01—Abstract
Summary
Summary of the 10-K filed January 27, 2020. Cited figures are marked; the original filing is the authoritative source.
Lennar Corporation reported fiscal 2019 (year ended November 30, 2019) as the largest homebuilder in the United States by consolidated revenues and earnings, with total revenues of $22.26 billiona and net earnings attributable to Lennar of $1.85 billion, or $5.74 per diluted share, compared with $20.57 billion of revenues and $1.70 billion of net earnings, or $5.44 per diluted share, in fiscal 2018.
Homebuilding generated $20.8 billionb of revenues, roughly 93% of consolidated revenues. New home deliveries rose to 51,491 from 45,627, while the average sales price fell to $400,000 from $413,000 as the company focused on the entry-level market. Gross margin on home sales improved to 20.6% from 19.6%, and SG&A as a percentage of home sales revenues improved to 8.3% from 8.5%.
Backlog dollar value was $6.3 billionc at November 30, 2019, versus $6.6 billion a year earlier. The company continued its pivot to a land-light model and a more pure-play homebuilding and financial services profile, having sold the Rialto Management Group and parts of its title and mortgage businesses. Owned homesites were 209,032 and optioned homesites were 104,210 at year-end.
Homebuilding senior notes and other debts payable totaled $7.78 billiond, down from $8.54 billion, and Homebuilding debt to total capital decreased to 32.8% from 36.9%. Stockholders' equity rose to $15.95 billion. The company repurchased $492.9 million of stock under its repurchase program during fiscal 2019.
In January 2020, the Board increased the annual dividend to $0.50 per share from $0.16. For fiscal 2020, management expects to close between 54,000 and 55,000 homes and expects gross margins consistent with fiscal 2019.
Key risks disclosed include a potential downturn in the homebuilding market, rising mortgage interest rates, tariffs on building materials, labor and material cost pressures, and $600 million of senior notes maturing in fiscal 2020 along with $2.7 billion of warehouse lines to be replaced. Stuart Miller, Executive Chairman, holds approximately 34% of the voting power of the company's Class A and Class B common stock.
02—Key points
Key Highlights
- Total revenues of $22.26 billion in fiscal 2019, up from $20.57 billion in fiscal 2018.
- Net earnings attributable to Lennar of $1.85 billion, or $5.74 per diluted share, versus $5.44 per diluted share in fiscal 2018.
- New home deliveries of 51,491, up from 45,627, with an average sales price of $400,000 versus $413,000.
- Gross margin on home sales of 20.6%, up from 19.6%; SG&A as a percentage of home sales revenues improved to 8.3% from 8.5%.
- Homebuilding debt to total capital fell to 32.8% from 36.9%; Homebuilding senior notes and other debts payable totaled $7.78 billion.
- Stock repurchases of $492.9 million under the repurchase program; annual dividend increased to $0.50 per share from $0.16 in January 2020.
- Fiscal 2020 outlook calls for 54,000 to 55,000 home closings and gross margins consistent with fiscal 2019.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed January 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $22.26B$20.57B | +8.2% |
| Operating Expenses | $19.80B$18.73B | +5.7% |
| Operating Income | $2.78B$2.46B | +12.7% |
| Net Income | $1.85B$1.70B | +9.0% |
| EPS (Basic) | $5.76$5.46 | +5.5% |
| EPS (Diluted) | $5.74$5.44 | +5.5% |
| Shares Outstanding (Basic) | 318.42M307.97M | +3.4% |
| Shares Outstanding (Diluted) | 318.42M308.56M | +3.2% |
05—Questions
Frequently Asked Questions
How did Lennar's profitability change in fiscal 2019?
Net earnings attributable to Lennar rose to $1.85 billion, or $5.74 per diluted share, from $1.70 billion, or $5.44 per diluted share, in fiscal 2018. Gross margin on home sales increased to 20.6% from 19.6%, although fiscal 2018 included $414.6 million of purchase accounting write-ups related to the CalAtlantic acquisition.
What is Lennar's outlook for fiscal 2020?
Management expects to close between 54,000 and 55,000 homes in fiscal 2020 and expects gross margins to remain consistent with fiscal 2019, even though the price per home may decrease as the company focuses more on the entry-level market. It also expects strong cash flow to pay down debt and return capital to shareholders.
How much debt does Lennar carry and how has it changed?
Homebuilding senior notes and other debts payable were $7.78 billion at November 30, 2019, down from $8.54 billion a year earlier. Homebuilding debt to total capital decreased to 32.8% from 36.9%. The company redeemed $600 million of 4.50% senior notes due November 2019 and $500 million of 4.500% senior notes due June 2019.
What are the main risks to Lennar's business?
The filing highlights a potential downturn in the homebuilding market, rising mortgage interest rates that could reduce buyer demand, higher costs from tariffs and labor and material shortages, and dependence on financing. It also notes $600 million of senior notes maturing in fiscal 2020 and $2.7 billion of warehouse lines that must be replaced or renewed.
How much control does Stuart Miller have over Lennar?
Stuart Miller, Executive Chairman and a Director, has the power to cast approximately 34% of the votes that can be cast by holders of all outstanding Class A and Class B common stock combined. The filing notes that this gives him substantial influence over the election of directors and most other stockholder matters.
06—Continue