01—Abstract
Summary
Summary of the 10-K filed March 1, 2004. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation's 10-K for the fiscal year ended November 30, 2003 reports record revenues, profits and earnings per share.
Total revenues were $8.91 billiona, up from $7.24 billion in 2002, and net earnings were $751.4 million, or $4.65 per diluted share, compared with $545.1 million, or $3.51 per diluted share, in 2002. Homebuilding operating earnings rose to $1.16 billion from $834.1 million, and financial services operating earnings reached $154.5 million. Homes delivered totaled 32,180, up from 27,393, and the backlog of sales contracts stood at 13,905 homes worth $3.9 billion.
The balance sheet strengthened over the year. Stockholders' equity increased to $3.26 billionb from $2.23 billion, and cash rose to $1.2 billion. The net homebuilding debt to total net capital ratio fell to 9.7% from 27.7%, and no amounts were outstanding under the $1 billion revolving credit facilities at year-end.
Total debt was $1.55 billionc for homebuilding and $740.5 million for financial services. Cash flow from operations was $580.8 million, and inventories rose by $267.2 million to support higher backlog and more active communities.
Subsequent to year-end, the company completed the January 2004 acquisition of The Newhall Land and Farming Company through a 50/50 joint venture with LNR Property Corporation, for approximately $1 billiond. The filing also discloses a two-for-one stock split effective January 2004, a dividend increase to $0.50 per share per year, and that Stuart Miller holds roughly 48% of the combined voting power, a concentration of control the filing flags as a risk factor.
02—Key points
Key Highlights
- Total revenues of $8.91 billion in fiscal 2003, up from $7.24 billion in 2002; net earnings of $751.4 million, up from $545.1 million.
- Diluted EPS of $4.65 versus $3.51 in 2002, with the filing describing the results as record revenues, profits and earnings per share.
- Homes delivered rose to 32,180 from 27,393, and new orders increased 18% to 33,523; backlog reached 13,905 homes valued at $3.9 billion.
- Gross margin on home sales improved to 23.1% from 22.2%, and average sales price rose to $256,000 from $245,000.
- Stockholders' equity grew to $3.26 billion; net homebuilding debt to total net capital declined to 9.7% from 27.7%, with zero borrowings under the $1 billion revolving credit facilities.
- Mortgage originations totaled $7.6 billion across 41,000 loans, and operating earnings from financial services increased to $154.5 million.
- Subsequent to year-end, the Newhall Land acquisition closed in January 2004 for approximately $1 billion, and a two-for-one stock split was distributed on January 20, 2004.
03—Questions
Frequently Asked Questions
What drove the increase in Lennar's 2003 earnings?
The filing attributes the increase in net earnings to strong homebuilding gross margins and higher operating earnings from the Financial Services Division. Deliveries and average sales price both increased on strong demand, supply constraints, demographic trends, low interest rates and improving economic conditions.
How strong is Lennar's balance sheet at year-end 2003?
Homebuilding cash was $1.2 billion at November 30, 2003. Homebuilding senior notes and other debts payable totaled $1.55 billion, down from $1.59 billion. The net homebuilding debt to total net capital ratio was 9.7%, compared with 27.7% a year earlier, and no amounts were outstanding under the revolving credit facilities.
What are the main risks to Lennar's business described in the filing?
The filing lists the cyclical nature of home sales, the availability and cost of land, material and labor prices, weather, government regulation, inflation or deflation, mortgage financing costs, competition, quarterly variability in results, and dependence on key personnel. It also notes that Stuart Miller holds about 48% of the combined voting power, which gives him significant influence over director elections and most stockholder matters.
What happened to Lennar's capital structure and shareholder returns in 2003 and early 2004?
In April 2003 the company distributed one Class B share for every ten shares held and listed Class B on the NYSE. In 2003 substantially all of the 3 7/8% zero-coupon convertible debentures were converted into about 13.6 million Class A shares. In September 2003 the quarterly dividend rate was raised to $0.50 per share per year. A two-for-one stock split was distributed on January 20, 2004.
04—Continue