===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended AUGUST 31, 1996
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
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 [ ]
Common shares outstanding as of the end of the current fiscal quarter:
Common 25,935,027
Class B Common 9,984,831
===============================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(UNAUDITED)
AUGUST 31, NOVEMBER 30,
1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
HOMEBUILDING, INVESTMENT AND FINANCIAL SERVICES:
Homebuilding and investment assets:
Cash and cash equivalents $ 15,351 21,870
Receivables, net 51,968 70,202
Inventories:
Construction in progress and model homes 289,981 199,774
Land held for development 392,095 304,630
---------------------------------
Total inventories 682,076 504,404
Land held for investment 71,217 72,976
Operating properties and equipment, net 218,117 189,341
Investments in and advances to partnerships 148,077 114,240
Other assets 98,799 40,792
Financial services assets 376,868 353,809
- ------------------------------------------------------------------------------------------------------------------------
Total assets - homebuilding, investment and financial services 1,662,473 1,367,634
- ------------------------------------------------------------------------------------------------------------------------
LIMITED-PURPOSE FINANCE SUBSIDIARIES - COLLATERAL FOR BONDS AND NOTES PAYABLE 62,710 74,728
- ------------------------------------------------------------------------------------------------------------------------
$ 1,725,183 1,442,362
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING, INVESTMENT AND FINANCIAL SERVICES:
Homebuilding and investment liabilities:
Accounts payable and accrued liabilities $ 160,333 114,833
Customer deposits 19,360 14,441
Income taxes:
Currently payable 11,820 12,219
Deferred - 42,611
Mortgage notes and other debts payable 519,291 336,633
Financial services liabilities 289,598 243,191
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities - homebuilding, investment and financial services 1,000,402 763,928
- ------------------------------------------------------------------------------------------------------------------------
LIMITED-PURPOSE FINANCE SUBSIDIARIES - BONDS AND NOTES PAYABLE 59,214 70,640
- ------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock 2,593 2,588
Class B common stock 999 999
Additional paid-in capital 171,485 170,586
Retained earnings 484,622 427,851
Unrealized gain on securities available-for-sale, net 5,868 5,770
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 665,567 607,794
- ------------------------------------------------------------------------------------------------------------------------
$ 1,725,183 1,442,362
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(Unaudited)
(In thousands, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Homebuilding $ 261,312 159,902 638,414 445,523
Investment 36,425 28,077 101,496 104,845
Financial services 20,680 14,875 59,955 40,193
Limited-purpose finance subsidiaries 1,661 1,876 4,990 5,884
- -------------------------------------------------------------------------------------------------------------------------------
Total revenues 320,078 204,730 804,855 596,445
- -------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Homebuilding 234,838 146,153 582,499 409,997
Investment 19,623 14,388 50,736 51,311
Financial services 13,642 9,469 38,735 26,638
Limited-purpose finance subsidiaries 1,664 1,883 5,009 5,881
Corporate general and administrative 3,321 2,343 9,301 7,640
Interest 7,835 4,733 21,230 12,358
- -------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 280,923 178,969 707,510 513,825
- -------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 39,155 25,761 97,345 82,620
INCOME TAXES 15,271 10,047 37,965 32,222
- -------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 23,884 15,714 59,380 50,398
- -------------------------------------------------------------------------------------------------------------------------------
AVERAGE SHARES OUTSTANDING 36,222 36,107 36,216 36,081
- -------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS PER SHARE $ .66 .44 1.64 1.40
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER COMMON SHARE $ .025 .025 .075 .075
- -------------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER CLASS B COMMON SHARE $ .0225 .0225 .0675 .0675
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
NINE MONTHS ENDED
AUGUST 31,
1996 1995
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 59,380 50,398
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization 9,390 8,048
Equity in earnings of partnerships (38,455) (22,838)
Gains on sales of other real estate (2,741) (15,086)
Decrease in deferred income taxes (11,393) (547)
Changes in assets and liabilities, net of effect of acquisitions:
Decrease (increase) in receivables (7,414) 11,608
Increase in inventories (57,177) (56,071)
Decrease (increase) in financial services' loans held for sale or disposition (1,215) 48
Increase in accounts payable and accrued liabilities 14,500 6,099
Other, net 5,807 831
------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (29,318) (17,510)
------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Operating properties and equipment:
Additions (19,966) (8,768)
Sales 6,080 20,444
Sales of land held for investment 9,254 9,833
Decrease in investments in and advances to partnerships 20,417 7,758
Increase in financial services' loans held for investment (6,412) (33,235)
Purchase of investment securities (81,344) (30,172)
Receipts from investment securities 44,850 8,827
Acquisition of businesses (121,405) -
Other, net 1,116 1,417
------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (147,410) (23,896)
------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit agreement 176,300 68,300
Net borrowings (repayments) under financial services' short-term debt (15,002) 12,600
Mortgage notes and other debts payable:
Proceeds from borrowings 113,001 152,486
Principal payments (101,644) (191,118)
Limited-purpose finance subsidiaries:
Principal reduction of mortgage loans and other receivables 12,332 11,175
Principal reduction of bonds and notes payable (11,881) (9,630)
Common stock:
Issuance 913 692
Dividends (2,618) (2,611)
------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 171,401 41,894
------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (5,327) 488
Cash and cash equivalents at beginning of period 30,243 17,942
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 24,916 18,430
------------------------------------------------------------------------------------------------------------------------------
Summary of cash and cash equivalent balances:
Homebuilding and investment $ 15,351 13,601
Financial services 9,565 4,829
------------------------------------------------------------------------------------------------------------------------------
$ 24,916 18,430
------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 23,831 15,746
Cash paid for income taxes $ 51,178 36,361
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
LENNAR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(1) BASIS OF CONSOLIDATION
The accompanying consolidated condensed financial statements include the
accounts of Lennar Corporation, all wholly-owned subsidiaries and partnerships
in which a controlling interest is held (the "Company"). All significant
intercompany transactions and balances have been eliminated. The Company's
investments in partnerships in which less than a controlling interest is held
are accounted for by the equity method. The financial statements have been
prepared by management without audit by independent public accountants and
should be read in conjunction with the November 30, 1995 audited financial
statements in the Company's Annual Report on Form 10-K for the year then ended.
However, in the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for fair presentation of the accompanying
consolidated condensed financial statements have been made.
(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.
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 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 and others. Since 1994, this division has been acquiring,
at a discount, issues of the unrated portion of debt securities which are
collateralized by real estate loans. The division has only invested in
securities in which it is the special servicer on behalf of all the certificate
holders of the security. The division earns interest on these investments as
well as fees for the special servicing activities.
Financial services activities are conducted primarily through Lennar Financial
Services, Inc. ("LFS") 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 portion of those securities.
The limited-purpose finance subsidiaries of LFS have placed mortgages and other
receivables as collateral for various long-term financings. These
limited-purpose finance subsidiaries are not considered a part of the financial
services operations and are reported separately.
(3) ACQUISITIONS
On December 29, 1995, the Company purchased the assets and operations of the
residential business of Houston-based Friendswood Development Company, the real
estate subsidiary of Exxon Corporation, for $110.5 million in cash. The Company
financed this transaction through borrowings under its existing revolving credit
agreement. The acquisition of these assets and operations has been accounted for
using the purchase method of accounting.
4
<PAGE>
During 1995, the Company acquired virtually all of the secured debt of Bramalea
California, Inc. ("BCI") for approximately $50 million after BCI had filed for
Chapter 11 bankruptcy protection. The Company acquired this debt, at a
significant discount from its face amount, in order to convert the debt into an
ownership interest when BCI was reorganized out of bankruptcy. During the third
quarter of 1996, the bankruptcy plan of BCI was confirmed and Lennar completed
its acquisition. The total purchase price for BCI was approximately $60 million,
which included the $50 million paid to acquire BCI's debt and approximately $10
million of advances to BCI subsequent to the purchase of its debt. As a result
of this transaction, the Company recorded a substantial deferred tax benefit,
which will be realized as the Company disposes of the assets.
(4) 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 the period.
(5) RESTRICTED CASH
Cash includes restricted deposits of $2.4 million and $3.1 million as of August
31, 1996 and November 30, 1995, respectively. These balances are comprised
primarily of escrow deposits related to new home sales and security deposits
from tenants of commercial and apartment properties.
(6) FINANCIAL SERVICES
The assets and liabilities related to the Company's financial services
operations (as described in Note 2) are summarized as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
AUGUST 31, NOVEMBER 30,
(IN THOUSANDS) 1996 1995
-----------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investment securities available-for-sale $ 177,800 141,832
Loans held for sale or disposition, net 143,825 123,842
Loans and mortgage-backed securities
held for investment, net 20,809 43,506
Investments in and advances to partnerships 13,900 27,301
Cash and receivables, net 15,339 14,416
Other 5,195 2,912
-----------------------------------------------------------------------------------------
$ 376,868 353,809
-----------------------------------------------------------------------------------------
Liabilities:
Notes and other debts payable $ 273,577 228,488
Other 16,021 14,703
-----------------------------------------------------------------------------------------
$ 289,598 243,191
-----------------------------------------------------------------------------------------
</TABLE>
(7) SUMMARY OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the nine months ended August 31, 1996, the Company acquired commercial
mortgage-backed securities for $106.9 million. Of this amount, $81.3 million was
paid in cash and the balance of $25.6 million was financed by the sellers.
During the same period of 1995, the Company acquired commercial mortgage-backed
securities for $65.1 million. Of this amount, $30.2 million was paid in cash and
the balance of $34.9 million was financed by the sellers. Also in 1996, the
Company acquired a commercial property for $26.1 million, of which $8.7 million
was paid in cash and the Company assumed a $17.4 million mortgage.
5
<PAGE>
As discussed in Note 3, the Company completed its acquisition of Bramalea
California, Inc. ("BCI"). Approximately $50 million of the purchase price
related to the secured debt of BCI which was purchased by the Company in 1995
and converted into an ownership interest upon completion of the acquisition in
the third quarter of 1996.
(8) RECLASSIFICATIONS
Certain prior year amounts in the consolidated condensed financial statements
have been reclassified to conform with the current period presentation.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) MATERIAL CHANGES IN RESULTS OF OPERATIONS.
OVERVIEW
Net earnings were $23.9 million and $59.4 million, respectively, for the
three-month and nine-month periods ended August 31, 1996, compared to $15.7
million and $50.4 million, respectively, for the same periods in 1995. The
quarterly and year-to-date 1996 operating earnings for the Homebuilding and
Financial Services Divisions increased from the same periods in 1995. Operating
earnings for the Investment Division were higher for the third quarter of 1996,
but were lower for the nine-month period as a result of a significant sale of
real estate which occurred in the second quarter of 1995. There were no sales of
comparable size in 1996. Additionally, interest expense was higher for both the
three-month and nine-month periods of 1996 primarily as a result of higher debt
levels, as well as an increase in the number of homes delivered which increased
the amount of previously capitalized interest charged to expense.
HOMEBUILDING
The following tables set forth selected financial and operational information
related to the Homebuilding Division for the periods indicated (unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(DOLLARS IN THOUSANDS, EXCEPT AUGUST 31, AUGUST 31,
AVERAGE SALES PRICES) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales of homes $ 248,798 156,751 609,939 433,244
Other 12,514 3,151 28,475 12,279
- --------------------------------------------------------------------------------------------------
Total revenues 261,312 159,902 638,414 445,523
COSTS AND EXPENSES:
Cost of homes sold 200,688 127,997 495,562 351,187
Cost of other revenues 7,029 1,875 15,993 9,159
Selling, general and administrative 27,121 16,281 70,944 49,651
- --------------------------------------------------------------------------------------------------
Total costs and expenses 234,838 146,153 582,499 409,997
- --------------------------------------------------------------------------------------------------
OPERATING EARNINGS $ 26,474 13,749 55,915 35,526
- --------------------------------------------------------------------------------------------------
Gross profit - home sales $ 48,110 28,754 114,377 82,057
Gross profit percentage 19.3% 18.3% 18.8% 18.9%
S,G&A as a percentage of homebuilding
revenues 10.4% 10.2% 11.1% 11.1%
Average sales price $ 152,600 133,600 146,600 137,400
- --------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF HOME AND BACKLOG DATA
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
DELIVERIES 1996 1995 1996 1995
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florida 828 803 2,315 2,243
Arizona 201 124 517 356
Texas 587 246 1,315 554
California 14 - 14 -
--------------------------------------------------------------------------------------------------
1,630 1,173 4,161 3,153
==================================================================================================
NEW ORDERS
--------------------------------------------------------------------------------------------------
Florida 751 878 2,572 2,642
Arizona 139 175 543 419
Texas 470 247 1,491 630
California 19 - 19 -
--------------------------------------------------------------------------------------------------
1,379 1,300 4,625 3,691
==================================================================================================
BACKLOG - HOMES
--------------------------------------------------------------------------------------------------
Florida 1,574 1,721
Arizona 328 301
Texas 562 219
California 40 -
--------------------------------------------------------------------------------------------------
2,504 2,241
--------------------------------------------------------------------------------------------------
BACKLOG - DOLLAR VALUE (IN THOUSANDS) $ 404,474 317,702
==================================================================================================
</TABLE>
Homebuilding revenues in the three-month and nine-month periods ended August 31,
1996 were $261.3 million and $638.4 million, respectively, compared to $159.9
million and $445.5 million, respectively, for the same periods in 1995.
Homebuilding revenues were higher in both of the 1996 periods due to a higher
number of home deliveries and an increase in the average sales prices. New home
deliveries for the 1996 three-month and nine-month periods were 1,630 and 4,161,
respectively, compared to 1,173 and 3,153, respectively, for the same periods of
1995. The average sales prices of homes delivered during the three-month and
nine-month periods ended August 31, 1996 were $152,600 and $146,600,
respectively, compared to $133,600 and $137,400, respectively, in the
corresponding periods of the prior year. The higher average sales prices were
due to a proportionately greater number of sales of higher priced homes.
Gross profit percentages from the sales of homes were 19.3% and 18.8%,
respectively, in the three-month and nine-month periods ending August 31, 1996,
compared to 18.3% and 18.9%, respectively, in the corresponding periods of the
prior year. These changes were primarily attributable to the mix of homes
delivered.
Selling, general and administrative expenses increased to $27.1 million and
$70.9 million for the three-month and nine-month periods ended August 31, 1996,
respectively, from $16.3 million and $49.7 million, respectively, for the
comparable periods in 1995. These increases in expenses were primarily the
result of the acquisition of Friendswood Development Company and additional
expenses associated with the increased sales revenues. Also, contributing to the
increases were additional expenses relating to the Company's homebuilding
expansion into California and start-up expenses for a new adult community in the
Orlando area. As a percentage of homebuilding revenues, selling, general and
administrative expenses remained relatively constant at 10.4% and 11.1%,
respectively, for the three-month and nine-month periods ended August 31, 1996,
compared to 10.2% and 11.1%, respectively, for the same periods in 1995.
8
<PAGE>
At August 31, 1996, the Company had approximately $404.5 million (2,504 homes)
of sales contracts in backlog as compared to $317.7 million (2,241 homes) at the
end of the same period a year ago. The increase in the backlog was attributable
to an increase in new orders, including Village Builders (the homebuilding
operation of Friendswood Development Company).
INVESTMENT
The following table presents the selected financial data related to the
Investment Division for the periods indicated (unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
(DOLLARS IN THOUSANDS) 1996 1995 1996 1995
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 13,617 11,652 42,245 37,330
Equity in earnings of partnerships 11,394 7,401 26,962 22,838
Management fees 4,428 2,095 14,586 7,293
Sales of other real estate 3,644 4,592 8,958 30,271
Other 3,342 2,337 8,745 7,113
---------------------------------------------------------------------------------------------------------
Total revenues 36,425 28,077 101,496 104,845
COST OF SALES AND EXPENSES 19,623 14,388 50,736 51,311
---------------------------------------------------------------------------------------------------------
OPERATING EARNINGS $ 16,802 13,689 50,760 53,534
---------------------------------------------------------------------------------------------------------
</TABLE>
For the three-month and nine-month periods ended August 31, 1996, Investment
Division revenues were $36.4 million and $101.5 million, respectively, compared
to $28.1 million and $104.8 million, respectively, in the same periods of 1995.
Operating earnings were $16.8 million and $50.8 million, respectively, in the
third quarter and first nine months of 1996, compared to $13.7 million and $53.5
million, respectively, in the corresponding periods of 1995. The increases in
revenues and operating earnings for the 1996 three-month period were primarily
due to increases in equity in earnings of partnerships, rental income and
management fees. The decreases in revenues and operating earnings for the 1996
nine-month period were primarily due to the decline in sales of other real
estate. In the second quarter of 1995, a recreational facility was sold for
$16.5 million. There were no sales of comparable size in 1996. The decreases in
revenues and operating earnings from sales of other real estate were partially
offset by increases in rental income, equity in earnings of partnerships and
management fees. Rental income on operating properties increased primarily as a
result of the acquisition of an additional commercial property during the first
quarter of 1996. Management fees increased primarily as a result of incentive
fees received from the partnerships managed by the division. A significant
portion of partnership earnings and management fees are derived from loan
payoffs and asset sales which can vary substantially from period to period.
9
<PAGE>
FINANCIAL SERVICES
The following table presents the selected financial data related to the
Financial Services Division for the periods indicated (unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
(DOLLARS IN THOUSANDS) 1996 1995 1996 1995
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 20,680 14,875 59,955 40,193
COSTS AND EXPENSES 13,642 9,469 38,735 26,638
INTERCOMPANY INTEREST EXPENSE 24 653 210 1,853
---------------------------------------------------------------------------------------------------------
OPERATING EARNINGS $ 7,014 4,753 21,010 11,702
---------------------------------------------------------------------------------------------------------
Dollar volume of mortgages originated $ 135,876 191,135 431,653 456,113
---------------------------------------------------------------------------------------------------------
Number of mortgages originated 1,200 1,700 3,800 4,200
---------------------------------------------------------------------------------------------------------
Principal balance of servicing portfolio $ 3,340,983 3,388,265
---------------------------------------------------------------------------------------------------------
Number of loans serviced 42,600 44,500
---------------------------------------------------------------------------------------------------------
</TABLE>
Operating earnings of the Financial Services Division were $7.0 million and
$21.0 million, respectively, for the three-month and nine-month periods ended
August 31, 1996, compared to $4.8 million and $11.7 million, respectively, for
the same periods of 1995. These increases were primarily attributable to
additional operating earnings from the division's investment in commercial
mortgage-backed securities, commercial loans and partnerships.
INTEREST EXPENSE
Interest expense during the three-month and nine-month periods ended August 31,
1996 was $7.8 million and $21.2 million, respectively, compared to $4.7 million
and $12.4 million, respectively, in the corresponding periods of the prior year.
The increase in interest expense was the result of higher debt levels, primarily
due to the Homebuilding Division's expansion in Texas and into California, as
well as an increase in the number of homes delivered which increased the amount
of previously capitalized interest charged to expense. Previously capitalized
interest charged to interest expense during the third quarter and first nine
months of 1996 was $5.0 million and $13.6 million, respectively, compared to
$4.3 million and $11.6 million, respectively, for the comparable periods last
year.
10
<PAGE>
(2) MATERIAL CHANGES IN FINANCIAL CONDITION.
During the nine months ended August 31, 1996, $29.3 million was used in the
Company's operations, compared to $17.5 million used during the corresponding
period of the prior year. The Company's primary use of cash was $57.2 million to
increase inventories through land purchases, land development and seasonal
increases in construction in progress. The use of cash was partially offset by
the Company's net earnings and a $14.5 million increase in accounts payable and
accrued liabilities.
The primary use of cash in the nine months ended August 31, 1995 was $56.1
million used to increase inventories through land purchases, land development
and construction. The use of cash was partially offset by net earnings, an $11.6
million decrease in receivables and a $6.1 million increase in accounts payable
and accrued liabilities.
Cash used in investing activities was $147.4 million in the first nine months of
1996, compared to $23.9 million used in the first nine months of 1995. During
1996, $121.4 million of cash was used in the acquisition of businesses and $81.3
million was used to purchase investment securities (commercial mortgage-backed
securities) by both the Investment and Financial Services Divisions. These uses
of cash were partially offset by $44.9 million of sales and principal payments
provided by the Company's portfolio of investment securities. In addition, $20.4
million of cash was provided by the Company's partnerships. This was primarily
comprised of $75.8 million of distributions from partnerships, partially offset
by investments in new partnerships in both the Homebuilding and Investment
Divisions.
During 1995, the use of cash in investing activities was primarily due to $33.2
million to increase loans held for investment by the Company's financial
services operations and $30.2 million to acquire additional investment
securities. These uses of cash were partially offset by $20.4 million from sales
of operating properties, $9.8 million from sales of land held for investment,
$8.8 million of sales and principal payments provided by the Company's portfolio
of investment securities and $7.8 million provided by the Company's investments
in partnerships.
At August 31, 1996, the Company had an unsecured revolving credit agreement with
a five-year commitment of $450 million. Certain Financial Services Division
subsidiaries are co-borrowers under this facility and at August 31, 1996 their
borrowings under this agreement amounted to $55.0 million. The total amount
outstanding under the Company's revolving credit agreement at August 31, 1996
was $347.5 million.
11
<PAGE>
PART II OTHER INFORMATION
ITEMS 1-5. NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
(27) Financial Data Schedule.
(b) Reports on Form 8-K: Registrant was not required to file,
and has not filed, a Form 8-K during the quarter for which
this report is being filed.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LENNAR CORPORATION
-------------------------------
(Registrant)
Date: OCTOBER 14, 1996 ALLAN J. PEKOR
----------------- -------------------------------
Allan J. Pekor
Financial Vice President
Chief Financial Officer
Date: OCTOBER 14, 1996 JAMES T. TIMMONS
------------------ --------------------------------
James T. Timmons
Controller
Chief Accounting Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> AUG-31-1996
<CASH> 15,351
<SECURITIES> 0
<RECEIVABLES> 51,968
<ALLOWANCES> 0
<INVENTORY> 682,076
<CURRENT-ASSETS> 749,395
<PP&E> 259,182
<DEPRECIATION> (41,065)
<TOTAL-ASSETS> 1,725,183
<CURRENT-LIABILITIES> 191,513
<BONDS> 852,082
0
0
<COMMON> 3,592
<OTHER-SE> 661,975
<TOTAL-LIABILITY-AND-EQUITY> 1,725,183
<SALES> 609,939
<TOTAL-REVENUES> 804,855
<CGS> 495,562
<TOTAL-COSTS> 562,291
<OTHER-EXPENSES> 123,989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,230
<INCOME-PRETAX> 97,345
<INCOME-TAX> 37,965
<INCOME-CONTINUING> 59,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,380
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.64
</TABLE>
