Lennar Reports First Quarter EPS of $0.14

Mar 29, 2011, 06:00 ET from Lennar Corporation

MIAMI, March 29, 2011 /PRNewswire/ --

  • Revenues of $558.0 million – down 3%
  • Net earnings of $27.4 million, or $0.14 per diluted share, compared to net loss of ($6.5) million, or ($0.04) per diluted share
  • Lennar Homebuilding operating earnings of $35.5 million, compared to $5.5 million
  • Gross margin on home sales of 20.0% – improved 80 basis points
  • S,G&A expenses as a % of revenues from home sales of 16.4% – up 60 basis points
  • Operating margin on home sales of 3.6% – improved 20 basis points
  • Lennar Financial Services operating earnings of $1.2 million, compared to a loss of ($0.9) million
  • Rialto Investments operating earnings of $11.0 million (net of $12.0 million of net earnings attributable to noncontrolling interests), compared to a loss of ($1.0) million
  • Deliveries of 1,923 homes – down 4%
  • New orders of 2,267 homes – down 12%; cancellation rate of 17%
  • Backlog of 1,948 homes – down 12%
  • Lennar Homebuilding cash and cash equivalents of $1.0 billion
  • Lennar Homebuilding debt to total capital, net of cash and cash equivalents, of 44.5%

Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's largest homebuilders, today reported results for its first quarter ended February 28, 2011.  First quarter net earnings attributable to Lennar in 2011 were $27.4 million, or $0.14 per diluted share, compared to a first quarter net loss attributable to Lennar of ($6.5) million, or ($0.04) per diluted share, in 2010.

Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, "We are pleased to report EPS of $0.14 for our first fiscal quarter of 2011, making this our fourth consecutive quarter of profitability. We were able to achieve these positive results, despite operating in a challenging housing market."

Mr. Miller continued, "During the quarter, we remained focused on the core fundamentals of our business, generating profitable results in each of our business segments. Our homebuilding segment continued to produce strong gross margins, benefiting from our intense focus on controlling construction costs and opening new high margin communities. Although S,G&A expenses increased as a percentage of revenues from home sales, they continued to decline in absolute dollars.  Our Rialto segment continued to produce healthy profits, generating $11.0 million of operating earnings in the first quarter."

Mr. Miller concluded, "Our strong balance sheet and significant liquidity puts us in an excellent position to purchase new strategic high margin land deals for our homebuilding business and distressed opportunities for our Rialto business. While it is unclear whether the spring selling season will gain momentum or continue its sluggish recovery, we are confident that our company is well positioned for a profitable year in 2011."

RESULTS OF OPERATIONS

THREE MONTHS ENDED FEBRUARY 28, 2011 COMPARED TO

THREE MONTHS ENDED FEBRUARY 28, 2010

Lennar Homebuilding

Revenues from home sales decreased 11% in the first quarter of 2011 to $457.9 million from $513.3 million in 2010.  Revenues were lower primarily due to a 7% decrease in the average sales price of homes delivered and 4% decrease in the number of home deliveries, excluding unconsolidated entities.  New home deliveries, excluding unconsolidated entities, decreased to 1,903 homes in the first quarter of 2011 from 1,988 homes last year. There was a decrease in home deliveries in Homebuilding Other and all of the Company's Homebuilding segments except for the Company's Homebuilding East segment. The average sales price of homes delivered decreased to $240,000 in the first quarter of 2011, primarily in the Company's Homebuilding West segment, from $258,000 in the same period last year. Sales incentives offered to homebuyers were $33,100 per home delivered in the first quarter of 2011, or 12.1% as a percentage of home sales revenue, compared to $37,100 per home delivered in the same period last year, or 12.5% as a percentage of home sales revenue.  

Gross margins on home sales were $91.7 million, or 20.0%, in the first quarter of 2011, compared to $98.4 million, or 19.2%, in the first quarter of 2010. Gross margin percentage on home sales improved compared to last year, primarily due to reduced sales incentives offered to homebuyers as a percentage of revenues from home sales. Gross profits on land sales totaled $2.5 million in the first quarter of 2011, compared to $1.4 million in the first quarter of 2010.

Selling, general and administrative expenses decreased by $5.7 million, or 7%, in the first quarter of 2011, compared to the same period last year. Selling, general and administrative expenses in the first quarter of 2011 included $8.0 million related to the receipt of a settlement discussed below, offset by $6.6 million related to expenses associated with remedying pre-existing liabilities of a previously acquired company. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 16.4% in the first quarter of 2011, from 15.8% in the first quarter of 2010.

Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was $8.7 million in the first quarter of 2011, which included the Company's share of a gain on debt extinguishment at one of Lennar Homebuilding's unconsolidated entities totaling $15.4 million, partially offset by $4.5 million of valuation adjustments related to assets of Lennar Homebuilding's unconsolidated entities. In the first quarter of 2010, Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was ($8.9) million.

Lennar Homebuilding other income, net, totaled $30.0 million in the first quarter of 2011, which included $29.5 million related to the receipt of a settlement. The parties to certain litigation in which the Company was plaintiff entered into a settlement agreement in which they agreed the Company may make the following statement: "Lennar recently settled litigation against a third party in connection with Lennar's ongoing dispute with Nicolas Marsch, III and his affiliates. As a result of the settlement, the third party paid Lennar total cash consideration of $37.5 million and that the terms are confidential." Lennar Homebuilding other income, net, in the first quarter of 2011 also included the recognition of $10.0 million of previously deferred management fee income related to one of Lennar Homebuilding's unconsolidated entities. In addition, Lennar Homebuilding other income, net, included $13.1 million of valuation adjustments to the Company's investments in Lennar Homebuilding's unconsolidated entities. In the first quarter of 2010, Lennar Homebuilding other income, net, was $14.2 million.  

Homebuilding interest expense was $35.8 million in the first quarter of 2011 ($13.5 million was included in cost of homes sold, $0.2 million in cost of land sold and $22.1 million in other interest expense), compared to $33.2 million in the first quarter of 2010 ($14.3 million was included in cost of homes sold, $0.2 million in cost of land sold and $18.7 million in other interest expense). Interest expense increased due to an increase in the Company's outstanding debt compared to the same period last year.

Sales of land, Lennar Homebuilding equity in earnings (loss) from unconsolidated entities, Lennar Homebuilding other income, net and net earnings (loss) attributable to noncontrolling interests 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.  

Lennar Financial Services

Operating earnings for the Lennar Financial Services segment were $1.2 million in the first quarter of 2011, compared to an operating loss of ($0.9) million in the first quarter of 2010.  The increase in profitability was primarily due to higher profits per loan in the segment's mortgage operations and reduced costs in the segment's title operations.

Rialto Investments

In the first quarter of 2011, operating earnings for the Rialto Investments segment were $23.0 million (which included $12.0 million of net earnings attributable to noncontrolling interests), compared to an operating loss of ($1.0) million in the same period last year. In the first quarter of 2011, revenues in this segment were $33.6 million, which consisted primarily of accretable interest income associated with the segment's portfolio of real estate loans, compared to revenues of $0.3 million in the same period last year. In the first quarter of 2011, Rialto Investments other income, net, was $13.2 million, which consisted primarily of gains from acquisition of real estate owned through foreclosure. The segment also had equity in earnings from unconsolidated entities of $4.5 million during the first quarter of 2011, consisting primarily of interest income and unrealized gains related to the Company's investment in the AllianceBernstein L.P. fund formed under the Federal government's Public-Private Investment Program, compared to equity in earnings from unconsolidated entities of $0.1 million in the same period last year. In the first quarter of 2011, expenses in this segment were $28.3 million, which consisted primarily of costs related to its portfolio operations, underwriting expenses related to both completed and abandoned transactions, and other general and administrative expenses, compared to expenses of $1.4 million in the same period last year.

Corporate General and Administrative Expenses

Corporate general and administrative expenses increased by $0.7 million, or 3%, in the first quarter of 2011, compared to the first quarter of 2010.  As a percentage of total revenues, corporate general and administrative expenses increased to 4.2% in the first quarter of 2011, from 3.9% in the first quarter of 2010.

Noncontrolling Interests

Net earnings (loss) attributable to noncontrolling interests were $11.3 million and ($1.0) million, respectively, in the first quarter of 2011 and 2010. Net earnings attributable to noncontrolling interests during the first quarter of 2011 were primarily related to the FDIC's interest in the portfolio of real estate loans that the Company acquired in partnership with the FDIC.

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.  Lennar's Rialto Investments segment is focused on distressed real estate asset investments, asset management and workout strategies. 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, 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, 2010.  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 first quarter earnings will be held at 11:00 a.m. Eastern Time on Tuesday, March 29, 2011.  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 203-369-1162 and entering 5723593 as the confirmation number.

LENNAR CORPORATION AND SUBSIDIARIES

Selected Revenues and Operational Information

(In thousands, except per share amounts)

(unaudited)

Three Months Ended

February 28,

2011

2010

Revenues:

Lennar Homebuilding

$

466,709

520,776

Lennar Financial Services

57,713

53,365

Rialto Investments

33,623

301

 Total revenues

$

558,045

574,442

Lennar Homebuilding operating earnings

$

35,488

5,455

Lennar Financial Services operating earnings (loss)

1,183

(901)

Rialto Investments operating earnings (loss)

23,002

(959)

Corporate general and administrative expenses

(23,352)

(22,640)

Earnings (loss) before income taxes

36,321

(19,045)

Benefit for income taxes

2,405

11,572

Net earnings (loss) (including net earnings (loss) attributable

to noncontrolling interests)

38,726

(7,473)

Less: Net earnings (loss) attributable to

noncontrolling interests

11,320

(950)

Net earnings (loss) attributable to Lennar

$

27,406

(6,523)

Average shares outstanding:

Basic

184,155

182,660

Diluted

194,859

182,660

Earnings (loss) per share:

Basic

$

0.15

(0.04)

Diluted

$

0.14

(0.04)

Supplemental information:

Interest incurred (1)

$

49,874

45,872

EBIT (2):

Net earnings (loss) attributable to Lennar

$

27,406

(6,523)

Benefit for income taxes

(2,405)

(11,572)

Interest expense

35,825

33,199

         EBIT

$

60,826

15,104

(1)

Amount represents interest incurred related to homebuilding debt.

(2)

EBIT is a non-GAAP financial measure defined as earnings before interest and taxes.  This financial measure has been presented because the Company finds it important and 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. Although management finds EBIT to be an important measure in conducting and evaluating the Company's operations, this measure has limitations as an analytical tool as it is not reflective of the actual profitability generated by the Company during the period. Management compensates for the limitations of using EBIT by using this non-GAAP measure only to supplement the Company's GAAP results. Due to the limitations discussed, EBIT should not be viewed in isolation, as it is not a substitute for GAAP measures.

LENNAR CORPORATION AND SUBSIDIARIES

Segment Information

(In thousands)

(unaudited)

Three Months Ended

February 28,

2011

2010

Lennar Homebuilding revenues:

Sales of homes

$

457,869

513,348

Sales of land

8,840

7,428

Total revenues

466,709

520,776

Lennar Homebuilding costs and expenses:

Cost of homes sold

366,199

414,972

Cost of land sold

6,389

6,075

Selling, general and administrative

75,175

80,918

Total costs and expenses

447,763

501,965

Lennar Homebuilding operating margins

18,946

18,811

Lennar Homebuilding equity in earnings (loss) from unconsolidated entities

8,661

(8,894)

Lennar Homebuilding other income, net

29,960

14,203

Other interest expense

(22,079)

(18,665)

Lennar Homebuilding operating earnings

$

35,488

5,455

Lennar Financial Services revenues

$

57,713

53,365

Lennar Financial Services costs and expenses

56,530

54,266

Lennar Financial Services operating earnings (loss)

$

1,183

(901)

Rialto Investments revenues

$

33,623

301

Rialto Investments costs and expenses

28,349

1,403

Rialto Investments equity in earnings from unconsolidated entities

4,525

143

Rialto Investments other income, net

13,203

-

Rialto Investments operating earnings (loss)

$

23,002

(959)

LENNAR CORPORATION AND SUBSIDIARIES

Summary of Deliveries, New Orders and Backlog

(Dollars in thousands)

(unaudited)

At or for the

Three Months Ended

February 28, 2011

February 28, 2010

Homes

Dollar Value

Homes

Dollar Value

Deliveries:

East

823                    

$        186,309                 

609                    

$        138,693                 

Central

312                    

66,064                 

317                    

65,775                 

West

341                    

110,992                 

448                    

175,330                 

Houston

219                    

48,664                 

346                    

73,827                 

Other

228                    

60,450                 

284                    

72,522                 

Total

1,923                    

$        472,479                 

2,004                    

$        526,147                 

Of the total home deliveries listed above, 20 homes with a dollar value of $14.6 million represent home deliveries from unconsolidated entities for the three months ended February 28, 2011, compared to 16 home deliveries with a dollar value of $12.8 million for the three months ended February 28, 2010.

New Orders:

East

982                    

$        220,611                 

970                    

$        211,363                 

Central

341                    

71,120                 

416                    

84,979                 

West

388                    

127,979                 

454                    

163,357                 

Houston

266                    

59,653                 

388                    

82,552                 

Other

290                    

82,177                 

349                    

86,357                 

Total

2,267                    

$        561,540                 

2,577                    

$        628,608                 

Of the total new orders listed above, 21 homes with a dollar value of $16.9 million represent new orders from unconsolidated entities for the three months ended February 28, 2011, compared to 9 new orders with a dollar value of $8.0 million for the three months ended February 28, 2010.

Backlog:

East

916                    

$        225,287                 

1,043                    

$        251,205                 

Central

283                    

58,348                 

266                    

55,141                 

West

226                    

74,825                 

342                    

132,341                 

Houston

292                    

69,900                 

291                    

69,560                 

Other

231                    

69,102                 

262                    

73,291                 

Total

1,948                    

$        497,462                 

2,204                    

$        581,538                 

Of the total homes in backlog listed above, 4 homes with a backlog dollar value of $4.5 million represents the backlog from unconsolidated entities at February 28, 2011, compared to 2 homes with a backlog dollar value of $2.5 million at February 28, 2010.

Lennar's reportable homebuilding segments and homebuilding other consist of homebuilding divisions located in:

East:

Florida, Maryland, New Jersey and Virginia

Central:

Arizona, Colorado and Texas (1)

West:

California and Nevada

Houston:

Houston, Texas

Other:

Georgia, Illinois, Minnesota, North Carolina and South Carolina

(1) Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.

LENNAR CORPORATION AND SUBSIDIARIES

Supplemental Data

(Dollars in thousands)

(unaudited)

February 28,

November 30,

February 28,

2011

2010

2010

Lennar Homebuilding debt

$

3,129,065

3,128,154

2,682,928

Total stockholders' equity

2,640,377

2,608,949

2,435,191

Total capital

$

5,769,442

5,737,103

5,118,119

Lennar Homebuilding debt to total capital

54.2%

54.5%

52.4%

Lennar Homebuilding debt

$

3,129,065

3,128,154

2,682,928

Less: Lennar Homebuilding cash and cash equivalents

1,014,000

1,207,247

732,386

Net Lennar Homebuilding debt

$

2,115,065

1,920,907

1,950,542

Net Lennar Homebuilding debt to total capital (1)

44.5%

42.4%

44.5%

(1)

Net Lennar Homebuilding debt to total capital consists of net Lennar Homebuilding debt (Lennar Homebuilding debt less Lennar Homebuilding cash and cash equivalents) divided by total capital (net Lennar Homebuilding debt plus total stockholders' equity).

SOURCE Lennar Corporation



RELATED LINKS

http://www.lennar.com