01—Abstract
Summary
Summary of the 10-K filed January 28, 2019. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation reported fiscal 2018 (year ended November 30, 2018) revenues of $20.57 billiona, up from $12.65 billion in 2017, driven primarily by the February 2018 acquisition of CalAtlantic Group, Inc. Lennar Homebuilding revenues were $19.08 billion, about 93% of consolidated revenues.
Home deliveries rose to 45,627 from 29,394, and net earnings attributable to Lennar were $1.70 billionb, or $5.44 per diluted share, compared with $810.5 million, or $3.38 per diluted share, in 2017. The filing notes that the gross margin on home sales was 19.6%, down from 22.1%, due in part to a $414.6 million purchase accounting write-up on CalAtlantic homes delivered during the year. Total assets grew to $28.57 billion, and Lennar Homebuilding debt was $8.54 billion, with Lennar Homebuilding debt to total capital of 36.9%, down from 44.9%.
The filing describes a portfolio reshaping. Lennar sold its Rialto Management Group on November 30, 2018 for $340 millionc, recording a gain of $296.4 million, and subsequently sold most of its retail title business, its title insurance underwriter, and its real estate brokerage business. Management said it intends to shift toward a land-lighter model, with about 25% of homesites controlled through options and a goal of over 40% in the next several years.
It also stated that it expects to deliver over 50,000 homes in fiscal 2019. Following year-end, the Board authorized repurchases of up to the lesser of $1 billiond or 25 million shares. The filing also flags risks.
Management cited rising mortgage rates, cost increases for labor and materials, including tariffs on Canadian lumber, and a 2019 maturity schedule of $1.1 billion in senior notes plus $2.1 billion of warehouse lines. Stuart Miller controls approximately 33% of the voting power.
02—Key points
Key Highlights
- Revenues of $20.57 billion in fiscal 2018, up from $12.65 billion in 2017, largely driven by the CalAtlantic acquisition completed February 12, 2018.
- Net earnings attributable to Lennar of $1.70 billion, or $5.44 per diluted share, versus $810.5 million, or $3.38 per diluted share, in 2017.
- Home deliveries rose to 45,627 from 29,394; backlog of 15,616 homes valued at $6.57 billion at November 30, 2018.
- Gross margin on home sales fell to 19.6% from 22.1%, including a $414.6 million backlog/construction-in-progress purchase accounting write-up; excluding it, gross margin was 21.8%.
- Sold Rialto Management Group on November 30, 2018 for $340 million, recording a $296.4 million gain, and subsequently sold parts of its title and brokerage businesses.
- Lennar Homebuilding debt to total capital decreased to 36.9% from 44.9%; the company had $1.1 billion of senior notes maturing in fiscal 2019.
- Board authorized a new repurchase program of up to the lesser of $1 billion or 25 million shares after year-end; quarterly dividend of $0.04 per share declared.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed January 28, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $20.57B$12.65B | +62.7% |
| Operating Expenses | $18.73B$11.31B | +65.7% |
| Operating Income | $2.46B$1.48B | +66.9% |
| Net Income | $1.70B$810.48M | +109.2% |
| EPS (Basic) | $5.46$3.38 | +61.5% |
| EPS (Diluted) | $5.44$3.38 | +60.9% |
| Shares Outstanding (Basic) | 307.97M237.16M | +29.9% |
| Shares Outstanding (Diluted) | 308.56M237.16M | +30.1% |
05—Questions
Frequently Asked Questions
Why did Lennar's revenue and deliveries increase so sharply in fiscal 2018?
The increase was primarily due to the February 2018 acquisition of CalAtlantic Group, Inc. Home deliveries rose 55% to 45,627, and the average sales price increased to $413,000 from $376,000.
Why did gross margins decline in 2018?
Gross margin on home sales decreased to 19.6% from 22.1%, primarily due to a $414.6 million backlog/construction-in-progress purchase accounting write-up on CalAtlantic homes delivered in the year, which reduced margins by 220 basis points. Construction costs per home also increased.
What did Lennar do with its non-core businesses?
Lennar sold its Rialto Management Group on November 30, 2018 for $340 million and retained certain fund investments and carried interests. After year-end it sold most of its retail title agency business, its title insurance underwriter, and its real estate brokerage business, and agreed to sell its non-Lennar residential mortgage business.
What are the main risks highlighted for fiscal 2019?
The filing highlights rising mortgage interest rates and short-term rates, continued cost increases for labor and materials including tariffs on Canadian lumber, $1.1 billion of senior notes maturing in fiscal 2019, and $2.1 billion of warehouse lines that must be renewed or replaced. Demand softness in late 2018 was also noted.
How much control does Stuart Miller have over Lennar?
Stuart Miller, Executive Chairman, has the power to cast approximately 33% of the votes that can be cast by holders of all outstanding Class A and Class B common stock, giving him substantial influence over director elections and most stockholder matters.
06—Continue