================================================================================
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 (FEE REQUIRED)
For the fiscal year ended November 30, 1995
Commission file number 1-6643
LENNAR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 59-1281887
(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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (305) 559-4000
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 10(cent) New York Stock Exchange
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 [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. YES [x] NO ____
As of February 5, 1996, registrant had outstanding 25,901,227 shares of
common stock and 9,985,731 shares of Class B common stock (which can be
converted into common stock). Of the total shares outstanding 25,430,354 shares
of common stock and 40,601 shares of Class B common stock, having a combined
aggregate market value (assuming the Class B shares were converted) on that
date of $674,980,308, were held by non-affiliates of the registrant.
Documents incorporated by reference:
RELATED
SECTION DOCUMENTS
- -------------------------------------------------------------------------------
II Pages 19 through 40 of the Annual Report to
Stockholders for the year ended November 30, 1995.
III Definitive Proxy Statement to be filed pursuant to
Regulation 14 A on or before March 29, 1996.
===============================================================================
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Lennar Corporation (together with its subsidiaries, the "Company") is a
diversified national real estate company with three principal businesses:
homebuilding, real estate investment and financial services. The Company's
homebuilding operations include the construction and sale of homes, as well as
the purchase, development and sale of residential land. The Investment Division
is involved in the ownership, development, management and leasing, as well as
the acquisition and sale, of commercial real estate and other real estate
related assets. The financial services operations consist of mortgage loan
origination and servicing, closing and title services and investments in rated
commercial real estate mortgage-backed securities.
For more than 25 years, Lennar has owned and managed commercial and
residential rental properties. Since 1992, the Company, through its Investment
Division, began acquiring portfolios of commercial real estate assets, including
real estate related loans, which it believed it could liquidate at a profit. As
of November 30, 1995, the Company had entered into a total of eleven
partnerships, all of which have been formed to acquire and manage portfolios of
assets. Five new partnerships were formed during 1995. The Company shares in the
profits and losses of the partnerships and also receives fees for the management
and disposition of the partnerships' assets.
Beginning in 1994, the Company also began acquiring, at a discount,
portions of commercial real estate mortgage-backed securities. The Company's
Investment Division invests in the unrated portions of these securities and the
Financial Services Division generally invests in the rated portions. The
Company's Investment Division partnerships also retain portions of these
securities when they are the issuer of the securities. The Company's Investment
Division is the special servicer on behalf of all the certificate holders (the
majority of which are not Lennar entities) of the commercial mortgage-backed
securities which are held by the Company and its partnerships.
Since 1991, the Company has expanded its homebuilding operations by
entering the following new markets: Dallas, Texas in 1991; Houston, Texas and
Port St. Lucie, Florida in 1992 and Sarasota, Florida in 1994. In addition, the
Company began the development of an adult-community in the Orlando, Florida area
in 1995. On December 29, 1995, the Company acquired the residential business of
Friendswood Development Company, the real estate subsidiary of Exxon
Corporation, for approximately $110 million. Friendswood Development Company is
based in Houston, Texas and its operations include the development of
master-planned communities, as well as Village Builders, its homebuilding
division.
During 1995, the Company acquired mortgages receivable for approximately
$47 million from the secured creditors of Bramalea of California, Inc. ("BCI")
after BCI had filed for bankruptcy protection. The Company acquired these
mortgages (at significant discounts from their face values) in order to convert
them into an ownership interest when BCI is reorganized out of bankruptcy which
is anticipated in 1996. The collateral for these mortgages consists of real
property located in California.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in three industry segments - homebuilding, real
estate investment and financial services. The financial information related to
these industry segments is contained in the financial statements incorporated by
reference to pages 26 through 39 of the Company's 1995 Annual Report to
Stockholders.
1
<PAGE>
NARRATIVE DESCRIPTION OF BUSINESS
HOMEBUILDING
The Company and its predecessor have been building homes since 1954. The
Company believes that, since its acquisition of Development Corporation of
America in 1986, it has each year delivered more homes in Florida than any other
homebuilder. The Company has been building homes in Arizona since 1972, where it
currently is one of the leading homebuilders. In 1991, the Company began
building homes in the Dallas/Fort Worth area of Texas. In 1992, it started
homebuilding operations in Houston, Texas and Port St. Lucie, Florida. In late
1994, the Company began homebuilding operations in Sarasota, Florida and in 1995
it started development of an adult-community in the Orlando, Florida area. The
Company has constructed and sold over 125,000 homes to date.
The Company's homebuilding activities in Florida are principally
conducted through Lennar Homes, Inc. In Arizona and Texas, these activities are
conducted through Lennar Homes of Arizona, Inc. and Lennar Homes of Texas, Inc.,
respectively. Effective with the acquisition of Friendswood Development Company,
the Company will also be conducting business in Texas through Village Builders,
Inc. and Friendswood Development Company.
The Company is involved in all phases of planning and building in its
residential communities, including land acquisition, site planning, preparation
of land, improvement of undeveloped and partially developed acreage, and design,
construction and marketing of homes. The Company subcontracts virtually all
segments of development and construction to others.
The Company sells single-family attached and detached homes and
condominiums in buildings generally one to five stories in height. Homes sold by
the Company are primarily in the moderate price range for the areas in which
they are located. They are targeted primarily at first time homebuyers, move-up
homebuyers and, in some communities, retirees. The average sales price of a
Lennar home was $138,200 in fiscal 1995.
CURRENT HOMEBUILDING ACTIVITIES
The table on the following page summarizes information about the
Company's recent homebuilding activities:
2
<PAGE>
<TABLE>
<CAPTION>
LENNAR CORPORATION AND CONSOLIDATED SUBSIDIARIES
Real Estate Activities
NOVEMBER 30, 1995
--------------------------------------------------------
HOMES DELIVERED HOMES COMPLETED ESTIMATED NUMBER
IN YEARS ENDED OR UNDER CONSTRUCTION OF HOMES THAT COULD
NOVEMBER 30, ----------------------- SOLD HOMES BE CONSTRUCTED ON
REGION AND TYPE OF --------------------------------- AVAILABLE FOR NOT YET LAND CURRENTLY
PRODUCTS 1995 1994 1993 SOLD (1) SALE STARTED (1) OWNED (2) (3) (4)
- ------------------ ---- ---- ---- -------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Florida
Single-family detached 2,400 2,471 2,155 658 329 363 14,680
Single-family attached 437 426 796 77 91 23 2,280
Multi-family 558 820 772 119 187 77 7,310
Arizona
Single-family detached 466 586 596 228 108 73 1,990
Single-family attached 38 46 11 1 8 -- --
Multi-family -- -- -- -- -- -- 330
Texas
Single-family detached 781 616 304 162 152 21 2,930
Single-family attached -- -- -- -- -- -- --
Multi-family -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Totals 4,680 4,965 4,634 1,245 875 557 29,520
====== ====== ====== ====== ====== ====== ======
<FN>
Notes:
(1) Although firm contracts relating to these homes were executed, there
can be no assurance that purchasers will meet their obligations under
the contracts.
(2) Based on current management estimates, which are subject to change.
(3) The Company owns additional property, which it may decide to develop
or sell in the future.
(4) As of November 30, 1995, the Company had contracts or options to
purchase approximately 8,000 additional homesites.
</FN>
</TABLE>
3
<PAGE>
PROPERTY ACQUISITION
The Company continuously considers the purchase of, and from time to time
acquires, land for its development and sales programs. It generally does not
acquire land for speculation. In some instances, the Company acquires land by
acquiring options enabling it to purchase parcels as they are needed. Although
some of the Company's land is held subject to purchase money mortgages or is
mortgaged to secure $85 million of term loans, most of the Company's land
(including most of the land on which it is currently building or expects to
build during the next year) is not subject to mortgages. The Company believes
its land inventory gives it a competitive advantage, particularly in Florida.
CONSTRUCTION AND DEVELOPMENT
The Company supervises and controls the development and building of its
own residential communities. It employs subcontractors for site improvements and
virtually all of the work involved in the construction of homes. In almost all
instances, the arrangements between the Company and the 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. The Company does not own heavy construction equipment and
generally has only a small labor force used to supervise development and
construction and perform routine maintenance and minor amounts of other work.
The Company generally finances construction with its own funds or
borrowings under its unsecured working capital lines, not with secured
construction loans.
MARKETING
The Company always has an inventory of homes under construction. A
majority of these homes are sold (I.E., the Company has received executed sales
contracts and deposits) before the Company starts construction.
The Company employs sales associates who are paid salaries, commissions
or both to make onsite sales of the Company's homes. The Company also sells
through independent brokers. The Company advertises its residential communities
through local media and sells primarily from models that it has designed and
constructed. In addition, the Company advertises its retirement communities in
areas where potential retirees live.
MORTGAGE FINANCING
The Company's financial services subsidiaries make conventional,
FHA-insured and VA-guaranteed mortgage loans available to qualified purchasers
of the Company's homes. Because of the availability of mortgage loans from the
Company's financial services subsidiaries, as well as independent mortgage
lenders, the Company believes access to financing has not been, and is not, a
significant problem for most purchasers of the Company's homes.
COMPETITION
The housing industry is highly competitive. In its activities, the
Company competes with other developers and builders in and near the areas where
the Company's communities are located, including a number of homebuilders with
nationwide operations. The Company has for the past 25 years been one of the
largest homebuilders in South Florida and for the past several years has
delivered more homes in the State of Florida than any other homebuilder. The
Company is also a leading homebuilder in Arizona and in Texas. Nonetheless, the
Company is subject to intense competition from a large number of homebuilders in
all of its market areas.
INVESTMENT
The Company has been engaged for more than 25 years in developing and
managing commercial and residential income-producing properties. Currently,
through its Investment Division, the Company owns and manages more than 2,800
rental apartment units (which are approximately 86% occupied) and more than 2.2
million square feet of office buildings,
4
<PAGE>
warehouses and neighborhood retail centers (which are approximately 86%
occupied), as well as two hotels consisting of 462 rooms, a mobile home park,
and golf and other recreational facilities in various communities. At times,
when properties reach what the Company believes to be optimum value, the Company
sells them.
Since 1992, the Investment Division has been acquiring, by itself and
through partnerships, portfolios of real estate assets which it believes it can
liquidate at a profit and from which it can generate rental, interest and other
income during the liquidation process which can last several years. As of
November 30, 1995, the Investment Division had entered into eleven partnerships.
The Company's equity interests in these partnerships range from 25% to 50%
(which in one instance includes an investment by the Company's Financial
Services Division). In addition to the Company participating in the
partnerships' purchases of portfolios of real estate assets, the Investment
Division oversees the management of those portfolios, for which it receives
management fees. A portfolio may consist of a combination of performing loans,
non-performing loans and real estate. With regard to performing loans, principal
and interest payments are collected until the loans are paid in full, or the
loans are used as collateral for non-recourse debt (which has the effect of
accelerating the partnerships' cash realization). With regard to non-performing
loans, the partnerships attempt to renegotiate the terms with the borrowers or
pursue other remedies, depending on the circumstances. These loans either become
performing, are paid off, or the partnerships become the owners of the
underlying real estate. This real estate is then managed and value enhanced
until it is sold.
In several instances, loans held by partnerships have been grouped into
pools, which have obtained funding by issuing rated and unrated securities
entitling the holders to the future proceeds of the loans. Often, the
partnerships retain the unrated portions of the securities issued. Since 1994,
the Investment Division began acquiring, at substantial discounts from their
face amounts, unrated portions of commercial mortgage-backed securities issued
by others. The Investment Division is the special servicer on behalf of all
certificate holders of these securities, both those issued by the partnerships
and by others. The principal business of the special servicer is the management
of real estate loans requiring attention.
FINANCIAL SERVICES
The Company's financial services subsidiaries originate mortgage loans,
service mortgage loans which they and other lenders originate, purchase and
re-sell mortgage loan pools, arrange title insurance and provide closing
services for homebuyers. This division also invests in issues of rated portions
of commercial real estate mortgage-backed securities for which Lennar's
Investment Division is the special servicer and an investor in the unrated
portions of those securities.
MORTGAGE ORIGINATION
Through two of the financial services subsidiaries, Universal American
Mortgage Company and AmeriStar Financial Services, Inc., the Company provides
conventional, FHA-insured and VA-guaranteed mortgage loans to buyers of the
Company's homes and others from offices located in Florida, California, Arizona,
Texas, North Carolina and Maryland. In 1995, loans to buyers of the Company's
homes represented approximately 20% of the Company's $650 million of loan
originations.
The Company sells the loans it originates in the secondary mortgage
market, generally on a non-recourse basis, and retains most of the servicing
rights. The Company has an interest rate risk management policy under which it
hedges its interest rate locked loan commitments and loans held for sale against
exposure to interest rate fluctuations. The Company finances its loans held for
sale with borrowings under the financial services subsidiaries' $80 million
lines of credit (secured by the loans and by certain servicing rights) or from
Lennar Corporation when, on a consolidated basis, the Company can minimize its
overall cost of funds.
MORTGAGE SERVICING
The Company obtains significant earnings from servicing loans originated
or acquired by its financial services subsidiaries. The Company services loans
for the Government National Mortgage Association (Ginnie Mae), the Federal
National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage
Corporation (Freddie Mac) and other mortgage investors. At
5
<PAGE>
November 30, 1995, it had a servicing portfolio of approximately 44,300 loans
with an unpaid principal balance of approximately $3.4 billion.
Revenues from servicing mortgage loans include servicing fees, late
charges and other ancillary fees and all, or in some states, part of the
interest on sums held in escrow for tax, insurance and other payments.
ASSET ACQUISITION AND DISPOSITION
The Company, from time to time, purchases pools of mortgage loans
originated by financial institutions and then re-sells the loans in the
secondary market. The benefits to the Company from these transactions include
gains from the sales of the loans and retention of the right to service the
loans after they are sold in the secondary market. In 1994, the Financial
Services Division expanded its investment activities by acquiring rated portions
of commercial mortgage-backed securities for which Lennar's Investment Division
is the special servicer.
TITLE INSURANCE AND CLOSING SERVICES
The Company arranges title insurance for, and provides closing services
to, buyers of the Company's homes and others in Florida. It provided these
services in connection with approximately 4,100 real estate transactions during
1995. During 1994, the Company formed TitleAmerica Insurance Corporation, a
title insurance underwriter, which provides title insurance to buyers of the
Company's homes and others.
OTHER ACTIVITIES
The Company has a number of limited-purpose finance subsidiaries which
have placed mortgages and other receivables as collateral for various long-term
financings. These subsidiaries pay the debt service on the long-term borrowings
primarily from the cash flows generated by the related pledged collateral. The
Company believes that the cash flows generated by these subsidiaries will be
adequate to meet the required debt payment schedules.
REGULATION
Homes and residential communities built by the Company must comply with
state and local regulations relating to, among other things, zoning, treatment
of waste, construction materials which must be used, certain aspects of building
design and minimum elevation of properties and other local ordinances. These
include laws in Florida and other states requiring use of construction materials
which reduce the need for energy-consuming heating and cooling systems. The
State of Florida has also adopted a law which requires that commitments to
provide roads and other offsite infrastructure be in place prior to the
commencement of new construction. The provisions of this law are implemented and
administered by individual counties and municipalities throughout the state and
may result in additional fees and assessments or building moratoriums. It is
difficult to predict the impact of this law on future operations, or what
changes may take place in the law in the future. However, the Company believes
that most of its Florida land presently meets the criteria under the law, and it
has the financial resources to provide for development of the balance of its
land in compliance with the law.
Recently, there have been changes to various building codes within
Florida. These changes have resulted in higher construction costs. These
additional costs have been recoverable through increased selling prices without
any significant effect on sales volume.
Virtually all areas of the United States have adopted regulations
intended to assure that construction and other activities will not have an
adverse effect on local environmental conditions. These regulations have had an
effect on the manner in which the Company has developed certain properties and
may have a continuing influence on the Company's development activities in the
future.
6
<PAGE>
In order to make it possible for purchasers of some of the Company's
homes to obtain FHA-insured or VA-guaranteed mortgages, the Company must
construct those homes in compliance with regulations promulgated by those
agencies.
The Company has registered condominium communities with the appropriate
authorities in Florida. It has registered some of its Florida communities with
authorities in New Jersey and New York. Sales in other states would require
compliance with laws in those states regarding sales of condominium homes.
The Company's title insurance agency subsidiary must comply with
applicable insurance laws and regulations.
The Company's subsidiary which underwrites title insurance is licensed in
the State of Florida, and must comply with Florida laws and regulations
regarding title insurance companies. These laws and regulations include
provisions regarding capitalization, investments, forms of policies and
premiums.
EMPLOYEES
At November 30, 1995, the Company employed 1,552 individuals, of whom 335
were management, supervisory and other professional personnel, 176 were
construction supervisory personnel, 271 were real estate salespersons, 153 were
hospitality personnel and 617 were professional support personnel, accounting,
office clerical and skilled workers.
Some of the subcontractors utilized by the Company may employ members of
labor unions. The Company does not have collective bargaining agreements
relating to its employees.
ITEM 2. PROPERTIES.
For information about properties owned by the Company for use in its
residential and commercial activities, see Item 1.
The Company maintains its executive offices, financial services
subsidiary headquarters, Investment Division headquarters, Dade County
Homebuilding Division offices and Dade County mortgage and title company branch
offices at 700 and 730 Northwest 107th Avenue, Miami, Florida in office
buildings built and owned by the Company. These offices occupy approximately
60,000 square feet. Other Company offices are located in Company-owned
communities or retail centers, or in leased space.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in various lawsuits brought by condominium and
homeowner associations in communities constructed by the Company. Although the
specific allegations in the lawsuits differ, in general, each of the lawsuits
asserts that the Company failed to construct buildings in the community involved
in accordance with plans and specifications and applicable construction codes,
and each of them seeks reimbursement for sums the plaintiff association claims
it will have to spend to remedy the alleged construction deficiencies.
Associations in other communities have threatened similar suits. Suits of this
type are common within the homebuilding industry. The Company does not believe
that these lawsuits or threatened lawsuits will have a material effect upon the
Company.
The Company had a number of claims for damages relating to a hurricane
which occurred in 1992. Most have been settled and to date, the Company's
insurers have made all payments required under settlements. Even if the Company
were required to make any payments with regard to the remaining hurricane
related claims, the Company believes that the amount it would pay would not be
material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1995.
7
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS.
Information concerning the market data for the Company's common stock and
related security holder matters is incorporated by reference to page 40 of the
Company's 1995 Annual Report to Stockholders.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data is incorporated by reference to page 19 of
the Company's 1995 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results
of operations is incorporated by reference to pages 20 through 24 of the
Company's 1995 Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated financial statements and supplementary data about the
Company are incorporated by reference to pages 26 through 39 of the Company's
1995 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information about the Company's directors is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 29, 1996 (120 days after
the end of the Company's fiscal year). The following people were the executive
officers of Lennar Corporation on February 5, 1996:
NAME/POSITION AGE YEAR OF ELECTION
------------- --- ----------------
Leonard Miller,
Chairman of the Board and
President 63 1969
Robert B. Cole,
Secretary 85 1969
Irving Bolotin,
Senior Vice President 63 1969
Allan J. Pekor,
Financial Vice President 59 1979
Sherman J. Kronick,
Vice President 70 1979
Marshall H. Ames,
Vice President 52 1982
Stuart A. Miller,
Vice President 38 1985
Jeffrey P. Krasnoff,
Vice President 40 1986
Jonathan M. Jaffe
Vice President 36 1994
8
<PAGE>
NAME/POSITION AGE YEAR OF ELECTION
------------- --- ----------------
M. Eugene Saleda,
Treasurer 60 1977
James T. Timmons,
Controller 30 1993
Steven J. Saiontz,
President, Lennar Financial
Services, Inc. 37 1987
Mr. Leonard Miller has been the Chief Executive Officer and a director of
the Company since it was founded.
Mr. Cole was formerly a member of Mershon, Sawyer, Johnston, Dunwody &
Cole, a firm of attorneys in Miami, Florida. Since 1983, he has been a
consultant to the Company on business and legal affairs, as well as Chairman of
the Company's Executive Committee and General Counsel.
Messrs. Bolotin, Pekor, Kronick, Ames, Krasnoff and Saleda have each held
substantially their present positions with the Company for more than five years.
Mr. Stuart Miller (who is the son of Leonard Miller) and Mr. Jaffe have
held various executive positions with the Company for more than five years. Mr.
Stuart Miller has been a Vice President since 1985, and currently heads the
Company's Homebuilding and Investment Divisions. Mr. Jaffe has been a Vice
President since 1994 and serves as a Regional President in the Company's
Homebuilding Division.
Mr. Timmons has been employed by the Company since 1992. He became its
Controller in 1993. Prior to joining the Company, Mr. Timmons was employed as a
Financial Auditor with Burger King Corporation and, before that, was employed by
KPMG Peat Marwick.
Mr. Saiontz (who is the son-in-law of Leonard Miller) has been employed
by the Company since 1984 and has been the President of Lennar Financial
Services, Inc. since 1987.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 29, 1996 (120 days after
the end of the Company's fiscal year).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 29, 1996 (120 days after
the end of the Company's fiscal year).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 29, 1996 (120 days after
the end of the Company's fiscal year).
9
<PAGE>
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 incorporated by
reference in Item 8:
<TABLE>
<CAPTION>
PAGE IN 1995 ANNUAL
FINANCIAL STATEMENT REPORT TO STOCKHOLDERS
------------------- -----------------------
<S> <C>
Independent Auditors' Report 25
Consolidated Balance Sheets as of November 30,
1995 and 1994 26
Consolidated Statements of Earnings for the
years ended November 30, 1995, 1994 and 1993 27
Consolidated Statements of Cash Flows for the
years ended November 30, 1995, 1994 and 1993 28
Consolidated Statements of Stockholders' Equity
for the years ended November 30, 1995, 1994
and 1993 29
Notes to Consolidated Financial Statements 30 - 39
</TABLE>
2. Predecessor Independent Auditors' Report on the financial
statements and financial statement schedules is included in
this report on page 15.
3. The following financial statement schedules are included in
this Report:
<TABLE>
<CAPTION>
FINANCIAL STATEMENT SCHEDULE PAGE IN THIS REPORT
---------------------------- -------------------
<S> <C>
Independent Auditors' Report on Schedules 14
VIII - Valuation and Qualifying Accounts 16
XI - Real Estate and Accumulated 17
Depreciation
XII - Mortgage Loans on Real Estate 18
</TABLE>
Information required by other schedules has either been incorporated in
the financial statements and accompanying notes, or is not applicable to the
Company.
10
<PAGE>
4. The following exhibits are filed with this Report or
incorporated by reference:
3(a). Certificate of Incorporation - Incorporated by reference
to Registration Statement No. 2-36239 and definitive proxy
statements dated February 29, 1980, March 6, 1985, March 24,
1987, March 1, 1989 and March 1, 1994.
3(b). Bylaws - Incorporated by reference to Annual Report on
Form 10-K for the year ended November 30, 1989.
10(a). Lennar Corporation 1980 Stock Option Plan - Incorporated
by reference to Registration Statement No. 2-73630.
10(b). Lennar Corporation 1991 Stock Option Plan - Incorporated
by reference to Registration Statement No. 33-45442.
10(c). Lennar Corporation Employee Stock Ownership Plan and
Trust - Incorporated by reference to Registration Statement
No. 2-89104.
10(d). Amendment dated December 13, 1989 to Lennar Corporation
Employee Stock Ownership Plan - Incorporated by reference to
Annual Report on Form 10-K for the year ended November 30,
1990.
10(e). Lennar Corporation Employee Stock Ownership/401k Trust
Agreement dated December 13, 1989 - Incorporated by reference
to Annual Report on Form 10-K for the year ended November 30,
1990.
10(f). Amendment dated April 18, 1990 to Lennar Corporation
Employee Stock Ownership/401k Plan - Incorporated by
reference to Annual Report on Form 10-K for the year ended
November 30, 1990.
10(g). Term Loan Agreement between Lennar Corporation and NCNB
National Bank of Florida dated April 14, 1988 - Incorporated
by reference to Annual Report on Form 10-K for the year ended
November 30, 1992.
10(h). Term Loan Agreement between Lennar Corporation and SunBank/
Miami, National Association dated April 27, 1988 -
Incorporated by reference to Annual Report on Form 10-K for
the year ended November 30, 1992.
10(i). Term Loan Agreement between Lennar Corporation and The
First National Bank of Chicago dated May 3, 1988 -
Incorporated by reference to Annual Report on Form 10-K for
the year ended November 30, 1992.
10(j). Revolving Credit Agreement dated July 29, 1994 between
The First National Bank of Chicago, as agent, and Lennar
Corporation and certain subsidiaries - Incorporated by
reference to Annual Report on Form 10-K for the year ended
November 30, 1994.
10(k). First Amendment to Revolving Credit Agreement dated
January 31, 1995 amending the Revolving Credit Agreement
dated July 29, 1994.
11
<PAGE>
10(l). Second Amendment to Revolving Credit Agreement dated
April 6, 1995 amending the Revolving Credit Agreement dated
July 29, 1994.
13. Pages 19 through 40 of the 1995 Annual Report to
Stockholders.
21. List of subsidiaries.
23. Independent Auditors' Consents.
27. Financial Data Schedule.
(b) Reports on Form 8-K filed during the quarter ended November 30, 1995.
None.
(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.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LENNAR CORPORATION
Leonard Miller /S/ LEONARD MILLER
Chairman of the Board and President -----------------------------------
Date: February 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated:
Principal Executive Officer:
Leonard Miller /S/ LEONARD MILLER
Chairman of the Board and President ----------------------------------
Date: February 27, 1996
Principal Financial Officer:
Allan J. Pekor /S/ ALLAN J. PEKOR
Financial Vice President ----------------------------------
Date: February 26, 1996
Principal Accounting Officer:
James T. Timmons /S/ JAMES T. TIMMONS
Controller -----------------------------------
Date: February 26, 1996
Directors:
Charles I. Babcock, Jr. /S/ CHARLES I. BABCOCK, JR.
----------------------------------
Date: February 27, 1996
Irving Bolotin /S/ IRVING BOLOTIN
----------------------------------
Date: February 26, 1996
Robert B. Cole /S/ ROBERT B. COLE
----------------------------------
Date: February 26, 1996
Richard W. McEwen
----------------------------------
Date: February , 1996
James W. McLamore /S/ JAMES W. MCLAMORE
----------------------------------
Date: February 27, 1996
Stuart A. Miller /S/ STUART A. MILLER
----------------------------------
Date: February 26, 1996
Arnold P. Rosen /S/ ARNOLD P. ROSEN
----------------------------------
Date: February 26, 1996
Steven J. Saiontz /S/ STEVEN J. SAIONTZ
----------------------------------
Date: February 26, 1996
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of the
Lennar Corporation:
We have audited the consolidated financial statements of Lennar Corporation (the
"Corporation") as of November 30, 1995 and 1994, and for the years then ended,
and have issued our report thereon dated January 11, 1996; such financial
statements and report are included in your 1995 Annual Report to Shareholders
and are incorporated herein by reference. Our audit also included the financial
statement schedules of Lennar Corporation, listed in Item 14 as of November 30,
1995 and 1994 and for the years then ended. These financial statement schedules
are the responsibility of the Corporation's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
January 11, 1996
14
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Lennar Corporation:
We have audited the consolidated statements of earnings, cash flows and
stockholders' equity of Lennar Corporation and subsidiaries for the year ended
November 30, 1993. These consolidated financial statements are incorporated by
reference in the annual report on Form 10-K for the year 1995. In connection
with our audit of the consolidated financial statements, we also have audited
the financial statement schedules. These consolidated financial statements and
financial related statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Lennar Corporation and subsidiaries for the year ended November 30, 1993, in
conformity with generally accepted accounting principles. Also in our opinion,
the related financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ KPMG PEAT MARWICK LLP
January 18, 1994
15
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
LENNAR CORPORATION AND CONSOLIDATED SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended November 30, 1995, 1994 and 1993
ADDITIONS
----------------------------
CHARGED CHARGED
BEGINNING TO COSTS (CREDITED) TO ENDING
DESCRIPTION BALANCE AND EXPENSES OTHER ACCOUNTS (DEDUCTIONS) BALANCE
- ------------------------------------------------ ------------- ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Year ended November 30, 1995
Allowances deducted from assets to which they
apply:
Allowances for doubtful accounts and notes
receivables $ 1,528,000 2,209,000 1,000 (1,366,000) 2,372,000
============= ============= ============= ============= ===========
Deferred income and unamortized discounts $ 2,361,000 -- (681,000) (1,079,000)(A) 601,000
============= ============= ============= ============= ===========
Loan loss reserve $ 3,534,000 1,271,000 -- (1,075,000) 3,730,000
============= ============= ============= ============= ===========
Valuation allowance $ -- 1,581,000 -- (295,000) 1,286,000
============= ============= ============= ============= ===========
Year ended November 30, 1994
Allowances deducted from assets to which they
apply:
Allowances for doubtful accounts and notes
receivable $ 1,323,000 1,091,000 (66,000) (820,000) 1,528,000
============= ============= ============= ============= ===========
Deferred income and unamortized discounts $ 1,261,000 -- 1,137,000(B) (37,000)(A) 2,361,000
============= ============= ============= ============= ===========
Loan loss reserve $ 3,595,000 472,000 -- (533,000) 3,534,000
============= ============= ============= ============= ===========
Year ended November 30, 1993
Allowances deducted from assets to which they
apply:
Allowances for doubtful accounts and notes
receivable $ 603,000 1,062,000 15,000 (357,000) 1,323,000
============= ============= ============= ============= ===========
Deferred income and unamortized discounts $ 1,688,000 -- (342,000) (85,000)(A) 1,261.000
============= ============= ============= ============= ===========
Loan loss reserve $ 151,000 416,000 3,717,000 (689,000) 3,595,000
============= ============= ============= ============= ===========
Loan loss reserve included in liabilities (C) $ 3,717,000 -- (3,717,000) -- --
============= ============= ============= ============= ===========
<FN>
Notes:
(A) Amortization of discounts and recognition of deferred income.
(B) Includes discounts on mortgages purchased.
(C) Loan loss reserves relating to loans serviced for others are included in
liabilities in the balance sheet.
</FN>
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Schedule XI
LENNAR CORPORATION AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation (D)
Year ended November 30, 1995
COSTS CAPITALIZED
INITIAL COST SUBSEQUENT TO GROSS AMOUNT AT WHICH
TO COMPANY ACQUISITION CARRIED AT CLOSE OF PERIOD
----------------------- ---------------------- -----------------------------------
BUILDING
AND CARRYING
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS LAND (A) BUILDINGS (A) TOTAL (C)
- ------------------------ ---------- ----------- ----------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rental apartment
property:
Dade County,
Florida $ 21,397,000 1,872,000 9,063,000 4,623,000 360,000 2,046,000 13,872,000 15,918,000
Rental office
property:
Dade County,
Florida 17,301,000 1,779,000 -- 13,577,000 1,959,000 4,319,000 12,996,000 17,315,000
Hotel:
Broward County,
Florida -- 1,000,000 3,478,000 8,824,000 367,000 1,367,000 12,302,000 13,669,000
Rental apartment
property:
Dade County,
Florida -- 3,526,000 9,999,000 -- -- 3,526,000 9,999,000 13,525,000
Rental office
property:
Orange County,
California -- 3,839,000 15,356,000 -- 120,000 3,862,000 15,453,000 19,315,000
Shopping center:
Maricopa County,
Arizona -- 2,381,000 9,524,000 -- 7,000 2,381,000 9,531,000 11,912,000
Other miscellaneous
properties which are
individually less
than 5% of total 33,088,000 33,018,000 63,177,000 24,694,000 2,367,000 36,825,000 86,431,000 123,256,000
---------- ----------- ----------- ---------- --------- ---------- ----------- -----------
$ 71,786,000 47,415,000 110,597,000 51,718,000 5,180,000 54,326,000 160,584,000 214,910,000
========== =========== =========== ========== ========= ========== =========== ===========
<CAPTION>
DATE OF
ACCUMULATED COMPLETION OF DATE
DESCRIPTION DEPRECIATION (B) CONSTRUCTION ACQUIRED
- ------------------------ ---------------- ------------ ---------
<S> <C> <C> <C>
Rental apartment
property:
Dade County,
Florida 9,298,000 1979 1977
Rental office
property:
Dade County,
Florida 2,442,000 Various 1980
Hotel:
Broward County,
Florida 2,401,000 Various 1987
Rental apartment
property:
Dade County,
Florida 1,510,000 Various 1991
Rental office
property:
Orange County,
California 429,000 1989 1994
Shopping center:
Maricopa County,
Arizona 265,000 1988 1994
Other miscellaneous
properties which are
individually less
than 5% of total 13,301,000 Various Various
----------
$29,646,000
===========
<PAGE>
<FN>
Notes:
(A) Includes related improvements and capitalized carrying costs.
(B) Depreciation is calculated using the straight-line method over the estimated
useful lives which vary from 15 to 40 years.
(C) The aggregate cost of the listed property for Federal income tax purposes
was $160,436,000 at November 30, 1995.
(D) The listed real estate includes operating properties completed or under
construction. Real estate inventories, held for resale in the ordinary
course of business, have been excluded from this schedule.
(E) Reference is made to notes 1, 9 and 10 of the consolidated financial statements.
(F) The changes in the total cost of investment properties and accumulated depreciation
for the years ended November 30, 1995, 1994 and 1993 are as follows (in thousands):
</FN>
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Cost:
Balance at beginning of year $ 215,856 175,144 122,709
Additions, at cost 7,103 53,340 40,557
Accounting change -- 7,482 --
Acquisitions through foreclosure -- -- 14,410
Cost of real estate sold (8,304) (11,802) --
Transfers 255 (8,308) (2,532)
------------ ------- -------
Balance at end of year $ 214,910 215,856 175,144
============ ======= =======
Accumulated depreciation:
Balance at beginning of year $ 26,423 22,508 19,834
Depreciation and amortization charged against
earnings 5,292 4,338 3,639
Accounting change -- 165 --
Depreciation on real estate sold (2,069) (351) --
Depreciation on transfers -- (237) (965)
------------ ------- -------
Balance at end of year $ 29,646 26,423 22,508
============ ======= =======
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE XII
LENNAR CORPORATION AND CONSOLIDATED SUBSIDIARIES
Mortgage Loans on Real Estate
November 30, 1995
PRINCIPAL
AMOUNT OF
LOANS
SUBJECT TO
FINAL PERIODIC FACE CARRYING DELINQUENT
INTEREST MATURITY PAYMENT PRIOR AMOUNT OF AMOUNT OF PRINCIPAL
DESCRIPTION RATE DATE TERMS LIENS MORTGAGES MORTGAGES (A) OR INTEREST
- ------------------------ -------- --------- --------- -------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
First mortgage notes
secured by real estate:
Residential land -
Los Angeles County,
California 6.6% 1991 Varying $ -- 55,000,000 12,850,000 12,850,000 (C)
payment
Residential land -
Riverside County,
California 6.6% 1994 Varying -- 28,274,000 7,850,000 7,850,000 (C)
payment
Residential land -
Orange County,
California 7.6% 1992 Varying -- 29,026,000 6,729,000 6,729,000 (C)
payment
Residential land -
San Diego County,
California 6.8% 1992 Varying -- 11,826,000 6,200,000 6,200,000 (C)
payment
Residential land -
Orange County,
California 6.6% 1994 Varying -- 18,985,000 3,600,000 3,600,000 (C)
payment
Retail shopping center -
Harris County,
Texas 9.5% 1996 Single payment -- 3,704,000 3,355,000 --
Residential land -
Broward County,
Florida 9.8% 1996 Level payment -- 1,915,000 1,915,000 --
Commercial land -
Gwinnett County,
Georgia 7.0% 1996 Level payment -- 1,746,000 1,630,000 --
Office building -
San Bernardino County,
California 8.5% 1994 Level payment -- 1,707,000 1,535,000 1,535,000
Other 7.5-10.0% 1990-2022 Various -- 11,077,000 2,238,000 373,000 (C)
---------- ----------- ---------- ---------
$ -- 163,260,000 47,902,000 39,137,000
========== =========== ========== ==========
<FN>
Notes:
(A) For Federal income tax purposes, the aggregate basis of the listed mortgages was $47,902,000 at November 30, 1995.
(B) This schedule does not include mortgages held by Lennar Financial Services, Inc.
(C) During 1995, the Company acquired first mortgage notes from the secured creditors of a company that had filed for bankruptcy
protection. The Company acquired these mortgages (at significant discounts from their face amounts) in order to convert them
into an ownership interest after bankruptcy proceedings are completed.
(D) The changes in the carrying amounts of mortgages for the years ended November 30, 1995, 1994 and 1993 are as follows
(in thousands):
</FN>
</TABLE>
1995 1994 1993
----------- ----------- ------------
Balance at beginning of year $18,360 26,605 15,520
Additions (deductions):
New mortgage loans, net 45,877 14,293 28,929
Collections of principal (9,788) (12,454) (4,099)
Transfers to Lennar Financial
Services, Inc. -- (11,151) --
Foreclosures (8,017) -- (14,576)
Amortization of discount 14 31 40
Deferred income recognized 1,065 6 45
Other 391 1,030 746
------- ------ ------
Balance at end of year $47,902 18,360 26,605
======= ====== ======
18
EXHIBIT 99
LENNAR CORPORATION
EXHIBITS TO
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FISCAL YEAR ENDED NOVEMBER 30, 1995
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
3(a). Certificate of Incorporation - Incorporated by reference to
Registration Statement No. 2-36239 and definitive proxy statements
dated February 29, 1980, March 6, 1985, March 24, 1987, March 1, 1989
and March 1, 1994.
3(b). Bylaws - Incorporated by reference to Annual Report on Form 10-K for
the year ended November 30, 1989.
10(a). Lennar Corporation 1980 Stock Option Plan - Incorporated by reference
to Registration Statement No. 2-73630.
10(b). Lennar Corporation 1991 Stock Option Plan - Incorporated by reference
to Registration Statement No. 33-45442.
10(c). Lennar Corporation Employee Stock Ownership Plan and Trust -
Incorporated by reference to Registration Statement No. 2-89104.
10(d). Amendment dated December 13, 1989 to Lennar Corporation Employee Stock
Ownership Plan-Incorporated by reference to Annual Report on Form 10-K
for the year ended November 30, 1990.
10(e). Lennar Corporation Employee Stock Ownership/401k Trust Agreement dated
December 13, 1989 Incorporated by reference to Annual Report on Form
10-K for the year ended November 30, 1990.
10(f). Amendment dated April 18, 1990 to Lennar Corporation Employee Stock
Ownership/401k Plan-Incorporated by reference to Annual Report on Form
10-K for the year ended November 30, 1990.
10(g). Term Loan Agreement between Lennar Corporation and NCNB National Bank
of Florida dated April 14, 1988 - Incorporated by reference to Annual
Report on Form 10-K for the year ended November 30, 1992.
10(h). Term Loan Agreement between Lennar Corporation and SunBank/Miami,
National Association dated April 27, 1988 - Incorporated by reference
to Annual Report on Form 10-K for the year ended November 30, 1992.
10(i). Term Loan Agreement between Lennar Corporation and The First National
Bank of Chicago dated May 3, 1988 - Incorporated by reference to Annual
Report on Form 10-K for the year ended November 30, 1992.
10(j). Revolving Credit Agreement dated July 29, 1994 between The First
National Bank of Chicago, as agent, and Lennar Corporation and certain
subsidiaries - Incorporated by reference to Annual Report on Form 10-K
for the year ended November 30, 1994.
10(k). First Amendment to Revolving Credit Agreement dated January 31, 1995
amending the Revolving Credit Agreement dated July 29, 1994.
10(l). Second Amendment to Revolving Credit Agreement dated April 6, 1995
amending the Revolving Credit Agreement dated July 29, 1994.
13. Pages 19-40 of the 1995 Annual Report to Stockholders.
21. List of subsidiaries.
23. Independent Auditors' Consents.
27. Financial Data Schedule.
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
First Amendment to Revolving Credit Agreement ("Amendment"), dated as
of January 31, 1995, by and among LENNAR CORPORATION, a corporation organized
and existing under the laws of the State of Delaware (the "Company"), the
Subsidiaries of the Company listed in Schedule I (said Subsidiaries, together
with the Company, hereinafter individually and collectively referred to as the
"Borrower") to the Agreement (as hereinafter defined), the lenders listed in
Schedule II to the Agreement (hereinafter such lenders, together with any
additional lenders as provided in Section 2.21 of the Agreement, are
collectively referred to as the "Lenders"), and THE FIRST NATIONAL BANK OF
CHICAGO, as Agent (the "Agent"), amending the Revolving Credit Agreement (the
"Agreement"), dated July 29, 1994, by and among the Borrower, the Lenders and
the Agent.
RECITAL
The Borrower has requested that the Lenders amend the Agreement, and
the Lenders are willing to make such amendment, all upon the terms and subject
to the conditions set forth herein.
AGREEMENT
In consideration of the foregoing and of the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. CAPITALIZED TERMS. Capitalized terms used in this Amendment and not
otherwise defined herein, shall have the meanings ascribed to them in the
Agreement.
2. MAXIMUM CREDIT FACILITIES.
(a) Section 2.01(c) of the Agreement is deleted in its entirety and
replaced with the following:
(c) Notwithstanding anything to the contrary contained in this
Agreement, the maximum principal amount of outstanding Advances shall
not at any time exceed $300,000,000.
(b) Section 2.21(a) of the Agreement is modified by replacing the
reference therein to $250,000,000" with $300,000,000".
<PAGE>
3. CERTAIN DEFINED TERMS.
Section 1.01 of the Agreement is modified by adding each of the
following defined terms, each of which defined terms shall supersede such
defined term if set forth in the Agreement:
"APPLICABLE MARGIN", in the event that the Company or the Company's
senior unsecured long-term debt is rated without regard to credit
enhancement by both Standard & Poor's and Moody's, shall be determined
in accordance with the following table, such Applicable Margin to
remain in effect for each Interest Period (with respect to Fixed Rate
Loans) during all of which the applicable rating Level shall remain in
effect:
<TABLE>
<CAPTION>
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit If the Company or If the Company or If the Company or If the Company or All other ratings
Quality the Company's the Company's se- the Company's the Company's apply or no ratings
senior unsecured nior unsecured senior unsecured senior unsecured exist
long-term debt rating long-term debt long-term debt rating long-term debt
is equal to or better rating is equal to is equal to or better rating is equal to or
than BBB+ from or better than than BBB- from better than BB+
S&P or Baa1 from BBB from S&P to S&P or Baa3 from from S&P or Ba1
Moody's Baa2 from Moody's, but from Moody's, but
Moody's, but insufficient to insufficient to
insufficient to achieve Level II achieve Level III
achieve Level I
- -----------------------------------------------------------------------------------------------------------------------------
Applicable 0% per annum 0% per annum 0% per annum 0% per annum 0% per annum
Margin
For
Floating
Rate Loans
- -----------------------------------------------------------------------------------------------------------------------------
Applicable .40% per annum .50% per annum .75% per annum 1.00% per annum 1.25% per annum
Margin
For
Eurodollar
Loans
- -----------------------------------------------------------------------------------------------------------------------------
Applicable .40% per annum .50% per annum .75% per annum 1.00% per annum 1.25% per annum
Margin
For Fixed
CD Rate
Loans
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
Notwithstanding the foregoing, if such applicable rating Level by
Moody's is more than one Level different from the applicable rating
Level by Standard & Poor's, the Applicable Margin shall correspond to
that of one Level higher than the lower of such Levels (E.G., if
Moody's rating is Baa1 (Level I) and Standard & Poor's rating is BB+
(Level IV), the applicable rating Level would be Level II). If the
Company or the Company's senior unsecured long-term debt is rated
without regard to credit enhancement by either Standard & Poor's or
Moody's (but not both), the Applicable Margin for Eurodollar Loans and
Fixed CD Rate Loans shall be determined in accordance with the
foregoing table, but increased by .125% if Levels I, II, III or IV are
applicable and 0% if Level V is applicable. If the Company or the
Company's senior unsecured long-term debt is not rated without regard
to credit enhancement by either Moody's or Standard & Poor's, the
Applicable Margin for Eurodollar Loans and Fixed CD Rate Loans shall be
determined in accordance with the foregoing table as if Level V was
applicable. Borrower acknowledges that the Company is currently rated
BBB- by Standard & Poor's and unrated by Moody's; and, accordingly,
.875% per annum is currently the Applicable Margin for Fixed Rate
Loans. Any change in such ratings shall result in a change in the
Applicable Margin as of the beginning of the next succeeding applicable
Interest Period for Fixed Rate Loans, and Borrower shall notify Agent
of any such rate change within five days thereof. If, within sixty (60)
days following any anniversary of the Effective Date, the Company has
not delivered to Agent written confirmation by each such rating agency
of such agency's rating of the Company or the Company's senior
unsecured long-term debt as of such anniversary, then the Applicable
Margin shall be calculated retroactively from such anniversary as if
neither the Company nor such debt were rated by such agency.
-3-
<PAGE>
"BORROWING BASE" means, from time to time, the sum of the following
amounts, all as reflected from time to time in accordance with United
States generally accepted accounting principles consistently applied in
the consolidated balance sheet of the Borrower: (i) 100% of Borrower's
unrestricted cash up to a maximum of $10,000,000 (with any excess cash
being excluded from the Borrowing Base); (ii) 100% of the Net Proceeds
due to Borrower at closing as a result of the consummation of the sale
of any Housing Unit, which Net Proceeds have been paid to the closing
agent handling such sale but which have not yet been received by
Borrower; PROVIDED, HOWEVER, that if, and to the extent that, such Net
Proceeds which are reported as outstanding on the last day of any
fiscal quarter of Borrower are not received by Borrower on or before
the tenth (10th) day following the end of any such fiscal quarter, such
Net Proceeds shall not be included in the Borrowing Base; (iii) 75% of
the Net Book Value of all Housing Units under Contract; (iv) 65% of the
Net Book Value of all Housing Units owned by Borrower (including,
without limitation, model Housing Units) that are not subject to a
contract for sale, PROVIDED that the amount determined pursuant to this
clause (iv) shall not exceed 30% of the Aggregate Commitment (with any
excess being excluded from the Borrowing Base); (v) the lower of (A)
100% of the Net Book Value of all Income Producing Properties (on an
asset-by-asset basis), or (B) six and one-half (6 1/2) times the Net
Operating Income for the four fiscal quarters immediately preceding the
date as of which Net Operating Income is to be determined, PROVIDED
that the amount determined pursuant to this clause (v) shall not exceed
30% of the Aggregate Commitment (with any excess being excluded from
the Borrowing Base); (vi) 50% of the Net Book Value of all
substantially improved land owned by the Borrower, PROVIDED that the
amount determined pursuant to this clause (vi) shall not exceed 25% of
the Aggregate Commitment (with any excess being excluded from the
Borrowing Base); and (vii) 50% of Borrower's Net Cash Invested,
PROVIDED, that the amount determined pursuant to this clause (vii)
shall not exceed the lesser of (X) 20% of the Aggregate Commitment, (Y)
$60,000,000 or (Z) 10% of consolidated shareholders' equity of the
Company and its Subsidiaries as of the end of the most recently
completed fiscal quarter next preceding the date as of which the
Borrowing Base is to be determined (with any excess being excluded from
the Borrowing Base); PROVIDED, HOWEVER, that notwithstanding anything
to the contrary provided herein, any asset which is encumbered by a
Lien
-4-
<PAGE>
shall not be included in the calculation of the Borrowing Base pursuant
to clauses (i) - (vii) above and the Discontinued Assets shall also be
disregarded in computation of the Borrowing Base. For purposes of
clause (vi) above, "substantially improved land" shall mean land with
respect to which at least 80% of the standard improvements (including
zoning and platting, engineering design and permits, filling to grade,
main water distribution and sewage collection systems and drainage
system installation, but excluding sidewalks, landscaping and sodding,
decorative and privacy walls, recreation facilities, guardhouse and
street lights) have been completed. For purposes of clause (vii) above,
(A) "Net Cash Invested" shall mean with respect to any Pool (as
hereinafter defined) the aggregate amount of cash invested by the
Borrower in such Pool (but in no event more than $30,000,000 with
respect to each Pool) less the cumulative amount of distributions
received by the Borrower from such Pool, less Borrower's pro rata
portion of cumulative net losses, if any, of such Pool for the period
during which Borrower or an Unconsolidated Joint Venture Subsidiary was
a partner in the Pool, but without regard to the Borrower's equity in
cumulative undistributed net earnings, if any, of such Pool for the
period during which Borrower or an Unconsolidated Joint Venture
Subsidiary was a partner in the Pool, and (B) "Pools" shall mean
partnerships and joint ventures in which the Borrower has invested cash
and the business of which is limited to investing in distressed real
estate properties and/or mortgage loans, PROVIDED that Pools shall not
include any joint venture or partnership which has been in existence
for five or more years or which has not made distributions to its
venturers or partners for two (2) consecutive years.
"EFFECTIVE DATE" means January 31, 1995.
"TERMINATION DATE" means January 31, 2000, subject, however, to earlier
termination in whole of the Aggregate Commitment pursuant to the terms
of this Agreement.
-5-
<PAGE>
"UNCONSOLIDATED JOINT VENTURE" shall mean a joint venture (whether in
the form of a corporation, a partnership or otherwise) (i) to which the
Borrower or an Unconsolidated Joint Venture Subsidiary is or becomes a
party (other than the tenancies in common listed in Schedule VII
annexed hereto), (ii) which Borrower is not required to consolidate in
its financial statements in accordance with United States generally
accepted accounting principles, and (iii) in which the Borrower has or
will have a total investment exceeding $25,000 or which has total
assets plus contingent liabilities exceeding $100,000. For the purposes
of this definition, the Borrower's investment in a joint venture shall
be deemed to include any Securities of the joint venture owned by the
Borrower, any loans, advances or accounts receivable by the Borrower
from the joint venture, any commitments, arrangement or other agreement
by the Borrower to provide funds or credit to the joint venture and the
Borrower's share of the undistributed profits of the joint venture.
"UNCONSOLIDATED JOINT VENTURE SUBSIDIARY" means a Subsidiary of the
Company which is a partner, shareholder or other equity owner in an
Unconsolidated Joint Venture, which is not a Borrower but all of the
issued and outstanding equity Securities of which Subsidiary are
pledged to the Lenders pursuant to Section 7.05.
4. COMMITMENT FEE AND REDUCTION OF COMMITMENTS. Section 2.06 of the
Agreement is deleted in its entirety and replaced with the following:
Section 2.06. COMMITMENT FEE AND REDUCTION OF COMMITMENTS. The Borrower
agrees to pay to the Agent for the account of each Lender a commitment
fee per annum on the daily unborrowed and unused portion of such
Lender's Commitment (I.E., after deducting from the Commitment of such
Lender the outstanding amount of all Loans made by such Lender) from
the Effective Date to and including the Termination Date, payable in
arrears on each Quarterly Payment Date thereafter and on the
Termination Date. Such commitment fee shall be determined on the first
day of each fiscal quarter in accordance with the following table, if
the Company or the Company's senior unsecured long-term debt is rated
without regard to credit enhancement by both Standard & Poor's and
Moody's, such fee to remain in effect throughout such quarter:
-6-
<PAGE>
<TABLE>
<CAPTION>
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit If the Company or If the Company or If the Company or If the Company or All other ratings
Quality the Company's the Company's se- the Company's the Company's apply or no ratings
senior unsecured nior unsecured senior unsecured senior unsecured exist
long-term debt rating long-term debt long-term debt rating long-term debt
is equal to or better rating is equal to is equal to or better rating is equal to or
than BBB+ from or better than than BBB- from better than BB+
S&P or Baa1 from BBB from S&P or S&P or Baa3 from from S&P or Ba1
Moody's Baa2 from Moody's, but from Moody's, but
Moody's, but insufficient to insufficient to
insufficient to achieve Level II achieve Level III
achieve Level I
- -----------------------------------------------------------------------------------------------------------------------------
Commitment .15% .20% .25% .35% .375%
Fee
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, if such applicable rating Level by
Moody's is more than one Level different from the applicable rating
Level by Standard & Poor's, the applicable commitment fee shall
correspond to that of one Level higher than the lower of such Levels.
If the Company or the Company's senior unsecured long-term debt is
rated without regard to credit enhancement by either Standard & Poor's
or Moody's (but not both), then the applicable commitment fee shall be
determined in accordance with the foregoing table, but increased by
.05% if Levels I, II, III or IV are applicable and by 0% if Level V is
applicable. If the Company or the Company's senior unsecured long-term
debt is not rated without regard to credit enhancement by either
Standard & Poor's or Moody's, the applicable commitment fee shall be
determined in accordance with the foregoing table as if Level V was
applicable. Borrower acknowledges that the Company is currently rated
BBB- by Standard & Poor's and unrated by Moody's; and, accordingly,
.30% per annum is currently the applicable commitment fee. If, within
sixty (60) days following any anniversary of the Effective Date, the
Company has not delivered to the Agent written confirmation by each
such rating agency of such agency's rating of the Company or the
Company's senior unsecured long-term debt as of such anniversary, then
the commitment fee shall be calculated retroactively from such
anniversary as if such debt were not rated by such agency. The Borrower
may permanently reduce the Aggregate Commitment in whole, or in part
ratably among the Lenders in integral multiples of $1,000,000, upon at
least three Business Days' written notice to the Agent, which notice
shall specify the amount of any such reduction, PROVIDED,
-7-
<PAGE>
HOWEVER, that the amount of the Aggregate Commitment may not be reduced
below the aggregate principal amount of the outstanding Advances. All
accrued commitment fees under this Section 2.06 shall be payable on the
effective date of any termination of the obligations of the Lenders to
make Loans hereunder. The fees payable under this Section 2.06, once
paid, shall not be refundable for any reason.
5. UP FRONT FEE. Section 2.07 of the Agreement is deleted in its
entirety and replaced with the following:
Section 2.07. UP FRONT FEE. On the Effective Date, the Borrower agrees
to pay to the Agent for the account of each Lender an up front fee
equal to .075% of the Aggregate Commitment as of the Effective Date.
6. FINANCIAL STATEMENTS. Section 4.03 of the Agreement is deleted in
its entirety and replaced with the following:
Section 4.03. FINANCIAL STATEMENTS. The Borrower heretofore has
provided to the Lenders (i) the consolidated balance sheet of the
Company and its Subsidiaries as of November 30, 1993, and the related
consolidated statements of earnings, stockholders' equity and cash
flows for the 12-month period ended on that date, audited and reported
upon by KPMG Peat Marwick, independent certified public accountants
(the "Audited Financial Statements"), and (ii) a consolidated balance
sheet of the Borrower as of August 31, 1994 and a consolidated
statement of earnings of the Borrower for the nine-month period ended
on that date, both unaudited, but certified to be true and accurate
(subject to normal year-end audit adjustments) by the President and the
chief financial officer of the Company (the "Unaudited Financial
Statements"). Those financial statements and reports (subject, in the
case of the Unaudited Financial Statements, to normal year-end audit
adjustments), and the related notes and schedules (if any), (a) were
prepared in accordance with United States generally accepted accounting
principles consistently applied throughout the respective periods
covered thereby, (b) present fairly the consolidated financial
condition of the Company and its Subsidiaries as of the respective
dates thereof, (c) show all material liabilities, direct or contingent,
of the Company and its Subsidiaries as of those dates (including,
without limitation, liabilities for taxes and material commitments),
and (d)
-8-
<PAGE>
present fairly the consolidated results of operations of the Company
and its Subsidiaries for the respective periods covered thereby.
7. ACCOUNTS AND REPORTS. Section 6.04 of the Agreement is amended by
deleting the period at the end of paragraph (p) thereof and adding a semicolon
thereto and adding the following to the end thereof:
(q) as soon available and in any event within 120 days after the end of
each fiscal year of each Pool (as defined in the definition of
"Borrowing Base"), a balance sheet of such Pool as of the end of such
fiscal year and the related statements of earnings, partners' equity
and cash flows for such fiscal year, all with accompanying notes and
schedules, prepared in accordance with United States generally accepted
accounting principles consistently applied and either (i) audited and
reported on by an independent firm of certified public accountants of
national standing or (ii) unaudited but certified to be true and
accurate by the chief financial officer of the Company to the best of
his knowledge;
(r) as soon as available and in any event within 60 days after the end
of each of the first three fiscal quarters and within 120 days after
the end of the fourth fiscal quarter of each fiscal year of each Pool,
a balance sheet of each such Pool as of the end of such quarter and the
related statements of earnings and partners' equity of each such Pool
for the period from the beginning of the fiscal year to the end of such
quarter, certified to be true and accurate, subject to normal year-end
audit adjustments, by the chief financial officer of the Company to the
best of his knowledge; and
(s) prior to or contemporaneously with the making of any investment in
any Unconsolidated Joint Venture, copies of each proposed shareholders'
agreement, certificate or articles of incorporation, partnership
agreement, joint venture agreement or similar organizational instrument
or agreement, relating to the formation of each Unconsolidated Joint
Venture, and each material restatement, modification, amendment or
supplement thereto.
8. FINANCING; NEW INVESTMENTS. The last sentence of Section 6.07 of the
Agreement is amended in its entirety and replaced with the following:
As used in this Section 6.07, the term "Significant Subsidiary" means a
-9-
<PAGE>
Subsidiary of one or more entities comprising the Borrower in which the
Borrower makes investments (whether through the purchase of capital
stock or instruments evidencing debt, advances or loans to such
Subsidiary or by the guaranty of indebtedness of such Subsidiary) in a
cumulative amount in excess of $1,000,000 but shall not include any
Subsidiary all of the issued and outstanding equity Securities of which
are pledged to the Lenders pursuant to Section 7.05 hereof.
9. TANGIBLE NET WORTH. Section 7.01 of the Agreement is deleted in its
entirety and replaced with the following:
Section 7.01. TANGIBLE NET WORTH. Permit the consolidated Tangible Net
Worth of (i) the Borrower and (ii) each Subsidiary whose equity
Securities are pledged to the Lenders pursuant to the Pledge Agreement
referred to in Section 7.05 hereof at any time to be less than the sum
of (a) $425,000,000, and (b) an amount equal to 50% of the result
obtained by subtracting the after tax net income of the Mortgage
Banking Subsidiaries, the Limited Purpose Finance Subsidiaries, STI and
TIC from the aggregate net income of the Company and its Subsidiaries,
for each fiscal quarter of the Company ending after August 31, 1994 for
which the Company and its Subsidiaries, taken as a whole, had net
income, and (c) the aggregate net proceeds received by the Borrower
after August 31, 1994 from the sale of any of its equity Securities.
10. GUARANTIES. Clause (d) of Section 7.03 of the Agreement is deleted
in its entirety and replaced with the following:
(d) guaranties of liabilities incurred by Unconsolidated Joint Ventures
to which the Borrower or an Unconsolidated Joint Venture Subsidiary is
a party, PROVIDED that all such guaranties outstanding at any one time,
when aggregated with all then outstanding investments in and loans or
advances to Unconsolidated Joint Ventures of the type referred to in
clause (i) of Section 7.05 hereof, do not exceed $50,000,000 for any
single Unconsolidated Joint Venture or $150,000,000 for all
Unconsolidated Joint Ventures.
11. LIMITATION ON INVESTMENTS. (a) Clause (i) of Section 7.05 of the
Agreement is deleted in its entirety and replaced with the following:
-10-
<PAGE>
(i) investments in or loans or advances to Unconsolidated Joint
Ventures to which the Borrower or a Subsidiary is a party, PROVIDED
that (A) all such investments, loans and advances outstanding at any
time, when aggregated with all then outstanding guaranties of the
obligations of Unconsolidated Joint Ventures of the type referred to in
clause (d) of Section 7.03 hereof do not exceed $50,000,000 for any
single Unconsolidated Joint Venture or $150,000,000 in the aggregate
for all Unconsolidated Joint Ventures, and (B) with respect to
investments, loans and advances by each Subsidiary which is not a
Borrower, all of the issued and outstanding equity Securities of such
Subsidiary shall have been pledged to the Agent pursuant to the terms
and provisions of a Pledge Agreement, which is in form and substance
satisfactory to the Required Lenders in their sole discretion, and such
pledge shall not be prohibited by, or result in a breach or violation
of, any agreement, indenture or other instrument to which the Company
or any Subsidiary is a party or is bound;
(b) The amendment set forth in paragraph (a) of this Section
11 shall be effective on and after July 29, 1994, as if originally included in
the Agreement on such date, and shall continue in effect from and after the
Effective Date; PROVIDED, HOWEVER, that notwithstanding the forgoing and the
provisions of paragraph (a) of this Section 11, if the Company and the Required
Lenders shall not have agreed upon the form, terms and provisions of a Pledge
Agreement relating to the pledge of all of the issued and outstanding equity
Securities of the following Subsidiaries, to wit: Lennar Central Holdings, Inc.,
Lennar Gotham Holdings, Inc., Lennar Northeast Holdings, Inc., Lennar Florida
Holdings, Inc. and Lennar Metro Holdings, Inc., within 30 days after the
Effective Date, the amendment effected by this Section 11 shall be terminated
effective on such 30th day and shall not be in effect thereafter.
12. LIMITATION ON UNSECURED DEBT. Section 7.10 of the Agreement is
deleted in its entirety and replaced with the following:
Section 7.10. LIMITATION ON UNSECURED DEBT. At any time, permit the
aggregate outstanding amount of the sum of (i) all outstanding
Indebtedness under the Notes plus (ii) all other unsecured Indebtedness
of the Borrower in excess of $20,000,000 to exceed the Borrowing Base
at such time.
-11-
<PAGE>
13. LIENS AND ENCUMBRANCES. The following is inserted after Section
7.15 of the Agreement:
Section 7.16. LIENS AND ENCUMBRANCES. Agree with any third party not to
create, assume or suffer to exist any Lien securing a charge or
obligation, on or of any of its property, real or personal, whether now
owned or hereafter acquired.
14. ASSIGNMENTS.
(a) Section 12.01 of the Agreement (SUCCESSORS AND PERMITTED
ASSIGNS) is amended by adding a new sentence at the end thereof to read as
follows:
A Lender may not assign less than the lesser of its Commitment or
$10,000,000.
(b) Section 12.03(b) (EFFECT; EFFECTIVE DATE) of the Agreement is
amended by replacing the reference therein to "$2,500" with "$4,000".
15. JOINDER AND ASSUMPTION.
(a) ADDITIONAL SUBSIDIARY BORROWERS. Each Subsidiary listed on
Schedule I to this Amendment which is not listed on Schedule I to the Agreement
hereby joins in the Agreement as one of the corporations constituting the
Borrower and hereby assumes all the obligations of the Borrower thereunder,
jointly and severally with the Company and all other Subsidiaries constituting
the Borrower.
(b) ADDITIONAL LENDERS. Each of the banks whose name appears on a
signature page to this Amendment and which is not a party to the Agreement as
originally executed on July 29, 1994, is hereby admitted as an additional Lender
under the Agreement as provided in Section 2.21 of the Agreement, and each such
bank agrees, on the terms and conditions set forth in the Agreement, to make
Loans to the Borrower from time to time in amounts not to exceed, in the
aggregate at any one time outstanding, the amount of the Commitment set forth
next to the name of such bank on such signature page. Contemporaneously
herewith, the Borrower is executing and delivering to each such additional
Lender a Note in the principal amount of its Commitment.
-12-
<PAGE>
(c) ADDITIONAL COMMITMENTS. If, and to the extent that, any
existing Lender is increasing the amount of its Commitment, such increased
Commitment is reflected in the Commitment set forth next to the name of such
Lender on a signature page to this Amendment. Contemporaneously herewith, the
Borrower is executing and delivering to each such Lender a Note in the principal
amount of its increased Commitment, which Note is to be in exchange for, and
cancellation of, the Note presently held by such Lender.
16. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
when the Agent shall have received counterparts of this Amendment executed by
the Borrower and each of the Lenders and each of the documents specified in
subsections (a) - (h) below (with all documents required below, except as
otherwise specified, to be dated the date of receipt thereof by the Agent, which
date shall be the same for all such documents, and each of such documents to be
in form and substance satisfactory to the Agent), and the conditions specified
in subsection (i) below shall have been satisfied:
(a) The favorable written opinion by Mershon, Sawyer, Johnston,
Dunwody & Cole, counsel for the Borrower, dated the Effective Date, addressed to
the Lenders and in form and substance satisfactory to the Agent, (i) confirming
the accuracy of the representations and warranties set forth in Sections 4.01
(excluding clause (ii) thereof, and limited, in the case of clause (iii)
thereof, to the jurisdictions listed under the heading "Where Qualified" in
Schedule VI to the Agreement), 4.02, 4.06, 4.11, 4.12 and the second sentence of
Section 4.08 of the Agreement (which opinion, as to the representations set
forth in clauses (ii)(b), (iii) and (iv) of Section 4.02, Sections 4.06, 4.11,
4.12 and the second sentence of Section 4.08 of the Agreement, may be to the
best knowledge of such counsel, and may in its entirety be limited to Florida,
Arizona, Delaware, Texas and United States federal law); and (ii) to the effect
that this Amendment has been duly authorized, executed and delivered by the
Borrower. Such counsel may rely, in its opinion, on the opinions of special
counsel to the Borrower referred to in subsection (b) below, as to matters of
law of the State of Illinois, and on the opinion of Fennemore, Craig of Phoenix,
Arizona as to matters of law of the State of Arizona, and the opinion of Arter &
Hadden as to matters of law of the State of Texas. The Borrower hereby instructs
its counsel to prepare its opinion and deliver it to Lenders for their benefit,
and such opinion shall contain a statement to such effect.
(b) The favorable written opinion of Rudnick & Wolfe, special
counsel
-13-
<PAGE>
to the Borrower, dated the Effective Date, that (i) no authorization, consent,
approval, license or exemption of, or filing or registration with or other
action by any Illinois, United States federal or Delaware governmental
department, commission, board, bureau, regulatory body, agency or
instrumentality or to the best knowledge of such counsel, any court is or will
be necessary for the execution, delivery and performance by the Borrower of this
Amendment and (ii) this Amendment constitutes the legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms, except as
the rights and remedies of the Lenders hereunder may be limited by (A)
applicable bankruptcy, reorganization, insolvency and other laws affecting
creditors' rights generally from time to time in effect, (B) the exercise of the
discretionary powers of the court before which any proceeding seeking equitable
remedies (including, without limitation, specific performance and injunctive
relief) may be brought, and (C) such other qualifications expressed in the
opinion provided that such qualifications are acceptable to Agent. Such counsel
may rely on the opinion of counsel to the Borrower delivered pursuant to
subsection (a), above, relating to the representations set forth in Sections
4.01 and 4.02 of the Agreement. The Borrower hereby instructs its special
counsel to prepare its opinion and deliver it to Lenders for their benefit, and
such opinion shall contain a statement to such effect.
(c) The favorable written opinion of Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A., special counsel to the Agent and the Lenders, dated
the Effective Date, addressed to the Lenders to the effect that: while it has
not independently considered the matters covered by the opinions provided
pursuant to subsections (a) and (b) above, to the extent necessary to enable it
to express the conclusions stated therein, those opinions of counsel and the
other documents provided pursuant to this Section 16 are substantially
responsive to the requirements of this Amendment.
(d) The following supporting documents with respect to each
Borrower: (i) a copy of its certificate of incorporation, certified as of a date
reasonably close to the Effective Date to be a true and accurate copy by the
Secretary of State of its state of incorporation, or a certificate of its
Secretary or Assistant Secretary to the effect that there have been no
amendments to its certificate of incorporation since July 29, 1994; (ii) a
certificate of the Secretary of State of its state of incorporation, dated as of
a date reasonably close to the Effective Date, as to its existence and (if
available) good standing; (iii) a certificate of the Secretary of State of each
jurisdiction, other than its state of incorporation, in which it does business,
as to its qualification as a foreign corporation, dated as of a date reasonably
close to the Effective Date; (iv) a copy of its
-14-
<PAGE>
by-laws, certified by its Secretary or Assistant Secretary to be a true and
accurate copy of its by-laws in effect on the Effective Date, or a certificate
of its Secretary or Assistant Secretary to the effect that there have been no
amendments thereto since July 29, 1994; (v) a certificate of its Secretary or
Assistant Secretary, dated the Effective Date, as to the incumbency and
signatures of its officers who have executed any documents in connection with
the transactions contemplated by this Amendment; (vi) a copy of resolutions of
its Board of Directors or the Executive Committee of its Board of Directors,
certified by its Secretary or Assistant Secretary to be a true and accurate copy
of resolutions duly adopted by such Board of Directors or Executive Committee
that are in full force and effect on the Effective Date, authorizing the
execution and delivery by it of this Amendment, and the other Loan Documents and
the performance by it of all its obligations thereunder; and (vii) such
additional supporting documents and other information with respect to its
operations and affairs as the Agent may reasonably request.
(e) A certificate signed by a duly authorized officer of each
Borrower stating that: (i) the representations and warranties of the Borrower
contained in Article IV of the Agreement and in Section 6 of this Amendment are
correct and accurate on and as of the Effective Date as though made on and as of
that date and (ii) no event has occurred and is continuing which constitutes an
Event of Default or Unmatured Default under the Agreement.
(f) A certificate signed by the President or Chief Financial
Officer of the Company that attests to the existence and adequacy of, and
summarizes, the property, casualty, and liability insurance programs carried by
the Borrower and that has been furnished by the Borrower to the Agent and the
Lenders, is complete and accurate. This summary includes the insurer's or
insurers' name(s), policy number(s), expiration date(s), amount(s) of coverage,
type(s) of coverage, exclusion(s), and deductibles. This summary also includes
similar information, and describes any reserves, relating to any self-insurance
program that is in effect.
(g) A new Note, substantially in the form of EXHIBIT A annexed to
this Amendment, issued to each current Lender in replacement of such Lender's
Note and for a principal amount equal to such Lender's Commitment.
(h) Such other documents as any Lender or its counsel may
reasonably request.
-15-
<PAGE>
(i) There shall not have occurred any changes in the consolidated
financial condition or results of operations of the Borrower from that reflected
in the financial statements dated November 30, 1993 which has or reasonably
could be expected to have, in the judgment of the Required Lenders, a Material
Adverse Effect on the Borrower's operations, taken as a whole.
17. LOCATION OF EXECUTION. This Amendment has been executed and
delivered to the Agent in Atlanta, Georgia. The Borrower reaffirms its
obligation to reimburse and indemnify the Lenders for any documentary stamp tax
or other taxes which may be imposed upon the Lenders in respect of the Agreement
or any Loan Documents.
18. NO OTHER MODIFICATIONS. Except as expressly amended or modified by
the terms hereof, the Agreement shall remain in full force and effect. This
Amendment shall not affect, modify or diminish the obligations of Borrower which
have accrued prior to the Effective Date including, but not limited to,
obligations to pay commitment fees and interest at the levels and rates as in
effect prior to the Effective Date.
19. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The Borrower
hereby certifies that the representations and warranties contained in the
Agreement continue to be true and correct and that no Event of Default or
Unmatured Default has occurred.
20. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Revolving Credit Agreement to be duly executed, sealed and delivered the day
and year first above written.
BORROWER:
LENNAR CORPORATION AND EACH OF THE
SUBSIDIARIES LISTED ON SCHEDULE I OTHER THAN ATLANTIC
HOLDINGS, INC.
-16-
<PAGE>
By: /s/ ALLAN J. PEKOR
------------------------------------------------
Allan J. Pekor as Vice President of each of such
corporations
Attest: /s/ MORRIS J. WATSKY
--------------------------------------------
Morris J. Watsky as Assistant Secretary of
each of such corporations
ATLANTIC HOLDINGS, INC.
By: /s/ ALLAN J. PEKOR
------------------------------------------------
Allan J. Pekor, authorized signatory
Attest: /s/ LORY SMITH
--------------------------------------------
Lori Smith, Assistant Secretary
Address:
Lennar Corporation
700 Northwest 107th Avenue
Miami, Florida 33172
Attention: Leonard Miller, President
COMMITMENTS: LENDERS:
$40,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ JAMES C. ROZEK
-------------------------------------------------
James C. Rozek, Vice President
-17-
<PAGE>
Address:
The First National Bank of Chicago
One First National Plaza
14th Floor, Suite 0151
Chicago, Illinois 60670-0151
Attention: James C. Rozek, Vice President
with a copy to:
The First National Bank of Chicago
One First National Plaza
Suite 0801
Chicago, Illinois 60670-0801
Attention: Law Department
$35,000,000 THE FIRST NATIONAL BANK OF BOSTON
By: /s/ LINDA CARTER
-------------------------------------------------
Address:
400 Perimeter Center Terrace
Suite 745
Atlanta, Georgia 30346
Attention: Linda Carter, Vice President
-18-
<PAGE>
$35,000,000 CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ DAVID M. CAWRSE
-------------------------------------------------
Address:
Suite 1700
235 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Pascal Seris, Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ DAVID M. CAWRSE
-------------------------------------------------
Address:
c/o Credit Lyonnais Atlanta Agency
Suite 1700
235 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Pascal Seris, Vice President
-19-
<PAGE>
$5,000,000 INTERCONTINENTAL BANK
By: /s/ KAREN B. GILMORE
-------------------------------------------------
Address:
6th Floor
200 S.E. First Street
Miami, Florida 33131
Attention: Karen B. Gilmore, Senior Vice President
$35,000,000 COMERICA BANK
By: /s/ MICHEL KRZYSTOWCZYK
-------------------------------------------------
Address:
One Detroit Center
500 Woodward Avenue, 9th Floor
Detroit, Michigan 48267
Attention: Michael Krzystowczyk, Vice President
$35,000,000 NATIONSBANK OF FLORIDA, N.A.
By: /s/ DESPINA Z. SIBLEY
-------------------------------------------------
Address:
150 S.E. Third Avenue, Room 524
Miami, Florida 33131
Attention: Despina Z. Sibley, Vice President
-20-
<PAGE>
$15,000,000 THE FUJI BANK, LIMITED
NEW YORK BRANCH
By: /s/ KATSUNORI NOZAWA
-------------------------------------------------
Norimasa Kuroda, Joint General Manager
Address:
Two World Trade Center, 79th Floor
New York, New York 10048
Attention: Vincent Ingato, Vice President
$20,000,000 BARNETT BANK OF SOUTH FLORIDA, N.A.
By: /s/ CLAY F. WILSON
-------------------------------------------------
Address:
701 Brickell Avenue, 6th Floor
Miami, Florida 33131
Attention: Clay F. Wilson, Vice President
-21-
<PAGE>
$25,000,000 NBD BANK
By: /s/ RICHARD J. JOHNSEN
-------------------------------------------------
Address:
Financial Services Division
611 Woodward Avenue
Detroit, Michigan 48226-3497
Attention: Pat Power, Second Vice President
$30,000,000 BANK OF AMERICA ILLINOIS
By: /s/ MARK LARIVIERE
-------------------------------------------------
Address:
231 S. LaSalle, 15th Floor
Chicago, Illinois 60697
Attention: Mark Lariviere, Vice President
-22-
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
Amendment to Revolving Credit Agreement ("Amendment"), dated as of
April 6, 1995 (the "Amendment Date"), by and among LENNAR CORPORATION, a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), THE SUBSIDIARIES OF THE COMPANY LISTED IN SCHEDULE I (said
Subsidiaries, together with the Company, hereinafter individually and
collectively referred to as the "Borrower") to the Credit Agreement (as
hereinafter defined), THE LENDERS LISTED IN SCHEDULE II TO THE CREDIT AGREEMENT
(hereinafter such lenders, together with any additional lenders as provided in
Section 2.21 of the Credit Agreement, are collectively referred to as the
"Lenders"), and THE FIRST NATIONAL BANK OF CHICAGO, as Agent, amending the
Revolving Credit Agreement, dated July 29, 1994, by and among the Borrower, the
Lenders and the Agent, as amended by First Amendment to Revolving Credit
Agreement, dated as of January 31, 1995, among such parties (as so amended, the
"Credit Agreement").
RECITAL
The Borrower has requested that the Lenders amend the Credit Agreement,
and the Lenders are willing to make such amendment, all upon the terms and
subject to the conditions set forth herein.
AGREEMENT
In consideration of the foregoing and of the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. CAPITALIZED TERMS. Capitalized terms used in this Amendment and not
otherwise defined herein, shall have the meanings ascribed to them in the Credit
Agreement.
2. MAXIMUM CREDIT FACILITIES.
(a) The Recital on page 1 of the Credit Agreement is deleted in its
entirety and replaced with the following:
The Borrower desires to obtain from the Lenders and the Lenders are
willing to provide to the Borrower revolving credit loans in an
aggregate principal amount outstanding from time to time not exceeding
$310,000,000, upon the terms and subject to the conditions hereinafter
set forth.
(b) Section 2.01(c) of the Credit Agreement is deleted in its
entirety and replaced with the following:
(c) Notwithstanding anything to the contrary contained in this
Agreement, the maximum principal amount of
<PAGE>
outstanding Advances shall not at any time exceed $310,000,000.
(c) Section 2.21(a) of the Credit Agreement is modified by replacing
the reference therein to "$300,000,000" with "$310,000,000".
(d) The Commitment set forth alongside the name of each Lender on
the signature page of this Amendment bearing the name of such Lender shall
reflect the Commitment of such Lender under the Credit Agreement.
3. JOINDER AND ASSUMPTION.
(a) ADDITIONAL SUBSIDIARY BORROWERS. Each Subsidiary listed on
Schedule I to this Amendment which is not listed on Schedule I to the Credit
Agreement hereby joins in the Credit Agreement as one of the corporations
constituting the Borrower and hereby assumes all the obligations of the Borrower
thereunder, jointly and severally with the Company and all other Subsidiaries
constituting the Borrower.
(b) ADDITIONAL LENDERS. Each of the banks (a "New Lender") whose
name appears on a signature page to this Amendment and which is not a party to
the Credit Agreement is hereby admitted as an additional Lender under the Credit
Agreement as provided in Section 2.21 of the Credit Agreement, and each such New
Lender agrees, on the terms and conditions set forth in the Credit Agreement, as
amended hereby, to make Loans to the Borrower from time to time in amounts not
to exceed, in the aggregate at any one time outstanding, the amount of the
Commitment set forth next to the name of such New Lender on its signature page
to this Amendment. Contemporaneously herewith, the Borrower is executing and
delivering to each New Lender a Note (each, a "Note") in the principal amount of
its Commitment. Each New Lender and the Agent hereby acknowledge that the form
and substance of such Note is acceptable. Notwithstanding the issuance of a Note
for the entire principal amount of a New Lender's Commitment, each New Lender
hereby agrees to fund its Pro Rata Share of all Loans outstanding on the
Amendment Date as follows: On the Amendment Date, each New Lender is funding its
Pro Rata Share of all Floating Rate Loans which are outstanding on the Amendment
Date ("Amendment Date Floating Rate Loans"); subsequent to the Amendment Date
each New Bank will fund its Pro Rata Share of each Eurodollar Loan outstanding
on the Amendment Date, with such funding to take place on each date that a
Eurodollar Interest Period expires with respect to such Eurodollar Loan. For
purposes of determining a New Lender's Pro Rata Share, the Commitment of such
New Lender shall be deemed at all times equal to its total Commitment as
-2-
<PAGE>
specified alongside its name on its signature page of this Amendment; PROVIDED,
HOWEVER, that solely for purposes of determining a New Lender's entitlement at
any time to the commitment fee pursuant to Section 2.06 of the Credit Agreement,
"Commitment" shall mean at such time the amount, if any, by which (i) the New
Lender's total Commitment exceeds (ii) the aggregate amount of the then
outstanding Loans actually advanced by the New Lender, until such time as the
New Lender shall have funded its Pro Rata Share of all outstanding Loans. To the
extent that the penultimate sentence of Section 2.21(b) of the Credit Agreement
is inconsistent with the provisions of this section, this section shall control.
(c) DELETION OF SUBSIDIARY BORROWER. LGP II Holdings, Inc. is
removed as of January 31, 1995 from Schedule I and shall not be a Borrower. Such
corporation is deemed to be an Unconsolidated Joint Venture Subsidiary as of
such date.
4. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
when the Agent shall have received counterparts of this Amendment executed by
the Borrower and each of the Lenders and each of the documents specified in
subsections (a) - (f) below (with all documents required below, except as
otherwise specified, to be dated the date of receipt thereof by the Agent, which
date shall be the same for all such documents, and each of such documents to be
in form and substance satisfactory to the Agent), and the conditions specified
in subsection (g) below shall have been satisfied:
(a) The favorable written opinion by Mershon, Sawyer, Johnston,
Dunwody & Cole, counsel for the Borrower, dated the Amendment Date, addressed to
the Lenders and in form and substance satisfactory to the Agent, (i) confirming
the accuracy of the representations and warranties set forth in Sections 4.01
(excluding clause (ii) thereof, and limited, in the case of clause (iii)
thereof, to the jurisdictions listed under the heading "Where Qualified" in
Schedule VI to the Credit Agreement), 4.02, 4.06, 4.11, 4.12 and the second
sentence of Section 4.08 of the Credit Agreement (which opinion, as to the
representations set forth in clauses (ii)(b), (iii) and (iv) of Section 4.02,
Sections 4.06, 4.11, 4.12 and the second sentence of Section 4.08 of the Credit
Agreement, may be to the best knowledge of such counsel, and may in its entirety
be limited to Florida, Arizona, Delaware, Texas and United States federal law);
and (ii) to the effect that this Amendment has been duly authorized, executed
and delivered by the Borrower. Such counsel may rely, in its opinion, on the
opinions of special counsel to the Borrower referred to in subsection (b) below,
as to matters of law of the State of Illinois, and on the opinion of Fennemore,
Craig of Phoenix, Arizona as to matters of
-3-
<PAGE>
law of the State of Arizona, and the opinion of Arter & Hadden as to matters of
law of the State of Texas. The Borrower hereby instructs its counsel to prepare
its opinion and deliver it to Lenders for their benefit, and such opinion shall
contain a statement to such effect.
(b) The favorable written opinion of Rudnick & Wolfe, special
counsel to the Borrower, dated the Amendment Date, that (i) no authorization,
consent, approval, license or exemption of, or filing or registration with or
other action by any Illinois, United States federal or Delaware governmental
department, commission, board, bureau, regulatory body, agency or
instrumentality or to the best knowledge of such counsel, any court is or will
be necessary for the execution, delivery and performance by the Borrower of this
Amendment and (ii) this Amendment constitutes the legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms, except as
the rights and remedies of the Lenders hereunder may be limited by (A)
applicable bankruptcy, reorganization, insolvency and other laws affecting
creditors' rights generally from time to time in effect, (B) the exercise of the
discretionary powers of the court before which any proceeding seeking equitable
remedies (including, without limitation, specific performance and injunctive
relief) may be brought, and (C) such other qualifications expressed in the
opinion provided that such qualifications are acceptable to Agent. Such counsel
may rely on the opinion of counsel to the Borrower delivered pursuant to
subsection (a), above, relating to the representations set forth in Sections
4.01 and 4.02 of the Credit Agreement. The Borrower hereby instructs its special
counsel to prepare its opinion and deliver it to Lenders for their benefit, and
such opinion shall contain a statement to such effect.
(c) The favorable written opinion of Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A., special counsel to the Agent and the Lenders, dated
the Amendment Date, addressed to the Lenders to the effect that: while it has
not independently considered the matters covered by the opinions provided
pursuant to subsections (a) and (b) above, to the extent necessary to enable it
to express the conclusions stated therein, those opinions of counsel and the
other documents provided pursuant to this Section 4 are substantially responsive
to the requirements of this Amendment.
(d) The following supporting documents with respect to each
Borrower: (i) a certificate of its Secretary or Assistant Secretary to the
effect that there have been no amendments to its certificate of incorporation
since January 31, 1995; (ii) a certificate of the Secretary of State of its
state of incorporation, dated as of a date reasonably close to the Amendment
Date, as to its existence and (if available) good standing; (iii) a
-4-
<PAGE>
certificate of the Secretary of State of each jurisdiction, other than its state
of incorporation, in which it does business, as to its qualification as a
foreign corporation, dated as of a date reasonably close to the Amendment Date;
(iv) a certificate of its Secretary or Assistant Secretary to the effect that
there have been no amendments thereto since January 31, 1995; (v) a certificate
of its Secretary or Assistant Secretary, dated the Amendment Date, as to the
incumbency and signatures of its officers who have executed any documents in
connection with the transactions contemplated by this Amendment; (vi) a copy of
resolutions of its Board of Directors or the Executive Committee of its Board of
Directors, certified by its Secretary or Assistant Secretary to be a true and
accurate copy of resolutions duly adopted by such Board of Directors or
Executive Committee that are in full force and effect on the Amendment Date,
authorizing the execution and delivery by it of this Amendment, and the other
Loan Documents and the performance by it of all its obligations thereunder; and
(vii) such additional supporting documents and other information with respect to
its operations and affairs as the Agent may reasonably request.
(e) A certificate signed by a duly authorized officer of each
Borrower stating that: (i) the representations and warranties of the Borrower
contained in Article IV of the Credit Agreement are correct and accurate on and
as of the Amendment Date as though made on and as of that date and (ii) no event
has occurred and is continuing which constitutes an Event of Default or
Unmatured Default under the Credit Agreement.
(f) Such other documents as any Lender or its counsel may reasonably
request.
(g) There shall not have occurred any changes in the consolidated
financial condition or results of operations of the Borrower from that reflected
in the financial statements dated November 30, 1994 which has or reasonably
could be expected to have, in the judgment of the Required Lenders, a Material
Adverse Effect on the Borrower's operations, taken as a whole.
5. LOCATION OF EXECUTION. This Amendment has been executed and
delivered to the Agent in Atlanta, Georgia. The Borrower reaffirms its
obligation to reimburse and indemnify the Lenders for any documentary stamp tax
or other taxes which may be imposed upon the Lenders in respect of the Credit
Agreement or any Loan Documents.
6. NO OTHER MODIFICATIONS. Except as expressly amended or modified by
the terms hereof, the Credit Agreement shall remain in full force and effect.
This Amendment shall not affect, modify or
-5-
<PAGE>
diminish the obligations of Borrower which have accrued prior to the Amendment
Date including, but not limited to, obligations to pay commitment fees and
interest at the levels and rates as in effect prior to the Amendment Date.
7. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The Borrower hereby
certifies that the representations and warranties contained in the Credit
Agreement continue to be true and correct and that no Event of Default or
Unmatured Default has occurred.
8. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to Revolving Credit Agreement to be duly executed, sealed and
delivered the day and year first above written.
BORROWER:
LENNAR CORPORATION AND EACH OF THE
SUBSIDIARIES LISTED ON SCHEDULE I OTHER
THAN ATLANTIC HOLDINGS, INC.
By: /s/ ALLAN J. PEKOR
------------------------------------------
Allan J. Pekor as Vice President of each
of such corporations
Attest: /s/ MORRIS J. WATSKY
--------------------------------------
Morris J. Watsky as Assistant
Secretary of each of such corporations
ATLANTIC HOLDINGS, INC.
By: /s/ ALLAN J. PEKOR
------------------------------------------
Allan J. Pekor, authorized signatory
Attest: /s/ LORI SMITH
--------------------------------------
Lori Smith, Assistant Secretary
-6-
<PAGE>
Address:
Lennar Corporation
700 Northwest 107th Avenue
Miami, Florida 33172
Attention: Leonard Miller, President
COMMITMENTS: LENDERS:
$40,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ JAMES C. ROZEK
------------------------------------------
James C. Rozek, Vice President
Address:
The First National Bank of Chicago
One First National Plaza
14th Floor, Suite 0151
Chicago, Illinois 60670-0151
Attention: James C. Rozek, Vice President
with a copy to:
The First National Bank of Chicago
One First National Plaza
Suite 0801
Chicago, Illinois 60670-0801
Attention: Law Department
$35,000,000 THE FIRST NATIONAL BANK OF BOSTON
By: /s/ LINDA CARTER
------------------------------------------
---------------------, -------------------
Address:
400 Perimeter Center Terrace
Suite 745
Atlanta, Georgia 30346
Attention: Linda Carter, Vice President
-7-
<PAGE>
$35,000,000 CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ DAVID M. CAWRSE
------------------------------------------
---------------------, -------------------
Address:
Suite 1700
235 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Pascal Seris, Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ DAVID M. CAWRSE
------------------------------------------
---------------------, -------------------
Address:
c/o Credit Lyonnais Atlanta Agency
Suite 1700
235 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Pascal Seris, Vice President
$5,000,000 INTERCONTINENTAL BANK
By: /s/ KAREN B. GILMORE
------------------------------------------
---------------------, -------------------
Address:
6th Floor
200 S.E. First Street
Miami, Florida 33131
Attention: Karen B. Gilmore, Senior Vice
President
$35,000,000 COMERICA BANK
By: /s/ MICHAEL KRZYSTOWCZYK
------------------------------------------
---------------------, -------------------
Address:
One Detroit Center
500 Woodward Avenue, 9th Floor
Detroit, Michigan 48267
Attention: Michael Krzystowczyk, Vice
President
-8-
<PAGE>
$35,000,000 NATIONSBANK OF FLORIDA, N.A.
By: /s/ DESPINA Z. SIBLEY
------------------------------------------
---------------------, -------------------
Address:
150 S.E. Third Avenue, Room 524
Miami, Florida 33131
Attention: Despina Z. Sibley, Vice President
$15,000,000 THE FUJI BANK, LIMITED
NEW YORK BRANCH
By: /s/ KATSUNORI NOZAWA
------------------------------------------
Norimasa Kuroda, Joint General Manager
Address:
Two World Trade Center, 79th Floor
New York, New York 10048
Attention: Vincent Ingato, Vice President
$20,000,000 BARNETT BANK OF SOUTH FLORIDA, N.A.
By: /s/ CLAY F. WILSON
------------------------------------------
---------------------, -------------------
Address:
701 Brickell Avenue, 6th Floor
Miami, Florida 33131
Attention: Clay F. Wilson, Vice President
-9-
<PAGE>
$25,000,000 NBD BANK
By: /s/ RICHARD J. JOHNSEN
------------------------------------------
---------------------, -------------------
Address:
Financial Services Division
611 Woodward Avenue
Detroit, Michigan 48226-3497
Attention: Pat Power, Second Vice President
$30,000,000 BANK OF AMERICA ILLINOIS
By: /s/ MARK LARIVIERE
------------------------------------------
---------------------, -------------------
Address:
231 S. LaSalle, 15th Floor
Chicago, Illinois 60697
Attention: Mark Lariviere, Vice President
$15,000,000 THE DAI-ICHI KANGYO BANK, LTD.
ATLANTA AGENCY
By: /s/ RYUJI NAKAMURA
------------------------------------------
----------------------, ------------------
Address:
Marquis Two Tower, Suite 2400
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: David Smith, First Vice President
-10-
<PAGE>
$20,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY
By: /s/ SHUSAI NAGAI
------------------------------------------
----------------------, ------------------
Address:
191 Peachtree Street, N.E.
Suite 3600
Atlanta, Georgia 30303
Attention: James H. Medders, Vice President
-11-
<PAGE>
SCHEDULE II - LENDERS
THE FIRST NATIONAL BANK OF CHICAGO,
THE FIRST NATIONAL BANK OF BOSTON,
CREDIT LYONNAIS ATLANTA AGENCY,
CREDIT LYONNAIS CAYMAN ISLAND BRANCH,
INTERCONTINENTAL BANK,
COMERICA BANK,
NATIONSBANK OF FLORIDA, N.A.
THE FUJI BANK, LIMITED, NEW YORK BRANCH,
BARNETT BANK OF SOUTH FLORIDA, N.A.,
NBD BANK
BANK OF AMERICA ILLINOIS
THE DAI-ICHI KANGYO BANK, LTD., ATLANTA AGENCY
THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY
EXHIBIT 13
<TABLE>
<CAPTION>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
Lennar Corporation and Subsidiaries
Years Ended November 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 1992 1991
---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Revenues:
Homebuilding $ 665,510 647,750 532,150 308,983 224,186
Investment $ 139,482 106,343 58,955 40,164 35,188
Financial services $ 57,787 54,348 59,204 56,723 37,688
Limited-purpose finance subsidiaries $ 7,689 9,485 14,355 21,164 26,070
Total revenues $ 870,468 817,926 664,664 427,034 323,132
Operating earnings - business segments:
Homebuilding $ 58,530 70,645 60,207 38,063 23,041
Investment $ 67,688 51,904 28,497 16,992 10,419
Financial services $ 19,013 14,844 15,104 16,411 15,830
Corporate general and administrative
expenses $ 10,523 10,309 8,670 8,833 7,921
Earnings before income taxes and
cumulative effect of changes in
accounting principles $ 115,455 111,746 82,054 45,363 33,043
Net earnings $ 70,427 69,126 52,511 29,146 21,148
Per share amounts:
Earnings before cumulative effect of
changes in accounting principles $ 1.95 1.89 1.51 .95 .70
Net earnings $ 1.95 1.92 1.51 .95 .70
Cash dividends - common stock $ .10 .095 .08 .08 .08
Cash dividends - Class B common stock $ .09 .084 .067 .067 .067
FINANCIAL POSITION:
Total assets $1,442,362 1,293,223 1,195,490 980,261 862,273
Total debt $ 635,761 566,312 531,480 496,205 426,150
Stockholders' equity $ 607,794 534,088 467,473 319,330 291,237
Shares outstanding (000's) 35,864 35,768 35,716 30,440 30,312
Stockholders' equity per share $ 16.95 14.93 13.09 10.49 9.61
DELIVERY AND BACKLOG INFORMATION:
Number of homes delivered 4,680 4,965 4,634 3,039 2,480
Backlog of home sales contracts 1,802 1,703 2,105 1,788 1,039
Dollar value of backlog $ 255,141 247,006 264,342 190,722 106,488
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Lennar's earnings increased in 1995 to $70.4 million ($1.95 per share) from
1994 earnings of $69.1 million ($1.92 per share) on total revenues in 1995 of
$870.5 million, compared to $817.9 million of revenues in 1994. Fiscal 1994
earnings had increased from 1993 earnings of $52.5 million ($1.51 per share),
and revenues in 1994 had increased from 1993 revenues of $664.7 million.
HOMEBUILDING
The Homebuilding Division constructs and sells single- family attached and
detached and multi-family homes. These activities also include the purchase,
development and sale of residential land. The following tables set forth
selected financial and operational information for the periods indicated:
SELECTED HOMEBUILDING DIVISION FINANCIAL DATA
(DOLLARS IN THOUSANDS, Years Ended November 30,
EXCEPT AVERAGE SALES PRICES) 1995 1994 1993
- -----------------------------------------------------------------------
Sales of homes $646,986 626,341 513,503
Other 18,524 21,409 18,647
- -----------------------------------------------------------------------
Total revenues $665,510 647,750 532,150
Gross profit - home sales $123,958 128,209 113,344
Gross profit percentage 19.2% 20.5% 22.1%
Selling, general &
administrative expenses $ 70,004 63,204 55,482
S,G&A as a percentage of
homebuilding revenues 10.5% 9.8% 10.4%
Operating earnings $ 58,530 70,645 60,207
Average sales price $138,200 126,200 111,100
- -----------------------------------------------------------------------
SUMMARY OF HOME AND BACKLOG DATA
DELIVERIES 1995 1994 1993
- -----------------------------------------------------------------------
Florida 3,395 3,717 3,723
Arizona 504 632 607
Texas 781 616 304
- -----------------------------------------------------------------------
4,680 4,965 4,634
=======================================================================
NEW ORDERS
- -----------------------------------------------------------------------
Florida 3,390 3,361 3,921
Arizona 568 530 721
Texas 821 672 309
- -----------------------------------------------------------------------
4,779 4,563 4,951
=======================================================================
BACKLOG - HOMES
- -----------------------------------------------------------------------
Florida 1,317 1,322 1,678
Arizona 302 238 340
Texas 183 143 87
- -----------------------------------------------------------------------
1,802 1,703 2,105
=======================================================================
BACKLOG - DOLLAR VALUE
(IN THOUSANDS) $255,141 247,006 264,342
=======================================================================
Revenues from homebuilding operations were $665.5 million in 1995, $647.8
million in 1994 and $532.2 million in 1993. The increased revenues in both years
were primarily the result of additional revenues from home sales. Revenues from
the sales of homes increased 3% in 1995 and 22% in 1994. The increase in 1995
was due to an increase in the average price of a home delivered, partially
offset by a decrease in the number of deliveries. In 1994, the increase was
attributable to both an increase in the number of new home deliveries and an
increase in the average sales price. The higher average sales prices in 1995 and
1994 were due to price increases for existing products, as well as a
proportionately greater number of sales of higher-priced homes. Other
Homebuilding Division revenues consisted primarily of residential land sales in
1995 and 1994. In 1995, 1994 and 1993, sales of residential land totaled $16.2
million, $18.8 million and $1.8 million, respectively. In 1993, other revenues
included $13.7 million from the repairing or rebuilding of homes in south Dade
County communities that were damaged by Hurricane Andrew. The rebuilding
activities did not have a significant impact on the Company's net earnings
during 1993 and were substantially completed by November 30, 1993.
New sales orders for fiscal 1995 increased by 5% when compared to 1994,
which had decreased by 8% from 1993. The increase in 1995 resulted in an
increase of 6% in the Company's backlog of home sales contracts to 1,802 at
November 30, 1995, as compared to a backlog of 1,703 contracts a year earlier.
The dollar value of contracts in backlog increased 3% to $255.1 million at
November 30, 1995 from $247.0 million a year earlier.
The gross profit percentages from the sales of homes were 19.2% in 1995,
20.5% in 1994 and 22.1% in 1993. The decreases in the gross profit percentages
were mainly attributable to increased competition in many of the Company's
markets, increases in construction costs due to additional building code
requirements in several counties throughout Florida, as well as increased land
costs related to the mix of homes delivered. Gross profit percentages are not
significantly different for the various types of homes which the Company builds
and are at the high end of the range of gross profit percentages among the
Company's major competitors.
Selling, general and administrative expenses increased by $6.8 million in
1995 and $7.7 million in 1994. The higher level of expenses in 1995 was
primarily attributable to general increases in operating costs. The higher level
of expenses in 1994 was primarily attributable to increases in volume-related
expenses such as sales commissions and outside brokers'
20
<PAGE>
commissions. Selling, general and administrative expenses as a percentage of
total homebuilding revenues increased to 10.5% in 1995 from 9.8% in 1994,
which was a decrease from the 10.4% reported in 1993. The higher percentages in
1995 and 1993, when compared to 1994, were primarily due to selling, general and
administrative expenses being absorbed by fewer homes delivered in 1995 and
1993.
INVESTMENT
The Investment Division is involved in the development, management and
leasing, as well as the acquisition and sale, of commercial and residential
rental properties and land. During the past four years, this division became a
participant and manager in eleven partnerships which acquired portfolios of
commercial mortgage loans and real estate. The division shares in the profits or
losses of the partnerships and also receives fees for the management and
disposition of the partnerships' assets. The division's interests in these
partnerships range from 9.9% to 50%. These partnerships are capitalized
primarily by long-term debt of which none is guaranteed by the Company. During
1994, this division also began acquiring, at a discount, issues of the unrated
portions of debt securities which are collateralized by real estate loans. The
division has only invested in securities for which it is the special servicer on
behalf of all the certificate holders of the security. The Company earns
interest on these investments as well as fees for the special servicing
activities. The following table provides selected financial information
regarding the Investment Division:
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------
REVENUES
Rental income $ 49,439 43,487 37,708
Equity in earnings of
partnerships 30,852 20,710 7,046
Management fees 10,274 12,390 6,714
Sales of real estate 38,173 21,518 45
Other 10,744 8,238 7,442
- --------------------------------------------------------------------------------
Total revenues 139,482 106,343 58,955
COST OF SALES AND EXPENSES 71,794 54,439 30,458
- --------------------------------------------------------------------------------
OPERATING EARNINGS $ 67,688 51,904 28,497
================================================================================
Investment Division revenues increased in 1995 to $139.5 million from
$106.3 million in 1994. The higher revenues were partially the result of
additional earnings from the division's partnerships, higher rental income on
operating properties owned directly by the Company and higher other income which
was primarily the result of the division's additional investment in commercial
mortgage-backed securities. Also, contributing to the increased revenues in 1995
was an increase in sales of real estate. These sales totaled $38.2 million in
1995, compared to $21.5 million in 1994. The increases in revenues discussed
above were partially offset by lower management fees in 1995, which decreased to
$10.3 million from $12.4 million in 1994. Investment Division revenues increased
to $106.3 million in 1994 from $59.0 million in 1993, primarily as a result of
increases in earnings from partnerships, management fees, rental income,
interest income and a higher level of sales of real estate.
Operating earnings for the Investment Division increased to $67.7 million
in 1995 from $51.9 million in 1994 and $28.5 million in 1993. These increases
were due primarily to increases in earnings from partnerships, increases in
rental income and an increase in gains on sales of other real estate. Gains on
other real estate sales in the Investment Division were $15.8 million in 1995,
compared to $9.3 million in 1994. There were no material gains from the sales of
real estate in 1993.
FINANCIAL SERVICES
Financial services activities are conducted primarily through Lennar
Financial Services, Inc. ("LFS") and five principal subsidiaries. LFS
subsidiaries perform mortgage servicing activities and provide mortgage
financing, title insurance and closing services for a wide variety of borrowers
and homebuyers. This division also invests in issues of rated portions of
commercial real estate mortgage-backed securities for which Lennar's Investment
Division is the special servicer and an investor in the unrated portion of those
securities. The following table sets forth selected financial and operational
information relating to the Financial Services Division:
Years Ended November 30,
(DOLLARS IN THOUSANDS) 1995 1994 1993
- ----------------------------------------------------------------------------
REVENUES $ 57,787 54,348 59,204
COSTS AND EXPENSES 38,774 39,504 44,100
INTERCOMPANY INTEREST EXPENSE 2,313 3,144 2,244
- ----------------------------------------------------------------------------
OPERATING EARNINGS $ 16,700 11,700 12,860
============================================================================
Dollar volume of
mortgages originated $ 650,074 941,351 1,290,836
============================================================================
Number of mortgages
originated 5,900 9,000 12,100
============================================================================
Principal balance of
servicing portfolio $3,400,120 3,392,071 3,410,829
============================================================================
Number of loans serviced 44,300 45,200 47,000
============================================================================
Operating earnings of the Financial Services Division increased in 1995 to
$16.7 million from $11.7 million in 1994. The increase in earnings was primarily
the result of
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
earnings from the division's investment in the rated portion of commercial
mortgage-backed securities. The division began acquiring these
investments during the third quarter of 1994. Consequently, earnings from these
investments in 1995 were significantly greater than earnings from these
activities in 1994. Additionally, earnings from the division's title and closing
services operations increased during 1995 due to the expansion of insurance
services provided by the division. The increases in operating earnings during
1995 were partially offset by lower gains from bulk sales of mortgage servicing
rights, which were $1.1 million in 1995, compared to $2.5 million in 1994.
Financial services' operating earnings decreased to $11.7 million in 1994
from $12.9 million in 1993. The decrease in 1994 earnings was partially
attributable to lower gains from bulk sales of mortgage servicing rights. In
1994, these gains totaled $2.5 million, compared to $3.3 million during 1993.
Also contributing to the lower operating earnings in 1994, was a decline in
mortgage loan originations and a reduction in servicing revenues. Partially
offsetting these decreases was a reduction of amortization expense for purchased
mortgage servicing rights. This amortization decreased as a result of a change
in the method of accounting for purchased mortgage servicing rights during 1994.
This change in accounting reduced the carrying value of the purchased mortgage
servicing rights and the related amortization.
INTEREST EXPENSE
During 1995, 1994 and 1993, interest costs of $35.8 million, $25.0 million
and $19.7 million, respectively, were incurred (excluding the limited-purpose
finance subsidiaries) and $23.4 million, $22.1 million and $17.1 million,
respectively, were capitalized by the Company's homebuilding and investment
operations. Previously capitalized interest charged to expense was $17.8 million
in 1995, $15.4 million in 1994 and $13.1 million in 1993.
Interest amounts incurred and charged to expense in 1995 were greater than
those incurred in 1994 and 1993 due to higher debt levels and interest rates.
The higher debt at November 30, 1995 is a reflection of the expansion in each of
the Company's business segments. The higher interest charged to expense in 1994,
when compared to 1993, was primarily the result of the higher volume of homes
delivered and land sales during 1994. The amount of interest capitalized by the
Company's real estate operations in any one year is a function of the assets
under development, outstanding debt levels and interest rates.
INCOME TAXES
The provision for income taxes in 1995 and 1994 was 39.0% of pre-tax
income, compared to 36.0% in 1993. The 1995 and 1994 provisions for income taxes
were higher due primarily to the adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", which required the Company to
adjust the assets and liabilities for prior business combinations from their
net-of-tax to pre-tax amounts.
IMPACT OF ECONOMIC CONDITIONS
The Company finances its land acquisition and development activities,
construction activities, mortgage banking activities and general operating needs
primarily from its own base of $607.8 million of equity at November 30, 1995, as
well as from commercial bank borrowings. The Company has maintained excellent
relationships with the commercial banks participating in its financing
arrangements and has no reason to believe that such relationships will not
continue in the future. The Company anticipates that there will be adequate
mortgage financing available for the purchasers of its homes during 1996 through
the Company's own financial services subsidiaries as well as from external
sources.
Total revenues and earnings in 1996 will be affected by both the new home
sales order rate during the year and the backlog of home sales contracts at the
beginning of the year. As interest rates declined during the latter part of
1995, the Company experienced an increase in the demand for its homes and the
Company is entering fiscal 1996 with a backlog of $255.1 million, which is 3%
higher than at the beginning of the prior fiscal year. In addition, the Company
added approximately $38 million to backlog when it aquired the Houston-based
residential business of Friendswood Development Company on December 29, 1995.
This acquisition should positively affect revenues and earnings in 1996.
Inflation can have a long-term impact on the Company 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. In general, in recent
years the increases in these costs have followed the rate of inflation and have
not had a significant adverse impact on the Company.
GOVERNMENT REGULATIONS
Governmental bodies in the areas where the Company conducts its business
have at times imposed laws and other
22
<PAGE>
regulations that affect the development of real estate. These laws and
regulations are often subject to frequent change. The State of Florida has
adopted a law which requires that commitments to provide roads and other offsite
infrastructure be in place prior to the commencement of new construction. This
law is being administered by individual counties and municipalities throughout
the State and may result in additional fees and assessments, or building
moratoriums. It is difficult to predict the impact of this law on future
operations, or what changes may take place in the law in the future. The Company
may have a competitive advantage in that it believes that most of its Florida
land presently meets the criteria under the law, and it has the financial
resources to provide for development of the balance of its land in compliance
with the law.
Recently, there have been changes to the various building codes within
Florida which have resulted in higher construction costs. The Company believes
these additional costs have generally been recoverable through increased selling
prices without any significant effect on sales volume.
FINANCIAL CONDITION AND CAPITAL RESOURCES
Lennar meets the majority of its short-term financing needs with cash
generated from operations and funds available under its unsecured revolving
credit agreement. During 1995, the Company extended and increased its revolving
credit agreement. The agreement, which is with twelve banks, provides a
financing commitment of up to $310 million for five years. At November 30, 1995,
there was $171.2 million outstanding under the Company's revolving credit
agreement, compared to $175.7 million outstanding under the agreement as of the
same date last year. In January 1996, the Company entered into an additional
$100 million unsecured revolving credit agreement with a one year term.
During 1995, $13.1 million in cash was used in the Company's operations,
compared to $101.8 million provided by operations in fiscal 1994. In 1995, $35.6
million in cash was used to increase inventories through land purchases, land
development and construction and $17.0 million was used to increase receivables.
The increase in receivables was primarily attributable to the acquisition of
$39.6 million of mortgages receivable from the secured creditors of Bramalea of
California, Inc. ("BCI") after BCI had filed for bankruptcy protection. The
Company acquired this debt (at a significant discount from its face amount) in
order to convert these receivables into an ownership interest when BCI is
reorganized out of bankruptcy. The uses of cash in 1995 were partially offset by
$14.1 million provided by an increase in accounts payable and accrued
liabilities. The primary source of cash flow from operations in 1994, in
addition to net earnings, was a $119.1 million reduction in loans held for sale
or disposition by the Company's Financial Services Division. This was partially
offset by $34.3 million used to increase inventories, $13.9 million used to
decrease accounts payable and accrued liabilities and $7.9 million used to
increase receivables.
Cash used in investing activities totaled $31.2 million in 1995, compared
to $124.2 million in 1994. In 1995, $57.5 million was used to purchase
investment securities (commercial mortgage-backed securities) in both the
Investment and Financial Services Divisions, $7.4 million was used to increase
financial services' loans held for investments and $3.7 million was used to
increase the Company's investments in partnerships. These uses of cash were
partially offset by $38.2 million provided by the sale of operating properties
and land held for investment, as well as $16.3 million provided by receipts from
investment securities. In 1994, the primary uses of cash for investing
activities consisted of $55.1 million used to purchase operating properties,
$46.9 million used to purchase investment securities and $43.6 million used to
increase the Company's investments in partnerships. These uses were partially
offset by $20.0 million provided by the sale of operating properties.
HOMEBUILDING AND INVESTMENT OPERATIONS
The Company finances its land acquisitions with its revolving lines of
credit or purchase money mortgages or buys land under option agreements. Option
agreements permit the Company to acquire portions of properties when it is ready
to build homes on them. The financial risk of adverse market conditions
associated with longer term land holdings is managed by strategic purchasing in
areas that the Company has identified as desirable growth markets along with
careful management of the land development process. The Company believes that
its land inventories give it a competitive advantage, especially in Florida,
where developers face government constraints and regulations which will limit
the number of available homesites in future years. Based on its current
financing capabilities, the Company does not believe that its land holdings have
an adverse effect on its liquidity.
The Company has supplemented its short-term borrowings with secured term
loans. Total secured borrowings, which include term loan debt, as well as
mortgage notes payable on certain operating properties and land, were $170.6
million at fiscal year-end 1995 and $136.2 million at November 30, 1994. A
significant portion of inventories,
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
land held for investment, model homes and operating properties remained
unencumbered at the end of the current fiscal year. Total real estate borrowings
increased to $336.6 million at November 30, 1995 from $328.9 million at November
30, 1994. This increase was attributable to increases in construction in
progress, land inventories and partnership investments.
FINANCIAL SERVICES
Lennar Financial Services subsidiaries finance their mortgage loans held
for sale on a short-term basis by either pledging them as collateral for
borrowings under two lines of credit totaling $80 million or borrowing funds
from Lennar Corporation in instances where, on a consolidated basis, this
minimizes the overall cost of funds. Total borrowings under the two lines of
credit were $54.9 million and $54.6 million at November 30, 1995 and 1994,
respectively.
The Financial Services Division utilizes revolving credit lines and
repurchase agreements to finance certain mortgage-backed securities. The
revolving credit lines total $75 million with total borrowings as of November
30, 1995 of $67.4 million. LFS also has two uncommitted short-term bank credit
lines totaling $35 million under which the entire amount was outstanding as of
November 30, 1995.
LFS subsidiaries sell the mortgage loans they originate within thirty to
sixty days of origination. At November 30, 1995, the balance of loans held for
sale or disposition was $123.8 million, compared to $124.3 million one year
earlier.
LIMITED-PURPOSE FINANCE SUBSIDIARIES
Limited-purpose finance subsidiaries of LFS have placed mortgage loans and
other receivables as collateral for various long-term financings. These
subsidiaries pay the debt service on the long-term borrowings primarily from the
cash flows generated by the related pledged collateral. Therefore, the related
interest income and interest expense, for the most part, offset one another in
each of the years in the three-year period ended November 30, 1995. The Company
believes that the cash flows generated by these subsidiaries will be adequate to
meet the required debt payment schedules.
Based on the Company's current financial condition and credit
relationships, Lennar believes that its operations and borrowing resources will
provide for its current and long-term capital requirements at the Company's
anticipated levels of growth.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS No. 121
requires companies to evaluate long-lived assets for impairment based on the
undiscounted future cash flows of the asset. If a long-lived asset is identified
as impaired, the value of the asset must be reduced to its fair value. The
Company's land holdings and operating properties would be considered long-lived
assets under this pronouncement.
In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights". SFAS No. 122, among other
provisions, requires the recognition of originated mortgage servicing rights as
assets by allocating total costs incurred in originating a loan between the loan
and the servicing rights based on their relative fair values. Presently, the
cost of originated mortgage servicing rights is included with the cost of the
related loans and written off against income when the loans are sold. Also,
under SFAS No. 122, all capitalized mortgage servicing rights are evaluated for
impairment based on the excess of the carrying amount of the mortgage servicing
rights over their fair value.
These statements are effective for fiscal years beginning after December
15, 1995. The Company plans to adopt these statements in the first quarter of
its fiscal year ending November 30, 1997. The actual effects of implementing
these new standards have not been determined. However, their adoption is not
expected to have any material adverse affect on the Company's financial position
or results of operations.
24
<PAGE>
DELOITTE &
TOUCH LLP
- ---------- ---------------------------------------------------------
[LOGO] Certified Public Accountants Suite 2500
100 Southeast Second Street
Miami, Florida 33131-2135
Telephone: (305) 358-4141
Facsimile: (305) 372-3160
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, 1995 and 1994
and the related consolidated statements of earnings, cash flows and
stockholders' equity for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. The consolidated financial statements of the
Company for the year ended November 30, 1993 were audited by other auditors,
whose report dated January 18, 1994, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit 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 provides 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 Lennar Corporation
and subsidiaries at November 30, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, effective
December 1, 1993, the Company changed its method of accounting for income taxes
to conform to Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", and its method of evaluating purchased mortgage servicing
rights for impairment. As discussed in Note 1 to the consolidated financial
statements, effective December 1, 1994, the Company changed its method of
accounting for its investments in debt securities to conform with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities".
/s/ DELOITTE & TOUCHE LLP
January 11, 1996
- ---------------
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
- ---------------
25
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Lennar Corporation and Subsidiaries
November 30, 1995 and 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
HOMEBUILDING, INVESTMENT AND FINANCIAL SERVICES:
Homebuilding and investment assets:
Cash and cash equivalents $ 21,870 16,801
Receivables, net 70,202 48,165
Inventories:
Construction in progress and model homes 199,774 175,547
Land held for development 304,630 300,488
-----------------------
Total inventories 504,404 476,035
Land held for investment 72,976 80,747
Operating properties and equipment, net 189,341 193,621
Investments in and advances to partnerships 114,240 106,637
Other assets 40,792 29,598
Financial services assets 353,809 252,195
- ----------------------------------------------------------------------------------------------------------
Total assets - homebuilding, investment and financial services 1,367,634 1,203,799
- ----------------------------------------------------------------------------------------------------------
LIMITED-PURPOSE FINANCE SUBSIDIARIES - COLLATERAL FOR BONDS AND NOTES PAYABLE 74,728 89,424
- ----------------------------------------------------------------------------------------------------------
$1,442,362 1,293,223
==========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING, INVESTMENT AND FINANCIAL SERVICES:
Homebuilding and investment liabilities:
Accounts payable and accrued liabilities $ 114,833 102,582
Customer deposits 14,441 15,271
Income taxes:
Currently payable 12,219 10,205
Deferred 42,611 50,796
Mortgage notes and other debts payable 336,633 328,936
Financial services liabilities 243,191 168,348
- ----------------------------------------------------------------------------------------------------------
Total liabilities - homebuilding, investment and financial services 763,928 676,138
- ----------------------------------------------------------------------------------------------------------
LIMITED-PURPOSE FINANCE SUBSIDIARIES - BONDS AND NOTES PAYABLE 70,640 82,997
- ----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock of $.10 par value per share
Authorized 100,000 shares; issued and outstanding:
1995 - 25,878; 1994 - 25,781 2,588 2,578
Class B common stock of $.10 par value per share
Authorized 30,000 shares; issued and outstanding:
1995 - 9,986; 1994 - 9,987 999 999
Additional paid-in capital 170,586 169,605
Retained earnings 427,851 360,906
Unrealized gain on securities available-for-sale, net 5,770 -
- ----------------------------------------------------------------------------------------------------------
Total stockholders' equity 607,794 534,088
- ----------------------------------------------------------------------------------------------------------
$1,442,362 1,293,223
==========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
Lennar Corporation and Subsidiaries
Years Ended November 30, 1995, 1994 and 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993
- --------------------------------------------------------------------------------
REVENUES:
Homebuilding $665,510 647,750 532,150
Investment 139,482 106,343 58,955
Financial services 57,787 54,348 59,204
Limited-purpose finance subsidiaries 7,689 9,485 14,355
- --------------------------------------------------------------------------------
Total revenues 870,468 817,926 664,664
- --------------------------------------------------------------------------------
COSTS AND EXPENSES:
Homebuilding 606,980 577,105 471,943
Investment 71,794 54,439 30,458
Financial services 38,774 39,504 44,100
Limited-purpose finance subsidiaries 7,687 9,441 14,351
Corporate general and administrative 10,523 10,309 8,670
Interest 19,255 15,382 13,088
- --------------------------------------------------------------------------------
Total costs and expenses 755,013 706,180 582,610
- --------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 115,455 111,746 82,054
INCOME TAXES 45,028 43,581 29,543
- --------------------------------------------------------------------------------
EARNINGS BEFORE CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES 70,427 68,165 52,511
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES FOR:
Income taxes - 4,745 -
Purchased mortgage servicing rights - (3,784) -
- --------------------------------------------------------------------------------
NET EARNINGS $ 70,427 69,126 52,511
================================================================================
NET EARNINGS PER SHARE:
BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $ 1.95 1.89 1.51
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES - .03 -
- --------------------------------------------------------------------------------
NET EARNINGS PER SHARE $ 1.95 1.92 1.51
================================================================================
See accompanying notes to consolidated financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lennar Corporation and Subsidiaries
Years Ended November 30, 1995, 1994 and 1993
(IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 70,427 69,126 52,511
Adjustments to reconcile
net earnings to net cash
provided by (used in)
operating activities:
Depreciation and amortization 10,274 8,396 9,976
Equity in earnings of partnerships (31,203) (20,710) (7,046)
Gain on sales of other real estate (15,776) (11,930) (548)
Decrease in deferred income taxes (8,185) (9,324) (2,296)
Changes in assets and liabilities, net
of effects from accounting changes:
Increase in receivables (17,009) (7,861) (16,325)
Increase in inventories (35,581) (34,261) (87,439)
Decrease (increase) in financial
services' loans held for sale
or disposition 30 119,071 (49,653)
Increase (decrease) in accounts
payable and accrued liabilities 14,140 (13,890) 27,227
Other, net (248) 3,192 5,126
- --------------------------------------------------------------------------------------
Net cash provided by
(used in) operating activities (13,131) 101,809 (68,467)
- --------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Operating properties and equipment:
Additions (10,053) (55,125) (21,366)
Sales 21,813 20,007 -
Sales of land held for investment 16,365 1,530 -
Increase in investments in and
advances to partnerships (3,701) (43,639) (20,180)
Increase in financial services'
loans held for investment (7,416) (6,704) (4,623)
Purchase of investment securities (57,450) (46,884) -
Receipts from investment securities 16,279 3,994 -
Purchase of interest in joint
ventures, net of cash acquired - - (4,782)
Other, net (7,082) 2,631 (6,129)
- --------------------------------------------------------------------------------------
Net cash used in investing activities (31,245) (124,190) (57,080)
- --------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under
revolving credit agreement (4,500) 46,000 84,800
Net borrowings (repayments) under
financial services' short-term debt (11,234) (113,447) 23,159
Mortgage notes and other debts payable:
Proceeds from borrowings 159,039 116,940 17,241
Principal payments (85,377) (23,232) (92,209)
Limited-purpose finance subsidiaries:
Principal reduction of mortgage
loans and other receivables 14,058 39,777 55,464
Principal reduction of bonds and notes payable (12,818) (37,429)
Common stock:
Issuance 991 778 98,251
Dividends (3,482) (3,289) (2,619)
- --------------------------------------------------------------------------------------
Net cash provided by financing activities 56,677 26,098 132,420
- --------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 12,301 3,717 6,873
Cash and cash equivalents at beginning of year 17,942 14,225 7,352
- --------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 30,243 17,942 14,225
======================================================================================
Summary of cash and cash equivalent balances:
Homebuilding and investment $ 21,870 16,801 10,606
Financial services 8,373 1,141 3,619
- --------------------------------------------------------------------------------------
$ 30,243 17,942 14,225
======================================================================================
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 20,815 12,303 17,692
Cash paid for income taxes $ 47,028 46,443 28,666
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Lennar Corporation and Subsidiaries
Years Ended November 30, 1995, 1994 and 1993
(IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK:
Beginning balance $ 2,578 1,715 1,364
Shares issued under public offering - - 345
Three-for-two stock split effected in
the form of a 50% stock dividend - 859 -
Shares issued under employee stock plans 10 4 6
- --------------------------------------------------------------------------------
Balance at November 30 2,588 2,578 1,715
- --------------------------------------------------------------------------------
CLASS B COMMON STOCK:
Beginning balance 999 666 666
Three-for-two stock split effected in
the form of a 50% stock dividend - 333 -
- --------------------------------------------------------------------------------
Balance at November 30 999 999 666
- --------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Beginning balance 169,605 170,023 72,123
Shares issued under public offering - - 96,747
Three-for-two stock split effected in
the form of a 50% stock dividend - (1,192) -
Shares issued under employee stock plans 981 774 1,153
- --------------------------------------------------------------------------------
Balance at November 30 170,586 169,605 170,023
- --------------------------------------------------------------------------------
RETAINED EARNINGS:
Beginning balance 360,906 295,069 245,177
Net earnings 70,427 69,126 52,511
Cash dividends - common stock (2,583) (2,448) (1,953)
Cash dividends - Class B common stock (899) (841) (666)
- --------------------------------------------------------------------------------
Balance at November 30 427,851 360,906 295,069
- --------------------------------------------------------------------------------
UNREALIZED GAIN ON SECURITIES
AVAILABLE-FOR-SALE, NET:
Beginning balance - - -
Net unrealized gains for the year 5,770 - -
- --------------------------------------------------------------------------------
Balance at November 30 5,770 - -
- --------------------------------------------------------------------------------
Total stockholders' equity $607,794 534,088 467,473
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
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 wholly-owned subsidiaries (the "Company"). The
Company's investments in partnerships are accounted for by the equity method.
All significant intercompany transactions and balances have been eliminated.
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 AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity 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.
INVENTORIES
Inventories are stated at the lower of accumulated costs or net realizable
value. Net realizable value is evaluated at the community level and is defined
as the estimated proceeds upon disposition less all future costs to complete and
sell. Inventory adjustments to net realizable value in 1995, 1994 and 1993 were
not material to the Company. Start-up costs, construction overhead and selling
expenses are expensed as incurred. Homes held for sale are classified as
construction in progress until delivered. Land, land development, amenities and
other costs are accumulated by specific area and allocated proportionately to
homes within the respective area.
INTEREST AND REAL ESTATE TAXES
Interest and real estate taxes attributable to land, homes and operating
properties are capitalized and added to the cost of those properties as long as
the properties are being actively developed. Interest expense relating to
financial services operations and limited-purpose finance subsidiaries is
included in their respective costs and expenses. Interest related to
homebuilding and investment operations, including interest costs relieved from
inventories, is included in interest expense.
During 1995, 1994 and 1993, interest costs of $35.8 million, $25.0 million
and $19.7 million, respectively, (excluding the limited-purpose finance
subsidiaries) were incurred and $23.4 million, $22.1 million and $17.1 million,
respectively, were capitalized by the Company's homebuilding and investment
operations. Previously capitalized interest charged to expense in 1995, 1994 and
1993 was $17.8 million, $15.4 million and $13.1 million, respectively.
OPERATING PROPERTIES AND EQUIPMENT
Operating properties and equipment are recorded at cost. Depreciation is
calculated to amortize the cost of depreciable assets over their estimated
useful lives using the straight-line method. The range of estimated useful lives
for operating properties is 15 to 40 years and for equipment is 2 to 10 years.
INVESTMENT SECURITIES
Effective December 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". This new standard requires that debt and equity
securities that have determinable fair values be 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 in the balance sheet. 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.
WARRANTIES
Warranty liabilities are not significant as the Company subcontracts
virtually all segments of construction to others and its contracts call for the
subcontractors to repair or replace any deficient items related to their trade.
Extended warranties are offered in some communities through independent
homeowner warranty insurance companies. The costs of these warranties are fixed
to the Company and are expensed in the period the homes are delivered.
30
<PAGE>
INCOME TAXES
Effective December 1, 1993, the Company adopted the provisions of 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 using enacted tax rates
expected to apply to taxable income in the years in which those differences are
expected to reverse. Prior to December 1, 1993, the Company utilized the
deferred method of accounting for income taxes under which deferred income taxes
were recognized for income and expense items that were reported in different
years for financial reporting purposes and income tax purposes using the tax
rate applicable for the year of the calculation.
NET EARNINGS PER SHARE
Net earnings per share is calculated by dividing net earnings by the
weighted average number of the total of common shares, Class B common shares and
common share equivalents outstanding during each year. The weighted average
number of shares outstanding was 36,100,000, 36,086,000 and 34,709,000 in 1995,
1994 and 1993, respectively.
FINANCIAL SERVICES
Mortgage loans held for sale or disposition by the Financial Services
Division are recorded at the lower of cost or market, as determined on an
aggregate basis. Discounts recorded on these loans are presented as a reduction
of the carrying amount of the loans and are not amortized.
This division enters into forward sales and option contracts to protect the
value of loans held for sale or disposition from increases in market interest
rates. Adjustments are made to these loans based on changes in the market value
of these hedging contracts (see Note 15).
When the division sells loans or mortgage-backed securities in 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 or the
securities. Loan origination fees, net of direct origination costs, are deferred
and recognized as a component of the gain or loss when loans are sold.
The division generally retains the servicing on the loans and
mortgage-backed securities it sells and recognizes servicing fee income as those
services are performed.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". SFAS No. 121 requires companies to evaluate
long-lived assets for impairment based on the undiscounted future cash flows of
the asset. If a long-lived asset is identified as impaired, the value of the
asset must be reduced to its fair value. The Company's land holdings and
operating properties would be considered long-lived assets under this
pronouncement.
In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights". SFAS No. 122, among other
provisions, requires the recognition of originated mortgage servicing rights as
assets by allocating total costs incurred in originating a loan between the loan
and the servicing rights based on their relative fair values. Presently, the
cost of originated mortgage servicing rights is included with the cost of the
related loans and written off against income when the loans are sold. Also,
under SFAS No. 122, all capitalized mortgage servicing rights are evaluated for
impairment based on the excess of the carrying amount of the mortgage servicing
rights over their fair value.
These statements are effective for fiscal years beginning after December
15, 1995. The Company plans to adopt these statements in the first quarter of
its fiscal year ending November 30, 1997. The actual effects of implementing
these new standards have not been determined. However, their adoption is not
expected to have any material adverse affect on the Company's financial position
or results of operations.
RECLASSIFICATIONS
Certain prior year amounts in the consolidated financial statements have
been reclassified to conform with the 1995 presentation.
2. BUSINESS SEGMENTS
The Company has three business segments: Homebuilding, Investment and
Financial Services. The limited-purpose finance subsidiaries are not considered
a business segment and are not included in the following tables.
HOMEBUILDING
Homebuilding operations include the construction and sale of single-family
and multi-family homes. These activities also include the purchase, development
and sale of residential land. The following table sets forth financial
information relating to the homebuilding operations:
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- ----------------------------------------------------------------------
REVENUES:
Sales of homes $646,986 626,341 513,503
Other 18,524 21,409 18,647
- ----------------------------------------------------------------------
Total revenues 665,510 647,750 532,150
COSTS AND EXPENSES:
Cost of homes sold 523,028 498,132 400,159
Cost of other revenues 13,948 15,769 16,302
Selling, general & administrative 70,004 63,204 55,482
- ----------------------------------------------------------------------
Total costs and expenses 606,980 577,105 471,943
- ----------------------------------------------------------------------
OPERATING EARNINGS $ 58,530 70,645 60,207
- ----------------------------------------------------------------------
IDENTIFIABLE ASSETS $541,266 531,330 500,507
- ----------------------------------------------------------------------
DEPRECIATION AND
AMORTIZATION $ 1,842 1,522 1,037
- ----------------------------------------------------------------------
INVESTMENT
The Investment Division is involved in the development, management and
leasing, as well as the acquisition and sale, of commercial and residential
properties and land. This division also participates in and manages partnerships
with financial institutions. During 1994, this division began acquiring, at a
discount, issues of the unrated portion of debt securities which are
collateralized by real estate loans. The following table sets forth financial
information relating to the Investment Division's operations:
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------------------------
REVENUES:
Rental income $ 49,439 43,487 37,708
Equity in earnings
of partnerships 30,852 20,710 7,046
Management fees 10,274 12,390 6,714
Sales of real estate 38,173 21,518 45
Other 10,744 8,238 7,442
- -------------------------------------------------------------------------
Total revenues 139,482 106,343 58,955
COST OF SALES AND EXPENSES 71,794 54,439 30,458
- -------------------------------------------------------------------------
OPERATING EARNINGS $ 67,688 51,904 28,497
- -------------------------------------------------------------------------
IDENTIFIABLE ASSETS $453,483 411,366 281,883
- -------------------------------------------------------------------------
CAPITAL EXPENDITURES $ 7,867 53,646 42,102
- -------------------------------------------------------------------------
DEPRECIATION AND
AMORTIZATION $ 5,483 5,010 4,130
- -------------------------------------------------------------------------
FINANCIAL SERVICES
The Financial Services Division's activities are conducted primarily
through Lennar Financial Services, Inc. and five subsidiaries: Universal
American Mortgage Company, AmeriStar Financial Services, Inc., Universal Title
Insurors, Inc., Lennar Capital Corporation and TitleAmerica Insurance
Corporation. These companies arrange mortgage financing, title insurance and
closing services for Lennar homebuyers and others; acquire, package and resell
home mortgage loans; and perform mortgage loan servicing activities. This
division also invests in issues of rated portions of commercial real estate
mortgage-backed securities for which Lennar's Investment Division is the special
servicer and an investor in the unrated portions of those securities. The
following table sets forth financial information relating to the financial
services operations:
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------
REVENUES $ 57,787 54,348 59,204
COSTS AND EXPENSES 38,774 39,504 44,100
INTERCOMPANY
INTEREST EXPENSE* 2,313 3,144 2,244
- -------------------------------------------------------
OPERATING EARNINGS $ 16,700 11,700 12,860
- -------------------------------------------------------
IDENTIFIABLE ASSETS $353,809 252,195 284,391
- -------------------------------------------------------
DEPRECIATION AND
AMORTIZATION $ 2,196 1,450 4,886
- -------------------------------------------------------
* Intercompany interest expense is reflected above to show interest expense on
intercompany debt of the financial services operations.
3. SUBSEQUENT EVENT-ACQUISITION
On December 29, 1995, the Company purchased the assets and operations of
the residential business of Friendswood Development Company, the real estate
subsidiary of Exxon Corporation, for approximately $110 million in cash, subject
to certain post-closing adjustments. The Company financed this transaction
through borrowings under its existing revolving credit agreement. The
acquisition of these assets and operations will be accounted for in fiscal 1996
using the purchase method of accounting.
4. ACCOUNTING CHANGES
Effective December 1, 1993, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes". This change in accounting principle resulted
in an increase to net earnings of $4.7 million in the first quarter of 1994. The
change in accounting for income taxes did not have a significant effect on the
Company's results of operations.
The first quarter of 1994 also included a charge of $3.8 million (net of
income tax effect of $2.4 million) for the cumulative effect on prior years of a
change in accounting for purchased mortgage servicing rights. During the first
quarter of 1994, the Company changed the way in which it evaluates these assets
for impairment from an undiscounted and disaggregated cash flow basis to a
discounted and disaggregated cash flow basis.
32
<PAGE>
5. RESTRICTED CASH
Cash includes restricted deposits of $3.1 million and $3.7 million as of
November 30, 1995 and 1994, respectively. These balances are comprised primarily
of escrow deposits held related to condominium purchases and security deposits
from tenants of commercial and apartment properties.
6. SUMMARY OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
During 1995, the Company acquired commercial mortgage-backed securities for
$81.7 million. Of this amount, $57.5 million was paid in cash and $24.2 million
was financed by the sellers.
During 1994, the Company's Financial Services Division acquired commercial
mortgage-backed securities for $72.4 million. Of this amount, $25.4 million was
paid in cash and the balance of $47.0 million was financed by the sellers.
During 1993, the Company acquired a portfolio of loans from the Resolution
Trust Corporation for $24.8 million. Of this amount, $5.0 million was paid in
cash and the Company issued a non-recourse note in the amount of $19.8 million
for the remainder.
Also during 1993, the Company purchased the other partners' interests in
three of its joint ventures. As a result, the operations of these ventures were
consolidated into the accounts of the Company as of the respective dates of
acquisition. The net result of these transactions was to decrease investments in
and advances to partnerships by $34.9 million, increase all other assets by
$73.7 million and increase liabilities by $38.8 million.
7. RECEIVABLES
November 30,
(IN THOUSANDS) 1995 1994
- -----------------------------------------------------------------
Accounts receivable $24,516 31,253
Mortgage and notes receivable 48,659 20,801
- -----------------------------------------------------------------
73,175 52,054
Allowance for doubtful accounts (2,372) (1,528)
Deferred income and unamortized discounts (601) (2,361)
- -----------------------------------------------------------------
$70,202 48,165
=================================================================
8. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS
Summarized financial information on a combined 100% basis related to the
Company's significant partnerships accounted for by the equity method follows:
November 30,
(IN THOUSANDS) 1995 1994
- -----------------------------------------------------------------
ASSETS:
Cash $ 66,927 96,046
Portfolio investments 1,078,841 1,286,375
Other assets 22,160 61,722
- -----------------------------------------------------------------
1,167,928 1,444,143
=================================================================
LIABILITIES AND EQUITY:
Accounts payable and
other liabilities $ 77,424 93,943
Notes and mortgages payable 570,882 737,344
Equity of:
The Company 149,174 105,537
Others 370,448 507,319
- -----------------------------------------------------------------
$1,167,928 1,444,143
=================================================================
Portfolio investments consist primarily of mortgage loans and business
loans collateralized by real property, as well as commercial properties and land
held for investment or sale. The Company's share of the partnerships' equity at
November 30, 1995 includes $113.6 million and $35.6 million related to the
Investment Division's and Financial Services Division's investments in
partnerships, respectively.
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- -----------------------------------------------------------------
Revenues $280,286 246,236 112,692
Costs and expenses 115,269 128,784 78,653
- -----------------------------------------------------------------
Pre-tax earnings of
partnerships $165,017 117,452 34,039
=================================================================
The Company's share of
pre-tax earnings $ 31,203 20,710 7,046
=================================================================
The Company's investments in partnerships consist primarily of its
Investment Division partnerships. At November 30, 1995, the Company's equity
interests in these partnerships ranged from 25% to 50% (which in one instance
includes an investment by the Company's Financial Services Division). These
partnerships are involved in the acquisition and management of portfolios of
real estate loans and assets. The Company shares in the profits and losses of
these partnerships and, as the manager of the partnerships, receives fees for
the management and disposition of the assets. The outstanding debt of these
partnerships is not guaranteed by the Company.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
9. OPERATING PROPERTIES AND EQUIPMENT
November 30,
(IN THOUSANDS) 1995 1994
- ----------------------------------------------------------------
Rental apartment properties $ 69,027 66,818
Retail centers 62,952 62,639
Office buildings 39,718 41,740
Community recreational facilities 9,693 14,207
Other 33,520 30,452
- ----------------------------------------------------------------
Total land and buildings 214,910 215,856
Furniture, fixtures and equipment 10,615 9,790
- ----------------------------------------------------------------
Total 225,525 225,646
Accumulated depreciation (36,184) (32,025)
- ----------------------------------------------------------------
$189,341 193,621
================================================================
The Company leases retail, office and other facilities under
non-cancellable operating leases with terms in excess of twelve months. The
future minimum rental revenues under these leases for the five years subsequent
to November 30, 1995, are as follows (in thousands): 1996-$13,078; 1997-$12,169;
1998-$9,900; 1999-$8,000 and 2000-$6,453.
10. MORTGAGE NOTES AND OTHER DEBTS PAYABLE
November 30,
(DOLLARS IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
Secured without recourse to the Company:
Mortgage notes on operating properties
and land with fixed interest rates from
6.8% to 9.5%, due through 2003 $ 25,616 25,169
Other secured debt:
Term loan notes with floating interest
rates (6.6% to 6.8% at November 30, 1995),
secured by certain real estate and operating
properties, due through 2002 84,960 50,000
Mortgage notes on operating properties and
land with interest rates from 4.0% to 8.3%,
due through 2015 60,002 61,057
Unsecured revolving credit notes payable
with floating interest rates 117,225 122,735
Other notes payable with floating interest
rates (6.7% to 8.8% at November 30, 1995),
due in 1996 48,830 13,500
Unsecured term loan note with floating
interest rate - 56,475
- --------------------------------------------------------------------------------
$336,633 328,936
================================================================================
During 1995, the Company amended its unsecured revolving credit agreement
by extending the term to five years and increasing the commitment to $310
million. This agreement is with twelve banks. Certain Financial Services
Division subsidiaries are co-borrowers under this facility and at November 30,
1995 and 1994 their borrowings under this agreement amounted to $54.0 million
and $53.0 million, respectively. The total amount outstanding under the
Company's revolving credit agreement at November 30, 1995 and 1994 was $171.2
million and $175.7 million, respectively. In January 1996, the Company entered
into an additional $100 million unsecured revolving credit agreement which
expires in January 1997.
The Company utilizes interest rate swap agreements to manage interest costs
and hedge against risks associated with changing interest rates (see Note 15).
The minimum aggregate principal maturities of mortgage notes and other
debts payable during the five years subsequent to November 30, 1995, are as
follows (in thousands): 1996-$94,024; 1997-$12,439; 1998-$24,492; 1999-$1,005
and 2000 -$844. All of the notes secured by land contain collateral release
provisions for accelerated payment which may be made as necessary to maintain
construction schedules.
34
<PAGE>
11. FINANCIAL SERVICES
The assets and liabilities related to the Company's financial services
operations (as described in Note 2) are summarized as follows:
November 30,
(IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
ASSETS:
Loans held for sale or disposition, net $123,842 124,324
Investment securities available-for-sale 141,832 -
Loans and mortgage-backed
securities held for investment, net 43,506 107,989
Investments in and advances
to partnerships 27,301 -
Cash and receivables, net 14,416 11,579
Servicing acquisition costs 2,329 3,949
Other 583 4,354
- --------------------------------------------------------------------------------
$353,809 252,195
================================================================================
LIABILITIES:
Notes and other debts payable $228,488 154,379
Other 14,703 13,969
- --------------------------------------------------------------------------------
$243,191 168,348
================================================================================
Investments in and advances to partnerships consist primarily of a 15.1%
equity interest, acquired in the fourth quarter of 1995, in a partnership in
which the Investment Division owns a 9.9% equity interest (see Note 8).
The Financial Services Division finances its activities through various
lines of credit, borrowings under short-term repurchase agreements or borrowings
from Lennar Corporation, when on a consolidated basis the Company can minimize
its cost of funds.
Warehouse lines of credit with banks are used to fund the division's
mortgage loan activity. Borrowings under these agreements were $54.9 million and
$54.6 million at November 30, 1995 and 1994, respectively, and were
collateralized by mortgage loans with outstanding principal balances of $57.0
million and $57.9 million, respectively, and by servicing rights to
approximately $1.5 billion of loans serviced by the division. 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 these
agreements at November 30, 1995 was 0.8%. On December 22, 1995, the Company
entered into a new warehouse line of credit facility totaling $125 million that
expires December 20, 1996, unless otherwise extended.
The division has two revolving lines of credit to finance certain
mortgage-backed securities which provide for aggregate borrowings of $75
million, expiring in 1998. Borrowings under these agreements were $67.4 million
at November 30, 1995 and were collateralized by mortgage-backed securities with
an aggregate carrying value of $101.1 million. The weighted average interest
rate at November 30, 1995 was 5.8%.
The division also utilizes short-term financing arrangements to sell
mortgage-backed securities under agreements to repurchase them with securities
dealers in the business of providing such financing. At November 30, 1995 and
1994, repurchase agreements outstanding totaled $17.2 million and $46.8 million,
respectively, and had a weighted average borrowing rate of 6.8% and 6.5%,
respectively.
During 1995, the division entered into two uncommitted, short-term bank
credit lines which provide for aggregate borrowings of $35.0 million. As of
November 30, 1995, $35.0 million was outstanding at an interest rate of 6.4%.
Advances generally mature within 90 days and are unsecured.
Certain subsidiaries of the Financial Services Division are co-borrowers in
the Company's revolving credit agreement (see Note 10). As of November 30, 1995
and 1994, the division's borrowings under this agreement amounted to $54.0
million and $53.0 million, respectively.
Certain of the division's servicing agreements require it to pass through
payments on loans even though it is unable to collect such payments and, in
certain instances, be responsible for losses incurred through foreclosure.
Exposure to this credit risk is minimized through geographical diversification
and review of the mortgage loan servicing created or purchased. Management
believes that it has provided adequate reserves for expected losses based on the
net realizable value of the underlying collateral. Provisions for these losses
have not been material to the Company. The division is also subject to
prepayment risk on the servicing portfolio. Exposure to prepayment risk is
managed by the division's ongoing evaluation of prepayment possibilities.
12. LIMITED-PURPOSE FINANCE SUBSIDIARIES
In prior years, limited-purpose finance subsidiaries of the Financial
Services Division 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 primarily from the cash flows
generated by the related pledged collateral which includes a combination of
mortgage notes, mortgage-backed securities and funds held by trustee.
At November 30, 1995 and 1994, the balances outstanding for the bonds and
notes payable were $70.6 and $83.0 million, respectively. The borrowings mature
in years 2013 through 2018 and carry interest rates ranging from 7.1% to 14.3%.
The annual principal repayments are dependent upon collections on the underlying
mortgages, including prepayments, and cannot be reasonably determined.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
13. INCOME TAXES
The provisions (benefits) for income taxes consist of the following:
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- ----------------------------------------------------------------------
Current:
Federal $ 47,857 44,092 28,620
State 6,787 8,337 5,400
- ----------------------------------------------------------------------
54,644 52,429 34,020
- ----------------------------------------------------------------------
Deferred:
Federal (9,982) (7,443) (4,013)
State 366 (1,405) (464)
- ----------------------------------------------------------------------
(9,616) (8,848) (4,477)
- ----------------------------------------------------------------------
Total expense $ 45,028 43,581 29,543
======================================================================
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 which comprise the net deferred tax
liability are as follows:
November 30,
(IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Capitalized expenses $36,818 36,447
Acquisition adjustments 15,154 15,913
Deferred gains 16,973 13,307
Installment sales 4,649 5,801
Unrealized gain on securities
available-for-sale 3,689 -
Other 3,531 2,592
- --------------------------------------------------------------------------------
Total deferred tax liabilities 80,814 74,060
- --------------------------------------------------------------------------------
Deferred tax assets:
Reserves and accruals 18,404 16,409
Investments in partnerships 14,086 6,185
Investment securities income 4,193 2,052
Other 1,151 507
- --------------------------------------------------------------------------------
Total deferred tax assets 37,834 25,153
- --------------------------------------------------------------------------------
Net deferred tax liability $42,980 48,907
================================================================================
At November 30, 1995 and 1994, the Financial Services Division and the
limited-purpose finance subsidiaries had net deferred tax assets (liabilities)
of $(.4) million and $1.9 million, respectively.
For the year ended November 30, 1993, a deferred income tax credit of $4.5
million resulted from timing differences in the recognition of income and
expenses for income tax and financial reporting purposes. The sources and tax
effects of those timing differences are presented below:
Income Tax
Expense (Credit)
----------------
(IN THOUSANDS) 1993
- -----------------------------------------------------------------
Installment and deferred profit
recognition on sales of real estate $(2,947)
Capitalized expenses (2,216)
Tax expense in excess of book deductions
on general and administrative expenses 484
Net change in financial services' loan
loss reserve 428
Recognition of joint venture income 318
Other, net (544)
- -----------------------------------------------------------------
Total $(4,477)
=================================================================
A reconciliation of the statutory rate with the effective tax rate follows:
% of Pre-tax Income
----------------------
1995 1994 1993
- -----------------------------------------------------------------
Statutory rate 35.0 35.0 35.0
State income taxes, net of federal
income tax benefit 4.0 4.0 3.9
Other - - (2.9)
- -----------------------------------------------------------------
Effective rate 39.0 39.0 36.0
=================================================================
14. CAPITAL STOCK
COMMON STOCK
The Company has two classes of common stock. The common stockholders have
one vote for each share owned, in matters requiring stockholder approval, and
during 1995 received quarterly dividends of $.025 per share. Class B common
stockholders have ten votes for each share of stock owned and during 1995
received quarterly dividends of $.0225 per share. As of November 30, 1995, Mr.
Leonard Miller, Chairman of the Board and President of the Company, owned or
controlled 9.9 million shares of Class B common stock, which represents
approximately 79% voting control of the Company.
Stock Option Plans
The Lennar Corporation 1980 Stock Option Plan ("1980 Plan") expired on
December 8, 1990. However, under the terms of the 1980 Plan, certain options
granted prior to the plan termination date were still outstanding during the
periods presented. The last options granted under the 1980 Plan were exercised
in November 1995.
36
<PAGE>
14. CAPITAL STOCK (CONTINUED)
The following table summarizes the status of the 1980 Plan:
1995 1994 1993
- -------------------------------------------------------------------------------
Option shares exercised 52,650 27,600 83,250
Option price per share
exercised (range) $4.33 - 6.57 4.33 - 7.09 4.33 - 7.09
Shares under option - 52,650 84,000
Option price per share (range) - 4.33 - 6.57 4.33 - 7.09
Shares under option - exercisable - 34,650 21,750
- -------------------------------------------------------------------------------
The Lennar Corporation 1991 Stock Option Plan ("1991 Plan") provides for
the granting of options to certain key employees of the Company to purchase
shares at prices not less than market value as of 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 varying
installments, on a cumulative basis. 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.
The following table summarizes the status of the 1991 Plan:
1995 1994 1993
- --------------------------------------------------------------------------------
Option shares exercised 22,500 10,650 17,550
Option price per share
exercised (range) $6.54 - 14.33 7.71 - 14.37 6.54 - 11.17
Shares under option 995,250 958,750 984,900
Option price per share (range) $6.54 - 22.55 6.54 - 22.55 6.54 - 22.55
Shares under option - exercisable 203,600 147,187 79,875
- --------------------------------------------------------------------------------
EMPLOYEE STOCK OWNERSHIP/401(K) PLAN
The Employee Stock Ownership/401(k) Plan ("Plan") provides shares of stock
to employees who have completed one year of continuous service with the Company.
All contributions for employees with five years or more of service are fully
vested. The Plan was amended in 1989 to add a cash or deferred program under
Section 401(k) of the Internal Revenue Code. Under the 401(k) portion of the
Plan, employees may make contributions which are invested on their behalf, 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 (in thousands): $847 in 1995, $625 in 1994 and $361 in 1993.
In 1995, 1994 and 1993, 15,332, 22,249 and 13,800 shares, respectively, were
contributed to participants' accounts.
RESTRICTIONS ON PAYMENT OF DIVIDENDS
Other than as required to maintain the financial ratios and net worth
requirements under the revolving credit and term loan agreements, there are no
restrictions on the payment of dividends on common stock by the Company. The
cash dividends paid with regard to a share of Class B common stock in a calendar
year may not be more than 90% of the cash dividends paid with regard to a share
of common stock in that calendar year. Furthermore, there are no agreements
which restrict the payment of dividends by subsidiaries to the Company.
- --------------------------------------------------------------------------------
15. FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of financial instruments held by the Company at November 30, 1995 and 1994,
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 herein 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 may have a material effect on the estimated fair value
amounts. The table excludes cash and cash equivalents, accounts receivable and
accounts payable, which had fair values approximating their carrying values.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
15. FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
November 30,
(IN THOUSANDS) 1995 1994
- ------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
HOMEBUILDING AND INVESTMENT:
Notes and mortgages receivable, net $ 48,058 48,058 18,440 18,440
Other assets - investment securities
held to maturity 21,460 21,460 16,102 16,102
FINANCIAL SERVICES:
Loans held for sale or disposition, net 123,842 123,842 124,324 124,324
Investment securities available-for-sale 141,832 141,832 - -
Loans and mortgage-backed securities
held for investment, net 43,506 47,897 107,989 109,370
LIMITED-PURPOSE FINANCE SUBSIDIARIES:
Collateral for bonds and notes payable 74,728 78,932 89,424 92,062
LIABILITIES
HOMEBUILDING AND INVESTMENT:
Mortgage notes and other debts payable 336,633 336,633 328,936 328,936
FINANCIAL SERVICES:
Notes and other debts payable 228,488 228,488 154,379 154,379
LIMITED-PURPOSE FINANCE SUBSIDIARIES:
Bonds and notes payable 70,640 74,067 82,997 83,923
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
HOMEBUILDING AND INVESTMENT:
Interest rate swap agreements - (3,723) - (300)
FINANCIAL SERVICES:
Commitments to originate loans - 71 - (155)
Commitments to sell loans - (531) - 114
- ------------------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used by the Company in
estimating fair values:
Notes and mortgages receivable: The fair values are based on discounting
future cash flows using the current interest rates at which similar loans would
be made or are estimated by the Company on the basis of financial or other
information.
Notes, mortgage notes and other debts payable: The fair value of fixed rate
borrowings is based on discounting future cash flows using the Company's
incremental borrowing rate. Variable rate borrowings are tied to market indices
and thereby, approximate fair value.
Investment securities, loans held for sale or disposition, loans and
mortgage-backed securities held for investment, collateral for bonds and notes
payable, bonds and notes payable and loan commitments: 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
financial and other information.
Interest rate swap agreements: The fair value is based on dealer quotes and
generally represents an estimate of the amount the Company would pay to
terminate the agreement at the reporting date.
The Company utilizes interest rate swap agreements to manage interest costs
and hedge against risks associated with changing interest rates. The Company
designates interest rate swaps as hedges of specific debt instruments and
recognizes interest differentials as adjustments to interest expense as the
differentials occur. Counterparties to these agreements are major financial
institutions. Credit loss from counterparty non-performance is not anticipated.
A majority of the Company's variable rate borrowings are based on the London
Interbank Offering Rate ("LIBOR") index. At November 30,1995, Lennar had four
interest rate swap agreements outstanding with a total notional amount of $220
million, of which $200 million will mature in 2002 and $20 million will mature
in 1996. The agreement maturing in 2002 fixed the LIBOR index at 6.0% to 6.1%
and the agreements maturing in 1996 fixed the LIBOR index at 8.7%.
As of November 30, 1995, the Financial Services Division's pipeline of
loans in process totaled approximately $33.9 million. There is no exposure to
credit risk in this type
38
<PAGE>
of commitment until the loans are funded. However, 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 borrower, the total commitments do not
necessarily represent future cash requirements. There is no exposure to market
risk until a rate commitment is extended by the Company to a borrower. Loans in
the pipeline of loans in process for which interest rates were committed to the
borrower totaled approximately $21.3 million as of November 30, 1995.
Substantially all of these commitments are 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 extends an interest rate lock to a loan applicant until the time in
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
the Company 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, 1995, the Company had open commitments amounting to $68.2
million to sell MBS with varying settlement dates through January 22, 1996. The
mortgage loan inventory and pipeline will be used to form the MBS that will fill
the forward delivery contracts.
16. 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 of the Company.
The Company had a number of claims for damages relating to a hurricane
which occurred in 1992. Most have been settled and to date, the Company's
insurers have made all payments required under settlements. Even if the Company
were required to make any payments with regard to the remaining hurricane
related claims, the Company believes that the amount it would pay would not be
material.
The Company is subject to the usual obligations associated with entering
into contracts for the purchase, development and sale of real estate in the
routine conduct of its business.
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 approximately $77.2 million at November 30, 1995.
- -------------------------------------------------------------------------------
17. QUARTERLY DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) First Second Third Fourth
- -------------------------------------------------------------------------------
1995
Revenues $181,183 210,532 204,730 274,023
Earnings before income taxes $ 24,602 32,257 25,761 32,835
Net earnings $ 15,007 19,677 15,714 20,029
Net earnings per share $ .42 .55 .44 .55
===============================================================================
1994
Revenues $191,826 207,318 199,424 219,358
Earnings before income taxes and
cumulative effect of changes
in accounting principles $ 24,184 29,543 30,255 27,764
Earnings before cumulative effect
of changes in accounting principles $ 14,752 18,021 18,456 16,936
Net earnings $ 15,713 18,021 18,456 16,936
Net earnings per share before
cumulative effect of changes in
accounting principles $ .41 .50 .51 .47
Net earnings per share $ .44 .50 .51 .47
===============================================================================
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.
39
<PAGE>
SHAREHOLDER INFORMATION
LENNAR CORPORATION AND SUBSIDIARIES
ANNUAL MEETING
The Annual Stockholders' Meeting will be
held at 11:00 a.m. on April 2, 1996
at the Doral Park Golf and Country Club,
5001 N.W. 104th Avenue, Miami, Florida
REGISTRAR AND TRANSFER AGENT
The First National Bank of Boston
150 Royall Street
Canton, Massachusetts 02021
LISTING
New York Stock Exchange (LEN)
GENERAL COUNSEL
Robert B. Cole, Esq.
700 N.W. 107th Avenue
Miami, Florida 33172
INDEPENDENT AUDITORS
Deloitte & Touche LLP
100 Southeast Second Street
Miami, Florida 33131
FORM 10-K AVAILABLE
A copy of the Company's Annual Report on Form 10-K as filed with the Securities
and Exchange Commission is available without charge to any stockholder upon
written request to:
Corporate Relations
Lennar Corporation
700 N.W. 107th Avenue
Miami, Florida 33172
Telephone: (305) 559-4000
<TABLE>
<CAPTION>
COMPARATIVE COMMON STOCK DATA
- ----------------------------------------------------------------------------------------------------
COMMON STOCK PRICES CASH DIVIDENDS
NEW YORK STOCK EXCHANGE PER SHARE
- ----------------------------------------------------------------------------------------------------
FISCAL HIGH/LOW PRICE COMMON STOCK CLASS B
QUARTER 1995 1994 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $17.50 - 15.12 $25.17 - 19.92 2 1/2(cent) 2 (cent) 2 1/4 (cent) 1 2/3 (cent)
Second 20.88 - 15.38 23.50 - 17.88 2 1/2(cent) 2 1/2(cent) 2 1/4 (cent) 2 1/4 (cent)
Third 21.38 - 17.75 22.00 - 17.88 2 1/2(cent) 2 1/2(cent) 2 1/4 (cent) 2 1/4 (cent)
Fourth 23.75 - 19.25 20.75 - 14.25 2 1/2(cent) 2 1/2(cent) 2 1/4 (cent) 2 1/4 (cent)
====================================================================================================
</TABLE>
As of November 30, 1995, there were approximately 1,000 holders of record of
the Company's common stock.
40
EXHIBIT 21
LENNAR CORPORATION AND SUBSIDIARIES
STATE OF INCORPORATION
----------------------
LENNAR CORPORATION Delaware
- --------------------------------------------------------------------
SUBSIDIARIES:
- -------------
Adjustable Mortgage Finance Corporation Florida
Ameristar Financial Services, Inc. California
Atlantic Holdings, Inc. Louisiana
Bert L. Smokler & Company Delaware
Boca Greens, Inc. Florida
Boca Isles Club, Inc. Florida
Boca Isles South Club, Inc. Florida
Club Pembroke Isles, Inc. Florida
DCA Acceptance Corporation Florida
DCA at Banyan Tree, Inc. Florida
DCA at North Lauderdale, Inc. Florida
DCA at Pembroke Pointe, Inc. Florida
DCA at Wiggins Bay, Inc. Florida
DCA Builder Issuer, Inc. Florida
DCA CML Acceptance, Inc. Florida
DCA Financial Corporation Florida
DCA General Contractors, Inc. Florida
DCA Homes, Inc. Florida
DCA Homes of Central Florida, Inc Florida
DCA Management Corporation Florida
DCA NJ Realty, Inc. New Jersey
DCA of Broward County, Inc. Florida
DCA of Fort Worth, Inc. Texas
DCA of Hialeah, Inc. Florida
DCA of Lake Worth, Inc. Florida
DCA of New Jersey, Inc. New Jersey
DCA of Texas, Inc. Texas
DCA of West Virginia, Inc. West Virginia
DCA Oil of Texas, Inc. Texas
Devco Land Corp. Florida
Devco Shopping Centers, Inc. Florida
Development Corporation of America Florida
Dreyfus Interstate Development Corp., The Delaware
Dyeing & Finishing, Inc. Florida
First Atlantic Building Corp. Florida
Friendswood Development Company Florida
H. Miller & Sons Inc. Florida
H. Miller & Sons of Florida, Inc. Florida
HMS Realty, Inc. Florida
Hillside, Inc. Florida
Inactive Corporations, Inc. Florida
Institutional Mortgages, Inc. Florida
Kings Isle Recreation Corp. Florida
<PAGE>
LENNAR CORPORATION AND SUBSIDIARIES, continued
SUBSIDIARIES: STATE OF INCORPORATION
- ------------- ----------------------
LC Financial Corporation Florida
LCP-II Holdings, Inc. Florida
Leisure Colony Management Corp. Florida
Leisure Communities Management, Inc. Florida
Len Acquisition Corporation Florida
Lennar Affiliate Purchaser Corporation Florida
Lennar Atlantic Holdings, Inc. Florida
Lennar Beverly Holdings, Inc. Nevada
Lennar Capital Corporation Florida
Lennar-Carson, Inc. Florida
Lennar Central Holdings, Inc. Florida
Lennar Commercial Properties, Inc. Florida
Lennar Communities Development, Inc. Delaware
Lennar Corporate Center, Inc. Florida
Lennar-Corry, Inc. Florida
Lennar Domestic Holdings, Inc. Florida
Lennar Eastern Holdings, Inc. Florida
Lennar Financial Services, Inc. Florida
Lennar Florida Holdings, Inc. Florida
Lennar Funding Corporation Florida
Lennar Homes of Arizona, Inc. Arizona
Lennar Homes of Texas, Inc. Texas
Lennar Homes, Inc. Florida
Lennar Kearny Holdings, Inc. Nevada
Lennar L.W. Assets, Inc. Florida
Lennar Management Corporation Florida
Lennar Management, Inc. California
Lennar Mayfair Holdings, Inc. Florida
Lennar Metro Holdings, Inc. Florida
Lennar Mortgage Holdings Corporation Florida
Lennar Mortgage Holdings I, Inc. Florida
Lennar Mote Ranch, Inc. Florida
Lennar MSW-II Holdings, Inc. Florida
Lennar Northeast Holdings, Inc. Florida
Lennar Park J.V., Inc. Florida
Lennar Partners, Inc. Florida
Lennar Partners of California, Inc. Florida
Lennar Qualified Affiliate II Corporation Florida
Lennar Real Estate Holdings, Inc. Florida
Lennar Realty Inc. Florida
Lennar Rolling Ridge, Inc. California
Lennar Seaboard Holdings, Inc. Florida
Lennar Securities Holdings, Inc. Florida
Lennar Texas Properties, Inc. Texas
Lennar Transamerica Holdings, Inc. Florida
Lennar U. S. Holdings, Inc. Florida
Lennar Wilshire Holdings, Inc. Nevada
Lentex Development Corporation Texas
LFH Sub I, Inc. Florida
LFS Asset Corp. Nevada
<PAGE>
LENNAR CORPORATION AND SUBSIDIARIES, continued
SUBSIDIARIES: STATE OF INCORPORATION
- ------------- ----------------------
LFS CMBS Investments, Inc. Nevada
LGP-II Holdings, Inc. Florida
Loan Funding, Inc. Florida
Lucerne Greens, Inc. Florida
Lucerne Merged Condominiums, Inc. Florida
MAP Builders, Inc. Florida
M.A.P. Vineyards of Plantation, Inc. Florida
Midwest Management Company, Inc. Michigan
Miller's Plantation Development Company Florida
Monterey Village Development Corp. Florida
MSWH SUB I, Inc. Florida
Multi-Builder Acceptance Corp. Alabama
NGMC Finance Corporation Florida
NGMC Finance Corporation, IV Florida
Parkview at Pembroke Pointe, Inc. Florida
P-G & H, Inc. West Virginia
Quality Roof Truss Company Florida
Riviera Land Corp. Florida
Satisfaction, Inc. Florida
South Dade Utilities, Inc. Florida
Springs Development Corporation Florida
State Home Acceptance Corporation Florida
Strategic Technologies, Inc. Florida
Sunrise Hotel Corp. Florida
Superior Realty & Marketing, Inc. Florida
Talladega Manufacturing, Inc. Alabama
TitleAmerica Insurance Corporation Florida
UAMC Asset Corp. Nevada
Universal American Finance Corp., I Florida
Universal American Mortgage Company Florida
Universal American Realty Corporation Delaware
Universal Title Insurors, Inc. Florida
Vista Del Lago Apartments, Inc. Florida
West Coast Mortgage Holdings, Inc. Florida
W. B. Homes, Inc. Florida
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-53003 of Lennar Corporation on Form S-3 of our reports dated January 11,
1996, appearing in and incorporated by reference in this Annual Report on Form
10-K of Lennar Corporation for the year ended November 30, 1995.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
February 27, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-45442, No. 2-73630 and No. 2-89104 of Lennar Corporation on Form S-8 of our
reports dated January 11, 1996, appearing in and incorporated by reference in
this Annual Report on Form 10-K of Lennar Corporation for the year ended
November 30, 1995.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
February 27, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Lennar Corporation:
We consent to incorporation by reference in the Registration Statement (No.
33-45442, No. 2-73630 and No. 2-89104) on Form S-8 and (No. 33-53003) on Form
S-3 of Lennar Corporation of our report dated January 18, 1994, relating to the
consolidated statements of earnings, cash flows and stockholders equity of
Lennar Corporation and subsidiaries for the year ended November 30, 1993.
/s/ KPMG PEAT MARWICK LLP
February 26, 1996
Miami, Florida
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<CASH> 21,870
<SECURITIES> 0
<RECEIVABLES> 70,202
<ALLOWANCES> 0
<INVENTORY> 504,404
<CURRENT-ASSETS> 596,476
<PP&E> 225,525
<DEPRECIATION> (36,184)
<TOTAL-ASSETS> 1,442,362
<CURRENT-LIABILITIES> 156,196
<BONDS> 635,761
0
0
<COMMON> 3,587
<OTHER-SE> 604,207
<TOTAL-LIABILITY-AND-EQUITY> 1,442,362
<SALES> 646,986
<TOTAL-REVENUES> 870,468
<CGS> 523,028
<TOTAL-COSTS> 608,770
<OTHER-EXPENSES> 126,988
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,255
<INCOME-PRETAX> 115,455
<INCOME-TAX> 45,028
<INCOME-CONTINUING> 70,427
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,427
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.95
</TABLE>
