Business Acquisition

3 Months Ended

Feb. 28, 2017

Business Combinations [Abstract]

Business Acquisition

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.