MIAMI, June 26 /PRNewswire-FirstCall/ --
-- Revenues of $1.1 billion - down 61%
-- Loss per share of $0.76 (includes a $0.60 per share charge related to
valuation adjustments and write-offs of option deposits and pre-
acquisition costs)
-- Gross margin on home sales:
-- 15.9% (excluding SFAS 144 valuation adjustments of $73.6 million) -
up 230 basis points
-- 8.7% (including SFAS 144 valuation adjustments) - up 150 basis
points
-- Operating margin on home sales:
-- 0.5% (excluding SFAS 144 valuation adjustments) - up 170 basis
points
-- (6.7%) (including SFAS 144 valuation adjustments) - up 80 basis
points
-- Selling, general and administrative expenses reduced by $238.9 million
- down 60%
-- Homebuilding cash of $882.4 million as of May 31, 2008
-- No outstanding borrowings under the Company's credit facility as of May
31, 2008
-- Homebuilding debt to total capital of 39.5% (net homebuilding debt to
total capital of 28.7%)
-- Deliveries of 3,830 homes - down 60%
-- New orders of 4,396 homes - down 45%; cancellation rate of 22%
-- Backlog dollar value of $1.3 billion - down 56%
Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's largest
homebuilders, today reported results for its second quarter ended May 31,
2008. Second quarter net loss in 2008 was $120.9 million, or $0.76 per
diluted share, compared to second quarter net loss of $244.2 million, or
$1.55 per diluted share, in 2007.
Stuart Miller, President and Chief Executive Officer of Lennar
Corporation, said, "Consistent with our expectations, the housing market
has continued its downward trend throughout our second quarter.
Foreclosures have increased while higher unemployment and diminishing
consumer confidence have defined overall economic weakness. As a result,
the housing market has continued to experience growth in inventory levels,
which has depressed the prices of homes and restricted the ability to sell
those homes in markets across the country."
"With the U.S. housing inventory growing in excess of absorption and
limited credit availability, the prospect of further deterioration in the
homebuilding industry will likely become reality absent Federal government
action. To that end, we are hopeful that the Federal government will
acknowledge the need for further reform and will institute programs
designed to stabilize and facilitate the recovery of the housing market."
"Notwithstanding the bleak operating environment, Lennar made
significant progress during our second quarter. We reduced our unsold
completed inventory by 70% in the second quarter of 2008 from the second
quarter of 2007 and by 47% from the first quarter of 2008, and now have on
average less than one completed unsold home per community. In addition, we
continued to make significant progress towards our goal of right-sizing our
business, as reflected by a 60% reduction in selling, general and
administrative expenses compared to a year ago. Our divisions are currently
on track to achieve a future S,G&A annualized run rate of 10% by the end of
our fiscal year. Moreover, given our success with asset reduction, we have
shifted our primary focus to 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."
"We are very pleased to end our second quarter with approximately $880
million in cash and no outstanding borrowings under our credit facility. We
have also reduced our maximum joint venture recourse debt by approximately
$1 billion from its peak level in 2006, which reflects a decrease of over
50%."
Mr. Miller concluded, "We recognize that the remainder of 2008 will
likely see further deterioration in overall market conditions; however, we
are confident that we remain well positioned with a strong balance sheet
and properly scaled operations to navigate the current market downturn as a
leaner and more efficient homebuilder."
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 2008 COMPARED TO
THREE MONTHS ENDED MAY 31, 2007
Homebuilding
Revenues from home sales decreased 62% in the second quarter of 2008 to
$1.0 billion from $2.7 billion in 2007. Revenues were lower primarily due
to a 58% 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 3,729 homes in the second
quarter of 2008 from 8,940 homes last year. In the second 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 $274,000 in the second quarter of 2008 from
$298,000 in the same period last year, due to reduced pricing and higher
sales incentives offered to homebuyers ($48,700 per home delivered in the
second quarter of 2008, compared to $43,700 per home delivered in the same
period last year).
Gross margins on home sales excluding SFAS 144 valuation adjustments
were $162.0 million, or 15.9%, in the second quarter of 2008, compared to
$364.8 million, or 13.6%, in 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 $88.4 million,
or 8.7%, in the second quarter of 2008, which included $73.6 million of
SFAS 144 valuation adjustments, compared to gross margins on home sales of
$193.2 million, or 7.2%, in the second quarter of 2007, which included
$171.6 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 $238.9
million, or 60%, in the second 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 15.4% in the second
quarter of 2008, from 14.7% in 2007, which was due to lower revenues.
Losses on land sales totaled $5.4 million in the second quarter of
2008, which included $2.1 million of SFAS 144 valuation adjustments and
$6.6 million of write-offs of deposits and pre-acquisition costs related to
approximately 2,100 homesites under option that the Company does not intend
to purchase. In the second quarter of 2007, losses on land sales totaled
$108.8 million, which included $69.4 million of SFAS 144 valuation
adjustments and $48.9 million of write-offs of deposits and pre-acquisition
costs related to approximately 5,400 homesites that were under option.
Equity in loss from unconsolidated entities was $18.9 million in the
second quarter of 2008, which included $8.0 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 $26.5 million in the second quarter of 2007, which included
$27.5 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 $47.9 million in the
second quarter of 2008, which included $46.9 million of APB 18 valuation
adjustments to the Company's investments in unconsolidated entities,
compared to management fees and other expense, net, of $12.8 million in the
second quarter of 2007, which included $11.6 million of APB 18 valuation
adjustments to the Company's investments in unconsolidated entities.
Minority interest income (expense), net was $0.2 million and ($0.8)
million, respectively, in the second quarter of 2008 and 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 $3.0 million in
the second quarter of 2008, compared to operating earnings of $14.2 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 and $6.7 million of
non-recurring expenses in the segment's title operations. There were $14.4
million in write-offs of land seller notes receivables in the second
quarter of 2007, compared to no write-offs in the second quarter of 2008.
Corporate General and Administrative Expenses
Corporate general and administrative expenses were reduced by $16.2
million, or 35%, in the second quarter of 2008, compared to the same period
last year. As a percentage of total revenues, corporate general and
administrative expenses increased to 2.6% in the second quarter of 2008,
from 1.6% in 2007, due to lower revenues.
SIX MONTHS ENDED MAY 31, 2008 COMPARED TO
SIX MONTHS ENDED MAY 31, 2007
Homebuilding
Revenues from home sales decreased 63% in the six months ended May 31,
2008 to $2.0 billion from $5.3 billion in 2007. Revenues were lower
primarily due to a 59% 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 7,166 homes in
the six months ended May 31, 2008 from 17,506 homes last year. In the six
months ended May 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 $276,000 in the six
months ended May 31, 2008 from $300,000 in 2007, due to reduced pricing and
higher sales incentives offered to homebuyers ($48,400 per home delivered
in 2008, compared to $44,600 per home delivered in 2007).
Gross margins on home sales excluding SFAS 144 valuation adjustments
were $324.9 million, or 16.5%, in the six months ended May 31, 2008,
compared to $774.0 million, or 14.6%, in 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 and West segments. Gross margins on home
sales were $225.1 million, or 11.4%, in the six months ended May 31, 2008,
which included $99.8 million of SFAS 144 valuation adjustments, compared to
gross margins on home sales of $554.1 million, or 10.4%, in the six months
ended May 31, 2007, which included $219.9 million of SFAS 144 valuation
adjustments.
Selling, general and administrative expenses were reduced by $433.3
million, or 57%, in the six months ended May 31, 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 16.8% in the six
months ended May 31, 2008, from 14.4% in 2007, which was due to lower
revenues.
Losses on land sales totaled $31.9 million in the six months ended May
31, 2008, which included $17.6 million of SFAS 144 valuation adjustments
and $23.4 million of write-offs of deposits and pre-acquisition costs
related to approximately 4,700 homesites under option that the Company does
not intend to purchase. In the six months ended May 31, 2007, loss on land
sales totaled $135.3 million, which included $82.7 million of SFAS 144
valuation adjustments and $69.9 million of write-offs of deposits and
pre-acquisition costs related to approximately 9,400 homesites that were
under option.
Equity in loss from unconsolidated entities was $41.9 million in the
six months ended May 31, 2008, which included $26.9 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 $40.7 million in the six months ended May 31, 2007, which
included $34.0 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 ($69.7)
million in the six months ended May 31, 2008, which included $76.5 million
of APB 18 valuation adjustments to the Company's investments in
unconsolidated entities, compared to management fees and other income
(expense), net, of $1.0 million in the six months ended May 31, 2007, net
of $14.3 million of APB 18 valuation adjustments to the Company's
investments in unconsolidated entities.
Minority interest expense, net totaled $16 thousand and $1.4 million,
respectively, in the six months ended May 31, 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 $12.7 million in
the six months ended May 31, 2008, compared to operating earnings of $30.1
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 and $9.2 million of
non-recurring expenses in the segment's title operations. There were $18.6
million in write-offs of land seller notes receivables during the six
months ended May 31, 2007, compared to no write-offs during the six months
ended May 31, 2008.
Corporate General and Administrative Expenses
Corporate general and administrative expenses were reduced by $28.3
million, or 31%, for the six months ended May 31, 2008, compared to the
same period last year. As a percentage of total revenues, corporate general
and administrative expenses increased to 2.9% in the six months ended May
31, 2008, from 1.6% 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, 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" 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 second quarter earnings will
be held at 11:00 a.m. Eastern time on Thursday, June 26, 2008. 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 402-220-6413 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 Six Months Ended
May 31, May 31,
2008 2007 2008 2007
Revenues:
Homebuilding $ 1,046,544 2,741,810 2,040,320 5,404,980
Financial services 81,372 134,133 150,509 263,043
Total revenues $ 1,127,916 2,875,943 2,190,829 5,668,023
Homebuilding operating loss $ (140,584) (351,665) (250,364) (211,690)
Financial services operating
earnings (loss) (3,014) 14,210 (12,706) 30,079
Corporate general and
administrative expenses (29,584) (45,817) (64,406) (92,736)
Loss before benefit for
income taxes (173,182) (383,272) (327,476) (274,347)
Benefit for income taxes 52,266 139,067 118,344 98,765
Net loss $ (120,916) (244,205) (209,132) (175,582)
Average shares outstanding:
Basic 158,347 157,697 158,275 157,413
Diluted 158,347 157,697 158,275 157,413
Loss per share:
Basic $ (0.76) (1.55) (1.32) (1.12)
Diluted $ (0.76) (1.55) (1.32) (1.12)
Supplemental information:
Interest incurred (1) $ 36,573 56,548 74,668 112,269
EBIT before valuation
adjustments and write-offs
of option deposits and
pre-acquisition costs and
financial services notes
receivables (2):
Loss before benefit for
income taxes $ (173,182) (383,272) (327,476) (274,347)
Interest expense 37,911 67,998 70,354 115,360
Valuation adjustments and
write-offs of option
deposits and
pre-acquisition costs
and financial services
notes receivable 137,220 343,467 244,331 439,343
EBIT before valuation
adjustments and write-offs
of option deposits and
pre-acquisition costs
and financial services
notes receivable $ 1,949 28,193 (12,791) 280,356
(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 receivables 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 receivables 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 Ended Six Months Ended
May 31, May 31,
2008 2007 2008 2007
Revenues:
Sales of homes $ 1,018,854 2,687,388 1,971,920 5,309,879
Sales of land 27,690 54,422 68,400 95,101
Total revenues 1,046,544 2,741,810 2,040,320 5,404,980
Costs and expenses:
Cost of homes sold 930,488 2,494,183 1,746,859 4,755,778
Cost of land sold 33,093 163,219 100,253 230,364
Selling, general and
administrative 156,972 395,895 331,990 765,321
Total costs and expenses 1,120,553 3,053,297 2,179,102 5,751,463
Gain on recapitalization of
unconsolidated entity - - - 175,879
Equity in loss from
unconsolidated entities (18,919) (26,523) (41,899) (40,728)
Management fees and other
income (expense), net (47,874) (12,831) (69,667) 1,010
Minority interest income
(expense), net 218 (824) (16) (1,368)
Operating loss $ (140,584) (351,665) (250,364) (211,690)
LENNAR CORPORATION AND SUBSIDIARIES
Valuation Adjustments and Write-offs
(In thousands)
(unaudited)
Three Months Ended Six Months Ended
May 31, May 31,
2008 2007 2008 2007
SFAS 144 valuation adjustments to
finished homes, CIP and land on
which the Company intends to
build homes:
East $ 34,176 100,293 42,282 119,408
Central 17,382 16,214 19,161 27,467
West 20,140 49,111 30,060 66,178
Other 1,922 6,011 8,346 6,843
Total 73,620 171,629 99,849 219,896
SFAS 144 valuation adjustments to
land the Company intends to sell
or has sold to third parties:
East 1,135 30,558 2,507 40,078
Central 381 2,653 9,678 2,710
West 623 19,299 4,815 22,799
Other 7 16,912 601 17,072
Total 2,146 69,422 17,601 82,659
Write-offs of option deposits and
pre-acquisition costs:
East 3,124 16,037 10,178 29,778
Central 531 9,908 4,875 11,208
West 843 21,669 4,207 24,740
Other 2,088 1,307 4,178 4,145
Total 6,586 48,921 23,438 69,871
Company's share of SFAS 144 valuation
adjustments related to assets of
unconsolidated entities:
East 3,084 - 7,241 3,833
Central - 1,143 158 1,143
West 4,926 26,347 18,951 29,051
Other - - 597 -
Total 8,010 27,490 26,947 34,027
APB 18 valuation adjustments to
investments in
unconsolidated entities:
East 9,158 4,228 10,095 6,869
Central 193 - 421 -
West 37,507 7,406 65,946 7,406
Other - - 34 -
Total 46,858 11,634 76,496 14,275
Financial services write-offs of
notes receivable - 14,371 - 18,615
Total valuation adjustments
and write-offs of option
deposits and
pre-acquisitions costs
and financial services
notes receivable $ 137,220 343,467 244,331 439,343
LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog
(Dollars in thousands)
(unaudited)
At or for the
Three Months Ended Six Months Ended
May 31, May 31,
2008 2007 2008 2007
Deliveries:
East 1,078 3,065 2,243 5,664
Central 1,284 3,267 2,463 6,398
West 1,065 2,435 1,989 4,841
Other 403 801 731 1,700
Total 3,830 9,568 7,426 18,603
Of the total deliveries listed above, 101 and 260 represent deliveries
from unconsolidated entities for the three and six months ended May 31,
2008, compared to 628 and 1,097 deliveries in the same periods last year.
New Orders:
East 1,304 2,668 2,246 4,743
Central 1,476 2,636 2,537 5,009
West 1,145 1,891 1,892 3,756
Other 471 861 766 1,680
Total 4,396 8,056 7,441 15,188
Of the total new orders listed above, 100 and 162 represent new orders
from unconsolidated entities for the three and six months ended May 31,
2008, compared to 382 and 736 new orders in the same periods last year.
Backlog - Homes:
East 1,794 3,224
Central 948 2,209
West 785 1,906
Other 431 860
Total 3,958 8,199
Of the total homes in backlog listed above, 197 represents homes in
backlog from unconsolidated entities at May 31, 2008, compared to 688 homes
in backlog at May 31, 2007.
Backlog - Dollar Value:
East $ 524,533 1,095,567
Central 217,893 495,664
West 331,428 926,283
Other 180,271 325,688
Total $ 1,254,125 2,843,202
Of the total dollar value of homes in backlog listed above, $102,465
represents the backlog dollar value from unconsolidated entities at May 31,
2008, compared to $316,633 of backlog dollar value at May 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)
May 31,
2008 2007
Homebuilding debt $ 2,310,494 2,585,286
Stockholders' equity 3,539,590 5,583,555
Total capital $ 5,850,084 8,168,841
Homebuilding debt to total capital 39.5% 31.6%
Homebuilding debt $ 2,310,494 2,585,286
Less: Homebuilding cash 882,433 234,256
Net homebuilding debt $ 1,428,061 2,351,030
Net homebuilding debt to total capital (1) 28.7% 29.6%
(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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CONTACT:
Scott Shipley, Investor Relations, Lennar
Corporation, +1-305-485-2054
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