8-K
LENNAR CORP /NEW/ (LEN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
March 19, 2020
Date of Report (Date of earliest event reported)
LENNAR CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-11749 | 95-4337490 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification No.) |
700 Northwest 107th Avenue, Miami, Florida 33172
(Address of principal executive offices) (Zip Code)
(305) 559-4000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Class A Common Stock, par value $.10 | LEN | New York Stock Exchange |
| Class B Common Stock, par value $.10 | LEN.B | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)
| Emerging growth company | ☐ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Item 2.02. Results of Operations and Financial Condition.
On March 19, 2020, Lennar Corporation issued a press release announcing its results of operations for the first quarter ended February 29, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits. |
|---|
The following exhibit is furnished as part of this Current Report on Form 8-K.
| Exhibit No. | Description of Document |
|---|---|
| 99.1 | Press Release issued by Lennar Corporation on March 19, 2020. |
| 104 | Cover Page Interactive Data File--the cover page XBRL tags are embedded within the Inline XBRL document. |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: March 19, 2020 | Lennar Corporation | |
|---|---|---|
| By: | /s/ Diane Bessette | |
| Name: | Diane Bessette | |
| Title: | Vice President, Chief Financial Officer and Treasurer |
3
Exhibit
Exhibit 99.1
Contact:
Allison Bober
Investor Relations
Lennar Corporation
(305) 485-2038
FOR IMMEDIATE RELEASE
Lennar Reports First Quarter EPS of $1.27
| • | Net earnings of $398.5 million, or $1.27 per diluted share, compared to net earnings of $239.9 million, or $0.74 per diluted share |
|---|---|
| • | Deliveries of 10,321 homes – up 17% |
| --- | --- |
| • | New orders of 12,376 homes – up 18%; new orders dollar value of $5.0 billion – up 20% |
| --- | --- |
| • | Backlog of 17,632 homes – up 2%; backlog dollar value of $7.2 billion – up 1% |
| --- | --- |
| • | Revenues of $4.5 billion – up 16% |
| --- | --- |
| • | Homebuilding operating margins of $474.3 million, compared to $384.9 million |
| --- | --- |
| ◦ | Gross margin on home sales of 20.5%, compared to 20.1% |
| --- | --- |
| ◦ | S,G&A expenses as a % of revenues from home sales of 9.2%, compared to 9.5% |
| --- | --- |
| ◦ | Operating margin on home sales of 11.4%, compared to 10.6% |
| --- | --- |
| • | Financial Services operating earnings (net of noncontrolling interests) of $58.2 million, compared to $21.8 million |
| --- | --- |
| • | Multifamily operating earnings (net of noncontrolling interests) of $1.7 million, compared to operating earnings of $6.8 million |
| --- | --- |
| • | Lennar Other operating earnings (net of noncontrolling interests) of $0.9 million, compared to $3.0 million |
| --- | --- |
| • | Homebuilding cash and cash equivalents of $785 million |
| --- | --- |
| • | Homebuilding debt to total capital of 33.6% |
| --- | --- |
| • | Borrowings of $300 million under the Company's $2.4 billion revolving credit facility |
| --- | --- |
| • | Repurchased 4.4 million shares for $288.4 million |
| --- | --- |
(more)
2-2-2
Miami, March 19, 2020 -- Lennar Corporation (NYSE: LEN and LEN.B), one of the nation’s leading homebuilders, today reported results for its first quarter ended February 29, 2020. First quarter net earnings attributable to Lennar in 2020 were $398.5 million, or $1.27 per diluted share, compared to first quarter net earnings attributable to Lennar in 2019 of $239.9 million, or $0.74 per diluted share.
Stuart Miller, Executive Chairman of Lennar, said, “Although today we are announcing our first quarter 2020 results, the events that have occurred since quarter-end currently command our focus and attention. With a near shutdown of large portions of our national economy, we are all stretching our minds to understand the parameters of the rapidly evolving landscape, while we contemplate what the future holds. Accordingly, our first quarter conference call this morning will be focused on Lennar’s oversight and management through the current crisis, and the steady-handed approach that we have applied.”
Mr. Miller continued, “First and foremost, our senior management team is evaluating every aspect of our company to determine how we protect the safety, health and hygiene of each and every one of our associates, customers and building partners, while we maintain our business. In that regard, we have engaged a distinguished medical professional, Dr. Pascal Goldschmidt, as our Chief Medical Officer who is assisting us in looking into every step of every business process to ensure we fully understand its impact on the health of every individual involved.
“Next, with safety, health and hygiene first, we are focused on the day to day operation of maintaining the parts of our business that are sustainable, while the national economy is struggling with a deepening pause, in order to ‘flatten the COVID-19 curve.’ Like food from the grocer is essential, our customers need a safe and secure place called ‘home,’ while the country moves from today’s landscape of uncertainty to knowing that ‘this too, shall pass.’ Balancing people, safety and pause, with production and closings is difficult, and has the undivided focus of our entire seasoned and experienced management team.
“Third, we are managing every element of our balance sheet, cash management and cash flow. We are managing the inflow, and especially the outflow, of cash to maintain a strong foundation. Lennar’s liquidity and strong balance sheet remain a stabilizing factor in enabling our company to help absorb the shock that is moving through the economy at this time. We are well positioned for stability today, as well as for opportunity when markets settle.
Mr. Miller concluded, “As you can see in the schedules in our earnings release, our first quarter results achieved and exceeded all expected metrics and we had been on track to expand on our guidance for the year. We have been focused on reducing land spend and land holdings to grow cash flow and fortify our balance sheet. That strategy was well-timed and has positioned us well. In the context of today’s widespread shutdowns, we are choosing to suspend guidance as the world resets and finds its way forward. In the meantime, the laser focus of our experienced, hands-on management team will navigate, make necessary adjustments and guide Lennar through current market conditions.”
3-3-3
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 29, 2020 COMPARED TO
THREE MONTHS ENDED FEBRUARY 28, 2019
Homebuilding
Revenues from home sales increased 15% in the first quarter of 2020 to $4.1 billion from $3.6 billion in the first quarter of 2019. Revenues were higher primarily due to a 17% increase in the number of home deliveries, excluding unconsolidated entities, partially offset by a 2% decrease in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, increased to 10,313 homes in the first quarter of 2020 from 8,802 homes in the first quarter of 2019, as a result of an increase in home deliveries in all homebuilding segments. The average sales price of homes delivered was $402,000 in the first quarter of 2020, compared to $410,000 in the first quarter of 2019. The decrease in average sales price primarily resulted from continuing to shift to lower-priced communities.
Gross margin on home sales were $849.0 million, or 20.5%, in the first quarter of 2020, compared to $726.1 million, or 20.1% in the first quarter of 2019. The gross margin percentage on home sales increased primarily due to the Company's focus on reducing construction costs.
Selling, general and administrative expenses were $378.9 million in the first quarter of 2020, compared to $343.3 million in the first quarter of 2019. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 9.2% in the first quarter of 2020, from 9.5% in the first quarter of 2019, due to improved operating leverage primarily as a result of an increase in home deliveries.
Financial Services
Operating earnings for the Financial Services segment were $58.2 million in the first quarter of 2020 (which included $47.3 million of operating earnings and an add back of $10.9 million of net loss attributable to noncontrolling interests) compared to $21.8 million in the first quarter of 2019 (which included $19.0 million of operating earnings and an add back of $2.8 million of net loss attributable to noncontrolling interests). Operating earnings increased due to an improvement in the mortgage business as a result of an increase in volume and margin, as well as reductions in loan origination costs driven in part by technology initiatives. Additionally, operating earnings of the Company's title business increased primarily due to an increase in volume.
Other Ancillary Businesses
Operating earnings for the Multifamily segment were $1.8 million in the first quarter of 2020 (which included $0.1 million of net earnings attributable to noncontrolling interests), compared to $6.8 million in the first quarter of 2019. Operating earnings for the Lennar Other segment were $0.9 million in the first quarter of 2020, compared to $3.1 million in the first quarter of 2019 (which included $0.1 million of net earnings attributable to noncontrolling interests).
4-4-4
Tax Rate
For the three months ended February 29, 2020 and February 28, 2019, we had a tax provision of $32.3 million and $79.7 million, respectively. The Company's overall effective income tax rate was 7.5% for the three months ended February 29, 2020 and 24.9% for the three months ended February 28, 2019. The reduction in the overall effective income tax rate is primarily due to the extension of the new energy efficient home tax credit during the first quarter of 2020.
Share Repurchases
During the first quarter of 2020, the Company repurchased a total 4.4 million shares of its common stock, including 4.3 million Class A shares and 0.1 million Class B shares, for $288.4 million at an average per share price of $66.42 per Class A share and $53.52 per Class B share.
Liquidity
At February 29, 2020, the Company had $785.0 million of Homebuilding cash & cash equivalents. Also at February 29, 2020, the Company had $300.0 million of outstanding borrowings under its revolving credit facility, thereby providing $2.1 billion of available capacity.
5-5-5
About Lennar
Lennar Corporation, founded in 1954, is one of the nation’s leading builders of quality homes for all generations. The Company builds affordable, move-up and active adult homes primarily under the Lennar brand name. Lennar’s Financial Services segment provides mortgage financing, title and closing services primarily for buyers of Lennar’s
homes and, through LMF Commercial, originates mortgage loans secured primarily by commercial real estate properties throughout the United States. Lennar's Multifamily segment is a nationwide developer of high-quality multifamily rental properties. Lennar Ventures drives the Company's technology and innovation strategies. For more information about Lennar, please visit www.lennar.com.
Note Regarding Forward-Looking Statements: Some of the statements in this press release are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995, including statements relating to the homebuilding market and other markets in which we participate. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those anticipated by the forward-looking statements. Important factors that could cause such differences include the potential negative impact of the coronavirus (COVID-19) outbreak on our ability to continue our Homebuilding or Multifamily development activities at normal levels or at all in affected regions; the duration, impact and severity of the COVID-19 outbreak; slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities; increases in operating costs, including costs related to construction materials, labor, real estate taxes and insurance, which exceed our ability to increase prices, both in our Homebuilding and Multifamily businesses; reduced availability of mortgage financing or increased interest rates; decreased demand for our homes or Multifamily rental properties, or our inability to successfully sell our apartment developments; natural disasters or catastrophic events for which our insurance may not provide adequate coverage; our ability to successfully execute our strategies, including our land lighter strategy; a decline in the value of the land and home inventories we maintain and resulting possible future writedowns of the carrying value of our real estate assets; unfavorable losses in legal proceedings; conditions in the capital, credit and financial markets; changes in laws, regulations or the regulatory environment affecting our business, and the risks described in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended November 30, 2019. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
A conference call to discuss the Company’s first quarter earnings will be held at 11:00 a.m. Eastern Time on Thursday, March 19, 2020. The call will be broadcast live on the Internet and can be accessed through the Company’s website at www.lennar.com. If you are unable to participate in the conference call, the call will be archived at www.lennar.com for 90 days. A replay of the conference call will also be available later that day by calling 203-369-3058 and entering 5723593 as the confirmation number.
6-6-6
LENNAR CORPORATION AND SUBSIDIARIES
Selected Revenues and Operating Information
(In thousands, except per share amounts)
| (unaudited) | Three Months Ended | |||||
|---|---|---|---|---|---|---|
| February 29, 2020 | February 28, 2019 | |||||
| Revenues: | ||||||
| Homebuilding | $ | 4,172,116 | 3,623,721 | |||
| Financial Services | 198,661 | 143,311 | ||||
| Multifamily | 132,617 | 97,394 | ||||
| Lennar Other | 1,943 | 3,656 | ||||
| Total revenues | $ | 4,505,337 | 3,868,082 | |||
| Homebuilding operating earnings | $ | 460,398 | 369,595 | |||
| Financial Services operating earnings | 47,317 | 18,972 | ||||
| Multifamily operating earnings | 1,785 | 6,797 | ||||
| Lennar Other operating earnings | 899 | 3,103 | ||||
| Corporate general and administrative expenses | (86,847 | ) | (79,343 | ) | ||
| Earnings before income taxes | 423,552 | 319,124 | ||||
| Provision for income taxes | (32,329 | ) | (79,700 | ) | ||
| Net earnings (including net loss attributable to noncontrolling interests) | 391,223 | 239,424 | ||||
| Less: Net loss attributable to noncontrolling interests | (7,229 | ) | (486 | ) | ||
| Net earnings attributable to Lennar | $ | 398,452 | 239,910 | |||
| Average shares outstanding: | ||||||
| Basic | 311,213 | 321,339 | ||||
| Diluted | 311,215 | 321,349 | ||||
| Earnings per share: | ||||||
| Basic | $ | 1.27 | 0.74 | |||
| Diluted | $ | 1.27 | 0.74 | |||
| Supplemental information: | ||||||
| Interest incurred (1) | $ | 93,291 | 104,383 | |||
| EBIT (2): | ||||||
| Net earnings attributable to Lennar | $ | 398,452 | 239,910 | |||
| Provision for income taxes | 32,329 | 79,700 | ||||
| Interest expense included in: | ||||||
| Costs of homes sold | 72,823 | 61,311 | ||||
| Costs of land sold | 197 | 282 | ||||
| Homebuilding other expense, net | 5,934 | 3,008 | ||||
| Total interest expense | 78,954 | 64,601 | ||||
| EBIT | $ | 509,735 | 384,211 | |||
| (1) | Amount represents interest incurred related to homebuilding debt. | |||||
| --- | --- | |||||
| (2) | EBIT is a non-GAAP financial measure defined as earnings before interest and taxes. This financial measure has been presented because the Company finds it important and useful in evaluating its performance and believes that it helps readers of the Company's financial statements compare its operations with those of its competitors. Although management finds EBIT to be an important measure in conducting and evaluating the Company's operations, this measure has limitations as an analytical tool as it is not reflective of the actual profitability generated by the Company during the period. Management compensates for the limitations of using EBIT by using this non-GAAP measure only to supplement the Company's GAAP results. Due to the limitations discussed, EBIT should not be viewed in isolation, as it is not a substitute for GAAP measures. | |||||
| --- | --- |
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LENNAR CORPORATION AND SUBSIDIARIES
Segment Information
(In thousands)
(unaudited)
| Three Months Ended | |||||
|---|---|---|---|---|---|
| February 29, 2020 | February 28, 2019 | ||||
| Homebuilding revenues: | |||||
| Sales of homes | $ | 4,140,767 | 3,608,129 | ||
| Sales of land | 26,867 | 13,783 | |||
| Other homebuilding | 4,482 | 1,809 | |||
| Total homebuilding revenues | 4,172,116 | 3,623,721 | |||
| Homebuilding costs and expenses: | |||||
| Costs of homes sold | 3,291,779 | 2,882,050 | |||
| Costs of land sold | 27,135 | 13,526 | |||
| Selling, general and administrative | 378,892 | 343,259 | |||
| Total homebuilding costs and expenses | 3,697,806 | 3,238,835 | |||
| Homebuilding operating margins | 474,310 | 384,886 | |||
| Homebuilding equity in loss from unconsolidated entities | (4,546 | ) | (13,756 | ) | |
| Homebuilding other expense, net | (9,366 | ) | (1,535 | ) | |
| Homebuilding operating earnings | $ | 460,398 | 369,595 | ||
| Financial Services revenues | $ | 198,661 | 143,311 | ||
| Financial Services costs and expenses | 151,344 | 124,339 | |||
| Financial Services operating earnings | $ | 47,317 | 18,972 | ||
| Multifamily revenues | $ | 132,617 | 97,394 | ||
| Multifamily costs and expenses | 137,348 | 101,178 | |||
| Multifamily equity in earnings from unconsolidated entities and other gain | 6,516 | 10,581 | |||
| Multifamily operating earnings | $ | 1,785 | 6,797 | ||
| Lennar Other revenues | $ | 1,943 | 3,656 | ||
| Lennar Other costs and expenses | 2,574 | 1,622 | |||
| Lennar Other equity in earnings from unconsolidated entities | 119 | 8,330 | |||
| Lennar Other income (expense), net | 1,411 | (7,261 | ) | ||
| Lennar Other operating earnings | $ | 899 | 3,103 |
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LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog
(Dollars in thousands, except average sales price)
(unaudited)
Lennar's reportable homebuilding segments and all other homebuilding operations not required to be reported separately have divisions located in:
East: Florida, New Jersey, North Carolina, Pennsylvania and South Carolina
Central: Georgia, Illinois, Indiana, Maryland, Minnesota, Tennessee and Virginia
Texas: Texas
West: Arizona, California, Colorado, Nevada, Oregon, Utah and Washington
Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint
| At or for the Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| February 29, 2020 | February 28, 2019 | February 29, 2020 | February 28, 2019 | February 29, 2020 | February 28, 2019 | |||
| Deliveries: | Homes | Dollar Value | Average Sales Price | |||||
| East | 4,065 | 3,612 | $ | 1,405,667 | 1,226,435 | $ | 346,000 | 340,000 |
| Central | 1,366 | 1,124 | 534,746 | 433,125 | 391,000 | 385,000 | ||
| Texas | 1,577 | 1,251 | 463,796 | 412,429 | 294,000 | 330,000 | ||
| West | 3,304 | 2,825 | 1,731,514 | 1,537,503 | 524,000 | 544,000 | ||
| Other | 9 | 8 | 8,039 | 7,758 | 893,000 | 970,000 | ||
| Total | 10,321 | 8,820 | $ | 4,143,762 | 3,617,250 | $ | 401,000 | 410,000 |
Of the total homes delivered listed above, eight homes with a dollar value of $3.0 million and an average sales price of $374,000 represent home deliveries from unconsolidated entities for the three months ended February 29, 2020, compared to 18 home deliveries with a dollar value of $9.1 million and an average sales price of $507,000 for the three months ended February 28, 2019.
| New Orders: | Homes | Dollar Value | Average Sales Price | |||||
|---|---|---|---|---|---|---|---|---|
| East | 4,625 | 4,493 | $ | 1,597,298 | 1,521,431 | $ | 345,000 | 339,000 |
| Central | 1,773 | 1,422 | 695,498 | 537,596 | 392,000 | 378,000 | ||
| Texas | 1,999 | 1,424 | 573,079 | 456,959 | 287,000 | 321,000 | ||
| West | 3,965 | 3,112 | 2,125,632 | 1,629,814 | 536,000 | 524,000 | ||
| Other | 14 | 12 | 13,581 | 11,313 | 970,000 | 943,000 | ||
| Total | 12,376 | 10,463 | $ | 5,005,088 | 4,157,113 | $ | 404,000 | 397,000 |
Of the total new orders listed above, 26 homes with a dollar value of $8.1 million and an average sales price of $310,000 represent new orders from unconsolidated entities for the three months ended February 29, 2020, compared to 15 new orders with a dollar value of $9.7 million and an average sales price of $647,000 for the three months ended February 28, 2019.
| Backlog: | Homes | Dollar Value | Average Sales Price | |||||
|---|---|---|---|---|---|---|---|---|
| East | 7,387 | 7,956 | $ | 2,640,129 | 2,817,706 | $ | 357,000 | 354,000 |
| Central | 2,420 | 2,284 | 982,589 | 894,724 | 406,000 | 392,000 | ||
| Texas | 2,592 | 2,321 | 822,620 | 805,250 | 317,000 | 347,000 | ||
| West | 5,219 | 4,688 | 2,702,535 | 2,579,762 | 518,000 | 550,000 | ||
| Other | 14 | 10 | 13,995 | 12,543 | 1,000,000 | 1,254,000 | ||
| Total | 17,632 | 17,259 | $ | 7,161,868 | 7,109,985 | $ | 406,000 | 412,000 |
Of the total homes in backlog listed above, 49 homes with a backlog dollar value of $15.2 million and an average sales price of $311,000 represent the backlog from unconsolidated entities at February 29, 2020, compared to 14 homes with a backlog dollar value of $7.7 million and an average sales price of $552,000 at February 28, 2019.
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LENNAR CORPORATION AND SUBSIDIARIES
Supplemental Data
(Dollars in thousands)
(unaudited)
| February 29, | November 30, | February 28, | |||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | |||||
| Homebuilding debt | $ | 8,115,498 | 7,776,638 | 9,256,423 | |||
| Stockholders' equity | 16,044,599 | 15,949,517 | 14,786,814 | ||||
| Total capital | $ | 24,160,097 | 23,726,155 | 24,043,237 | |||
| Homebuilding debt to total capital | 33.6 | % | 32.8 | % | 38.5 | % | |
| Homebuilding debt | $ | 8,115,498 | 7,776,638 | 9,256,423 | |||
| Less: Homebuilding cash and cash equivalents | 784,950 | 1,200,832 | 852,551 | ||||
| Net homebuilding debt | $ | 7,330,548 | 6,575,806 | 8,403,872 | |||
| Net homebuilding debt to total capital (1) | 31.4 | % | 29.2 | % | 36.2 | % | |
| (1) | Net homebuilding debt to total capital is a non-GAAP financial measure defined as net homebuilding debt (homebuilding debt less homebuilding cash and cash equivalents) divided by total capital (net homebuilding debt plus stockholders' equity). The Company believes the ratio of net homebuilding debt to total capital is a relevant and a useful financial measure to investors in understanding the leverage employed in homebuilding operations. However, because net homebuilding debt to total capital is not calculated in accordance with GAAP, this financial measure should not be considered in isolation or as an alternative to financial measures prescribed by GAAP. Rather, this non-GAAP financial measure should be used to supplement the Company's GAAP results. | ||||||
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