Back to GetFilings.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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, 2003

Commission file number 1-11749

LENNAR CORPORATION

(Exact name of registrant as specified in its charter)

700 Northwest 107th Avenue, Miami, Florida 33172

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (305) 559-4000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

NONE

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  þ  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.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  YES  þ  NO  ¨

The aggregate market value of the registrant’s Class A and Class B common stock held by non-affiliates of the registrant (108,781,312 Class A shares and 10,904,060 Class B shares) as of May 31, 2003 (adjusted for the registrant’s two-for-one stock split in January 2004), based on the closing sale price per share as reported by the New York Stock Exchange on such date, was $4,002,093,239.

As of January 31, 2004, the registrant had outstanding 122,988,592 shares of Class A common stock and 32,524,462 shares of Class B common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

PART I

Item 1.    Business.

General Development of Business

We are one of the nation’s largest homebuilders and a provider of 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 subsidiaries provide mortgage financing, title insurance, closing services and insurance agency services for both buyers of our homes and others, and sell the loans they originate in the secondary mortgage market. These subsidiaries also provide high-speed Internet access, cable television and alarm installation and monitoring services to residents of communities we develop and others.

The following is a summary of our growth history:

1

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.

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, Patriot Homes, NuHome, Barry Andrews Homes, Concord Homes, Summit Homes, Cambridge Homes, Coleman Homes and Rutenberg Homes. 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 $256,000 in fiscal 2003.

Current Homebuilding Activities

Of the deliveries listed above, 768, 568 and 795 deliveries relate to unconsolidated partnerships for the years ended November 30, 2003, 2002 and 2001, respectively.

At November 30, 2003, our market regions consisted of homebuilding divisions in the following states: East: Florida, Maryland, Virginia, New Jersey, North Carolina and South Carolina. Central: Texas, Illinois and Minnesota. West: California, Colorado, Arizona and Nevada.

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, community development, home design, construction and marketing. Decisions related to our overall strategy, acquisitions of land and businesses, risk management, 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.

2

Property Acquisition

In our homebuilding operations, we generally acquire land for development and the 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 as well as the amounts invested in owned land and increase our access 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 enables us to defer acquiring portions of properties owned by third parties and unconsolidated partnerships until we are ready to build homes on them. This reduces our financial risk associated with land holdings. 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, 2003, we owned approximately 74,000 homesites and had access to an additional 135,000 homesites through option contracts or our unconsolidated partnerships.

Construction and Development

We supervise and control the development of the land and the building of our residential communities. We hire 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 generally 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 under $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^® and Design Studio^SM provide customers with flexibility to choose how they would like to purchase their new home. In our Everything’s Included^® 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 website 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.

Our business is somewhat seasonal, with signings of new home sales contracts being strongest in the late winter and spring, resulting in the strongest home deliveries (and therefore, strongest home sales revenues) in the late summer and fall (our third and fourth fiscal quarters).

For a small percentage of our homebuyers (generally less than 5% of our deliveries), we have participated in charitable down-payment assistance programs. Through these programs, we make a donation to a non-profit organization that provides financial assistance to a homebuyer, who would not otherwise have sufficient funds for a down payment.

Quality Service

We strive to continually improve customer satisfaction by employing a process which is intended to provide a positive experience for each homeowner throughout the pre-sale, sale, building, closing and post-closing

3

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.

The quality of our homes is affected substantially more by the efforts of on-site management and others engaged in the construction process than it is by the materials we use in particular homes or similar factors. Currently, most management team members’ bonus plans are in part contingent upon achieving customer satisfaction.

We have a “Heightened Awareness” program which is a 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. Our communities are inspected and reviewed on a periodic 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 have a quality assurance program in certain markets where we employ third-party consultants to inspect our homes during the construction process. These inspectors provide us with documentation of all inspection reports and follow-up verification. We also 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 reputation. Sales of existing homes also provide significant competition. Some of our principal national competitors include Beazer Homes USA, Inc., Centex Corporation, D.R. Horton, Inc., Hovnanian Enterprises, Inc., KB Home, M.D.C. Holdings, Inc., NVR, Inc., Pulte Homes, Inc., Standard Pacific Corp., The Ryland Group, Inc. and Toll Brothers, Inc.

FINANCIAL SERVICES

Mortgage Financing

We provide a full spectrum of conventional, FHA-insured and VA-guaranteed, first and second lien residential mortgage loan products to our homebuyers and others through our financial services subsidiaries, Universal American Mortgage Company, LLC, and Eagle Home Mortgage, Inc., in Arizona, California, Colorado, Florida, Illinois, Maryland, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, South Carolina, Texas, Virginia and Washington. In 2003, our financial services subsidiaries provided loans to approximately 72% of our homebuyers who obtained mortgage financing from us in areas where we offered services for the entire year. 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 obstacle for most purchasers of our homes.

During 2003, we originated approximately 41,000 mortgage loans totaling $7.6 billion. We sell the loans we originate in the secondary mortgage market 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 lines of credit or from our general corporate funds.

Title Insurance, Closing Services and Insurance Agency Services

We provide closing services and title insurance to our homebuyers and others. We provided closing services for approximately 245,000 real estate transactions and issued 175,000 title insurance policies during 2003 through subsidiaries of North American Title Group, Inc. Closing services are provided by agency subsidiaries in Arizona, California, Colorado, District of Columbia, Florida, Illinois, Maryland, Nevada, Texas and Virginia. North American Title Insurance Corporation in Florida and Texas, and North American Title Insurance Company in Arizona, California, Colorado and Nevada provide title insurance underwriting.

4

We provide personal lines, property and casualty insurance products through our insurance agency subsidiary, Universal American Insurance Agency, Inc., for our homebuyers and others in Arizona, California, Colorado, Florida, Illinois, Maryland, Minnesota, Nevada, North Carolina, South Carolina, Texas and Virginia. During 2003, we issued approximately 8,500 new homeowner policies and renewed approximately 4,600 homeowner policies.

Strategic Technologies

Our subsidiary, Strategic Technologies, Inc., provides broadband services including high-speed Internet access, as well as alarm installation and monitoring services to residents of our communities and others. At November 30, 2003, we had approximately 6,000 broadband subscribers and approximately 14,000 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, prevented us from engaging through 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 through 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). In August 2003, this agreement was extended through November 30, 2005. We have no current intention to become involved in the types of activities in which LNR primarily engages (primarily related to commercial or multi-family residential real estate, commercial mortgage loans and investments in commercial mortgage-backed securities). Further, the agreement delineating activities in which we could engage from those in which LNR could engage has helped the two companies work cooperatively in partnerships and other joint endeavors.

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 is the sole director and officer of family-owned entities which own stock that gives Mr. Miller voting control, or near voting control, of both companies. An Independent Directors Committee approves all ventures we enter into with LNR and any significant transactions between LNR and us or any of our subsidiaries.

In July 2003, a company of which we and LNR each owns 50% agreed to purchase The Newhall Land and Farming Company for approximately $1 billion. That transaction was completed in January 2004. In connection with the transaction, the company jointly owned by LNR and us, and another company of which we and LNR each owns 50%, entered into a $600 million bank financing arrangement.

For more information about certain of 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.

5

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 personal lines insurance and title subsidiaries must comply with applicable insurance laws and regulations. Our mortgage financing subsidiaries and title agencies must comply with applicable real estate lending laws and regulations.

Our mortgage banking and 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, lending and privacy disclosures, forms of policies and premiums.

We can be affected by government regulation that does not directly apply to us, such as any curtailment of activities of the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). Because these organizations provide significant liquidity to the secondary mortgage market, a serious curtailment of their activities could increase mortgage interest rates and therefore increase the effective cost of purchasing our homes.

A subsidiary of The Newhall Land and Farming Company, of which we indirectly own 50%, provides water to a portion of Los Angeles County. This subsidiary is subject to extensive regulation by the California Public Utilities Commission.

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. They include the factors discussed under “Particular Factors Which Could Affect Us.”

PARTICULAR FACTORS WHICH COULD AFFECT US

The following factors in particular could significantly affect our operations and financial results. We publicly disseminate future earnings goals which could be impacted by some of these factors.

We are subject to the cyclical nature of the home sales market.

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 or cancellations of contracts in backlog.

6

Although the homebuilding business historically has been cyclical, it has not undergone a down cycle in a number of years. This has led some people to assert that the prices of homes and the stocks of homebuilding companies are overvalued and will decline when or if the market for new homes begins to weaken. A decline in prices of stocks of homebuilding companies could make it more difficult and more expensive for us to raise funds through stock issuances if we needed funds to meet our obligations or otherwise wanted to do so.

We could be affected by prices or shortages of materials or by weather conditions.

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.

We are dependent on the availability of suitable land.

Our ability to build homes depends upon our being able to acquire at acceptable prices land that is suitable for residential development in the areas in which we want to build homes. Because of this, we maintain, directly or through partnerships or similar arrangements, a significant inventory of land, much of which is undeveloped or only partially developed.

We could be affected by governmental regulations.

All of our businesses are subject to substantial governmental regulations. In particular, the homebuilding business is subject to government regulations relating to land use, water rights, construction materials, building design and minimum elevation of properties, as well as a variety of environmental matters. Changes in government regulations often increase the cost of building homes in areas in which we have communities and could prevent entirely the building of new homes in some areas.

We could be affected by inflation or deflation.

Inflation can increase the cost of building materials, land, labor and other construction related costs. Conversely, deflation can reduce the value of our land inventory and make it more difficult for us to recover 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.

The majority 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 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.

Competition may affect our profitability.

Our profitability is affected both by the number of homes we sell and by the profit margins we achieve when we sell homes. Competition and similar factors can reduce the number of homes we sell, or can force us to accept reduced profit margins in order to maintain sales volume.

Our operating results vary from quarter to quarter.

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:

7

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 could be hurt by loss of key personnel.

Our success depends to a significant degree on the efforts of our senior management. Our operations may be adversely affected if key 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 senior management.

We have a significant stockholder.

We have two classes of stock: Class A common stock, which is entitled to one vote per share; and Class B common stock, which is entitled to ten votes per share. Stuart Miller, our President and Chief Executive Officer, has voting control, through family-owned entities and personal holdings, of Class A and Class B common stock that entitles Mr. Miller to approximately 48% of the combined votes that can be cast by the holders of our outstanding Class A and Class B common stock combined. That gives significant influence to Mr. Miller in electing all our directors and approving most matters that are presented to our stockholders. Mr. Miller’s voting power might discourage someone from making a significant equity investment in us, even if we needed the investment to meet our obligations and to operate our business.

EMPLOYEES

At November 30, 2003, we employed 10,572 individuals of whom 6,786 were involved in homebuilding operations and 3,786 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.

ACCESS TO OUR INFORMATION

We electronically file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all exhibits and amendments to these reports, with the Securities and Exchange Commission (“SEC”). The public may read and copy any of the reports that are filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site, www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically.

We make available, free of charge, through our website, www.lennar.com, and by responding to requests addressed to our investor relations department, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all exhibits and amendments to these reports. These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

8

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 a homebuilding division in an office complex in Miami, Florida. The leases for these offices expire through 2009. Our other homebuilding and financial services offices are located in the markets where we conduct business, primarily in leased space.

Item 3.    Legal Proceedings.

We are party 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.

9

PART II

Item 5.    Market for the Registrant’s Common Stock and Related Security Holder Matters.

Share, dividend and per share amounts in the tables below have been adjusted for our January 2004 two-for-one stock split.

As of November 30, 2003, there were approximately 1,200 holders of record of our Class A common stock and approximately 900 holders of record of our Class B common stock.

The following table summarizes our equity compensation plans as of November 30, 2003:

10

Item 6.    Selected Financial Data.