2006 Fourth Quarter * Revenues of $4.3 billion -- down 15% * Loss per share
of $1.24 -- includes write-offs of option deposits and pre-acquisition
costs of $111.1 million and valuation adjustments of $382.8 million *
Homebuilding operating loss of $319.4 million -- includes write-offs and
valuation adjustments noted above * Financial Services operating earnings
of $42.9 million -- up $8.3 million * Homebuilding debt to total capital of
31.4% and cash of $662 million * New orders of 9,606 homes -- down 6%
2006 Fiscal Year * Revenues of $16.3 billion -- up 17% * EPS of $3.69 --
includes write-offs of option deposits and pre- acquisition costs of $152.2
million and valuation adjustments of $476.0 million * Homebuilding
operating earnings of $986.2 million -- includes write-offs and valuation
adjustments noted above * Financial Services operating earnings of $149.8
million -- up $45.0 million * Deliveries of 49,568 homes -- up 17% * New
orders of 42,212 homes -- down 3% * Backlog dollar value of $4.0 billion --
down 42%
MIAMI, Jan. 17 /PRNewswire-FirstCall/ -- Lennar Corporation (NYSE: LEN
and LEN.B), one of the nation's largest homebuilders, today reported
results for its fourth quarter and fiscal year ended November 30, 2006.
Fourth quarter net loss in 2006 was $195.6 million, or $1.24 per diluted
share, compared to net earnings of $581.2 million, or $3.54 per diluted
share, in 2005.
Stuart Miller, President and Chief Executive Officer of Lennar
Corporation, said, "As we noted in our pre-earnings release, market
conditions have remained depressed through the end of our fourth quarter.
In this environment, we have continued to focus on strengthening our
balance sheet. We have continued to build-out our inventory, deliver our
backlog and convert inventory into cash. With a balance sheet-first focus,
we have priced our homes to market conditions and maintained an "inventory
neutral" position. Accordingly, our land inventory and homes under
construction have declined throughout the second half of 2006."
Mr. Miller continued, "As we look ahead to 2007, the strength of our
balance sheet, together with our renegotiated land positions that reflect
current market conditions, provide the springboard from which we will
rebuild our margins. To that end, we have identified four focal points that
will drive our margin improvement in 2007: right-sizing S,G&A expenses to
match both current volume and efficiencies, reducing construction costs,
redesigning product to meet today's market demand and building on land at
current market prices. We will also continue to carefully match our starts
to demand, and as a result, we estimate deliveries will decline in excess
of 20% in 2007, compared to 2006."
Mr. Miller concluded, "Uncertain market conditions make it difficult to
provide a 2007 earnings goal. While we know that the margin in our backlog
will result in lower profitability in the first half of 2007, we believe
that if the current environment of strong employment, low interest rates
and a healthy economy continues, and the market for new homes demonstrates
traditional, seasonal improvement, we will meet or exceed our 2006 earnings
of $3.69 per share."
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 2006 COMPARED TO
THREE MONTHS ENDED NOVEMBER 30, 2005
Homebuilding
Revenues from home sales decreased 14% in the fourth quarter of 2006 to
$4.0 billion from $4.7 billion in 2005. Revenues were lower primarily due
to a 4% decrease in the number of home deliveries and an 11% decrease in
the average sales price of homes delivered in 2006. New home deliveries,
excluding unconsolidated entities, decreased to 13,285 homes in the fourth
quarter of 2006 from 13,851 homes last year. In the fourth quarter of 2006,
new home deliveries were lower primarily due to a decrease in the Company's
Homebuilding West segment and Homebuilding Other, partially offset by an
increase in the Company's Homebuilding East segment, compared to 2005. The
average sales price of homes delivered decreased to $302,000 in the fourth
quarter of 2006 from $338,000 in 2005, primarily due to higher sales
incentives offered to homebuyers ($47,300 per home delivered in the fourth
quarter of 2006, compared to $10,600 per home delivered last year).
Gross margins on home sales excluding inventory valuation adjustments
were $576.6 million, or 14.4%, in the fourth quarter of 2006, compared to
$1.3 billion, or 27.0%, in the same quarter of 2005. Gross margin
percentage on home sales decreased compared to last year in all of the
Company's homebuilding segments and Homebuilding Other primarily due to
higher sales incentives offered to homebuyers. Gross margins on home sales
including inventory valuation adjustments were $336.8 million, or 8.4%, in
the fourth quarter of 2006 due to $239.8 million of inventory valuation
adjustments ($138.9 million, $25.6 million, $59.7 million and $15.6
million, respectively, in the Company's Homebuilding East, Central and West
segments and Homebuilding Other).
Selling, general and administrative expenses as a percentage of
revenues from home sales increased to 12.1% in the fourth quarter of 2006,
from 9.8% in 2005. The 230 basis point increase was primarily due to lower
revenues and increases in broker commissions and advertising expenses,
partially offset by lower incentive compensation expenses. Management fees
of $11.8 million received during the fourth quarter of 2005 from
unconsolidated entities in which the Company has investments, which were
previously recorded as a reduction of selling, general and administrative
expenses, have been reclassified to management fees and other income, net
in order to conform to the 2006 presentation.
Loss on land sales totaled $119.9 million in the fourth quarter of
2006, net of $111.1 million of write-offs of deposits and pre-acquisition
costs ($73.4 million, $0.1 million, $27.2 million and $10.4 million,
respectively, in the Company's Homebuilding East, Central and West segments
and Homebuilding Other) related to 9,395 homesites under option that the
Company does not intend to purchase and $33.3 million of inventory
valuation adjustments ($16.6 million, $4.0 million and $12.7 million,
respectively, in the Company's Homebuilding East and Central segments and
Homebuilding Other), compared to gross profit of $58.2 million in 2005.
Equity in earnings (loss) from unconsolidated entities was ($59.6) million
in the fourth quarter of 2006, which included $109.7 million of valuation
adjustments ($24.6 million, $78.4 million and $6.7 million, respectively,
in the Company's Homebuilding East and West segments and Homebuilding
Other) to the Company's investments in unconsolidated entities, compared to
$79.1 million last year. Management fees and other income, net, totaled
$9.0 million in the fourth quarter of 2006, compared to $37.2 million in
the fourth quarter of 2005. Minority interest expense, net was $1.4 million
and $11.2 million, respectively, in the fourth quarter of 2006 and 2005.
Sales of land, equity in earnings (loss) from unconsolidated entities,
management fees and other income, 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 earnings for the Financial Services segment were $42.9
million in the fourth quarter of 2006, compared to $34.6 million last year.
The increase was primarily due to improved results from the segment's
mortgage operations as a result of an increased capture rate and a higher
percentage of fixed-rate loans.
Corporate General and Administrative Expenses
Corporate general and administrative expenses as a percentage of total
revenues were 0.8% in the fourth quarter of 2006, compared to 1.3% in the
same period last year. The 50 basis point decrease was primarily due to
lower incentive compensation expenses.
YEAR ENDED NOVEMBER 30, 2006 COMPARED TO
YEAR ENDED NOVEMBER 30, 2005
Homebuilding
Revenues from home sales increased 17% in the year ended November 30,
2006 to $14.9 billion from $12.7 billion in 2005. Revenues were higher
primarily due to a 15% increase in the number of home deliveries in 2006.
New home deliveries, excluding unconsolidated entities, increased to 47,032
homes in the year ended November 30, 2006 from 40,882 homes last year. In
the year ended November 30, 2006, new home deliveries were higher in each
of the Company's homebuilding segments and Homebuilding Other, compared to
2005. The average sales price of homes delivered increased to $315,000 in
the year ended November 30, 2006 from $311,000 in 2005 despite higher sales
incentives offered to homebuyers ($32,000 per home delivered in 2006,
compared to $9,000 per home delivered in 2005).
Gross margins on home sales excluding inventory valuation adjustments
were $3.0 billion, or 20.3%, in the year ended November 30, 2006, compared
to $3.3 billion, or 26.0%, in 2005. Gross margin percentage on home sales
decreased compared to last year in all of the Company's homebuilding
segments and Homebuilding Other primarily due to higher sales incentives
offered to homebuyers. Gross margins on home sales including inventory
valuation adjustments were $2.7 billion, or 18.4%, in the year ended
November 30, 2006 due to $280.5 million of inventory valuation adjustments
($157.0 million, $27.1 million, $79.0 million and $17.4 million,
respectively, in the Company's Homebuilding East, Central and West segments
and Homebuilding Other).
Selling, general and administrative expenses as a percentage of
revenues from home sales were 11.9% and 11.1%, respectively, for the years
ended November 30, 2006 and 2005. The 80 basis point increase was primarily
due to increases in broker commissions and advertising expenses, partially
offset by lower incentive compensation expenses. Management fees of $37.4
million received during the year ended November 30, 2005 from
unconsolidated entities in which the Company has investments, which were
previously recorded as a reduction of selling, general and administrative
expenses, have been reclassified to management fees and other income, net
in order to conform to the 2006 presentation.
Loss on land sales totaled $30.0 million in the year ended November 30,
2006, net of $152.2 million of write-offs of deposits and pre-acquisition
costs ($80.5 million, $2.9 million, $44.0 million and $24.8 million,
respectively, in the Company's Homebuilding East, Central and West segments
and Homebuilding Other) related to 24,235 homesites under option that the
Company does not intend to purchase and $69.1 million of inventory
valuation adjustments ($24.7 million, $17.3 million and $27.1 million,
respectively, in the Company's Homebuilding East and Central segments and
Homebuilding Other), compared to gross profit of $200.8 million in 2005.
Equity in earnings (loss) from unconsolidated entities was ($12.5) million
in the year ended November 30, 2006, which included $126.4 million of
valuation adjustments ($25.5 million, $92.8 million and $8.1 million,
respectively, in the Company's Homebuilding East and West segments and
Homebuilding Other) to the Company's investments in unconsolidated
entities, compared to $133.8 million last year. Management fees and other
income, net, totaled $66.6 million in the year ended November 30, 2006,
compared to $99.0 million in 2005. Minority interest expense, net was $13.4
million and $45.0 million, respectively, in the years ended November 30,
2006 and 2005. Sales of land, equity in earnings (loss) from unconsolidated
entities, management fees and other income, 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 earnings from continuing operations for the Financial
Services segment were $149.8 million in the year ended November 30, 2006,
compared to $104.8 million last year. The increase was primarily due to a
$17.7 million pretax gain generated from monetizing the segment's personal
lines insurance policies, as well as increased profitability from the
segment's mortgage operations as a result of increased volume and profit
per loan.
Corporate General and Administrative Expenses
Corporate general and administrative expenses as a percentage of total
revenues were 1.2% in the year ended November 30, 2006, compared to 1.4% in
the same period last year.
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 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, http://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 Relating to Our
Business" in Item 1A of our Annual Report on Form 10-K/A for our fiscal
year ended November 30, 2005. We do not undertake any obligation to update
forward-looking statements.
A conference call to discuss the Company's fourth quarter earnings will
be held at 11:00 a.m. Eastern time on Wednesday, January 17, 2007. The call
will be broadcast live on the Internet and can be accessed through the
Company's website at http://www.lennar.com. If you are unable to participate in
the conference call, the call will be archived at http://www.lennar.com for 90
days. A replay of the conference call will also be available later that day
by calling 320-365- 3844 and entering 857485 as the confirmation number.
LENNAR CORPORATION AND SUBSIDIARIES
Selected Revenues and Earnings Information
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Years Ended
November 30, November 30,
2006 2005 2006 2005
Revenues:
Homebuilding $4,102,229 4,867,338 15,623,040 13,304,599
Financial services 163,836 162,596 643,622 562,372
Total revenues $4,266,065 5,029,934 16,266,662 13,866,971
Homebuilding operating
earnings (loss) $ (319,354) 962,534 986,153 2,277,091
Financial services
operating earnings 42,893 34,580 149,803 104,768
Corporate general and
administrative expenses 34,023 63,526 193,307 187,257
Loss on redemption of 9.95%
senior notes - - - 34,908
Earnings (loss) from
continuing operations
before provision(benefit)
for income taxes (310,484) 933,588 942,649 2,159,694
Provision (benefit) for
income taxes (114,879) 352,429 348,780 815,284
Earnings (loss) from
continuing operations (195,605) 581,159 593,869 1,344,410
Discontinued operations:
Earnings from discontinued
operations before
provision for income taxes - - - 17,261
Provision for income taxes - - - 6,516
Earnings from discontinued
operations - - - 10,745
Net earnings (loss) $ (195,605) 581,159 593,869 1,355,155
Average shares outstanding:
Basic 157,130 157,108 158,040 155,398
Diluted 157,130 164,604 161,371 165,522
Earnings per share:
Basic:
Earnings (loss) from
continuing operations $ (1.24) 3.70 3.76 8.65
Earnings from
discontinued operations - - - 0.07
Net earnings (loss) $ (1.24) 3.70 3.76 8.72
Diluted:
Earnings (loss) from
continuing operations $ (1.24) 3.54 3.69 8.17
Earnings from
discontinued operations - - - 0.06
Net earnings (loss) $ (1.24) 3.54 3.69 8.23
Supplemental information:
Interest incurred (1) $ 64,204 50,027 247,477 172,898
EBIT (2):
Earnings (loss) from
continuing operations
before provision
(benefit) for
income taxes $ (310,484) 933,588 942,649 2,159,694
Earnings from
discontinued operations
before provision
for income taxes - - - 17,261
Interest 63,106 65,360 241,066 187,154
EBIT $ (247,378) 998,948 1,183,715 2,364,109
(1) Homebuilding interest incurred is capitalized to inventories and
relieved as cost of sales when homes are delivered or land is sold.
(2) EBIT is a non-GAAP financial measure derived by adding back previously
capitalized interest amortized to cost of sales that was reflected in
earnings (loss) before provision (benefit) for income taxes. The
Company's management uses EBIT because it believes this financial
measure helps to compare the Company's operations with those of its
competitors, by eliminating factors that differ from company to
company for reasons that often are not related to the efficiency and
effectiveness of a particular company's operations. The Company
believes EBIT provides useful information to investors and analysts,
because it will help them compare the efficiency and effectiveness of
the Company's operations with those of its competitors.
LENNAR CORPORATION AND SUBSIDIARIES
Homebuilding Information
(In thousands)
(unaudited)
Three Months Ended Years Ended
November 30, November 30,
2006 2005 (1) 2006 2005 (1)
Revenues:
Sales of homes $4,008,366 4,658,684 14,854,874 12,711,789
Sales of land 93,863 208,654 768,166 592,810
Total revenues 4,102,229 4,867,338 15,623,040 13,304,599
Costs and expenses:
Cost of homes sold 3,671,554 3,402,211 12,114,433 9,410,343
Cost of land sold 213,740 150,442 798,165 391,984
Selling, general and
administrative 484,291 457,305 1,764,967 1,412,917
Total costs and expenses 4,369,585 4,009,958 14,677,565 11,215,244
Equity in earnings (loss)
from unconsolidated entities (59,615) 79,135 (12,536) 133,814
Management fees and other
income, net 8,977 37,195 66,629 98,952
Minority interest expense,
net 1,360 11,176 13,415 45,030
Operating earnings (loss) $ (319,354) 962,534 986,153 2,277,091
(1) Certain prior year amounts have been reclassified to conform to the
2006 presentation.
LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog
(Dollars in thousands)
(unaudited)
At or for the
Three Months Ended Years Ended
November 30, November 30,
2006 2005 2006 2005
Deliveries:
East 4,776 3,944 14,859 11,220
Central 4,630 4,691 17,069 15,448
West 3,410 4,295 13,333 11,731
Other 1,190 1,473 4,307 3,960
Total 14,006 14,403 49,568 42,359
Of the total deliveries listed above, 721 and 2,536, respectively,
represent deliveries from unconsolidated entities for the three months and
year ended November 30, 2006, compared to 552 and 1,477 deliveries in the same
periods last year.
New Orders:
East 2,675 2,456 11,290 11,096
Central 3,701 4,143 16,120 15,926
West 2,358 2,512 11,119 12,179
Other 872 1,125 3,683 4,204
Total 9,606 10,236 42,212 43,405
Of the total new orders listed above, 488 and 1,921, respectively,
represent new orders from unconsolidated entities for the three months and
year ended November 30, 2006, compared to 283 and 1,254 new orders in the same
periods last year.
Backlog - Homes:
East 4,139 7,581
Central 3,598 4,547
West 2,991 4,883
Other 880 1,554
Total 11,608 18,565
Of the total homes in backlog listed above, 1,089 represents homes in
backlog from unconsolidated entities at November 30, 2006, compared to
1,359 homes in backlog at November 30, 2005.
Backlog - Dollar Value:
East $1,460,213 2,774,396
Central 850,472 1,210,257
West 1,328,617 2,374,646
Other 341,126 524,939
Total $3,980,428 6,884,238
Of the total dollar value of homes in backlog listed above, $478,707
represents the backlog dollar value from unconsolidated entities at
November 30, 2006, compared to $590,129 of backlog dollar value at November
30, 2005.
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)
November 30,
2006 2005
Homebuilding debt $2,613,503 2,592,772
Stockholders' equity 5,701,372 5,251,411
Total capital $8,314,875 7,844,183
Homebuilding debt to total capital 31.4% 33.1%
SOURCE Lennar Corporation
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