================================================================================
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 August 31, 2002
---------------
Commission File Number: 1-11749
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Lennar Corporation
(Exact name of registrant as specified in its charter)
Delaware 95-4337490
(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 September 30, 2002:
Common 55,165,332
----------
Class B Common 9,700,462
----------
================================================================================
Part I. Financial Information
Item 1. Financial Statements
Lennar Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
August 31, November 30,
2002 2001
- --------------------------------------------------------------------------------------------------------------------
ASSETS
Homebuilding:
Cash $ 58,363 824,013
Receivables, net 87,465 24,345
Inventories 3,576,443 2,416,541
Investments in unconsolidated partnerships 353,708 300,064
Other assets 332,644 253,933
----------------------------------
4,408,623 3,818,896
Financial services 800,422 895,530
- --------------------------------------------------------------------------------------------------------------------
Total assets $ 5,209,045 4,714,426
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 892,098 755,726
Senior notes and other debts payable, net 1,643,008 1,505,255
----------------------------------
2,535,106 2,260,981
Financial services 674,038 794,183
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 3,209,144 3,055,164
Stockholders' equity:
Preferred stock - -
Common stock of $0.10 par value per share,
64,924 shares issued at August 31, 2002 6,492 6,412
Class B common stock of $0.10 par value per share,
9,700 shares issued at August 31, 2002 970 974
Additional paid-in capital 870,134 843,924
Retained earnings 1,314,732 996,998
Unearned restricted stock (8,114) (10,833)
Treasury stock, at cost; 9,848 common shares at August 31, 2002 (158,992) (158,927)
Accumulated other comprehensive loss (25,321) (19,286)
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,999,901 1,659,262
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 5,209,045 4,714,426
====================================================================================================================
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 Nine Months Ended
August 31, August 31,
------------------------ -------------------------
2002 2001 2002 2001
- -------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ 1,745,347 1,466,792 4,349,270 3,761,959
Financial services 115,456 110,836 330,894 311,244
- -------------------------------------------------------------------------------------------------------
Total revenues 1,860,803 1,577,628 4,680,164 4,073,203
- -------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding 1,487,676 1,267,745 3,764,972 3,275,443
Financial services 85,382 86,169 250,685 245,664
Corporate general and administrative 19,575 19,545 55,979 53,720
Interest 39,706 30,681 94,284 83,795
- -------------------------------------------------------------------------------------------------------
Total costs and expenses 1,632,339 1,404,140 4,165,920 3,658,622
- -------------------------------------------------------------------------------------------------------
Earnings before income taxes 228,464 173,488 514,244 414,581
Income taxes 86,245 66,793 194,127 159,614
- -------------------------------------------------------------------------------------------------------
Net earnings $ 142,219 106,695 320,117 254,967
=======================================================================================================
Basic earnings per share $ 2.22 1.69 5.03 4.07
=======================================================================================================
Diluted earnings per share $ 2.01 1.53 4.55 3.68
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
Cash dividends per common share $ 0.0125 0.0125 0.0375 0.0375
- -------------------------------------------------------------------------------------------------------
Cash dividends per Class B common share $ 0.01125 0.01125 0.03375 0.03375
=======================================================================================================
See accompanying notes to consolidated condensed financial statements.
2
Lennar Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
August 31,
-------------------------
2002 2001
- ---------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 320,117 254,967
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 32,211 35,867
Amortization of discount on debt 18,889 14,123
Tax benefit from exercise of stock options 9,550 8,600
Equity in earnings from unconsolidated partnerships (17,083) (8,843)
Increase in deferred income taxes 6,079 40,901
Changes in assets and liabilities, net of effect from acquisitions:
Increase in receivables (96,359) (86,137)
Increase in inventories (627,574) (411,912)
(Increase) decrease in other assets 5,542 (7,320)
Decrease in financial services loans held for sale or disposition 175,525 56,138
Increase (decrease) in accounts payable and other liabilities 802 (112,677)
- ---------------------------------------------------------------------------------------------------------
Net cash used in operating activities (172,301) (216,293)
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net additions to operating properties and equipment (7,420) (11,301)
Increase in investments in unconsolidated partnerships, net (47,283) (70,587)
Decrease in financial services mortgage loans 12,092 12,090
Decrease in financial services mortgage servicing rights - 10,812
Purchases of investment securities (25,924) (11,124)
Proceeds from investment securities 17,452 10,800
Acquisitions, net of cash acquired (390,393) -
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (441,476) (59,310)
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings under revolving credit facilities 42,300 -
Net repayments under financial services short-term debt (126,558) (9,826)
Net proceeds from issuance of 5.125% zero-coupon convertible
senior subordinated notes - 224,250
Proceeds from other borrowings 20,075 110
Principal payments on other borrowings (91,699) (25,542)
Limited-purpose finance subsidiaries, net 126 1,962
Common stock:
Issuance, net 17,048 18,933
Dividends (2,383) (2,327)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (141,091) 207,560
- ---------------------------------------------------------------------------------------------------------
Net decrease in cash (754,868) (68,043)
Cash at beginning of period 877,274 333,877
- ---------------------------------------------------------------------------------------------------------
Cash at end of period $ 122,406 265,834
=========================================================================================================
3
Lennar Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows -- Continued
(Unaudited)
(In thousands)
Nine Months Ended
August 31,
----------------------------------
2002 2001
- --------------------------------------------------------------------------------------------------------------------------
Summary of cash:
Homebuilding $ 58,363 208,570
Financial services 64,043 57,264
- --------------------------------------------------------------------------------------------------------------------------
$ 122,406 265,834
- --------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 13,836 21,114
Cash paid for income taxes $ 185,714 146,102
Supplemental disclosures of non-cash investing and financing activities:
Purchases of inventory financed by sellers $ 9,820 19,480
==========================================================================================================================
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, partnerships and other
entities in which a controlling interest is held (the "Company"). The Company's
investments in unconsolidated partnerships in which a significant, but less than
controlling, interest is held are accounted for by the equity method.
Controlling interest is determined based on a number of factors, which include
the Company's ownership interest and participation in the management of the
partnership. 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, 2001 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 nine months ended August 31, 2002 are not necessarily
indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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) Operating and Reporting Segments
The Company has two operating and reporting segments: Homebuilding and Financial
Services. The Company's reportable segments are strategic business units that
offer different products and services.
Homebuilding operations include the sale and construction of single-family
attached and detached homes. These activities also include the purchase,
development and sale of residential land by the Company and unconsolidated
partnerships in which it has investments.
The Financial Services Division provides mortgage financing, title insurance and
closing services for both the Company's homebuyers and others. This Division
resells the residential mortgage loans it originates in the secondary mortgage
market and also provides high-speed Internet access, cable television and alarm
monitoring services for both the Company's homebuyers and other customers.
5
(3) Acquisitions
During 2002, the Company acquired eight regional homebuilders which marked the
Company's entry into Chicago, Baltimore and the Carolinas and expanded the
Company's presence in several other states. In connection with these
acquisitions, total consideration, including debt of acquired companies, totaled
approximately $575 million. The results of operations of the acquired
homebuilders are included in the Company's results of operations since their
respective acquisition dates. The pro forma effect of these acquisitions on the
results of operations was not presented as their effect is not considered
material.
(4) Earnings Per Share
Basic earnings per share is computed by dividing net 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 Nine Months Ended
August 31, August 31,
---------------------------- -------------------------
(In thousands, except per share amounts) 2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------------
Numerator:
Numerator for basic earnings per share -
net earnings $ 142,219 106,695 320,117 254,967
Interest on zero-coupon senior convertible
debentures due 2018, net of tax 1,610 1,529 4,787 4,545
-------------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per share $ 143,829 108,224 324,904 259,512
=============================================================================================================
Denominator:
Denominator for basic earnings per share -
weighted average shares 63,992 63,025 63,673 62,607
Effect of dilutive securities:
Employee stock options and restricted stock 1,447 1,695 1,580 1,803
Zero-coupon senior convertible debentures
due 2018 6,105 6,105 6,105 6,105
-------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 71,544 70,825 71,358 70,515
=============================================================================================================
Basic earnings per share $ 2.22 1.69 5.03 4.07
=============================================================================================================
Diluted earnings per share $ 2.01 1.53 4.55 3.68
=============================================================================================================
6
(4) Earnings Per Share, Continued
In the second quarter of 2001, the Company issued zero-coupon convertible senior
subordinated notes due 2021 (the "Notes"). The Notes are convertible into the
Company's common stock if the sale price of the Company's common stock exceeds
certain thresholds or in other specified instances, at the rate of approximately
6.4 shares per $1,000 face amount at maturity, which would total approximately 4
million shares. These shares were not included in the calculation of diluted
earnings per share for the three and nine months ended August 31, 2002 and 2001
because the average closing price of the Company's common stock over the last
twenty trading days of the third quarter did not exceed 110% ($67.32 per share
at August 31, 2002) of the accreted conversion price.
(5) Financial Services
The assets and liabilities related to the Company's financial services
operations are summarized as follows:
(Unaudited)
August 31, November 30,
(In thousands) 2002 2001
-----------------------------------------------------------------------------------------------------
Assets:
Cash and receivables, net $ 239,057 161,060
Mortgage loans held for sale or disposition, net 415,907 587,694
Mortgage loans, net 29,628 41,590
Title plants 15,586 15,530
Goodwill, net 30,236 25,158
Other 59,684 51,352
Limited-purpose finance subsidiaries 10,324 13,146
-----------------------------------------------------------------------------------------------------
$ 800,422 895,530
=====================================================================================================
Liabilities:
Notes and other debts payable $ 570,756 693,931
Other 92,958 87,106
Limited-purpose finance subsidiaries 10,324 13,146
-----------------------------------------------------------------------------------------------------
$ 674,038 794,183
=====================================================================================================
(6) Cash
Cash as of August 31, 2002 and November 30, 2001 included $59.9 million and
$64.4 million, respectively, of cash held in escrow for approximately three
days.
(7) Debt
In May 2002, the Company amended and restated its senior secured credit
facilities (the "Amended Facilities"), to provide the Company with up to $1.3
billion of financing. The Amended Facilities consist of a $653 million revolving
credit facility maturing in April 2006, a $273 million 364-day revolving credit
facility maturing in April 2003 and a $393 million term loan B maturing in May
2007. The Company may elect to convert borrowings under the 364-day revolving
credit facility to a term loan, which would mature in April 2006. At August 31,
2002, $392.0 million and $42.3 million were outstanding under the term loan B
and the revolving credit facilities, respectively. Interest rates are
LIBOR-based and the margins are set by a pricing grid with thresholds that
adjust based on changes in the Company's leverage ratio and the Amended
Facilities' credit rating.
7
(8) Comprehensive Income
The Company has various interest rate swap agreements which effectively fix the
variable interest rate on approximately $300 million of outstanding debt related
to its homebuilding operations. The swap agreements have been designated as cash
flow hedges and, accordingly, are reflected at their fair value in the
consolidated condensed balance sheets. The related loss is deferred, net of tax,
in stockholders' equity as accumulated other comprehensive loss.
Comprehensive income consists of net earnings adjusted for the change in
accumulated other comprehensive loss in the consolidated condensed balance
sheets. Comprehensive income was $314.1 million and $238.7 million for the nine
months ended August 31, 2002 and 2001, respectively.
(9) Deferred Compensation
In June 2002, the Company adopted the Lennar Corporation Nonqualified Deferred
Compensation Plan (the "Plan") that allows a selected group of members of
management to defer a portion of their salaries and bonuses and up to 100% of
their restricted stock. All participant contributions to the Plan are vested.
Salaries and bonuses that are deferred under the Plan are credited with earnings
or losses based on investment decisions made by the participants.
Restricted stock is deferred under the Plan by surrendering the restricted stock
in exchange for the right to receive in the future a number of shares equal to
the number of restricted shares that are surrendered. The surrender is reflected
as a reduction in stockholders' equity equal to the value of the restricted
stock when it was issued, with an offsetting increase in stockholders' equity to
reflect a deferral of the compensation expense related to the surrendered
restricted stock. Changes in the value of the shares that will be issued in the
future are not reflected in the financial statements.
By August 31, 2002, approximately 60,000 shares of restricted stock had been
surrendered under the Plan, resulting in a reduction in stockholders' equity of
$1.1 million fully offset by an increase in stockholders' equity to reflect the
deferral of compensation in that amount. Shares that the Company is obligated to
issue in the future under the Plan are treated as outstanding shares in both the
Company's basic and diluted earnings per share calculations for the three and
nine months ended August 31, 2002.
(10) New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 no longer requires or permits the amortization
of goodwill and indefinite-lived assets. Instead, these assets must be reviewed
annually (or more frequently under certain conditions) for impairment in
accordance with this statement. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. The Company adopted SFAS No. 142 on December 1, 2001.
No impairment charges were recognized from the adoption of this statement.
8
(10) New Accounting Pronouncements, Continued
Pro forma net earnings for the three and nine months ended August 31, 2001 were
$108.2 million, or $1.55 per diluted share ($1.72 per basic share), and $259.6
million, or $3.75 per diluted share ($4.15 per basic share), respectively, after
adding back amortization of goodwill, net of tax, of $1.5 million and $4.6
million, respectively.
In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 provides guidance for financial
accounting and reporting for impairment or disposal of long-lived assets. SFAS
No. 144 supercedes SFAS No. 121. SFAS No. 144 is effective for the Company in
fiscal 2003. Management does not currently believe that the implementation of
SFAS No. 144 will have a material impact on the Company's financial condition or
results of operations.
9
(11) Supplemental Financial Information
During May 2000, the Company issued $325 million of 9.95% senior notes due 2010.
The Company's obligations to pay principal, premium, if any, and interest under
the notes are guaranteed on a joint and several basis by substantially all of
its subsidiaries, other than subsidiaries engaged in mortgage and title
reinsurance activities. The guarantees are full and unconditional and the
guarantor subsidiaries are 100% owned by Lennar Corporation. The Company has
determined that separate, full financial statements of the guarantors would not
be material to investors and, accordingly, supplemental financial information
for the guarantors is presented.
Consolidating Condensed Balance Sheet
August 31, 2002
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
Homebuilding:
Cash and receivables, net $ (76,198) 222,026 - - 145,828
Inventories - 3,569,922 6,521 - 3,576,443
Investments in unconsolidated
partnerships - 353,708 - - 353,708
Other assets 75,037 257,607 - - 332,644
Investments in subsidiaries 2,451,386 275,957 - (2,727,343) -
- -----------------------------------------------------------------------------------------------------------------------
2,450,225 4,679,220 6,521 (2,727,343) 4,408,623
Financial services - 29,658 800,799 (30,035) 800,422
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 2,450,225 4,708,878 807,320 (2,757,378) 5,209,045
=======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 279,653 612,827 90 (472) 892,098
Senior notes and other debts
payable, net 1,518,446 154,125 - (29,563) 1,643,008
Intercompany (1,347,775) 1,483,362 (135,587) - -
- -----------------------------------------------------------------------------------------------------------------------
450,324 2,250,314 (135,497) (30,035) 2,535,106
Financial services - 7,178 666,860 - 674,038
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 450,324 2,257,492 531,363 (30,035) 3,209,144
Stockholders' equity 1,999,901 2,451,386 275,957 (2,727,343) 1,999,901
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 2,450,225 4,708,878 807,320 (2,757,378) 5,209,045
=======================================================================================================================
10
(11) Supplemental Financial Information, Continued
Consolidating Condensed Balance Sheet
November 30, 2001
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
Homebuilding:
Cash and receivables, net $ 710,748 137,610 - - 848,358
Inventories - 2,410,117 6,424 - 2,416,541
Investments in unconsolidated
partnerships - 300,064 - - 300,064
Other assets 83,983 169,950 - - 253,933
Investments in subsidiaries 1,955,678 197,821 - (2,153,499) -
- -----------------------------------------------------------------------------------------------------------------------
2,750,409 3,215,562 6,424 (2,153,499) 3,818,896
Financial services - 24,762 870,768 - 895,530
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 2,750,409 3,240,324 877,192 (2,153,499) 4,714,426
======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 295,188 460,320 218 - 755,726
Senior notes and other debts
payable, net 1,460,610 44,645 - - 1,505,255
Intercompany (664,651) 773,091 (108,440) - -
- ----------------------------------------------------------------------------------------------------------------------
1,091,147 1,278,056 (108,222) - 2,260,981
Financial services - 6,590 787,593 - 794,183
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 1,091,147 1,284,646 679,371 - 3,055,164
Stockholders' equity 1,659,262 1,955,678 197,821 (2,153,499) 1,659,262
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 2,750,409 3,240,324 877,192 (2,153,499) 4,714,426
======================================================================================================================
11
(11) Supplemental Financial Information, Continued
Consolidating Condensed Statement of Earnings
Three Months Ended August 31, 2002
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
- -----------------------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ - 1,745,347 - - 1,745,347
Financial services - 14,764 101,750 (1,058) 115,456
- -----------------------------------------------------------------------------------------------------------------------
Total revenues - 1,760,111 101,750 (1,058) 1,860,803
- -----------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding - 1,487,539 137 - 1,487,676
Financial services - 13,999 71,383 - 85,382
Corporate general and administrative 19,575 - - - 19,575
Interest - 40,764 - (1,058) 39,706
- -----------------------------------------------------------------------------------------------------------------------
Total costs and expenses 19,575 1,542,302 71,520 (1,058) 1,632,339
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (19,575) 217,809 30,230 - 228,464
Provision (benefit) for income taxes (7,458) 82,223 11,480 - 86,245
Equity in earnings from subsidiaries 154,336 18,750 - (173,086) -
- -----------------------------------------------------------------------------------------------------------------------
Net earnings $ 142,219 154,336 18,750 (173,086) 142,219
=======================================================================================================================
Consolidating Condensed Statement of Earnings
Three Months Ended August 31, 2001
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
- -----------------------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ - 1,466,792 - - 1,466,792
Financial services - 15,868 94,968 - 110,836
- -----------------------------------------------------------------------------------------------------------------------
Total revenues - 1,482,660 94,968 - 1,577,628
- -----------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding - 1,267,629 116 - 1,267,745
Financial services - 15,864 70,305 - 86,169
Corporate general and administrative 19,545 - - - 19,545
Interest - 30,681 - - 30,681
- -----------------------------------------------------------------------------------------------------------------------
Total costs and expenses 19,545 1,314,174 70,421 - 1,404,140
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (19,545) 168,486 24,547 - 173,488
Provision (benefit) for income taxes (8,086) 64,866 10,013 - 66,793
Equity in earnings from subsidiaries 118,154 14,534 - (132,688) -
- -----------------------------------------------------------------------------------------------------------------------
Net earnings $ 106,695 118,154 14,534 (132,688) 106,695
=======================================================================================================================
12
(11) Supplemental Financial Information, Continued
Consolidating Condensed Statement of Earnings
Nine Months Ended August 31, 2002
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
- --------------------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ - 4,349,264 6 - 4,349,270
Financial services - 39,135 292,817 (1,058) 330,894
- --------------------------------------------------------------------------------------------------------------------
Total revenues - 4,388,399 292,823 (1,058) 4,680,164
- --------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding - 3,764,548 424 - 3,764,972
Financial services - 34,266 216,419 - 250,685
Corporate general and administrative 55,979 - - - 55,979
Interest - 95,342 - (1,058) 94,284
- --------------------------------------------------------------------------------------------------------------------
Total costs and expenses 55,979 3,894,156 216,843 (1,058) 4,165,920
- --------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (55,979) 494,243 75,980 - 514,244
Provision (benefit) for income taxes (21,012) 186,577 28,562 - 194,127
Equity in earnings from subsidiaries 355,084 47,418 - (402,502) -
- --------------------------------------------------------------------------------------------------------------------
Net earnings $ 320,117 355,084 47,418 (402,502) 320,117
====================================================================================================================
Consolidating Condensed Statement of Earnings
Nine Months Ended August 31, 2001
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
- --------------------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ - 3,761,955 4 - 3,761,959
Financial services - 40,941 270,303 - 311,244
- --------------------------------------------------------------------------------------------------------------------
Total revenues - 3,802,896 270,307 - 4,073,203
- --------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding - 3,275,071 372 - 3,275,443
Financial services - 47,127 198,537 - 245,664
Corporate general and administrative 53,720 - - - 53,720
Interest - 83,795 - - 83,795
- --------------------------------------------------------------------------------------------------------------------
Total costs and expenses 53,720 3,405,993 198,909 - 3,658,622
- --------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (53,720) 396,903 71,398 - 414,581
Provision (benefit) for income taxes (20,497) 152,807 27,304 - 159,614
Equity in earnings from subsidiaries 288,190 44,094 - (332,284) -
- --------------------------------------------------------------------------------------------------------------------
Net earnings $ 254,967 288,190 44,094 (332,284) 254,967
====================================================================================================================
13
11) Supplemental Financial Information, Continued
Consolidating Condensed Statement of Cash Flows
Nine Months Ended August 31, 2002
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings (loss) $ 320,117 355,084 47,418 (402,502) 320,117
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities (312,434) (642,277) 89,354 372,939 (492,418)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 7,683 (287,193) 136,772 (29,563) (172,301)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in investments in
unconsolidated partnerships, net - (47,283) - - (47,283)
Acquisitions, net of cash acquired - (387,406) (2,987) - (390,393)
Other (624) (2,345) (831) - (3,800)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (624) (437,034) (3,818) - (441,476)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments)
under revolving credit facilities and
other borrowings 39,300 (98,163) - 29,563 (29,300)
Net repayments under financial
services debt - - (126,582) - (126,582)
Limited-purpose finance
subsidiaries, net - - 126 - 126
Common stock:
Issuance, net 17,048 - - - 17,048
Dividends (2,383) - - - (2,383)
Intercompany (848,837) 844,526 4,311 - -
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (794,872) 746,363 (122,145) 29,563 (141,091)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (787,813) 22,136 10,809 - (754,868)
Cash at beginning of period 710,325 113,722 53,227 - 877,274
- -------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ (77,488) 135,858 64,036 - 122,406
===============================================================================================================================
14
11) Supplemental Financial Information, Continued
Consolidating Condensed Statement of Cash Flows
Nine Months Ended August 31, 2001
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
- --------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings (loss) $ 254,967 288,190 44,094 (332,284) 254,967
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities (278,924) (502,361) (22,259) 332,284 (471,260)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities (23,957) (214,171) 21,835 - (216,293)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
(Increase) decrease in investments in
unconsolidated partnerships, net - (70,606) 19 - (70,587)
Other - (5,782) 17,059 - 11,277
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities - (76,388) 17,078 - (59,310)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments)
under revolving credit facilities and
other borrowings 221,250 (21,843) - - 199,407
Net repayments under financial
services debt - - (10,415) - (10,415)
Limited-purpose finance
subsidiaries, net - - 1,962 - 1,962
Common stock:
Issuance 18,933 - - - 18,933
Dividends (2,327) - - - (2,327)
Intercompany (301,007) 314,949 (13,942) - -
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (63,151) 293,106 (22,395) - 207,560
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (87,108) 2,547 16,518 - (68,043)
Cash at beginning of period 205,783 88,221 39,873 - 333,877
- --------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 118,675 90,768 56,391 - 265,834
====================================================================================================================
15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Some of the statements contained in the following Management's Discussion and
Analysis of Financial Condition and Results of Operations are "forward-looking
statements" as that term is defined in the Private Securities Litigation Reform
Act of 1995. By their nature, forward-looking statements involve risks,
uncertainties and other factors that may cause actual results to differ
materially from those which the statements anticipate. Factors which may affect
our results include, but are not limited to, changes in general economic
conditions, the market for homes and prices for homes generally and in areas
where we have developments, the availability and cost of land suitable for
residential development, materials prices, labor costs, interest rates, consumer
confidence or competition, as well as terrorist acts or other acts of war,
environmental factors and government regulations affecting our operations. See
our Annual Report on Form 10-K for the year ended November 30, 2001 for a
further discussion of these and other risks and uncertainties applicable to our
business.
(1) Results of Operations
Overview
Net earnings were $142.2 million, or $2.01 per share diluted ($2.22 per share
basic), in the third quarter of 2002, compared to $106.7 million, or $1.53 per
share diluted ($1.69 per share basic), in the third quarter of 2001. For the
nine months ended August 31, 2002, net earnings were $320.1 million, or $4.55
per share diluted ($5.03 per share basic), compared to $255.0 million, or $3.68
per share diluted ($4.07 per share basic) in 2001.
Homebuilding
The following tables set forth selected financial and operational information
related to our Homebuilding Division for the periods indicated (unaudited):
Three Months Ended Nine Months Ended
August 31, August 31,
(Dollars in thousands, except --------------------------- ---------------------------
average sales price) 2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------
Revenues:
Sales of homes $ 1,691,282 1,422,056 4,198,652 3,674,906
Sales of land and other revenues 49,890 42,408 133,535 78,210
Equity in earnings from
unconsolidated partnerships 4,175 2,328 17,083 8,843
- ------------------------------------------------------------------------------------------------------
Total revenues 1,745,347 1,466,792 4,349,270 3,761,959
Costs and expenses:
Cost of homes sold 1,276,772 1,082,643 3,192,277 2,813,991
Cost of land and other expenses 31,567 38,196 101,366 66,474
Selling, general and administrative 179,337 146,906 471,329 394,978
- ------------------------------------------------------------------------------------------------------
Total costs and expenses 1,487,676 1,267,745 3,764,972 3,275,443
- ------------------------------------------------------------------------------------------------------
Operating earnings $ 257,671 199,047 584,298 486,516
======================================================================================================
Gross margin on home sales 24.5% 23.9% 24.0% 23.4%
S,G&A expenses as a % of
revenues from home sales 10.6% 10.3% 11.2% 10.7%
----------------------------------------------------------
Operating margin as a % of
revenues from home sales 13.9% 13.5% 12.7% 12.7%
----------------------------------------------------------
Average sales price $ 242,000 232,000 237,000 233,000
======================================================================================================
16
Summary of Home and Backlog Data By Region
(Dollars in thousands)
At or for the Nine
Three Months Ended Months Ended
August 31, August 31,
------------------ ------------------------
Deliveries 2002 2001 2002 2001
---------------------------------------------------------------------------------------
East 2,289 2,046 5,808 5,244
Central 1,978 1,969 5,223 4,714
West 2,726 2,119 6,652 5,786
---------------------------------------------------------------------------------------
Subtotal 6,993 6,134 17,683 15,744
Unconsolidated partnerships 134 154 370 675
---------------------------------------------------------------------------------------
Total 7,127 6,288 18,053 16,419
=======================================================================================
New Orders
---------------------------------------------------------------------------------------
East 2,573 2,128 7,619 6,513
Central 1,828 1,562 5,460 5,322
West 2,975 2,059 8,209 6,598
---------------------------------------------------------------------------------------
Subtotal 7,376 5,749 21,288 18,433
Unconsolidated partnerships 201 113 554 742
---------------------------------------------------------------------------------------
Total 7,577 5,862 21,842 19,175
=======================================================================================
Backlog - Homes
---------------------------------------------------------------------------------------
East 5,447 4,037
Central 3,008 2,535
West 5,913 4,263
---------------------------------------------------------------------------------------
Subtotal 14,368 10,835
Unconsolidated partnerships 460 284
---------------------------------------------------------------------------------------
Total 14,828 11,119
=======================================================================================
Backlog Dollar Value
(including unconsolidated partnerships) $ 3,910,682 2,701,382
=======================================================================================
Our market regions consist of the following states: East: Florida, Maryland,
Virginia, New Jersey, North Carolina and South Carolina. Central: Texas,
Illinois and Minnesota. West: California, Colorado, Arizona and Nevada. In
addition, we have unconsolidated partnerships in other states.
Revenues from sales of homes increased 19% and 14% in the three and nine months
ended August 31, 2002, respectively, compared to the same periods in 2001.
Revenues were higher due primarily to a 14% and 12% increase in the number of
new home deliveries and a 4% and 2% increase in the average sales price for the
three and nine months ended August 31, 2002, respectively, compared to the same
periods in 2001. New home deliveries were higher primarily due to a strong
homebuilding market, combined with our homebuilding acquisitions this year.
17
Gross margin percentages on home sales were 24.5% and 24.0% in the three and
nine months ended August 31, 2002, respectively, compared to 23.9% and 23.4% in
the same periods last year. Margins increased primarily due to strength in the
Florida and California markets, partially offset by the Texas market, which is
continuing to offer additional sales incentives. Margins were negatively
impacted 20 basis points for the three months ended August 31, 2002 due to
purchase accounting associated with our recent homebuilding acquisitions.
Selling, general and administrative expenses as a percentage of revenues from
home sales were 10.6% and 11.2% in the three and nine months ended August 31,
2002, respectively, compared to 10.3% and 10.7% in the same periods last year.
The increases in 2002 were primarily due to an increase in insurance costs,
compared to the same periods last year.
Sales of land and other revenues, net totaled $18.3 million and $32.2 million in
the three and nine months ended August 31, 2002, respectively, compared to $4.2
million and $11.7 million in the same periods in 2001. Equity in earnings from
unconsolidated partnerships was $4.2 million and $17.1 million in the three and
nine months ended August 31, 2002, respectively, compared to $2.3 million and
$8.8 million in the same periods last year. Margins achieved on land sales and
equity in earnings from unconsolidated partnerships may vary significantly from
period to period depending on the timing of land sales by us and our
unconsolidated partnerships.
At August 31, 2002, our backlog of sales contracts was 14,828 homes ($3.9
billion), compared to 11,119 homes ($2.7 billion) at August 31, 2001. The higher
backlog was primarily attributable to our recent homebuilding acquisitions and
growth in the number of active communities, which resulted in higher new orders
in 2002 compared to 2001.
Financial Services
The following table presents selected financial data related to our Financial
Services Division for the periods indicated (unaudited):
Three Months Ended Nine Months Ended
August 31, August 31,
------------------------- -------------------------
(Dollars in thousands) 2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------
Revenues $ 115,456 110,836 330,894 311,244
Costs and expenses 85,382 86,169 250,685 245,664
-------------------------------------------------------------------------------------------------------
Operating earnings $ 30,074 24,667 80,209 65,580
=======================================================================================================
Dollar value of mortgages originated $ 1,536,196 1,348,992 3,956,280 3,591,132
-------------------------------------------------------------------------------------------------------
Number of mortgages originated 8,400 8,000 22,600 21,900
-------------------------------------------------------------------------------------------------------
Mortgage capture rate of Lennar
homebuyers 80% 78% 80% 78%
-------------------------------------------------------------------------------------------------------
Number of title transactions 46,000 47,000 140,000 125,000
=======================================================================================================
Operating earnings from our Financial Services Division increased to $30.1
million and $80.2 million in the three and nine months ended August 31, 2002,
respectively, compared to $24.7 million and $52.3 million (excluding a $13
million gain on the sale of mortgage servicing rights in 2001) in the same
periods last year. The increase in both periods was a result of a higher volume
of new home deliveries and a higher profit per loan originated in 2002. The
three month increase was partially offset by a lower level of refinance
transactions in our title operations in the third quarter of 2002, compared to
2001.
18
Corporate General and Administrative
Corporate general and administrative expenses as a percentage of total revenues
were 1.1% and 1.2% in the three and nine months ended August 31, 2002,
respectively, compared to 1.2% and 1.3% in the same periods last year.
Interest
Interest expense totaled $39.7 million, or 2.1% of total revenues, and $94.3
million, or 2.0% of total revenues, in the three and nine months ended August
31, 2002, respectively, compared to interest expense of $30.7 million, or 1.9%
of total revenues, and $83.8 million, or 2.1% of total revenues, respectively,
in the same periods last year. The weighted average interest rate for interest
incurred was 7.7% in both the nine months ended August 31, 2002 and 2001. The
average debt outstanding was $1.6 billion for the nine months ended August 31,
2002 compared to $1.5 billion in the same period last year.
(2) Liquidity and Financial Resources
In the nine months ended August 31, 2002, $172.3 million of cash was used in
operating activities, compared to $216.3 million in 2001. Cash generated in 2002
was primarily due to net earnings of $320.1 million and $175.5 million of cash
received from the sale in 2002 of loans which we had originated near the end of
fiscal 2001. Cash received from the sale of loans was used to pay down our
financial services warehouse lines of credit. The generation of cash was offset
primarily by $627.6 million of cash used to increase inventories due to a higher
number of active communities as we continue to grow and $96.4 million used to
fund an increase in receivables in the nine months ended August 31, 2002.
Earnings before interest, income taxes, depreciation and amortization ("EBITDA")
were $280.4 million and $640.7 million in the three and nine months ended August
31, 2002, respectively, compared to $216.1 million and $534.2 million in the
same periods last year.
Cash used in investing activities totaled $441.5 million in the nine months
ended August 31, 2002, compared to $59.3 million in the corresponding period in
2001. In the first nine months of 2002, we used $390.4 million of cash for
acquisitions.
The majority of our short-term financing needs are met with cash generated from
operations and funds available under our senior secured credit facilities. In
May 2002, we amended and restated our senior secured credit facilities (the
"Amended Facilities"), to provide us with up to $1.3 billion of financing. The
Amended Facilities consist of a $653 million revolving credit facility maturing
in April 2006, a $273 million 364-day revolving credit facility maturing in
April 2003 and a $393 million term loan B maturing in May 2007. We may elect to
convert borrowings under the 364-day revolving credit facility to a term loan,
which would mature in April 2006. At August 31, 2002, $392.0 million and $42.3
million were outstanding under the term loan B and the revolving credit
facilities, respectively. Interest rates are LIBOR-based and the margins are set
by a pricing grid with thresholds that adjust based on changes in our leverage
ratio and the Amended Facilities' credit rating. At August 31, 2002, we had
letters of credit outstanding in the amount of $423.6 million, of which $288.8
million were collateralized against certain borrowings available under the
Amended Facilities.
Our Financial Services Division finances its mortgage loan activities by
pledging them as collateral for borrowings under a line of credit totaling $405
million. Borrowings under the financial services line of credit were $375.9
million at August 31, 2002.
19
In the normal course of business, we enter into partnerships that acquire and
develop land for our homebuilding operations or for sale to third parties.
Through these partnerships, we reduce and share our risk and the amount invested
in land while increasing access to potential future homesites. Partnerships are
either consolidated with our operations or accounted for by the equity method of
accounting. The selection between these two methods involves judgment as to the
level of control we have over the partnerships. Controlling interest is
determined based on a number of factors, which include our ownership interest
and participation in the management of the partnership. Our investments in
unconsolidated partnerships in which a significant, but less than controlling,
interest is held are accounted for by the equity method of accounting. Many of
the partnerships in which we invest are accounted for by the equity method of
accounting. We do not include in our income our pro rata partnership earnings
resulting from land sales to our homebuilding divisions. Instead, we account for
those earnings as a reduction of our cost of purchasing the land from the
partnerships. This in effect defers recognition of our share of the partnership
earnings until title passes to a third party homebuyer.
In some instances, we and/or our partners in unconsolidated partnerships have
provided guarantees of partnership debt. At August 31, 2002, we had recourse
guarantees of $52.7 million and limited maintenance guarantees of $138.9
million. When we provide guarantees, the partnership generally receives more
favorable terms from its lenders. A limited maintenance guarantee only applies
if the partnership defaults on its loan arrangements and the fair value of the
collateral (generally land and improvements) is less than a specified percentage
of the loan balance. If we were required to make a payment under one of these
guarantees to bring the fair value of the collateral above the specified
percentage of the loan balance, the payment constitutes a capital contribution
or loan to the unconsolidated partnership and increases our share of any funds
distributed by the partnership.
During 2002, we acquired eight regional homebuilders which marked our entry into
Chicago, Baltimore and the Carolinas and expanded our presence in several other
states. In connection with these acquisitions, total consideration, including
debt of acquired companies, totaled approximately $575 million. The results of
operations of the acquired homebuilders are included in our results of
operations since their respective acquisition dates.
In June 2001, our Board of Directors increased our previously authorized stock
repurchase program to permit future purchases of up to 10 million shares of our
outstanding common stock. We may repurchase these shares in the open market from
time-to-time. At August 31, 2002, no shares had been repurchased under this
authorization. During the nine months ended August 31, 2002, our treasury stock
increased by approximately 1,000 shares related to share reacquisitions at the
time of vesting of restricted stock.
We have shelf registration statements under the Securities Act of 1933, as
amended, relating to up to $970 million of equity or debt securities which we
may sell for cash and up to $400 million of equity or debt securities which we
may issue in connection with acquisitions of companies or interests in them,
businesses or assets. As of August 31, 2002, no securities had been issued under
these registration statements.
Although the homebuilding business historically has been cyclical, it has not
undergone a down cycle in many years. This has led some people to assert that
the prices of homes and the stocks of homebuilding companies are overvalued and
will decline rapidly when the market for new homes begins to weaken. A decline
in prices of
20
stocks of homebuilding companies would make it more expensive, and could make it
more difficult, for us to raise funds through stock issuances if we wanted to do
so.
Even if there is a period when we are not able to raise funds through stock
issuances, based on our financial condition and financial market resources, our
management believes that our operations and access to financing will provide for
our current and long-term requirements at our anticipated levels of growth.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks related to fluctuations in interest rates on our
debt obligations, mortgage loans and mortgage loans held for sale or
disposition. We utilize derivative instruments, including interest rate swaps,
to manage our exposure to changes in interest rates. We also utilize forward
commitments and option contracts to mitigate the risk associated with our
mortgage loan portfolio.
Our Annual Report on Form 10-K for the year ended November 30, 2001 contains
information about market risks under "Item 7A. Quantitative and Qualitative
Disclosures About Market Risk." There have been no material changes in our
market risks during the nine months ended August 31, 2002.
Item 4. Controls and Procedures
We have for many years had procedures in place for gathering the information
that is needed to enable us to file required quarterly and annual reports with
the Securities and Exchange Commission ("SEC"). However, because of additional
disclosure requirements imposed by the SEC in August 2002, as required by the
Sarbanes-Oxley Act of 2002, we formed a committee consisting of the people who
are primarily responsible for preparation of those reports, including our
general counsel and our principal accounting officer, to review and formalize
our procedures, and to have ongoing responsibility for designing and
implementing our disclosure controls and procedures (i.e., the controls and
procedures by which we ensure that information we are required to disclose in
the annual and quarterly reports we file with the SEC is processed, summarized
and reported within the required time periods). On October 11, 2002, our chief
executive officer and our chief financial officer met with that committee to
evaluate the disclosure controls and procedures we had in place and the steps
that are being taken to formalize those procedures and to introduce some
additional steps to the information-gathering process. Based upon that
evaluation, our chief executive officer and our chief financial officer
concluded that, while the procedures we have had in place appear to have
provided all the information we have needed to date, the committee should
proceed to formalize and supplement our disclosure controls and procedures in
order to ensure that all the information required to be disclosed in our reports
is accumulated and communicated to the people responsible for preparing those
reports, and to our principal executive and financial officers, at times and in
a manner that will allow timely decisions regarding required disclosures.
We constantly review the internal controls we have in place to ensure that all
transactions in which we are involved are properly recorded and to safeguard our
assets. This includes reviews and evaluations by our accounting department,
discussions with our outside auditors and
21
discussions with members of our internal audit group. While we are constantly
taking steps to improve our internal controls and to apply our internal controls
to new types of transactions or situations in which we are involved, we have not
since October 11, 2002 (the day on which our chief executive officer and chief
financial officer met with the committee that has on-going responsibility for
designing and implementing our disclosure controls and procedures), or at any
other time within 90 days before the filing of this report, made any significant
changes in our internal controls or in other factors that could significantly
affect these controls, including taking any corrective actions with regard to
significant deficiencies or material weaknesses. This has been confirmed by our
chief executive officer and our chief financial officer.
Part II. Other Information
Items 1-5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10. Lennar Corporation Nonqualified Deferred Compensation Plan
99. Certification by Stuart A. Miller, President and Chief
Executive Officer, and Bruce E. Gross, Vice President and
Chief Financial Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
We filed a current report on Form 8-K dated July 28, 2002, which
provided information relating to the change of control of our
Company resulting from the death of Leonard Miller.
We filed a current report on Form 8-K dated August 13, 2002, which
contained a Statement under Oath Regarding Facts and Circumstances
Relating to Exchange Act Filings by each of our Chief Executive
Officer and Chief Financial Officer, as contemplated by a
Securities and Exchange Commission Order dated June 27, 2002. We
also filed an amended current report on Form 8-K dated August 13,
2002, which corrected an error in those sworn statements.
22
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Lennar Corporation
----------------------------------
(Registrant)
Date: October 15, 2002 /s/ Bruce E. Gross
---------------- ----------------------------------
Bruce E. Gross
Vice President and
Chief Financial Officer
Date: October 15, 2002 /s/ Diane J. Bessette
---------------- ----------------------------------
Diane J. Bessette
Vice President and
Controller
23
Chief Executive Officer's Certification
I, Stuart A. Miller, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lennar
Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Securities Exchange Act Rule 13a-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the registrant's periodic reports are being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 15, 2002 /s/ Stuart A. Miller
------------------------------------
Name: Stuart A. Miller
Title: President and
Chief Executive Officer
24
Chief Financial Officer's Certification
I, Bruce E. Gross, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lennar
Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Securities Exchange Act Rule 13a-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the registrant's periodic reports are being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 15, 2002 /s/ Bruce E. Gross
-----------------------------------
Name: Bruce E. Gross
Title: Vice President and
Chief Financial Officer
25
Exhibit Index
Ex# Exhibit Description
10. Lennar Corporation Nonqualified Deferred Compensation Plan
99. Certification by Stuart A. Miller, President and Chief Executive Officer,
and Bruce E. Gross, Vice President and Chief Financial Officer, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.