Lennar Corporation (NYSE:LEN) on Thursday reported a loss of $120.9 million(-$0.76 per diluted share) for the second quarter of 2008, a marked improvement from a loss double that in last year's second quarter but up from a loss of $88.2 million in this year's first fiscal quarter.
The loss included $137.2 million in impairments and write-downs, which were less than some analysts expected, yet the earnings missed Wall Street estimates of -$0.55 per share by a substantial margin.
The loss was due primarily to a 62% drop to $1.0 billion in revenues from home sales, driven by a 58% decrease in the number of home deliveries to3,729 and an 8% decrease in the average sales price of homes to $274,000.Average sales incentives increased to $48,700 per home delivered in the second quarter of 2008 from $43,700 per home delivered in the same period last year.
New orders also fell sharply, down 45% from the same period last year, with a cancellation rate of 22%. The dollar value of the company's homes in backlog was down 56% to $1.3 billion. The company also said it had reduced its spec inventory by 70% from the same quarter last year and 47% from the first quarter and now has on average fewer than one unsold completed home per community.
The financial services unit lost $3.0 million in the second quarter, compared to operating earnings of $14.2 million last year, primarily due to lower transactions in the segment's title operations, compared to last year as a result of the overall weakness in the market and $6.7 million of non-recurring expenses in the segment's title operations.
Lennar also said it had reduced sales, general and administrative (SG&) expenses by 60% to $238.9 million and ended the quarter with no outstanding borrowings on its credit facility. It had $882.4 million in cash on hand at quarter's end.
Lennar's debt-to-capital ratio at the end of the quarter was 39.5%. The company said it had also reduced its maximum joint venture recourse debt by approximately $1 billion from its peak level in 2006, a decrease of more than 50%.
"Foreclosures have increased while higher unemployment and diminishing consumer confidence have defined overall economic weakness," said Stuart Miller, Lennar president and CEO. "As a result, the housing market has continued to experience growth in inventory levels, which has depressed the prices of homes and restricted the ability to sell those homes in markets across the country."
Miller joined the chorus of peers among the CEOs of big public home building companies by calling upon the federal government to pass additional stimulus measures for the housing market. "With the U.S. housing inventory growing in excess of absorption and limited credit availability, the prospect of further deterioration in the homebuilding industry will likely become reality absent Federal government action," he said.
Shares of Lennar opened down and were trading off 5.6% at $13.75 mid-morning amid a down day for the Dow and the entire home builder group.