e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2009
Commission File Number: 1-11749
Lennar Corporation
(Exact name of registrant as specified in its charter)
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Delaware
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95-4337490 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
700 Northwest 107th Avenue, Miami, Florida 33172
(Address of principal executive offices) (Zip Code)
(305) 559-4000
(Registrants telephone number, including area code)
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 þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or such shorter period that the registrant was required to submit and post such files). YES o
NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). YES o NO þ
Common stock outstanding as of September 30, 2009:
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Class A
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152,041,536 |
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Class B
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31,283,959 |
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TABLE OF CONTENTS
Part I. Financial Information
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Item 1. |
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Financial Statements. |
Lennar Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
(unaudited)
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August 31, |
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November 30, |
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2009 |
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2008 |
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ASSETS |
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Homebuilding: |
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Cash and cash equivalents |
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$ |
1,336,739 |
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1,091,468 |
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Restricted cash |
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11,315 |
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8,828 |
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Receivables, net |
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110,983 |
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94,520 |
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Income tax receivables |
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1,501 |
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255,460 |
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Inventories: |
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Finished homes and construction in progress |
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1,549,716 |
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2,080,345 |
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Land under development |
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2,063,632 |
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1,741,407 |
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Consolidated inventory not owned |
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608,110 |
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678,338 |
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Total inventories |
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4,221,458 |
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4,500,090 |
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Investments in unconsolidated entities |
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650,878 |
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766,752 |
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Other assets |
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260,807 |
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99,802 |
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6,593,681 |
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6,816,920 |
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Financial services |
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494,658 |
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607,978 |
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Total assets |
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$ |
7,088,339 |
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7,424,898 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Homebuilding: |
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Accounts payable |
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$ |
216,239 |
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246,727 |
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Liabilities related to consolidated inventory not owned |
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532,045 |
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592,777 |
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Senior notes and other debts payable |
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2,665,796 |
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2,544,935 |
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Other liabilities |
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756,204 |
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834,873 |
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4,170,284 |
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4,219,312 |
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Financial services |
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340,704 |
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416,833 |
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Total liabilities |
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4,510,988 |
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4,636,145 |
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Minority interest |
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171,391 |
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165,746 |
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Stockholders equity: |
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Class A common stock of $0.10 par value per share
Authorized: August 31, 2009 and November 30, 2008 300,000 shares;
Issued: August 31, 2009 163,540 shares; November 30, 2008 140,503 shares |
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16,354 |
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14,050 |
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Class B common stock of $0.10 par value per share
Authorized: August 31, 2009 and November 30, 2008 90,000 shares;
Issued: August 31, 2009 and November 30, 2008 32,964 shares |
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3,296 |
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3,296 |
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Additional paid-in capital |
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2,199,384 |
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1,944,626 |
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Retained earnings |
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800,180 |
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1,273,159 |
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Treasury stock, at cost; August 31, 2009 11,503 Class A common shares and 1,680
Class B
common shares; November 30, 2008 11,229 Class A common shares and 1,680
Class B
common shares |
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(613,254 |
) |
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(612,124 |
) |
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Total stockholders equity |
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2,405,960 |
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2,623,007 |
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Total liabilities and stockholders equity |
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$ |
7,088,339 |
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7,424,898 |
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See accompanying notes to condensed consolidated financial statements.
1
Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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August 31, |
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August 31, |
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2009 |
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2008 |
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2009 |
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2008 |
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Revenues: |
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Homebuilding |
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$ |
643,613 |
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1,016,156 |
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1,977,876 |
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3,056,476 |
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Financial services |
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77,117 |
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90,384 |
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227,770 |
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240,893 |
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Total revenues |
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720,730 |
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1,106,540 |
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2,205,646 |
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3,297,369 |
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Costs and expenses: |
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Homebuilding (1) |
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704,360 |
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1,054,180 |
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2,150,194 |
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3,233,282 |
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Financial services |
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65,961 |
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103,245 |
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199,583 |
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266,460 |
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Corporate general and administrative |
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28,053 |
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34,047 |
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86,323 |
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98,453 |
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Total costs and expenses |
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798,374 |
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1,191,472 |
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2,436,100 |
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3,598,195 |
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Equity in loss from unconsolidated entities (2) |
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(42,303 |
) |
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(10,958 |
) |
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(105,110 |
) |
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(52,857 |
) |
Other expense, net (3) |
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(51,697 |
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(52,228 |
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(122,053 |
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(121,895 |
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Minority interest income, net (4) |
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2,779 |
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9,016 |
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11,033 |
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9,000 |
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Loss before (provision) benefit for income taxes |
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(168,865 |
) |
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(139,102 |
) |
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(446,584 |
) |
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(466,578 |
) |
(Provision) benefit for income taxes (5) |
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(2,740 |
) |
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50,138 |
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(6,135 |
) |
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168,482 |
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Net loss |
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$ |
(171,605 |
) |
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(88,964 |
) |
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(452,719 |
) |
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(298,096 |
) |
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Basic and diluted loss per share |
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$ |
(0.97 |
) |
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(0.56 |
) |
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(2.72 |
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(1.88 |
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Cash dividends per each Class A and Class B
common share |
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$ |
0.04 |
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0.16 |
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0.12 |
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0.48 |
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(1) |
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Homebuilding costs and expenses include $58.8 million and $152.0 million,
respectively, of valuation adjustments for the three and nine months ended August 31, 2009;
and $64.5 million and $205.4 million, respectively, of valuation adjustments for the three
and nine months ended August 31, 2008. |
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(2) |
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Equity in loss from unconsolidated entities includes SFAS 144 valuation adjustments related to assets of unconsolidated entities
in which the Company has investments of
$31.0 million and $81.0 million,
respectively,
for the three and nine months ended August 31, 2009;
and $2.9 million and $29.9 million, respectively, for the three and nine months ended August
31, 2008. |
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(3) |
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Other expense, net includes APB 18
valuation adjustments to the Companys investments in
unconsolidated entities of
$27.5 million and $71.7 million, respectively,
for the three
and nine months ended August 31, 2009; and $40.0 million and $116.5 million, respectively,
for the three and nine months ended August 31, 2008. Other expense, net includes $0.5
million and $5.6 million, respectively, of write-offs of notes receivable for the three and
nine months ended August 31, 2009 and 2008. Other expense, net also includes $22.4 million
and $5.2 million, respectively, of interest expense not capitalized for the three months
ended August 31, 2009 and 2008; and $49.0 million and $22.1 million, respectively, of
interest expense not capitalized for the nine months ended August 31, 2009 and 2008. |
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(4) |
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For the three and nine months ended August 31, 2008, minority interest income, net
includes $7.9 million of minority interest income recorded as a result of a $15.9 million
SFAS 144 valuation adjustment to inventory of a 50% owned consolidated joint venture. |
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(5) |
|
(Provision) benefit for income taxes includes a valuation allowance of $60.2 million and
$162.4 million, respectively, for the three and nine months ended August 31, 2009 recorded
by the Company against its entire amount of deferred tax assets generated as a result of its
net loss during the periods presented. |
See accompanying notes to condensed consolidated financial statements.
2
Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
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Nine Months Ended |
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August 31, |
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2009 |
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2008 |
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Cash flows from operating activities: |
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Net loss |
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$ |
(452,719 |
) |
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(298,096 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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14,054 |
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25,942 |
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Amortization of discount/premium on debt, net |
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1,363 |
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1,878 |
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Equity in loss from unconsolidated entities, including $81.0 million and $29.9
million, respectively, of the Companys share of SFAS 144 valuation adjustments
related to assets of unconsolidated entities for the nine months ended August 31,
2009 and 2008 |
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105,110 |
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|
52,857 |
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Distributions of earnings from unconsolidated entities |
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2,098 |
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|
17,801 |
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Minority interest income, net |
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(11,033 |
) |
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(9,000 |
) |
Share-based compensation expense |
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|
21,963 |
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|
21,288 |
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Tax provision from share-based awards |
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(6,042 |
) |
Deferred income tax benefit |
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|
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|
(245,185 |
) |
Gain on partial redemption of senior notes |
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(1,169 |
) |
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Valuation adjustments and write-offs of option deposits and pre-acquisition costs,
goodwill and notes receivable |
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224,247 |
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354,683 |
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Changes in assets and liabilities: |
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Increase in restricted cash |
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(10,619 |
) |
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(12,099 |
) |
Decrease in receivables |
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281,333 |
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1,111,929 |
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Decrease (increase) in inventories, excluding valuation adjustments and
write-offs of option deposits and pre-acquisition costs |
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263,886 |
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(41,028 |
) |
Decrease in other assets |
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|
15,731 |
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|
1,982 |
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Decrease in financial services loans held-for-sale |
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|
47,193 |
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|
110,769 |
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Decrease in accounts payable and other liabilities |
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(114,522 |
) |
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(233,311 |
) |
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Net cash provided by operating activities |
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386,916 |
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854,368 |
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Cash flows from investing activities: |
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Net additions to operating properties and equipment |
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(832 |
) |
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(2,234 |
) |
Contributions to unconsolidated entities |
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(278,254 |
) |
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(343,846 |
) |
Distributions of capital from unconsolidated entities |
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24,221 |
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80,440 |
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Decrease in financial services portfolio loans held-for-investment |
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3,749 |
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|
2,918 |
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Purchases of investment securities |
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(1,647 |
) |
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(163,479 |
) |
Proceeds from sales and maturities of investment securities |
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18,184 |
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|
169,949 |
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Net cash used in investing activities |
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(234,579 |
) |
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(256,252 |
) |
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Cash flows from financing activities: |
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Net repayments under financial services debt |
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(81,179 |
) |
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(347,272 |
) |
Proceeds from 12.25% senior notes due 2017 |
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392,392 |
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Debt issuance costs of 12.25% senior notes due 2017 |
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(5,500 |
) |
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Redemption of 7 5/8% senior notes due 2009 |
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(281,477 |
) |
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Partial redemption of 5.125% senior notes due 2010 |
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(19,177 |
) |
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Partial redemption of 5.95% senior notes due 2011 |
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(4,647 |
) |
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Proceeds from other borrowings |
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17,543 |
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|
994 |
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Principal payments on other borrowings |
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(67,712 |
) |
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|
(130,024 |
) |
Exercise of land option contracts from an unconsolidated land investment venture |
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(22,907 |
) |
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(44,146 |
) |
Receipts related to minority interests |
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|
3,588 |
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|
148,624 |
|
Payments related to minority interests |
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(3,366 |
) |
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|
(3,535 |
) |
Common stock: |
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Issuances |
|
|
221,125 |
|
|
|
224 |
|
Repurchases |
|
|
(1,130 |
) |
|
|
(1,686 |
) |
Dividends |
|
|
(20,260 |
) |
|
|
(77,073 |
) |
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|
Net cash provided by (used in) financing activities |
|
$ |
127,293 |
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|
(453,894 |
) |
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|
3
Lennar Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(unaudited)
|
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|
|
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|
Nine Months Ended |
|
|
|
August 31, |
|
|
|
2009 |
|
|
2008 |
|
Net increase in cash and cash equivalents |
|
$ |
279,630 |
|
|
|
144,222 |
|
Cash and cash equivalents at beginning of period |
|
|
1,203,422 |
|
|
|
795,194 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
1,483,052 |
|
|
|
939,416 |
|
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|
|
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|
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|
Summary of cash and cash equivalents: |
|
|
|
|
|
|
|
|
Homebuilding |
|
$ |
1,336,739 |
|
|
|
857,050 |
|
Financial services |
|
|
146,313 |
|
|
|
82,366 |
|
|
|
|
|
|
|
|
|
|
$ |
1,483,052 |
|
|
|
939,416 |
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash investing activities: |
|
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|
|
|
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|
Non-cash contributions to unconsolidated entities |
|
$ |
280 |
|
|
|
27,320 |
|
Non-cash distributions from unconsolidated entities |
|
$ |
90,744 |
|
|
|
56,912 |
|
Non-cash reclass from inventory to operating properties and equipment |
|
$ |
102,775 |
|
|
|
|
|
Consolidation/deconsolidation of previously unconsolidated/consolidated entities, net: |
|
|
|
|
|
|
|
|
Receivables |
|
$ |
9,821 |
|
|
|
15,584 |
|
Inventories |
|
$ |
191,621 |
|
|
|
394,450 |
|
Investment in unconsolidated entities |
|
$ |
(99,363 |
) |
|
|
(165,977 |
) |
Other assets |
|
$ |
69,574 |
|
|
|
945 |
|
Other debts payable |
|
$ |
(79,105 |
) |
|
|
(167,542 |
) |
Other liabilities |
|
$ |
(76,935 |
) |
|
|
(52,611 |
) |
Minority interest |
|
$ |
(15,613 |
) |
|
|
(24,849 |
) |
See accompanying notes to condensed consolidated financial statements.
4
Lennar Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
Basis of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Lennar
Corporation and all subsidiaries, partnerships and other entities in which Lennar Corporation has a
controlling interest and variable interest entities (see Note 17) in which Lennar Corporation is
deemed to be the primary beneficiary (the Company). The Companys investments in both
unconsolidated entities in which a significant, but less than controlling, interest is held and in
variable interest entities in which the Company is not deemed to be the primary beneficiary, are
accounted for by the equity method. All intercompany transactions and balances have been
eliminated in consolidation. The condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP)
for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by GAAP for complete
financial statements. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements in the Companys Annual Report on Form 10-K
for the year ended November 30, 2008. The Company has evaluated subsequent events through October
9, 2009, the date the condensed consolidated financial statements were filed with the Securities
Exchange Commission (SEC). In the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for the fair presentation of the accompanying condensed
consolidated financial statements have been made.
The Company has historically experienced, and expects to continue to experience, variability
in quarterly results. The condensed consolidated statements of operations for the three and nine
months ended August 31, 2009 are not necessarily indicative of the results to be expected for the
full year.
Reclassifications
Certain prior year amounts in the condensed consolidated financial statements have been
reclassified to conform with the 2009 presentation. These reclassifications had no impact on the
Companys results of operations.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the condensed consolidated financial
statements and accompanying notes. Actual results could differ from those estimates.
(2) Operating and Reporting Segments
The Companys operating segments are aggregated into reportable segments in accordance with
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures About Segments of an
Enterprise and Related Information, (SFAS 131) based primarily upon similar economic
characteristics, geography and product type. The Companys reportable segments consist of:
|
(1) |
|
Homebuilding East |
|
|
(2) |
|
Homebuilding Central |
|
|
(3) |
|
Homebuilding West |
|
|
(4) |
|
Homebuilding Houston |
|
|
(5) |
|
Financial Services |
Information about homebuilding activities in states which are not economically similar to
other states in the same geographic area is grouped under Homebuilding Other, which is not
considered a reportable segment in accordance with SFAS 131.
5
Operations of the Companys homebuilding segments primarily include the construction and sale
of single-family attached and detached homes, and to a lesser extent, multi-level residential
buildings, as well as the purchase, development and sale of residential land directly and through
the Companys unconsolidated entities. The Companys reportable homebuilding segments, and all
other homebuilding operations not required to be reported separately, have divisions located in:
|
|
|
|
|
East: Florida, Maryland, New Jersey and Virginia |
|
|
Central: Arizona, Colorado and Texas (1) |
|
|
West: California and Nevada |
|
|
Houston: Houston, Texas |
|
|
Other: Illinois, Minnesota, New York, North Carolina and South Carolina |
|
|
|
(1) |
|
Texas in the Central reportable segment excludes Houston, Texas, which is its own
reportable segment. |
Operations of the Financial Services segment include mortgage financing, title insurance,
closing services and to a much lesser extent other ancillary services (including high-speed
Internet and cable television) for both buyers of the Companys homes and others. Substantially
all of the loans the Financial Services segment originates are sold in the secondary mortgage
market on a servicing released, non-recourse basis; although, the Company remains liable for
certain limited representations and warranties related to loan sales. The Financial Services
segment operates generally in the same states as the Companys homebuilding operations, as well as
in other states.
Evaluation of segment performance is based primarily on operating earnings (loss) before
(provision) benefit for income taxes. Operating earnings (loss) for the homebuilding segments
consist of revenues generated from the sales of homes and land, equity in earnings (loss) from
unconsolidated entities, other income (expense), net and minority interest income (expense), net,
less the cost of homes and land sold and selling, general and administrative expenses.
Homebuilding operating earnings (loss) includes the following:
|
|
|
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, (SFAS
144) valuation adjustments to finished homes, construction in progress (CIP) and land on
which the Company intends to build homes, |
|
|
|
|
SFAS 144 valuation adjustments to land the Company intends to sell or has sold to third
parties, |
|
|
|
|
Write-offs of option deposits and pre-acquisition costs related to land under option
that the Company does not intend to purchase, |
|
|
|
|
SFAS 144 valuation adjustments related to assets of unconsolidated entities in which the
Company has investments, recorded in equity in earning (loss) from unconsolidated entities,
and |
|
|
|
|
Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for
Investments in Common Stock, (APB 18) valuation adjustments to the Companys investments
in unconsolidated entities, recorded in other income (expense), net. |
Financial Services operating earnings (loss) consist of revenues generated from mortgage
financing, title insurance, closing services, and to a much lesser extent other ancillary services
(including high-speed Internet and cable television) less the cost of such services, certain
selling, general and administrative expenses incurred by the Financial Services segment and
goodwill impairments.
Each
reportable segment follows the same accounting principles described in Note 1 Summary
of Significant Accounting Policies to the consolidated financial statements in the Companys 2008
Annual Report on Form 10-K. Operational results of each segment are not necessarily indicative of
the results that would have occurred had the segment been an independent stand alone entity during
the periods presented.
6
Financial information relating to the Companys operations was as follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
Assets: |
|
|
|
|
|
|
|
|
Homebuilding East |
|
$ |
1,555,938 |
|
|
|
1,588,299 |
|
Homebuilding Central |
|
|
722,037 |
|
|
|
774,412 |
|
Homebuilding West |
|
|
1,950,952 |
|
|
|
2,022,787 |
|
Homebuilding Houston |
|
|
248,624 |
|
|
|
267,628 |
|
Homebuilding Other |
|
|
810,009 |
|
|
|
849,726 |
|
Financial Services |
|
|
494,658 |
|
|
|
607,978 |
|
Corporate and unallocated |
|
|
1,306,121 |
|
|
|
1,314,068 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
7,088,339 |
|
|
|
7,424,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding East |
|
$ |
192,056 |
|
|
|
318,371 |
|
|
|
601,801 |
|
|
|
898,173 |
|
Homebuilding Central |
|
|
96,913 |
|
|
|
112,404 |
|
|
|
252,211 |
|
|
|
404,896 |
|
Homebuilding West |
|
|
172,818 |
|
|
|
323,747 |
|
|
|
591,761 |
|
|
|
1,028,677 |
|
Homebuilding Houston |
|
|
102,412 |
|
|
|
154,376 |
|
|
|
300,316 |
|
|
|
393,363 |
|
Homebuilding Other |
|
|
79,414 |
|
|
|
107,258 |
|
|
|
231,787 |
|
|
|
331,367 |
|
Financial Services |
|
|
77,117 |
|
|
|
90,384 |
|
|
|
227,770 |
|
|
|
240,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues (1) |
|
$ |
720,730 |
|
|
|
1,106,540 |
|
|
|
2,205,646 |
|
|
|
3,297,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding East |
|
$ |
(52,690 |
) |
|
|
5,099 |
|
|
|
(85,968 |
) |
|
|
(66,213 |
) |
Homebuilding Central |
|
|
(9,706 |
) |
|
|
(21,637 |
) |
|
|
(54,836 |
) |
|
|
(64,843 |
) |
Homebuilding West |
|
|
(90,878 |
) |
|
|
(67,757 |
) |
|
|
(238,081 |
) |
|
|
(206,362 |
) |
Homebuilding Houston |
|
|
3,570 |
|
|
|
15,468 |
|
|
|
10,002 |
|
|
|
30,670 |
|
Homebuilding Other |
|
|
(2,264 |
) |
|
|
(23,367 |
) |
|
|
(19,565 |
) |
|
|
(35,810 |
) |
Financial Services |
|
|
11,156 |
|
|
|
(12,861 |
) |
|
|
28,187 |
|
|
|
(25,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating loss |
|
|
(140,812 |
) |
|
|
(105,055 |
) |
|
|
(360,261 |
) |
|
|
(368,125 |
) |
Corporate and unallocated |
|
|
(28,053 |
) |
|
|
(34,047 |
) |
|
|
(86,323 |
) |
|
|
(98,453 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before (provision) benefit
for income taxes |
|
$ |
(168,865 |
) |
|
|
(139,102 |
) |
|
|
(446,584 |
) |
|
|
(466,578 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Total revenues are net of sales incentives of $112.2 million ($42,200 per home
delivered) and $385.3 million ($48,600 per home delivered), respectively, for the three
and nine months ended August 31, 2009, compared to $169.7 million ($45,900 per home
delivered) and $516.2 million ($47,500 per home delivered), respectively, for the three
and nine months ended August 31, 2008. |
7
Valuation adjustments and write-offs relating to the Companys operations were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
August 31, |
|
August 31, |
(In thousands) |
|
2009 |
|
|
2008 |
|
2009 |
|
|
2008 |
SFAS 144 valuation adjustments to finished homes, CIP
and land on which the Company intends to build homes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
$ |
38,701 |
|
|
|
8,685 |
|
|
|
60,972 |
|
|
|
50,967 |
|
Central |
|
|
1,209 |
|
|
|
2,058 |
|
|
|
11,463 |
|
|
|
21,107 |
|
West |
|
|
6,879 |
|
|
|
18,900 |
|
|
|
40,903 |
|
|
|
48,960 |
|
Houston |
|
|
517 |
|
|
|
682 |
|
|
|
760 |
|
|
|
794 |
|
Other |
|
|
2,092 |
|
|
|
1,959 |
|
|
|
10,638 |
|
|
|
10,305 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
49,398 |
|
|
|
32,284 |
|
|
|
124,736 |
|
|
|
132,133 |
|
|
|
|
|
|
|
|
|
|
|
|
SFAS 144 valuation adjustments to land the Company
intends to sell or has sold to third parties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East (1) |
|
|
|
|
|
|
11,333 |
|
|
|
2,117 |
|
|
|
13,840 |
|
Central |
|
|
7 |
|
|
|
1,201 |
|
|
|
1,185 |
|
|
|
10,770 |
|
West |
|
|
5 |
|
|
|
622 |
|
|
|
2,533 |
|
|
|
5,437 |
|
Houston |
|
|
628 |
|
|
|
|
|
|
|
628 |
|
|
|
109 |
|
Other |
|
|
|
|
|
|
292 |
|
|
|
|
|
|
|
893 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
640 |
|
|
|
13,448 |
|
|
|
6,463 |
|
|
|
31,049 |
|
|
|
|
|
|
|
|
|
|
|
|
Write-offs of option deposits and pre-acquisition costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
|
5,963 |
|
|
|
832 |
|
|
|
11,743 |
|
|
|
11,010 |
|
Central |
|
|
|
|
|
|
1,706 |
|
|
|
82 |
|
|
|
5,836 |
|
West |
|
|
2,779 |
|
|
|
5,866 |
|
|
|
4,482 |
|
|
|
10,073 |
|
Houston |
|
|
|
|
|
|
|
|
|
|
721 |
|
|
|
745 |
|
Other |
|
|
|
|
|
|
2,458 |
|
|
|
3,786 |
|
|
|
6,636 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
8,742 |
|
|
|
10,862 |
|
|
|
20,814 |
|
|
|
34,300 |
|
|
|
|
|
|
|
|
|
|
|
|
Companys share of SFAS 144 valuation adjustments
related to assets of unconsolidated entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
|
|
|
|
|
|
|
|
|
251 |
|
|
|
7,241 |
|
Central |
|
|
600 |
|
|
|
|
|
|
|
1,454 |
|
|
|
158 |
|
West |
|
|
30,351 |
|
|
|
2,919 |
|
|
|
79,296 |
|
|
|
21,870 |
|
Houston |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
597 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
30,951 |
|
|
|
2,919 |
|
|
|
81,001 |
|
|
|
29,866 |
|
|
|
|
|
|
|
|
|
|
|
|
APB 18 valuation adjustments to investments in
unconsolidated entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
|
|
|
|
|
10,076 |
|
|
|
2,566 |
|
|
|
20,171 |
|
Central |
|
|
1,024 |
|
|
|
|
|
|
|
13,179 |
|
|
|
421 |
|
West |
|
|
26,381 |
|
|
|
16,647 |
|
|
|
54,407 |
|
|
|
82,593 |
|
Houston |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
80 |
|
|
|
13,272 |
|
|
|
1,571 |
|
|
|
13,306 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
27,485 |
|
|
|
39,995 |
|
|
|
71,723 |
|
|
|
116,491 |
|
|
|
|
|
|
|
|
|
|
|
|
Write-offs of notes receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West |
|
|
511 |
|
|
|
1,000 |
|
|
|
511 |
|
|
|
1,000 |
|
Other |
|
|
|
|
|
|
4,596 |
|
|
|
|
|
|
|
4,596 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
511 |
|
|
|
5,596 |
|
|
|
511 |
|
|
|
5,596 |
|
|
|
|
|
|
|
|
|
|
|
|
Financial services goodwill impairments |
|
|
|
|
|
|
27,176 |
|
|
|
|
|
|
|
27,176 |
|
|
|
|
|
|
|
|
|
|
|
|
Total valuation adjustments and write-offs of option
deposits and pre-acquisition costs, notes receivable
and goodwill |
|
$ |
117,727 |
|
|
|
132,280 |
|
|
|
305,248 |
|
|
|
376,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For the three and nine months ended August 31, 2008, SFAS 144 valuation adjustments to
land the Company intends to sell or has sold to third parties have been reduced by $7.9
million of minority interest income recorded as a result of a $15.9 million SFAS 144 valuation
adjustment to inventory of a 50% owned consolidated joint venture. |
8
Changes in market conditions during the third quarter of 2009 led to lower home
sales prices in certain communities and changes in the strategy of certain joint ventures, which
resulted in valuation adjustments and write-offs. Further deterioration in the homebuilding market
could cause additional pricing pressures and slower absorption, which could lead to additional
valuation adjustments in the future. In addition, market conditions could cause the Company to
re-evaluate its strategy regarding certain assets that could result in further valuation
adjustments and/or additional write-offs of option deposits and pre-acquisition costs due to
abandonment of those option contracts.
(3) Investments in Unconsolidated Entities
Summarized condensed financial information on a combined 100% basis related to unconsolidated
entities in which the Company has investments that are accounted for by the equity method was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
Statements of
Operations |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
97,572 |
|
|
|
155,367 |
|
|
|
216,815 |
|
|
|
772,635 |
|
Costs and expenses |
|
|
264,385 |
|
|
|
256,816 |
|
|
|
959,750 |
|
|
|
1,046,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss of unconsolidated entities (1) |
|
$ |
(166,813 |
) |
|
|
(101,449 |
) |
|
|
(742,935 |
) |
|
|
(274,318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Companys share of net loss
recognized (2) |
|
$ |
(42,303 |
) |
|
|
(10,958 |
) |
|
|
(105,110 |
) |
|
|
(52,857 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The net loss of unconsolidated entities for the three and nine months ended August 31,
2009 was primarily related to valuation adjustments recorded by the unconsolidated
entities. The Companys exposure to such losses was significantly lower as a result of its
small ownership interest in the respective unconsolidated entities or its previous APB 18
valuation adjustments to its investments in unconsolidated entities. |
|
(2) |
|
For the three and nine months ended August 31, 2009, the Companys share of net loss
recognized from unconsolidated entities includes $31.0 million and $81.0 million,
respectively of SFAS 144 valuation adjustments related to assets of unconsolidated entities
in which the Company has investments, compared to $2.9 million and $29.9 million,
respectively, for the three and nine months ended August 31, 2008. |
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
Balance
Sheets |
|
2009 |
|
|
2008 |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
196,187 |
|
|
|
135,081 |
|
Inventories |
|
|
4,818,496 |
|
|
|
7,115,360 |
|
Other assets |
|
|
300,455 |
|
|
|
541,984 |
|
|
|
|
|
|
|
|
|
|
$ |
5,315,138 |
|
|
|
7,792,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity: |
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
$ |
628,695 |
|
|
|
1,042,002 |
|
Debt |
|
|
2,229,179 |
|
|
|
4,062,058 |
|
Equity of: |
|
|
|
|
|
|
|
|
The Company |
|
|
650,878 |
|
|
|
766,752 |
|
Others |
|
|
1,806,386 |
|
|
|
1,921,613 |
|
|
|
|
|
|
|
|
Total equity of unconsolidated entities |
|
|
2,457,264 |
|
|
|
2,688,365 |
|
|
|
|
|
|
|
|
|
|
$ |
5,315,138 |
|
|
|
7,792,425 |
|
|
|
|
|
|
|
|
The Companys equity in its unconsolidated entities |
|
|
26 |
% |
|
|
29 |
% |
|
|
|
|
|
|
|
In fiscal 2007, the Company sold a portfolio of land consisting of approximately 11,000
homesites in 32 communities located throughout the country to a strategic land investment venture
with Morgan Stanley Real Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc., in which
the Company has a 20% ownership interest and 50% voting rights. Due to the Companys continuing
involvement, the transaction did not qualify as a sale by the Company under GAAP; thus, the
inventory has remained on the Companys consolidated balance sheet in consolidated inventory not
owned. As of August 31, 2009 and November 30, 2008, the portfolio of land (including land
development costs) of $492.5 million and $538.4 million, respectively, is reflected as inventory in
the summarized condensed financial information related to unconsolidated entities in which the
Company has investments. The decrease in this inventory from November 30, 2008 to August 31, 2009
resulted primarily from valuation adjustments of $41.6 million recorded by the land investment
venture.
9
In June 2008, LandSource Communities Development LLC (LandSource) and a number of its
subsidiaries commenced proceedings under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. In July 2009, the United States Bankruptcy Court for
the District of Delaware confirmed the plan of reorganization for LandSource. As a result of the
bankruptcy proceedings, LandSource was reorganized into a new company called Newhall Land
Development, LLC, (Newhall). The reorganized company emerged from Chapter 11 free of its previous
bank debt. As part of the reorganization plan, the Company invested $140 million in exchange for
approximately a 15% equity interest in the reorganized Newhall, ownership in several communities
that were formerly owned by LandSource and the settlement and release of any claims that might have
been asserted against the Company.
The unconsolidated entities in which the Company has investments usually finance their
activities with a combination of partner equity and debt financing. In some instances, the Company
and its partners have guaranteed debt of certain unconsolidated entities.
The summary of the Companys net recourse exposure related to the unconsolidated entities in
which the Company has investments was as follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
Several recourse debt repayment |
|
$ |
50,725 |
|
|
|
78,547 |
|
Several recourse debt maintenance |
|
|
99,343 |
|
|
|
167,941 |
|
Joint and several recourse debt repayment |
|
|
141,902 |
|
|
|
138,169 |
|
Joint and several recourse debt maintenance |
|
|
85,928 |
|
|
|
123,051 |
|
Land seller debt and other debt recourse exposure |
|
|
2,420 |
|
|
|
12,170 |
|
|
|
|
|
|
|
|
The Companys maximum recourse exposure |
|
|
380,318 |
|
|
|
519,878 |
|
Less: joint and several reimbursement agreements
with the Companys partners |
|
|
(121,177 |
) |
|
|
(127,428 |
) |
|
|
|
|
|
|
|
The Companys net recourse exposure |
|
$ |
259,141 |
|
|
|
392,450 |
|
|
|
|
|
|
|
|
During the nine months ended August 31, 2009, the Company reduced its maximum recourse
exposure related to indebtedness of unconsolidated entities by $139.6 million, of which $78.4
million was paid by the Company and $61.2 million related to the joint ventures selling inventory,
dissolution of joint ventures and renegotiation of joint venture debt agreements. In addition,
during the three and nine months ended August 31, 2009, the Company recorded $1.0 million and $28.9
million, respectively, of obligation guarantees related to debt of certain of its joint ventures.
As of August 31, 2009, the Company had $4.8 million recorded as a liability.
The Companys senior unsecured revolving credit facility (the Credit Facility) requires the
Company to effect quarterly reductions of its maximum recourse exposure related to joint ventures
in which it has investments by a total of $200 million to $535 million by November 30, 2009, which
the Company accomplished as of May 31, 2009. The Company must also effect quarterly reductions
during its 2010 fiscal year totaling $180 million to $355 million of which the Company has already
reduced it by $91.2 million as of August 31, 2009. During the first six months of its 2011 fiscal
year, the Company must reduce its maximum recourse exposure related to joint ventures by $80
million to $275 million.
If the joint ventures are unable to reduce their debt, where there is recourse to the Company,
through the sale of inventory or other means, then the Company and its partners may be required to
contribute capital to the joint ventures.
10
The recourse debt exposure in the previous table represents the Companys maximum recourse
exposure to loss from guarantees and does not take into account the underlying value of the
collateral or the other assets of the borrowers that are available to repay the debt or to
reimburse the Company for any payments on its guarantees. The Companys unconsolidated entities
that have recourse debt have a significant amount of assets and equity. The summarized balance
sheets of the Companys unconsolidated entities with recourse debt were as follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
November 30, |
|
|
2009 |
|
2008 |
(In thousands) |
|
|
|
|
|
|
|
|
Assets |
|
$ |
1,647,973 |
|
|
|
2,846,819 |
|
Liabilities |
|
|
1,057,024 |
|
|
|
1,565,148 |
|
Equity (1) |
|
|
590,949 |
|
|
|
1,281,671 |
|
|
|
|
(1) |
|
The decrease in equity of the Companys unconsolidated entities with recourse debt
relates primarily to valuation adjustments recorded by the unconsolidated entities during
the nine months ended August 31, 2009. The Companys exposure to such losses was
significantly lower, as a result of its small ownership interest in the respective
unconsolidated entities or its previous APB 18 valuation adjustments to its investments in
unconsolidated entities. |
In addition, in most instances in which the Company has guaranteed debt of an
unconsolidated entity, the Companys partners have also guaranteed that debt and are required to
contribute their share of the guarantee payments. Some of the Companys guarantees are repayment
guarantees and some are maintenance guarantees. In a repayment guarantee, the Company and its
venture partners guarantee repayment of a portion or all of the debt in the event of a default
before the lender would have to exercise its rights against the collateral. In the event of
default, if the Companys venture partner does not have adequate financial resources to meet its
obligations under the reimbursement agreement, the Company may be liable for more than its
proportionate share, up to its maximum recourse exposure, which is the full amount covered by the
joint and several guarantee. The maintenance guarantees only apply if the value of the collateral
(generally land and improvements) is less than a specified percentage of the loan balance. If the
Company is required to make a payment under a maintenance guarantee to bring the value of the
collateral above the specified percentage of the loan balance, the payment would constitute a
capital contribution or loan to the unconsolidated entity and increase the Companys share of any
funds the unconsolidated entity distributes.
In many of the loans to unconsolidated entities, the Company and its joint venture partners
(or entities related to them) have been required to give guarantees of completion to the lenders.
Those completion guarantees may require that the guarantors complete the construction of the
improvements for which the financing was obtained. If the construction is to be done in phases,
very often the guarantee is to complete only the phases as to which construction has already
commenced and for which loan proceeds were used. Under many of the completion guarantees, the
guarantors are permitted, under certain circumstances, to use undisbursed loan proceeds to satisfy
the completion obligations, and in many of those cases, the guarantors only pay interest on those
funds, with no repayment of the principal of such funds required.
During the three months ended August 31, 2009, there were no payments under completion or
maintenance guarantees. During the nine months ended August 31, 2009, the Company made payments of
$5.6 million and $18.0 million, respectively, under completion and maintenance guarantees. During
the three and nine months ended August 31, 2009, loan repayments, including amounts paid under the
Companys repayment guarantees, were $21.9 million and $60.4 million, respectively. These guarantee
payments are recorded primarily as contributions to the Companys unconsolidated entities.
In accordance with Financial Accounting Standards Board (FASB) Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, as of August 31, 2009, the fair values of the maintenance guarantees,
repayment guarantees and completion guarantees were not material. The Company believes that as of
August 31, 2009, in the event it becomes legally obligated to perform under a guarantee of the
obligation of an unconsolidated entity due to a triggering event under a guarantee, most of the
time the collateral should be sufficient to repay at least a significant portion of the obligation
or the Company and its partners would contribute additional capital into the venture.
11
In certain instances, the Company has placed performance letters of credit and surety
bonds with municipalities for its joint ventures (see Note 10).
The total debt of the unconsolidated entities in which the Company has investments was as
follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
The Companys net recourse exposure |
|
$ |
259,141 |
|
|
|
392,450 |
|
Reimbursement agreements from partners |
|
|
121,177 |
|
|
|
127,428 |
|
|
|
|
|
|
|
|
The Companys maximum recourse exposure |
|
$ |
380,318 |
|
|
|
519,878 |
|
|
|
|
|
|
|
|
|
Non-recourse
bank debt and other debt (partners share of several recourse) |
|
$ |
183,596 |
|
|
|
285,519 |
|
Non-recourse land seller debt and other debt |
|
|
83,015 |
|
|
|
90,519 |
|
Non-recourse bank debt with completion guarantees excluding LandSource |
|
|
621,628 |
|
|
|
820,435 |
|
Non-recourse bank debt without completion guarantees excluding LandSource |
|
|
960,622 |
|
|
|
994,580 |
|
Non-recourse bank debt without completion guarantees LandSource (1) |
|
|
|
|
|
|
1,351,127 |
|
|
|
|
|
|
|
|
Non-recourse debt to the Company |
|
|
1,848,861 |
|
|
|
3,542,180 |
|
|
|
|
|
|
|
|
Total debt |
|
$ |
2,229,179 |
|
|
|
4,062,058 |
|
|
|
|
|
|
|
|
The Companys maximum recourse exposure as a % of total JV debt |
|
|
17 |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
(1) |
|
During the third quarter of 2009, LandSource emerged from bankruptcy as a new
reorganized company named Newhall Land Development, LLC. As a result, all of LandSources
bank debts were discharged. |
(4) Income Taxes
FIN 48
At August 31, 2009 and November 30, 2008, the Company had $92.5 million and $100.2 million,
respectively, of gross unrecognized tax benefits. During the three and nine months ended August 31,
2009, total unrecognized tax benefits decreased by $11.9 million and $13.0 million, respectively,
as a result of the completion of various state examinations, settlements with various taxing
authorities and the lapse of statute limitations. The decrease in total unrecognized tax benefits
for the three and nine months ended August 31, 2009 was partially offset by an increase of $5.3
million related to tax benefits taken in a prior period. Although the Company has not recognized
these tax benefits, $23.7 million would affect the Companys effective tax rate if the Company were
to recognize these tax benefits.
The Company expects the total amount of unrecognized tax benefits to decrease by $54.6 million
within twelve months as a result of the settlement of certain tax accounting items with the IRS
with respect to the prior examination cycle that carried over to the current years under
examination, and as a result of the conclusion of examinations with a number of state taxing
authorities. The majority of these items were previously recorded as deferred tax liabilities and
the settlement will not affect the Companys tax rate.
At August 31, 2009, the Company had $33.0 million accrued for interest and penalties, of which
$1.9 million and $5.3 million, respectively, was recorded during the three and nine months ended
August 31, 2009 in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes an interpretation of FASB Statement No. 109, (FIN 48). At November 30, 2008, the Company
had $33.5 million accrued for interest and penalties.
The IRS is currently examining the Companys federal income tax returns for fiscal years 2005
through 2009, and certain state taxing authorities are examining various fiscal years. The final
outcome of these examinations is not yet determinable. The statute of limitations for the
Companys major tax jurisdictions remains open for examination for fiscal year 2003 and subsequent
years.
Deferred Tax Assets
SFAS 109, Accounting for Income Taxes, (SFAS 109) requires a reduction of the carrying
amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is
more likely than not that such assets will not be realized. Accordingly, the need to establish
valuation allowances for deferred tax assets is assessed periodically based on the SFAS 109
more-likely-than-not realization
12
threshold criterion. In the assessment for a valuation allowance,
appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This
assessment considers, among other matters, the nature, frequency and severity of current and
cumulative losses, forecasts of future profitability, the duration of statutory carryforward
periods, the Companys experience with loss carryforwards not expiring unused and tax planning
alternatives.
During fiscal 2008, the Company established a full valuation allowance against its deferred
tax assets totaling $730.8 million. Based upon an evaluation of all available evidence, during the
three and nine months ended August 31, 2009, the Company recorded an additional valuation allowance
of $60.2 million and $162.4 million, respectively, against the entire amount of deferred tax assets
generated as a result of its net loss during the periods. The Companys cumulative loss position
over the evaluation period and the current uncertain and volatile market conditions were
significant evidence supporting the need for a valuation allowance. As a result, as of August 31,
2009, the Companys deferred tax assets valuation allowance was $893.2 million. In future periods,
the allowance could be reduced based on sufficient evidence indicating that it is more likely than
not that a portion or all of the Companys deferred tax assets will be realized.
(5) Loss Per Share
Basic loss per share is computed by dividing net loss attributable to common stockholders by
the weighted average number of shares of common stock outstanding for the period. As a result of
the Companys net loss during all periods presented, the weighted average number of shares of
common stock used for calculating basic and diluted loss per share are the same because the
inclusion of securities or other contracts to issue common stock would be anti-dilutive. Basic and
diluted loss per share was calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(In thousands, except per share amounts) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Numerator for basic and diluted loss
per share net loss |
|
$ |
(171,605 |
) |
|
|
(88,964 |
) |
|
|
(452,719 |
) |
|
|
(298,096 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted loss
per share weighted average shares |
|
|
176,770 |
|
|
|
158,499 |
|
|
|
166,658 |
|
|
|
158,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share |
|
$ |
(0.97 |
) |
|
|
(0.56 |
) |
|
|
(2.72 |
) |
|
|
(1.88 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase 6.8 million and 6.7 million shares, respectively, of common stock
were outstanding and anti-dilutive for the three months ended August 31, 2009 and 2008. Options to
purchase 7.5 million shares of common stock were outstanding and anti-dilutive for both the nine
months ended August 31, 2009 and 2008.
13
(6) Financial Services
The assets and liabilities related to the Financial Services segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
146,313 |
|
|
|
111,954 |
|
Restricted cash |
|
|
30,109 |
|
|
|
21,977 |
|
Receivables, net (1) |
|
|
79,627 |
|
|
|
133,641 |
|
Loans held-for-sale (2) |
|
|
140,192 |
|
|
|
190,056 |
|
Loans held-for-investment, net |
|
|
20,837 |
|
|
|
58,339 |
|
Investments held-to-maturity |
|
|
2,746 |
|
|
|
19,139 |
|
Goodwill |
|
|
34,046 |
|
|
|
34,046 |
|
Other (3) |
|
|
40,788 |
|
|
|
38,826 |
|
|
|
|
|
|
|
|
|
|
$ |
494,658 |
|
|
|
607,978 |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Notes and other debts payable |
|
$ |
144,605 |
|
|
|
225,783 |
|
Other (4) |
|
|
196,099 |
|
|
|
191,050 |
|
|
|
|
|
|
|
|
|
|
$ |
340,704 |
|
|
|
416,833 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Receivables, net primarily relate to loans sold to investors for which the Company had
not yet been paid as of August 31, 2009 and November 30, 2008, respectively. |
|
(2) |
|
Loans held-for-sale relate to unsold loans as of August 31, 2009 and November 30, 2008,
respectively, carried at fair value. |
|
(3) |
|
Other assets include mortgage loan commitments of $5.9 million and $4.4 million,
respectively, as of August 31, 2009 and November 30, 2008, carried at fair value. |
|
(4) |
|
Other liabilities include forward contracts of $2.7 million and $6.5 million,
respectively, as of August 31, 2009 and November 30, 2008, carried at fair value. |
At August 31, 2009, the Financial Services segment had warehouse repurchase facilities
that mature in December 2009 ($100 million) and in June 2010 ($200 million), and a new 364-day
warehouse repurchase facility that matures in July 2010 ($125 million). The maximum aggregate
commitment under these facilities totaled $425 million. The new 364-day warehouse repurchase
facility replaced an on going 60-day committed repurchase facility. The Financial Services segment
uses these facilities to finance its lending activities until the mortgage loans are sold to
investors and expects the facilities to be renewed or replaced with other facilities when they
mature. Borrowings under the facilities were $144.5 million and $209.5 million, respectively, at
August 31, 2009 and November 30, 2008 and were collateralized by mortgage loans and receivables on
loans sold to investors but not yet paid for with outstanding principal balances of $191.2 million
and $281.2 million, respectively, at August 31, 2009 and November 30, 2008. If the facilities are
not renewed, the borrowings under the lines of credit will be paid off by selling the mortgage
loans held-for-sale to investors and by collecting on receivables on loans sold but not yet paid.
Without the facilities, the Financial Services segment would have to use cash from operations and
other funding sources to finance its lending activities.
At November 30, 2008, the Financial Services segment had advances under the on going 60-day
committed repurchase facility of $5.2 million, which were collateralized by mortgage loans and
receivables on loans sold to investors but not yet paid for with outstanding principal balances of
$5.5 million. At November 30, 2008, the Financial Services segment had advances under a different
conduit funding agreement totaling $10.8 million, which were collateralized by mortgage loans.
(7) Cash and Cash Equivalents
Cash and cash equivalents as of August 31, 2009 and November 30, 2008 included $5.5 million
and $9.8 million, respectively, of cash held in escrow for approximately three days.
14
(8) Restricted Cash
Restricted cash consists of customer deposits on home sales held in restricted accounts until
title transfers to the homebuyer, as required by the state and local governments in which the homes
were sold.
(9) Other Assets
During the three months ended August 31, 2009, the Company reclassified $102.8 million from
inventories to operating properties, which is included in other assets, as a result of converting a
multi-level residential building to a rental operation. Other assets
also include a $58.5 million
operating property associated with the consolidation of a joint
venture during the three months ended August 31, 2009.
(10) Senior Notes and Other Debts Payable
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
5.125% senior notes due 2010 |
|
$ |
279,918 |
|
|
|
299,877 |
|
5.95% senior notes due 2011 |
|
|
244,727 |
|
|
|
249,615 |
|
5.95% senior notes due 2013 |
|
|
347,156 |
|
|
|
346,851 |
|
5.50% senior notes due 2014 |
|
|
248,224 |
|
|
|
248,088 |
|
5.60% senior notes due 2015 |
|
|
501,424 |
|
|
|
501,618 |
|
6.50% senior notes due 2016 |
|
|
249,760 |
|
|
|
249,733 |
|
12.25% senior notes due 2017 |
|
|
392,392 |
|
|
|
|
|
7 5/8% senior notes due 2009 |
|
|
|
|
|
|
280,976 |
|
Mortgage notes on land and other debt |
|
|
402,195 |
|
|
|
368,177 |
|
|
|
|
|
|
|
|
|
|
$ |
2,665,796 |
|
|
|
2,544,935 |
|
|
|
|
|
|
|
|
The Companys Credit Facility consists of a $1.1 billion revolving credit facility that
matures in July 2011.
In order to borrow under the Credit Facility, the Company is required
to first use its cash in excess of $750 million and have availability under its borrowing base calculation. As of August 31, 2009, the Company had no availability
to borrow under the Credit Facility due to the fact that it had cash
and cash equivalents of $1.3 billion. The Company can create availability under its Credit Facility to the extent it uses the cash in excess of $750 million to
purchase qualified borrowing base assets.
The Credit Facility is guaranteed by substantially all of the Companys subsidiaries. Interest
rates on outstanding borrowings are LIBOR-based, with margins determined based on changes in the
Companys credit ratings, or an alternate base rate, as described in the Credit Facility agreement.
At both August 31, 2009 and November 30, 2008, the Company had no outstanding balance under the
Credit Facility. However, at August 31, 2009 and November 30, 2008, $194.6 million and $275.2
million, respectively, of the Companys total letters of credit outstanding discussed below, were
collateralized against certain borrowings available under the Credit Facility.
The Companys performance letters of credit outstanding were $108.1 million and $167.5
million, respectively, at August 31, 2009 and November 30, 2008. The Companys financial letters
of credit outstanding were $212.8 million and $278.5 million, respectively, at August 31, 2009 and
November 30, 2008. Performance letters of credit are generally posted with regulatory bodies to
guarantee the Companys performance of certain development and construction activities and
financial letters of credit are generally posted in lieu of cash deposits on option contracts.
Additionally, at August 31, 2009, the Company had outstanding performance and surety bonds related
to site improvements at various projects (including certain projects of the Companys joint
ventures) of $864.1 million. Although significant development and construction activities have
been completed related to these site improvements, these bonds are generally not released or
reduced until all development and construction activities are completed. As of August 31, 2009,
there were approximately $339.2 million, or 39%, of costs to complete related to these site
improvements. The Company does not presently anticipate any draws upon these bonds, but if such
draws occur, the Company does not believe they would have a material effect on its financial
position, results of operations or cash flows.
At August 31, 2009, the Company believes it was in compliance with its debt covenants.
Under the Credit Facility agreement, the Company is required to maintain a leverage ratio of less
than or equal to 55% at the end of each fiscal quarter during the Companys 2009 fiscal year and a
leverage ratio of less
15
than or equal to 52.5% for its 2010 fiscal year and through the maturity of the
Companys Credit Facility in 2011. If the Companys adjusted consolidated tangible net worth, as
calculated per the Credit Facility agreement, falls below $1.6 billion, the Companys Credit
Facility would be reduced from $1.1 billion to $0.9 billion. In no event may the Companys adjusted
consolidated tangible net worth, as calculated per the Credit Facility agreement, be less than $1.3
billion. As of August 31, 2009, the Companys leverage ratio and adjusted consolidated tangible net
worth, calculated per the Credit Facility agreement (which involves adjustments to GAAP financial
measures, as described in Managements Discussion and Analysis of Financial Condition and Results
of Operations) were 50% and $2.1 billion, respectively.
In addition to other requirements, the Credit Facility requires the Company to effect
quarterly reductions of its maximum recourse exposure related to joint ventures in which it has
investments by a total of $200 million to $535 million by November 30, 2009, which the Company
accomplished as of May 31, 2009. The Company must also effect quarterly reductions during its 2010
fiscal year totaling $180 million to $355 million of which the Company has already reduced it by
$91.2 million. During the first six months of its 2011 fiscal year, the Company must reduce its
maximum recourse exposure related to joint ventures by $80 million to $275 million.
If the joint ventures are unable to reduce their debt, where there is recourse to the Company,
through the sale of inventory or other means, then the Company and its partners may be required to
contribute capital to the joint ventures.
In March 2009, the Company retired its $281 million of 7 5/8% senior notes due March 2009 for
100% of the outstanding principal amount, plus accrued and unpaid interest as of the maturity date.
In April 2009, the Company issued $400 million of 12.25% senior notes due 2017 (the 12.25%
Senior Notes) at a price of 98.098% in a private placement. Proceeds from the offering, after
payment of initial purchasers discount and expenses, were $386.7 million. The Company added the
proceeds to the Companys working capital to be used for general corporate purposes, which may
include the repayment or repurchase of its near-term maturities or of debt of its joint ventures
that it has guaranteed. Interest on the 12.25% Senior Notes is due semi-annually. The 12.25% Senior
Notes are unsecured and unsubordinated, and are guaranteed by substantially all of the Companys
subsidiaries. In September 2009, the Company completed an exchange of the 12.25% Senior Notes for
substantially identical notes registered under the Securities Act of 1933 (the Exchange Notes),
with all of the 12.25% Senior Notes being exchanged for the Exchange Notes. At August 31, 2009, the
carrying amount of the 12.25% Senior Notes was $392.4 million.
(11) Product Warranty
Warranty and similar reserves for homes are established at an amount estimated to be adequate
to cover potential costs for materials and labor with regard to warranty-type claims expected to be
incurred subsequent to the delivery of a home. Reserves are determined based on historical data
and trends with respect to similar product types and geographical areas. The Company regularly
monitors the warranty reserve and makes adjustments to its pre-existing warranties in order to
reflect changes in trends and historical data as information becomes available. Warranty reserves
are included in other liabilities in the accompanying condensed consolidated balance sheets. The
activity in the Companys warranty reserve was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Warranty reserve, beginning of period |
|
$ |
142,174 |
|
|
|
132,942 |
|
|
|
129,449 |
|
|
|
164,842 |
|
Warranties issued during the period |
|
|
6,475 |
|
|
|
10,899 |
|
|
|
19,757 |
|
|
|
32,845 |
|
Adjustments to pre-existing warranties from
changes in estimates |
|
|
13,967 |
|
|
|
9,814 |
|
|
|
42,746 |
|
|
|
7,872 |
|
Payments |
|
|
(18,678 |
) |
|
|
(23,546 |
) |
|
|
(48,014 |
) |
|
|
(75,450 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranty reserve, end of period |
|
$ |
143,938 |
|
|
|
130,109 |
|
|
|
143,938 |
|
|
|
130,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Adjustments to pre-existing warranties from changes in estimates for the three and nine
months ended August 31, 2009 include an adjustment for warranty issues related to defective drywall
manufactured in China and purchased and installed by various of the Companys subcontractors.
Defective Chinese drywall appears to be an industry-wide issue as other homebuilders have publicly
disclosed that they are experiencing similar issues with defective Chinese drywall.
As of August 31, 2009, the Company identified approximately 500 homes delivered in Florida
primarily during its 2006 and 2007 fiscal years that are confirmed to have defective Chinese
drywall and resulting damage. This represents a small percentage of homes the Company delivered in
Florida (2.6%) and nationally (0.6%) during those fiscal years in the aggregate.
Based on its efforts to date, the Company has not identified defective Chinese drywall in
homes delivered by the Company outside of Florida. The Company is continuing its investigation of
homes delivered during the relevant time period in order to determine whether there are additional
homes, not yet inspected, with defective Chinese drywall and resulting damage. If the outcome of
the Companys inspections identifies more homes than the Company has estimated to have defective
Chinese drywall, it might require an increase in the Companys warranty reserve in the future.
Through August 31, 2009, the Company has accrued $54.5 million of warranty reserves, which
include amounts related to homes identified as having defective Chinese drywall as well as an
estimate for homes not yet inspected that may contain Chinese drywall. As of August 31, 2009, the warranty reserve, net of payments
was $41.8 million. The Company has a $33.6 million receivable for covered damages under its
insurance coverage relative to the cost it expects to incur in
remedying the homes confirmed and estimated to
have defective Chinese drywall and resulting damage. The Company is seeking reimbursement from its
subcontractors, insurers and others for costs the Company has incurred or expects to incur to
investigate and repair defective Chinese drywall and resulting damage.
(12) Stockholders Equity
The Company has a stock repurchase program which permits the purchase of up to 20 million
shares of its outstanding common stock. There were no share repurchases during the nine months
ended August 31, 2009. As of August 31, 2009, 6.2 million shares of common stock can be
repurchased in the future under the program. Treasury stock increased by 0.1 million and 0.3
million common shares, respectively, during the three and nine months ended August 31, 2009, in
connection with activity related to the Companys equity compensation plan and forfeitures of
restricted stock.
During April 2009, the Company entered into distribution agreements with J.P. Morgan
Securities, Inc., Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Deutsche Bank Securities Inc., relating to an offering of the Companys Class A common stock
into the market from time to time for an aggregate of up to $275 million. As of August 31, 2009,
the Company had sold a total of 21.0 million shares of its Class A common stock under the equity
offering for gross proceeds of $225.5 million, or an average of $10.76 per share. After
compensation to the distributors of $4.5 million, the Company received net proceeds of $221.0
million. The Company will use the proceeds from the offering for general corporate purposes which
may include acquisitions.
(13) Share-Based Payment
During the three months ended August 31, 2009 and 2008, compensation expense related to the
Companys share-based payment awards was $6.4 million and $6.4 million, respectively, of which $3.0
million and $1.9 million, respectively, related to stock options and $3.4 million and $4.5 million,
respectively, related to awards of restricted common stock (nonvested shares). During the nine
months ended August 31, 2009 and 2008, compensation expense related to the Companys share-based
payment awards was $22.0 million and $21.3 million, respectively, of which $9.0 million and $8.8
million, respectively, related to stock options and $13.0 million and $12.5 million, respectively,
related to nonvested shares. During the three months ended August 31, 2009, the Company granted an
immaterial amount of stock options and did not issue any nonvested shares. During the three months
ended August 31,
17
2008, the Company granted 4.5 million stock options and issued 0.1 million
nonvested shares. During the nine months ended August 31, 2009, the Company granted an immaterial
amount of stock options and did not issue any nonvested shares. During the nine months ended August
31, 2008, the Company granted 4.5 million stock options and issued 1.2 million nonvested shares.
(14) Comprehensive Loss
Comprehensive loss represents changes in stockholders equity from non-owner sources. The
components of comprehensive loss were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net loss |
|
$ |
(171,605 |
) |
|
|
(88,964 |
) |
|
|
(452,719 |
) |
|
|
(298,096 |
) |
Unrealized gain on
Companys portion
of unconsolidated
entitys interest
rate swap
liability, net of
tax |
|
|
|
|
|
|
2,812 |
|
|
|
|
|
|
|
2,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(171,605 |
) |
|
|
(86,152 |
) |
|
|
(452,719 |
) |
|
|
(296,035 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(15) Financial Instruments
The following table presents the carrying amounts and estimated fair values of financial
instruments held by the Company at August 31, 2009 and November 30, 2008, using available market
information and what the Company believes to be appropriate valuation methodologies. Considerable
judgment is required in interpreting market data to develop the estimates of fair value. The use of
different market assumptions and/or estimation methodologies might have a material effect on the
estimated fair value amounts. The table excludes cash and cash equivalents, restricted cash,
receivables and accounts payable, which had fair values approximating their carrying amounts due to
the short maturities of these instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31, 2009 |
|
November 30, 2008 |
|
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
(In thousands) |
|
Amount |
|
Value |
|
Amount |
|
Value |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held-for-investment, net |
|
$ |
20,837 |
|
|
|
20,837 |
|
|
|
58,339 |
|
|
|
58,339 |
|
Investments held-to-maturity |
|
$ |
2,746 |
|
|
|
2,758 |
|
|
|
19,139 |
|
|
|
19,266 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes and other debts payable |
|
$ |
2,665,796 |
|
|
|
2,594,167 |
|
|
|
2,544,935 |
|
|
|
1,785,692 |
|
Financial services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes and other debts payable |
|
$ |
144,605 |
|
|
|
144,605 |
|
|
|
225,783 |
|
|
|
225,783 |
|
The following methods and assumptions are used by the Company in estimating fair values:
HomebuildingFor senior notes and other debts payable, the fair value of fixed-rate
borrowings is based on quoted market prices. The Companys variable-rate borrowings are tied to
market indices and approximate fair value due to the short maturities associated with the majority
of the instruments.
Financial servicesThe fair values above are based on quoted market prices, if available. The
fair values for instruments that do not have quoted market prices are estimated by the Company on
the basis of discounted cash flows or other financial information.
18
(16) Fair Value Disclosures
SFAS No. 157, Fair Value Measurements, (SFAS 157), provides a framework for measuring fair
value, expands disclosures about fair value measurements and establishes a fair value hierarchy
which prioritizes the inputs used in measuring fair value summarized as follows:
Level 1: Fair value determined based on quoted prices in active markets
for identical assets.
Level 2: Fair value determined using significant other observable inputs.
Level 3: Fair value determined using significant unobservable inputs.
The Companys financial instruments measured at fair value on a recurring basis are all
within the Companys Financial Services segment and are summarized below:
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
Fair Value at |
Financial
Instruments |
|
Hierarchy |
|
August 31, 2009 |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
Loans held-for-sale (1) |
|
Level 2 |
|
$ |
140,192 |
|
Mortgage loan commitments |
|
Level 2 |
|
|
5,894 |
|
Forward contracts |
|
Level 2 |
|
|
(2,717 |
) |
|
|
|
(1) |
|
The aggregate fair value of loans held-for-sale of $140.2 million exceeds its aggregate
principal balance of
$136.3 million by $3.9 million. |
As of August 31, 2009, the Companys loans held-for-sale are carried at fair value in
accordance with SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities,
(SFAS 159), which permits entities to measure various financial instruments and certain other
items at fair value on a contract-by-contract basis. Management believes carrying loans
held-for-sale at fair value improves financial reporting by mitigating volatility in reported
earnings caused by measuring the fair value of the loans and the derivative instruments used to
economically hedge them without having to apply complex hedge accounting provisions. In addition,
the Company also applies Staff Accounting Bulletin (SAB) No. 109, Written Loan Commitments
Recorded at Fair Value through Earnings, (SAB 109) to its rights to service a mortgage loan and
recognizes revenue upon entering into an interest rate lock loan commitment with a borrower. The
fair value of these servicing rights is included in the Companys loans held-for-sale balance as of
August 31, 2009. Fair value of the servicing rights is determined based on quoted market prices,
where available, or the prices for other mortgage whole loans with similar characteristics.
The Companys assets measured at fair value on a nonrecurring basis are those assets for which
the Company has recorded valuation adjustments and write-offs during the current period. The assets
measured at fair value on a nonrecurring basis are all within the Companys Homebuilding operations
and are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
Fair Value at |
|
Total |
Non-financial
Assets |
|
Hierarchy |
|
August 31, 2009 |
|
Losses(1) |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Finished homes and construction in progress (2) |
|
Level 3 |
|
$ |
83,300 |
|
|
|
(43,301 |
) |
Land under development (3) |
|
Level 3 |
|
|
4,624 |
|
|
|
(6,737 |
) |
Investments in unconsolidated entities (4) |
|
Level 3 |
|
|
125 |
|
|
|
(27,485 |
) |
|
|
|
(1) |
|
Represents total losses recorded during the three months ended August 31, 2009. |
|
(2) |
|
In accordance with SFAS 144, finished homes and construction in progress with a
carrying value of $126.6 million were written down to their fair value of $83.3 million,
resulting in an impairment charge of $43.3 million, which was included in homebuilding
costs and expenses in the Companys statement of operations for three months ended August
31, 2009. |
|
(3) |
|
In accordance with SFAS 144, land under development with a carrying value of $11.3
million was written down to its fair value of $4.6 million, resulting in an impairment
charge of $6.7 million, which was included in homebuilding costs and expenses in the
Companys statement of operations for the three months ended August 31, 2009. |
19
|
|
|
(4) |
|
In accordance with APB 18, investments in unconsolidated entities with an aggregate
carrying value of $27.6 million were written down to their fair value of $0.1 million. The
impairment charge of $27.5 million was included in other expense, net in the Companys
statement of operations for the three months ended August 31, 2009. |
Finished homes and construction in progress and land under development are included
within inventories. Inventories are stated at cost unless the inventory within a community is
determined to be impaired, in which case the impaired inventory is written down to fair value. The
Company reviews its inventory for impairment by evaluating each community during each reporting
period. The inventory within each community is categorized as finished homes and construction in
progress or land under development based on the development stage of the community. As of August
31, 2009 and 2008, there were 411 and 523 active communities, respectively, each of which was
reviewed for impairment. SFAS 144 requires that if the undiscounted cash flows expected to be
generated by an asset are less than its carrying amount, an impairment charge should be recorded to
write-down the carrying amount of such asset to its fair value.
The Company estimates the fair value of its communities using a discounted cash flow model. In
determining the projected cash flows of a community, the Company primarily uses estimates related
to market supply and demand, product type by community, homesite sizes, sales pace, sales prices,
sales incentives, construction costs, sales and marketing expenses, the local economy, competitive
conditions, labor costs, costs of materials and other factors for that particular community. Every
homebuilding division evaluates the historical performance of each of its communities and the
current trends in the market and economy impacting the community and its surrounding areas. These
trends are analyzed for
each of the estimates listed above. For example, since the start of the downturn in the
housing market, the Company has reduced its construction costs in many communities, and this
reduction in construction costs, in addition to changes in product type, has impacted future
estimated cash flows. Using all of the trend information available, the division provides its best
estimate of projected cash flows for each community. While many of the estimates are calculated
based on trends, all estimates are subjective and change from market to market; and from community
to community as market and economic conditions change. The determination of fair value also
requires discounting the estimated cash flows at a rate the Company believes a market participant
would determine to be commensurate with the inherent risks associated with the assets and related
estimated cash flow streams. The discount rate used in determining each assets fair value depends
on the communitys projected life and development stage. The Company generally uses a discount rate
of approximately 20% depending on the perceived risks associated with a communitys cash flow
streams relative to its inventory.
The Company evaluates each of its investments in unconsolidated entities for impairment during
each reporting period in accordance with APB 18. A series of operating losses of an investee or
other factors including age of venture, intent and ability for the Company to retain its investment
in the entity, financial condition and long-term prospects of the entity and relationships with the
other partners and banks, may indicate that a decrease in the value of the Companys investment in
the unconsolidated entity has occurred which is other-than-temporary. The amount of impairment
recognized is the excess of the investments carrying amount over its estimated fair value. If the
Company determines that its investment in the unconsolidated entity, or a portion of this
investment could not be recovered through disposition, the Company includes these losses in other
expense, net. The evaluation of the Companys investment in an unconsolidated entity includes two
critical assumptions: (1) projected future distributions from the unconsolidated entity and (2)
discount rates applied to the future distributions. Inventory of the Companys unconsolidated
entities is also reviewed for potential impairment in accordance with SFAS 144. The unconsolidated
entities generally use discount rates of approximately 20% in their SFAS 144 reviews for
impairment, subject to the perceived risks associated with the communitys cash flow stream
relative to its inventory. If a valuation adjustment is recorded by an unconsolidated entity in
accordance with SFAS 144, the Companys proportionate share is reflected in the Companys equity in
loss from unconsolidated entities with a corresponding decrease to its investments in
unconsolidated entities.
20
(17) Consolidation of Variable Interest Entities
The Company follows FASB Interpretation No. 46(R), Consolidation of Variable Interest
Entities, (FIN 46R), which requires the consolidation of certain entities in which an enterprise
absorbs a majority of the entitys expected losses, receives a majority of the entitys expected
residual returns, or both, as a result of ownership, contractual or other financial interests in
the entity.
Unconsolidated Entities
At August 31, 2009, the Company had investments in and advances to unconsolidated entities
established to acquire and develop land for sale to the Company in connection with its homebuilding
operations, for sale to third parties or for the construction of homes for sale to third-party
homebuyers. The Company evaluated all agreements under FIN 46R that were entered into or had
reconsideration events during the nine months ended August 31, 2009, and it consolidated entities
that at August 31, 2009 had total combined assets and liabilities of $195.3 million and $95.8
million, respectively.
At August 31, 2009 and November 30, 2008, the Companys recorded investment in unconsolidated
entities was $650.9 million and $766.8 million, respectively. The Companys estimated maximum
exposure to loss with regard to unconsolidated entities is primarily its recorded investment in
these entities and the exposure under the guarantees discussed in Note 3.
Option Contracts
The Company has access to land through option contracts, which generally enables it to control
portions of properties owned by third parties (including land funds) and unconsolidated entities
until the Company has determined whether to exercise the option.
A majority of the Companys option contracts require a non-refundable cash deposit or
irrevocable letter of credit based on a percentage of the purchase price of the land. The Companys
option contracts sometimes include price adjustment provisions, which adjust the purchase price of
the land to its approximate fair value at the time of acquisition, or are based on the fair value
of the land at the time of takedown.
The Companys investments in option contracts are recorded at cost unless those investments
are determined to be impaired, in which case the Companys investments are written down to fair
value. The Company reviews option contracts for impairment during each reporting period. The most
significant indicator of impairment is a decline in the fair value of the optioned property such
that the purchase and development of the optioned property would no longer meet the Companys
targeted return on investment. Such declines could be caused by a variety of factors including
increased competition, decreases in demand or changes in local regulations that adversely impact
the cost of development. Changes in any of these factors would cause the Company to re-evaluate the
likelihood of exercising its land options.
Some option contracts contain a predetermined take-down schedule for the optioned land
parcels. However, in almost all instances, the Company is not required to purchase land in
accordance with those take-down schedules. In substantially all instances, the Company has the
right and ability to not exercise its option and forfeit its deposit without further penalty, other
than termination of the option and loss of any unapplied portion of its deposit and pre-acquisition
costs. Therefore, in substantially all instances, the Company does not consider the take-down price
to be a firm contractual obligation.
When the Company does not intend to exercise an option, it writes off any unapplied deposit
and pre-acquisition costs associated with the option contract. For the three months ended August
31, 2009 and August 31, 2008, the Company wrote-off $8.7 million and $10.9 million, respectively,
of option deposits and pre-acquisition costs related to land under option that it does not intend
to purchase. For the nine months ended August 31, 2009 and August 31, 2008, the Company wrote off
$20.8 million and $34.3 million, respectively, of option deposits and pre-acquisition costs related
to land under option that it does not intend to purchase.
21
The table below indicates the number of homesites owned and homesites to which the Company had
access through option contracts with third parties (optioned) or unconsolidated joint ventures in
which the Company has investments (JVs) (i.e., controlled homesites) at August 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled Homesites |
|
|
Owned |
|
|
Total |
|
August 31, 2009 |
|
Optioned |
|
|
JVs |
|
|
Total |
|
|
Homesites |
|
|
Homesites |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
|
8,019 |
|
|
|
2,504 |
|
|
|
10,523 |
|
|
|
25,622 |
|
|
|
36,145 |
|
Central |
|
|
1,370 |
|
|
|
3,761 |
|
|
|
5,131 |
|
|
|
16,168 |
|
|
|
21,299 |
|
West |
|
|
29 |
|
|
|
11,212 |
|
|
|
11,241 |
|
|
|
21,410 |
|
|
|
32,651 |
|
Houston |
|
|
1,051 |
|
|
|
2,115 |
|
|
|
3,166 |
|
|
|
6,588 |
|
|
|
9,754 |
|
Other |
|
|
489 |
|
|
|
677 |
|
|
|
1,166 |
|
|
|
7,747 |
|
|
|
8,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homesites |
|
|
10,958 |
|
|
|
20,269 |
|
|
|
31,227 |
|
|
|
77,535 |
|
|
|
108,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled Homesites |
|
|
Owned |
|
|
Total |
|
August 31, 2008 |
|
Optioned |
|
|
JVs |
|
|
Total |
|
|
Homesites |
|
|
Homesites |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
|
9,416 |
|
|
|
5,676 |
|
|
|
15,092 |
|
|
|
26,813 |
|
|
|
41,905 |
|
Central |
|
|
1,724 |
|
|
|
6,036 |
|
|
|
7,760 |
|
|
|
14,493 |
|
|
|
22,253 |
|
West |
|
|
1,370 |
|
|
|
24,183 |
|
|
|
25,553 |
|
|
|
18,547 |
|
|
|
44,100 |
|
Houston |
|
|
1,434 |
|
|
|
2,755 |
|
|
|
4,189 |
|
|
|
7,897 |
|
|
|
12,086 |
|
Other |
|
|
768 |
|
|
|
733 |
|
|
|
1,501 |
|
|
|
8,512 |
|
|
|
10,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homesites |
|
|
14,712 |
|
|
|
39,383 |
|
|
|
54,095 |
|
|
|
76,262 |
|
|
|
130,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company evaluates all option contracts for land when entered into or upon a
reconsideration event to determine whether it is the primary beneficiary of certain of these option
contracts. Although the Company does not have legal title to the optioned land, under FIN 46R, the
Company, if it is deemed to be the primary beneficiary, is required to consolidate the land under
option at the purchase price of the optioned land. During the nine months ended August 31, 2009,
the effect of the consolidation of these option contracts was an increase of $12.5 million to
consolidated inventory not owned with a corresponding increase to liabilities related to
consolidated inventory not owned in the Companys condensed consolidated balance sheet as of August
31, 2009. This increase was offset by the Company exercising its options to acquire land under
certain contracts previously consolidated, resulting in a net decrease in consolidated inventory
not owned of $70.2 million during the nine months ended August
31, 2009. To reflect the purchase price of the inventory consolidated under FIN
46R, the Company reclassified $2.1 million of related option deposits from land under development
to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as of
August 31, 2009. The liabilities related to consolidated inventory not owned primarily represent
the difference between the option exercise prices for the optioned land and the Companys cash
deposits.
The Companys exposure to loss related to its option contracts with third parties and
unconsolidated entities consisted of its non-refundable option deposits and pre-acquisition costs
totaling $173.6 million and $191.2 million, respectively, at August 31, 2009 and November 30, 2008.
Additionally, the Company had posted $58.8 million and $89.5 million, respectively, of letters of
credit in lieu of cash deposits under certain option contracts as of August 31, 2009 and November
30, 2008.
(18) New Accounting Pronouncements
In September 2006, the FASB issued SFAS 157. SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS 157 was effective for the Companys financial
assets and liabilities on December 1, 2007. The FASB deferred the provisions of SFAS 157 relating
to nonfinancial assets and
22
liabilities until the Companys fiscal year beginning December 1, 2008. SFAS 157 did not
materially affect how the Company determines fair value, but has resulted in certain additional
disclosures (see Note 16).
In December 2008, the FASB issued FASB Staff Position (FSP) FAS 140-4 and FIN 46(R)-8,
Disclosure by Public Entities (Enterprises) About Transfers of Financial Assets and Interests in
Variable Interest Entities. The purpose of this FSP is to promptly improve disclosures by public
companies until the pending amendments to SFAS No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, and FIN 46R requiring public companies to
provide additional disclosures regarding their involvement about the transferors continuing
involvement with transferred financial assets are effective. It also amends FIN 46R by requiring public companies
to provide additional disclosures regarding their involvement with variable interest entities. This
FSP was effective for the Companys fiscal year beginning December 1, 2008. The FSP did not have a
material effect on the Companys condensed consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133, (SFAS 161). SFAS 161 expands the
disclosure requirements in SFAS 133 regarding an entitys derivative instruments and hedging
activities. SFAS 161 was effective for the Companys fiscal year beginning December 1, 2008. The
adoption of SFAS 161 did not have a material effect on the Companys condensed consolidated
financial statements.
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments, (FSP 107-1). FSP 107-1 requires that the fair value disclosures
required for all financial instruments within the scope of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments, be included in interim financial statements. In addition, FSP 107-1
requires public companies to disclose the method and significant assumptions used to estimate the
fair value of those financial instruments and to discuss any changes of method or assumptions, if
any, during the reporting period. FSP 107-1 was effective for the
Companys quarter ended August
31, 2009. The adoption of FSP 107-1 did not have a material effect on the Companys condensed
consolidated financial statements, but has resulted in certain additional disclosures (see Note
15).
In May 2009, the FASB issued SFAS No. 165, Subsequent Events, (SFAS 165). SFAS 165
establishes general standards of accounting for and disclosures of events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. Among
other things, SFAS 165 requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date. SFAS 165 was effective for the Companys quarter
ended August 31, 2009. The adoption of SFAS 165 did not have a material impact on the Companys
condensed consolidated financial statements, but has resulted in certain additional disclosures
(see Note 1).
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R),
(SFAS 167). SFAS 167 amends the consolidation guidance applicable to variable interest entities
and the definition of a variable interest entity, and requires enhanced disclosures to provide more
information about an enterprises involvement in a variable interest entity. This statement also
requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable
interest entity. SFAS 167 is effective for the Companys fiscal year beginning December 1, 2009.
The Company is currently reviewing the effect of SFAS 167 on its condensed consolidated financial
statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162,
(SFAS 168). SFAS 168 establishes the FASB Accounting Standards Codification as the source of
authoritative accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with GAAP. SFAS 168 is effective
for the Companys November 30, 2009 consolidated financial statements. SFAS 168 does not change
GAAP and will not have a material impact on the Companys consolidated financial statements.
23
(19) Supplemental Financial Information
The Companys obligations to pay principal, premium, if any, and interest under its Credit
Facility, 5.125% senior notes due 2010, 5.95% senior notes due 2011, 5.95% senior notes due 2013,
5.50% senior notes due 2014, 5.60% senior notes due 2015, 6.50% senior notes due 2016 and 12.25%
senior notes due 2017 are guaranteed by substantially all of the Companys subsidiaries. The
guarantees are full and unconditional and the guarantor subsidiaries are 100% directly or
indirectly owned by Lennar Corporation. The guarantees are joint and several, subject to
limitations as to each guarantor designed to eliminate constructive fraudulent conveyance concerns.
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 as follows:
Condensed Consolidating Balance Sheet
August 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lennar |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(In thousands) |
|
Corporation |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, restricted cash,
receivables, net and income tax receivables |
|
$ |
1,260,978 |
|
|
|
167,348 |
|
|
|
32,212 |
|
|
|
|
|
|
|
1,460,538 |
|
Inventories |
|
|
|
|
|
|
3,709,972 |
|
|
|
511,486 |
|
|
|
|
|
|
|
4,221,458 |
|
Investments in unconsolidated entities |
|
|
|
|
|
|
623,447 |
|
|
|
27,431 |
|
|
|
|
|
|
|
650,878 |
|
Other assets |
|
|
27,242 |
|
|
|
56,089 |
|
|
|
177,476 |
|
|
|
|
|
|
|
260,807 |
|
Investments in subsidiaries |
|
|
3,802,053 |
|
|
|
641,102 |
|
|
|
|
|
|
|
(4,443,155 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,090,273 |
|
|
|
5,197,958 |
|
|
|
748,605 |
|
|
|
(4,443,155 |
) |
|
|
6,593,681 |
|
Financial services |
|
|
|
|
|
|
159,752 |
|
|
|
334,906 |
|
|
|
|
|
|
|
494,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,090,273 |
|
|
|
5,357,710 |
|
|
|
1,083,511 |
|
|
|
(4,443,155 |
) |
|
|
7,088,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
$ |
234,357 |
|
|
|
672,906 |
|
|
|
65,180 |
|
|
|
|
|
|
|
972,443 |
|
Liabilities related to consolidated inventory
not owned |
|
|
|
|
|
|
532,045 |
|
|
|
|
|
|
|
|
|
|
|
532,045 |
|
Senior notes and other debts payable |
|
|
2,263,601 |
|
|
|
193,699 |
|
|
|
208,496 |
|
|
|
|
|
|
|
2,665,796 |
|
Intercompany |
|
|
186,355 |
|
|
|
91,793 |
|
|
|
(278,148 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,684,313 |
|
|
|
1,490,443 |
|
|
|
(4,472 |
) |
|
|
|
|
|
|
4,170,284 |
|
Financial services |
|
|
|
|
|
|
65,214 |
|
|
|
275,490 |
|
|
|
|
|
|
|
340,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,684,313 |
|
|
|
1,555,657 |
|
|
|
271,018 |
|
|
|
|
|
|
|
4,510,988 |
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
171,391 |
|
|
|
|
|
|
|
171,391 |
|
Stockholders equity |
|
|
2,405,960 |
|
|
|
3,802,053 |
|
|
|
641,102 |
|
|
|
(4,443,155 |
) |
|
|
2,405,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
5,090,273 |
|
|
|
5,357,710 |
|
|
|
1,083,511 |
|
|
|
(4,443,155 |
) |
|
|
7,088,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
(19)
Supplemental Financial Information (Continued)
Condensed Consolidating Balance Sheet
November 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lennar |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(In thousands) |
|
Corporation |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, restricted cash,
receivables, net and income tax
receivables |
|
$ |
1,263,623 |
|
|
|
165,060 |
|
|
|
21,593 |
|
|
|
|
|
|
|
1,450,276 |
|
Inventories |
|
|
|
|
|
|
3,975,084 |
|
|
|
525,006 |
|
|
|
|
|
|
|
4,500,090 |
|
Investments in unconsolidated entities |
|
|
|
|
|
|
751,613 |
|
|
|
15,139 |
|
|
|
|
|
|
|
766,752 |
|
Other assets |
|
|
30,420 |
|
|
|
64,515 |
|
|
|
4,867 |
|
|
|
|
|
|
|
99,802 |
|
Investments in subsidiaries |
|
|
4,314,255 |
|
|
|
635,413 |
|
|
|
|
|
|
|
(4,949,668 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,608,298 |
|
|
|
5,591,685 |
|
|
|
566,605 |
|
|
|
(4,949,668 |
) |
|
|
6,816,920 |
|
Financial services |
|
|
|
|
|
|
8,332 |
|
|
|
599,646 |
|
|
|
|
|
|
|
607,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
5,608,298 |
|
|
|
5,600,017 |
|
|
|
1,166,251 |
|
|
|
(4,949,668 |
) |
|
|
7,424,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
$ |
269,457 |
|
|
|
700,411 |
|
|
|
111,732 |
|
|
|
|
|
|
|
1,081,600 |
|
Liabilities related to consolidated inventory
not owned |
|
|
|
|
|
|
592,777 |
|
|
|
|
|
|
|
|
|
|
|
592,777 |
|
Senior notes and other debts payable |
|
|
2,176,758 |
|
|
|
130,126 |
|
|
|
238,051 |
|
|
|
|
|
|
|
2,544,935 |
|
Intercompany |
|
|
539,076 |
|
|
|
(140,463 |
) |
|
|
(398,613 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,985,291 |
|
|
|
1,282,851 |
|
|
|
(48,830 |
) |
|
|
|
|
|
|
4,219,312 |
|
Financial services |
|
|
|
|
|
|
2,911 |
|
|
|
413,922 |
|
|
|
|
|
|
|
416,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,985,291 |
|
|
|
1,285,762 |
|
|
|
365,092 |
|
|
|
|
|
|
|
4,636,145 |
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
165,746 |
|
|
|
|
|
|
|
165,746 |
|
Stockholders equity |
|
|
2,623,007 |
|
|
|
4,314,255 |
|
|
|
635,413 |
|
|
|
(4,949,668 |
) |
|
|
2,623,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
5,608,298 |
|
|
|
5,600,017 |
|
|
|
1,166,251 |
|
|
|
(4,949,668 |
) |
|
|
7,424,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
(19)
Supplemental Financial Information (Continued)
Condensed Consolidating Statement of Operations
Three Months Ended August 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lennar |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(In thousands) |
|
Corporation |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
$ |
|
|
|
|
636,918 |
|
|
|
6,695 |
|
|
|
|
|
|
|
643,613 |
|
Financial services |
|
|
|
|
|
|
43,750 |
|
|
|
49,406 |
|
|
|
(16,039 |
) |
|
|
77,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
680,668 |
|
|
|
56,101 |
|
|
|
(16,039 |
) |
|
|
720,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
|
|
|
|
|
694,217 |
|
|
|
12,078 |
|
|
|
(1,935 |
) |
|
|
704,360 |
|
Financial services |
|
|
|
|
|
|
40,699 |
|
|
|
37,258 |
|
|
|
(11,996 |
) |
|
|
65,961 |
|
Corporate general and administrative |
|
|
26,319 |
|
|
|
|
|
|
|
|
|
|
|
1,734 |
|
|
|
28,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
26,319 |
|
|
|
734,916 |
|
|
|
49,336 |
|
|
|
(12,197 |
) |
|
|
798,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in loss from unconsolidated entities |
|
|
|
|
|
|
(42,211 |
) |
|
|
(92 |
) |
|
|
|
|
|
|
(42,303 |
) |
Other expense, net |
|
|
(3,828 |
) |
|
|
(51,711 |
) |
|
|
|
|
|
|
3,842 |
|
|
|
(51,697 |
) |
Minority interest income, net |
|
|
|
|
|
|
|
|
|
|
2,779 |
|
|
|
|
|
|
|
2,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before (provision) benefit for income taxes |
|
|
(30,147 |
) |
|
|
(148,170 |
) |
|
|
9,452 |
|
|
|
|
|
|
|
(168,865 |
) |
(Provision) benefit for income taxes |
|
|
2,789 |
|
|
|
(2,401 |
) |
|
|
(3,128 |
) |
|
|
|
|
|
|
(2,740 |
) |
Equity in earnings (loss) from subsidiaries |
|
|
(144,247 |
) |
|
|
6,324 |
|
|
|
|
|
|
|
137,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
(171,605 |
) |
|
|
(144,247 |
) |
|
|
6,324 |
|
|
|
137,923 |
|
|
|
(171,605 |
) |
| |
|
| |
|
| |
|
| |
|
| |
|
|
Condensed Consolidating Statement of Operations
Three Months Ended August 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lennar |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(In thousands) |
|
Corporation |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
$ |
|
|
|
|
1,014,296 |
|
|
|
1,860 |
|
|
|
|
|
|
|
1,016,156 |
|
Financial services |
|
|
|
|
|
|
2,240 |
|
|
|
105,423 |
|
|
|
(17,279 |
) |
|
|
90,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
1,016,536 |
|
|
|
107,283 |
|
|
|
(17,279 |
) |
|
|
1,106,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
|
|
|
|
|
1,055,890 |
|
|
|
1,836 |
|
|
|
(3,546 |
) |
|
|
1,054,180 |
|
Financial services |
|
|
|
|
|
|
1,447 |
|
|
|
112,804 |
|
|
|
(11,006 |
) |
|
|
103,245 |
|
Corporate general and administrative |
|
|
34,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
34,047 |
|
|
|
1,057,337 |
|
|
|
114,640 |
|
|
|
(14,552 |
) |
|
|
1,191,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in loss from unconsolidated entities |
|
|
|
|
|
|
(10,958 |
) |
|
|
|
|
|
|
|
|
|
|
(10,958 |
) |
Other expense, net |
|
|
(2,727 |
) |
|
|
(52,228 |
) |
|
|
|
|
|
|
2,727 |
|
|
|
(52,228 |
) |
Minority interest income, net |
|
|
|
|
|
|
|
|
|
|
9,016 |
|
|
|
|
|
|
|
9,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before (provision) benefit
for income taxes |
|
|
(36,774 |
) |
|
|
(103,987 |
) |
|
|
1,659 |
|
|
|
|
|
|
|
(139,102 |
) |
(Provision) benefit for income taxes |
|
|
13,265 |
|
|
|
37,473 |
|
|
|
(600 |
) |
|
|
|
|
|
|
50,138 |
|
Equity in earnings (loss) from subsidiaries |
|
|
(65,455 |
) |
|
|
1,059 |
|
|
|
|
|
|
|
64,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
(88,964 |
) |
|
|
(65,455 |
) |
|
|
1,059 |
|
|
|
64,396 |
|
|
|
(88,964 |
) |
| |
|
| |
|
| |
|
| |
|
| |
|
|
26
(19)
Supplemental Financial Information (Continued)
Condensed Consolidating Statement of Operations
Nine Months Ended August 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lennar |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(In thousands) |
|
Corporation |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
$ |
|
|
|
|
1,947,066 |
|
|
|
30,810 |
|
|
|
|
|
|
|
1,977,876 |
|
Financial services |
|
|
|
|
|
|
123,941 |
|
|
|
146,512 |
|
|
|
(42,683 |
) |
|
|
227,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
2,071,007 |
|
|
|
177,322 |
|
|
|
(42,683 |
) |
|
|
2,205,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
|
|
|
|
|
2,116,834 |
|
|
|
50,368 |
|
|
|
(17,008 |
) |
|
|
2,150,194 |
|
Financial services |
|
|
|
|
|
|
113,785 |
|
|
|
106,365 |
|
|
|
(20,567 |
) |
|
|
199,583 |
|
Corporate general and administrative |
|
|
81,207 |
|
|
|
|
|
|
|
|
|
|
|
5,116 |
|
|
|
86,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
81,207 |
|
|
|
2,230,619 |
|
|
|
156,733 |
|
|
|
(32,459 |
) |
|
|
2,436,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in loss from unconsolidated entities |
|
|
|
|
|
|
(104,872 |
) |
|
|
(238 |
) |
|
|
|
|
|
|
(105,110 |
) |
Other expense, net |
|
|
(10,182 |
) |
|
|
(122,095 |
) |
|
|
|
|
|
|
10,224 |
|
|
|
(122,053 |
) |
Minority interest income, net |
|
|
|
|
|
|
|
|
|
|
11,033 |
|
|
|
|
|
|
|
11,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before (provision) benefit for income taxes |
|
|
(91,389 |
) |
|
|
(386,579 |
) |
|
|
31,384 |
|
|
|
|
|
|
|
(446,584 |
) |
(Provision) benefit for income taxes |
|
|
10,207 |
|
|
|
(5,310 |
) |
|
|
(11,032 |
) |
|
|
|
|
|
|
(6,135 |
) |
Equity in earnings (loss) from subsidiaries |
|
|
(371,537 |
) |
|
|
20,352 |
|
|
|
|
|
|
|
351,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
(452,719 |
) |
|
|
(371,537 |
) |
|
|
20,352 |
|
|
|
351,185 |
|
|
|
(452,719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
Nine Months Ended August 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lennar |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(In thousands) |
|
Corporation |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
$ |
|
|
|
|
3,050,362 |
|
|
|
5,518 |
|
|
|
596 |
|
|
|
3,056,476 |
|
Financial services |
|
|
|
|
|
|
4,370 |
|
|
|
292,423 |
|
|
|
(55,900 |
) |
|
|
240,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
3,054,732 |
|
|
|
297,941 |
|
|
|
(55,304 |
) |
|
|
3,297,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
|
|
|
|
|
3,235,705 |
|
|
|
6,135 |
|
|
|
(8,558 |
) |
|
|
3,233,282 |
|
Financial services |
|
|
|
|
|
|
3,567 |
|
|
|
302,380 |
|
|
|
(39,487 |
) |
|
|
266,460 |
|
Corporate general and administrative |
|
|
98,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
98,453 |
|
|
|
3,239,272 |
|
|
|
308,515 |
|
|
|
(48,045 |
) |
|
|
3,598,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in loss from unconsolidated entities |
|
|
|
|
|
|
(52,857 |
) |
|
|
|
|
|
|
|
|
|
|
(52,857 |
) |
Other expense, net |
|
|
(7,259 |
) |
|
|
(121,895 |
) |
|
|
|
|
|
|
7,259 |
|
|
|
(121,895 |
) |
Minority interest income, net |
|
|
|
|
|
|
|
|
|
|
9,000 |
|
|
|
|
|
|
|
9,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before benefit for income taxes |
|
|
(105,712 |
) |
|
|
(359,292 |
) |
|
|
(1,574 |
) |
|
|
|
|
|
|
(466,578 |
) |
Benefit for income taxes |
|
|
38,174 |
|
|
|
129,740 |
|
|
|
568 |
|
|
|
|
|
|
|
168,482 |
|
Equity in loss from subsidiaries |
|
|
(230,558 |
) |
|
|
(1,006 |
) |
|
|
|
|
|
|
231,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(298,096 |
) |
|
|
(230,558 |
) |
|
|
(1,006 |
) |
|
|
231,564 |
|
|
|
(298,096 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
(19) Supplemental Financial Information (Continued)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended August 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lennar |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(In thousands) |
|
Corporation |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$ |
(452,719 |
) |
|
|
(371,537 |
) |
|
|
20,352 |
|
|
|
351,185 |
|
|
|
(452,719 |
) |
Adjustments to reconcile net earnings (loss) to net
cash
provided by (used in) operating activities |
|
|
144,275 |
|
|
|
1,060,910 |
|
|
|
(14,365 |
) |
|
|
(351,185 |
) |
|
|
839,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
(308,444 |
) |
|
|
689,373 |
|
|
|
5,987 |
|
|
|
|
|
|
|
386,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in investments in unconsolidated entities, net |
|
|
|
|
|
|
(206,029 |
) |
|
|
(48,004 |
) |
|
|
|
|
|
|
(254,033 |
) |
Other |
|
|
(52 |
) |
|
|
19,966 |
|
|
|
(460 |
) |
|
|
|
|
|
|
19,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(52 |
) |
|
|
(186,063 |
) |
|
|
(48,464 |
) |
|
|
|
|
|
|
(234,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under financial services debt |
|
|
|
|
|
|
(69 |
) |
|
|
(81,110 |
) |
|
|
|
|
|
|
(81,179 |
) |
Net proceeds from 12.25% senior notes due 2017 |
|
|
386,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
386,892 |
|
Redemption of 7 5/8% senior notes due 2009 |
|
|
(281,477 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(281,477 |
) |
Partial redemption of 5.125% senior notes due 2010 |
|
|
(19,177 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,177 |
) |
Partial redemption of 5.95% senior notes due 2011 |
|
|
(4,647 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,647 |
) |
Net repayments on other borrowings |
|
|
|
|
|
|
(4,664 |
) |
|
|
(45,505 |
) |
|
|
|
|
|
|
(50,169 |
) |
Exercise of land option contracts from an
unconsolidated land investment venture |
|
|
|
|
|
|
(22,907 |
) |
|
|
|
|
|
|
|
|
|
|
(22,907 |
) |
Net receipts related to minority interests |
|
|
|
|
|
|
|
|
|
|
222 |
|
|
|
|
|
|
|
222 |
|
Common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances |
|
|
221,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221,125 |
|
Repurchases |
|
|
(1,130 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,130 |
) |
Dividends |
|
|
(20,260 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,260 |
) |
Intercompany |
|
|
265,307 |
|
|
|
(464,249 |
) |
|
|
198,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
546,633 |
|
|
|
(491,889 |
) |
|
|
72,549 |
|
|
|
|
|
|
|
127,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
238,137 |
|
|
|
11,421 |
|
|
|
30,072 |
|
|
|
|
|
|
|
279,630 |
|
Cash and cash equivalents at beginning of period |
|
|
1,007,594 |
|
|
|
125,437 |
|
|
|
70,391 |
|
|
|
|
|
|
|
1,203,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
1,245,731 |
|
|
|
136,858 |
|
|
|
100,463 |
|
|
|
|
|
|
|
1,483,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
(19) Supplemental Financial Information (Continued)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended August 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lennar |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(In thousands) |
|
Corporation |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(298,096 |
) |
|
|
(230,558 |
) |
|
|
(1,006 |
) |
|
|
231,564 |
|
|
|
(298,096 |
) |
Adjustments to reconcile net loss to net cash
provided by operating activities |
|
|
567,908 |
|
|
|
728,759 |
|
|
|
87,361 |
|
|
|
(231,564 |
) |
|
|
1,152,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
269,812 |
|
|
|
498,201 |
|
|
|
86,355 |
|
|
|
|
|
|
|
854,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in investments in unconsolidated entities, net |
|
|
|
|
|
|
(263,406 |
) |
|
|
|
|
|
|
|
|
|
|
(263,406 |
) |
Other |
|
|
(691 |
) |
|
|
(3,694 |
) |
|
|
11,539 |
|
|
|
|
|
|
|
7,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
(691 |
) |
|
|
(267,100 |
) |
|
|
11,539 |
|
|
|
|
|
|
|
(256,252 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under financial services debt |
|
|
|
|
|
|
|
|
|
|
(347,272 |
) |
|
|
|
|
|
|
(347,272 |
) |
Net repayments on other borrowings |
|
|
|
|
|
|
(46,570 |
) |
|
|
(82,460 |
) |
|
|
|
|
|
|
(129,030 |
) |
Exercise of land option contracts from an
unconsolidated land investment venture |
|
|
|
|
|
|
(44,146 |
) |
|
|
|
|
|
|
|
|
|
|
(44,146 |
) |
Net receipts related to minority interests |
|
|
|
|
|
|
|
|
|
|
145,089 |
|
|
|
|
|
|
|
145,089 |
|
Common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances |
|
|
224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
224 |
|
Repurchases |
|
|
(1,686 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,686 |
) |
Dividends |
|
|
(77,073 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77,073 |
) |
Intercompany |
|
|
70,498 |
|
|
|
(202,629 |
) |
|
|
132,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(8,037 |
) |
|
|
(293,345 |
) |
|
|
(152,512 |
) |
|
|
|
|
|
|
(453,894 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
261,084 |
|
|
|
(62,244 |
) |
|
|
(54,618 |
) |
|
|
|
|
|
|
144,222 |
|
Cash and cash equivalents at beginning of period |
|
|
497,384 |
|
|
|
139,733 |
|
|
|
158,077 |
|
|
|
|
|
|
|
795,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
758,468 |
|
|
|
77,489 |
|
|
|
103,459 |
|
|
|
|
|
|
|
939,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our unaudited condensed consolidated financial statements and
accompanying notes included under Item 1 of this Report and our audited consolidated financial
statements and accompanying notes included in our Annual Report on Form 10-K for our fiscal year
ended November 30, 2008.
Some of the statements in this Managements Discussion and Analysis of Financial Condition and
Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q, are forward-looking
statements, as that term is defined in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements may include statements regarding our business, financial
condition, results of operations, cash flows, strategies and prospects. You can identify
forward-looking statements by the fact that these statements do not relate strictly to historical
or current matters. Rather, forward-looking statements relate to anticipated or expected events,
activities, trends or results. Because forward-looking statements relate to matters that have not
yet occurred, these statements are inherently subject to risks and uncertainties. Many factors
could cause our actual activities or results to differ materially from the activities and results
anticipated in forward-looking statements. These factors include those described under the caption
Risk Factors included in Item 1A of our Annual Report on Form 10-K for our fiscal year ended
November 30, 2008. We do not undertake any obligation to update forward-looking statements, except
as required by Federal securities laws.
Outlook
During the third quarter of 2009, the overall housing market appears to have continued its
road back to recovery as more confident homebuyers took advantage of increased affordability,
declining home prices, historically low interest rates and government stimulus programs. While high
unemployment, increased foreclosures and strict credit standards continue to present challenges for
the industry to generate a more normalized sales pace and pricing, consumer sentiment has
significantly improved as homebuyers appear to have recognized that the residential housing market
is stabilizing.
Our strategy has been to streamline our core homebuilding operations for a return to
profitability and to position us for future opportunities. We have continued to make strategic
operational changes in order to address the current homebuilding environment by focusing on S,G&A
control and efficient low-cost floor plans targeted to first-time and value-focused homebuyers.
S,G&A control has resulted in the centralization of functions and reduction of homebuilding
divisions in order to significantly lower overhead costs, while our focus on efficient low-cost
floor plans and market tuned product has enabled us to reduce our construction cost per square foot
and the number of floor plans we bring to market.
In
addition, we continue to focus on carefully managing our inventory levels
and working on reducing our joint
ventures and our net recourse indebtedness exposure. We will also continue to
focus on cash generation and returning to homebuilding profitability.
(1) Results of Operations
Overview
We historically have experienced, and expect to continue to experience, variability in
quarterly results. Our results of operations for the three and nine months ended August 31, 2009
are not necessarily indicative of the results to be expected for the full year.
Our net loss was $171.6 million, or $0.97 per basic and diluted share, in the third quarter of
2009, compared to net loss of $89.0 million, or $0.56 per basic and diluted share, in the third
quarter of 2008. Net loss was $452.7 million, or $2.72 per basic and diluted share, in the nine
months ended August 31, 2009, compared to a net loss of $298.1 million, or $1.88 per basic and
diluted share, in the nine months
ended August 31, 2008. Market conditions remained challenging in all of our regions and the
net loss for
30
the three and nine months ended August 31, 2009 is attributable to those conditions.
Our gross margins decreased during the three and nine months ended August 31, 2009, compared to the
same periods last year, primarily as a result of Statement of Financial Accounting Standards No.
144, Accounting for the Impairment of Long-lived Assets, (SFAS 144) valuation adjustments and a
decrease in the average sales price of homes delivered during the three and nine months ended
August 31, 2009, compared to the same periods last year.
Financial information relating to our operations was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(In thousands) |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
$ |
635,266 |
|
|
|
995,731 |
|
|
|
1,946,624 |
|
|
|
2,967,651 |
|
Sales of land |
|
|
8,347 |
|
|
|
20,425 |
|
|
|
31,252 |
|
|
|
88,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homebuilding revenues |
|
|
643,613 |
|
|
|
1,016,156 |
|
|
|
1,977,876 |
|
|
|
3,056,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of homes sold |
|
|
585,770 |
|
|
|
848,609 |
|
|
|
1,786,854 |
|
|
|
2,595,468 |
|
Cost of land sold |
|
|
17,792 |
|
|
|
49,273 |
|
|
|
48,839 |
|
|
|
149,526 |
|
Selling, general and administrative |
|
|
100,798 |
|
|
|
156,298 |
|
|
|
314,501 |
|
|
|
488,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homebuilding costs and expenses |
|
|
704,360 |
|
|
|
1,054,180 |
|
|
|
2,150,194 |
|
|
|
3,233,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding operating margins |
|
|
(60,747 |
) |
|
|
(38,024 |
) |
|
|
(172,318 |
) |
|
|
(176,806 |
) |
Equity in loss from unconsolidated entities |
|
|
(42,303 |
) |
|
|
(10,958 |
) |
|
|
(105,110 |
) |
|
|
(52,857 |
) |
Other expense, net |
|
|
(51,697 |
) |
|
|
(52,228 |
) |
|
|
(122,053 |
) |
|
|
(121,895 |
) |
Minority interest income, net |
|
|
2,779 |
|
|
|
9,016 |
|
|
|
11,033 |
|
|
|
9,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding operating loss |
|
$ |
(151,968 |
) |
|
|
(92,194 |
) |
|
|
(388,448 |
) |
|
|
(342,558 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial services revenues |
|
$ |
77,117 |
|
|
|
90,384 |
|
|
|
227,770 |
|
|
|
240,893 |
|
Financial services costs and expenses |
|
|
65,961 |
|
|
|
103,245 |
|
|
|
199,583 |
|
|
|
266,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial services operating earnings (loss) |
|
$ |
11,156 |
|
|
|
(12,861 |
) |
|
|
28,187 |
|
|
|
(25,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating loss |
|
$ |
(140,812 |
) |
|
|
(105,055 |
) |
|
|
(360,261 |
) |
|
|
(368,125 |
) |
Corporate general and administrative expenses |
|
|
(28,053 |
) |
|
|
(34,047 |
) |
|
|
(86,323 |
) |
|
|
(98,453 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before (provision) benefit for income taxes |
|
$ |
(168,865 |
) |
|
|
(139,102 |
) |
|
|
(446,584 |
) |
|
|
(466,578 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended August 31, 2009 versus Three Months Ended August 31, 2008
Revenues from home sales decreased 36% in the third quarter of 2009 to $635.3 million from
$995.7 million in 2008. Revenues were lower primarily due to a 28% decrease in the number of home
deliveries, excluding unconsolidated entities, and a 12% decrease in the average sales price of
homes delivered in the third quarter of 2009. New home deliveries, excluding unconsolidated
entities, decreased to 2,660 homes in the third quarter of 2009 from 3,694 homes last year. In the
third quarter of 2009, new home deliveries were lower in each of our homebuilding segments and
Homebuilding Other, compared to 2008. The average sales price of homes delivered decreased to
$239,000 in the third quarter of 2009 from $270,000 in the same period last year. Sales incentives
offered to homebuyers were $42,200 per home delivered in the third quarter of 2009, compared to
$45,900 per home delivered in the same period last year, and declined sequentially from $52,600 per
home delivered in the second quarter of 2009.
Gross margins on home sales were $49.5 million, or 7.8%, in the third quarter of 2009, which
included $49.4 million of SFAS 144 valuation adjustments, compared to gross margins on home sales
of $147.1 million, or 14.8%, in the third quarter of 2008, which included $32.3 million of SFAS 144
valuation adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments were
$98.9 million, or 15.6%, in the third quarter of 2009, compared to $179.4 million, or 18.0%, in the
third quarter of 2008. Gross margin percentage on home sales, excluding SFAS 144 valuation
adjustments, decreased compared to last year, due to reduced pricing and to sales incentives as a
percentage of revenues from home sales
31
increasing to 15.0% in the third quarter of 2009, from 14.5%
in the same period last year. Gross margins
on home sales excluding SFAS 144 valuation adjustments is a non-GAAP financial measure which
is discussed in the Non-GAAP Financial Measure section.
Homebuilding interest expense was $40.7 million in the third quarter of 2009 ($17.8 million
was included in cost of homes sold, $0.5 million was included in cost of land sold and $22.4
million was included in other expense, net), compared to $27.6 million in the third quarter of 2008
($21.4 million was included in cost of homes sold, $1.0 million was included in cost of land sold
and $5.2 million was included in other expense, net). Despite a decrease in deliveries during the
third quarter of 2009, compared to the third quarter of 2008, interest expense increased primarily
due to the interest related to $400 million of 12.25% senior notes due 2017 issued during the
second quarter of 2009 and a reduction in qualifying assets eligible for interest capitalization as
a result of a decrease in inventories.
Selling, general and administrative expenses were reduced by $55.5 million, or 36%, in the
third quarter of 2009, compared to the same period last year, primarily due to reductions in
associate headcount, variable selling expenses and fixed costs. As a percentage of revenues from
home sales, selling, general and administrative expenses were 15.9% in the third quarter of 2009
and 15.7% in 2008.
Losses on land sales totaled $9.4 million in the third quarter of 2009, which included $0.6
million of SFAS 144 valuation adjustments and $8.7 million of write-offs of deposits and
pre-acquisition costs related to homesites under option that we do not intend to purchase. In the
third quarter of 2008, losses on land sales totaled $28.8 million, which included $21.4 million of
SFAS 144 valuation adjustments and $10.9 million of write-offs of deposits and pre-acquisition
costs related to homesites that were under option.
Equity in loss from unconsolidated entities was $42.3 million in the third quarter of 2009,
which included $31.0 million of SFAS 144 valuation adjustments related to assets of unconsolidated
entities in which we have investments, compared to equity in loss from unconsolidated entities of
$11.0 million in the third quarter of 2008, which included $2.9 million of SFAS 144 valuation
adjustments related to assets of unconsolidated entities in which we have investments.
Other expense, net, was $51.7 million in the third quarter of 2009, which included $27.5
million of Accounting Principles Board Opinion No. 18,
The Equity Method of Accounting for Investments in Common Stock, (APB 18) valuation adjustments to our investments in unconsolidated entities and $0.5
million of write-offs of notes receivable, compared to other expense, net, of $52.2 million in the
third quarter of 2008, which included $40.0 million of APB 18
valuation adjustments
to our investments in unconsolidated entities and $5.6 million of write-offs of notes receivable.
Minority interest income, net, was $2.8 million in the third quarter of 2009, compared to
minority interest income, net, of $9.0 million in the third quarter of 2008, which included $7.9
million of minority interest income as a result of a $15.9 million SFAS 144 valuation adjustment to
inventory of a 50%-owned consolidated joint venture.
Sales of land, equity in loss from unconsolidated entities, other expense, net and minority
interest income, net may vary significantly from period to period depending on the timing of land
sales and other transactions entered into by us and unconsolidated entities in which we have
investments.
Operating earnings for the Financial Services segment was $11.2 million in the third quarter
of 2009, compared to an operating loss of $12.9 million in the same period last year. In the third
quarter of 2008, there was a $27.2 million write-off of goodwill related to the segments mortgage
operations, compared to no write-off in the third quarter of 2009.
Corporate general and administrative expenses were reduced by $6.0 million, or 18%, in the
third quarter of 2009, compared to the same period last year. As a percentage of total revenues,
corporate general and administrative expenses increased to 3.9% in the third quarter of 2009, from
3.1% in 2008, due to lower revenues.
32
SFAS 109 requires a reduction of the carrying amounts of deferred tax assets by a valuation
allowance, if based on available evidence, it is more likely than not that such assets will not be
realized. As a result of its net loss during the three months ended August 31, 2009, we generated
deferred tax assets of $60.2
million and recorded a non-cash valuation allowance in accordance with SFAS 109 against the
entire amount of deferred tax assets generated.
During the three months ended August 31, 2009, we issued 8.1 million shares of our Class A
common stock under an equity offering into the market from time to time for gross proceeds of $99.2
million.
In July 2009, the United States Bankruptcy Court for the District of Delaware confirmed the
plan of reorganization for LandSource Communities Development LLC (LandSource). As a result of
the bankruptcy proceedings, LandSource was reorganized into a new company called Newhall Land
Development, LLC, (Newhall). The reorganized company emerged from Chapter 11 free of bank debt.
As part of the reorganization plan, we invested $140 million in exchange for approximately a 15%
equity interest in the reorganized Newhall, ownership in several communities that were formerly
owned by LandSource and the settlement and release of any claims that might have been asserted
against us.
Our overall effective income tax rates were (1.62%) and 36.04%, respectively for the three
months ended August 31, 2009 and 2008. The decrease in the effective tax rate, compared with the
same period during 2008, resulted primarily from the establishment of a deferred tax asset
valuation allowance.
Nine Months Ended August 31, 2009 versus Nine Months Ended August 31, 2008
Revenues from home sales decreased 34% in the nine months ended August 31, 2009 to $1.9
billion from $3.0 billion in 2008. Revenues were lower primarily due to a 27% decrease in the
number of home deliveries, excluding unconsolidated entities, and a 10% decrease in the average
sales price of homes delivered in 2009. New home deliveries, excluding unconsolidated entities,
decreased to 7,934 homes in the nine months ended August 31, 2009 from 10,860 homes last year. In
the nine months ended August 31, 2009, new home deliveries were lower in each of our homebuilding
segments and Homebuilding Other, compared to 2008. The average sales price of homes delivered
decreased to $245,000 in the nine months ended August 31, 2009 from $274,000 in 2008. Sales
incentives offered to homebuyers were $48,600 per home delivered in the nine months ended August
31, 2009, compared to $47,500 per home delivered in the same period last year.
Gross margins on home sales were $159.8 million, or 8.2%, in the nine months ended August 31,
2009, which included $124.7 million of SFAS 144 valuation adjustments, compared to gross margins on
home sales of $372.2 million, or 12.5%, in the nine months ended August 31, 2008, which included
$132.1 million of SFAS 144 valuation adjustments. Gross margins on home sales excluding SFAS 144
valuation adjustments were $284.5 million, or 14.6%, in the nine months ended August 31, 2009,
compared to $504.3 million, or 17.0%, in 2008. Gross margin percentage on home sales, excluding
SFAS 144 valuation adjustments, decreased compared to last year, due to reduced pricing and to
sales incentives as a percentage of revenues from home sales increasing to 16.5% in the nine months
ended August 31, 2009, from 14.8% in the same period last year. Gross margins on home sales
excluding SFAS 144 valuation adjustments is a non-GAAP financial measure, which is discussed
in the Non-GAAP Financial Measure section.
Homebuilding interest expense was $99.5 million in the nine months ended August 31, 2009
($45.5 million was included in cost of homes sold, $5.0 million was included in cost of land sold
and $49.0 million was included in other expense, net), compared to $98.0 million in the same period
last year ($73.6 million was included in cost of homes sold, $2.3 million was included in cost of
land sold and $22.1 million was included in other expense, net). Despite a decrease in deliveries
during the nine months ended August 31, 2009, compared to the same period last year, interest
expense increased primarily due to the interest related to $400 million of 12.25% senior notes due
2017 issued during the second quarter of 2009 and a reduction in qualifying assets eligible for
interest capitalization as a result of a decrease in inventories.
33
Selling, general and administrative expenses were reduced by $173.8 million, or 36%, in the
nine months ended August 31, 2009, compared to the same period last year, primarily due to
reductions in associate headcount, variable selling expenses and fixed costs. As a percentage of
revenues from home sales, selling, general and administrative expenses improved to 16.2% in the
nine months ended August 31, 2009, from 16.5% in 2008.
Losses on land sales totaled $17.6 million in the nine months ended August 31, 2009, which
included $6.5 million of SFAS 144 valuation adjustments and $20.8 million of write-offs of deposits
and pre-acquisition costs related to homesites under option that we do not intend to purchase. In
the nine months ended August 31, 2008, losses on land sales totaled $60.7 million, which included
$39.0 million of SFAS 144 valuation adjustments and $34.3 million of write-offs of deposits and
pre-acquisition costs related to homesites that were under option.
Equity in loss from unconsolidated entities was $105.1 million in the nine months ended August
31, 2009, which included $81.0 million of SFAS 144 valuation adjustments related to assets of
unconsolidated entities in which we have investments, compared to equity in loss from
unconsolidated entities of $52.9 million in the nine months ended August 31, 2008, which included
$29.9 million of SFAS 144 valuation adjustments related to assets of unconsolidated entities in
which we have investments.
Other expense, net, was $122.1 million in the nine months ended August 31, 2009, which
included $71.7 million of APB 18 valuation adjustments to our investments in unconsolidated
entities and $0.5 million of write-offs of notes receivable, compared to other expense, net, of
$121.9 million in the nine months ended August 31, 2008, which included $116.5 million of APB 18
valuation adjustments to our investments in unconsolidated entities and $5.6 million of write-offs
of notes receivable.
Minority interest income, net, was $11.0 million in the nine months ended August 31, 2009,
compared to minority interest income, net, of $9.0 million in the nine months ended August 31,
2008, which included $7.9 million of minority interest as a result of a $15.9 million SFAS 144
valuation adjustment to inventory of a 50%-owned consolidated joint venture.
Sales of land, equity in loss from unconsolidated entities, other expense, net and minority
interest income, net may vary significantly from period to period depending on the timing of land
sales and other transactions entered into by us and unconsolidated entities in which we have
investments.
Operating earnings for the Financial Services segment was $28.2 million in the nine months
ended August 31, 2009, compared to an operating loss of $25.6 million in the same period last year.
The increase in profitability in the Financial Services segment was primarily due to lower fixed
costs as a result of its successful cost reduction initiatives implemented throughout the downturn.
In addition, in the nine months ended August 31, 2008, there was a $27.2 million write-off of
goodwill related to the segments mortgage operations, compared to no write-off in the nine months
ended August 31, 2009.
Corporate general and administrative expenses were reduced by $12.1 million, or 12%, in the
nine months ended August 31, 2009, compared to the same period last year. As a percentage of total
revenues, corporate general and administrative expenses increased to 3.9% in the nine months ended
August 31, 2009, from 3.0% in the same period last year, due to lower revenues.
SFAS 109 requires a reduction of the carrying amounts of deferred tax assets by a valuation
allowance, if based on available evidence, it is more likely than not that such assets will not be
realized. As a result of its net loss during the nine months ended August 31, 2009, we generated
deferred tax assets of $162.4 million and recorded a non-cash valuation allowance in accordance
with SFAS 109 against the entire amount of deferred tax assets generated.
As of August 31, 2009, we had issued 21.0 million shares of our Class A common stock under an
equity offering into the market from time to time for gross proceeds of $225.5 million. We are
authorized to sell shares for up to $275 million under the equity offering. We will use the
proceeds from the equity offering for general corporate purposes
which may include acquisitions.
34
Our overall effective income tax rates were (1.37%) and 36.11%, respectively for the nine
months
ended August 31, 2009 and 2008. The decrease in the effective tax rate, compared with the
same period during 2008, resulted primarily from the establishment of a deferred tax asset
valuation allowance.
Non-GAAP Financial Measure
Gross margins on home sales excluding SFAS 144 valuation adjustments is a non-GAAP financial
measure, and is defined by us as sales of homes revenue less costs of homes sold excluding SFAS 144
valuation adjustments recorded during the period. Management finds this to be an important
and useful measure in evaluating our performance because it discloses the profit we generate on
homes we actually delivered during the period, as our SFAS 144 valuation adjustments relate to
inventory that we did not deliver during the period. Gross margins on home sales excluding SFAS
144 valuation adjustments also is important to our management, because it assists our management in
making strategic decisions regarding our construction pace, product mix and product pricing based
upon the profitability we generated on homes we actually delivered during previous periods. We
believe investors also find gross margins on home sales excluding SFAS 144 valuation adjustments to
be important and useful because it discloses a profitability measure on homes we actually delivered
in a period that can be compared to the profitability on homes we delivered in a prior period
without regard to the variability of SFAS 144 valuation adjustments recorded from period to period.
In addition, to the extent that our competitors provide similar information, disclosure of our
gross margins on home sales excluding SFAS 144 valuation adjustments helps readers of our financial
statements compare our ability to generate profits with regard to the homes we deliver in a period
to our competitors ability to generate profits with regard to the homes they deliver in the same
period.
Although management finds gross margins on home sales excluding SFAS 144 valuation adjustments
to be an important measure in conducting and evaluating our operations, this measure has
limitations as an analytical tool as it is not reflective of the actual profitability generated by
our company during the period. This is because it excludes charges we recorded, in accordance with
SFAS 144, relating to inventory that was impaired during the period. In addition, because gross
margins on home sales excluding SFAS 144 valuation adjustments is a financial measure that is not
calculated in accordance with GAAP, it may not be completely comparable to similarly titled
measures of our competitors due to differences in methods of calculation and charges being
excluded. Our management compensates for the limitations of using gross margins on home sales
excluding SFAS 144 valuation adjustments by using this non-GAAP measure only to supplement our GAAP
results in order to provide a more complete understanding of the factors and trends affecting our
operations. In order to analyze our overall performance and actual profitability relative to our
homebuilding operations, we also compare our gross margins on home sales during the period,
inclusive of SFAS 144 valuation adjustments, with the same measure during prior comparable periods.
Due to the limitations discussed above, gross margins on home sales excluding SFAS 144 valuation
adjustments should not be viewed in isolation as it is not a substitute for GAAP measures of gross
margins.
The table set forth below reconciles our gross margins on home sales excluding SFAS 144
valuation adjustments for the three and nine months ended August 31, 2009 and 2008 to our gross
margins on home sales for the three and nine months ended August 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
$ |
635,266 |
|
|
|
995,731 |
|
|
|
1,946,624 |
|
|
|
2,967,651 |
|
Cost of homes sold |
|
|
585,770 |
|
|
|
848,609 |
|
|
|
1,786,854 |
|
|
|
2,595,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales |
|
|
49,496 |
|
|
|
147,122 |
|
|
|
159,770 |
|
|
|
372,183 |
|
SFAS 144 valuation adjustments to finished homes, CIP and
land on which we intend to build homes |
|
|
49,398 |
|
|
|
32,284 |
|
|
|
124,736 |
|
|
|
132,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales excluding SFAS 144
valuation adjustments |
|
$ |
98,894 |
|
|
|
179,406 |
|
|
|
284,506 |
|
|
|
504,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
Homebuilding Segments
We have grouped our homebuilding activities into four reportable segments, which we refer to
as Homebuilding East, Homebuilding Central, Homebuilding West and Homebuilding Houston, based
primarily upon similar economic characteristics, geography and product type. Information about
homebuilding activities in states that do not have economic characteristics that are similar to
those in other states in the same geographic area is grouped under Homebuilding Other.
References in this Managements Discussion and Analysis of Financial Condition and Results of
Operations to homebuilding segments are to those reportable segments.
At August 31, 2009, our reportable homebuilding segments and Homebuilding Other consisted of
homebuilding divisions located in:
East: Florida, Maryland, New Jersey and Virginia
Central: Arizona, Colorado and Texas (1)
West: California and Nevada
Houston: Houston, Texas
Other: Illinois, Minnesota, New York, North Carolina and South Carolina
|
|
|
(1) |
|
Texas in the Central reportable segment excludes Houston, Texas, which is its own
reportable segment. |
The following tables set forth selected financial and operational information related to our
homebuilding operations for the periods indicated:
Selected Financial and Operational Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
$ |
190,321 |
|
|
|
306,415 |
|
|
|
583,630 |
|
|
|
878,856 |
|
Sales of land |
|
|
1,735 |
|
|
|
11,956 |
|
|
|
18,171 |
|
|
|
19,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total East |
|
|
192,056 |
|
|
|
318,371 |
|
|
|
601,801 |
|
|
|
898,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
94,297 |
|
|
|
111,429 |
|
|
|
247,823 |
|
|
|
389,155 |
|
Sales of land |
|
|
2,616 |
|
|
|
975 |
|
|
|
4,388 |
|
|
|
15,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central |
|
|
96,913 |
|
|
|
112,404 |
|
|
|
252,211 |
|
|
|
404,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
170,974 |
|
|
|
320,943 |
|
|
|
587,970 |
|
|
|
1,000,056 |
|
Sales of land |
|
|
1,844 |
|
|
|
2,804 |
|
|
|
3,791 |
|
|
|
28,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total West |
|
|
172,818 |
|
|
|
323,747 |
|
|
|
591,761 |
|
|
|
1,028,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
100,442 |
|
|
|
152,075 |
|
|
|
295,596 |
|
|
|
385,775 |
|
Sales of land |
|
|
1,970 |
|
|
|
2,301 |
|
|
|
4,720 |
|
|
|
7,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Houston |
|
|
102,412 |
|
|
|
154,376 |
|
|
|
300,316 |
|
|
|
393,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
79,232 |
|
|
|
104,869 |
|
|
|
231,605 |
|
|
|
313,809 |
|
Sales of land |
|
|
182 |
|
|
|
2,389 |
|
|
|
182 |
|
|
|
17,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other |
|
|
79,414 |
|
|
|
107,258 |
|
|
|
231,787 |
|
|
|
331,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homebuilding revenues |
|
$ |
643,613 |
|
|
|
1,016,156 |
|
|
|
1,977,876 |
|
|
|
3,056,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Operating earnings (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
$ |
(37,616 |
) |
|
|
22,787 |
|
|
|
(56,400 |
) |
|
|
(824 |
) |
Sales of land |
|
|
(5,696 |
) |
|
|
(18,742 |
) |
|
|
(5,999 |
) |
|
|
(29,619 |
) |
Equity in loss from unconsolidated entities |
|
|
(1,676 |
) |
|
|
(3,262 |
) |
|
|
(4,312 |
) |
|
|
(30,275 |
) |
Other expense, net |
|
|
(7,788 |
) |
|
|
(4,683 |
) |
|
|
(19,561 |
) |
|
|
(15,092 |
) |
Minority interest income, net |
|
|
86 |
|
|
|
8,999 |
|
|
|
304 |
|
|
|
9,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total East |
|
|
(52,690 |
) |
|
|
5,099 |
|
|
|
(85,968 |
) |
|
|
(66,213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Central: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
(4,348 |
) |
|
|
(19,449 |
) |
|
|
(30,420 |
) |
|
|
(55,299 |
) |
Sales of land |
|
|
160 |
|
|
|
(1,846 |
) |
|
|
(168 |
) |
|
|
(11,719 |
) |
Equity in earnings (loss) from unconsolidated entities |
|
|
(940 |
) |
|
|
338 |
|
|
|
(2,763 |
) |
|
|
1,106 |
|
Other income (expense), net |
|
|
(4,579 |
) |
|
|
(680 |
) |
|
|
(21,579 |
) |
|
|
1,534 |
|
Minority interest income (expense), net |
|
|
1 |
|
|
|
|
|
|
|
94 |
|
|
|
(465 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central |
|
|
(9,706 |
) |
|
|
(21,637 |
) |
|
|
(54,836 |
) |
|
|
(64,843 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
West: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
(15,947 |
) |
|
|
(30,250 |
) |
|
|
(70,765 |
) |
|
|
(80,616 |
) |
Sales of land |
|
|
(3,274 |
) |
|
|
(5,794 |
) |
|
|
(5,983 |
) |
|
|
(15,997 |
) |
Equity in loss from unconsolidated entities |
|
|
(39,169 |
) |
|
|
(7,474 |
) |
|
|
(96,198 |
) |
|
|
(21,997 |
) |
Other expense, net |
|
|
(33,825 |
) |
|
|
(24,256 |
) |
|
|
(69,150 |
) |
|
|
(87,770 |
) |
Minority interest income, net |
|
|
1,337 |
|
|
|
17 |
|
|
|
4,015 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total West |
|
|
(90,878 |
) |
|
|
(67,757 |
) |
|
|
(238,081 |
) |
|
|
(206,362 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
5,644 |
|
|
|
15,769 |
|
|
|
15,108 |
|
|
|
31,320 |
|
Sales of land |
|
|
(680 |
) |
|
|
476 |
|
|
|
(1,696 |
) |
|
|
801 |
|
Equity in loss from unconsolidated entities |
|
|
(365 |
) |
|
|
(278 |
) |
|
|
(1,514 |
) |
|
|
(808 |
) |
Other expense, net |
|
|
(1,029 |
) |
|
|
(499 |
) |
|
|
(1,896 |
) |
|
|
(643 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Houston |
|
|
3,570 |
|
|
|
15,468 |
|
|
|
10,002 |
|
|
|
30,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
965 |
|
|
|
1,967 |
|
|
|
(12,254 |
) |
|
|
(10,686 |
) |
Sales of land |
|
|
45 |
|
|
|
(2,942 |
) |
|
|
(3,741 |
) |
|
|
(4,167 |
) |
Equity in loss from unconsolidated entities |
|
|
(153 |
) |
|
|
(282 |
) |
|
|
(323 |
) |
|
|
(883 |
) |
Other expense, net |
|
|
(4,476 |
) |
|
|
(22,110 |
) |
|
|
(9,867 |
) |
|
|
(19,924 |
) |
Minority interest income (expense), net |
|
|
1,355 |
|
|
|
|
|
|
|
6,620 |
|
|
|
(150 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other |
|
|
(2,264 |
) |
|
|
(23,367 |
) |
|
|
(19,565 |
) |
|
|
(35,810 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homebuilding operating loss |
|
$ |
(151,968 |
) |
|
|
(92,194 |
) |
|
|
(388,448 |
) |
|
|
(342,558 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
37
Summary of Homebuilding Data
Deliveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Homes |
|
|
Dollar Value (In thousands) |
|
|
Average Sales Price |
|
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
East |
|
|
885 |
|
|
|
1,197 |
|
|
$ |
190,321 |
|
|
|
313,505 |
|
|
$ |
215,000 |
|
|
|
262,000 |
|
Central |
|
|
462 |
|
|
|
561 |
|
|
|
94,297 |
|
|
|
111,430 |
|
|
|
204,000 |
|
|
|
199,000 |
|
West |
|
|
551 |
|
|
|
885 |
|
|
|
195,507 |
|
|
|
335,401 |
|
|
|
355,000 |
|
|
|
379,000 |
|
Houston |
|
|
494 |
|
|
|
758 |
|
|
|
100,442 |
|
|
|
152,074 |
|
|
|
203,000 |
|
|
|
201,000 |
|
Other |
|
|
299 |
|
|
|
390 |
|
|
|
79,232 |
|
|
|
135,555 |
|
|
|
265,000 |
|
|
|
348,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,691 |
|
|
|
3,791 |
|
|
$ |
659,799 |
|
|
|
1,047,965 |
|
|
$ |
245,000 |
|
|
|
276,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the total homes delivered listed above, 31 homes with a dollar value of $24.5 million
and an average sales price of $791,000 represent deliveries from unconsolidated entities for the
three months ended August 31, 2009, compared to 97 deliveries with a dollar value of $52.2 million
and an average sales price of $538,000 for the three months ended August 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
Homes |
|
|
Dollar Value (In thousands) |
|
|
Average Sales Price |
|
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
East |
|
|
2,654 |
|
|
|
3,440 |
|
|
$ |
583,630 |
|
|
|
902,585 |
|
|
$ |
220,000 |
|
|
|
262,000 |
|
Central |
|
|
1,243 |
|
|
|
1,837 |
|
|
|
247,823 |
|
|
|
389,155 |
|
|
|
199,000 |
|
|
|
212,000 |
|
West |
|
|
1,758 |
|
|
|
2,874 |
|
|
|
627,724 |
|
|
|
1,106,454 |
|
|
|
357,000 |
|
|
|
385,000 |
|
Houston |
|
|
1,479 |
|
|
|
1,945 |
|
|
|
295,596 |
|
|
|
385,775 |
|
|
|
200,000 |
|
|
|
198,000 |
|
Other |
|
|
848 |
|
|
|
1,121 |
|
|
|
232,155 |
|
|
|
373,778 |
|
|
|
274,000 |
|
|
|
333,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
7,982 |
|
|
|
11,217 |
|
|
$ |
1,986,928 |
|
|
|
3,157,747 |
|
|
$ |
249,000 |
|
|
|
282,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the total homes delivered listed above, 48 homes with a dollar value of $40.3 million
and an average sales price of $840,000 represent deliveries from unconsolidated entities for the
nine months ended August 31, 2009, compared to 357 deliveries with a dollar value of $190.1 million
and an average sales price of $532,000 for the nine months ended August 31, 2008.
Sales Incentives (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Sales Incentives |
|
|
Average Sales Incentives |
|
|
Sales Incentives |
|
|
|
(In thousands) |
|
|
Per Home Delivered |
|
|
as a % of Revenue |
|
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
East |
|
$ |
43,869 |
|
|
|
63,142 |
|
|
$ |
49,600 |
|
|
|
53,900 |
|
|
|
18.7 |
% |
|
|
17.0 |
% |
Central |
|
|
15,151 |
|
|
|
21,011 |
|
|
|
32,800 |
|
|
|
37,500 |
|
|
|
13.9 |
% |
|
|
15.8 |
% |
West |
|
|
24,223 |
|
|
|
53,325 |
|
|
|
46,600 |
|
|
|
62,200 |
|
|
|
12.4 |
% |
|
|
14.2 |
% |
Houston |
|
|
16,781 |
|
|
|
17,853 |
|
|
|
34,000 |
|
|
|
23,600 |
|
|
|
14.3 |
% |
|
|
10.5 |
% |
Other |
|
|
12,157 |
|
|
|
14,347 |
|
|
|
40,700 |
|
|
|
41,300 |
|
|
|
13.3 |
% |
|
|
12.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
112,181 |
|
|
|
169,678 |
|
|
$ |
42,200 |
|
|
|
45,900 |
|
|
|
15.0 |
% |
|
|
14.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
Sales Incentives |
|
|
Average Sales Incentives |
|
|
Sales Incentives |
|
|
|
(In thousands) |
|
|
Per Home Delivered |
|
|
as a % of Revenue |
|
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
East |
|
$ |
139,970 |
|
|
|
179,055 |
|
|
$ |
52,700 |
|
|
|
53,300 |
|
|
|
19.4 |
% |
|
|
16.9 |
% |
Central |
|
|
46,846 |
|
|
|
70,925 |
|
|
|
37,700 |
|
|
|
38,600 |
|
|
|
15.9 |
% |
|
|
15.4 |
% |
West |
|
|
107,170 |
|
|
|
177,563 |
|
|
|
62,600 |
|
|
|
66,600 |
|
|
|
15.4 |
% |
|
|
15.1 |
% |
Houston |
|
|
50,102 |
|
|
|
40,667 |
|
|
|
33,900 |
|
|
|
20,900 |
|
|
|
14.5 |
% |
|
|
9.5 |
% |
Other |
|
|
41,198 |
|
|
|
47,979 |
|
|
|
48,700 |
|
|
|
45,600 |
|
|
|
15.1 |
% |
|
|
13.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
385,286 |
|
|
|
516,189 |
|
|
$ |
48,600 |
|
|
|
47,500 |
|
|
|
16.5 |
% |
|
|
14.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Sales incentives relate to home deliveries during the period, excluding
deliveries by unconsolidated entities. |
38
New Orders (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Homes |
|
|
Dollar Value (In thousands) |
|
|
Average Sales Price |
|
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
East |
|
|
1,046 |
|
|
|
944 |
|
|
$ |
233,718 |
|
|
|
205,855 |
|
|
$ |
223,000 |
|
|
|
218,000 |
|
Central |
|
|
492 |
|
|
|
554 |
|
|
|
98,788 |
|
|
|
106,582 |
|
|
|
201,000 |
|
|
|
192,000 |
|
West |
|
|
651 |
|
|
|
870 |
|
|
|
223,807 |
|
|
|
311,873 |
|
|
|
344,000 |
|
|
|
358,000 |
|
Houston |
|
|
557 |
|
|
|
687 |
|
|
|
116,734 |
|
|
|
127,153 |
|
|
|
210,000 |
|
|
|
185,000 |
|
Other |
|
|
358 |
|
|
|
332 |
|
|
|
87,936 |
|
|
|
91,991 |
|
|
|
246,000 |
|
|
|
277,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,104 |
|
|
|
3,387 |
|
|
$ |
760,983 |
|
|
|
843,454 |
|
|
$ |
245,000 |
|
|
|
249,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the total new orders listed above, 17 homes with a dollar value of $13.8 million and
an average sales price of $816,000 represent new orders from unconsolidated entities for the three
months ended August 31, 2009, compared to 50 new orders with a dollar value of $20.8 million and an
average sales price of $415,000 for the three months ended August 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
Homes |
|
|
Dollar Value (In thousands) |
|
|
Average Sales Price |
|
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
East |
|
|
2,869 |
|
|
|
3,190 |
|
|
$ |
631,866 |
|
|
|
752,201 |
|
|
$ |
220,000 |
|
|
|
236,000 |
|
Central |
|
|
1,421 |
|
|
|
1,811 |
|
|
|
284,725 |
|
|
|
378,622 |
|
|
|
200,000 |
|
|
|
209,000 |
|
West |
|
|
2,032 |
|
|
|
2,762 |
|
|
|
699,885 |
|
|
|
1,037,662 |
|
|
|
344,000 |
|
|
|
376,000 |
|
Houston |
|
|
1,601 |
|
|
|
1,967 |
|
|
|
323,116 |
|
|
|
392,259 |
|
|
|
202,000 |
|
|
|
199,000 |
|
Other |
|
|
935 |
|
|
|
1,098 |
|
|
|
237,145 |
|
|
|
302,300 |
|
|
|
254,000 |
|
|
|
275,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
8,858 |
|
|
|
10,828 |
|
|
$ |
2,176,737 |
|
|
|
2,863,044 |
|
|
$ |
246,000 |
|
|
|
264,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the total new orders listed above, 48 homes with a dollar value of $34.0 million and
an average sales price of $709,000 represent new orders from unconsolidated entities for the nine
months ended August 31, 2009, compared to 212 new orders with a dollar value of $110.9 million and
an average sales price of $523,000 for the nine months ended August 31, 2008.
|
|
|
(2) |
|
New orders represent the number of new sales contracts executed with
homebuyers, net of cancellations, during the three and nine months ended August 31,
2009 and 2008. |
Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
|
|
Dollar Value (In thousands) |
|
|
Average Sales Price |
|
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
East |
|
|
1,004 |
|
|
|
1,541 |
|
|
$ |
252,100 |
|
|
|
416,889 |
|
|
$ |
251,000 |
|
|
|
271,000 |
|
Central |
|
|
301 |
|
|
|
259 |
|
|
|
61,277 |
|
|
|
52,965 |
|
|
|
204,000 |
|
|
|
204,000 |
|
West |
|
|
521 |
|
|
|
770 |
|
|
|
180,955 |
|
|
|
306,975 |
|
|
|
347,000 |
|
|
|
399,000 |
|
Houston |
|
|
391 |
|
|
|
611 |
|
|
|
85,188 |
|
|
|
134,824 |
|
|
|
218,000 |
|
|
|
221,000 |
|
Other |
|
|
258 |
|
|
|
373 |
|
|
|
67,367 |
|
|
|
136,031 |
|
|
|
261,000 |
|
|
|
365,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,475 |
|
|
|
3,554 |
|
|
$ |
646,887 |
|
|
|
1,047,684 |
|
|
$ |
261,000 |
|
|
|
295,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the total homes in backlog listed above, 7 homes with a backlog dollar value of $5.8
million and an average sales price of $829,000 represent the backlog from unconsolidated entities
at August 31, 2009, compared with backlog from unconsolidated entities of 132 homes with a dollar
value of $66.8 million and an average sales price of $506,000 at August 31, 2008.
39
Backlog represents the number of homes under sales contracts. Homes are sold using sales
contracts, which are generally accompanied by sales deposits. In some instances, purchasers are
permitted to cancel sales contracts if they fail to qualify for financing or under certain other
circumstances. We experienced cancellation rates in our homebuilding segments and Homebuilding
Other as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
August 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
East |
|
|
22 |
% |
|
|
34 |
% |
|
|
21 |
% |
|
|
30 |
% |
Central |
|
|
17 |
% |
|
|
25 |
% |
|
|
16 |
% |
|
|
22 |
% |
West |
|
|
16 |
% |
|
|
25 |
% |
|
|
14 |
% |
|
|
23 |
% |
Houston |
|
|
19 |
% |
|
|
25 |
% |
|
|
19 |
% |
|
|
24 |
% |
Other |
|
|
14 |
% |
|
|
22 |
% |
|
|
16 |
% |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall |
|
|
19 |
% |
|
|
27 |
% |
|
|
18 |
% |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended August 31, 2009 versus Three Months Ended August 31, 2008
Homebuilding East: Homebuilding revenues decreased for the three months ended August 31,
2009, compared to the same period last year, primarily due to a decrease in the number of home
deliveries in all the states in this segment, except in New Jersey, and a decrease in the average
sales price of homes delivered in all the states in this segment. Gross margins on home sales were
($10.5) million, or (5.5%), for the three months ended August 31, 2009, including SFAS 144
valuation adjustments of $38.7 million, compared to gross margins on home sales of $58.4 million,
or 19.1%, for the three months ending August 31, 2008, including $8.7 million of SFAS 144 valuation
adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments were $28.2
million, or 14.8%, for the three months ended August 31, 2009, compared to $67.1 million, or 21.9%,
for the same period last year. Gross margin percentage on home sales, excluding SFAS 144 valuation
adjustments, decreased compared to last year due to reduced pricing and higher sales incentives
offered to homebuyers as a percentage of revenues from home sales (18.7% in 2009, compared to 17.0%
in 2008).
Losses on land sales were $5.7 million for the three months ended August 31, 2009, including
$6.0 million of write-offs of deposits and pre-acquisition costs related to land under option that
we do not intend to purchase, compared to losses on land sales of $18.7 million during the same
period last year, including $0.8 million of write-offs of deposits and pre-acquisition costs
related to land that was under option and $19.3 million of SFAS 144 valuation adjustments.
Homebuilding Central: Homebuilding revenues decreased for the three months ended August 31,
2009, compared to the same period last year, primarily due to a decrease in the number of home
deliveries in all the states in this segment. Gross margins on home sales were $10.3 million, or
10.9%, for the three months ended August 31, 2009, including SFAS 144 valuation adjustments of $1.2
million, compared to gross margins on home sales of $4.4 million, or 4.0%, for the three months
ending August 31, 2008, including $2.1 million of SFAS 144 valuation adjustments. Gross margins on
home sales excluding SFAS 144 valuation adjustments were $11.5 million, or 12.2%, for the three
months ended August 31, 2009, compared to $6.5 million, or 5.8%, for the same period last year.
Gross margin percentage on home sales, excluding SFAS 144 valuation adjustments, increased compared
to last year due to our lower inventory basis, continued focus on reducing costs, and lower sales
incentives offered to homebuyers as a percentage of revenues from home sales (13.9% in 2009,
compared to 15.8% in 2008).
Gross profits on land sales were $0.2 million for the three months ended August 31, 2009,
compared to losses on land sales of $1.8 million during the same period last year, including $1.7
million of write-offs of deposits and pre-acquisition costs related to land that was under option
and $1.2 million of SFAS 144 valuation adjustments.
Homebuilding West: Homebuilding revenues decreased for the three months ended August 31,
2009, compared to the same period last year, primarily due to a decrease in the number of home
deliveries and average sales price of homes delivered in all of the states in this segment. Gross
margins on home sales were $21.1 million, or 12.4%, for the three months ended August 31, 2009,
including SFAS 144 valuation adjustments of $6.9 million, compared to gross margins on home sales
of $33.1 million, or 10.3%, for the
40
three months ending August 31, 2008, including $18.9 million of SFAS 144 valuation adjustments. Gross margins on home sales excluding SFAS 144 valuation
adjustments were $28.0 million, or 16.4%, for the three months ended August 31, 2009, compared to
$52.0 million, or 16.2%, for the same period last year. Gross margin percentage on home sales,
excluding SFAS 144 adjustments, increased compared to last year primarily due to lower sales
incentives offered to homebuyers as a percentage of revenues from home sales (12.4% in 2009,
compared to 14.2% in 2008).
Losses on land sales were $3.3 million for the three months ended August 31, 2009, including
$2.8 million of write-offs of deposits and pre-acquisition costs related to land under option that
we do not intend to purchase, compared to losses on land sales of $5.8 million during the same
period last year, including $5.9 million of write-offs of deposits and pre-acquisition costs
related to land that was under option and $0.6 million of SFAS 144 valuation adjustments.
Homebuilding Houston: Homebuilding revenues decreased for the three months ended August 31,
2009, compared to the same period last year, primarily due to a decrease in the number of home
deliveries in this segment. Gross margins on home sales were $16.6 million, or 16.6%, for the three
months ended August 31, 2009, including SFAS 144 valuation adjustments of $0.5 million, compared to
gross margins on home sales of $32.5 million, or 21.3%, for the three months ending August 31,
2008, including $0.7 million of SFAS 144 valuation adjustments. Gross margins on home sales
excluding SFAS 144 valuation adjustments were $17.2 million, or 17.1%, for the three months ended
August 31, 2009, compared to $33.1 million, or 21.8%, for the same period last year. Gross margin
percentage on home sales, excluding SFAS 144 valuation adjustments, decreased compared to last year
due to higher sales incentives offered to homebuyers as a percentage of revenues from home sales
(14.3% in 2009, compared to 10.5% in 2008).
Losses on land sales were $0.7 million for the three months ended August 31, 2009, including
$0.6 million of SFAS 144 valuation adjustments, compared to gross profits on land sales of $0.5
million during the same period last year.
Homebuilding Other: Homebuilding revenues decreased for the three months ended August 31,
2009, compared to the same period last year, primarily due to a decrease in the number of home
deliveries in all states in Homebuilding Other. Gross margins on home sales were $11.9 million, or
15.0%, for the three months ended August 31, 2009, including SFAS 144 valuation adjustments of $2.1
million, compared to gross margins on home sales of $18.8 million, or 17.9%, for the three months
ending August 31, 2008, including $2.0 million of SFAS 144 valuation adjustments. Gross margins on
home sales excluding SFAS 144 valuation adjustments were $14.0 million, or 17.7%, for the three
months ended August 31, 2009, compared to $20.7 million, or 19.8%, for the same period last year.
Gross margin percentage on home sales, excluding SFAS 144 valuation adjustments, decreased compared
to last year primarily due to higher sales incentives offered to homebuyers as a percentage of
revenues from home sales (13.3% in 2009, compared to 12.1% in 2008).
Gross profits on land sales were less than $0.1 million for the three months ended August 31,
2009, compared to losses on land sales of $2.9 million during the same period last year, including
$2.5 million of write-offs of deposits and pre-acquisition costs related to land that was under
option and $0.3 million of SFAS 144 valuation adjustments.
Nine Months Ended August 31, 2009 versus Nine Months Ended August 31, 2008
Homebuilding East: Homebuilding revenues decreased for the nine months ended August 31, 2009,
compared to the same period last year, primarily due to a decrease in the number of home deliveries
in all the states in this segment, except New Jersey, and a decrease in the average sales price of
homes delivered in all the states in this segment. Gross margins on home sales were $19.6 million,
or 3.4%, for the nine months ended August 31, 2009, including SFAS 144 valuation adjustments of
$61.0 million, compared to gross margins on home sales of $127.8 million, or 14.5%, for the nine
months ended August 31, 2008, including $51.0 million of SFAS 144 valuation adjustments. Gross
margins on home sales excluding SFAS 144 valuation adjustments were $80.5 million, or 13.8%, for
the nine months ended August 31, 2009, compared to $178.8 million, or 20.3%, for the same period
last year. Gross margin percentage on home sales, excluding SFAS 144 valuation adjustments,
decreased compared to last year due to reduced
41
pricing and higher sales incentives offered to homebuyers as a percentage of revenues from home sales (19.4% in 2009, compared to 16.9% in 2008).
Losses on land sales were $6.0 million for the nine months ended August 31, 2009, including
$11.7 million of write-offs of deposits and pre-acquisition costs related to land under option that
we do not intend to purchase and $2.1 million of SFAS 144 valuation adjustments, compared to losses
on land sales of $29.6 million during the same period last year, including $11.0 million of
write-offs of deposits and pre-acquisition costs related to land that was under option and $21.8
million of SFAS 144 valuation adjustments.
Homebuilding Central: Homebuilding revenues decreased for the nine months ended August 31,
2009, compared to the same period last year, primarily due to a decrease in the number of home
deliveries in all the states in this segment. Gross margins on home sales were $17.3 million, or
7.0%, for the nine months ended August 31, 2009, including SFAS 144 valuation adjustments of $11.5
million, compared to gross margins on home sales of $21.3 million, or 5.5%, for the nine months
ended August 31, 2008, including $21.1 million of SFAS 144 valuation adjustments. Gross margins on
home sales excluding SFAS 144 valuation adjustments were $28.8 million, or 11.6%, for the nine
months ended August 31, 2009, compared to $42.4 million, or 10.9%, for the same period last year.
Gross margin percentage on home sales, excluding SFAS 144 valuation adjustments, increased compared
to last year due to our lower inventory basis and continued focus on reducing costs. Sales
incentives offered to homebuyers as a percentage of home sales revenues were 15.9% in 2009 and
15.4% in 2008.
Losses on land sales were $0.2 million for the nine months ended August 31, 2009, including
$0.1 million of write-offs of deposits and pre-acquisition costs related to land under option that
we do not intend to purchase and $1.2 million of SFAS 144 valuation adjustments, compared to losses
on land sales of $11.7 million during the same period last year, including $5.8 million of
write-offs of deposits and pre-acquisition costs related to land that was under option and $10.8
million of SFAS 144 valuation adjustments.
Homebuilding West: Homebuilding revenues decreased for the nine months ended August 31, 2009,
compared to the same period last year, primarily due to a decrease in the number of home deliveries
and average sales price of homes delivered in all the states in this segment. Gross margins on home
sales were $51.2 million, or 8.7%, for the nine months ended August 31, 2009, including SFAS 144
valuation adjustments of $40.9 million, compared to gross margins on home sales of $103.8 million,
or 10.4%, for the nine months ended August 31, 2008, including $49.0 million of SFAS 144 valuation
adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments were $92.1
million, or 15.7%, for the nine months ended August 31, 2009, compared to $152.8 million, or 15.3%,
for the same period last year. Gross margin percentage on home sales, excluding SFAS 144 valuation
adjustments, increased compared to last year due to our lower inventory basis and continued focus
on reducing costs. Sales incentives offered to homebuyers as a percentage of home sales revenues
were 15.4% in 2009 and 15.1% in 2008.
Losses on land sales were $6.0 million for the nine months ended August 31, 2009, including
$4.5 million of write-offs of deposits and pre-acquisition costs related to land under option that
we do not intend to purchase and $2.5 million of SFAS 144 valuation adjustments, compared to losses
on land sales of $16.0 million during the same period last year, including $10.1 million of
write-offs of deposits and pre-acquisition costs related to land that was under option and $5.4 million of SFAS 144 valuation
adjustments.
Homebuilding Houston: Homebuilding revenues decreased for the nine months ended August 31,
2009, compared to the same period last year, primarily due to a decrease in the number of home
deliveries in this segment. Gross margins on home sales were $50.3 million, or 17.0%, for the nine
months ended August 31, 2009, including SFAS 144 valuation adjustments of $0.8 million, compared to
gross margins on home sales of $78.3 million, or 20.3%, for the nine months ended August 31, 2008,
including $0.8 million of SFAS 144 valuation adjustments. Gross margins on home sales excluding
SFAS 144 valuation adjustments were $51.1 million, or 17.3%, for the nine months ended August 31,
2009, compared to $79.1 million, or 20.5%, for the same period last year. Gross margin percentage
on home sales, excluding SFAS
42
144 valuation adjustments, decreased compared to last year primarily due to higher sales incentives offered to homebuyers as a percentage of home sales revenues (14.5%
in 2009, compared to 9.5% in 2008).
Losses on land sales were $1.7 million for the nine months ended August 31, 2009, including
$0.7 million of write-offs of deposits and pre-acquisition costs related to land under option that
we do not intend to purchase and $0.6 million of SFAS 144 valuation adjustments, compared to gross
profits on land sales of $0.8 million during the same period last year, including $0.7 million of
write-offs of deposits and pre-acquisition costs related to land that was under option and $0.1
million of SFAS 144 valuation adjustments.
Homebuilding Other: Homebuilding revenues decreased for the nine months ended August 31,
2009, compared to the same period last year, primarily due to a decrease in the number of home
deliveries in all the states in Homebuilding Other except in the Carolinas and a decrease in the
average sales price of homes in the Carolinas and Minnesota. Gross margins on home sales were $21.3
million, or 9.2%, for the nine months ended August 31, 2009, including SFAS 144 valuation
adjustments of $10.6 million, compared to gross margins on home sales of $41.0 million, or 13.1%,
for the nine months ended August 31, 2008, including $10.3 million of SFAS 144 valuation
adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments were $32.0
million, or 13.8%, for the nine months ended August 31, 2009, compared to $51.3 million, or 16.3%,
for the same period last year. Gross margin percentage on home sales, excluding SFAS 144 valuation
adjustments, decreased compared to last year due to higher sales incentives offered to homebuyers
as a percentage of home sales revenues (15.1% in 2009, compared to 13.3% in 2008).
Losses on land sales were $3.7 million for the nine months ended August 31, 2009, including
$3.8 million of write-offs of deposits and pre-acquisition costs related to land under option that
we do not intend to purchase, compared to losses on land sales of $4.2 million during the same
period last year, including $6.6 million of write-offs of deposits and pre-acquisition costs
related to land that was under option and $0.9 million of SFAS 144 valuation adjustments.
43
Gross margins on home sales excluding SFAS 144 valuation adjustments is a Non-GAAP
financial measure that is discussed previously under Non-GAAP Financial Measure. The table set
forth below reconciles our gross margins on home sales excluding SFAS 144 valuation adjustments for
the three and nine months ended August 31, 2009 and 2008 for each of our reportable homebuilding
segments and Homebuilding Other to our gross margins on home sales for the three and nine months
ended August 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
East: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
$ |
190,321 |
|
|
|
306,415 |
|
|
|
583,630 |
|
|
|
878,856 |
|
Cost of homes sold |
|
|
200,841 |
|
|
|
248,014 |
|
|
|
564,071 |
|
|
|
751,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales |
|
|
(10,520 |
) |
|
|
58,401 |
|
|
|
19,559 |
|
|
|
127,815 |
|
SFAS 144 valuation adjustments to finished
homes, CIP and land on which we intend to build
homes |
|
|
38,701 |
|
|
|
8,685 |
|
|
|
60,972 |
|
|
|
50,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales excluding
SFAS 144 valuation adjustments |
|
|
28,181 |
|
|
|
67,086 |
|
|
|
80,531 |
|
|
|
178,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
94,297 |
|
|
|
111,429 |
|
|
|
247,823 |
|
|
|
389,155 |
|
Cost of homes sold |
|
|
83,993 |
|
|
|
107,027 |
|
|
|
230,485 |
|
|
|
367,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales |
|
|
10,304 |
|
|
|
4,402 |
|
|
|
17,338 |
|
|
|
21,290 |
|
SFAS 144 valuation adjustments to finished
homes, CIP and land on which we intend to build
homes |
|
|
1,209 |
|
|
|
2,058 |
|
|
|
11,463 |
|
|
|
21,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales excluding
SFAS 144 valuation adjustments |
|
|
11,513 |
|
|
|
6,460 |
|
|
|
28,801 |
|
|
|
42,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
170,974 |
|
|
|
320,943 |
|
|
|
587,970 |
|
|
|
1,000,056 |
|
Cost of homes sold |
|
|
149,826 |
|
|
|
287,864 |
|
|
|
536,737 |
|
|
|
896,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales |
|
|
21,148 |
|
|
|
33,079 |
|
|
|
51,233 |
|
|
|
103,794 |
|
SFAS 144 valuation adjustments to finished
homes, CIP and land on which we intend to build
homes |
|
|
6,879 |
|
|
|
18,900 |
|
|
|
40,903 |
|
|
|
48,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales excluding
SFAS 144 valuation adjustments |
|
|
28,027 |
|
|
|
51,979 |
|
|
|
92,136 |
|
|
|
152,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
100,442 |
|
|
|
152,075 |
|
|
|
295,596 |
|
|
|
385,775 |
|
Cost of homes sold |
|
|
83,799 |
|
|
|
119,609 |
|
|
|
245,286 |
|
|
|
307,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales |
|
|
16,643 |
|
|
|
32,466 |
|
|
|
50,310 |
|
|
|
78,303 |
|
SFAS 144 valuation adjustments to finished
homes, CIP and land on which we intend to build
homes |
|
|
517 |
|
|
|
682 |
|
|
|
760 |
|
|
|
794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales excluding
SFAS 144 valuation adjustments |
|
|
17,160 |
|
|
|
33,148 |
|
|
|
51,070 |
|
|
|
79,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes |
|
|
79,232 |
|
|
|
104,869 |
|
|
|
231,605 |
|
|
|
313,809 |
|
Cost of homes sold |
|
|
67,311 |
|
|
|
86,095 |
|
|
|
210,275 |
|
|
|
272,828 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales |
|
|
11,921 |
|
|
|
18,774 |
|
|
|
21,330 |
|
|
|
40,981 |
|
SFAS 144 valuation adjustments to finished
homes, CIP and land on which we intend to build
homes |
|
|
2,092 |
|
|
|
1,959 |
|
|
|
10,638 |
|
|
|
10,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margins on home sales excluding
SFAS 144 valuation adjustments |
|
|
14,013 |
|
|
|
20,733 |
|
|
|
31,968 |
|
|
|
51,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margins on home sales |
|
$ |
49,496 |
|
|
|
147,122 |
|
|
|
159,770 |
|
|
|
372,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total SFAS 144 valuation adjustments |
|
$ |
49,398 |
|
|
|
32,284 |
|
|
|
124,736 |
|
|
|
132,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margins on home sales
excluding
SFAS 144 valuation adjustments |
|
$ |
98,894 |
|
|
|
179,406 |
|
|
|
284,506 |
|
|
|
504,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
The SFAS 144 valuation adjustments and write-offs of deposits and pre-acquisition costs
in our homebuilding segments and Homebuilding Other resulted primarily from challenging market
conditions that have persisted during the nine months ended August 31, 2009. The SFAS 144
valuation adjustments were calculated based on assumptions of current market conditions and
estimates made by our management, which may differ from actual results. Changes in market
conditions could result in additional inventory valuation adjustments, as well as additional
write-offs of options deposits and pre-acquisition costs in the future.
At August 31, 2009 and 2008, we owned 77,535 homesites and 76,262 homesites, respectively, and
had access to an additional 31,227 homesites and 54,095 homesites, respectively, through either
option contracts with third parties or agreements with unconsolidated entities in which we have
investments. At November 30, 2008, we owned 74,681 homesites and had access to an additional
38,589 homesites through either option contracts with third parties or agreements with
unconsolidated entities in which we have investments. At August 31, 2009, 3% of the homesites we
owned were subject to home purchase contracts. At August 31, 2009 and 2008, our backlog of sales
contracts was 2,475 homes ($646.9 million) and 3,554 homes ($1,047.7 million), respectively. The
lower backlog was primarily attributable to challenging market conditions that have persisted
during the nine months ended August 31, 2009, which resulted in lower new orders in the nine months
ended August 31, 2009, compared to the prior year. While our backlog was lower year over year, it
has improved sequentially throughout 2009 and is at the highest level since August 31, 2008.
Financial Services Segment
The following table presents selected financial data related to our Financial Services segment
for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
$ |
77,117 |
|
|
|
90,384 |
|
|
|
227,770 |
|
|
|
240,893 |
|
Costs and expenses |
|
|
65,961 |
|
|
|
103,245 |
|
|
|
199,583 |
|
|
|
266,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
$ |
11,156 |
|
|
|
(12,861 |
) |
|
|
28,187 |
|
|
|
(25,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar value of mortgages originated |
|
$ |
869,000 |
|
|
|
1,045,000 |
|
|
|
3,105,000 |
|
|
|
3,182,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of mortgages originated |
|
|
4,000 |
|
|
|
4,500 |
|
|
|
13,700 |
|
|
|
13,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage capture rate of Lennar homebuyers |
|
|
85 |
% |
|
|
87 |
% |
|
|
87 |
% |
|
|
85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of title and closing service transactions |
|
|
31,000 |
|
|
|
28,400 |
|
|
|
92,800 |
|
|
|
82,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of title policies issued |
|
|
24,600 |
|
|
|
20,800 |
|
|
|
61,100 |
|
|
|
66,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Financial Condition and Capital Resources
At August 31, 2009, we had cash and cash equivalents related to our homebuilding and financial
services operations of $1,483.1 million, compared to $939.4 million at August 31, 2008.
We finance our land acquisition and development activities, construction activities, financial
services activities and general operating needs primarily with cash generated from our operations,
debt issuances and equity offerings, as well as cash borrowed under our revolving credit facility
and our warehouse lines of credit.
Operating Cash Flow Activities
In the nine months ended August 31, 2009 and 2008, cash provided by operating activities
totaled $386.9 million and $854.4 million, respectively. During the nine months ended August 31,
2009, cash provided by operating activities was positively impacted by a
decrease in inventories, as a result of reducing completed, unsold inventory and curtailing land
purchases at the beginning of the year, and the receipt of a
federal tax refund of $251.0 million generated by losses
incurred prior to fiscal 2009.
45
These cash flows were partially offset by a decrease in
accounts payable and other liabilities. Throughout the nine months ended August 31, 2009, we
continued to focus our efforts on adjusting pricing to meet market conditions.
Investing Cash Flow Activities
During the nine months ended August 31, 2009 and 2008, cash flows used in investing activities
totaled $234.6 million and $256.3 million, respectively. In the nine months ended August 31, 2009,
we contributed $278.3 million of cash to unconsolidated entities of which $94.5 million related to
our investment in the reorganized Newhall, as well as the purchase of equity interests in other
joint ventures previously owned by LandSource, compared to $343.8 million of cash contributed to
unconsolidated entities in the same period last year. Our investing activities also included
distributions of capital from unconsolidated entities during the nine months ended August 31, 2009
and 2008 of $24.2 million and $80.4 million, respectively.
We are always looking at the possibility of acquiring homebuilders and other companies.
However, at August 31, 2009, we had no agreements or understandings regarding any significant
transactions.
Financing Cash Flow Activities
During the nine months ended August 31, 2009, our net cash provided by financing activities
was primarily attributed to the issuance of common stock and new debt, partially offset by the
redemption of debt.
Homebuilding debt to total capital and net homebuilding debt to total capital are financial
measures commonly used in the homebuilding industry and are presented to assist in understanding
the leverage of our homebuilding operations. Management believes providing a measure of leverage of
our homebuilding operations enables management and readers of our financial statements to better
understand our financial position and performance. Homebuilding debt to total capital and net
homebuilding debt to total capital are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
|
August 31, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
|
2008 |
|
Homebuilding debt |
|
$ |
2,665,796 |
|
|
|
2,544,935 |
|
|
|
2,338,697 |
|
Stockholders equity |
|
|
2,405,960 |
|
|
|
2,623,007 |
|
|
|
3,431,898 |
|
|
|
|
|
|
|
|
|
|
|
Total capital |
|
$ |
5,071,756 |
|
|
|
5,167,942 |
|
|
|
5,770,595 |
|
|
|
|
|
|
|
|
|
|
|
Homebuilding debt to total capital |
|
|
52.6 |
% |
|
|
49.2 |
% |
|
|
40.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding debt |
|
$ |
2,665,796 |
|
|
|
2,544,935 |
|
|
|
2,338,697 |
|
Less: Homebuilding cash and cash equivalents |
|
|
1,336,739 |
|
|
|
1,091,468 |
|
|
|
857,050 |
|
|
|
|
|
|
|
|
|
|
|
Net homebuilding debt |
|
$ |
1,329,057 |
|
|
|
1,453,467 |
|
|
|
1,481,647 |
|
|
|
|
|
|
|
|
|
|
|
Net homebuilding debt to total capital (1) |
|
|
35.6 |
% |
|
|
35.7 |
% |
|
|
30.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net homebuilding debt to total capital consists of net homebuilding debt
(homebuilding debt less homebuilding cash and cash equivalents) divided by total
capital (net homebuilding debt plus stockholders equity). |
At August 31, 2009, homebuilding debt to total capital and net homebuilding debt to total
capital were higher compared to August 31, 2008 due to the increase in homebuilding debt as a
result of an increase in senior notes and other debts payable, and the decrease in stockholders
equity primarily due to our cumulative net loss since August 31, 2008, which included the effects
of inventory valuation adjustments, write-offs of option deposits and pre-acquisition costs, our
share of SFAS 144 valuation adjustments related to assets of unconsolidated entities, APB 18
valuation adjustments to investments in unconsolidated entities and a valuation allowance against
our deferred tax assets, all of which are non-cash items. This decrease in stockholders equity was
partially offset by common stock issued under our equity offering.
46
Our average debt outstanding was $2.6 billion for the nine months ended August 31, 2009,
compared to $2.3 billion in the same period last year. The average rate for interest incurred was
6.1% for the nine months ended August 31, 2009, compared to 5.9% for the same period last year.
Interest incurred related to homebuilding debt for the nine months ended August 31, 2009 was $123.0
million, compared to $110.7 million last year. The majority of our short-term financing needs,
including financings for land acquisition and development activities and general operating needs,
are met with cash generated from operations, market transactions and funds available under our
unsecured revolving credit facility (the Credit Facility).
In March 2009, we retired our $281 million of 7 5/8% senior notes due March 2009 for 100% of
the outstanding principal amount, plus accrued and unpaid interest as of the maturity date.
In April 2009, we issued $400 million of 12.25% senior notes due 2017 (the 12.25% Senior
Notes) at a price of 98.098% in a private placement. Proceeds from the offering, after payment of
initial purchasers discount and expenses, were $386.7 million. We added the proceeds to our
working capital to be used for general corporate purposes, which may include the repayment or
repurchase of our near-term maturities or of debt of our joint ventures that we have guaranteed.
Interest on the 12.25% Senior Notes is due semi-annually. The 12.25% Senior Notes are unsecured and
unsubordinated, and are guaranteed by substantially all of our subsidiaries. In September 2009, we
completed an exchange of the 12.25% Senior Notes for substantially identical notes registered under
the Securities Act of 1933 (the Exchange Notes), with substantially all of the 12.25% Senior
Notes being exchanged for the Exchange Notes. At August 31, 2009, the carrying amount of the 12.25%
Senior Notes was $392.4 million.
Our
Credit Facility consists of a $1.1 billion revolving credit
facility that matures in July
2011.
In order to borrow under our Credit Facility, we are
required to first use our cash in excess of $750 million and have availability under our borrowing base calculation. As of August 31, 2009, we had no availability to borrow under our Credit
Facility due to the fact that we had cash and cash equivalents of $1.3 billion. We can create availability under our Credit Facility to the extent we use the cash in excess of $750 million to purchase qualified borrowing
base assets.
Our Credit Facility is guaranteed by substantially all of our subsidiaries. Interest rates on
outstanding borrowings are LIBOR-based, with margins determined based on changes in our credit
ratings, or an alternate base rate, as described in our Credit Facility agreement. During the nine
months ended August 31, 2009, we did not have any borrowings under our Credit Facility, compared to average daily
borrowings of $28.4 million during the nine months ended August 31, 2008. At August 31, 2009 and
November 30, 2008, we had no outstanding balance under our Credit Facility. However, at August 31,
2009 and November 30, 2008, $194.6 million and $275.2 million, respectively, of our total letters
of credit outstanding discussed below, were collateralized against certain borrowings available
under our Credit Facility.
Our performance letters of credit outstanding were $108.1 million and $167.5 million,
respectively, at August 31, 2009 and November 30, 2008. Our financial letters of credit outstanding
were $212.8 million and $278.5 million, respectively, at August 31, 2009 and November 30, 2008.
Performance letters of credit are generally posted with regulatory bodies to guarantee our
performance of certain development and construction activities, and financial letters of credit are
generally posted in lieu of cash deposits on option contracts.
At
August 31, 2009, we believe we were in compliance with our debt
covenants. Under our Credit
Facility agreement, we are required to maintain a leverage ratio of less than or equal to 55% at
the end of each fiscal quarter during our 2009 fiscal year and a leverage ratio of less than or
equal to 52.5% for our 2010 fiscal year and through the maturity of our Credit Facility in 2011. If
our adjusted consolidated tangible net worth, as calculated per our Credit Facility agreement,
falls below $1.6 billion, our Credit Facility would be reduced from $1.1 billion to $0.9 billion.
In no event may our adjusted consolidated tangible net worth, as calculated per our Credit Facility
agreement, be less than $1.3 billion.
47
The following are computations of our adjusted consolidated tangible net worth and our
leverage ratio as calculated per our Credit Facility agreement (the Agreement) as of August 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level Achieved as |
|
|
|
|
(Dollars in thousands) |
|
Covenant Level |
|
|
of August 31, 2009 |
|
|
Cushion |
|
Adjusted consolidated tangible net worth (1) |
|
$ |
1,440,217 |
|
|
|
2,089,618 |
|
|
|
649,401 |
|
Leverage ratio (2) |
|
|
55 |
% |
|
|
50 |
% |
|
500 Basis Points |
The terms adjusted consolidated tangible net worth and leverage ratio used in the Agreement
are specifically calculated per the Agreement and differ in specified ways from comparable GAAP or
common usage terms. Our adjusted consolidated tangible net worth and leverage ratio, as well as our
maximum recourse exposure from joint ventures were calculated for purposes of the Agreement as of
August 31, 2009 as follows:
|
|
|
(1) |
|
The minimum adjusted consolidated tangible net worth and the adjusted consolidated
tangible net worth as calculated per the Agreement are as follows: |
Minimum adjusted consolidated tangible net worth
|
|
|
|
|
|
|
As of August 31, |
|
(In thousands) |
|
2009 |
|
Stated adjusted consolidated tangible net worth per the Agreement |
|
$ |
2,330,000 |
|
Plus: 50% of cumulative positive consolidated net income in excess of
aggregate amount paid to purchase or redeem equity securities |
|
|
3,416 |
|
Less: Deferred tax asset valuation allowance |
|
|
(893,199 |
) |
|
|
|
|
Minimum adjusted consolidated tangible net worth as calculated per
the Agreement |
|
$ |
1,440,217 |
|
|
|
|
|
Adjusted consolidated tangible net worth
|
|
|
|
|
|
|
As of August 31, |
|
(In thousands) |
|
2009 |
|
Consolidated stockholders equity |
|
$ |
2,405,960 |
|
Less: Intangible assets (a) |
|
|
(35,499 |
) |
|
|
|
|
Consolidated tangible net worth as calculated per the Agreement |
|
|
2,370,461 |
|
Less: Consolidated stockholders equity of mortgage banking subsidiaries (b) |
|
|
(280,843 |
) |
|
|
|
|
Adjusted consolidated tangible net worth as calculated per the Agreement |
|
$ |
2,089,618 |
|
|
|
|
|
(a) |
|
Intangible assets include the Financial Services title operations goodwill of
$34.0 million and other intangible assets of $1.5 million included in other assets
in our condensed consolidated balance sheet as of August 31, 2009. |
|
(b) |
|
Consolidated stockholders equity of mortgage banking subsidiaries represents
the stockholders equity of the Financial Services segments mortgage operations
which is included in stockholders equity in our condensed consolidated balance
sheet as of August 31, 2009. |
48
|
|
|
(2) |
|
The leverage ratio as calculated per the Agreement is as follows: |
|
|
|
|
|
(In thousands) |
|
As of August 31, 2009 |
|
Senior notes and other debts payable |
|
$ |
2,665,796 |
|
Less: Indebtedness of our consolidated entities (a) |
|
|
(208,030 |
) |
|
|
|
|
Lennars indebtedness as calculated per the Agreement |
|
|
2,457,766 |
|
Plus: Letters of credit (b) |
|
|
213,540 |
|
Plus: Lennars maximum recourse exposure related to unconsolidated entities |
|
|
380,318 |
|
Plus: Lennars maximum recourse exposure related to its consolidated entities (a) |
|
|
63,433 |
|
|
|
|
|
Consolidated indebtedness as calculated per the Agreement |
|
|
3,115,057 |
|
Less: 75% of unconsolidated and consolidated entities reimbursement obligations (c) |
|
|
(106,343 |
) |
Plus: 10% of unconsolidated and consolidated entities non-recourse
indebtedness with completion guarantees (d) |
|
|
64,465 |
|
Less: the lesser of $500 million or unrestricted cash in excess of $15 million per
the Agreement |
|
|
(500,000 |
) |
|
|
|
|
Numerator as calculated per the Agreement |
|
$ |
2,573,179 |
|
|
|
|
|
Denominator as calculated per the Agreement |
|
$ |
5,162,797 |
|
|
|
|
|
Leverage ratio (e) |
|
|
50 |
% |
|
|
|
|
(a) |
|
Indebtedness of our consolidated entities primarily includes $145.1 million of
non-recourse debt of our consolidated entities and $63.4 million of recourse debt of
our consolidated entities. These amounts are included in senior notes and other
debts payable in our condensed consolidated balance sheet as of August 31, 2009.
Indebtedness of our consolidated entities is offset by $0.5 million of primarily
corporate guarantees. |
|
(b) |
|
Letters of credit include our financial letters of credit outstanding of $212.8
million disclosed in Note 10 of the notes to our condensed consolidated financial
statements as of August 31, 2009 and $0.7 million of letters of credit related to
the Financial Services segments title operations. |
|
(c) |
|
Reimbursement obligations include $121.2 million related to our joint and
several reimbursement agreements from partners of our unconsolidated entities and
$20.6 million related to our joint and several reimbursement agreements from
partners of our consolidated entities. |
|
(d) |
|
Non-recourse debt with completion guarantees includes $621.6 million of our
unconsolidated entities non-recourse debt with completion guarantees and $23.0
million of consolidated entities non-recourse debt with completion guarantees. |
|
(e) |
|
Leverage ratio consists of the numerator as calculated per the Agreement divided
by the denominator as calculated per the Agreement (consolidated indebtedness as
calculated per the Agreement, less 75% of unconsolidated and consolidated entities
reimbursement obligations, plus 10% of unconsolidated and consolidated entities
non-recourse indebtedness with completion guarantees, plus adjusted consolidated
tangible net worth as calculated per the Agreement). |
Additionally, our Credit Facility requires us to effect quarterly reductions of our maximum
recourse exposure related to joint ventures in which we have investments by a total of $200 million
to $535 million by November 30, 2009, which we had already accomplished as of May 31, 2009. We must
also effect quarterly reductions during our 2010 fiscal year totaling $180 million to $355 million
of which we have already reduced it by $91.2 million. During the first six months of our 2011
fiscal year, we must reduce our maximum recourse exposure related to joint ventures by $80 million
to $275 million.
If the joint ventures are unable to reduce their debt, where there is recourse to us, through
the sale of inventory or other means, then we and our partners may be required to contribute
capital to the joint ventures.
While we currently believe we are in compliance with the debt covenants in the Agreement, if
we had to record significant additional impairments in the future, they could cause us to fail to
comply with the Agreements covenants. In addition, if we default in the payment or performance of
certain obligations relating to the debt of unconsolidated entities above a specified threshold
amount, we would be in default under the Agreement. Either of those events would give the lenders
the right to cause any amounts we owe
49
under our Credit Facility, if any, to become immediately due. If we were unable to repay the
borrowings when they became due, that could entitle holders of $2.3 billion of debt securities we
have sold into the capital markets to cause the sums evidenced by those debt securities to become
immediately due, which might require us to sell assets at prices well below the future fair values,
or the carrying values, of the assets.
At
August 31, 2009, our Financial Services segment had warehouse repurchase facilities that
mature in December 2009 ($100 million) and in June 2010 ($200 million), and a new 364-day warehouse
repurchase facility that matures in July 2010 ($125 million). The maximum aggregate commitment
under these facilities totaled $425 million. The new 364-day warehouse repurchase facility replaced
an on going 60-day committed repurchase facility. Our Financial Services segment uses these
facilities to finance its lending activities until the mortgage loans are sold to investors and
expects the facilities to be renewed or replaced with other facilities when they mature. Borrowings
under the facilities were $144.5 million and $209.5 million, respectively, at August 31, 2009 and
November 30, 2008 and were collateralized by mortgage loans and receivables on loans sold to
investors but not yet paid for with outstanding principal balances of $191.2 million and $281.2
million, respectively, at August 31, 2009 and November 30, 2008.
At November 30, 2008, our Financial Services segment had advances under the on going 60-day
committed repurchase facility of $5.2 million, which were collateralized by mortgage loans and
receivables on loans sold to investors but not yet paid for with outstanding principal balances of
$5.5 million. At November 30, 2008, our Financial Services segment had advances under a different
conduit funding agreement totaling $10.8 million, which were collateralized by mortgage loans.
Due to the fact that our Financial Services segments borrowings under the lines of credit are
generally repaid with the proceeds from the sales of mortgage loans and receivables on loans that
secure those borrowings, the facilities are not likely to be a call on our current or future cash
resources. If the facilities are not renewed, the borrowings under the lines of credit will be paid
off by selling the mortgage loans held-for-sale to investors and by collecting on receivables on
loans sold but not yet paid. Without the facilities, our Financial Services segment would have to
use cash from operations and other funding sources to finance its lending activities.
Changes in Capital
We have a stock repurchase program which permits the purchase of up to 20 million shares of
our outstanding common stock. There were no share repurchases during the nine months ended August
31, 2009. As of August 31, 2009, 6.2 million shares of common stock can be repurchased in the
future under the program. Treasury stock increased by 0.1 million and 0.3 million common shares,
respectively, during the three and nine months ended August 31, 2009, in connection with activity
related to our equity compensation plan and forfeitures of restricted stock.
During April 2009, we entered into distribution agreements with J.P.
Morgan Securities, Inc., Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Deutsche Bank Securities Inc., relating to an offering of our Class A common stock
into the market from time to time for an aggregate of up to $275 million. As of August 31, 2009, we
had sold a total of 21.0 million shares of our Class A common stock under the equity offering for
gross proceeds of $225.5 million, or an average of $10.76 per share. After compensation to the
distributors of $4.5 million, we received net proceeds of $221.0 million. We will use the proceeds
from the offering for general corporate purposes which may include acquisitions.
On August 5, 2009, we paid cash dividends of $0.04 per share for both our Class A and Class B
common stock to holders of record at the close of business on July 22, 2009, as declared by our
Board of Directors on June 30, 2009. On October 6, 2009, our Board of Directors declared a
quarterly cash dividend of $0.04 per share on both our Class A and Class B common stock payable on
November 13, 2009 to holders of record at the close of business on October 23, 2009.
50
Based on our current financial condition and credit relationships, we believe that our
operations and borrowing resources will provide for our current and long-term capital requirements
at our anticipated levels of activity.
Off-Balance Sheet Arrangements
Investments in Unconsolidated Entities
We strategically invest in unconsolidated entities that acquire and develop land (1) for our
homebuilding operations or for sale to third parties or (2) for the construction of homes for sale
to third-party homebuyers. Through these entities, we primarily seek to reduce and share our risk
by limiting the amount of our capital invested in land, while obtaining access to potential future
homesites and allowing us to participate in strategic ventures. The use of these entities also, in
some instances, enables us to acquire land to which we could not otherwise obtain access, or could
not obtain access on as favorable terms, without the participation of a strategic partner.
Participants in these joint ventures are land owners/developers, other homebuilders and financial
or strategic partners. Joint ventures with land owners/developers give us access to homesites owned
or controlled by our partner. Joint ventures with other homebuilders provide us with the ability to
bid jointly with our partner for large land parcels. Joint ventures with financial partners allow
us to combine our homebuilding expertise with access to our partners capital. Joint ventures with
strategic partners allow us to combine our homebuilding expertise with the specific expertise
(e.g., commercial or infill experience) of our partner. Most joint ventures are governed by an
executive committee consisting of members from the partners.
Summarized condensed financial information on a combined 100% basis related to unconsolidated
entities in which we have investments that are accounted for by the equity method was as follows:
Statements of Operations and Selected Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
August 31, |
|
|
August 31, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
$ |
97,572 |
|
|
|
155,367 |
|
|
|
216,815 |
|
|
|
772,635 |
|
Costs and expenses |
|
|
264,385 |
|
|
|
256,816 |
|
|
|
959,750 |
|
|
|
1,046,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss of unconsolidated entities (1) |
|
$ |
(166,813 |
) |
|
|
(101,449 |
) |
|
|
(742,935 |
) |
|
|
(274,318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share of net loss (2) |
|
$ |
(42,208 |
) |
|
|
(8,415 |
) |
|
|
(105,457 |
) |
|
|
(49,006 |
) |
Our share of net loss recognized (2) |
|
$ |
(42,303 |
) |
|
|
(10,958 |
) |
|
|
(105,110 |
) |
|
|
(52,857 |
) |
Our cumulative share of net earnings deferred at
August 31, 2009 and 2008, respectively |
|
|
|
|
|
|
|
|
|
$ |
13,251 |
|
|
|
25,093 |
|
Our investments in unconsolidated entities |
|
|
|
|
|
|
|
|
|
$ |
650,878 |
|
|
|
799,189 |
|
Equity of the unconsolidated entities |
|
|
|
|
|
|
|
|
|
$ |
2,457,264 |
|
|
|
2,876,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our investment % in the unconsolidated entities |
|
|
|
|
|
|
|
|
|
|
26.5 |
% |
|
|
27.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The net loss of unconsolidated entities for the three and nine months ended August 31, 2009
was primarily related to valuation adjustments recorded by the unconsolidated entities. Our
exposure to such losses was significantly lower as a result of our small ownership interest in
the respective unconsolidated entities or our previous APB 18 valuation adjustments to our
investments in unconsolidated entities. |
|
(2) |
|
For the three and nine months ended August 31, 2009, our share of net loss recognized from
unconsolidated entities includes $31.0 million and $81.0 million, respectively, of SFAS 144
valuation adjustments related to assets of the unconsolidated entities in which we have
investments, compared to $2.9 million and $29.9 million, respectively, for the three and nine
months ended August 31, 2008. |
51
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
196,187 |
|
|
|
135,081 |
|
Inventories |
|
|
4,818,496 |
|
|
|
7,115,360 |
|
Other assets |
|
|
300,455 |
|
|
|
541,984 |
|
|
|
|
|
|
|
|
|
|
$ |
5,315,138 |
|
|
|
7,792,425 |
|
|
|
|
|
|
|
|
Liabilities and equity: |
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
$ |
628,695 |
|
|
|
1,042,002 |
|
Debt |
|
|
2,229,179 |
|
|
|
4,062,058 |
|
Equity of: |
|
|
|
|
|
|
|
|
Lennar |
|
|
650,878 |
|
|
|
766,752 |
|
Others |
|
|
1,806,386 |
|
|
|
1,921,613 |
|
|
|
|
|
|
|
|
Total equity of unconsolidated entities |
|
|
2,457,264 |
|
|
|
2,688,365 |
|
|
|
|
|
|
|
|
|
|
$ |
5,315,138 |
|
|
|
7,792,425 |
|
|
|
|
|
|
|
|
Our equity in the unconsolidated entities |
|
|
26 |
% |
|
|
29 |
% |
|
|
|
|
|
|
|
In fiscal 2007, we sold a portfolio of land consisting of approximately 11,000 homesites in 32
communities located throughout the country to a strategic land investment venture with Morgan
Stanley Real Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc., in which we have a
20% ownership interest and 50% voting rights. Due to our continuing involvement, the transaction
did not qualify as a sale by us under GAAP; thus, the inventory has remained on our consolidated
balance sheet in consolidated inventory not owned. As of August 31, 2009 and November 30, 2008, the
portfolio of land (including land development costs) of $492.5 million and $538.4 million,
respectively, is reflected as inventory in the summarized condensed financial information related
to unconsolidated entities in which we have investments. The decrease in this inventory from
November 30, 2008 to August 31, 2009 resulted primarily from valuation adjustments of $41.6 million
recorded by the land investment venture.
In June 2008, LandSource and a number of its subsidiaries commenced proceedings under Chapter
11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. In
July 2009, the United States Bankruptcy Court for the District of Delaware confirmed the plan of
reorganization for LandSource. As a result of the bankruptcy proceedings, LandSource was
reorganized into Newhall. The reorganized company emerged from Chapter 11 free of its previous bank
debt. As part of the reorganization plan, we invested $140 million in exchange for approximately a
15% equity interest in the reorganized Newhall, ownership in several communities that were formerly
owned by LandSource and the settlement and release of all claims that might have been asserted
against us.
Debt to total capital of the unconsolidated entities in which we have investments was
calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
Debt |
|
$ |
2,229,179 |
|
|
|
4,062,058 |
|
Equity |
|
|
2,457,264 |
|
|
|
2,688,365 |
|
|
|
|
|
|
|
|
Total capital |
|
$ |
4,686,443 |
|
|
|
6,750,423 |
|
|
|
|
|
|
|
|
Debt to total capital of our unconsolidated entities |
|
|
47.6 |
% |
|
|
60.2 |
% |
|
|
|
|
|
|
|
52
At August 31, 2009, we had equity investments in 72 unconsolidated entities, compared to 83
unconsolidated entities at May 31, 2009 and 146 unconsolidated entities at August 31, 2008. We
will try to further reduce the number of unconsolidated entities in which we have investments. Our
investments in unconsolidated entities by type of venture were as follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
Land development |
|
$ |
607,027 |
|
|
|
633,652 |
|
Homebuilding |
|
|
43,851 |
|
|
|
133,100 |
|
|
|
|
|
|
|
|
Total investment |
|
$ |
650,878 |
|
|
|
766,752 |
|
|
|
|
|
|
|
|
During the three and nine months ended August 31, 2009, as homebuilding market conditions
remained challenged, we recorded $31.0 million and $81.0 million, respectively, of SFAS 144
valuation adjustments related to assets of unconsolidated entities in which we have investments,
compared to $2.9 million and $29.9 million, respectively, in the same periods last year. In
addition, we recorded $27.5 million and $71.7 million, respectively, of APB 18 valuation
adjustments to our investments in unconsolidated entities for the three and nine months ended
August 31, 2009, compared to $40.0 million and $116.5 million, respectively, in the same periods
last year. We will continue to monitor our investments and the recoverability of assets owned by
the joint ventures.
The summary of our net recourse exposure related to the unconsolidated entities in which we
have investments was as follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
Several recourse debt repayment |
|
$ |
50,725 |
|
|
|
78,547 |
|
Several recourse debt maintenance |
|
|
99,343 |
|
|
|
167,941 |
|
Joint and several recourse debt repayment |
|
|
141,902 |
|
|
|
138,169 |
|
Joint and several recourse debt maintenance |
|
|
85,928 |
|
|
|
123,051 |
|
Land seller debt and other debt recourse exposure |
|
|
2,420 |
|
|
|
12,170 |
|
|
|
|
|
|
|
|
Lennars maximum recourse exposure |
|
|
380,318 |
|
|
|
519,878 |
|
Less: joint and several reimbursement agreements
with our partners |
|
|
(121,177 |
) |
|
|
(127,428 |
) |
|
|
|
|
|
|
|
Our net recourse exposure |
|
$ |
259,141 |
|
|
|
392,450 |
|
|
|
|
|
|
|
|
During the nine months ended August 31, 2009, we reduced our maximum recourse exposure related
to indebtedness of unconsolidated entities by $139.6 million, of which $78.4 million was paid by us
and $61.2 million related to the joint ventures selling inventory, dissolution of joint ventures
and renegotiation of joint venture debt agreements. In addition, during the three and nine months
ended August 31, 2009, we recorded $1.0 million and $28.9 million, respectively, of obligation
guarantees related to debt of certain of our joint ventures. As of August 31, 2009, we had $4.8
million recorded as a liability.
Indebtedness of an unconsolidated entity is secured by its own assets. Some unconsolidated
entities own multiple properties and other assets. There is no cross collateralization of debt
to different unconsolidated entities. We also do not use our investment in one unconsolidated
entity as collateral for the debt in another unconsolidated entity or commingle funds among our
unconsolidated entities.
In connection with a loan to an unconsolidated entity, we and our partners often guarantee to
a lender either jointly and severally or on a several basis, any, or all of the following: (i) the
completion of the development, in whole or in part, (ii) indemnification of the lender from
environmental issues, (iii) indemnification of the lender from bad boy acts of the unconsolidated
entity (or full recourse liability in the event of unauthorized transfer or bankruptcy) and (iv)
that the loan to value and/or loan to cost will not exceed a certain percentage (maintenance or
remargining guarantee) or that a percentage of the outstanding loan will be repaid (repayment
guarantee).
In connection with loans to an unconsolidated entity where there is a joint and several
guarantee, we generally have a reimbursement agreement with our partner. The reimbursement
agreement provides that
53
neither party is responsible for more than its proportionate share of the
guarantee. However, if our joint venture partner does not have adequate financial resources to meet
its obligations under the reimbursement agreement, we may be liable for more than our proportionate
share, up to our maximum exposure, which is the full amount covered by the joint and several
guarantee.
The recourse debt exposure in the previous table represents our maximum exposure to loss from
guarantees and does not take into account the underlying value of the collateral or the other
assets of the borrowers that are available to repay the debt or to reimburse us for any payments on
our guarantees. Our unconsolidated entities that have recourse debt have a significant amount of
assets and equity. The
summarized balance sheets of our unconsolidated entities with recourse debt were as follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
November 30, |
(In thousands) |
|
2009 |
|
2008 |
Assets |
|
$ |
1,647,973 |
|
|
|
2,846,819 |
|
Liabilities |
|
|
1,057,024 |
|
|
|
1,565,148 |
|
Equity (1) |
|
|
590,949 |
|
|
|
1,281,671 |
|
|
|
|
(1) |
|
The decrease in equity of our unconsolidated entities with recourse debt relates
primarily to valuation adjustments recorded by the unconsolidated entities during the nine
months ended August 31, 2009. Our exposure to such losses was significantly lower, as a
result of our small ownership interest in the respective unconsolidated entities or our
previous APB 18 valuation adjustments to our investments in unconsolidated entities. |
In addition, in most instances in which we have guaranteed debt of an unconsolidated entity,
our partners have also guaranteed that debt and are required to contribute their share of the
guarantee payments. Some of our guarantees are repayment guarantees and some are maintenance
guarantees. In a repayment guarantee, we and our venture partners guarantee repayment of a portion
or all of the debt in the event of a default before the lender would have to exercise its rights
against the collateral. In the event of default, if our venture partner does not have adequate
financial resources to meet its obligations under the reimbursement agreement, we may be liable for
more than our proportionate share, up to our maximum recourse exposure, which is the full amount
covered by the joint and several guarantee. The maintenance guarantees only apply if the value of
the collateral (generally land and improvements) is less than a specified percentage of the loan
balance. If we are required to make a payment under a maintenance guarantee to bring the value of
the collateral above the specified percentage of the loan balance, the payment would constitute a
capital contribution or loan to the unconsolidated entity and increase our share of any funds the
unconsolidated entity distributes.
In many of the loans to unconsolidated entities, we and our joint venture partners (or
entities related to them) have been required to give guarantees of completion to the lenders. Those
completion guarantees may require that the guarantors complete the construction of the improvements
for which the financing was obtained. If the construction is to be done in phases, very often the
guarantee is to complete only the phases as to which construction has already commenced and for
which loan proceeds were used. Under many of the completion guarantees, the guarantors are
permitted, under certain circumstances, to use undisbursed loan proceeds to satisfy the completion
of obligations, and in many of those cases, the guarantors only pay interest on those funds, with
no repayment of the principal of such funds required.
During the three months ended August 31, 2009, there were no payments under completion or
maintenance guarantees. During the nine months ended August 31, 2009, we made payments of $5.6
million and $18.0 million, respectively, under completion and maintenance guarantees. During the
three and nine months ended August 31, 2009, loan repayments, including amounts paid under our
repayment guarantees, were $21.9 million and $60.4 million, respectively. These guarantee payments
are recorded primarily as contributions to our unconsolidated entities.
In accordance with Financial Accounting Standards Board (FASB) Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, as of August 31, 2009, the fair values of the maintenance guarantees,
repayment guarantees and completion guarantees were not material. We believe that as of August 31,
2009, in the event we become legally obligated to perform under a guarantee of the obligation of an
unconsolidated
54
entity due to a triggering event under a guarantee, most of the time the collateral should
be sufficient to repay at least a significant portion of the obligation or we and our partners
would contribute additional capital into the venture.
The total debt of the unconsolidated entities in which we have investments was as follows:
|
|
|
|
|
|
|
|
|
|
|
August 31, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
Lennars net recourse exposure |
|
$ |
259,141 |
|
|
|
392,450 |
|
Reimbursement agreements from partners |
|
|
121,177 |
|
|
|
127,428 |
|
|
|
|
|
|
|
|
Lennars maximum recourse exposure |
|
$ |
380,318 |
|
|
|
519,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse
bank debt and other debt (partners share of several recourse) |
|
$ |
183,596 |
|
|
|
285,519 |
|
Non-recourse land seller debt and other debt |
|
|
83,015 |
|
|
|
90,519 |
|
Non-recourse bank debt with completion guarantees excluding LandSource |
|
|
621,628 |
|
|
|
820,435 |
|
Non-recourse bank debt without completion guarantees excluding LandSource |
|
|
960,622 |
|
|
|
994,580 |
|
Non-recourse bank debt without completion guarantees LandSource (1) |
|
|
|
|
|
|
1,351,127 |
|
|
|
|
|
|
|
|
Non-recourse debt to Lennar |
|
|
1,848,861 |
|
|
|
3,542,180 |
|
|
|
|
|
|
|
|
Total debt |
|
$ |
2,229,179 |
|
|
|
4,062,058 |
|
|
|
|
|
|
|
|
Lennars maximum recourse exposure as a % of total JV debt |
|
|
17 |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
(1) |
|
During the third quarter of 2009, LandSource emerged from bankruptcy as a new
reorganized company named Newhall Land Development, LLC. As a result, all of
LandSources bank debts were discharged. |
Some of the unconsolidated entities debt arrangements contain certain financial
covenants. As market conditions remained challenged during the three months ended August 31,
2009, we continued to closely monitor these covenants and the unconsolidated entities ability
to comply with them. Our Credit Facility requires us to report defaults arising under
indebtedness with respect to our joint ventures. As of August 31, 2009, we had no joint venture
defaults reported under the Credit Facility.
In view of current credit market conditions, it is not uncommon for lenders to real estate
developers, including joint ventures in which we have interests, to assert non-monetary defaults
(such as failures to meet construction completion deadlines or declines in the market value of
collateral below required amounts) or technical monetary defaults against the real estate
developers. In most instances, those asserted defaults are resolved by modifications of loan
terms, additional equity investments or other concessions by the borrowers. In addition, in
some instances, real estate developers, including joint ventures in which we have interests, are
forced to request temporary waivers of covenants in loan documents or modifications of loan
terms, which are often, but not always, obtained. However, in some instances developers,
including joint ventures in which we have interests, are not able to meet their monetary
obligations to lenders, and are thus declared in default. Because we sometimes guarantee all or
portions of the obligations to lenders of joint ventures in which we have interests, when these
joint ventures default on their obligations, lenders may or may not have claims against us.
Normally, we do not make payments with regard to guarantees of joint venture obligations while
the joint ventures are contesting assertions regarding sums due to their lenders. When it is
determined that a joint venture is obligated to make a payment that we have guaranteed and the
joint venture will not be able to make that payment, we accrue the amounts probable to be paid
by us as a liability. Although we generally fulfill our guarantee obligations within a
reasonable time after we determine that we are obligated with regard to them, at any point in
time it is likely that we will have some balance of unpaid guarantee liability. At August 31,
2009, the liability for unpaid guarantees of joint venture indebtedness reflected on our balance
sheet totaled $4.8 million.
55
The following table summarizes the principal maturities of our unconsolidated entities
(JVs) debt as per current debt arrangements as of August 31, 2009 and does not represent
estimates of future cash payments that will be made to reduce debt balances. Many JV loans have
extension options in the loan agreements that would allow the loans to be extended into future
years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Maturities of Unconsolidated JVs by Period |
|
|
|
Total JV |
|
|
Total JV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
(In thousands) |
|
Assets (1) |
|
|
Debt |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
Thereafter |
|
|
Debt (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net recourse debt to Lennar |
|
$ |
|
|
|
|
259,141 |
|
|
|
120,499 |
|
|
|
76,795 |
|
|
|
12,764 |
|
|
|
46,663 |
|
|
|
2,420 |
|
Reimbursement agreements |
|
|
|
|
|
|
121,177 |
|
|
|
8,862 |
|
|
|
27,992 |
|
|
|
50,878 |
|
|
|
33,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross recourse debt to Lennar |
|
$ |
1,647,973 |
|
|
|
380,318 |
|
|
|
129,361 |
|
|
|
104,787 |
|
|
|
63,642 |
|
|
|
80,108 |
|
|
|
2,420 |
|
Debt without recourse to Lennar |
|
|
3,286,064 |
|
|
|
1,848,861 |
|
|
|
249,489 |
|
|
|
480,381 |
|
|
|
951,687 |
|
|
|
79,447 |
|
|
|
87,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,934,037 |
|
|
|
2,229,179 |
|
|
|
378,850 |
|
|
|
585,168 |
|
|
|
1,015,329 |
|
|
|
159,555 |
|
|
|
90,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes unconsolidated joint venture assets where the joint venture has no debt. |
|
(2) |
|
Represents land seller debt and other debt. |
The following table is a breakdown of the assets, debt and equity of the
unconsolidated joint ventures by partner type as of August 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
Total Debt |
|
|
|
|
|
|
|
|
|
|
JV Debt |
|
|
Remaining |
|
|
|
|
|
|
|
Recourse |
|
|
|
|
|
|
Recourse |
|
|
Without |
|
|
|
|
|
|
|
|
|
|
to Total |
|
|
Homes/ |
|
|
|
Total JV |
|
|
Debt to |
|
|
Reimbursement |
|
|
Debt to |
|
|
Recourse to |
|
|
Total JV |
|
|
Total JV |
|
|
Capital |
|
|
Homesites |
|
(Dollars in thousands) |
|
Assets |
|
|
Lennar |
|
|
Agreements |
|
|
Lennar |
|
|
Lennar |
|
|
Debt |
|
|
Equity |
|
|
Ratio |
|
|
in JV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partner Type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land Owners/Developers |
|
$ |
775,625 |
|
|
|
73,023 |
|
|
|
|
|
|
|
73,023 |
|
|
|
211,147 |
|
|
|
284,170 |
|
|
|
383,937 |
|
|
|
43 |
% |
|
|
31,717 |
|
Other Builders |
|
|
721,899 |
|
|
|
90,188 |
|
|
|
8,862 |
|
|
|
81,326 |
|
|
|
175,799 |
|
|
|
265,987 |
|
|
|
384,409 |
|
|
|
41 |
% |
|
|
13,529 |
|
Financial |
|
|
3,268,896 |
|
|
|
70,489 |
|
|
|
50,878 |
|
|
|
19,611 |
|
|
|
1,232,219 |
|
|
|
1,302,708 |
|
|
|
1,438,615 |
|
|
|
48 |
% |
|
|
50,512 |
|
Strategic |
|
|
548,718 |
|
|
|
144,198 |
|
|
|
61,437 |
|
|
|
82,761 |
|
|
|
141,839 |
|
|
|
286,037 |
|
|
|
250,303 |
|
|
|
53 |
% |
|
|
13,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,315,138 |
|
|
|
377,898 |
|
|
|
121,177 |
|
|
|
256,721 |
|
|
|
1,761,004 |
|
|
|
2,138,902 |
|
|
|
2,457,264 |
|
|
|
47 |
% |
|
|
109,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land seller debt and other debt |
|
$ |
|
|
|
|
2,420 |
|
|
|
|
|
|
|
2,420 |
|
|
|
87,857 |
|
|
|
90,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total JV debt |
|
$ |
|
|
|
|
380,318 |
|
|
|
121,177 |
|
|
|
259,141 |
|
|
|
1,848,861 |
|
|
|
2,229,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
The table below indicates the assets, debt and equity of our 10 largest unconsolidated
joint venture investments as of August 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
Total Debt |
|
|
|
|
|
|
|
|
|
|
JV Debt |
|
|
|
|
|
|
|
|
|
|
|
Recourse |
|
|
|
|
|
|
Recourse |
|
|
Without |
|
|
|
|
|
|
|
|
|
|
to Total |
|
|
|
Lennars |
|
|
Total JV |
|
|
Debt |
|
|
Reimbursement |
|
|
Debt to |
|
|
Recourse to |
|
|
Total JV |
|
|
Total JV |
|
|
Capital |
|
(Dollars in thousands) |
|
Investment |
|
|
Assets |
|
|
to Lennar |
|
|
Agreements |
|
|
Lennar |
|
|
Lennar |
|
|
Debt |
|
|
Equity |
|
|
Ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land development JVs (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platinum Triangle Partners |
|
$ |
99,027 |
|
|
|
270,634 |
|
|
|
66,889 |
|
|
|
33,445 |
|
|
|
33,444 |
|
|
|
|
|
|
|
66,889 |
|
|
|
195,835 |
|
|
|
25 |
% |
Heritage Fields El Toro |
|
|
84,805 |
|
|
|
1,439,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
545,518 |
|
|
|
545,518 |
|
|
|
676,696 |
|
|
|
45 |
% |
Newhall Land Development (2) |
|
|
46,604 |
|
|
|
523,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
317,000 |
|
|
|
|
|
Runkle Canyon |
|
|
36,719 |
|
|
|
74,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,437 |
|
|
|
|
|
MS Rialto Residential Holdings |
|
|
33,524 |
|
|
|
502,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,131 |
|
|
|
113,131 |
|
|
|
365,339 |
|
|
|
24 |
% |
Ballpark Village |
|
|
30,903 |
|
|
|
119,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,910 |
|
|
|
56,910 |
|
|
|
61,276 |
|
|
|
48 |
% |
56th & Lone Mountain |
|
|
25,067 |
|
|
|
108,213 |
|
|
|
28,336 |
|
|
|
|
|
|
|
28,336 |
|
|
|
28,336 |
|
|
|
56,672 |
|
|
|
49,483 |
|
|
|
53 |
% |
Baywinds Land Trust |
|
|
24,214 |
|
|
|
53,638 |
|
|
|
4,914 |
|
|
|
|
|
|
|
4,914 |
|
|
|
15,154 |
|
|
|
20,068 |
|
|
|
32,827 |
|
|
|
38 |
% |
Rocking Horse Partners |
|
|
20,107 |
|
|
|
50,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,840 |
|
|
|
9,840 |
|
|
|
39,998 |
|
|
|
20 |
% |
Huntley Venture |
|
|
18,962 |
|
|
|
71,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 largest JV investments |
|
|
419,932 |
|
|
|
3,213,593 |
|
|
|
100,139 |
|
|
|
33,445 |
|
|
|
66,694 |
|
|
|
768,889 |
|
|
|
869,028 |
|
|
|
1,883,111 |
|
|
|
32 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other JVs |
|
|
230,946 |
|
|
|
2,101,545 |
|
|
|
277,759 |
|
|
|
87,732 |
|
|
|
190,027 |
|
|
|
992,115 |
|
|
|
1,269,874 |
|
|
|
574,153 |
|
|
|
69 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
650,878 |
|
|
|
5,315,138 |
|
|
|
377,898 |
|
|
|
121,177 |
|
|
|
256,721 |
|
|
|
1,761,004 |
|
|
|
2,138,902 |
|
|
|
2,457,264 |
|
|
|
47 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land seller debt and other debt |
|
$ |
|
|
|
|
|
|
|
|
2,420 |
|
|
|
|
|
|
|
2,420 |
|
|
|
87,857 |
|
|
|
90,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total JV debt |
|
$ |
|
|
|
|
|
|
|
|
380,318 |
|
|
|
121,177 |
|
|
|
259,141 |
|
|
|
1,848,861 |
|
|
|
2,229,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All of the joint ventures presented in the table above operate in our
Homebuilding West segment except for 56th & Lone Mountain and Rocking
Horse Partners, which operate in our Homebuilding Central segment, Baywinds Land
Trust, which operates in our Homebuilding East segment, Huntley Venture, which
operates in Homebuilding Other and MS Rialto Residential Holdings which operates in
all of our homebuilding segments and Homebuilding Other. At August 31, 2009, our
investments in Bellevue Towers Investors and Lennar Intergulf (Central Park) were no
longer part of our list of 10 largest unconsolidated joint venture investments
because of valuation adjustments and thus they are not included in the table above. |
|
(2) |
|
During the third quarter of 2009, LandSource emerged from bankruptcy as a new
reorganized company named Newhall Land Development, LLC. As a result, all of
LandSources bank debts were discharged. |
The table below indicates the percentage of assets, debt and equity of our 10 largest
unconsolidated joint venture investments as of August 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Gross |
|
|
% of Net |
|
|
% of Total |
|
|
|
|
|
|
% of |
|
|
Recourse |
|
|
Recourse |
|
|
Debt Without |
|
|
% of |
|
|
|
Total JV |
|
|
Debt to |
|
|
Debt to |
|
|
Recourse to |
|
|
Total JV |
|
|
|
Assets |
|
|
Lennar |
|
|
Lennar |
|
|
Lennar |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 largest JVs |
|
|
60 |
% |
|
|
26 |
% |
|
|
26 |
% |
|
|
44 |
% |
|
|
77 |
% |
Other |
|
|
40 |
% |
|
|
74 |
% |
|
|
74 |
% |
|
|
56 |
% |
|
|
23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Contracts
We have access to land through option contracts, which generally enables us to control
portions of properties owned by third parties (including land funds) and unconsolidated entities
until we have determined whether to exercise the option.
When we intend not to exercise an option, we write-off any unapplied deposit and
pre-acquisition costs associated with the option contract. For the three months ended August
31, 2009 and 2008, we wrote-off $8.7 million and $10.9 million, respectively, of option deposits
and pre-acquisition costs related to land under option that we do not intend to purchase. For
the nine months ended August 31, 2009 and 2008, we wrote-off $20.8 million and $34.3 million,
respectively, of option deposits and pre-acquisition costs related to land that was under option
that we do not intend to purchase.
57
The table below indicates the number of homesites owned and homesites to which we had
access through option contracts with third parties (optioned) or unconsolidated joint ventures at
August 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled Homesites |
|
|
Owned |
|
|
Total |
|
August 31, 2009 |
|
Optioned |
|
|
JVs |
|
|
Total |
|
|
Homesites |
|
|
Homesites |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
|
8,019 |
|
|
|
2,504 |
|
|
|
10,523 |
|
|
|
25,622 |
|
|
|
36,145 |
|
Central |
|
|
1,370 |
|
|
|
3,761 |
|
|
|
5,131 |
|
|
|
16,168 |
|
|
|
21,299 |
|
West |
|
|
29 |
|
|
|
11,212 |
|
|
|
11,241 |
|
|
|
21,410 |
|
|
|
32,651 |
|
Houston |
|
|
1,051 |
|
|
|
2,115 |
|
|
|
3,166 |
|
|
|
6,588 |
|
|
|
9,754 |
|
Other |
|
|
489 |
|
|
|
677 |
|
|
|
1,166 |
|
|
|
7,747 |
|
|
|
8,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homesites |
|
|
10,958 |
|
|
|
20,269 |
|
|
|
31,227 |
|
|
|
77,535 |
|
|
|
108,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled Homesites |
|
|
Owned |
|
|
Total |
|
August 31, 2008 |
|
Optioned |
|
|
JVs |
|
|
Total |
|
|
Homesites |
|
|
Homesites |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
|
|
9,416 |
|
|
|
5,676 |
|
|
|
15,092 |
|
|
|
26,813 |
|
|
|
41,905 |
|
Central |
|
|
1,724 |
|
|
|
6,036 |
|
|
|
7,760 |
|
|
|
14,493 |
|
|
|
22,253 |
|
West |
|
|
1,370 |
|
|
|
24,183 |
|
|
|
25,553 |
|
|
|
18,547 |
|
|
|
44,100 |
|
Houston |
|
|
1,434 |
|
|
|
2,755 |
|
|
|
4,189 |
|
|
|
7,897 |
|
|
|
12,086 |
|
Other |
|
|
768 |
|
|
|
733 |
|
|
|
1,501 |
|
|
|
8,512 |
|
|
|
10,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homesites |
|
|
14,712 |
|
|
|
39,383 |
|
|
|
54,095 |
|
|
|
76,262 |
|
|
|
130,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We evaluate all option contracts for land when entered into or upon a reconsideration
event to determine whether we are the primary beneficiary of certain of these option contracts.
Although we do not have legal title to the optioned land, under FASB Interpretation No. 46(R),
Consolidation of Variable Interest Entities, (FIN 46R) if we are deemed to be the primary
beneficiary, we are required to consolidate the land under option at the purchase price of the
optioned land. During the nine months ended August 31, 2009, the effect of the consolidation of
these option contracts was an increase of $12.5 million to consolidated inventory not owned with a
corresponding increase to liabilities related to consolidated inventory not owned in our condensed
consolidated balance sheet as of August 31, 2009. This increase was offset primarily by our
exercise of options to acquire land under certain contracts previously consolidated, resulting in a
net decrease in consolidated inventory not owned of
$70.2 million during the nine months ended August
31, 2009. To reflect the purchase price of the inventory consolidated under FIN 46R, we
reclassified $2.1 million of related option deposits from land under development to consolidated
inventory not owned in the accompanying condensed consolidated balance sheet as of August 31, 2009.
The liabilities related to consolidated inventory not owned primarily represent the difference
between the option exercise prices for the optioned land and our cash deposits.
Our exposure to loss related to our option contracts with third parties and unconsolidated
entities consisted of our non-refundable option deposits and pre-acquisition costs totaling $173.6
million and $191.2 million, respectively, at August 31, 2009 and November 30, 2008. Additionally,
we had posted $58.8 million and $89.5 million, respectively, of letters of credit in lieu of cash
deposits under certain option contracts as of August 31, 2009 and November 30, 2008.
58
Contractual Obligations and Commercial Commitments
During the nine months ended August 31, 2009, our contractual obligations with regard to debt
related to our homebuilding operations changed. In March 2009, we retired our $281 million of 7
5/8% senior notes due March 2009, and in April 2009 we issued $400 million of 12.25% senior notes
due 2017 as previously discussed under Financing Cash Flow Activities. The following summarizes
our contractual debt obligations as of August 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
|
|
|
|
Three months |
|
|
December 1, |
|
|
December 1, |
|
|
December 1, |
|
|
|
|
|
|
|
|
|
ending |
|
|
2009 through |
|
|
2010 through |
|
|
2012 through |
|
|
|
|
|
|
|
|
|
November 30, |
|
|
November 30, |
|
|
November 30, |
|
|
November 30, |
|
|
|
Contractual Obligations |
|
Total |
|
|
2009 |
|
|
2010 |
|
|
2012 |
|
|
2014 |
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding Senior notes and
other debts payable |
|
$ |
2,665,796 |
|
|
|
19,964 |
|
|
|
347,192 |
|
|
|
470,273 |
|
|
|
678,708 |
|
|
|
1,149,659 |
|
Financial Services Notes and
other
debts payable |
|
|
144,605 |
|
|
|
144,504 |
|
|
|
26 |
|
|
|
42 |
|
|
|
30 |
|
|
|
3 |
|
Interest commitments under
interest-bearing debt |
|
|
872,951 |
|
|
|
43,504 |
|
|
|
168,979 |
|
|
|
284,879 |
|
|
|
218,744 |
|
|
|
156,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
$ |
3,683,352 |
|
|
|
207,972 |
|
|
|
516,197 |
|
|
|
755,194 |
|
|
|
897,482 |
|
|
|
1,306,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We are subject to the usual obligations associated with entering into contracts
(including option contracts) for the purchase, development and sale of real estate in the routine
conduct of our business. Option contracts for the purchase of land generally enable us to defer
acquiring portions of properties owned by third parties and unconsolidated entities until we have
determined whether to exercise our option. This reduces our financial risk associated with land
holdings. At August 31, 2009, we had access to 31,227 homesites through option contracts with
third parties and unconsolidated entities in which we have investments. At August 31, 2009, we had
$58.8 million of letters of credit posted in lieu of cash deposits under certain option contracts.
At August 31, 2009, we had letters of credit outstanding in the amount of $320.9 million
(which included the $58.8 million of letters of credit discussed above). These letters of credit
are generally posted either with regulatory bodies to guarantee our performance of certain
development and construction activities or in lieu of cash deposits on option contracts.
Additionally, at August 31, 2009, we had outstanding performance and surety bonds related to site
improvements at various projects (including certain projects of our joint ventures) of $864.1
million. Although significant development and construction activities have been completed related
to these site improvements, these bonds are generally not released or reduced until all of the
development and construction activities are completed. As of August 31, 2009, there were
approximately $339.2 million, or 39%, of costs to complete related to these site improvements. We
do not presently anticipate any draws upon these bonds, but if any such draws occur, we do not
believe they would have a material effect on our financial position, results of operations or cash
flows.
Our Financial Services segment had a pipeline of loan applications in process of $1.1 billion
at August 31, 2009. Loans in process for which interest rates were committed to the borrowers and
builder commitments for loan programs totaled approximately $252.0 million as of August 31, 2009.
Substantially all of these commitments were for periods of 60 days or less. Since a portion of
these commitments is expected to expire without being exercised by the borrowers or because
borrowers may not meet certain criteria at the time of closing, the total commitments do not
necessarily represent future cash requirements.
Our Financial Services segment uses mandatory mortgage-backed securities (MBS) forward
commitments, option contracts and investor commitments to hedge our mortgage-related interest rate
exposure. These instruments involve, to varying degrees, elements of credit and interest rate
risk. Credit risk associated with MBS forward commitments, option contracts and loan sales
transactions is managed by limiting our counterparties to investment banks, federally regulated
bank affiliates and other investors meeting our credit standards. Our risk, in the event of
default by the purchaser, is the difference between
59
the contract price and fair value of the MBS
forward commitments and option contracts. At August 31, 2009, we had open commitments amounting to $311.0 million to sell MBS with varying settlement
dates through November 2009.
(3) New Accounting Pronouncements
See Note 18 of our condensed consolidated financial statements included under Item 1 of this
Report for a discussion of new accounting pronouncements applicable to our company.
(4) Critical Accounting Policies
We believe that there have been no significant changes to our critical accounting policies
during the nine months ended August 31, 2009, as compared to those we disclosed in Managements
Discussion and Analysis of Financial Condition and Results of Operations included in our Annual
Report on Form 10-K for the year ended November 30, 2008. Even though our critical accounting
policies have not changed significantly during the nine months ended August 31, 2009, the following
provides additional disclosures about the Companys valuation process related to inventories and
investments in unconsolidated entities.
Inventories
Inventories are stated at cost unless the inventory within a community is determined to be
impaired, in which case the impaired inventory is written down to fair value. Inventory costs
include land, land development and home construction costs, real estate taxes, deposits on land
purchase contracts and interest related to development and construction. We review our inventory
for impairment by evaluating each community during each reporting period. The inventory within
each community is categorized as finished homes and construction in progress or land under
development based on the development stage of the community. There were 411 and 523 active
communities as of August 31, 2009 and 2008, respectively. SFAS 144 requires that if the
undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an
impairment charge should be recorded to write down the carrying amount of such asset to its fair
value.
In conducting our review for indicators of impairment on a community level, we evaluate, among
other things, the margins on homes that have been delivered, margins on homes under sales contracts
in backlog, projected margins on homes with regard to future home sales over the life of the
community, projected margins with regard to future land sales, and the fair value of the land
itself. We pay particular attention to communities in which inventory is moving at a slower than
anticipated absorption pace and communities whose average sales price and/or margins are trending
downward and are anticipated to continue to trend downward. From this review we identify
communities whose carrying values exceed their undiscounted cash flows. While all of our segments
have been severely impacted by the downturn in the housing market, our Central and West
homebuilding segments have been most significantly impacted as evidenced by the decrease in
revenues of 38% and 42%, respectively, for the nine months ended August 31, 2009, compared to the
nine months ended August 31, 2008.
We estimate the fair value of our communities using a discounted cash flow model. These
projected cash flows for each community are significantly impacted by estimates related to market
supply and demand, product type by community, homesite sizes, sales pace, sales prices, sales
incentives, construction costs, sales and marketing expenses, the local economy, competitive
conditions, labor costs, costs of materials and other factors for that particular community. Every
division evaluates the historical performance of each of its communities as well as the current
trends in the market and economy impacting the community and its surrounding areas. These trends
are analyzed for each of the estimates listed above. For example, since the start of the downturn
in the housing market, we have found ways to reduce our construction costs in many communities, and
this reduction in construction costs in addition to change in product type in many communities has
impacted future estimated cash flows.
Each of the homebuilding markets we operate in is unique, as homebuilding has historically
been a local business driven by local market conditions and demographics. Each of our homebuilding
markets is dynamic and has specific supply and demand relationships reflective of local economic
conditions. Our
60
cash flow models are impacted by many assumptions. Some of the most critical
assumptions in our cash flow models are our projected absorption pace for home sales, sales prices
and costs to build and deliver our homes on a community by community basis.
In order to arrive at the assumed absorption pace for home sales included in our cash flow
models, we analyze our historical absorption pace in the community as well as other communities in
the geographical area. In addition, we analyze internal and external market studies and trends,
which generally include, but are not limited to, statistics on population demographics,
unemployment rates and availability of competing product in the geographic area where the community
is located. When analyzing our historical absorption pace for home sales and corresponding internal
and external market studies, we place greater emphasis on more current metrics and trends such as
the absorption pace realized in our most recent quarters as well as forecasted population
demographics, unemployment rates and availability of competing product. Generally, if we notice a
variation from historical results over a span of two fiscal quarters, we consider such variation to
be the establishment of a trend and adjust our historical information accordingly in order to
develop assumptions on the projected absorption pace in the cash flow model for a community.
In order to determine the assumed sales prices included in our cash flow models, we analyze
the historical sales prices realized on homes we delivered in the community and other communities
in the geographical area as well as the sales prices included in our current backlog for such
communities. In addition, we analyze internal and external market studies and trends, which
generally include, but are not limited to, statistics on sales prices in neighboring communities
and sales prices on similar products in non-neighboring communities in the geographic area where
the community is located. When analyzing our historical sales prices and corresponding market
studies, we also place greater emphasis on more current metrics and trends such as future
forecasted sales prices in neighboring communities as well as future forecasted sales prices for
similar product in non-neighboring communities. Generally, if we notice a variation from
historical results over a span of two fiscal quarters, we consider such variation to be the
establishment of a trend and adjust our historical information accordingly in order to develop
assumptions on the projected sales prices in the cash flow model for a community.
In order to arrive at our assumed costs to build and deliver our homes, we generally assume a
cost structure reflecting contracts currently in place with our vendors adjusted for any
anticipated cost reduction initiatives or increases in cost structure. Costs assumed in our cash
flow models for our communities are generally based on the rates we are currently obligated to pay
under existing contracts with our vendors adjusted for any anticipated cost reduction initiatives
or increases in cost structure. Due to the fact that the estimates and assumptions included in our
cash flow models are based upon historical results and projected trends, they do not anticipate
unexpected changes in market conditions that may lead to us incurring additional impairment charges
in the future.
Using all the available trend information, we calculate our best estimate of projected cash
flows for each community. While many of the estimates are calculated based on historical and
projected trends, all estimates are subjective and change from market to market and community to
community as market and economic conditions change. The determination of fair value also requires
discounting the estimated cash flows at a rate we believe a market participant would determine to
be commensurate with the inherent risks associated with the assets and related estimated cash flow
streams. The discount rate used in determining each assets fair value depends on the communitys
projected life and development stage. We generally use a discount rate of approximately 20%,
subject to the perceived risks associated with the communitys cash flow streams relative to its
inventory. For example, construction in progress inventory which is closer to completion will
generally require a lower discount rate than land under development in communities consisting of
multiple phases spanning several years of development.
We estimate fair values of inventory evaluated for impairment under SFAS 144 based on market
conditions and assumptions made by management at the time the inventory is evaluated, which may
differ materially from actual results if market conditions or our assumptions change. For example,
further market deterioration or changes in our assumptions may lead to us incurring additional
impairment charges on previously impaired inventory, as well as on inventory not currently
impaired, but for which indicators of impairment may arise if further market deterioration occurs.
61
We also have access to land inventory through option contracts, which generally enables us to
defer acquiring portions of properties owned by third parties and unconsolidated entities until we
have determined whether to exercise our option. A majority of our option contracts require a
non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase
price of the land. Our
option contracts are recorded at cost. In determining whether to walk away from an option
contract, we evaluate the option primarily based upon the expected cash flows from the property
that is the subject of the option. If we intend to walk away from an option contract, we record a
charge to earnings in the period such decision is made for the deposit amount and related
pre-acquisition costs associated with the option contract.
We believe that the accounting related to inventory valuation and impairment is a critical
accounting policy because: (1) assumptions inherent in the valuation of our inventory are highly
subjective and susceptible to change and (2) the impact of recognizing impairments on our inventory
has been and could continue to be material to our consolidated financial statements. Our evaluation
of inventory impairment, as discussed above, includes many assumptions. The critical assumptions
include the timing of the home sales within a community, managements projections of selling prices
and costs and the discount rate applied to the estimate of the fair value of the homesites within a
community on the balance sheet date. Our assumptions on the timing of home sales are critical
because the homebuilding industry has historically been cyclical and sensitive to changes in
economic conditions such as interest rates, credit availability, unemployment levels and consumer
sentiment. Changes in these economic conditions could materially affect the projected sales price,
costs to develop the homesites and/or absorption rate in a community. Our assumptions on discount
rates are critical because the selection of a discount rate affects the estimated fair value of the
homesites within a community. A higher discount rate reduces the estimated fair value of the
homesites within the community, while a lower discount rate increases the estimated fair value of
the homesites within a community. Because of changes in economic and market conditions and
assumptions and estimates required of management in valuing inventory during changing market
conditions, actual results could differ materially from managements assumptions and may require
material inventory impairment charges to be recorded in the future.
During the three months ended August 31, 2009 and 2008, we recorded $58.8 million and $64.5
million, respectively, of inventory adjustments, which included $49.4 million and $32.3 million,
respectively, of valuation adjustments to finished homes, construction in progress and land on
which we intend to build homes in 39 communities, during both the three months ended August 31,
2009 and 2008. The inventory adjustments also included $0.6 million and $21.4 million,
respectively, during the three months ended August 31, 2009 and 2008, of SFAS 144 valuation
adjustments to land we intend to sell or have sold to third parties and $8.7 million and $10.9
million, respectively, during the three months ended August 31, 2009 and 2008, of write-offs of
deposits and pre-acquisition costs related to homesites option that we do not intend to purchase.
During the nine months ended August 31, 2009 and 2008, we recorded $152.0 million and $205.4
million, respectively, of inventory adjustments, which included $124.7 million and $132.1 million,
respectively, of valuation adjustments to finished homes, construction in progress and land on
which we intend to build homes in 102 communities and 96 communities, respectively, during the nine
months ended August 31, 2009 and 2008. The inventory adjustments also included $6.5 million and
$39.0 million, respectively, during the nine months ended August 31, 2009 and 2008, of SFAS 144
valuation adjustments to land we intend to sell or have sold to third parties and $20.8 million and
$34.3 million, respectively, during the nine months ended August 31, 2009 and 2008, of write-offs
of deposits and pre-acquisition costs related to homesites option that we do not intend to
purchase.
The SFAS 144 valuation adjustments were estimated based on market conditions and assumptions
made by management at the time the valuation adjustments were recorded, which may differ materially
from actual results if market conditions or our assumptions change. See Note 2 of the notes to our
condensed consolidated financial statements included in Item 1 of this document for details related
to valuation adjustments and write-offs by reportable segment and homebuilding other.
62
Investments in Unconsolidated Entities
We strategically invest in unconsolidated entities that acquire and develop land (1) for our
homebuilding operations or for sale to third parties or (2) for construction of homes for sale to
third-party homebuyers. Our partners generally are unrelated homebuilders, land owners/developers
and financial or other strategic partners.
Most of the unconsolidated entities through which we acquire and develop land are accounted
for by the equity method of accounting because we are not the primary beneficiary, as defined under
FIN 46R, and we have a significant, but less than controlling, interest in the entities. We record
our investments in these entities in our consolidated balance sheets as Investments in
Unconsolidated Entities and our pro-rata share of the entities earnings or losses in our
consolidated statements of operations as Equity in Loss from Unconsolidated Entities, as
described in Note 3 of the notes to our condensed consolidated financial statements included in
Item 1 of this document. Advances to these entities are included in the investment balance.
Management looks at specific criteria and uses its judgment when determining if we are the
primary beneficiary of, or have a controlling interest in, an unconsolidated entity. Factors
considered in determining whether we have significant influence or we have control include risk and
reward sharing, experience and financial condition of the other partners, voting rights,
involvement in day-to-day capital and operating decisions and continuing involvement. The
accounting policy relating to the use of the equity method of accounting is a critical accounting
policy due to the judgment required in determining whether we are the primary beneficiary or have
control or significant influence.
As of August 31, 2009, we believe that the equity method of accounting is appropriate for our
investments in unconsolidated entities where we are not the primary beneficiary and we do not have
a controlling interest, but rather share control with our partners. At August 31, 2009, the
unconsolidated entities in which we had investments had total assets of $5.3 billion and total
liabilities of $2.9 billion.
We evaluate each of our investments in unconsolidated entities for impairment during each
reporting period in accordance with APB 18. A series of operating losses of an investee or other
factors may indicate that a decrease in the value of our investment in the unconsolidated entity
has occurred which is other-than-temporary. The amount of impairment recognized is the excess of
the investments carrying amount over its estimated fair value.
Additionally, we consider various qualitative factors to determine if a decrease in the value
of our investment is other-than-temporary. These factors include age of the venture, intent and
ability for us to retain our investment in the entity, financial condition and long-term prospects
of the entity and relationships with the other partners and banks. If we believe that the decline
in the fair value of the investment is temporary, then no impairment is recorded.
The evaluation of our investment in unconsolidated entities includes two critical assumptions:
(1) projected future distributions from the unconsolidated entities and (2) discount rates applied
to the future distributions.
Our assumptions on the projected future distributions from the unconsolidated entities are
dependent on market conditions. Specifically, distributions are dependent on cash to be generated
from the sale of inventory by the unconsolidated entities. Such inventory is also reviewed for
potential impairment by the unconsolidated entities in accordance with SFAS 144. The review for
inventory impairment performed by our unconsolidated entities is materially consistent with our
process, as discussed above, for evaluating its own inventory as of the end of a reporting period.
The unconsolidated entities generally also use a discount rate of approximately 20% in their SFAS
144 reviews for impairment, subject to the perceived risks associated with the communitys cash
flow streams relative to its inventory. If a valuation adjustment is recorded by an unconsolidated
entity in accordance with SFAS 144, our proportionate share of it is reflected in our equity in
loss from unconsolidated entities with a corresponding decrease to our investment in unconsolidated
entities. In certain instances, we may be required to record additional losses relating to our
investment in unconsolidated entities under APB 18; such losses are included in other
63
expense, net.
We believe our assumptions on the projected future distributions from the unconsolidated entities
are critical because the operating results of the unconsolidated entities from which the projected
distributions are derived are dependent on the status of the homebuilding industry, which has
historically been cyclical and sensitive to changes in economic conditions such as interest rates,
credit availability, unemployment levels and consumer sentiment. Changes in these economic
conditions could materially affect the projected operational results of the unconsolidated entities
from which the distributions are derived.
In addition, we believe our assumptions on discount rates are also critical because the
selection of the
discount rates also affects the estimated fair value of our investment in unconsolidated
entities. A higher discount rate reduces the estimated fair value of our investment in
unconsolidated entities, while a lower discount rate increases the estimated fair value of our
investment in unconsolidated entities. Because of changes in economic conditions, actual results
could differ materially from managements assumptions and may require material valuation
adjustments to our investments in unconsolidated entities to be recorded in the future.
During the three months ended August 31, 2009 and 2008, we recorded $58.4 million and $42.9
million, respectively, of valuation adjustments to our investments in unconsolidated entities,
which included $31.0 million and $2.9 million, respectively, for the three months ended August 31,
2009 and 2008, of our share of SFAS 144 valuation adjustments related to assets of our
unconsolidated entities and $27.5 million and $40.0 million, respectively, during the three months
ended August 31, 2009 and 2008, of valuation adjustments to our investments in unconsolidated
entities in accordance with APB 18.
During the nine months ended August 31, 2009 and 2008, we recorded $152.7 million and $146.4
million, respectively, of valuation adjustments to our investments in unconsolidated entities,
which included $81.0 million and $29.9 million, respectively, for the nine months ended August 31,
2009 and 2008, of our share of SFAS 144 valuation adjustments related to assets of our
unconsolidated entities and $71.7 million and $116.5 million, respectively, during the nine months
ended August 31, 2009 and 2008, of valuation adjustments to our investments in unconsolidated
entities in accordance with APB 18.
These valuation adjustments were calculated based on market conditions and assumptions made by
management at the time the valuation adjustments were recorded, which may differ materially from
actual results if market conditions or our assumptions change.
64
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks related to fluctuations in interest rates on our investments,
debt obligations, loans held-for-sale and portfolio loans held-for-investment. We utilize forward
commitments and option contracts to mitigate the risks associated with our mortgage loan portfolio.
During the nine months ended August 31, 2009, our market risks with regard to debt related to
our homebuilding operations changed. In March 2009, we retired our $281 million of 7 5/8% senior
notes due in March 2009 and in April 2009 we issued $400 million of 12.25% senior notes due 2017 as
discussed under Financing Cash Flow Activities.
The following table presents principal cash flows and related weighted average effective
interest rates by expected maturity dates and estimated fair values at August 31, 2009 for our
homebuilding senior notes and other debts payable and Financial Services notes and other debts
payable. Weighted average variable interest rates are based on the variable interest rates at
August 31, 2009.
Information Regarding Interest Rate Sensitivity
Principal (Notional) Amount by
Expected Maturity and Average Interest Rate
August 31, 2009
|
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|
|
|
|
|
|
|
|
|
|
|
|
Three months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at |
|
|
November 30, |
|
Years Ending November 30, |
|
|
|
|
|
|
|
|
|
August 31, |
(Dollars in millions) |
|
2009 |
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
Thereafter |
|
Total |
|
2009 |
|
LIABILITIES |
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes and other
debts
payable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
3.6 |
|
|
|
287.9 |
|
|
|
259.8 |
|
|
|
|
|
|
|
356.3 |
|
|
|
259.7 |
|
|
|
1,149.7 |
|
|
|
2,317.0 |
|
|
|
2,245.4 |
|
Average interest rate |
|
|
2.1 |
% |
|
|
5.1 |
% |
|
|
5.9 |
% |
|
|
|
|
|
|
6.1 |
% |
|
|
5.6 |
% |
|
|
8.1 |
% |
|
|
6.9 |
% |
|
|
|
|
Variable rate |
|
$ |
16.4 |
|
|
|
59.3 |
|
|
|
74.9 |
|
|
|
135.6 |
|
|
|
45.4 |
|
|
|
17.2 |
|
|
|
|
|
|
|
348.8 |
|
|
|
348.8 |
|
Average interest rate |
|
|
1.7 |
% |
|
|
3.4 |
% |
|
|
6.0 |
% |
|
|
3.3 |
% |
|
|
3.8 |
% |
|
|
5.5 |
% |
|
|
|
|
|
|
4.0 |
% |
|
|
|
|
Financial services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes and other debts
payable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
0.1 |
|
Average interest rate |
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.9 |
% |
|
|
|
|
Variable rate |
|
$ |
144.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144.5 |
|
|
|
144.5 |
|
Average interest rate |
|
|
4.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.5 |
% |
|
|
|
|
65
Item 4. Controls and Procedures.
Our Chief Executive Officer and Chief Financial Officer participated in an evaluation by our
management of the effectiveness of our disclosure controls and procedures as of the end of our
fiscal quarter that ended on August 31, 2009. Based on their participation in that evaluation, our
CEO and CFO concluded that our disclosure controls and procedures were effective as of August 31,
2009 to ensure that information required to be disclosed in our reports filed or submitted under
the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms, and to ensure that
information required to be disclosed in our reports filed or submitted under the Securities
Exchange Act of 1934 is accumulated and communicated to our management, including our CEO and CFO,
as appropriate to allow timely decisions regarding required disclosures.
Our CEO and CFO also participated in an evaluation by our management of any changes in our
internal control over financial reporting that occurred during the quarter ended August 31, 2009.
That evaluation did not identify any changes that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Items 1 5. Not applicable.
Item 6. Exhibits.
|
|
|
31.1.
|
|
Rule 13a-14(a) certification by Stuart A. Miller, President
and Chief Executive Officer. |
|
|
|
31.2.
|
|
Rule 13a-14(a) certification by Bruce E. Gross, Vice President
and Chief Financial Officer. |
|
|
|
32.
|
|
Section 1350 certifications by Stuart A. Miller, President and
Chief Executive Officer, and Bruce E. Gross, Vice President and Chief Financial
Officer. |
66
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, we have duly caused this
report to be signed on our behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
Lennar Corporation
(Registrant)
|
|
Date: October 9, 2009 |
/s/ Bruce E. Gross
|
|
|
Bruce E. Gross |
|
|
Vice President and
Chief Financial Officer |
|
|
|
|
|
Date: October 9, 2009 |
/s/ David M. Collins
|
|
|
David M. Collins |
|
|
Controller |
|
|