Operating And Reporting Segments

3 Months Ended

Feb. 29, 2016

Segment Reporting [Abstract]

Operating And Reporting Segments

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) Homebuilding Houston

(5) Lennar Financial Services

(6) Rialto

(7) Lennar Multifamily

In the first quarter of 2016, the Company made the decision to divide the Southeast Florida operating division into two operating segments to maximize operational efficiencies given the continued growth of the division. As a result of this change in management structure, the Company re-evaluated its reportable segments and determined that neither operating segment met the reportable criteria set forth in Accounting Standards Codification ("ASC") 280, Segment Reporting. The Company aggregated these operating segments into the Homebuilding East reportable segment as these divisions exhibit similar economic characteristics, geography and product type as the other divisions in Homebuilding East. All prior year segment information has been restated to conform with the 2016 presentation. The change in the reportable segments has no effect on the Company's condensed consolidated financial position, results of operations or cash flows for the periods presented.

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 other interest expense 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, Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia

Central: Arizona, Colorado and Texas⁽¹⁾ 

West: California and Nevada

Houston: Houston, Texas

Other: Illinois, Minnesota, Oregon, Tennessee and Washington

(1)Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.

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, 2015. 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 29, 2016		November 30, 2015
Assets:
Homebuilding East	$	3,519,242	3,140,604
Homebuilding Central	1,488,437		1,421,195
Homebuilding West	4,248,352		4,157,616
Homebuilding Houston	541,449		481,386
Homebuilding Other	825,145		858,000
Rialto	1,272,004		1,505,500
Lennar Financial Services	1,157,079		1,425,837
Lennar Multifamily	451,108		415,352
Corporate and unallocated	692,372		1,014,019
Total assets	$	14,195,188	14,419,509

	Three Months Ended
	February 29,		February 28,
(In thousands)	2016		2015
Revenues:
Homebuilding East	$	659,054	610,683
Homebuilding Central	275,219		210,508
Homebuilding West	551,339		382,773
Homebuilding Houston	138,621		131,257
Homebuilding Other	162,248		106,437
Lennar Financial Services	123,956		124,827
Rialto	43,711		41,197
Lennar Multifamily	39,516		36,457
Total revenues (1)	$	1,993,664	1,644,139
Operating earnings (loss):
Homebuilding East	$	84,706	86,533
Homebuilding Central	20,323		15,052
Homebuilding West (2)	88,834		82,493
Homebuilding Houston	12,872		17,015
Homebuilding Other	13,903		6,551
Lennar Financial Services	14,931		15,527
Rialto	1,610		2,808
Lennar Multifamily	12,182		(5,682	)
Total operating earnings	249,361		220,297
Corporate general and administrative expenses	47,668		43,654
Earnings before income taxes	$	201,693	176,643

(1) Total revenues were net of sales incentives of $103.7 million ($21,600 per home delivered) for the three months ended February 29, 2016, and $93.6 million ($21,800 per home delivered) for the three months ended February 28, 2015.

(2) For the three months ended February 29, 2016 and February 28, 2015, operating earnings included $6.0 million and $31.3 million, respectively, of equity in earnings from Heritage Fields El Toro, one of the Company's unconsolidated entities ("El Toro"), for details refer to Note 3.