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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended FEBRUARY 28, 1999
Commission File Number: 1-11749
LENNAR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 59-1281887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 NORTHWEST 107TH AVENUE, MIAMI, FLORIDA 33172
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 559-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Common shares outstanding as of March 31, 1999:
Common 48,421,506
Class B Common 9,848,562
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands, except share amounts)
(Unaudited)
February 28, November 30,
1999 1998
- ---------------------------------------------------------------------------------------------------
ASSETS
HOMEBUILDING:
Cash and cash equivalents $ 74,543 34,677
Receivables, net 26,653 23,803
Inventories 1,324,905 1,198,553
Investments in partnerships 175,372 156,536
Other assets 130,933 137,311
----------------------------------
1,732,406 1,550,880
FINANCIAL SERVICES 339,539 366,954
- ---------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,071,945 1,917,834
===================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING:
Accounts payable and other liabilities $ 312,195 322,267
Income taxes currently payable 16,929 33,440
Mortgage notes and other debts payable 713,303 530,630
----------------------------------
1,042,427 886,337
FINANCIAL SERVICES 286,693 315,832
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,329,120 1,202,169
STOCKHOLDERS' EQUITY:
Common stock of $0.10 par value per share,
48,417,506 shares outstanding at February 28, 1999 4,842 4,824
Class B common stock of $0.10 par value per share,
9,848,562 shares outstanding at February 28, 1999 985 991
Additional paid-in capital 523,647 523,645
Retained earnings 213,351 186,205
- ---------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 742,825 715,665
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,071,945 1,917,834
===================================================================================================
See accompanying notes to consolidated condensed financial statements.
1
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
February 28,
--------------------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
REVENUES:
Homebuilding $ 531,376 408,538
Financial services 59,223 32,174
- -------------------------------------------------------------------------------------------------------------------------------
Total revenues 590,599 440,712
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COSTS AND EXPENSES:
Homebuilding 472,986 368,984
Financial services 53,502 27,817
Corporate general and administrative 8,515 6,289
Interest 9,543 10,617
- -------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 544,546 413,707
- -------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 46,053 27,005
Income taxes 18,191 10,802
- -------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 27,862 16,203
===============================================================================================================================
BASIC EARNINGS PER SHARE $ 0.48 0.30
===============================================================================================================================
DILUTED EARNINGS PER SHARE $ 0.45 0.30
===============================================================================================================================
- -------------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER COMMON SHARE $ 0.0125 0.0125
===============================================================================================================================
CASH DIVIDENDS PER CLASS B COMMON SHARE $ 0.01125 0.01125
===============================================================================================================================
See accompanying notes to consolidated condensed financial statements.
2
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended
February 28,
-----------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 27,862 16,203
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization 8,645 5,916
Amortization of discount/premium on debt, net 1,294 (938)
Equity in earnings from partnerships (3,060) (4,326)
Increase in deferred income taxes 1,556 3,000
Changes in assets and liabilities, net of effect of acquisitions:
(Increase) decrease in receivables (655) 15,921
Increase in inventories (109,845) (66,113)
(Increase) decrease in other assets (7,152) 1,811
Decrease (increase) in financial services loans held for sale or disposition 34,754 (1,581)
Decrease in accounts payable and other liabilities (17,128) (15,431)
Decrease in income taxes currently payable (16,511) (14,885)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (80,240) (60,423)
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of operating properties and equipment (3,576) (1,693)
Increase in investments in partnerships, net (15,776) (18,599)
Decrease (increase) in financial services mortgage loans 2,680 (215)
Purchases of investment securities (975) -
Receipts from investment securities 2,700 -
Acquisitions of properties and businesses, net of cash acquired (7,178) (48,874)
Other, net 279 (418)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (21,846) (69,799)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit agreement (97,650) 142,150
Net repayments under financial services short-term debt (19,625) (1,037)
Net proceeds from issuance of senior notes 266,153 -
Mortgage notes and other debts payable:
Proceeds from borrowings 1,809 9,044
Principal payments (7,654) (14,104)
Limited-purpose finance subsidiaries, net 256 235
Common stock:
Issuance 14 2,752
Dividends (716) (653)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 142,587 138,387
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Net increase in cash and cash equivalents 40,501 8,165
Cash and cash equivalents at beginning of period 61,577 62,599
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Cash and cash equivalents at end of period $ 102,078 70,764
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3
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows -- Continued
(Unaudited)
(In thousands)
Three Months Ended
February 28,
-----------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Summary of cash and cash equivalent balances:
Homebuilding $ 74,543 53,110
Financial services 27,535 17,654
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$ 102,078 70,764
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ - 5,178
Cash paid for income taxes $ 32,234 20,303
Supplemental disclosures of non-cash investing and financing activities:
Purchases of inventory financed by sellers $ 16,303 10,200
=================================================================================================================================
See accompanying notes to consolidated condensed financial statements.
4
LENNAR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include the
accounts of Lennar Corporation and all subsidiaries and partnerships in which a
controlling interest is held (the "Company"). The Company's investments in
partnerships (and similar entities) in which a significant, but less than
controlling, interest is held are accounted for by the equity method. All
significant intercompany transactions and balances have been eliminated. The
financial statements have been prepared by management without audit by
independent public accountants and should be read in conjunction with the
November 30, 1998 audited financial statements in the Company's Annual Report on
Form 10-K for the year then ended. However, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for fair
presentation of the accompanying consolidated condensed financial statements
have been made. Certain prior year amounts in the consolidated condensed
financial statements have been reclassified to conform with the current period
presentation.
The Company historically has experienced, and expects to continue to experience,
variability in quarterly results. The consolidated condensed statement of
earnings for the three months ended February 28, 1999 is not necessarily
indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
(2) BUSINESS SEGMENTS
The Company has two business segments: Homebuilding and Financial Services.
Homebuilding operations include the sale and construction of single-family
attached and detached homes in Florida, California, Texas, Arizona and Nevada.
These activities also include the purchase, development and sale of residential
land. The Company has a non-controlling 50% interest in Lennar Land Partners
("LLP"), a general partnership with LNR Property Corporation ("LNR") which
acquires, develops and sells land to Lennar, LNR and others. The Company manages
the day-to-day operations of LLP and receives a management fee.
Financial Services activities are conducted primarily through Lennar Financial
Services, Inc. and its subsidiaries. These companies provide mortgage financing,
title insurance and closing services for Lennar homebuyers and others, package
and resell residential mortgage loans and mortgage-backed securities, perform
mortgage loan servicing activities and provide cable television and alarm
monitoring services to residents of Lennar communities and others.
5
(3) DEBT
In February 1999, the Company issued $282 million of 7 5/8% Senior Notes due
2009 for the purpose of reducing amounts outstanding under revolving credit
facilities and redeeming outstanding 10 3/4% notes. Proceeds from the offering,
after underwriting and market discounts, expenses and settlement of a related
interest rate hedge agreement, were approximately $266 million. In March 1999,
the Company redeemed all of the outstanding 10 3/4% Senior Notes due 2004 of one
of its subsidiaries, Greystone Homes, Inc., at a price of 105.375% of the
principal amount outstanding plus accrued interest. Cash paid to redeem the
notes was approximately $132 million.
(4) EARNINGS PER SHARE
Basic earnings per share is computed by dividing earnings attributable to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company. Basic and diluted earnings per share
were calculated as follows (unaudited):
Three Months Ended
February 28,
-----------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1999 1998
------------------------------------------------------------------------------------------------------------
NUMERATOR:
Numerator for basic earnings per share - net earnings $ 27,862 16,203
Interest on zero coupon convertible debentures 1,362 -
------------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per share $ 29,224 16,203
============================================================================================================
DENOMINATOR:
Denominator for basic earnings per share -
weighted average shares 58,216 53,248
Effect of dilutive securities:
Employee stock options 879 909
Zero coupon convertible debentures 6,105 -
------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 65,200 54,157
============================================================================================================
Basic earnings per share $ 0.48 0.30
============================================================================================================
Diluted earnings per share $ 0.45 0.30
============================================================================================================
6
(5) FINANCIAL SERVICES
The assets and liabilities related to the Company's financial services
operations (as described in Note 2) are summarized as follows:
(Unaudited)
February 28, November 30,
(IN THOUSANDS) 1999 1998
-------------------------------------------------------------------------------------------------------------
ASSETS:
Cash and receivables, net $ 36,812 40,479
Mortgage loans held for sale or disposition, net 180,014 214,954
Mortgage loans, net 18,904 21,370
Mortgage servicing rights, net 13,537 11,080
Title plants 16,211 16,104
Other 42,207 28,075
Limited-purpose finance subsidiaries 31,854 34,892
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$ 339,539 366,954
=============================================================================================================
LIABILITIES:
Notes and other debts payable $ 213,691 233,316
Other 41,148 47,624
Limited-purpose finance subsidiaries 31,854 34,892
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$ 286,693 315,832
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(6) CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of February 28, 1999 and November 30, 1998 included
$41.1 million and $15.0 million, respectively, of cash held in escrow for
periods of up to three days.
(7) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS No. 131 requires public
companies to report certain information about their operating segments in their
annual and interim financial statements. It also requires public companies to
report certain information about their products and services, the geographic
areas in which they operate and their major customers. The Company will adopt
the statement in its fiscal year 1999 and will be required to present additional
financial statement disclosures in its 1999 year-end financial statements and
for interim periods thereafter. These additional disclosures will not have an
impact on the Company's results of operations or financial position.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective for fiscal years
beginning after June 15, 1999. This statement will require the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, a change in the fair value of
the derivative will either be offset against the change in the fair value of the
hedged asset, liability, or firm commitment through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings.
Management does not currently believe that the implementation of SFAS No. 133
will have a material impact on the Company's results of operations or financial
position.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CERTAIN STATEMENTS CONTAINED IN THE FOLLOWING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MAY BE
"FORWARD-LOOKING STATEMENTS" AS DEFINED IN THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO, CHANGES IN GENERAL
ECONOMIC CONDITIONS, THE MARKET FOR HOMES GENERALLY AND IN AREAS WHERE THE
COMPANY HAS DEVELOPMENTS, THE AVAILABILITY AND COST OF LAND SUITABLE FOR
RESIDENTIAL DEVELOPMENT, MATERIALS PRICES, LABOR COSTS, INTEREST RATES, CONSUMER
CONFIDENCE, COMPETITION, ENVIRONMENTAL FACTORS AND GOVERNMENT REGULATIONS
AFFECTING THE COMPANY'S OPERATIONS. SEE THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED NOVEMBER 30, 1998 FOR A FURTHER DISCUSSION OF THESE AND OTHER
RISKS AND UNCERTAINTIES APPLICABLE TO THE COMPANY'S BUSINESS.
(1) RESULTS OF OPERATIONS
OVERVIEW
Net earnings increased to $27.9 million, or $0.45 per share diluted ($0.48 per
share basic), in the first quarter of 1999, from $16.2 million, or $0.30 per
share (basic and diluted), in the first quarter of 1998. Homebuilding operating
earnings increased significantly due primarily to growth in California, as a
result of the Company's continued expansion in this market. Financial Services
operating earnings increased primarily as a result of higher earnings from title
services, including North American Title which was acquired in January 1998.
HOMEBUILDING
The following tables set forth selected financial and operational information
related to the Homebuilding Division for the periods indicated (unaudited):
Three Months Ended
February 28,
(DOLLARS IN THOUSANDS, EXCEPT ------------------------------
AVERAGE SALES PRICES) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
REVENUES:
Sales of homes $ 506,769 393,826
Sales of land and other revenues 21,547 10,386
Equity in earnings from partnerships 3,060 4,326
- -------------------------------------------------------------------------------------------------------------------
Total revenues 531,376 408,538
COSTS AND EXPENSES:
Cost of homes sold 400,418 314,470
Cost of land and other expenses 16,585 8,890
Selling, general and administrative 55,983 45,624
- -------------------------------------------------------------------------------------------------------------------
Total costs and expenses 472,986 368,984
- -------------------------------------------------------------------------------------------------------------------
OPERATING EARNINGS $ 58,390 39,554
===================================================================================================================
Gross margin on home sales - $ $ 106,351 79,356
Gross margin on home sales - % 21.0% 20.2%
S,G&A expenses as a percentage of homebuilding revenues 10.5% 11.2%
Operating earnings as a percentage of homebuilding revenues 11.0% 9.7%
Average sales price $ 211,000 193,000
===================================================================================================================
8
SUMMARY OF HOME AND BACKLOG DATA
Three Months Ended
February 28,
-----------------------------
DELIVERIES 1999 1998
- -------------------------------------------------------------------------------------------------------------
Florida 759 717
California 791 468
Texas 524 517
Arizona/Nevada 323 342
- -------------------------------------------------------------------------------------------------------------
2,397 2,044
=============================================================================================================
NEW ORDERS
- -------------------------------------------------------------------------------------------------------------
Florida 1,030 937
California 843 693
Texas 654 573
Arizona/Nevada 360 355
- -------------------------------------------------------------------------------------------------------------
2,887 2,558
=============================================================================================================
BACKLOG - HOMES
- -------------------------------------------------------------------------------------------------------------
Florida 1,815 1,515
California 1,200 1,212
Texas 833 724
Arizona/Nevada 742 585
- -------------------------------------------------------------------------------------------------------------
4,590 4,036
=============================================================================================================
BACKLOG - DOLLAR VALUE (IN THOUSANDS) $ 933,918 790,833
=============================================================================================================
Homebuilding revenues increased 30% in the first quarter of 1999 to $531.4
million from $408.5 million in 1998. Revenues were higher primarily due to a 17%
increase in the number of home deliveries and a 10% increase in the average
sales price. New home deliveries increased to 2,397 homes in the first quarter
from 2,044 homes last year. The greatest increase in deliveries occurred in
California, primarily as a result of acquisitions made in 1998. The average
sales price on homes delivered increased to $211,000 in 1999 from $193,000 in
1998. The increase in the average sales price was primarily due to a higher
percentage of deliveries coming from the California market, where sales prices
are higher, and a combination of price increases and product mix changes in
Texas and Florida.
Gross margin percentages on home sales increased in the first quarter of 1999 to
21.0% from 20.2% in 1998. This increase was primarily attributable to a greater
percentage of deliveries coming from the California market, where the Company
currently generates higher gross margin percentages. Gross margins from land
sales totaled $3.7 million, or 18.7%, in the first quarter of 1999 compared to
$1.4 million, or 17.1%, in the same period last year. Margins achieved on sales
of land may vary significantly from period to period.
Selling, general and administrative expenses as a percentage of homebuilding
revenues improved to 10.5% in the first quarter of 1999 from 11.2% in the first
quarter of 1998. This improvement resulted from the Company's ability to
leverage overhead as it expanded in its existing markets.
At February 28, 1999, the Company's backlog of sales contracts increased to
4,590 homes ($934 million) compared to 4,036 homes ($791 million) at February
28, 1998. The higher backlog was attributable to an increase in new orders
during the last several quarters.
9
FINANCIAL SERVICES
The following table presents selected financial data related to the Financial
Services Division for the periods indicated (unaudited):
Three Months Ended
February 28,
-------------------------------
(DOLLARS IN THOUSANDS) 1999 1998
- ---------------------------------------------------------------------------------------------------------
Revenues $ 59,223 32,174
Costs and expenses 53,502 27,817
- ---------------------------------------------------------------------------------------------------------
Operating earnings $ 5,721 4,357
=========================================================================================================
Dollar value of mortgages originated $ 269,667 174,461
- ---------------------------------------------------------------------------------------------------------
Number of mortgages originated 1,900 1,384
- ---------------------------------------------------------------------------------------------------------
Principal balance of servicing portfolio $ 3,238,847 3,077,298
- ---------------------------------------------------------------------------------------------------------
Number of loans serviced 40,000 42,000
- ---------------------------------------------------------------------------------------------------------
Number of title transactions 38,000 18,000
=========================================================================================================
Operating earnings from the Financial Services Division increased 31% in the
first quarter of 1999, compared to the same period last year. This increase was
primarily due to higher earnings from title services, including the contribution
from North American Title which was acquired in January 1998. The increases in
dollar value and number of mortgages originated resulted primarily from higher
homebuilding deliveries and a greater capture rate of Lennar homebuyers.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES
Corporate general and administrative expenses as a percentage of total revenues
were 1.4% in the first quarter of both 1999 and 1998.
INTEREST EXPENSE
In the first quarter of 1999, interest expense was $9.5 million, or 1.6% of
total revenues, compared to interest expense of $10.6 million, or 2.4% of total
revenues, in the first quarter of 1998. The Company continued to benefit from
the issuance in the third quarter of 1998 of $229 million of zero-coupon senior
convertible debt securities. These notes have an effective interest rate of 3
7/8%. Interest incurred was $12.1 million in the first quarter of 1999 compared
to $11.0 million in the first quarter of 1998. The increase in interest incurred
resulted from an increase in the average debt level in the 1999 first quarter
due to the Company's growth.
(2) LIQUIDITY AND FINANCIAL RESOURCES
In the three months ended February 28, 1999, $80.2 million in cash was used in
the Company's operating activities compared to $60.4 million in the
corresponding period in 1998. In the three months ended February 28, 1999,
$109.8 million of cash was used to increase inventories through land purchases,
land development and construction, $17.1 million was used to reduce accounts
payable and other liabilities and $16.5 million was used to reduce current
income taxes payable. These uses of cash were partially offset by $27.9 million
of net earnings and $34.8 million of cash received from the sale and disposition
of loans by the Company's Financial Services Division. In the three months ended
February 28, 1998, cash flows used in operating activities related primarily to
$66.1 million of cash used to increase inventories through land purchases, land
development and
10
construction, $15.4 million used to reduce accounts payable and other
liabilities and $14.9 million used to reduce current income taxes payable. These
uses of cash were partially offset by $16.2 million of net earnings and $15.9
million in cash collected from receivables during the quarter.
Cash used in investing activities totaled $21.8 million in the three months
ended February 28, 1999, compared to cash used in investing activities of $69.8
million in the corresponding period in 1998. In the three months ended February
28, 1999, $15.8 million was used to increase the Company's investments in
partnerships. In the three months ended February 28, 1998, cash flows used in
investing activities related primarily to $48.9 million of cash used in the
acquisitions of businesses and $18.6 million used to increase the Company's
investments in partnerships.
The Company meets the majority of its short-term financing needs with cash
generated from operations and funds available under its unsecured revolving
credit facilities. At February 28, 1999, the Company had unsecured revolving
credit facilities in the aggregate amount of $645 million, which may be used to
refinance existing indebtedness, for working capital, for acquisitions and for
general corporate purposes. At February 28, 1999, $39.0 million was outstanding
under the Company's revolving credit facilities, compared to $136.7 million
outstanding at November 30, 1998. The decrease in the first quarter of 1999 was
the result of repayments made with proceeds from the issuance of 7 5/8% Senior
Notes, partially offset by borrowings associated with homebuilding activities.
Funds under the revolving credit facilities were re-borrowed subsequent to
February 28, 1999 to redeem outstanding 10 3/4% notes as discussed below.
In February 1999, the Company issued $282 million of 7 5/8% Senior Notes due
2009 for the purpose of reducing amounts outstanding under revolving credit
facilities and redeeming outstanding 10 3/4% notes. Proceeds from the offering,
after underwriting and market discounts, expenses and settlement of a related
interest rate hedge agreement, were approximately $266 million. In March 1999,
the Company redeemed all of the outstanding 10 3/4% Senior Notes due 2004 of one
of its subsidiaries, Greystone Homes, Inc., at a price of 105.375% of the
principal amount outstanding plus accrued interest. Cash paid to redeem the
notes was approximately $132 million.
In March 1999, the Company filed a shelf registration statement and prospectus
with the Securities and Exchange Commission to offer, from time to time, its
common stock, preferred stock, depositary shares, debt securities or warrants at
an aggregate initial offering price not to exceed $500 million. Proceeds can be
used for repayment of debt, acquisitions and general corporate purposes.
Based on the Company's current financial condition and financial market
resources, management believes that its operations and capital resources will
provide for its current and long-term capital requirements at the Company's
anticipated levels of growth.
(3) YEAR 2000
The "Year 2000 issue" relates to issues which may arise from the inability of
existing computer systems to properly recognize the year 2000. If not corrected,
computer systems may fail or miscalculate data.
The Company uses a variety of operating systems, computer software applications,
computer hardware equipment and other equipment in conjunction with its
homebuilding and financial services operations. In addition, the Company uses
other non-information technology internal office systems. The Company is in the
process of converting the majority of its computer information systems to one
company-wide system. This new system is Year 2000 compliant. The Company has
11
completed a significant portion of the implementation of this new system and
expects to complete the implementation by the end of 1999. The Company is also
making modifications to its existing computer information systems to make them
Year 2000 compliant in the event it is not able to complete the conversion to
the new company-wide system before the year 2000. The financial impact of
becoming Year 2000 compliant has not been and is not expected to be material to
the Company's financial position or results of operations.
The Company is surveying certain of its significant vendors, subcontractors,
suppliers and others ("third parties") to assess their state of readiness for
the Year 2000. The Company cannot assure that the third parties will be Year
2000 compliant and failure of the third parties to be Year 2000 ready could have
an adverse effect on the Company. Disruptions of financial markets or computer
system failures at government agencies, financial institutions, utilities and
others on which the Company is dependent could also adversely impact the
Company. The effects of a potential disruption cannot be determined at this
time.
PART II. OTHER INFORMATION
ITEMS 1-5. NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
(27) Financial Data Schedule.
(b) Reports on Form 8-K: A report on Form 8-K dated February
19, 1999 was filed by the Registrant providing information
in connection with the Company's offering of $282 million
of 7 5/8% Senior Notes due 2009.
12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LENNAR CORPORATION
----------------------------------------------
(Registrant)
Date: APRIL 13, 1999 /S/ BRUCE E. GROSS
-------------- ----------------------------------------------
Bruce E. Gross
Chief Financial Officer
Date: APRIL 13, 1999 /S/ DIANE J. BESSETTE
-------------- ----------------------------------------------
Diane J. Bessette
Controller
13
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule