LENNAR CORP /NEW/ - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2004

Commission File Number: 1-11749

Lennar Corporation

(Exact name of registrant as specified in its charter)

Delaware

95-4337490

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

700 Northwest 107th Avenue, Miami, Florida 33172

(Address of principal executive offices) (Zip Code)

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

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨

Common shares outstanding as of June 30, 2004:


Class A		123,471,003
Class B		32,581,831

Part I. Financial Information

Item 1. Financial Statements

Lennar Corporation and Subsidiaries

Consolidated Condensed Balance Sheets

(In thousands, except per share amounts)


	(Unaudited) May 31, 2004			November 30, 2003
ASSETS
Homebuilding:
Cash	$	140,675		1,201,276
Receivables, net		124,350		60,392
Inventories:
Finished homes and construction in progress		2,945,800		2,006,548
Land under development		1,597,965		1,592,978
Consolidated inventory not owned		224,233		49,329
Land held for development		7,345		7,246

Total inventories		4,775,343		3,656,101
Investments in unconsolidated entities		696,020		390,334
Other assets		444,190		450,619

		6,180,578		5,758,722
Financial services		815,505		1,016,710

Total assets	$	6,996,083		6,775,432

LIABILITIES AND STOCKHOLDERS’ EQUITY
Homebuilding:
Accounts payable and other liabilities	$	1,071,321		1,040,961
Liabilities related to consolidated inventory not owned		201,888		45,214
Senior notes and other debts payable, net		1,594,074		1,552,217

		2,867,283		2,638,392
Financial services		648,824		873,266

Total liabilities		3,516,107		3,511,658

Stockholders’ equity:
Preferred stock		—		—
Class A common stock of $0.10 par value per share, 125,960 shares issued at May 31, 2004		12,596		12,533
Class B common stock of $0.10 par value per share, 32,582 shares issued at May 31, 2004		3,258		3,251
Additional paid-in capital		1,378,369		1,358,304
Retained earnings		2,216,520		1,914,963
Unearned compensation		(4,064	)	(4,301	)
Deferred compensation plan; 528 Class A common shares and 53 Class B common shares at May 31, 2004		(4,864	)	(4,919	)
Deferred compensation liability		4,864		4,919
Treasury stock, at cost; 2,402 Class A common shares at May 31, 2004		(109,644	)	—
Accumulated other comprehensive loss		(17,059	)	(20,976	)

Total stockholders’ equity		3,479,976		3,263,774

Total liabilities and stockholders’ equity	$	6,996,083		6,775,432

See accompanying notes to consolidated condensed financial statements.

Lennar Corporation and Subsidiaries

Consolidated Condensed Statements of Earnings

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended May 31,			Six Months Ended May 31,
	2004		2003 (1)	2004	2003 (1)
Revenues:
Homebuilding	$	2,210,723	1,967,013	3,968,105	3,439,348
Financial services		132,162	136,095	237,687	264,230

Total revenues		2,342,885	2,103,108	4,205,792	3,703,578

Costs and expenses:
Homebuilding		1,920,873	1,737,541	3,472,187	3,065,797
Financial services		99,868	98,917	182,398	192,707
Corporate general and administrative		31,251	25,727	59,929	47,391

Total costs and expenses		2,051,992	1,862,185	3,714,514	3,305,895

Equity in earnings from unconsolidated entities		13,958	11,316	19,235	19,918

Management fees and other income, net		18,701	5,295	36,737	10,725

Earnings before provision for income taxes		323,552	257,534	547,250	428,326

Provision for income taxes		122,141	97,219	206,587	161,693

Net earnings	$	201,411	160,315	340,663	266,633

Basic earnings per share (2)	$	1.30	1.13	2.19	1.89

Diluted earnings per share (2)	$	1.22	1.02	2.06	1.71

Cash dividends per Class A common share (2)	$	0.125	0.00625	0.25	0.0125

Cash dividends per Class B common share (2)	$	0.125	0.00625	0.25	0.011875

(1)	Certain prior year amounts have been reclassified to conform to the 2004 presentation (see Note 1).

(2)	Per share amounts have been retroactively adjusted to reflect the effect of the Company’s January 2004 two-for-one stock split (see Notes 1 and 9).

See accompanying notes to consolidated condensed financial statements.

Lennar Corporation and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended May 31,
	2004			2003
Cash flows from operating activities:
Net earnings	$	340,663		266,633
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		24,857		29,850
Amortization of discount on debt		8,731		12,911
Tax benefit from employee stock plans and vesting of restricted stock		7,306		4,255
Equity in earnings from unconsolidated entities		(19,235	)	(19,918	)
Deferred income tax provision (benefit)		23,468		(15,066	)
Changes in assets and liabilities, net of effect from acquisitions:
Increase in receivables		(49,845	)	(21,006	)
Increase in inventories		(844,372	)	(468,352	)
Decrease (increase) in other assets		6,105		(25,300	)
Decrease in financial services loans held-for-sale		210,943		224,485
Decrease in accounts payable and other liabilities		(7,592	)	(117,130	)

Net cash used in operating activities		(298,971	)	(128,638	)

Cash flows from investing activities:
Net additions to operating properties and equipment		(9,949	)	(8,923	)
Contributions to unconsolidated entities		(399,747	)	(92,767	)
Distributions from unconsolidated entities		122,206		128,681
Increase in financial services mortgage loans		(1,146	)	(1,908	)
Purchases of investment securities		(29,861	)	(8,026	)
Proceeds from investment securities		18,217		3,992
Acquisitions, net of cash acquired		(64,106	)	(107,929	)

Net cash used in investing activities		(364,386	)	(86,880	)

Cash flows from financing activities:
Net repayments under financial services short-term debt		(208,641	)	(211,681	)
Net proceeds from issuance of senior floating-rate notes		298,500		—
Net proceeds from issuance of 5.95% senior notes		—		341,730
Principal repayments on other borrowings		(335,950	)	(158,690	)
Common stock:
Issuances		11,561		7,832
Repurchases		(109,644	)	—
Dividends		(39,106	)	(1,993	)

Net cash used in financing activities		(383,280	)	(22,802	)

Net decrease in cash		(1,046,637	)	(238,320	)
Cash at beginning of period		1,270,872		777,159

Cash at end of period	$	224,235		538,839

Lennar Corporation and Subsidiaries

Consolidated Condensed Statements of Cash Flows — Continued

(Unaudited)

(In thousands)


	Six Months Ended May 31,
	2004		2003
Summary of cash:
Homebuilding	$	140,675	480,719
Financial services		83,560	58,120

	$	224,235	538,839

Supplemental disclosures of non-cash investing and financing activities:
Consolidated inventory not owned	$	115,331	12,186
Purchases of inventory financed by sellers	$	26,298	14,251

See accompanying notes to consolidated condensed financial statements.

Lennar Corporation and Subsidiaries

Notes to Consolidated Condensed Financial Statements

(Unaudited)

(1) Basis of Presentation

The accompanying consolidated condensed financial statements include the accounts of Lennar Corporation and all subsidiaries, partnerships and other entities in which Lennar Corporation has a controlling interest and variable interest entities (see Note 12) in which Lennar Corporation is deemed the primary beneficiary (the “Company”). The Company’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities in which the Company is not deemed to be the primary beneficiary, are accounted for by the equity method. All significant intercompany transactions and balances have been eliminated in consolidation. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These financial statements should be read in conjunction with the November 30, 2003 audited financial statements in the Company’s Annual Report on Form 10-K for the year then ended. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the accompanying consolidated condensed financial statements have been made.

The Company historically has experienced, and expects to continue to experience, variability in quarterly results. The consolidated condensed statements of earnings for the three and six months ended May 31, 2004 are not necessarily indicative of the results to be expected for the full year.

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.

In December 2003, the Company’s Board of Directors approved a two-for-one stock split in the form of a 100% stock dividend of Class A and Class B common stock payable to stockholders of record on January 6, 2004. The additional shares were distributed on January 20, 2004. All share and per share amounts (except par value) have been retroactively adjusted to reflect the stock split. There was no net effect on total stockholders’ equity as a result of the stock split.

Certain prior year amounts in the consolidated condensed financial statements have been reclassified to conform with the 2004 presentation. These reclassifications had no impact on reported net earnings. In particular, homebuilding results reflect reclassifications that have been made to interest expense (now included in cost of homes sold and cost of land sold), equity in earnings from unconsolidated entities and management fees and other income, net.

(2) Operating and Reporting Segments

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. Segment amounts include all elimination adjustments made in consolidation.

Homebuilding

Homebuilding operations primarily 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 the Company’s unconsolidated entities.

Financial Services

The Financial Services Division provides mortgage financing, title insurance, closing services and insurance agency services for both buyers of the Company’s homes and others. It sells the loans it originates in the secondary mortgage market. The Financial Services Division also provides high-speed Internet access, cable television, and alarm installation and monitoring services to residents of the Company’s communities and others.

Financial information relating to the Company’s reportable segments is as follows (unaudited):


	Three Months Ended May 31,			Six Months Ended May 31,
*(In thousands)*	2004		2003	2004	2003
Homebuilding Revenues:
Sales of homes	$	2,063,707	1,894,991	3,726,804	3,335,150
Sales of land		147,016	72,022	241,301	104,198

Total homebuilding revenues		2,210,723	1,967,013	3,968,105	3,439,348

Homebuilding Costs and Expenses:
Cost of homes sold		1,580,001	1,464,733	2,869,300	2,590,670
Cost of land sold		90,482	59,069	149,134	86,859
Selling, general and administrative		250,390	213,739	453,753	388,268

Total homebuilding costs and expenses		1,920,873	1,737,541	3,472,187	3,065,797

Equity in earnings from unconsolidated entities		13,958	11,316	19,235	19,918
Management fees and other income, net		18,701	5,295	36,737	10,725