MIAMI, Sept. 23 FL-Lennar-Q3-earnings
MIAMI, Sept. 23 /PRNewswire-FirstCall/ --
-- Revenues of $1.1 billion - down 53%
-- Loss per share of $0.56 (includes a $0.53 per share charge related to
valuation adjustments and other write-offs)
-- Gross margin on home sales:
-- 18.0% (excluding SFAS 144 valuation adjustments of $32.3 million) -
up 400 basis points
-- 14.8% (including SFAS 144 valuation adjustments) - up 1,480 basis
points
-- Operating margin on home sales:
-- 2.3% (excluding SFAS 144 valuation adjustments) - up 230 basis
points
-- -0.9% (including SFAS 144 valuation adjustments) - up 1,310 basis
points
-- Selling, general and administrative expenses reduced by $148.0 million
- down 49%
-- Homebuilding cash of $857.1 million as of August 31, 2008
-- No outstanding borrowings under the Company's credit facility as of
August 31, 2008
-- Homebuilding debt to total capital of 40.5% (net homebuilding debt to
total capital of 30.2%)
-- Maximum recourse indebtedness related to the Company's unconsolidated
entities of $630.0 million - reduced by $1.1 billion, or 64%, since its
peak at November 30, 2006
-- Deliveries of 3,791 homes - down 50%
-- New orders of 3,387 homes - down 42%; cancellation rate of 27%
-- Backlog dollar value of $1.0 billion - down 53%
Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's largest
homebuilders, today reported results for its third quarter ended August 31,
2008. Third quarter net loss in 2008 was $89.0 million, or $0.56 per diluted
share, compared to third quarter net loss of $513.9 million, or $3.25 per
diluted share, in 2007.
Stuart Miller, President and Chief Executive Officer of Lennar
Corporation, said, "While we expected the housing market to remain constrained
throughout the third quarter, the weakness in the market actually accelerated
as a result of increased foreclosures, weakened consumer confidence and
tightened mortgage lending standards. Although the Federal government has
recognized that stabilizing the housing market is critical to solving the
current credit crisis, the government has yet to act meaningfully to help
stabilize home prices. While we were encouraged that Congress passed the July
housing stimulus bill as a first step, additional government actions will be
necessary to help facilitate housing market stabilization, which in turn will
help stabilize the financial markets as well."
Mr. Miller continued, "While the housing market continues to search for a
bottom, we have been making significant progress to improve our basic
operations. We continued to focus on the execution of an efficient
homebuilding model through the repositioning of our product to meet today's
consumer demand and by aggressively reducing our construction costs. This
focus resulted in our third quarter, pre-impairment gross margin percentage
improvement of 400 basis points year-over-year to 18.0%. As a result of a
steeper decline in revenues than we anticipated, we did not achieve a
reduction in S,G&A expenses as a percentage of revenue from the second
quarter. However, we did continue to make significant progress towards our
goal of right-sizing our business by cutting our selling, general and
administrative expenses by approximately
one-half, compared to a year ago. We have taken further actions during the
quarter, including consolidating divisions, which should enable us to achieve
a significant improvement in our S,G&A percentage going forward."
"We ended our third quarter with $857 million in cash and no outstanding
borrowings under our credit facility, while we reduced our maximum
unconsolidated joint venture recourse debt to $630 million, a decrease of 22%
from the end of our second quarter."
Mr. Miller concluded, "As we enter the fourth quarter of 2008, we remain
well positioned with a strong balance sheet and properly scaled operations to
navigate the current market as a leaner and more efficient homebuilder."
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 2008 COMPARED TO
THREE MONTHS ENDED AUGUST 31, 2007
Homebuilding
Revenues from home sales decreased 54% in the third quarter of 2008 to
$995.7 million from $2.2 billion in 2007. Revenues were lower primarily due
to a 49% decrease in the number of home deliveries and a 9% decrease in the
average sales price of homes delivered in 2008. New home deliveries,
excluding unconsolidated entities, decreased to 3,694 homes in the third
quarter of 2008 from 7,266 homes last year. In the third 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 $270,000 in the third quarter of 2008 from $296,000 in
the same period last year, due to reduced pricing. Sales incentives offered to
homebuyers were $45,900 and $46,000 per home delivered, respectively, in the
third quarter of 2008 and 2007.
Gross margins on home sales excluding SFAS 144 valuation adjustments were
$179.4 million, or 18.0%, in the third quarter of 2008, compared to $304.1
million, or 14.0%, in the third quarter of 2007. Gross margin percentage on
home sales, excluding SFAS 144 valuation adjustments, improved compared to
last year, primarily due to the Company's lower inventory basis and continued
focus on repositioning its product and reducing construction costs. The
largest gross margin percentage improvement was experienced in the Company's
Homebuilding East segment. Gross margins on home sales were $147.1 million,
or 14.8%, in the third quarter of 2008, which included $32.3 million of SFAS
144 valuation adjustments, compared to gross margins on home sales of $1.0
million, or 0.0%, in the third quarter of 2007, which included $303.1 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 $148.0
million, or 49%, in the third quarter of 2008, compared to the same period
last year, primarily due to reductions in associate headcount, variable
selling expense and fixed costs. As a percentage of revenues from home sales,
selling, general and administrative expenses increased to 15.7% in the third
quarter of 2008, from 14.0% in 2007, which was due to lower revenues.
Losses on land sales totaled $28.8 million in the third quarter of 2008,
which included $21.4 million of SFAS 144 valuation adjustments and $10.9
million of write-offs of deposits and pre-acquisition costs related to
approximately 900 homesites under option that the Company does not intend to
purchase. In the third quarter of 2007, losses on land sales totaled $344.7
million, which included $114.6 million of SFAS 144 valuation adjustments and
$242.5 million of write-offs of deposits and pre-acquisition costs related to
approximately 15,000 homesites that were under option.
Equity in loss from unconsolidated entities was $11.0 million in the third
quarter of 2008, which included $2.9 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 $127.4
million in the third quarter of 2007, which included $138.7 million of SFAS
144 valuation adjustments related to assets of unconsolidated entities in
which the Company has investments.
Management fees and other expense, net, totaled $52.2 million in the third
quarter of 2008, which included $40.0 million of APB 18 valuation adjustments
to the Company's investments in unconsolidated entities and $5.6 million of
write-offs of notes receivable, compared to management fees and other expense,
net, of $10.5 million in the third quarter of 2007, which included $32.1
million of APB 18 valuation adjustments to the Company's investments in
unconsolidated entities and $16.5 million of goodwill write-offs, partially
offset by the recognition of $24.7 million of profit deferred at the time of
the recapitalization of the LandSource joint venture.
Minority interest income (expense), net was $9.0 million in the third
quarter of 2008, which included $7.9 million of minority interest income as a
result of a $15.9 million SFAS 144 valuation adjustment to inventory of a
50%-owned consolidated joint venture, compared to minority interest income
(expense), net of ($1.8) million in the third quarter of 2007.
Sales of land, equity in loss from unconsolidated entities, management
fees and other expense, net and minority interest income (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 $12.9 million in the
third quarter of 2008, compared to an operating loss of $5.2 million in the
same period last year. The operating loss was due to a $27.2 million write-off
of goodwill related to the segment's mortgage operations. This loss was
partially offset by increased profitability in the mortgage operations
primarily due to higher profits per loan resulting from an increase in FHA
loans. There were $9.3 million in write-offs of land seller notes receivable
in third quarter of 2007, compared to no write-offs of land seller notes
receivable in the third quarter of 2008.
Corporate General and Administrative Expenses
Corporate general and administrative expenses were reduced by $10.7
million, or 24%, in the third quarter of 2008, compared to the same period
last year. As a percentage of total revenues, corporate general and
administrative expenses increased to 3.1% in the third quarter of 2008, from
1.9% in 2007, due to lower revenues.
NINE MONTHS ENDED AUGUST 31, 2008 COMPARED TO
NINE MONTHS ENDED AUGUST 31, 2007
Homebuilding
Revenues from home sales decreased 60% in the nine months ended August 31,
2008 to $3.0 billion from $7.5 billion in 2007. Revenues were lower primarily
due to a 56% 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 10,860 homes in the nine
months ended August 31, 2008 from 24,772 homes last year. In the nine months
ended August 31, 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 $274,000 in the nine months ended
August 31, 2008 from $299,000 in 2007, due to reduced pricing. Sales
incentives offered to homebuyers were $47,500 per home delivered in the nine
months ended August 31, 2008, compared to $45,000 per home delivered in the
same period last year.
Gross margins on home sales excluding SFAS 144 valuation adjustments were
$504.3 million, or 17.0%, in the nine months ended August 31, 2008, compared
to $1.1 billion, or 14.4%, in the third quarter of 2007. Gross margin
percentage on home sales, excluding SFAS 144 valuation adjustments, improved
compared to last year primarily due to the Company's lower inventory basis and
continued focus on repositioning its product and reducing construction costs.
The largest gross margin percentage improvement was experienced in the
Company's Homebuilding East segment. Gross margins on home sales were $372.2
million, or 12.5%, in the nine months ended August 31, 2008, which included
$132.1 million of SFAS 144 valuation adjustments, compared to gross margins on
home sales of $555.1 million, or 7.4%, in the nine months ended August 31,
2007, which included $523.0 million of SFAS 144 valuation adjustments.
Selling, general and administrative expenses were reduced by $581.3
million, or 54%, in the nine months ended August 31, 2008, compared to the
same period last year, primarily due to reductions in associate headcount,
variable selling expense and fixed costs. As a percentage of revenues from
home sales, selling, general and administrative expenses increased to 16.5% in
the nine months ended August 31, 2008, from 14.3% in 2007, which was due to
lower revenues.
Losses on land sales totaled $60.7 million in the nine months ended August
31, 2008, which included $39.0 million of SFAS 144 valuation adjustments and
$34.3 million of write-offs of deposits and pre-acquisition costs related to
approximately 5,500 homesites under option that the Company does not intend to
purchase. In the nine months ended August 31, 2007, losses on land sales
totaled $480.0 million, which included $197.2 million of SFAS 144 valuation
adjustments and $312.4 million of write-offs of deposits and pre-acquisition
costs related to approximately 24,400 homesites that were under option.
Equity in loss from unconsolidated entities was $52.9 million in the nine
months ended August 31, 2008, which included $29.9 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 $168.1 million in the nine months ended August 31, 2007, which
included $172.7 million of SFAS 144 valuation adjustments related to assets of
unconsolidated entities in which the Company has investments.
Management fees and other expense, net totaled $121.9 million in the nine
months ended August 31, 2008, which included $116.5 million of APB 18
valuation adjustments to the Company's investments in unconsolidated entities
and $5.6 million of write-offs of notes receivable, compared to management
fees and other expense, net of $9.5 million in the nine months ended August
31, 2007, which included $46.4 million of APB 18 valuation adjustments to the
Company's investments in unconsolidated entities and $16.5 million of goodwill
write-offs, partially offset by the recognition of $24.7 million of profit
deferred at the time of the recapitalization of the LandSource joint venture.
Minority interest income (expense), net was $9.0 million in the nine
months ended August 31, 2008, which included $7.9 million of minority interest
income as a result of a $15.9 million SFAS 144 valuation adjustment to
inventory of a 50%-owned consolidated joint venture, compared to minority
interest income (expense), net of ($3.2) million in the nine months ended
August 31, 2007.
Sales of land, equity in loss from unconsolidated entities, management
fees and other expense, net and minority interest income (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 $25.6 million in the
nine months ended August 31, 2008, compared to operating earnings of $24.8
million in the same period last year. The decline in profitability was
primarily due to a goodwill write-off of $27.2 million related to the
segment's mortgage operations and lower transactions in the segment's title
and mortgage operations, compared to last year as a result of the overall
weakness in the housing market. There were $27.9 million in write-offs of land
seller notes receivables during the nine months ended August 31, 2007,
compared to no write-offs of land seller notes receivables during the nine
months ended August 31, 2008.
Corporate General and Administrative Expenses
Corporate general and administrative expenses were reduced by $39.0
million, or 28%, for the nine months ended August 31, 2008, compared to 2007.
As a percentage of total revenues, corporate general and administrative
expenses increased to 3.0% in the nine months ended August 31, 2008, from 1.7%
in the same period last year, 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, cash
flows, 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 third quarter earnings will be
held at 11:00 a.m. Eastern time on Tuesday, September 23, 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
402-998-1175 and entering 5932669 as the confirmation number.
LENNAR CORPORATION AND SUBSIDIARIES
Selected Revenues and Operational Information
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
August 31, August 31,
2008 2007 2008 2007
Revenues:
Homebuilding $1,016,156 2,229,188 3,056,476 7,634,168
Financial services 90,384112,665240,893 375,708
Total revenues $1,106,540 2,341,853 3,297,369 8,009,876
Homebuilding operating loss $ (92,194) (787,698) (342,558) (999,388)
Financial services operating
earnings (loss)(12,861)(5,245) (25,567) 24,834
Corporate general and
administrative expenses(34,047) (44,700) (98,453) (137,436)
Loss before benefit for
income taxes (139,102) (837,643) (466,578) (1,111,990)
Benefit for income taxes 50,138323,791168,482 422,556
Net loss $ (88,964) (513,852) (298,096) (689,434)
Basic and diluted average
shares outstanding 158,499157,973158,350 157,600
Basic and diluted loss per
share $(0.56) (3.25) (1.88) (4.37)
Supplemental information:
Interest incurred (1) $ 36,049 45,191110,717 157,460
EBIT before valuation
adjustments and write-offs
of option deposits and
pre-acquisition costs,
goodwill and notes
receivable (2):
Loss before benefit for
income taxes $ (139,102) (837,643) (466,578) (1,111,990)
Interest expense 27,632 40,299 97,986 155,659
Valuation adjustments and
write-offs of option
deposits and
pre-acquisition costs,
goodwill and notes
receivable 132,280856,758376,611 1,296,101
EBIT before valuation
adjustments and write-
offs of option deposits
and pre-acquisition
costs, goodwill and
notes receivable$ 20,810 59,414 8,019 339,770
(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, goodwill and 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, goodwill and notes receivable reflected in loss before 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 EndedNine Months Ended
August 31,August 31,
2008 2007 2008 2007
Revenues:
Sales of homes $ 995,731 2,169,443 2,967,651 7,479,322
Sales of land 20,425 59,745 88,825154,846
Total revenues 1,016,156 2,229,188 3,056,476 7,634,168
Costs and expenses:
Cost of homes sold 848,609 2,168,446 2,595,468 6,924,224
Cost of land sold 49,273404,444149,526634,808
Selling, general and
administrative156,298304,254488,288 1,069,575
Total costs and expenses 1,054,180 2,877,144 3,233,282 8,628,607
Gain on recapitalization of
unconsolidated entity - - - 175,879
Equity in loss from
unconsolidated entities (10,958) (127,409) (52,857) (168,137)
Management fees and other
expense, net(52,228) (10,511) (121,895)(9,501)
Minority interest income
(expense), net9,016 (1,822) 9,000 (3,190)
Operating loss$ (92,194) (787,698) (342,558) (999,388)
LENNAR CORPORATION AND SUBSIDIARIES
Valuation Adjustments and Write-offs
(In thousands)
(unaudited)
Three Months Ended Nine Months Ended
August 31, August 31,
2008 2007 2008 2007
SFAS 144 valuation adjustments to
finished homes, CIP and land on
which the Company intends to
build homes:
East $ 8,685 92,542 50,967211,950
Central 2,740 35,645 21,901 63,112
West18,900 149,893 48,960216,071
Other1,959 25,056 10,305 31,899
Total 32,284 303,136 132,133523,032
SFAS 144 valuation adjustments to
land the Company intends to sell
or has sold to third parties:
East (1)11,333 32,228 13,840 72,306
Central 1,201 16,334 10,879 19,044
West 622 41,2425,437 64,041
Other 292 24,755 893 41,827
Total 13,448 114,559 31,049197,218
Write-offs of option deposits and
pre-acquisition costs:
East 832 44,553 11,010 74,331
Central 1,706 38,2056,581 49,413
West 5,866 139,719 10,073164,459
Other2,458 20,0376,636 24,182
Total 10,862 242,514 34,300312,385
Company's share of SFAS 144
valuation adjustments related
to assets of unconsolidated
entities:
East -3,1787,241 7,011
Central -9,445 158 10,588
West 2,919 126,062 21,870155,113
Other-- 597 -
Total 2,919 138,685 29,866172,712
APB 18 valuation adjustments to
investments in unconsolidated
entities:
East10,076 19,850 20,171 26,719
Central -5,752 421 5,752
West16,6472,990 82,593 10,396
Other 13,2723,505 13,306 3,505
Total 39,995 32,097 116,491 46,372
Write-offs of notes receivable:
West 1,000-1,000 -
Other4,596-4,596 -
Total 5,596-5,596 -
Goodwill impairments:
Central -2,828- 2,828
Other- 13,669- 13,669
Total - 16,497- 16,497
Financial services write-offs of
notes receivable -9,270- 27,885
Financial services goodwill
impairment 27,176- 27,176 -
Total valuation adjustments
and write-offs of option
deposits and pre-acquisitions
costs, goodwill and notes
receivable $ 132,280 856,758 376,611 1,296,101
(1) For the three and nine months ended August 31, 2008, SFAS 144
valuation adjustments to land the Company intends to sell or has sold
to third parties has been reduced by $7.9 million of minority interest
income recorded as a result of a $15.9 million SFAS 144 valuation
adjustment to inventory of a 50% - owned consolidated joint venture.
LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog
(Dollars in thousands)
(unaudited)
At or for the
Three Months Ended Nine Months Ended
August 31, August 31,
2008 20072008 2007
Deliveries:
East1,197 2,089 3,440 7,753
Central 1,319 2,739 3,782 9,137
West 885 2,043 2,874 6,884
Other 390765 1,121 2,465
Total 3,791 7,636 11,217 26,239
Of the total deliveries listed above, 97 and 357, respectively, represent
deliveries from unconsolidated entities for the three and nine months
ended August 31, 2008, compared to 370 and 1,467 deliveries in the same
periods last year.
New Orders:
East 944 1,552 3,190 6,295
Central 1,241 2,064 3,778 7,073
West 870 1,591 2,762 5,347
Other 332597 1,098 2,277
Total 3,387 5,804 10,828 20,992
Of the total new orders listed above, 50 and 212, respectively, represent
new orders from unconsolidated entities for the three and nine months
ended August 31, 2008, compared to 232 and 968 new orders in the same
periods last year.
Backlog - Homes:
East 1,541 2,687
Central 870 1,534
West 770 1,454
Other373692
Total3,554 6,367
Of the total homes in backlog listed above, 132 represents homes in
backlog from unconsolidated entities at August 31, 2008, compared to 550
homes in backlog at August 31, 2007.
Backlog - Dollar Value:
East $ 416,889922,909
Central 187,789340,236
West 306,975686,393
Other136,031276,510
Total $1,047,684 2,226,048
Of the total dollar value of homes in backlog listed above, $66,768
represents the backlog dollar value from unconsolidated entities at August
31, 2008, compared to $268,698 of backlog dollar value at August 31, 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)
August 31,
2008 2007
Homebuilding debt $2,338,6972,571,291
Stockholders' equity 3,431,8985,097,259
Total capital $5,770,5957,668,550
Homebuilding debt to total capital 40.5%33.5%
Homebuilding debt $2,338,6972,571,291
Less: Homebuilding cash 857,050 128,049
Net homebuilding debt $1,481,6472,443,242
Net homebuilding debt to total capital (1) 30.2%32.4%
(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
