Housing Bubble
Lennar reports record EPS for Q1 2003
March 18 , 2003
MIAMI, /PRNewswire-FirstCall/ -- Lennar Corporation (NYSE:LEN) , one of the nation's largest homebuilders, today reported earnings for its first quarter ended February 28, 2003. First quarter net earnings in 2003 were $106.3 million, or $1.51 per share diluted, compared to net earnings of $71.9 million, or $1.03 per share diluted, in 2002. Revenues in the first quarter increased 30% to $1.6 billion from $1.2 billion in the same period last year.
Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, "While the geopolitical and economic environment remains uncertain given current events, we are pleased to report yet another record quarter. Our disciplined financial management, guided by the Lennar process, has allowed us to achieve an almost 50% increase in net earnings with a return on net capital in excess of 20%, while still continuing to strengthen our balance sheet."
Mr. Miller continued, "Our balance sheet remains strong and our leverage is at an historically low level which positions the Company both for possible adverse market conditions and to capitalize on market inefficiencies and opportunities as they arise."
Mr. Miller concluded, "Given our current sales pace and record backlog of approximately $3.5 billion and assuming general economic stability, we are well positioned to achieve our stated goals of $8.50 per share in fiscal 2003 and $10.00 per share in fiscal 2004, which is based on 76 million diluted shares in both years assuming dilution for both of the Company's convertible debt securities."
Homebuilding
Revenues from sales of homes increased 30% in the first quarter of 2003 to $1.4 billion from $1.1 billion in 2002. Revenues were higher due primarily to a 18% increase in the number of home deliveries and a 10% increase in the average sales price. New home deliveries increased to 5,642 homes in the first quarter of 2003 from 4,791 homes last year. New home deliveries were higher primarily due to strength in the California market, combined with the Company's entry into the Illinois market in the second half of 2002. The average sales price on homes delivered increased to $255,000 in the first quarter of 2003 from $232,000 in 2002, primarily due to an increase in the average sales price in most of the Company's markets, combined with changes in product mix.
Gross margins on home sales were $342.9 million, or 23.8%, in the first quarter of 2003, compared to $256.4 million, or 23.1%, in 2002. Margins were positively impacted by strength in most of the Company's markets, offset by softness in the Texas market.
Selling, general and administrative expenses as a percentage of revenues from home sales were 12.1% in both the first quarter of 2003 and 2002. Selling, general and administrative expenses declined as a percentage of revenues from home sales given the higher revenues in selected markets including primarily California, Maryland and Virginia. This decrease was offset by higher marketing costs in other markets, including primarily Texas and Colorado.
Sales of land and other revenues, net, totaled $11.4 million in the first quarter of 2003, compared to $4.7 million in the same period in 2002. Equity in earnings from unconsolidated partnerships was $8.6 million in the first quarter of 2003, compared to $6.2 million in the same period last year. Margins achieved on land sales and equity in earnings from unconsolidated partnerships may vary significantly from period to period depending on the timing of land sales by the Company and unconsolidated partnerships in which it has investments.
Financial services
Operating earnings for the Financial Services Division increased to $34.3 million in the first quarter of 2003 from $23.4 million last year. The increase was primarily due to improved results from the Company's mortgage and title operations which benefited from a continued low interest rate and strong housing environment in the first quarter of 2003. Mortgage and title results reflected increases both in the number of transactions and in the profit per transaction in the first quarter of 2003, compared to 2002.
LENNAR CORPORATION
Selected Revenues and Earnings Information
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
February 28,
2003 2002
Revenues:
Homebuilding $ 1,488,735 1,142,119
Financial services 128,135 105,625
Total revenues $ 1,616,870 1,247,744
Operating earnings:
Homebuilding $ 188,313 132,735
Financial services 34,345 23,424
Total operating earnings 222,658 156,159
Corporate general and administrative
expenses 21,664 16,624
Interest expense 30,202 24,048
Earnings before income taxes 170,792 115,487
Income taxes 64,474 43,596
Net earnings $ 106,318 71,891
Average shares outstanding:
Basic 64,212 63,303
Diluted 71,649 71,090
Earnings per share:
Basic $ 1.66 1.14
Diluted $ 1.51 1.03
Supplemental information:
Interest incurred (1) $ 32,943 30,675
EBITDA (2):
Earnings before income taxes $ 170,792 115,487
Interest expense 30,202 24,048
Depreciation and amortization 14,406 10,206
EBITDA $ 215,400 149,741
(1) Homebuilding interest incurred is capitalized as inventories and
relieved as interest expense when homes are delivered.
(2) EBITDA is a non-GAAP financial measure derived by adding back
interest expense and depreciation and amortization that were
reflected in earnings before income taxes.
LENNAR CORPORATION
Homebuilding Segment Information
(In thousands)
(Unaudited)
Three Months Ended
February 28,
2003 2002
Revenues:
Sales of homes $ 1,440,159 1,109,774
Sales of land and other revenues 39,974 26,132
Equity in earnings from
unconsolidated partnerships 8,602 6,213
Total revenues 1,488,735 1,142,119
Costs and expenses:
Cost of homes sold 1,097,275 853,396
Cost of land and other expenses 28,618 21,467
Selling, general and administrative 174,529 134,521
Total costs and expenses 1,300,422 1,009,384
Operating earnings $ 188,313 132,735
LENNAR CORPORATION
Summary of Deliveries, New Orders and Backlog By Region
(Dollars in thousands)
At or for the
Three Months Ended
February 28,
2003 2002
Deliveries:
East 1,618 1,540
Central 1,836 1,488
West 2,188 1,763
Subtotal 5,642 4,791
Unconsolidated partnerships 188 119
Total 5,830 4,910
New Orders:
East 2,477 2,135
Central 2,089 1,659
West 1,960 2,287
Subtotal 6,526 6,081
Unconsolidated partnerships 185 122
Total 6,711 6,203
Backlog - Homes:
East 5,376 4,121
Central 2,910 2,120
West 4,310 3,571
Subtotal 12,596 9,812
Unconsolidated partnerships 442 253
Total 13,038 10,065
Backlog Dollar Value
(including unconsolidated
partnerships) $ 3,468,002 2,450,070
Lennar's market regions consist of 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
In addition, Lennar has interests in unconsolidated partnerships that sell homes in other states.
LENNAR CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in thousands)
(Unaudited)
February 28, November 30,
2003 2002 2002
Assets:
Cash and cash equivalents $ 500,227 483,573 731,163
Inventories 3,662,319 2,660,360 3,237,577
Investments in unconsolidated
partnerships 298,440 315,878 285,594
Other assets 442,245 289,674 406,170
Financial services 688,595 630,464 1,095,129
$ 5,591,826 4,379,949 5,755,633
Liabilities and stockholders' equity:
Accounts payable and other
liabilities $ 879,703 660,387 969,779
Senior notes and other debts
payable 1,826,790 1,505,570 1,585,309
Financial services 551,544 473,285 971,388
Total liabilities 3,258,037 2,639,242 3,526,476
Stockholders' equity 2,333,789 1,740,707 2,229,157
$ 5,591,826 4,379,949 5,755,633
Net debt to total capital (1) 36.2% 37.0% 27.7%
(1) Net debt to total capital is net homebuilding debt (homebuilding debt
less homebuilding cash) divided by total capital
(net homebuilding debt plus stockholders' equity).
Source: Lennar Corporation
