01—Abstract
Summary
Summary of the 10-K filed January 22, 2016. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation (LEN) reported fiscal 2015 (year ended November 30, 2015) as one of the nation's largest homebuilders, with Homebuilding accounting for $8.5 billiona, or approximately 89%, of consolidated revenues.
Total revenues were $9.47 billionb and net earnings attributable to Lennar were $802.9 million, or $3.46 per diluted share, compared with $638.9 million, or $2.80 per diluted share, in 2014. Deliveries rose to 24,292 homes from 21,003, the average sales price increased to $344,000 from $326,000, and gross margin on home sales was 24.0%, down from 25.4%, as land costs increased. The company expects lower margins in 2016 than in 2015, citing cost increases outpacing sales price increases, competitive pressures and development of previously inactive land.
It projects deliveries of between 26,500 and 27,000 homes in fiscal 2016, and ended the year with a backlog of 6,646 homes worth $2.48 billionc. Ancillary businesses include Rialto (a commercial real estate investment and finance segment that raised over $510 million in commitments for Fund III), Lennar Multifamily (which formed a Venture with approximately $1.1 billion of equity commitments), and FivePoint Communities, whose planned combination with other California master-planned developments is conditioned on an initial public offering. Key risks disclosed include a pending Settlers Crossing lawsuit in which a District Court ordered the company to buy a Maryland property for $114 million plus 12% simple interest; the company has appealed and posted a $223.4 million bond.
Total Lennar Homebuilding debt was $5.03 billiond, with a debt-to-total-capital ratio of 47.1%. Stuart A. Miller holds approximately 44% of the voting power through Class B shares.
02—Key points
Key Highlights
- Total revenues of $9.47 billion in fiscal 2015, up from $7.78 billion in 2014; Lennar Homebuilding revenues were $8.47 billion.
- Net earnings attributable to Lennar of $802.9 million, or $3.46 per diluted share, versus $2.80 in 2014.
- Home deliveries rose to 24,292 from 21,003, and new orders to 25,106 from 22,029; the average sales price was $344,000.
- Gross margin on home sales declined to 24.0% from 25.4%, and operating margin to 14.1% from 14.9%, mainly due to higher land costs.
- Management expects lower margins in 2016 and plans to deliver between 26,500 and 27,000 homes in fiscal 2016.
- Settlers Crossing litigation: a District Court ordered a $114 million property purchase plus 12% interest; the company has appealed and posted a $223.4 million bond.
- Lennar Homebuilding debt was $5.03 billion, a 47.1% debt-to-total-capital ratio; the $1.6 billion Credit Facility had no outstanding borrowings.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed January 22, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $9.47B$7.78B | +21.8% |
| Operating Expenses | $8.39B$6.86B | +22.3% |
| Operating Income | $1.43B$1.15B | +24.3% |
| Interest Expense | $12.45M$36.55M | −65.9% |
| Net Income | $802.89M$638.92M | +25.7% |
| EPS (Basic) | $3.78$3.12 | +21.2% |
| EPS (Diluted) | $3.39$2.80 | +21.1% |
| Shares Outstanding (Basic) | 209.85M202.21M | +3.8% |
| Shares Outstanding (Diluted) | 235.47M228.24M | +3.2% |
05—Questions
Frequently Asked Questions
How did Lennar perform financially in fiscal 2015?
Revenues rose to $9.47 billion from $7.78 billion, and net earnings attributable to Lennar increased to $802.9 million, or $3.46 per diluted share, from $638.9 million, or $2.80 per diluted share. Home sales revenue increased 22%, driven by a 15% increase in deliveries and a 6% increase in average sales price.
What is the outlook for 2016?
Management believes the housing market will continue its slow and steady recovery. It expects lower margins in 2016 than in 2015 due to cost increases outpacing price increases and competitive pressures, and it is positioned to deliver between 26,500 and 27,000 homes. It also anticipates a profitable year for Lennar Multifamily and says substantially all homes in backlog will be delivered in fiscal 2016.
What are the main legal and financial risks?
The most significant disclosed legal matter is the Settlers Crossing case, in which the District Court ordered Lennar to buy a Maryland property for $114 million plus 12% simple interest, which accrues at $13.7 million per year. The company believes the ruling is contrary to law, has appealed, and has posted a $223.4 million bond. Lennar also carries $5.4 billion of consolidated debt excluding credit facilities, and its ability to access capital depends on its credit ratings.
How are the non-homebuilding businesses performing?
Lennar Financial Services produced $127.8 million of operating earnings, up from $80.1 million, on higher mortgage volume. Rialto generated $33.6 million of operating earnings, and Lennar Multifamily posted a $7.2 million operating loss, which narrowed from $11.0 million, helped by $22.2 million of gains on property sales by unconsolidated entities.
Who controls the company's voting power?
Chief Executive Officer Stuart A. Miller, through personal holdings and family-owned entities, controls Class B and some Class A shares that give him approximately 44% of the votes of all outstanding Class A and Class B common stock combined. Class B shares carry 10 votes per share, and they trade at a substantially lower price than Class A shares.
06—Continue