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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 MAY 31, 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 June 30, 1999:
Common 48,464,123
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)
May 31, November 30,
1999 1998
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ASSETS
HOMEBUILDING:
Cash and cash equivalents $ 27,642 34,677
Receivables, net 27,736 23,803
Inventories 1,381,725 1,198,553
Investments in partnerships 193,002 156,536
Other assets 123,104 137,311
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1,753,209 1,550,880
FINANCIAL SERVICES 395,686 366,954
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TOTAL ASSETS $ 2,148,895 1,917,834
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LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING:
Accounts payable and other liabilities $ 320,700 322,267
Income taxes currently payable 11,093 33,440
Mortgage notes and other debts payable, net 717,047 530,630
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1,048,840 886,337
FINANCIAL SERVICES 317,889 315,832
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TOTAL LIABILITIES 1,366,729 1,202,169
STOCKHOLDERS' EQUITY:
Common stock of $0.10 par value per share,
48,452,740 shares outstanding at May 31, 1999 4,845 4,824
Class B common stock of $0.10 par value per share,
9,848,562 shares outstanding at May 31, 1999 985 991
Additional paid-in capital 524,110 523,645
Retained earnings 252,226 186,205
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TOTAL STOCKHOLDERS' EQUITY 782,166 715,665
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,148,895 1,917,834
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See accompanying notes to consolidated condensed financial statements.
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
May 31, May 31,
---------------------------- -----------------------------
1999 1998 1999 1998
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REVENUES:
Homebuilding $ 670,157 476,097 1,201,533 884,635
Financial services 68,200 56,009 127,423 88,183
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Total revenues 738,357 532,106 1,328,956 972,818
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COSTS AND EXPENSES:
Homebuilding 594,403 422,493 1,067,389 791,477
Financial services 58,748 48,044 112,250 75,861
Corporate general and administrative 8,806 6,503 17,321 12,792
Interest 10,960 12,389 20,503 23,006
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Total costs and expenses 672,917 489,429 1,217,463 903,136
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EARNINGS BEFORE INCOME TAXES 65,440 42,677 111,493 69,682
Income taxes 25,849 17,071 44,040 27,873
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NET EARNINGS $ 39,591 25,606 67,453 41,809
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BASIC EARNINGS PER SHARE $ 0.68 0.48 1.16 0.78
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DILUTED EARNINGS PER SHARE $ 0.63 0.47 1.08 0.77
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CASH DIVIDENDS PER COMMON SHARE $ 0.0125 0.0125 0.025 0.025
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CASH DIVIDENDS PER CLASS B COMMON SHARE $ 0.01125 0.01125 0.0225 0.0225
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See accompanying notes to consolidated condensed financial statements.
LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
May 31,
-----------------------------
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 67,453 41,809
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization 18,747 9,811
Amortization of discount/premium on debt, net 3,758 (1,876)
Equity in earnings from partnerships (4,464) (7,127)
Increase in deferred income taxes 13,996 9,615
Changes in assets and liabilities, net of effect of acquisitions:
Decrease in receivables 1,094 23,373
Increase in inventories (180,699) (120,161)
Increase in other assets (12,079) (15,643)
Decrease (increase) in financial services loans held for sale or disposition 18,580 (29,571)
Decrease in accounts payable and other liabilities (9,839) (8,421)
Decrease in income taxes currently payable (22,347) (17,989)
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Net cash used in operating activities (105,800) (116,180)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of operating properties and equipment (7,062) (4,166)
Increase in investments in partnerships, net (23,144) (19,218)
Decrease in financial services mortgage loans 2,709 489
Purchases of investment securities (5,181) (2,321)
Receipts from investment securities 3,800 1,933
Acquisitions of properties and businesses, net of cash acquired (20,172) (63,818)
Other, net 178 113
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Net cash used in investing activities (48,872) (86,988)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facilities 41,850 162,250
Net (repayments) borrowings under financial services short-term debt (7,364) 35,201
Net proceeds from issuance of senior notes 266,153 -
Mortgage notes and other debts payable:
Proceeds from borrowings 1,809 9,444
Principal payments (146,868) (26,165)
Limited-purpose finance subsidiaries, net 372 307
Common stock:
Issuance 480 20,483
Dividends (1,432) (1,314)
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Net cash provided by financing activities 155,000 200,206
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Net increase (decrease) in cash and cash equivalents 328 (2,962)
Cash and cash equivalents at beginning of period 61,577 62,599
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Cash and cash equivalents at end of period $ 61,905 59,637
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LENNAR CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows -- Continued
(Unaudited)
(In thousands)
Six Months Ended
May 31,
-----------------------------
1999 1998
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Summary of cash and cash equivalent balances:
Homebuilding $ 27,642 39,075
Financial services 34,263 20,562
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$ 61,905 59,637
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Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 4,989 10,055
Cash paid for income taxes $ 51,033 34,548
Supplemental disclosures of non-cash investing and financing activities:
Purchases of inventory financed by sellers $ 19,172 20,500
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See accompanying notes to consolidated condensed financial statements.
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 statements of
earnings for the three and six months ended May 31, 1999 are 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 and develops land and may sell such 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.
(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 $132 million, which approximated their carrying value.
(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 Six Months Ended
May 31, May 31,
-------------------------- --------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1999 1998 1999 1998
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NUMERATOR:
Numerator for basic earnings per share -
net earnings $ 39,591 25,606 67,453 41,809
Interest on zero-coupon convertible
debentures 1,380 - 2,742 -
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Numerator for diluted earnings per share $ 40,971 25,606 70,195 41,809
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DENOMINATOR:
Denominator for basic earnings per share -
weighted average shares 58,281 53,806 58,249 53,527
Effect of dilutive securities:
Employee stock options 772 1,135 825 1,022
Zero-coupon convertible debentures 6,105 - 6,105 -
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Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 65,158 54,941 65,179 54,549
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Basic earnings per share $ 0.68 0.48 1.16 0.78
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Diluted earnings per share $ 0.63 0.47 1.08 0.77
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(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)
May 31, November 30,
(IN THOUSANDS) 1999 1998
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ASSETS:
Cash and receivables, net $ 43,866 40,479
Mortgage loans held for sale or disposition, net 219,175 214,954
Mortgage loans, net 18,907 21,370
Mortgage servicing rights, net 16,130 11,080
Title plants 14,587 16,104
Goodwill 21,136 7,935
Other 31,763 20,140
Limited-purpose finance subsidiaries 30,122 34,892
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$ 395,686 366,954
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LIABILITIES:
Notes and other debts payable $ 247,525 233,316
Other 40,242 47,624
Limited-purpose finance subsidiaries 30,122 34,892
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$ 317,889 315,832
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(6) CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of May 31, 1999 and November 30, 1998 included
$18.6 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 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". The effective date of this statement, as
amended by SFAS No. 137, is for fiscal years beginning after June 15, 2000. SFAS
No. 133 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.
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 FROM THOSE WHICH ARE ANTICIPATED. 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 $39.6 million, or $0.63 per share diluted ($0.68 per
share basic), in the second quarter of 1999, from $25.6 million, or $0.47 per
share diluted ($0.48 per share basic), in the second quarter of 1998. For the
six months ended May 31, 1999, net earnings were $67.5 million, or $1.08 per
share diluted ($1.16 per share basic), compared to $41.8 million, or $0.77 per
share diluted ($0.78 per share basic), in 1998. Homebuilding operating earnings
increased significantly in both 1999 periods due primarily to growth in
California and the continued overall strength of the homebuilding market.
Financial Services operating earnings increased in both periods primarily as a
result of an increase in mortgage originations resulting from higher business
activity in existing markets and expansion into new markets.
HOMEBUILDING
The following tables set forth selected financial and operational information
related to the Homebuilding Division for the periods indicated (unaudited):
Three Months Ended Six Months Ended
May 31, May 31,
(DOLLARS IN THOUSANDS, EXCEPT --------------------------- ---------------------------
AVERAGE SALES PRICES) 1999 1998 1999 1998
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REVENUES:
Sales of homes $ 625,424 455,732 1,132,193 849,558
Sales of land and other revenues 43,329 17,564 64,876 27,950
Equity in earnings from partnerships 1,404 2,801 4,464 7,127
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Total revenues 670,157 476,097 1,201,533 884,635
COSTS AND EXPENSES:
Cost of homes sold 490,684 358,359 891,102 672,829
Cost of land and other expenses 37,159 15,363 53,744 24,253
Selling, general and administrative 66,560 48,771 122,543 94,395
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Total costs and expenses 594,403 422,493 1,067,389 791,477
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OPERATING EARNINGS $ 75,754 53,604 134,144 93,158
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Gross margin on home sales - $ $ 134,740 97,373 241,091 176,729
Gross margin on home sales - % 21.5% 21.4% 21.3% 20.8%
S,G&A expenses as a percentage of
homebuilding revenues 9.9% 10.2% 10.2% 10.7%
Operating earnings as a percentage
of homebuilding revenues 11.3% 11.3% 11.2% 10.5%
Average sales price $ 201,000 188,000 205,000 190,000
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SUMMARY OF HOME AND BACKLOG DATA
Three Months Ended Six Months Ended
May 31, May 31,
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DELIVERIES 1999 1998 1999 1998
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Florida 962 853 1,721 1,570
California 913 603 1,704 1,071
Texas 827 662 1,351 1,179
Arizona/Nevada 414 311 737 653
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3,116 2,429 5,513 4,473
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NEW ORDERS
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Florida 1,140 1,157 2,170 2,094
California 1,113 809 1,956 1,502
Texas 945 840 1,599 1,413
Arizona/Nevada 434 514 794 869
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3,632 3,320 6,519 5,878
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BACKLOG - HOMES
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Florida 1,993 1,819
California 1,400 1,418
Texas 951 902
Arizona/Nevada 762 788
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5,106 4,927
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BACKLOG - DOLLAR VALUE (IN THOUSANDS) $ 1,116,593 959,765
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Homebuilding revenues increased 41% and 36% in the three and six months ended
May 31, 1999, respectively, compared to the same periods in 1998. Revenues were
higher primarily due to increases in the number of home deliveries and average
sales price in both periods. New home deliveries were higher in each state in
which the Company operates in both 1999 periods, with the greatest increases
generated in the California market primarily as a result of acquisitions made in
1998. Generally favorable market conditions throughout the Company's
homebuilding markets also contributed to the increase in new home deliveries in
the first six months of 1999. The increase in average sales price on homes
delivered during the second quarter was primarily due to higher average sales
prices in each state, combined with a higher percentage of deliveries coming
from California, where sales prices are higher than the Company average. In the
first six months of 1999, the average sales price increased primarily due to a
higher percentage of deliveries in the California market and a combination of
price increases and product mix changes in Texas and Florida. Revenues from land
sales totaled $41.7 million and $61.4 million in the three and six months ended
May 31, 1999, respectively, compared to $15.3 million and $23.4 million, in the
same periods in 1998, respectively. Equity in earnings from partnerships
decreased to $1.4 million and $4.5 million in the three and six months ended May
31, 1999, respectively, from $2.8 million and $7.1 million in the same periods
last year, respectively, due primarily to a lower level of land sales in the
Company's land development partnerships.
Gross margins on home sales increased to $134.7 million and $241.1 million in
the three and six months ended May 31, 1999, respectively, compared to $97.4
million and $176.7 million in the three and six months ended May 31, 1998,
respectively. Gross margin percentages from sales of homes increased
approximately 10 basis points and 50 basis points in the three and six months
ended May 31, 1999, respectively, compared to the same periods in 1998. Gross
margin percentages in both periods increased in the Company's Texas market,
partially offset by gross margin percentages in the recently entered Sacramento
and Inland Empire markets, which are currently lower than the
Company's average California gross margin percentages. The Company continues to
generate its highest overall gross margin percentages in the California market.
Gross margins from land sales totaled $5.9 million, or 14.1%, and $9.6 million,
or 15.6%, in the three and six months ended May 31, 1999, respectively, compared
to $0.7 million, or 4.8%, and $2.1 million, or 9.1%, in the same periods last
year, respectively. Margins achieved on sales of land may vary significantly
from period to period.
Selling, general and administrative expenses as a percentage of homebuilding
revenues decreased in both the three and six months ended May 31, 1999 compared
to the same periods in 1998, reflecting overhead leverage associated with the
Company's expansion in its existing markets.
At May 31, 1999, the Company's backlog of sales contracts increased to 5,106
homes compared to 4,927 homes at May 31, 1998. The higher backlog was
attributable to an increase in new orders during the last several quarters.
FINANCIAL SERVICES
The following table presents selected financial data related to the Financial
Services Division for the periods indicated (unaudited):
Three Months Ended Six Months Ended
May 31, May 31,
--------------------------- ---------------------------
(DOLLARS IN THOUSANDS) 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
Revenues $ 68,200 56,009 127,423 88,183
Costs and expenses 58,748 48,044 112,250 75,861
- ----------------------------------------------------------------------------------------------------------
Operating earnings $ 9,452 7,965 15,173 12,322
- ----------------------------------------------------------------------------------------------------------
Dollar value of mortgages originated $ 670,300 239,286 939,967 413,747
- ----------------------------------------------------------------------------------------------------------
Number of mortgages originated 4,661 1,841 6,561 3,225
- ----------------------------------------------------------------------------------------------------------
Principal balance of servicing portfolio $ 3,323,000 3,083,000
- ----------------------------------------------------------------------------------------------------------
Number of loans serviced 40,000 41,000
- ----------------------------------------------------------------------------------------------------------
Number of title transactions 36,000 35,000 74,000 53,000
- ----------------------------------------------------------------------------------------------------------
Operating earnings from the Financial Services Division increased in the three
and six months ended May 31, 1999 compared to the same periods last year
primarily as a result of an increase in mortgage originations resulting from
higher business activity in existing markets, expansion into new markets and a
greater capture rate of Lennar homebuyers. Higher earnings in the title
insurance business also contributed to the six month increase.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES
Corporate general and administrative expenses as a percentage of total revenues
were 1.2% in both the three months ended May 31, 1999 and 1998 and 1.3% in both
the six months ended May 31, 1999 and 1998.
INTEREST EXPENSE
Interest expense in the three months ended May 31, 1999 was $11.0 million, or
1.5% of total revenues, compared to interest expense of $12.4 million, or 2.3%
of total revenues, in the same period in 1998. In the six months ended May 31,
1999, interest expense was $20.5 million, or 1.5% of total revenues, compared to
interest expense of $23.0 million, or 2.4% of total revenues, in the same period
last year. The decreases in interest expense and interest as a percentage of
total revenues in both periods were primarily due to a lower average borrowing
cost as the Company continued to benefit from the issuance in the third quarter
of 1998 of $229 million of zero-coupon senior convertible debt securities with
an effective interest rate of 3.875%. Interest incurred was $13.9 million and
$26.0 million in the three and six months ended May 31, 1999, respectively,
compared to $12.3 million and $23.2 million in the same periods last year,
respectively. Interest incurred increased in both 1999 periods primarily due to
an increase in average debt outstanding in 1999 as a result of the Company's
continued growth.
(2) LIQUIDITY AND FINANCIAL RESOURCES
In the six months ended May 31, 1999, $105.8 million in cash was used in the
Company's operating activities compared to $116.2 million in the corresponding
period in 1998. In the six months ended May 31, 1999, $180.7 million of cash was
used to increase inventories through land purchases, land development and
construction and $22.3 million was used to reduce current income taxes payable.
These uses of cash were partially offset by $67.5 million of net earnings, $18.6
million of cash received from the sale and disposition of loans by the Company's
Financial Services Division and an increase in deferred income taxes of $14.0
million. In the six months ended May 31, 1998, $120.2 million of cash was used
to increase inventories through land purchases, land development and
construction, $29.6 million was used by the Company's Financial Services
Division in its mortgage loan origination operations and $18.0 million was used
to reduce current income taxes payable. These uses of cash were partially offset
by $41.8 million of net earnings and a reduction in receivables of $23.4
million.
Cash used in investing activities totaled $48.9 million in the six months ended
May 31, 1999, compared to cash used in investing activities of $87.0 million in
the corresponding period in 1998. In the six months ended May 31, 1999, $20.2
million of cash was used in the acquisitions of properties and businesses and
$23.1 million was used to increase the Company's investments in partnerships. In
the six months ended May 31, 1998, $63.8 million of cash was used in the
acquisitions of properties and businesses and $19.2 million was 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. Total homebuilding debt increased to $717.0 million at May
31, 1999 compared to $530.6 million at November 30, 1998. This increase was a
result of the Company's continued growth in 1999 and the timing of homebuilding
construction activity and deliveries. The Company's ratio of homebuilding debt
to total capital at May 31, 1999 was 47.8%, compared to 42.6% at November 30,
1998 and 57.4% at May 31, 1998.
At May 31, 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 May 31, 1999, $178.5 million was outstanding under the Company's
revolving credit facilities, compared to $136.7 million outstanding at November
30, 1998.
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 $132 million, which approximated their carrying value.
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. As of
May 31, 1999, no amounts had been used related to this registration statement.
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
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 all third parties will be Year
2000 compliant and failure of 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 1-3. NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The following matters were resolved by vote at the April 6, 1999 annual meeting
of stockholders of Lennar Corporation:
(1) The following members of the Board of Directors were re-elected to hold
office until 2002:
Votes For Votes Withheld
----------- --------------
Reuben S. Leibowitz 141,896,630 1,573,578
Stuart A. Miller 141,536,489 1,933,719
Steven J. Saiontz 141,530,527 1,939,681
Other directors whose term of office continued after the meeting:
Irving Bolotin
Jonathan M. Jaffe
R. Kirk Landon
Sidney Lapidus
Leonard Miller
Arnold P. Rosen
(2) The Company's stockholders approved an amendment to the Company's
Certificate of Incorporation which authorizes the Company to issue up to
100,000,000 shares of Participating Preferred Stock. The results of the
vote were as follows:
Votes Votes Votes Broker
For Against Abstaining Non-votes
----------- ---------- ---------- ---------
Common shares 22,383,770 15,512,086 89,335 7,231,907
Class B Common shares 98,253,110 0 0 0
Common and Class B combined 120,636,880 15,512,086 89,335 7,231,907
ITEM 5. NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
(27) Financial Data Schedule.
(b) Reports on Form 8-K: Registrant was not required to file,
and has not filed, a Form 8-K during the quarter for which
this report is being filed.
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: JULY 14, 1999 /S/ BRUCE E. GROSS
----------------------------------------
Bruce E. Gross
Chief Financial Officer
Date: JULY 14, 1999 /S/ DIANE J. BESSETTE
----------------------------------------
Diane J. Bessette
Controller
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule