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Press release from PR Newswire

Lennar Reports Second Quarter EPS of $0.07

Thursday, June 23, 2011

Lennar Reports Second Quarter EPS of $0.0706:00 EDT Thursday, June 23, 2011MIAMI, June 23, 2011 /PRNewswire/ --Revenues of $764.5 million ? up 37% from Q1 2011; down 6% from Q2 2010 Net earnings of $13.8 million, or $0.07 per diluted share, compared to $39.7 million in Q2 2010, or $0.21 per diluted share, which included $11.0 million, or $0.06 per diluted share, benefit for income taxesLennar Homebuilding operating earnings of $21.2 million, compared to $35.5 million in Q1 2011 and $29.5 million in Q2 2010 Gross margin on home sales of 19.4%:Down 60 basis points from Q1 2011Down 120 basis points from Q2 2010S,G&A expenses as a % of revenues from home sales of 14.9%Improved 150 basis points from Q1 2011Up 100 basis points from Q2 2010Operating margin on home sales of 4.4% Improved 80 basis points from Q1 2011Down 230 basis points from Q2 2010Lennar Financial Services operating earnings of $2.5 million, compared to $13.7 million in Q2 2010Rialto Investments operating earnings totaled $9.8 million (net of $12.9 million of net earnings attributable to noncontrolling interests), compared to $5.1 million (net of $9.6 million of net earnings attributable to noncontrolling interests) in Q2 2010Deliveries of 2,682 homes ? up 39% from Q1 2011; down 8% from Q2 2010New orders of 3,204 homes ? up 41% from Q1 2011; flat with Q2 2010Cancellation rate of 17% Backlog of 2,470 homes ? up 27% from Q1 2011; down 1% from Q2 2010Lennar Homebuilding cash and cash equivalents of $945.2 millionLennar Homebuilding debt to total capital, net of cash and cash equivalents, of 44.9%Lennar Corporation (NYSE: LEN and LEN.B), one of the nation?s largest homebuilders, today reported results for its second quarter ended May 31, 2011. Second quarter net earnings attributable to Lennar in 2011 were $13.8 million, or $0.07 per diluted share, compared to second quarter net earnings attributable to Lennar of $39.7 million, or $0.21 per diluted share, in 2010. Stuart Miller, Chief Executive Officer of Lennar Corporation, said, ?We are pleased to report EPS of $0.07 for our second fiscal quarter of 2011. Despite operating in a challenging housing market that saw very little evidence of a spring selling season, we were still able to achieve strong results, making this our fifth consecutive quarter of profitability. Our new orders during the quarter were flat with last year notwithstanding the elevated level of sales in March and April of the prior year due to the Federal homebuyer tax credit.  For the month of May, new orders were up over 30%, while new orders declined approximately 11% in the prior two months. Given that the housing stimulus tax credit was eliminated in May 2010, we should experience favorable year-over-year comparisons going forward.? Mr. Miller continued, ?During the quarter, we continued to focus on the basics of our core homebuilding business. We benefitted greatly from our strategic capital investments in new high margin communities, which helped produce one of the highest gross margins in the industry. Our homebuilding operations were also driven by the reinvigoration of our Everything?s Included marketing platform and by our continued focus on reducing construction costs and controlling overhead.?Mr. Miller concluded, ?Our strong balance sheet and liquidity will allow us to continue to purchase new strategic high margin land deals for our homebuilding business and distressed opportunities for our Rialto business. Given current market conditions, we remain confident that our company is well positioned for a profitable year in 2011.?RESULTS OF OPERATIONSTHREE MONTHS ENDED MAY 31, 2011 COMPARED TO THREE MONTHS ENDED MAY 31, 2010Lennar HomebuildingRevenues from home sales decreased 6% in the second quarter of 2011 to $649.8 million from $694.8 million in 2010.  Revenues were lower primarily due to a 9% decrease in the number of home deliveries, excluding unconsolidated entities, partially offset by a 2% increase in the average sales price of homes delivered.  New home deliveries, excluding unconsolidated entities, decreased to 2,652 homes in the second quarter of 2011 from 2,902 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 increased to $245,000 in the second quarter of 2011 from $240,000 in the same period last year. Sales incentives offered to homebuyers were $33,900 per home delivered in the second quarter of 2011, or 12.1% as a percentage of home sales revenue, compared to $31,100 per home delivered in the same period last year, or 11.5% as a percentage of home sales revenue.  Gross margins on home sales were $125.7 million, or 19.4%, in the second quarter of 2011, compared to gross margins on home sales of $143.4 million, or 20.6%, in the second quarter of 2010. Gross margin percentage on home sales decreased compared to last year, primarily due to increased sales incentives offered to homebuyers as a percentage of revenue from home sales. Gross profits on land sales totaled $2.9 million in the second quarter of 2011, compared to $2.0 million in the second quarter of 2010.Selling, general and administrative expenses were $96.9 million and $96.8 million, respectively, in the second quarter of 2011 and 2010.  Selling, general and administrative expenses as a percentage of revenues from home sales increased to 14.9% in the second quarter of 2011, from 13.9% in 2010, due to lower revenues.Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was $2.4 million in the second quarter of 2011, compared to ($1.4) million in the second quarter of 2010.Lennar Homebuilding other income (expense), net, totaled $9.5 million in the second quarter of 2011, of which $5.1 million related to the favorable resolution of a joint venture. In the second quarter of 2010, Lennar Homebuilding other income (expense), net, was ($0.3) million, which included a pre-tax loss of $10.8 million related to the repurchase of senior notes through a tender offer, offset by other income and a $4.3 million pre-tax gain on the extinguishment of other debt.Homebuilding interest expense was $41.5 million in the second quarter of 2011 ($18.5 million was included in cost of homes sold, $0.5 million in cost of land sold and $22.5 million in other interest expense), compared to $37.1 million in the second quarter of 2010 ($19.3 million was included in cost of homes sold, $0.3 million in cost of land sold and $17.5 million in other interest expense). Interest expense increased primarily due to an increase in the Company?s outstanding debt compared to the same period last year. Lennar Financial ServicesOperating earnings for the Lennar Financial Services segment was $2.5 million in the second quarter of 2011, compared to operating earnings of $13.7 million in the same period last year. The decrease in profitability was due primarily to decreased volume in both the segment?s mortgage and title operations. In addition, in the second quarter of 2010, the Lennar Financial Services segment received $5.1 million of proceeds from the previous sale of a cable system.Rialto InvestmentsIn the second quarter of 2011, operating earnings for the Rialto Investments segment were $22.7 million (which included $12.9 million of net earnings attributable to noncontrolling interests), compared to operating earnings of $14.7 million (which included $9.6 million of net earnings attributable to noncontrolling interests) in the same period last year. In the second quarter of 2011, revenues in this segment were $42.6 million, which consisted primarily of interest income associated with the segment?s portfolio of real estate loans, compared to revenues of $34.6 million in the same period last year. In the second quarter of 2011, Rialto Investments other income, net, was $15.3 million, which consisted primarily of gains from acquisition of real estate owned through foreclosure and a $4.7 million gain on the sale of investment securities. The segment also had equity in earnings (loss) from unconsolidated entities of ($3.0) million in the second quarter of 2011, consisting primarily of unrealized losses related to the Company?s investment in the AllianceBernstein L.P. (?AB?) fund formed under the Federal government?s Public-Private Investment Program (?PPIP?), partially offset by interest income, compared to equity in earnings (loss) from unconsolidated entities of ($0.4) million in the same period last year. In the second quarter of 2011, expenses in this segment were $32.3 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 $19.5 million in the same period last year.Corporate General and Administrative ExpensesCorporate general and administrative expenses were $20.6 million, or 2.7% as a percentage of total revenues, in the second quarter of 2011, compared to $22.2 million, or 2.7% as a percentage of total revenues, in the second quarter of 2010.Noncontrolling InterestsNet earnings attributable to noncontrolling interests were $11.1 million and $6.9 million, respectively, in the second quarter of 2011 and 2010. Net earnings attributable to noncontrolling interests during both the second quarter of 2011 and 2010 were primarily related to the FDIC?s interest in the portfolio of real estate loans that the Company acquired in partnership with the FDIC.SIX MONTHS ENDED MAY 31, 2011 COMPARED TOSIX MONTHS ENDED MAY 31, 2010Lennar HomebuildingRevenues from home sales decreased 8% in the six months ended May 31, 2011 to $1,107.7 million from $1,208.1 million in 2010.  Revenues were lower primarily due to a 7% decrease in the number of home deliveries, excluding unconsolidated entities and a 2% decrease in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, decreased to 4,555 homes in the six months ended May 31, 2011 from 4,890 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 $243,000 in the six months ended May 31, 2011, from $247,000 in the same period last year, due to a decrease in average sales price in the Company?s Homebuilding West segment. Sales incentives offered to homebuyers were $33,500 per home delivered in the six months ended May 31, 2011, or 12.1% as a percentage of home sales revenue, compared to $33,600 per home delivered in the same period last year, or 11.9% as a percentage of home sales revenue.  Gross margins on home sales were $217.4 million, or 19.6%, in the six months ended May 31, 2011, compared to gross margins on home sales of $241.8 million, or 20.0%, in the six months ended May 31, 2010. Gross margin percentage on home sales decreased slightly compared to last year primarily due to increased sales incentives offered to homebuyers as a percentage of revenues from home sales. Gross profits on land sales totaled $5.4 million in the six months ended May 31, 2011, compared to gross profits on land sales of $3.4 million in the six months ended May 31, 2010.Selling, general and administrative expenses decreased by $5.6 million, or 3%, in the six months ended May 31, 2011, compared to the same period last year. Selling, general and administrative expenses in the six months ended May 31, 2011 included $7.6 million related to expenses associated with remedying pre-existing liabilities of a previously acquired company offset by $8.0 million related to the receipt of a settlement discussed below. Selling, general and administrative expenses as a percentage of revenues from home sales increased to 15.5% in the six months ended May 31, 2011, from 14.7% in 2010, primarily due to lower revenues. Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was $11.1 million in the six months ended May 31, 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 six months ended May 31, 2010, Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was ($10.3) million. Lennar Homebuilding other income (expense), net, totaled $39.5 million in the six months ended May 31, 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 (expense), net, in the six months ended May 31, 2011 also included $5.1 million related to the favorable resolution of a joint venture and 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 (expense), net, included $8.4 million of valuation adjustments to the Company?s investments in Lennar Homebuilding?s unconsolidated entities. In the six months ended May 31, 2010, Lennar Homebuilding other income (expense), net, was $14.0 million, which included a pre-tax loss of $10.8 million related to the repurchase of senior notes through a tender offer, offset by other income and a $13.6 million pre-tax gain on the extinguishment of other debt.Homebuilding interest expense was $77.3 million in the six months ended May 31, 2011 ($32.0 million was included in cost of homes sold, $0.7 million in cost of land sold and $44.5 million in other interest expense), compared to $70.3 million in the six months ended May 31, 2010 ($33.7 million was included in cost of homes sold, $0.4 million in cost of land sold and $36.2 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.Lennar Financial ServicesOperating earnings for the Lennar Financial Services segment were $3.7 million in the six months ended May 31, 2011, compared to operating earnings of $12.8 million in the same period last year. The decrease in profitability was due primarily to decreased volume in both the segment?s mortgage and title operations. In addition, in the six months ended May 31, 2010, the Lennar Financial Services segment received $5.1 million of proceeds from the previous sale of a cable system.Rialto InvestmentsIn the six months ended May 31, 2011, operating earnings for the Rialto Investments segment were $45.7 million (which included $24.8 million of net earnings attributable to noncontrolling interests), compared to operating earnings of $13.7 million (which included $9.6 million of net earnings attributable to noncontrolling interests) in the same period last year. In the six months ended May 31, 2011, revenues in this segment were $76.2 million, which consisted primarily of interest income associated with the segment?s portfolio of real estate loans, compared to revenues of $34.9 million in the same period last year. In the six months ended May 31, 2011, Rialto Investments other income, net, was $28.5 million, which consisted primarily of gains from acquisition of real estate owned through foreclosure and a $4.7 million gain on the sale of investment securities. The segment also had equity in earnings (loss) from unconsolidated entities of $1.6 million in the six months ended May 31, 2011, consisting primarily of interest income, partially offset by unrealized losses related to the Company?s investment in the AB PPIP, compared to equity in earnings (loss) from unconsolidated entities of ($0.3) million in the same period last year. In the six months ended May 31, 2011, expenses in this segment were $60.6 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 $20.9 million in the same period last year.Corporate General and Administrative ExpensesCorporate general and administrative expenses were $44.0 million, or 3.3% as a percentage of total revenues, in the six months ended May 31, 2011, compared to $44.9 million, or 3.2% as a percentage of total revenues, in the six months ended May 31, 2010.Noncontrolling InterestsNet earnings attributable to noncontrolling interests were $22.4 million and $5.9 million, respectively, in the six months ended May 31, 2011 and 2010. Net earnings attributable to noncontrolling interests during both the six months ended May 31, 2011 and 2010 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, 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, 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 second quarter earnings will be held at 11:00 a.m. Eastern time on Thursday, June 23, 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 402-998-1610 and entering 5723593 as the confirmation number.LENNAR CORPORATION AND SUBSIDIARIESSelected Revenues and Operational Information(In thousands, except per share amounts)(unaudited)Three Months EndedSix Months EndedMay 31,May 31,2011201020112010Revenues:Lennar Homebuilding$662,476705,3281,129,1851,226,104Lennar Financial Services59,42274,536117,135127,901Rialto Investments42,59534,61776,21834,918  Total revenues$764,493814,4811,322,5381,388,923Lennar Homebuilding operating earnings $21,22529,46856,71334,923Lennar Financial Services operating earnings 2,49513,6533,67812,752Rialto Investments operating earnings 22,67814,66745,68013,708Corporate general and administrative expenses(20,598)(22,234)(43,950)(44,874)Earnings before income taxes25,80035,55462,12116,509Benefit (provision) for income taxes(953)11,0301,45222,602Net earnings (including net earnings attributable to noncontrolling interests)24,84746,58463,57339,111Less: Net earnings attributable to noncontrolling interests11,0626,86522,3825,915Net earnings attributable to Lennar $13,78539,71941,19133,196Average shares outstanding:Basic184,621183,012184,388182,836Diluted195,305186,392195,082184,547Earnings per share:Basic$0.070.210.220.18Diluted$0.070.210.220.18Supplemental information:Interest incurred (1)$50,18144,746100,05590,618EBIT (2):Net earnings attributable to Lennar$13,78539,71941,19133,196(Benefit) provision for income taxes953(11,030)(1,452)(22,602)Interest expense41,49237,10677,31770,305EBIT $56,23065,795117,05680,899(1)  Amount represents interest incurred related to Lennar 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 Ended    Six Months Ended   May 31,      May 31, 2011201020112010Lennar Homebuilding revenues:Sales of homes$649,782694,7581,107,6511,208,106Sales of land 12,69410,57021,53417,998Total revenues662,476705,3281,129,1851,226,104Lennar Homebuilding costs and expenses:Cost of homes sold524,036551,347890,235966,319Cost of land sold9,7938,56316,18214,638Selling, general and administrative96,88296,779172,057177,697Total costs and expenses630,711656,6891,078,4741,158,654Lennar Homebuilding operating margins31,76548,63950,71167,450Lennar Homebuilding equity in earnings (loss) from unconsolidated entities2,417(1,402)11,078(10,296)Lennar Homebuilding other income (expense), net 9,511(253)39,47113,950Other interest expense(22,468)(17,516)(44,547)(36,181)Lennar Homebuilding operating earnings $21,22529,46856,71334,923Lennar Financial Services revenues$59,42274,536117,135127,901Lennar Financial Services costs and expenses56,92760,883113,457115,149Lennar Financial Services operating earnings $2,49513,6533,67812,752Rialto Investments revenues$42,59534,61776,21834,918Rialto Investments costs and expenses32,27319,51460,62220,917Rialto Investments equity in earnings (loss) from unconsolidated entities(2,973)(436)1,552(293)Rialto Investments other income, net15,329-28,532-Rialto Investments operating earnings $22,67814,66745,68013,708LENNAR CORPORATION AND SUBSIDIARIESSummary of Deliveries and New Orders (Dollars in thousands)(unaudited)Three Months EndedSix Months EndedMay 31,May 31,2011201020112010Deliveries - Homes:East1,1389911,9611,600Central429504741821West4195687601,016Houston331465550811Other365384593668Total2,6822,9124,6054,916Of the total home deliveries listed above, 30 and 50, respectively, represent home deliveries from unconsolidated entities for the three and six months ended May 31, 2011, compared to 10 and 26 home deliveries from unconsolidated entities in the same periods last year. Deliveries - Dollar Value:East$ 265,985219,101452,294357,794Central89,555100,085155,619165,860West140,172185,891251,164361,221Houston76,565100,943125,229174,770Other98,13497,017158,584169,539Total$ 670,411703,0371,142,8901,229,184Of the total dollar value of home deliveries listed above, $20.6 million and $35.2 million, respectively, represent the dollar value of home deliveries from unconsolidated entities for the three and six months ended May 31, 2011, compared to $8.3 million and $21.1 million dollar value of home deliveries from unconsolidated entities in the same periods last year. New Orders - Homes:East1,2871,2532,2692,223Central513487854903West5305989181,052Houston419484685872Other455385745734Total3,2043,2075,4715,784Of the total new orders listed above, 35 and 56, respectively, represent new orders from unconsolidated entities for the three and six months ended May 31, 2011, compared to 37 and 46 new orders from unconsolidated entities in the same periods last year.New Orders - Dollar Value:East$ 306,616276,098527,227487,461Central110,754101,839181,874186,818West178,178192,871306,157356,228Houston94,049107,393153,702189,945Other117,25499,859199,431186,216Total$ 806,851778,0601,368,3911,406,668Of the total dollar value of new orders listed above, $21.6 million and $38.5 million, respectively, represent the dollar value of new orders from unconsolidated entities for the three and six months ended May 31, 2011, compared to $22.5 million and $30.6 million dollar value of new orders from unconsolidated entities in the same periods last year.LENNAR CORPORATION AND SUBSIDIARIESSummary of Backlog (Dollars in thousands)(unaudited)May 31,20112010Backlog - Homes:East1,0651,305Central367249West337372Houston380310Other321263Total2,4702,499Of the total homes in backlog listed above, 9 homes represents the backlog from unconsolidated entities at May 31, 2011, compared to 29 homes in backlog from unconsolidated entities at May 31, 2010.Backlog - Dollar Value:East$     266,192307,000Central79,39757,175West112,571139,517Houston87,38576,118Other88,14676,133Total$     633,691655,943Of the total dollar value of homes in backlog listed above, $5.4 million represents the backlog dollar value from unconsolidated entities at May 31, 2011, compared to $16.7 million of backlog dollar value from unconsolidated entities at May 31, 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.Supplemental Data(Dollars in thousands)(unaudited)May 31, November 30,May 31,201120102010Lennar Homebuilding debt$3,104,3173,128,1542,890,212Total stockholders' equity2,651,8452,608,9492,473,893Total capital$5,756,1625,737,1035,364,105Lennar Homebuilding debt to total capital53.9%54.5%53.9%Lennar Homebuilding debt$3,104,3173,128,1542,890,212Less: Lennar Homebuilding cash and cash equivalents945,1551,207,2471,087,698Net Lennar Homebuilding debt$2,159,1621,920,9071,802,514Net Lennar Homebuilding debt to total capital (1)44.9%42.4%42.2%(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