EXHIBIT 13
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
Lennar Corporation and Subsidiaries
Years Ended November 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 1992 1991
---------- ------- ------- ------- -------
RESULTS OF OPERATIONS:
Revenues:
Homebuilding $ 665,510 647,750 532,150 308,983 224,186
Investment $ 139,482 106,343 58,955 40,164 35,188
Financial services $ 57,787 54,348 59,204 56,723 37,688
Limited-purpose finance subsidiaries $ 7,689 9,485 14,355 21,164 26,070
Total revenues $ 870,468 817,926 664,664 427,034 323,132
Operating earnings - business segments:
Homebuilding $ 58,530 70,645 60,207 38,063 23,041
Investment $ 67,688 51,904 28,497 16,992 10,419
Financial services $ 19,013 14,844 15,104 16,411 15,830
Corporate general and administrative
expenses $ 10,523 10,309 8,670 8,833 7,921
Earnings before income taxes and
cumulative effect of changes in
accounting principles $ 115,455 111,746 82,054 45,363 33,043
Net earnings $ 70,427 69,126 52,511 29,146 21,148
Per share amounts:
Earnings before cumulative effect of
changes in accounting principles $ 1.95 1.89 1.51 .95 .70
Net earnings $ 1.95 1.92 1.51 .95 .70
Cash dividends - common stock $ .10 .095 .08 .08 .08
Cash dividends - Class B common stock $ .09 .084 .067 .067 .067
FINANCIAL POSITION:
Total assets $1,442,362 1,293,223 1,195,490 980,261 862,273
Total debt $ 635,761 566,312 531,480 496,205 426,150
Stockholders' equity $ 607,794 534,088 467,473 319,330 291,237
Shares outstanding (000's) 35,864 35,768 35,716 30,440 30,312
Stockholders' equity per share $ 16.95 14.93 13.09 10.49 9.61
DELIVERY AND BACKLOG INFORMATION:
Number of homes delivered 4,680 4,965 4,634 3,039 2,480
Backlog of home sales contracts 1,802 1,703 2,105 1,788 1,039
Dollar value of backlog $ 255,141 247,006 264,342 190,722 106,488
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Lennar's earnings increased in 1995 to $70.4 million ($1.95 per share) from
1994 earnings of $69.1 million ($1.92 per share) on total revenues in 1995 of
$870.5 million, compared to $817.9 million of revenues in 1994. Fiscal 1994
earnings had increased from 1993 earnings of $52.5 million ($1.51 per share),
and revenues in 1994 had increased from 1993 revenues of $664.7 million.
HOMEBUILDING
The Homebuilding Division constructs and sells single- family attached and
detached and multi-family homes. These activities also include the purchase,
development and sale of residential land. The following tables set forth
selected financial and operational information for the periods indicated:
SELECTED HOMEBUILDING DIVISION FINANCIAL DATA
(DOLLARS IN THOUSANDS, Years Ended November 30,
EXCEPT AVERAGE SALES PRICES) 1995 1994 1993
- -----------------------------------------------------------------------
Sales of homes $646,986 626,341 513,503
Other 18,524 21,409 18,647
- -----------------------------------------------------------------------
Total revenues $665,510 647,750 532,150
Gross profit - home sales $123,958 128,209 113,344
Gross profit percentage 19.2% 20.5% 22.1%
Selling, general &
administrative expenses $ 70,004 63,204 55,482
S,G&A as a percentage of
homebuilding revenues 10.5% 9.8% 10.4%
Operating earnings $ 58,530 70,645 60,207
Average sales price $138,200 126,200 111,100
- -----------------------------------------------------------------------
SUMMARY OF HOME AND BACKLOG DATA
DELIVERIES 1995 1994 1993
- -----------------------------------------------------------------------
Florida 3,395 3,717 3,723
Arizona 504 632 607
Texas 781 616 304
- -----------------------------------------------------------------------
4,680 4,965 4,634
=======================================================================
NEW ORDERS
- -----------------------------------------------------------------------
Florida 3,390 3,361 3,921
Arizona 568 530 721
Texas 821 672 309
- -----------------------------------------------------------------------
4,779 4,563 4,951
=======================================================================
BACKLOG - HOMES
- -----------------------------------------------------------------------
Florida 1,317 1,322 1,678
Arizona 302 238 340
Texas 183 143 87
- -----------------------------------------------------------------------
1,802 1,703 2,105
=======================================================================
BACKLOG - DOLLAR VALUE
(IN THOUSANDS) $255,141 247,006 264,342
=======================================================================
Revenues from homebuilding operations were $665.5 million in 1995, $647.8
million in 1994 and $532.2 million in 1993. The increased revenues in both years
were primarily the result of additional revenues from home sales. Revenues from
the sales of homes increased 3% in 1995 and 22% in 1994. The increase in 1995
was due to an increase in the average price of a home delivered, partially
offset by a decrease in the number of deliveries. In 1994, the increase was
attributable to both an increase in the number of new home deliveries and an
increase in the average sales price. The higher average sales prices in 1995 and
1994 were due to price increases for existing products, as well as a
proportionately greater number of sales of higher-priced homes. Other
Homebuilding Division revenues consisted primarily of residential land sales in
1995 and 1994. In 1995, 1994 and 1993, sales of residential land totaled $16.2
million, $18.8 million and $1.8 million, respectively. In 1993, other revenues
included $13.7 million from the repairing or rebuilding of homes in south Dade
County communities that were damaged by Hurricane Andrew. The rebuilding
activities did not have a significant impact on the Company's net earnings
during 1993 and were substantially completed by November 30, 1993.
New sales orders for fiscal 1995 increased by 5% when compared to 1994,
which had decreased by 8% from 1993. The increase in 1995 resulted in an
increase of 6% in the Company's backlog of home sales contracts to 1,802 at
November 30, 1995, as compared to a backlog of 1,703 contracts a year earlier.
The dollar value of contracts in backlog increased 3% to $255.1 million at
November 30, 1995 from $247.0 million a year earlier.
The gross profit percentages from the sales of homes were 19.2% in 1995,
20.5% in 1994 and 22.1% in 1993. The decreases in the gross profit percentages
were mainly attributable to increased competition in many of the Company's
markets, increases in construction costs due to additional building code
requirements in several counties throughout Florida, as well as increased land
costs related to the mix of homes delivered. Gross profit percentages are not
significantly different for the various types of homes which the Company builds
and are at the high end of the range of gross profit percentages among the
Company's major competitors.
Selling, general and administrative expenses increased by $6.8 million in
1995 and $7.7 million in 1994. The higher level of expenses in 1995 was
primarily attributable to general increases in operating costs. The higher level
of expenses in 1994 was primarily attributable to increases in volume-related
expenses such as sales commissions and outside brokers'
20
commissions. Selling, general and administrative expenses as a percentage of
total homebuilding revenues increased to 10.5% in 1995 from 9.8% in 1994,
which was a decrease from the 10.4% reported in 1993. The higher percentages in
1995 and 1993, when compared to 1994, were primarily due to selling, general and
administrative expenses being absorbed by fewer homes delivered in 1995 and
1993.
INVESTMENT
The Investment Division is involved in the development, management and
leasing, as well as the acquisition and sale, of commercial and residential
rental properties and land. During the past four years, this division became a
participant and manager in eleven partnerships which acquired portfolios of
commercial mortgage loans and real estate. The division shares in the profits or
losses of the partnerships and also receives fees for the management and
disposition of the partnerships' assets. The division's interests in these
partnerships range from 9.9% to 50%. These partnerships are capitalized
primarily by long-term debt of which none is guaranteed by the Company. During
1994, this division also began acquiring, at a discount, issues of the unrated
portions of debt securities which are collateralized by real estate loans. The
division has only invested in securities for which it is the special servicer on
behalf of all the certificate holders of the security. The Company earns
interest on these investments as well as fees for the special servicing
activities. The following table provides selected financial information
regarding the Investment Division:
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------
REVENUES
Rental income $ 49,439 43,487 37,708
Equity in earnings of
partnerships 30,852 20,710 7,046
Management fees 10,274 12,390 6,714
Sales of real estate 38,173 21,518 45
Other 10,744 8,238 7,442
- --------------------------------------------------------------------------------
Total revenues 139,482 106,343 58,955
COST OF SALES AND EXPENSES 71,794 54,439 30,458
- --------------------------------------------------------------------------------
OPERATING EARNINGS $ 67,688 51,904 28,497
================================================================================
Investment Division revenues increased in 1995 to $139.5 million from
$106.3 million in 1994. The higher revenues were partially the result of
additional earnings from the division's partnerships, higher rental income on
operating properties owned directly by the Company and higher other income which
was primarily the result of the division's additional investment in commercial
mortgage-backed securities. Also, contributing to the increased revenues in 1995
was an increase in sales of real estate. These sales totaled $38.2 million in
1995, compared to $21.5 million in 1994. The increases in revenues discussed
above were partially offset by lower management fees in 1995, which decreased to
$10.3 million from $12.4 million in 1994. Investment Division revenues increased
to $106.3 million in 1994 from $59.0 million in 1993, primarily as a result of
increases in earnings from partnerships, management fees, rental income,
interest income and a higher level of sales of real estate.
Operating earnings for the Investment Division increased to $67.7 million
in 1995 from $51.9 million in 1994 and $28.5 million in 1993. These increases
were due primarily to increases in earnings from partnerships, increases in
rental income and an increase in gains on sales of other real estate. Gains on
other real estate sales in the Investment Division were $15.8 million in 1995,
compared to $9.3 million in 1994. There were no material gains from the sales of
real estate in 1993.
FINANCIAL SERVICES
Financial services activities are conducted primarily through Lennar
Financial Services, Inc. ("LFS") and five principal subsidiaries. LFS
subsidiaries perform mortgage servicing activities and provide mortgage
financing, title insurance and closing services for a wide variety of borrowers
and homebuyers. This division also invests in issues of rated portions of
commercial real estate mortgage-backed securities for which Lennar's Investment
Division is the special servicer and an investor in the unrated portion of those
securities. The following table sets forth selected financial and operational
information relating to the Financial Services Division:
Years Ended November 30,
(DOLLARS IN THOUSANDS) 1995 1994 1993
- ----------------------------------------------------------------------------
REVENUES $ 57,787 54,348 59,204
COSTS AND EXPENSES 38,774 39,504 44,100
INTERCOMPANY INTEREST EXPENSE 2,313 3,144 2,244
- ----------------------------------------------------------------------------
OPERATING EARNINGS $ 16,700 11,700 12,860
============================================================================
Dollar volume of
mortgages originated $ 650,074 941,351 1,290,836
============================================================================
Number of mortgages
originated 5,900 9,000 12,100
============================================================================
Principal balance of
servicing portfolio $3,400,120 3,392,071 3,410,829
============================================================================
Number of loans serviced 44,300 45,200 47,000
============================================================================
Operating earnings of the Financial Services Division increased in 1995 to
$16.7 million from $11.7 million in 1994. The increase in earnings was primarily
the result of
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
earnings from the division's investment in the rated portion of commercial
mortgage-backed securities. The division began acquiring these
investments during the third quarter of 1994. Consequently, earnings from these
investments in 1995 were significantly greater than earnings from these
activities in 1994. Additionally, earnings from the division's title and closing
services operations increased during 1995 due to the expansion of insurance
services provided by the division. The increases in operating earnings during
1995 were partially offset by lower gains from bulk sales of mortgage servicing
rights, which were $1.1 million in 1995, compared to $2.5 million in 1994.
Financial services' operating earnings decreased to $11.7 million in 1994
from $12.9 million in 1993. The decrease in 1994 earnings was partially
attributable to lower gains from bulk sales of mortgage servicing rights. In
1994, these gains totaled $2.5 million, compared to $3.3 million during 1993.
Also contributing to the lower operating earnings in 1994, was a decline in
mortgage loan originations and a reduction in servicing revenues. Partially
offsetting these decreases was a reduction of amortization expense for purchased
mortgage servicing rights. This amortization decreased as a result of a change
in the method of accounting for purchased mortgage servicing rights during 1994.
This change in accounting reduced the carrying value of the purchased mortgage
servicing rights and the related amortization.
INTEREST EXPENSE
During 1995, 1994 and 1993, interest costs of $35.8 million, $25.0 million
and $19.7 million, respectively, were incurred (excluding the limited-purpose
finance subsidiaries) and $23.4 million, $22.1 million and $17.1 million,
respectively, were capitalized by the Company's homebuilding and investment
operations. Previously capitalized interest charged to expense was $17.8 million
in 1995, $15.4 million in 1994 and $13.1 million in 1993.
Interest amounts incurred and charged to expense in 1995 were greater than
those incurred in 1994 and 1993 due to higher debt levels and interest rates.
The higher debt at November 30, 1995 is a reflection of the expansion in each of
the Company's business segments. The higher interest charged to expense in 1994,
when compared to 1993, was primarily the result of the higher volume of homes
delivered and land sales during 1994. The amount of interest capitalized by the
Company's real estate operations in any one year is a function of the assets
under development, outstanding debt levels and interest rates.
INCOME TAXES
The provision for income taxes in 1995 and 1994 was 39.0% of pre-tax
income, compared to 36.0% in 1993. The 1995 and 1994 provisions for income taxes
were higher due primarily to the adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", which required the Company to
adjust the assets and liabilities for prior business combinations from their
net-of-tax to pre-tax amounts.
IMPACT OF ECONOMIC CONDITIONS
The Company finances its land acquisition and development activities,
construction activities, mortgage banking activities and general operating needs
primarily from its own base of $607.8 million of equity at November 30, 1995, as
well as from commercial bank borrowings. The Company has maintained excellent
relationships with the commercial banks participating in its financing
arrangements and has no reason to believe that such relationships will not
continue in the future. The Company anticipates that there will be adequate
mortgage financing available for the purchasers of its homes during 1996 through
the Company's own financial services subsidiaries as well as from external
sources.
Total revenues and earnings in 1996 will be affected by both the new home
sales order rate during the year and the backlog of home sales contracts at the
beginning of the year. As interest rates declined during the latter part of
1995, the Company experienced an increase in the demand for its homes and the
Company is entering fiscal 1996 with a backlog of $255.1 million, which is 3%
higher than at the beginning of the prior fiscal year. In addition, the Company
added approximately $38 million to backlog when it aquired the Houston-based
residential business of Friendswood Development Company on December 29, 1995.
This acquisition should positively affect revenues and earnings in 1996.
Inflation can have a long-term impact on the Company because increasing
costs of land, materials and labor result in a need to increase the sales prices
of homes. In addition, inflation is often accompanied by higher interest rates,
which can have a negative impact on housing demand and the costs of financing
land development activities and housing construction. In general, in recent
years the increases in these costs have followed the rate of inflation and have
not had a significant adverse impact on the Company.
GOVERNMENT REGULATIONS
Governmental bodies in the areas where the Company conducts its business
have at times imposed laws and other
22
regulations that affect the development of real estate. These laws and
regulations are often subject to frequent change. The State of Florida has
adopted a law which requires that commitments to provide roads and other offsite
infrastructure be in place prior to the commencement of new construction. This
law is being administered by individual counties and municipalities throughout
the State and may result in additional fees and assessments, or building
moratoriums. It is difficult to predict the impact of this law on future
operations, or what changes may take place in the law in the future. The Company
may have a competitive advantage in that it believes that most of its Florida
land presently meets the criteria under the law, and it has the financial
resources to provide for development of the balance of its land in compliance
with the law.
Recently, there have been changes to the various building codes within
Florida which have resulted in higher construction costs. The Company believes
these additional costs have generally been recoverable through increased selling
prices without any significant effect on sales volume.
FINANCIAL CONDITION AND CAPITAL RESOURCES
Lennar meets the majority of its short-term financing needs with cash
generated from operations and funds available under its unsecured revolving
credit agreement. During 1995, the Company extended and increased its revolving
credit agreement. The agreement, which is with twelve banks, provides a
financing commitment of up to $310 million for five years. At November 30, 1995,
there was $171.2 million outstanding under the Company's revolving credit
agreement, compared to $175.7 million outstanding under the agreement as of the
same date last year. In January 1996, the Company entered into an additional
$100 million unsecured revolving credit agreement with a one year term.
During 1995, $13.1 million in cash was used in the Company's operations,
compared to $101.8 million provided by operations in fiscal 1994. In 1995, $35.6
million in cash was used to increase inventories through land purchases, land
development and construction and $17.0 million was used to increase receivables.
The increase in receivables was primarily attributable to the acquisition of
$39.6 million of mortgages receivable from the secured creditors of Bramalea of
California, Inc. ("BCI") after BCI had filed for bankruptcy protection. The
Company acquired this debt (at a significant discount from its face amount) in
order to convert these receivables into an ownership interest when BCI is
reorganized out of bankruptcy. The uses of cash in 1995 were partially offset by
$14.1 million provided by an increase in accounts payable and accrued
liabilities. The primary source of cash flow from operations in 1994, in
addition to net earnings, was a $119.1 million reduction in loans held for sale
or disposition by the Company's Financial Services Division. This was partially
offset by $34.3 million used to increase inventories, $13.9 million used to
decrease accounts payable and accrued liabilities and $7.9 million used to
increase receivables.
Cash used in investing activities totaled $31.2 million in 1995, compared
to $124.2 million in 1994. In 1995, $57.5 million was used to purchase
investment securities (commercial mortgage-backed securities) in both the
Investment and Financial Services Divisions, $7.4 million was used to increase
financial services' loans held for investments and $3.7 million was used to
increase the Company's investments in partnerships. These uses of cash were
partially offset by $38.2 million provided by the sale of operating properties
and land held for investment, as well as $16.3 million provided by receipts from
investment securities. In 1994, the primary uses of cash for investing
activities consisted of $55.1 million used to purchase operating properties,
$46.9 million used to purchase investment securities and $43.6 million used to
increase the Company's investments in partnerships. These uses were partially
offset by $20.0 million provided by the sale of operating properties.
HOMEBUILDING AND INVESTMENT OPERATIONS
The Company finances its land acquisitions with its revolving lines of
credit or purchase money mortgages or buys land under option agreements. Option
agreements permit the Company to acquire portions of properties when it is ready
to build homes on them. The financial risk of adverse market conditions
associated with longer term land holdings is managed by strategic purchasing in
areas that the Company has identified as desirable growth markets along with
careful management of the land development process. The Company believes that
its land inventories give it a competitive advantage, especially in Florida,
where developers face government constraints and regulations which will limit
the number of available homesites in future years. Based on its current
financing capabilities, the Company does not believe that its land holdings have
an adverse effect on its liquidity.
The Company has supplemented its short-term borrowings with secured term
loans. Total secured borrowings, which include term loan debt, as well as
mortgage notes payable on certain operating properties and land, were $170.6
million at fiscal year-end 1995 and $136.2 million at November 30, 1994. A
significant portion of inventories,
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
land held for investment, model homes and operating properties remained
unencumbered at the end of the current fiscal year. Total real estate borrowings
increased to $336.6 million at November 30, 1995 from $328.9 million at November
30, 1994. This increase was attributable to increases in construction in
progress, land inventories and partnership investments.
FINANCIAL SERVICES
Lennar Financial Services subsidiaries finance their mortgage loans held
for sale on a short-term basis by either pledging them as collateral for
borrowings under two lines of credit totaling $80 million or borrowing funds
from Lennar Corporation in instances where, on a consolidated basis, this
minimizes the overall cost of funds. Total borrowings under the two lines of
credit were $54.9 million and $54.6 million at November 30, 1995 and 1994,
respectively.
The Financial Services Division utilizes revolving credit lines and
repurchase agreements to finance certain mortgage-backed securities. The
revolving credit lines total $75 million with total borrowings as of November
30, 1995 of $67.4 million. LFS also has two uncommitted short-term bank credit
lines totaling $35 million under which the entire amount was outstanding as of
November 30, 1995.
LFS subsidiaries sell the mortgage loans they originate within thirty to
sixty days of origination. At November 30, 1995, the balance of loans held for
sale or disposition was $123.8 million, compared to $124.3 million one year
earlier.
LIMITED-PURPOSE FINANCE SUBSIDIARIES
Limited-purpose finance subsidiaries of LFS have placed mortgage loans and
other receivables as collateral for various long-term financings. These
subsidiaries pay the debt service on the long-term borrowings primarily from the
cash flows generated by the related pledged collateral. Therefore, the related
interest income and interest expense, for the most part, offset one another in
each of the years in the three-year period ended November 30, 1995. The Company
believes that the cash flows generated by these subsidiaries will be adequate to
meet the required debt payment schedules.
Based on the Company's current financial condition and credit
relationships, Lennar believes that its operations and borrowing resources will
provide for its current and long-term capital requirements at the Company's
anticipated levels of growth.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS No. 121
requires companies to evaluate long-lived assets for impairment based on the
undiscounted future cash flows of the asset. If a long-lived asset is identified
as impaired, the value of the asset must be reduced to its fair value. The
Company's land holdings and operating properties would be considered long-lived
assets under this pronouncement.
In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights". SFAS No. 122, among other
provisions, requires the recognition of originated mortgage servicing rights as
assets by allocating total costs incurred in originating a loan between the loan
and the servicing rights based on their relative fair values. Presently, the
cost of originated mortgage servicing rights is included with the cost of the
related loans and written off against income when the loans are sold. Also,
under SFAS No. 122, all capitalized mortgage servicing rights are evaluated for
impairment based on the excess of the carrying amount of the mortgage servicing
rights over their fair value.
These statements are effective for fiscal years beginning after December
15, 1995. The Company plans to adopt these statements in the first quarter of
its fiscal year ending November 30, 1997. The actual effects of implementing
these new standards have not been determined. However, their adoption is not
expected to have any material adverse affect on the Company's financial position
or results of operations.
24
DELOITTE &
TOUCH LLP
- ---------- ---------------------------------------------------------
[LOGO] Certified Public Accountants Suite 2500
100 Southeast Second Street
Miami, Florida 33131-2135
Telephone: (305) 358-4141
Facsimile: (305) 372-3160
To the Board of Directors and Stockholders of Lennar Corporation:
We have audited the accompanying consolidated balance sheets of Lennar
Corporation and subsidiaries (the "Company") as of November 30, 1995 and 1994
and the related consolidated statements of earnings, cash flows and
stockholders' equity for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. The consolidated financial statements of the
Company for the year ended November 30, 1993 were audited by other auditors,
whose report dated January 18, 1994, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lennar Corporation
and subsidiaries at November 30, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, effective
December 1, 1993, the Company changed its method of accounting for income taxes
to conform to Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", and its method of evaluating purchased mortgage servicing
rights for impairment. As discussed in Note 1 to the consolidated financial
statements, effective December 1, 1994, the Company changed its method of
accounting for its investments in debt securities to conform with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities".
/s/ DELOITTE & TOUCHE LLP
January 11, 1996
- ---------------
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
- ---------------
25
CONSOLIDATED BALANCE SHEETS
Lennar Corporation and Subsidiaries
November 30, 1995 and 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994
- ----------------------------------------------------------------------------------------------------------
ASSETS
HOMEBUILDING, INVESTMENT AND FINANCIAL SERVICES:
Homebuilding and investment assets:
Cash and cash equivalents $ 21,870 16,801
Receivables, net 70,202 48,165
Inventories:
Construction in progress and model homes 199,774 175,547
Land held for development 304,630 300,488
-----------------------
Total inventories 504,404 476,035
Land held for investment 72,976 80,747
Operating properties and equipment, net 189,341 193,621
Investments in and advances to partnerships 114,240 106,637
Other assets 40,792 29,598
Financial services assets 353,809 252,195
- ----------------------------------------------------------------------------------------------------------
Total assets - homebuilding, investment and financial services 1,367,634 1,203,799
- ----------------------------------------------------------------------------------------------------------
LIMITED-PURPOSE FINANCE SUBSIDIARIES - COLLATERAL FOR BONDS AND NOTES PAYABLE 74,728 89,424
- ----------------------------------------------------------------------------------------------------------
$1,442,362 1,293,223
==========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING, INVESTMENT AND FINANCIAL SERVICES:
Homebuilding and investment liabilities:
Accounts payable and accrued liabilities $ 114,833 102,582
Customer deposits 14,441 15,271
Income taxes:
Currently payable 12,219 10,205
Deferred 42,611 50,796
Mortgage notes and other debts payable 336,633 328,936
Financial services liabilities 243,191 168,348
- ----------------------------------------------------------------------------------------------------------
Total liabilities - homebuilding, investment and financial services 763,928 676,138
- ----------------------------------------------------------------------------------------------------------
LIMITED-PURPOSE FINANCE SUBSIDIARIES - BONDS AND NOTES PAYABLE 70,640 82,997
- ----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock of $.10 par value per share
Authorized 100,000 shares; issued and outstanding:
1995 - 25,878; 1994 - 25,781 2,588 2,578
Class B common stock of $.10 par value per share
Authorized 30,000 shares; issued and outstanding:
1995 - 9,986; 1994 - 9,987 999 999
Additional paid-in capital 170,586 169,605
Retained earnings 427,851 360,906
Unrealized gain on securities available-for-sale, net 5,770 -
- ----------------------------------------------------------------------------------------------------------
Total stockholders' equity 607,794 534,088
- ----------------------------------------------------------------------------------------------------------
$1,442,362 1,293,223
==========================================================================================================
See accompanying notes to consolidated financial statements.
26
CONSOLIDATED STATEMENTS OF EARNINGS
Lennar Corporation and Subsidiaries
Years Ended November 30, 1995, 1994 and 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993
- --------------------------------------------------------------------------------
REVENUES:
Homebuilding $665,510 647,750 532,150
Investment 139,482 106,343 58,955
Financial services 57,787 54,348 59,204
Limited-purpose finance subsidiaries 7,689 9,485 14,355
- --------------------------------------------------------------------------------
Total revenues 870,468 817,926 664,664
- --------------------------------------------------------------------------------
COSTS AND EXPENSES:
Homebuilding 606,980 577,105 471,943
Investment 71,794 54,439 30,458
Financial services 38,774 39,504 44,100
Limited-purpose finance subsidiaries 7,687 9,441 14,351
Corporate general and administrative 10,523 10,309 8,670
Interest 19,255 15,382 13,088
- --------------------------------------------------------------------------------
Total costs and expenses 755,013 706,180 582,610
- --------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 115,455 111,746 82,054
INCOME TAXES 45,028 43,581 29,543
- --------------------------------------------------------------------------------
EARNINGS BEFORE CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES 70,427 68,165 52,511
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES FOR:
Income taxes - 4,745 -
Purchased mortgage servicing rights - (3,784) -
- --------------------------------------------------------------------------------
NET EARNINGS $ 70,427 69,126 52,511
================================================================================
NET EARNINGS PER SHARE:
BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $ 1.95 1.89 1.51
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES - .03 -
- --------------------------------------------------------------------------------
NET EARNINGS PER SHARE $ 1.95 1.92 1.51
================================================================================
See accompanying notes to consolidated financial statements.
27
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lennar Corporation and Subsidiaries
Years Ended November 30, 1995, 1994 and 1993
(IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 70,427 69,126 52,511
Adjustments to reconcile
net earnings to net cash
provided by (used in)
operating activities:
Depreciation and amortization 10,274 8,396 9,976
Equity in earnings of partnerships (31,203) (20,710) (7,046)
Gain on sales of other real estate (15,776) (11,930) (548)
Decrease in deferred income taxes (8,185) (9,324) (2,296)
Changes in assets and liabilities, net
of effects from accounting changes:
Increase in receivables (17,009) (7,861) (16,325)
Increase in inventories (35,581) (34,261) (87,439)
Decrease (increase) in financial
services' loans held for sale
or disposition 30 119,071 (49,653)
Increase (decrease) in accounts
payable and accrued liabilities 14,140 (13,890) 27,227
Other, net (248) 3,192 5,126
- --------------------------------------------------------------------------------------
Net cash provided by
(used in) operating activities (13,131) 101,809 (68,467)
- --------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Operating properties and equipment:
Additions (10,053) (55,125) (21,366)
Sales 21,813 20,007 -
Sales of land held for investment 16,365 1,530 -
Increase in investments in and
advances to partnerships (3,701) (43,639) (20,180)
Increase in financial services'
loans held for investment (7,416) (6,704) (4,623)
Purchase of investment securities (57,450) (46,884) -
Receipts from investment securities 16,279 3,994 -
Purchase of interest in joint
ventures, net of cash acquired - - (4,782)
Other, net (7,082) 2,631 (6,129)
- --------------------------------------------------------------------------------------
Net cash used in investing activities (31,245) (124,190) (57,080)
- --------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under
revolving credit agreement (4,500) 46,000 84,800
Net borrowings (repayments) under
financial services' short-term debt (11,234) (113,447) 23,159
Mortgage notes and other debts payable:
Proceeds from borrowings 159,039 116,940 17,241
Principal payments (85,377) (23,232) (92,209)
Limited-purpose finance subsidiaries:
Principal reduction of mortgage
loans and other receivables 14,058 39,777 55,464
Principal reduction of bonds and notes payable (12,818) (37,429)
Common stock:
Issuance 991 778 98,251
Dividends (3,482) (3,289) (2,619)
- --------------------------------------------------------------------------------------
Net cash provided by financing activities 56,677 26,098 132,420
- --------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 12,301 3,717 6,873
Cash and cash equivalents at beginning of year 17,942 14,225 7,352
- --------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 30,243 17,942 14,225
======================================================================================
Summary of cash and cash equivalent balances:
Homebuilding and investment $ 21,870 16,801 10,606
Financial services 8,373 1,141 3,619
- --------------------------------------------------------------------------------------
$ 30,243 17,942 14,225
======================================================================================
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 20,815 12,303 17,692
Cash paid for income taxes $ 47,028 46,443 28,666
See accompanying notes to consolidated financial statements.
28
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Lennar Corporation and Subsidiaries
Years Ended November 30, 1995, 1994 and 1993
(IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------
COMMON STOCK:
Beginning balance $ 2,578 1,715 1,364
Shares issued under public offering - - 345
Three-for-two stock split effected in
the form of a 50% stock dividend - 859 -
Shares issued under employee stock plans 10 4 6
- --------------------------------------------------------------------------------
Balance at November 30 2,588 2,578 1,715
- --------------------------------------------------------------------------------
CLASS B COMMON STOCK:
Beginning balance 999 666 666
Three-for-two stock split effected in
the form of a 50% stock dividend - 333 -
- --------------------------------------------------------------------------------
Balance at November 30 999 999 666
- --------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Beginning balance 169,605 170,023 72,123
Shares issued under public offering - - 96,747
Three-for-two stock split effected in
the form of a 50% stock dividend - (1,192) -
Shares issued under employee stock plans 981 774 1,153
- --------------------------------------------------------------------------------
Balance at November 30 170,586 169,605 170,023
- --------------------------------------------------------------------------------
RETAINED EARNINGS:
Beginning balance 360,906 295,069 245,177
Net earnings 70,427 69,126 52,511
Cash dividends - common stock (2,583) (2,448) (1,953)
Cash dividends - Class B common stock (899) (841) (666)
- --------------------------------------------------------------------------------
Balance at November 30 427,851 360,906 295,069
- --------------------------------------------------------------------------------
UNREALIZED GAIN ON SECURITIES
AVAILABLE-FOR-SALE, NET:
Beginning balance - - -
Net unrealized gains for the year 5,770 - -
- --------------------------------------------------------------------------------
Balance at November 30 5,770 - -
- --------------------------------------------------------------------------------
Total stockholders' equity $607,794 534,088 467,473
================================================================================
See accompanying notes to consolidated financial statements.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Lennar Corporation and all wholly-owned subsidiaries (the "Company"). The
Company's investments in partnerships are accounted for by the equity method.
All significant intercompany transactions and balances have been eliminated.
REVENUE RECOGNITION
Revenues from sales of homes are recognized when the sales are closed and
title passes to the new homeowners. Revenues from sales of other real estate
(including the sales of land and operating properties) are recognized when a
significant down payment is received, the earnings process is complete and the
collection of any remaining receivables is reasonably assured.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Due to the short
maturity period of the cash equivalents, the carrying amount of these
instruments approximates their fair values.
INVENTORIES
Inventories are stated at the lower of accumulated costs or net realizable
value. Net realizable value is evaluated at the community level and is defined
as the estimated proceeds upon disposition less all future costs to complete and
sell. Inventory adjustments to net realizable value in 1995, 1994 and 1993 were
not material to the Company. Start-up costs, construction overhead and selling
expenses are expensed as incurred. Homes held for sale are classified as
construction in progress until delivered. Land, land development, amenities and
other costs are accumulated by specific area and allocated proportionately to
homes within the respective area.
INTEREST AND REAL ESTATE TAXES
Interest and real estate taxes attributable to land, homes and operating
properties are capitalized and added to the cost of those properties as long as
the properties are being actively developed. Interest expense relating to
financial services operations and limited-purpose finance subsidiaries is
included in their respective costs and expenses. Interest related to
homebuilding and investment operations, including interest costs relieved from
inventories, is included in interest expense.
During 1995, 1994 and 1993, interest costs of $35.8 million, $25.0 million
and $19.7 million, respectively, (excluding the limited-purpose finance
subsidiaries) were incurred and $23.4 million, $22.1 million and $17.1 million,
respectively, were capitalized by the Company's homebuilding and investment
operations. Previously capitalized interest charged to expense in 1995, 1994 and
1993 was $17.8 million, $15.4 million and $13.1 million, respectively.
OPERATING PROPERTIES AND EQUIPMENT
Operating properties and equipment are recorded at cost. Depreciation is
calculated to amortize the cost of depreciable assets over their estimated
useful lives using the straight-line method. The range of estimated useful lives
for operating properties is 15 to 40 years and for equipment is 2 to 10 years.
INVESTMENT SECURITIES
Effective December 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". This new standard requires that debt and equity
securities that have determinable fair values be classified as
available-for-sale unless they are classified as held to maturity. Securities
classified as held to maturity are carried at amortized cost because they are
purchased with the intent and ability to hold to maturity. Available-for-sale
securities are recorded at fair value in the balance sheet. Any unrealized
holding gains or losses on available-for-sale securities are reported in a
separate component of stockholders' equity, net of tax effects, until realized.
WARRANTIES
Warranty liabilities are not significant as the Company subcontracts
virtually all segments of construction to others and its contracts call for the
subcontractors to repair or replace any deficient items related to their trade.
Extended warranties are offered in some communities through independent
homeowner warranty insurance companies. The costs of these warranties are fixed
to the Company and are expensed in the period the homes are delivered.
30
INCOME TAXES
Effective December 1, 1993, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities, and are measured using enacted tax rates
expected to apply to taxable income in the years in which those differences are
expected to reverse. Prior to December 1, 1993, the Company utilized the
deferred method of accounting for income taxes under which deferred income taxes
were recognized for income and expense items that were reported in different
years for financial reporting purposes and income tax purposes using the tax
rate applicable for the year of the calculation.
NET EARNINGS PER SHARE
Net earnings per share is calculated by dividing net earnings by the
weighted average number of the total of common shares, Class B common shares and
common share equivalents outstanding during each year. The weighted average
number of shares outstanding was 36,100,000, 36,086,000 and 34,709,000 in 1995,
1994 and 1993, respectively.
FINANCIAL SERVICES
Mortgage loans held for sale or disposition by the Financial Services
Division are recorded at the lower of cost or market, as determined on an
aggregate basis. Discounts recorded on these loans are presented as a reduction
of the carrying amount of the loans and are not amortized.
This division enters into forward sales and option contracts to protect the
value of loans held for sale or disposition from increases in market interest
rates. Adjustments are made to these loans based on changes in the market value
of these hedging contracts (see Note 15).
When the division sells loans or mortgage-backed securities in the
secondary market, a gain or loss is recognized to the extent that the sales
proceeds exceed, or are less than, the book value of the loans or the
securities. Loan origination fees, net of direct origination costs, are deferred
and recognized as a component of the gain or loss when loans are sold.
The division generally retains the servicing on the loans and
mortgage-backed securities it sells and recognizes servicing fee income as those
services are performed.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". SFAS No. 121 requires companies to evaluate
long-lived assets for impairment based on the undiscounted future cash flows of
the asset. If a long-lived asset is identified as impaired, the value of the
asset must be reduced to its fair value. The Company's land holdings and
operating properties would be considered long-lived assets under this
pronouncement.
In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights". SFAS No. 122, among other
provisions, requires the recognition of originated mortgage servicing rights as
assets by allocating total costs incurred in originating a loan between the loan
and the servicing rights based on their relative fair values. Presently, the
cost of originated mortgage servicing rights is included with the cost of the
related loans and written off against income when the loans are sold. Also,
under SFAS No. 122, all capitalized mortgage servicing rights are evaluated for
impairment based on the excess of the carrying amount of the mortgage servicing
rights over their fair value.
These statements are effective for fiscal years beginning after December
15, 1995. The Company plans to adopt these statements in the first quarter of
its fiscal year ending November 30, 1997. The actual effects of implementing
these new standards have not been determined. However, their adoption is not
expected to have any material adverse affect on the Company's financial position
or results of operations.
RECLASSIFICATIONS
Certain prior year amounts in the consolidated financial statements have
been reclassified to conform with the 1995 presentation.
2. BUSINESS SEGMENTS
The Company has three business segments: Homebuilding, Investment and
Financial Services. The limited-purpose finance subsidiaries are not considered
a business segment and are not included in the following tables.
HOMEBUILDING
Homebuilding operations include the construction and sale of single-family
and multi-family homes. These activities also include the purchase, development
and sale of residential land. The following table sets forth financial
information relating to the homebuilding operations:
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- ----------------------------------------------------------------------
REVENUES:
Sales of homes $646,986 626,341 513,503
Other 18,524 21,409 18,647
- ----------------------------------------------------------------------
Total revenues 665,510 647,750 532,150
COSTS AND EXPENSES:
Cost of homes sold 523,028 498,132 400,159
Cost of other revenues 13,948 15,769 16,302
Selling, general & administrative 70,004 63,204 55,482
- ----------------------------------------------------------------------
Total costs and expenses 606,980 577,105 471,943
- ----------------------------------------------------------------------
OPERATING EARNINGS $ 58,530 70,645 60,207
- ----------------------------------------------------------------------
IDENTIFIABLE ASSETS $541,266 531,330 500,507
- ----------------------------------------------------------------------
DEPRECIATION AND
AMORTIZATION $ 1,842 1,522 1,037
- ----------------------------------------------------------------------
INVESTMENT
The Investment Division is involved in the development, management and
leasing, as well as the acquisition and sale, of commercial and residential
properties and land. This division also participates in and manages partnerships
with financial institutions. During 1994, this division began acquiring, at a
discount, issues of the unrated portion of debt securities which are
collateralized by real estate loans. The following table sets forth financial
information relating to the Investment Division's operations:
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------------------------
REVENUES:
Rental income $ 49,439 43,487 37,708
Equity in earnings
of partnerships 30,852 20,710 7,046
Management fees 10,274 12,390 6,714
Sales of real estate 38,173 21,518 45
Other 10,744 8,238 7,442
- -------------------------------------------------------------------------
Total revenues 139,482 106,343 58,955
COST OF SALES AND EXPENSES 71,794 54,439 30,458
- -------------------------------------------------------------------------
OPERATING EARNINGS $ 67,688 51,904 28,497
- -------------------------------------------------------------------------
IDENTIFIABLE ASSETS $453,483 411,366 281,883
- -------------------------------------------------------------------------
CAPITAL EXPENDITURES $ 7,867 53,646 42,102
- -------------------------------------------------------------------------
DEPRECIATION AND
AMORTIZATION $ 5,483 5,010 4,130
- -------------------------------------------------------------------------
FINANCIAL SERVICES
The Financial Services Division's activities are conducted primarily
through Lennar Financial Services, Inc. and five subsidiaries: Universal
American Mortgage Company, AmeriStar Financial Services, Inc., Universal Title
Insurors, Inc., Lennar Capital Corporation and TitleAmerica Insurance
Corporation. These companies arrange mortgage financing, title insurance and
closing services for Lennar homebuyers and others; acquire, package and resell
home mortgage loans; and perform mortgage loan servicing activities. This
division also invests in issues of rated portions of commercial real estate
mortgage-backed securities for which Lennar's Investment Division is the special
servicer and an investor in the unrated portions of those securities. The
following table sets forth financial information relating to the financial
services operations:
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------
REVENUES $ 57,787 54,348 59,204
COSTS AND EXPENSES 38,774 39,504 44,100
INTERCOMPANY
INTEREST EXPENSE* 2,313 3,144 2,244
- -------------------------------------------------------
OPERATING EARNINGS $ 16,700 11,700 12,860
- -------------------------------------------------------
IDENTIFIABLE ASSETS $353,809 252,195 284,391
- -------------------------------------------------------
DEPRECIATION AND
AMORTIZATION $ 2,196 1,450 4,886
- -------------------------------------------------------
* Intercompany interest expense is reflected above to show interest expense on
intercompany debt of the financial services operations.
3. SUBSEQUENT EVENT-ACQUISITION
On December 29, 1995, the Company purchased the assets and operations of
the residential business of Friendswood Development Company, the real estate
subsidiary of Exxon Corporation, for approximately $110 million in cash, subject
to certain post-closing adjustments. The Company financed this transaction
through borrowings under its existing revolving credit agreement. The
acquisition of these assets and operations will be accounted for in fiscal 1996
using the purchase method of accounting.
4. ACCOUNTING CHANGES
Effective December 1, 1993, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes". This change in accounting principle resulted
in an increase to net earnings of $4.7 million in the first quarter of 1994. The
change in accounting for income taxes did not have a significant effect on the
Company's results of operations.
The first quarter of 1994 also included a charge of $3.8 million (net of
income tax effect of $2.4 million) for the cumulative effect on prior years of a
change in accounting for purchased mortgage servicing rights. During the first
quarter of 1994, the Company changed the way in which it evaluates these assets
for impairment from an undiscounted and disaggregated cash flow basis to a
discounted and disaggregated cash flow basis.
32
5. RESTRICTED CASH
Cash includes restricted deposits of $3.1 million and $3.7 million as of
November 30, 1995 and 1994, respectively. These balances are comprised primarily
of escrow deposits held related to condominium purchases and security deposits
from tenants of commercial and apartment properties.
6. SUMMARY OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
During 1995, the Company acquired commercial mortgage-backed securities for
$81.7 million. Of this amount, $57.5 million was paid in cash and $24.2 million
was financed by the sellers.
During 1994, the Company's Financial Services Division acquired commercial
mortgage-backed securities for $72.4 million. Of this amount, $25.4 million was
paid in cash and the balance of $47.0 million was financed by the sellers.
During 1993, the Company acquired a portfolio of loans from the Resolution
Trust Corporation for $24.8 million. Of this amount, $5.0 million was paid in
cash and the Company issued a non-recourse note in the amount of $19.8 million
for the remainder.
Also during 1993, the Company purchased the other partners' interests in
three of its joint ventures. As a result, the operations of these ventures were
consolidated into the accounts of the Company as of the respective dates of
acquisition. The net result of these transactions was to decrease investments in
and advances to partnerships by $34.9 million, increase all other assets by
$73.7 million and increase liabilities by $38.8 million.
7. RECEIVABLES
November 30,
(IN THOUSANDS) 1995 1994
- -----------------------------------------------------------------
Accounts receivable $24,516 31,253
Mortgage and notes receivable 48,659 20,801
- -----------------------------------------------------------------
73,175 52,054
Allowance for doubtful accounts (2,372) (1,528)
Deferred income and unamortized discounts (601) (2,361)
- -----------------------------------------------------------------
$70,202 48,165
=================================================================
8. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS
Summarized financial information on a combined 100% basis related to the
Company's significant partnerships accounted for by the equity method follows:
November 30,
(IN THOUSANDS) 1995 1994
- -----------------------------------------------------------------
ASSETS:
Cash $ 66,927 96,046
Portfolio investments 1,078,841 1,286,375
Other assets 22,160 61,722
- -----------------------------------------------------------------
1,167,928 1,444,143
=================================================================
LIABILITIES AND EQUITY:
Accounts payable and
other liabilities $ 77,424 93,943
Notes and mortgages payable 570,882 737,344
Equity of:
The Company 149,174 105,537
Others 370,448 507,319
- -----------------------------------------------------------------
$1,167,928 1,444,143
=================================================================
Portfolio investments consist primarily of mortgage loans and business
loans collateralized by real property, as well as commercial properties and land
held for investment or sale. The Company's share of the partnerships' equity at
November 30, 1995 includes $113.6 million and $35.6 million related to the
Investment Division's and Financial Services Division's investments in
partnerships, respectively.
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- -----------------------------------------------------------------
Revenues $280,286 246,236 112,692
Costs and expenses 115,269 128,784 78,653
- -----------------------------------------------------------------
Pre-tax earnings of
partnerships $165,017 117,452 34,039
=================================================================
The Company's share of
pre-tax earnings $ 31,203 20,710 7,046
=================================================================
The Company's investments in partnerships consist primarily of its
Investment Division partnerships. At November 30, 1995, the Company's equity
interests in these partnerships ranged from 25% to 50% (which in one instance
includes an investment by the Company's Financial Services Division). These
partnerships are involved in the acquisition and management of portfolios of
real estate loans and assets. The Company shares in the profits and losses of
these partnerships and, as the manager of the partnerships, receives fees for
the management and disposition of the assets. The outstanding debt of these
partnerships is not guaranteed by the Company.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
9. OPERATING PROPERTIES AND EQUIPMENT
November 30,
(IN THOUSANDS) 1995 1994
- ----------------------------------------------------------------
Rental apartment properties $ 69,027 66,818
Retail centers 62,952 62,639
Office buildings 39,718 41,740
Community recreational facilities 9,693 14,207
Other 33,520 30,452
- ----------------------------------------------------------------
Total land and buildings 214,910 215,856
Furniture, fixtures and equipment 10,615 9,790
- ----------------------------------------------------------------
Total 225,525 225,646
Accumulated depreciation (36,184) (32,025)
- ----------------------------------------------------------------
$189,341 193,621
================================================================
The Company leases retail, office and other facilities under
non-cancellable operating leases with terms in excess of twelve months. The
future minimum rental revenues under these leases for the five years subsequent
to November 30, 1995, are as follows (in thousands): 1996-$13,078; 1997-$12,169;
1998-$9,900; 1999-$8,000 and 2000-$6,453.
10. MORTGAGE NOTES AND OTHER DEBTS PAYABLE
November 30,
(DOLLARS IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
Secured without recourse to the Company:
Mortgage notes on operating properties
and land with fixed interest rates from
6.8% to 9.5%, due through 2003 $ 25,616 25,169
Other secured debt:
Term loan notes with floating interest
rates (6.6% to 6.8% at November 30, 1995),
secured by certain real estate and operating
properties, due through 2002 84,960 50,000
Mortgage notes on operating properties and
land with interest rates from 4.0% to 8.3%,
due through 2015 60,002 61,057
Unsecured revolving credit notes payable
with floating interest rates 117,225 122,735
Other notes payable with floating interest
rates (6.7% to 8.8% at November 30, 1995),
due in 1996 48,830 13,500
Unsecured term loan note with floating
interest rate - 56,475
- --------------------------------------------------------------------------------
$336,633 328,936
================================================================================
During 1995, the Company amended its unsecured revolving credit agreement
by extending the term to five years and increasing the commitment to $310
million. This agreement is with twelve banks. Certain Financial Services
Division subsidiaries are co-borrowers under this facility and at November 30,
1995 and 1994 their borrowings under this agreement amounted to $54.0 million
and $53.0 million, respectively. The total amount outstanding under the
Company's revolving credit agreement at November 30, 1995 and 1994 was $171.2
million and $175.7 million, respectively. In January 1996, the Company entered
into an additional $100 million unsecured revolving credit agreement which
expires in January 1997.
The Company utilizes interest rate swap agreements to manage interest costs
and hedge against risks associated with changing interest rates (see Note 15).
The minimum aggregate principal maturities of mortgage notes and other
debts payable during the five years subsequent to November 30, 1995, are as
follows (in thousands): 1996-$94,024; 1997-$12,439; 1998-$24,492; 1999-$1,005
and 2000 -$844. All of the notes secured by land contain collateral release
provisions for accelerated payment which may be made as necessary to maintain
construction schedules.
34
11. FINANCIAL SERVICES
The assets and liabilities related to the Company's financial services
operations (as described in Note 2) are summarized as follows:
November 30,
(IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
ASSETS:
Loans held for sale or disposition, net $123,842 124,324
Investment securities available-for-sale 141,832 -
Loans and mortgage-backed
securities held for investment, net 43,506 107,989
Investments in and advances
to partnerships 27,301 -
Cash and receivables, net 14,416 11,579
Servicing acquisition costs 2,329 3,949
Other 583 4,354
- --------------------------------------------------------------------------------
$353,809 252,195
================================================================================
LIABILITIES:
Notes and other debts payable $228,488 154,379
Other 14,703 13,969
- --------------------------------------------------------------------------------
$243,191 168,348
================================================================================
Investments in and advances to partnerships consist primarily of a 15.1%
equity interest, acquired in the fourth quarter of 1995, in a partnership in
which the Investment Division owns a 9.9% equity interest (see Note 8).
The Financial Services Division finances its activities through various
lines of credit, borrowings under short-term repurchase agreements or borrowings
from Lennar Corporation, when on a consolidated basis the Company can minimize
its cost of funds.
Warehouse lines of credit with banks are used to fund the division's
mortgage loan activity. Borrowings under these agreements were $54.9 million and
$54.6 million at November 30, 1995 and 1994, respectively, and were
collateralized by mortgage loans with outstanding principal balances of $57.0
million and $57.9 million, respectively, and by servicing rights to
approximately $1.5 billion of loans serviced by the division. There are several
interest rate pricing options which fluctuate with market rates. The borrowing
rate has been reduced to the extent that custodial escrow balances exceeded
required compensating balance levels. The effective interest rate on these
agreements at November 30, 1995 was 0.8%. On December 22, 1995, the Company
entered into a new warehouse line of credit facility totaling $125 million that
expires December 20, 1996, unless otherwise extended.
The division has two revolving lines of credit to finance certain
mortgage-backed securities which provide for aggregate borrowings of $75
million, expiring in 1998. Borrowings under these agreements were $67.4 million
at November 30, 1995 and were collateralized by mortgage-backed securities with
an aggregate carrying value of $101.1 million. The weighted average interest
rate at November 30, 1995 was 5.8%.
The division also utilizes short-term financing arrangements to sell
mortgage-backed securities under agreements to repurchase them with securities
dealers in the business of providing such financing. At November 30, 1995 and
1994, repurchase agreements outstanding totaled $17.2 million and $46.8 million,
respectively, and had a weighted average borrowing rate of 6.8% and 6.5%,
respectively.
During 1995, the division entered into two uncommitted, short-term bank
credit lines which provide for aggregate borrowings of $35.0 million. As of
November 30, 1995, $35.0 million was outstanding at an interest rate of 6.4%.
Advances generally mature within 90 days and are unsecured.
Certain subsidiaries of the Financial Services Division are co-borrowers in
the Company's revolving credit agreement (see Note 10). As of November 30, 1995
and 1994, the division's borrowings under this agreement amounted to $54.0
million and $53.0 million, respectively.
Certain of the division's servicing agreements require it to pass through
payments on loans even though it is unable to collect such payments and, in
certain instances, be responsible for losses incurred through foreclosure.
Exposure to this credit risk is minimized through geographical diversification
and review of the mortgage loan servicing created or purchased. Management
believes that it has provided adequate reserves for expected losses based on the
net realizable value of the underlying collateral. Provisions for these losses
have not been material to the Company. The division is also subject to
prepayment risk on the servicing portfolio. Exposure to prepayment risk is
managed by the division's ongoing evaluation of prepayment possibilities.
12. LIMITED-PURPOSE FINANCE SUBSIDIARIES
In prior years, limited-purpose finance subsidiaries of the Financial
Services Division placed mortgages and other receivables as collateral for
various long-term financings. These limited-purpose finance subsidiaries pay the
principal of, and interest on, these financings primarily from the cash flows
generated by the related pledged collateral which includes a combination of
mortgage notes, mortgage-backed securities and funds held by trustee.
At November 30, 1995 and 1994, the balances outstanding for the bonds and
notes payable were $70.6 and $83.0 million, respectively. The borrowings mature
in years 2013 through 2018 and carry interest rates ranging from 7.1% to 14.3%.
The annual principal repayments are dependent upon collections on the underlying
mortgages, including prepayments, and cannot be reasonably determined.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
13. INCOME TAXES
The provisions (benefits) for income taxes consist of the following:
Years Ended November 30,
(IN THOUSANDS) 1995 1994 1993
- ----------------------------------------------------------------------
Current:
Federal $ 47,857 44,092 28,620
State 6,787 8,337 5,400
- ----------------------------------------------------------------------
54,644 52,429 34,020
- ----------------------------------------------------------------------
Deferred:
Federal (9,982) (7,443) (4,013)
State 366 (1,405) (464)
- ----------------------------------------------------------------------
(9,616) (8,848) (4,477)
- ----------------------------------------------------------------------
Total expense $ 45,028 43,581 29,543
======================================================================
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The tax effects
of significant temporary differences which comprise the net deferred tax
liability are as follows:
November 30,
(IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Capitalized expenses $36,818 36,447
Acquisition adjustments 15,154 15,913
Deferred gains 16,973 13,307
Installment sales 4,649 5,801
Unrealized gain on securities
available-for-sale 3,689 -
Other 3,531 2,592
- --------------------------------------------------------------------------------
Total deferred tax liabilities 80,814 74,060
- --------------------------------------------------------------------------------
Deferred tax assets:
Reserves and accruals 18,404 16,409
Investments in partnerships 14,086 6,185
Investment securities income 4,193 2,052
Other 1,151 507
- --------------------------------------------------------------------------------
Total deferred tax assets 37,834 25,153
- --------------------------------------------------------------------------------
Net deferred tax liability $42,980 48,907
================================================================================
At November 30, 1995 and 1994, the Financial Services Division and the
limited-purpose finance subsidiaries had net deferred tax assets (liabilities)
of $(.4) million and $1.9 million, respectively.
For the year ended November 30, 1993, a deferred income tax credit of $4.5
million resulted from timing differences in the recognition of income and
expenses for income tax and financial reporting purposes. The sources and tax
effects of those timing differences are presented below:
Income Tax
Expense (Credit)
----------------
(IN THOUSANDS) 1993
- -----------------------------------------------------------------
Installment and deferred profit
recognition on sales of real estate $(2,947)
Capitalized expenses (2,216)
Tax expense in excess of book deductions
on general and administrative expenses 484
Net change in financial services' loan
loss reserve 428
Recognition of joint venture income 318
Other, net (544)
- -----------------------------------------------------------------
Total $(4,477)
=================================================================
A reconciliation of the statutory rate with the effective tax rate follows:
% of Pre-tax Income
----------------------
1995 1994 1993
- -----------------------------------------------------------------
Statutory rate 35.0 35.0 35.0
State income taxes, net of federal
income tax benefit 4.0 4.0 3.9
Other - - (2.9)
- -----------------------------------------------------------------
Effective rate 39.0 39.0 36.0
=================================================================
14. CAPITAL STOCK
COMMON STOCK
The Company has two classes of common stock. The common stockholders have
one vote for each share owned, in matters requiring stockholder approval, and
during 1995 received quarterly dividends of $.025 per share. Class B common
stockholders have ten votes for each share of stock owned and during 1995
received quarterly dividends of $.0225 per share. As of November 30, 1995, Mr.
Leonard Miller, Chairman of the Board and President of the Company, owned or
controlled 9.9 million shares of Class B common stock, which represents
approximately 79% voting control of the Company.
Stock Option Plans
The Lennar Corporation 1980 Stock Option Plan ("1980 Plan") expired on
December 8, 1990. However, under the terms of the 1980 Plan, certain options
granted prior to the plan termination date were still outstanding during the
periods presented. The last options granted under the 1980 Plan were exercised
in November 1995.
36
14. CAPITAL STOCK (CONTINUED)
The following table summarizes the status of the 1980 Plan:
1995 1994 1993
- -------------------------------------------------------------------------------
Option shares exercised 52,650 27,600 83,250
Option price per share
exercised (range) $4.33 - 6.57 4.33 - 7.09 4.33 - 7.09
Shares under option - 52,650 84,000
Option price per share (range) - 4.33 - 6.57 4.33 - 7.09
Shares under option - exercisable - 34,650 21,750
- -------------------------------------------------------------------------------
The Lennar Corporation 1991 Stock Option Plan ("1991 Plan") provides for
the granting of options to certain key employees of the Company to purchase
shares at prices not less than market value as of the date of the grant. No
options granted under the 1991 Plan may be exercisable until at least six months
after the date of the grant. Thereafter, exercises are permitted in varying
installments, on a cumulative basis. Each stock option granted will expire on a
date determined at the time of the grant, but not more than 10 years after the
date of the grant.
The following table summarizes the status of the 1991 Plan:
1995 1994 1993
- --------------------------------------------------------------------------------
Option shares exercised 22,500 10,650 17,550
Option price per share
exercised (range) $6.54 - 14.33 7.71 - 14.37 6.54 - 11.17
Shares under option 995,250 958,750 984,900
Option price per share (range) $6.54 - 22.55 6.54 - 22.55 6.54 - 22.55
Shares under option - exercisable 203,600 147,187 79,875
- --------------------------------------------------------------------------------
EMPLOYEE STOCK OWNERSHIP/401(K) PLAN
The Employee Stock Ownership/401(k) Plan ("Plan") provides shares of stock
to employees who have completed one year of continuous service with the Company.
All contributions for employees with five years or more of service are fully
vested. The Plan was amended in 1989 to add a cash or deferred program under
Section 401(k) of the Internal Revenue Code. Under the 401(k) portion of the
Plan, employees may make contributions which are invested on their behalf, and
the Company may also make contributions for the benefit of employees. The
Company records as compensation expense an amount which approximates the vesting
of the contributions to the Employee Stock Ownership portion of the Plan, as
well as the Company's contribution to the 401(k) portion of the Plan.
This amount was (in thousands): $847 in 1995, $625 in 1994 and $361 in 1993.
In 1995, 1994 and 1993, 15,332, 22,249 and 13,800 shares, respectively, were
contributed to participants' accounts.
RESTRICTIONS ON PAYMENT OF DIVIDENDS
Other than as required to maintain the financial ratios and net worth
requirements under the revolving credit and term loan agreements, there are no
restrictions on the payment of dividends on common stock by the Company. The
cash dividends paid with regard to a share of Class B common stock in a calendar
year may not be more than 90% of the cash dividends paid with regard to a share
of common stock in that calendar year. Furthermore, there are no agreements
which restrict the payment of dividends by subsidiaries to the Company.
- --------------------------------------------------------------------------------
15. FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of financial instruments held by the Company at November 30, 1995 and 1994,
using available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts. The table excludes cash and cash equivalents, accounts receivable and
accounts payable, which had fair values approximating their carrying values.
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
15. FINANCIAL INSTRUMENTS (CONTINUED)
November 30,
(IN THOUSANDS) 1995 1994
- ------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- ------------------------------------------------------------------------------------
ASSETS
HOMEBUILDING AND INVESTMENT:
Notes and mortgages receivable, net $ 48,058 48,058 18,440 18,440
Other assets - investment securities
held to maturity 21,460 21,460 16,102 16,102
FINANCIAL SERVICES:
Loans held for sale or disposition, net 123,842 123,842 124,324 124,324
Investment securities available-for-sale 141,832 141,832 - -
Loans and mortgage-backed securities
held for investment, net 43,506 47,897 107,989 109,370
LIMITED-PURPOSE FINANCE SUBSIDIARIES:
Collateral for bonds and notes payable 74,728 78,932 89,424 92,062
LIABILITIES
HOMEBUILDING AND INVESTMENT:
Mortgage notes and other debts payable 336,633 336,633 328,936 328,936
FINANCIAL SERVICES:
Notes and other debts payable 228,488 228,488 154,379 154,379
LIMITED-PURPOSE FINANCE SUBSIDIARIES:
Bonds and notes payable 70,640 74,067 82,997 83,923
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
HOMEBUILDING AND INVESTMENT:
Interest rate swap agreements - (3,723) - (300)
FINANCIAL SERVICES:
Commitments to originate loans - 71 - (155)
Commitments to sell loans - (531) - 114
- ------------------------------------------------------------------------------------
The following methods and assumptions were used by the Company in
estimating fair values:
Notes and mortgages receivable: The fair values are based on discounting
future cash flows using the current interest rates at which similar loans would
be made or are estimated by the Company on the basis of financial or other
information.
Notes, mortgage notes and other debts payable: The fair value of fixed rate
borrowings is based on discounting future cash flows using the Company's
incremental borrowing rate. Variable rate borrowings are tied to market indices
and thereby, approximate fair value.
Investment securities, loans held for sale or disposition, loans and
mortgage-backed securities held for investment, collateral for bonds and notes
payable, bonds and notes payable and loan commitments: The fair values are based
on quoted market prices if available. The fair values for instruments which do
not have quoted market prices are estimated by the Company on the basis of
financial and other information.
Interest rate swap agreements: The fair value is based on dealer quotes and
generally represents an estimate of the amount the Company would pay to
terminate the agreement at the reporting date.
The Company utilizes interest rate swap agreements to manage interest costs
and hedge against risks associated with changing interest rates. The Company
designates interest rate swaps as hedges of specific debt instruments and
recognizes interest differentials as adjustments to interest expense as the
differentials occur. Counterparties to these agreements are major financial
institutions. Credit loss from counterparty non-performance is not anticipated.
A majority of the Company's variable rate borrowings are based on the London
Interbank Offering Rate ("LIBOR") index. At November 30,1995, Lennar had four
interest rate swap agreements outstanding with a total notional amount of $220
million, of which $200 million will mature in 2002 and $20 million will mature
in 1996. The agreement maturing in 2002 fixed the LIBOR index at 6.0% to 6.1%
and the agreements maturing in 1996 fixed the LIBOR index at 8.7%.
As of November 30, 1995, the Financial Services Division's pipeline of
loans in process totaled approximately $33.9 million. There is no exposure to
credit risk in this type
38
of commitment until the loans are funded. However, the division uses the
same credit policies in the approval of the commitments as are applied to all
lending activities. Since a portion of these commitments is expected to expire
without being exercised by the borrower, the total commitments do not
necessarily represent future cash requirements. There is no exposure to market
risk until a rate commitment is extended by the Company to a borrower. Loans in
the pipeline of loans in process for which interest rates were committed to the
borrower totaled approximately $21.3 million as of November 30, 1995.
Substantially all of these commitments are for periods of 30 days or less.
Mandatory mortgage-backed securities ("MBS") forward commitments are used
by the Company to hedge its interest rate exposure during the period from when
the Company extends an interest rate lock to a loan applicant until the time in
which the loan is sold to an investor. These instruments involve, to varying
degrees, elements of credit and interest rate risk. Credit risk is managed by
the Company by entering into agreements with investment bankers with primary
dealer status and with permanent investors meeting the credit standards of the
Company. At any time the risk to the Company, in the event of default by the
purchaser, is the difference between the contract price and current market
value. At November 30, 1995, the Company had open commitments amounting to $68.2
million to sell MBS with varying settlement dates through January 22, 1996. The
mortgage loan inventory and pipeline will be used to form the MBS that will fill
the forward delivery contracts.
16. COMMITMENTS AND CONTINGENT LIABILITIES
The Company and certain subsidiaries are parties to various claims, legal
actions and complaints arising in the ordinary course of business. In the
opinion of management, the disposition of these matters will not have a material
adverse effect on the financial condition of the Company.
The Company had a number of claims for damages relating to a hurricane
which occurred in 1992. Most have been settled and to date, the Company's
insurers have made all payments required under settlements. Even if the Company
were required to make any payments with regard to the remaining hurricane
related claims, the Company believes that the amount it would pay would not be
material.
The Company is subject to the usual obligations associated with entering
into contracts for the purchase, development and sale of real estate in the
routine conduct of its business.
The Company is committed, under various letters of credit, to perform
certain development and construction activities and provide certain guarantees
in the normal course of business. Outstanding letters of credit under these
arrangements totaled approximately $77.2 million at November 30, 1995.
- -------------------------------------------------------------------------------
17. QUARTERLY DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) First Second Third Fourth
- -------------------------------------------------------------------------------
1995
Revenues $181,183 210,532 204,730 274,023
Earnings before income taxes $ 24,602 32,257 25,761 32,835
Net earnings $ 15,007 19,677 15,714 20,029
Net earnings per share $ .42 .55 .44 .55
===============================================================================
1994
Revenues $191,826 207,318 199,424 219,358
Earnings before income taxes and
cumulative effect of changes
in accounting principles $ 24,184 29,543 30,255 27,764
Earnings before cumulative effect
of changes in accounting principles $ 14,752 18,021 18,456 16,936
Net earnings $ 15,713 18,021 18,456 16,936
Net earnings per share before
cumulative effect of changes in
accounting principles $ .41 .50 .51 .47
Net earnings per share $ .44 .50 .51 .47
===============================================================================
Quarterly and year-to-date computations of per share amounts are made
independently. Therefore, the sum of per share amounts for the quarters may not
agree with per share amounts for the year.
39
SHAREHOLDER INFORMATION
LENNAR CORPORATION AND SUBSIDIARIES
ANNUAL MEETING
The Annual Stockholders' Meeting will be
held at 11:00 a.m. on April 2, 1996
at the Doral Park Golf and Country Club,
5001 N.W. 104th Avenue, Miami, Florida
REGISTRAR AND TRANSFER AGENT
The First National Bank of Boston
150 Royall Street
Canton, Massachusetts 02021
LISTING
New York Stock Exchange (LEN)
GENERAL COUNSEL
Robert B. Cole, Esq.
700 N.W. 107th Avenue
Miami, Florida 33172
INDEPENDENT AUDITORS
Deloitte & Touche LLP
100 Southeast Second Street
Miami, Florida 33131
FORM 10-K AVAILABLE
A copy of the Company's Annual Report on Form 10-K as filed with the Securities
and Exchange Commission is available without charge to any stockholder upon
written request to:
Corporate Relations
Lennar Corporation
700 N.W. 107th Avenue
Miami, Florida 33172
Telephone: (305) 559-4000
COMPARATIVE COMMON STOCK DATA
- ----------------------------------------------------------------------------------------------------
COMMON STOCK PRICES CASH DIVIDENDS
NEW YORK STOCK EXCHANGE PER SHARE
- ----------------------------------------------------------------------------------------------------
FISCAL HIGH/LOW PRICE COMMON STOCK CLASS B
QUARTER 1995 1994 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------
First $17.50 - 15.12 $25.17 - 19.92 2 1/2(cent) 2 (cent) 2 1/4 (cent) 1 2/3 (cent)
Second 20.88 - 15.38 23.50 - 17.88 2 1/2(cent) 2 1/2(cent) 2 1/4 (cent) 2 1/4 (cent)
Third 21.38 - 17.75 22.00 - 17.88 2 1/2(cent) 2 1/2(cent) 2 1/4 (cent) 2 1/4 (cent)
Fourth 23.75 - 19.25 20.75 - 14.25 2 1/2(cent) 2 1/2(cent) 2 1/4 (cent) 2 1/4 (cent)
====================================================================================================
As of November 30, 1995, there were approximately 1,000 holders of record of
the Company's common stock.
40