease in the average sales price of homes delivered was primarily due to pricing to market.

For the year ended November 30, 2023, a

decrease in revenues per square foot was partially offset by a decrease in costs per square foot, which resulted in a decrease in gross margin percentage of home deliveries.

In addition, land costs increased year over year.

Homebuilding West:

Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries in all states of the segment except for Arizona, Nevada and Utah and an increase in the average sales price in all the states of the segment.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in Arizona, California, Nevada and Utah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

For the year ended November 30, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margins increased year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Revenues from home sales decreased in 2023 compared to 2022, primarily due to a decrease in the average sales price of homes delivered in all the states in the segment which was partially offset by an increase in the number of home deliveries in all the states in the segment except in Colorado, Nevada, Utah and Washington.

The decrease in the average sales price of homes delivered in all the states in the segment was primarily due to pricing to market and product mix.

The increase in the number of home deliveries in Arizona, California, Idaho and Oregon was primarily due to an increase in the number of active communities and deliveries per active community.

For the year ended November 30, 2023, a decrease in revenues per square foot and an increase in costs per square foot primarily due to higher materials and labor costs, resulted in a decrease in gross margin percentage of home deliveries.

In addition, land costs increased year over year.

Financial Services Segment

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LMF Commercial originated commercial loans as follows:

Years Ended November 30,

(Dollars in thousands) 2023 2022

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However, more recently we have focused on creating and participating in funds 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 Sheet November 30,

(In thousands) 2022 2021

The following table provides information related to our investment in the Multifamily segment:

At November 30,

(Dollars in thousands) 2023 2022

Multifamily investments in unconsolidated entities $ 599,852 648,126

Lennar's net investment in Multifamily 1,095,218 935,961

Statement of Operations Years Ended November 30,

(Dollars in thousands) 2022 2021

Number of operating properties/investments sold through joint ventures — 2

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Lennar's remaining commitments (1) 3,635 12,830

Distributions to Lennar 25,576 12,555

Distributions to Lennar during the year ended November 30, 2023 — —

(1) While there are remaining commitments with LMV I, there are no plans for additional capital calls.

Our Multifamily segment had equity investments in unconsolidated entities.

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Our Lennar Other segment includes fund investments we retained subsequent to our sale of the Rialto investment and asset management platform as well as strategic investments in technology companies that are looking to improve the homebuilding and financial services industries to better serve homebuyers and homeowners and increase efficiencies.

As of November 30, 2022 and 2021, our balance sheet had $788.5 million and $1.5 billion, respectively, of assets in the Lennar Other segment, which included investments in unconsolidated entities of $316.5 million and $346.3 million, respectively.

As of November 30, 2023 and 2022, our balance sheet had $657.9 million and $788.5 million, respectively, of assets in the Lennar Other segment, which included investments in unconsolidated entities of $276.2 million and $316.5 million, respectively.

We have investments in Blend Labs, Inc.

("Blend Labs"), Hippo Holdings, Inc.

("Hippo"), Opendoor, Inc.

("Hippo"), Opendoor Technologies, Inc.

("Opendoor"), SmartRent, Inc.

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("Sonder") and Sunnova Energy International, Inc.

("Sunnova"), which are held at market and will therefore change depending on the fair value of our share holdings in those entities on the last day of each quarter.

("Sunnova"), which are held at market and will therefore change depending on the fair value of our shareholdings in those entities on the last day of each quarter.

All the investments are accounted for as investments in equity securities which are held at fair value and the changes in fair values are recognized through earnings.

The following is a detail of Lennar Other unrealized gains (losses) from our technology investments:

The following is a detail of Lennar Other unrealized losses from mark-to-market adjustments on our technology investments:

Years Ended November 30,

(In thousands) 2023 2022

Blend Labs (BLND) mark-to-market $ (25,630) (6,744)

Hippo (HIPO) mark-to-market (222,447) 207,634

Opendoor (OPEN) mark-to-market (265,276) 239,312

SmartRent (SMRT) mark-to-market (78,177) 79,483

Sonder (SOND) mark-to-market (2,339) —

Sunnova (NOVA) mark-to-market (61,225) (8,883)

Lennar Other unrealized gains (losses) from technology investments $ (655,094) 510,802

Blend Labs (BLND) $ (130) (25,630)

Hippo (HIPO) (19,210) (222,447)

Opendoor (OPEN) 21,762 (265,276)

SmartRent (SMRT) 5,914 (78,177)

Sonder (SOND) (700) (2,339)

Sunnova (NOVA) (57,798) (61,225)

Lennar Other unrealized losses from technology investments $ (50,162) (655,094)

At November 30, 2023 and 2022, Lennar Other owned commercial mortgage-backed securities ("CMBS") with carrying values of $38.0 million and $35.5 million, respectively.

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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 investor funds as well as cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility (the "Credit Facility").

At November 30, 2022, we had $4.6 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under our $2.6 billion revolving credit facility, thereby providing $7.2 billion of available capacity.

At November 30, 2023, we had $6.3 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under our $2.6 billion revolving credit facility, thereby approximately $8.9 billion of available capacity.

Operating Cash Flow Activities

During 2023 and 2022, cash provided by operating activities totaled $5.2 billion and $3.3 billion, respectively.

During 2023, cash provided by operating activities was positively impacted by our net earnings and $2.3 billion decrease in inventories due to our strategy of controlling more homesites and acquiring finished homesites, thus reducing the amount of spend related to inventory.

This was partially offset by a decrease in accounts payable and other liabilities of $626 million, primarily due to the payment of income taxes, an increase in receivables of $329 million, an increase in deposits and pre-acquisition costs on real estate of $296 million as we increased the percentage of controlled homesites, and an increase in loans held-for-sale of $367 million primarily related to the sale of loans originated by our Financial Services segment.

During 2022, cash provided by operating activities was positively impacted by our net earnings, excluding Lennar Other unrealized mark-to-market losses on our publicly traded technology investments and other realized loss totaling $672 million and an increase in accounts payable and other liabilities of $701 million.

This was partially offset by a $2.4 billion increase in inventories due to strategic land purchases, land development and construction costs and an increase in receivables of $422 million.

During 2021, cash provided by operating activities was positively impacted by our net earnings, net of Lennar Other unrealized/realized gains of $681 million primarily due to mark-to-market gains on strategic investments that went public during the year ended November 30, 2021 (Opendoor, Hippo and SmartRent) and the sale of our solar business to Sunnova.

In addition, there was an increase in accounts payable and other liabilities of $881 million, partially offset by a $2.0 billion increase in inventories due to strategic land purchases, land development and construction costs and an increase in receivables of $290 million.

This was partially offset by a $1.7 billion increase in inventories due to strategic land purchases, land development and construction costs, $672 million increase in deposits and pre-acquisition costs on real estate as we increased the percentage of controlled homesites, and an increase in receivables of $422 million.

Investing Cash Flow Activities

During 2023 and 2022, cash used in investing activities totaled $177 million and $128 million, respectively.

During 2023, our cash used in investing activities was primarily due to cash contributions of $201 million to unconsolidated entities,

which primarily included (1) $94 million to Homebuilding unconsolidated entities, (2) $81 million to Lennar Other unconsolidated entities, and (3) $27 million to Multifamily unconsolidated entities.

This was partially offset by distributions of capital from unconsolidated entities of $100 million, which primarily included (1) $70 million from Homebuilding unconsolidated entities, and (2) $29 million from our Lennar Other unconsolidated entities.

During 2022, our cash used in investing activities was primarily due to cash contributions of $447 million to unconsolidated entities, which primarily included (1) $307 million to Homebuilding unconsolidated entities, (2) $111 million to Lennar Other unconsolidated entities, and (3) $30 million to Multifamily unconsolidated entities.

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This was partially offset by distributions of capital from unconsolidated entities of $398 million, which primarily included (1) $79 million from Homebuilding unconsolidated entities, (2) $252 million from Multifamily unconsolidated entities, and (3) $67 million from our Lennar Other unconsolidated entities.

During 2021, our cash used in investing activities was primarily due to cash contributions of $408 million to unconsolidated entities, which primarily included (1) $251 million to Homebuilding unconsolidated entities (2) $72 million to Multifamily unconsolidated entities, and (3) $83 million to strategic technology investments included in the Lennar Other segment.

In addition, we had $128 million of purchases of investment securities related to strategic technology investments in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $362 million, which primarily included (1) $177 million from Homebuilding unconsolidated entities (2) $128 million from Multifamily unconsolidated entities, and (3) $57 million from our Lennar Other segment, which included our unconsolidated Rialto real estate funds and distributions from strategic investments.

Financing Cash Flow Activities

During 2023 and 2022, our cash used in financing activities totaled $3.2 billion and $1.3 billion, respectively.

During 2022, our cash used in financing activities was primarily due to (1) early redemption of $575 million aggregate principal amount of our 4.75% senior notes due November 2022, (2) $48 million principal payments on notes payable and other borrowings, (3) repurchase of our common stock for $1.0 billion, which included $968 million of repurchases of our stock under our repurchase program and $72 million of repurchases related to our equity compensation plan, and (4) $438 million of dividend payments.

During 2023, our cash used in financing activities was primarily due to the (1) redemption of $378 million aggregate principal amount of our 4.875% senior notes due December 2023, (2) redemption of $425 million aggregate principal amount of our 5.875% senior notes due November 2024, (3) $296 million combined of partial repurchase of our 4.500% senior notes due 2024 and 4.75% senior notes due 2027, (4) $105 million principal payments on notes payable and other borrowings, (5) repurchase of our common stock for $1.2 billion, which included $1.1 billion of repurchases of our stock under our repurchase program and $73 million of repurchases related to our equity compensation plan, (6) $431 million of dividend payments, and (7) $381 million of net payments from liabilities related to consolidated inventory not owned due to land sales to land banks, net of takedowns.

These were partially offset by (1) $29 million of net borrowings under our Financial Services warehouse facilities, and (2) receipts related to noncontrolling interests of $21 million.

During 2022, our cash used in financing activities was primarily due to (1) early redemption of $575 million aggregate principal amount of our 4.75% senior notes due November 2022, (2) $48 million principal payment on notes payable and other borrowings, (3) repurchase of our common stock for $1.0 billion, which included $968 million of repurchase of our stock under our repurchase program and $72 million of repurchases related to our equity compensation plan, and (4) $438 million of dividend payments.

These were partially offset by (1) $485 million of net proceeds from liabilities related to consolidated inventory not owned due to land sales to land banks, net of takedowns, (2) $409 million of net borrowings under our Financial Services warehouse facilities, and (3) receipts related to noncontrolling interests of $42 million.

During 2021, our cash used in financing activities was primarily impacted by (1) redemption of $600 million aggregate principal amount of our 4.125% senior notes due January 2022 at par, (2) early retirement, at a premium, of $250 million aggregate principal amount of our 5.375% senior notes due October 2022, (3) retirement of $300 million aggregate principal amount of our 6.25% senior notes due December 2021, (4) $195 million principal payments on notes payable and other borrowings, (5) repurchase of our common stock for $1.4 billion, which included $1.4 billion of repurchases of our stock under our repurchase program and $65 million of repurchases related to our equity compensation plan, and (6) $310 million of dividend payments.

These were partially offset by (1) $344 million of reductions in liabilities related to consolidated inventory not owned due to land sales to land banks, (2) $262 million of net borrowings under our Financial Services warehouse facilities, and (3) receipts related to noncontrolling interests of $70 million.

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.

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Rather, this non-GAAP financial measure should be used to supplement our GAAP results.

At November 30, 2022, Homebuilding debt to total capital was lower compared to November 30, 2021 primarily as a result of an increase in stockholders' equity due to net earnings and a decrease in homebuilding debt due to

debt paydowns, partially offset by share repurchases.

At November 30, 2023, Homebuilding debt to total capital was lower compared to November 30, 2022, primarily as a result of an increase in stockholders' equity due to net earnings and a decrease in homebuilding debt due to debt paydowns and debt repurchases, partially offset by share repurchases.

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.

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.

We have announced an intention to spin off, subject to market conditions, our multifamily and single-family rental asset management businesses and some of our investment assets.

We planned to spin off our Multifamily and single family home for rent asset management businesses, together with some investment assets, by transferring them to a newly formed subsidiary, Quarterra Group, Inc ("Quarterra"), and distributing the stock of that subsidiary to our stockholders.

That would have made us more of a pure play homebuilding company.

At this time, we have deferred this transaction due to market conditions.

Our Homebuilding senior notes and other debts payable are summarized within Note 4 of the Notes to Consolidated Financial Statements.

In May 2022, we amended the credit agreement governing our unsecured revolving credit facility (the “Credit Facility") which increased the commitment from $2.5 billion to $2.6 billion and extended the maturity to May 2027, except for $350 million which matures in April 2024.

The Credit Facility has a $425 million accordion feature, subject to additional commitments, thus the maximum borrowings are $3.0 billion.

The maximum available borrowings on our Credit Facility were as follows:

(In thousands) November 30, 2023

Commitments - maturing in April 2024 $ 350,000

Commitments - maturing in May 2027 2,225,000

Total commitments $ 2,575,000

Accordion feature 425,000

Total maximum borrowings capacity $ 3,000,000

The proceeds available under the Credit Facility, which are subject to specified conditions for borrowing, may be used for working capital and general corporate purposes.

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If our interest coverage ratio subsequently exceeds 2.25:1.00 for two consecutive fiscal calendar quarters, the leverage ratio we will be required to maintain will be increased by 2.5% per quarter to a maximum of 65%.

As of the end of each fiscal quarter, we are also required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last twelve months then ended.

As of the end of each fiscal quarter, we are also required to maintain either (1) liquidity in an amount equal

to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last twelve months then ended.

We believe that we were in compliance with our debt covenants at November 30, 2023.

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At November 30, 2023, the Financial Services segment had warehouse facilities, all of which were 364-day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows:

(In thousands) Maximum Aggregate Commitment

Maximum Aggregate Commitment

(In thousands) Committed Amount Uncommitted Amount Total

Residential facilities maturing:

December 2023 (1) $ 500,000 — 500,000

April 2024 250,000 250,000 500,000

May 2024 (2) 1,500,000 — 1,500,000

August 2023 1,000,000

June 2024 100,000 400,000 500,000

September 2024 100,000 100,000 200,000

Total residential facilities $ 2,450,000 750,000 3,200,000

LMF commercial facilities maturing:

December 2022 (1) $ 400,000

July 2023 50,000

November 2023 (1) 100,000 — 100,000

December 2023 (3) 400,000 — 400,000

Total LMF commercial facilities $ 500,000 — 500,000

Total $ 3,700,000

(1) Subsequent to November 30, 2022, the maturity date was extended to December 2023.

The Financial Services segment uses the residential warehouse facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected.

(1) Subsequent to November 30, 2023, the maturity date of December 2023 was extended to March 2024 and the maturity date of November 2023 was extended to January 2024.

(2) In December 2023, the maximum aggregate commitment was reduced to $600 million until maturity in May 2024.

(3) Consists of two commercial facilities each with maximum aggregate commitment amounts of $200 million.

Subsequent to November 30, 2023, one of the facility's maturity date was extended to December 2024.

The Financial Services segment uses residential mortgage loan warehouse facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected.

The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature.

The LMF Commercial facilities finance LMF Commercial loan originations and securitization activities and were secured by up to 80% interests in the originated commercial loans financed.

Borrowings and collateral under the facilities and their prior year predecessors were as follows:

Borrowings and collateral under the facilities were as follows:

(In thousands) 2023 2022

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Changes in Capital Structure

In October 2021, the Board of Directors authorized an increase to our stock repurchase program to enable us to repurchase up to the lesser of an additional $1.0 billion in value, excluding commission, or 25 million in shares, of our outstanding Class A or Class B common stock.

As a result of prior authorizations being almost exhausted, in March 2022, our Board of Directors approved an additional authorization for us to repurchase up to the lesser of $2.0 billion in value, or 30 million in shares, of our outstanding Class A or Class B common stock.

In March 2022, our Board of Directors approved an authorization for us to repurchase up to the lesser of $2.0 billion in value, or 30 million in shares, of our outstanding Class A or Class B common stock.

The repurchase authorization has no expiration date.

This authorization was in addition to what was remaining of our October 2021 stock repurchase program.

Subsequent to November 30, 2023, our Board of Directors authorized an increase to our stock repurchase program to enable us to repurchase up to an additional $5 billion in value of our outstanding Class A or Class B common stock.

Repurchases are authorized to be made in open-market or private transactions.

The repurchase authorization has no expiration date.

The following table provides information about our repurchases of Class A and Class B common stock:

November 30, 2022 November 30, 2021

Years Ended November 30,

(Dollars in thousands, except price per share) Class A Class B Class A Class B

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Average price per share $ 113.54 $ 99.52 $ 90.23 $ 73.60

During the year ended November 30, 2023, treasury stock increased by 11.3 million shares primarily due to our repurchase of 10.0 million shares of Class A and Class B common stock through our stock repurchase program.

During the year ended November 30, 2022, treasury stock decreased due to our retirement of 46.7 million and 2.8 million treasury shares of Class A and Class B common stock, respectively, as authorized by our Board of Directors.

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During the year ended November 30, 2022, this decrease in treasury shares was partially offset by our repurchase of 9.6 million and 1.3 million shares of Class A and Class B common stock, respectively, through our stock repurchase program.

During the year ended November 30, 2021, treasury stock increased by 14.7 million shares of Class A common stock and 0.1 million shares of Class B common stock primarily due to 14.0 million shares of common stock repurchased during the year through our stock repurchase program.

During the years ended November 30, 2022 and 2021, our Class A and Class B common stockholders received an aggregate per share annual dividend of $1.50 and $1.00, respectively.

On January 12, 2023, our Board of Directors declared a quarterly cash dividend of $0.375 per share on both our Class A and Class B common stock.

During both the years ended November 30, 2023 and 2022, our Class A and Class B common stockholders received an aggregate per share annual dividend of $1.50.

On January 9, 2024, our Board of Directors increased our annual dividend to $2.00 per share from $1.50 per share, resulting in a quarterly cash dividend of $0.50 per share on both our Class A and Class B common stock.

The dividend is payable on February 7, 2024 to holders of record at the close of business on January 24, 2024.

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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.

If the proposed spin-off of our multifamily and single family rental asset management businesses takes place, the subsidiaries involved in those businesses will no longer guarantee our senior notes.

If the proposed spin-off of our multifamily and single-family rental asset management businesses or any other of our businesses takes place, the subsidiaries involved in those businesses will no longer guarantee our senior notes.

Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at November 30, 2023 is included in the following tables.

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Amounts due from and transactions with non-guarantor subsidiaries and related parties are separately disclosed:

(In thousands) November 30, 2022

November 30, 2021

As of November 30,

(In thousands) 2023 2022

Due from non-guarantor subsidiaries $ 22,020,227 17,959,091

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Total liabilities 9,181,456 10,455,359

(In thousands) November 30, 2022

(In thousands) Year Ended November 30, 2023

Total revenues $ 32,244,464

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Homebuilding - Investments in Unconsolidated Entities

We regularly monitor the results of our Homebuilding, Multifamily, and Lennar Other unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations.

We also monitor the performance of Homebuilding 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 their debt covenants, we evaluate and assess possible impairment of our investments.

We believe that substantially all of the joint ventures were in compliance with their debt covenants at November 30, 2023, except for one joint venture that had an other-than-temporary impairment which is included in Note 1 of the Notes to Consolidated Financial Statements.

At November 30, 2023, we had equity investments in 48 active Homebuilding and land unconsolidated entities (of which 5 had recourse debt, 15 had non-recourse debt and 28 had no debt), compared to 48 active Homebuilding and land unconsolidated entities at November 30, 2022.

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Details regarding these investments, balances and debt are included in Note 3 of the Notes to Consolidated Financial Statements.

We regularly monitor the results of our Homebuilding unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations.

We also monitor the performance of Homebuilding joint ventures in which we have investments on a regular basis to assess compliance with debt covenants.

For those joint ventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment.

We believe all of the joint ventures were in compliance with their debt covenants at November 30, 2022.

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of November 30, 2023.

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Multifamily - Investments in Unconsolidated Entities

At November 30, 2022, Multifamily had equity investments in 23 active unconsolidated entities that are engaged in multifamily residential developments (of which 15 had non-recourse debt and 8 had no debt), compared to 14 active unconsolidated entities at November 30, 2021.

At November 30, 2023, Multifamily had equity investments in 22 active unconsolidated entities that are engaged in multifamily residential developments (of which 20 had non-recourse debt and 2 had no debt), and 23 active unconsolidated

entities at November 30, 2022.

We invest in unconsolidated entities that acquire and develop land to construct multifamily rental properties.

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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 manages and has investments in LMV I and LMV II, which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily rental properties.

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 manages and has investments in LMV I, LMV II and Canada Pension Plan Investments Fund, which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily rental properties.

Details of each as of and during the year ended November 30, 2023 are included in Note 3 of the Notes to Consolidated Financial Statements.

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Lennar Other - Investments in Unconsolidated Entities

As part of the sale of the Rialto investment and asset management platform, we retained the right to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds.

As part of the sale of the Rialto investment and asset management platform, we retained the right to receive a portion of payments with regard to carried interests if certain 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 and have been recorded as revenues.

These distributions are not subject to clawbacks but reduce future carried interest payments to which we become entitled from the applicable funds and were recorded as equity in earnings (loss) in the consolidated statement of operations.

Our investment in the Rialto funds totaled $148.7 million and $185.1 million as of November 30, 2023 and 2022, respectively.

As of November 30, 2023 and 2022, we had strategic technology investments in unconsolidated entities of $127.5 million and $131.5 million respectively, accounted for under the equity method of accounting.

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.

We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land banks) and unconsolidated entities until we have determined whether to exercise the options.

Since fiscal year 2020, we have been increasing the percentage of our total homesites that we control through options rather than own.

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The arrangement with the investor group, together with existing and other strategic partnerships we are discussing, are significant steps in our strategy to migrate to a higher percentage of our homesites which we control but do not own, which we expect will result in greater cash flow and higher returns on assets and equity.

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) at November 30, 2022 and 2021:

Controlled Homesites

November 30, 2022 Optioned JVs Total Owned

The table below indicates the number of homesites to which we had access through option contracts with third parties or unconsolidated JVs (i.e., controlled homesites) and homesites owned at November 30, 2023 and 2022:

November 30, 2023 Controlled Homesites Owned

Homesites Total

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% of total homesites 76 % 24 %

Controlled Homesites

November 30, 2021 Optioned JVs Total Owned

November 30, 2022 Controlled Homesites Owned

Homesites Total

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(1) Based on trailing twelve months of home deliveries.

Excluding homes in inventory, our percentage of total homesites controlled as of November 30, 2022 and 2021 was 69% and 64%, respectively.

Excluding homes in inventory, our years of supply owned as of November 30, 2022 and 2021 was 1.9 years and 2.4 years, respectively.

Details on option contracts and related consolidated inventory not owned and exposure are included in Note 1 and Note 8 of the Notes to Consolidated Financial Statements.

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Financial Services - notes and other debts payable 2,163,805 2,032,712 — — 131,093

Multifamily - note payable 3,741 3,741 — — —

Interest commitments under interest bearing debt (2) 365,772 131,477 171,110 59,558 3,627

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(2) Interest commitments on variable interest-bearing debt are determined based on the interest rate as of November 30, 2023.

(3) Amounts include $4.1 million and $15.2 million remaining equity investment commitments to LMV I and LMV II, respectively, for future expenditures related to the construction and development of the projects and $77.3 million remaining equity investment commitment to the Upward America Venture.

(3) Amounts include $12.8 million of remaining equity investment commitments to LMV II, for future expenditures related to the construction and development of the projects and $69.8 million of remaining equity investment commitment to the Upward America Venture.

We are subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate in the routine conduct of our business.

Option contracts for the purchase of land generally reduces our financial risk and costs of capital associated with land holdings.

Option contracts for the purchase of land generally reduce our financial risk and costs of capital associated with land holdings.

At November 30, 2023, we had access to 309,700 homesites through option contracts with third parties and unconsolidated entities in which we have investments.

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Our Financial Services segment had a pipeline of loan applications in process of $3.3 billion at November 30, 2023.

Loans in process for which interest rates were committed to the borrowers totaled approximately $2.2 billion as of November 30, 2022.

Loans in process for which interest rates were committed to the borrowers totaled approximately $2.1 billion as of

November 30, 2023.

A significant portion of these commitments had a remaining period of 60 days or less.

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We try to manage the financial risks of adverse market conditions associated with land holdings by what we believe to be prudent underwriting of land purchases in areas we view as desirable growth markets, careful management of the land development process and limitation of risks by using partners to share the costs of purchasing and developing land as well as obtaining access to land through option contracts.

Although we believe our land underwriting standards are conservative, we were required to take impairment charges with regards to several properties in 2022 due to the reduced demand for new homes in the second half of 2022.

Although we believe our land underwriting standards are conservative, we do not anticipate a severe decline in land values and the sharply reduced demand for new homes in the near future.

We historically have experienced, and expect to continue to experience, variability in quarterly results.

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However, a variety of factors can alter seasonal patterns.

For example, in 2020, the shutdown of large portions of our national economy in March and April due to the COVID-19 pandemic temporarily reduced our home sales, and therefore altered our normal seasonal pattern.

Interest Rates and Changing Prices

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Our accounting policies are more fully described in Note 1 of the notes to our consolidated financial statements included in Item 8 of this document.

As discussed in Note 1, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying

Future events and their effects cannot be determined with absolute certainty.

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We recorded a significant amount of goodwill in connection with the 2018 acquisition of CalAtlantic.

We record goodwill associated with acquisitions of businesses when the purchase price of the business exceeds the fair value of the net tangible and identifiable assets acquired.

We record goodwill associated with acquisitions of businesses when the purchase price of the business exceeds the fair value of the net

tangible and identifiable assets acquired.

In accordance with ASC Topic 350, Intangibles-Goodwill and Other ("ASC 350"), we evaluate goodwill for potential impairment on at least an annual basis.

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Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value.

Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction.

Inventory costs include land, land development and home construction costs, real estate taxes and interest related to development and construction.

We review our inventory for indicators of impairment by evaluating each community during each reporting period.

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The projected cash flows for each community are significantly impacted by estimates related to market supply and demand, product type by community, homesite sizes, sales pace, sales prices, sales incentives, construction costs, sales and marketing expenses, the local economy, competitive conditions, labor costs, costs of materials and other factors for that particular community.

Every division evaluates the historical performance of each of its communities as well as current trends in the market and economy impacting the community and its surrounding areas.

We evaluate the historical performance of each of our communities as well as current trends in the market and economy impacting the community and its surrounding areas.

These trends are analyzed for each of the estimates listed above.

27 unchanged sentences

Factors considered in determining whether we have significant influence, or we have control include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and continuing involvement.

The accounting policy relating to the use of the equity method of accounting is a critical accounting policy due to the judgment required in determining whether the entity is a VIE or a voting interest entity and then whether we are the primary beneficiary or have control or significant

We believe that the equity method of accounting is appropriate for our investments in unconsolidated entities where we are not the primary beneficiary and we do not have a controlling interest, but rather share control with our partners.

3 unchanged sentences

The evaluation of our investment in unconsolidated entities for other-than-temporary impairment includes certain critical assumptions:

(1) projected future distributions from the unconsolidated entities, (2) discount rates applied to the future distributions and (3) various other factors.

(1) projected future distributions from the unconsolidated entities, (2) discount rates applied to the future distributions, (3) the length of the time and the extent to which the market value has been less than cost, and (4) various other factors.

Our assumptions on the projected future distributions from unconsolidated entities are dependent on market conditions.

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis