Lennar Reports First Quarter EPS of $1.27
MIAMI, March 19, 2020 /PRNewswire/ --
-- Net earnings of $398.5 million, or $1.27 per diluted share, compared to
net earnings of $239.9 million, or $0.74 per diluted share
-- Deliveries of 10,321 homes - up 17%
-- New orders of 12,376 homes - up 18%; new orders dollar value of $5.0
billion - up 20%
-- Backlog of 17,632 homes - up 2%; backlog dollar value of $7.2 billion -
up 1%
-- Revenues of $4.5 billion - up 16%
-- Homebuilding operating margins of $474.3 million, compared to $384.9
million
-- Gross margin on home sales of 20.5%, compared to 20.1%
-- S,G&A expenses as a % of revenues from home sales of 9.2%, compared
to 9.5%
-- Operating margin on home sales of 11.4%, compared to 10.6%
-- Financial Services operating earnings (net of noncontrolling interests)
of $58.2 million, compared to $21.8 million
-- Multifamily operating earnings (net of noncontrolling interests) of $1.7
million, compared to operating earnings of $6.8 million
-- Lennar Other operating earnings (net of noncontrolling interests) of
$0.9 million, compared to $3.0 million
-- Homebuilding cash and cash equivalents of $785 million
-- Homebuilding debt to total capital of 33.6%
-- Borrowings of $300 million under the Company's $2.4 billion revolving
credit facility
-- Repurchased 4.4 million shares for $288.4 million
Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's leading homebuilders, today reported results for its first quarter ended February 29, 2020. First quarter net earnings attributable to Lennar in 2020 were $398.5 million, or $1.27 per diluted share, compared to first quarter net earnings attributable to Lennar in 2019 of $239.9 million, or $0.74 per diluted share.
Stuart Miller, Executive Chairman of Lennar, said, "Although today we are announcing our first quarter 2020 results, the events that have occurred since quarter-end currently command our focus and attention. With a near shutdown of large portions of our national economy, we are all stretching our minds to understand the parameters of the rapidly evolving landscape, while we contemplate what the future holds. Accordingly, our first quarter conference call this morning will be focused on Lennar's oversight and management through the current crisis, and the steady-handed approach that we have applied."
Mr. Miller continued, "First and foremost, our senior management team is evaluating every aspect of our company to determine how we protect the safety, health and hygiene of each and every one of our associates, customers and building partners, while we maintain our business. In that regard, we have engaged a distinguished medical professional, Dr. Pascal Goldschmidt, as our Chief Medical Officer who is assisting us in looking into every step of every business process to ensure we fully understand its impact on the health of every individual involved.
"Next, with safety, health and hygiene first, we are focused on the day to day operation of maintaining the parts of our business that are sustainable, while the national economy is struggling with a deepening pause, in order to 'flatten the COVID-19 curve.' Like food from the grocer is essential, our customers need a safe and secure place called 'home,' while the country moves from today's landscape of uncertainty to knowing that 'this too, shall pass.' Balancing people, safety and pause, with production and closings is difficult, and has the undivided focus of our entire seasoned and experienced management team.
"Third, we are managing every element of our balance sheet, cash management and cash flow. We are managing the inflow, and especially the outflow, of cash to maintain a strong foundation. Lennar's liquidity and strong balance sheet remain a stabilizing factor in enabling our company to help absorb the shock that is moving through the economy at this time. We are well positioned for stability today, as well as for opportunity when markets settle.
Mr. Miller concluded, "As you can see in the schedules in our earnings release, our first quarter results achieved and exceeded all expected metrics and we had been on track to expand on our guidance for the year. We have been focused on reducing land spend and land holdings to grow cash flow and fortify our balance sheet. That strategy was well-timed and has positioned us well. In the context of today's widespread shutdowns, we are choosing to suspend guidance as the world resets and finds its way forward. In the meantime, the laser focus of our experienced, hands-on management team will navigate, make necessary adjustments and guide Lennar through current market conditions."
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 29, 2020 COMPARED TO
THREE MONTHS ENDED FEBRUARY 28, 2019
Homebuilding
Revenues from home sales increased 15% in the first quarter of 2020 to $4.1 billion from $3.6 billion in the first quarter of 2019. Revenues were higher primarily due to a 17% increase in the number of home deliveries, excluding unconsolidated entities, partially offset by a 2% decrease in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, increased to 10,313 homes in the first quarter of 2020 from 8,802 homes in the first quarter of 2019, as a result of an increase in home deliveries in all homebuilding segments. The average sales price of homes delivered was $402,000 in the first quarter of 2020, compared to $410,000 in the first quarter of 2019. The decrease in average sales price primarily resulted from continuing to shift to lower-priced communities.
Gross margin on home sales were $849.0 million, or 20.5%, in the first quarter of 2020, compared to $726.1 million, or 20.1% in the first quarter of 2019. The gross margin percentage on home sales increased primarily due to the Company's focus on reducing construction costs.
Selling, general and administrative expenses were $378.9 million in the first quarter of 2020, compared to $343.3 million in the first quarter of 2019. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 9.2% in the first quarter of 2020, from 9.5% in the first quarter of 2019, due to improved operating leverage primarily as a result of an increase in home deliveries.
Financial Services
Operating earnings for the Financial Services segment were $58.2 million in the first quarter of 2020 (which included $47.3 million of operating earnings and an add back of $10.9 million of net loss attributable to noncontrolling interests) compared to $21.8 million in the first quarter of 2019 (which included $19.0 million of operating earnings and an add back of $2.8 million of net loss attributable to noncontrolling interests). Operating earnings increased due to an improvement in the mortgage business as a result of an increase in volume and margin, as well as reductions in loan origination costs driven in part by technology initiatives. Additionally, operating earnings of the Company's title business increased primarily due to an increase in volume.
Other Ancillary Businesses
Operating earnings for the Multifamily segment were $1.8 million in the first quarter of 2020 (which included $0.1 million of net earnings attributable to noncontrolling interests), compared to $6.8 million in the first quarter of 2019. Operating earnings for the Lennar Other segment were $0.9 million in the first quarter of 2020, compared to $3.1 million in the first quarter of 2019 (which included $0.1 million of net earnings attributable to noncontrolling interests).
Tax Rate
For the three months ended February 29, 2020 and February 28, 2019, we had a tax provision of $32.3 million and $79.7 million, respectively. The Company's overall effective income tax rate was 7.5% for the three months ended February 29, 2020 and 24.9% for the three months ended February 28, 2019. The reduction in the overall effective income tax rate is primarily due to the extension of the new energy efficient home tax credit during the first quarter of 2020.
Share Repurchases
During the first quarter of 2020, the Company repurchased a total 4.4 million shares of its common stock, including 4.3 million Class A shares and 0.1 million Class B shares, for $288.4 million at an average per share price of $66.42 per Class A share and $53.52 per Class B share.
Liquidity
At February 29, 2020, the Company had $785.0 million of Homebuilding cash & cash equivalents. Also at February 29, 2020, the Company had $300.0 million of outstanding borrowings under its revolving credit facility, thereby providing $2.1 billion of available capacity.
About Lennar
Lennar Corporation, founded in 1954, is one of the nation's leading builders of quality homes for all generations. The Company builds affordable, move-up and active adult homes primarily under the Lennar brand name. Lennar's Financial Services segment provides mortgage financing, title and closing services primarily for buyers of Lennar's homes and, through LMF Commercial, originates mortgage loans secured primarily by commercial real estate properties throughout the United States. Lennar's Multifamily segment is a nationwide developer of high-quality multifamily rental properties. Lennar Ventures drives the Company's technology and innovation strategies. For more information about Lennar, please visit www.lennar.com.
Note Regarding Forward-Looking Statements: 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, including statements relating to the homebuilding market and other markets in which we participate. 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. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those anticipated by the forward-looking statements. Important factors that could cause such differences include the potential negative impact of the coronavirus (COVID-19) outbreak on our ability to continue our Homebuilding or Multifamily development activities at normal levels or at all in affected regions; the duration, impact and severity of the COVID-19 outbreak; slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities; increases in operating costs, including costs related to construction materials, labor, real estate taxes and insurance, which exceed our ability to increase prices, both in our Homebuilding and Multifamily businesses; reduced availability of mortgage financing or increased interest rates; decreased demand for our homes or Multifamily rental properties, or our inability to successfully sell our apartment developments; natural disasters or catastrophic events for which our insurance may not provide adequate coverage; our ability to successfully execute our strategies, including our land lighter strategy; a decline in the value of the land and home inventories we maintain and resulting possible future writedowns of the carrying value of our real estate assets; unfavorable losses in legal proceedings; conditions in the capital, credit and financial markets; changes in laws, regulations or the regulatory environment affecting our business, and the risks described in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended November 30, 2019. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
A conference call to discuss the Company's first quarter earnings will be held at 11:00 a.m. Eastern Time on Thursday, March 19, 2020. 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 203-369-3058 and entering 5723593 as the confirmation number.
LENNAR CORPORATION AND SUBSIDIARIES
Selected Revenues and Operating Information
(In thousands, except per share amounts)
(unaudited)
Three Months Ended
February 29, 2020 February 28,
2019
---
Revenues:
Homebuilding $
4,172,116 3,623,721
Financial Services 198,661 143,311
Multifamily 132,617 97,394
Lennar Other 1,943 3,656
Total revenues $
4,505,337 3,868,082
Homebuilding operating
earnings $
460,398 369,595
Financial Services operating
earnings 47,317 18,972
Multifamily operating
earnings 1,785 6,797
Lennar Other operating
earnings 899 3,103
Corporate general and
administrative expenses (86,847) (79,343)
Earnings before income taxes 423,552 319,124
Provision for income taxes (32,329) (79,700)
Net earnings (including net
loss attributable to
noncontrolling interests) 391,223 239,424
Less: Net loss attributable
to noncontrolling interests (7,229) (486)
Net earnings attributable to
Lennar $
398,452 239,910
Average shares outstanding:
Basic 311,213 321,339
Diluted 311,215 321,349
Earnings per share:
Basic $
1.27 0.74
Diluted $
1.27 0.74
Supplemental information:
Interest incurred (1) $
93,291 104,383
EBIT (2):
Net earnings attributable to
Lennar $
398,452 239,910
Provision for income taxes 32,329 79,700
Interest expense included in:
Costs of homes sold 72,823 61,311
Costs of land sold 197 282
Homebuilding other expense,
net 5,934 3,008
Total interest expense 78,954 64,601
EBIT $
509,735 384,211
(1) Amount represents interest
incurred related to homebuilding
debt.
(2) EBIT is a non-GAAP financial
measure defined as earnings
before interest and taxes. This
financial measure has been
presented because the Company
finds it important and useful in
evaluating its performance and
believes that it helps readers
of the Company's financial
statements compare its
operations with those of its
competitors. Although management
finds EBIT to be an important
measure in conducting and
evaluating the Company's
operations, this measure has
limitations as an analytical
tool as it is not reflective of
the actual profitability
generated by the Company during
the period. Management
compensates for the limitations
of using EBIT by using this non-
GAAP measure only to supplement
the Company's GAAP results. Due
to the limitations discussed,
EBIT should not be viewed in
isolation, as it is not a
substitute for GAAP measures.
LENNAR CORPORATION AND SUBSIDIARIES
Segment Information
(In thousands)
(unaudited)
Three Months Ended
February 29, February 28,
2020 2019
---
Homebuilding revenues:
Sales of homes $
4,140,767 3,608,129
Sales of land 26,867 13,783
Other homebuilding 4,482 1,809
Total homebuilding revenues 4,172,116 3,623,721
Homebuilding costs and expenses:
Costs of homes sold 3,291,779 2,882,050
Costs of land sold 27,135 13,526
Selling, general and administrative 378,892 343,259
Total homebuilding costs and expenses 3,697,806 3,238,835
Homebuilding operating margins 474,310 384,886
Homebuilding equity in loss from unconsolidated entities (4,546) (13,756)
Homebuilding other expense, net (9,366) (1,535)
Homebuilding operating earnings $
460,398 369,595
Financial Services revenues $
198,661 143,311
Financial Services costs and expenses 151,344 124,339
Financial Services operating earnings $
47,317 18,972
Multifamily revenues $
132,617 97,394
Multifamily costs and expenses 137,348 101,178
Multifamily equity in earnings from unconsolidated entities and other gain 6,516 10,581
Multifamily operating earnings $
1,785 6,797
Lennar Other revenues $
1,943 3,656
Lennar Other costs and expenses 2,574 1,622
Lennar Other equity in earnings from unconsolidated entities 119 8,330
Lennar Other income (expense), net 1,411 (7,261)
Lennar Other operating earnings $
899 3,103
LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog
(Dollars in thousands, except average sales price)
(unaudited)
Lennar's reportable homebuilding segments and all other homebuilding operations not required to be reported separately have divisions located in:
East: Florida, New Jersey, North Carolina, Pennsylvania and South Carolina
Central: Georgia, Illinois, Indiana, Maryland, Minnesota, Tennessee and Virginia
Texas: Texas
West: Arizona, California, Colorado, Nevada, Oregon, Utah and Washington
Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint
At or for the Three Months Ended
February February
29, 28, February 29, February 28, February 29, February 28,
2020 2019 2020 2019 2020 2019
Deliveries: Homes Dollar Value Average Sales Price
East 4,065 3,612 $
1,405,667 1,226,435 $
346,000 340,000
Central 1,366 1,124 534,746 433,125 391,000 385,000
Texas 1,577 1,251 463,796 412,429 294,000 330,000
West 3,304 2,825 1,731,514 1,537,503 524,000 544,000
Other 9 8 8,039 7,758 893,000 970,000
Total 10,321 8,820 $
4,143,762 3,617,250 $
401,000 410,000
Of the total homes delivered listed above, eight homes with a dollar value of $3.0 million and an average sales price of $374,000 represent home deliveries from unconsolidated entities for the three months ended February 29, 2020, compared to 18 home deliveries with a dollar value of $9.1 million and an average sales price of $507,000 for the three months ended February 28, 2019.
New
Orders: Homes Dollar Value Average Sales Price
East 4,625 4,493 $
1,597,298 1,521,431 $
345,000 339,000
Central 1,773 1,422 695,498 537,596 392,000 378,000
Texas 1,999 1,424 573,079 456,959 287,000 321,000
West 3,965 3,112 2,125,632 1,629,814 536,000 524,000
Other 14 12 13,581 11,313 970,000 943,000
Total 12,376 10,463 $
5,005,088 4,157,113 $
404,000 397,000
Of the total new orders listed above, 26 homes with a dollar value of $8.1 million and an average sales price of $310,000 represent new orders from unconsolidated entities for the three months ended February 29, 2020, compared to 15 new orders with a dollar value of $9.7 million and an average sales price of $647,000 for the three months ended February 28, 2019.
Backlog: Homes Dollar Value Average Sales Price
East 7,387 7,956 $
2,640,129 2,817,706 $
357,000 354,000
Central 2,420 2,284 982,589 894,724 406,000 392,000
Texas 2,592 2,321 822,620 805,250 317,000 347,000
West 5,219 4,688 2,702,535 2,579,762 518,000 550,000
Other 14 10 13,995 12,543 1,000,000 1,254,000
Total 17,632 17,259 $
7,161,868 7,109,985 $
406,000 412,000
Of the total homes in backlog listed above, 49 homes with a backlog dollar value of $15.2 million and an average sales price of $311,000 represent the backlog from unconsolidated entities at February 29, 2020, compared to 14 homes with a backlog dollar value of $7.7 million and an average sales price of $552,000 at February 28, 2019.
LENNAR CORPORATION AND SUBSIDIARIES
Supplemental Data
(Dollars in thousands)
(unaudited)
February 29, November 30, February 28,
2020 2019 2019
---
Homebuilding debt $
8,115,498 7,776,638 9,256,423
Stockholders' equity 16,044,599 15,949,517 14,786,814
Total capital $
24,160,097 23,726,155 24,043,237
Homebuilding debt to 33.6 32.8 38.5
total capital
% % %
===
Homebuilding debt $
8,115,498 7,776,638 9,256,423
Less: Homebuilding
cash and cash
equivalents 784,950 1,200,832 852,551
Net homebuilding debt $
7,330,548 6,575,806 8,403,872
Net homebuilding debt 31.4 29.2 36.2
to total capital (1)
% % %
===
(1) Net homebuilding debt to total
capital is a non-GAAP financial
measure defined as net
homebuilding debt (homebuilding
debt less homebuilding cash and
cash equivalents) divided by total
capital (net homebuilding debt
plus stockholders' equity). The
Company believes the ratio of net
homebuilding debt to total capital
is a relevant and a useful
financial measure to investors in
understanding the leverage
employed in homebuilding
operations. However, because net
homebuilding debt to total capital
is not calculated in accordance
with GAAP, this financial measure
should not be considered in
isolation or as an alternative to
financial measures prescribed by
GAAP. Rather, this non-GAAP
financial measure should be used
to supplement the Company's GAAP
results.
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SOURCE Lennar Corporation
