================================================================================
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 February 29, 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 March 31, 2000:
Common 38,877,366
----------
Class B Common 9,848,112
---------
================================================================================
<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)
February 29, November 30,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
HOMEBUILDING:
Cash and cash equivalents $ 30,179 83,256
Receivables, net 29,374 11,162
Inventories 1,393,024 1,274,551
Investments in partnerships 173,169 173,310
Other assets 99,076 97,826
-----------------------------------
1,724,822 1,640,105
FINANCIAL SERVICES 328,246 417,542
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,053,068 2,057,647
=================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING:
Accounts payable and other liabilities $ 316,761 333,532
Mortgage notes and other debts payable, net 750,184 523,661
-----------------------------------
1,066,945 857,193
FINANCIAL SERVICES 233,414 318,955
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,300,359 1,176,148
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock of $0.10 par value per share,
48,520,118 shares issued at February 29, 2000 4,852 4,851
Class B common stock of $0.10 par value per share,
9,848,562 shares issued at February 29, 2000 985 985
Additional paid-in capital 525,718 525,623
Retained earnings 377,641 356,058
Treasury stock, at cost; 9,709,500 shares at February 29, 2000 (156,487) (6,018)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 752,709 881,499
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,053,068 2,057,647
=================================================================================================================================
</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
--------------------------------------
February 29, February 28,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Homebuilding $ 580,922 531,376
Financial services 59,445 59,223
- ---------------------------------------------------------------------------------------------------------------------------
Total revenues 640,367 590,599
- ---------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Homebuilding 526,093 472,986
Financial services 58,837 53,502
Corporate general and administrative 9,057 8,515
Interest 9,968 9,543
- ---------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 603,955 544,546
- ---------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 36,412 46,053
Income taxes 14,201 18,191
- ---------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 22,211 27,862
===========================================================================================================================
BASIC EARNINGS PER SHARE $ 0.42 0.48
===========================================================================================================================
DILUTED EARNINGS PER SHARE $ 0.40 0.45
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER COMMON SHARE $ 0.0125 0.0125
- ---------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER CLASS B COMMON SHARE $ 0.01125 0.01125
===========================================================================================================================
</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)
Three Months Ended
-------------------------------
February 29, February 28,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 22,211 27,862
Adjustments to reconcile net earnings to net cash used in operating
activities:
Depreciation and amortization 8,135 8,645
Amortization of discount/premium on debt, net 5,604 1,294
Equity in earnings from partnerships (4,229) (3,060)
Increase in deferred income taxes 1,792 1,556
Changes in assets and liabilities, net of effect of acquisitions:
Increase in receivables (11,493) (655)
Increase in inventories (121,862) (109,845)
Increase in other assets (2,693) (7,152)
Decrease in financial services loans held for sale or disposition 64,992 34,754
Decrease in accounts payable and other liabilities (23,913) (33,639)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (61,456) (80,240)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of operating properties and equipment (4,074) (3,576)
(Increase) decrease in investments in partnerships, net 8,407 (15,776)
Decrease in financial services mortgage loans 441 2,680
Purchases of investment securities (2,916) (975)
Receipts from investment securities 3,700 2,700
Acquisitions of properties and businesses, net of cash acquired -- (7,178)
Other, net 143 279
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 5,701 (21,846)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit facilities 229,600 (97,650)
Net repayments under financial services short-term debt (77,837) (19,625)
Net proceeds from issuance of senior notes -- 266,153
Proceeds from other borrowings 635 1,809
Principal payments on other borrowings (13,130) (7,654)
Limited-purpose finance subsidiaries, net (59) 256
Common stock:
Issuance 96 14
Repurchases (150,469) --
Dividends (628) (716)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (11,792) 142,587
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (67,547) 40,501
Cash and cash equivalents at beginning of period 118,167 61,577
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 50,620 102,078
=====================================================================================================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows -- Continued
(Unaudited)
(In thousands)
Three Months Ended
-------------------------------
February 29, February 28,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Summary of cash and cash equivalent balances:
Homebuilding $ 30,179 74,543
Financial services 20,441 27,535
- ---------------------------------------------------------------------------------------------------------------------
$ 50,620 102,078
- ---------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 8,868 32,234
Supplemental disclosures of non-cash investing and financing activities:
Purchases of inventory financed by sellers $ 4,780 16,303
=====================================================================================================================
</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 statement of
earnings for the three months ended February 29, 2000 is 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) OPERATING SEGMENTS
The Company has two operating segments: Homebuilding and Financial Services.
Homebuilding operations include the sale and construction 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 by the Company and partnerships in which it has investments.
Financial Services activities are conducted primarily through Lennar Financial
Services, Inc. and its subsidiaries which provide mortgage financing, title
insurance and closing services for Lennar homebuyers and others. The 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) TREASURY STOCK
In September 1999, the Company's Board of Directors approved the repurchase of
up to ten million shares of the Company's outstanding common stock. The Company
may repurchase shares, from time-to-time, subject to market conditions. As of
February 29, 2000, the Company had repurchased approximately 9.7 million shares
of its outstanding common stock for an aggregate purchase price of approximately
$156.5 million (including approximately 9.3 million shares for an aggregate
purchase price of approximately $150.5 million during the first quarter of
2000). On February 8, 2000, the Company's Board of Directors authorized the
repurchase of an additional five million shares of the Company's outstanding
common stock.
(4) 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
-----------------------------------
February 29, February 28,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NUMERATOR:
Numerator for basic earnings per share - net earnings $ 22,211 27,862
Interest on zero coupon convertible debentures, net of tax 1,428 1,362
------------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per share $ 23,639 29,224
============================================================================================================
DENOMINATOR:
Denominator for basic earnings per share -
weighted average shares 53,160 58,216
Effect of dilutive securities:
Employee stock options 411 879
Zero coupon convertible debentures 6,105 6,105
------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 59,676 65,200
============================================================================================================
Basic earnings per share $ 0.42 0.48
============================================================================================================
Diluted earnings per share $ 0.40 0.45
============================================================================================================
</TABLE>
6
<PAGE>
(5) 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)
February 29, November 30,
(IN THOUSANDS) 2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and receivables, net $ 32,841 54,031
Mortgage loans held for sale or disposition, net 163,188 229,042
Mortgage loans, net 23,056 22,562
Mortgage servicing rights, net 14,382 15,564
Title plants 14,587 14,587
Goodwill, net 19,571 20,070
Other 36,526 36,062
Limited-purpose finance subsidiaries 24,095 25,624
--------------------------------------------------------------------------------------------------------
$ 328,246 417,542
========================================================================================================
LIABILITIES:
Notes and other debts payable $ 175,371 253,010
Other 33,948 40,321
Limited-purpose finance subsidiaries 24,095 25,624
--------------------------------------------------------------------------------------------------------
$ 233,414 318,955
========================================================================================================
</TABLE>
(6) CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of February 29, 2000 and November 30, 1999 included
$23.7 million and $33.5 million, respectively, of cash held in escrow for
periods of up to three days.
(7) PENDING ACQUISITION OF U.S. HOME CORPORATION
In February 2000, the Company entered into a definitive agreement to acquire
U.S. Home Corporation through a merger of U.S. Home with a subsidiary of the
Company. U.S. Home stockholders will receive a total of approximately $476
million, of which approximately one-half will be in cash and the remainder will
be in common stock of the Company. The common stock portion, and therefore the
total purchase price, is subject to adjustment if the price of the Company's
stock is greater or lower than specified levels. U.S. Home will become a
wholly-owned subsidiary of the Company. The transaction is subject to approval
by the stockholders of both companies. Both companies have scheduled stockholder
meetings on April 28, 2000 to vote on the transaction. If the necessary
stockholder approvals are obtained, the Company expects the transaction to close
in May 2000.
U.S. Home is primarily a homebuilder, with operations in 11 states. U.S. Home
had total revenues of $1.8 billion and net income of $72 million in 1999, and it
delivered 9,069 homes during that year.
7
<PAGE>
(8) NEW FINANCING COMMITMENT
In March 2000, the Company announced that it had received commitments from Banc
One Capital Markets and Deutsche Banc Alex. Brown and affiliates to provide a
total of up to $1.8 billion of financing in connection with its agreement to
acquire U.S. Home. The financing includes a $1 billion revolving credit
facility, a $300 million institutional Term Loan B and a $500 million capital
markets bridge loan. This committed financing will be used to refinance existing
U.S. Home and Lennar debt and for ongoing general corporate purposes.
When the acquisition of U.S. Home takes place, holders of its publicly-held
Notes (currently totaling $525 million) will have a right to require U.S. Home
to repurchase their Notes for 101% of their principal amount within 90 days
after the transaction is completed. In April 2000, the Company commenced a
tender offer for all of U.S. Home's publicly-held Notes for 101% of their
principal amount. The Company will also pay between $5 and $15 per $1,000
principal amount of Notes for consents to amendments to the indentures relating
to the Notes which will eliminate most of the restrictive covenants in those
indentures. The Company's obligation to purchase the tendered Notes is
conditioned on completion of its acquisition of U.S. Home.
(9) NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The effective date of this statement, as
amended by SFAS No. 137, is 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.
8
<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
Net earnings were $22.2 million, or $0.40 per share diluted ($0.42 per share
basic), in the first quarter of 2000, compared to $27.9 million, or $0.45 per
share diluted ($0.48 per share basic), in the first quarter of 1999.
Homebuilding operating earnings decreased in the first quarter of 2000 due
primarily to a shift in deliveries from higher margin to lower margin areas.
Financial Services operating earnings decreased primarily as a result of lower
earnings from the Division's title services operations, which were impacted by a
reduced number of refinancing transactions as a result of higher interest rates.
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
---------------------------------
(DOLLARS IN THOUSANDS, EXCEPT February 29, February 28,
AVERAGE SALES PRICES) 2000 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Sales of homes $ 523,948 506,769
Sales of land and other revenues 52,745 21,547
Equity in earnings from partnerships 4,229 3,060
- -----------------------------------------------------------------------------------------------------------
Total revenues 580,922 531,376
COSTS AND EXPENSES:
Cost of homes sold 420,967 400,418
Cost of land and other expenses 45,163 16,585
Selling, general and administrative 59,963 55,983
- -----------------------------------------------------------------------------------------------------------
Total costs and expenses 526,093 472,986
- -----------------------------------------------------------------------------------------------------------
OPERATING EARNINGS $ 54,829 58,390
===========================================================================================================
Gross margin on home sales - $ $ 102,981 106,351
Gross margin on home sales - % 19.7% 21.0%
S,G&A expenses as a percentage of homebuilding revenues 10.3% 10.5%
Operating earnings as a percentage of homebuilding revenues 9.4% 11.0%
Average sales price $ 217,000 211,000
===========================================================================================================
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF HOME AND BACKLOG DATA
Three Months Ended
---------------------------------
February 29, February 28,
DELIVERIES 2000 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Florida 769 759
California 666 791
Texas 764 524
Arizona/Nevada 212 323
- -------------------------------------------------------------------------------------------------------
2,411 2,397
=======================================================================================================
NEW ORDERS
- -------------------------------------------------------------------------------------------------------
Florida 851 1,030
California 860 843
Texas 776 654
Arizona/Nevada 271 360
- -------------------------------------------------------------------------------------------------------
2,758 2,887
=======================================================================================================
BACKLOG - HOMES
- -------------------------------------------------------------------------------------------------------
Florida 1,173 1,815
California 973 1,200
Texas 664 833
Arizona/Nevada 428 742
- -------------------------------------------------------------------------------------------------------
3,238 4,590
=======================================================================================================
BACKLOG - DOLLAR VALUE (IN THOUSANDS) $772,937 933,918
=======================================================================================================
</TABLE>
Revenues from sales of homes increased 3% in the first quarter of 2000 to $523.9
million from $506.8 million in 1999. Revenues were higher due primarily to a 3%
increase in the average sales price on new home deliveries to $217,000 in the
first quarter of 2000 from $211,000 in the first quarter of 1999. New home
deliveries totaled 2,411 homes in the first quarter of 2000, compared to 2,397
homes in the first quarter of 1999.
Gross margin as a percentage of sales of homes was 19.7% in the first quarter of
2000, compared to 21.0% in the same period in 1999. The lower gross margin
percentage in 2000 reflected a shift in the quarter to a lower percentage of
deliveries from California, where the gross margin percentage is currently
higher than the Company average, to a higher percentage of deliveries in Texas,
where the Company experienced a reduced margin percentage compared to last year.
Revenues from land sales totaled $51.3 million in the first quarter of 2000,
compared to $19.7 million in the same period in 1999. Gross margins from land
sales totaled $6.4 million, or 12.5%, in the first quarter of 2000, compared to
$3.7 million, or 18.7%, last year. Equity in earnings from partnerships
increased to $4.2 million in the first quarter of 2000 from $3.1 million in the
first quarter of 1999. 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 homebuilding
revenues were 10.3% in the first quarter of 2000, compared to 10.5% in the first
quarter of 1999.
10
<PAGE>
At February 29, 2000, the Company's backlog of sales contracts was 3,238 homes
($773 million), compared to 4,590 homes ($934 million) at February 28, 1999. The
decrease in backlog was due to an improved backlog conversion ratio of 83% in
the first quarter of 2000, compared to 58% in the first quarter of 1999, and a
decline in new orders in recent quarters.
FINANCIAL SERVICES
The following table presents selected financial data related to the Financial
Services Division for the periods indicated (unaudited):
Three Months Ended
-------------------------------
February 29, February 28,
(DOLLARS IN THOUSANDS) 2000 1999
- --------------------------------------------------------------------------------
Revenues $ 59,445 59,223
Costs and expenses 58,837 53,502
- --------------------------------------------------------------------------------
Operating earnings $ 608 5,721
================================================================================
Dollar value of mortgages originated $ 483,018 269,667
- --------------------------------------------------------------------------------
Number of mortgages originated 3,200 1,900
- --------------------------------------------------------------------------------
Principal balance of servicing portfolio $ 2,969,355 3,238,847
- --------------------------------------------------------------------------------
Number of loans serviced 37,000 40,000
- --------------------------------------------------------------------------------
Number of title transactions 26,000 38,000
================================================================================
Operating earnings from the Financial Services Division decreased in the first
quarter of 2000 to $0.6 million from $5.7 million in the same period in 1999.
This decrease was primarily due to lower title earnings which resulted from a
31% decrease in the number of title transactions. The decrease in title
transactions reflected lower refinancing activity as a result of higher interest
rates.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES
Corporate general and administrative expenses as a percentage of total revenues
were 1.4% in the first quarter of both 2000 and 1999.
INTEREST EXPENSE
In the first quarter of 2000, interest expense was $10.0 million, or 1.6% of
total revenues, compared to interest expense of $9.5 million, or 1.6% of total
revenues, in 1999. Interest incurred was $12.8 million in the first quarter of
2000, compared to $12.1 million last year. The increase in interest incurred was
primarily due to a higher average borrowing rate in 2000.
(2) LIQUIDITY AND FINANCIAL RESOURCES
In the first quarter of 2000, $61.5 million of cash was used in the Company's
operating activities, compared to $80.2 million in the first quarter of 1999. In
the first quarter of 2000, $121.9 million of cash was used to increase
inventories through land purchases, land development and construction and $23.9
million was used to reduce accounts payable and other liabilities. These uses of
cash were partially offset by $22.2 million of net earnings and $65.0 million of
cash received from the sale or disposition of loans by the Company's Financial
Services Division. In the first quarter of 1999, $109.8 million of cash was used
to increase inventories through land purchases, land development and
construction and $33.6 million was used to reduce accounts
11
<PAGE>
payable and other liabilities. These uses of cash were partially offset by $27.9
million of net earnings and $34.8 million of cash received from the sale or
disposition of loans by the Company's Financial Services Division.
Cash provided by investing activities totaled $5.7 million in the first quarter
of 2000, compared to cash used in investing activities of $21.8 million in the
corresponding period in 1999. In the first quarter of 2000, $8.4 million of cash
was provided by the Company's investments in partnerships. In the first quarter
of 1999, $15.8 million of cash was used to increase the Company's investments in
partnerships.
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 February 29, 2000, the Company had unsecured revolving
credit facilities in the aggregate amount of $645 million, which were available
to refinance existing indebtedness, for working capital, for acquisitions and
for general corporate purposes. At February 29, 2000, $229.6 million was
outstanding under the Company's revolving credit facilities, compared to no
balance outstanding at November 30, 1999. The increase from November 30, 1999
was due to borrowings associated with seasonal homebuilding activities and
repurchases of common stock.
In September 1999, the Company's Board of Directors approved the repurchase of
up to ten million shares of the Company's outstanding common stock. The Company
may repurchase shares, from time-to-time, subject to market conditions. As of
February 29, 2000, the Company had repurchased approximately 9.7 million shares
of its outstanding common stock for an aggregate purchase price of approximately
$156.5 million (including approximately 9.3 million shares for an aggregate
purchase price of approximately $150.5 million during the first quarter of
2000). On February 8, 2000, the Company's Board of Directors authorized the
repurchase of an additional five million shares of the Company's outstanding
common stock.
In March 1999, 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. Proceeds can be
used for repayment of debt, acquisitions and general corporate purposes. As of
February 29, 2000, no securities had been issued under this registration
statement.
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.
12
<PAGE>
(3) PENDING ACQUISITION OF U.S. HOME CORPORATION
In February 2000, the Company entered into a definitive agreement to acquire
U.S. Home Corporation through a merger of U.S. Home with a subsidiary of the
Company. U.S. Home stockholders will receive a total of approximately $476
million, of which approximately one-half will be in cash and the remainder will
be in common stock of the Company. The common stock portion, and therefore the
total purchase price, is subject to adjustment if the price of the Company's
stock is greater or lower than specified levels. U.S. Home will become a
wholly-owned subsidiary of the Company. The transaction is subject to approval
by the stockholders of both companies. Both companies have scheduled stockholder
meetings on April 28, 2000 to vote on the transaction. If the necessary
stockholder approvals are obtained, the Company expects the transaction to close
in May 2000.
U.S. Home is primarily a homebuilder, with operations in 11 states. U.S. Home
had total revenues of $1.8 billion and net income of $72 million in 1999, and it
delivered 9,069 homes during that year.
(4) NEW FINANCING COMMITMENT
In March 2000, the Company announced that it had received commitments from Banc
One Capital Markets and Deutsche Banc Alex. Brown and affiliates to provide a
total of up to $1.8 billion of financing in connection with its agreement to
acquire U.S. Home. The financing includes a $1 billion revolving credit
facility, a $300 million institutional Term Loan B and a $500 million capital
markets bridge loan. This committed financing will be used to refinance existing
U.S. Home and Lennar debt and for ongoing general corporate purposes.
When the acquisition of U.S. Home takes place, holders of its publicly-held
Notes (currently totaling $525 million) will have a right to require U.S. Home
to repurchase their Notes for 101% of their principal amount within 90 days
after the transaction is completed. In April 2000, the Company commenced a
tender offer for all of U.S. Home's publicly-held Notes for 101% of their
principal amount. The Company will also pay between $5 and $15 per $1,000
principal amount of Notes for consents to amendments to the indentures relating
to the Notes which will eliminate most of the restrictive covenants in those
indentures. The Company's obligation to purchase the tendered Notes is
conditioned on completion of its acquisition of U.S. Home.
13
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1-5. NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
(27) Financial Data Schedule.
(b) Reports on Form 8-K: A report on Form 8-K dated February 16, 2000
was filed by the Registrant providing information in connection
with the Company's agreement to merge with U.S. Home Corporation.
14
<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: April 14, 2000 /S/ BRUCE E. GROSS
-------------------------------
Bruce E. Gross
Vice President and
Chief Financial Officer
Date: April 14, 2000 /S/ DIANE J. BESSETTE
---------------------------------
Diane J. Bessette
Vice President and
Controller
15
<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 FINANCIAL STATEMENTS FOR THE THREE
MONTHS ENDED FEBRUARY 29, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-2000
<PERIOD-START> DEC-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 30,179
<SECURITIES> 0
<RECEIVABLES> 31,546
<ALLOWANCES> 2,172
<INVENTORY> 1,393,024
<CURRENT-ASSETS> 1,452,577
<PP&E> 21,086
<DEPRECIATION> 14,570
<TOTAL-ASSETS> 2,053,068
<CURRENT-LIABILITIES> 316,761
<BONDS> 949,650
0
0
<COMMON> 5,837
<OTHER-SE> 746,872
<TOTAL-LIABILITY-AND-EQUITY> 2,053,068
<SALES> 523,948
<TOTAL-REVENUES> 640,367
<CGS> 420,967
<TOTAL-COSTS> 466,130
<OTHER-EXPENSES> 127,857
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,968
<INCOME-PRETAX> 36,412
<INCOME-TAX> 14,201
<INCOME-CONTINUING> 22,211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,211
<EPS-BASIC> 0.42
<EPS-DILUTED> 0.40
</TABLE>
