01—Abstract
Summary
Summary of the 10-K filed January 27, 2009. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation's fiscal 2008 10-K (fiscal year ended November 30, 2008) shows a sharp downturn.
Homebuilding revenues fell to $4.26 billiona from $9.73 billion in 2007, and the company reported a net loss of $1.11 billion, or $7.00 per diluted share, compared with a net loss of $1.94 billion, or $12.31 per share, in 2007. The loss was driven largely by inventory valuation adjustments and write-offs ($340.5 million in 2008), a non-cash $730.8 million valuation allowance against deferred tax assets, and $205.0 million of valuation adjustments to unconsolidated entities. Deliveries fell to 15,735 homes from 33,283, and new orders were down 48% in 2008 per the filing.
Liquidity and leverage remained a focus. Cash and cash equivalents for homebuilding and financial services totaled $1.20 billionb, and operating cash flow was $1.10 billion, helped by $877.0 million of net federal and state tax refunds. Homebuilding debt to total capital rose to 49.2% from 37.5%.
The company reduced its joint venture recourse exposure to $392.5 millionc from $1,102.9 million at November 30, 2006, and cut its annual dividend to $0.16 per share from $0.64. The company's credit ratings were lowered and it no longer holds investment-grade ratings, and its $1.1 billion revolving credit facility carries covenants, including a minimum tangible net worth requirement. Management states that cash generation is its top priority for 2009, with plans to convert inventory to cash and reduce land purchases and home starts.
The filing also discloses that LandSource, the largest joint venture, filed for Chapter 11 in June 2008, and that the company's 16%d stake in it carried a zero value at year-end. Stuart A. Miller, President and CEO, holds voting control of approximately 49% of the votes.
02—Key points
Key Highlights
- Homebuilding revenues fell to $4.26 billion in 2008 from $9.73 billion in 2007; home deliveries dropped to 15,735 from 33,283.
- Net loss of $1.11 billion, or $7.00 per diluted share, versus a net loss of $1.94 billion, or $12.31 per share, in 2007.
- A non-cash $730.8 million valuation allowance was recorded against deferred tax assets, leaving no net deferred tax assets at November 30, 2008.
- Inventory adjustments and write-offs totaled $340.5 million in 2008, down from $2,445.1 million in 2007.
- Homebuilding debt to total capital increased to 49.2% from 37.5%; the company no longer holds investment-grade credit ratings.
- Quarterly dividend cut to $0.16 per share annually from $0.64; the company received $877.0 million of net tax refunds in 2008.
- Joint venture net recourse exposure was reduced to $392.5 million from $1,102.9 million at November 30, 2006.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed January 27, 2009Financial Statements
| Revenue | $4.58B |
| Operating Expenses | $5.02B |
| Net Income | -$1.11B |
| EPS (Basic) | $-7.01 |
| EPS (Diluted) | $-7.01 |
05—Questions
Frequently Asked Questions
Why did Lennar post such a large loss in fiscal 2008?
The loss was driven mainly by weak housing demand, which forced inventory valuation adjustments and write-offs of $340.5 million, $205.0 million of valuation adjustments on unconsolidated entities, and a $730.8 million non-cash valuation allowance against deferred tax assets. Lower home prices and higher sales incentives also compressed margins.
How is Lennar managing its liquidity and debt?
The company reported $1.20 billion of cash and cash equivalents and $1.10 billion of operating cash flow for 2008, aided by $877.0 million of net tax refunds. Its $1.1 billion revolving credit facility, which matures in July 2011, is subject to covenants, and management says cash generation will be its top priority in 2009.
What happened with the LandSource joint venture?
LandSource and several subsidiaries filed for Chapter 11 in June 2008. In November 2008, Lennar's land purchase options with LandSource were terminated, and it recognized a deferred profit of $101.3 million. Lennar's 16% ownership interest had a carrying value of zero at November 30, 2008.
Has Lennar changed its dividend or share repurchase policy?
Yes. In October 2008 the Board reduced the annual dividend to $0.16 per share from $0.64. The company made no share repurchases under its 2001 program during the fourth quarter of 2008 and no material repurchases in 2008 or 2007.
What is the outlook for Lennar's business in 2009?
The filing says management has no visibility on when market conditions will subside and that further deterioration could lead to additional valuation adjustments. Management plans to reduce overhead, curtail land purchases and home starts, and convert inventory to cash.
06—Continue