01—Abstract
Summary
Summary of the 10-K filed January 29, 2010. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation reported a net loss of $417.1 milliona, or $2.45 per basic and diluted share, for the fiscal year ended November 30, 2009, compared with a net loss of $1,109.1 million, or $7.00 per share, in 2008.
Revenues fell to $3.12 billionb from $4.58 billion. The loss was reduced by a $314.3 million income tax benefit, which included a $351.8 million reversal of the deferred tax asset valuation allowance tied to tax legislation allowing a carryback of the 2009 loss. Homebuilding operating loss was $647.4 million, including $359.9 million of inventory impairments.
Home deliveries dropped to 11,478 from 15,735, and the average sales price fell to $243,000c from $270,000. Gross margin on home sales was 9.1%, compared with 12.3% in 2008. The company ended the year with $1.3 billion in homebuilding cash and a net homebuilding debt-to-total capital ratio of 36.9%.
During 2009 it issued $400 milliond of 12.25% senior notes due 2017, retired $448 million of senior notes and other debt, and sold $225 million of Class A stock under a $275 million equity program. It expects a tax refund of approximately $320 million in early 2010. Joint ventures were reduced to 62 from 116 at the end of 2008, and maximum recourse exposure fell to $288 million from $520 million.
The filing states that the Credit Facility is $1.1 billion, that no amount was available to borrow under it at year-end, and that the company was in compliance with its covenants, though it warns that future valuation adjustments or new debt could threaten compliance. Management states that demand may be stabilizing and that the company is positioned for a potential return to profitability in 2010. Investors should weigh that outlook against continued losses, the company's lack of investment-grade ratings, and the risk of further impairments.
Stuart A. Miller controls about 46% of the voting power.
02—Key points
Key Highlights
- Net loss of $417.1 million ($2.45 per share) in fiscal 2009, improved from a $1,109.1 million loss ($7.00 per share) in fiscal 2008
- Total revenues of $3.12 billion, down from $4.58 billion; home deliveries of 11,478 versus 15,735
- Gross margin on home sales of 9.1% (15.6% excluding valuation adjustments) versus 12.3% in 2008
- Year-end cash of $1.3 billion and net homebuilding debt-to-total capital of 36.9%
- $400 million 12.25% senior notes due 2017 issued; $448 million of senior notes and other debt retired; $225 million of stock sold under equity program
- Expected tax refund of approximately $320 million in early 2010; $351.8 million reversal of deferred tax asset valuation allowance in fiscal 2009
- Joint ventures reduced to 62 from 116 and maximum recourse exposure to $288 million from $520 million
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed January 29, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $3.12B$4.58B | −31.8% |
| Operating Expenses | $3.58B$5.02B | −28.6% |
| Operating Income | -$642.84M— | — |
| Interest Expense | $147.45M— | — |
| Net Income | -$417.15M-$1.11B | +62.4% |
| EPS (Basic) | $-2.45$-7.01 | +65.0% |
| EPS (Diluted) | $-2.45$-7.01 | +65.0% |
| Shares Outstanding (Diluted) | 171K— | — |
05—Questions
Frequently Asked Questions
Why did the net loss narrow in fiscal 2009?
The filing attributes the improvement mainly to lower homebuilding losses and a $314.3 million income tax benefit, which includes a $351.8 million reversal of the deferred tax asset valuation allowance tied to tax legislation that allowed the 2009 loss to be carried back. Homebuilding revenues fell, and inventory impairments were $359.9 million, versus $340.5 million in 2008.
Is Lennar at risk of violating its debt covenants?
The company states it was in compliance at November 30, 2009, with a leverage ratio of 48% against a 55% covenant level. It warns that significant valuation adjustments, new debt, or large joint venture investments in fiscal 2010 could cause noncompliance. A default could let lenders terminate the Credit Facility and could entitle holders of $2.2 billion of debt securities to demand repayment.
What does management say about the outlook?
Management says demand trends in its communities may be stabilizing, that homebuyers are benefiting from affordability and government stimulus, and that it is positioned for a potential return to profitability in 2010. The filing also notes the company has no basis for predicting how long demand and supply will remain out of balance.
How much control does the Miller family have over the company?
Stuart A. Miller, President, CEO and a Director, controls about 46% of the voting power of Class A and Class B common stock combined, which lets him effectively control director elections and stockholder votes. Class B shares carry ten votes each, compared with one for Class A.
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