Exhibit 99.1
Contact:
Marshall Ames
Investor Relations
Lennar Corporation
(305) 485-2092
FOR IMMEDIATE RELEASE
Lennar Reports Fourth Quarter EPS of $3.54, up 55%
Financial Highlights
2005 Fourth Quarter
| • | Revenues from continuing operations of $5.0 billion – up 42% |
| • | EPS from continuing operations of $3.54 – up 55% |
| • | Homebuilding operating earnings of $962.5 million – up 54% |
| • | Gross margin on home sales of 27.0% – up 140 basis points |
| • | New orders of 10,236 homes – up 25% |
2005 Fiscal Year
| • | Revenues from continuing operations of $13.9 billion – up 32% |
| • | EPS from continuing operations of $8.17 – up 43% (includes $0.13 per share charge on the redemption of the Company’s 9.95% senior notes) |
| • | Homebuilding operating earnings of $2.3 billion – up 47% |
| • | Gross margin on home sales of 26.0% – up 210 basis points |
| • | Gross profit on land sales for fiscal 2005 of $200.8 million – up $41.5 million |
| • | Debt to total capital of 33.1% and cash of $910 million |
| • | Deliveries of 42,359 homes – up 17% |
| • | Backlog dollar value of $6.9 billion – up 36% |
2006 Goal
| • | Fiscal 2006 EPS goal of $9.25 reaffirmed |
Miami, December 15, 2005 — Lennar Corporation (NYSE: LEN and LEN.B), one of the nation’s largest homebuilders, today reported earnings for its fourth quarter and fiscal year ended November 30, 2005. Fourth quarter net earnings from continuing operations in 2005 were $581.2 million, or $3.54 per share diluted, compared to net earnings from continuing operations of $379.4 million, or $2.29 per share diluted, in 2004.
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Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, “The intense focus on the fundamentals of our homebuilding process allowed us to achieve record results once again in fiscal 2005, as we exceeded our target and delivered a record 42,359 homes despite the 400 to 500 deliveries delayed due to the significant disruption caused by Hurricane Wilma. Overall, we are very pleased with our performance in fiscal 2005, which resulted in strong revenue growth and a 210 basis point increase in gross margin percentage on new home deliveries.”
Mr. Miller continued, “While the industry continues to be influenced by increased regulation, we expect our homebuilding operations to continue to benefit substantially from our access to homesites in land-constrained markets. Despite signs nationally of a more normalized level of activity with regards to sales pace and price appreciation, our capital investments in these strategic markets afford us a significant competitive advantage and allow us to be well positioned for future success.”
Mr. Miller concluded, “As we enter fiscal 2006, our record-level $6.9 billion backlog, strong balance sheet and strategic access to homesites position us well to achieve our previously announced fiscal 2006 earnings per share goal of $9.25.”
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 2005 COMPARED TO
THREE MONTHS ENDED NOVEMBER 30, 2004
Homebuilding
Revenues from home sales increased 39% in the fourth quarter of 2005 to $4.7 billion from $3.4 billion in 2004. Revenues were higher primarily due to an 18% increase in the number of home deliveries and an 18% increase in the average sales price of homes delivered in the fourth quarter of 2005. New home deliveries, excluding unconsolidated entities, increased to 13,851 homes in the fourth quarter of 2005 from 11,716 homes last year. In the fourth quarter of 2005, new home deliveries were higher in each of the Company’s regions, compared to 2004. The average sales price of homes delivered increased to $338,000 in the fourth quarter of 2005 from $287,000 in 2004.
Gross margins on home sales were $1.3 billion, or 27.0%, in the fourth quarter of 2005, compared to $860.4 million, or 25.6%, in 2004. Gross margin percentage on home sales increased 140 basis points primarily due to product mix favoring our higher margin states, as well as a significant gross margin percentage improvement in Arizona and Florida.
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Selling, general and administrative expenses as a percentage of revenues from home sales were 9.6% in both the fourth quarter of 2005 and 2004.
Gross profit on land sales totaled $58.2 million in the fourth quarter of 2005, compared to $13.3 million in 2004. Some of these land sales were from consolidated joint ventures, which resulted in minority interest expense. Minority interest expense from these land sales and other activities of the consolidated joint ventures was $11.2 million and $3.0 million, respectively, in the fourth quarter of 2005 and 2004 and is included in management fees and other income, net. Management fees and other income, net, totaled $14.2 million in the fourth quarter of 2005, compared to $11.5 million in 2004. Equity in earnings from unconsolidated entities was $79.1 million in the fourth quarter of 2005, compared to $61.8 million last year. Sales of land, equity in earnings from unconsolidated entities and management fees and other income, net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by the Company and unconsolidated entities in which it has investments.
Financial Services
Operating earnings from continuing operations for the Financial Services Division were $34.6 million in the fourth quarter of 2005, compared to $33.1 million last year. The increase was primarily due to the Division’s title operations, which generated higher profit per transaction in the fourth quarter of 2005, compared to 2004. This increase was partially offset by reduced profitability from the Division’s mortgage operations due to a more competitive mortgage environment.
Corporate General and Administrative Expenses
Corporate general and administrative expenses as a percentage of total revenues from continuing operations were 1.3% in both the fourth quarter of 2005 and 2004.
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YEAR ENDED NOVEMBER 30, 2005 COMPARED TO
YEAR ENDED NOVEMBER 30, 2004
Homebuilding
Revenues from home sales increased 33% in the year ended November 30, 2005 to $12.7 billion from $9.6 billion in 2004. Revenues were higher primarily due to a 16% increase in the number of home deliveries and a 15% increase in the average sales price of homes delivered in 2005. New home deliveries, excluding unconsolidated entities, increased to 40,882 homes in the year ended November 30, 2005 from 35,189 homes last year. In the year ended November 30, 2005, new home deliveries were higher in each of the Company’s regions, compared to 2004. The average sales price of homes delivered increased to $311,000 in the year ended November 30, 2005 from $272,000 in 2004.
Gross margins on home sales were $3.3 billion, or 26.0%, in the year ended November 30, 2005, compared to $2.3 billion, or 23.9%, in 2004. Gross margin percentage on home sales increased 210 basis points primarily due to a product mix favoring our higher margin states, as well as a significant gross margin percentage improvement in Arizona, California and Florida.
Selling, general and administrative expenses as a percentage of revenues from home sales were 10.8% in the year ended November 30, 2005, compared to 10.9% in 2004.
Gross profit on land sales totaled $200.8 million in the year ended November 30, 2005, compared to $159.4 million in 2004. Some of these land sales were from consolidated joint ventures, which resulted in minority interest expense. Minority interest expense from these land sales and other activities of the consolidated joint ventures was $45.0 million and $10.8 million, respectively, in the years ended November 30, 2005 and 2004 and is included in management fees and other income, net. Management fees and other income, net, totaled $16.5 million in the year ended November 30, 2005, compared to $58.5 million in 2004. Equity in earnings from unconsolidated entities was $133.8 million in the year ended November 30, 2005, compared to $90.7 million last year. Sales of land, equity in earnings from unconsolidated entities and management fees and other income, net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by the Company and unconsolidated entities in which it has investments.
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Financial Services
Operating earnings from continuing operations for the Financial Services Division were $104.8 million in the year ended November 30, 2005, compared to $110.7 million last year. The decrease was primarily due to reduced profitability from the Division’s mortgage operations as a result of a more competitive mortgage environment in 2005, as well as a $6.5 million pretax gain generated from monetizing a majority of the Division’s alarm monitoring contracts in 2004. This decrease was partially offset by improved profitability from the Division’s title operations in 2005.
Corporate General and Administrative Expenses
Corporate general and administrative expenses as a percentage of total revenues from continuing operations were 1.4% in the year ended November 30, 2005, compared to 1.3% in 2004.
Loss on Redemption of 9.95% Senior Notes
In 2005, the Company redeemed all of its outstanding 9.95% senior notes, which resulted in a pretax loss on redemption of $34.9 million, or $0.13 per share diluted, net of tax.
Discontinued Operations
In 2005, the Company generated a $15.8 million pretax gain on the sale of a subsidiary of the Financial Services Division’s title company. As a result of the sale, the subsidiary’s results are presented as discontinued operations for 2005 and 2004. Net earnings from discontinued operations for the year ended November 30, 2005 were $10.7 million, or $0.06 per share diluted, compared to $1.0 million in the prior year.
Lennar Corporation, founded in 1954, is headquartered in Miami, Florida and is one of the nation’s leading builders of quality homes for all generations, building affordable, move-up and retirement homes. The Company operates primarily under the Lennar and U.S. Home brand names and utilizes a Dual Marketing strategy consisting of the Everything’s Included® and Design StudioSM programs. Lennar’s Financial Services Division provides mortgage financing, title insurance, closing services and insurance agency services for both buyers of the Company’s homes and others. Its Strategic Technologies Division provides high-speed Internet and cable television services to residents of the Company’s communities and others. Previous press releases may be obtained at www.lennar.com.
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Some of the statements in this press release are “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption “Risk Factors Relating to Our Business” included in our Annual Report on Form 10-K, as amended on Form 10-K/A, for our fiscal year ended November 30, 2004, and in our other filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements.
A conference call to discuss the Company’s fourth quarter earnings will be held at 11:00 AM Eastern time on Thursday, December 15, 2005. The call will be broadcast live on the Internet and can be accessed through the Company’s website at www.lennar.com. If you are unable to participate in the conference call, the call will be archived at www.lennar.com for 90 days. A replay of the conference call will also be available later that day by calling 320-365-3844 and entering 805917 as the confirmation number.
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LENNAR CORPORATION AND SUBSIDIARIES
Selected Revenues and Earnings Information
(In thousands, except per share amounts)
| Three Months Ended November 30, |
Years Ended November 30, | ||||||||
| 2005 |
2004 |
2005 |
2004 | ||||||
| Revenues: |
|||||||||
| Homebuilding |
$ | 4,867,338 | 3,411,089 | 13,304,599 | 10,000,632 | ||||
| Financial services |
162,596 | 138,338 | 562,372 | 500,336 | |||||
| Total revenues |
$ | 5,029,934 | 3,549,427 | 13,866,971 | 10,500,968 | ||||
| Homebuilding operating earnings |
$ | 962,534 | 623,918 | 2,277,091 | 1,548,488 | ||||
| Financial services operating earnings |
34,580 | 33,120 | 104,768 | 110,731 | |||||
| Corporate general and administrative expenses |
63,526 | 47,609 | 187,257 | 141,722 | |||||
| Loss on redemption of 9.95% senior notes |
— | — | 34,908 | — | |||||
| Earnings from continuing operations before provision for income taxes |
933,588 | 609,429 | 2,159,694 | 1,517,497 | |||||
| Provision for income taxes |
352,429 | 230,060 | 815,284 | 572,855 | |||||
| Earnings from continuing operations |
581,159 | 379,369 | 1,344,410 | 944,642 | |||||
| Discontinued operations: |
|||||||||
| Earnings from discontinued operations before provision for income taxes (1) |
— | 586 | 17,261 | 1,570 | |||||
| Provision for income taxes |
— | 221 | 6,516 | 593 | |||||
| Earnings from discontinued operations |
— | 365 | 10,745 | 977 | |||||
| Net earnings |
$ | 581,159 | 379,734 | 1,355,155 | 945,619 | ||||
| Average shares outstanding: |
|||||||||
| Basic |
157,108 | 155,644 | 155,398 | 155,398 | |||||
| Diluted |
164,604 | 167,127 | 165,522 | 167,340 | |||||
| Earnings per share: |
|||||||||
| Basic: |
|||||||||
| Earnings from continuing operations |
$ | 3.70 | 2.44 | 8.65 | 6.08 | ||||
| Earnings from discontinued operations |
0.00 | 0.00 | 0.07 | 0.01 | |||||
| Net earnings |
$ | 3.70 | 2.44 | 8.72 | 6.09 | ||||
| Diluted: |
|||||||||
| Earnings from continuing operations |
$ | 3.54 | 2.29 | 8.17 | 5.70 | ||||
| Earnings from discontinued operations |
0.00 | 0.00 | 0.06 | 0.00 | |||||
| Net earnings |
$ | 3.54 | 2.29 | 8.23 | 5.70 | ||||
| Supplemental information: |
|||||||||
| Interest incurred (2) |
$ | 50,027 | 38,381 | 172,898 | 137,921 | ||||
| EBIT (3): |
|||||||||
| Earnings from continuing operations before provision for income taxes |
$ | 933,588 | 609,429 | 2,159,694 | 1,517,497 | ||||
| Earnings from discontinued operations before provision for income taxes (1) |
— | 586 | 17,261 | 1,570 | |||||
| Interest |
65,360 | 45,022 | 187,154 | 134,193 | |||||
| EBIT |
$ | 998,948 | 655,037 | 2,364,109 | 1,653,260 | ||||
| (1) | Earnings from discontinued operations before provision for income taxes includes a gain of $15.8 million for the year ended November 30, 2005 related to the sale of a subsidiary of the Company’s Financial Services Division’s title company. |
| (2) | Homebuilding interest incurred is capitalized to inventories and relieved as cost of sales when homes are delivered or land is sold. |
| (3) | EBIT is a non-GAAP financial measure derived by adding back previously capitalized interest amortized to cost of sales that was reflected in earnings before provision for income taxes. The Company’s management uses EBIT because it believes this financial measure helps to compare the Company’s operations with those of its competitors, by eliminating factors that differ from company to company for reasons that often are not related to the efficiency and effectiveness of a particular company’s operations. The Company believes EBIT provides useful information to investors and analysts, because it will help them compare the efficiency and effectiveness of the Company’s operations with those of its competitors. |
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LENNAR CORPORATION AND SUBSIDIARIES
Homebuilding Segment Information
(In thousands)
| Three Months Ended November 30, |
Years Ended November 30, | ||||||||
| 2005 |
2004 |
2005 |
2004 | ||||||
| Revenues: |
|||||||||
| Sales of homes |
$ | 4,658,684 | 3,357,688 | 12,711,789 | 9,559,847 | ||||
| Sales of land |
208,654 | 53,401 | 592,810 | 440,785 | |||||
| Total revenues |
4,867,338 | 3,411,089 | 13,304,599 | 10,000,632 | |||||
| Costs and expenses: |
|||||||||
| Cost of homes sold |
3,402,211 | 2,497,331 | 9,410,343 | 7,275,446 | |||||
| Cost of land sold |
150,442 | 40,116 | 391,984 | 281,409 | |||||
| Selling, general and administrative |
445,478 | 323,003 | 1,375,480 | 1,044,483 | |||||
| Total costs and expenses |
3,998,131 | 2,860,450 | 11,177,807 | 8,601,338 | |||||
| Equity in earnings from unconsolidated entities |
79,135 | 61,819 | 133,814 | 90,739 | |||||
| Management fees and other income, net |
14,192 | 11,460 | 16,485 | 58,455 | |||||
| Operating earnings |
$ | 962,534 | 623,918 | 2,277,091 | 1,548,488 | ||||
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LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog By Region
(Dollars in thousands)
| Three Months Ended November 30, |
At or for the Years Ended November 30, | ||||||||
| 2005 |
2004 |
2005 |
2004 | ||||||
| Deliveries: |
|||||||||
| East |
4,389 | 4,030 | 12,467 | 11,323 | |||||
| Central |
4,283 | 3,535 | 13,074 | 11,122 | |||||
| West |
5,731 | 4,643 | 16,818 | 13,759 | |||||
| Total |
14,403 | 12,208 | 42,359 | 36,204 | |||||
| Of the total deliveries listed above, 552 and 1,477, respectively, represent deliveries from unconsolidated entities for the three months and year ended November 30, 2005, compared to 492 and 1,015 deliveries in the same periods last year. | |||||||||
| New Orders: |
|||||||||
| East |
2,914 | 2,304 | 12,577 | 12,467 | |||||
| Central |
3,585 | 2,813 | 13,793 | 11,192 | |||||
| West |
3,737 | 3,043 | 17,035 | 14,008 | |||||
| Total |
10,236 | 8,160 | 43,405 | 37,667 | |||||
| Of the total new orders listed above, 283 and 1,254, respectively, represent new orders from unconsolidated entities for the three months and year ended November 30, 2005, compared to 349 and 1,700 new orders in the same periods last year. | |||||||||
| Backlog - Homes: |
|||||||||
| East |
8,128 | 7,327 | |||||||
| Central |
3,286 | 2,567 | |||||||
| West |
7,151 | 5,652 | |||||||
| Total |
18,565 | 15,546 | |||||||
| Of the total homes in backlog listed above, 1,359 represents homes in backlog from unconsolidated entities at November 30, 2005, compared to 1,585 homes in backlog at November 30, 2004. | |||||||||
| Backlog - Dollar Value: |
|||||||||
| East |
$ | 2,931,247 | 2,177,884 | ||||||
| Central |
775,505 | 633,703 | |||||||
| West |
3,177,486 | 2,243,686 | |||||||
| Total |
$ | 6,884,238 | 5,055,273 | ||||||
| Of the total dollar value of homes in backlog listed above, $590,129 represents the backlog dollar value from unconsolidated entities at November 30, 2005, compared to $644,839 of backlog dollar value at November 30, 2004. | |||||||||
Lennar’s market regions consist of homebuilding divisions located in the following states:
| East: | Florida, Maryland, Virginia, New Jersey, New York, North Carolina and South Carolina | |
| Central: | Texas, Illinois and Minnesota | |
| West: | California, Colorado, Arizona and Nevada | |
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LENNAR CORPORATION AND SUBSIDIARIES
Supplemental Data
(Dollars in thousands)
| November 30, |
|||||||
| 2005 |
2004 |
||||||
| Homebuilding debt |
$ | 2,592,772 | 2,021,014 | ||||
| Stockholders’ equity |
5,251,411 | 4,052,972 | |||||
| Total capital |
$ | 7,844,183 | 6,073,986 | ||||
| Homebuilding debt to total capital |
33.1 | % | 33.3 | % | |||