Miami-based Lennar Corporation reported results from a dismal fourth quarter Thursday morning (Jan. 24), with revenues down 49% to $2.2 billion, impairments of $1.7 billion, a goodwill write-down of $174 million and a net loss of $1.3 billion.

The loss, on a per share basis, was $7.92, $7.50 of which was related to land sales and other write-offs, which included $740.4 million related to the November, 2007 sale of 11,000 lots to a joint venture with Morgan Stanley, land impairment charges of $229.7 million and write-downs of option deposits and pre-acquisition costs of $217.6 million. Home building loss was $224.8 million, loss from investments in unconsolidated entities was $277.3 million, and the company took a $173.7 million charge to goodwill.

Deliveries of new homes fell 50% from the fourth quarter of 2006 to 7,044; new orders likewise fell by 50% to 4,761. The cancellation rate was 33% for the quarter.

One bright note in the earnings report was that the losses will result in a tax refund that will net the company $852 million in cash after the quarter closes. Lennar stock was trading higher, up 3.82% to $15.51 at 11 a.m., in heavy volume on the New York Stock Exchange.

"Our strategy has been to aggressively reconcile our asset valuations to the reality of existing market conditions and to remain primarily focused on cash generation by aggressively converting inventory into cash," said Stuart Miller, Lennar CEO. "As is reflected in our year-end numbers, we have taken meaningful steps along these lines."

For the 2007 fiscal year, Lennar lost $1.9 billion, or $12.32 per diluted share. Revenues fell 37% from the year before to $10.2 billion on deliveries of 33,283 homes, which were down 33% from 2006. New orders were down from'06 levels to 25,753 homes, with a cancellation rate of 30% for the year.

The company drew down the backlog value of its inventory by 65%, to $1.4 billion, and cut the number of home sites owned and controlled at year-end of by 47% to 148,671. It cut home building debt by $318.1 million, putting its home-building debt-to-total-capital ratio at 37.5% (net homebuilding debt to total capital of 30.2%).

The company had $642.5 million of cash on hand at year-end. Lennar said it had no outstanding balance under its credit facility at year-end. It has amended its revolving credit facility, reducing its borrowing capacity from$3.1 billion to $1.5 billion.

"We have continued to price homes to current market conditions, build-out our inventory, deliver our backlog and maintain low inventory levels," said Miller. "We have significantly reduced our operations in each market to reflect the sales pace of the market."

He added, "As we look ahead to 2008, we are not expecting market conditions to improve, and perhaps might continue to decline in the near term. "

Michael Rehaut, home building analyst at J.P. Morgan Securities, wrote in a research note, "While LEN's receipt of an $852 million tax refund is a positive (post quarter-end), negatively, we note the higher than expected land charges represented a 20.7% hit to equity. Moreover, orders fell 49% YOY, below our -35%E, and gross margins (ex-charges) fell more than expected to 12.1%, below our 13.2%E. Accordingly, we believe these data points reflect still highly challenging fundamentals."

Rehaut also noted that Lennar did not take a "FAS 109" charge to deferred tax assets, as have several other big builders, and said he suspected that was because Lennar uses Deloitte & Touche as its auditor, rather and Earnst & Young, which has been insisting that companies it audits take the charge.

David Goldberg at UBS wrote, "We expect Lennar's leverage to decline next year, reflecting the benefit of: 1) $850M in refunds generated from carrying back tax benefits from losses this year against prior period taxes paid; 2) management's efforts to right-size its inventory. As this continues, we expect Lennar to underperform peers that proactively reduced their land positions earlier in the downturn."