================================================================================
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, 1998
Commission File Number: 1-11749
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 September 30, 1998:
Common 48,226,304
Class B Common 9,909,631
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands, except share amounts)
(UNAUDITED)
AUGUST 31, NOVEMBER 30,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
HOMEBUILDING:
Cash and cash equivalents $ 49,372 52,926
Receivables, net 28,163 34,646
Inventories 1,308,147 806,975
Operating properties and equipment, net 11,857 8,598
Investments in partnerships 148,775 108,064
Other assets 124,692 127,631
-----------------------------------
1,671,006 1,138,840
FINANCIAL SERVICES 258,652 156,988
LIMITED-PURPOSE FINANCE SUBSIDIARIES - COLLATERAL FOR BONDS AND NOTES PAYABLE 37,888 47,456
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,967,546 1,343,284
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING:
Accounts payable and other liabilities $ 262,347 198,386
Income taxes currently payable 13,353 22,634
Mortgage notes and other debts payable 803,129 527,303
-----------------------------------
1,078,829 748,323
FINANCIAL SERVICES 201,998 108,506
LIMITED-PURPOSE FINANCE SUBSIDIARIES - BONDS AND NOTES PAYABLE 37,888 47,456
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,318,715 904,285
STOCKHOLDERS' EQUITY:
Common stock of $0.10 par value per share,
48,226,304 shares outstanding at August 31, 1998 4,823 4,322
Class B common stock of $0.10 par value per share,
9,909,631 shares outstanding at August 31, 1998 991 994
Additional paid-in capital 523,290 388,797
Retained earnings 119,727 44,886
- ------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 648,831 438,999
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,967,546 1,343,284
========================================================================================================================
</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,
---------------------------- -----------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Homebuilding $ 558,723 310,115 1,443,358 765,386
Financial services 61,287 21,577 147,361 67,981
Limited-purpose finance subsidiaries 925 928 3,034 3,632
- ------------------------------------------------------------------------------------------------------------------
Total revenues 620,935 332,620 1,593,753 836,999
- ------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Homebuilding 487,629 277,439 1,279,106 700,130
Financial services 52,200 12,508 125,952 38,503
Limited-purpose finance subsidiaries 925 924 3,034 3,628
Corporate general and administrative 8,303 3,655 21,095 10,265
Interest 13,437 5,460 36,443 14,891
- ------------------------------------------------------------------------------------------------------------------
Total costs and expenses 562,494 299,986 1,465,630 767,417
- ------------------------------------------------------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 58,441 32,634 128,123 69,582
Income taxes 23,376 12,727 51,249 27,137
- ------------------------------------------------------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS 35,065 19,907 76,874 42,445
EARNINGS FROM DISCONTINUED OPERATIONS
(net of income taxes: three months - $5,354;
nine months - $17,433) - 8,374 - 27,267
- ------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 35,065 28,281 76,874 69,712
==================================================================================================================
BASIC EARNINGS PER SHARE:
Continuing operations $ 0.61 0.55 1.40 1.18
Discontinued operations - 0.23 - 0.76
- ------------------------------------------------------------------------------------------------------------------
$ 0.61 0.78 1.40 1.94
==================================================================================================================
DILUTED EARNINGS PER SHARE:
Continuing operations $ 0.59 0.55 1.37 1.17
Discontinued operations - 0.23 - 0.75
- ------------------------------------------------------------------------------------------------------------------
$ 0.59 0.78 1.37 1.92
==================================================================================================================
- ------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER COMMON SHARE $ 0.0125 0.025 0.0375 0.075
- ------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER CLASS B COMMON SHARE $ 0.01125 0.0225 0.03375 0.0675
==================================================================================================================
</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,
-------------------------------
1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings from continuing operations $ 76,874 42,445
Earnings from discontinued operations - 27,267
Adjustments to reconcile net earnings to net cash used in operating
activities:
Depreciation and amortization 15,630 6,455
Amortization of discount/premium on debt, net (2,167) -
Equity in earnings of partnerships (8,923) (29,905)
Gain on sales of other real estate (2,378) (16,160)
Deferred income taxes 11,026 (11,823)
Changes in assets and liabilities, net of effect of acquisitions:
Decrease in receivables 7,714 13,404
Increase in inventories (211,107) (128,794)
Increase in other assets (3,150) (5,922)
Increase in financial services loans held for sale or disposition (35,014) (5,576)
Increase in accounts payable and accrued liabilities 55,100 14,378
Decrease in income taxes currently payable (9,281) (18,543)
- --------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (105,676) (112,774)
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Operating properties and equipment:
Additions (10,432) (43,469)
Sales 6 17,319
Decrease (increase) in investments in partnerships (21,653) 70,005
Decrease in financial services mortgage loans 428 16
Purchases of investment securities (2,603) (106,056)
Receipts from investment securities 1,600 152,459
Acquisitions of properties and businesses, net of cash acquired (188,725) -
Other, net 140 (1,211)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (221,239) 89,063
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit agreement 35,450 27,900
Net borrowings (repayments) under financial services short-term debt 59,792 (7,493)
Net proceeds from issuance of zero coupon senior convertible debentures 222,960 -
Mortgage notes and other debts payable:
Proceeds from borrowings 113,700 147,254
Principal payments (121,687) (133,036)
Limited-purpose finance subsidiaries:
Principal reduction of mortgage loans and other receivables 9,491 7,253
Principal reduction of bonds and notes payable (8,994) (7,102)
Common stock:
Issuance 40,894 2,107
Dividends (2,033) (2,626)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 349,573 34,257
- --------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 22,658 10,546
Cash and cash equivalents at beginning of period 62,599 60,670
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 85,257 71,216
==============================================================================================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows -- Continued
(Unaudited)
(In thousands)
NINE MONTHS ENDED
AUGUST 31,
-------------------------------
1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Summary of cash and cash equivalent balances:
Homebuilding $ 49,372 51,624
Financial services 35,885 13,981
Discontinued operations - 5,611
- --------------------------------------------------------------------------------------------------------------
$ 85,257 71,216
- --------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 13,078 23,315
Cash paid for income taxes $ 39,002 74,185
Supplemental disclosures of non-cash investing and financing activities:
Purchases of inventory financed by sellers $ 22,300 25,300
==============================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
LENNAR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include the
accounts of Lennar Corporation, its wholly-owned subsidiaries and partnerships
in which it holds a controlling interest (the "Company"). The Company's
investments in partnerships (and similar entities) in which a significant, but
less than controlling, interest is held are accounted for by the equity method.
All significant intercompany transactions and balances have been eliminated. The
financial statements have been prepared by management without audit by
independent public accountants and should be read in conjunction with the
November 30, 1997 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. Certain prior year amounts in the consolidated condensed
financial statements have been reclassified to conform with the current period
presentation.
As a result of the Company's spin-off of its commercial real estate investment
and management business, including the Investment Division business segment, on
October 31, 1997 (the "Spin-off"), the accompanying 1997 financial statements
have been restated to reflect the Investment Division as a discontinued
operation (see Note 3). Accordingly, the revenues and expenses of the Investment
Division have been excluded from the respective captions in the consolidated
condensed statements of earnings and have been reported as "earnings from
discontinued operations" for the three and nine months ended August 31, 1997.
The Company historically has experienced, and expects to continue to experience,
variability in quarterly results. The consolidated condensed statements of
earnings for the three and nine months ended August 31, 1998 are not necessarily
indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
(2) BUSINESS SEGMENTS
The Company has two business segments: Homebuilding and Financial Services. The
limited-purpose finance subsidiaries are not considered a business segment. See
Note 3 regarding the discontinued Investment Division business segment.
Homebuilding operations include the construction and sale of single-family
attached and detached homes in Florida, California, Texas, Arizona and Nevada.
These activities also include the purchase, development and sale of residential
land. The Company has a non-controlling 50% interest in Lennar Land Partners
("LLP"), a general partnership formed with LNR Property Corporation ("LNR") at
the time of the Spin-off, to acquire, develop and sell land to Lennar, LNR and
others. The Company manages the day-to-day operations of LLP and receives a
management fee. On October 31, 1997, the Company completed a merger with Pacific
Greystone Corporation. The merger expanded the Company's homebuilding operations
in California and Arizona and provided the Company with operations in Nevada.
5
<PAGE>
Financial Services activities are conducted primarily through Lennar Financial
Services, Inc. ("LFS") and its subsidiaries. These companies provide mortgage
financing, title insurance and closing services for Lennar homebuyers and
others; acquire, package and resell mortgage loans and mortgage-backed
securities; perform mortgage loan servicing activities and provide cable
television and alarm monitoring services to residents of Lennar communities and
others.
In prior years, the 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 trustees. These
limited-purpose finance subsidiaries are not considered a part of the financial
services operations and are reported separately.
(3) DISCONTINUED OPERATIONS
On June 10, 1997, the Company's Board of Directors approved a plan to spin-off
the commercial real estate investment and management business, which primarily
consisted of the Investment Division segment. The Spin-off, which was conducted
through the distribution of the stock of LNR Property Corporation to existing
shareholders of the Company in the form of a tax-free distribution, was
completed effective October 31, 1997. The components of earnings from
discontinued operations were as follows for the three and nine months ended
August 31, 1997 (unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(IN THOUSANDS) AUGUST 31, 1997 AUGUST 31, 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 19,831 98,268
Costs and expenses 1,638 43,072
- -----------------------------------------------------------------------------------------------------
Operating earnings 18,193 55,196
Interest 4,465 10,496
- -----------------------------------------------------------------------------------------------------
Earnings from discontinued operations before income
taxes 13,728 44,700
Income taxes 5,354 17,433
- -----------------------------------------------------------------------------------------------------
Earnings from discontinued operations $ 8,374 27,267
=====================================================================================================
</TABLE>
(4) ACQUISITIONS
In the third quarter of 1998, the Company acquired the properties of two
California homebuilders, ColRich Communities and Polygon Communities. In the
first quarter of 1998, the Company acquired a Northern California homebuilder,
Winncrest Homes, and the North American Asset Development Group of companies,
which provide title and escrow services in California, Arizona, and Colorado. In
connection with these acquisitions for $200 million in cash (inclusive of cash
acquired of $12 million) and the issuance of $95 million in common stock, the
Company received assets with a fair value of $334 million, assumed liabilities
totaling $46 million and recorded goodwill of $7 million. The acquisitions were
accounted for using the purchase method of accounting.
(5) ISSUANCE OF ZERO COUPON SENIOR CONVERTIBLE DEBENTURES
In the third quarter of 1998, the Company issued, for $229 million, Zero Coupon
Senior Convertible Debentures due 2018 ("Debentures") with a face amount at
maturity of $493 million. The Debentures were issued at a price of $464.31 per
$1,000 face amount at maturity, which equates to a yield to maturity over the
life of the Debentures of 3 7/8%. Proceeds from the offering, after
6
<PAGE>
underwriting discount and expenses, were approximately $223 million. The Company
used the proceeds to repay $100 million in short-term loans which were used to
fund acquisitions, and to reduce balances outstanding under its revolving credit
facilities. The Debentures are convertible at any time into the Company's common
stock at the rate of 12.4 shares per $1,000 face amount at maturity, which
equates to an initial conversion price of $37.50 per share, although if
converted during the first five years, the Company may elect to pay cash equal
to the fair value of the common stock at the time of the conversion. Holders
have the option to require the Company to repurchase the Debentures on any of
the fifth, tenth, or fifteenth anniversary dates from the issue date for the
initial issue price plus accrued original issue discount. The Company has the
option to satisfy the repurchases with any combination of cash and/or shares of
the Company's common stock. The Company will have the option to redeem the
Debentures, in cash, at any time after the fifth anniversary date for the
initial issue price plus accrued original issue discount.
(6) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which requires a dual presentation of basic and diluted earnings per
share on the face of the statement of earnings. Basic earnings per share is
computed by dividing earnings attributable to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the Company. The Company adopted SFAS No. 128 in the first
quarter of 1998. Earnings per share for all prior periods presented have been
restated to conform with SFAS No. 128. Basic and diluted earnings per share were
calculated as follows (unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
-------------------------- -----------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NUMERATOR:
Numerator for basic earnings per share -
net earnings $ 35,065 28,281 76,874 69,712
Interest on zero coupon convertible
debentures 391 - 391 -
- ---------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per share $ 35,456 28,281 77,265 69,712
=========================================================================================================
DENOMINATOR:
Denominator for basic earnings per share -
weighted average shares 57,447 36,041 54,834 36,000
Effect of dilutive securities:
Employee stock options 1,059 409 1,034 349
Zero coupon convertible debentures 1,971 - 657 -
- ---------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 60,477 36,450 56,525 36,349
=========================================================================================================
Basic earnings per share $ 0.61 0.78 1.40 1.94
=========================================================================================================
Diluted earnings per share $ 0.59 0.78 1.37 1.92
=========================================================================================================
</TABLE>
7
<PAGE>
(7) 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)
(IN THOUSANDS) AUGUST 31, 1998 NOVEMBER 30, 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and receivables, net $ 44,412 14,993
Mortgage loans, net 19,138 19,600
Loans held for sale or disposition, net 139,344 106,020
Title plants 15,917 800
Other 39,841 15,575
- ------------------------------------------------------------------------------------
$ 258,652 156,988
====================================================================================
LIABILITIES:
Notes and other debts payable $ 157,210 86,936
Other 44,788 21,570
- ------------------------------------------------------------------------------------
$ 201,998 108,506
====================================================================================
</TABLE>
(8) SUPPLEMENTAL INFORMATION ON GREYSTONE HOMES, INC.
Greystone Homes, Inc. ("Greystone Homes") is a wholly-owned subsidiary of the
Company. Greystone Homes is the obligor on 10.75% Senior Notes ("Notes") with a
current aggregate principal amount of $124.8 million. The Notes were recorded at
fair value of $138.2 million at the time of the merger between the Company and
Pacific Greystone Corporation. The Notes are fully and unconditionally
guaranteed by the Company. Separate financial statements and other related
disclosures for Greystone Homes are not presented, as the Company's management
does not consider the information material to investors. Summarized financial
information for Greystone Homes for the periods indicated is presented below.
<TABLE>
<CAPTION>
SUMMARY CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS) AUGUST 31, 1998 NOVEMBER 30, 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 615 5,565
Inventories 478,202 330,568
Goodwill, net 43,894 45,612
Other assets 23,095 42,521
- ------------------------------------------------------------------------------------
$ 545,806 424,266
====================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accounts payable and other liabilities $ 70,979 47,460
Intercompany payable to Lennar Corporation 107,810 19,600
Notes payable 687 4,160
Senior unsecured notes payable 134,750 137,812
- ------------------------------------------------------------------------------------
314,226 209,032
Stockholder's equity 231,580 215,234
- ------------------------------------------------------------------------------------
$ 545,806 424,266
====================================================================================
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SUMMARY CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
-----------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- ----------------------------------
PRO FORMA PRO FORMA
AUGUST 31, SEPTEMBER 30, AUGUST 31, SEPTEMBER 30,
(IN THOUSANDS) 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOMEBUILDING REVENUES $ 164,897 158,585 435,580 409,308
COSTS AND EXPENSES:
Cost of homes sold 132,730 125,492 343,513 324,303
Selling, general and
administrative 20,083 15,392 54,632 41,137
Interest and other, net 3,779 3,963 10,191 9,871
- -----------------------------------------------------------------------------------------------------
Total costs and expenses 156,592 144,847 408,336 375,311
EARNINGS BEFORE INCOME
TAXES 8,305 13,738 27,244 33,997
Income taxes 3,322 5,720 10,898 14,274
- -----------------------------------------------------------------------------------------------------
NET EARNINGS $ 4,983 8,018 16,346 19,723
=====================================================================================================
</TABLE>
The pro forma results for the three and nine months ended September 30, 1997
reflect all relevant purchase accounting adjustments resulting from the
Company's merger with Pacific Greystone Corporation.
(9) CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of August 31, 1998 and November 30, 1997 included
$21.6 million and $41.9 million, respectively, of cash held in escrow for
periods of up to three days.
(10) NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS No. 131 requires public companies to
report certain information about their operating segments in their annual and
interim financial statements. It also requires public companies to report
certain information about their products and services, the geographic areas in
which they operate and their major customers. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997 and the Company will adopt the
statement no later than December 1, 1998. This statement will require additional
financial statement disclosures but will not have an impact on the Company's
results of operations or financial position.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CERTAIN STATEMENTS CONTAINED IN THE FOLLOWING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MAY BE
"FORWARD-LOOKING STATEMENTS" AS DEFINED IN THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO, CHANGES IN GENERAL
ECONOMIC CONDITIONS, THE MARKET FOR HOMES GENERALLY AND IN AREAS WHERE THE
COMPANY HAS DEVELOPMENTS, THE AVAILABILITY AND COST OF LAND SUITABLE FOR
RESIDENTIAL DEVELOPMENT, MATERIALS PRICES, LABOR COSTS, INTEREST RATES, CONSUMER
CONFIDENCE, COMPETITION, ENVIRONMENTAL FACTORS AND GOVERNMENT REGULATIONS
AFFECTING THE COMPANY'S OPERATIONS. SEE THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED NOVEMBER 30, 1997 FOR A FURTHER DISCUSSION OF THESE AND OTHER
RISKS AND UNCERTAINTIES APPLICABLE TO THE COMPANY'S BUSINESS.
(1) RESULTS OF OPERATIONS
OVERVIEW
On October 31, 1997, Lennar completed the spin-off of its commercial real estate
investment and management business consisting of the Investment Division
segment, the portions of the Financial Services Division involved in commercial
mortgage lending and investments and certain assets of the Homebuilding Division
utilized in related businesses. The spin-off was conducted through the
distribution of the stock of LNR Property Corporation ("LNR"). At the time of
the spin-off transaction, Lennar and LNR formed a general partnership ("Lennar
Land Partners") to acquire, develop and sell land. Lennar and LNR contributed
properties to Lennar Land Partners in exchange for 50% general partnership
interests in Lennar Land Partners. Lennar also completed a merger with Pacific
Greystone Corporation ("Greystone"), thereby significantly expanding its
homebuilding operations in California and Arizona and entering the Nevada
market. The merger was effective October 31, 1997.
Earnings from continuing operations increased to $35.1 million, or $0.59 per
share diluted ($0.61 per share basic), in the third quarter of 1998, from $19.9
million, or $0.55 per share (basic and diluted), in the third quarter of 1997.
For the nine months ended August 31, 1998, earnings from continuing operations
were $76.9 million, or $1.37 per share diluted ($1.40 per share basic), compared
to $42.4 million, or $1.17 per share diluted ($1.18 per share basic), a year
earlier. Homebuilding operating earnings increased significantly in both periods
due to growth in the Company's California market as a result of the merger with
Greystone on October 31, 1997, acquisitions made during 1998 and growth in the
Company's existing California operations, as well as growth in the Texas market.
Financial Services operating earnings were relatively consistent in the third
quarter and lower in the first nine months of 1998 compared to the same periods
last year. Earnings in both 1998 periods include a significant contribution from
North American Title, which was acquired in January 1998. Earnings in both 1998
periods also reflect the absence of the portions of this division previously
involved in commercial mortgage lending and investments which were included in
the assets spun-off on October 31, 1997.
10
<PAGE>
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
AUGUST 31, AUGUST 31,
(DOLLARS IN THOUSANDS, EXCEPT ---------------------------- ---------------------------
AVERAGE SALES PRICES) 1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales of homes $ 545,512 290,687 1,395,070 708,992
Sales of land and other revenues 13,211 19,428 48,288 56,394
- -------------------------------------------------------------------------------------------------
Total revenues 558,723 310,115 1,443,358 765,386
COSTS AND EXPENSES:
Cost of homes sold 427,376 232,606 1,100,205 573,287
Cost of land and other expenses 10,293 12,565 34,546 37,031
Selling, general and administrative 49,960 32,268 144,355 89,812
- -------------------------------------------------------------------------------------------------
Total costs and expenses 487,629 277,439 1,279,106 700,130
- -------------------------------------------------------------------------------------------------
OPERATING EARNINGS $ 71,094 32,676 164,252 65,256
=================================================================================================
Gross margin - home sales $ 118,136 58,081 294,865 135,705
Gross margin percentage 21.7% 20.0% 21.1% 19.1%
S,G&A as a percentage of total
homebuilding revenues 8.9% 10.4% 10.0% 11.7%
Average sales price $ 194,000 165,000 192,000 160,000
=================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF HOME AND BACKLOG DATA
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
---------------------- ------------------------
DELIVERIES 1998 1997 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florida 851 915 2,421 2,286
California 908 109 1,979 209
Texas 662 582 1,841 1,480
Arizona 292 158 803 450
Nevada 98 - 240 -
- -----------------------------------------------------------------------------
2,811 1,764 7,284 4,425
=============================================================================
NEW ORDERS
- -----------------------------------------------------------------------------
Florida 1,069 861 3,163 2,698
California 744 174 2,246 490
Texas 603 696 2,016 1,795
Arizona 262 119 911 421
Nevada 97 - 317 -
- -----------------------------------------------------------------------------
2,775 1,850 8,653 5,404
=============================================================================
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AUGUST 31,
------------------------
BACKLOG - HOMES 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
Florida 2,037 1,617
California 1,593 320
Texas 843 753
Arizona 562 218
Nevada 195 -
- -----------------------------------------------------------------------------
5,230 2,908
- -----------------------------------------------------------------------------
BACKLOG - DOLLAR VALUE (IN THOUSANDS) $ 1,072,774 537,928
=============================================================================
</TABLE>
Homebuilding revenues increased significantly in the three and nine months ended
August 31, 1998 compared to the same periods in 1997 due to increases in the
number of home deliveries and average sales price in both periods. The fourth
quarter 1997 merger with Greystone (which has operations primarily in
California) and expansion of the Company's existing California operations
significantly contributed to the increases in both new home deliveries and the
average sales price of homes delivered. In addition, the Company's Texas
homebuilding operations contributed to the increase in the number of homes
delivered in both 1998 periods.
Gross margin percentages from sales of homes increased approximately 170 basis
points and 200 basis points in the three and nine months ended August 31, 1998,
respectively, compared to the same periods in 1997. These increases were
primarily due to expansion in California where the Company currently generates
higher margins than the overall Company average.
Sales of land and other revenues were lower in the three and nine months ended
August 31, 1998 compared to the same periods last year. These decreases were
primarily due to the transfer of land to Lennar Land Partners on October 31,
1997 and the resulting reduction in third party land sales by the Company. In
addition, land sales and margins on land sales may vary significantly from
period to period. Other revenues included equity in earnings from partnerships
of $1.8 million and $8.9 million in the three and nine months ended August 31,
1998, respectively, compared to ($0.1) million and $3.9 million in the same
periods in 1997, respectively. The 1998 increases were due primarily to the
Company's equity in earnings from Lennar Land Partners.
Selling, general and administrative expenses as a percentage of homebuilding
revenues decreased in both the three and nine months ended August 31, 1998
compared to the same periods in 1997. These decreases were due primarily to the
increase in revenues.
At August 31, 1998, the Company's backlog of sales contracts increased to 5,230
homes ($1.1 billion) compared to 2,908 homes ($537.9 million) at August 31,
1997. The increase in backlog was attributable to an increase in new orders in
all states in which the Company operates. The most significant increases in new
orders and backlog were generated in California, primarily as a result of the
merger with Greystone in October 1997 and acquisitions made in 1998.
12
<PAGE>
FINANCIAL SERVICES
The following table presents 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) 1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 61,287 21,577 147,361 67,981
Costs and expenses 52,200 12,508 125,952 38,503
- -------------------------------------------------------------------------------------------------------
Operating earnings $ 9,087 9,069 21,409 29,478
=======================================================================================================
Dollar volume of mortgages originated $ 262,818 100,849 676,565 256,896
- -------------------------------------------------------------------------------------------------------
Number of mortgages originated 1,987 870 5,212 2,259
- -------------------------------------------------------------------------------------------------------
Principal balance of servicing portfolio $ 3,119,000 3,147,000
- -------------------------------------------------------------------------------------------------------
Number of loans serviced 41,000 40,000
=======================================================================================================
</TABLE>
Operating earnings from the Financial Services Division were relatively
consistent in the third quarter and lower in the first nine months of 1998
compared to the same periods last year. Comparisons were impacted by the absence
during both 1998 periods of earnings from the Division's investment in
commercial real estate mortgage-backed securities, partnerships and commercial
loans ("Distributed Investments") which were distributed as part of the spin-off
of the Company's commercial real estate investment and management business in
1997. Excluding the 1997 operating results related to the Distributed
Investments, operating earnings increased $6.4 million and $11.8 million in the
three and nine months ended August 31, 1998 compared to the same periods last
year. These increases were primarily due to a significant contribution from
North American Title, which was acquired in January 1998. Higher mortgage
profits, which resulted from increased mortgage originations, also contributed
to the increases. The increases in dollar value and number of mortgages
originated resulted primarily from higher homebuilding deliveries and a greater
capture rate of Lennar homebuyers.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES
Corporate general and administrative expenses as a percentage of total revenues
were 1.3% in both the three and nine months ended August 31, 1998 compared to
1.1% and 1.2% in the three and nine months ended August 31, 1997, respectively.
INTEREST EXPENSE
Interest expense was higher in the three and nine months ended August 31, 1998
compared to the same periods last year as a result of higher debt levels due to
the Company's expansion and an increase in the amount of capitalized interest
charged to expense due to a greater number of homes delivered and an increase in
interest per home delivered.
13
<PAGE>
DISCONTINUED OPERATIONS
On June 10, 1997, the Company's Board of Directors approved a plan to spin-off
the commercial real estate investment and management business, which primarily
consisted of the Investment Division segment. The spin-off, which was conducted
through the distribution of the stock of LNR Property Corporation to existing
shareholders of the Company in the form of a tax-free distribution, was
completed effective October 31, 1997. Earnings from discontinued operations
totaled $8.4 million, or $0.23 per share (basic and diluted), in the third
quarter of 1997 and $27.3 million, or $0.75 per share diluted ($0.76 per share
basic), in the nine months ended August 31, 1997.
(2) PRO FORMA RESULTS OF OPERATIONS
The following pro forma results of operations for 1997 give effect to the
spin-off of the Company's commercial real estate investment and management
business, the merger with Pacific Greystone Corporation and the formation of
Lennar Land Partners, all of which were completed on October 31, 1997, as if
such transactions had occurred at the beginning of the periods. Lennar
Corporation pro forma results were derived from the three and nine months ended
August 31; Pacific Greystone Corporation pro forma results were derived from the
three and nine months ended September 30. The following pro forma information is
presented to show results of operations for 1998 and 1997 on a more comparable
basis. The following pro forma financial information for the 1997 periods is not
necessarily indicative of the results of operations which would have been
reported if the transactions had occurred on the dates or for the periods
indicated.
14
<PAGE>
The 1998 actual and 1997 pro forma results of operations and selected
Homebuilding financial data were as follows for the periods indicated
(unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
AUGUST 31/ AUGUST 31/
(DOLLARS IN THOUSANDS, EXCEPT AUGUST 31, SEPTEMBER 30, AUGUST 31, SEPTEMBER 30,
AVERAGE SALES PRICES) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Homebuilding $ 558,723 452,239 1,443,358 1,136,359
Financial services 61,287 12,088 147,361 36,104
Limited-purpose finance
subsidiaries 925 928 3,034 3,632
- --------------------------------------------------------------------------------------------------------
Total revenues $ 620,935 465,255 1,593,753 1,176,095
- --------------------------------------------------------------------------------------------------------
OPERATING EARNINGS:
Homebuilding $ 71,094 46,004 164,252 105,853
Financial services 9,087 2,638 21,409 9,581
Limited-purpose finance
subsidiaries - 4 - 4
- --------------------------------------------------------------------------------------------------------
Total operating earnings 80,181 48,646 185,661 115,438
Corporate general and
administrative expenses 8,303 6,571 21,095 17,017
Interest expense 13,437 6,615 36,443 17,996
- --------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 58,441 35,460 128,123 80,425
Income taxes 23,376 14,409 51,249 32,845
- --------------------------------------------------------------------------------------------------------
NET EARNINGS $ 35,065 21,051 76,874 47,580
========================================================================================================
HOMEBUILDING:
Gross margin - home sales $ 118,136 86,993 294,865 213,209
Gross margin percentage 21.7% 19.4% 21.1% 19.1%
S,G&A as a percentage of total
homebuilding revenues 8.9% 8.7% 10.0% 9.9%
Average sales price $ 194,000 184,000 192,000 181,000
New home deliveries 2,811 2,438 7,284 6,187
New orders 2,775 2,582 8,653 7,439
Backlog - homes 5,230 3,909
Backlog - dollar value $ 1,072,774 791,237
========================================================================================================
</TABLE>
HOMEBUILDING
Homebuilding revenues, on a pro forma basis, increased 24% in the third quarter
and 27% in the nine months ended August 31, 1998 compared to the same periods in
1997. Revenues were higher primarily due to increases in the number of home
deliveries and average sales prices in both periods. The California and Texas
homebuilding markets generated the largest increases in new home deliveries in
the three and nine months ended August 31, 1998 compared to the same periods
last year. The increase in the average sales price was primarily due to a higher
percentage of deliveries coming from the California market, where sales prices
are higher, and an increase in the average sales price in Texas. Homebuilding
revenues included land sales of $9.6 million and $33.1 million in the three and
nine months ended August 31, 1998, respectively, compared to pro forma land
sales of $1.4 million and $5.7 million, respectively, in the same periods last
year.
Gross margin percentages on home sales, on a pro forma basis, increased in both
the third quarter and first nine months of 1998 compared to the same periods in
1997. The third quarter increase was a result of higher gross margin percentages
in each state in which the Company operates, combined
15
<PAGE>
with a greater percentage of deliveries coming from the California market, where
the Company currently generates higher than average gross margin percentages.
The nine month increase was primarily attributable to increased margins in the
Company's California and Texas markets. Gross margins from land sales totaled
$0.2 million and $2.4 million in the three and nine months ended August 31,
1998, respectively, compared to ($1.0) million (pro forma) and $0.6 million (pro
forma), respectively, in the same periods in 1997. Margins achieved on sales of
land may vary significantly from period to period.
Selling, general and administrative expenses as a percentage of homebuilding
revenues were 8.9% and 10.0% in the three and nine months ended August 31, 1998,
respectively, compared to 8.7% (pro forma) and 9.9% (pro forma) in the three and
nine months ended August 31, 1997, respectively.
FINANCIAL SERVICES
Operating earnings for the Financial Services Division increased in both the
three and nine months ended August 31, 1998, on a pro forma basis, due primarily
to contributions from North American Title, which was acquired in January 1998,
as well as higher mortgage services profits.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES
Corporate general and administrative expenses as a percentage of total revenues
were 1.3% in both the three and nine months ended August 31, 1998 compared to
1.4% (pro forma) in both the three and nine months ended August 31, 1997. The
decrease in both 1998 periods was due primarily to the growth in revenues.
INTEREST
In the third quarter of 1998, interest incurred was $15.0 million and interest
expense was $13.4 million. This compares to interest incurred of $8.9 million
(pro forma) and interest expense of $6.6 million (pro forma) in the third
quarter of 1997. In the nine months ended August 31, 1998, interest incurred was
$38.3 million and interest expense was $36.4 million compared to interest
incurred of $26.1 million (pro forma) and interest expense of $18.0 million (pro
forma) in the nine months ended August 31, 1997. The increase in interest
expense in both periods was primarily the result of higher debt levels due to
the Company's expansion and an increase in the amount of capitalized interest
charged to expense due to a greater number of homes delivered and an increase in
interest per home delivered.
(3) LIQUIDITY AND FINANCIAL RESOURCES
In the nine months ended August 31, 1998, $105.7 million in cash was used in the
Company's operating activities compared to $112.8 million in the corresponding
period in 1997. In the nine months ended August 31, 1998, $211.1 million of cash
was used to increase inventories through land purchases, land development and
construction, $35.0 million was used by the Financial Services Division in its
mortgage loan origination operations and $9.3 million was used to reduce current
income taxes payable. These uses of cash were partially offset by $76.9 million
of net earnings and an increase in accounts payable and accrued liabilities of
$55.1 million. In the nine months ended August 31, 1997, cash flows used in
operating activities related primarily to $128.8 million of cash used to
increase inventories through land purchases, land development and construction.
Cash used in investing activities totaled $221.2 million in the nine months
ended August 31, 1998, compared to cash generated from investing activities of
$89.1 million in the corresponding period in 1997. In the nine months ended
August 31, 1998, $188.7 million of cash was used in the acquisitions of
properties and businesses and $21.7 million was used to increase the Company's
investments in partnerships. In the nine months ended August 31, 1997, $106.1
million of cash was used to purchase investment securities by both the
discontinued Investment Division and the Financial
16
<PAGE>
Services Division and $43.5 million was used to purchase operating properties
and equipment, primarily by the discontinued Investment Division. These
purchases were more than offset by $152.5 million of proceeds from investment
securities and $70.0 million of cash provided from partnership investments, both
of which related primarily to the spun-off real estate investment and management
business.
The Company meets the majority of its short-term financing needs with cash
generated from operations and funds available under its unsecured revolving
credit facilities. At August 31, 1998, the Company had unsecured revolving
credit facilities in the aggregate amount of $650 million, which may be used to
refinance existing indebtedness, for working capital, for acquisitions and for
general corporate purposes. At August 31, 1998, $412.0 million was outstanding
under the Company's revolving credit facilities, compared to $376.5 million
outstanding at November 30, 1997. The increase was a result of the Company's
continued growth.
In the third quarter of 1998, the Company issued, for $229 million, Zero Coupon
Senior Convertible Debentures due 2018 ("Debentures") with a face amount at
maturity of $493 million. The Debentures were issued at a price of $464.31 per
$1,000 face amount at maturity, which equates to a yield to maturity over the
life of the Debentures of 3 7/8%. Proceeds from the offering, after underwriting
discount and expenses, were approximately $223 million. The Company used the
proceeds to repay $100 million in short-term loans which were used to fund
acquisitions, and to reduce balances outstanding under its revolving credit
facilities. The Debentures are convertible at any time into the Company's common
stock at the rate of 12.4 shares per $1,000 face amount at maturity, which
equates to an initial conversion price of $37.50 per share, although if
converted during the first five years, the Company may elect to pay cash equal
to the fair value of the common stock at the time of the conversion. Holders
have the option to require the Company to repurchase the Debentures on any of
the fifth, tenth, or fifteenth anniversary dates from the issue date for the
initial issue price plus accrued original issue discount. The Company has the
option to satisfy the repurchases with any combination of cash and/or shares of
the Company's common stock. The Company will have the option to redeem the
Debentures, in cash, at any time after the fifth anniversary date for the
initial issue price plus accrued original issue discount.
In March 1998, the Company entered into an equity draw-down agreement with a
major international banking firm (the "Firm") under which the Company has the
option to sell common stock, up to proceeds of $120 million, to the Firm in
increments of up to $15 million (or such higher amount as may be agreed to by
the parties) per month. As of August 31, 1998, the Company had issued 1.1
million shares under the agreement resulting in proceeds to the Company of $36
million.
In February 1998, the Company filed a shelf registration statement and
prospectus with the Securities and Exchange Commission to offer, from time to
time, its common stock, preferred stock, depositary shares, debt securities or
warrants at an aggregate initial offering price not to exceed $500 million. As
of August 31, 1998, the Company had $235 million available under the shelf
registration statement. Proceeds can be used for repayment of debt, acquisitions
and general corporate purposes.
In the third quarter of 1998, the Company acquired the properties of two
California homebuilders, ColRich Communities and Polygon Communities. In the
first quarter of 1998, the Company acquired a Northern California homebuilder,
Winncrest Homes, and the North American Asset Development Group of companies,
which provide title and escrow services in California, Arizona, and Colorado. In
connection with these acquisitions for $200 million in cash (inclusive of cash
acquired of $12 million) and the issuance of $95 million in common stock, the
Company received assets with a fair value of $334 million, assumed liabilities
totaling $46 million and recorded goodwill of $7 million. The acquisitions were
accounted for using the purchase method of accounting.
17
<PAGE>
Based on the Company's current financial condition and financial market
resources, management believes that its operations and capital resources will
provide for its current and long-term capital requirements at the Company's
anticipated levels of growth.
YEAR 2000
The Company utilizes a number of computer information systems in conjunction
with its homebuilding and financial services operations. The Company is in the
process of converting the majority of its computer information systems to one
company-wide system. This new system is Year 2000 compliant. The Company has
completed a significant portion of the implementation of this new system and
expects to complete the implementation by the middle of 1999. The Company is
also making modifications to its existing computer information systems to make
them Year 2000 compliant in the event it is not able to complete the conversion
to the new company-wide system before the year 2000. The Company is in the
process of surveying its significant vendors and suppliers to assess their state
of readiness for the Year 2000. The Company cannot currently determine to what
extent the Year 2000 issue will affect these parties and, consequently, the
Company. The financial impact of becoming Year 2000 compliant has not been and
is not expected to be material to the Company's financial position or results of
operations.
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: A report on Form 8-K dated July 24,
1998 was filed by the Registrant providing information in
connection with the Company's offering of Zero Coupon
Senior Convertible Debentures due 2018.
18
<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, 1998 /S/ BRUCE E. GROSS
-------------------------------
Bruce E. Gross
Chief Financial Officer
Date: OCTOBER 14, 1998 /S/ DIANE J. BESSETTE
-------------------------------
Diane J. Bessette
Controller
19
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE LENNAR
CORPORATION UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEET AND STATEMENT OF
EARNINGS FOR THE NINE MONTHS ENDED AUGUST 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> AUG-31-1998
<CASH> 49,372
<SECURITIES> 0
<RECEIVABLES> 28,163
<ALLOWANCES> 0
<INVENTORY> 1,308,147
<CURRENT-ASSETS> 1,385,682
<PP&E> 22,587
<DEPRECIATION> 10,730
<TOTAL-ASSETS> 1,967,546
<CURRENT-LIABILITIES> 275,700
<BONDS> 998,227
0
0
<COMMON> 5,814
<OTHER-SE> 643,017
<TOTAL-LIABILITY-AND-EQUITY> 1,967,546
<SALES> 1,395,070
<TOTAL-REVENUES> 1,593,753
<CGS> 1,100,205
<TOTAL-COSTS> 1,134,751
<OTHER-EXPENSES> 294,436
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,443
<INCOME-PRETAX> 128,123
<INCOME-TAX> 51,249
<INCOME-CONTINUING> 76,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,874
<EPS-PRIMARY> 1.40<F1>
<EPS-DILUTED> 1.37
<FN>
<F1>Represents basic EPS in accordance with SFAS 128.
</FN>
</TABLE>
