Financial Highlights
Second Quarter
- Revenues from continuing operations of $2.9 billion - up 25%
- Homebuilding operating earnings of $431.5 million - up 34%
- Gross margin % on home sales of 24.9% - up 150 basis points
- Backlog dollar value of $7.3 billion - up 25%
- EPS from continuing operations of $1.55 - up 27% ($1.42 - up 16%,
including $0.13 per share charge on the redemption of the Company's
9.95% senior notes)
2005 Goal
- Fiscal 2005 EPS goal from continuing operations increased to
$7.80 from $7.15 ($7.67 - including $0.13 per share charge on the
redemption of the Company's 9.95% senior notes).
MIAMI, June 21 /PRNewswire-FirstCall/ -- Lennar Corporation
(NYSE: LEN and LEN.B), one of the nation's largest homebuilders, today
reported earnings for its second quarter ended May 31, 2005. Second quarter
net earnings from continuing operations in 2005 were $233.2 million, or $1.42
per share diluted, compared to net earnings from continuing operations of
$201.2 million, or $1.22 per share diluted, in 2004.
Stuart Miller, President and Chief Executive Officer of Lennar
Corporation, said, "We are pleased to report record results for our second
quarter, which generated an increase in revenues from continuing operations of
25% and an increase in earnings per share from continuing operations of 27%
over the prior year. These record results were driven by our ability to
continue to capitalize on favorable pricing conditions within various
strategic homebuilding markets in which we operate, as evidenced by a 150
basis point increase in gross margin on home sales."
Mr. Miller continued, "The homebuilding industry and Lennar in particular
continue to thrive on strong consumer demand as a result of positive economic
and demographic trends, particularly in land-constrained markets. As the
industry has continued to benefit from favorable market conditions, we have
continued to focus on strengthening our strategic market positions via both
organic and acquisitive growth."
Mr. Miller concluded, "Demand for our homes remained strong during the
first half of 2005, and our record $7.3 billion backlog provides us with
excellent visibility for the second half of our fiscal year. Given our strong
balance sheet, strategic market positions and record backlog, we are
comfortable increasing our 2005 earnings per share goal."
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 2005 COMPARED TO
THREE MONTHS ENDED MAY 31, 2004
Homebuilding
Revenues from home sales increased 27% in the second quarter of 2005 to
$2.6 billion from $2.1 billion in 2004. Revenues were higher primarily due to
a 15% increase in the number of home deliveries and a 10% increase in the
average sales price of homes delivered in 2005. New home deliveries,
excluding unconsolidated entities, increased to 8,951 homes in the second
quarter of 2005 from 7,765 homes last year. In the second quarter of 2005, new
home deliveries were higher in each of the Company's regions, compared to
2004. The average sales price of homes delivered increased to $293,000 in the
second quarter of 2005 from $266,000 in 2004.
Gross margins on home sales were $654.1 million, or 24.9%, in the second
quarter of 2005, compared to $483.7 million, or 23.4%, in 2004. Gross margin
percentage on home sales increased 150 basis points primarily due to favorable
pricing conditions. This increase was primarily attributable to strong
improvement in the Company's West region and improvement in the Company's East
region (primarily Florida), which was partially offset by lower margins in the
Company's Central region.
Selling, general and administrative expenses as a percentage of revenues
from home sales improved to 11.8% in the second quarter of 2005 from 12.1% in
2004. This improvement was primarily due to an increase in the number of new
home deliveries in the second quarter of 2005.
Gross profit on land sales totaled $72.7 million in the second quarter of
2005, compared to $56.5 million in 2004. Some of these land sales were from
consolidated joint ventures, which resulted in minority interest expense.
Minority interest expense from these land sales and other activities of the
consolidated joint ventures was $19.4 million and $1.3 million, respectively,
in the second quarter of 2005 and 2004 and is included in management fees and
other income (expense), net.
Management fees and other income (expense), net, totaled ($8.7) million in
the second quarter of 2005, compared to $18.7 million in 2004. Equity in
earnings from unconsolidated entities was $21.7 million in the second quarter
of 2005, compared to $14.0 million last year. Sales of land, equity in
earnings from unconsolidated entities and management fees and other 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 earnings from continuing operations for the Financial Services
Division were $19.0 million in the second quarter of 2005, compared to $32.0
million last year. The decrease was primarily due to reduced profitability
from the Division's mortgage operations as a result of a more competitive
mortgage environment, as well as a $6.5 million pretax gain generated from
monetizing a majority of the Division's alarm monitoring contracts during the
second quarter of 2004.
Corporate General and Administrative Expenses
Corporate general and administrative expenses as a percentage of total
revenues from continuing operations were 1.4% in the second quarter of 2005,
compared to 1.3% last year.
Loss on Redemption of 9.95% Senior Notes
In the second quarter of 2005, the Company redeemed all of its outstanding
9.95% senior notes, which resulted in a pretax loss on redemption of $34.9
million, or $0.13 per share diluted.
Discontinued Operations
In the second quarter of 2005, the Company generated a $15.8 million
pretax gain on the sale of a title subsidiary of the Financial Services
Division. As a result of the sale, the subsidiary's results are presented as
discontinued operations for the three months ended May 31, 2005 and 2004. Net
earnings from discontinued operations for the second quarter of 2005 were
$10.3 million, or $0.06 per share diluted, compared to $0.2 million in the
prior year.
SIX MONTHS ENDED MAY 31, 2005 COMPARED TO
SIX MONTHS ENDED MAY 31, 2004
Homebuilding
Revenues from home sales increased 30% in the six months ended May 31,
2005 to $4.8 billion from $3.7 billion in 2004. Revenues were higher
primarily due to a 16% increase in the number of home deliveries and a 12%
increase in the average sales price of homes delivered in 2005. New home
deliveries, excluding unconsolidated entities, increased to 16,528 homes in
the six months ended May 31, 2005 from 14,260 homes last year. In the six
months ended May 31, 2005, new home deliveries were higher in each of the
Company's regions, compared to 2004, with the largest contribution coming from
the Company's West region. The average sales price of homes delivered
increased to $292,000 in the six months ended May 31, 2005 from $261,000 in
2004.
Gross margins on home sales were $1.2 billion, or 24.8%, in the six months
ended May 31, 2005, compared to $857.5 million, or 23.0%, in 2004. Gross
margin percentage on home sales increased 180 basis points primarily due to
favorable pricing conditions. This increase was primarily attributable to
strong improvement in the Company's West region and improvement in the
Company's East region (Florida), which was partially offset by lower margins
in the Company's Central region.
Selling, general and administrative expenses as a percentage of revenues
from home sales improved to 11.9% in the six months ended May 31, 2005 from
12.2% in 2004. This improvement was primarily due to an increase in the
number of new home deliveries in 2005.
Gross profit on land sales totaled $96.2 million in the six months ended
May 31, 2005, compared to $92.2 million in 2004. Some of these land sales were
from consolidated joint ventures, which resulted in minority interest expense.
Minority interest expense from these land sales and other activities of the
consolidated joint ventures was $20.7 million and $0.6 million, respectively,
in the six months ended May 31, 2005 and 2004 and is included in management
fees and other income, net.
Management fees and other income, net, totaled $5.3 million in the six
months ended May 31, 2005, compared to $36.7 million in 2004. Equity in
earnings from unconsolidated entities was $37.9 million in the six months
ended May 31, 2005, compared to $19.2 million last year. Sales of land,
equity in earnings from unconsolidated entities and management fees and other
income, 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
Division were $35.2 million in the six months ended May 31, 2005, compared to
$54.7 million last year. The decrease was primarily due to reduced
profitability from the Division's mortgage operations as a result of a more
competitive mortgage environment, as well as a $6.5 million pretax gain
generated from monetizing a majority of the Division's alarm monitoring
contracts during 2004. This decrease was partially offset by improved
profitability from the Division's title operations.
Corporate General and Administrative Expenses
Corporate general and administrative expenses as a percentage of total
revenues from continuing operations were 1.5% in the six months ended May 31,
2005, compared to 1.4% last year.
Loss on Redemption of 9.95% Senior Notes
In 2005, the Company redeemed all of its outstanding 9.95% senior notes,
which resulted in a pretax loss on redemption of $34.9 million, or $0.13 per
share diluted.
Discontinued Operations
In 2005, the Company generated a $15.8 million pretax gain on the sale of
a title subsidiary of the Financial Services Division. As a result of the
sale, the subsidiary's results are presented as discontinued operations for
the six months ended May 31, 2005 and 2004. Net earnings from discontinued
operations for the six months ended May 31, 2005 were $10.7 million, or $0.06
per share diluted, compared to $0.4 million in the prior year.
Lennar Corporation, founded in 1954, is headquartered in Miami, Florida
and is one of the nation's leading builders of quality homes for all
generations, building affordable, move-up and retirement homes. The Company
operates primarily under the Lennar and U.S. Home brand names and utilizes a
Dual Marketing strategy consisting of the Everything's Included(R) and Design
Studio(SM) programs. Lennar's Financial Services Division provides mortgage
financing, title insurance, closing services and insurance agency services for
both buyers of the Company's homes and others. Its Strategic Technologies
Division provides high-speed Internet and cable television services to
residents of the Company's communities and others. Previous press releases
may be obtained at 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, 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 Relating to Our Business" included
in our Annual Report on Form 10-K for our fiscal year ended November 30, 2004,
and in our other filings with the Securities and Exchange Commission. We do
not undertake any obligation to update forward-looking statements.
A conference call to discuss the Company's second quarter earnings will be
held at 11:00 AM Eastern time on Tuesday, June 21, 2005. 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 784790 as the confirmation number.
LENNAR CORPORATION AND SUBSIDIARIES
Selected Revenues and Earnings Information
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
May 31, May 31,
2005 2004 2005 2004
Revenues:
Homebuilding $ 2,801,315 2,210,723 5,091,253 3,968,105
Financial services 131,659 131,322 247,452 236,107
Total revenues $ 2,932,974 2,342,045 5,338,705 4,204,212
Homebuilding operating
earnings $ 431,461 322,509 761,980 551,890
Financial services operating
earnings 18,963 31,962 35,249 54,681
Corporate general and
administrative expenses 40,827 31,251 77,987 59,929
Loss on redemption of 9.95%
senior notes 34,908 - 34,908 -
Earnings from continuing
operations before
provision for income taxes 374,689 323,220 684,334 546,642
Provision for income taxes 141,445 122,016 258,336 206,357
Earnings from continuing
operations 233,244 201,204 425,998 340,285
Discontinued operations:
Earnings from discontinued
operations before
provision for income
taxes (1) 16,535 332 17,261 608
Provision for income taxes 6,242 125 6,516 230
Earnings from discontinued
operations 10,293 207 10,745 378
Net earnings $ 243,537 201,411 436,743 340,663
Average shares outstanding:
Basic 154,292 154,970 154,718 155,249
Diluted 165,711 167,304 166,284 167,605
Earnings per share:
Basic:
Earnings from continuing
operations $ 1.51 1.30 2.75 2.19
Earnings from discontinued
operations 0.07 0.00 0.07 0.00
Net earnings $ 1.58 1.30 2.82 2.19
Diluted:
Earnings from continuing
operations $ 1.42 1.22 2.59 2.06
Earnings from discontinued
operations 0.06 0.00 0.06 0.00
Net earnings $ 1.48 1.22 2.65 2.06
Supplemental information:
Interest incurred (2) $ 40,560 32,537 77,483 64,069
EBIT (3):
Earnings from continuing
operations before
provision
for income taxes $ 374,689 323,220 684,334 546,642
Earnings from discontinued
operations before
provision
for income taxes 16,535 332 17,261 608
Interest 46,552 30,079 77,604 55,442
EBIT $ 437,776 353,631 779,199 602,692
(1) Earnings from discontinued operations before provision for income
taxes includes a gain of $15,816 for the three and six months ended
May 31, 2005 related to the sale of a title subsidiary of the
Company's Financial Services Division.
(2) Homebuilding interest incurred is capitalized to inventories and
relieved as cost of sales when homes are delivered or land is sold.
(3) EBIT is a non-GAAP financial measure derived by adding back previously
capitalized interest amortized to cost of sales that was reflected in
earnings before provision 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 Segment Information
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
May 31, May 31,
2005 2004 2005 2004
Revenues:
Sales of homes $ 2,622,340 2,063,707 4,836,919 3,726,804
Sales of land 178,975 147,016 254,334 241,301
Total revenues 2,801,315 2,210,723 5,091,253 3,968,105
Costs and expenses:
Cost of homes sold 1,968,258 1,580,001 3,638,394 2,869,300
Cost of land sold 106,255 90,482 158,129 149,134
Selling, general and
administrative 308,380 250,390 575,927 453,753
Total costs and expenses 2,382,893 1,920,873 4,372,450 3,472,187
Equity in earnings from
unconsolidated entities 21,747 13,958 37,886 19,235
Management fees and other
income (expense), net (8,708) 18,701 5,291 36,737
Operating earnings $ 431,461 322,509 761,980 551,890
LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog By Region
(Dollars in thousands)
(Unaudited)
At or for the
Three Months Ended Six Months Ended
May 31, May 31,
2005 2004 2005 2004
Deliveries:
East 2,697 2,366 4,906 4,542
Central 2,953 2,496 5,250 4,485
West 3,560 3,065 6,863 5,554
Total 9,210 7,927 17,019 14,581
Of the total deliveries listed above, 259 and 491, respectively, represent
deliveries from unconsolidated entities for the three and six months ended
May 31, 2005, compared to 162 and 321 deliveries in the same periods last
year.
New Orders:
East 3,427 3,972 6,467 7,312
Central 3,847 3,106 6,691 5,325
West 4,821 4,387 8,397 7,532
Total 12,095 11,465 21,555 20,169
Of the total new orders listed above, 430 and 752, respectively, represent
new orders from unconsolidated entities for the three and six months ended
May 31, 2005, compared to 489 and 810 new orders in the same periods last
year.
Backlog - Homes:
East 8,888 8,891
Central 4,008 3,337
West 7,640 7,189
Total 20,536 19,417
Of the total homes in backlog listed above, 1,846 represents homes in
backlog from unconsolidated entities at May 31, 2005, compared to 1,320
homes in backlog at May 31, 2004.
Backlog - Dollar Value:
East $ 2,989,464 2,349,388
Central 957,703 785,945
West 3,396,595 2,725,249
Total $ 7,343,762 5,860,582
Of the total dollar value of homes in backlog listed above, $768,731
represents the backlog dollar value from unconsolidated entities at May
31, 2005, compared to $536,309 of backlog dollar value at May 31, 2004.
Lennar's market regions consist of homebuilding divisions located in the
following states:
East: Florida, Maryland, Virginia, New Jersey, North Carolina and
South Carolina
Central: Texas, Illinois and Minnesota
West: California, Colorado, Arizona and Nevada
LENNAR CORPORATION AND SUBSIDIARIES
Supplemental Data
(Dollars in thousands)
(Unaudited)
May 31,
2005 2004
Homebuilding debt $ 2,337,436 1,594,074
Stockholders' equity 4,267,486 3,479,976
Total capital $ 6,604,922 5,074,050
Homebuilding debt to total capital 35.4% 31.4%
SOURCE Lennar Corporation
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