01—Abstract
Summary
Summary of the 10-K filed January 20, 2017. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation reported fiscal 2016 (year ended November 30, 2016) results with revenues of $10.95 billiona, up from $9.47 billion in 2015, and net earnings attributable to Lennar of $911.8 million, or $3.93 per diluted share, compared with $802.9 million, or $3.46 per diluted share, in 2015.
Homebuilding generated $9.7 billionb in revenues, about 89% of consolidated revenues, and the company delivered 26,563 homes at an average sales price of $361,000. Gross margin on home sales was 23.0%, down from 24.0% in 2015, which the company attributed primarily to higher land costs per home. Operating earnings were $1.56 billion in total, with Lennar Homebuilding contributing $1.34 billion, Lennar Financial Services $163.6 million, and Lennar Multifamily $71.2 million, while Rialto posted an operating loss of $16.7 million.
The company expects lower margins in 2017 than in 2016 as cost increases outpace sales price increases, and says it is positioned to deliver between 28,500 and 29,000 homes in fiscal 2017. Lennar's balance sheet strengthened during the year: Lennar Homebuilding debt to total capital fell to 39.4% from 47.1%, and the company retired its 2.75% and 3.25% convertible notes largely through conversion into equity. Total assets were $15.36 billionc at year end.
Pending items include the agreed acquisition of WCI Communities, Inc. for $23.50d per share in a cash and Class A stock combination, with a WCI stockholder vote expected in February 2017. Lennar also remains in litigation over a 2005 Maryland land contract, where the District Court ordered it to purchase the property for $114 million plus 12% simple interest, and it has posted a $223.4 million bond while it appeals. For investors, the key tensions are margin compression alongside volume and earnings growth, a leveraged capital structure that is improving but still carries $4.58 billion of Lennar Homebuilding debt, and the Settlers Crossing judgment and WCI deal as near-term event risks.
02—Key points
Key Highlights
- Total revenues of $10.95 billion in fiscal 2016, up from $9.47 billion in fiscal 2015
- Net earnings attributable to Lennar of $911.8 million, or $3.93 per diluted share, versus $3.46 in 2015
- Gross margin on home sales of 23.0%, down from 24.0%, primarily due to higher land costs per home
- 26,563 new home deliveries and an average sales price of $361,000, both increasing year over year
- Lennar Homebuilding debt to total capital decreased to 39.4% from 47.1%, reflecting higher equity and lower debt
- Pending acquisition of WCI Communities, Inc. at $23.50 per share in cash and Class A stock, subject to a February 2017 WCI stockholder vote
- Settlers Crossing litigation: court ordered a $114 million property purchase plus 12% simple interest, under appeal with a $223.4 million bond posted
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed January 20, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $10.95B$9.47B | +15.6% |
| Operating Expenses | $9.69B$8.39B | +15.5% |
| Operating Income | $1.56B$1.43B | +9.6% |
| Interest Expense | $4.63M$12.45M | −62.9% |
| Net Income | $911.84M$802.89M | +13.6% |
| EPS (Basic) | $4.05$3.78 | +7.1% |
| EPS (Diluted) | $3.86$3.39 | +13.9% |
| Shares Outstanding (Basic) | 223.08M209.85M | +6.3% |
| Shares Outstanding (Diluted) | 235.37M235.47M | 0.0% |
05—Questions
Frequently Asked Questions
How did Lennar perform financially in fiscal 2016?
Lennar's total revenues rose to $10.95 billion from $9.47 billion, and net earnings attributable to Lennar increased to $911.8 million, or $3.93 per diluted share, from $802.9 million, or $3.46 per diluted share. Homebuilding operating earnings were $1.34 billion.
What does management expect for margins and deliveries in fiscal 2017?
Management expects lower margins in 2017 compared to 2016 because cost increases are outpacing sales price increases and competitive pressures. The company believes it is positioned to deliver between 28,500 and 29,000 homes in fiscal 2017.
What is the WCI Communities acquisition?
Lennar agreed on September 22, 2016 to acquire WCI Communities, Inc. through a merger for a combination of Class A common stock and cash totaling $23.50 per WCI share, anticipated as $11.75 in cash and $11.75 in Class A stock. Lennar may reduce the stock portion and make the entire consideration cash. The deal requires WCI stockholder approval, with a vote expected in February 2017.
What is the status of the Settlers Crossing litigation?
In January 2015 the District Court ordered Lennar to purchase a Maryland property for the $114 million contract balance, plus 12% simple interest from May 27, 2008 (about $116 million as of November 30, 2016) and seller real estate taxes of $1.6 million. Lennar has appealed, believes the decision is contrary to applicable law, and has not recorded a liability. It posted a $223.4 million bond to stay the judgment during appeal.
How is Lennar's leverage and liquidity position?
Lennar Homebuilding debt totaled $4.58 billion at November 30, 2016, down from $5.03 billion, and debt to total capital was 39.4% versus 47.1% a year earlier. Cash and cash equivalents across operations were $1.3 billion, and the company stated it was in compliance with its debt covenants. It had no outstanding borrowings under its $1.8 billion Credit Facility.
06—Continue