Lennar Reports First Quarter Results
|Date Added: April 03, 2009 02:24:49 PM|
|Author: Tamara Jackson|
-- Revenues of $593.1 million - down 44%
Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's largest homebuilders, today reported results for its first quarter ended February 28, 2009. First quarter net loss in 2009 was $155.9 million, or $0.98 per diluted share, compared to first quarter net loss of $88.2 million, or $0.56 per diluted share, in 2008.
Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, "The housing market continued its downward trend throughout our first quarter. Despite historically low interest rates and some indicators pointing toward market stabilization, low consumer confidence, increased unemployment and growing foreclosure rates negatively impacted new home sales in most of our markets. While we are hopeful that the recent actions taken by the Federal government will help stimulate housing demand and restore consumer confidence, we continue to adjust our business to adapt to market conditions."
Mr. Miller continued, "During the first quarter, we continued to focus on returning to profitability by concentrating on the basics of our homebuilding operations. We remained focused on repositioning our product to meet today's consumer demand for more affordable product. We reduced our construction costs by re-bidding and re-tooling our product and eliminated S, G & A expenses by restructuring our operations and consolidating operating divisions in the wake of declining volume levels."
"We remain focused on maintaining strong liquidity as we ended our first quarter with $1.1 billion in cash, no outstanding borrowings under our credit facility and a responsible homebuilding debt-to-total capital ratio, net of homebuilding cash, of 37.4%. We also reduced the number of our unconsolidated joint ventures to 95 from 116 at November 30, 2008 and reduced our maximum unconsolidated joint venture recourse debt to $474 million from $520 million at November 30, 2008."
Mr. Miller concluded, "As we continue to focus on homebuilding profitability and on cash generation, we are well positioned to weather the current challenges and to take advantage of opportunities as they present themselves."
RESULTS OF OPERATIONS THREE MONTHS ENDED FEBRUARY 28, 2009 COMPARED TO THREE MONTHS ENDED FEBRUARY 29, 2008
Revenues from home sales decreased 45% in the first quarter of 2009 to $522.8 million from $953.1 million in 2008. Revenues were lower primarily due to a 38% decrease in the number of home deliveries and a 12% decrease in the average sales price of homes delivered in 2009. New home deliveries, excluding unconsolidated entities, decreased to 2,136 homes in the first quarter of 2009 from 3,437 homes last year. In the first quarter of 2009, new home deliveries were lower in each of the Company's homebuilding segments and Homebuilding Other, compared to 2008. The average sales price of homes delivered decreased to $244,000 in the first quarter of 2009 from $278,000 in the same period last year, primarily due to reduced pricing. Sales incentives offered to homebuyers were $50,500 per home delivered in the first quarter of 2009, compared to $48,000 per home delivered in the first quarter of 2008.
Gross margins on home sales excluding SFAS 144 valuation adjustments were $75.0 million, or 14.3%, in the first quarter of 2009, compared to $162.9 million, or 17.1%, in 2008. Gross margin percentage on home sales, excluding SFAS 144 valuation adjustments, decreased compared to last year, primarily due to higher sales incentives offered to homebuyers as a percentage of revenues from home sales. Gross margins on home sales were $34.2 million, or 6.5%, in the first quarter of 2009, which included $40.8 million of SFAS 144 valuation adjustments, compared to gross margins on home sales of $136.7 million, or 14.3%, in the first quarter of 2008, which included $26.2 million of SFAS 144 valuation adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments is a non-GAAP financial measure. This financial measure is disclosed by certain of the Company's competitors. The Company finds it useful and important in evaluating its performance because it discloses the Company's gross margins with regard to new homes the Company actually delivers in the periods presented. The Company believes that disclosing this information is helpful to readers of its financial statements by enabling them to compare the gross margins of new homes the Company actually delivers during the periods presented with those of its competitors.
Selling, general and administrative expenses were reduced by $73.8 million, or 42%, in the first quarter of 2009, compared to the same period last year, primarily due to reduction in associate headcount, variable selling expenses and fixed costs. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 19.4% in the first quarter of 2009, from 18.4% in the first quarter of 2008, due to lower revenues.
Losses on land sales totaled $10.5 million in the first quarter of 2009, which included $0.2 million of SFAS 144 valuation adjustments and $10.2 million of write-offs of deposits and pre-acquisition costs related to approximately 1,100 homesites under option that the Company does not intend to purchase. In the first quarter of 2008, losses on land sales totaled $26.5 million, which included $15.5 million of SFAS 144 valuation adjustments and $16.9 million of write-offs of deposits and pre-acquisition costs related to approximately 2,600 homesites that were under option.
Equity in loss from unconsolidated entities was $2.9 million in the first quarter of 2009, compared to equity in loss from unconsolidated entities of $23.0 million in the first quarter of 2008, which included $18.9 million of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which the Company has investments.
Other income (expense), net, totaled ($47.8) million in the first quarter of 2009, which included $37.2 million of APB 18 valuation adjustments to the Company's investments in unconsolidated entities, compared to other income (expense), net, of ($21.8) million in the first quarter of 2008, which included $29.6 million of APB 18 valuation adjustments to the Company's investments in unconsolidated entities.
Minority interest income (expense), net was $1.7 million and ($0.2) million, respectively, in the first quarter of 2009 and 2008.
Sales of land, equity in loss from unconsolidated entities, other income (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.
Operating earnings for the Financial Services segment was $0.5 million in the first quarter of 2009, compared to an operating loss of $9.7 million in the first quarter of 2008. The improvement in the Financial Services segment was primarily due to lower fixed costs as a result of the Company's focus on cost reductions in the segment's mortgage and title operations.
Corporate General and Administrative Expenses
Corporate general and administrative expenses were reduced by $6.8 million, or 20%, in the first quarter of 2009, compared to the first quarter of 2008. As a percentage of total revenues, corporate general and administrative expenses increased to 4.7% in the first quarter of 2009, from 3.3% in the first quarter of 2008, due to lower revenues.
Deferred Tax Asset Valuation Allowance
SFAS 109 requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on available evidence, it is more likely than not that such assets will not be realized. As a result of its net loss during the three months ended February 28, 2009, the Company generated deferred tax assets of $57.7 million and recorded a non-cash valuation allowance in accordance with SFAS 109 against the entire amount of deferred tax assets generated.
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, 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, 2008. 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 31, 2009. 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 203-369-0957 and entering 5932669 as the confirmation number.