- Revenues of $2.8 billion
- down 14%
- EPS of $0.43 - includes a $175.9 million pretax gain on the LandSource
transaction and a $91.6 million pretax charge related to FAS 144 valuation
adjustments and write-offs of option deposits and pre- acquisition costs
- Homebuilding operating earnings of $140.0 million - down 69%
- Financial Services operating earnings of $15.9 million - up $5.2 million
- Homebuilding debt to total capital improved to 30.9% from 36.0% (net
homebuilding debt to total capital of 28.6%)
- New orders of 7,132 homes - down 27%; cancellation rate of 29%
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 28, 2007. First quarter net
earnings in 2007 were $68.6 million, or $0.43 per diluted share, compared
to first quarter net earnings of $258.1 million, or $1.58 per diluted
share, in 2006.
Stuart Miller, President and Chief Executive Officer of Lennar
Corporation, said, "The housing market continues to demonstrate overall
weakness. While some markets are performing better than others, the
typically stronger spring selling season has not yet materialized. These
soft market conditions have been exacerbated by the well-publicized
problems in the subprime lending market."
Mr. Miller continued, "As weak market conditions have persisted, we
have continued to focus on our 'balance sheet first' strategy. Since early
2006, we have focused on fortifying our balance sheet by carefully managing
inventory levels (converting both land and home inventory to cash) and
significantly reducing land purchases and starts. Concurrently, we have
adjusted our land assets where appropriate while we have written-off option
deposits and pre-acquisition costs on land we no longer desire to close."
"Additionally, we completed the LandSource transaction this quarter,
further strengthening our balance sheet with the receipt of approximately
$700 million of cash during the quarter. The strong sponsorship of
LandSource, coupled with the land availability primarily created by
builders walking away from option deposits, positions us for new
opportunities to purchase favorably-priced, larger land parcels within
LandSource."
"While we are primarily focused on fortifying our balance sheet, we are
concurrently focused on rebuilding our profit margins. Given current market
conditions, we are continuing to pursue cost reductions, SG&A savings,
product redesign and proper land pricing in order to see margin improvement
starting in the second half of 2007. Until we see prices stabilize,
however, we will not be able to project the timing or the scope of margin
recovery, or set earnings goals for the company."
"We are very pleased that we ended our first quarter with our net
homebuilding debt to total capital at 28.6%. Our strong balance sheet will
position us well for success as market conditions recover. In the interim,
we will continue to manage our business with day-by-day focus on
maintaining a very low inventory balance and a consistent pressure on
reducing costs as we rebuild our margins."
Mr. Miller concluded, "Given the state of the market, we do not expect
to achieve our previously stated 2007 earnings goal, and we are not
comfortable providing a new earnings goal at this time. Our company remains
focused on managing through this downturn with a balance sheet first
strategy, maintaining ample liquidity to position us well for future
opportunities."
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 2007 COMPARED TO
THREE MONTHS ENDED FEBRUARY 28, 2006
Homebuilding
Revenues from home sales decreased 10% in the first quarter of 2007 to
$2.6 billion from $2.9 billion in 2006. Revenues were lower primarily due
to a 4% decrease in the number of home deliveries and a 7% decrease in the
average sales price of homes delivered in 2007. New home deliveries,
excluding unconsolidated entities, decreased to 8,566 homes in the first
quarter of 2007 from 8,904 homes last year. In the first quarter of 2007,
new home deliveries were lower primarily due to a decrease in the Company's
Homebuilding Central and West segments, compared to 2006. The average sales
price of homes delivered decreased to $303,000 in the first quarter of 2007
from $326,000 in the same period last year, primarily due to higher sales
incentives offered to homebuyers ($45,500 per home delivered in the first
quarter of 2007, compared to $13,800 per home delivered in the same period
last year).
Gross margins on home sales excluding FAS 144 valuation adjustments
were $409.2 million, or 15.6%, in the first quarter of 2007, compared to
$727.9 million, or 24.9%, in 2006. 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 FAS 144
valuation adjustments were $360.9 million, or 13.8%, in the first quarter
of 2007 due to $48.3 million of FAS 144 valuation adjustments ($19.1
million, $11.3 million, $17.1 million and $0.8 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 14.1% in the first quarter of 2007,
from 13.0% in 2006. The 110 basis point increase was primarily due to lower
revenues and an increase in broker commissions, partially offset by lower
personnel-related expenses.
Loss on land sales totaled $26.5 million in the first quarter of 2007,
net of $21.0 million of write-offs of deposits and pre-acquisition costs
($13.8 million, $1.3 million, $3.1 million and $2.8 million, respectively,
in the Company's Homebuilding East, Central and West segments and
Homebuilding Other) related to approximately 4,000 homesites under option
that the Company does not intend to purchase and $13.2 million of FAS 144
valuation adjustments ($9.5 million, $3.5 million and $0.2 million,
respectively, in the Company's Homebuilding East and West segments and
Homebuilding Other), compared to gross profit from land sales of $49.1
million last year.
In February 2007, the Company's LandSource joint venture admitted MW
Housing Partners as a new strategic partner. The transaction resulted in a
cash distribution to the Company of approximately $700 million. The
Company's resulting ownership of LandSource is 16%. The Company will retain
a promote opportunity allowing it to have a disproportionate share of the
entity's future positive net cash flow. As a result of the
recapitalization, the Company recognized a pretax gain of $175.9 million in
the first quarter of 2007 and could potentially recognize an additional
$400 million in future years, in addition to profits from its continuing
ownership interest.
Equity in earnings (loss) from unconsolidated entities was ($14.2)
million in the first quarter of 2007, which included $6.5 million of FAS
144 valuation adjustments ($3.8 million and $2.7 million, respectively, in
the Company's Homebuilding East and West segments) to the Company's
investments in unconsolidated entities, compared to equity in earnings from
unconsolidated entities of $38.2 million last year. Management fees and
other income, net, totaled $13.8 million in the first quarter of 2007
(including $2.6 million of FAS 144 valuation adjustments), compared to
$19.4 million in the first quarter of 2006. Minority interest expense, net
was $0.5 million and $4.4 million, respectively, in the first quarter of
2007 and 2006. 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 $15.9
million in the first quarter of 2007, compared to $10.6 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 1.7% and 1.6%, respectively, in the first quarter of 2007 and
2006.
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, 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" in Item 1A of our
Annual Report on Form 10-K for our fiscal year ended November 30, 2006. We
do not undertake any obligation to update forward-looking statements.
A conference call to discuss the Company's first quarter earnings will
be held at 11:00 a.m. Eastern time on Tuesday, March 27, 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 867353 as the confirmation number.
LENNAR CORPORATION AND SUBSIDIARIES
Selected Revenues and Earnings Information
(In thousands, except per share amounts)
(unaudited)
Three Months Ended
February 28,
2007 2006
Revenues:
Homebuilding $ 2,663,170 3,108,718
Financial services 128,910 131,941
Total revenues $ 2,792,080 3,240,659
Homebuilding operating earnings $ 139,975 450,872
Financial services operating earnings 15,869 10,625
Corporate general and administrative
expenses 46,919 51,891
Earnings before provision for income
taxes 108,925 409,606
Provision for income taxes 40,302 151,554
Net earnings $ 68,623 258,052
Average shares outstanding:
Basic 157,130 157,826
Diluted 158,866 164,554
Earnings per share:
Basic $ 0.44 1.64
Diluted $ 0.43 1.58
Supplemental information:
Interest incurred (1) $ 60,608 53,484
EBIT before FAS 144 valuation
adjustments and write-offs of
option deposits and
pre-acquisition costs (2):
Earnings before provision for
income taxes $ 108,925 409,606
Interest expense 47,362 44,870
FAS 144 valuation adjustments and
write-offs of option deposits and
pre-acquisition costs 91,632 10,810
EBIT before FAS 144 valuation
adjustments and write-offs of option
deposits and pre-acquisition costs $ 247,919 465,286
(1) Homebuilding interest incurred is primarily interest capitalized to
inventories and relieved as cost of sales when homes are delivered or
land is sold.
(2) EBIT before FAS 144 valuation adjustments and write-offs of option
deposits and pre-acquisition costs is a non-GAAP financial measure
derived by adding back interest expense, FAS 144 valuation adjustments
and write-offs of option deposits and pre-acquisition costs reflected
in earnings before provision for income taxes. This financial measure
is used in the Company's revolving credit facility's covenant
calculation.
LENNAR CORPORATION AND SUBSIDIARIES
Homebuilding Information
(In thousands)
(unaudited)
Three Months Ended
February 28,
2007 2006
Revenues:
Sales of homes $ 2,622,491 2,920,695
Sales of land 40,679 188,023
Total revenues 2,663,170 3,108,718
Costs and expenses:
Cost of homes sold 2,261,595 2,192,772
Cost of land sold 67,145 138,919
Selling, general and
administrative 369,426 379,365
Total costs and expenses 2,698,166 2,711,056
Gain on recapitalization of
unconsolidated entity 175,879 -
Equity in earnings (loss) from
unconsolidated entities (14,205) 38,190
Management fees and other income, net 13,841 19,433
Minority interest expense, net 544 4,413
Operating earnings $ 139,975 450,872
LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog
(Dollars in thousands)
(unaudited)
At or for the
Three Months Ended
February 28,
2007 2006
Deliveries:
East 2,599 2,572
Central 3,131 3,408
West 2,406 2,560
Other 899 759
Total 9,035 9,299
Of the total deliveries listed above, 469 represents deliveries from
unconsolidated entities for the three months ended February 28, 2007,
compared to 395 deliveries last year.
New Orders:
East 2,075 3,083
Central 2,373 3,619
West 1,865 2,317
Other 819 774
Total 7,132 9,793
Of the total new orders listed above, 354 represents new orders from
unconsolidated entities for the three months ended February 28, 2007,
compared to 282 new orders last year.
Backlog - Homes:
East 3,615 8,219
Central 2,840 4,758
West 2,450 4,962
Other 800 1,519
Total 9,705 19,458
Of the total homes in backlog listed above, 974 represents homes in
backlog from unconsolidated entities at February 28, 2007, compared to
1,505 homes in backlog at February 28, 2006.
Backlog - Dollar Value:
East $ 1,277,842 2,966,860
Central 673,062 1,224,905
West 1,168,050 2,347,924
Other 330,801 532,009
Total $ 3,449,755 7,071,698
Of the total dollar value of homes in backlog listed above, $450,701
represents the backlog dollar value from unconsolidated entities at
February 28, 2007, compared to $596,664 of backlog dollar value at
February 28, 2006.
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 28,
2007 2006
Homebuilding debt $ 2,581,494 3,125,172
Stockholders' equity 5,774,981 5,554,800
Total capital $ 8,356,475 8,679,972
Homebuilding debt to total capital 30.9% 36.0%
Homebuilding debt $ 2,581,494 3,125,172
Less: Homebuilding cash 263,746 112,030
Net homebuilding debt $ 2,317,748 3,013,142
Net homebuilding debt to total
capital (1) 28.6% 35.2%
(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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