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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2001
Commission file number 1-11749
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LENNAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4337490
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 Northwest 107th Avenue, Miami, Florida 33172
(Address of principal executive offices) (Zip Code)
(305) 559-4000
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, par value 10c New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of January 31, 2002, registrant had outstanding 54,460,211 shares of
common stock and 9,700,462 shares of Class B common stock (which can be
converted into common stock). Of the total shares outstanding, 53,347,075
shares of common stock and 19,501 shares of Class B common stock, having a
combined aggregate market value (assuming the Class B shares were converted) on
that date of $2,959,176,639, were held by non-affiliates of the registrant.
Documents incorporated by reference:
Related
Section Documents
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III Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before March 30, 2002.
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PART I
Item 1. Business.
General Development of Business
We are one of the nation's largest homebuilders and a provider of
residential financial services. Our homebuilding operations include the sale
and construction of single-family attached and detached homes, as well as the
purchase, development and sale of residential land directly and through our
unconsolidated partnerships. Our financial services operations provide
mortgage financing, title insurance and closing services for both our
homebuyers and others, resell the residential mortgage loans it originates in
the secondary mortgage market, and also provide high-speed Internet access,
cable television and alarm monitoring services to residents of our communities
and others.
The following is a summary of our growth:
1954--We were founded as a Miami homebuilder.
1972--Entered the Arizona homebuilding market.
1986--Acquired Development Corporation of America in Florida.
1991--Entered the Texas homebuilding market.
1995--Entered the California homebuilding market through the acquisition of
Bramalea California, Inc.
1996--Expanded in California through our acquisition of Renaissance Homes,
Inc., significantly expanded our operations in Texas with the
acquisition of the assets and operations of Houston-based Village
Builders (a homebuilder) and Friendswood Development Company (a
developer of master-planned communities) and acquired Regency Title.
1997--Continued our expansion in California through homesite acquisitions
and unconsolidated partnership investments. We also acquired Pacific
Greystone Corporation which further expanded our operations in
California and Arizona and brought us into the Nevada homebuilding
market.
1998--Acquired the properties of two California homebuilders, ColRich
Communities and Polygon Communities, acquired a Northern California
homebuilder, Winncrest Homes and acquired North American Title.
1999--Acquired Southwest Land Title and Eagle Home Mortgage.
2000--Acquired U.S. Home Corporation which expanded our operations into New
Jersey, Maryland/Virginia, Minnesota, Ohio and Colorado and
strengthened our position in other states, and acquired Texas
Professional Title.
2002--Acquired Patriot Homes, a homebuilder in the Baltimore marketplace,
and expanded into the Carolinas with our acquisition of Don Galloway
Homes and the assets and operations of Sunstar Communities.
Financial Information about Operating Segments
We have two operating segments--homebuilding and financial services. The
financial information related to these operating segments is contained in Item
8.
2
Narrative Description of Business
HOMEBUILDING
Under the Lennar Family of Builders banner, we operate using the following
brand names: Lennar Homes, U.S. Home, Greystone Homes, Village Builders,
Renaissance Homes, Orrin Thompson Homes, Lundgren Bros., Winncrest Homes,
Sunstar Communities, Don Galloway Homes, Patriot Homes, Rutenberg Homes and
NuHome. Our active adult communities are primarily marketed under the Heritage
and Greenbriar brand names.
Through our own efforts and unconsolidated partnerships in which we have
interests, we are involved in all phases of planning and building in our
residential communities, including land acquisition, site planning,
preparation and improvement of land, and design, construction and marketing of
homes. We subcontract virtually all aspects of development and construction.
We primarily sell single-family attached and detached homes. The homes are
targeted primarily to first-time, move-up and active adult homebuyers. The
average sales price of a Lennar home was $237,000 in fiscal 2001.
Current Homebuilding Activities
Homes Delivered in
the Years Ended
November 30,
--------------------
Region 2001 2000 1999
- ------ ------ ------ ------
Florida.................................................... 6,620 5,361 4,241
Maryland/Virginia.......................................... 692 466 --
New Jersey................................................. 422 328 --
------ ------ ------
East Region.............................................. 7,734 6,155 4,241
------ ------ ------
Texas...................................................... 5,972 4,696 3,107
Minnesota.................................................. 745 472 --
Ohio....................................................... 21 35 --
------ ------ ------
Central Region........................................... 6,738 5,203 3,107
------ ------ ------
California................................................. 4,372 3,805 3,731
Colorado................................................... 1,524 984 --
Arizona.................................................... 1,944 1,568 1,064
Nevada..................................................... 792 521 446
------ ------ ------
West Region.............................................. 8,632 6,878 5,241
------ ------ ------
Subtotal................................................. 23,104 18,236 12,589
Unconsolidated partnerships................................ 795 342 17
------ ------ ------
Total.................................................... 23,899 18,578 12,606
====== ====== ======
Management and Operating Structure
We balance a local operating structure with centralized corporate level
management. Our local managers, who have significant experience both in the
homebuilding industry generally and in their particular markets, are
responsible for operating decisions regarding land identification, home
design, construction and marketing. Decisions related to our overall strategy,
acquisitions of land and businesses, financing, cash management and
information systems are centralized at the corporate level.
We view unconsolidated partnerships and similar entities as a means to both
expand our market opportunities and manage our risk. For additional
information about our unconsolidated partnerships, see Management's Discussion
and Analysis of Financial Condition and Results of Operations in Item 7.
Property Acquisition
In our homebuilding operations, we generally acquire land for the
development and construction of homes which we sell to homebuyers. We also
sell land to third parties. Land acquisitions are subject to strict
underwriting criteria and may be made directly or through partnerships with
other entities. Through unconsolidated partnerships, we reduce our risk and
the amount invested in owned land and increase our access
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to other land. Partnerships also, in some instances, help us acquire land to
which we could not obtain access, or could not obtain access on as favorable
terms, without the participation of a strategic partner.
In some instances, we acquire land through option contracts, which let us
defer purchasing land until we are ready to build homes on it. Most of our
land is not subject to mortgages; however, the majority of land acquired by
partnerships is subject to purchase money mortgages. We generally do not
acquire land for speculation. At November 30, 2001, we owned approximately
55,000 homesites and had access to an additional 73,000 homesites through
options or unconsolidated partnerships.
Construction and Development
We supervise and control the development and building of our residential
communities. We employ subcontractors for site improvements and virtually all
of the work involved in the construction of homes. In almost all instances,
the arrangements with our subcontractors commit the subcontractors to complete
specified work in accordance with written price schedules. These price
schedules normally change to meet changes in labor and material costs. We do
not own heavy construction equipment and only have a relatively small labor
force used to supervise development and construction and perform routine
maintenance and minor amounts of other work. We generally finance construction
and land development activities with cash generated from operations as well as
from borrowings under our working capital lines and issuances of public debt.
Marketing
We offer a diversified line of homes for first-time, move-up and active
adult homebuyers. With homes priced from below $100,000 to above one million
dollars and available in a variety of environments ranging from urban infill
communities to golf course communities, we are focused on providing homes for
a wide spectrum of buyers. Our unique dual marketing strategies of
"Everything's Included/SM/"and "Design Studio/SM/"provide customers with
flexibility to choose how they would like to purchase their new home. In our
Everything's Included/SM/ homes, we make the homebuying experience simple by
including desirable, top-of-the-line features as standard items. In our Design
Studio/SM/ homes, we provide an individualized homebuying experience and
personalized design consultation in our design studios, offering a diverse
selection of upgrades and options for a new home. We sell our homes primarily
from models that we have designed and constructed.
We employ sales associates who are paid salaries, commissions or both to
make on-site sales of homes. We also sell through independent brokers. We
advertise our communities in newspapers and other local and regional
publications, on billboards and through our web site, www.lennar.com. The web
site allows homebuyers to search for homes with specific design criteria in
their price range and desired location. In addition, we advertise our active
adult communities in areas where prospective active adult homebuyers live.
Quality Service
We employ a process which is intended to provide a positive experience for
each customer throughout the pre-sale, sale, building, closing and post-
closing periods. The participation of sales associates, on-site construction
supervisors and post-closing customer care associates, working in a team
effort, is intended to foster our reputation for quality service and
ultimately lead to enhanced customer retention and referrals.
Our "Heightened Awareness" program is a full-time focused initiative
designed to objectively evaluate and measure the quality of construction in
our communities. The purpose of this program is to ensure that the homes
delivered to our customers meet our high standards. Each of our communities is
inspected and reviewed on a regular basis by one of our trained associates.
This program is an example of our commitment to provide the finest homes to
our customers. In addition to our "Heightened Awareness" program, we obtain
independent surveys of selected customers through a third party consultant and
use the survey results to further improve our standard of quality and customer
satisfaction.
Competition
The housing industry is highly competitive. In our activities, we compete
with numerous developers and builders of various sizes, both national and
local, who are building homes in and near the areas where our communities are
located. Competition is on the basis of location, design, quality, amenities,
price, service and
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reputation. Sales of existing homes also provide competition. Some of our
principal national competitors include Centex Corporation, D.R. Horton, Inc.,
KB Home and Pulte Homes, Inc.
FINANCIAL SERVICES
Mortgage Financing
We provide conventional, FHA-insured and VA-guaranteed mortgage loans to
our homebuyers and others through our financial services subsidiaries: (1)
Universal American Mortgage Company in Florida, California, Arizona, Texas,
Nevada, Virginia, Maryland, New Jersey, Colorado, Minnesota, Ohio, North
Carolina and South Carolina; (2) Eagle Home Mortgage, Inc. in Washington,
Oregon, Utah, Arizona and Nevada and (3) AmeriStar Financial Services, Inc. in
California and Nevada. In 2001, our financial services subsidiaries provided
loans to 79% of our homebuyers who seek mortgage financing. Because of the
availability of mortgage loans from our financial services subsidiaries, as
well as independent mortgage lenders, we believe access to financing has not
been, and is not, a significant problem for most purchasers of our homes.
We sell the loans we originate into the secondary mortgage market,
generally on a servicing released, non-recourse basis. We have a corporate
risk management policy under which we hedge our interest rate risk on rate
locked loan commitments and loans held for sale against exposure to interest
rate fluctuations. We finance our mortgage loan activities with borrowings
under our financial services subsidiaries' warehouse line of credit or from
corporate liquidity when, on a consolidated basis, this enables us to minimize
our overall cost of funds.
Title Insurance and Closing Services
We arrange title insurance for, and provide closing services to, our
homebuyers and others. We provided these services in connection with
approximately 173,000 real estate transactions during 2001. We provide these
services through our various North American Title Company agency subsidiaries
in Arizona, California, Colorado, Florida and Texas and our title insurance
underwriters, North American Title Insurance Corporation in Florida and Texas
and North American Title Insurance Company in Arizona, California and
Colorado.
Strategic Technologies
Our subsidiary, Strategic Technologies, Inc., provides high-speed Internet
access, cable television and alarm monitoring services to residents of our
communities and others. At November 30, 2001, we had approximately 5,300 cable
television subscribers in California and approximately 10,600 alarm monitoring
customers in Florida and California.
RELATIONSHIP WITH LNR PROPERTY CORPORATION
In connection with the 1997 transfer of our commercial real estate
investment and management business to LNR Property Corporation ("LNR"), and
the spin-off of LNR to our stockholders, we entered into an agreement which,
among other things, prevents us from engaging at least until December 2002 in
any of the businesses in which LNR was engaged, or anticipated becoming
engaged, at the time of the spin-off, and prohibited LNR from engaging, at
least until December 2002, in any of the businesses in which we were engaged,
or anticipated becoming engaged, at the time of the spin-off (except in
limited instances in which our then activities or anticipated activities
overlap with LNR). Specifically, we are precluded, at least until December
2002, from engaging in the business of (i) acquiring and actively managing
commercial or residential multi-family rental real estate, other than as an
incident to, or otherwise in connection with, our homebuilding business, (ii)
acquiring portfolios of commercial mortgage loans or real estate assets
acquired through foreclosures of mortgage loans, other than real estate
acquired as sites of homes to be built or sold as part of our homebuilding
business, (iii) making or acquiring mortgage loans, other than mortgage loans
secured by detached or attached homes or residential condominium units, (iv)
constructing office buildings or other commercial or industrial buildings,
other than small shopping centers, professional office buildings and similar
facilities which will be adjuncts to our residential developments, (v)
purchasing commercial mortgage-backed securities or real estate asset-backed
securities or (vi) acting as a servicer or special servicer with regard to
securitized commercial mortgage pools.
We are not, however, prevented from owning or leasing office buildings in
which we occupy a majority of the space; acquiring securities backed by pools
of residential mortgages; acquiring an entity which, when it is
5
acquired, is engaged in one of the prohibited activities as an incidental part
of its activities; owning as a passive investor an interest of less than 10%
in a publicly traded company which is engaged in a prohibited business;
acquiring commercial paper or short-term debt instruments of entities engaged
in one or more of the prohibited businesses; or owning an interest in, and
managing, Lennar Land Partners.
We and LNR are separate publicly-traded companies and neither of us has any
financial interest in the other except for partnerships in which we both have
investments. Stuart Miller, our President and Chief Executive Officer, is the
Chairman of the Board of Directors of LNR, and Steven Saiontz, one of our
Directors, is the Chief Executive Officer and a Director of LNR. In addition,
Leonard Miller, our Chairman of the Board of Directors, owns stock which gives
him voting control of both companies and is Chairman of the Executive
Committee and a Director of LNR, for which he receives a fee. There are
provisions both in our by-laws and in those of LNR requiring approval by an
Independent Directors Committee of any significant transactions between us and
LNR or any of its subsidiaries.
For information about our partnerships with LNR, see Management's
Discussion and Analysis of Financial Condition and Results of Operations in
Item 7.
REGULATION
Homes and residential communities that we build must comply with state and
local laws and regulations relating to, among other things, zoning, treatment
of waste, construction materials which must be used, density requirements,
building design and minimum elevation of properties. These include laws
requiring use of construction materials which reduce the need for energy-
consuming heating and cooling systems. These laws and regulations are subject
to frequent change and often increase construction costs. In some cases, there
are laws which require that commitments to provide roads and other offsite
infrastructure be in place prior to the commencement of new construction.
These laws and regulations are usually administered by individual counties and
municipalities and may result in fees and assessments or building moratoriums.
In addition, certain new development projects are subject to assessments for
schools, parks, streets and highways and other public improvements, the costs
of which can be substantial.
The residential homebuilding industry also is subject to a variety of
local, state and federal statutes, ordinances, rules and regulations
concerning the protection of health and the environment. Environmental laws
and conditions may result in delays, may cause us to incur substantial
compliance and other costs, and can prohibit or severely restrict homebuilding
activity in environmentally sensitive regions or areas.
In recent years, several cities and counties in which we have developments
have submitted to voters "slow growth" initiatives and other ballot measures
which could impact the affordability and availability of homes and land within
those localities. Although many of these initiatives have been defeated, we
believe that if similar initiatives were approved, residential construction by
us and others within certain cities or counties could be seriously impacted.
In order to make it possible for purchasers of some of our homes to obtain
FHA-insured or VA-guaranteed mortgages, we must construct those homes in
compliance with regulations promulgated by those agencies.
We have registered condominium communities with the appropriate authorities
in Florida and California. Sales in other states would require compliance with
laws in those states regarding sales of condominium homes.
Our title insurance agency subsidiaries must comply with applicable
insurance laws and regulations. Our mortgage financing subsidiaries must
comply with applicable real estate lending laws and regulations.
The mortgage banking and title insurance subsidiaries are licensed in the
states in which they do business and must comply with laws and regulations in
those states regarding mortgage banking and title insurance companies. These
laws and regulations include provisions regarding capitalization, operating
procedures, investments, forms of policies and premiums.
6
CAUTIONARY STATEMENTS
Some of the statements in this Report are "forward-looking statements" as
that term is defined in the Private Securities Litigation Reform Act of 1995.
By their nature, forward-looking statements involve risks, uncertainties and
other factors that may cause actual results to differ materially from those
which the statements anticipate.
PARTICULAR FACTORS WHICH COULD AFFECT US
The following factors in particular could significantly affect our
operations and financial results.
The residential homebuilding industry is cyclical and is highly sensitive to
changes in economic conditions.
The residential homebuilding industry is cyclical and is highly sensitive
to changes in general economic conditions, such as levels of employment,
consumer confidence and income, availability of financing, interest rate
levels and demand for housing. The resale market for used homes, including
foreclosed homes, also affects the sale of new homes.
The residential homebuilding industry has, from time-to-time, experienced
fluctuating lumber prices and supply, as well as shortages of other materials
and labor, including insulation, drywall, concrete, carpenters, electricians
and plumbers. Delays in construction of homes due to these factors or due to
weather conditions could have an adverse effect upon our operations.
Inflation can increase the cost of building materials and labor and other
construction related costs. Conversely, deflation can reduce the value of our
land inventory and make it more difficult to include the full cost of
previously purchased land in home sale prices.
Customers may be unwilling or unable to purchase our homes at times when
mortgage financing costs are high.
Virtually all of our homebuyers finance their acquisitions through our
financial services subsidiaries or third-party lenders. In general, housing
demand is adversely affected by increases in interest rates and by decreases
in the availability of mortgage financing. If effective mortgage interest
rates increase and the ability or willingness of prospective buyers to finance
home purchases is adversely affected, our operating results may be negatively
affected. Our homebuilding activities also are dependent upon the availability
and cost of mortgage financing for buyers of homes currently owned by
potential purchasers of our homes who cannot purchase our homes until they
sell their current homes.
A number of things can cause our operating results to vary.
We have historically experienced, and expect to continue to experience,
variability in operating results on a quarterly basis. Factors which may
contribute to this variability include, but are not limited to:
. the timing of home deliveries and land sales;
. the timing of receipt of regulatory approvals for the construction of
homes;
. the condition of the real estate market and general economic conditions;
. the cyclical nature of the homebuilding and financial services
industries;
. prevailing interest rates and availability of mortgage financing;
. the increase in the number of homes available for sale in the
marketplace;
. pricing policies of our competitors;
. the timing of the opening of new residential communities;
. weather conditions; and
. the cost and availability of materials and labor.
Our historical financial performance is not necessarily a meaningful
indicator of future results. We expect our financial results to continue to
vary from quarter to quarter.
We depend on key personnel.
Our success depends to a significant degree on the efforts of our senior
management. Our operations may be adversely affected if certain members of
senior management cease to be active in our Company. We have designed our
compensation structure and employee benefit programs to encourage long-term
employment by executive officers.
7
EMPLOYEES
At November 30, 2001, we employed 7,728 individuals of whom 4,780 were
involved in homebuilding operations and 2,948 were involved in financial
services operations. We do not have collective bargaining agreements relating
to any of our employees. However, some of the subcontractors we use have
employees who are represented by labor unions.
Item 2. Properties.
For information about properties we own for use in our homebuilding
activities, see Item 1.
We lease and maintain our executive offices, financial services subsidiary
headquarters, certain mortgage and title branches and Miami-Dade County,
Florida homebuilding office in an office complex we built which is now owned
by an independent third party. The leases for these offices expire in 2009.
Our other homebuilding and financial services offices are located in the
markets where we conduct business, generally in our communities or in leased
space.
Item 3. Legal Proceedings.
We are parties to various claims and lawsuits which arise in the ordinary
course of business. Although the specific allegations in the lawsuits differ,
most of them involve claims that we failed to construct buildings in
particular communities in accordance with plans and specifications or
applicable construction codes and seek reimbursement for sums allegedly needed
to remedy the alleged deficiencies, or assert contract issues or relate to
personal injuries. Lawsuits of these types are common within the homebuilding
industry. We do not believe that these claims or lawsuits will have a material
effect on our business, financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters.
Common Stock Prices Cash Dividends
New York Stock Exchange Per Share
-------------------------- ---------------------------
Fiscal Quarter High/Low Price Common Stock Class B
- -------------- -------------------------- ------------- -------------
2001 2000 2001 2000 2001 2000
First.................... $40.75--31.81 18.63--15.25 1 1/4c 1 1/4c 1 1/8c 1 1/8c
Second................... $46.69--33.80 21.75--16.25 1 1/4c 1 1/4c 1 1/8c 1 1/8c
Third.................... $49.88--35.02 29.44--17.88 1 1/4c 1 1/4c 1 1/8c 1 1/8c
Fourth................... $45.44--31.04 34.88--25.63 1 1/4c 1 1/4c 1 1/8c 1 1/8c
As of November 30, 2001, there were approximately 2,000 holders of record
of our common stock.
8
Item 6. Selected Financial Data.
At or for the Years Ended November 30,
--------------------------------------------------
2001 2000 1999 1998 1997
---------- --------- --------- --------- ---------
(Dollars in thousands, except per share amounts)
Results of Operations:
Revenues:
Homebuilding............... $5,603,947 4,390,034 2,849,207 2,204,428 1,208,570
Financial services......... $ 425,354 316,934 269,307 212,437 94,512
Total revenues............. $6,029,301 4,706,968 3,118,514 2,416,865 1,303,082
Operating earnings:
Homebuilding............... $ 785,626 480,796 340,803 283,369 120,240
Financial services......... $ 89,131 43,595 31,096 33,335 35,545
Corporate general and
administrative expenses... $ 75,831 50,155 37,563 28,962 15,850
Earnings from continuing
operations before income
taxes..................... $ 679,423 375,635 285,477 240,114 85,727
Earnings from continuing
operations................ $ 417,845 229,137 172,714 144,068 50,605
Earnings from discontinued
operations................ $ -- -- -- -- 33,826
Net earnings............... $ 417,845 229,137 172,714 144,068 84,431
Per share amounts
(diluted):
Earnings from continuing
operations................ $ 6.01 3.64 2.74 2.49 1.34
Earnings from discontinued
operations................ $ -- -- -- -- 0.89
Net earnings per share..... $ 6.01 3.64 2.74 2.49 2.23
Cash dividends per share--
common stock.............. $ .05 .05 .05 .05 .088
Cash dividends per share--
Class B common stock...... $ .045 .045 .045 .045 .079
Financial Position:
Total assets............... $4,714,426 3,777,914 2,057,647 1,917,834 1,343,284
Debt:
Homebuilding............... $1,505,255 1,254,650 523,661 530,630 527,303
Financial services......... $ 707,077 448,860 278,634 268,208 134,392
Stockholders' equity....... $1,659,262 1,228,580 881,499 715,665 438,999
Shares outstanding (000s).. 64,015 62,731 57,917 58,151 53,160
Stockholders' equity per
share..................... $ 25.92 19.58 15.22 12.31 8.26
Delivery and Backlog
Information
(including unconsolidated
partnerships):
Number of homes delivered.. 23,899 18,578 12,606 10,777 6,702
Backlog of home sales
contracts................. 8,339 8,363 2,903 4,100 3,318
Dollar value of backlog.... $1,982,000 2,072,000 662,000 840,000 665,000
As a result of the October 1997 spin-off of our commercial real estate
investment and management business, including the Investment Division business
segment, the selected financial data for 1997 reflects our Investment Division
as a discontinued operation.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Some of the statements contained in the following Management's Discussion and
Analysis of Financial Condition and Results of Operations are "forward-looking
statements" as that term is defined in the Private Securities Litigation
Reform Act of 1995. By their nature, forward-looking statements involve risks,
uncertainties and other factors that may cause actual results to differ
materially from those which the statements anticipate. Factors which may
affect our results include, but are not limited to, changes in general
economic conditions, the market for homes generally or in areas where we have
developments, the availability and cost of land suitable for residential
development, materials prices, labor costs, interest rates, consumer
confidence, competition, environmental factors and government regulations
affecting our operations.
9
RESULTS OF OPERATIONS
Overview
We achieved record revenues, profits and earnings per share in 2001. Our
net earnings in 2001 were $417.8 million, or $6.01 per share diluted, compared
to $229.1 million, or $3.64 per share diluted, in 2000. The increase was
primarily a result of our acquisition of U.S. Home Corporation ("U.S. Home"),
which contributed a full year of earnings in 2001, compared to seven months
contributed in 2000. With $824 million of cash and our $1 billion revolving
credit facilities fully paid down to zero, our net homebuilding debt to total
capital ratio (debt is net of homebuilding cash) was 29.1% at November 30,
2001, compared to 44.0% last year. Our record earnings combined with a strong
balance sheet contributed to a return on net capital (debt is net of
homebuilding cash) of approximately 20% in 2001, compared to approximately 14%
in 2000.
Homebuilding
Our Homebuilding Division sells and constructs homes primarily for entry
level, move-up and active adult homebuyers. We also use a dual marketing
strategy in which we sell homes under both our "Everything's Included/SM/" and
"Design Studio/SM/" programs. Our land operations include the purchase,
development and sale of land for our homebuilding activities, as well as the
sale of land to third parties. In certain circumstances, we diversify our
operations through strategic alliances and minimize our risk by forming
partnerships with other entities. The following tables set forth selected
financial and operational information for the years indicated. The results of
U.S. Home are included in the information since its acquisition in May 2000.
Selected Homebuilding Division Financial Data
Years Ended November 30,
--------------------------------
2001 2000 1999
---------- --------- ---------
(Dollars in thousands,
except average sales price)
Revenues:
Sales of homes.............................. $5,467,548 4,118,549 2,671,744
Sales of land and other revenues............ 109,348 258,145 157,981
Equity in earnings from unconsolidated part-
nerships................................... 27,051 13,340 19,482
---------- --------- ---------
Total revenues............................. 5,603,947 4,390,034 2,849,207
Costs and expenses:
Cost of homes sold.......................... 4,159,107 3,277,183 2,105,422
Cost of land and other expenses............. 86,010 220,948 130,432
Selling, general and administrative......... 573,204 411,107 272,550
---------- --------- ---------
Total costs and expenses................... 4,818,321 3,909,238 2,508,404
---------- --------- ---------
Operating earnings.......................... $ 785,626 480,796 340,803
========== ========= =========
Gross margin on home sales.................. 23.9% 20.4% 21.2%
SG&A expenses as a % of revenues from home
sales...................................... 10.5% 10.0% 10.2%
---------- --------- ---------
Operating margin as a % of revenues from
home sales................................. 13.4% 10.4% 11.0%
---------- --------- ---------
Average sales price......................... $ 237,000 226,000 212,000
========== ========= =========
10
Summary of Home and Backlog Data By Region
Years Ended November 30,
------------------------------
2001 2000 1999
----------- --------- -------
(Dollars in thousands)
Deliveries
East............................................. 7,734 6,155 4,241
Central.......................................... 6,738 5,203 3,107
West............................................. 8,632 6,878 5,241
----------- --------- -------
Subtotal........................................ 23,104 18,236 12,589
Unconsolidated partnerships...................... 795 342 17
----------- --------- -------
Total........................................... 23,899 18,578 12,606
=========== ========= =======
New Orders
East............................................. 8,058 5,676 3,788
Central.......................................... 6,760 5,089 3,056
West............................................. 8,224 6,770 4,536
----------- --------- -------
Subtotal........................................ 23,042 17,535 11,380
Unconsolidated partnerships...................... 833 312 29
----------- --------- -------
Total........................................... 23,875 17,847 11,409
=========== ========= =======
Backlog--Homes
East............................................. 3,092 2,768 1,091
Central.......................................... 1,949 1,632 652
West............................................. 3,043 3,451 1,148
----------- --------- -------
Subtotal........................................ 8,084 7,851 2,891
Unconsolidated partnerships...................... 255 512 12
----------- --------- -------
Total........................................... 8,339 8,363 2,903
=========== ========= =======
Backlog Dollar Value
(including unconsolidated partnerships) $1,982,000 2,072,000 662,000
=========== ========= =======
At November 30, 2001, our market regions consisted of the following states:
East: Florida, Maryland/Virginia and New Jersey. Central: Texas, Minnesota and
Ohio. West: California, Colorado, Arizona and Nevada. In addition, we have
unconsolidated partnerships in Georgia, Michigan, Missouri and North Carolina.
Revenues from sales of homes increased 33% in 2001 and 54% in 2000 compared
to the previous years as a result of a 27% increase and a 45% increase in the
number of home deliveries, and a 5% increase and a 7% increase in the average
sales price in 2001 and 2000, respectively. New home deliveries were higher
primarily due to the inclusion of a full year of U.S. Home's homebuilding
activity in 2001, compared to seven months inclusion in 2000. The average
sales price of homes delivered increased in 2001 and 2000 primarily due to an
increase in the average sales price in most of our existing markets, combined
with changes in our product mix.
During 2001, U.S. Home and its subsidiaries contributed 40% of both our
homebuilding revenues and our homebuilding expenses. During 2000, during which
we owned U.S. Home and its subsidiaries for seven months, U.S. Home and its
subsidiaries contributed 31% of our homebuilding revenues and 32% of our
homebuilding expenses.
Gross margin percentages on home sales were 23.9%, 20.4% and 21.2% in 2001,
2000 and 1999, respectively. The increase in 2001 compared to 2000 was due to
improved operational efficiencies and strength in the homebuilding markets in
which we operate. The decrease in the gross margin percentage in 2000 compared
to 1999 was impacted by purchase accounting associated with the acquisition of
U.S. Home. The gross margin percentage in 2000 would have been 21.3% excluding
the effect of purchase accounting.
Selling, general and administrative expenses as a percentage of revenues
from home sales increased to 10.5% in 2001 compared to 10.0% and 10.2% in 2000
and 1999, respectively. The increase in 2001 was primarily due to higher
personnel-related expenses, compared to 2000. We provide incentives to our
associates to achieve
11
the highest level of financial performance and combined with our record
results in 2001, resulted in significantly higher bonuses when compared to
2000. The improvement in 2000 compared to 1999 resulted primarily from the
increased volume and efficiencies realized from the acquisition of U.S. Home
in May 2000.
Revenues from land sales totaled $87.2 million in 2001, compared to $243.5
million in 2000 and $150.3 million in 1999. Gross profits from land sales
totaled $4.6 million, or a 5.2% margin, in 2001, compared to $27.6 million, or
an 11.3% margin, in 2000 and $22.2 million, or a 14.8% margin, in 1999. Equity
in earnings from unconsolidated partnerships increased to $27.1 million in
2001, compared to $13.3 million in 2000 and $19.5 million in 1999. Margins
achieved on sales of land and equity in earnings from unconsolidated
partnerships may vary significantly from period to period depending on the
timing of land sales by us and our unconsolidated partnerships.
New home orders increased 34% in 2001 and 56% in 2000 compared to the
previous years. The increases in 2001 and 2000 were due to the inclusion of a
full year of U.S. Home's homebuilding activity in 2001 and seven months of
U.S. Home's homebuilding activity in 2000. Backlog dollar value was $2.0
billion at November 30, 2001, compared to $2.1 billion at November 30, 2000,
due primarily to lower new orders in the months immediately following the
tragic events of September 11, 2001.
Financial Services
Our Financial Services Division provides mortgage financing, title
insurance and closing services for both our homebuyers and others. The
Division also resells the residential mortgage loans it originates in the
secondary mortgage market and provides high-speed Internet access, cable
television and alarm monitoring services for both our homebuyers and other
customers. The following table sets forth selected financial and operational
information relating to our Financial Services Division. The results of U.S.
Home's financial services operations are included in the information since its
acquisition in May 2000.
Years Ended November 30,
--------------------------------
2001 2000 1999
---------- --------- ---------
(Dollars in thousands)
Revenues..................................... $ 425,354 316,934 269,307
Costs and expenses........................... 336,223 273,339 238,211
---------- --------- ---------
Operating earnings........................... $ 89,131 43,595 31,096
---------- --------- ---------
Dollar value of mortgages originated......... $5,225,568 3,240,252 2,162,479
---------- --------- ---------
Number of mortgages originated............... 30,600 20,800 14,900
---------- --------- ---------
Mortgage capture rate of Lennar homebuyers... 79% 73% 63%
---------- --------- ---------
Number of title transactions................. 173,000 120,000 139,000
========== ========= =========
Operating earnings from our Financial Services Division increased to $89.1
million in 2001 compared to $43.6 million and $31.1 million in 2000 and 1999,
respectively. The increase in 2001 was partially attributable to pretax
earnings of approximately $16 million primarily related to the sale of our
retained mortgage servicing rights. Additionally, the increase reflects the
successful operational efficiencies which resulted from the combination of our
and U.S. Home's mortgage operations under the Universal American Mortgage
banner and the consolidation of our title operations under the North American
Title banner. The increase also reflects a greater level of refinance activity
and a higher capture rate of our homebuyers as well as a full year of earnings
contribution from U.S. Home in 2001. The increase in 2000 compared to 1999 was
primarily due to the seven months of earnings contribution from U.S. Home. The
earnings contribution from U.S. Home represented 26% of the Division's
operating earnings in 2001 and 28% of the Division's operating earnings in
2000.
Corporate General and Administrative
Corporate general and administrative expenses as a percentage of total
revenues were 1.3% in 2001 compared to 1.1% and 1.2% in 2000 and 1999,
respectively.
12
Interest
Interest expense was $119.5 million, or 2.0% of total revenues, in 2001,
$98.6 million, or 2.1% of total revenues, in 2000 and $48.9 million, or 1.6%
of total revenues, in 1999. Interest incurred was $127.9 million, $117.4
million and $54.6 million in 2001, 2000 and 1999, respectively. The average
rates for interest incurred were 7.6%, 6.2% and 6.2% in 2001, 2000 and 1999,
respectively. The average debt outstanding was $1.5 billion, $1.4 billion and
$0.8 billion in 2001, 2000 and 1999, respectively.
FINANCIAL CONDITION AND CAPITAL RESOURCES
At November 30, 2001, we had available cash of $824.0 million, compared to
$287.6 million at the end of fiscal 2000. The increase in cash was primarily
due to $417.8 million of net earnings generated from operations during 2001.
Cash flows provided by operating activities in 2001 were reduced by financial
services loans held for sale or disposition of $211.1 million and $57.1
million in receivables. We sell the loans we originate into the secondary
mortgage market, generally within thirty days of the closing of the loan. The
cash related to these loans and receivables was primarily received in December
2001 and was used to pay down our warehouse lines of credit. Additionally,
although inventories decreased $223.3 million in 2000, they increased $130.7
million in 2001, as we positioned ourselves for future growth.
Cash provided by investing activities was $1.9 million in 2001, compared to
cash used in investing activities of $186.7 million in 2000. In 2001, $10.8
million was provided by the sale of substantially all of our mortgage
servicing rights and $5.6 million related to net distributions by
unconsolidated partnerships in which we invest. This generation of cash was
offset by $13.1 million of net additions to operating properties and
equipment. In 2000, $158.4 million of cash was used in the acquisitions of
properties and businesses, which included $152.4 million used for the
acquisition of U.S. Home.
We finance our land acquisition and development activities, construction
activities, financial services activities and general operating needs
primarily with cash generated from operations, as well as cash borrowed under
revolving credit facilities. In addition, we have in recent years sold
convertible and non-convertible debt into public markets, and we have an
effective Securities Act registration statement under which we could sell to
the public up to $970 million of debt securities, common stock or preferred
stock. We also buy land under option agreements, which permit us to acquire
portions of properties when we are ready to build homes on them. The financial
risks of adverse market conditions associated with land holdings is managed by
prudent underwriting of land purchases in areas we view as desirable growth
markets, careful management of the land development process, limitation of
risk by using partners to share the costs of purchasing and developing land
and obtaining access to land through option arrangements.
Our senior secured credit facilities provide us with up to $1.4 billion of
financing. The credit facilities consist of a $715 million five-year revolving
credit facility, a $300 million 364-day revolving credit facility and a $400
million term loan B. We may elect to convert borrowings under the 364-day
revolving credit facility to a term loan which would mature in May 2005. At
November 30, 2001, there was $395 million outstanding under the term loan B
and we had paid down our revolving credit facilities to zero.
In the second quarter of 2001, we issued, for gross proceeds of
approximately $230 million, zero-coupon convertible senior subordinated notes
due 2021 ("Notes") with a face amount at maturity of approximately
$633 million. The Notes were issued at a price of $363.46 per $1,000 face
amount at maturity, which equates to a yield to maturity over the life of the
Notes of 5.125%. Proceeds from the offering, after underwriting discount, were
approximately $224 million. We used the proceeds to repay amounts outstanding
under our revolving credit facilities and added the balance of the net
proceeds to our working capital. The Notes are convertible into our common
stock at any time, if the sale price of our common stock exceeds certain
thresholds or in other specified instances, at the rate of approximately 6.4
shares per $1,000 face amount at maturity, or a total of approximately 4
million shares. The conversion ratio equates to an initial conversion price of
$56.93 per share (when our stock price was $43.13 per share). These shares
will be included in the calculation of our diluted earnings per share if the
average closing price of our common stock over the last twenty trading days of
each quarter exceeds 110% of the accreted conversion price. This calculation
equated to $64.79 per share at November 30, 2001. Holders have the option to
require us to repurchase the Notes on any of the fifth, tenth, or fifteenth
anniversaries of the issue date for the initial issue price plus accrued yield
to the purchase date. We have the option to satisfy the repurchases with any
combination of cash and/or shares of common stock. We have the option to
redeem the
13
Notes, in cash, at any time after the fifth anniversary for the initial issue
price plus accrued yield to redemption. We will pay contingent interest on the
Notes during specified six-month periods beginning on April 4, 2006 if the
market price of the Notes exceeds specified levels. At November 30, 2001, the
carrying value of the outstanding Notes, net of unamortized original issue
discount, was $235.9 million.
As a result of the U.S. Home acquisition, holders of U.S. Home's publicly-
held notes totaling $525 million were entitled to require U.S. Home to
repurchase the notes for 101% of their principal amount within 90 days after
the transaction was completed. Independent of that requirement, in April 2000,
we made a tender offer for all of the notes and a solicitation of consents to
modify provisions of the indentures relating to the notes. As a result of the
tender offer and required repurchases after the acquisition, we paid
approximately $520 million in 2000, which includes tender and consent fees,
for $508 million of U.S. Home's notes.
In May 2000, we issued $325 million of 9.95% senior notes due 2010 at a
price of 92.313% to finance a portion of the purchase price of U.S. Home's
publicly-held notes that were tendered in response to our offer and consent
solicitation in April 2000, and to pay associated costs and expenses. The
senior notes are guaranteed on a joint and several basis by substantially all
of our subsidiaries, other than subsidiaries engaged in mortgage and
reinsurance activities. Proceeds from the offering, after underwriting
discount and expenses, were approximately $295 million. At November 30, 2001,
the carrying amount of the senior notes was $301.3 million.
In February 1999, we issued $282 million of 7 5/8% senior notes. The senior
notes are due in 2009 and were issued for the purpose of reducing amounts
outstanding under revolving credit facilities and redeeming outstanding 10
3/4% notes. Proceeds from the offering, after underwriting and market
discounts, expenses and settlement of a related interest rate hedge agreement,
were approximately $266 million. The senior notes are collateralized by the
stock of certain of our subsidiaries. In March 1999, we redeemed all of the
outstanding 10 3/4% senior notes due 2004 of one of our subsidiaries,
Greystone Homes, Inc., at a price of 105.375% of the principal amount
outstanding plus accrued interest. Cash paid to redeem the notes was $132
million, which approximated their carrying value. At November 30, 2001, the
carrying value of the 7 5/8% senior notes was $271.5 million.
In July 1998, we issued, for $229 million, zero-coupon senior convertible
debentures due 2018 (the "Debentures") with a face amount at maturity of $493
million. The Debentures have an effective interest rate of 3 7/8%. The
Debentures are convertible at any time into our common stock at the rate of
12.3768 shares per $1,000 face amount at maturity. If the Debentures are
converted during the first five years, we may elect to pay cash equal to the
fair value of the common stock at the time of the conversion. Holders have the
option to require us to repurchase the Debentures on any of the fifth, tenth
or fifteenth anniversaries of the issue date for the initial issue price plus
accrued original issue discount. We have the option to satisfy the repurchases
with any combination of cash and/or shares of our common stock. We have the
option to redeem the Debentures, in cash, at any time after the fifth
anniversary for the initial issue price plus accrued original issue discount.
The Debentures are collateralized by the stock of certain of our subsidiaries.
At November 30, 2001, the carrying value of outstanding Debentures, net of
unamortized original issue discount, was $256.9 million.
Our ratio of net homebuilding debt to total capital was 29.1% at November
30, 2001, compared to 44.0% at November 30, 2000. The decrease primarily
resulted from cash generated by our operations during 2001. In addition to the
use of capital in our ordinary homebuilding and financial services activities,
we will continue to actively evaluate various other uses of capital which fit
into our homebuilding and financial services strategies and appear to meet our
profitability and return on capital requirements. This may include
acquisitions of or investments in other entities. These activities may be
funded through any combination of our credit facilities, cash generated from
operations, sales of assets or the issuance of public debt, common stock or
preferred stock.
Our Financial Services Division finances its mortgage loan activities by
pledging them as collateral for borrowings under a line of credit totaling
$500 million. Borrowings under the financial services line of credit were
$483.2 million and $339.4 million at November 30, 2001 and 2000, respectively.
During 2001, we sold substantially all of our retained mortgage servicing
rights and realized a pretax profit of approximately $13 million.
We have various interest rate swap agreements which effectively convert
variable interest rates to fixed interest rates on approximately $400 million
of outstanding debt related to our homebuilding operations. The interest rate
swaps mature at various dates through 2007 and fix the LIBOR index (to which
certain of our debt
14
interest rates are tied) at an average interest rate of 6.6% at November 30,
2001. The net effect on our operating results is that interest on the
variable-rate debt being hedged is recorded based on fixed interest rates.
Counterparties to each of the above agreements are major financial
institutions. At November 30, 2001, the fair value of the interest rate swaps,
net of tax, was a $19.3 million liability. Our Financial Services Division, in
the normal course of business, uses derivative financial instruments to reduce
our exposure to fluctuations in interest rates. The Division enters into
forward commitments and option contracts to protect the value of loans held
for sale or disposition from increases in market interest rates. We do not
anticipate that we will suffer credit losses from counterparty non-
performance.
Our 2000 Stock Option and Restricted Stock Plan (the "Plan") provides for
the granting of stock options and stock appreciation rights and awards of
restricted common stock to key officers, employees and directors. The exercise
prices of stock options and stock appreciation rights are not less than the
market value of the common stock on the date of the grant. No options granted
under the Plan may be exercisable until at least six months after the date of
the grant. Thereafter, exercises are permitted in installments determined when
the options are granted. Each stock option and stock appreciation right will
expire on a date determined at the time of the grant, but not more than 10
years after the date of the grant. At November 30, 2001, 835,000 shares of
restricted stock were outstanding under the Plan. The stock was valued based
on its market price on the date of grant. The grants vest over 5 years.
Unearned compensation arising from the restricted stock grants is amortized to
expense over the period of restrictions and is shown as a reduction of
stockholders' equity in the consolidated balance sheets.
In June 2001, our Board of Directors increased our previously authorized
stock repurchase program to permit future purchases of up to 10 million shares
of our outstanding common stock. We may repurchase these shares in the open
market from time-to-time. During 2001, we did not repurchase any of our
outstanding common stock. As of November 30, 2000, under prior approvals, we
had repurchased approximately 9.8 million shares of our outstanding common
stock for an aggregate purchase price of approximately $158.9 million, or $16
per share.
We have shelf registration statements under the Securities Act of 1933, as
amended, relating to up to $970 million of equity or debt securities which we
may sell for cash and up to $400 million of equity or debt securities which we
may issue in connection with acquisitions of companies or interests in them,
businesses, or assets. As of November 30, 2001, no securities had been issued
under these registration statements.
In March 1998, we entered into an equity draw-down agreement with a major
international banking firm (the "Firm") under which we have the option to sell
common stock, up to proceeds of $120 million, to the Firm in increments of up
to $15 million (or such higher amount as may be agreed to by the parties) per
month. In the event we elect to sell common stock, the sales price is equal to
98% of the average of the daily high and low stock price from time-to-time. As
of November 30, 2001, we had issued 1.1 million shares under the agreement
resulting in proceeds to us of $36 million, all of which occurred in fiscal
1998.
We believe we maintain excellent relationships with the financial
institutions participating in our financing arrangements and have no reason to
believe that these relationships will not continue in the future. Based on our
current financial condition and credit relationships, we believe that our
operations and borrowing resources will provide for our current and long-term
capital requirements at our anticipated levels of growth.
Investments in Unconsolidated Partnerships
We frequently enter into partnerships that acquire and develop land for our
homebuilding operations or for sale to third parties. Through partnerships, we
reduce and share our risk and the amount invested in land while increasing
access to potential future homesites. The use of partnerships also, in some
instances, enables us to acquire land to which we could not otherwise obtain
access, or could not obtain access on as favorable terms, without the
participation of a strategic partner. Our partners generally are third party
homebuilders, land sellers seeking a share of the profits from development of
the land or real estate professionals who do not have the capital and/or
expertise to develop properties by themselves. While we view the use of
unconsolidated partnerships as beneficial to our homebuilding activities, we
do not view them as essential to those activities.
15
Many of the partnerships in which we invest are accounted for by the equity
method of accounting. At November 30, 2001, we had ownership interests of
between 10% to 50% in these unconsolidated partnerships. In many instances, we
are appointed as the day-to-day manager of the partnerships and receive fees
for performing this function. During 2001, 2000 and 1999, we received
management fees and reimbursement of expenses totaling $26.1 million, $9.7
million, and $6.2 million, respectively, from unconsolidated partnerships in
which we had interests. We may obtain options or other arrangements under
which we can purchase portions of the land held by the unconsolidated
partnerships. Option prices are generally negotiated prices that approximate
fair value when we receive the options. During 2001, 2000 and 1999, $232.6
million, $134.6 million, and $111.3 million, respectively, of the
unconsolidated partnerships' revenues were from land sales to our homebuilding
divisions.
At November 30, 2001, the unconsolidated partnerships in which we had
interests had total assets of $1.4 billion and total liabilities of $777.1
million, which included $627.4 million of notes and mortgages payable. In some
instances, we and/or our partners have provided varying levels of guarantees
on certain partnership debt. We provided guarantees totaling $338.7 million of
which $151.0 million were limited maintenance guarantees. When we provide
guarantees, the partnership generally receives more favorable terms from its
lenders. These limited guarantees only apply if the partnership defaults on
its loan arrangements and the fair value of the collateral (generally land and
improvements thereto) is less than a specified percentage of the loan balance.
If we are required to make a payment under these guarantees to bring the fair
value of the collateral above the specified percentage of the loan balance,
the payment would constitute a capital contribution or loan to the
unconsolidated partnership and increase our share of any funds distributed
upon the dissolution of the partnership.
During 2001, the unconsolidated partnerships in which we were a partner
generated $903.3 million of revenues and incurred $761.7 million of expenses,
resulting in net earnings of $141.6 million. Our share of those net earnings
was $27.1 million. We do not include in our income our pro rata partnership
earnings resulting from land sales to our homebuilding divisions. Instead, we
account for those earnings as a reduction of our cost of purchasing the land
from the partnerships when title passes to a third party homebuyer, which in
effect defers recognition of the partnership earnings until we sell the land.
At the time of the 1997 transfer of our commercial real estate investment
to LNR Property Corporation ("LNR"), and the spin-off of LNR to our
stockholders, we formed Lennar Land Partners with LNR, a 50%-50% owned
unconsolidated partnership, which is included in the above discussion of
unconsolidated partnerships. We also have several other unconsolidated
partnerships with LNR. In these partnerships, we provide the residential
development experience and LNR contributes the commercial property expertise.
In 2001, 2000 and 1999, we purchased land from Lennar Land Partners for a
total of $104.2 million, $112.3 million and $109.3 million, respectively. We
believe the amounts we paid for land purchased from Lennar Land Partners
approximates the amounts we would have paid to independent third parties for
similar properties.
Contractual Obligations and Commercial Commitments
We are subject to the usual obligations associated with entering into
contracts for the purchase (including option contracts), development and sale
of real estate in the routine conduct of our business. Option contracts for
the purchase of land permit us to acquire portions of properties when we are
ready to build homes on them. This reduces our financial risk associated with
land holdings. At November 30, 2001, we had $180.3 million of primarily non-
refundable option deposits and advanced costs, with entities including
unconsolidated partnerships, which allows us to acquire approximately 31,000
homesites.
The minimum aggregate principal maturities of senior notes and other debts
payable during the five years subsequent to November 30, 2001 are as follows:
2002--$17.7 million; 2003--$7.3 million; 2004--$22.9 million; 2005--$6.3
million and 2006--$4.0 million. The remaining principal obligations are due
subsequent to November 30, 2006. Our debt arrangements contain certain
financial covenants with which we were in compliance at November 30, 2001.
The minimum aggregate principal maturities of our Financial Services
Division's notes and other debts payable during the five years subsequent to
November 30, 2001 are as follows: 2002--$343.5 million and 2003--$350.4
million.
16
We have entered into agreements to lease certain office facilities and
equipment under operating leases. Future minimum payments under the
noncancelable leases are as follows: 2002--$30.7 million; 2003--$25.2 million;
2004--$20.0 million; 2005--$14.5 million; 2006--$11.4 million and thereafter--
$24.7 million.
We are committed, under various letters of credit, to perform certain
development and construction activities and provide certain guarantees in the
normal course of business. Outstanding letters of credit under these
arrangements totaled $154.3 million at November 30, 2001. Additionally, we had
outstanding performance and surety bonds related to site improvements at
various projects with estimated costs to complete of $750.7 million. We do not
believe that any such bonds are likely to be drawn upon.
At November 30, 2001, our Financial Services Division's pipeline of loans
in process totaled approximately $1.7 billion. To minimize credit risk, we use
the same credit policies in the approval of the commitments as are applied to
our lending activities. Since a portion of these commitments is expected to
expire without being exercised by the borrowers, the total commitments do not
necessarily represent future cash requirements. Loans in the pipeline of loans
in process for which interest rates were committed to the borrower totaled
approximately $235.0 million as of November 30, 2001. Substantially all of
these commitments were for periods of 30 days or less.
Mandatory mortgage-backed securities ("MBS") forward commitments are used
by the Financial Services Division to hedge our interest rate exposure during
the period from when we make an interest rate commitment to a loan applicant
until the time at which the loan is sold to an investor. These instruments
involve, to varying degrees, elements of credit and interest rate risk. Credit
risk is managed by entering into agreements with investment bankers with
primary dealer status and with permanent investors meeting our credit
standards. Our risk, in the event of default by the purchaser, is the
difference between the contract price and current market value. At November
30, 2001, we had open commitments amounting to $291.0 million to sell MBS with
varying settlement dates through January 2002.
ECONOMIC CONDITIONS
Despite difficult economic conditions in large portions of the United
States during much of 2001, the homebuilding environment remained strong due
to a positive supply/demand relationship as well as low interest rates. As a
result of this favorable environment, our new orders increased by 34% in 2001
(6% giving pro forma effect for all of 2000 for the May 2000 acquisition of
U.S. Home Corporation). New orders decreased 14% in the fourth quarter of
fiscal 2001, compared to the same period in 2000, primarily as a result of the
tragic events of September 11, 2001, resulting in a lower backlog at November
30, 2001 than at the same date in 2000.
BACKLOG
Backlog represents the number of homes subject to pending sales contracts.
Homes are sold using sales contracts which are generally accompanied by sales
deposits. Before entering into sales contracts, we generally prequalify our
customers. In some instances, purchasers are permitted to cancel sales
contracts if they are unable to close on the sale of their existing home or
fail to qualify for financing and under certain other circumstances. We
experienced an average cancellation rate of 22% in 2001, compared to 21% and
20% in 2000 and 1999, respectively. Although cancellations can delay the sales
of our homes, they have not had a material impact on sales, operations or
liquidity, because we closely monitor the progress of prospective buyers in
obtaining financing and use the information to adjust construction start plans
to match anticipated deliveries of homes. We do not recognize revenue on homes
covered by pending sales contracts until the sales are closed and title passes
to the new homeowners.
SEASONALITY
We have historically experienced variability in results of operations from
quarter to quarter due to the seasonal nature of the homebuilding business. We
typically experience the highest rate of orders for new homes in the first
half of the calendar year although the rate of orders for new homes is highly
dependent on the number of active communities and the timing of new community
openings. Because new home deliveries trail orders for new homes by several
months, we typically have a greater percentage of new home deliveries in the
second half of our fiscal year compared to the first half. As a result, our
earnings from sales of homes are generally higher in the second half of the
fiscal year.
17
INTEREST RATES AND CHANGING PRICES
Inflation can have a long-term impact on us because increasing costs of
land, materials and labor result in a need to increase the sales prices of
homes. In addition, inflation is often accompanied by higher interest rates,
which can have a negative impact on housing demand and the costs of financing
land development activities and housing construction. Rising interest rates,
as well as increased materials and labor costs, may reduce gross margins. In
recent years, the increases in these costs have followed the general rate of
inflation and hence have not had a significant adverse impact on us. In
addition, deflation can impact the value of real estate and make it difficult
for us to recover our land costs. Therefore, either inflation or deflation
could adversely impact our future results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method and requires acquired intangible
assets to be recognized as assets apart from goodwill if certain criteria are
met. We adopted SFAS No. 141 for all future acquisitions.
SFAS No. 142 no longer requires or permits the amortization of goodwill and
indefinite-lived assets. Instead, these assets must be reviewed annually (or
more frequently under certain conditions) for impairment in accordance with
this statement. This impairment test uses a fair value approach rather than
the undiscounted cash flows approach previously required by SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of. We adopted SFAS No. 142 on December 1, 2001. Because of
that, amortization of goodwill of approximately $6 million per year will not
be incurred in the future. We do not currently believe that the implementation
of SFAS No. 142 will have a material impact on our financial condition or
results of operations.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 provides accounting
guidance for financial accounting and reporting for impairment or disposal of
long-lived assets. SFAS No. 144 supersedes SFAS No. 121. SFAS No. 144 is
effective for our 2003 fiscal year. We do not currently believe that the
implementation of SFAS No. 144 will have a material impact on our financial
condition or results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks related to fluctuations in interest rates on
our debt obligations, mortgage loans and mortgage loans held for sale or
disposition. We utilize derivative instruments, including interest rate swaps,
in conjunction with our overall strategy to manage our exposure to changes in
interest rates. We also utilize forward commitments and option contracts to
mitigate the risk associated with our mortgage loan portfolio.
The tables on the following pages provide information at November 30, 2001
and 2000 about our significant derivative financial instruments and other
financial instruments used for purposes that are sensitive to changes in
interest rates. For mortgage loans held for sale or disposition, mortgage
loans and investments and senior notes and other debts payable, the tables
present principal cash flows and related weighted average effective interest
rates by expected maturity dates and estimated fair market values at November
30, 2001 and 2000. Weighted average variable interest rates are based on the
variable interest rates at November 30, 2001 and 2000. For interest rate
swaps, the tables present notional amounts and weighted average interest rates
by contractual maturity dates and estimated fair market values at November 30,
2001 and 2000. Notional amounts are used to calculate the contractual cash
flows to be exchanged under the contracts. Our limited-purpose finance
subsidiaries have placed mortgages and other receivables as collateral for
various long-term financings. These limited-purpose finance subsidiaries pay
the principal of, and interest on, these financings almost entirely from the
cash flows generated by the related pledged collateral and therefore, they
received little more than is required to pay that debt service and are
excluded from the following tables.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations in Item 7 and Notes 1 and 13 of Notes to Consolidated Financial
Statements in Item 8 for a further discussion of these items and our strategy
of mitigating our interest rate risk.
18
Information Regarding Interest Rate Sensitivity
Principal (Notional) Amount by
Expected Maturity and Average Interest Rate
November 30, 2001
Years Ending November 30, Fair Market Value
-------------------------------- at November 30,
2002 2003 2004 2005 2006 Thereafter Total 2001
------ ----- ---- ----- ---- ---------- ------- -----------------
(Dollars in millions)
ASSETS
Financial Services:
Mortgage loans held for
sale or
disposition, net:
Fixed rate............. $ -- -- -- -- -- 573.9 573.9 574.1
Average interest rate.. -- -- -- -- -- 6.9% -- --
Variable rate.......... $ -- -- -- -- -- 13.8 13.8 13.8
Average interest rate.. -- -- -- -- -- 5.9% -- --
Mortgage loans and in-
vestments:
Fixed rate............. $ 18.4 4.8 1.2 0.3 5.9 24.2 54.8 54.2
Average interest rate.. 6.9% 9.9% 7.0% 9.2% 9.1% 10.7% -- --
LIABILITIES
Homebuilding:
Senior notes and other
debts payable:
Fixed rate............. $ 17.7 7.3 22.9 6.3 4.0 1,447.1 1,505.3 1,611.5
Average interest rate.. 5.6% 5.0% 7.6% 6.4% 5.7% 6.8% -- --
Financial Services:
Notes and other debts
payable:
Fixed rate............. $ -- -- -- -- -- -- -- --
Average interest rate.. -- -- -- -- -- -- -- --
Variable rate.......... $343.5 350.4 -- -- -- -- 693.9 693.9
Average interest rate.. 3.0% 3.1% -- -- -- -- -- --
OTHER FINANCIAL
INSTRUMENTS
Homebuilding:
Interest rate swaps:
Variable to fixed--
notional amount....... $ -- -- -- 100.0 -- 300.0 400.0 (31.4)
Average pay rate....... -- -- -- 6.7% -- 6.6% -- --
Average receive rate... -- -- -- LIBOR -- LIBOR -- --
19
Information Regarding Interest Rate Sensitivity
Principal (Notional) Amount by
Expected Maturity and Average Interest Rate
November 30, 2000
Years Ending November 30, Fair Market Value
------------------------------- at November 30,
2001 2002 2003 2004 2005 Thereafter Total 2000
------ ---- ---- ---- ----- ---------- ------- -----------------
(Dollars in millions)
ASSETS
Financial Services:
Mortgage loans held for
sale or
disposition, net:
Fixed rate............. $ -- -- -- -- -- 374.5 374.5 377.5
Average interest rate.. -- -- -- -- -- 7.8% -- --
Variable rate.......... $ -- -- -- -- -- 2.0 2.0 2.0
Average interest rate.. -- -- -- -- -- 7.9% -- --
Mortgage loans and
investments:
Fixed rate............. $ 23.6 1.1 3.3 1.3 0.3 25.4 55.0 54.5
Average interest rate.. 6.4% 9.6% 8.3% 7.2% 9.4% 9.2% -- --
LIABILITIES
Homebuilding:
Senior notes and other debts
payable:
Fixed rate............. $ 14.8 19.4 5.4 5.3 6.5 1,203.3 1,254.7 1,287.9
Average interest rate.. 9.0% 8.3% 8.2% 9.0% 8.7% 7.9% -- --
Financial Services:
Notes and other debts
payable:
Fixed rate............. $ 0.7 0.1 0.1 -- -- -- 0.9 0.9
Average interest rate.. 4.9% 9.8% 9.8% -- -- -- -- --
Variable rate.......... $428.1 -- -- -- -- -- 428.1 428.1
Average interest rate.. 6.7% -- -- -- -- -- -- --
OTHER FINANCIAL
INSTRUMENTS
Homebuilding:
Interest rate swaps:
Variable to fixed--
notional amount....... $ -- -- -- -- 100.0 300.0 400.0 (5.7)
Average pay rate....... -- -- -- -- 6.7% 6.6% -- --
Average receive rate... -- -- -- -- LIBOR LIBOR -- --
20
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Lennar Corporation:
We have audited the accompanying consolidated balance sheets of Lennar
Corporation and subsidiaries (the "Company") as of November 30, 2001 and 2000,
and the related consolidated statements of earnings, stockholders' equity and
cash flows for each of the three years in the period ended November 30, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of November 30, 2001 and 2000, and the results of its operations
and its cash flows for each of the three years in the period ended November
30, 2001, in conformity with accounting principles generally accepted in the
United States of America.
Certified Public Accountants
Miami, Florida
January 9, 2002
21
CONSOLIDATED BALANCE SHEETS
Lennar Corporation and Subsidiaries
November 30, 2001 and 2000
2001 2000
---------- ---------
(In thousands,
except
per share amounts)
ASSETS
Homebuilding:
Cash..................................................... $ 824,013 287,627
Receivables, net......................................... 24,345 42,270
Inventories:
Housing................................................. 2,410,058 2,284,548
Land held for development............................... 6,483 17,036
---------- ---------
Total inventories...................................... 2,416,541 2,301,584
Investments in unconsolidated partnerships............... 300,064 257,639
Other assets............................................. 253,933 277,794
---------- ---------
3,818,896 3,166,914
Financial services....................................... 895,530 611,000
---------- ---------
$4,714,426 3,777,914
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities................... $ 755,726 778,238
Senior notes and other debts payable, net................ 1,505,255 1,254,650
---------- ---------
2,260,981 2,032,888
Financial services....................................... 794,183 516,446
---------- ---------
Total liabilities........................................ 3,055,164 2,549,334
Stockholders' equity:
Preferred stock.......................................... -- --
Common stock of $0.10 par value per share
Authorized 100,000 shares;
Issued: 2001--64,124; 2000--62,731...................... 6,412 6,273
Class B common stock of $0.10 par value per share
Authorized 30,000 shares;
Issued: 2001--9,738; 2000--9,848........................ 974 985
Additional paid-in capital............................... 843,924 812,501
Retained earnings........................................ 996,998 582,299
Unearned restricted stock................................ (10,833) (14,535)
Treasury stock, at cost;
2001--9,847 common shares; 2000--9,848 common shares.... (158,927) (158,943)
Accumulated other comprehensive loss..................... (19,286) --
---------- ---------
Total stockholders' equity............................... 1,659,262 1,228,580
---------- ---------
$4,714,426 3,777,914
========== =========
See accompanying notes to consolidated financial statements.
22
CONSOLIDATED STATEMENTS OF EARNINGS
Lennar Corporation and Subsidiaries
Years Ended November 30, 2001, 2000 and 1999
2001 2000 1999
---------- --------- ---------
(In thousands, except
per share amounts)
Revenues:
Homebuilding.................................... $5,603,947 4,390,034 2,849,207
Financial services.............................. 425,354 316,934 269,307
---------- --------- ---------
Total revenues.................................. 6,029,301 4,706,968 3,118,514
---------- --------- ---------
Costs and expenses:
Homebuilding.................................... 4,818,321 3,909,238 2,508,404
Financial services.............................. 336,223 273,339 238,211
Corporate general and administrative............ 75,831 50,155 37,563
Interest expense................................ 119,503 98,601 48,859
---------- --------- ---------
Total costs and expenses........................ 5,349,878 4,331,333 2,833,037
---------- --------- ---------
Earnings before provision for income taxes...... 679,423 375,635 285,477
Provision for income taxes...................... 261,578 146,498 112,763
---------- --------- ---------
Net earnings.................................... $ 417,845 229,137 172,714
========== ========= =========
Earnings per share:
Basic........................................... $ 6.66 4.00 2.97
========== ========= =========
Diluted......................................... $ 6.01 3.64 2.74
========== ========= =========
See accompanying notes to consolidated financial statements.
23
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Lennar Corporation and Subsidiaries
Years Ended November 30, 2001, 2000 and 1999
2001 2000 1999
---------- --------- -------
(In thousands)
Common stock:
Beginning balance............................. $ 6,273 4,851 4,824
U.S. Home acquisition......................... -- 1,298 --
Employee stock plans and restricted stock
grants....................................... 128 124 21
Conversion of Class B common stock............ 11 -- 6
---------- --------- -------
Balance at November 30........................ 6,412 6,273 4,851
---------- --------- -------
Class B common stock:
Beginning balance............................. 985 985 991
Conversion to common stock.................... (11) -- (6)
---------- --------- -------
Balance at November 30........................ 974 985 985
---------- --------- -------
Additional paid-in capital:
Beginning balance............................. 812,501 525,623 523,645
U.S. Home acquisition......................... -- 265,569 --
Payment made under acquisition agreement...... -- -- (1,252)
Employee stock plans and restricted stock
grants....................................... 19,273 20,204 2,210
Tax benefit from exercise of stock options.... 12,150 1,105 1,020
---------- --------- -------
Balance at November 30........................ 843,924 812,501 525,623
---------- --------- -------
Retained earnings:
Beginning balance............................. 582,299 356,058 186,205
Net earnings.................................. 417,845 229,137 172,714
Cash dividends--common stock.................. (2,705) (2,453) (2,418)
Cash dividends--Class B common stock.......... (441) (443) (443)
---------- --------- -------
Balance at November 30........................ 996,998 582,299 356,058
---------- --------- -------
Unearned restricted stock:
Beginning balance............................. (14,535) -- --
Restricted stock (grants) cancellations....... 415 (15,856) --
Amortization of unearned restricted stock..... 3,287 1,321 --
---------- --------- -------
Balance at November 30........................ (10,833) (14,535) --
---------- --------- -------
Treasury stock, at cost:
Beginning balance............................. (158,943) (6,018) --
Repurchases of common stock................... -- (152,925) (6,018)
Shares issued................................. 16 -- --
---------- --------- -------
Balance at November 30........................ (158,927) (158,943) (6,018)
---------- --------- -------
Accumulated other comprehensive loss:
Beginning balance............................. -- -- --
SFAS No. 133 transition adjustment, net of
tax.......................................... (3,510) -- --
Change in fair value of interest rate swaps,
net of tax................................... (15,776) -- --
---------- --------- -------
Balance at November 30........................ (19,286) -- --
---------- --------- -------
Net earnings.................................. 417,845 229,137 172,714
---------- --------- -------
Comprehensive income.......................... 398,559 229,137 172,714
Total stockholders' equity.................... $1,659,262 1,228,580 881,499
========== ========= =======
See accompanying notes to consolidated financial statements.
24
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lennar Corporation and Subsidiaries
Years Ended November 30, 2001, 2000 and 1999
2001 2000 1999
-------- -------- --------
(In thousands)
Cash flows from operating activities:
Net earnings.................................... $417,845 229,137 172,714
Adjustments to reconcile net earnings to net
cash
provided by operating activities:
Depreciation and amortization................... 48,383 44,267 38,956
Amortization of discount/premium on debt, net... 20,287 11,186 8,774
Equity in earnings from unconsolidated partner-
ships.......................................... (27,051) (13,340) (19,482)
Tax benefit from exercise of stock options...... 12,150 1,105 1,020
Increase (decrease) in deferred income taxes.... 9,769 (17,223) 28,125
Changes in assets and liabilities, net of ef-
fects
from acquisitions:
(Increase) decrease in receivables.............. (57,100) (11,912) 8,173
(Increase) decrease in inventories.............. (130,725) 223,255 (77,428)
(Increase) decrease in other assets............. 48 (14,179) (3,639)
(Increase) decrease in financial services loans
held for sale or disposition.................... (211,143) (75,871) 6,293
Increase (decrease) in accounts payable and
other liabilities.............................. (23,267) 104,079 (41,196)
-------- -------- --------
Net cash provided by operating activities....... 59,196 480,504 122,310
-------- -------- --------
Cash flows from investing activities:
Net additions to operating properties and equip-
ment........................................... (13,110) (10,502) (15,328)
(Increase) decrease in investments in unconsoli-
dated partnerships, net........................ 5,601 (2,857) 6,524
(Increase) decrease in financial services mort-
gage loans..................................... (997) (11,834) 1,548
Purchases of investment securities.............. (18,143) (18,112) (13,119)
Receipts from investment securities............. 17,700 14,946 11,600
Decrease in financial services mortgage servic-
ing rights..................................... 10,812 -- --
Acquisition of U.S. Home Corporation, net of
cash acquired.................................. -- (152,386) --
Acquisitions of properties and businesses, net
of cash acquired............................... -- (5,971) (19,747)
-------- -------- --------
Net cash provided by (used in) investing activi-
ties........................................... 1,863 (186,716) (28,522)
-------- -------- --------
Cash flows from financing activities:
Net repayments under revolving credit facili-
ties........................................... -- -- (136,650)
Net borrowings (repayments) under financial
services short-term debt....................... 265,607 153,155 (856)
Payments for tender of U.S. Home Corporation's
senior notes................................... -- (519,759) --
Net proceeds from issuance of 5.125% zero-coupon
convertible senior
subordinated notes............................. 224,250 -- --
Net proceeds from issuance of 9.95% senior
notes.......................................... -- 294,988 --
Net proceeds from issuance of 7 5/8% senior
notes.......................................... -- -- 266,153
Proceeds from other borrowings.................. 110 424,783 1,856
Principal payments on other borrowings.......... (26,382) (279,941) (160,570)
Limited-purpose finance subsidiaries, net....... 2,110 45 769
Common stock:
Issuance........................................ 19,789 4,472 2,231
Payment made under acquisition agreement........ -- -- (1,252)
Repurchases..................................... -- (152,925) (6,018)
Dividends....................................... (3,146) (2,896) (2,861)
-------- -------- --------
Net cash provided by (used in) financing activi-
ties........................................... 482,338 (78,078) (37,198)
-------- -------- --------
25
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
Lennar Corporation and Subsidiaries
Years Ended November 30, 2001, 2000 and 1999
2001 2000 1999
-------- ---------- -------
(In thousands)
Net increase in cash............................. 543,397 215,710 56,590
Cash at beginning of year........................ 333,877 118,167 61,577
-------- ---------- -------
Cash at end of year.............................. $877,274 333,877 118,167
======== ========== =======
Summary of cash:
Homebuilding..................................... $824,013 287,627 83,256
Financial services............................... 53,261 46,250 34,911
-------- ---------- -------
$877,274 333,877 118,167
-------- ---------- -------
Supplemental disclosures of cash flow informa-
tion:
Cash paid for interest, net of amounts capital-
ized............................................ $ 17,546 1,157 9,647
Cash paid for income taxes....................... $234,549 91,742 108,845
Supplemental disclosures of non-cash investing
and
financing activities:
Assumption of mortgages related to acquisitions
of
properties...................................... $ 28,993 5,529 29,342
Acquisition of U.S. Home Corporation:
Fair value of assets acquired, inclusive of cash
of $90,997...................................... $ -- 1,654,444 --
Goodwill recorded................................ -- 47,809 --
Liabilities assumed.............................. -- (1,192,004) --
-------- ---------- -------
$ -- 510,249 --
======== ========== =======
Common stock issued.............................. $ -- 266,867 --
Cash paid........................................ -- 243,382 --
-------- ---------- -------
Total consideration.............................. $ -- 510,249 --
======== ========== =======
See accompanying notes to consolidated financial statements.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
1. Summary of Significant Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
Lennar Corporation and all subsidiaries and partnerships (and similar
entities) in which a controlling interest is held (the "Company"). The
Company's investments in unconsolidated partnerships in which a significant,
but less than controlling, interest is held are accounted for by the equity
method. Controlling interest is determined based on a number of factors, which
include the Company's ownership interest and participation in the management
of the partnership. All significant intercompany transactions and balances
have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could
differ from those estimates.
Revenue Recognition
Revenues from sales of homes are recognized when the sales are closed and
title passes to the new homeowners. Revenues from sales of other real estate
(including the sales of land and operating properties) are recognized when a
significant down payment is received, the earnings process is complete and the
collection of any remaining receivables is reasonably assured.
Cash
The Company considers all highly liquid investments purchased with
maturities of three months or less to be cash equivalents. Due to the short
maturity period of the cash equivalents, the carrying amount of these
instruments approximates their fair values. Cash as of November 30, 2001 and
2000 included $64.4 million and $65.9 million, respectively, of cash held in
escrow for approximately three days.
Inventories
Inventories are stated at cost unless the inventory within a community is
determined to be impaired, in which case the impaired inventory is written
down to fair value. The Company evaluates long-lived assets for impairment
based on the undiscounted future cash flows of the assets. Write-downs of
inventories deemed to be impaired are recorded as adjustments to the cost
basis of the respective inventories. No impairment existed during the years
ended November 30, 2001, 2000 or 1999.
Start-up costs, construction overhead and selling expenses are expensed as
incurred. Homes held for sale are classified as housing inventories until
delivered. Land, land development, amenities and other costs are accumulated
by specific area and allocated to homes within the respective areas.
Interest and Real Estate Taxes
Interest and real estate taxes attributable to land, homes and operating
properties are capitalized while they are being actively developed. Interest
related to homebuilding, including interest costs relieved from inventories,
is included in interest expense. Interest expense related to the financial
services operations is included in its costs and expenses.
During 2001, 2000 and 1999, interest incurred by the Company's homebuilding
operations was $127.9 million, $117.4 million and $54.6 million, respectively.
Capitalized interest charged to expense in 2001, 2000 and 1999 was $119.5
million, $98.6 million and $48.9 million, respectively.
Operating Properties and Equipment
Operating properties and equipment are recorded at cost and are included in
other assets in the consolidated balance sheets. The assets are depreciated
over their estimated useful lives using the straight-line method. The
estimated useful life for operating properties is 30 years and for equipment
is 2 to 10 years.
27
Investment Securities
Investment securities that have determinable fair values are classified as
available-for-sale unless they are classified as held-to-maturity. Securities
classified as held-to-maturity are carried at amortized cost because they are
purchased with the intent and ability to hold to maturity. Available-for-sale
securities are recorded at fair value. Any unrealized holding gains or losses
on available-for-sale securities are reported in a separate component of
stockholders' equity, net of tax effects, until realized.
At November 30, 2001 and 2000, investment securities classified as held-to-
maturity totaled $13.2 million and $12.5 million, respectively, and were
included in other assets of the Financial Services Division. There were no
other investment securities at November 30, 2001 or 2000.
Derivative Financial Instruments
Effective December 1, 2000, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities by
requiring that all derivatives be recognized in the balance sheet and measured
at fair value. Gains or losses resulting from changes in the fair value of
derivatives are recognized in earnings or recorded in other comprehensive
income and recognized in the statement of earnings when the hedged item
affects earnings, depending on the purpose of the derivatives and whether they
qualify for hedge accounting treatment.
The Company's policy is to designate at a derivative's inception the
specific assets, liabilities, or future commitments being hedged and monitor
the derivative to determine if it remains an effective hedge. The
effectiveness of a derivative as a hedge is based on high correlation between
changes in its value and changes in the value of the underlying hedged item.
The Company recognizes gains or losses for amounts received or paid when the
underlying transaction settles. The Company does not enter into or hold
derivatives for trading or speculative purposes.
The Company has various interest rate swap agreements which effectively
convert variable interest rates to fixed interest rates on approximately $400
million of outstanding debt related to its homebuilding operations. The swap
agreements have been designated as cash flow hedges and, accordingly, are
reflected at their fair value in the consolidated balance sheet at November
30, 2001. The related loss is deferred in stockholders' equity as accumulated
other comprehensive loss (see Note 11). The Company accounts for its interest
rate swaps using the shortcut method, as described in SFAS No. 133. Amounts to
be received or paid as a result of the swap agreements are recognized as
adjustments to interest incurred on the related debt instruments. The Company
believes that there will be no ineffectiveness related to the interest rate
swaps and therefore no portion of the accumulated other comprehensive loss
will be reclassified into future earnings. The net effect on the Company's
operating results is that interest on the variable rate debt being hedged is
recorded based on fixed interest rates.
The Financial Services Division, in the normal course of business, uses
derivative financial instruments to reduce its exposure to fluctuations in
interest rates. The Division enters into forward commitments and option
contracts to protect the value of fixed rate locked loan commitments and loans
held for sale or disposition from fluctuations in market interest rates. These
derivative financial instruments are designated as fair value hedges, and,
accordingly, for all qualifying and highly effective fair value hedges, the
changes in the fair value of the derivative and the loss or gain on the hedged
asset relating to the risk being hedged are recorded currently in earnings.
The effect of the implementation of SFAS No. 133 on the Financial Services
Division's operating earnings was not significant.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of
net assets acquired and was amortized by the Company on a straight-line basis
over periods ranging from 15 to 20 years. At November 30, 2001 and 2000,
goodwill was $105.8 million and $110.4 million, respectively (net of
accumulated amortization of $18.0 million and $11.6 million, respectively). In
the event that facts and circumstances indicated that the carrying value of
goodwill might be impaired, an evaluation of recoverability is performed. If
an evaluation was required, the estimated future undiscounted cash flows
associated with the goodwill would be compared to the carrying amount to
determine if a write-down to fair value based on discounted cash flows was
required. No impairment existed during the years ended November 30, 2001, 2000
or 1999. Goodwill is included in other
28
assets of the Homebuilding Division ($80.6 million and $85.2 million at
November 30, 2001 and 2000, respectively) and the assets of the Financial
Services Division ($25.2 million at both November 30, 2001 and 2000) in the
consolidated balance sheets. Subsequent to the Company's adoption of SFAS No.
141 and SFAS No. 142, goodwill and its amortization will be accounted for in
accordance with the standards they prescribe which will discontinue the
Company's amortization of goodwill. See the New Accounting Pronouncements
section of Note 1.
Income Taxes
Income taxes are accounted for in accordance with SFAS No. 109, Accounting
for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities, and are measured by using enacted tax rates expected
to apply to taxable income in the years in which those differences are
expected to reverse.
Stock-Based Compensation
The Company grants stock options to certain employees for fixed numbers of
shares with, in each instance, an exercise price not less than the fair value
of the shares at the date of the grant. The Company accounts for the stock
option grants in accordance with Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees. No compensation expense is
recognized because all stock options granted have exercise prices not less
than the market value of the Company's stock on the date of the grant. The pro
forma disclosures required by SFAS No. 123, Accounting for Stock-Based
Compensation, are included in Note 12. Restricted stock grants are valued
based on the market price of the common stock on the date of grant. Unearned
compensation arising from the restricted stock grants is amortized to expense
using the straight-line method over the period of the restrictions. Unearned
restricted stock is shown as a reduction of stockholders' equity in the
consolidated balance sheets.
Earnings per Share
Earnings per share is accounted for in accordance with SFAS No. 128,
Earnings per Share, which requires a dual presentation of basic and diluted
earnings per share on the face of the consolidated statement of earnings.
Basic earnings per share is computed by dividing earnings attributable to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the Company.
Financial Services
Mortgage loans held for sale or disposition by the Financial Services
Division are carried at market value, as determined on an aggregate basis.
Premiums and discounts recorded on these loans are presented as an adjustment
to the carrying amount of the loans and are not amortized.
When the Division sells loans into the secondary market, a gain or loss is
recognized to the extent that the sales proceeds exceed, or are less than, the
book value of the loans. Loan origination fees, net of direct origination
costs, are deferred and recognized as a component of the gain or loss when
loans are sold. In prior years, the Division retained servicing rights from
some of the loans it originated and maintained a portfolio of mortgage
servicing rights. During 2001, the Division sold substantially all of its
existing portfolio of mortgage servicing rights and realized a pretax profit
of approximately $13 million from the sale of the servicing rights. Subsequent
to the sale, the Division has sold the servicing rights together with the
loans it originated. Prior to the sale of the mortgage servicing rights
portfolio, the book value of each mortgage loan the Division sold was
allocated partly to the mortgage servicing right and partly to the loan
(separately from the mortgage servicing right) based on their estimated
relative fair values at the time the loan was sold and the servicing rights
retained. The fair value of mortgage servicing rights was determined by
discounting the estimated future cash flows using a discount rate commensurate
with the risks involved. This method of valuation incorporated assumptions
that market participants would use in their estimates of future servicing
income and expense, including assumptions about prepayment, default and
interest rates. Impairment, if any, was recognized through a valuation
allowance and a charge to current operations. Mortgage servicing rights were
amortized in proportion to, and over the period of, the estimated net
servicing income of the underlying mortgages. The book value and estimated
fair
29
value of mortgage servicing rights was $11.7 million and $13.4 million,
respectively, at November 30, 2000. A valuation allowance related to mortgage
servicing rights was not required at or for the year ended November 30, 2000.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 requires all business combinations initiated
after June 30, 2001 to be accounted for using the purchase method and requires
acquired intangible assets to be recognized as assets apart from goodwill if
certain criteria are met. The Company adopted SFAS No. 141 for all future
acquisitions.
SFAS No. 142 no longer requires or permits the amortization of goodwill and
indefinite-lived assets. Instead, these assets must be reviewed annually (or
more frequently under certain conditions) for impairment in accordance with
this statement. This impairment test uses a fair value approach rather than
the undiscounted cash flows approach previously required by SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of. The Company adopted SFAS No. 142 on December 1, 2001.
Because of that, amortization of goodwill of approximately $6 million per year
will not be incurred in the future. Management does not currently believe that
the implementation of SFAS No. 142 will have a material impact on the
Company's financial condition or results of operations.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 provides accounting
guidance for financial accounting and reporting for impairment or disposal of
long-lived assets. SFAS No. 144 supersedes SFAS No. 121. SFAS No. 144 is
effective for the Company in fiscal 2003. Management does not currently
believe that the implementation of SFAS No. 144 will have a material impact on
the Company's financial condition or results of operations.
Reclassification
Certain prior year amounts in the consolidated financial statements have
been reclassified to conform with the 2001 presentation.
2. Acquisition
On May 3, 2000, the Company acquired U.S. Home Corporation ("U.S. Home") in
a transaction in which U.S. Home stockholders received a total of
approximately $243 million in cash and 13 million shares of the Company's
common stock with a value of approximately $267 million. The cash portion of
the acquisition was funded primarily from the Company's revolving credit
facilities (see Note 7). U.S. Home is primarily a homebuilder and had
operations in 13 states at the acquisition date. On an unaudited basis, U.S.
Home had total revenues of $1.8 billion and net income of $72.4 million in
1999, and it delivered 9,246 homes (including unconsolidated partnerships)
during that year.
The acquisition was accounted for using the purchase method of accounting.
In connection with the transaction, the Company acquired assets with a fair
value of $1.7 billion, assumed liabilities with a fair value of $1.2 billion
and recorded goodwill of $48 million. Through November 30, 2001, goodwill was
being amortized on a straight-line basis over 20 years. The results of U.S.
Home are included in the Company's consolidated statements of earnings since
the acquisition date. Revenues and net earnings on an unaudited pro forma
basis would have been $5.5 billion and $260.4 million, respectively, for the
year ended November 30, 2000 and $4.9 billion and $233.2 million,
respectively, for the year ended November 30, 1999, had the acquisition
occurred on December 1, 1998. Pro forma earnings per share would have been
$3.81 per share diluted ($4.15 per share basic) for the year ended November
30, 2000 and $3.07 per share diluted ($3.28 per share basic) for the year
ended November 30, 1999. The pro forma information gives effect to actual
operating results prior to the acquisition, adjusted for the pro forma effect
of interest expense, amortization of goodwill, and certain other adjustments,
together with their related income tax effect. The pro forma information does
not purport to be indicative of the results of operations which would have
actually been reported had the acquisition occurred on December 1, 1998.
30
3. Operating and Reporting Segments
In 1999, the Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which establishes new standards for the
way that public enterprises report information about operating and reporting
segments. It also establishes standards for related disclosures about products
and services, geographic areas and major customers.
The Company has two operating and reporting segments: Homebuilding and
Financial Services. The Company's reportable segments are strategic business
units that offer different products and services. The accounting policies of
the segments are described in the summary of significant accounting policies
in Note 1.
Homebuilding
Homebuilding operations include the sale and construction of single-family
attached and detached homes. These activities also include the purchase,
development and sale of residential land by the Company and unconsolidated
partnerships in which it has investments. The following table sets forth
financial information relating to the homebuilding operations:
Years Ended November 30,
------------------------------
2001 2000 1999
---------- --------- ---------
(In thousands)
Revenues:
Sales of homes................................. $5,467,548 4,118,549 2,671,744
Sales of land and other revenues............... 109,348 258,145 157,981
Equity in earnings from unconsolidated partner-
ships......................................... 27,051 13,340 19,482
---------- --------- ---------
Total revenues............................... 5,603,947 4,390,034 2,849,207
Costs and expenses:
Cost of homes sold............................. 4,159,107 3,277,183 2,105,422
Cost of land and other expenses................ 86,010 220,948 130,432
Selling, general and administrative............ 573,204 411,107 272,550
---------- --------- ---------
Total costs and expenses..................... 4,818,321 3,909,238 2,508,404
---------- --------- ---------
Operating earnings............................. $ 785,626 480,796 340,803
========== ========= =========
Depreciation and amortization.................. $ 38,733 33,858 29,505
---------- --------- ---------
Additions to operating properties and equip-
ment.......................................... $ 8,173 5,779 2,283
========== ========= =========
Financial Services
The Financial Services Division provides mortgage financing, title
insurance and closing services for both the Company's homebuyers and others.
The Division resells the residential mortgage loans it originates in the
secondary mortgage market and also provides high-speed Internet access, cable
television, and alarm monitoring services for both the Company's homebuyers
and other customers. The following table sets forth financial information
relating to the financial services operations:
Years Ended November 30,
------------------------
2001 2000 1999
-------- ------- -------
(In thousands)
Revenues.............................................. $425,354 316,934 269,307
Costs and expenses.................................... 336,223 273,339 238,211
-------- ------- -------
Operating earnings.................................... $ 89,131 43,595 31,096
======== ======= =======
Depreciation and amortization......................... $ 9,650 10,409 9,451
-------- ------- -------
Interest income, net.................................. $ 21,279 15,707 12,301
-------- ------- -------
Additions to operating properties and equipment....... $ 7,087 10,243 13,045
======== ======= =======
31
4. Receivables
November 30,
----------------
2001 2000
-------- ------
(In thousands)
Accounts receivable........................................... $ 20,076 32,327
Mortgages and notes receivable................................ 8,549 14,846
-------- ------
28,625 47,173
Allowance for doubtful accounts............................... (4,280) (4,903)
-------- ------
$ 24,345 42,270
======== ======
5. Investments in Unconsolidated Partnerships
Summarized condensed financial information on a combined 100% basis related
to the Company's investments in unconsolidated partnerships and other similar
entities (collectively the "Partnerships") accounted for by the equity method
was as follows:
November 30,
---------------------
2001 2000
----------- ---------
(In thousands)
Assets:
Cash...................................................... $ 37,782 35,504
Land under development.................................... 1,203,089 962,835
Other assets.............................................. 161,598 145,866
----------- ---------
$ 1,402,469 1,144,205
=========== =========
Liabilities and equity:
Accounts payable and other liabilities.................... $ 149,691 122,597
Notes and mortgages payable............................... 627,383 471,742
Equity of:
The Company.............................................. 300,064 257,639
Others................................................... 325,331 292,227
----------- ---------
$ 1,402,469 1,144,205
=========== =========
Years Ended November 30,
------------------------
2001 2000 1999
-------- ------- -------
(In thousands)
Revenues............................................... $903,293 361,684 283,979
Costs and expenses..................................... 761,704 295,224 219,100
-------- ------- -------
Net earnings of unconsolidated partnerships............ $141,589 66,460 64,879
-------- ------- -------
Company share of net earnings.......................... $ 27,051 13,340 19,482
======== ======= =======
At November 30, 2001, the Company's equity interest in each of these
Partnerships ranged from 10% to 50%. The Company's partners generally are
third party homebuilders, land sellers seeking a share of the profits from
development of the land or real estate professionals who do not have the
capital and/or expertise to develop properties by themselves. The Partnerships
follow accounting principles generally accepted in the United States of
America. The Company shares in the profits and losses of these Partnerships
and, when appointed the manager of the Partnerships, receives fees for the
management of the assets. During 2001, 2000 and 1999, the Company received
management fees and reimbursement of expenses from the Partnerships totaling
$26.1 million, $9.7 million and $6.2 million, respectively. The Company does
not include in its income the pro rata Partnership earnings resulting from
land sales to the Company. These amounts are recorded as a reduction of the
cost of purchasing the land from the Partnerships which increases profits when
title passes to a third party homebuyer.
32
The Company may obtain options or other arrangements under which the
Company can purchase portions of the land held by the Partnerships. Option
prices are generally negotiated prices that approximate fair value when the
Company receives the options. During 2001, 2000 and 1999, $232.6 million,
$134.6 million, and $111.3 million, respectively, of the Partnerships'
revenues were from land sales to the Company. In some instances, the Company
and/or its partners have provided varying levels of guarantees on certain
partnership debt. At November 30, 2001, the Company provided guarantees on
$338.7 million of unconsolidated partnership debt, of which $151.0 million
were limited maintenance guarantees.
At the time of the 1997 transfer of the Company's commercial real estate
investment to LNR Property Corporation ("LNR"), and the spin-off of LNR to the
Company's stockholders, the Company and LNR formed Lennar Land Partners, a
50%-50% owned partnership, which is included in the above discussion of
Partnerships. At November 30, 2001, the Company also had several other
unconsolidated partnerships with LNR. In 2001, 2000 and 1999, the Company
purchased land from Lennar Land Partners for a total of $104.2 million,
$112.3 million and $109.3 million, respectively. The Company believes the
amounts it paid for land purchased from Lennar Land Partners approximates the
amounts it would have paid to independent third parties for similar
properties.
6. Operating Properties and Equipment
November 30,
-----------------
2001 2000
-------- -------
(In thousands)
Furniture, fixtures and equipment............................ $ 45,267 47,043
Community recreational facilities............................ 8,774 2,098
-------- -------
54,041 49,141
Accumulated depreciation..................................... (36,097) (30,556)
-------- -------
$ 17,944 18,585
======== =======
Operating properties and equipment are included in other assets in the
consolidated balance sheets.
7. Senior Notes and Other Debts Payable
November 30,
---------------------
2001 2000
----------- ---------
(In thousands)
3 7/8% zero-coupon se-
nior convertible deben-
tures
due 2018............... $ 256,877 247,205
5.125% zero-coupon con-
vertible senior subor-
dinated notes
due 2021............... 235,894 --
7 5/8% senior notes due
2009................... 271,493 270,480
9.95% senior notes due
2010................... 301,346 300,017
Term loan B due 2007.... 395,000 399,000
U.S. Home senior notes
due through 2009....... 9,446 12,913
Mortgage notes on land
with fixed interest
rates from
5.4% to 10.0% due
through 2009........... 35,199 25,035
----------- ---------
$ 1,505,255 1,254,650
=========== =========
In May 2000, the Company entered into new financing arrangements related to
the acquisition of U.S. Home, for working capital and for future growth. The
financings include senior secured credit facilities with a group of financial
institutions which provide the Company with up to $1.4 billion of financing.
The credit facilities consist of a $715 million five-year revolving credit
facility, a $300 million 364-day revolving credit facility and a $400 million
term loan B (collectively the "Facilities"). The Company may elect to convert
borrowings under the 364-day revolving credit facility to a term loan which
would mature in May 2005. The Facilities are collateralized by the outstanding
common stock of certain of the Company's subsidiaries. Certain Financial
Services Division subsidiaries are co-borrowers under the Facilities. At
November 30, 2001, no borrowings were allocated to this Division. At November
30, 2001, $395 million was outstanding under the term loan B and no amounts
were outstanding under the revolving credit facilities. The weighted average
interest rate
33
of the Facilities at November 30, 2001 was 5.7%. The Company utilizes interest
rate swap agreements to manage interest costs and hedge against risks
associated with changing interest rates.
In the second quarter of 2001, the Company issued, for gross proceeds of
approximately $230 million, zero-coupon convertible senior subordinated notes
due 2021 ("Notes") with a face amount at maturity of approximately $633
million. The Notes were issued at a price of $363.46 per $1,000 face amount at
maturity, which equates to a yield to maturity over the life of the Notes of
5.125%. Proceeds from the offering, after underwriting discount, were
approximately $224 million. The Company used the proceeds to repay amounts
outstanding under its revolving credit facilities and added the balance of the
net proceeds to working capital. The Notes are convertible into the Company's
common stock at any time, if the sale price of the Company's common stock
exceeds certain thresholds or in other specified instances, at the rate of
approximately 6.4 shares per $1,000 face amount at maturity, or a total of
approximately 4 million shares. The conversion ratio equates to an initial
conversion price of $56.93 per share (when the Company's stock price was
$43.13 per share). These shares will be included in the calculation of the
Company's diluted earnings per share if the average closing price of the
Company's common stock over the last twenty trading days of each quarter
exceeds 110% of the accreted conversion price. This calculation equated to
$64.79 per share at November 30, 2001. Holders have the option to require the
Company to repurchase the Notes on any of the fifth, tenth, or fifteenth
anniversaries of the issue date for the initial issue price plus accrued yield
to the purchase date. The Company has the option to satisfy the repurchases
with any combination of cash and/or shares of the Company's common stock. The
Company will have the option to redeem the Notes, in cash, at any time after
the fifth anniversary for the initial issue price plus accrued yield to
redemption. The Company will pay contingent interest on the Notes during
specified six-month periods beginning on April 4, 2006 if the market price of
the Notes exceeds specified levels. At November 30, 2001, the carrying value
of outstanding Notes, net of unamortized original issue discount, was $235.9
million.
As a result of the U.S. Home acquisition, holders of U.S. Home's publicly-
held notes totaling $525 million were entitled to require U.S. Home to
repurchase the notes for 101% of their principal amount within 90 days after
the transaction was completed. Independent of that requirement, in April 2000,
the Company made a tender offer for all of the notes and a solicitation of
consents to modify provisions of the indentures relating to the notes. As a
result of the tender offer and required repurchases after the acquisition, the
Company paid approximately $520 million in 2000, which includes tender and
consent fees, for $508 million of U.S. Home's notes.
In May 2000, the Company issued $325 million of 9.95% senior notes due 2010
at a price of 92.313% to finance a portion of the purchase price of U.S.
Home's publicly-held notes that were tendered in response to the Company's
offer and consent solicitation in April 2000, and to pay associated costs and
expenses. The senior notes are guaranteed on a joint and several basis by
substantially all of the Company's subsidiaries, other than subsidiaries
engaged in mortgage and reinsurance activities. Proceeds from the offering,
after underwriting discount and expenses, were approximately $295 million. At
November 30, 2001, the carrying value of the senior notes was $301.3 million.
In February 1999, the Company issued $282 million of 7 5/8% senior notes.
The senior notes are due in 2009 and were issued for the purpose of reducing
amounts outstanding under revolving credit facilities and redeeming
outstanding 10 3/4% senior notes. Proceeds from the offering, after
underwriting and market discounts, expenses and settlement of a related
interest rate hedge agreement, were approximately $266 million. The senior
notes are collateralized by the stock of certain of the Company's
subsidiaries. In March 1999, the Company redeemed all of the outstanding
10 3/4% senior notes due 2004 of one of its subsidiaries, Greystone Homes,
Inc., at a price of 105.375% of the principal amount outstanding plus accrued
interest. Cash paid to redeem the notes was $132 million, which approximated
their carrying value. At November 30, 2001, the carrying value of the 7 5/8%
senior notes was $271.5 million.
In July 1998, the Company issued, for $229 million, zero-coupon senior
convertible debentures due 2018 (the "Debentures") with a face amount at
maturity of $493 million. The Debentures have an effective interest rate of
3 7/8%. The Debentures are convertible at any time into the Company's common
stock at the rate of 12.3768 shares per $1,000 face amount at maturity. If the
Debentures are converted during the first five years, the Company may elect to
pay cash equal to the fair value of the common stock at the time of the
conversion. Holders have the option to require the Company to repurchase the
Debentures on any of the fifth, tenth, or fifteenth anniversaries of the issue
date for the initial issue price plus accrued original issue discount. The
Company has the option to satisfy the repurchases with any combination of cash
and/or shares of the Company's
34
common stock. The Company will have the option to redeem the Debentures, in
cash, at any time after the fifth anniversary for the initial issue price plus
accrued original issue discount. The Debentures are collateralized by the
stock of certain of the Company's subsidiaries. At November 30, 2001, the
carrying value of outstanding Debentures, net of unamortized original issue
discount, was $256.9 million.
The minimum aggregate principal maturities of senior notes and other debts
payable during the five years subsequent to November 30, 2001 are as follows:
2002--$17.7 million; 2003--$7.3 million; 2004--$22.9 million; 2005--$6.3
million and 2006--$4.0 million. The remaining principal obligations are due
subsequent to November 30, 2006. The Company's debt arrangements contain
certain financial covenants with which the Company was in compliance at
November 30, 2001.
8. Financial Services
The assets and liabilities related to the Company's financial services
operations were as follows:
November 30,
-----------------
2001 2000
--------- -------
(In thousands)
Assets:
Cash and receivables, net..................................... $ 161,060 79,025
Mortgage loans held for sale or disposition, net.............. 587,694 376,452
Mortgage loans, net........................................... 41,590 42,504
Mortgage servicing rights, net................................ -- 11,653
Operating properties and equipment, net....................... 18,592 18,869
Title plants.................................................. 15,530 15,530
Goodwill, net................................................. 25,158 25,199
Other......................................................... 32,760 21,874
Limited-purpose finance subsidiaries.......................... 13,146 19,894
--------- -------
$ 895,530 611,000
========= =======
Liabilities:
Notes and other debts payable................................. $ 693,931 428,966
Other......................................................... 87,106 67,586
Limited-purpose finance subsidiaries.......................... 13,146 19,894
--------- -------
$ 794,183 516,446
========= =======
At November 30, 2001, the Division had a $500 million warehouse line of
credit which included a $145 million 30-day increase which expired in December
2001 to fund the Division's mortgage loan activities. Borrowings under this
facility were $483.2 million and $339.4 million at November 30, 2001 and 2000,
respectively, and were collateralized primarily by mortgage loans with
outstanding principal balances of $518.8 million and $297.2 million,
respectively, and in 2000, by servicing rights relating to approximately $1.8
billion of loans. There are several interest rate pricing options which
fluctuate with market rates. The borrowing rate has been reduced to the extent
that custodial escrow balances exceeded required compensating balance levels.
The effective interest rate on this facility at November 30, 2001 and 2000 was
3.1% and 6.4%, respectively. The warehouse line of credit matures in June
2003, at which time the Company expects the facility to be renewed. At
November 30, 2001 and 2000, the Division had advances under conduit funding
agreements with certain major financial institutions amounting to $190.6
million and $58.8 million, respectively. Borrowings under these agreements are
collateralized by mortgage loans and had an effective interest rate of 3.0%
and 7.5% at November 30, 2001 and 2000, respectively. The Division also had a
$20 million revolving line of credit with a bank, collateralized by certain
assets of the Division and stock of certain title insurance subsidiaries.
Borrowings under the line of credit were $20 million at both November 30, 2001
and 2000 and had an effective interest rate of 3.1% and 7.8% at November 30,
2001 and 2000, respectively.
The limited-purpose finance subsidiaries of the Financial Services Division
have placed mortgages and other receivables as collateral for various long-
term financings. These limited-purpose finance subsidiaries pay the principal
of, and interest on, these financings almost entirely from the cash flows
generated by the related pledged collateral, which includes a combination of
mortgage notes, mortgage-backed securities and funds held by a trustee. At
November 30, 2001 and 2000, the balances outstanding for the bonds and notes
payable were
35
$13.1 million and $19.9 million, respectively. The borrowings mature in years
2013 through 2018 and carry interest rates ranging from 8.6% to 11.6%. The
annual principal repayments are dependent upon collections on the underlying
mortgages, including prepayments, and cannot be reasonably determined.
The minimum aggregate principal maturities of the Company's Financial
Services Division's notes and other debts payable during the five years
subsequent to November 30, 2001 are as follows: 2002--$343.5 million and
2003--$350.4 million.
9. Income Taxes
The provision for income taxes consisted of the following:
Years Ended November 30,
--------------------------
2001 2000 1999
--------- ------- -------
(In thousands)
Current:
Federal.............................................. $ 220,124 146,666 71,091
State................................................ 31,685 17,055 13,547
--------- ------- -------
251,809 163,721 84,638
--------- ------- -------
Deferred:
Federal.............................................. 9,281 (15,672) 24,422
State................................................ 488 (1,551) 3,703
--------- ------- -------
9,769 (17,223) 28,125
--------- ------- -------
$ 261,578 146,498 112,763
========= ======= =======
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The tax
effects of significant temporary differences that give rise to the net
deferred tax asset are as follows:
November 30,
-----------------
2001 2000
-------- -------
(In thousands)
Deferred tax assets:
Acquisition adjustments.................................... $ 41,202 75,997
Reserves and accruals...................................... 104,758 74,972
Net operating loss and capital loss carryforwards, tax af-
fected.................................................... 4,466 4,466
Investments in unconsolidated partnerships................. 5,414 3,386
Deferred gains............................................. -- 1,900
Other...................................................... 6,555 7,412
-------- -------
Deferred tax assets........................................ 162,395 168,133
Less: valuation allowance.................................. (7,117) (7,117)
-------- -------
Total deferred tax assets, net............................. 155,278 161,016
-------- -------
Deferred tax liabilities:
Capitalized expenses....................................... 4,273 14,922
Deferred gains............................................. 115 --
Installment sales.......................................... 1,506 2,281
Section 461 deductions and other........................... 47,701 32,361
-------- -------
Total deferred tax liabilities............................. 53,595 49,564
-------- -------
Net deferred tax asset..................................... $101,683 111,452
======== =======
The Homebuilding Division's net deferred tax asset amounting to $90.4
million and $110.0 million at November 30, 2001 and 2000, respectively, is
included in other assets in the consolidated balance sheets.
At November 30, 2001 and 2000, the Financial Services Division had a net
deferred tax asset of $11.3 million and $1.5 million, respectively.
36
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely
than not that a portion or all of the deferred tax asset will not be realized.
At November 30, 2001 and 2000, the Company had a valuation allowance of $7.1
million for net operating loss and capital loss carryforwards and certain
acquisition adjustments which currently are not expected to be realized. Based
on management's assessment, it is more likely than not that the net deferred
tax asset will be realized through future taxable earnings.
A reconciliation of the statutory rate and the effective tax rate follows:
Percentage of
Pre-tax Income
--------------
2001 2000 1999
---- ---- ----
Statutory rate................................................... 35.0 35.0 35.0
State income taxes, net of federal income tax benefit............ 3.1 3.4 3.9
Other............................................................ 0.4 0.6 0.6
---- ---- ----
Effective rate................................................... 38.5 39.0 39.5
==== ==== ====
10.Earnings Per Share
Basic and diluted earnings per share for the years ended November 30, 2001,
2000 and 1999 were calculated as follows:
2001 2000 1999
-------- ------- -------
(In thousands, except
per share amounts)
Numerator:
Numerator for basic earnings per share--net earnings.. $417,845 229,137 172,714
Interest on zero-coupon senior convertible debentures
due 2018, net of tax................................. 6,094 5,808 5,538
-------- ------- -------
Numerator for diluted earnings per share.............. $423,939 234,945 178,252
======== ======= =======
Denominator:
Denominator for basic earnings per share--weighted av-
erage shares......................................... 62,737 57,341 58,246
Effect of dilutive securities:
Employee stock options and restricted stock.......... 1,737 1,053 684
Zero-coupon senior convertible debentures due 2018... 6,105 6,105 6,105
-------- ------- -------
Denominator for diluted earnings per share--adjusted
weighted average shares and assumed conversions...... 70,579 64,499 65,035
======== ======= =======
Basic earnings per share.............................. $ 6.66 4.00 2.97
======== ======= =======
Diluted earnings per share............................ $ 6.01 3.64 2.74
======== ======= =======
11.Comprehensive Income
In accordance with the transition provisions of SFAS No. 133, on December
1, 2000, the Company recorded a cumulative-effect type adjustment of $3.5
million (net of tax benefit of $2.2 million) in accounts payable and other
liabilities and accumulated other comprehensive loss to recognize the fair
value of interest rate swaps. Subsequent to the Company's adoption of SFAS No.
133 through November 30, 2001, the liability and accumulated other
comprehensive loss increased $15.8 million (net of tax benefit of $9.9
million) to $19.3 million. Comprehensive income was $398.6 million, $229.1
million and $172.7 million for the years ended November 30, 2001, 2000 and
1999, respectively.
12.Capital Stock
Preferred Stock
The Company is authorized to issue 500,000 shares of preferred stock with a
par value of $10 per share and 100 million shares of participating preferred
stock with a par value of $0.10 per share. No shares of preferred stock or
participating preferred stock have been issued as of November 30, 2001.
37
Common Stock
The Company has two classes of common stock, common stock and Class B
common stock. The common stockholders have one vote for each share owned in
matters requiring stockholder approval and during both 2001 and 2000 received
quarterly dividends of $0.0125 per share. The Class B common stockholders have
ten votes for each share of stock owned and during both 2001 and 2000 received
quarterly dividends of $0.01125 per share. As of November 30, 2001, Mr.
Leonard Miller, Chairman of the Board of the Company, owned or controlled
9.7 million shares of common stock and Class B common stock, which represented
approximately 64% voting control of the Company.
In June 2001, the Company's Board of Directors increased the Company's
previously authorized stock repurchase program to permit future purchases of
up to 10 million shares of the Company's outstanding common stock. The Company
may repurchase these shares in the open market from time-to-time. During 2001,
the Company did not repurchase any of its outstanding common stock. During
2000 and 1999, under prior approvals, the Company repurchased approximately
9,406,000 and 442,000 shares of its outstanding common stock for an aggregate
purchase price of approximately $152.9 million and $6.0 million, respectively.
The Company has shelf registration statements under the Securities Act of
1933, as amended, relating to up to $970 million of equity or debt securities
which it may sell for cash and up to $400 million of equity or debt securities
which it may issue in connection with acquisitions of companies or interests
in them, businesses, or assets. At November 30, 2001, no securities had been
issued under these registration statements.
Restrictions on Payment of Dividends
Other than as required to maintain the financial ratios and net worth
required by the revolving credit facilities, there are no restrictions on the
payment of dividends on common stock by the Company. The cash dividends per
share paid with regard to a share of Class B common stock in a calendar year
may not be more than 90% of the per share cash dividends paid with regard to a
share of common stock in that calendar year. There are no agreements which
restrict the payment of dividends by subsidiaries of the Company other than as
required to maintain the financial ratios and net worth requirements under the
Financial Services Division's warehouse lines of credit.
Stock Option Plans
The Lennar Corporation 2000 Stock Option and Restricted Stock Plan (the
"2000 Plan") provides for the granting of stock options and stock appreciation
rights and awards of restricted common stock to key officers, employees and
directors. The exercise prices of stock options and stock appreciation rights
are not less than the market value of the common stock on the date of the
grant. No options granted under the 2000 Plan may be exercisable until at
least six months after the date of the grant. Thereafter, exercises are
permitted in installments determined when options are granted. Each stock
option and stock appreciation right will expire on a date determined at the
time of the grant, but not more than 10 years after the date of the grant. At
November 30, 2001, 835,000 shares of restricted stock were outstanding under
the 2000 Plan. The stock was valued based on its market price on the date of
the grant. The grants vest over 5 years. Unearned compensation arising from
the restricted stock grants is amortized to expense over the period of the
restrictions and is shown as a reduction of stockholders' equity in the
consolidated balance sheets.
The Lennar Corporation 1997 Stock Option Plan (the "1997 Plan") provided
for the granting of stock options and stock appreciation rights to key
employees of the Company to purchase shares at prices not less than market
value of the common stock on the date of the grant. No options granted under
the 1997 Plan may be exercisable until at least six months after the date of
the grant. Thereafter, exercises are permitted in installments determined when
options are granted. Each stock option and stock appreciation right granted
will expire on a date determined at the time of the grant, but not more than
10 years after the date of the grant.
The Lennar Corporation 1991 Stock Option Plan (the "1991 Plan") provided
for the granting of options to certain key employees of the Company to
purchase shares at prices not less than market value of the common stock on
the date of the grant. No options granted under the 1991 Plan may be
exercisable until at least six months after the date of the grant. Thereafter,
exercises are permitted in installments determined when options are granted.
Each stock option granted will expire on a date determined at the time of the
grant, but not more than 10 years after the date of the grant.
38
A summary of the Company's stock option activity for the years ended
November 30, 2001, 2000 and 1999 was as follows:
2001 2000 1999
-------------------- ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Stock Exercise Stock Exercise Stock Exercise
Options Price Options Price Options Price
---------- -------- --------- -------- --------- --------
Outstanding, beginning
of year................ 3,478,683 $16.68 3,445,230 $16.20 3,679,256 $15.52
Grants.................. 791,600 $37.47 671,000 $17.68 211,000 $23.95
Terminations............ (101,389) $29.33 (256,652) $19.43 (235,108) $19.83
Exercises............... (1,303,138) $14.14 (380,895) $11.74 (209,918) $10.05
---------- ------ --------- ------ --------- ------
Outstanding, end of
year................... 2,865,756 $23.13 3,478,683 $16.68 3,445,230 $16.20
---------- ------ --------- ------ --------- ------
Exercisable, end of
year................... 748,812 $15.60 1,422,734 $14.14 1,299,743 $11.87
---------- ------ --------- ------ --------- ------
Available for grant, end
of year................ 2,216,500 3,890,822 1,310,072
---------- --------- ---------
Weighted average fair
value per share of
options granted during
the year under SFAS No.
123 ................... $18.41 $ 7.84 $ 9.40
The following table summarizes information about stock options outstanding
at November 30, 2001:
Options Outstanding Options Exercisable
----------------------------------------- -----------------------------
Weighted
Number Average Weighted Number Weighted
Outstanding at Remaining Average Per Outstanding at Average Per
Range of Per Share November 30, Contractual Share November 30, Share
Exercise Prices 2001 Life Exercise Price 2001 Exercise Price
- ------------------ -------------- ----------- -------------- -------------- --------------
$ 4.56 -
$11.42 417,756 1.9 years $ 9.14 322,478 $ 9.91
$13.95 -
$19.59 1,038,700 5.6 years $16.60 289,534 $15.94
$20.35 -
$28.32 464,550 5.0 years $21.04 60,550 $21.03
$32.84 -
$41.85 944,750 8.2 years $36.91 76,250 $34.03
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock option plans. No compensation expense is recognized
because all stock options granted have exercise prices not less than the
market value of the Company's stock on the date of grant. SFAS No. 123
requires "as adjusted" information regarding net earnings and earnings per
share to be disclosed for new options granted. The Company determined this
information using the fair value method of that statement. The fair value of
these options was determined at the date of the grant using the Black-Scholes
option-pricing model. The significant weighted average assumptions for the
years ended November 30, 2001, 2000 and 1999 were as follows:
2001 2000 1999
----------- ----------- -----------
Dividend yield.............................. 0.1% 0.2% - 0.3% 0.2% - 0.3%
Volatility rate............................. 40% - 42% 39% - 44% 40% - 42%
Risk-free interest rate..................... 4.5% - 5.8% 7.1% - 7.5% 4.8% - 6.1%
Expected option life (years)................ 6.4 3.9 - 7.7 3.9 - 7.7
The estimated fair value of the options is recognized in expense over the
options' vesting period for "as adjusted" disclosures. The earnings per share
"as adjusted" for the effects of SFAS No. 123 is not indicative of the effects
on reported net earnings for future years. The Company's reported "as
adjusted" information for the years ended November 30, 2001, 2000 and 1999 was
as follows:
39
2001 2000 1999
-------- ------- -------
(In thousands, except
per share amounts)
Net earnings........................................... $417,845 229,137 172,714
Net earnings "as adjusted"............................. $414,049 226,568 170,620
Earnings per share as reported-- basic................. $ 6.66 4.00 2.97
Earnings per share "as adjusted"--basic................ $ 6.60 3.95 2.93
Earnings per share as reported--diluted................ $ 6.01 3.64 2.74
Earnings per share "as adjusted"--diluted.............. $ 5.95 3.60 2.71
Employee Stock Ownership/401(k) Plan
Prior to 1998, the Employee Stock Ownership/401(k) Plan (the "Plan")
provided shares of stock to employees who had completed one year of continuous
service with the Company. During 1998, the Plan was amended to exclude any new
shares from being provided to employees. At November 30, 2001, the Plan held
in employees' accounts 146,325 shares of the Company's common stock. All prior
year contributions to employees actively employed on or after October 1, 1998
vest at a rate of 20% per year over a five year period. All active
participants in the Plan whose employment terminated prior to October 1, 1998
vested based upon the Plan that was active prior to their termination of
employment. Under the 401(k) portion of the Plan, contributions made by
employees can be invested in a variety of mutual funds, and the Company may
also make contributions for the benefit of employees. The Company records as
compensation expense an amount which approximates the vesting of the
contributions to the Employee Stock Ownership portion of the Plan, as well as
the Company's contribution to the 401(k) portion of the Plan. This amount was
$6.5 million in 2001, $4.7 million in 2000 and $3.1 million in 1999.
13.Financial Instruments
The following table presents the carrying amounts and estimated fair values
of financial instruments held by the Company at November 30, 2001 and 2000,
using available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies might have a material effect on the estimated fair
value amounts. The table excludes cash, receivables and accounts payable,
which had fair values approximating their carrying values.
November 30,
------------------------------------------
2001 2000
--------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- --------- --------- ---------
(In thousands)
ASSETS
Financial services:
Mortgage loans held for sale or
disposition, net................. $ 587,694 587,916 376,452 379,499
Mortgage loans, net............... 41,590 40,886 42,504 42,014
Investments held-to-maturity...... 13,235 13,284 12,488 12,507
Limited-purpose finance
subsidiaries--collateral for
bonds and notes payable.......... 13,146 13,730 19,894 20,320
LIABILITIES
Homebuilding:
Senior notes and other debts pay-
able............................. $1,505,255 1,611,460 1,254,650 1,287,902
Financial services:
Notes and other debts payable..... $ 693,931 693,931 428,966 428,966
Limited-purpose finance
subsidiaries--bonds and notes
payable.......................... 13,146 13,682 19,894 20,169
OTHER FINANCIAL INSTRUMENTS
Homebuilding:
Interest rate swap liability...... $ (31,359) (31,359) -- (5,707)
Financial services assets (liabil-
ities):
Commitments to originate loans.... $ (1,085) (1,085) -- 445
Forward commitments to sell
loans............................ 2,351 2,351 -- (119)
========== ========= ========= =========
40
The following methods and assumptions are used by the Company in estimating
fair values:
Homebuilding--Senior notes and other debts payable: The fair value of fixed
rate borrowings is based on quoted market prices. Variable rate borrowings are
tied to market indices and therefore approximate fair value. Interest rate
swap agreements: The fair value is based on dealer quotations and generally
represents an estimate of the amount the Company would pay or receive to
terminate the agreement at the reporting date.
Financial services--The fair values are based on quoted market prices, if
available. The fair values for instruments which do not have quoted market
prices are estimated by the Company on the basis of discounted cash flows or
other financial information.
The Company utilizes interest rate swap agreements to manage interest costs
and hedge against risks associated with changing interest rates.
Counterparties to these agreements are major financial institutions. Credit
loss from counterparty non-performance is not anticipated. A majority of the
Company's available variable rate borrowings are based on the London Interbank
Offered Rate ("LIBOR") index. At November 30, 2001, the Company had six
interest rate swap agreements outstanding with a total notional amount of $400
million, which will mature at various dates through 2007. These agreements
fixed the LIBOR index at an average interest rate of 6.6% at November 30,
2001. The effect of the interest rate swap agreements on interest incurred and
on the average interest rate was an increase for the year ended November 30,
2001 of $7.2 million and 0.48%, a decrease of $1.2 million and 0.08% for the
year ended November 30, 2000 and an increase of $1.8 million and 0.22% for the
year ended November 30, 1999.
As of November 30, 2001, the Financial Services Division's pipeline of
loans in process totaled approximately $1.7 billion. To minimize credit risk,
the Division uses the same credit policies in the approval of the commitments
as are applied to all lending activities. Since a portion of these commitments
is expected to expire without being exercised by the borrowers, the total
commitments do not necessarily represent future cash requirements. Loans in
the pipeline of loans in process for which interest rates were committed to
the borrower totaled approximately $235.0 million as of November 30, 2001.
Substantially all of these commitments were for periods of 30 days or less.
Mandatory mortgage-backed securities ("MBS") forward commitments are used
by the Company to hedge its interest rate exposure during the period from when
the Company makes an interest rate commitment to a loan applicant until the
time at which the loan is sold to an investor. These instruments involve, to
varying degrees, elements of credit and interest rate risk. Credit risk is
managed by entering into agreements with investment bankers with primary
dealer status and with permanent investors meeting the credit standards of the
Company. At any time, the risk to the Company, in the event of default by the
purchaser, is the difference between the contract price and current market
value. At November 30, 2001, the Company had open commitments amounting to
$291.0 million to sell MBS with varying settlement dates through January 2002.
14.Commitments and Contingent Liabilities
The Company and certain subsidiaries are parties to various claims, legal
actions and complaints arising in the ordinary course of business. In the
opinion of management, the disposition of these matters will not have a
material adverse effect on the financial condition or results of operations of
the Company.
The Company is subject to the usual obligations associated with entering
into contracts for the purchase (including option contracts), development and
sale of real estate, which it does in the routine conduct of its business.
Option contracts for the purchase of land permit the Company to acquire
portions of properties when it is ready to build homes on them. The use of
option contracts allows the Company to reduce the financial risk of adverse
market conditions associated with long-term land holdings. At November 30,
2001, the Company had $180.3 million of primarily non-refundable option
deposits and advanced costs, with entities including unconsolidated
partnerships, which allows the Company to acquire approximately 31,000
homesites.
41
The Company has entered into agreements to lease certain office facilities
and equipment under operating leases. Future minimum payments under the
noncancelable leases are as follows: 2002--$30.7 million; 2003--$25.2 million;
2004--$20.0 million; 2005--$14.5 million; 2006--$11.4 million and thereafter--
$24.7 million. Rental expense for the years ended November 30, 2001, 2000 and
1999 was $42.3 million, $36.6 million and $24.3 million, respectively.
The Company is committed, under various letters of credit, to perform
certain development and construction activities and provide certain guarantees
in the normal course of business. Outstanding letters of credit under these
arrangements totaled $154.3 million at November 30, 2001. The Company also had
outstanding performance and surety bonds with estimated costs to complete of
$750.7 million related principally to its obligations for site improvements at
various projects at November 30, 2001. The Company does not believe that any
such bonds are likely to be drawn upon.
15.Supplemental Financial Information
As discussed in Note 7, the Company issued $325 million of 9.95% senior
notes due 2010. The Company's obligations to pay principal, premium, if any,
and interest under the notes are guaranteed on a joint and several basis by
substantially all of its subsidiaries, other than subsidiaries engaged in
mortgage and title reinsurance activities. The Company has determined that
separate, full financial statements of the guarantors would not be material to
investors and, accordingly, supplemental financial information for the
guarantors is presented. Consolidating statements of cash flows are not
presented because cash flows for the non-guarantor subsidiaries were not
significant for any of the periods presented.
42
CONSOLIDATING BALANCE SHEET
November 30, 2001
Non-
Lennar Guarantor Guarantor
Corporation Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------ ------------ ----------
(In thousands)
ASSETS
Homebuilding:
Cash and receivables,
net.................... $ 710,748 137,610 -- -- 848,358
Inventories............. -- 2,410,117 6,424 -- 2,416,541
Investments in
unconsolidated
partnerships........... -- 300,064 -- -- 300,064
Other assets............ 83,983 169,950 -- -- 253,933
Investments in subsidi-
aries.................. 1,955,678 197,821 -- (2,153,499) --
---------- ---------- --------- ----------- ----------
2,750,409 3,215,562 6,424 (2,153,499) 3,818,896
Financial services...... -- 24,762 870,768 -- 895,530
---------- ---------- --------- ----------- ----------
$2,750,409 3,240,324 877,192 (2,153,499) 4,714,426
========== ========== ========= =========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and
other liabilities...... $ 295,188 460,320 218 -- 755,726
Senior notes and other
debts payable, net..... 1,460,610 44,645 -- -- 1,505,255
Intercompany............ (664,651) 773,091 (108,440) -- --
---------- ---------- --------- ----------- ----------
1,091,147 1,278,056 (108,222) -- 2,260,981
Financial services...... -- 6,590 787,593 -- 794,183
---------- ---------- --------- ----------- ----------
Total liabilities....... 1,091,147 1,284,646 679,371 -- 3,055,164
Stockholders' equity.... 1,659,262 1,955,678 197,821 (2,153,499) 1,659,262
---------- ---------- --------- ----------- ----------
$2,750,409 3,240,324 877,192 (2,153,499) 4,714,426
========== ========== ========= =========== ==========
43
CONSOLIDATING BALANCE SHEET
November 30, 2000
Non-
Lennar Guarantor Guarantor
Corporation Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------ ------------ ----------
(In thousands)
ASSETS
Homebuilding:
Cash and receivables,
net.................... $ 211,635 117,649 613 -- 329,897
Inventories............. -- 2,295,191 6,393 -- 2,301,584
Investments in
unconsolidated
partnerships........... -- 257,639 -- -- 257,639
Other assets............ 85,936 191,858 -- -- 277,794
Investments in subsidi-
aries.................. 1,495,680 200,488 -- (1,696,168) --
---------- ---------- --------- ----------- ----------
1,793,251 3,062,825 7,006 (1,696,168) 3,166,914
Financial services...... -- 16,604 594,396 -- 611,000
---------- ---------- --------- ----------- ----------
$1,793,251 3,079,429 601,402 (1,696,168) 3,777,914
========== ========== ========= =========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and
other liabilities...... $ 225,362 550,659 2,217 -- 778,238
Senior notes and other
debts payable, net..... 1,216,703 37,947 -- -- 1,254,650
Intercompany............ (877,394) 993,477 (116,083) -- --
---------- ---------- --------- ----------- ----------
564,671 1,582,083 (113,866) -- 2,032,888
Financial services...... -- 1,666 514,780 -- 516,446
---------- ---------- --------- ----------- ----------
Total liabilities....... 564,671 1,583,749 400,914 -- 2,549,334
Stockholders' equity.... 1,228,580 1,495,680 200,488 (1,696,168) 1,228,580
---------- ---------- --------- ----------- ----------
$1,793,251 3,079,429 601,402 (1,696,168) 3,777,914
========== ========== ========= =========== ==========
CONSOLIDATING STATEMENT OF EARNINGS
Year Ended November 30, 2001
Non-
Lennar Guarantor Guarantor
Corporation Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------ ------------ ---------
(In thousands)
Revenues:
Homebuilding............ $ -- 5,603,943 4 -- 5,603,947
Financial services...... -- 55,146 370,208 -- 425,354
-------- --------- -------- -------- ---------
Total revenues.......... -- 5,659,089 370,212 -- 6,029,301
-------- --------- -------- -------- ---------
Costs and expenses:
Homebuilding............ -- 4,817,778 543 -- 4,818,321
Financial services...... -- 62,358 273,865 -- 336,223
Corporate general and
administrative......... 75,831 -- -- -- 75,831
Interest................ -- 119,503 -- -- 119,503
-------- --------- -------- -------- ---------
Total costs and ex-
penses................. 75,831 4,999,639 274,408 -- 5,349,878
-------- --------- -------- -------- ---------
Earnings (loss) before
income taxes........... (75,831) 659,450 95,804 -- 679,423
Provision (benefit) for
income taxes........... (27,829) 253,888 35,519 -- 261,578
Equity in earnings from
subsidiaries........... 465,847 60,285 -- (526,132) --
-------- --------- -------- -------- ---------
Net earnings............ $417,845 465,847 60,285 (526,132) 417,845
======== ========= ======== ======== =========
44
CONSOLIDATING STATEMENT OF EARNINGS
Year Ended November 30, 2000
Non-
Lennar Guarantor Guarantor
Corporation Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------ ------------ ---------
(In thousands)
Revenues:
Homebuilding............ $ -- 4,387,157 2,877 -- 4,390,034
Financial services...... -- 47,818 269,116 -- 316,934
-------- --------- -------- --------- ---------
Total revenues.......... -- 4,434,975 271,993 -- 4,706,968
-------- --------- -------- --------- ---------
Costs and expenses:
Homebuilding............ -- 3,906,772 2,466 -- 3,909,238
Financial services...... -- 52,533 220,806 -- 273,339
Corporate general and
administrative......... 50,155 -- -- -- 50,155
Interest................ -- 98,601 -- -- 98,601
-------- --------- -------- --------- ---------
Total costs and ex-
penses................. 50,155 4,057,906 223,272 -- 4,331,333
-------- --------- -------- --------- ---------
Earnings (loss) before
income taxes........... (50,155) 377,069 48,721 -- 375,635
Provision (benefit) for
income taxes........... (20,298) 147,057 19,739 -- 146,498
Equity in earnings from
subsidiaries........... 258,994 28,982 -- (287,976) --
-------- --------- -------- --------- ---------
Net earnings............ $229,137 258,994 28,982 (287,976) 229,137
======== ========= ======== ========= =========
45
CONSOLIDATING STATEMENT OF EARNINGS
Year Ended November 30, 1999
Non-
Lennar Guarantor Guarantor
Corporation Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------ ------------ ----------
(In thousands)
Revenues:
Homebuilding............ $ -- 2,848,105 1,102 -- 2,849,207
Financial services...... -- 31,025 238,282 -- 269,307
-------- --------- -------- --------- ----------
Total revenues.......... -- 2,879,130 239,384 -- 3,118,514
-------- --------- -------- --------- ----------
Costs and expenses:
Homebuilding............ -- 2,506,332 2,072 -- 2,508,404
Financial services...... -- 34,115 204,096 -- 238,211
Corporate general and
administrative......... 37,563 -- -- -- 37,563
Interest................ -- 48,859 -- -- 48,859
-------- --------- -------- --------- ----------
Total costs and
expenses............... 37,563 2,589,306 206,168 -- 2,833,037
-------- --------- -------- --------- ----------
Earnings (loss) before
income taxes........... (37,563) 289,824 33,216 -- 285,477
Provision (benefit) for
income taxes........... (15,823) 114,480 14,106 -- 112,763
Equity in earnings from
subsidiaries........... 194,454 19,110 -- (213,564) --
-------- --------- -------- --------- ----------
Net earnings............ $172,714 194,454 19,110 (213,564) 172,714
======== ========= ======== ========= ==========
16. Quarterly Data (unaudited)
First Second Third Fourth
---------- --------- --------- ---------
(In thousands, except per share amounts)
2001
Revenues............................... $1,104,042 1,391,533 1,577,628 1,956,098
Earnings before income taxes........... $ 83,360 157,733 173,488 264,842
Net earnings........................... $ 51,266 97,006 106,695 162,878
Earnings per share:
Basic................................ $ 0.83 1.55 1.69 2.58
Diluted.............................. $ 0.75 1.40 1.53 2.32
========== ========= ========= =========
2000
Revenues............................... $ 640,367 968,180 1,376,215 1,722,206
Earnings before income taxes........... $ 36,412 59,739 100,011 179,473
Net earnings........................... $ 22,211 36,441 61,007 109,478
Earnings per share:
Basic................................ $ 0.42 0.69 0.99 1.77
Diluted.............................. $ 0.40 0.64 0.90 1.59
========== ========= ========= =========
Quarterly and year-to-date computations of per share amounts are made
independently. Therefore, the sum of per share amounts for the quarters may
not agree with per share amounts for the year.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
46
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information about our directors is incorporated by reference to our
definitive proxy statement, which will be filed with the Securities and
Exchange Commission not later than March 30, 2002 (120 days after the end of
our fiscal year). The following people were our executive officers on February
20, 2002:
Name/Position Age Year of Election
- ------------- --- ----------------
Stuart A. Miller,
President and Chief Executive Officer..................... 44 1997
Robert J. Strudler,
Vice Chairman and Chief Operating Officer................. 59 2000
Bruce E. Gross,
Vice President and Chief Financial Officer................ 43 1997
Marshall H. Ames,
Vice President............................................ 58 1982
Diane J. Bessette,
Vice President and Controller............................. 41 1997
Jonathan M. Jaffe,
Vice President............................................ 42 1994
Craig M. Johnson,
Vice President, Community Development..................... 48 2000
Waynewright Malcolm,
Vice President and Treasurer.............................. 38 1997
David B. McCain,
Vice President, General Counsel and Secretary............. 41 1998
Allan J. Pekor,
Vice President............................................ 65 1997
The year of election represents the year that the executive officer was
elected to his or her current position.
Mr. Stuart Miller (who is the son of Leonard Miller, our Chairman of the
Board of Directors) has been our President and Chief Executive Officer since
April 1997 and is one of our Directors. Prior to that, Mr. Miller held various
executive positions with us and had been a Vice President since 1985. Mr.
Miller is also the Chairman of the Board of LNR Property Corporation.
Mr. Strudler has been Vice Chairman of the Board of Directors and Chief
Operating Officer since May 2000. Prior to that, Mr. Strudler was the Chairman
and Co-Chief Executive Officer of U.S. Home Corporation.
Mr. Gross has been a Vice President and our Chief Financial Officer since
1997. Prior to that, Mr. Gross was employed as Senior Vice President,
Controller and Treasurer of Pacific Greystone Corporation.
Mr. Ames has been a Vice President since 1982 and has held various
positions in our Homebuilding Division.
Ms. Bessette has been employed by us since 1995, has been our Controller
since 1997 and became a Vice President in 2000.
Mr. Jaffe has been a Vice President since 1994 and serves as a Regional
President in our Homebuilding Division. Mr. Jaffe is one of our Directors.
Mr. Johnson has been a Vice President since May 2000 and is President of
Strategic Technologies, Inc. Prior to that, Mr. Johnson was a Senior Vice
President of U.S. Home Corporation.
Mr. Malcolm joined us as Treasurer in 1997 and became a Vice President in
2000. Prior to that, Mr. Malcolm was employed as Director, Finance and
Regulatory Affairs, at Citizens Utilities Company.
Mr. McCain joined us in 1998 as a Vice President, General Counsel and
Secretary. Prior to joining us, Mr. McCain was employed at John Alden Asset
Management Company for more than 10 years, where he last served as Vice
President, General Counsel and Secretary.
Mr. Pekor has held various executive positions with us since 1979. Mr.
Pekor presently serves as a Vice President and has served as President of
Lennar Financial Services, Inc. since 1997.
47
Item 11. Executive Compensation.
The information called for by this item is incorporated by reference to our
definitive proxy statement, which will be filed with the Securities and
Exchange Commission not later than March 30, 2002 (120 days after the end of
our fiscal year).
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for by this item is incorporated by reference to our
definitive proxy statement, which will be filed with the Securities and
Exchange Commission not later than March 30, 2002 (120 days after the end of
our fiscal year).
Item 13. Certain Relationships and Related Transactions.
The information called for by this item is incorporated by reference to our
definitive proxy statement, which will be filed with the Securities and
Exchange Commission not later than March 30, 2002 (120 days after the end of
our fiscal year).
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this Report.
1. The following financial statements are contained in Item 8:
Financial Statements Page in this Report
-------------------- -------------------
Report of Independent Auditors......................... 21
Consolidated Balance Sheets as of November 30, 2001 and
2000.................................................. 22
Consolidated Statements of Earnings for the Years Ended
November 30, 2001, 2000
and 1999.............................................. 23
Consolidated Statements of Stockholders' Equity for the
Years Ended November 30, 2001, 2000 and 1999.......... 24
Consolidated Statements of Cash Flows for the Years
Ended November 30, 2001, 2000 and 1999................ 25
Notes to Consolidated Financial Statements............. 27
2. The following financial statement schedule is included in this Report:
Financial Statement Schedule Page in this Report
---------------------------- -------------------
Independent Auditors' Report on Schedule................. 52
II - Valuation and Qualifying Accounts................... 53
Information required by other schedules has either been incorporated in the
consolidated financial statements and accompanying notes or is not
applicable to us.
3. The following exhibits are filed with this Report or incorporated by
reference:
3(a). Amended and Restated Certificate of Incorporation, dated April
28, 1998--Incorporated by reference to Exhibit 3(a) to the Annual
Report on Form 10-K for the fiscal year ended November 30, 1998.
3(b). Certificate of Amendment to Certificate of Incorporation, dated
April 9, 1999--Incorporated by reference to Exhibit 3(a) to the
Annual Report on Form 10-K for the fiscal year ended November 30,
1999.
3(c). Bylaws--Incorporated by reference to Exhibit 3.2 to the Current
Report on Form 8-K dated November 17, 1997, file number 1-06643.
4(a). Indenture, dated as of December 31, 1997, between Lennar
Corporation and Bank One Trust Company, N.A., as successor in
interest to The First National Bank of Chicago, as trustee--
Incorporated by Reference to Registration Statement No. 333-
45527.
48
4(b). First Supplemental Indenture, dated as of July 29, 1998, between
Lennar Corporation and Bank One Trust Company, N.A., as successor
in interest to The First National Bank of Chicago, as trustee
(relating to Lennar's Zero Coupon Senior Convertible Debentures
due 2018)--Incorporated by reference to the Current Report on
Form 8-K dated July 24, 1998, file number 1-11749.
4(c). Second Supplemental Indenture, dated as of February 19, 1999,
between Lennar Corporation and Bank One Trust Company, N.A., as
successor in interest to The First National Bank of Chicago, as
trustee (relating to Lennar's 7 5/8% Senior Notes due 2009)--
Incorporated by reference to the Current Report on Form 8-K dated
February 19, 1999, file number 1-11749.
4(d). Third Supplemental Indenture, dated May 3, 2000, by and among
Lennar Corporation and Bank One Trust Company, N.A., as successor
trustee to The First National Bank of Chicago (relating to
Lennar's 7 5/8% Senior Notes due 2009)--Incorporated by reference
to the Annual Report on Form 10-K for the fiscal year ended
November 30, 2000.
4(e). Fourth Supplemental Indenture, dated May 3, 2000, by and among
Lennar Corporation and Bank One Trust Company, N.A., as successor
trustee to The First National Bank of Chicago (relating to
Lennar's Zero Coupon Senior Convertible Debentures due 2018)--
Incorporated by reference to the Annual Report on Form 10-K for
the fiscal year ended November 30, 2000.
4(f). Fifth Supplemental Indenture, dated April 4, 2001, by and among
Lennar Corporation and Bank One Trust Company, N.A., as trustee
(relating to Lennar's Zero Coupon Convertible Senior Subordinated
Notes due 2021)--Incorporated by reference to the Current Report
on Form 8-K dated April 4, 2001, file number 1-11749.
4(g). Indenture, dated May 3, 2000, by and among Lennar Corporation and
Bank One Trust Company, N.A., as trustee, including Form of 9.95%
Series A Senior Notes due 2010 and Form of 9.95% Series B Senior
Notes due 2010--Incorporated by reference to Registration
Statement No. 333-41316.
4(h). Registration Rights Agreement, dated May 3, 2000, by and among
Lennar Corporation and the Initial Purchasers--Incorporated by
reference to Registration Statement No. 333-41316.
10(a). Lennar Corporation 2000 Stock Option and Restricted Stock Plan--
Incorporated by reference to the Quarterly Report on Form 10-Q
for the quarter ended February 28, 2001.
10(b). Amended and Restated Lennar Corporation 1997 Stock Option Plan--
Incorporated by reference to Annual Report on Form 10-K for the
fiscal year ended November 30, 1997.
10(c). Lennar Corporation 1991 Stock Option Plan--Incorporated by
reference to Registration Statement No. 33-45442.
10(d). Lennar Corporation Employee Stock Ownership Plan and Trust--
Incorporated by reference to Registration Statement No. 2-89104.
10(e). Amendment dated December 13, 1989 to Lennar Corporation Employee
Stock Ownership Plan--Incorporated by reference to Annual Report
on Form 10-K for the fiscal year ended November 30, 1990.
10(f). Lennar Corporation Employee Stock Ownership/401(k) Trust
Agreement dated December 13, 1989--Incorporated by reference to
Annual Report on Form 10-K for the fiscal year ended November
30, 1990.
10(g). Amendment dated April 18, 1990 to Lennar Corporation Employee
Stock Ownership/401(k) Plan--Incorporated by reference to Annual
Report on Form 10-K for the fiscal year ended November 30, 1990.
10(h). Partnership Agreement for Lennar Land Partners by and between
Lennar Land Partners Sub, Inc. and LNR Land Partners Sub, Inc.,
dated October 24, 1997--Incorporated by reference to Annual
Report on Form 10-K for the fiscal year ended November 30, 1997.
Lennar Land Partners Sub II, Inc. and LNR Land Partners Sub II,
Inc. entered into an identical Partnership Agreement for Lennar
Land Partners II on June 28, 1999.
10(i). Separation and Distribution Agreement, dated June 10, 1997,
between Lennar Corporation and LNR Property Corporation--
Incorporated by reference to Registration Statement No. 333-
35671.
49
10(j). Credit Agreement, dated October 31, 1997, by and among Lennar
Land Partners and the Lenders named therein--Incorporated by
reference to Annual Report on Form 10-K for the fiscal year
ended November 30, 1997.
10(k). Credit Agreement, dated May 3, 2000, among Lennar Corporation
and various lenders--Incorporated by reference to the Annual
Report on Form 10-K for the fiscal year ended November 30, 2000.
10(l). Plan and Agreement of Merger, dated as of February 16, 2000,
between Lennar Corporation, U.S. Home Corporation and Len
Acquisition Corporation--Incorporated by reference to Current
Report on Form 8-K dated February 23, 2000, file number 1-11749.
10(m). Warehousing Credit and Security Agreement dated June 25, 2001
between Universal American Mortgage Company, Eagle Home
Mortgage, Inc., Ameristar Financial Services, Inc., Universal
American Mortgage Company of California, UAMC Asset Corp. II and
Residential Funding Corporation.
21. List of subsidiaries.
23. Independent Auditors' Consent.
99. Financial statements of Lennar Corporation's guarantor subsidiaries.
(b) Current Reports on Form 8-K filed during the quarter ended November 30,
2001.
We filed a Current Report on Form 8-K dated October 5, 2001, file
number 1-11749, which contained our earnings release for the quarter
ended August 31, 2001.
(c) The exhibits to this Report are listed in Item 14(a)3.
(d) The financial statement schedules required by Regulation S-X which are
excluded from the Annual Report to Stockholders as permitted by Rule
14a-3(b)(1) are listed in Item 14(a)2.
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, we have duly caused this Report to be signed on our
behalf by the undersigned, thereunto duly authorized.
LENNAR CORPORATION
/s/ Stuart A. Miller
_______________________________________
Stuart A. Miller
President, Chief Executive Officer and
Director
Date: February 28, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on our behalf and in the
capacities and on the dates indicated:
Principal Executive Officer:
Stuart A. Miller /s/ Stuart A. Miller
President, Chief Executive Officer and Direc- ---------------------------------
tor Date: February 28, 2002
Principal Financial Officer:
Bruce E. Gross /s/ Bruce E. Gross
Vice President and Chief Financial Officer ---------------------------------
Date: February 28, 2002
Principal Accounting Officer:
Diane J. Bessette /s/ Diane J. Bessette
Vice President and Controller ---------------------------------
Date: February 28, 2002
Directors:
Irving Bolotin /s/ Irving Bolotin
---------------------------------
Date: February 28, 2002
Steven L. Gerard /s/ Steven L. Gerard
---------------------------------
Date: February 28, 2002
Jonathan M. Jaffe /s/ Jonathan M. Jaffe
---------------------------------
Date: February 28, 2002
R. Kirk Landon /s/ R. Kirk Landon
---------------------------------
Date: February 28, 2002
Sidney Lapidus /s/ Sidney Lapidus
---------------------------------
Date: February 28, 2002
Leonard Miller /s/ Leonard Miller
---------------------------------
Date: February 28, 2002
Herve Ripault /s/ Herve Ripault
---------------------------------
Date: February 28, 2002
Steven J. Saiontz /s/ Steven J. Saiontz
---------------------------------
Date: February 28, 2002
Donna Shalala /s/ Donna Shalala
---------------------------------
Date: February 28, 2002
Robert J. Strudler /s/ Robert J. Strudler
---------------------------------
Date: February 28, 2002
51
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Lennar Corporation:
We have audited the consolidated financial statements of Lennar Corporation
and subsidiaries (the "Company") as of November 30, 2001 and 2000 and for each
of the three years in the period ended November 30, 2001, and have issued our
report thereon dated January 9, 2002; such report is included elsewhere in
this Form 10-K. Our audits also included the financial statement schedule of
the Company, listed in Item 14(a)2. The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Certified Public Accountants
Miami, Florida
January 9, 2002
52
Schedule II
LENNAR CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended November 30, 2001, 2000 and 1999
Additions
----------------------
Charged Charged
Beginning to costs to other Ending
Description balance and expenses accounts Deductions balance
- ----------- ---------- ------------ --------- ---------- ---------
Year ended November 30,
2001
Allowances deducted
from assets to which
they apply:
Allowances for
doubtful accounts
and notes
receivable......... $5,188,000 2,368,000 -- (2,801,000) 4,755,000
---------- --------- --------- ---------- ---------
Deferred income and
unamortized
discounts.......... $8,345,000 7,000 254,000 (3,965,000) 4,641,000
---------- --------- --------- ---------- ---------
Loan loss reserve... $3,645,000 655,000 9,000 (244,000) 4,065,000
---------- --------- --------- ---------- ---------
Valuation
allowance.......... $1,377,000 -- -- (118,000) 1,259,000
---------- --------- --------- ---------- ---------
Deferred tax asset
valuation
allowance.......... $7,117,000 -- -- -- 7,117,000
---------- --------- --------- ---------- ---------
Year ended November 30,
2000
Allowances deducted
from assets to which
they apply:
Allowances for
doubtful accounts
and notes
receivable......... $2,471,000 3,834,000 28,000 (1,145,000) 5,188,000
---------- --------- --------- ---------- ---------
Deferred income and
unamortized
discounts.......... $1,128,000 -- 7,896,000 (679,000) 8,345,000
---------- --------- --------- ---------- ---------
Loan loss reserve... $3,778,000 -- -- (133,000) 3,645,000
---------- --------- --------- ---------- ---------
Valuation
allowance.......... $1,249,000 -- 903,000 (775,000) 1,377,000
---------- --------- --------- ---------- ---------
Deferred tax asset
valuation
allowance.......... $8,508,000 -- -- (1,391,000) 7,117,000
---------- --------- --------- ---------- ---------
Year ended November 30,
1999
Allowances deducted
from assets to which
they apply:
Allowances for
doubtful accounts
and notes
receivable......... $4,075,000 2,011,000 38,000 (3,653,000) 2,471,000
---------- --------- --------- ---------- ---------
Deferred income and
unamortized
discounts.......... $ 231,000 -- 1,156,000 (259,000) 1,128,000
---------- --------- --------- ---------- ---------
Loan loss reserve... $3,090,000 1,200,000 21,000 (533,000) 3,778,000
---------- --------- --------- ---------- ---------
Valuation
allowance.......... $1,903,000 93,000 56,000 (803,000) 1,249,000
---------- --------- --------- ---------- ---------
Deferred tax asset
valuation
allowance.......... $7,659,000 -- 849,000 -- 8,508,000
---------- --------- --------- ---------- ---------
53
SHAREHOLDER INFORMATION
Lennar Corporation and Subsidiaries
Annual Meeting
The Annual Stockholders' Meeting will be
held at 11:00 a.m. on April 2, 2002
at the Doral Park Golf and Country Club,
5001 N.W. 104th Avenue
Miami, Florida 33178
Registrar and Transfer Agent
EquiServe, Inc.
P.O. Box 43010
Providence, Rhode Island 02940
Listing
New York Stock Exchange (LEN)
Corporate Counsel
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Independent Auditors
Deloitte & Touche LLP
200 South Biscayne Boulevard, Suite 400
Miami, Florida 33131
54
Exhibit Index
Exhibit Number Exhibit Description
-------------- -------------------
10(m). Warehousing Credit and Security Agreement dated June 25, 2001
between Universal American Mortgage Company, Eagle Home
Mortgage, Inc., Ameristar Financial Services, Inc., Universal
American Mortgage Company of California, UAMC Asset Corp. II and
Residential Funding Corporation.
21. List of subsidiaries.
23. Independent Auditors' Consent.
99. Financial statements of Lennar Corporation's guarantor subsidiaries.