================================================================================
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, 2000
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, 2000:
Common 52,735,942
Class B Common 9,848,112
================================================================================
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Lennar Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
August 31, November 30,
2000 1999
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Homebuilding:
Cash and cash equivalents $ 58,134 83,256
Receivables, net 37,684 11,162
Inventories 2,662,750 1,274,551
Investments in partnerships 254,839 173,310
Other assets 258,346 97,826
-----------------------------------
3,271,753 1,640,105
Financial services 497,634 417,542
---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 3,769,387 2,057,647
=================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 616,181 333,532
Mortgage notes and other debts payable, net 1,656,066 523,661
-----------------------------------
2,272,247 857,193
Financial services 381,038 318,955
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,653,285 1,176,148
Stockholders' equity:
Preferred stock -- --
Common stock of $0.10 par value per share,
62,575 shares issued at August 31, 2000 6,258 4,851
Class B common stock of $0.10 par value per share,
9,848 shares issued at August 31, 2000 985 985
Additional paid-in capital 809,700 525,623
Retained earnings 473,581 356,058
Unearned restricted stock (15,479) --
Treasury stock, at cost; 9,848 shares at August 31, 2000 (158,943) (6,018)
---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,116,102 881,499
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 3,769,387 2,057,647
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE>
Lennar Corporation and Subsidiaries
Consolidated Condensed Statements of Earnings
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
------------------------------ -------------------------------
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Homebuilding $ 1,288,700 746,766 2,756,753 1,948,299
Financial services 87,515 72,731 228,009 200,154
-------------------------------------------------------------------------------------------------------------------------------
Total revenues 1,376,215 819,497 2,984,762 2,148,453
-------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding 1,164,305 656,183 2,501,701 1,723,572
Financial services 70,516 64,675 195,462 176,925
Corporate general and administrative 13,554 9,929 33,880 27,250
Interest 27,829 13,548 57,557 34,051
-------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,276,204 744,335 2,788,600 1,961,798
-------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 100,011 75,162 196,162 186,655
Income taxes 39,004 29,689 76,503 73,729
-------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 61,007 45,473 119,659 112,926
===============================================================================================================================
Basic earnings per share $ 0.99 0.78 2.14 1.94
===============================================================================================================================
Diluted earnings per share $ 0.90 0.72 1.98 1.80
===============================================================================================================================
-------------------------------------------------------------------------------------------------------------------------------
Cash dividends per common share $ 0.0125 0.0125 0.0375 0.0375
-------------------------------------------------------------------------------------------------------------------------------
Cash dividends per Class B common share $ 0.01125 0.01125 0.03375 0.03375
===============================================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
Lennar Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
August 31,
---------------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 119,659 112,926
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization 30,874 28,783
Amortization of discount/premium on debt, net 11,274 6,729
Equity in earnings from partnerships (9,667) (12,571)
Increase in deferred income taxes 23,155 4,996
Changes in assets and liabilities, net of effect of acquisitions:
(Increase) decrease in receivables (1,703) 319
Increase in inventories (126,841) (234,413)
Increase in other assets (24,253) (13,612)
Decrease in financial services loans held for sale or disposition 22,774 9,844
Decrease in accounts payable and other liabilities (70,489) (13,656)
-------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (25,217) (110,655)
-------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of operating properties and equipment (13,411) (10,563)
(Increase) decrease in investments in partnerships, net (7,899) 11,570
(Increase) decrease in financial services mortgage loans (20,678) 1,892
Purchases of investment securities (14,586) (10,165)
Receipts from investment securities 11,946 9,000
Acquisition of U.S. Home Corporation, net of cash acquired (152,386) --
Acquisitions of properties and businesses, net of cash acquired (4,305) (20,172)
Other, net -- 79
-------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (201,319) (18,359)
-------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings under credit facilities 798,700 39,050
Net borrowings (repayments) under financial services short-term debt 42,072 (8,109)
Payments for tender of U.S. Home's senior notes (519,759) --
Net proceeds from issuance of 9.95% senior notes 294,988 --
Net proceeds from issuance of 7 5/8% senior notes -- 266,153
Proceeds from other borrowings 4,371 1,814
Principal payments on other borrowings (268,596) (156,427)
Limited-purpose finance subsidiaries, net 79 519
Common stock:
Issuance 2,408 1,965
Repurchases (152,925) --
Dividends (2,136) (2,149)
-------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 199,202 142,816
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (27,334) 13,802
Cash and cash equivalents at beginning of period 118,167 61,577
-------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 90,833 75,379
===============================================================================================================================
</TABLE>
3
<PAGE>
Lennar Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows -- Continued
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
August 31,
---------------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Summary of cash and cash equivalent balances:
Homebuilding $ 58,134 38,357
Financial services 32,699 37,022
-------------------------------------------------------------------------------------------------------------------------------
$ 90,833 75,379
-------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 888 1,745
Cash paid for income taxes $ 60,106 83,203
Supplemental disclosures of non-cash investing and financing activities:
Purchases of inventory financed by sellers $ 4,984 29,210
===============================================================================================================================
</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 and all subsidiaries and partnerships in which a
controlling interest is held (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, 1999 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.
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, 2000 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.
Homebuilding operations include the sale and construction of single-family
attached and detached homes in 13 states. These activities also include the
purchase, development and sale of residential land by the Company and
partnerships in which it has investments.
Financial Services activities are conducted primarily through Lennar Financial
Services, Inc. and its subsidiaries and U.S. Home Mortgage Corporation, which
provide mortgage financing, title insurance and closing services for Lennar
homebuyers and others. The Financial Services Division also packages and resells
residential mortgage loans and mortgage-backed securities, performs mortgage
loan servicing activities and provides cable television and alarm monitoring
services to residents of Lennar communities and others.
5
<PAGE>
(3) Acquisition of U.S. Home Corporation
On May 3, 2000, the Company acquired U.S. Home Corporation in a transaction in
which U.S. Home stockholders received a total of approximately $243 million in
cash and 13 million shares of the Company's common stock. U.S. Home is primarily
a homebuilder, with operations in 13 states. U.S. Home had total revenues of
$1.8 billion and net income of $72.4 million in 1999, and it delivered 9,246
homes (including joint ventures) during that year.
The acquisition was accounted for using the purchase method of accounting. In
connection with the transaction, the Company acquired assets with a fair value
of $1.7 billion, assumed liabilities with a fair value of $1.2 billion and
recorded goodwill of $48 million. Goodwill is being amortized on a straight-line
basis over 20 years. Revenues and net earnings on an unaudited pro forma basis
would have been $3.8 billion and $156.9 million, respectively, for the nine
months ended August 31, 2000 and $3.5 billion and $149.6 million, respectively,
for the nine months ended August 31, 1999, had the acquisition occurred on
December 1, 1998. Pro forma earnings per share would have been $2.30 per share
diluted ($2.49 per share basic) for the nine months ended August 31, 2000 and
$1.97 per share diluted ($2.10 per share basic) for the nine months ended August
31, 1999. The pro forma information gives effect to actual operating results
prior to the acquisition, adjusted for the pro forma effect of interest expense,
amortization of goodwill, and certain other adjustments, together with their
related income tax effect. The pro forma information does not purport to be
indicative of the results of operations which would have actually been reported
had the acquisition occurred on December 1, 1998.
(4) Debt
As a result of the U.S. Home acquisition, holders of U.S. Home's publicly-held
Notes totaling $525 million were entitled to require U.S. Home to repurchase the
Notes for 101% of their principal amount within 90 days after the transaction
was completed. Independent of that requirement, in April 2000, the Company made
a tender offer for all of the Notes and a solicitation of consents to modify
provisions of the indentures relating to the Notes. As a result of the tender
offer and required repurchases after the acquisition, the Company paid
approximately $520 million, which includes tender and consent fees, for $508
million of U.S. Home's Notes.
In May 2000, the Company issued $325 million of 9.95% Senior Notes due 2010 at a
price of 92.313% for the purpose of purchasing U.S. Home's publicly-held Notes
that were tendered in response to the Company's offer and consent solicitation
in April 2000, and to pay associated costs and expenses. Proceeds from the
offering, after underwriting discount and expenses, were approximately $295
million.
In May 2000, the Company also entered into new financing arrangements related to
the acquisition of U.S. Home, for working capital and for future growth. The
financing includes senior secured credit facilities with a group of financial
institutions which provides the Company with up to $1.4 billion of financing.
The credit facilities consist of a $700 million five-year revolving credit
facility, a $300 million 364-day revolving credit facility and a $400 million
term loan B. The Company may elect to convert borrowings under the 364-day
revolving credit facility to a term loan which matures in May 2005. At August
31, 2000, $798.7 million was outstanding under these credit facilities.
6
<PAGE>
(5) 2000 Stock Option and Restricted Stock Plan
The Company's 2000 Stock Option and Restricted Stock Plan (the "Plan"), which is
subject to stockholder approval at the 2001 annual meeting of the Company's
stockholders, provides for the granting of stock options and awards of
restricted stock to certain officers, employees and directors. In the third
quarter of 2000, 860,000 shares of restricted stock were awarded under the Plan.
The stock was valued based on its market price on the date of grant. Unearned
compensation arising from the restricted stock grants is amortized to expense
over the periods of the restrictions. Unearned restricted stock is shown as a
reduction of stockholders' equity in the accompanying consolidated condensed
balance sheets.
(6) Treasury Stock
In September 1999, the Company's Board of Directors approved the repurchase of
up to 10 million shares of the Company's outstanding common stock from
time-to-time, subject to market conditions. In February 2000, the Company's
Board of Directors authorized the repurchase of an additional 5 million shares
of the Company's outstanding common stock. As of August 31, 2000, the Company
had repurchased approximately 9.8 million shares of its outstanding common stock
for an aggregate purchase price of approximately $158.9 million.
(7) Earnings Per Share
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. 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) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic earnings per share -
net earnings $ 61,007 45,473 119,659 112,926
Interest on zero-coupon convertible
debentures, net of tax 1,457 1,389 4,332 4,131
-------------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per share $ 62,464 46,862 123,991 117,057
=============================================================================================================
Denominator:
Denominator for basic earnings per share -
weighted average shares 61,650 58,324 55,863 58,274
Effect of dilutive securities:
Employee stock options and restricted stock 1,390 668 781 772
Zero-coupon convertible debentures 6,105 6,105 6,105 6,105
-------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 69,145 65,097 62,749 65,151
=============================================================================================================
Basic earnings per share $ 0.99 0.78 2.14 1.94
=============================================================================================================
Diluted earnings per share $ 0.90 0.72 1.98 1.80
=============================================================================================================
</TABLE>
7
<PAGE>
(8) 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) 2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and receivables, net $ 59,843 54,031
Mortgage loans held for sale or disposition, net 277,490 229,042
Mortgage loans, net 51,599 22,562
Mortgage servicing rights, net 11,897 15,564
Title plants 14,606 14,587
Goodwill, net 23,182 20,070
Other 37,772 36,062
Limited-purpose finance subsidiaries 21,245 25,624
-------------------------------------------------------------------------------------------------
$ 497,634 417,542
-------------------------------------------------------------------------------------------------
Liabilities:
Notes and other debts payable $ 304,947 253,010
Other 54,846 40,321
Limited-purpose finance subsidiaries 21,245 25,624
-------------------------------------------------------------------------------------------------
$ 381,038 318,955
-------------------------------------------------------------------------------------------------
</TABLE>
(9) Cash and Cash Equivalents
Cash and cash equivalents as of August 31, 2000 and November 30, 1999 included
$56.7 million and $33.5 million, respectively, of cash held in escrow for
periods of up to three days.
(10) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS No. 137 and SFAS No.
138, which is required to be adopted for fiscal years beginning after June 15,
2000. SFAS No. 133 will require the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge, a change in the fair value of the derivative will either be offset
against the change in the fair value of the hedged asset, liability, or firm
commitment through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. Management does not currently believe
that the implementation of SFAS No. 133 will have a material impact on the
Company's results of operations or financial position.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements", which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB No. 101 is
applicable for the Company beginning in the fourth quarter of the year ending
November 30, 2001. Management does not currently believe that the implementation
of SAB No. 101 will have a material impact on the Company's results of
operations or financial position.
8
<PAGE>
(11) Supplemental Financial Information
As discussed in Note 4, the Company sold $325 million of 9.95% Senior Notes due
2010. The Company's obligations to pay principal, premium, if any, and interest
under the Notes are guaranteed on a joint and several basis by substantially all
of its subsidiaries, other than subsidiaries engaged in mortgage and title
reinsurance activities. The Company has determined that separate, full financial
statements of the guarantors would not be material to investors and,
accordingly, supplemental financial information for the guarantors is presented
below. Consolidating statements of cash flows are not presented because cash
flows for the non-guarantor subsidiaries were not significant for any of the
periods presented.
Consolidating Condensed Balance Sheet
August 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Non-
Lennar Guarantor Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Homebuilding:
Cash and receivables, net $ 5,798 89,435 585 -- 95,818
Inventories -- 2,655,956 6,794 -- 2,662,750
Investments in partnerships -- 254,839 -- -- 254,839
Other assets 84,105 174,241 -- -- 258,346
Investments in subsidiaries 1,358,729 193,757 -- (1,552,486) --
-------------------------------------------------------------------------------------------------------------------------
1,448,632 3,368,228 7,379 (1,552,486) 3,271,753
Financial services -- 9,474 488,160 -- 497,634
-------------------------------------------------------------------------------------------------------------------------
Total assets $ 1,448,632 3,377,702 495,539 (1,552,486) 3,769,387
=========================================================================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 129,806 484,237 2,138 -- 616,181
Mortgage notes and other debts
payable, net 1,616,164 39,902 -- -- 1,656,066
Intercompany (1,413,440) 1,492,234 (78,794) -- --
-------------------------------------------------------------------------------------------------------------------------
332,530 2,016,373 (76,656) -- 2,272,247
Financial services -- 2,600 378,438 -- 381,038
-------------------------------------------------------------------------------------------------------------------------
Total liabilities 332,530 2,018,973 301,782 -- 2,653,285
Stockholders' equity 1,116,102 1,358,729 193,757 (1,552,486) 1,116,102
-------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 1,448,632 3,377,702 495,539 (1,552,486) 3,769,387
=========================================================================================================================
</TABLE>
9
<PAGE>
Supplemental Financial Information, Continued
Consolidating Condensed Balance Sheet
November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Non-
Lennar Guarantor Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Homebuilding:
Cash and receivables, net $ 48,343 45,534 541 -- 94,418
Inventories -- 1,267,050 7,501 -- 1,274,551
Investments in partnerships -- 173,310 -- -- 173,310
Other assets 63,143 34,683 -- -- 97,826
Investments in subsidiaries 573,291 107,900 -- (681,191) --
-------------------------------------------------------------------------------------------------------------------------
684,777 1,628,477 8,042 (681,191) 1,640,105
Financial services -- 26,132 391,410 -- 417,542
-------------------------------------------------------------------------------------------------------------------------
Total assets $ 684,777 1,654,609 399,452 (681,191) 2,057,647
=========================================================================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 103,002 228,421 2,109 -- 333,532
Mortgage notes and other debts
payable, net 507,445 16,216 -- -- 523,661
Intercompany (807,169) 827,316 (20,147) -- --
-------------------------------------------------------------------------------------------------------------------------
(196,722) 1,071,953 (18,038) -- 857,193
Financial services - 9,365 309,590 -- 318,955
-------------------------------------------------------------------------------------------------------------------------
Total liabilities (196,722) 1,081,318 291,552 -- 1,176,148
Stockholders' equity 881,499 573,291 107,900 (681,191) 881,499
-------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 684,777 1,654,609 399,452 (681,191) 2,057,647
=========================================================================================================================
</TABLE>
10
<PAGE>
Supplemental Financial Information, Continued
Consolidating Condensed Statement of Earnings
Nine Months Ended August 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Non-
Lennar Guarantor Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Homebuilding $ -- 2,753,878 2,875 -- 2,756,753
Financial services -- 36,180 191,829 -- 228,009
-------------------------------------------------------------------------------------------------------------------------
Total revenues -- 2,790,058 194,704 -- 2,984,762
-------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding -- 2,499,717 1,984 -- 2,501,701
Financial services -- 35,540 159,922 -- 195,462
Corporate general and administrative 33,880 -- -- -- 33,880
Interest -- 57,557 -- -- 57,557
-------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 33,880 2,592,814 161,906 -- 2,788,600
-------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (33,880) 197,244 32,798 -- 196,162
Provision (benefit) for income taxes (13,425) 76,925 13,003 -- 76,503
Equity in earnings from subsidiaries 140,114 19,795 -- (159,909) --
-------------------------------------------------------------------------------------------------------------------------
Net earnings $ 119,659 140,114 19,795 (159,909) 119,659
=========================================================================================================================
</TABLE>
Consolidating Condensed Statement of Earnings
Nine Months Ended August 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Non-
Lennar Guarantor Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Homebuilding $ -- 1,947,198 1,101 -- 1,948,299
Financial services -- 20,349 179,805 -- 200,154
-------------------------------------------------------------------------------------------------------------------------
Total revenues -- 1,967,547 180,906 -- 2,148,453
-------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding -- 1,721,541 2,031 -- 1,723,572
Financial services -- 23,821 153,104 -- 176,925
Corporate general and administrative 27,250 -- -- -- 27,250
Interest -- 34,051 -- -- 34,051
-------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 27,250 1,779,413 155,135 -- 1,961,798
-------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (27,250) 188,134 25,771 -- 186,655
Provision (benefit) for income taxes (10,306) 74,314 9,721 -- 73,729
Equity in earnings from subsidiaries 129,870 16,050 -- (145,920) --
-------------------------------------------------------------------------------------------------------------------------
Net earnings $ 112,926 129,870 16,050 (145,920) 112,926
=========================================================================================================================
</TABLE>
11
<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 risks, uncertainties and other
factors that may cause actual results to differ materially from those which are
anticipated. 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, 1999 for a further discussion of these and other
risks and uncertainties applicable to the Company's business.
(1) Results of Operations
Overview
In May 2000, the Company acquired U.S. Home Corporation. See Note 3 of Notes to
Consolidated Condensed Financial Statements for additional information.
Third quarter net earnings were $61.0 million, or $0.90 per share diluted ($0.99
per share basic), compared to $45.5 million, or $0.72 per share diluted ($0.78
per share basic), in 1999. For the nine months ended August 31, 2000, net
earnings were $119.7 million, or $1.98 per share diluted ($2.14 per share
basic), compared to $112.9 million, or $1.80 per share diluted ($1.94 per share
basic), in 1999.
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) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Sales of homes $ 1,243,408 664,677 2,610,782 1,796,870
Sales of land and other revenues 42,119 73,982 136,304 138,858
Equity in earnings from partnerships 3,173 8,107 9,667 12,571
-------------------------------------------------------------------------------------------------------
Total revenues 1,288,700 746,766 2,756,753 1,948,299
Costs and expenses:
Cost of homes sold 998,390 523,393 2,109,490 1,414,495
Cost of land and other expenses 36,113 63,781 114,098 117,525
Selling, general and administrative 129,802 69,009 278,113 191,552
-------------------------------------------------------------------------------------------------------
Total costs and expenses 1,164,305 656,183 2,501,701 1,723,572
-------------------------------------------------------------------------------------------------------
Operating earnings $ 124,395 90,583 255,052 224,727
=======================================================================================================
Gross margin on home sales - $ $ 245,018 141,284 501,292 382,375
Gross margin on home sales - % 19.7% 21.3% 19.2% 21.3%
S,G&A expenses as a percentage of
revenues from home sales 10.4% 10.4% 10.7% 10.7%
Operating earnings as a percentage
of homebuilding revenues 9.7% 12.1% 9.3% 11.5%
Average sales price $ 224,000 206,000 221,000 205,000
=======================================================================================================
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Summary of Home and Backlog Data By Region
(Dollars in thousands) Three Months Ended Nine Months Ended
August 31, August 31,
---------------------------- --------------------------
Deliveries 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
East 1,794 1,078 3,897 2,799
Central 1,694 832 3,613 2,183
West 2,056 1,321 4,304 3,762
-----------------------------------------------------------------------------------------------------
Subtotal 5,544 3,231 11,814 8,744
Joint Ventures 135 4 193 4
-----------------------------------------------------------------------------------------------------
Total 5,679 3,235 12,007 8,748
-----------------------------------------------------------------------------------------------------
New Orders
-----------------------------------------------------------------------------------------------------
East 1,820 889 4,030 3,059
Central 1,511 744 3,520 2,343
West 1,935 962 4,683 3,712
-----------------------------------------------------------------------------------------------------
Subtotal 5,266 2,595 12,233 9,114
Joint Ventures 94 12 167 23
-----------------------------------------------------------------------------------------------------
Total 5,360 2,607 12,400 9,137
-----------------------------------------------------------------------------------------------------
Backlog - Homes
-----------------------------------------------------------------------------------------------------
East 3,624 1,804
Central 1,653 863
West 3,938 1,803
-----------------------------------------------------------------------------------------------------
Subtotal 9,215 4,470
Joint Ventures 272 19
-----------------------------------------------------------------------------------------------------
Total 9,487 4,489
-----------------------------------------------------------------------------------------------------
Backlog dollar value (includes joint ventures) $2,288,779 1,038,121
-----------------------------------------------------------------------------------------------------
</TABLE>
The Company's market regions consist of the following states:
East: Primarily Florida and also includes Maryland/Virginia and New Jersey
Central: Primarily Texas and also includes Minnesota and Ohio
West: Primarily California and also includes Colorado, Arizona and Nevada
Homebuilding revenues increased 73% and 41% in the three and nine months ended
August 31, 2000, respectively, compared to the same periods in 1999. Revenues
were higher primarily due to increases in the number of home deliveries and
average sales price in both periods. New home deliveries were higher due to the
inclusion of U.S. Home's homebuilding activity since its acquisition in May
2000. The increase in average sales price on homes delivered during both periods
was due primarily to an increase in the average sales price in most of the
Company's existing markets combined with changes in product mix.
13
<PAGE>
Gross profits on home sales increased to $245.0 million and $501.3 million in
the three and nine months ended August 31, 2000, respectively, compared to
$141.3 million and $382.4 million in the three and nine months ended August 31,
1999, respectively. Gross profits were impacted by purchase accounting
associated with the acquisition of U.S. Home. Gross margin percentages on home
sales were 20.7% (excluding the effect of purchase accounting) and 19.7%
(including the effect of purchase accounting) in the third quarter of 2000,
compared to 21.3% in 1999. Gross margin percentages on home sales were 20.5%
(excluding the effect of purchase accounting) and 19.2% (including the effect of
purchase accounting) in the nine months ended August 31, 2000, compared to 21.3%
in 1999.
Revenues from land sales totaled $38.3 million and $128.5 million in the three
and nine months ended August 31, 2000, respectively, compared to $71.4 million
and $132.9 million, in the same periods in 1999, respectively. Gross profits
from land sales totaled $3.8 million, or 9.9%, and $16.9 million, or 13.2%, in
the three and nine months ended August 31, 2000, respectively, compared to $8.1
million, or 11.4%, and $17.7 million, or 13.3%, in the same periods last year,
respectively. Equity in earnings from partnerships decreased to $3.2 million and
$9.7 million in the three and nine months ended August 31, 2000, respectively,
from $8.1 million and $12.6 million in the same periods last year, respectively.
Margins achieved on land sales and equity in earnings from partnerships may vary
significantly from period to period depending on the timing of land sales by the
Company and its partnerships.
Selling, general and administrative expenses as a percentage of revenues from
home sales were 10.4% and 10.7% in the three and nine months ended August 31,
2000, respectively, and 10.4% and 10.7% in the three and nine months ended
August 31, 1999, respectively.
At August 31, 2000, the Company's backlog of sales contracts increased to 9,487
homes ($2.3 billion) compared to 4,489 homes ($1.0 billion) at August 31, 1999.
The higher backlog was attributable to the acquisition of U.S. Home in May 2000.
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) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 87,515 72,731 228,009 200,154
Costs and expenses 70,516 64,675 195,462 176,925
-------------------------------------------------------------------------------------------------------
Operating earnings $ 16,999 8,056 32,547 23,229
-------------------------------------------------------------------------------------------------------
Dollar value of mortgages originated $ 971,473 614,356 2,141,326 1,554,323
-------------------------------------------------------------------------------------------------------
Number of mortgages originated 6,100 4,200 13,900 10,800
-------------------------------------------------------------------------------------------------------
Principal balance of servicing portfolio $ 2,294,000 3,442,000
-------------------------------------------------------------------------------------------------------
Number of loans serviced 30,000 41,000
-------------------------------------------------------------------------------------------------------
Number of title transactions 31,000 35,000 88,000 109,000
-------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
Operating earnings from the Financial Services Division increased in the three
and nine months ended August 31, 2000 compared to the same periods last year.
The increase was primarily due to greater earnings from the Company's mortgage
operations, including the earnings contribution from U.S. Home Mortgage
Corporation since its acquisition in May 2000, and the earnings contribution in
the second quarter of 2000 from Strategic Technologies, Inc. resulting from the
sale of three Florida cable systems.
Corporate General and Administrative Expenses
Corporate general and administrative expenses as a percentage of total revenues
were 1.0% and 1.1% in the three and nine months ended August 31, 2000,
respectively, and 1.2% and 1.3% in the three and nine months ended August 31,
1999, respectively.
Interest Expense
In the third quarter of 2000, interest expense was $27.8 million, or 2.0% of
total revenues, compared to interest expense of $13.5 million, or 1.7% of total
revenues, in 1999. In the nine months ended August 31, 2000, interest expense
was $57.6 million, or 1.9% of total revenues, compared to interest expense of
$34.1 million, or 1.6% of total revenues, in 1999. The increase in interest as a
percentage of total revenues in both periods was primarily due to an increase in
interest per home delivered which resulted from higher average debt outstanding
compared to the same periods last year. Interest incurred was $41.0 million and
$78.9 million in the three and nine months ended August 31, 2000, respectively,
compared to $14.9 million and $40.9 million in the three and nine months ended
August 31, 1999, respectively.
(2) Liquidity and Financial Resources
In the nine months ended August 31, 2000, $25.2 million in cash was used in the
Company's operating activities, compared to $110.7 million in the corresponding
period in 1999. In the nine months ended August 31, 2000, $126.8 million of cash
was used to increase inventories through land purchases, land development and
construction and $70.5 million was used to reduce accounts payable and other
liabilities. These uses of cash were offset by $119.7 million of net earnings,
$22.8 million of cash received from the sale or disposition of loans by the
Company's Financial Services Division and an increase in deferred income taxes
of $23.2 million. In the nine months ended August 31, 1999, $234.4 million of
cash was used to increase inventories through land purchases, land development
and construction. This use of cash was partially offset by $112.9 million of net
earnings.
Earnings before interest, income taxes, depreciation and amortization ("EBITDA")
were $140.6 million and $284.6 million in the three and nine months ended August
31, 2000, respectively, compared to $98.7 million and $249.5 million in the
three and nine months ended August 31, 1999, respectively.
Cash used in investing activities totaled $201.3 million in the nine months
ended August 31, 2000, compared to cash used in investing activities of $18.4
million in the corresponding period in 1999. In the nine months ended August 31,
2000, $156.7 million of cash was used in the acquisitions of properties and
businesses, which includes $152.4 million used for the acquisition of U.S. Home.
In the nine months ended August 31, 1999, $20.2 million of cash was used in the
acquisitions of properties and businesses.
15
<PAGE>
The Company meets the majority of its short-term financing needs with cash
generated from operations and funds available under its credit facilities. In
May 2000, the Company entered into new financing arrangements related to the
acquisition of U.S. Home, for working capital and for future growth. The
financing includes senior secured credit facilities with a group of financial
institutions which will provide the Company with up to $1.4 billion of
financing. The credit facilities consist of a $700 million five-year revolving
credit facility, a $300 million 364-day revolving credit facility and a $400
million term loan B. The Company may elect to convert borrowings under the
364-day revolving credit facility to a term loan which matures in May 2005. At
August 31, 2000, $798.7 million was outstanding under these credit facilities.
As a result of the U.S. Home acquisition, holders of U.S. Home's publicly-held
Notes totaling $525 million were entitled to require U.S. Home to repurchase the
Notes for 101% of their principal amount within 90 days after the transaction
was completed. Independent of that requirement, in April 2000, the Company made
a tender offer for all of the Notes and a solicitation of consents to modify
provisions of the indentures relating to the Notes. As a result of the tender
offer and required repurchases after the acquisition, the Company paid
approximately $520 million, which includes tender and consent fees, for $508
million of U.S. Home's Notes.
In May 2000, the Company issued $325 million of 9.95% Senior Notes due 2010 at a
price of 92.313% for the purpose of purchasing U.S. Home's publicly-held Notes
that were tendered in response to the Company's offer and consent solicitation
in April 2000, and to pay associated costs and expenses. Proceeds from the
offering, after underwriting discount and expenses, were approximately $295
million.
The Company's 2000 Stock Option and Restricted Stock Plan (the "Plan"), which is
subject to stockholder approval at the 2001 annual meeting of the Company's
stockholders, provides for the granting of stock options and awards of
restricted stock to certain officers, employees and directors. In the third
quarter of 2000, 860,000 shares of restricted stock were awarded under the Plan.
The stock was valued based on its market price on the date of grant. Unearned
compensation arising from the restricted stock grants is amortized to expense
over the periods of the restrictions. Unearned restricted stock is shown as a
reduction of stockholders' equity in the accompanying consolidated condensed
balance sheets.
In September 1999, the Company's Board of Directors approved the repurchase of
up to 10 million shares of the Company's outstanding common stock from
time-to-time, subject to market conditions. In February 2000, the Company's
Board of Directors authorized the repurchase of an additional 5 million shares
of the Company's outstanding common stock. As of August 31, 2000, the Company
had repurchased approximately 9.8 million shares of its outstanding common stock
for an aggregate purchase price of approximately $158.9 million.
In July 2000 and March 1999, the Company filed shelf registration statements and
prospectuses 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 $1
billion in total. Proceeds can be used for repayment of debt, acquisitions and
general corporate purposes. As of August 31, 2000, no securities had been issued
under these two registration statements.
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.
16
<PAGE>
(3) Market Risk
The information included in "Item 7A. Market Risk" in the Company's Annual
Report on Form 10-K for the year ended November 30, 1999 is incorporated herein
by reference.
During the nine months ended August 31, 2000, the Company entered into new
financing arrangements as a result of the acquisition of U.S. Home. As discussed
in the Liquidity and Financial Resources section, in May 2000, the Company
issued $325 million of 9.95% Senior Notes due 2010 at a price of 92.313%.
Proceeds from the offering, after underwriting discount and expenses, were
approximately $295 million. In May 2000, the Company also entered into new
financing arrangements related to the acquisition of U.S. Home, for working
capital and for future growth. The financing includes senior secured credit
facilities with a group of financial institutions which will provide the Company
with up to $1.4 billion of financing. The credit facilities consist of a $700
million five-year revolving credit facility, a $300 million 364-day revolving
credit facility and a $400 million term loan B. At August 31, 2000, $798.7
million was outstanding under these credit facilities.
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/A dated May 2,
2000 was filed by the Registrant on June 30, 2000
providing pro forma financial information in connection
with the Company's acquisition of U.S. Home Corporation.
The report also contained supplemental financial
information for the guarantors of the Company's 9.95%
Senior Notes due 2010.
17
<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 16, 2000 /s/ BRUCE E. GROSS
-----------------------------------------
Bruce E. Gross
Vice President and
Chief Financial Officer
Date: October 16, 2000 /s/ DIANE J. BESSETTE
-----------------------------------------
Diane J. Bessette
Vice President and
Controller
18
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
27 Financial Data Schedule
