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Press Release
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| Lennar Reports First Quarter Results |
MIAMI, March 27 /PRNewswire-FirstCall/ -- Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's largest homebuilders, today reported results for its first quarter ended February 29, 2008. First quarter net loss in 2008 was $88.2 million, or $0.56 per diluted share, compared to first quarter net earnings of $68.6 million, or $0.43 per diluted share, in 2007. Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, "Market conditions have remained challenged and continued to deteriorate throughout our first quarter of 2008. The housing industry continues to be impacted by an unfavorable supply and demand relationship, which restricts the volume of new home sales and, concurrently, depresses home prices in most markets across the country." "Home inventories have been expanding due to the high number of foreclosures, negotiated 'short sales,' and stretched homeowners looking to sell homes they can no longer afford. While sales are occurring and clearing prices are being reached, the pace of overall housing inventory growth is exceeding absorption at the current time." "Concurrently, lower consumer confidence has quieted demand among prospective homebuyers and deterred them from a buying decision, while contraction in the lending markets has reduced the availability of credit for those prospective homebuyers that do wish to buy a home." "On a more optimistic note, numerous initiatives, both private and public, have been designed and proposed to move towards stabilization and resolution. There is a growing consensus that the deterioration of the housing market has likely led us into recession, and the stabilization and recovery of the housing market will likely lead us out. Accordingly, we expect that some of these initiatives and the many that are being discussed will lead to a bottom and recovery." Mr. Miller continued, "Our first quarter results reflect the fact that our balance sheet has been and continues to be our top priority. With most of the significant work on asset impairment behind us, throughout our first quarter we have remained focused on the delivery of our backlog, curtailing land purchases where possible, restructuring our joint ventures where necessary, and right-sizing our operations in order to protect cash, preserve value and fortify our balance sheet." "To that end, we are very pleased that we ended our first quarter with over $1 billion in cash and no outstanding balance under our credit facility. In addition, we have reduced the number of our joint venture partnerships by approximately one-third to 180 and our maximum joint venture recourse debt by approximately one-half to $917 million, from their peak levels in 2006." Mr. Miller concluded, "As we look ahead to the remainder of 2008, we recognize that market conditions are likely to remain challenging in the near term. Accordingly, we will continue to work diligently on rebuilding margins and ultimately, profitability as well. With a longer-term perspective, we believe that government action and normal market clearing will work together to lead the housing market to stabilization and ultimately recovery."
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 29, 2008 COMPARED TO
THREE MONTHS ENDED FEBRUARY 28, 2007
Homebuilding
Revenues from home sales decreased 64% in the first quarter of 2008 to $953.1 million from $2.6 billion in 2007. Revenues were lower primarily due to a 60% decrease in the number of home deliveries and an 8% decrease in the average sales price of homes delivered in 2008. New home deliveries, excluding unconsolidated entities, decreased to 3,437 homes in the first quarter of 2008 from 8,566 homes last year. In the first quarter of 2008, new home deliveries were lower in each of the Company's homebuilding segments and Homebuilding Other, compared to 2007. The average sales price of homes delivered decreased to $278,000 in the first quarter of 2008 from $303,000 in the same period last year, due to reduced pricing and higher sales incentives offered to homebuyers ($48,000 per home delivered in the first quarter of 2008, compared to $45,500 per home delivered in the same period last year). Gross margins on home sales excluding SFAS 144 valuation adjustments were $162.9 million, or 17.1%, in the first quarter of 2008, compared to $409.2 million, or 15.6%, in 2007. Gross margin percentage on home sales excluding SFAS 144 valuation adjustments increased compared to last year in the Company's Homebuilding East and West segments and Homebuilding Other primarily due to the Company's lower inventory basis and continued focus on reducing construction costs. Gross margins on home sales were $136.7 million, or 14.3%, in the first quarter of 2008, which included $26.2 million of SFAS 144 valuation adjustments, compared to gross margins on home sales of $360.9 million, or 13.8%, in the first quarter of 2007, which included $48.3 million of SFAS 144 valuation adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments is a non-GAAP financial measure disclosed by certain of the Company's competitors and has been presented because the Company finds it useful in evaluating its performance and believes that it helps readers of the Company's financial statements compare its operations with those of its competitors. Selling, general and administrative expenses were reduced by $194.4 million, or 53%, in the first quarter of 2008, compared to the same period last year, primarily due to reductions in associate headcount and variable selling expense. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 18.4% in the first quarter of 2008, from 14.1% in 2007, which was primarily due to lower revenues. Loss on land sales totaled $26.5 million in the first quarter of 2008, which included $15.5 million of SFAS 144 valuation adjustments and $16.9 million of write-offs of deposits and pre-acquisition costs related to 2,600 homesites under option that the Company does not intend to purchase. In the first quarter of 2007, loss on land sales totaled $26.5 million, which included $13.2 million of SFAS 144 valuation adjustments and $21.0 million of write-offs of deposits and pre-acquisition costs related to 4,000 homesites that were under option. Equity in loss from unconsolidated entities was $23.0 million in the first quarter of 2008, which included $18.9 million of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which the Company has investments, compared to equity in loss from unconsolidated entities of $14.2 million in the first quarter of 2007, which included $6.5 million of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which the Company has investments. Management fees and other income (expense), net, totaled ($21.8) million in the first quarter of 2008, which included $29.6 million of APB 18 valuation adjustments to the Company's investments in unconsolidated entities, compared to management fees and other income (expense), net, of $13.8 million in the first quarter of 2007, net of $2.6 million of APB 18 valuation adjustments to the Company's investments in unconsolidated entities. Minority interest expense, net was $0.2 million and $0.5 million, respectively, in the first quarter of 2008 and 2007. Sales of land, equity in loss from unconsolidated entities, management fees and other income (expense), net and minority interest expense, net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by the Company and unconsolidated entities in which it has investments. Financial Services Operating loss for the Financial Services segment was $9.7 million in the first quarter of 2008, compared to operating earnings of $15.9 million last year. The decline in profitability was primarily due to lower transactions in the segment's title operations, compared to last year as a result of the overall weakness in the housing market. Corporate General and Administrative Expenses Corporate general and administrative expenses were reduced by $12.1 million, or 26%, in the first quarter of 2008, compared to the same period last year. As a percentage of total revenues, corporate general and administrative expenses increased to 3.3% in the first quarter of 2008, compared to 1.7% in the same period last year, primarily due to lower revenues. Lennar Corporation, founded in 1954, is one of the nation's leading builders of quality homes for all generations. The Company builds affordable, move-up and retirement homes primarily under the Lennar brand name. Lennar's Financial Services segment provides primarily mortgage financing, title insurance and closing services for both buyers of the Company's homes and others. Previous press releases and further information about the Company may be obtained at the "Investor Relations" section of the Company's website, www.lennar.com. Some of the statements in this press release are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption "Risk Factors" in Item 1A of our Annual Report on Form 10-K for our fiscal year ended November 30, 2007. We do not undertake any obligation to update forward-looking statements, except as required by Federal securities laws. A conference call to discuss the Company's first quarter earnings will be held at 11:00 a.m. Eastern Time on Thursday, March 27, 2008. The call will be broadcast live on the Internet and can be accessed through the Company's website at www.lennar.com. If you are unable to participate in the conference call, the call will be archived at www.lennar.com for 90 days. A replay of the conference call will also be available later that day by calling 402-998-1673 and entering 5932669 as the confirmation number.
LENNAR CORPORATION AND SUBSIDIARIES
Selected Revenues and Earnings (Loss) Information
(In thousands, except per share amounts)
(unaudited)
Three Months Ended
February 29, February 28,
2008 2007
Revenues:
Homebuilding $993,776 2,663,170
Financial services 69,137 128,910
Total revenues $1,062,913 2,792,080
Homebuilding operating earnings (loss) $(109,780) 139,975
Financial services operating earnings (loss) (9,692) 15,869
Corporate general and administrative expenses 34,822 46,919
Earnings (loss) before provision
(benefit) for income taxes (154,294) 108,925
Provision (benefit) for income taxes (66,078) 40,302
Net earnings (loss) $(88,216) 68,623
Average shares outstanding:
Basic 158,204 157,130
Diluted 158,204 158,866
Earnings (loss) per share:
Basic $(0.56) 0.44
Diluted $(0.56) 0.43
Supplemental information:
Interest incurred (1) $38,095 55,721
EBIT before valuation adjustments
and write-offs of option deposits and
pre-acquisition costs and financial
services notes receivable (2):
Earnings (loss) before provision
(benefit) for income taxes $(154,294) 108,925
Interest expense 32,443 47,362
Valuation adjustments and write-offs
of option deposits and pre-acquisition
costs and financial services notes
receivable 107,111 95,876
EBIT before valuation adjustments and
write-offs of option deposits and pre-
acquisition costs and financial services
notes receivable $(14,740) 252,163
(1) Amount represents interest incurred related to homebuilding debt,
which is primarily capitalized to inventories and relieved as cost of
sales when homes are delivered or land is sold.
(2) EBIT before valuation adjustments and write-offs of option deposits
and pre-acquisition costs and financial services notes receivable is a
non-GAAP financial measure derived by adding back interest expense,
valuation adjustments and write-offs of option deposits and pre-
acquisition costs and financial services notes receivable reflected in
earnings (loss) before provision (benefit) for income taxes. This
financial measure has been presented because the Company finds it
useful in evaluating its performance and believes that it helps
readers of the Company's financial statements compare its operations
with those of its competitors.
LENNAR CORPORATION AND SUBSIDIARIES
Homebuilding Information
(In thousands)
(unaudited)
Three Months Ended
February 29, February 28,
2008 2007
Revenues:
Sales of homes $953,066 2,622,491
Sales of land 40,710 40,679
Total revenues 993,776 2,663,170
Costs and expenses:
Cost of homes sold 816,371 2,261,595
Cost of land sold 67,160 67,145
Selling, general and administrative 175,018 369,426
Total costs and expenses 1,058,549 2,698,166
Gain on recapitalization of
unconsolidated entity - 175,879
Equity in loss from unconsolidated
entities 22,980 14,205
Management fees and other income
(expense), net (21,793) 13,841
Minority interest expense, net 234 544
Operating earnings (loss) $(109,780) 139,975
LENNAR CORPORATION AND SUBSIDIARIES
Valuation Adjustments and Write-offs
(In thousands)
(unaudited)
Three Months Ended
February 29, February 28,
2008 2007
SFAS 144 valuation adjustments to
finished homes, CIP and land on which
the Company intends to build homes:
East $8,106 19,115
Central 1,779 11,253
West 9,920 17,067
Other 6,424 832
Total 26,229 48,267
SFAS 144 valuation adjustments to
land the Company intends to sell to
third parties:
East 1,372 9,520
Central 9,297 57
West 4,192 3,500
Other 594 161
Total 15,455 13,238
Write-offs of option deposits and
pre-acquisition costs:
East 7,054 13,741
Central 4,344 1,300
West 3,364 3,071
Other 2,090 2,838
Total 16,852 20,950
Company's share of SFAS 144 valuation
adjustments related to assets of
unconsolidated entities:
East 4,157 3,832
Central 158 -
West 14,025 2,704
Other 597 -
Total 18,937 6,536
APB 18 valuation adjustments to investments
in unconsolidated entities:
East 937 2,641
Central 228 -
West 28,439 -
Other 34 -
Total 29,638 2,641
Financial services write-offs of
notes receivable - 4,244
Total valuation adjustments and
write-offs of option deposits and
pre-acquisitions costs and financial
services notes receivable $107,111 95,876
LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog
(Dollars in thousands)
(unaudited)
At or for the
Three Months Ended
February 29, February 28,
2008 2007
Deliveries:
East 1,165 2,599
Central 1,179 3,131
West 924 2,406
Other 328 899
Total 3,596 9,035
Of the total deliveries listed above, 159 represents deliveries from unconsolidated entities for the three months ended February 29, 2008, compared to 469 deliveries in the same period last year.
New Orders:
East 942 2,075
Central 1,061 2,373
West 747 1,865
Other 295 819
Total 3,045 7,132
Of the total new orders listed above, 62 represents new orders from unconsolidated entities for the three months ended February 29, 2008, compared to 354 new orders in the same period last year.
Backlog - Homes:
East 1,568 3,615
Central 756 2,840
West 711 2,450
Other 363 800
Total 3,398 9,705
Of the total homes in backlog listed above, 204 represents homes in backlog from unconsolidated entities at February 29, 2008, compared to 974 homes in backlog at February 28, 2007.
Backlog - Dollar Value:
East $492,862 1,277,842
Central 174,361 673,062
West 307,071 1,168,050
Other 178,045 330,801
Total $1,152,339 3,449,755
Of the total dollar value of homes in backlog listed above, $113,865 represents the backlog dollar value from unconsolidated entities at February 29, 2008, compared to $450,701 of backlog dollar value at February 28, 2007.
Lennar's reportable homebuilding segments and homebuilding other consist
of homebuilding divisions located in the following states:
East: Florida, Maryland, New Jersey and Virginia
Central: Arizona, Colorado and Texas
West: California and Nevada
Other: Illinois, Minnesota, New York, North Carolina and South
Carolina
LENNAR CORPORATION AND SUBSIDIARIES
Supplemental Data
(Dollars in thousands)
(unaudited)
February 29, February 28,
2008 2007
Homebuilding debt $2,279,497 2,581,494
Stockholders' equity 3,680,898 5,774,981
Total capital $5,960,395 8,356,475
Homebuilding debt to total
capital 38.2% 30.9%
Homebuilding debt $2,279,497 2,581,494
Less: Homebuilding cash 1,088,141 263,746
Net homebuilding debt $1,191,356 2,317,748
Net homebuilding debt to total
capital (1) 24.5% 28.6%
(1) Net homebuilding debt to total capital consists of net homebuilding
debt (homebuilding debt less homebuilding cash) divided by total
capital (net homebuilding debt plus stockholders' equity).
SOURCE Lennar Corporation |
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