01—Abstract
Summary
Summary of the 10-K filed February 28, 2003. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation reported record fiscal 2002 results for the year ended November 30, 2002, with net earnings of $545.1 milliona, or $7.72 per diluted share, compared to $417.8 million, or $6.01 per diluted share, in 2001.
Total revenues rose to $7.32 billionb from $6.03 billion. Homebuilding revenues were $6.84 billion, with operating earnings of $979.6 million, and financial services operating earnings were $127.6 million. During 2002 the company acquired nine homebuilders for total consideration of approximately $600 million, expanding into the Carolinas and the Chicago, Baltimore and Central Valley, California markets.
Homes delivered rose to 27,393 from 23,899, and the backlog dollar value increased to $3.2 billionc from $2.0 billion. The balance sheet remained solid. Cash was $731.2 million at year end, the revolving credit facilities were paid down to zero, and the net homebuilding debt to total net capital ratio improved to 27.7% from 29.1%.
Stockholders' equity grew to $2.23 billiond from $1.66 billion. Operating cash flow was $204.6 million, reduced by increased inventories and receivables to support a larger backlog and more active communities. Subsequent to year end, on February 5, 2003, the company issued $350 million of 5.95% senior notes due 2013.
Investors should note that Stuart Miller, President and CEO, holds voting control of approximately 64% of the combined votes through Class B common stock, which gives him power to elect all directors. The filing also states that the homebuilding business has not undergone a down cycle in a number of years and identifies cyclicality, interest rates, land availability and materials costs as principal risk factors.
02—Key points
Key Highlights
- Record fiscal 2002 net earnings of $545.1 million, or $7.72 per diluted share, up from $417.8 million, or $6.01 per diluted share, in 2001
- Total revenues of $7.32 billion in 2002 versus $6.03 billion in 2001; homebuilding gross margin on home sales was 24.3%, up from 23.9%
- Homes delivered totaled 27,393 in 2002 versus 23,899 in 2001; new orders increased 19%, and backlog dollar value reached $3.2 billion
- Acquired nine homebuilders in 2002 for total consideration of approximately $600 million, expanding into the Carolinas and Chicago, Baltimore and Central Valley, California
- Cash of $731.2 million at November 30, 2002, with zero outstanding under $926 million of revolving credit facilities; net homebuilding debt to total net capital ratio of 27.7%
- Financial Services operating earnings rose to $127.6 million from $89.1 million, driven by mortgage and title operations; 34,100 mortgages originated totaling $6.13 billion
- Subsequent event: $350 million of 5.95% senior notes due 2013 issued February 5, 2003
03—Questions
Frequently Asked Questions
How did Lennar perform financially in fiscal 2002?
Lennar reported net earnings of $545.1 million, or $7.72 per diluted share, compared with $417.8 million, or $6.01 per diluted share, in fiscal 2001. The company described these as record revenues, profits and earnings per share. Total revenues were $7.32 billion, up from $6.03 billion.
What drove the growth in homebuilding during 2002?
Revenues from home sales rose 20% to $6.58 billion, reflecting a 16% increase in home deliveries and a 4% increase in the average sales price. Deliveries were higher due to a strong homebuilding market and the company's 2002 acquisitions. The filing notes that softness in the Texas market partially offset gross margin gains.
How strong is Lennar's balance sheet?
At November 30, 2002, the company had $731.2 million of cash and had paid down its revolving credit facilities to zero. Stockholders' equity increased to $2.23 billion from $1.66 billion. The net homebuilding debt to total net capital ratio improved to 27.7% from 29.1%. Homebuilding debt totaled $1.59 billion.
Who controls the company and what does that mean for shareholders?
Stuart Miller, President and Chief Executive Officer, has voting control through family-owned entities of Class B common stock, which carries approximately 64% of the combined votes. This gives him the power to elect all directors and approve most matters submitted to stockholders. The filing notes that this control might discourage someone from making a significant equity investment in the company.
What are the main risks identified in the filing?
The filing highlights the cyclical nature of the homebuilding market, which it notes has not undergone a down cycle in a number of years, along with interest rate and mortgage financing availability, land availability, material and labor cost fluctuations, weather, government regulation, and reliance on key personnel.
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