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Press release from PR Newswire

Lennar Reports First Quarter EPS of $0.14

Tuesday, March 29, 2011

Lennar Reports First Quarter EPS of $0.1406:00 EDT Tuesday, March 29, 2011MIAMI, 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 shareLennar Homebuilding operating earnings of $35.5 million, compared to $5.5 millionGross margin on home sales of 20.0% ? improved 80 basis pointsS,G&A expenses as a % of revenues from home sales of 16.4% ? up 60 basis pointsOperating margin on home sales of 3.6% ? improved 20 basis pointsLennar Financial Services operating earnings of $1.2 million, compared to a loss of ($0.9) millionRialto 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 OPERATIONSTHREE MONTHS ENDED FEBRUARY 28, 2011 COMPARED TOTHREE MONTHS ENDED FEBRUARY 28, 2010Lennar HomebuildingRevenues 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 ServicesOperating 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 InvestmentsIn 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 ExpensesCorporate 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 InterestsNet 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 SUBSIDIARIESSelected Revenues and Operational Information(In thousands, except per share amounts)(unaudited)Three Months EndedFebruary 28,20112010Revenues:Lennar Homebuilding$466,709520,776Lennar Financial Services57,71353,365Rialto Investments33,623301  Total revenues$558,045574,442Lennar Homebuilding operating earnings $35,4885,455Lennar 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 taxes36,321(19,045)Benefit for income taxes2,40511,572Net earnings (loss) (including net earnings (loss) attributableto noncontrolling interests)38,726(7,473)Less: Net earnings (loss) attributable to noncontrolling interests11,320(950)Net earnings (loss) attributable to Lennar$27,406(6,523)Average shares outstanding:Basic184,155182,660Diluted194,859182,660Earnings (loss) per share:Basic$0.15(0.04)Diluted$0.14(0.04)Supplemental information:Interest incurred (1)$49,87445,872EBIT (2):Net earnings (loss) attributable to Lennar $27,406(6,523)Benefit for income taxes(2,405)(11,572)Interest expense35,82533,199          EBIT $60,82615,104(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 SUBSIDIARIESSegment Information(In thousands)(unaudited)Three Months EndedFebruary 28,20112010Lennar Homebuilding revenues:Sales of homes$457,869513,348Sales of land 8,8407,428Total revenues466,709520,776Lennar Homebuilding costs and expenses:Cost of homes sold366,199414,972Cost of land sold6,3896,075Selling, general and administrative75,17580,918Total costs and expenses447,763501,965Lennar Homebuilding operating margins18,94618,811Lennar Homebuilding equity in earnings (loss) from unconsolidated entities8,661(8,894)Lennar Homebuilding other income, net 29,96014,203Other interest expense(22,079)(18,665)Lennar Homebuilding operating earnings $35,4885,455Lennar Financial Services revenues$57,71353,365Lennar Financial Services costs and expenses56,53054,266Lennar Financial Services operating earnings (loss)$1,183(901)Rialto Investments revenues$33,623301Rialto Investments costs and expenses28,3491,403Rialto Investments equity in earnings from unconsolidated entities4,525143Rialto Investments other income, net13,203-Rialto Investments operating earnings (loss)$23,002(959)LENNAR CORPORATION AND SUBSIDIARIESSummary of Deliveries, New Orders and Backlog(Dollars in thousands)(unaudited)At or for theThree Months EndedFebruary 28, 2011February 28, 2010HomesDollar ValueHomesDollar ValueDeliveries:East823                    $        186,309                 609                    $        138,693                 Central312                    66,064                 317                    65,775                 West341                    110,992                 448                    175,330                 Houston219                    48,664                 346                    73,827                 Other228                    60,450                 284                    72,522                 Total1,923                    $        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:East982                    $        220,611                 970                    $        211,363                 Central341                    71,120                 416                    84,979                 West388                    127,979                 454                    163,357                 Houston266                    59,653                 388                    82,552                 Other290                    82,177                 349                    86,357                 Total2,267                    $        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:East916                    $        225,287                 1,043                    $        251,205                 Central283                    58,348                 266                    55,141                 West226                    74,825                 342                    132,341                 Houston292                    69,900                 291                    69,560                 Other231                    69,102                 262                    73,291                 Total1,948                    $        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 VirginiaCentral:Arizona, Colorado and Texas (1)West:California and NevadaHouston:Houston, TexasOther: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 SUBSIDIARIESSupplemental Data(Dollars in thousands)(unaudited)February 28, November 30,February 28, 201120102010Lennar Homebuilding debt$3,129,0653,128,1542,682,928Total stockholders' equity2,640,3772,608,9492,435,191Total capital$5,769,4425,737,1035,118,119Lennar Homebuilding debt to total capital54.2%54.5%52.4%Lennar Homebuilding debt$3,129,0653,128,1542,682,928Less: Lennar Homebuilding cash and cash equivalents1,014,0001,207,247732,386Net Lennar Homebuilding debt$2,115,0651,920,9071,950,542Net 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 CorporationFor further information: Diane Bessette, Vice President and Treasurer, Lennar Corporation, +1-305-229-6419