01—Abstract
Summary
Summary of the 10-K filed January 23, 2015. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation is one of the nation's largest homebuilders and also operates Lennar Financial Services, Rialto (a commercial real estate investment, investment management and finance company) and Lennar Multifamily.
Homebuilding generated $7.0 billiona in revenues, about 90% of consolidated revenues, in fiscal 2014. Total revenues were $7.78 billion and net earnings attributable to Lennar were $638.9 million, or $2.80 per diluted share, compared with $479.7 million, or $2.15 per diluted share, in 2013. Home deliveries rose to 21,003 from 18,290, the average sales price rose to $326,000 from $290,000, and the backlog dollar value reached $1.97 billion.
Gross margin on home sales improved to 25.4%b from 24.9%. The company expects to deliver between 23,500 and 24,000 homes in fiscal 2015 with gross margins averaging about 24%, and it expects some margin contraction. Management says it is still in the early stages of a protracted slow-growth housing recovery and is shifting toward a land-lighter model with the goal of becoming cash-flow positive, expecting positive cash flow in fiscal 2016.
Cash used in operating activities was $788.5 millionc in 2014. Lennar Homebuilding debt was $4.69 billion, and the Lennar Homebuilding debt-to-total-capital ratio was 49.3%. Net of Lennar Homebuilding cash, the ratio was 44.1%.
Key risks disclosed include a slowdown in the housing recovery, land write-downs, competition, reliance on warehouse facilities maturing in 2015, and covenant compliance. A court ruling in January 2015 ordered Lennar to buy a Maryland property for a $114 milliond balance, which the company says is contrary to law and will appeal.
Stuart A. Miller holds about 44% of the voting power through Class B shares.
02—Key points
Key Highlights
- Net earnings attributable to Lennar rose to $638.9 million ($2.80 diluted EPS) in fiscal 2014 from $479.7 million ($2.15) in 2013.
- Total revenues were $7.78 billion, with Lennar Homebuilding contributing $7.03 billion.
- Home deliveries increased to 21,003 from 18,290, and the average sales price rose to $326,000 from $290,000.
- Gross margin on home sales improved to 25.4% from 24.9%; the backlog dollar value reached $1.97 billion, up from $1.62 billion.
- Fiscal 2015 guidance calls for 23,500 to 24,000 deliveries and gross margins averaging about 24%, with some margin contraction expected.
- Lennar Homebuilding debt-to-total-capital was 49.3%, and the company had a $1.5 billion Credit Facility with no outstanding borrowings.
- Cash used in operating activities was $788.5 million in 2014, and the company expects positive cash flow to begin in fiscal 2016.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed January 23, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $7.78B$5.94B | +31.1% |
| Operating Expenses | $6.86B$5.25B | +30.6% |
| Operating Income | $1.15B$828.00M | +38.5% |
| Interest Expense | $36.55M$214.26M | −82.9% |
| Net Income | $638.92M$479.67M | +33.2% |
| EPS (Basic) | $3.12$2.48 | +25.8% |
| EPS (Diluted) | $2.80$2.15 | +30.2% |
| Shares Outstanding (Basic) | 202.21M— | — |
| Shares Outstanding (Diluted) | 228.24M225.92M | +1.0% |
05—Questions
Frequently Asked Questions
How did Lennar perform financially in fiscal 2014?
Net earnings attributable to Lennar were $638.9 million, or $2.80 per diluted share, compared with $479.7 million, or $2.15 per diluted share, in 2013. Earnings before income taxes were $969.8 million, and total revenues were $7.78 billion.
What is the company's outlook for fiscal 2015?
Lennar expects to deliver between 23,500 and 24,000 homes with gross margins averaging about 24%. It expects some margin contraction from competitive pressures, expects its Financial Services earnings to increase, and says it is on track for another year of substantial profitability.
How much debt does Lennar carry?
Lennar Homebuilding senior notes and other debts payable were $4.69 billion at November 30, 2014. The Lennar Homebuilding debt-to-total-capital ratio was 49.3%, or 44.1% net of Lennar Homebuilding cash.
What legal and regulatory risks does the filing highlight?
In January 2015 a court ordered Lennar to purchase a Maryland property for the $114 million contract balance, plus 12% interest and fees. The company believes the decision is contrary to applicable law and will appeal. The filing also flags regulatory changes and the 2015 maturity of warehouse facilities.
Who controls voting power at Lennar?
Stuart A. Miller, Chief Executive Officer and a Director, controls about 44% of the votes across Class A and Class B common stock through personal holdings and family-owned entities. The Class B shares carry 10 votes per share.
06—Continue