01—Abstract
Summary
Summary of the 10-K filed January 28, 2014. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation (LEN) reported fiscal 2013 (year ended November 30, 2013) net earnings attributable to Lennar of $479.7 milliona, or $2.15 per diluted share, including a $177.0 million tax provision ($0.78 per diluted share).
This compares with net earnings of $679.1 millionb, or $3.11 per diluted share, in 2012, which included a $435.2 million tax benefit. Total revenues rose to $5.94 billion from $4.11 billion, with Lennar Homebuilding revenues of $5.35 billion. Homebuilding delivered 18,290 homes in 2013 versus 13,802 in 2012, the average sales price rose to $290,000 from $255,000, and the gross margin on home sales improved to 24.9% from 22.7%.
Backlog ended the year at 4,806 homes worth $1.62 billionc, and new orders increased 21% year over year. The company's segments include Lennar Financial Services, which earned $85.8 million of operating earnings; Rialto Investments, a commercial real estate investment, management and finance business, which earned $26.1 million of operating earnings and launched the Rialto Mortgage Finance (RMF) conduit; and Lennar Multifamily, which posted a $17.0 million operating loss as it started up. Liquidity and leverage improved during the year: Lennar Homebuilding cash was $695.4 million, Lennar Homebuilding debt to total capital was 50.2% versus 54.0% a year earlier, and the 2.00% convertible senior notes were fully converted into Class A common stock.
Management expects 21,000 to 22,000 deliveries and gross margins averaging about 25% in fiscal 2014, and expects Financial Services earnings to decline. Risks highlighted in the filing include sensitivity to mortgage rates and the availability of financing, rising material and labor costs, the company's substantial indebtedness of $4.6 billiond excluding credit facilities, and the concentration of voting control with CEO Stuart A.
Miller, who holds about 44% of the votes. The company also disclosed a December 2013 jury award of $802 million in compensatory and $200 million in punitive damages against Briarwood Capital LLC and Nicolas Marsch III, although it does not expect to collect that amount.
02—Key points
Key Highlights
- Net earnings attributable to Lennar were $479.7 million, or $2.15 per diluted share, in 2013, compared with $679.1 million, or $3.11 per diluted share, in 2012, which included a $435.2 million tax benefit.
- Total revenues increased to $5.94 billion from $4.11 billion, driven by Lennar Homebuilding revenues of $5.35 billion and 18,290 homes delivered versus 13,802 in 2012.
- The average sales price of a Lennar home rose to $290,000 from $255,000, and gross margin on home sales improved to 24.9% from 22.7%.
- Ending backlog was 4,806 homes valued at $1.62 billion, and new orders rose 21% year over year.
- Lennar Homebuilding cash was $695.4 million at year end, and Lennar Homebuilding debt to total capital fell to 50.2% from 54.0%.
- Management expects 21,000 to 22,000 home deliveries with gross margins averaging about 25% in fiscal 2014, and expects Financial Services earnings to decline.
- Stuart A. Miller, the CEO, holds about 44% of the votes that can be cast by Class A and Class B common stockholders combined.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed January 28, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $5.94B$4.11B | +44.6% |
| Operating Expenses | $5.25B$3.79B | +38.5% |
| Operating Income | $828.00M$349.45M | +136.9% |
| Interest Expense | $214.26M$181.38M | +18.1% |
| Net Income | $479.67M$679.12M | −29.4% |
| EPS (Basic) | $2.48$3.58 | −30.7% |
| EPS (Diluted) | $2.15$3.11 | −30.9% |
| Shares Outstanding (Diluted) | 225.92M218.69M | +3.3% |
05—Questions
Frequently Asked Questions
How did Lennar's profitability change in fiscal 2013?
Net earnings attributable to Lennar were $479.7 million, or $2.15 per diluted share, compared with $679.1 million, or $3.11 per diluted share, in 2012. The 2013 figure includes a $177.0 million tax provision, while 2012 benefited from a $435.2 million tax benefit tied to the reversal of a valuation allowance. Earnings before income taxes rose to $681.9 million from $222.1 million.
What drove the growth in homebuilding results?
Home deliveries increased to 18,290 from 13,802, and the average sales price rose to $290,000 from $255,000. Sales incentives fell to $20,500 per home from $28,300, which helped lift the gross margin on home sales to 24.9% from 22.7%.
How is the company's debt and liquidity position?
Lennar Homebuilding debt totaled $4.19 billion at year end, and Lennar Homebuilding debt to total capital declined to 50.2% from 54.0%. The company ended the year with $695.4 million of Lennar Homebuilding cash and cash equivalents and a $950 million unsecured revolving credit facility with no outstanding borrowings. It issued $275 million of 4.125% senior notes due 2018 and $225 million of 4.750% senior notes due 2022, and the 2.00% convertible senior notes converted into Class A common stock.
What does management expect for fiscal 2014?
Management said it is well positioned to deliver between 21,000 and 22,000 homes with gross margins expected to average about 25%. It expects Financial Services earnings to decrease due to lower refinance volume and more competition, while Rialto's prospects are expected to improve and Multifamily is not expected to contribute meaningfully until beyond fiscal 2014.
What are the main risks flagged in the filing?
The filing cites sensitivity to mortgage interest rates and financing availability, rising land, labor and material costs, and substantial indebtedness. It also notes that Stuart A. Miller controls about 44% of the votes, which could discourage takeover attempts, and that the Class B shares trade 20% to 30% below Class A shares. The company also says it does not expect to collect the $802 million compensatory and $200 million punitive damages awarded in December 2013 against Briarwood Capital LLC and Nicolas Marsch III.
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